from which the radiologist makes his diagnosis. In all instances, the critical diagnostic decisions are made by the radiologist and provided to the patient's attending physician in a written or oral consultation. When the radiologist treats patients, most commonly for some form of cancer, he normally sets up the treatment protocol and supervises each session.

The question of compensating radiologists for administrative and supervisory functions is one which has arisen in good part because current Medicare regulations made it desirable for hospitals to be able to attribute certain professional expenses to departmental costs. In most voluntary community hospitals, radiologists feel that their role in administering radiology departments is akin to that of other chiefs of medical service. Over the past decade, we have observed a trend for hospitals to provide an x-ray department administrator. These x-ray administrators usually are not physicians. They are charged with the logistical management of the department, relieving the physicians to concentrate on providing patient service. Ordinarily, in community hospitals, the radiologists have no source of income other than patient fees and reject any extra payments from the hospital if allowed to practice on a fee-for-service basis.

Conversely, there are large public and academic hospitals in which the chief of radiology and his staff carry burdens of administration, teaching and research which account for significant portions of their time. In such institutions, it is felt proper for there to be arrangements for institutional compensation for such nonpatient care.

It should be noted that where a radiologist or group of radiologists hold responsibilities for activities other than patient care, their volume of patient services is diminished proportionately by comparison with a group undertaking only patient services. Thus, we would urge that care be taken to avoid differentiating the basis for compensating the individual patient services of radiologists who also administer or teach or do research from the straightforward fee-for-service to be allowed for their colleagues who spend full time on patient service.

In that same paragraph of your speech, there is a sentence which reads, “No percentage, lease or direct billing arrangements would ordinarily be recognized for Medicare or Medicaid purposes." This sentence introduces two new concepts which should receive serious thought.

Over the years, a relatively small minority of radiologists have practiced in hospitals under a variety of lease arrangements. Some leases were based upon the volume of practice, amounting to an inversion of the percentage contract in which the hospital divided a joint fee with the physician. The majority of leases known to the College represented situations in which the radiologist purchased space, equipment and supportive services from the hospital, usually for a fixed annual fee. The radiologist, in turn, charged patients on much the same basis as he might have billed in a private office not located physically within a hospital.

The lease basis for practice has not been a popular one for hospitals. In some states, attorneys general have ruled that a non-profit institution cannot lease a portion of its facilities without jeopardizing the status of the whole. However, the lease does not necessarily share the same attributes of a perentage contract.

The subsequent phrase in your sentence, "direct billing arrangements," represents what we would hope is a semantic misunderstanding. Within the common usage of that phrase by physicians and health insurers, this refers to the sending of a bill by a physician to a patient for services rendered. We would use the term similarly whether the physician sends it only to the patient or whether he accepts assignment and sends it to a health care insurer. In that context, direct billing is the opposite of arrangements under which a hospital bills for physician services by combining the physician charge with hospital service charges. To us, direct billing and fee-for-service mean the same thing.

If the phrase is meant to prohibit the sending of bills to patients or their insurers by radiologists, then it would negate the fee-for-service basis promised above. If the phrase means that radiologists would be required to accept assignments of benefits for Medicare and Medicaid patients, this would constitute discriminatory treatment and surely would be opposed by those radiologists who refuse assignments and, on principle, by many who accept assignments.

If the phrase could be deleted from further discussions and from legislative language, it would resolve the problem we have suggested and would leave clear your intent to cover radiology services on a fee-for-service basis. If the phrase means something else, we respectfully request further explanation.

In the paragraph in your speech following the one just discussed, we applaud your understanding of the need to cover outpatient diagnostic services in an equitable way to avoid the large movement of patients in covered programs away from physician offices. Such an unchecked movement can only add to the public expenditures involved in expanding hospital facilities and, at the same time, represent an economic waste of private office facilities. We have held that there should be no discrimination in the payment for ambulatory services according to site, i.e., office or hospital outpatient department.

We have written at considerable length about what we perceive as the implications and impact of your words, once translated into legislation. Your legislative intentions are of the utmost concern to the nation's radiolgists. They need to be clear enough to avert regulatory distortion. We are grateful for your recognition of our basic desire to continue practice on a fee-for-service basis with Medicare and Medicaid patients. We would hope that you would continue to consult with our legislative counsel, J. T. Rutherford, and with the officers and staff of the College as you develop this legislation.

Sincerely,

JOHN M. DENNIS, M.D., Chairman, Board of Chancellors.

Dr. SCHWINGER. We have several observations upon features of the bill which I will express in brief, and I will append more detailed technical comments. For convenience, we will use the same sequence as the items appear in S. 1470.

In section 2, subsection (e), a provision yields the Federal responsibility to States with Federal contracts to establish rate-setting or cost review commissions. There is no requirement therein for any standard approach. Our experience with several of the State commissions now in operation is that their performance lacks the care which the subcommittee is providing in other parts of section 2 to merge the objectives of quality, availability and cost containment. We urge either deletion of subsection (e) or else the imposition of requirements for national standards.

In section 10, the options to accept or refuse assignments are important to doctors for both philosophical and practical reasons. Some radiology groups have had to borrow against Federal program accounts receivable to meet operating costs because of delays in payment and the certainty that medicaid payments, when finally received, will be severely reduced.

In section 10, we applaud the provisions for simplified submission of claims by participating physicians. We are confused about the administrative allowance and we raise detailed questions in our written statement.

In section 12, we can accept for diagnostic and therapeutic radiology the requirements that physician services be "personally performed or personally directed" and "customarily and appropriately done by a physician." However, we are concerned about the specificity of definitions of medical services and procedures elsewhere in that section. Distinctions drawn for payment purposes are difficult to establish in real-life situations. Our admonition is for great care in the handling of this section.

In section 12, further in subparagraphs (b) (2) (G) and in (c) we continue to prefer independent practice over percentage contracts as

a basis for the compensation of radiologists. It has been the policy of the ACR for more than a decade that radiologists should practice in voluntary hospitals on the same independent basis as other physicians. Where all physicians are salaried, then radiologists should share that status. In our written comments, we raise questions about the salary concept.

In expressing a preference for independent radiology practice in hospital departments, we suggested that the seeds of abuse are contained in percentage contracts. Not all percentage arrangements represent an abuse of patients, of hospitals, or of the radiologists involved. Where good faith is observed by radiologists and hospitals, good radiology practice is provided.

In one area, the elimination of percentage contracts may pose a problem which would warrant the subcommittee's indulgence. Some radiologists provide part-time coverage to several rural hospitals seattered over a wide geographical area. Everyone is agreed that this specialty service serves as essential need even though the volume is marginal. These problems can be solved but they may require special handling by program administrators and intermediaries.

In section 15, we appreciate the response of the subcommittee to our earlier requests for relief from current actions against us by Federal agencies on the premise that our preparation and distribution of relative value schedules constituted an unlawful restraint of trade. Since we testified last year, the ACR has accepted a consent decree from the Federal Trade Commission which prohibits us from further involvement with a relative value scale.

In the final analysis, it is the acceptance of any relative value scale by third party payers which determines its usefulness to providers. Since Federal programs are the largest payers for health services, it is appropriate that they review any scales offered by anyone.

The language in section 15 reserves all initiative to the government, allowing professional societies only an opportunity to respond without legal jeopardy.

In our testimony last year on S. 3205, we urged a position which preserves the right of the FTC to investigate possible restraints of trade by the application of relative value scales while also preserving the right of professional societies to act in good faith in their preparation. We still think this is a preferred approach and again enclose possible language to achieve the desired results.

In section 31, we applaud any and all provisions to assist or require Medicaid programs to become more efficient. The delays, inefficiencies and underfunding of many of them seem almost contrived to induce doctors to avoid participation. The college has urged its members to participate in medicaid programs, but we do so with the knowledge that the aggravation often exceeds the income.

In section 40, we note a prohibition on Federal payments under a formula derived from leases of hospital equipment or facilities on a percentage basis. This is consistent with positions of the American College of Radiology. However, some of these existing leases have produced excellent radiology services.

In section 41, we support the provision to cover costs of ambulance transportation for patients between hospitals where specialized facilities are not available in the originating hospitals. Such coverage can

help to avoid duplication of expensive equipment without imposing unintended burdens upon patients.

An additional dimension of the same concept is found in other community and private health facilities freestanding from a hospital. These include the centers for radiation therapy of cancers and sometimes computed tomographic scanners. Most patients served in such community facilities are ambulatory. A small percentage are bedridden and require institutional care in hospitals or extended care facilities is not now covered by the Federal programs.

Radiation therapy may require as many as 40 or more daily visits, and represent significant transportation costs to patients lacking the resources to pay them. We urge extension of the language to cover transportation of patients from institutional care to ambulatory health facilities which serve the entire community.

In section 44, we applaud the intent to prevent the embarrassment of doctors by the publication of erroneous and often misleading information about fees billed for the care of patients covered by Federal programs. Radiology groups are among those embarrassed and harassed by the recent publication of an error-ridden list of physicians billing "large" amounts.

These remarks represent the major themes in our testimony on S. 1470. We submit additional detailed comments in writing and request the inclusion of all our material in the record of the hearing. If any of us now or later can assist the subcommittee further, please request it. We wish the subcommittee well in its efforts.

Senator TALMADGE. Thank you very much.

First, as chairman of this subcommittee, on behalf of this subcommittee and on behalf of the staff I want to thank the American College of Radiology for their very helpful and constructive suggestions in preparing this legislation.

Now, at the bottom of page 9, you refer to institutions where physicians must change to a salary arrangement to be in compliance with S. 1470. While the bill would not permit percentage arrangements, it would not force physicians into salary arrangements, would it?

Dr. SCHWINGER. We can anticipate some situations where if the percentage arrangement were eliminated, the obtaining of independent practice may be near to impossible for various reasons and might, perhaps, leave no alternative but a salary arrangement.

We find this a difficult problem.

Senator TALMADGE. What about the fee-for-service arrangements? Dr. SCHWINGER. We assume the fee-for-service arrangement to represent independent practice. As I say, there may be some areas where this might be extremely difficult to obtain. There are problems with other third party payers, for example, that might impose serious problems here. Some Blue Cross programs, for example, are rather opposed to independent or fee-for-service kinds of practice and might leave no alternative but for a hopsital to make some kind of arrangement with a radiologist and put him on a salary basis.

Senator TALMADCE. In the middle of the paragraph on page 8 you express concern about language in S. 1470 that authorizes the Secretary of HEW to establish limits on medical services, supply and equipment that do not vary in quality from one supply to another.

This simply repeats the language in the present law. There is no change.

Dr. SCHWINGER. Thank you.

Senator TALMADGE. Senator Curtis any questions?

Senator CURTIS. No questions.

Senator TALMADGE. Thank you very much. We appreciate your helpful suggestions and appreciate your continued work with the staff of our subcommittee.

[Additional comments of Dr. Schwinger follow:]

The following comments apply to specific provisions of S 1470.

In Section 2, there is at least the strong possibility of a conflict between the express prohibition in paragraph (b) to amend section 1861 of the act in subparagraph (aa) (2) (C) which excludes from the term "routine operating costs" the "(C) costs of interns residents, and non-administrative physicians" and the subsequent provisions in subsection (e) (2) "the system (created by the state) applies to all revenue sources for hospital services in the state."

Our experience with the several state cost commissions, such as the one in Maryland, already indicates that the commissions are not mindful of the distinctions between physician service and hospital service originally contained in PL 89-97, as amended, and now addressed in detail in sections 10 and 12 of S. 1470. Since the Congress has recognized the separation of physician service on the several occasions, we are reluctant to leave an opening for varieties of departures from this position.

In section 4(c), amendments to section 1122 (d) (B)(i) raise a question of double jeopardy for sponsors of new medical facilities proposals which, of itself, could add time and expense to the process of community approval and thus to the ultimate cost of providing the proposed service. While there is an appeal mechanism to the Department of Health, Education and Welfare, the amount of delay certain to ensue will not contribute to the purpose of this section. We appreciate that the failure of the joint planning agencies to act within 180 days will constitute approval. However, the two houses of Congress have a mechanism which allows them to compromise differences and enact legislation. A more explicit provision for planning agencies would be equally useful.

In section 10 (c) (2), we are puzzled, as we mentioned above, about the application of the $1 administrative cost-saving allowance offered to some but not all participating physicians. For example, radiologists providing either diagnostic or therapeutic services to hospital patients would be excluded, though a surgeon providing services to the same patients would be covered. A participatnig radiologist, under the language in subsection (C) performs x-ray examinations in his own office on ambulatory patients who are neither inpatients nor outpatients of a hospital and would thus be eligible for the allowance.

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In the official explanation of the bill a different phrase, “. . . the office of the billing physician," is used and would certainly qualify the office radiologist. The nature of radiology practice in or out of hospitals lends itself to bulk handling of bills where radiologists are willing and able to accept assignments. We doubt that it is the intent of this section or of its exact language to discourage radiologists from becoming participating physicians. But we must confess our inability even to explain to radiologists with certainty how this provision would affect them or why they have been treated in a discriminatory fashion. We have doubts about the validity of the whole concept and at the very least, we seek further clarification.

In section 11 (a)(1) amending section 1842 (b) (3), we raise a question about the intent of the language in paragraph (C). The phrase in question refers to the meaning of "medical services, supplies, and equipment . . . that . . do not generally vary significantly in quality from one supplier to another. . ." In many contexts other than legislation, the phrase "medical services” is used as being synonymous with "physician services." We hope this is not the intent here and that we may depend upon those services defined in section 12 as physician services being excluded from the intent and application of paragraph (C).

In section 12 (a) (1) the phrase needing clarification reads. “.. or any natient care service unless service (A) is personally performed by or personally directed by a physician for the benefit of the patient and (B) is of such nature