The effort to make PSRO's an instrument of better care has been part of the association's whole activity in this area-its gathering together of all the professional and provider groups affected by PSRO, its extensive task force effort to provide elective input in the developing program, its continuing contract with the Federal officials and agencies responsible for PSRO implementation, and the formation of the new AMA ad hoc committee on PSRO.

At the same time, we are receiving only the first returns concerning the impact of PSRO's. Few have had more than 1 year's experience in actual review, despite the more than 3 years since the law's enactment. It should be borne in mind that the first several years of any new program are "shakedown" years which provide only a minimal basis for evaluation. The complexities of PSRO will prolong the period needed for proper evaluation.

Moreover, PSRO must be correlated with other congressional programs and the other review requirements mandated by Congress to which I referred earlier, such as the utilization review requirements of medicare and medicaid, program review teams and applicable hospital accreditation requirements.

Mr. Chairman, there are individuals who will advocate unequivocally that PSRO is the only viable vehicle for quality assurance under any national health insurance program which may be formulated. In our view the PSRO record justifying the assumption by PSRO of such a massive task is far from clear.

We therefore caution against attaching PSRO-lock, stock, and barrel-to any national health insurance program. We have yet to see the evidence as to whether PSRO's can be effective in improving care for the limited group of programs now reviewed, and we believe that Congress and the Nation should have the opportunity to review and evaluate that evidence before PSRO's become an integral part of the health care of every man, woman, and child in the country. To extend the PSRO program, without having any favorable operational record, to 215 million individuals and carrying the potential of permanently molding health care for everyone in this country, would be premature and unsupportable.

It is our considered opinion that in the absence of a clear, favorable record, it would not be advisable to impose any single, monolithic review program such as PSRO upon our entire health system in any national health insurance program. The varied patterns and types of health care in this country can best be fostered in an atmosphere free of rigid uniform controls. Flexibility of review and flexibility in development of health care delivery must be provided if there is to be continued improvement in health care.

Mr. Chairman, shortly after enactment of PSRO our association identified several critical areas of the PSRO law calling for early amendment. The substance of two of our proposals-eligibility of statewide PSRO's and deferment of the date when the Secretary could recognize entities other than professional associations as PSRO's-has been incorporated in recent amendments adopted at the close of last year in Public Law 94-182. The other amendments are still germane. We have attached a listing of our amendments to this statement, and they are embodied in H.R. 5515 and H.R. 5528, pending before your full committee.

Without going into detail here, these amendments address many important areas, including the proper role of norms, criteria, and standards of care, the volume of review to be required, elimination of harsh penalties, restructuring of procedural reporting requirements, protection of confidentiality, and provision for immunity of review records. We invite your consideration of all our amendments as you examine the PSRO program.

Before closing, I want to point out the absolute necessity for providing for flexibility within any review system. Thus flexibility must be provided within PSRO itself, and we believe that whether PSRO is a success or a failure will depend as much on the leeway it allows at the local level as on any other factor. In this regard we are concerned that while Congress provided for and intended discretion and autonomy in the local PSRO, the development of the program is burdened by Federal direction and restrictions.

In our program for national health insurance, H.R. 6222, the Comprehensive Health Care Insurance Act of 1975, we have sought to provide in programs of review the flexibility which we feel is so important to continued improvement of health care. The advancements in our health care system which have marked its superiority are based in large part upon the freedom of scientists, researchers, and practitioners to apply their knowledge and skills in a creative and scientifically stimulating environment. Innovation and development must continue to be encouraged, lest our high standards of health care become stagnant.

[The attachment referred to follows:]

SUMMARY OF H.R. 5515, H.R. 5528 (REFERRED TO HOUSE COMMITTEE ON WAYS AND MEANS AND COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE) AND S. 1472 (REFERRED TO SENATE COMMITTEE ON FINANCE)

PSRO AMENDMENTS1

The following reflects the substance of amendments to PRSO contained in the above bills:

(1) The definition of “qualified organization" under Section 1152(b) (1) (A) should be expanded so that organizations, including foundations, designated by medical societies will be specifically eligible for consideration as a PSRO. (2) (A) Authority for the Secretary to enter into PSRO contracts with groups other than professional associations, as provided in Section 1152 (b) (1) (B), should be postponed from January 1, 1976, to July 1, 1978. (b) The National Professional Standards Review Council should conduct a study to review the extent of professional participation in the implementation of the PSRO program. Such study would be completed by January 1, 1978, and thereupon presented to Congress, at which time Congress could determine whether, and under what conditions, other agencies would be allowed to serve as PSROs.

(3) (A) Section 1156 should be amended to specifically direct the respective PSROS to ascertain and develop appropriate guidelines, (referring to norms, criteria, and standards) drawing upon the expertise of national state, and county medical associations and specialty societies.

(B) The law should be amended to specifically state that such guidelines (referring to norms, criteria and standards) are to be guides only and cannot be substituted for individual professional judgment.

(4) Consistent with policy in opposition to preadmission certification of institutional care, such authority presently existing in the PSRO law should be deleted.

Amendments sponsored by American Medical Association to Section 249F of P.L.

92-603.

(5) "Regular Review" of Patient and Provider profiles should not be required to be based upon case-by-case analysis of care provided or received. Section 1155(a)(4) should be amended to allow for the review on a sample basis.

(6) Section 1160 (b) (3) providing for financial penalties in lieu of termination or suspension should be repealed. A system of graduated sanctions, clearly stating the maximum applicable penalty (such as, a suspension up to 30 days for a first finding by the PSRO that the provider or practitioner has established a pattern of practice which is unacceptable) should be established. (7) Certain reporting provisions require PSROS to submit to the Statewide Council, for forwarding to the Secretary, all determinations made by the PSRO that a practitioner or a provider has violated any obligations relating to necessity, quality or situs of care furnished (Sections 1157 and 1160(b) (1)). These provisions should be amended to require the PSRO to report to the Statewide Council only when it determines that a pattern of practice requires such attention or that a provider or practitioner has grossly and flagrantly violated the obligations imposed under the Act. Such determinations should be made only after a conference with the provider or practitioner in an attempt to seek compliance, and a finding that he or it has shown an inability or lack of desire or intention to comply with the program requirements.

(8) Section 1167 should be amended to provide that the written records of Professional Standards Review Organizations, Statewide Professional Standards Review Councils, and the National Professional Standards Review Council shall not be subject to subpoena or discovery proceedings in any civil action; nor shall the identity of any member, employee, or person providing information, counsel or services be subject to subpoena or discover proceedings; nor shall the discussion or deliberations of any such organization, council member, employee, or person be subject to subpoena or discovery proceedings in any civil action.

(9) Section 1167 (c) should be repealed. (Section 1167 purports (in subsection (c)), to limit the liability of an individual furnishing items or services when such individual has acted in compliance with the norms of care appled by a PSRO, provided that he exercised due care in his conduct. This provision could have the unintended and undersirable effect of pressuring practitioners to adhere to the norms. Moreover, the provision is at best meaningless because on its face it is applicable only when the practitioner has exercised due care-the very issue at the heart of the malpractice issues. (10) The law should be amended to state the limited functions of the "norms, criteria, and standards" developed thereunder and to define their applicability in civil cases.

(11) Section 1168, referring to the reimbursement of PSRO expenses, should be amplified so that contract applicants will have an accurate understanding as to which organizational expenses will be reimbursable.

(12) The law should be amended to provide for the appeal of area designations.

(13) The law should be amended to provide for PSRO review of care delivered through all federal medical programs such as the Veterans Administration and Public Health Service.

(14) Section 1155 (b)(4) should be repealed. PSROS would be authorized under Section 1155 (b) (4) to inspect the facilities in which care is rendered or services are provided by practitioners or providers. Institutions are currently subject to inspection by the Joint Commission on Accreditation of Hospitals, and, however, facilities are generally subject to regulation that state and local law. It has been observed that the further requirements of onsite inspections by PSROS would be an unwarranted duplication.

(15) Section 1155 (b) (3) should be repealed. Practitioners and providers are obligated to maintain supporting documentation substantiating the necessity and quality of care provided under Medicare and Medicaid. These record-keeping requirements (Section 1160 (a) (1) (C) are duplicated by an ambiguous authorization under Section 1155 (b) (3) allowing PSROS to "examine the pertinent records" of practitioners and providers. This authority is, at best, redundant and could be the subject of abuse. It should be observed that unrestrained examinations of medical records would jeopardize their confidentiality.

(16) The role of the state medical society should be further augmented by authorizing the Secretary to enter into contracts with the state medical society, or its designated organization, to provide technical and administrative assistance to PSROS in the administration of the PSRO program. Under such contracts, the organization would be reimbursed directly by DHEW.

(17) Section 213 of P.L. 92-603, which describes circumstances under which payment may be made under Medicare for certain otherwise noncovered items and services, and under which recovery can be made from providers and practitioners, should be repealed.

(18) Provisions of Section 207 of P.L. 92-603, relating to utilization review procedures under Medicaid should be repealed.

(19) Section 229 of P.L. 92-603, authorizing the creation of program review teams, should be repealed.

Mr. ROGERS. Thank you very much for your statement. We appreciate the views you have given to the committee. I believe our last witness now is Dr. Woodbury Perkins, director of medical education at Mercy Hospital and Medical Center in San Diego.

Dr. PERKINS. Mr. Chairman, in the interest of time I am going to defer to Dr. Leo Gehrig, senior vice president of the American Hospital Association (AHA), who will give a resume of our written testimony.

STATEMENT OF LEO J. GEHRIG, M.D.

Dr. GEHRIG. In line with Mr. Scheuer's request, and that of the committee staff, we shall not read out statement, but would like to put a couple of key points in perspective.

First, from the historical point of view, hospitals have had both voluntary and mandatory standards since 1918, originally developed by the American College of Surgeons, and since 1951 administered by the Joint Commission on Accreditation of Hospitals.

These early standards dealt in great depth with the structure and organization for delivery of hospital services. In the last 7 years we have moved into what I consider an expanded and updated quality assurance program, developed by an AHA advisory committee, of which Dr. Perkins is a valued member, which began work in 1969 on what we called the quality assurance program for medical care in hospitals.

I would be glad, Mr. Chairman, to leave for your files a copy of this program. It was an effort 3 years prior to the PSRO statute, to develop a methodology of improved quality assurance review within a hospital.

This program has been developed and the Kellogg Foundation subsequently granted assistance to the AHA for a research project involving implementation of the program in 16 hospitals to work out the bugs, if you will, in an attempt to get a more effective process.

The ASA quality assurance program, in our judgment, is consistent with efforts under the PSRO law, to carry out institutional review, based on a solid methodology workable on the local level.

I would like to make clear that the AHA is not married to this procedure, but we believe it represents, among a host of efforts of this type, an effective aproach at the institutional level. We think, as Dr. Platt well said earlier, that this is an important area of involvement because it does two things: First it actively involves the

peer group, the medical staff, in its own review process, both development and implementation.

Second, the program provides for feedback within the institutional setting, where we have what I think is the key to solving many of our problems and providing continuing education of the staff.

Mr. Scheuer, pointed up problems of abuse and, as has been said, we are opposed to abuse. Nevertheless I think you would agree, if you look across the breadths of both hospitals and practitioners, the vast majority of such institutions and professionals are attempting to do a good job. We need a review process that has an automatic feedback for education and obviously there are within that frame of reference openings for administrative changes that are needed. On occasion you can get down to the punitive action level, too.

In summary, I would like to say that we have been very much involved in quality assurance, and we do believe that this is the direction in which we must go. We know too little yet to talk about either its costs or its cost-benefit ratio, however.

The AHA and member hospitals are working to be alined in the institutional setting with the PSRO activity as it has been constructed in the statute.

Mr. SCHEUER. Would it include both your outpatient services as well as your inpatient services?

Dr. GEHRIG. I think Dr. Perkins might well comment on this, but I believe, as has been pointed out by others, that we had better walk before we run. We have a big job to do in the beginning in the implementation area. Our process is adaptable to ambulatory service, but we are in a developmental phase and not in a position yet to extend to ambulatory care, which not only involves in outpatient facilities in hospitals but obviously in private offices, too.

Thank you.

[Dr. Perkin's prepared statement follows:]

STATEMENT OF WOODBURY PERKINS, M.D., ON BEHALF OF THE AMERICAN

HOSPITAL ASSOCIATION

Mr. Chairman, I am Woodbury Perkins, M.D., Director of Medical Education at Mercy Hospital and Medical Center in San Diego, and with me is Leo J. Gehrig, M.D., Senior Vice President of the American Hospital Association. We are here in response to your invitation to the Association to present our views on the role of hospitals in the assurance of high quality medical care as part of your consideration of national health insurance. It is certainly appropriate for the American Hospital Association to speak to such matters because it has some 7,000 institutional members, including almost all of the hospitals in the country. I am appearing as a representative of the membership with a particular interest and experience in such matters; I served as a member of the original advisory panel that worked with the AHA to develop it Quality Assurance Program.

HISTORICAL PERSPECTIVES

Hospital standards are set both through voluntary programs as well as through mandatorily established requirements. The voluntary efforts save been in existence for many years. Mandatory requirements exist in such forms as licensure and, more recently, the "conditions of participation" in federal programs such as Medicare.

A very significant voluntary effort dates back to 1918 when the American College of Surgeons developed its Hospital Standardization Program. While its beginning was modest, this program expanded over the years. By 1951 the