Please contact us if we may be of further service to the Subcommittee. We request that this data be made part of the hearings records.

Sincerely,

Enclosures.

JAMES H. SAMMONS, M.D.

TABLE 1.-AVERAGE NET INCOME FROM MEDICAL PRACTICE BY SPECIALTY, 1970-74

Senator TALMADGE. One other question, Dr. Holden.

The participating physician concept has been used in many Blue Shield plans there is nothing new or radical about it.

You are opposed to this provision because you say that nothing less than increases in reimbursement levels would encourage acceptance of assignments.

Based upon discussions with many physicians, we believe that the provision will, in fact, increase their net incomes without necessarily increasing the payment levels. My bill of last year, as you know, S. 4205, contained a section requirng that medicaid pay not less than 80 percent of medicare payment levels for physicians' services. That provision would have established a minimum level. You opposed that section in your testimony last year, yet many physicians and physician organizations have since expressed their surprise at your position. In fact, they stated adoption of last year's provision would have resulted in substantial increases in payments under medicaid in many States and would increase physician's participation.

I think your position on the participating physician provision in this year's bill may also misread the intentions and concerns of many doctors. Would you comment on that?

Dr. HOLDEN. May I ask Dr. Beddingfield, who has been more conversant with the details of this bill, to comment?

Senator TALMADGE. Yes.

Dr. BEDDINGFIELD. Mr. Chairman, as we point out in our statement, we think that the present bill certainly represents a considerable improvement. The reason that we oppose the tying together of medicare and medicaid reimbursement in the last bill was that we realized the intent of the author of the legislation in trying to establish this as a floor for medicaid reimbursement and encourage participation by physicians. We have the feeling, and I think that this is a valid concern, that this would actually become a ceiling.

There is already a reduction in all governmental programs. First of all, you have the somewhat skewed definition of what the usual, customary and reasonable was, as in the original medicare law. That has been further curtailed by the imposition of the economic index.

Now there is a proposal in the bill to further regulate this by the mechanism in the present bill which would tend, over the long run, to equate fees, or narrow the gap between various fee areas.

Actually, I believe in the previous legislation that one really had two choices under medicare. You either participated as a physician, or you were a nonparticipating physician. You had to be either way, one way or the other.

If my reading of the present bill is correct, there is a third option. At the present time, one could be participating and be so identified with the Government stamp of approval as a participating physician, or one could be completely nonparticipating and bill all of his patients directly, or one could be selective, as one can now. One can take assignments in certain cases and not take assignments in other cases. If you were following that last option, the dual choice mechanism, of course, I do not think you would be eligible for the dollars administratively.

Senator TALMADGE. Is it not true that under present law, they can do whatever they see fit? In many States, they have been reducing physician fees. In my own State, the prevailing rate now is 55 percent.

Dr. BEDDINGFIELD. Yes; I think we are all aware of not only the financial plight of the Federal Government, but of the States and the escalating medicaid costs. We share those concerns as recently as yesterday in my own State of North Carolina the Governor came out expressing his concerns about the medicaid program. There are going to be cutbacks in services or rates of reimbursement.

This is true.

Senator TALMADGE. Senator Dole?

Senator DOLE. Of course, you address yourself primarily to the chairman's legislation, which others cosponsored, S. 1470. You did not touch on the administration's proposal.

We should not infer that you support it because it was not mentioned, or should we?

Dr. BEDDINGFIELD. You are correct. We do not support the administration's proposal. We would be pleased to make available to this committee some prior testimony we have given to committees of the Congress on that proposal.

Senator DOLE. Even though there may be some objectionable features in S. 1470, that does offer a better framework as far as you are concerned?

Dr. BEDDINGFIELD. I think it is a better approach, very much so. Senator DOLE. We have had a lot of testimony, from hospital witnesses and others, that really sort of keys in on the physicians. He is the key person, he or she, as far as costs are concerned, and the level of result of costs, because he sends you to the hospital, orders your services. A lot of the costs are a direct result of initiatives taken by the physician.

I am just wondering what can be done, or what is being done, or what should be done, to build a greater cost consciousness on the part of physicians?

I assume they might have that in mind from time to time, but you have the ball now. What do you do with it?

Dr. BEDDINGFIELD. I would be pleased to respond, Senator. Everybody wants a whipping boy. At this moment, we are the whipping boy. Certainly, physicians do play a part in this. We are not trying to escape that role. I do not believe that thoughtless admission of patients to hospitals, or careless or prolific ordering of tests is playing a substantial part in the monumental problem facing us. It is a part of the problem.

We are concerned about costs as a professional organization, as practicing physicians-Dr. Holden made reference to a study going on currently in the AMA in which a Member of Congress is participating.

Second, to be more specific, the association has appeared before this committee back during the days of deliberation of PSRO, and we have PSRO. This is a mechanism which, when properly used, can address the problem that you are addressing in your question.

Ever since Congress created PSRO, the implementation of it has been slow-primarily because of the slowness of funding by Congress. The application of PSRO techniques is not universal across the land. Many of them exist only on paper and not in substance or

function.

While we do not believe that cost control should be the primary and only thrust of PSRO, this was certainly a part of the motivation of the Congress in enacting that amendment to the Social Security Act. We believe that application of this technique, in looking at its results, would address the question as far as unnecessary admissions are concerned and as far as the appropriateness of various tests. Coming back, however, to what I consider to be the main difficultiesthe main things causing the increase in health care costs-I believe they are inflation in general: the increasing expense of an advanced technology, the expectations of the public in general, and the overexpectations of the consuming public in general which, I think, have been engendered by overpromise by the Congress and perhaps even overexpectations engendered by the medical profession. We can do everything for you-the simple fact is, we cannot.

Senator DOLE. It seems to me that there is a lot of focus-not intentional-but repeated references to, we do not put anybody in the hospital, we do not this-it sort of rests on the doorstep of the physician. Sooner or later it is just going to occur to someone, if you just can control the physician you can control everything else. Probably it has already occurred to some.

Dr. BEDDINGFIELD. That thought has already occurred to me.

Senator DOLE. I am sure it has occurred to some of us in Congress. Also in your statement you refer to the need for higher reimbursement by medicare. I am not certain I really understand what higher reimbursement is.

Let me give you an example. Is the reasonable amount $1,000 for cataract surgery which medicare allows in New York, or Los Angeles or the $800 that pays for the same procedure in San Francisco or the $600 allowance in Boston, St. Louis, Phoenix, and Philadelphia? I am not certain what it is in Wilson, N.C., or Washington, D.C. I do not think it would be that much.

You have the same spread between the highs and the lows and the mediums as far as initial comprehensive office visits in Los Angeles and Chicago, $60; $50 in San Francisco: $40 in New York, Philadelphia, Boston, Houston, Dallas, and Cleveland.

It is confusing. How should we determine what should be higher reimbursement?

Dr. BEDDINGFIELD. To further confuse it, giving a nuts and bolts example with which I am obviously more familiar, I can tell you a