Amends title XVIII (Medicare) of the Social Security Act to provide that with respect to the establishment of an appropriate allowance for depreciation and for interest on capital indebtedness with respect to a hospital's asset which has undergone a change of ownership: (1) the valuation of the asset as a result of the change shall not exceed the net book value of the asset; (2) to the extent that the sum of the capital indebtedness and equity exceeds the net book value of the asset, capital indebtedness and equity capital shall not be recognized; and (3) only the amount (if any) by which the net book value of the asset exceeds the equity capital established with respect to the asset shall be recognized as capital indebtedness. Directs the Secretary of Health and Human Services, in the case of the disposition of depreciable assets for which depreciation has been taken and reimbursed as a reasonable cost under Medicare, to provide for an appropriate net depreciation adjustment in the reimbursement of the transferor so as to reflect any gain or loss upon such disposition relative to the net book value of the asset. Defines "net book value" to mean, with respect to an hospital asset the ownership of which has changed, the valuation of the asset established for Medicare (less accumulated depreciation) on the date before the date of the ownership change.

Sets forth effective date provisions. Requires a report to Congress from the Secretary concerning net appreciation adjustments in reimbursements to hospitals under Medicare.

Prohibits, in determining the reasonable cost of services, the recognition as reasonable: (1) in the provision of health care services, costs attributable to the negotiation or settlement of the sale or purchase of any capital asset for which a valuation has previously been established under Medicare; (2) rental charges incurred for a capital asset the ownership of which has been transferred under a sale-and- leaseback agreement to the extent the charges exceed the amount which the provider would have included in reimbursable costs had the provider retained legal title to the asset; and (3) in the case of a capital asset for which a valuation has been established for purposes of Medicare, rental charges incurred for the lease of the asset under a lease-purchase agreement to the extent the charges exceed the amount which would have been included in reimbursable costs with respect to the provider having legal title to the asset.