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State are lower than would otherwise be payable under title XVIII and title XIX.

3 If the Secretary finds that any of the above conditions 4 in a State which previously met them have not been met 5 for a year the Secretary shall, after due notice, reimburse 6 hospitals in that State according to the provisions of this 7 Act unless he finds that unusual, justifiable and non8 recurring circumstances led to the failure to comply. 9 (f) (1) Section 1866 (a) (1) of the Social Security 10 Act is amended by inserting ", and" in place of the period 11 at the end of subparagraph (C), and by adding a subpara12 graph: "(D) not to increase amounts due from any indi13 vidual, organization, or agency in order to offset reductions 14 made under section 1861 (aa) in the amount paid, or ex15 pected to be paid, under title XVIII.".

16 (2) Section 1902 (a) (27) of the Social Security Act is 17 amended by deleting "and" at the end of subparagraph 18 (A), by inserting ", and" in place of the semicolon at the 19 end of subparagraph (B) and by adding a new subpara20 graph:

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"(C) not to increase amounts due from any individual

22 organization, or agency in order to offset reductions made

23 under section 1902 (a) (13) (D) in the amount paid, or ex

24 pected to be paid under title XIX;"

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1 lish a reimbursement system for hospitals, hospital reim2 bursement in that State under titles XVIII and XIX shall

3 be based on that State system, if the Secretary finds that

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(1) the State has mandated the reimbursement system and it applies to all hospitals in the State which have provider agreements under title XVIII or title XIX;

(2) the system applies to all revenue sources for hospital services in the State;

(3) all hospitals in the State with which there is a provider agreement conform to the accounting and uniform reporting requirements of section 1861 (aa) (1)

(A), and furnishes any appropriate reports that the Secretary may require; and,

(4) (A) based upon an annual evaluation of the system, aggregate payments to hospitals in the State under title XVIII and title XIX for those com

ponents of hospitals costs determined under section

1861 (aa) for the fiscal year following an annual evaluation are estimated to be less than payments would

be under section 1861 (aa) or, (B) where a State

that is unable to satisfy requirements of subparagraph

(A) demonstrates to the satisfaction of the Secretary that total reimbursable inpatient hospital costs in the

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State are lower than would otherwise be payable under title XVIII and title XIX.

3 If the Secretary finds that any of the above conditions 4 in a State which previously met them have not been met 5 for a year the Secretary shall, after due notice, reimburse 6 hospitals in that State according to the provisions of this 7 Act unless he finds that unusual, justifiable and non8 recurring circumstances led to the failure to comply. 9 (f) (1) Section 1866 (a) (1) of the Social Security 10 Act is amended by inserting ", and" in place of the period 11 at the end of subparagraph (C), and by adding a subpara12 graph: "(D) not to increase amounts due from any indi13 vidual, organization, or agency in order to offset reductions 14 made under section 1861 (aa) in the amount paid, or ex15 pected to be paid, under title XVIII.".

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(2) Section 1902 (a) (27) of the Social Security Act is 17 amended by deleting "and" at the end of subparagraph 18 (A), by inserting ", and" in place of the semicolon at the 19 end of subparagraph (B) and by adding a new subpara20 graph:

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"(C) not to increase amounts due from any individual

22 organization, or agency in order to offset reductions made 23 under section 1902 (a) (13) (D) in the amount paid, or ex24 pected to be paid under title XIX;"

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1 closing, modifying, or charging usage of underutilized hos2 pital facilities which is expected to benefit the programs au3 thorized under title XVIII and title XIX by (i) eliminating 4 excess bed capacity, (ii) discontinuing an underutilized 5 service for which there are adequate alternative sources, or

(iii) substituting for the underutilized service some other 7 service which is needed in the area and which is consistent 8 with the findings of an appropriate health planning agency. 9 "(3) A hospital which has carried out a qualified con10 version and which continues in operation will be regarded as having experienced a 'reimbursement detriment' (A) 12 to the extent that, solely because of the conversion there is

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a reduction in the aggregate reimbursement (but only to 14 the extent the capital was accepted as reasonable for pur15 poses of reimbursement) which is considered in determining 16 for payment purposes under title XVIII or title XIX to the 17 hospital the reasonable cost (as the term is used for purposes 18 of those titles) incurred by the hospital; (B) if the conver19 sion results, on an interim basis, in increased operating costs 20 to the extent that operating costs exceed amounts ordinarily reimbursable under titles XVIII and XIX, or (C) in the case of complete closure of a nonprofit, nongovernmental 23 (except local governmental) hospital, other than for re24 placement of the hospital to the extent of actual debt 25 obligations previously recognized as reasonable for reim

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1 bursement, where the debt remains outstanding, less any

2 salvage value.

3 "(c) (1) Any hospital may file an application with the 4 Board (in a form and including data and information as 5 the Board, with the approval of the Secretary, may require) 6 for a transitional allowance with respect to any qualified 7 conversion which was formally initiated after December 31, 8 1977. The Board, with the approval of the Secretary, may 9 also establish procedures, consistent with this section, by 10 means of which a finding of a reimbursement detriment may 11 be made prior to the actual conversion.

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"(2) The Board shall consider any application filed 13 by a hospital, and if the Board finds that—

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"(A) the facility conversion is a qualified facility conversion, and

"(B) the hospital is experiencing a reimbursement detriment because it carried out the qualified facility conversion,

19 the Board shall transmit to the Secretary its recommendation 20 that the Secretary establish, a transitional allowance for the. 21 hospital in amounts reasonably related to prior or prospec22 tive use of the facility under titles XVIII and XIX, and for 23 a period, not to exceed twenty years, specified by the Board; 24 and, if the Board finds that the criteria in clauses (A) and 25 (B) are not met, it shall advise the Secretary not to estab

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