HOSPITAL AND HEALTH FACILITY CONSTRUCTION AND MODERNIZATION WEDNESDAY, MARCH 26, 1969 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON PUBLIC HEALTH AND WELFARE, Washington, D.C. The subcommittee met at 10 a.m., pursuant to notice, in room 2212, Rayburn House Office Building, Hon. John Jarman (chairman of the subcommittee) presiding. Mr. JARMAN. The subcommittee will please come to order. As we continue the hearings on the Hill-Burton program, we have the honor this morning in leading off with testimony from the distinguished senior Senator from New York, Senator Javits. It is a real pleasure to have you with us, Senator. STATEMENT OF HON. JACOB K. JAVITS, U.S. SENATOR FROM THE STATE OF NEW YORK Senator JAVITS. Thank you, Mr. Chairman. Mr. Chairman, first let me say that I am deeply gratified that the committee has proceeded exactly as it indicated it would proceed when we had our conference last year on the health services and facilities amendments bill. At that time, the House committee assured the Senate conferees that they had every desire to get into this subject in a comprehensive way, as is now indicated, and that they would give consideration to the provisions which had passed the Senate last year. I am here to testify to that provision which now substantially combines my bill. May I say that I also had an opportunity to look over the legislation proposed by Representative Rogers, Representative Staggers, by the Department of Health, Education, and Welfare under the previous administration and by the bill which Secretary Finch indicated was going to be set up on the part of this administra tion. It seems to me that all hands now accept the basic principle that we are to make a major provision in three ways. One, there is the traditional support for hospital construction exemplified by Hill-Burton. The second aspect which I see is in everybody's mind is the idea of making loans available, especially for modernization, which will have a government guarantee. The administration is proposing to do that, to some extent at the expense of the Hill-Burton grant authorization. None the less, the principle is accepted even by the administration. The third aspect which appears in some, though not all the bills, is the question of the authority for an interest subvention. This was contained in the bill the Senate passed last year which was rejected in conference only because of the fact that the House had not considered it. And it is now hearing it. I therefore express confidence, Mr. Chairman, that whatever any of us may feel about individual details we will have a bill which will at least have met squarely these three questions. I have my views and every member of the committee is entitled to his views on the way they should be met, but I think that we can derive great satisfaction from the fact that these are now the accepted points of contact in respect of the matter and that they will be dealt with both by the Senate and the House and that we will get a result in conference which more nearly represents what we need than we have been able to before because of the fact one House had done something which the other House had not even considered. HOSPITAL MODERNIZATION AND IMPROVEMENT ACT With that as a preliminary I would like to testify briefly. I appear to testify in behalf of the Hospital Modernization and Improvement Act of 1969 (S-269) which I introduced together with Senators Brooke of Massachusetts, Dominick of Colorado, Murphy of California, and Prouty of Vermont; a compensation measure is sponsored in this body by the distinguished dean of the House, Representative Emanuel Čeller, as H.R. 3783. This bill would guarantee up to 90 percent on $400 million in loans to public and private nonprofit hospitals for modernization for each. of the next 3 years ($1.2 billion in guarantees) and provide Federal payments on interest charges of up to 3 percent on these loans. Congress would be putting a roof on it in two ways, one by the aggregate amount which it appropriated for this purpose and two by the interest figure of subvention of not over 3 percent. I wish to emphasize that because there is no automaticity about it. It is entirely a matter of negotiation and discretion by the Adminis trator. What we would be doing would be giving him the authority and a fund out of which to make good on that authority. This proposal is similar to the one I sponsored last year which passed the Senate as part of the health services and facilities amendments bill but was, as you will recall, deleted in conference because no hearings had been held in the House. Before Congressman Rogers arrived I spoke of his bill with approval and satisfaction because I think we are now all so much on the same wave length we are bound to get a result. This measure which we sponsored in Senate and which Congressman Celler sponsors here is aimed at correcting the condition of intolerable obsolescence afflicting one-third of the Nation's hospital capacity which is seriously impairing our ability to deliver up-to-date health services at a reasonable cost and which is seriously limiting medical education and research centered in hospitals. In addition, the bill provides that where the need is equal between two or more institutions, priority will be given to a teaching hospital, thus giving impetus to facilities contributing toward easing the dire shortage of trained health personnel. Finally, the bill also strengthens the effort toward innovation and modernization by giving the Federal Hospital Council responsibility for the evaluation of the effectiveness of the hospital modernization supported by this legislation and other Public Health Service Act programs (principally Hill-Burton) with especial emphasis on innovation and improvement of procedures and hospital techniques. This provision will help make more productive the $2 billion spent annually in hospital construction and the $19.1 billion spent each year in hospital care. As was pointed out in the report of the National Advisory Commission on Health Facilities: The cost of services within health care facilities is affected significantly by the planning and design of the facilities and systems employed to deliver health care. I ask unanimous consent that a section by section analysis of the Hospital Modernization and Improvement Act be included as part of my testimony. Mr. ROGERS (presiding). Without objection it is so ordered. (The document referred to follows:) SECTION-BY-SECTION ANALYSIS-S. 269 (H.R. 3783) Section 1-Short Title: "Hospital Modernization and Improvement Act of 1969" Section 2 AUTHORIZATION OF LOAN GUARANTEES The new section 621 of the Public Health Service Act would authorize the Secretary to guarantee the payment of principal and interest to non-Federal lenders who made loans to public and other nonprofit agencies for projects for the modernization of medical facilities. The amount of a loan guarantee with respect to any modernization project under this part, when added to a grant or a loan under part A, could not exceed 90 percent of the cost of such modernization project. ALLOCATION AMONG THE STATES The new section 622 would authorize the Secretary, after consultation with the Federal Hospital Advisory Council, to allot the amount available for loans which might be guaranteed under this part among the States in a fair and equitable manner after considering relative population, financial need, and need for modernization of facilities. Any amounts allotted for the guarantee of loans, but unobligated by a State at the end of the fiscal year would remain available for the next fiscal year. APPLICATIONS AND CONDITIONS Under the new section 623, loans would be guaranteed only upon an application submitted to the Secretary through the State agency designated under section 604 as the sole agency responsible for the administration of the State plan. An application would have to meet certain specified requirements. First, the application would have to meet the requirements under clauses (1) through (5) of section 605(a). These requirements relate to the inclusion in the application of a description of the site for the project, plans and specifications for the project, assurance that the applicant has proper title, assurance of adequate financial support to complete and operate the project, and assurance as to compliance with the prevailing wage provision in the Davis-Bacon Act. The application would also have to contain a certification by the State agency of what it determines the cost of the modernization project will be. In order for an application to receive approval, the Secretary would have ot find that four requirements were met. First, a sufficient amount to cover the cost of the project would have to remain in the State's allotment under new section 622. Second, the Secretary must make the findings required under clauses (1) through (4) of section 605(a). These required findings are that the application contains assurance as to title, financial support, and payment of prevailing wages, that the plans and specifications are in accord with regulations, that the applica tion is in conformity with the State plan approved under section 604, and that the application has been approved and recommended by the State agency and has priority over other projects. (Under this part, the finding by the State agency that an application has priority over others would be based on appropriately modified regulations.) Third the Secretary must obtain assurances that the applicant will keep records and make reports which the Secretary reasonably requires. Finally, the Secretary must determine that the terms and conditions of the loan are reasonable and in accord with regulations. The Secretary could not disapprove an application without affording the State agency an opportunity for a hearing. Amendments to an approved application would be subject to approval just as if they were original applications. The United States would be entitled to recover from the applicant the amount of any payments made under a guarantee under this part. (The Secretary for good cause could waive this right of recovery.) The United States would be subrogated to the rights of the applicant upon its recovery of payments from the applicant. The Secretary would be authorized to subject guarantees under this part to the terms and conditions that he might determine to be necessary to carry out the purposes of this part. In order to protect the financial interest of the United States, the Secretary would be authorized to modify any of the terms and conditions of the guarantee. Neither the applicant on whose behalf a loan guarantee is made nor any other person who made a loan to the applicant could contest any guarantee made by the Secretary, with one exception. Fraud or misrepresentation could make the guarantee contestable. PAYMENT OF INTEREST ON GUARANTEED LOANS The new section 624 would create a contractual right to each holder of a loan guaranteed under this part to receive from the United States (a) one-half of the interest rate which becomes due and payable, or (b), if lower, the interest which would become due and payable at a rate of 3%. Such amounts as might be necessary to carry out this section would be authorized. Contracts to meet the payments provided for in this section could not amount to an aggregate greater than the amount provided for in appropriation acts. LIMITATION ON AMOUNT OF LOANS GUARANTEED The new section 625 would establish a limit on the cumulative total of loan guarantees under this part that could be outstanding at any one time. For fiscal year 1970, the maximum allowable limit of outstanding loans guaranteed would be $400 million; for fiscal year 1971, $800 million; and for fiscal year 1972, $1,200 million. These limits would apply unless appropriation acts specified a lower limit. LOAN GUARANTEE FUND Under the new section 636, a separate loan guarantee fund for loan guarantees for the modernization of hospital and medical facilities would be established within the Treasury. The fund would be available without fiscal year limitation. Such amounts as might be necessary to provide capital for the fund would be authorized to be appropriated. The Secretary would be authorized to borrow funds to discharge his responsibilities under guarantees issued under this part. In order to borrow funds, the Secretary would be authorized to issue notes and other forms of obligations bearing interest at a rate determined by the Secretary of the Treasury. The Secretary of the Treasury would be authorized to purchase these obligations issued by the Secretary. The amounts borrowed under this part would be deposited in the fund. The Secretary would also redeem, from the fund, the notes and obligations issued under this section. Section 3 Expansion, if not in excess of 10% of existing facilities and if in conformity with the State plan, is also eligible for loan guarantee and interest payments. Section 4 Where it is determined that the need is equal between two or more institutions, priority will be given to teaching hospitals. A teaching hospital is defined as a hospital that allocates a substantial part of its resources to conduct, in its own name or in formal association with a college or university, formal education program(s) or course(s) of instruction in the health disciplines that lead to the granting of recognized certificates, diplomas, or degrees, or that are required for professional certification or licensure. Section 5 Amends the new section 631 to provide that the Federal Hospital Council will evaluate the effectiveness (including the innovation of new methods) of modernization under the Public Health Service Act and report at least annually to the Secretary of Health, Education, and Welfare and to the Congress with its findings and recommendations. Section 6 This section of the bill would amend section 302(c) (2) (B) of the Federal National Mortgage Association Charter Act (added by the Participation Sales Act of 1966-Public Law 89-429), which authorizes FNMA to establish trusts for HEW with respect to certain loans by the Commissioner of Education, so as to authorize such trusts also with respect to loans under these new provisions of the PHS Act. HARLEM HOSPITAL Senator JAVITS. I inject parenthetically here, one case which shows things deteriorate and then they finally break down. That is Harlem Hospital in New York, which you have all read about. I have had occasion to inspect its facilities. It was just almost the classic case requiring modernization, not for a day or a month or a year, but for years. And, then it finally broke down. There comes a point where the automobile is just so defective it just cannot run any more and sometimes we wonder that it runs at all for as long as it does. That was the case in Harlem Hospital. But at a given point it can do no more and then you have a real crisis as we have now in respect to this community. I emphasize, Mr. Chairman, that you are approaching in my judgment, conditions of breakdown like this in city after city. Though I appreciated the attitude in the conference last year, I certainly am very hopeful that we can get at it, and get it done. I will tell you now, I am not a stickler for any part of my bill. Let us do it in substance, whether it is the Rogers' bill, the Staggers' bill, the administration bill or any elements of my bill. Let us do it in substance, but let us do it, because we are going to have recurrent breakdowns now of the most dismaying character in city after city. I think we have run out of our string on this matter of the obsolescence of hospital facilities. Now, Mr. Chairman, I am aware also that the committee has considered not only hospital modernization, but revisions of the HillBurton Act. I would like to urge a point or two in that regard. ELIMINATE HILL-BURTON RURAL PRIORITY First, I urge, eliminate the rural priority language now in the HillBurton Act. The great need that originally existed when this was enacted to enable rural areas to catch up with the cities has dissipated. City needs are great and are difficult to meet as center cities face up to increased demands on all fronts with limited financial resources. We all know the unbelievable demographic finding of the flow of populations from the rural areas to the settled centers. I heard it analyzed the other day; in the decade which came after the end of World War II, the flow of population against the rural areas has shown |