42 U.S.C. § 1320a–1 — Limitation on use of Federal funds for capital expenditures

(a) Purpose and planning. Federal money appropriated under subchapters XVIII and XIX must not support unnecessary capital expenditures by or for health-care facilities reimbursed under those subchapters. As far as possible, reimbursement must support planning for health services and facilities in the States.

(b) State^* agreement and appeals. After consulting the Governor or other chief executive and appropriate local officials, the Secretary^* must make an agreement with a State that is able and willing to do so. Under the agreement, a designated planning agency must have a governing body or advisory board with at least half its members representing consumers. The agency must: (1) make findings and recommendations, and submit needed supporting material to the Secretary, about proposed capital expenditures by or for health-care facilities in its area of responsibility; (2) receive findings and recommendations from other agencies described in subsection (d)(1)(B)(ii), and submit them and needed supporting material to the Secretary, about expenditures in those agencies’ areas; and (3) establish procedures allowing a person^* proposing an expenditure to appeal the designated agency’s recommendation and receive a fair hearing from that agency or another person or agency designated by the Governor or other chief executive. This appeal procedure applies whenever and to the extent the findings indicate that the expenditure does not fit the standards, criteria, or plans developed under the Public Health Service Act to meet the area’s need for adequate health-care facilities.

(c) State payments. The Secretary must pay the State from the Treasury’s general fund, in advance or as reimbursement as the agreement provides, for the reasonable cost of performing subsection (b)’s functions. The Secretary may adjust payments for earlier overpayments or underpayments.

(d) Excluding costs from federal payments. (1) Except as paragraph (2) provides, the Secretary must determine whether: (A) neither the designated planning agency nor an agency described in subsection (d)(1)(B)(ii) received notice of the proposed expenditure at least 60 days before the expenditure was obligated, in the procedure or level of detail that agency requires; or (B) an agency received timely notice, notified the proposer within a reasonable time and before obligation that the expenditure would not fit the applicable standards, criteria, or plans, and, before the designated agency submitted its findings under subsection (b), the designated agency: (i) consulted and considered the findings and recommendations of State planning agencies established under sections 314(a) and 604(a) of the Public Health Service Act, unless either was the designated agency, and considered the comprehensive regional, metropolitan, or other local plan agency covering the facility’s area, or, if none existed, another public or nonprofit private agency or organization performing similar functions under regulatory criteria; and (ii) gave the proposer a fair hearing about the findings.

If either condition in subparagraph (A) or (B) is met, the Secretary must, for the period needed to carry out this section’s purpose, leave out of federal payments under subchapters XVIII and XIX for services at the facility the amounts attributable to depreciation, interest on borrowed money, return on equity capital for a proprietary facility, and other expenses related to that expenditure. For an organization paid per capita, by a fixed fee, or at a negotiated rate, the Secretary must exclude an amount judged reasonably equivalent to what would have been excluded under another payment method. (2) After submitting the matter to the advisory council under subsection (i), the Secretary must not exclude these expenses under paragraph (1) if doing so would discourage operation or expansion of a facility that has shown it can efficiently, effectively, and economically provide comprehensive health care, including institutional services, or would otherwise conflict with effective organization and delivery of health services or administration^* of subchapter XVIII or XIX.

(e) Leases. If a person leases or obtains by a comparable arrangement a facility, part of a facility, or equipment that would have been subject to exclusion under subsection (d) if bought, the Secretary must: (1) when calculating the person’s rental expense for federal payments for services in the facility, subtract the amount judged reasonably equivalent to the amount that would have been excluded after a purchase; and (2) when calculating return on equity capital, subtract amounts deposited under the lease or comparable arrangement.

(f) Reconsideration. A person dissatisfied with a Secretary determination under this section may ask the Secretary to reconsider it within six months after notification. A Secretary determination under this section cannot receive administrative or judicial review.

(g) “Capital expenditure” defined. For this section, a “capital expenditure” is spending that generally accepted accounting principles do not properly charge as an operating or maintenance expense and that: (1) exceeds $600,000, or a lower amount set by the State; (2) changes the facility’s bed capacity; or (3) substantially changes the facility’s services. In deciding whether the amount exceeds the dollar threshold, include the cost of studies, surveys, designs, plans, working drawings, specifications, and other activities essential to acquiring, improving, expanding, or replacing the related plant and equipment.

(h) Religious nonmedical institutions. This section does not apply to a religious nonmedical health-care institution as defined in section 1395x(ss)(1).

(i) National advisory council. (1) The Secretary must establish a national advisory council, or designate a suitable existing council, to advise and assist in preparing general regulations for this section and on policy matters in administering it, including coordinating its activities with other parts of this chapter and other federal or federally assisted health programs. (2) The Secretary must provide for consultation and coordination between this council and the Federal Hospital Council, National Advisory Health Council, Health Insurance Benefits Advisory Council, and other suitable national advisory councils on matters concerning this section and related federal health programs. (3) If the Secretary establishes a council, its members must not otherwise be regular full-time United States^* employees. The Secretary must appoint them without regard to civil-service laws from leaders in fundamental sciences, medical sciences, and organizing, delivering, and financing health care, and from State or local officials, people active in community, public, or civic affairs, or representatives of minority groups. While attending meetings or doing council business, members may receive Secretary-set compensation up to the maximum rate then specified for GS–18 in 5 U.S.C. § 5332, including travel time. Away from home or regular business locations, they may receive travel expenses, including per diem instead of subsistence, as 5 U.S.C. § 5703 allows for intermittent government employees.

(j) Eligible-organization exception. A capital expenditure by or for a health-care facility is not subject to this section’s review if 75 percent of the patients reasonably expected to use the related service will be enrolled in an eligible organization defined in section 1395mm(b), and the Secretary finds the organization needs the services and facilities to operate efficiently and economically and cannot otherwise readily access them because: (1) the facilities do not provide common services at one site as the organization usually does; (2) the facilities are not available under a contract of reasonable duration; (3) full and equal medical-staff privileges are unavailable; (4) arrangements with the facilities are not administratively feasible; or (5) buying the services costs more than providing them directly.