42 CFR Part 124, Subpart H are the Hill-Burton recovery and waiver recovery regulations. The Secretary of Health and Human Services (Secretary) is entitled to recover funds and authorized to waive that right of recovery under certain circumstances on a grant assisted facility that was sold, transferred, or ceases to be a legal organization that was qualified to receive funding under the Hill-Burton Act at any time within 20 years from completion of the grant aided construction or modernization.
Right of Recovery and Waiver of Recovery
A public or other nonprofit facility assisted under the Hospital Survey and Construction Act (the Hill-Burton Act), either Titles VI or XVI must retain its eligible status for a period of 20 years from completion of the assisted project. If an assisted facility changes its status, in either its ownership or its use, a recovery action must be considered. If an obligated facility is transferred to an ineligible entity (a for profit entity or a non-profit entity unwilling to assume service obligations through sale, lease or management contract), the federal government is entitled to a recovery.
However, the Secretary may issue a good cause waiver which conditionally waives the right of recovery of federal funds if a facility continues to be used in a manner consistent with the purposes of the Public Health Service (PHS) Act. A good cause waiver of recovery may be granted if a facility that received assistance ceases to be used for an eligible purpose, and there are assurances that its service obligations will be assumed by an eligible entity. Subsequent changes of use or control which occur within the 20-year obligation period must be reviewed for consideration of a recovery action.
Additionally, if there is a change of control within the 20 year eligible use period of a facility to another eligible entity which agrees to assume the Hill-Burton obligations, no recovery action is necessary. This change of status must also be approved by the Secretary.
The Secretary may issue a waiver to a proprietary entity which obtained control or purchased an obligated facility, provided that the entity agrees to establish an irrevocable trust to provide eligible health services.
Change of Status and Notification Requirement
A change of status includes a facility ceasing to be a legal organization qualified to have filed a grant application. A change of status occurs when a facility is closed or conveyed to another entity through lease, merger, bankruptcy, foreclosure or other arrangement. Also included could be a sale or management agreement.
A change of use is when a facility ceases to be used for one or more of the purposes for which it was constructed.
Any change of status or use of a facility within 20 years of completion of the assisted project initiates the recovery process. The grantee must notify the Secretary through HRSA’s Division of Poison Control and Healthcare Facilities within 10 days of the change, whether the change occurred before or after the 20 year period. If you think your organization has a change of status or use, please contact the Project Officer assigned to your grant. If you do not know the Project Officer assigned to your grant, please call 301-443-5656 or email DFCRCOMM@hrsa.gov.