tion-specific finding of inappropriateness shall, upon request of the person(s) providing that service, be reviewed, under an appeals mechanism consistent with State law governing the practices and procedures of administrative agencies, by an agency of the State (other than the State Agency) designated by the Governor. The decision of the reviewing agency shall be considered the final decision of the State Agency.

(11) Provision that if a State Agency (or a reviewing agency, under paragraph (a)(9) of this section) makes a finding regarding an existing institutional health service which the State Agency determines is not consistent with the goals of the applicable health systems plan (established under Section 1513(b)(2) of the Act) or the priorities of the applicable annual implementation plan (established under Section 1513(b)(3) of the Act, the State Agency (or the reviewing agency, as appropriate) shall submit to the appropriate health systems agency a detailed statement of the reasons for the inconsistency.

(b) Procedures adopted for reviews in accordance with paragraph (a) of this section may vary according to the type of health service being reviewed.

(c) The procedures adopted for reviews may provide that the requirements of paragraph (a)(3) of this section shall be deemed satisfied for any health service area within the State if the health systems agency has provided for a corresponding procedure.

§ 123.606 Exceptions to use of procedures. A State Agency may, with respect to any type or group of reviews, request from the Secretary an exception to the requirement that it use review procedures which meet the requirements of § 123.605. The requirements of 42 CFR 123.408 apply to such a request for an exception.

§ 123.607 Criteria for State Agency review. (a) The State Agency shall adopt, and use as appropriate, specific criteria for conducting the reviews covered by this subpart. These criteria shall relate to availability, accessibility, acceptability, continuity, cost, and quality and shall include at least the gen

eral considerations listed below, but in the case of areawide reviews which result in institution-specific findings of services provided by or through HMOs, the considerations shall be limited to those set forth in paragraph (a)(8) of this section.

(1) The relationship of the health services being reviewed to the applicable health systems plans, annual implementation plans, and State health plan.

(2) The relationship of the services reviewed to the long-range development plan (if any) of the person providing the services.

(3) The need that the population served has for the services, and the extent to which low income persons, racial and ethnic minorities, women, handicapped persons, and other underserved groups have access to those services.

(4) The availability of less costly or more effective alternative methods of providing the services.

(5) The relationship of the services reviewed to the existing health care system of the area in which the services are provided.

(6) The availability of resources (including health manpower, manage. ment personnel, and funds for capital and operating needs) for the provision of the services reviewed and the availability of alternative uses of these resources for the provision of other health services.

(7) The special needs and circumstances of those entities which provide a substantial portion of their services or resources or both, to individuals not residing in the health service areas in which the entities are located or in adjacent health services areas. These entities may include medical and other health professions schools, multidisciplinary clinics, and specialty centers.

(8) The special needs and circumstances of HMOs. In the case of areawide reviews which result in institution-specific findings regarding serv ices provided by or through an HMO, the needs and circumstances shall be limited to:

(i) The needs of enrolled members and reasonably anticipated new members of the HMO for the existing insti

tutional health services provided by the organization.

(ii) Whether the services could be obtained from non-HMO, or other HMO, providers in a reasonable and cost-effective manner which is consistent with the basic method of operation of the HMO.

(iii) Any other factors which the State Agency may propose and the Secretary may, in accordance with paragraph (c) of this section, find to be consistent with the purpose of Title XIII of the Act.

(9) The special needs and circumstances of biomedical and behavorial research projects which are designed to meet a national need and for which local conditions offer special advan-1 tages.

(10) The contribution of the existing institutional health services in meeting the health related needs of members of medically underserved groups and groups which have traditionally experienced difficulties in obtaining equal access to health services (for example, low income persons, racial and ethnic minorities, women, and handicapped persons) particularly those needs identified in the applicable health systems plan and annual implementation plan as deserving of priority.

(11) The special circumstances of health service institutions with respect to the need for conserving energy.

(12) In accordance with Section 1502(b) of the Act, the effect of competition on the supply of the health services being reviewed.

(13) Improvements or innovations in the financing and delivery of health services which foster competition, in accordance with Section 1502(b) of the Act, and serve to promote quality assurance and cost effectiveness.

(14) The quality of care provided by the services or facilities in the past.

(b) Criteria adopted for reviews in accordance with paragraph (a) of this section may vary according to the type of health service being reviewed and the purpose of the review. Furthermore, the criteria used in the review of a particular service need not address all six of the characteristics of appropriateness (availability, accessibility, acceptability, continuity, cost, and

quality). Should an agency fail to use criteria addressing all six of the characteristics of appropriateness in a review, it must explain this in the finding.

(c) Where a State Agency proposes under paragraph (a)(8)(iii) of this section that it be permitted to base areawide reviews resulting in institution-specific findings of services provided by or through HMOs on criteria which consider factors not set forth in paragraph (a)(8) of this section, it shall do so in a written request to the Secretary, specifying the reasons for the proposal. The Secretary will approve the request if he finds the additional factors to be consistent with the purpose of Title XIII of the Act. Unless the Secretary has approved the additional factors, the State Agency shall base its review solely on the factors set forth in paragraph (a)(8) of this section.

§ 123.608 Required findings.

(a) A State Agency shall, in accordance with the requirements of this subpart, make public its findings with respect to the appropriateness of existing institutional health services.

(b) A State Agency may not make a finding that an existing institutional health service is inappropriate unless it has stated in writing that the service has not met one or more of the established criteria of the State Agency and the ways in which the service failed to meet the criteria, including any that are beyond the control of the person(s) providing that service.

(c) A State Agency, in conducting an areawide review resulting in institution-specific findings, may not make a finding that an existing institutional health service provided by or through an HMO is inappropriate solely because there is an HMO of the same type, as specified in section 1310(b) of the Act, in the same health service area, or solely because the services being reviewed are not discussed in the applicable health systems plan, annual implementation plan, or State health

plan.

(d) Where a State Agency has made a finding that a service is inappropriate, the State Agency shall, to the extent practicable, at the same time,

As used in this subpart

(a) "Act" means the Public Health Service Act, as amended.

(b) "Construction" means construction of new buildings and initial equipment of such buildings and, in any case in which it will help to provide a service not previously provided in the community, equipment of any buildings. It includes architect's fees, but excludes the cost of off-site improvements and, except with respect to public health centers, the cost of the acquistion of land.

(c) "Cost" means the amount found by the Secretary to be necessary for construction or modernization under a project, except that such term does not include any amount found by the Secretary to be attributable to expansion of the bed capacity of any facility.

(d) "Equipment" means those items which are necessary for the functioning of the facility but does not include items of current operating expense such as food, fuel, pharmaceuticals,

dressings, paper, printed forms, and housekeeping supplies.

(e) “Facility for long-term care” means a facility (including a skilled nursing care or intermediate care facility), providing inpatient care for convalescent or chronic disease paK tients who require skilled nursing or intermediate care and related medical services

Dec A ST (1) Which is a hospital (other than a

hospital primarily for the care and treatment of mentally ill or tuberculoir sis patients) or is operated in conneconstrucy tion with a hospital, or

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(2) In which such care and medical services are prescribed by, or are performed under the general direction of, persons licensed to practice medicine or surgery in the State.

(f) "Health systems agency" means an agency which has been conditionally or fully designated pursuant to section 1515 of the Act and 42 CFR Part 122.

(g) "Hospital" includes general, tuberculosis, and other types of hospitals, and related facilities such as labo

ance Fratories, outpatient departments, or nurses' home facilities, extended care facilities, facilities related to programs for home health services, self-care units, and central service facilities, operated in connection with hospitals, Pat and education or training facilities for health professional personnel operateased as an integral part of a hospital,

but does not include any facility furanishing primarily domiciliary care.

(h) "Major repair" means those repairs to an existing building, excluding routine maintenance, which restore the building to a sound state, the cost of which is a least 10 percent of plant value or $200,000, whichever is greater. "Plant value" means the historic book value of the building at the time of application for assistance under this subpart.

(i) “Medical facility" means a hospital, public health center, outpatient medical facility, rehabilitation facility, or a facility for long-term care.

(j) "Modernization" means the alteration, expansion (excluding expansion which increases bed capacity), major repair, remodeling, replacement, and renovation of existing buildings (including initial equipment thereof), and

the replacement of obsolete equipment of existing buildings, including energy conservation projects.

(k) "Outpatient medical facility" means a facility, located in or apart from a hospital, for the diagnosis or diagnosis and treatment of ambulatory patients (including ambulatory inpatients):

(1) Which is operated in connection with a hospital, or

(2) In which patient care of a specialized nature (such as in an eye clinic, dental clinic, or ambulatory surgical center) is provided under the professional supervision of persons licensed to practice medicine or surgery in the State, or in the case of dental diagnosis or treatment, under the professional supervision of persons licensed to practice dentistry in the State, or

(3) Which offers to patients not requiring hospitalization the services of licensed physicians in various medical specialties, and which provides to its patients a reasonably full range of diagnostic and treatment services.

(1) "Public health center" means a publicly owned facility for the provision of public health services, including related facilities such as laboratories, clinics, and administrative offices operated in connection with such a facility.

"Quasi-public

(m) corporation" means a private, nonprofit corporation which has been formally given one or more governmental powers by a generof al-purpose unit government to enable it to carry out its work.

(n) "Rehabilitation facility" means a facility which is operated for the primary purpose of assisting in the rehabilitation of disabled persons through an integrated program of medical evaluation and services, and psychological, social, or vocational evaluation and services, under competent professional supervision, and in the case of which the major portion of the required evaluation and services is furnished within the facility; and either the facility is operated in connection with a hospital, or all medical and related health services are prescribed by, or are under the general direction of persons licensed to practice medicine or surgery in the State.

(o) "Secretary" means the Secretary of Health and Human Services and any other officer or employee of the Department of Health and Human Services to whom the authority involved has been delegated.

(p) "State" means any one of the several States, the Commonwealth of Puerto Rico, Guam, American Samoa, the Trust Territory of the Pacific Islands, the Virgin Islands, and the District of Columbia.

(q) "State health planning and development agency" or "State Agency" means the agency of a State government which has been conditionally or fully designated under section 1521 of the Act and 42 CFR Part 123.

(r) "Title" means a fee simple, or such other estate or interest in the project site (including a leasehold on which the rental does not exceed 4 percent of the value of the land) as the Secretary finds sufficient to assure undisturbed use and possession for the purpose of construction or modernization and operation of the project for a period of not less than twenty years.

(s) "Urban or rural poverty area" means a census tract, census county division, or minor civil division, as applicable, in which the percentage of the residents with incomes below the poverty level, as defined by the Secretary of Commerce is not less than the percentage derived in accordance with the following sentence. This percentage shall be derived so that the percentage of the total population of the United States residing in all such areas is equal to the percentage of the total population of the United States with incomes below such poverty level, plus five percent.

construction

and/or project designed to:

modernization

(1) Eliminate or prevent safety haz ards which under Federal, State, and/ or local fire, building or life safety codes or regulations, will, in the judgment of the Secretary result in one or more of the following:

(i) Loss of licensure for the facility. (ii) Closing of all or a substantial part of the facility,

(iii) Loss of eligibility for reimbursement under Title XVIII or Title XIX of the Social Security Act; or

(2) Avoid noncompliance with State licensure or voluntary accreditation standards where noncompliance will, in the judgment of the Secretary, result in one or both of the following: (i) Loss of licensure for the facility, (ii) Loss of accreditation resulting in loss of eligibility for reimbursement under Title XVIII or Title XIX of the Social Security Act.

§ 124.4 Application.

An application for a grant under this subpart must be submitted directly to the Secretary at such time and in such form and manner as the Secretary may prescribe. The application must be executed by an individual authorized to act for the applicant and assume on behalf of the applicant the obligations imposed by the Act, this subpart, and the terms and conditions of the grant. The application must contain the following:

(a) A description of the site of the project.

(b) A full description, with all appropriate documentation, of:

(1) The imminent safety hazards, licensure and/or accreditation problems of the facility;

(2) The type and amount of assist ance sought under this subpart;

(3) The construction of moderniza. tion project for which funds are sought, describing how it will remedy the problems described pursuant to paragraph (b)(1) of this section, with a complete schedule for the proposed construction or modernization; and

(4) How failure to remedy the prob lems described pursuant to paragraph (b) (1) of this section will affect the population served by the facility.