---
kind: "section"
citation: "42 U.S.C. § 1395uu"
title: "42"
title_heading: "The Public Health and Welfare"
number: "1395uu"
heading: "Payments to promote closing or conversion of underutilized hospital facilities"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/42/1395uu"
units:
  - "Chapter 7 — Social Security"
  - "Subchapter XVIII — Health Insurance for Aged and Disabled"
  - "Part E — Miscellaneous Provisions"
---

# §1395uu. Payments to promote closing or conversion of underutilized hospital facilities

- (a) **Transitional allowances; procedures applicable—** Any [hospital](/usc/42/1395x.md?p=e) may file an application with the [Secretary](/usc/42/1301.md?p=a-6) (in such form and [including](/usc/42/1301.md?p=b) such data and information as the [Secretary](/usc/42/1301.md?p=a-6) may require) for establishment of a transitional allowance under this subchapter with respect to the closing or conversion of an underutilized [hospital](/usc/42/1395x.md?p=e) [facility](/usc/42/1320a–3.md?p=c-5-B). The [Secretary](/usc/42/1301.md?p=a-6) also may establish procedures, consistent with this section, by which a [hospital](/usc/42/1395x.md?p=e), before undergoing an actual closure or conversion of a [hospital](/usc/42/1395x.md?p=e) [facility](/usc/42/1320a–3.md?p=c-5-B), can have a determination made as to whether or not it will be eligible for a transitional allowance under this section with respect to such closure or conversion.
- (b) **Allowable costs as transitional allowances; findings and determinations—** If the [Secretary](/usc/42/1301.md?p=a-6) finds, after consideration of an application under [subsection (a)](#a), that—
  - (1) the [hospital](/usc/42/1395x.md?p=e)’s closure or conversion—
    - (A) is formally initiated after September 30, 1981,
    - (B) is expected to benefit the program under this subchapter by (i) eliminating excess bed capacity, (ii) discontinuing an underutilized service for which there are adequate alternative sources, or (iii) substituting for the underutilized service some other service which is needed in the area, and
    - (C) is consistent with the findings of an appropriate health planning [agency](/usc/42/1397n–12.md?p=1) and with any applicable [State](/usc/42/1395x.md?p=x) program for reduction in the number of [hospital](/usc/42/1395x.md?p=e) beds in the [State](/usc/42/1395x.md?p=x), and
  - (2) in the case of a complete closure of a [hospital](/usc/42/1395x.md?p=e)—
    - (A) the [hospital](/usc/42/1395x.md?p=e) is a private [nonprofit](/usc/42/300s–3.md?p=3) [hospital](/usc/42/1395x.md?p=e) or a local governmental [hospital](/usc/42/1395x.md?p=e), and
    - (B) the closure is not for replacement of the [hospital](/usc/42/1395x.md?p=e),

  the [Secretary](/usc/42/1301.md?p=a-6) may include as an allowable cost in the [hospital](/usc/42/1395x.md?p=e)’s reasonable cost (for the purpose of making payments to the [hospital](/usc/42/1395x.md?p=e) under this subchapter) an amount (in this section referred to as a “transitional allowance”), as provided in [subsection (c)](#c).

- (c) **Factors determinative of transitional allowance—**
  - (1) Each transitional allowance established shall be reasonably related to the prior or pro­spective use of the [facility](/usc/42/1320a–3.md?p=c-5-B) involved under this subchapter and shall recognize—
    - (A) in the case of a [facility](/usc/42/1320a–3.md?p=c-5-B) conversion or closure (other than a complete closure of a [hospital](/usc/42/1395x.md?p=e))—
      - (i) in the case of a private [nonprofit](/usc/42/300s–3.md?p=3) or local governmental [hospital](/usc/42/1395x.md?p=e), that portion of the [hospital](/usc/42/1395x.md?p=e)’s costs attributable to capital assets of the [facility](/usc/42/1320a–3.md?p=c-5-B) which have been taken into account in determining reasonable cost for purposes of determining the amount of payment to the [hospital](/usc/42/1395x.md?p=e) under this subchapter, and
      - (ii) in the case of any [hospital](/usc/42/1395x.md?p=e), transitional operating cost increases related to the conversion or closure to the extent that such operating costs exceed amounts ordinarily reimbursable under this subchapter; and
    - (B) in the case of complete closure of a [hospital](/usc/42/1395x.md?p=e), the outstanding portion of actual debt obligations previously recognized as reasonable for purposes of reimbursement under this subchapter, less any salvage value of the [hospital](/usc/42/1395x.md?p=e).
  - (2) A transitional allowance shall be for a period (not to exceed 20 years) specified by the [Secretary](/usc/42/1301.md?p=a-6), except that, in the case of a complete closure described in [paragraph (1)(B)](#c-1-B), the [Secretary](/usc/42/1301.md?p=a-6) may provide for a lump-sum allowance where the [Secretary](/usc/42/1301.md?p=a-6) determines that such a one-time allowance is more efficient and economical.
  - (3) A transitional allowance shall take effect on a date established by the [Secretary](/usc/42/1301.md?p=a-6), but not earlier than the date of completion of the closure or conversion concerned.
  - (4) A transitional allowance shall not be considered in applying the limits to costs recognized as reasonable pursuant to the third sentence of subparagraph (A) and subparagraph (L)(i) of [section 1395x(v)(1) of this title](/usc/42/1395x.md?p=v-1), or in determining whether the reasonable cost exceeds the customary charges for a service for purposes of determining the amount to be paid to a provider pursuant to sections [1395f(b)](/usc/42/1395f.md?p=b) and [1395l(a)(2)](/usc/42/1395l.md?p=a-2) of this title.
- (d) **Hearing to review determination—** A [hospital](/usc/42/1395x.md?p=e) dissatisfied with a determination of the [Secretary](/usc/42/1301.md?p=a-6) on its application under this section may obtain an informal or formal hearing, at the discretion of the [Secretary](/usc/42/1301.md?p=a-6), by filing (in such form and within such time period as the [Secretary](/usc/42/1301.md?p=a-6) establishes) a request for such a hearing. The [Secretary](/usc/42/1301.md?p=a-6) shall make a final determination on such application within 30 days after the last day of such hearing.

## Source credit

(Aug. 14, 1935, ch. 531, title XVIII, § 1884, as added Pub. L. 97–35, title XXI, § 2101(a)[(1)], Aug. 13, 1981, 95 Stat. 785; amended Pub. L. 97–248, title I, § 128(a)(6), Sept. 3, 1982, 96 Stat. 366.)

## Notes

### Editorial Notes

### Amendments

1982—Subsec. (d). Pub. L. 97–248 redesignated second subsec. (c), relating to hearing to review determination, as subsec. (d).

### Statutory Notes and Related Subsidiaries

### Effective Date of 1982 Amendment

Amendment by Pub. L. 97–248 effective as if originally included as part of this section as this section was enacted by the Omnibus Budget Reconciliation Act of 1981, Pub. L. 97–35, see section 128(e)(2) of Pub. L. 97–248, set out as a note under section 1395x of this title.

### Effective Date

Pub. L. 97–35, title XXI, § 2101(c), Aug. 13, 1981, 95 Stat. 787, provided that: “The amendment made by subsection (a) [enacting this section and amending section 1396b of this title] shall apply only to services furnished by a hospital during any accounting year beginning on or after October 1, 1981.”

### Payments To Promote Closure and Conversion of Underutilized Hospital Facilities

Pub. L. 98–369, div. B, title III, § 2353, July 18, 1984, 98 Stat. 1099, directed Secretary of Health and Human Services to carry out a study and report to Congress prior to Mar. 31, 1985, on modifications required in this section in order to conform the closure and conversion program authorized in that section to the prospective payment system under section 1395ww(d) of this title, so as to provide assistance to hospitals which may have particular problems in converting facilities (or parts thereof) from acute care to less intensive care or in closing facilities (or parts thereof), such report to include recommendations as to how, and whether, implementation of this section as modified may result in reductions in total hospital inpatient costs and total expenditures under this subchapter, and prohibited from implementing this section prior to Mar. 31, 1985.

### Establishment and Evaluation of Transitional Allowances; Report and Recommendations to Congress

Pub. L. 97–35, title XXI, § 2101(b), Aug. 13, 1981, 95 Stat. 786, prohibited Secretary of Health and Human Services from establishing under this section transitional allowances with respect to more than 50 hospitals prior to Jan. 1, 1984, and directed Secretary to evaluate effectiveness of program of transitional allowances established under this section and, not later than Jan. 1, 1983, report to Congress on such evaluation and include in such report such recommendations for such legislative changes as deemed appropriate.