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it was found that many of these claims were filed by doctors who hired two or more doctors under the same vendor number. This is highly emphasized, somewhat to the discredit of these physicians. Now, also, Dr. Todd pointed out quite clearly that less than

one in 1,800 doctors had been found to be guilty of these practices. So I think the scapegoat has to stop, and I think some inequities have to stop, and some serious planning has to go into at least making the Medi-Cal program available to people who need it.

The ghetto is suffering because of these inequities, and we are asking, frankly, that special attention be given to the ghetto in the processing of claims, so that the people in the ghetto will not suffer from lack of services.

I would like to introduce Dr. Phillip Smith, who is a member of the Drew Medical Society, which is the Los Angeles wing of the national society.

Senator RANDOLPH. Yes, Doctor, we would be pleased to have you speak briefly. STATEMENT OF DR. PHILLIP M. SMITH, VICE PRESIDENT,

CHARLES R. DREW MEDICAL SOCIETY Dr. SMITH. I only came down to substantiate the statement that Dr. Littlejohn made. The Drew Medical Society—the Los Angeles chapter of the National Society-is interested in getting medical services to the ghetto area.

As President Johnson stated at our meeting in Houston, one of the rights of people of the ghetto-of all people-is the right to adequate health.

Health services in the area cannot be given equally, and people cannot be placed in the mainstream of medicine unless we have equal opportunities for everyone involved.

In stating reasons for medicaid to the aged, there are hospitals in the Los Angeles area which will not admit medicare patients—if a black physician has this medicare patient—this patient is discriminated against. These have to be taken care of.

There are some hospitals, also, in the Los Angeles area which will not-which have a limitation-who will not admit black physicians to their staff, but yet and still, they can have a medicare patient admitted-one or two token and this is discriminating against the physician.

We are not thinking about physicians—we are thinking about the people the physicians treat. Once you discriminate against the physician, then you don't think about him, you think about the people he is treating, and these are the people we want to put into the mainstream of medicine.

Also, as one speaker stated about the fees-it is almost as though he feels that the doctor goes out and recruits patients. You must remember that in the ghetto area the physicians are in an area where the people are indigent. They were attracted there before the bill came out-like my practice is there—and one must realize the truth at that time.

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OUTSIDE MEDICAL RELIEF They had a system at that time called the OMR-outside medical relief. These doctors donated time—which, I have a card in my pocket which says, "You will treat these patients without any profits.

Well, they had thousands of these type of cases which you were treating for $3 a visit.

At the time of medicare, all these patients were referred to medicaid patients. So you already had free patients in your practice.

It must be stated also that we are interested in care for the patient. If the doctor is working hard enough to warrant his fees—his moneythen it should be given to him.

If you look at previous statements made by another person, you would feel that the cost of care is the most important. If the doctor is making $200,000 a year and giving quality care, I don't see why anyone should care.

Senator RANDOLPH. Thank you very, very much, Dr. Smith, Dr. Littlejohn, and Mrs. Dudley.

Your information you have given and your comments that you have set forth will be most carefully considered by the members of the subcommittee and the committee on aging.

I want you to know that even though we appear somewhat hurried as you gave your testimony, that will not be so when we go over what you have said, and attempt to evaluate it.

And certainly, we shall not only find it informative, but challenging, as we do our work.

Thank you very much.
Mrs. DUDLEY. Thank you.
Dr. LITTLEJOHN. Thank you.
Senator RANDOLPH. Mr. Mulder.

Mr. Mulder, you were present earlier today when the speaker of the assembly, Jesse Unruh, read his statement and made additional comment and answered questions from the members of the committee—and the colloquy-do you recall his statements?

Mr. MULDER. In general, yes, sir.

Senator RANDOLPH. Would you have any comment-rebuttal, or what would you describe from your standpoint as the errors or mistakes, inaccuracies, or whatnot, if there were any, in his statement?

Mr. MULDER. There are a few observations I would like to make for the record.

STATEMENT OF CAREL E. H. MULDER, DIRECTOR, CALIFORNIA DE

PARTMENT OF HEALTH CARE SERVICES, HUMAN RELATIONS AGENCY

Mr. MULDER. My name is Carel Mulder. I am the director of the department of health care services. I am a career public servant21 years in public welfare, and 11 years in health care.

I would like the committee members to have a few points understood about the Medi-Cal program which may have escaped you in the course of the day.

One of these is you might believe that Medi-Cal does not provide preventive services. I must tell you that Medi-Cal strongly supports preventive services that the instructions to social workers are that people who do not have a personal physician, must be encouraged to seek such a personal physician, to undergo examination in order that any illness may be detected early and be subject to treatment when it can be treated sensibly and with a good chance of success.

The main problem with the program in the past has been the extreme haste with which it was put into operation. The fiscal intermediary testified this morning about the contract: the contract was entered into just a few weeks before the operation was to start

Senator RANDOLPH. Am I correct in saying not only the haste, but to a certain degree the magnitude of the problem of a State like California—and I am not attempting to lead the witness—but would you say that that is a problem, as well as the haste with which you stress

Mr. MULDER. It is, indeed. It continues to be a problem. We have made many improvements in the operation of the system.

The claims processing is going a great deal faster than it has. There has been much more emphasis on the medical audit. We now have operating in most counties very active peer review committees. Not only in the field of medicine, but for other fields as well.

MEDI-CAL COMPLEMENTARY TO MEDICARE Another observation I would like to make is that with respect to the aged, Medi-Cal is really a complementary resource to medicare; that the majority of the care received by the aged is really medicarefinanced, rather than by Medi-Cal.

The speaker this morning spoke about the problem around reimbursement for physicians and indicated that there had been a steadfast refusal on the part of the Governor to consider a fee schedule for physicians' services.

In that connection, the committee should know that the law which was enacted before Governor Reagan took office contains the requirement that payment be made on the basis of "reasonable charges and that these reasonable charges are to be determined in relation to the individual physician's usual charge-customary within the localityand within the prevailing charges in the locality.

Senator RANDOLPH. When was that law passed!

Mr. MULDER. It was passed in November of 1965, and became operative on March 1 of 1966.

The fee language is the same as the fee language which is in title 18, the medicare program. The legislature did have opportunity for reviewing the method of payment to physicians. Two committees gave it their attention and fee schedules were considered by legislative committees, and they did not proceed with them.

It has been our position that with, respect to a fee schedule, if it is to provide adequate payment for the average physician, this will happen: that the physicians who customarily charge below the average will immediately move up to the average, and that physicians who customarily charge above the average will become disinclined to participate in the program, if it doesn't provide them with their usual fees.

And the end result is that you pay the same, except that you pay it to fewer physicians who are predominantly, usually, charging lower. And the end result we felt would not be substantially different in terms of outlay.

Another observation with respect to some of the testimony of this morning: reference was made to utilization surveillance. Lest there be any misunderstanding, the system which Dr. Breslow, when he was director of public health, instituted in the early stages of the program still exists.

We do receive paid claims which are arranged in month of service order, and these records are reviewed to detect any pattern of care that appears to deviate from the accepted community norm.

Anything that looks deviant is referred to Blue Shield, where it is again subjected to medical audit, and then may go to the peer review committees that were described by Dr. Todd this morning.

Likewise, in our office, we receive complaints from a variety of sources, such as the licensing boards-indications that something may be wrong—and wherever professional judgment is needed to determine what went wrong and what should be done about it, we use these peer review committees.

SAN JOAQUIN Cost REVIEW PROJECT

In fact, in one area, the San Joaquin valley—the northern part of the valley-we are experimenting with an even deeper type of review.

As was indicated this morning, physicians services constitute only 19 or 20 percent of the medical care dollar that is paid in Medi-Cal.

On the other hand, about 75 percent of the dollars are for services which have been ordered or prescribed or recommended by physicians. Therefore, a review of the physicians billings is really not sufficient to determine if there is economical and conscientious use of the program.

In the San Joaquin project, which is operated by the foundation for medical care, records are reviewed with respect to all of the services so there is an intensive review of hospital utilization, drug prescriptions, and so on.

This offers a much greater promise for control than we have found in the past, and if this will work, and if it is not too expensive-we have to balance cost against the result-we hope to expand it to other

We also want to expand the prepayment concept which is being experimented with in San Joaquin Medical Foundation as well.

It was said this morning that Governor Reagan would like to see Medi-Cal scratched. I want to assure you this is not so. The governor has observed from time to time that the Medi-Cal program is a problem which needs much tighter control, and it needs much, much improvement. We have been working toward that improvement and in cooperation with the provider organizations, we have better controls.

The legislature has been responsive in approving legislation which will enable us to exercise more controls and to require prior authorization for certain services where this is warranted, and has also given us the means in case we do run short of money to have an orderly readjustment of the services in the program.

areas.

If there are any other questions that you may have I will be glad to answer them. If I don't have the answers, we would be glad to furnish them to you in writing.

Senator RANDOLPH. Thank you, Mr. Mulder.

This committee now, I believe I will be speaking appropriately for all members, we are in nowise interested in the politics of a particular situation nor in the personalities involved in such a situation. We must, however, probe, search. This is our function. And the hearing is for that purpose as well as hearing testimony. So, when we hear the conflicting viewpoints, it is necessary that we attempt to have a presentation-even, perhaps, a rebuttal, if we wish to call it that-to keep the balance.

And I personally am not so concerned—and I say this to our audience as well as to the witness—I am not so concerned with differences. I am concerned only when people are indifferent. And that is what I want to find out-if there is a difference, yes, I have that with my colleagues who sit here at my right today. As I earlier sat here today.

We do not vote all the same on all questions, but I can say for him that he is not indifferent to this subject matter—as well as other subject matter in the Congress.

And I think, by and large, that would be said of the Members of the Senate—the body to which we belong.

And so, if we can, with a spirit of objectivity, we can have viewpoints expressed as we have here today and not allow them to go off into tangents, but to keep at least on the body of the substance of what we are talking about, then it is a service to us, frankly, when we have these different viewpoints that are expressed here today.

I would not want the viewpoints to flow from imagined problems, you understand. We, in this country, can often create crisis. I don't want to get into that—that's another subject—but we want to be very careful to deal with the substantive matters. I know our chairman feels that way, and I know all the members of the committee feel that way. And

SO, I think it is constructive that we have the discussion which we have had, not only from Speaker Unruh, but from Mr. Mulder and perhaps others who are contributing to the dialog here today.

This is highly important. Yes, Congress passes legislation. The intent is written, and then often the agency or agencies involved will not administer the law as perhaps we in the Congress really intended. This has happened many times, and we have to have an oversight committee to check up and to see, "Now, is the agency carrying out the law as intended by the membership that passed it?"

And so you see why conflicts often arise in these areas. I would hope that out of this hearing, and I will be speaking for all members, particularly for our chairman, who of necessity is absent at this time, that we want the facts insofar as we can determine the facts.

And we want to move forward to correct the inequities whenever those inequities have been substantiated by fact. This is very important. I think it is an obligation.

As we go back on Capitol Hill, as we review not only the problem here in the immediate Los Angeles area, but in California.

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