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that its performance by a physician is customary and appropriate.” In diagnostic radiology, the x-ray, isotopic, ultrasound or thermographic image normally is produced by a trained technologist working under the supervision of the radiologist. The radiologist need not be physically present during the image-making process. However. he must exert continuing supervision over the technologists and he must personally inspect the images produced by them to render a diagnostic opinion. In therapeutic radiology, the radiologist customarily plans a course of treatment and is present during individual treatments. This definition has not been at issue, except very occasionally by the interpretation of a Medicare intermediary. However, it would be appreciated if the legislative history could reflect the understanding stated above.

In paragraph (3), following, we note that the administration of isotopes by a pathologist is included within listings of physician service. This is correct, in our opinion, since pathologists utilize radiosotopes for studies of dynamic body function. However, radiologists and some other physicians also use some of the same isotopes in body imaging procedures. Our point here is to avoid any inadvertent negative inference that only pathologists use isotopes.

Section 12(b) (2) amending section 1842 (b) (3A) paragraph (G), and an addition to section 1861 (v) both address the prohibition of the use of a percentage contract between a physician and a hospital as a basis for determining the customary physician charge ". . . to the extent that the charge exceeds an amount equal to the salary which would reasonably have been paid for the service (together with any additional costs that would have been incurred by the hospital) to the physician performing it if it has been performed in an employment relationship with the hospital ... as the secretary may determine to be appropriate." Our question relates to the task of the secretary, program administrators and carriers in determining what is ". . . the salary which reasonably would have been paid for the service." This seems to us to be a mandate for the federal programs to fix or at least to review and approve the levels of physician salaries in those institutions where physicians must change to a salary arrangement to be in compliance with these two subsections. There already exist various bases for salary practice relating to faculty status, civil service and straightforward employment. In theory, at least, institutional charges for physician services to Medicare and Medicaid beneficiaries already are supposed to reflect the incomes and fringe benefits derived by the physicians who perform the services. We think it would be unfortunate for these sections to result in still another federal standard for the income of physicians. Perhaps the legislative history could reflect a limited intent here.

In section 15, we have addressed above our conceptual difficulties with current proposals to allow medical organizations to prepare relative value scales at the initiative of the secretary of Health, Education, and Welfare and subject to his review and approval. If we now presume that the concept as contained in section 15 is to apply, we make the following suggestions about the subcommittee's language.

In paragraph (c), the exemption from consent decrees "by which an association has waived its right to make recommendations concerning fees" perpetuates a point of disagreement between the FTC and the several associations as to whether of not an RVS can be equated exactly with a "recommendation concerning fees." The FTC has contended that the promulgation of a RVS is a per se violation. We have argued to the contrary. Our only point here is that the language might be changed to make a distinction.

More cogently, the preparation of RVSs in the past has involved not only the work of expert committees but also a period of testing of their preliminary product by a selected group of radiologic facilities. Such test periods usaully have produced refinements and improvements in the final product. If the language now prohibits such reasonable testing. the final product is likely to be inferior and immediately in need of modifications. This could be handled in the legislative history, if the point is well taken.

In section 40(a)(1) (B) we note that there now exists a limited number of leases by which radiologists operate, manage and control radiology departments in hospitals. In some instances, the personnel are employees of the radiologist and the equipment is his property. Some of these instances now involve percentage arrangements or fixed fees per procedure paid to the institution. These arrangements can and will be changed if the bill is enacted. However, it may require some time to disentangle some of these relationships and an appreciation of their complexity in the legislative history would be welcomed.

In section 41, we have already noted the desirability of extending language to cover transportation of patients from hospitals and extended care facilities to free-standing health centers for sophisticated diagnosis and treatment using CT scanners, radiation therapy equipment and other expensive and complex equipment. This should not require any complicated regulations since these are local situations and the carriers are already familiar with them.

In section 44, we again salute the subcommittee for this effort to rectify a situation which has resulted in approbrium and embarrassment for physicians. These are our comments on S 1470. If there is additional information which the subcommittee seeks which is within our capability to provide, please call upon us. Thank you for this opportunity to comment.

Senator TALMADGE. The next witness is Dr. Tyra Hutchens, president-elect, College of American Pathologists and chairman, Department of Clinical Pathology, University of Oregon Medical School, accompanied by Dr. Jerald R. Schenken, Nebraska Methodist Hospital. Senator CURTIS. Mr. Chairman?

Senator TALMADGE. Senator Curtis is recognized.

Senator CURTIS. I wish to welcome these distinguished doctors here and I want to say that Dr. Schenken is not a newcomer before this committee. He has given much of his time to improving the practice and public spirit of work in Nebraska Methodist Hospital.

Senator TALMADGE. We are delighted to have you. You come very highly recommended, doctor. If you will insert your full statement into the record and, in the interests of brevity, please summarize it for 10 minutes.


Dr. HUTCHENS. Mr. Chairman and members of the committee, I am Tyra Hutchens. I am the president-elect of the College of American Pathologists. With me is Dr. Jerald Schenken of Omaha. Dr. Dennis Dorsey, president of the College of American Pathologists has asked me to relay his regrets since illness keeps him from presenting his remarks.

We thank you, Mr. Chairman, for the sincere and complimentary remarks you made about the specialty of pathology both during hearings last year and in a well-received speech delivered at the joint spring meeting of the college and the American Society of Clinical Pathologists.

Mr. Chairman, with the same sense of respect you have expressed for pathology, the college supports the intent of S. 1470; we do, however, have a few concerns.

Prior to the introduction of S. 1470, the college board of governors approved the support of relative value schedules which include a physician's component for each clinical pathology laboratory procedure, as well as other suitable reimbursement mechanisms.

The testimony we offered on S. 3205 was interpreted by some as a defense of the percentage contract as the best mechanism for the reimbursement of hospital-associated pathologists.

I should like to clarify the record. The college was not defending the percentage contract as a reimbursement mechanism superior to all others. We were supporting the concept that a hospital and a physician should be available to them multiple options for payment of pathology services. In our opinion, S. 3205 did not offer acceptable alternatives.

S. 1470 does offer an equitable alternative to percentage contracts for those who wish to avail themselves of the option contained in section 15.

Mr. Chairman, we will now address several specific sections of the bill.

When the subsections of section 12 are viewed collectively, they would appear to restrict the reimbursement options available to hospital-associated pathologists. When studied individually and related to the relative value schedule section of the bill we believe that these seemingly restrictive provisions can be appropriately modified.

Subsection (A) (1) redefines physicians' services as contained in section 1861 (Q) of the Social Security Act. The college is of the opinion that this redefinition would seriously impair the administration of the Act. Defining the term "personally performed by or personally directed" would inevitably lead to a complex maze of regulations.

The college urges that this redefinition of physicians' services be deleted and that the current definition as contained in the Act be retained. Subsection (A) (2) would add a new paragraph: "(3) pathology services," to section 1861 (q) of the act.

Mr. Chairman, we are pleased with the changes that recognize the performance of autopsies and the supervision, direction, and quality control of the clinical laboratory as professional services. We do, however, have several concerns.

There is actual medical judgment and the potential for medical judgment in every pathology service. The autopsy is medically indispensable. It is the ultimate quality assurance in the practice of medicine. It is an important monitor of the effects of treatment. It must be classified as a physician's service and be fairly compensated under any reimbursement program.

Further, the classification of supervision and quality control as being "customarily performed by nonphysician personnel" is misleading. It recognizes the manual-technical portion of these responsibilities which may be performed by technical personnel, but which are, in reality, only a small part of supervision and quality control. The manualtechnical portion is merely the visible result of the policy, procedure and standard setting; evaluation, and action initiative that have been and remain the medical responsibility of the pathologist-director of the laboratory.

In order that the definition of pathology services as contained in this subsection better reflects the fact that there is a physician's component in every clinical pathology laboratory service, we have offered amending language which is included in our written statement.

The college believes that subsection (b) (1) of section 12 provides for a possible solution to problems some hospitals have in obtaining badly needed services. We believe this subsection allows for the leasetype arrangement which the college supports.

It would appear appropriate for the Secretary to approve lease arrangements under circumstances where a lease promotes, among other benefits, the regionalization of certain services, or facilitates the provision of services in locations and settings in which such services would not be economically available.

Turning now to section 15, the college strongly supports its inclusion in S. 1470.

The college long ago recognized the value of appropriate use of relative value schedules. The college's activity in this area was terminated. by a consent decree signed by the college with the U.S. Department of Agriculture.

The college welcomes the inclusion of relative value schedules as a basis for establishing a method of reimbursement for physicians. Further, Mr. Chairman, the college maintains that such relative value schedules must contain a physician's component in every clinical pathology laboratory procedure.

A proper and equitable relative value schedule should recognize the following structure: three sets of variables are involved: (1) relative value schedule; (2) the physician's component of the relative value. schedule; and (3) the conversion factor-to convert to dollars.

The first variable, the relative value assigned to each item of clinical pathology laboratory service, should reflect the average total effort and expense required to develop the data and prepare a report appropriate for that service. Cost of supplies and equipment and of professional, technical and support effort, all affect the relative value. If a given procedure becomes more complex, the relative value would necessarily rise, and, on the other hand, if it becomes simpler and less expensive, the relative value would decline.

The second variable, the physician's component, is a specified part of the relative value of every item of clinical pathology laboratory service. The physician's component is not a uniform, across-the-board fraction but is determined separately for each item. Thus, it is not a disguised percentage arrangement.

Items having a high physician's component often have a relatively low technical component. Items with a high physician's component requires more professional observation and interpretation by the pathologist. Conversely, items with a low physician's component require less professional observation and interpretation.

Whatever the physician's component, it must include the pathologist's effort in maintaining professional and technical standards. There is no way of foretelling which particular service will require direct attention and special interpretation by the pathologist. This potential need goes beyond his involvement in establishing procedures, evaluating methods, judging the competence of technical personnel, establishing and evaluating quality control, determining abnormal results outside expected norms and other professional services.

Thus, every procedure performed in the Department of Pathology, including the clinical laboratories, involves an actual as well as a possible consultation by the pathologist.

The third variable, the conversion factor, is applied for a given. period of time to the current relative value of each item of clinical pathology laboratory service and must be adjusted to reflect general

economic changes, including inflation. Only if inflation were halted and the buying power of the dollar stationary would the conversion factor remain stationary.

This discussion of the relative value schedule with a physicians' component and the earlier discussed lease arrangement in appropriate situations, does not touch upon all types of contractual relations that we support. The college urges multiple approaches to contractual relations between pathologists and institutions. Our discussions of the relative value schedule and the lease arrangement are to point out and support alternatives, not substitutes, for various forms of contractual arrangements.

In an effort to better relate section 15 to section 12, we have offered amending language which is contained in our written statement.

Mr. Chairman, this concludes our comments on S. 1470. When we came before you last year to testify on S. 3205, the college opposed the limitations being placed on contractual relationships between pathologists and hospitals. As you requested we have worked on developing alternatives and specific proposals.

During the past year, there have been fruitful discussions with you, Mr. Chairman, and with the committee staff. We want to continue these cooperative efforts and are ready and willing to assist you at any time.

We thank you for this opportunity to present testimony on S. 1470. Senator TALMADGE. Thank you very much. I appreciate your thoughtful and constructive statement as well as your expressions of support for a number of provisions in S. 1470.

I want to commend you for presenting what I believe to be a considerably more positive statement than that which was offered last year at the hearings on S. 3205. Your present statement reflects a substantial amount of hard work and effort and give and take.

I want to assure you that we will study your suggestions carefully with a view toward, wherever possible, incorporating those which meet common objectives.

I want to further compliment you and your colleagues for your cooperation and the spirit of cooperation which you have demonstrated with this subcommittee and the subcommittee staff. I think that we have reached substantial agreement now on common objectives.

In referring to your testimony in support of relative value scales, am I correct in my understanding that you are not viewing this merely as an additional reimbursement option but, in fact, your association is agreeing to withdraw its support of percentage contracts in favor of relative value scales?

Dr. HUTCHENS. Yes. The current college policy on this, is that we support the use of appropriate relative value scales as well as other suitable reimbursement mechanisms for pathologists in lieu of percentage arrangements between pathologists and institutions. Senator TALMADGE. Thank you.

Senator Curtis?

Senator CURTIS. Thank you, Mr. Chairman.

There are one or two matters here that I would like to have cleared up in my mind. I have not been able to follow all of these hearings in

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