[Federal Register Volume 60, Number 62 (Friday, March 31, 1995)]
[Rules and Regulations]
[Pages 16754-16757]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-7846]
[[Page 16753]]
_______________________________________________________________________
Part V
Department of Health and Human Services
_______________________________________________________________________
Public Health Service
_______________________________________________________________________
42 CFR Part 124
Medical Facility Construction and Modernization; Requirements for
Provision of Services to Persons Unable to Pay; Final Rule
Federal Register / Vol. 60, No. 62 / Friday, March 31, 1995 / Rules
and Regulations
[[Page 16754]]
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Public Health Service
42 CFR Part 124
RIN: 0905-AE33
Medical Facility Construction and Modernization; Requirements for
Provision of Services to Persons Unable to Pay
AGENCY: Public Health Service, DHHS.
ACTION: Final rule.
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SUMMARY: This document revises the rules currently governing how
certain health care facilities, assisted under Titles VI and XVI of the
Public Health Service Act, fulfill the assurance, given in their
applications for assistance, that they would provide a reasonable
volume of services to persons unable to pay. Public comment on the
current rules and operational experience with them indicated the need
to revise the current requirements with respect to nursing homes, many
of which are unable under current requirements to meet their obligation
to provide such services. The rules below should permit qualified
facilities to satisfy their uncompensated services assurance.
DATES: These rules are effective on May 1, 1995.
Applicability For facilities certified under 42 CFR 124.516(b)(1),
these rules are applicable on the later of May 1, 1995 or the beginning
of the facility's next fiscal year. For all other facilities, these
rules are applicable on May 1, 1995.
FOR FURTHER INFORMATION CONTACT: Mr. Eulas Dortch, 301-443-5656.
SUPPLEMENTARY INFORMATION: On April 4, 1994, the Secretary of Health
and Human Services proposed amending the rules governing what is
popularly known as the Hill-Burton uncompensated services program. 59
FR 15693. As explained more fully below, the Notice of Proposed
Rulemaking (NPRM) proposed to expand the income eligibility limits
applicable to patients served by obligated nursing homes, to help such
facilities meet their existing uncompensated services obligations.
The Public Health Service strongly encourages all grant recipients
to provide a smoke-free workplace and promote the non-use of all
tobacco products. This is consistent with the PHS mission to protect
and advance the physical and mental health of the American people.
Regulatory Background
Health care facilities covered by the program received construction
assistance under two titles of the Public Health Service Act, Title VI
(the ``Hill-Burton Act'', 42 U.S.C. 291, et seq.) and Title XVI (42
U.S.C. 300q, et seq.). Under both titles, facilities receiving such
construction assistance have been required, as a condition of receiving
the construction assistance, to provide an assurance that ``there will
be available in the facility or portion thereof to be constructed or
modernized a reasonable volume of services to persons unable to pay
therefor * * *.'' 42 U.S.C. 291c(e). See also 42 U.S.C. 300s-
1(b)(1)(K)(ii). This assurance is known as the ``uncompensated services
assurance.''
Regulations governing compliance with the uncompensated services
assurance were first issued in 1947, and have been revised several
times. On May 18, 1979, comprehensive regulations governing compliance
with the assurance were issued at 44 FR 29372. Among other things, the
1979 regulations: established a minimum level of uncompensated services
facilities were required to provide; set an annual compliance level of
uncompensated services to be provided and required facilities to make
up any deficit in meeting the annual compliance level through provision
of more uncompensated services in later years; required facilities to
allocate their uncompensated services either under a plan meeting
certain requirements or on a first-request, first-served basis;
required facilities to notify the public of the existence of their
uncompensated services programs through public notice and provision of
personal notice to individuals served by the facilities; and required
facilities to keep records documenting compliance and to periodically
report concerning compliance. The 1979 regulations also for the first
time established national eligibility criteria, based on income:
Individuals whose annual income was at or below the poverty level
(known as ``Category A individuals'') were automatically eligible for
uncompensated services; individuals whose annual income was at or below
two times the poverty level (known as ``Category B individuals'') were
also eligible for uncompensated services, unless the facility decided
to limit its services to Category A individuals only. However, the 1979
regulations also provided that amounts to which an individual was
entitled under a third-party insurance or governmental program could
not be credited towards a facility's uncompensated services quota.
On December 3, 1987, the Secretary revised the 1979 regulations at
52 FR 46022. As pertinent here, the 1987 regulations effected a
technical revision of the 1979 regulations, making explicit what had
formerly been implicit in those regulations; i.e., that coverage of an
indigent under a third-party insurance or governmental program
precludes eligibility for uncompensated services. 42 CFR 124.505(a)(1)
(1988). This policy simply reflects the long-standing agency view of
the uncompensated services program as a program of last resort,
designed to serve persons who have no source of payment, such as
Medicaid or private insurance, for medical care.
This policy has created major compliance problems for many Hill-
Burton-obligated nursing homes. HHS determined that, of the 287 nursing
homes with outstanding uncompensated services obligations under the
general compliance standards of the regulations, 243 have deficits; the
majority of these have received no uncompensated services credit. These
deficits persist despite many attempts by HHS to provide technical
assistance to nursing homes to bring them into compliance. The
fundamental problem is that, in most of these nursing homes, the only
individuals who meet the income-eligibility requirements for receipt of
uncompensated services are also covered by their state's Medicaid
program; hence, they are by definition ineligible for uncompensated
services under Sec. 124.505(a)(1). Thus, in states in which the
Medicaid eligibility limits exceed the Hill-Burton eligibility limits
and which cover most or all medical services, nursing homes are
chronically unable to fulfill their uncompensated services obligations.
Proposed Rules
HHS established a task force to analyze nursing home compliance
issues and develop strategies for dealing with compliance problems.
Based on the task force findings and its own survey of regional offices
of the Health Care Financing Administration, which administers the
Medicaid program, HHS proposed to triple the income eligibility limit
for individuals in nursing homes, to create a broader pool of eligible
individuals for such facilities. The NPRM accordingly proposed to
establish a third income eligibility level (Category C) for nursing
home services only. See, proposed Sec. 124.505(a)(2)(iii). A Category C
individual would be an individual whose annual income is greater than
two times, but does not [[Page 16755]] exceed three times, the poverty
level. The regulations already define which facilities are ``nursing
homes'' within the scope of the regulation. See, Sec. 124.502(h). In
addition, the NPRM proposed certain technical and conforming amendments
to other sections of the regulations. The principal one was the
proposed change to Sec. 124.506(a)(1)(v), to provide that if a nursing
home provides services on a reduced charge basis to both Category B and
Category C individuals, it may not employ a discount method that gives
Category C individuals greater discounts than those given to Category B
individuals.
Public Comment and Department's Response
The Department received seven comments on the NPRM, two from
nursing home associations and five from representatives of individual
nursing homes. While most of the commentors applauded the proposed
revisions as a step in the right direction, they made a number of
suggestions for other policies that would, in their view, better
address the chronic deficit problem faced by so many nursing homes.
These comments and the Department's responses thereto are set out
below.
1. The most common criticism was that the proposed remedy fails to
address what the commentors in general see as the chief problem: The
inadequacy of Medicaid reimbursements. The commentors generally noted
that their facilities run large losses attributable to the differential
between Medicaid reimbursement and actual costs, and suggested that
facilities be permitted to write off this differential as uncompensated
services. An Ohio facility that advocated this approach noted that, in
Ohio, all persons with incomes up to the cost of nursing home services
qualify for Medicaid, so that there are no non-Medicaid eligible
patients who would qualify for uncompensated services. A variation of
this approach was the suggestion that a compliance alternative be
created for facilities with a Medicaid patient census of at least 70%.
The Department does not agree that it should treat as uncompensated
services amounts in excess of ``reasonable costs'' (the amount
reimbursed by Medicaid). To do so would result in facility credit for
unreasonable charges and a reduction in the amount of uncompensated
services to persons unable to pay. Rather, it wishes to look at the
effect of the rules below, together with the recently adopted
charitable facility alternative, on reducing the incidence of
intractable deficits. For the same reasons, it is not prepared to craft
a compliance alternative for majority-Medicaid facilities along the
lines suggested. These facilities, by virtue of their high volume
Medicaid levels, have an inherently smaller compliance level under the
3 percent compliance option. However, the Department intends to
continue to study this issue.
With respect to the Ohio situation, it is likely that such
facilities will qualify under the recently published charitable
facility alternative. See, 59 FR 44634 (Aug. 30, 1994). Such facilities
may be able to satisfy their obligations and make up their deficits
under that alternative, as long as they collect no monies (other than
those required to be collected under governmental programs) from Hill-
Burton eligible patients.
2. One provider association, while supportive of the proposed
rules, suggested that the Department adopt additional compliance
alternatives for facilities in states which have medically needy
programs and which, accordingly, are likely to be unable to benefit
from the proposed increase in the income eligibility level. The
association suggested that (1) services uncovered by Medicaid be
identified and considered eligible for inclusion as uncompensated
services, such as additional hours of nursing care, therapies, or other
activities; (2) health-related services provided to eligible non-
residents on the nursing facility premises be counted as uncompensated
services; and (3) services provided by nursing homes off-premises under
Medicaid home and community-based waivers be counted as uncompensated
services.
Generally, the Department agrees that health services provided by a
Hill-Burton facility that are not covered by Medicaid should count as
uncompensated services, and it has traditionally accepted them as such.
However, since Medicaid patients are not liable for additional hours of
care provided which exceed established Medicaid standards, such costs
are not considered to be uncompensated services. With respect to the
second proposal, there is no problem under the present regulations with
counting, toward a facility's uncompensated services quota, health
services provided on-premises to eligible nonresidents of the facility.
Thus, facilities may include such services in their allocation plans.
However, the association's third proposal is not one that the
Department can accept, since services which are reimbursed by Medicaid
are, by definition, ineligible for Hill-Burton credit.
3. A couple of facilities objected to the proposed rules on the
grounds that expanding the income eligibility limits would create a
larger pool of eligibles and thus be devastating to facilities that are
already in financial straits. One facility asked in particular that it
be allowed to write off necessary building maintenance and improvement
expenses as uncompensated services, as it is unable to afford to serve
more persons below cost than it already does.
These facilities appear to misapprehend the requirements of the
current uncompensated services regulations. Under the current
regulations, facilities that are financially unable to meet their
uncompensated services obligation may apply to have it deferred until
they are financially able to make it up. See 42 CFR 124.503(b)(1)(i)
and 124.511(c). However, except to the extent building maintenance and
improvement expenses are factored into a facility's indirect cost rate
that forms part of the basis for its charges for services, such
expenses are not creditable as ``uncompensated services,'' because they
are not ``services'' within the meaning of the statute.
4. A couple of commenters stated that the proposed increase in
income eligibility limits would be problemmatic for other reasons: (1)
Because such individuals would be covered under the proposed Health
Security Act; and (2) because the proposed limit exceeds the costs of
nursing home services in certain states. The Department, however, does
not share the commenters' concerns in this regard. Should health care
reform become law, this program (like others) will have to be reviewed
for consistency with the operation of the reform statute enacted, but
this is not an issue that can productively be addressed before
enactment of such a statute. With respect to the second comment, the
Department thinks that the income limit will not be a problem in such
states, as a facility cannot, in any event, receive credit for more
than it charges.
5. No comments were received concerning the conforming and
technical amendments proposed. However, the recent adoption of the
charitable facility compliance alternative has necessitated a
conforming amendment to that section (see Sec. 124.516 below).
Otherwise, however, no changes to the proposed technical and conforming
amendments have been made.
6. Dates. Note that, with respect to facilities certified under the
alternative in the newly adopted Sec. 124.516(b)(1), this amendment is
applicable on May 1, 1995 or the beginning of the facility's
[[Page 16756]] next fiscal year, whichever is later. Thus, it is the
Department's intention that the three-year base in Sec. 124.516 will
operate prospectively only with respect to the amendment to the
charging restriction of Sec. 124.516(b)(1). For example, a nursing home
applying for certification under Sec. 124.516(b)(1) in 1996 would only
have to demonstrate that it had not charged persons with incomes up to
three times the poverty level for that part of the three-year period in
which the amendment below applied to it, not for the entire three-year
period.
It should be noted that the changes adopted below will not have the
same automatic effect for other nursing homes. Rather, unless a nursing
home has failed to adopt an allocation plan, it will generally not be
required to provide uncompensated services to Category C individuals
unless it takes an affirmative action to do so, through publication of
a revised allocation plan covering Category C individuals. See,
Sec. 124.506(a)(1)(v) below. However, to facilitate prompt coverage of
such individuals, a facility need not wait until the effective date of
these amendments to publish a revised allocation plan under
Sec. 124.506(c), but may do so any time after publication of these
amendments, with the effective date of the revised allocation plan
being at least 60 days following publication.
Regulatory Flexibility Act and Executive Order 12866
The rules below do not change the existing procedural and reporting
requirements for obligated facilities. The Department has determined
that the impact will not approach the annual $100 million threshhold
for major economic consequences as defined in Executive Order 12866.
Therefore, a regulatory impact analysis is not required.
Consistent with the provisions of the Regulatory Flexibility Act (5
U.S.C. 605(b)), the Secretary certifies that this rule will not have a
significant economic impact on a substantial number of small entities.
Paperwork Reduction Act of 1980
The rules below contain no information collection or reporting
requirements which are subject to review by the Office of Management
and Budget (OMB) under the Paperwork Reduction Act of 1980.
List of Subjects in 42 CFR Part 124
Grant programs--health, Health facilities, Loan programs--health,
Low income persons.
Dated: January 12, 1995.
Philip R. Lee,
Assistant Secretary for Health.
Approved: March 24, 1995.
Donna E. Shalala,
Secretary.
For reasons set out in the preamble, subpart F of 42 CFR part 124
is hereby amended to read as follows:
Subpart F--Reasonable Volume of Uncompensated Services to Persons
Unable to Pay
1. The authority citation for 42 CFR part 124, subpart F, continues
to read as follows:
Authority: 42 U.S.C. 216; 42 U.S.C. 300s(3).
2. The first two sentences of Sec. 124.503(b)(4) are revised to
read as follows:
Sec. 124.503 Compliance level.
(a) * * *
(b) * * *
(4) Affirmative action plan for precluding future deficits. Except
where a facility reports to the Secretary in accordance with
Sec. 124.509(a)(2)(iii) that it was financially unable to provide
uncompensated services at the annual compliance level, a facility that
fails to meet its annual compliance level in any fiscal year shall, in
the following year, develop and implement a plan of action that can
reasonably be expected to enable the facility to meet its annual
compliance level. Such actions may include special notice to the
community through newspaper, radio, and television, or expansion of
service to Category B, or, with respect to nursing homes, Category C,
persons. * * *
* * * * *
3. Section 124.505 is amended by revising paragraph (a)(2)(ii) and
adding (a)(2)(iii) to read as follows:
Sec. 124.505 Eligibility criteria.
(a) * * *
(2) * * *
(ii) Category B--A person whose annual individual or family income,
as applicable, is greater than but not more than twice the poverty line
issued by the Secretary pursuant to 42 U.S.C. 9902 that applies to the
individual or family. If persons in Category B are included in the
allocation plan, the facility shall provide uncompensated services to
these persons without charge, or in accordance with a schedule of
charges as specified in the allocation plan.
(iii) Category C--With respect only to persons seeking or receiving
nursing home services, a person whose annual or family income, as
applicable, is more than twice but not greater than three times the
poverty line issued by the Secretary pursuant to 42 U.S.C. 9902 that
applies to the individual or family. If persons in Category C are
included in the allocation plan, the facility shall provide
uncompensated services to these persons without charge, or in
accordance with a schedule of charges as specified in the allocation
plan; and
* * * * *
4. Section 124.506 is amended by revising paragraph (a)(1)(iii)
through (a)(1)(v), the first sentence of paragraph (b)(2), and by
adding paragraph (a)(1)(vi), to read as follows:
Sec. 124.506 Allocation of services; plan requirement.
(a)(1) * * *
(iii) State whether Category B or, in the case of nursing homes
only, Category C persons will be provided uncompensated services, and
if so, whether the services will be available without charge or at a
reduced charge;
(iv) If services will be made available to Category B persons at a
reduced charge, specify the method used for reducing charges, and
provide that the method is applicable to all persons in Category B;
(v) With respect to nursing homes only, if services will be made
available to Category C persons at a reduced charge, specify the method
used for reducing charges, provided that such method may not result in
greater reductions than those afforded to Category B persons, and
provide that this method is applicable to all persons in Category C;
and
(vi) Provide that the facility provides uncompensated services to
all persons eligible under the plan who request uncompensated services.
(b)(1) * * *
(2) If no plan was previously published in accordance with
paragraph (a)(2) of this section, the facility must provide
uncompensated services without charge to all applicants in Category A
and Category B, and, with respect to nursing homes, Category C, who
request service in the facility.* * *
* * * * *
5. Section 124.516 is amended by revising paragraph (b)(1) to read
as follows:
Sec. 124.516 Charitable facility compliance alternative.
(a) * * *
(b) * * *
(1)(i) For facilities that are nursing homes: It received, for the
three most recent fiscal years, no monies directly from patients with
incomes up to triple the current poverty line issued by the
[[Page 16757]] Secretary pursuant to 42 U.S.C. 9902, exclusive of
amounts charged or received for purposes of claiming reimbursement
under third party insurance or governmental programs, such as Medicaid
or Medicare deductible or coinsurance amounts;
(ii) For all other facilities. It received, for the three most
recent fiscal years, no monies directly from patients with incomes up
to double the current poverty line issued by the Secretary pursuant to
42 U.S.C. 9902, exclusive of amounts charged or received for purposes
of claiming reimbursement under third party insurance or governmental
programs, such as Medicaid or Medicare deductible or coinsurance
amounts; or
* * * * *
[FR Doc. 95-7846 Filed 3-30-95; 8:45 am]
BILLING CODE 4160-15-M
