surgery indicated? These are the decisions that translate into dollars-into many dollars per case, and these are decisions which can be made only by physicians. Beyond this, of course, the physician has full responsibility for his own clients, and we will come back to this in due course, since it is a highly publicized issue at this point in history. The preponderant share of the medical care dollar, however, is not paid to the physician-it is paid for the goods and services which he recommends. It follows that this is the area of greater economic significance. In the $4.6 billion spent for Medicare in 1967, only 25% went for Part B payments to physicians.

It is worth contemplating for a few moments the track record of government as a guardian of the public pocket book. The chief and overwhelming distinction of government at the Federal level has been its unbridled enthusiasm for spending. For example. since 1961 the Gross National Product has increased 49%. During this time consumer spending increased 46% and Business spending 47%. but government spending went up 63%, and if one considers only non-military spending it went up 77%. The appropriations of Congress and of most State legislatures scarcely bear testimony to a philosophy of frugality. It is government which in effect has written the blank check for Medical Care and must look to someone else to fill in the amount. It is in large part this abundance of governmental dollars chasing after scarce services that has created the problem. In the field of direct patient care government has long operated the world's largest hospital-medical-surgical program, in the Veterans Administration. Many kind things have been said about V.A. Hospitals, the quality of care, and the role they have come to play in teaching and research, but these compliments have not included any citations for economy and efficiency. Quite to the contrary there have been many allegations that when the government has been in complete control average patient stays for comparable illnesses are distinctly longer than in community general hospitals, that physician productivity is substantially less in terms of patients per doctor and in physician working hours per week. The V.A. Hospital System can be compared to a vast closed panel group practice plan, with prepayment of a sort. I have not heard that anyone has seriously championed the fiscal feasibility of extending this type of care to the entire population.

One could cite other evidence of the fact that government has not pioneered in economy in medical care, but in addition government, through its democratic processes too often stands as a threat to quality of care as well. Perhaps you have seen the news stories about the Commissioner of Health in Cattaraugus County, New York, who resigned his position rather than to certify payments for Chiropractic services under Medicaid. I am delighted to report that he is now heading a Health Department in Pennsylvania, and I believe he is doing a great deal more to promote quality of health care than has the New York State Legislature, in foisting payment for chiropractic on the public.

Government could, of course, impose controls of various sorts. The popular one at the moment, called for by the AFL-CIO, and assorted legislators and columnists, is for the establishment of fixed fee schedules. This of course addresses itself to the lesser part of the problem, since it does not touch utilization-only physicians fees. Presumably several investigations of the matter of physicians fees are to be conducted by Congress, or under its auspices, and it is my personal opinion that this should not be upsetting to any physicians who are charging reasonably and fairly by existing professional standards. It is surely not the policy of the profession or its organized societies to uphold the right of the individual physician to charge unconscionably or immoderately. One would hope that any "investigation" on this score would, in addition to documenting abuses, study carefully the opportunities for their elimination. If it is appropriate to investigate the financial dealings of Senators and Congressmen I would concede that it is all right to check up on physicians. It should be remembered that the medical profession itself has made considerable progress in the development of review committees, grievance committees, and the like. There must also be a preservation of perspective, since in respect to Medicare at least--the elimination of a full 7% increase in physicians fees, which constitute less than 25% of the program expenditures, would amount to a 1&4 percent saving, overall. Ill considered, punitive efforts to fix prices-a position generally abhorred by government in respect to most business-could be productive of unintended and unhappy results. I would submit that, compared to the capacities of the medical profession itself, government is ill equipped to remedy the difficulties.

The situation in respect to third party payors, or consumer groups, as guardians of public expenditures for health care, is quite different from that of

24-798-69-pt. 3-12

government. Underwriters have obviously had a sincere interest in safeguarding their own funds. None of them could survive the sort of deficit operation which is a way of life in government. But among all of the voluntary prepayment plans, the prepaid closed panel group practices and the private insurance companies no alternative to physician review has ever been found. It is quite true that claims review is becoming automated and sophisticated to the extent that machines pick out cases which depart from a programmed range of acceptability, but the actual evaluation of the case and the charges depends upon physician judgment.

This brings us back to my initial allegation that physicians are the only qualified guardians of the public interest in the realm of expenditures for direct patient care. It remains to consider the extent to which they are being helped or hindered in so functioning, and to discuss ways in which they may function more effectively.

UTILIZATION RELATED TO EXPENDITURES

Utilization of hospital facilities and services, for example, is directly related to expenditures. But this is not a simple straight line relationship. That is to say, a reduction in use does not bring about a corresponding reduction in cost. The simple illustration is the hospital room. The most expensive item in the hospital is the unoccupied room. The cost of maintaining it in large part continues, without off-setting revenue. If a zealous utilization review committee should somehow decrease hospital occupancy to the 50% level for any significant period of time what would happen to the per diem cost? It would go up-not down. The most efficient, most economical form of hospital operation is that which uses its facilities and its personnel at close to tolerance levels. Without the application of a great deal of wisdom, the coalescent wisdom of the medical staff and the hospital administration, there may be great imbalances, to the disadvantage of the patient. Hospitals, per se, function poorly as conservators of the public dollar.

In order to judge the propriety of charges for goods or services it is necessary to know what the charge is, as well as the cost on which it is based. For this reason I feel that the flight from fee-for-service is progress in the wrong direction. How is it possible to judge the equity of a hospital charge which becomes unidentifiable with an overall per diem rate. How can one pass on the reasonableness of a fee which is never established as a charge against a pre-paid premium or as a credit toward the physician's salary? To abandon fee-for-service, as is currently championed by so many critics of medicine, seems to me to be forsaking the only real opportunity to identify and isolate the opportunities for economy, and to equate the price tag to the value of the item purchased. By this I imply that it is being made increasingly difficult for anyone-physicians included—to appraise the value of goods and services when the charges are submerged and lose their individual identities.

In this connection it may be of interest to report to you a small study which I have just made in my own 500 bed community general hospital. If, as I have postulated, the physician has this important role of guardian in respect to patient expenditures, how familiar is he with the prices charged to his patients in the hospital? I listed 20 of the more common things ordered by physicians in our hospital-items such as a blood sugar, a chest X-ray, a special duty private nurse, and the like. I asked 17 physicians to fill in what they thought each item cost the patient. 12 were practicing physicians with many hospital patients. 5 were residents in training, responsible for much of the ordering. The pattern became clear, and I didn't feel that I needed to add a lot more people in order to establish statistical validity. Doctors don't know very accurately what charges are made. The spread per item varied from 150% to 600%. 29% of the answers were correct, or close enough to count as correct. 31% of the guesses were high. 40% were low. Residents were a bit wilder than the attending men. All this, I believe, simply points up an important opportunity for improvement. I believe any business man would seek deliverance from a buyer who didn't know the price of what he bought. You have been hearing much about group practice and especially about the notion that pre-paid closed panel group practice may conserve dollars. I regard this as undocumented, especially where quality as well as quantity requires consideration. No one, I believe, has suggested that any type of practice arrangement converts an inadequate physician into an adequate one. I don't recall who first said it, but I would agree that one thing worse than an incompetent physician would be a group of incompetent physicians. Our quest is not for bargain-base

ment medicine, but for competent medical care, fairly given and fairly compensated. In this quest there is still great room for innovation, experimentation and improvement. There is still much virtue in our non-system of care as against the rigidity of systems as devised by the British, the Germans, the Swedes and the others. It is naive of our government to think that the heart of the matter is how the doctor is paid, or how the patient pays.

If the common denominator is the ethical competent well-motivated physicianalmost any system will work well. If not, it seems impossible to devise a system which can't be beat. This is the quandry enveloping those who discredit the medical profession. They have no happy alternative to turn to.

Frankly, I believe that those who downgrade the medical profession, who diminish its status and who undermine its authority are self-defeatists. To the degree that estrangements have developed between government and medicine, between labor and medicine, between hospitals and doctors, there are tragedies of our time. It has indeed progressed to the point where a substantial number of physicians sincerely wish to have nothing to do with government subsidized programs of care. How much better off would we be if there were constructive cooperative attacks upon our problems of financing and the delivery of services by all parties involved. I believe the medical profession needs the understanding, the support, and the effective assistance of all interested parties to do the job that only it can do. And when that support and assistance is proferred I believe the medical profession should accept it.

Two Canadian physicians, in writing a book called "Medicine and the State" which analyzes in depth the principal government-operated care plans-England, Germany, Russia and the like, reach what I regard as a significant, a highly important conclusion. They state it this way "In the field of health care it does appear that once personal responsibility is removed, collective selfishness replaces the restraints of the individual experience. Experience suggests that individual morality declines as public responsibility increases". For patients and physicians alike we should consider the need to strengthen the sense of personal responsibility and to fortify the restraints of the individual conscience.

The professional association, in this country, has done much to potentiate the efforts of individual physicians, not only in pursuit of scientific excellence, but in the exercise of civic responsibility. Therefore all professional associations of physicians should dedicate a share of their efforts in this direction, but the one instrument best suited for the purpose is the County Medical Societyaccessible to the full complement of ethical competent physicians, each belonging to a vigorous progressive State Association, and all integrated in to the American Medical Association. Despite the abundance of brickbats aimed at the AMA, largely because of its conservatism and its resistance to government interventions and controls, it has generally been recognized as a major force for good in the advancement of scientific medicine, physician education, and the development of quality controls. The track record of the medical profession in respect to self discipline and the imposition of high standards is most encouraging. The admission requirements for medical school are self-imposed and they have been so high as to occasion howls of anguish. It was the profession itself, through the AMA that acted importantly in the elimination of medical diploma mills. All of the specialty societies and certifying Boards have been voluntary developments. The evolution of tissue committees, medical audits, and restrictions of privileges in hospitals have been developed by the profession itself, as have the mechanisms and organizations for accreditation of hospitals and other medical facilities. Insurance claims review committees and grievance or mediation committees are inventions and developments by physicians and their medical associations. That these self-imposed controls are less than perfect is not surprising. That there is room for improvement is obvious. But this is working machinery and these are functioning programs. The bright hope lies in perfecting what we have.

CONCLUSIONS

Now I should like to try to pull these observations together in order to draw some useful conclusions.

1. Much of the expenditure of public and private funds under the general heading of medical service is outside the range of direct patient care and is beyond the immediate influence of the practicing physician. These elements relate to expenditures for research, education, capital construction, operation of institutional facilities, and the like. They need to be identified and financed as such.

2. Expenditures by, or in behalf of individual patients for direct patient care are greatly influenced by physicians, and there is a great opportunity to improve physician awareness and exercise of responsibility in this respect.

3. Despite extensive efforts on the part of medical societies to encourage medical schools to include instruction in medical-economic understanding and responsibility little has been accomplished in the schools of this country, and virtually nothing has been or can be accomplished in the foreign schools which train so many of our physicians.

4. Opportunity exists for medical economic orientation at the interne and resident level, and this may present an excellent place for cooperation between hospital training programs and local medical societies.

5. Since the physician alone is in position to make decisions in the individual case as to reasonable alternatives in expenditure for diagnostic and therapeutic services, other interested parties should aid and abet the physician in the exercise of this decision-making responsibility.

6. Individual physicians can best be oriented and assisted by their own professional associations, which are already responsible for most of the progress in the area of utilization review, claims review and other efforts to contain expenditures for medical care.

7. Government, labor, industry, third party payors, and consumer groups should lend their support and assistance to medical societies in constructive approaches to the problem.

8. Physicians and their associations should be receptive to any genuine help which may be proferred.

9. The physicians who have remained aloof from organized medicine and the AMA should be vigorously encouraged to become participants in active programs to increase physician responsibility. They should be encouraged by their schools, their employers, their hospitals, and perhaps even by their patients.

10. Irrational, divisive bickerings by all interested agencies and organizations should be set aside in favor of cooperative assault on a massive problem.

EXHIBIT B: MEDICAL CARE COST CONTROL

[From the AMA News, Apr. 8, 1968]

ONLY M.D.'S CAN CONTROL CARE COSTS, PANEL TOLD

Organized medicine, through a concerted effort by state and county medical societies, is "potentially the greatest ally" of the public in controlling expenditures for medical services, participants at the second national American Medical Association Congress on the Socio-Economics of Health Care were told.

Russell B. Roth, MD, Erie, Pa., vice-speaker of the AMA House of Delegates, said, "Vast programs of financing medical care must be supervised, must be audited, must be equated to need, and must be protected against abuse." Government "Ill-Equipped"

Government, considered by some to be the answer to the problem, could impose controls, he said, but compared to the medical profession, it is "ill equipped to remedy the difficulties.

"It is government which in effect has written the blank check for medical care and must look to someone else to fill in the amount," Dr. Roth said. "It is in large part this abundance of governmental dollars chasing after scarce services that has created the problem."

Despite efforts of third party payors and voluntary prepayment plans, no alternative to physician review has ever been found, he said.

"It is quite true that claims review is becoming automated and sophisticated to the extent that machines pick out cases which depart from a programmed range of acceptability, but the actual evaluation of the case and the charges depends upon physician judgment,” Dr. Roth pointed out.

Areas of Need

Proper utilization of hospital facilities and services, fee-for-service payment, and quality of care are areas in which the physician can function more effectively and help to identify and contain expenditures, he said.

Critics of the medical profession, including labor-management, and government, are "self-defeatists," Dr. Roth emphasized.

"I believe the medical profession needs the understanding, the support, and the effective assistance of all interested parties to do the job that only it can

do," he said. "And when that support and assistance is proferred. I believe the medical profession should accept it."

Dr. Roth made the following suggestions in regard to the future role of organized medicine as "guardian" of the consumer's interest in expenditures for medical care:

Identification of public and private expenditures for medical service which differ from elements relating to direct patient care, to improve physician aware

ness.

Identification of public and private expenditures for medical service which differ from elements relating to direct patient care, to improve physician awareness.

Instruct medical societies to encourage medical schools to include medicaleconomic understanding and responsibility in their curriculums, especially at the intern and resident level.

Encourage physicians who have remained aloof from organized medicine to become active participants.

Solicit aid of other interested parties in decision-making for constructive cooperative approaches to the problem.

Make use of medicine's professional associations, while remaining receptive to any genuine help which may be proferred.

ITEM 10: STATEMENT OF DR. ALEXANDER SIMON, DEPARTMENT OF PSYCHIATRY, UNIVERSITY OF CALIFORNIA, SAN FRANCISCO MEDICAL CENTER

Probably few countries have begun to face the full implications of the aging population for health and welfare services. Our experiences with Medicare and Medicaid have only suggested the variety and magnitude of the problems presented by a program directed at providing even minimal health services to an increasingly larger group of elderly persons in our population. The incidence and prevalence of mental disorders in this group is high, and comprehensive health services for them should include continuity of care from prevention through screening, outpatient and hospital treatment, and aftercare, and should cover medical, psychiatric, and social and supportive services. Although in most cases specific methods for the prevention of mental illness and for the treatment of many mental disorders in the elderly are not yet possible, at least the severity of disorder may be ameliorated by symptomatic treatment, its personal and social consequence can be mitigated, and the care and treatment made available can be humane.

I am not well acquainted with the details of costs related to the delivery of health services in general, but I should like to emphasize the need for close liaison and coordination among all agencies, health care personnel, and services working in this field. The problems associated with prevention, treatment, and rehabilitation of the geriatric mentally ill not only are enormous and complicated by lack of knowledge, but also are inextricably tangled. Coordination of efforts is necessary from screening and the identification of persons with problems through treatment and aftercare and the provision of supportive services. Screening, for example, is useless if services for referral are not available or are not located where they are easy to reach or if transportation and assistance to get there are not available. Screening programs that see patients at times of psychosocial crisis have shown the wide variety of resources needed: general hospitals, psychiatric units in general hospitals, public and private mental hospitals, medical and psychiatric office care and home visits, psychiatric outpatient clinics, nursing and boarding homes, family care homes, old age homes, and homemaker services, visiting nurses, "Meals on Wheels," and other services to make it possible for some elderly patients to remain at home. But who is to assume responsibility for continuity of care and for the necessary flow of information from one facility or caretaker to another?

Government at all levels, as well as the community as a whole, must be concerned with the availability, quality, and delivery of these services. Community studies have found moderate or severe psychiatric impairment in approximately 20 per cent of elderly persons living in the community. Yet, only one and a half to two per cent of the patients seen in outpatient psychiatric clinics are aged sixty-five or over. In addition, office psychiatric care of the elderly has dis