the same attorney that Mr. Gottheiner used. I don't know if there is any connection.

Mr. HALAMANDARIS. May I have the name of the director of the Medi-Cal program that expelled Mr Gottheiner?

Mr. HALL. It is Mr. Carel E. H. Mulder.

Mr. HALAMANDARIS. And what is the attorney's name?

Mr. HALL. William Bagley, who is currently the head of the Federal Commodities Credit Corporation, after he lost the election for controller in the State of California. It is interesting, anyway.

Mr. HALAMANDARIS. We could go on and on with this. I would like to pursue some of this with you in private.

Do you know if Homemakers Upjohn is resorting to franchising? Do they do that same technique, to your knowledge?

Mr. HALL. Not to my knowledge. You hear an awfully lot of rumors. I have no information on that.

Mr. HALAMANDARIS. Do you agree with the previous response from the witness that it may be perfectly legal, and that we can do nothing about the franchising situation?

Mr. HALL. I would have a hunch from the way these programs have been administered, and on the basis of my experience with James Dwight, Jr., whether it is legal or not, that it would not really make any difference. He is absolutely correct, nobody would do anything

Mr. HALAMANDARIS. Well, OK. I think that we have a lot of leads to follow up, and some gentlemen may want to appear before our committee to answer some of the allegations that we have heard today.

LOBBYING TECHNIQUE NEEDS LOOKING INTO

I think I will recommend to this committee, and to the counterpart in the House, that we look into the lobbying technique employed by Homemakers Upjohn. Another factor I would like to explore is how and why these regulations could be promulgated in such

a vacuum.

There appears to be no rational reason for pushing them out at this time.

Mr. WEINER. Just a few questions.

I know it is late, that you gentlemen are experts, and that you have traveled a long way. I would like to thank you for all of the help you have given us over the past many, many months in providing expertise, in helping us so greatly in this field that we are working in.

I also want to thank you for making very lucid comments today. Mr. Semmel, I wanted to ask you a question on this States' rights issue, since HEW said that there is great misinterpretation of the regulations.

Correct me if I am wrong, but where the States do not license, or where there are no licensure laws, is it not correct to say the regulations would negate the right of the States, and they would preempt the rights of those States? Maybe you could clear this up. It seems the regulations have a devastating impact in this area.

Mr. SEMMEL. Essentially you have 39 States that have no laws. It forces them either to pass a law, or to certify as medicaid providers the proprietary agencies.

Mr. WEINER. So it brings them into the field, regardless of what the States have done, and they have not been in the field before.

Mr. SEMMEL. They either pass a licening law or they certify an unlicensed agency.

Mr. WEINER. And it is much more difficult to get a law passed than to live with a situation that they have now.

Mr. SEMMEL. Yes; in addition, as a realistic matter, by the time the State legislature does consider this matter, and the legislative action takes place, you would have any number of agencies that would become certified. It is much harder to revoke certification than it is not to let them in the first place.

CONTACTING ALL SEGMENTS

Mr. WEINER. Mr. Hall, would you say it is good policy, as well as good sense, to contact all segments the next time HEW intends to issue regulations?

Mr. HALL. I would answer the question yes, but if you are not going to contact one group, and contact another, I find that is unfortunate.

Mr. WEINER. Perhaps they should issue a public statement that they are intending to issue regulations, and that they would appreciate some comments.

Mr. HALL. Again, my understanding of publishing the draft regulations in the Federal Register is to do just that. So why does one need to have a consultation prior to drafting of the regulations.

If I may take 1 more minute to point out that proprietary agencies, including Upjohn, paid 30 percent less than the community agencies to their Homemaker-Home Health Aides in San Francisco.

In addition, there is now a union grievance on file because they do not pay traveltime between the agency assignments, which appears to be in violation of California labor laws. This should affect their regulation, as well as the union contract, one cannot take from the poor, essentially minority women and former public assistant recipients I am not sure these proposed rules would make any contribution to changing this.

Mr. WEINER. I would like to ask Mr. Trautman a question. Do you think that all providers of home health care should be bonded to cover such potential actions as malfeasance?

Mr. TRAUTMAN. I am not a bonding expert, or a bonding insurance salesman. What we would like is to have this looked into very carefully. Should all providers be required to put up a surety bond, or only a provider who has problems with meeting the requirements? This is something that should be studied carefully.

This is one thing they are talking about in New York. Bonding employees, does not give you quality. That is only insuring that the provider, or organization that your employee is bondable, which is more or less a credit check on an employee, not a quality type of approach.

Mr. WEINER. One final question. What would the opinion or the feeling of the panel be about having a formal procedure, such as having hearings prior to the issuance of regulations having such drastic changes? This procedure could be prior to regulations being put in the Federal Register so that HEW cannot do what they did here.

Concerning these regulations, for example, there was no public outcry until these hearings in the Congress took place.

What about requiring HEW to hold public hearings before promulgating such regulations?

Mr. HALL. If the administration is intent on doing something, I am not sure it makes much difference. Perhaps this forum is better. Mr. DANSTEDT. I think the other factor you must remember, the industry is very fragmented, and perhaps this is the most feasible way to bring testimony.

If they have a game plan and they have time to work on it over a period of time, I think this type of forum is very feasible, just as a general forum. I think it has relative value.

Mr. WEINER. I do appreciate that, because if the intent is not there, no matter what forum they use, it will make no difference.

Thank you very much. From the House side, we certainly appreciate the long time you have been with us today.

Mr. HALAMANDARIS. We do thank you gentlemen for appearing, and we appreciate your coming here today.

DRAFTING FUTURE LEGISLATION

Mr. STERN. If I could make one additional statement, there is something which has made its cumulative effect apparent throughout this hearing today. We have heard talk of two levels of proprietarism. You gentlemen, and people before you, have indicated very clearly that there are "sharks"-that one has to avoid "sharks" at all costs, and even when precautions are taken the laws may not get them all beforehand. But then there is the broader issue: can we address the question of "proprietarism" per se with our hearings? Here is where I think we can provide remedies to some of the questions, because some of the recommendations which you have made to the staff and to Congressmen and Senators will be considered in the drafting of future legislation. Hopefully, HEW will not do the same thing again. Even with all that has been said pro and con about proprietarism, we do have some interesting controversies. One is that of persons "whispering in the Government's ear." I think it comes to that. Who should the Government trust? Who should be the one, in effect, giving the advice to the Government and doing all but promulgating regulations? Because of your comments, we recognize the need to develop some equitable way of getting input from both proprietary and nonproprietary sources.

Mr. BYRNE. I think the issue that came up today showed that we have a big problem on our hands, and I think it fundamentally is based on the relatively limited standards thus far promulgated, and I think what we at the national association should work together with whatever parts of Government needs to work with to firm up these standards, before there is anything that really happens.

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As a volunteer group, we must look at the threat that is to come. We must look at our past history and we must consider essentially the threat to the aged by opening up the floodgates too quickly. We must not find ourselves in the position 7 or 8 years after, as in the nursing home field, in a terrible mess-one that takes years to correct. It would be my suggestion that we drag our feet, and that we get some principles set forth in a better fashion, representing the various current divices.

Mr. STERN. What about Upjohn-should they also be involved?

Mr. BYRNE. They have come to our board meetings and they can contribute. We have been doing some exploring with them and in about 2 weeks we will have another session. So I think we can certainly work together, the proprietaries and the nonproprietaries, but I just hope we can forestall any big changes right now.

Mr. HALL. I think you raised a very fundamental question-that there is confusion in talking about the profit motive and free enterprise. It is not free enterprise that we are talking about. Titles XVIII, XIX, and XX are exclusively Government programs. Allegedly, they are in very short supply of money and, depending on what you are talking about, I think one has to raise the question: If that is the case, where does the profit come from? In the free marketplace where Upjohn is operating-and the patient is able to make a choice, I suppose they could go anywhere they want. But when you are not dealing with a free marketplace, and titles XVIII, XIX, and XX are not a part of the free marketplace, then I think we have the right to require every provider, whether they are public, tax exempt, or taking profits, to meet standards.

Mr. SEMMEL. I think as was indicated earlier, this is not an area which the patient chooses the agency. It is an area where the doctor chooses the agency, and so the free market is really not operating. The patient's choice is really not operating at all in this area.

BUILDING UPON EXPERIENCE

Mr. TRAUTMAN. I believe we have some basic principles in the medicare certification process, as far as quality is concerned, and we should use that experience and build upon it.

We have had meetings on this issue and concluded that at this time we cannot support a move to go ahead without first looking at the certificate of need, State licensure, disclosure, and other controls which will be needed. When you are small, no one cares about you, and there are controls in being small. As more money becomes available, the potential for abuse increases proportionately. The faster home health grows, the potential for abuse is greater. The question is, what base do we want to work from, and what kind of controls should we have on this growth in home health?

Mr. STERN. Thank you very much.

Mr. HALAMANDARIS. Thank you.

We have a couple of other people in this room that have been very patient, and who have asked for a few minutes. We will hear from them now.

Mr. James Terence Prendergast and Mr. Fred Keeley.

Mr. Prendergast, if you will go first-I see you have given your card with your name to our court reporter, and if you could be brief, we would be grateful. You may proceed.

STATEMENT OF JAMES TERENCE PRENDERGAST, LEGISLATIVE COUNSEL FOR STAFF BUILDERS, NEW YORK, N.Y.

Mr. PRENDERGAST. Thank you very much.

Mr. Chairman, my name is James Terence Prendergast. I am the legislative counsel for Staff Builders, a nationwide organization which includes a division of medical services that is quite active.

In the past year I also represented 14 home health companies in the New York Legislature where we struggled over the same issues. I think that this whole issue has taken a tragic turn. I think it is unfortunate for people out there, the ones we all want to serve, that the proprietaries and the voluntaries are being pitted against each other.

I hope, Mr. Chairman, that the subcommittees will continue to review, in a serious-minded fashion, ways of utilizing all providers of services in home health care.

It has already been remarked, for example, that there is a talent for marketing that there is a talent for promotion-that is possessed by the proprietaries which could be used in this field. You can help reach an accommodation with a powerful force for home health services in this country of ours, if you enlist the proprietary sector in advancing the totality of all home health services. We view this as our very real interest.

I come to you from New York City, where we are experiencing a tragic lack of funds, as you all know, because others have come here asking you to put up money. This is just the first symptom of what is going to be a national crisis: a shortage of public funds.

I think it is incumbent upon you to consider costs very carefully. When costs are considered carefully, we will wind up with a better program. We must try to return to competition, where possible, in the home health industry and in home health services.

I submit that one area which is totally appropriate for competition is home health services. I say that for a fairly good reason because, in an area where you only need a hospital with 250 beds, there is an enormous capital investment, that merits protection. But in the home health industry protection is not needed.

You can run a good home health agency serving an average of 100 cases a week from a headquarters the size of one-fourth of the space of this hearing room. It is a labor-intensive industry. It does not need a very large area, and it is easy to operate.

The major problem is delay in Government payment. One of your witnesses today, Dr. Etzioni, has called for a voucher system. Such a system would attempt to get some free market behavior. It can be done in this area. Remember one of the most useful points of regulation is the consumer and it would be relatively easy for the consumer to make changes in a free home health market.

We do have enormous problems with what Mr. Stern has described as the “shark.” In the nursing home field that has been a problem.