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"(1) which is a hospital (other than a hospital primarily for the care and treatment of mentally ill or tuberculous patients) or is operated in connection with a hospital, or

"(2) in which such nursing care and medical services are prescribed by, or are performed under the general direction of, persons licensed to practice medicine or surgery in the State.

"(j) The term 'construction' includes construction of new buildings, expansion, remodeling, and alteration of existing buildings, and initial equipment of any such buildings (including medical transportation facilities); including architects' fees, but excluding the cost of off-site improvements and, except with respect to public health centers, the cost of the acquisition of land.

"(k) The term 'cost' as applied to construction or modernization means the amount found by the Surgeon General to be necessary for construction and modernization, respectively, under a project, except that such term, as applied to a project for modernization of a facility for which a grant or loan is to be made from an allotment under section 602(a)(2), does not include any amount found by the Surgeon General to be attributable to expansion of the bed capacity of such facility.

"(1) The term 'modernization' includes alteration, major repair (to the extent permitted by regulations), remodeling, replacement, and renovation of existing buildings (including initial equipment thereof), and replacement of obsolete, built-in (as determined in accordance with regulations) equipment of existing buildings.

"(m) The term 'title', when used with reference to a site for a project, means a fee simple, or such other estate or interest (including a leasehold on which the rental does not exceed 4 per centum of the value of the land) as the Surgeon General finds sufficient to assure for a period of not less than fifty years' undisturbed use and possession for the purposes of construction and operation of the project.

"(n) The term 'mortgage' means a first mortgage (1) on real estate, in fee simple, or (2) on such other estate or interest (including a leasehold on which the rental does not exceed 4 per centum of the value of the land) as the Surgeon General finds sufficient to secure the mortgage debt and to assure, for a period of not less than fifty years from the date the mortgage is executed, undisturbed use and possession for the purposes of construction and operation of the project. The term 'first mortgage' means such classes of first liens as are commonly given to secure advances (including but not limited to advances during construction) on, or the unpaid purchase price of, real estate, under the laws of the State in which the real estate is located, together with the credit instrument or instruments, if any, secured thereby, and any mortgage may be in the form of one or more trust mortgages or mortgage indentures or deeds of trust, securing notes, bonds, or other credit instruments, and, by the same instrument or by a separate instrument, may create a security interest in initial equipment, whether or not attached to the realty.

"(o) The term 'mortgagee' includes the original lender under a mortgage, and his or its successors and assigns, and includes the holders of credit instruments issued under a trust mortgage or deed of trust pursuant to which such holders act by and through a trustee named therein.

"(p) The term 'mortgagor' includes the original borrower under a mortgage and its successors and assigns."

(b) The amendment made by subsection (a) shall become effective upon the date on enactment of this Act, except that

(1) all applications approved by the Surgeon General under title VI of the Public Health Service Act prior to such date, and allotments of sums appropriated prior to such date, shall be governed by the provisions of such title VI in effect prior to such date;

(2) allotment percentages promulgated by the Surgeon General under such title VI during 1962 shall continue to be effective for purposes of such title as amended by this Act for the fiscal year ending June 30, 1965;

(3) the terms of members of the Federal Hospital Council who are serving on such Council prior to such date shall expire on the date they would have expired had this Act not been enacted;

(4) no application with respect to a project for modernization of any facility in any State may be approved by the Surgeon General, for purposes of receiving funds from an allotment under section 602(a) (2) of the Public Health Service Act, as amended by this Act, before July 1, 1965, or before

such State has had a State plan approved by the Surgeon General as meeting the requirements of section 604 (a) (4) (E) as well as the other require ments of section 604 of such Act as so amended.

(c) No application for insurance with respect to a mortgage on a nursing home under section 232 of the National Housing Act shall be approved by the Federal Housing Commissioner unless such application is filed before the close of the sixth month following the month in which this Act is enacted.

(d) (1) The sixth sentence of paragraph "Seventh" of section 5136 of the Revised Statutes, as amended (12 U.S.C. 24), is amended by inserting after the words "Federal home loan banks," the following: "or obligations which are insured by the Surgeon General of the Public Health Service under title VI of the Public Health Service Act".

(2) The third sentence of the first paragraph of section 24 of the Federal Reserve Act, as amended (12 U.S.C. 371), is amended by inserting after the words "or title V of the Housing Act of 1949, as amended," the following: "or which are insured by the Surgeon General of the Public Health Service pursuant to title VI of the Public Health Service Act,”.

(e) (1) Section 35(4) of chapter III of the Act entitled "An Act to regulate the business of life insurance in the District of Columbia", approved June 19, 1934 (48 Stat. 1125), as amended (D.C. Code, 1961 edition, sec. 35-535), is further amended by inserting after the words "the National Housing Act, as amended," the following: "or insured under the provisions of title VI of the Public Health Service Act,".

(2) Section 18(4) of chapter II of the Act entitled "An Act to provide for the regulation of the business of fire, marine, and casualty insurance, and for other purposes", approved October 9, 1940 (54 Stat. 1063), as amended (D.C. Code, 1961 edition, sec. 35-1321), is further amended to read as follows:

"(4) Bonds or notes secured by mortgages or deeds of trust insured by the Federal Housing Administrator, or insured under the provisions of title VI of the Public Health Service Act, or in debentures issued by the Federal Housing Administrator: Provided, That the restrictions in subparagraph (3) of this section in regard to the ratio of the loan to the value of the property shall not apply to such insured mortgages or deeds of trust."

(f) Subsection (a) of section 304 of the Trust Indenture Act of 1939 (15 U.S.C. 77ddd) is amended by striking out the word "or" at the end of subparagraph (8); by striking out the period at the end of subparagraph (9) and inserting in lieu thereof a semicolon and the word "or"; and by adding after subparagraph (9) a new subparagraph as follows:

"(10) any security issued under a mortgage or trust deed indenture as to which a contract of insurance under title VI of the Public Health Service Act is in effect; and any such security shall be deemed to be exempt from the provisions of the Securities Act of 1933 to the same extent as though such security were specifically enumerated in section 3 (a) (2), as amended, of the Securities Act of 1933 (15 U.S.C. 77c(a) (2)).”

(g) Section 263 of chapter X of the Bankruptcy Act (11 U.S.C. 663) is amended by adding at the end thereof the following: "Nothing contained in this chapter shall be deemed to affect or apply to the creditors of any corporation under a mortgage insured pursuant to title VI of the Public Health Service Act.".

EXECUTIVE OFFICE OF THE PRESIDENT,

BUREAU OF THE BUDGET, Washington, D.C., March 31, 1964.

Hon. OREN HARRIS,

Chairman, Committee on Interstate and Foreign Commerce,

House of Representatives,

Washington, D.C.

DEAR MR. CHAIRMAN: This is in response to your request for the views of the Bureau of the Budget on H.R. 10041, a bill to improve the public health through revising, consolidating, and improving the hospital and other medical facilities provisions of the Public Health Service Act.

This bill is the same in most major respects as the administration's proposed legislation which was sent to Congress on February 10, 1964. It differs from that proposal in two significant ways, however, by omitting language specifically requiring the availability of the facilities without discrimination on account of

race, creed, or color and by reducing the total authorization requested by the administration for the modernization of existing medical facilities.

H.R. 10041 would eliminate the "separate but equal" provision of the HillBurton Act and require that State plans provide for adequate facilities "for all persons residing in the State." The bill also authorizes a requirement that before State approval of any project, assurance must be given that "the facility or portion thereof to be constructed or modernized will be made available to all persons residing in the territorial area of the applicant."

The administration proposal is more specific in this regard in that it expressly provides that the availability is to be "without discrimination on account of race, creed, or color." We recommend inclusion of the language in the administration's proposal because it more clearly expresses the national policy on this matter and because it would remove any basis for the contention that there may be discrimination on account of race, creed, or color, in the availability of such facilities.

The modernization of existing hospitals has been a problem of increasing importance for many years and one which cannot be met adequately under the present Hill-Burton program. Although the greatest requirements are in larger urban areas, the effort to overcome functional obsolescence and to correct fire, safety, or other hazards to patients' health must be made in every hospital and medical facility. Thus even the smaller hospitals in rural areas may require modernization in order to raise the general level of medical care. The total estimated cost of modernization is considerable, with an estimated present backlog of several billion dollars. Moreover, it cannot be looked upon as a one-time requirement to be met over a period of a few years because hospitals which were built at such a rapid rate in the two decades before 1930 will soon add to the volume of obsolescence.

The administration's draft bill included $340 million for 5 years in a special category to begin support of modernization projects in fiscal year 1965. H.R. 10041 contains only $160 million of authorizations for the years 1966 to 1969. Furthermore, it contains authority permitting use of $70 million of that amount for other purposes, so that the most which can be guaranteed for modernization support for the entire Nation over the 4-year period is limited to $90 million. Neither the $90 million nor the maximum of $160 million for that purpose are adequate if a meaningful national effort is to be made.

Since its inception, the Hill-Burton program has made a major contribution in the national effort to raise the level of medical care and to make such care available in every area. Now, with this program due to expire on June 30, 1964, we believe it is highly appropriate to consider needed improvements such as reorientation to meet the modernization needs of existing medical faciilties, the enlargement of the grant authorization for nonprofit nursing homes and other long-term care projects in combination with mortgage insurance for proprietary nursing homes, and the provision of Federal financial support for the encouragement of areawide planning of the diverse types of facilities required for modern medical practice.

The Bureau of the Budget recommends enactment of H,R. 10041, amended to include the nondiscrimination language set forth in the administration's proposal, and the authorization of $340 million specifically for modernization beginning in the fiscal year 1965. The enactment of H.R. 10041, so amended, would be in accord with the program of the President.

Sincerely yours,

PHILLIP S. HUGHES,

Assistant Director for Legislative Reference.

Hon. OREN HARRIS,

U.S. DEPARTMENT OF LABOR,
OFFICE OF THE SECRETARY,
Washington, March 13, 1964.

Chairman, Committee on Interstate and Foreign Commerce,
House of Representatives, Washington, D.C.

DEAR MR. CHAIRMAN: This is in further response to your request for our views on H.R. 10041, the Hospital and Medical Facilities Amendments of 1964. The Department of Labor strongly favors the enactment of legislation to implement recommendations in President Johnson's special health message. However, we believe that the Department of Health, Education, and Welfare can best

advise whether H.R. 10041 would effectively carry out these recommendations. From the standpoint of our particular responsibilities, we note with approval that the bill contains provisions to protect the labor standards of laborers and mechanics employed on projects authorized by this legislation.

The Bureau of the Budget advises that there is no objection to the submission of this report from the standpoint of the administration's program.

Yours sincerely,

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OFFICE OF THE ADMINISTRATOR,
Washington, D.C., March 20, 1964.

Subject: H.R. 10041, 88th Congress (Representative Harris).
Hon. OREN HARRIS,

Chairman, Committee on Interstate and Foreign Commerce,
House of Representatives; Washington, D.C.

DEAR MR. CHAIRMAN: This is in further reply to your request for the views of this Agency on H.R. 10041, a bill to be cited as the Hospital and Medical Facilities Amendments of 1964.

The Housing Agency is primarily concerned with those provisions of the bill which deal with State and local planning of hospital and other medical facilities and with the proposed program of mortgage insurance for the construction and modernization of such facilities.

The bill would authorize a 5-year program of grants to assist in the development and implementation of comprehensive regional, metropolitan area, or other local plans for health and related facilities and services. These local plans would, except as provided by regulations of the Surgeon General, form à basis for State plans which would set forth the type, location, and priority of needed health facilities: Any construction or modernization project seeking grant assistance would have to be in accord with a State plan.

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Public or nonprofit private agencies and organizations would be eligible to receive these planning grants, which could be made for up to 66% percent of the cost of approved projects, except that during the first 3 years of a project up to 100 percent of such cost could be granted under special conditions. The proposal would authorize the appropriation of $5 million for fiscal year 1965 and $10 million for each of the succeeding 4 fiscal years.

This Agency has no objection to the establishment of the proposed new medical facilities planning program. Such a program will help to assure that the construction and renovation assistance provided under the bill is used effectively and efficiently. In this connection we should like to call your attention to the federally assisted comprehensive planning program administered by this Agency under section 701 of the Housing Act of 1954. Comprehensive planning assisted under section 701 deals with general development planning and coordination of State, regional, and local development programs. Over 3,000 acres of under 50,000 population-including over 800 localities of under 2,500 population—have received or are receiving assistance for such planning through their State planning agencies. In addition, over 160 metropolitan areas and urban regions are receiving section 701 assistance in carrying on metropolitan or areawide comprehensive planning.

The proposed medical facilities planning is a specialized type of functional planning which extends substantially beyond the scope of the planning assisted under section 701. However, the medical facilities planning should be closely related to any local comprehensive planning being carried on with regard to such matters as population projections and the location and density of residential and other development; the location of highways, water, sewer, and other public facilities needed for hospitals and other health facilities; and the scheduling and financing of public facilities. In addition, the statewide medical facilities plan developed on the basis of these assisted local plans should be properly coordinated with other statewide development planning. The majority of the States are currently carrying on such planning programs, 24 of them with section 701 assistance. Again, such planning must be closely related to medical facilities planning with regard to such matters as the location and scheduling of other State-sponsored public facilities.

We are pleased to note that the Secretary of Health, Education, and Welfare, in his recent testimony on H.R. 10041 before your committee, explicitly recognized the importance of close coordination with general development planning and stated that the Surgeon General would take steps to assure that health facilities and services are developed accordingly. He also indicated that his Department planned to take all appropriate steps to assure coordination at the Federal level.

The bill would terminate the program of mortgage insurance for proprietary nursing homes administered by this Agency under section 232 of the National Housing Act. The expiration date for this program would be 6 months after enactment of H.R. 10041. The bill would instead authorize the Surgeon General to establish a program of mortgage insurance for the construction or modernization of proprietary nursing homes and private nonprofit hospitals, nursing homes, and other medical facilities. The agency administering the State medical facilities plan would be required to determine, in accordance with the State plan, that there was need for the assisted facility.

The Housing Agency has no objection to these provisions of the bill.

The Bureau of the Budget has advised that there is no objection to the presentation of this report from the standpoint of the administration's program. Sincerely yours,

ROBERT C. WEAVER, Administrator.

DEPARTMENT OF THE INTERIOR,

OFFICE OF THE SECRETARY, Washington, D.C., March 10, 1964.

Hon. OREN HARRIS,

Chairman, Committee on Interstate and Foreign Commerce, House of Representatives, Washington, D.C.

DEAR MR. HARRIS: Your committee has requested our comments on H.R. 10041, a bill to improve the public health through revising, consolidating, and improving the hospital and other medical facilities provisions of the Public Health Service Act.

In view of the fact that the program authorized by this bill is the primary responsibility of the Secretary of Health, Education, and Welfare, our comments will be restricted to those areas of primary interest to this Department.

Section 602 of the bill provides for allotments among the States, including the Virgin Islands, Guam, and American Samoa, of the sums authorized by section 601 of the bill for each of the types of facilities mentioned. The allotments of the Virgin Islands, American Samoa, and Guam for any fiscal year are increased up to one-half of the minimums applicable to the individual States, but only to the extent these territories satisfy the Surgeon General, prior to the allotment date, that the allotment will be obligated for the purposes of section 601 within the availability period. The minimum allotments for the individual States are $50,000 for grants for the construction of rehabilitation facilities; $100,000 for the construction of diagnostic or treatment centers; and $200,000 for the construction of facilities for long-term care, construction of hospitals and public health centers, and modernization of facilities referred to in section 601. In the case of the States no showing must be made that the increased allotments can be obligated within the availability period.

Finally, the sums allotted under section 602 of the bill to the territories for a fiscal year remain available for the next 2 fiscal years in addition to the sums allotted for each of such 2 fiscal years.

The Virgin Islands, consisting of St. Thomas, St. John, and St. Croix, have developed into one of the major tourist areas of the world. This has resulted in providing an extraordinarily large amount of hospital and medical care to persons who are not residents of any of these islands. During 1962, the Knud Hansen Memorial Hospital, which is the only hospital on St. Thomas, provided inpatient services to nonresidents which represented 34.3 percent of the total number of patient-days in the hospital: At this same hospital, during the period between January and November 1962, 44 percent of the admissions for obstetric care were nonresidents. In December the figure was 46 percent. Thus, more than one-third of the care at this hospital alone is not covered by the provision of the Hill-Burton Act.

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