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do well to follow this lead in their payments to health facilities involved in their programs.

Some might argue that planning under these circumstances is hardly voluntary. It all depends upon how one looks at the concept of voluntarism in the kind of system we have developed in this country to defer the cost of health services. Private group purchasers and government programs have become the collection and disbursement agencies for the bulk of the population. Those facilities that want to go it alone ought to be willing to go it alone all the way.

For the fact of the matter remains that even under the most favorable planning circumstances, the cost of hospitalization can impose an unncessarily heavy burden on group purchase programs when hospitals are misused.

A number of studies have uncovered a disturbing amount of unnecessary utilization of hospitals under health care programs. To the consumer, the escalation of costs that results from over utilization of expensive facilities is no less a factor in the deterioration of the medical dollar that the rising costs of hospital and pesonal health services as such. In fact, the cost of over-utilization is perhaps more disturbing than other forms of medical inflation because it suggests that there may be something very wrong with the balance of benefits in health care programs.

It would be unfair, of course, to place all the blame on hospitals when unnecessary utilization occurs. After all, it is the doctor who controls admissions and who orders the services and determines the length of stays. He is the person who must assume final responsibility through the functioning of hospital review committees.

Yet, organized labor and other group purchasers cannot escape their share of the responsibility. Negotiated programs, like most voluntary health plans, emphasize hospital care at the expense of grossly inferior coverage of outpatient services. This imbalance in benefit structures distorts patterns of utilization of health services and undoubtedly lies behind a great deal of misuse or overuse of hospitals. Labor knows this, and is seeking the assistance of providers to correct the imbalance.

At the same time, however, we cannot overlook the misuse of hospitals that occurs because of the unavailability in the community of other facilities and services that could be used just as effectively, or more effectively, to take care of the patient's needs at a lower cost.

My reference is to the person whose stay in the hospital is stretched out, for example, because quality extended care facilities are not readily available; to the patient who winds up in a hospital because he does not have access to good home health services; and to others who find it difficult to obtain diagnostic services in the community without being hospitalized.

To the extent that this occurs, we must turn again to the hospitals, the doctors and others involved in the health planning process for relief. There no longer is any room for buck-passing, for the day of providing for hospital-based services in splendid isolation from all other facilities and services needed in the community is rapidly drawing to a close. The sheer magnitude of our growing health needs, and the pressures being exerted on existing health resources, make intolerable the waste associated with this kind of fragmented planning.

All of us-individual consumers, providers, vendors, and group purchasers— must come to grips with the basic issues confronting us concerning the organization of health services. Are we interested only in caring for the sick, or are we primarily interested in maintaining health? Or shouldn't we be interested in both?

Hospitals have operated primairly as institutions for healing the sick. Does it follow that they should only be interested in doing a good job for people who get sick and need hospitalization, or should they be equally interested in keeping people well and out of hospitals?

There can be no choice for group purchasers of health care services. Organized labor is interested in both. We seek your assistance along with other providers to do both better.


As a matter of national policy, the focus today in the health care field is currently on the development of comprehensive systems for delivering health services and maintaining health. Furthermore, planning for facilities and services under federal comprehensive planning is recognized only within the context of total health needs. Health facilities and services planning, in fact, must now be

effectively related to planning for personal health services, manpower development, and environmental health.

We hope hospital groups will accept this as a challenge to break new ground in the provision of services to the community. As recommended by the State "543" Committee, special attention needs to be given "to the development of new systems for delivering health services, especially to meet the needs of the underprivileged and those whose life styles are not compatible with the manner in which health services are currently organized and delivered."

Those of us involved in the work of the Council, as representatives of group purchasers of health services, would welcome the opportunity to develop new group service plans in cooperation with hospitals and others interested in expanding their out-patient services. We simply cannot ignore our 15 years of experience with negotiated programs, which has taught us that money alone does not assure good health care. We have learned the hard way that medical inflation, in part, is the product of irresponsibility of group purchasers who dump millions of dollars into the so-called mainstream without demanding a voice in how medical resources are used and organized. While our dollars have fed the inflationary fires, they have done preciously little to stimulate more efficient use of resources. We have bargained hard to remove the financial barriers to good medical care for the sick, but in the process we have largely forgotten about the needs of our members to stay healthy. Even more seriously, we have contributed to the growth and entrenchment of a system of delivering health services that is not only plagued by rigidities, but is basically incompatible with the level of health education and life styles for many in our population.

I am not only talking about the underprivileged for whom the promise of mainstream health care becomes a mockery without developing new medical delivery systems that penetrate their environment and the socio-economic problems that confront them in our urban society. I am also talking about many of our union members and their families in the so-called middle class of America who also have difficulty in using the prevailing delivery system, even when we try to remove the financial barriers.

It is true that in the development of our groups programs, we have talked a great deal about experimentation. In practice, however, we have done very little to make effective alternative programs available to our members and to others in the population who have become all but medically disenfranchised in a health-care sense.

A burning desire to change our ways lies behind the formation and the work of the Council. In a very real sense, the Council is the spontaneous product of years of frustration in dealing with vendors and other special interests whom we have allowed to engulf our islands of health plans and to decimate our bargaining power and ability to effect change the necessary change that today can no longer be held back.

With the new focus on health, brought about by Medicare, the development of state and regional medical programs, and the requirement of comprehensive planning under federal law, we believe that the time for action is now.

We have served notice on the vendors that while we cannot do without health facilities and the professionals who provide health services through them, we can do without the vendors. We are therefore turning today more directly to the providers to deal with the staggering problems confronting group purchasers of health services.

Our surface focus may appear to be simply on controlling costs, but our real interest is on controlling costs by finding more effective ways of providing health services for people. The experimentation we desire may be more expensive when measured only in terms of providing medical care for the sick, but not in terms of maintaining health, which is our ultimate objective.

If hospitals today are prepared to take a fresh look at health maintenance problems, then we invite those interested to work cooperatively with the Council and interested doctors so that together we may begin some serious experimentation with new ways of relating the use of in-patient facilities to the development of out-patient services to lessen the need for hospitalization and help keep people well.

Immediately, the idea of hospital-linked out-patient clinics and neighborhood health centers comes to mind, based on the development of comprehensive prepaid group practice arrangements. We are very much interested in this approach, but we do not want to rule out experimentation with entirely new ways of bringing both solo and group practices into contact with out-patient services

that are specifically organized and designed to break down utilization barriers, to increase the level of health awareness, to provide for early detection of disease, and to promote more meaningful doctor-patient relationships on a continuing basis.

Some doctors, of course, may view such experimentation as a threat to solo practice arrangements, but it is too late to placate those who fear the competition of group practice arrangements. Group practice is every bit as professional as solo practice, and we know that quality can be good or bad in both. We are not out to destroy solo practice. Our goal is to provide a full range of alternatives available to group purchasers and to individual consumers, including alternatives that reach the individual who is clearly unable for any number of reasons to use the existing system effectively.

To those who still fear the Council's motives, we invite them to help us build into everything we do quality standards that are beyond reproach and beyond anything in operation today in the mainstream of health care.

In concluding, some of you may be wondering-why hospitals? Why should they be singled out to give special attention to the organization and provision of out-patient services? There is really no answer, except that hospitals traditionally have been the focus of medical care as it is practiced in this country. Doctors are brought together through hospitals at the most esteemed level of medical practice. Operating through their hospital committees, doctors have set high standards of performance for themselves while they are practicing in hospitals-standards which have no counterpart in their solo out-patient practice of medicine.

If hospitals can bring the best out of doctors when they are practicing in their institutions, then it is logical that hospitals should try to help bring the best out of them when they are providing health services outside the hospital, especially since the quality, scope and organization of out-patient services are vital factors affecting hospital admissions.

In any event, it appears to us that hospitals are slowly evolving into health centers, which we believe they should have been all along. It remains to be seen who will rise to the challenge and who will sit back; who will help to build a healthier state and nation, and who will try to hold onto those delivery systems and organizational concepts that are rapidly losing their viability and validity for increasing numbers in our society. We both have our work cut out for us.


October 15, 1968.

DEAR SENATOR WILLIAMS: Your Subcommittee has already received extensive testimony relative to the problems our elderly population encounters in obtaining health care. The hearings in California undoubtedly will reinforce testimony already received, but probably will produce no problems which have not already been brought out. Before dealing with specifics in regard to Regional Medical Programs, I would like to discuss briefly the major areas already brought before your Subcommittee.


The severe present and predicted future shortages of health professionals, particularly physicians, nurses, and dentists have created problems in obtaining medical care for all age groups. In fact, it is possible that the incentive fee structures of Medicare and Medicaid have increased the provision of services for the elderly in some communities to the point that good medical care, and particularly preventive medical services, for the younger age groups has diminished in availability. It is obvious that expanded or new governmental programs to pay for services rendered will not increase the capacity of the schools of medicine, nursing and dentistry. In fact, conversely, they may make it more rewarding for able instructors to stay out of teaching. Hence, it is imperative as coverage or benefits expand in governmental or insurance third party payment programs that equal emphasis be given to creation of additional educational facilities and incentives which will lead competent professionals to enter the teaching fields.


There has been wide discussion in the health field of developing new "subprofessional" or "allied health" personnel, or expanding the legitimate functions of lower level professionals in order to lessen the work load on physicians, nurses and others who are in short supply. In California recent joint agreements between the medical, nursing and hospital organizations as well as changes in the state law have expanded the legitimate functions of RNs and LVNs. While such actions are undoubtedly helpful in some instances, they do nothing to add to the absolute numbers of health care personnel available they merely push some of the work down the line and create acute manpower problems at lower levels.

The only solution to the manpower problem is more training for more persons at all levels. Every resource should be utilized: teacher incentives, subsidized facilities, scholarships, loans, and outright subsidy of trainees. The health professions must be made available to qualified and interested applicants from all levels of our society, not merely to those qualified applicants who can afford the hight cost of such training.


Much testimony has been presented to your subcommittee regarding the methods of payment for services, particularly through Medicare and Medicaid. The use of the fee-for-service approach, especially the physician profile, has been seriously attacked as provided for unbridled escalation of fees and incentives for over-utilization. It has also been described as deleterious to the development of group practice. Without doubt, the unscrupulous provider can profit unfairly under this-but he will find a way to do so under any system. He can gradually increase his fees and he can have patients return again and again for unnecessary visits.

I feel a note is indicated here to attempt once again to put to rest the misinformation that was widely publicized about the California Medi-Cal program, that 1200 physicians averaged over $70,000 each during the first year. The figure of 1200 represented that number of "vendor codes," most of these. in turn, representing physician groups. In one instance it was a group of 123 physicians. Investigation of those few solo practitioners who received large amounts of money revealed, in most instances, that the payments were justified. These were high volume doctors who worked long hours six and seven days a week in ghetto areas and who represented virtually the only medical services available to the residents.

While the fee-for-service system undoubtedly has its drawbacks and opportunities for abuse, one must consider the alternatives and their potential disadvantages. It is obvious from the testimony presented to the subcommittee that a clinic type approach with salaried physicians would not be very popular with anyone. Both professionals and elderly individuals testified about the long waiting periods and excessive travel requirements involved in clinic medicine. Yet there was some indication that a few preferred clinics and in some areas these were the only places care could be obtained.

The other alternative is the "capitation" method of payment. This means just what it says, a payment "per head" on a flat monthly or annual basis for providing all necessary professional services for a predetermined group of people. It provides a guaranteed income for the doctor regardless of how many or how few services he must provide. This method is not as foreign to American medicine or the American people as one might think. For years it has been a common method of providing well-child care in the private practice of pediatrics for the first two or three years of life. It is of course, the basis of the HIP, Kaiser and Ross Loos program as well as a number of other smaller family group practice plans. It is being developed on a private basis in some places through such organizations as American Medical Services in Los Angeles.

If properly used, the capitation method is a stimulus to the practice of preventive care-it is of obvious financial advantage to keep the patient well, and to discover disease in its early and less costly stages, than to wait until the patient is seriously ill. Conversely, there is a danger of under-utilization, a possible tendency to not see the patient often enough. Regrettably, the only conclusion one can read from this is that any method will require either external or internal review until the system adjusts to the new demands.

The other disadvantage, if it is such, of the capitation method is the possible violation of the principle of "free choice" of provider, which was written into the 1967 amendments to Title XIX. Obviously, the method gives a competi

tive advantage to group practice, as more comprehensive services, it is argued, can be offered at presumably lower rates per person. Perhaps some objective conclusions in the organization of medical services, which are not in evidence now, should be a goal of government programs of health care for the aging. The overall patterns of care will not change rapidly but at least the change that is encouraged should be based on fact since no single type of organization fits all situations. The dilemma is to be able to encourage new approaches without isolating the individuals concerned from high quality care or making care so difficult to obtain that for all practicable purposes it does not exist.


The availability of medical care both for the elderly and the young in our population varies widely according to economic, cultural and ethnic characteristics of the patient population. Your subcommittee has heard much testimony on the diminishing numbers of physicians, dentists and others in the ghetto areas of our cities, taking place simultaneously with increases in the population and crowding of these areas. One attack on this problem is the dispersal of population through low-cost housing and urban development programs, and through long range changes in social acceptance of these groups outside the ghetto. These important, and in fact imperative, changes will be a long time in realization. In the meantime steps must be taken to bring services to these areas. No amount of increase in total health manpower will help if some trained professionals do not locate in the areas of need. Every possible known and innovative method should be explored and tested in an effort to increase available services in these areas. Obviously, in spite of the widely publicized "opportunities to get rich" through Medicare and Medicaid, the financial incentives of these programs have not proved sufficient to reverse the trend of professionals to move out. Perhaps these programs have encouraged outward movement as a physician or dentist can now meet his income expectations in better neighborhoods without working as hard. We are watching the West Oakland experiment under U.S.P.H.S. auspices with great interest as it represents one way of attempting to solve this problem.

The Regional Medical Program, as you are aware, is not designed to increase the total amount of health services available. It must work with existing resources and without disturbing existing patterns of delivery of health care. RMP can (and to date largely has been designed to) increase the level of health care through increasing the availability of specialized medical services. However, in a limited manpower market, such efforts must necessarily be at the expense of basic health services. It was the quite obvious intent of Congress that RMP should not endeavor to create a whole new system of health care. In fact, perhaps the restrictions placed upon facilities and basic health care education make it virtually impossible for RMP to contribute materially to overall quantity of health care available.

From the standpoint of quality, RMP certainly is designed to effect improvements in the care of those persons afflicted with one of the categorical diseases or in imminent danger of becoming so afflicted. As indicated above, however, since we are "robbing Peter to pay Paul" we could end up reducing the quality of general health care available for the population as a whole. A cadre of highly trained physicians and nurses staffing a coronary care unit on a ratio of three professionals to one patient can well mean a shortage of personnel in the medical and surgical services of the same hospital.

RMP needs to be tied more closely to other programs, not just in health but in general socio-economic developments. Our relationships with Comprehensive Health Planning are loose at best and nonexistent in many areas, yet the two programs which share so many common goals should be moving in close coordination. I fear there is fault on both sides of this problem. RMP has drifted too much into control by medical schools or medical center officials and CHP too much into the hands of facilities-oriented planners. Both seem to function under the same basic philosophy, i.e., if they do their job well (increased and improved teaching or increased and improved buildings and equipment) more and better patient services will infallibly result. This is not necessarily true. Most patient care is still given by physicians in their private offices who are too busy to spend much time on postgraduate education. A few RMP projects, such as the Roseville Pilot Program in California, are attempting to get at this problem, but the bulk of the programs are still specialized training for specialists and are hospital or medical school based.

Perhaps RMP's greatest contribution eventually will come through the stimulation and support of preventive medical services. It is here that the greatest hope

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