US Code

Public Law 119-73 (01/23/2026)

42 U.S.C. § 1395uu

Payments to promote closing or conversion of underutilized hospital facilities

(a)

Transitional allowances; procedures applicable

Any hospital may file an application with the Secretary (in such form and including such data and information as the Secretary may require) for establishment of a transitional allowance under this subchapter with respect to the closing or conversion of an underutilized hospital facility. The Secretary also may establish procedures, consistent with this section, by which a hospital, before undergoing an actual closure or conversion of a hospital facility, can have a determination made as to whether or not it will be eligible for a transitional allowance under this section with respect to such closure or conversion.

(b)

Allowable costs as transitional allowances; findings and determinations

If the Secretary finds, after consideration of an application under subsection (a), that—
(1)
the hospital’s closure or conversion—
(A)
is formally initiated after ,
(B)
is expected to benefit the program under this subchapter by (i) eliminating excess bed capacity, (ii) discontinuing an underutilized service for which there are adequate alternative sources, or (iii) substituting for the underutilized service some other service which is needed in the area, and
(C)
is consistent with the findings of an appropriate health planning agency and with any applicable State program for reduction in the number of hospital beds in the State, and
(2)
in the case of a complete closure of a hospital—
(A)
the hospital is a private nonprofit hospital or a local governmental hospital, and
(B)
the closure is not for replacement of the hospital,
the Secretary may include as an allowable cost in the hospital’s reasonable cost (for the purpose of making payments to the hospital under this subchapter) an amount (in this section referred to as a “transitional allowance”), as provided in subsection (c).
(c)

Factors determinative of transitional allowance

(1)
Each transitional allowance established shall be reasonably related to the prior or pro­spective use of the facility involved under this subchapter and shall recognize—
(A)
in the case of a facility conversion or closure (other than a complete closure of a hospital)—
(i)
in the case of a private nonprofit or local governmental hospital, that portion of the hospital’s costs attributable to capital assets of the facility which have been taken into account in determining reasonable cost for purposes of determining the amount of payment to the hospital under this subchapter, and
(ii)
in the case of any hospital, transitional operating cost increases related to the conversion or closure to the extent that such operating costs exceed amounts ordinarily reimbursable under this subchapter; and
(B)
in the case of complete closure of a hospital, the outstanding portion of actual debt obligations previously recognized as reasonable for purposes of reimbursement under this subchapter, less any salvage value of the hospital.
(2)
A transitional allowance shall be for a period (not to exceed 20 years) specified by the Secretary, except that, in the case of a complete closure described in paragraph (1)(B), the Secretary may provide for a lump-sum allowance where the Secretary determines that such a one-time allowance is more efficient and economical.
(3)
A transitional allowance shall take effect on a date established by the Secretary, but not earlier than the date of completion of the closure or conversion concerned.
(4)
section 1395x(v)(1) of this titlel A transitional allowance shall not be considered in applying the limits to costs recognized as reasonable pursuant to the third sentence of subparagraph (A) and subparagraph (L)(i) of , or in determining whether the reasonable cost exceeds the customary charges for a service for purposes of determining the amount to be paid to a provider pursuant to sections 1395f(b) and 1395(a)(2) of this title.
(d)

Hearing to review determination

A hospital dissatisfied with a determination of the Secretary on its application under this section may obtain an informal or formal hearing, at the discretion of the Secretary, by filing (in such form and within such time period as the Secretary establishes) a request for such a hearing. The Secretary shall make a final determination on such application within 30 days after the last day of such hearing.

Aug. 14, 1935, ch. 531Pub. L. 97–35, title XXI, § 2101(a)[(1)]95 Stat. 785Pub. L. 97–248, title I, § 128(a)(6)96 Stat. 366(, title XVIII, § 1884, as added , , ; amended , , .)

Editorial Notes

Amendments

Pub. L. 97–2481982—Subsec. (d). redesignated second subsec. (c), relating to hearing to review determination, as subsec. (d).

Statutory Notes and Related Subsidiaries

Effective Date of 1982 Amendment

Pub. L. 97–248Pub. L. 97–35section 128(e)(2) of Pub. L. 97–248section 1395x of this titleAmendment by effective as if originally included as part of this section as this section was enacted by the Omnibus Budget Reconciliation Act of 1981, , see , set out as a note under .

Effective Date

Pub. L. 97–35, title XXI, § 2101(c)95 Stat. 787

section 1396b of this title“The amendment made by subsection (a) [enacting this section and amending ] shall apply only to services furnished by a hospital during any accounting year beginning on or after .”
, , , provided that:

Payments To Promote Closure and Conversion of Underutilized Hospital Facilities

Pub. L. 98–369, div. B, title III, § 235398 Stat. 1099section 1395ww(d) of this title, , , directed Secretary of Health and Human Services to carry out a study and report to Congress prior to , on modifications required in this section in order to conform the closure and conversion program authorized in that section to the prospective payment system under , so as to provide assistance to hospitals which may have particular problems in converting facilities (or parts thereof) from acute care to less intensive care or in closing facilities (or parts thereof), such report to include recommendations as to how, and whether, implementation of this section as modified may result in reductions in total hospital inpatient costs and total expenditures under this subchapter, and prohibited from implementing this section prior to .

Establishment and Evaluation of Transitional Allowances; Report and Recommendations to Congress

Pub. L. 97–35, title XXI, § 2101(b)95 Stat. 786, , , prohibited Secretary of Health and Human Services from establishing under this section transitional allowances with respect to more than 50 hospitals prior to , and directed Secretary to evaluate effectiveness of program of transitional allowances established under this section and, not later than , report to Congress on such evaluation and include in such report such recommendations for such legislative changes as deemed appropriate.