
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 23, 2000]
[Document not affected by Public Laws enacted between
  January 23, 2000 and December 4, 2001]
[CITE: 42USC1320a-1]

 
                 TITLE 42--THE PUBLIC HEALTH AND WELFARE
 
                       CHAPTER 7--SOCIAL SECURITY
 
   SUBCHAPTER XI--GENERAL PROVISIONS, PEER REVIEW, AND ADMINISTRATIVE 
                             SIMPLIFICATION
 
                       Part A--General Provisions
 
Sec. 1320a-1. Limitation on use of Federal funds for capital 
        expenditures
        

(a) Use of reimbursement for planning activities for health services and 
        facilities

    The purpose of this section is to assure that Federal funds 
appropriated under subchapters XVIII and XIX of this chapter are not 
used to support unnecessary capital expenditures made by or on behalf of 
health care facilities which are reimbursed under any of such 
subchapters and that, to the extent possible, reimbursement under such 
subchapters shall support planning activities with respect to health 
services and facilities in the various States.

(b) Agreement between Secretary and State for submission of proposed 
        capital expenditures related to health care facilities and 
        procedures for appeal from recommendations

    The Secretary, after consultation with the Governor (or other chief 
executive officer) and with appropriate local public officials, shall 
make an agreement with any State which is able and willing to do so 
under which a designated planning agency (which shall be an agency 
described in clause (ii) of subsection (d)(1)(B) of this section that 
has a governing body or advisory board at least half of whose members 
represent consumer interests) will--
        (1) make, and submit to the Secretary together with such 
    supporting materials as he may find necessary, findings and 
    recommendations with respect to capital expenditures proposed by or 
    on behalf of any health care facility in such State within the field 
    of its responsibilities,
        (2) receive from other agencies described in clause (ii) of 
    subsection (d)(1)(B) of this section, and submit to the Secretary 
    together with such supporting material as he may find necessary, the 
    findings and recommendations of such other agencies with respect to 
    capital expenditures proposed by or on behalf of health care 
    facilities in such State within the fields of their respective 
    responsibilities, and
        (3) establish and maintain procedures pursuant to which a person 
    proposing any such capital expenditure may appeal a recommendation 
    by the designated agency and will be granted an opportunity for a 
    fair hearing by such agency or person other than the designated 
    agency as the Governor (or other chief executive officer) may 
    designate to hold such hearings,

whenever and to the extent that the findings of such designated agency 
or any such other agency indicate that any such expenditure is not 
consistent with the standards, criteria, or plans developed pursuant to 
the Public Health Service Act [42 U.S.C. 201 et seq.] to meet the need 
for adequate health care facilities in the area covered by the plan or 
plans so developed.

(c) Manner of payment to States for carrying out agreement

    The Secretary shall pay any such State from the general fund in the 
Treasury, in advance or by way of reimbursement as may be provided in 
the agreement with it (and may make adjustments in such payments on 
account of overpayments or underpayments previously made), for the 
reasonable cost of performing the functions specified in subsection (b) 
of this section.

(d) Determination of amount of exclusions from Federal payments

    (1) Except as provided in paragraph (2), if the Secretary determines 
that--
        (A) neither the planning agency designated in the agreement 
    described in subsection (b) of this section nor an agency described 
    in clause (ii) of subparagraph (B) of this paragraph had been given 
    notice of any proposed capital expenditure (in accordance with such 
    procedure or in such detail as may be required by such agency) at 
    least 60 days prior to obligation for such expenditure; or
        (B)(i) the planning agency so designated or an agency so 
    described had received such timely notice of the intention to make 
    such capital expenditure and had, within a reasonable period after 
    receiving such notice and prior to obligation for such expenditure, 
    notified the person proposing such expenditure that the expenditure 
    would not be in conformity with the standards, criteria, or plans 
    developed by such agency or any other agency described in clause 
    (ii) for adequate health care facilities in such State or in the 
    area for which such other agency has responsibility, and
        (ii) the planning agency so designated had, prior to submitting 
    to the Secretary the findings referred to in subsection (b) of this 
    section--
            (I) consulted with, and taken into consideration the 
        findings and recommendations of, the State planning agencies 
        established pursuant to sections 314(a) and 604(a) of the Public 
        Health Service Act [42 U.S.C. 246(a), 291d(a)] (to the extent 
        that either such agency is not the agency so designated) as well 
        as the public or nonprofit private agency or organization 
        responsible for the comprehensive regional, metropolitan area, 
        or other local area plan or plans referred to in section 314(b) 
        of the Public Health Service Act [42 U.S.C. 246(b)] and covering 
        the area in which the health care facility proposing such 
        capital expenditure is located (where such agency is not the 
        agency designated in the agreement), or, if there is no such 
        agency, such other public or nonprofit private agency or 
        organization (if any) as performs, as determined in accordance 
        with criteria included in regulations, similar functions, and
            (II) granted to the person proposing such capital 
        expenditure an opportunity for a fair hearing with respect to 
        such findings;

then, for such period as he finds necessary in any case to effectuate 
the purpose of this section, he shall, in determining the Federal 
payments to be made under subchapters XVIII and XIX of this chapter with 
respect to services furnished in the health care facility for which such 
capital expenditure is made, not include any amount which is 
attributable to depreciation, interest on borrowed funds, a return on 
equity capital (in the case of proprietary facilities), or other 
expenses related to such capital expenditure. With respect to any 
organization which is reimbursed on a per capita or a fixed fee or 
negotiated rate basis, in determining the Federal payments to be made 
under subchapters XVIII and XIX of this chapter, the Secretary shall 
exclude an amount which in his judgment is a reasonable equivalent to 
the amount which would otherwise be excluded under this subsection if 
payment were to be made on other than a per capita or a fixed fee or 
negotiated rate basis.
    (2) If the Secretary, after submitting the matters involved to the 
advisory council established or designated under subsection (i) of this 
section, determines that an exclusion of expenses related to any capital 
expenditure of any health care facility would discourage the operation 
or expansion of such facility which has demonstrated to his satisfaction 
proof of capability to provide comprehensive health care services 
(including institutional services) efficiently, effectively, and 
economically, or would otherwise be inconsistent with the effective 
organization and delivery of health services or the effective 
administration of subchapter XVIII or XIX of this chapter, he shall not 
exclude such expenses pursuant to paragraph (1).

(e) Treatment of lease or comparable arrangement of any facility or 
        equipment for a facility in determining amount of exclusions 
        from Federal payments

    Where a person obtains under lease or comparable arrangement any 
facility or part thereof, or equipment for a facility, which would have 
been subject to an exclusion under subsection (d) of this section if the 
person had acquired it by purchase, the Secretary shall (1) in computing 
such person's rental expense in determining the Federal payments to be 
made under subchapters XVIII and XIX of this chapter with respect to 
services furnished in such facility, deduct the amount which in his 
judgment is a reasonable equivalent of the amount that would have been 
excluded if the person had acquired such facility or such equipment by 
purchase, and (2) in computing such person's return on equity capital 
deduct any amount deposited under the terms of the lease or comparable 
arrangement.

(f) Reconsideration by Secretary of determinations

    Any person dissatisfied with a determination by the Secretary under 
this section may within six months following notification of such 
determination request the Secretary to reconsider such determination. A 
determination by the Secretary under this section shall not be subject 
to administrative or judicial review.

(g) ``Capital expenditure'' defined

    For the purposes of this section, a ``capital expenditure'' is an 
expenditure which, under generally accepted accounting principles, is 
not properly chargeable as an expense of operation and maintenance and 
which (1) exceeds $600,000 (or such lesser amount as the State may 
establish), (2) changes the bed capacity of the facility with respect to 
which such expenditure is made, or (3) substantially changes the 
services of the facility with respect to which such expenditure is made. 
For purposes of clause (1) of the preceding sentence, the cost of the 
studies, surveys, designs, plans, working drawings, specifications, and 
other activities essential to the acquisition, improvement, expansion, 
or replacement of the plant and equipment with respect to which such 
expenditure is made shall be included in determining whether such 
expenditure exceeds the dollar amount specified in clause (1).

(h) Applicability to Christian Science sanatoriums

    The provisions of this section shall not apply to a religious 
nonmedical health care institution (as defined in section 1395x(ss)(1) 
of this title).

(i) National advisory council; establishment or designation of existing 
        council; functions; consultations with other appropriate 
        national advisory councils; composition; compensation and travel 
        expenses

    (1) The Secretary shall establish a national advisory council, or 
designate an appropriate existing national advisory council, to advise 
and assist him in the preparation of general regulations to carry out 
the purposes of this section and on policy matters arising in the 
administration of this section, including the coordination of activities 
under this section with those under other parts of this chapter or under 
other Federal or federally assisted health programs.
    (2) The Secretary shall make appropriate provision for consultation 
between and coordination of the work of the advisory council established 
or designated under paragraph (1) and the Federal Hospital Council, the 
National Advisory Health Council, the Health Insurance Benefits Advisory 
Council, and other appropriate national advisory councils with respect 
to matters bearing on the purposes and administration of this section 
and the coordination of activities under this section with related 
Federal health programs.
    (3) If an advisory council is established by the Secretary under 
paragraph (1), it shall be composed of members who are not otherwise in 
the regular full-time employ of the United States, and who shall be 
appointed by the Secretary without regard to the civil service laws from 
among leaders in the fields of the fundamental sciences, the medical 
sciences, and the organization, delivery, and financing of health care, 
and persons who are State or local officials or are active in community 
affairs or public or civic affairs or who are representative of minority 
groups. Members of such advisory council, while attending meetings of 
the council or otherwise serving on business of the council, shall be 
entitled to receive compensation at rates fixed by the Secretary, but 
not exceeding the maximum rate specified at the time of such service for 
grade GS-18 in section 5332 of title 5, including traveltime, and while 
away from their homes or regular places of business they may also be 
allowed travel expenses, including per diem in lieu of subsistence, as 
authorized by section 5703 of such title 5 for persons in the Government 
service employed intermittently.

(j) Capital expenditure review exception for eligible organization 
        health care facilities

    A capital expenditure made by or on behalf of a health care facility 
shall not be subject to review pursuant to this section if 75 percent of 
the patients who can reasonably be expected to use the service with 
respect to which the capital expenditure is made will be individuals 
enrolled in an eligible organization as defined in section 1395mm(b) of 
this title, and if the Secretary determines that such capital 
expenditure is for services and facilities which are needed by such 
organization in order to operate efficiently and economically and which 
are not otherwise readily accessible to such organization because--
        (1) the facilities do not provide common services at the same 
    site (as usually provided by the organization),
        (2) the facilities are not available under a contract of 
    reasonable duration,
        (3) full and equal medical staff privileges in the facilities 
    are not available,
        (4) arrangements with such facilities are not administratively 
    feasible, or
        (5) the purchase of such services is more costly than if the 
    organization provided the services directly.

(Aug. 14, 1935, ch. 531, title XI, Sec. 1122, as added Pub. L. 92-603, 
title II, Sec. 221(a), Oct. 30, 1972, 86 Stat. 1386; amended Pub. L. 93-
233, Sec. 18(z), (z-1), Dec. 31, 1973, 87 Stat. 973; Pub. L. 95-559, 
Sec. 14(b), Nov. 1, 1978, 92 Stat. 2141; Pub. L. 96-32, Sec. 2(c), July 
10, 1979, 93 Stat. 82; Pub. L. 97-35, title XXI, Sec. 2193(c)(3), Aug. 
13, 1981, 95 Stat. 827; Pub. L. 97-248, title I, Sec. 137(a)(5), Sept. 
3, 1982, 96 Stat. 376; Pub. L. 98-21, title VI, Sec. 607(a), (b)(1), 
(c), Apr. 20, 1983, 97 Stat. 171, 172; Pub. L. 98-369, div. B, title 
III, Sec. 2354(a)(1), (2), July 18, 1984, 98 Stat. 1100; Pub. L. 105-33, 
title IV, Sec. 4454(c)(1), Aug. 5, 1997, 111 Stat. 431.)

                       References in Text

    The Public Health Service Act, referred to in subsec. (b), is act 
July 1, 1944, ch. 373, 58 Stat. 682, as amended, which is classified 
generally to chapter 6A (201 et seq.) of this title. For complete 
classification of this Act to the Code, see Short Title note set out 
under section 201 of this title and Tables.
    The civil service laws, referred to in subsec. (i)(3), are set out 
in Title 5, Government Organization and Employees. See, particularly, 
section 3301 et seq. of Title 5.


                               Amendments

    1997--Subsec. (h). Pub. L. 105-33 substituted ``a religious 
nonmedical health care institution (as defined in section 1395x(ss)(1) 
of this title).'' for ``Christian Science sanatoriums operated, or 
listed and certified, by the First Church of Christ, Scientist, Boston, 
Massachusetts.''
    1984--Subsec. (b). Pub. L. 98-369, Sec. 2354(a)(1), substituted a 
comma for the period at end of par. (1), and struck out ``(or the Mental 
Retardation Facilities and Community Mental Health Centers Construction 
Act of 1963)'' before ``to meet the need'' in provisions following par. 
(3).
    Subsec. (i)(3). Pub. L. 98-369, Sec. 2354(a)(2), substituted 
``5703'' for ``5703(b)''.
    1983--Subsec. (c). Pub. L. 98-21, Sec. 607(a), substituted ``the 
general fund in the Treasury'' for ``the Federal Hospital Insurance 
Trust Fund''.
    Subsec. (g). Pub. L. 98-21, Sec. 607(b)(1), substituted ``$600,000 
(or such lesser amount as the State may establish)'' for ``$100,000'' 
and Pub. L. 98-21, Sec. 607(b)(1)(B), substituted ``the dollar amount 
specified in clause (1)'' for ``$100,000'' the second time it appeared.
    Subsec. (j). Pub. L. 98-21, Sec. 607(c), added subsec. (j).
    1982--Subsec. (d)(2). Pub. L. 97-248 amended directory language of 
Pub. L. 97-35, Sec. 2193(c)(3)(B), to correct typographical error, and 
did not involve any change in text. See 1981 Amendment note below.
    1981--Subsec. (a). Pub. L. 97-35, Sec. 2193(c)(3)(A), substituted 
``subchapters XVIII and XIX of this chapter'' for ``subchapters V, 
XVIII, and XIX of this chapter''.
    Subsec. (d)(1). Pub. L. 97-35, Sec. 2193(c)(3)(A), substituted in 
provision following subpar. (B)(ii)(II) ``subchapters XVIII and XIX of 
this chapter'' for ``subchapters V, XVIII, and XIX of this chapter'' in 
two places.
    Subsec. (d)(2). Pub. L. 97-35, Sec. 2193(c)(3)(B), as amended by 
Pub. L. 97-248, Sec. 137(a)(5), substituted ``subchapter XVIII or XIX of 
this chapter'' for ``subchapter V, XVIII, or XIX of this chapter''.
    Subsec. (e). Pub. L. 97-35, Sec. 2193(c)(3)(A), substituted 
``subchapters XVIII and XIX of this chapter'' for ``subchapters V, 
XVIII, and XIX of this chapter''.
    1979--Pub. L. 96-32 amended directory language of Pub. L. 95-559 and 
required no change in text of section. See 1978 Amendment notes below.
    1978--Subsecs. (a), (b). Pub. L. 95-559, Sec. 14(b)(1), (2), as 
amended by Pub. L. 96-32, struck out references to health maintenance 
organizations wherever appearing.
    Subsec. (d). Pub. L. 95-559, Sec. 14(b)(1), (3), as amended by Pub. 
L. 96-32, struck out references to health maintenance organizations 
wherever appearing and in par. (2) ``or organization, or of any facility 
of such organization,'' after ``expansion of such facility''.
    1973--Subsec. (d)(1). Pub. L. 93-233, Sec. 18(z), inserted ``or a 
fixed fee or negotiated rate'' after ``per capita'' wherever appearing 
in last sentence.
    Subsec. (d)(2). Pub. L. 93-233, Sec. 18(z-1), substituted 
``exclude'' for ``include'' where last appearing.


                    Effective Date of 1997 Amendment

    Amendment by Pub. L. 105-33 effective Aug. 5, 1997, and applicable 
to items and services furnished on or after such date, with provision 
that Secretary of Health and Human Services issue regulations to carry 
out such amendment by not later than July 1, 1998, see section 4454(d) 
of Pub. L. 105-33, set out as an Effective Date note under section 
1395i-5 of this title.


                    Effective Date of 1984 Amendment

    Section 2354(e) of Pub. L. 98-369 provided that:
    ``(1) Except as provided in paragraph (2), the amendments made by 
this section [amending this section and sections 1316, 1320a-7a, 1320a-
8, 1395f, 1395i, 1395i-2, 1395k, 1395l, 1395n, 1395p, 1395s to 1395z, 
1395aa, 1395cc, 1395ff, 1395ii, 1395ll, 1395mm, 1395oo, 1395rr, and 
1395ww of this title and section 162 of Title 26, Internal Revenue Code, 
and amending provisions set out as notes under sections 1320c, 1395x, 
and 1395mm of this title] shall be effective on the date of the 
enactment of this Act [July 18, 1984]; but none of such amendments shall 
be construed as changing or affecting any right, liability, status, or 
interpretation which existed (under the provisions of law involved) 
before that date.
    ``(2) The amendments made by paragraphs (1) [amending section 1395f 
of this title and provisions set out as a note under section 1395x of 
this title], (2) [amending section 1316 of this title], and (3) 
[amending provisions set out as notes under sections 1320c and 1395mm of 
this title] of subsection (c) shall be effective as if they had been 
originally included in Public Laws 96-499, 97-35, and 97-248, 
respectively.''


                    Effective Date of 1982 Amendment

    Amendment by Pub. L. 97-248 effective as if originally included as 
part of this section as this section was amended by the Omnibus Budget 
Reconciliation Act of 1981, Pub. L. 97-35, see section 137(d)(2) of Pub. 
L. 97-248, set out as a note under section 1396a of this title.


 Effective Date of 1981 Amendment, Savings, and Transitional Provisions

    For effective date, savings, and transitional provisions relating to 
amendment by Pub. L. 97-35, see section 2194 of Pub. L. 97-35, set out 
as a note under section 701 of this title.


                             Effective Date

    Section 221(b) of Pub. L. 92-603 provided that: ``The amendment made 
by subsection (a) [enacting this section] shall apply only with respect 
to a capital expenditure the obligation for which is incurred by or on 
behalf of a health care facility or health maintenance organization 
subsequent to whichever of the following is earlier: (A) December 31, 
1972, or (B) with respect to any State or any part thereof specified by 
such State, the last day of the calendar quarter in which the State 
requests that the amendment made by subsection (a) of this section 
[enacting this section] apply in such State or such part thereof.''


                    Termination of Advisory Councils

    Advisory councils in existence on Jan. 5, 1973, to terminate not 
later than the expiration of the 2-year period following Jan. 5, 1973, 
unless, in the case of a council established by the President or an 
officer of the Federal Government, such council is renewed by 
appropriate action prior to the expiration of such 2-year period, or in 
the case of a council established by the Congress, its duration is 
otherwise provided by law. Advisory councils established after Jan. 5, 
1973, to terminate not later than the expiration of the 2-year period 
beginning on the date of their establishment, unless, in the case of a 
council established by the President or an officer of the Federal 
Government, such council is renewed by appropriate action prior to the 
expiration of such 2-year period, or in the case of a council 
established by the Congress, its duration is otherwise provided by law. 
See sections 3(2) and 14 of Pub. L. 92-463, Oct. 6, 1972, 86 Stat. 770, 
776, set out in the Appendix to Title 5, Government Organization and 
Employees.


         References in Other Laws to GS-16, 17, or 18 Pay Rates

    References in laws to the rates of pay for GS-16, 17, or 18, or to 
maximum rates of pay under the General Schedule, to be considered 
references to rates payable under specified sections of Title 5, 
Government Organization and Employees, see section 529 [title I, 
Sec. 101(c)(1)] of Pub. L. 101-509, set out in a note under section 5376 
of Title 5.


 Expenditures or Obligations of Health Care Facilities Providing Health 
    Care Services Prior to December 18, 1970; Limitations on Federal 
                              Participation

    Section 221(d) of Pub. L. 92-603 provided that: ``In the case of a 
health care facility providing health care services as of December 18, 
1970, which on such date is committed to a formal plan of expansion or 
replacement, the amendments made by the preceding provisions of this 
section [enacting this section and amending sections 705, 706, 709, 
1395x, 1396a, and 1396b of this title] shall not apply with respect to 
such expenditures as may be made or obligations incurred for capital 
items included in such plan where preliminary expenditures toward the 
plan of expansion or replacement (including payments for studies, 
surveys, designs, plans, working drawings, specifications, and site 
acquisition, essential to the acquisition, improvement, expansion, or 
replacement of the health care facility or equipment concerned) of 
$100,000 or more, had been made during the three-year period ended 
December 17, 1970.''

                  Section Referred to in Other Sections

    This section is referred to in sections 1395x, 1396b, 6371d of this 
title.
