Dr. BEDDINGFIELD. I am vaguely familiar with it. Is it organized? Mr. CRANE. It started with a physician in Houston, Tex., and increasing numbers of physicians have opted in favor of it. Where the physician refuses to accept payment from a third party, whether it is a private insurance company or the Government and that that relationship is one that exists between the patient and the third-party

payer.

On the one hand, sure, it involves the risk of not getting total reimbursement by the patient. On the other hand, it has the advantage now of enabling those physicians who were quick to accept the benefits of third-party payment to avoid getting stuck with the 75th percentile payment of 1970 fee schedules.

Dr. BEDDINGFIELD. I am certainly aware of that philosophy. A group of physicians have opted for that philosophy; yes, sir.

Mr. CRANE. Do you basically approve or disapprove of it?

Dr. BEDDINGFIELD. I think it ought to be a matter of individual option determined by the dictates of one's own conscience.

Mr. ROSTENKOWSKI. Mr. Martin.

Mr. MARTIN. Dr. Camalier, in your last brief paragraph on the nurse staffing in rural hospitals, you advocate extension of current provisions, allowing for waivers compliance with the general medicare nursing requirements.

Earlier today we got with other witnesses into a discussion of some of the obstacles to the nurses in rural areas receiving payments. One suggestion that has been advanced would be to allow reimbursement. even where there is no direct physician's supervision in a rural area but indirect supervision.

Are we talking about the same thing or are you advocating and would the AMA support some modification along the lines that I was just mentioning?

Dr. BEDDINGFIELD. I think we are talking about two different but perhaps related things. I think the amendment that Dr. Camalier spoke to hospital staffing and the requirements, the waiver which presently exist in medicare that only requires a registered nurse part of the time in rural hospitals who cannot meet the ordinary staffing requirements of nurses.

I think the related question, they are both related to manpower and to distribution and to access to health care, has to do with the utilization of the family nurse practitioner in a perhaps rural setting to provide primary care.

The position of the American Medical Association has been as experiments and innovative forms of health care to participate in it and to encourage the use of physician extenders and family nurse practitioners is one example of that.

Incidentally, we have the program in our State of North Carolina. where family nurse practitioners do deliver primary care, but our policy would be to insist that any physician extender, whether it be a physician's assistant or family nurse practitioner, be a dependent practitioner acting under the supervision and direction of the licensed doctor of medicine and not to be a free-standing independently licensed practitioner.

This program is growing and we believe it has been reasonably successful.

Mr. MARTIN. What is the basis for the problem, though, of some of these nurse practitioners not being able to be paid more, let's say, I suppose insufficient supervision by physicians because they don't have access to them.

I am sure you would be aware in your part of the State that there would be some situations like this. Is it a question of supervision?

Dr. BEDDINGFIELD. We think in terms of our personal experiences. At the present time I am involved as a supervising physician in a rural, satellite rural clinic that employs a family nurse practitioner.

She operates under a rigid set of standing orders designed by me and the other sponsoring physicians. We review each and every one of her charts. As far as third party payment goes, most of the commercial insurance companies will pay for services that this nurse renders under our delegation of authority and under our review.

Medicaid, being a State sponsored program in North Carolina, will pay for these services. However, medicare will not pay for these services. Therein lies the problem.

Mr. MARTIN. So perhaps you can anticipate or help us with formulating of some possible legislation that could ease that distinction.

Dr. BEDDINGFIELD. We would advocate that. But we would again advocate that this be done under the authority of the existing medical supervision and direction and delegation of authority; yes.

Mr. MARTIN. If you could reflect on that and your colleagues had that kind of experience and share an idea along that line with us, it would be helpful. Thank you.

Mr. ROSTENKOWSKI. Thank you.

I have several questions that I will submit to you and you can answer for the record.

[The questions and answers follow:]

RESPONSE OF THE AMERICAN MEDICAL ASSOCIATION TO QUESTIONS ON H.R. 6699 FROM THE SUBCOMMITTEE ON HEALTH, COMMITTEE ON WAYS AND MEANSOCTOBER 20, 1975

These comments will respond to questions submitted by the Subcommittee concerning H.R. 6699. Our Board of Trustees reviewed this measure at its recent meeting on October 17, 1975. We do not attempt here to discuss all the issues that are inherent in H.R. 6699 nor to set out all the serious questions and ramifications which the bill raises. Among the many issues raised by the bill are the salient points set out below in response to issues raised in the questions. We will be happy to expand upon these points and to provide a more complete analysis of this proposal if you so desire.

At the outset, however, we want to state an overall view that the bill, in proposing its unprecedented system of price controls, is both arbitrary and discriminatory, and raises serious constitutional questions. It would create extreme hardships and inequities for both physicians and patients. It would cause major disruptions in the delivery of health care and would exacerbate existing shortages.

We must not also that the questions submitted are not accurate in their characterization of the language of H.R. 6699. It should also be noted that certain assumptions contained in the questions must themselves be questioned as to their validity.

The questions submitted to us are as follows:

(a) If the Subcommittee were to consider basic revisions in reimbursement for physicians' services, would the provisions of H.R. 6699 provide a basic approach that you could support? Under this bill, Medicare would make payment on the basis of a fee schedule devised by organizations or physicians in each state. (HEW would have to accept this fee schedule if it met specific requirements.) Doctors would choose whether to be participating physicians, only they could re

ceive payment directly from Medicare, and payment for their services would not be subject to the usual deductible or coinsurance.

(b) Would the AMA be supportive of a bill such as H.R. 6699 which would encourage elimination of large differences in reimbursement between rural and urban physicians?

(c) In the event that Congress enacted legislation along the lines of H.R. 6699 under which participating physicians would have to accept assignment of all claims, would you encourage your members to participate?

Our comments to principal issues raised by the foregoing questions are as follows:

(1) The Association cannot support the basic approach of H.R. 6699, nor the bill itself, in any revisions in reimbursement for physicians' services.

(2) The bill would create an unprecedented system of price controls which is arbitrary and discriminatory. It provides for an arbitrary schedule of fees controlled by an artificial ceiling selected only on the criteria of predetermined levels of expenditures. The bill is grossly unfair and would cause immediate rollbacks in reimbursement for most physicians. Under the bill the authority to set the schedule of fees is vested in the Governor (and not by "organizations or physicians" as stated in the question).

(3) The creation of uniform fees throughout the state does not recognize the many factors influencing the free market place which has caused existing variations. Such a proposal does not take into consideration such factors as costs of living, costs of establishing and maintaining a medical practice, and costs in providing proper medical services, and the quality of life of particular geographic locations.

(4) The bill would create hardships and inequities for physicians and particularly for patients.

(5) The bill would aggravate existing shortages, and would curtail availability of health services for the elderly and the poor.

(6) The bill raises serious constitutional questions. (7) Medicaid costs to the states would be increased.

(8) Since responsibility for state Medicaid expenditures is in the Governor, the bill would vest a conflicting role in him by giving him authority to establish physician fees controlling Medicare and Medicaid reimbursements.

(9) Physicians and their patients should be free to decide the method of payment for services. Physicians who directly bill Medicare patients are in fact participating in Medicare in accordance with the Medicare law. It should be noted that the bill would cause an increasing shift from assignments to direct billing. (10) It would be grossly unfair and misleading to publish fees and lists of physicians taking assignments and holding them out exclusively as the "participating" physicians under Medicare. The effect of such a publication would be the public view that beneficiaries are direct to listed physicians.

(11) The role of the state medical societies under H.R. 6699 (which role can be filled by "equivalent organizations") is at best precatory. Moreover, a most difficult role would be created in attempting to reconcile, into a uniform schedule for recommendation to the Governor, the differences in usual and customary fees of all physicians (metropolitan, rural, specialist, non-specialist, etc.) in all areas of the state. In such roles the state societies are placed in a precarious legal status, e.g., with reference to application of the Sherman Act.

(12) Payment for physician services should be recognized at the usual, customary, and reasonable levels in the area of practice of the physician. Any program which creates economic barriers to prevent free choice is unfair, would create classes of care, and affect availability.

(13) The program will result in further beneficiary dissatisfaction with the Social Security programs.

Further serious defects of the bill could be discussed, but we have limited this response to exigencies created by the questions posed. As stated earlier, we would be pleased to expand upon the above and provide additional comments if the Subcommittee desires. We urge you not to adopt H.R. 6699 or its approach in any consideration of revisions in Medicare-Medicaid reimbursement mechanisms. Mr. ROSTENKOWSKI. Thank you, gentlemen.

Dr. Gabriel, Dr. Taylor?

Welcome gentlemen. If you will identify yourselves and proceed with your testimony.

STATEMENT OF EARL A. GABRIEL, D.O., PRESIDENT OF THE AMERICAN OSTEOPATHIC ASSOCIATION, AND JOHN C. TAYLOR, D.O., CHAIRMAN OF THE COUNCIL ON FEDERAL HEALTH PROGRAMS OF THE AMERICAN OSTEOPATHIC ASSOCIATION, ACCOMPANIED BY JOHN PERRIN, DIRECTOR, WASHINGTON OFFICE OF AOS

Dr. GABRIEL. Thank you, Mr. Chairman and members of the committee.

I am Earl A. Gabriel, president of the American Osteopathic Association. With me on my right is John C. Taylor, D.O., chairman of the Council on Federal Health Programs for the American Osteopathic Association; to my far left is Mr. John Perrin, director of our Washington office.

Mr. Chairman, the American Osteopathic Association is, as always, most pleased to have the opportunity to appear before this committee. We are particularly gratified to participate in your continuing review of specific medicare issues which have been of grave concern to many individuals and organizations interested in the delivery of quality health care.

We again applaud this committee and its distinguished chairman for their leadership in implementing timely oversight hearings of administrative regulations, to insure their conformity with congressional

intent.

While each of the issues under consideration by this committee. today are of substantial import and interest to our association, we shall, in the interest of brevity and emphasis, restrict our testimony to two areas: First, possible changes in the PSRO law and, second, the recently adopted regulations tying determination of reasonable charges for physicians' services to an economic index.

I will begin by making a few comments on the subject of possible revisions to the PSRO law and then ask Dr. Taylor to speak on the subject of the new regulations relative to physicians' fees.

While we cannot speak for every individual osteopathic physician or every State and local osteopathic society, the position of the American Osteopathis Association is now, and has been since the inception of the PSRO legislation, one of support and cooperation.

We feel that the objectives of the law are commendable and we applaud the efforts of Congress directed at affording the organizations of the health professions the opportunity to review the professional activities of their peers.

Our confidence that physicians can successfully monitor their own performance is based upon our experience with peer review in the osteopathic profession; and our confidence that this legislation will be fully and effectively implemented is based on our belief that the greater number of physicians in this country have considered peer review to be a professional responsibility long before it became a legal obligation.

We are aware that there has been considerable criticism of the PSRO program from some quarters, and we recognize that there have

been some legitimate and unforeseen problems which have developed in the process of implementing the program.

Section 1155 (a) (6), this section dealing with the accessibility to private practice patient records. Specifically it reads PSRO is authorized to examine the pertinent records of any practitioner.

We feel that this allows for a breakdown of confidentiality of the patient-physician relationship. However, we do not believe that the program needs major revamping and we urge this committee to carefully consider any proposed changes in this law to insure that the effectiveness of the program will not be diluted. There are those who would have you amend this program to death.

I should now like to call on my colleague, Dr. John C. Taylor, to briefly outline our thoughts on the new regulations regarding limitation of physicians charges. Dr. Taylor.

Dr. TAYLOR. Mr. Chairman, committee members, on June 12 I had the privilege of appearing before this committee to offer the comments of our association on several medicare issues, including the then pending regulations on limitation of physicians charges tied to an economic index.

In our testimony of June 12, we commented that the regulations were "devoid of any substantive information about the elements of the index, the data to be derived therefrom or the methodology utilized in. its collection and preparation."

We indicated that we were not in a position to make a realistic evaluation of the full implications of the proposed regulations until all of the elements of the plan were made manifest.

We also advised this committee that our request to the Secretary for an extension of time for comment on the regulations was declined, after the eleventh hour. Of course, subsequent to our testimony and that of many others within the health care community who raised similar objections, the Secretary chose to proceed with immediate implementation of the questioned regulation.

The final regulation as it appeared in the Federal Register of June 16, 1975, and as amplified by part B intermediary letter No. 7517 is, we believe, still subject to much of the same criticism we and others have raised heretofore.

First, Public Law 92-603 mandated that the economic index was to be calculated for various regions of the country in order to be responsive to the varying economic factors which influence the prevailing charges in a given area.

The regulation, however, establishes an economic index which is calculated on a national basis. While this national index will be applied "locally" it fails, on its face, to conform with the original congressional intent.

Second, the regulation fails to outline the methodology for calculating the cumulative economic index. Intermediary letter No. 75-17 declares that the cumulative economic index for fiscal year 1976 is 1.179, but fails to explain how this magic number was established.

Finally, no attempt has been made in the regulation to prevent unnecessary discrimination against the physician by including an evaluation of any general increases in the cost of living, in addition to changes

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