[House Report 108-27]
[From the U.S. Government Publishing Office]
108th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 108-27
======================================================================
HOSPITAL MORTGAGE INSURANCE ACT OF 2003
_______
March 6, 2003.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Oxley, from the Committee on Financial Services, submitted the
following
R E P O R T
[To accompany H.R. 659]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred the
bill (H.R. 659) to amend section 242 of the National Housing
Act regarding the requirements for mortgage insurance under
such Act for hospitals, having considered the same, report
favorably thereon without amendment and recommend that the bill
do pass.
CONTENTS
Page
Purpose and Summary.............................................. 1
Background and Need for Legislation.............................. 2
Hearings......................................................... 3
Committee Consideration.......................................... 3
Committee Votes.................................................. 3
Committee Oversight Findings..................................... 3
Performance Goals and Objectives................................. 3
New Budget Authority, Entitlement Authority, and Tax Expenditures 3
Committee Cost Estimate.......................................... 4
Congressional Budget Office Cost Estimate........................ 4
Federal Mandates Statement....................................... 5
Constitutional Authority Statement............................... 5
Applicability to Legislative Branch.............................. 5
Section-by-Section Analysis...................................... 6
Changes in Existing Law Made by the Bill, as Reported............ 6
Purpose and Summary
H.R. 659, the Hospital Mortgage Insurance Act of 2003, will
amend section 242 of the National Housing Act (12 U.S.C. 1715z-
7) to respond to changes in State laws in order to ensure that
hospitals will not be automatically prevented from applying for
FHA mortgage insurance. This provision permits the Department
of Housing and Urban Development (HUD) to establish an
alternate method for hospitals to demonstrate the need and
feasibility of their proposed projects in those States where
State evaluation processes no longer exist.
Background and Need for Legislation
Hospitals face significant financial challenges when
providing care to patients who are covered by Medicare and
Medicaid. At the same time, improvements in technology and
health care knowledge necessitate capital improvements such as
additions and renovations to existing buildings. It is
generally accepted that modern health care facilities would
improve the quality of life and the health of the population.
In an effort to assist States to provide modern health care
facilities, Congress enacted section 242 of the National
Housing Act in 1968. Section 242 permits FHA to insure
mortgages of hospital sponsors used to finance the replacement,
modernization and rehabilitation of inefficient existing
facilities. Low interest rate costs attributable to FHA insured
financing, as well as the development of more cost-efficient
facilities substantially reduces both provider and Federal and
State reimbursement.
To be eligible for section 242 financing, a hospital must
obtain a certificate of need (CON) from a designated State
agency, or in the absence of CON authority, a State
commissioned feasibility study. In addition, the hospital needs
to demonstrate that there are reasonable State or local minimum
licensing and operating standards in effect.
The Certificate of Need program was established in 1968 by
Congress to control the number of hospital beds and
expenditures. When the Federal Certificate of Need program
began, forty-nine States enacted legislation for a Certificate
of Need program; Louisiana was the only State that did not.
However, as a result of continuing Federal policy
encouraging deregulation, CON authority has ``sunset'' in some
States. In fact, over the last 20 years, at least 18 States
have repealed their Certificate of Need programs. The problem
has been further compounded by at least two other factors. In
some States retaining CON authority, some projects will not
qualify for the Certificate of Need process. In others, the
relevant State agency often lacks the authority to commission
alternative feasibility studies.
H.R. 659 would address problems in States where section 242
mortgage insurance for hospitals is not available. The
legislation would also:
Allow uniform eligibility criteria to be
established to safeguard FHA insurance funds while
generating additional insurance premium revenues;
Complement the cost reduction goals of
Federal regulations;
Significantly reduce the cost to providers
of complying with expensive, pre-deregulation CON
eligibility requirements; and,
Provide major economic stimulus to State and
local communities, as well as construction and
permanent employment opportunities.
In the 107th Congress, provisions similar to H.R. 659 were
included in H.R. 3995, the Housing Affordability Act for
America. H.R. 3995 was considered and approved by the Committee
on Financial Services. However, H.R. 3995 was not considered by
the full House.
Hearings
No hearings were held on this legislation in the 108th
Congress.
Committee Consideration
The Committee on Financial Services met in open session on
Feburary 13, 2003, and ordered H.R. 659, the Hospital Morgage
Insurance Act of 2003, reported to the House with a favorable
recommendation by a voice vote, a quorum being present.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto. A
motion by Mr. Oxley to report the bill to the House with a
favorable recommendation was agreed to by a voice vote.
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee made findings that are
reflected in this report.
Performance Goals and Objectives
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the Committee establishes the
following performance related goals and objectives for this
legislation:
The legislation will ensure that hospitals in every State
are able to submit adequate information to demonstrate
eligibility for FHA mortgage insurance. HUD will ensure that
minimum standards for licensure and operations exist and will
be applied satisfactorily and develop guidelines for
documenting need and feasibility for the hospital. In cases
where the State continues to issue a Certificate of Need, in
addition to other requirements that may be established by the
Secretary, the applicant is required to show evidence of prior
approval under that program.
New Budget Authority, Entitlement Authority, and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee adopts as its
own the estimate of budget authority, entitlement authority, or
tax expenditures or revenues contained in the cost estimate
prepared by the Director of the Congressional Budget Office
pursuant to section 402 of the Congressional Budget Act of
1974.
Committee Cost Estimate
The Committee adopts as its own the cost estimate prepared
by the Director of the Congressional Budget Office pursuant to
section 402 of the Congressional Budget Act of 1974.
Congressional Budget Office Estimate
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, February 27, 2003.
Hon. Michael G. Oxley,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 659, the Hospital
Mortgage Insurance Act of 2003.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Susanne S.
Mehlman.
Sincerely,
Douglas Holtz-Eakin,
Director.
Enclosure.
H.R. 659--Hospital Mortgage Insurance Act of 2003
CBO estimates that implementing H.R. 659 would increase
offsetting collections (a credit against discretionary
spending) by $2 million to $3 million a year. Enacting the bill
would not affect direct spending or revenues.
H.R. 659 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act and
would impose no costs on state, local, or tribal governments.
Under the National Housing Act, the Federal Housing
Administration (FHA) of the U.S. Department of Housing and
Urban Development (HUD) offers to insure private loans used to
finance the modernization and rehabilitation of certain
hospital facilities. To qualify for such insurance, hospitals
must obtain a certificate of need (CON) issued from a
designated state agency. The CON determines whether or not the
hospital applying for the loan meets certain eligibility
requirements necessary for receipt of the FHA loan guarantee.
If a state has no CON process in place, the state must
commission or conduct an independent feasibility study in lieu
of the CON. According to FHA, 24 states currently do not have a
CON process in place and, many of these states do not have the
fiscal and managerial means to support a feasibility study on
their own.
H.R. 659 would give HUD the authority to establish a
process for determining the need and feasibility for a
hospital's proposed project, thus eliminating the requirement
for states to provide a feasibility study where no CON
procedure exists. To the extent that additional hospitals would
obtain loan insurance under this bill, CBO estimates that FHA
could earn additional offsetting collections (which are
recorded as a reduction in discretionary spending). Under
current law, FHA guarantees of hospital mortgages result in net
offsetting collections to the federal government because the
credit subsidy is estimated to be negative. That is, guarantee
fees for new mortgages more than offset the costs of expected
defaults, resulting in net collections from the loan guarantee
program.
CBO expects that H.R. 659's change to the application
process would create some increase in demand for the hospital
insurance program, especially in the 24 states without a CON
process. According to FHA, this program currently insures 64
mortgages with a combined outstanding principal balance of
about $4 billion. Only four mortgages out of those 64 are
located in non-CON states. Based on information from industry
sources, CBO expects that the need for capital improvements in
hospitals will continue to grow as hospitals are increasingly
under pressure to acquire state-of-the-art equipment and expand
services. In addition, since 2000 this program has generated
about $2 million in offsetting collections per year. CBO
estimates that enacting this legislation would result in $2
million to $3 million of additional collections each year. Such
offsetting collections are contingent on enactment of
appropriation bills, which establish the authority to make such
loan guarantees by specifying commitment levels. Thus,
enactment of H.R. 659 would not affect direct spending or
revenues.
The CBO staff contact for this estimate is Susanne S.
Mehlman. This estimate was approved by Peter H. Fontaine,
Deputy Assistant Director for Budget Analysis.
Federal Mandates Statement
The Committee adopts as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform
Act.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds that the
Constitutional Authority of Congress to enact this legislation
is provided by Article 1, section 8, clause 1 (relating to the
defense and general welfare of the United States), and clause 3
(relating to the power to regulate foreign and interstate
commerce).
Applicability to Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.
Section-by-Section Analysis of the Legislation
Section 1. Short title
This section establishes the short title of the bill, the
``Hospital Mortgage Insurance act of 2003''.
Section 2. Standards for determining need and feasibility for hospitals
This section amends section 242(d) of the National Housing
Act (12 U.S.C. 1715z-7) to require hospitals applying for FHA
mortgage insurance to meet State or local licensure and
operation requirements; and, in cases where there is no State
Certificate of Need program, it authorizes the HUD Secretary to
establish a process for determining the need and feasibility
for the hospital's proposed projects.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
SECTION 242 OF THE NATIONAL HOUSING ACT
mortgage insurance for hospitals
Sec. 242. (a) * * *
* * * * * * *
(d) In order to carry out the purpose of this section, the
Secretary is authorized to insure any mortgage which covers a
new or rehabilitated hospital, including equipment to be used
in its operation, subject to the following conditions:
(1) * * *
* * * * * * *
[(4) The Secretary shall not insure any mortgage under this
section unless he has received, from the State agency
designated in accordance with section 604(a)(1) or section 1521
of the Public Health Service Act for the State in which is
located the hospital covered by the mortgage, a certification
that (A) there is a need for such hospital, and (B) there are
in force in such State or the political subdivision of the
State in which the proposed hospital would be located
reasonable minimum standards of licensure and methods of
operation for hospitals. No such mortgage shall be insured
under this section unless the Secretary has received such
assurance as he may deem satisfactory from the State agency
that such standards will be applied and enforced with respect
to any hospital located in the State for which mortgage
insurance is provided under this section. If no such State
agency exists, or if the State agency exists but is not
empowered to provide a certification that there is a need for
the hospital as set forth in clause (A) of the first sentence,
the Secretary shall not insure any mortgage under this section
unless (A) the State in which the hospital is located has
conducted or commissioned and paid for the preparation of an
independent study of market need and feasibility that (i) is
prepared in accordance with the principles established by the
American Institute of Certified Public Accountants; (ii)
assesses, on a marketwide basis, the impact of the proposed
hospital on, and its relationship to, other health care
facilities and services, the percentage of excess beds,
demographic projections, alternative health care delivery
systems, and the reimbursement structure of the hospital; (iii)
is addressed to and is acceptable to the Secretary in form and
substance; and (iv) in the event the State does not prepare the
study, is prepared by a financial consultant selected by the
State and approved by the Secretary; and (B) the State complies
with the other provisions of this paragraph that would
otherwise be required to be met by a State agency designated in
accordance with section 604(a)(1) or section 1521 of the Public
Health Service Act. The proposed mortgagor may reimburse the
State for the cost of the independent feasibility study
required in the preceding sentence.]
(4)(A) The Secretary shall require satisfactory evidence that
the hospital will be located in a State or political
subdivision of a State with reasonable minimum standards of
licensure and methods of operation for hospitals and
satisfactory assurance that such standards will be applied and
enforced with respect to the hospital.
(B) The Secretary shall establish the means for determining
need and feasibility for the hospital. If the State has an
official procedure for determining need for hospitals, the
Secretary shall also require that such procedure be followed
before the application for insurance is submitted, and the
application shall document that need has also been established
under that procedure.
* * * * * * *