In California, there are some 30 units of Upjohn, and to my knowledge only 2 are certified for medicare or medicaid, yet there have been no licensing restrictions for the Upjohn Co. stopping participation in those programs. This has been possible since 1965. My question would be, why have they not been participating?

The second misleading thing is this business of talking with Jim. I, too, talked with Jim-James S. Dwight, Jr.-and copies of our correspondence are enclosed with the exhibits.

Mr. Dwight told me there was a policy in HEW not to share drafted regulations with anybody, because if they are going to do it with one, they would have to do it with others. I was also told this very same thing by Mr. James Burr and by Dr. Ted Cooper, both of HEW.

Mr. WEINER. Has it been your understanding of this morning's testimony that one of the companies has shared their drafting? Mr. HALAMANDARIS. This is the very point.

Mr. HALL. That is correct.

Mr. WEINER. That they showed it to them?
Mr. HALL. That is correct.

Now, in late July, or early August, I was informed, and there was waved in front of me a copy of a letter from Secretary Weinberger to the Speaker of the House of Representatives, indicating that the proposed regulation changes allowing for the proprietaries was going to be submitted for publication in the Federal Register.

At that time, there was never a mention of some 500 or 700 agencies that might need to be, or might want to be, included in medicaid, that are nonprofit.

CONCERN FOR NONPROFIT GROUPS

I would submit, there may not have been a constructive conspiracy to include only the proprietary interests, but it seems to me that the inclusion of the nonprofit smaller agencies, or the single service agencies did not get consideration until very late in the game. I was really-my heart was really warmed by the belief, or the statement attributed to Mr. James S. Dwight, Jr., that he was concerned about those nonprofit groups out there.

I would encourage the subcommittees to go back and look at the experience of the Upjohn Co.'s handling of assembly bill No. 696 in California, introduced as a spot bill very late in the session, asking the California legislature to license the title homemaker, so that the Upjohn Co., as I read it, would be able to advertise, as they do on television-I saw one ad last night, one in New York the night before-that they have State licensed and certified personnel. I think that would be misleading.

Now, as to the 24-hour care business, Upjohn has some 30 franchises listed on their list of providers in California.

I happen to have called seven of those from San Francisco last week on Saturday.

I got four answering services, and let the phone ring 15 times on the other three.

The only agency in San Francisco open that day was a community agency, open 365 days a year. It is not open 24 hours a day, but should be; when the funds and resources are available it will be.

I have some information about training that Upjohn has provided in cooperation with other proprietary agencies in San Francisco. The records are in the San Francisco Department of Social Services, some of which are included in the exhibits brought with me. The exhibits clearly document the fact that what is on paper may be good-may be better than the rest-but the product is not. That is, the trained person ready to go into the field is not adequately trained.

About 2 years ago, Upjohn sold its contract in San Francisco. The new owner's company now participates in titles XVIII, XIX, and XX, and is now an approved agency of the National Council for Homemaker-Home Health Aide Services, Inc.

BETTER QUALITY FROM IMPROVED STANDARDS

The new owner has stated: "By having better quality, we have been able to reduce utilization and total costs-the national council standards helped us do it." And this company documents these facts in the report of a study offered for your review.

Upjohn also states: "As to delivery of quality care, we do not follow standards-we set them. Upjohn would not have it any other way."

Such language may be dramatic jargon and a pleasing corporate slogan; but, unless quality and standards are verified, anyone can say anything. Upjohn does have corporate standards, but who verifies them?

Upjohn standards include euphemistic phrases, such as: "As required if," and "As deemed necessary by local management."

Standards must protect the public's interest and not be designed to perpetrate corporate profits and public images.

There are a number of solutions, but I think I have taken enough of your time. They are included in my statement, and they have been covered already.

Thank you.

Mr. HALAMANDARIS. We do thank you very much. Your prepared statement will be made a part of the record.

[The prepared statement of Mr. Hall follows:]

PREPARED STATEMENT OF HADLEY DALE HALL

I am Hadley Dale Hall, executive director of San Francisco Home Health Service, a United Way agency established 18 years ago. I am a member of: the Board of Directors of the National Council on Homemaker-Home Health Aide Services, Inc., and an active member of their executive, legislative, and standards approval committees; the board of directors of the National Association of Home Health Agencies, and have been an active member of several of its committees; and the board of directors of the California Association for Health Services at Home, and serve as chairman of one of its active committees and as a member of two others.

I do not speak for these groups, or the San Francisco Home Health Service. I come to testify on my own time and at my personal expense. I speak from 15 years of vigorous involvement and commitment to caring for children and adults in their own homes, when such care is appropriate and safe.

The very recent phenomenon of profit-making organizations in this field can be traced to the enactment of Federal legislation which provided service funds in a fragmented and bureaucratic manner. This recent development gives many of us cause for alarm and concern-because we see, unhappily, history repeating itself.

The issue of profit-taking in the field of in-home health services raises some serious questions.

First, the important question of quality assurance and the conflict between quality assurance and the profit incentive.

Government responsibility has been well defined in most fields which involve the American consumer, and that responsibility in health care delivery cannot be disputed. In-home health services have been defined by the field, and the definition calls for substantial ethical professional competence. Professional competence includes an adequate ratio of appropriate professional staff to consumer needs; for the assessment and planning of consumer care and management; for the training and supervision of paraprofessional staff. Standards which have been developed and accepted in service programs provide for the delivery of professional services related to these aspects of home health care on a one-to-one basis in the home, where all phases of care need can be understood. Staff ratios must be established which protect service quality. The professional component of in-home health care is one of the aspects of the services which tend to be sharply curtailed in profit-taking services. Abuses which have occurred in long term care facilities are just as possible for the individuals in their homes, whose only assurance of quality must reside in the guarantee that standards will be maintained. The President of one of the larger proprietary services has stated that in his business: "We do not follow standards -we make them." I do not believe that in our services the consumer should be forced to rely upon the intentions of private business. The assurance that the responsibility rests in the enforcement of adequate standards is broader than intentions of any single provider.

Second, the question of the source of the margin of profit in profit-taking services.

GOOD PROTECTION NEEDED TO GUARANTEE DELIVERY

The source of the margin of profit deserves careful examination. Does it come from economies taken at the expense of the group which is economically the most disadvantaged in the service hierarchy—namely, the paraprofessional? Are paraprofessionals in profit-taking concerns provided with guarantees which insure delivery of safe service? Such guarantees include wages above the minimum, with increments to advancement; provision for sick leave; for vacation; for training; for professional backup; for the costs and time of travel between assignments; for participation in health and retirement plans? Workers in this most demanding of all services require such protection if they are to be relied upon to deliver good care. Quality programs recognize and accept the importance of such protection, and provide for it. There is widespread evidence that at least a portion of the margin of profit in profit-taking businesses is taken at the expense of these workers, many of whom have come from public assistance to take employment which they hope will guarantee a minimum of self-respecting earning capacity.

Third, the effect of a policy which allows for the siphoning off of profit dollars upon a relatively fixed budget for in-home health services, particularly in medicaid and, more particularly, for paraprofessional services in in-home health services.

What is the effect of a policy of profit-taking upon the over-all budget for in-home health services? These services have been consistently under-financed in the past and this under-financing has sharply limited service availability with the result that less appropriate and more costly care resources have been used. The effect of profit-taking upon limited budgets can be illustrated by examining the situation in California. Here, the budget for homemaker services and chore services for fiscal year 1974-75 has been established at nearly $80 million. If profits of 10 percent were to be siphoned from this budget, a total of nearly $8 million would be drawn off-dollars which could be used to purchase services, and this can be extended to nationally budgeted funding in all of the programs which are intended for in-home health services. If even one-half or one-third of this amount were used for profits, we are still confronted with the question-is it appropriate in a program for the medically needy to use funds intended for service in order to provide business profits?

SERVICE AT LESS COST

Fourth, the question of real economy: Does profit-taking in competition with non-profit services result in a product which is equal in quality, but less

costly? It has been contended that profit-taking business provides service at a less costly unit cost. If quality guarantees are not observed, they may be able to do this. But, the incentive to sell more units of service is an element in all business, and this has been demonstrated in my community.

This committee has adequately documented abuses in the nursing home industry; other governmental units have exposed abuses and exploitation by profit-taking organizations handling day care services for children, and educational training for adult students. The latter, too often, made the owners rich through public programs rather than through competition in the free marketplace, while many of these students failed their training; or, worse could not secure employment because of inadequate training, even though the taxpayer paid bills of sufficient size to have allowed for adequate faculty and training. Finally, abuses have occurred in the in-home health services delivery business which do not occur in services which observe ethical standards.

Let me give two current examples of profit-taking organizations in the inhome health services field in San Francisco. Also, I would like to discuss one issue related to cost, another issue which involves quality, and complete my testimony by offering some solutions for your consideration:

The first example involves Peter Gottheiner. Mr. Gottheiner's reputation is very well known. According to a résumé of Mr. Gottheiner, which is submitted for your information, he was founder, administrator and president of California Coordinated Health Care Services, Inc. This corporation had a medicare provider number. This corporation, headed by Mr. Gottheiner, is no longer certified. On or about March 10, 1971, Mr. Gottheiner states that he dissolved this corporation and voluntarily withdrew from the medicare program.

LARGE OVERPAYMENTS

However, the staff of the regional office of the Bureau of Health Insurance states: "There were overpayments, through audit exceptions, in the amount of $364,192, for cost reporting periods ending December 31, 1969. No cost reports were submitted for 1970 and 1971, although interim medicare payments by Blue Cross, in the amount of $481,309, were made to California Coordinated Health Care Services, Inc.," the company Mr. Gottheiner founded and administered.

I understand that Mr. Gottheiner and/or the corporation protested the audit exceptions, but neither he nor the corporation filed an appeal of the exceptions. This same corporation, of which Mr. Gottheiner was the administrator and president, also had a medicaid license. It no longer has such a license. The corporation was suspended by the California Franchise Tax Board. I do not know if this was voluntary or involuntary.

Mr. Gottheiner also had a contract for services for ". employees of the city and county of San Francisco who sustained industrial injuries in their line of duty." This organization no longer has such a contract.

These facts and others are documented in the records of Federal, State, and local government-and have been for several years. However, Mr. Gottheiner has direct and/or indirect controlling interest in three corporations that are doing business with federally funded programs under title XX of the Social Security Act. According to his résumé, he is sole stockholder and president of Health Help, Inc., which was awarded a contract for Homemaker Services in February 1971-some 6 weeks before he voluntarily dissolved California Coordinated Health Care Services, Inc.

Mr. Gottheiner's daughter and son are 60 percent stockholders of Visiting Home Services, Inc. Mr. Gottheiner lists himself as president of this corporation. His son and daughter also hold 52 percent of the stock of United Professional Services, Inc.

The corporation, California Coordinated Health Care Services, Inc., of which Mr. Gottheiner was founder, administrator, and president, had unresolved audit exceptions totaling $846,271. These were funds from title XVIII of the Social Security Act. If there were audit exceptions related to title XIX, I do not know. With this history, another company, Health Help, Inc., of which Mr. Gottheiner was sole stockholder and president, was able to secure a contract under what is now title XX for Homemaker Services, in San Francisco, and I understand Visiting Home Services has contracts in several other counties in California and in other States.

A recent report by the field review unit of the California Department of Health on only one of his many contracts and companies providing services to the poor and elderly, suggests the following: