"APPROVAL OF PROJECTS FOR CONSTRUCTION OR MODERNIZATION

"SEC. 605. (a) For each project pursuant to a State plan approved under this part, there shall be submitted to the Surgeon General, through the State agency, an application by the State or a political subdivision thereof or by a public or other nonprofit agency. If two or more such agencies join in the project, the application may be filed by one or more of such agencies. Such application shall set forth

"(1) a description of the site for such project;

“(2) plans and specifications therefor, in accordance with regulations prescribed under section 603;

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'(3) reasonable assurance that title to such site is or will be vested in one or more of the agencies filing the application or in a public or other nonprofit agency which is to operate the facility on completion of the project;

"(4) reasonable assurance that adequate financial support will be available for the completion of the project and for its maintenance and operation when completed;

"(5) reasonable assurance that all laborers and mechanics employed by contractors or subcontractors in the performance of construction or modernization on the project will be paid wages at rates not less than those prevailing on similar work in the locality as determined by the Secretary of Labor in accordance with the Davis-Bacon Act, as amended (40 U.S.C. 27a-276a-5); and the Secretary of Labor shall have with respect to the labor standards specified in this paragraph the authority and functions set forth in Reorganization Plan Numbered 14 of 1950 (15 F.R. 3176; 5 U.S.C. 133z-15) and section 2 of the Act of June 13, 1934, as amended (40 U.S.C. 276c); and

"(6) a certification by the State agency of the Federal share for the project.

"(b) The Surgeon General shall approve such application if sufficient funds to pay the Federal share of the cost of such project are available from the appropriate allotment to the State, and if the Surgeon General finds (1) that the application contains such reasonable assurance as to title, financial support, and payment of prevailing rates of wages; (2) that the plans and specifications are in accord with the regulations prescribed pursuant to section 603; (3) that the application is in conformity with the State plan approved under section 604 and contains an assurance that in the operation of the project there will be compliance with the applicable requirements of the regulations prescribed under section 603 (e), and with State standards for operation and maintenance; and (4) that the application has been approved and recommended by the State agency and is entitled to priority over other projects within the State in accordance with the regulations prescribed pursuant to section 603 (a). Notwithstanding the preceding sentence, the Surgeon General may approve such an application for a project for construction or modernization of a rehabilitation facility only if it is also approved by the Secretary of Health, Education, and Welfare.

"(c) No application shall be disapproved until the Surgeon General has afforded the State agency an opportunity for a hearing.

"(d) Amendment of any approved application shall be subject to approval in the same manner as an original application.

"PAYMENTS FOR CONSTRUCTION OR MODERNIZATION

"SEC. 606. (a) Upon certification to the Surgeon General by the State agency, based upon inspection by it, that work has been performed upon a project, or purchases have been made, in accordance with the approved plans and specifications, and that payment of an installment is due to the applicant, such installment shall be paid to the State, from the applicable allotment of such State, except that (1) if the State is not authorized by law to make payments to the applicant, or if the State so requests, the payment shall be made directly to the applicant, (2) if the Surgeon General, after investigation or otherwise, has reason to believe that any act (or failure to act) has occurred requiring action pursuant to section 607, payment may, after he has given the State agency notice of opportunity for hearing pursuant to such section, be withheld, in whole or in part, pending corrective action or action based on such hearing, and (3) the total of payments under this subsection with respect to such project may not exceed an amount equal to the Federal share of the cost of construction of such project.

"(b) In case an amendment to an approved application is approved as provided in section 605 or the estimated cost of a project is revised upward, any additional payment with respect thereto may be made from the applicable allotment of the State for the fiscal year in which such amendment or revision is approved..

"(c) (1) At the request of any State, a portion of any allotment or allotments of such State under this part shall be available to pay one-half (or such smaller share as the State may request) of the expenditures found necessary by the Surgeon General for the proper and efficient administration during such year of the State plan approved under this part; except that not more than 2 per centum of the total of the allotments of such State for a year, or $50,000, whichever is less, shall be available for such purpose for such year. Payments of amounts due under this paragraph may be made in advance or by way of reimbursement, and in such installments, as the Surgeon General may determine.

"(2) Any amount paid under paragraph (1) to any State for any fiscal year shall be paid on condition that there shall be expended from State sources for such year for administration of the State plan approved under this part not less than the total amount expended for such purposes from such sources during the fiscal year ending June 30, 1964.

"WITHHOLDING OF PAYMENTS

"SEC. 607. Whenever the Surgeon General, after reasonable notice and opportunity for hearing to the State agency designated as provided in section 604(a) (1), finds

(a) that the State agency is not complying substantially with the provisions required by section 604 to be included in its State plan; or

(b) that any assurance required to be given in an application filed under section 605 is not being or cannot be carried out; or

“(c) that there is a substantial failure to carry out plans and specifications approved by the Surgeon General under section 605; or

"(d) that adequate State funds are not being provided annually for the direct administration of the State plan,

the Surgeon General may forthwith notify the State agency that

"(e) no further payments will be made to the State under this part, or "(f) no further payments will be made from the allotments of such State. from appropriations under any one or more subparagraphs or paragraphs of section 601, or for any project or projects, designated by the Surgeon General as being affected by the action or inaction referred to in paragraph (a), (b), (c), or (d) of this section,

as the Surgeon General may determine to be appropriate under the circumstances; and, except with regard to any project for which the application has already been approved and which is not directly affected, further payments may be wihheld, in whole or in part, until there is no longer any failure to comply (or carry out the assurance or plans and specifications or provide adequate State funds, as the case may be) or, if such compliance (or other action) is impossible, until the State repays or arranges for the repayment of Federal moneys to which the recipient was not entitled.

"JUDICIAL REVIEW

"SEC. 608. (a) If the Surgeon General refuses to approve any application for a project submitted under section 605 or section 610, the State agency through which such application was submitted, or if any State is dissatisfied with his action under section 607 such State, may appeal to the United States court of appeals for the circuit in which such State is located, by filing a petition with such court within sixty days after such action. A copy of the petition shall be forthwith transmitted by the clerk of the court to the Surgeon General, or any officer designated by him for that purpose. The Surgeon General shall thereupon file in the court the record of the proceedings on which he based his action, as provided in section 2112 of title 28, United States Code. Upon the filing of such petition, the court shall have jurisdiction to affirm the action of the Surgeon General or to set it aside, in whole or in part, temporarily or permanently, but until the filing of the record, the Surgeon General may modify or set aside his order.

"(b) The findings of the Surgeon General as to the facts, if supported by substantial evidence, shall be conclusive, but the court, for good cause shown, may remand the case to the Surgeon General to take further evidence, and the Surgeon General may thereupon make new or modified findings of fact and may modify his previous action, and shall file in the court the record of the further proceedings. Such new or modified findings of fact shall likewise be conclusive if supported by substantial evidence.

"(c) The judgment of the court affirming or setting aside, in whole or in part, any action of the Surgeon General shall be final, subject to review by the Supreme Court of the United States upon certiorari or certification as provided in section 1254 of title 28, United States Code. The commencement of proceedings under this section shall not, unless so specifically ordered by the court, operate as a stay of the Surgeon General's action.

"RECOVERY

"SEC. 609. If any facility with respect to which funds have been paid under section 606 shall, at any time within twenty years after the completion of construction

"(a) be sold or transferred to any person, agency, or organization (1) which is not qualified to file an application under section 605, or (2) which is not approved as a transferee by the State agency designated pursuant to section 604, or its successor, or

"(b) cease to be a public health center or a public or other nonprofit hospital, diagnostic or treatment center, facility for long-term care, or rehabilitation facility, unless the Surgeon General determines, in accordance with regulations, that there is good cause for releasing the applicant or other owner from this obligation.

the United States shall be entitled to recover from either the transferor or the transferee (or, in the case of a facility which has ceased to be public or nonprofit, from the owners thereof) an amount bearing the same ratio to the then value (as determined by the agreement of the parties or by action brought in the district court of the United States for the district in which the facility is situated) of so much of the facility as constituted an approved project or projects, as the amount of the Federal participation bore to the cost of the construction or modernization under such project or projects. Such right of recovery shall not constitute a lien upon said facility prior to judgment.

"LOANS FOR CONSTRUCTION OR MODERNIZATION OF HOSPITALS AND OTHER MEDICAL FACILITIES

"SEC. 610. (a) In order further to assist the States in carrying out the purposes of this title, the Surgeon General is authorized to make a loan of funds to the applicant for any project for construction or modernization which meets all of the conditions specified for a grant under this part.

"(b) Except as provided in this section, an application for a loan with respect to any project under this part shall be submitted, and shall be approved by the Surgeon General, in accordance with the same procedures and subject to the same limitations and conditions as would be applicable to the making of a grant under this part for such project. Any such application may be approved in any fiscal year only if sufficient funds are available from the allotment for the type of project involved. All loans under this section shall be paid directly to the applicant.

"(c) (1) The amount of a loan under this part shall not exceed an amount equal to the Federal share of the estimated cost of construction or modernization under the project. Where a loan and a grant are made under this part with respect to the same project, the aggregate amount of such loan and such grant shall not exceed an amount equal to the Federal share of the estimated cost of construction or modernization under the project. Each loan shall bear interest at the rate arrived at by adding one-quarter of 1 per centum per annum to the rate which the Secretary of the Treasury determines to be equal to the current average yield on all outstanding marketable obligations of the United States as of the last day of the month preceding the date the application for the loan is approved and by adjusting the result so obtained to the nearest one-eighth of 1 per centum. Each loan made under this part shall mature not more than forty years after the date on which such loan is made, except that

nothing in this part shall prohibit the payment of all or part of the loan at any time prior to the maturity date. In addition to the terms and conditions provided for, each loan under this part shall be made subject to such terms, conditions, and covenants relating to repayment of principal, payment of interest, and other matters as may be agreed upon by the applicant and the Surgeon General.

"(2) The Surgeon General may enter into agreements modifying any of the terms and conditions of a loan made under this part whenever he determines such action is necessary to protect the financial interest of the United States. “(3) If, at any time before a loan for a project has been repaid in full, any of the events specified in clause (a) or clause (b) of section 609 occurs with respect to such project, the unpaid balance of the loan shall become immediately due and payable by the applicant, and any transferee of the facility shall be liable to the United States for such repayment.

"(d) Any loan under this part shall be made out of the allotment from which a grant for the project concerned would be made. Payments of interest and repayments of principal on loans under this part shall be deposited in the Treasury as miscellaneous receipts.

"PART B-MORTGAGE INSURANCE FOR CONSTRUCTION AND MODERNIZATION OF HOSPITALS AND OTHER MEDICAL FACILITIES

"MORTGAGE INSURANCE

"SEC. 621. (a) The Surgeon General, on behalf of the United States, is authorized, upon application made by the mortgagor and the mortgagee pursuant to this part, to insure any mortgage (including advances on such mortgage during construction) against default in the payment of interest on, and the repayment of the principal of, the obligation secured by the mortgage if the mortgage is for the purpose of financing the cost of construction or modernization of a private nonprofit hospital or other medical facility referred to in paragraph (a) or (b) of section 601 or a proprietary nursing home, and meets the conditions provided in, or prescribed pursuant to, this part. The Surgeon General, on behalf of the United States, is also authorized to make commitments, upon such terms as he may prescribe, for the insuring of such mortgages prior to the date of their execution or disbursement thereon.

"(b) No mortgage shall be insured under this part unless

"(1) the application has been submitted to the Surgeon General through the State agency and has been filed jointly by the mortgagor and the mortgagee, and complies with the requirements of paragraphs (1) to (5), inclusive, of section 605 (a);

"(2) the State agency certifies and the Surgeon General finds that there is a need for the project as determined in accordance with the provisions required to be set forth in the State plan under section 604 (a) (4);

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'(3) the application contains an assurance from the mortgagor that there will be compliance with State standards for operation and maintenance;

"(4) the mortgagor is approved by the Surgeon General as responsible and able to repay the obligation secured by the mortgage, and the mortgagee is approved by the Surgeon General as responsible and able to service the mortgage properly;

"(5) the principal obligation secured by the mortgage (A) has a maturity satisfactory to the Surgeon General but not to exceed forty years, and provides for complete amortization of such principal obligation by periodic payments within such terms as the Surgeon General shall prescribe, and (B) bears interest (exclusive of charges made pursuant to section 623 (a)) at a rate not to exceed 5 per centum per annum of the amount of the principal obligation at any time, or not to exceed such rate (not in excess of 6 per centum per annum of such amount) as the Surgeon General finds necessary to meet the mortgage market;

"(6) the mortgage contains an undertaking (in accordance with regulations in force at the time the mortgage is approved for insurance) to the effect that, except as authorized by the Surgeon General and the mortgagee, the property will be used as a hospital or other medical facility until the mortgage has been paid in full or the contract of insurance is otherwise terminated; and

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"(7) the mortgagor and the mortgagee certify (1) that they will keep such records relating to the mortgage transaction and indebtedness, to the construction or modernization of the facility covered by the mortgage, and to the use of such facility as a hospital or other medical facility as are prescribed by the Surgeon General at the time of such certification, (2) that they will make such reports as may from time to time be required by the Surgeon General pertaining to such matters, and (3) that the Surgeon General or any authorized officer or employee of the Public Health Service or of any agency or institution employed or utilized by the Surgeon General for that purpose, shall have access to and the right to examine and audit such records.

"(c) (1) In the case of a project for the construction or modernization of a facility (other than a project for a proprietary nursing home) the amount of the principal obligation secured by the mortgage—

“(A) may not exceed 50 per centum of the value of the facility (including other property subject to the mortgage) after completion of the project, as determined by the Surgeon General, and

"(B) may not, when added to the amount of any grant or loan approved for such project under part A or of any other Federal grant or loan which the mortgagor has obtained or is assured of obtaining for such project under any other law of the United States, exceed 75 per centum of the value of the facility (including other property subject to the mortgage) after completion of the project, as determined by the Surgeon General. "(2) In the case of a project for construction or modernization of a proprietary nursing home, the amount of the principal obligation secured by the mortgage may not exceed 90 per centum of the value of the facility (including other property subject to the mortgage) after completion of the project, as determined by the Surgeon General.

"(d) Any contract of insurance executed by the Surgeon General under this part shall be conclusive evidence of the eligibility of the mortgage for insurance, and the validity of any contract for insurance so executed shall be incontestable in the hands of an approved mortgagee from the date of the execution of such contract, except for fraud or misrepresentation on the part of such approved mortgagee.

"(e) The failure of the mortgagor to make any payment provided for under the terms of a mortgage insured under this part shall be considered a default under such mortgage. If such default continues for a period of thirty days, the mortgagee shall be entitled to receive the insurance benefits upon conveyance to the Surgeon General of the title to the property with respect to which the mortgage was insured and assignment of all related claims of the mortgagee: Provided, That the mortgagee may, in the event of such default, assign to the Surgeon General all rights and interests arising under the mortgage and all related claims and assets, and in such event the insurance benefits shall be reduced by 1 per centum of the unpaid amount of the principal obligation. The insurance benefits shall include the sum of the unpaid principal amount of the loan and the unpaid interest on the loan to the date of default; and, in addition, shall include interest on such sum from the date of default to the date of payment of such benefits, at the rate determined by the Secretary of the Treasury for the purpose of section 622 (b) for the fiscal year during which such benefits are paid.

"(f) Nothing in this part shall be construed to preclude any forbearance for the benefit of the mortgagor which may be agreed upon by the parties to the insured mortgage and approved by the Surgeon General, or to preclude forbearance by the Surgeon General in the enforcement of the obligation after payment of the insurance benefits.

"(g) The maximum aggregate amount of insurance liability (contingent or actual) with respect to mortgages insured under this part and outstanding at any one time shall not exceed $250,000,000, increased by annual increments of $500,000,000 on July 1, 1965, and on July 1 of each of the next three years. For the purposes of this subsection, the insurance liability (contingent or actual) with respect to any mortgage insured under this part shall be deemed to be the outstanding principal obligation of the mortgage.