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Dr. AMENT. I would like to proceed with my comments on my statement at this time.

Senator TALMADGE. You may proceed.

Dr. AMENT. My name is Richard Ament, and I am a physician engaged in the practice of anesthesiology in Buffalo, N.Y., and I am currently president of the American Society of Anesthesiologists.

AŠA is an organization of some 14,000 physicians, 11,000 of whom are actively engaged in the practice of anesthesiology. The position of the ASA on S. 1470 is set forth in our written presentation, copies of which are before the members of the subcommittee. I do not intend to read that statement. In essence, ASA is supportive of those portions of S. 1470 dealing most specifically with the practice of anesthesiology and seeks only minor clarification of the bill, along the lines already discussed with the Finance Committee staff.

We do advocate, however, the reinsertion into S. 1470 of the proposed 80-percent floor on medicaid reimbursement for all physicians. As discussed in our statement, the reimbursement to anesthesiologists under medicaid today falls far below this level to the point where anesthesiologists are becoming less and less inclined to accept medicaid patients.

While we are intellectually sympathetic with those who advocate that medicaid reimbursement should be no different than that under medicare, we believe, as practical individuals, that some improvement in the situation is better than no improvement at all, not only from the point of view of the anesthesiologists but also from the point of view of medicaid patients who require our care.

I would like to take the remaining amount of time allotted to me by the subcommittee to offer some general thoughts which are my own. and not necessarily those of ASA. It is well-known to the committee and the staff that ASA has departed markedly in its approach to S. 1470 and its predecessor, S. 3205 from several other elements of organized medicine, including most particularly the American Medical Association.

AMA, in its formal statement to the committee yesterday, expressed its strong opposition to those portions of the bill that attemped to define the context and the basis upon which the Federal Government will reimburse anesthesiologists and other specialists for professional services rendered to medicare patients.

AMA's underlying philosophic ground is that this proposed Federal action amounts to a definition of the practice of medicine, an enterprise in which the Government should not be engaged. ASA, on the other hand, thought that the chairman's initial proposals last year involving condemnation of percentage arrangements, requiring that reimbursement of anesthesiologists and others be tied to personal performance or personal direction of medical services, and generally supporting the right of organized medicine, collectively to deal with the Federal Government, in organizing levels of reimbursement were almost indirect accord with ASA's published ethical standards for the practice of anesthesiology and other statements of ASA's position. ASA has thus been publicly supportive of the chairman's effects, and privately cooperative with the committee and its staff in the articulation of these principles in S. 3205 and S. 1470.

Let there be no mistake, however. Neither ASA nor its membership is enthusiastic about congressional standards-setting which threatens. or tends to threaten, the freedom of choice of the individual physician to determine how he will practice medicine. That we appear to be moving in the direction of a national medicare physician fee schedule, I assure you, is a development that is not greeted with unbounded joy by our society or by the individual anesthesiologist.

On the other hand, I believe that the time has passed when organized medicine can choose to ignore legitimate interests of the Federal Government in determining the context in which it will pay for physician services. We may not like the fact that the Federal Government is in this act at all, but the simple fact is that no real likelihood exists that participation by our Government in the provision of medical services is going to diminish.

Given this very practcal and somewhat painful situation, I believe that we at ASA have a responsibility to our membership to devote our principal efforts to assure that the reimbursement mechanism is of a minimal complexity and conforms as closely as possible to what we view as the ethical and sound practice of anesthesiology.

We owe this responsibility, not only to our membership but to the consumer of medical services as well, for if, by virtue of legislative or regulatory action the Federal reimbursement mechanism and the ethical and proper practice of medicine are not in close harmony, the principal losers will be the federally insured patients whom the physician will either decline to serve or will serve only with reluctance.

ASA is presently engaged in antitrust litigation brought by the Department of Justice, the purpose of which is to test the legal validity of one method by which organized medicine at the national, State, or local level may participate in the development of the reimbursement mechanism. Or, perhaps more accurately, in the definition of appropriate relative reimbursement standards for various medical procedures.

Not only do we regard this as a constitutional right of organized medicine under the first amendment right of petition, but we believe that the full participation of physicians and organized medicine in this process at every stage is essential to a practical medical care delivery system at a cost which this country can afford.

Thus, both with reference to this bill and with other similar legislation or regulatory proposals which undoubtedly lie ahead, ASA's posture will undoubtedly be to participate directly in the development of appropriate reimbursement mechanisms. Where reimbursement proposals promote ethical and sound anesthesiological care, we will support them. Where they do not, we will work aggressively to change them, just as we have done during the course of development of this bill and in various negotiations with the HEW bureaus.

Thus, during the past several months, ASA has acted to bring about changes in medically inappropriate BHI reimbursement standards for anesthesia payments for cataracts, surgically and medically unsound BQA standards for a standard postanesthesia note, medically unreasonable BHI regulations concerning reimbursement of anesthesiologists for the medical direction of anesthesiologists-in-training and nonphysicians as well.

In all of these situations, ASA has devoted countless hours and waited countless months for rational revisions of medically misdirected Federal regulations. This is a frustrating process, just as it is frustrating for me to hear Secretary Califano earlier this week once again attack percentage arrangements involving anesthesiologists, despite our long history of opposition to these arrangements, despite the fact that 90 percent of anesthesiologists practice in fee-for-service settings and, despite the fact that, as pointed out in recent ASA correspondence to Secretary Califano, which we submit for the record, the practical remunerative effect to anesthesiologists from percentage arrangements on HEW's own figures is modest indeed.

[The following was subsequently supplied for the record:]

Park Ridge, Ill., May 19, 1977.

Secretary, Department of Health, Education, and Welfare,
Washington, D.C.

DEAR SECRETARY CALIFANO: I am writing you this letter in my capacity as the current President of the American Society of Anesthesiologists (ASA), an organization of approximately 11,000 physicians actively engaged in the practice of anesthesiology.

My purpose in writing is to express my keen disappointment in the remarks attributed to you in the May 18 issue of The Washington Post, in which you are quoted as recommending that hospitals "negotiate 'much more firmly' with specialists such as pathologists, radiologists, and anesthesiologists who often 'get a percentage of the gross' income of their departments. That is like the entertainment business. . . this is not the entertainment business" (emphasis added).

In brief, I believe that the facts will demonstrate that if accurately quoted, you owe an apology to ASA and its membership for this blanket characterization of the way in which anesthesiologists are compensated for their professional medical services, and for the clear implication from the story that the amount of compensation received by anesthesiologists for their services is excessive.

In the first place, the ASA has for many years formally and publicly opposed the billing for anesthesiology services on a percentage basis. The current Guidelines to the Ethical Practice of Anesthesiology (as amended by the ASA House of Delegates on October 15, 1975) states in pertinent part as follows:

"Final return from the private practice of anesthesia should be on a fee-forservice basis. . . . Anesthesiologists should not permit a hospital to bill or collect for his services as an anesthesiologist. . . . It is unethical for a physician to be paid by a hospital for professional service to individual patients who pay the hospital for such service...".

Consistent with this policy, ASA (virtually alone among organized medical societies) last year testified in favor of the provisions of the Talmadge Bill (S. 3205) dealing with a prohibition against percentage arrangements. In his statement before the Subcommittee on Health of the Senate Finance Committee, presented in July, 1976, then-President John W. Ditzler of the ASA stated as follows:

"We agree, as an ethical matter, that physician reimbursement arrangements, based upon a percentage of hospital income or receipts, are inappropriate."

As you know, the use of percentage reimbursement arrangements for physicians was then and is now a subject of major concern to Senator Talmadge and the members of his Subcommittee, and I believe that if you will inquire of the Senator or members of the Subcommittee staff, you will find that ASA is regarded as a major supporter of the Senator's views, both in this, and in other areas, relating to appropriate containment of health care costs.

I find your statement all the more offensive in light of a recent study prepared by Arthur Andersen & Co. for the Social Security Administration, relating to reimbursement in practice arrangements of "provider-based" physicians (March 1977; Contract No. 600-76-0055). In part, that study compared annual earnings

of physician specialists in three categories—radiologists, pathologists, and anesthesiologists-depending upon whether the specialist was compensated on a salary basis, or a percentage basis.1 I trust you will find the findings of your own study as illuminating as I did:

1. Average full-time earnings of a radiologist on a salary basis was $52,600 per annum, as compared with average full-time earnings of $124,400 under a percentage compensation arrangement. The latter figure is 237% of the former.

2. Average full-time earnings of a pathologist on a salary basis was $49,200 per annum, as compared with average full-time earnings of $138,200 under a percentage compensation arrangement. The latter figure is 281% of the former. 3. Average full-time earinings of an anesthesiologist on a salary basis was $62,300 per annum, as compared with average full-time earnings of $87,400 under a percentage compensation arrangement. The latter figure is only 140% of the former.

I trust you will note that the difference between the two compensation arrangements, both in absolute dollars and in terms of ratio, is radically smaller for the anesthesiologist than for either the radiologist or pathologist. As acknowledged by the study, moreover, numerous fringe benefits and other costs (e.g., professional liability insurance premiums which, in the case of an anesthesiologist, may range up to $25,000 or $30,000 a year)—normally absorbed by the hospital under a salary arrangement-are assumed by the physician on a percentage arrangement. In short, whatever may be true of other specialties, your own study reveals that entirely aside from important ethical considerations which lead ASA to oppose percentage arrangements, there is relatively little financial advantage (if any) to the anesthesiologist from such an arrangement.

Finally, as you might anticipate by virtue of my present position with the ASA, I have had the opportunity both this year and over the past several years to come into contact with practicing anesthesiologists from all parts of the United States. I personally am not familiar with one single case of an anesthesiologist who is compensated on a percentage basis. This is not to say that I do not believe such cases exist, but I do take the most serious issue with your characterization of these arrangements for anesthesiologists as "often" occurring. I believe they in fact occur only with rare exception in the United States today.

Quite frankly, both I and ASA have grown weary-particularly in view of the Society's condemnation of percentage arrangements over the past several years and in view of our open support of the Talmadge proposals-of what we believe to be a continuing and repeated distortion of truth concerning the methods by which anesthesiologists, with very few exceptions, are compensated for their services. If HEW is possessed of information-as implied in The Washington Post story that our understanding of the truth is incorrect, then we will be very glad to know it. For this reason, please regard this letter as a request, under the Freedom of Information Act (5 U.S.C. § 552) for any information (and supporting documents) possessed by your office, HEW, the Social Security Administration, or the Bureau of Health Insurance concerning the number or proportion of anesthesiologists currently being compensated under a percentage arrangement, and the average or assumed compensation earned by such anesthesiologists as a result of such arrangements.

Very truly yours,



Dr. AMENT. What we ask of this committee, of the Secretary and HEW as a whole is, while they wrestle with the problem of maintaining the national cost of medical care at a manageable level, they also respect the fact that physicians, and not departmental administrators, best understand the practice of medicine as it exists and as it should exist, between physician and patient.

To do otherwise, I suggest would destroy the foundation on which the entire system rests.

1 The survey covered 120 hospitals, that did not purport to report earnings of physicians compensated on a fee-for-service basis-the compensation basis farmost commonly utilized by anesthesiologists. Indeed, I would estimate that fewer than 10 percent of the country's anesthesiologists are compensated either under a salary or percentage arrangement.

Thank you very much.

Senator TALMADGE. Thank you very much for your helpful and constructive statement.

Senator Dole?

Senator DOLE. Just briefly, of course, I share your view with reference to the statement about the Secretary. I think it raises again the spectre of inaccuracy, for reporting payments under programs were not too accurate, and he promises to be accurate next year and maybe he can also clarify the statement made about your association, since you are opposed to that.

You say professional liability premiums are as high as $18,000 annually. Are you suggesting $18,000 as a minimum malpractice payment?

Dr. AMENT. No. The average malpractice insurance premium is, at the present time, $7,500. In some areas, anesthesiologists, particularly in the Midwest, are paying considerably lower than that, despite the fact that they are in a high-risk category. If you will note, in that statement, I refer to large metropolitan areas. The $18,000 figure comes from New York City. The $30,000 figure comes from a part of California. In some parts of California, it is even higher. The metropolitan areas are the areas in which the malpractice situation is most


Senator DOLE. What is it in Buffalo?

Dr. AMENT. In Buffalo it is about $5,600. The upstate area runs approximately a third to a half of the metropolitan area.

Senator DOLE. That does not give us a totally objective figure, where the highest figure is given for the cost. I assumed it was not that high. What is the average income for an anesthesiologist? According to the previous testimony, they are quite well-paid.

Dr. AMENT. I would have no way to give you such a figure. We have never done an economic survey on anesthesiologist, the kind of surveys that medical economists have done. My own feeling is that there is a certain built-in error, just in the method of collection. I really could not give you a figure.

Mr. SCOTT. In the letter to Secretary Califano, referred to by Dr. Ament, there is a reference to a study by an independent consulting firm to HEW on the compensation, on a salary basis, or percentage basis, leaving aside the fee-for-service basis, of the three specialties known as hospital-associated.

The average earnings, admittedly, on a small statistical basis, of the anesthesiologist on a salaried basis was $62,300 a year and on a percentage basis was $87,400 per year.

As we pointed out in our letter, an anesthesiologist on a percentage basis assumes all or many of his costs of practice which would be paid for by the hospital under a salary arrangement. It is our own belief, based on HEW's own figures, at least on the basis of this study, there is not a substantial difference for the anesthesiologist who practices on a percentage basis rather than on a salary basis.

Senator DOLE. Would it be fair to say that you do not share the views expressed by the previous witnesses, the anesthetists? Dr. AMENT. No, we do not.

Senator DOLE. There is total disagreement?

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