U.S. Department of Health and Human Services
Health Resources and Services Administration
Frequently Asked Questions
- What constitutes a change of status?
A change of status is a change in control or use of an assisted health facility within 20 years of completion of the project. A change of control occurs when the ownership of a facility is conveyed by sale, lease or management agreement, or in any other manner, to another entity. A change of use is the conversion of part or all of the grant-assisted project to a use that was different from the original approved use.
- Must I notify anyone when I sell my facility?
You must send a complete written notice by registered mail to the Central Office within 10 days of the sale.
Division of Facilities Compliance and Recovery
5600 Fishers Lane
Rockville, Maryland 20857
- Can I sell my facility before the end of the 20-year eligible use period is completed without a penalty?
Yes. A facility may be sold without a penalty if the new entity is a nonprofit entity, and accepts the grant obligations. If you sell to a for-profit, there will be a recovery claim, unless an irrevocable trust is established.
- If I sell my facility to a buyer which is a for-profit entity, is the for-profit entity eligible to establish an irrevocable trust?
Yes, if the buyer files a written request for the waiver. An irrevocable trust must be established by the buyer at the amount prescribed by the Secretary.
- If I sell my facility to a for-profit entity, how much will the recovery claim be?
The recovery amount cannot be calculated prior to the date of the sale. An owner must notify the HRSA Field Office when a transfer has taken place. Then the HRSA Field Office will calculate a recovery amount using either the Transaction Value Method or the Depreciated Reproduction Value Method.
- Must a recovery review be done if a grant was received for equipment only?
- Do management contracts represent a change of status?
Yes, a change of status review must be completed.
- If I enter into a Management Contract, are incentive fees acceptable?
Yes. Incentive fees are acceptable if they are based on specific performance targets such as the Consumer Price Index.
- If I enter into a Management Contract, may the contract provide for management fees and incentive fees to be paid from net revenues?
No. The contract would be unacceptable. If payment to a management firm is calculated as a percentage of its net income, the facility would no longer be nonprofit.
- Must a change of status review be done if health services are moved from one facility to another facility?
- What is required for an eligible entity to assume existing obligations?
Articles of incorporation and bylaws documenting the nonprofit status of the new eligible entity in control of the facility must be reviewed. In addition, the new eligible entity must submit a board resolution from its governing board accepting the Hill-Burton obligations of the original facility.
- Does the community service obligation continue if a facility is sold or transferred to a for-profit organization after the 20-year eligible use period has ended?
Contact the Office for Civil Rights for information concerning the community service obligation.
- If a facility has completed its uncompensated services obligation early (before the end of 20-years), does the 20-year eligible use period continue for purposes of recovery?
Yes, the two obligations are distinct and separate.