of better health, the best care of the sick and injured, the continued advancement of medical knowledge and the transfer of new technology to the patient's bedside. It is imperative that these facilities receive more adequate capital financing support, as a matter of national policy, if they are to remain the social instruments best serving the overarching interests of the community in matters of health and disease. THE NEED FOR SOLUTIONS TO THE STATED PROBLEM Because the problem of facility need for teaching hospitals can only be resolved through a prompt and comprehensive national effort, it is essential that representatives of the teaching hospital community outline the basic capital requirements to accomplish preservation of excellence in these multi-purpose institutions. To this end, the Council of Teaching Hospitals of the Association of American Medical Colleges is suggesting Federal assistance programs for modernization and expansion of teaching institutions. The need for such financing is urgent. The many interrelated facilities for patient care, education, research and community service are continually affected by advances in both clinical medicine and the basic sciences. Correspondingly, there is constant demand on these institutions to provide personnel, equipment and adequate, modern up-to-date buildings. The problem in financing hospital construction arises mainly from the fact that hospitals are non-profit organizations, being reimbursed for their services most frequently on a cost, or less than cost basis. The economics of such a situation prevent the accumulation of a surplus. Depreciation charges, when received, most often must be used for renovation or for maintenance of existing plant and equipment rather than for modernization or expansion of plant facilities. In 1967 the Council of Teaching Hospitals of the Association of American Medical Colleges sampled its membership to determine the extent of need for modernization and expansion among 250 of its members. Federal and Canadian hospitals were not included. Replies were received from 214 hospitals, providing an 85% return. Of the approximately 115,000 beds represented in this survey, 35% were over 35 years old and an additional 16% were between 21 and 35 years old. Of the 85% responding hospitals, 120 planned to replace 27,500 beds over the next ten years, and 142 planned to add 24,000 beds during the same period of time. For all forms of construction, including replacement, renovation and expansion, the estimated attendant cost for the ten year period is $4 billion. The reliability and validity of this study have recently been verified by a series of circumstances and events. Governor Rockefeller of New York has estimated that $1 billion is needed for the construction and modernization of all hospitals in the State of New York alone, and is working toward the development of legislation that will accomplish this purpose. A study completed by the Hospital Planning Council for Metropolitan Chicago resulted in the determination that $370 million is needed for modernization, and $720 million is needed for facility replacement of the 69 hospitals totalling approximately 6,000 beds in that city. This same Council determined that the costs of modernization would approximate $156 million and the cost of replacement, $300 million for six teaching hospitals in the metropolitan area. Additionally, in Philadelphia the capital needs for modernization, replacement, and expansion of the hospitals either operated by, or affiliated with, the area's 5 medical schools would total $278 million as determined by the Philadelphia Hospital Survey Committee in 1967. Because the teaching hospitals serve a combination of community, regional and national purposes and because their strength is divided through a diversity of forms of ownership and control, the Council of Teaching Hospitals, Association of American Medical Colleges, favors both Federal and local participation, as well as the use of borrowed capital, in the construction of teaching hospitals. Federal funds should be provided under conditions that will: 1. Be sufficient to encourage action that is both prompt and adequate; 2. encourage the facility modernization and expansion of existing teaching hospitals; 3. encourage an institution's continuing effectiveness in maintaining diversity in its sources of financial support; 4. recognize the indispensability of the multiple purposes of the teaching hospital, i.e., patient care, education, research and service to the community and the beneficial influences which these multiple functions have on the standards of excellence maintained by the teaching hospital. PROPOSALS 1. The Council of Teaching Hospitals, Association of American Medical Colleges, recommends that the Congress provide assistance in the form of a grant program, a loan program or a combination grant and loan program as is fiscally indicated. One such program might be: a. The teaching hospital, in applying under the provision of this program, would assure Federal authorities that it has 10% of the proposed construction monies. b. The Federal government would grant the applicant 20% of the total estimated cost at the time construction begins. c. The Federal government would assure the applicant 35% of the construction monies from government borrowing. The principal and interest would be paid by the government over a period not to exceed 10 years. d. The Federal government would authorize the applicant to borrow 35% on a straight loan or bank issue basis, payable over a period not to exceed 25 years. The government would insure both interest and principal. 2. Because of this severity of the problem and the immediate need for modernization in teaching hospitals, it is further recommended that the Congress appropriate $220 million per year over a 10-year period to provide the necessary financial support for such a program. EXCERPTS FROM RECENT PRESIDENTIAL APPOINTED COMMISSIONS THAT IDENTIFY THE NEED FOR MODERNIZATION AND CONSTRUCTION FUNDS FOR TEACHING HOSPITALS Report of the National Advisory Commission on Health Manpower, November 1967. U.S. Government Printing Office: 196 P-O-288-638. Although net income (including incentive payments), depreciation funds, and commercial borrowing should be the principal means for providing funds for hospital modernization, Federal grant and loan programs will be required to meet the extraordinary needs of some large urban centers where complete overhaul of hospital facilities is needed. In these areas, the plants are so obsolete that there is no possibility of operating them efficiently enough to obtain capital_funds required for modernization or replacement. We therefore recommend that Federal assistance in the form of grants or loans (or loan guarantees) be promised to obsolete hospitals in those areas where modernization needs are so extensive that nongovernmental sources of capital will be clearly insufficient. (Volume 1, Page 61) National Advisory Commission on Health Facilities: A Report to the President U.S. Government Printing Office 1968 0-327-238. The multiple responsibilities of teaching hospitals for the education of health manpower and scientific research, in addition to patient care, result in unique and extensive requirements for modernization. (Page 64) Remarks given by Mr. Boisfeuillet Jones, Chairman, National Advisory Commission On Health Facilities in Presenting Commissions' Report to the President, December 13, 1968. The Commission is mindful of the remarkable record of health facility construction encouraged by the Hill-Burton Program over the past two decades. It notes that hospitals now represent capital assets of about $28 billion, but now need $10 billion for modernization and replacement and will need another $10 billion modernization over the next 10 years. Mr. ROGERS. We do recognize the tremendous job the teaching hospitals are doing. Let me ask you this: On page 6, you state the teaching hospital is the locus of much of the scientific investigation that is done to advance the state of medical knowledge and patterns of medical care, such as our university hospitals where the doctors are trained. How much of the teaching professor's time, would you say, or could you give us any figures on this, is devoted to research? Dr. ROGERS. Well, it would vary considerably from professor to professor. I would say 30 percent. Mr. VIGUERS. Let me add one aspect of that, at least on policy in our institutions; namely, the portion of the professor's time which is devoted to research is paid for out of research funds and not from potient or educational funds. Mr. ROGERS. This concerns me somewhat. Mr. VIGUERS. We have some people who spend 100 percent of their time in research on the faculty, down to men who spend no time. Mr. ROGERS. Yes. That is what I wonder. I wonder if we have not directed so much money into the research area, where we have almost required the teaching profession to do some research work, to help maintain funds, to build up the income for the institution, as well, to devote so much of their time there that we have underemphasized in effect the teaching profession in the medical field. I wonder if we should not redirect some of the moneys so that we would encourage an excellent professor to devote more of his time to the teaching profession, rather than dividing so much as many of them do. Many of them, I am sure, go up to half of that time and I recognize the importance of research, too. But if we could not, by having a flow of dollars directed into the teaching profession, as we have directed the billions into the research area, encourage the teaching professor, encourage the production of more doctors, dentists, nurses, and so forth. What would be your comment on that? Dr. ROGERS. My feeling, Mr. Chairman, would be that a money flow for educational purposes would be highly appropriate. I think that there is no question but this country turns out the best health professionals in the world and in general, there is a pretty good positive correlation between the excellent teacher and the individual who has significant research interests. But I think that money is flowing for educational purposes to medical schools that could be put to very good use. I would hate to see our biomedical programs wither on the vine because they have brought us to this present imminence, but I think having moneys through an educational channel would be highly appropriate. Mr. ROGERS. If the doctor knew that his services for teaching were going to be properly paid for and recognized, he might be able to produce more doctors. Then, the researcher can devote his time to the research projects, but those who really are mainly professors, I think perhaps should be encouraged. Now, let me ask you this: Is your association doing anything to study and to make recommendations on reduction of medical costs, hospital costs? Dr. ROGERS. I might, with your permission, turn the question to Dr. Berson, executive director of AAMC, sitting directly behind me. Dr. BERSON. Mr. Rogers, we are making some efforts to study some aspects, and I think perhaps Mr. McNulty can give you more details than I can. Basically, research in the whole area of the delivery of health services is important. We do not have enough knowledge in that area, and this is one reason why 6 years ago our association got a grant, from a foundation and recruited an able staff man to do some very exploratory studies in this area. A number of institutions were doing the same thing, but the research effort in this area is new and we cannot yet report very outstanding results from that effort. But we have been seriously concerned for 6 or 7 years. Mr. ROGERS. I wonder if you would let us have for the record what you have done in this area, what your member institutions have done, any results from it, any recommendations, if you could let us have a brief summary of this it would be helpful to the committee. We had planned to go into a study of this as was announced by the chairman yesterday, into health costs, hospital costs, because it is becoming a very serious problem for everyone. Mr. VIGUERS. For us, too. Mr. ROGERS. I am sure including your institutions, too. Mr. MCNULTY. We will submit the statement. I would only say of this new council of 350 institutions, one-half of our resources in terms of our manpower, our interest, money and staff, are being devoted to the researching of the system and ways in which we can expedite and make more effective the system. Mr. ROGERS. That is fine. Thank you. (See letter dated April 16, 1969. p. 170.) Dr. ROGERS. On those lines, Mr. Chairman, I thought it might interest you to know that Johns Hopkins, on the basis of the small amount of seed money from the National Center for Health Services Research and Development, is inaugurating a whole new series of outreach programs in the ghetto area in east Baltimore, and is picking up as an experimental plan in an attempt to define more efficient lower cost systems for the city of Columbia, which is emerging in the Washington-Baltimore corridor. Mr. ROGERS. If you could let us have just a memo on that, as to what is being done, what it is geared to, this will be helpful. (See letter dated April 16, 1969, p. 170.) Mr. ROGERS. Should research funds be controlled by the States, comprehensive planning? Dr. ROGERS. My feeling, Mr. Chairman, is that comprehensive planning is something we are all seriously concerned with. In my judgment, it is not far enough along. There are multiple areas involved-HUD, regional medical programs, comprehensive State programs, mental health programs, none of which have coalesced to a level where I feel that the teaching hospitals which have this important leadership role to be well out ahead of their State or local community, I feel it would be unfortunate if the moneys flowed through that channel. Mr. ROGERS. Should outpatient clinics be connected with a hospital? Dr. ROGERS. I think that they must be. Again, I thought the statement Mr. Biemiller made, or his quote of Ernie Saward of the Kaiser Permanente group, was very germane. Mr. ROGERS. But they wanted us to lift that requirement Dr. ROGERS. There seemed to be a little conflict there. But my own judgment is outpatient facilities must be part of a continual system of care which must ultimately have as a backup a major hospital. Mr. ROGERS. Then you would agree that we should not lift that present requirement of the law, that the outpatient clinic should be 28-236 0-6912 run by the hospital, or by the group that owns the hospital. They should also run the outpatient clinic as is done by the Kaiser group, as I understand. Dr. ROGERS. Yes. Mr. ROGERS. I presume this is what you are telling me. Dr. ROGERS. Yes, it is. I was pausing only because I thought in reading their statement they were suggesting there might be other groups that would emerge, that could conceivably have both a hospital and an outpatient group. Mr. ROGERS. They have a hospital and an outpatient, they qualify, do they not? That is why I could not get their testimony. Mr. VIGUERS. I could not understand it. Mr. ROGERS. As long as they have the hospital, this is what we want, I presume. Dr. ROGERS. It seems to me the entire system is critical and to build isolated units is our major problem at the present, and it must be a continuum going from primary, simple care moving through the entire spectrum to the highly complex care. Mr. VIGUERS. I think this also has something to do with your concern about the suburban community hospital. I believe that we should move toward a system of hospital care which will include these various units, where we can consolidate for various economies and more effective use of some of our scarce manpower. Mr. ROGERS. Could your organization give to us typical examples of cost per patient per day in your organization, the typical, the smallest, the largest, the medium, what they run, the variants, and a breakdown of what those costs are to the organization to enable us to consider some of the problems we are going to have to think about? And how much of your support money comes from the Federal Government, from research funds, Hill-Burton funds, or whatever funds may be. Could you give us the typical example, pick the large institution, the medium and small? Dr. ROGERS. Yes, we could very readily do that. (See letter dated April 16, 1969, below.) Mr. ROGERS. Anything else you may desire to give to the committee? Dr. ROGERS. Mr. Chairman, we thank you for your time and all of your service. Mr. JARMAN. Thank you very much. The testimony is most helpful. (The following letter was received for the record:) ASSOCIATION OF AMERICAN MEDICAL COLLEGES, Congressman JOHN JARMAN, DEAR CONGRESSMAN JARMAN: The purpose of this letter is to provide for the record of the hearings on Hospital Modernization and Construction (H.R. 6797 and H.R. 7059) the Association's recommendations concerning the relations that should exist between these programs and the state comprehensive planning agencies, certain information about research that has been conducted by this Association relevant to the delivery of health services, and some information about the impact of the repayment of guaranteed loans on the cost per patient day, all as requested by the committee. The Association of American Medical Colleges recommends that the provisions of the Staggers bill (H.R. 7059), providing that the state comprehensive planning |