I do have additional information that I would like to submit to you. If there are any questions I would be very pleased to try to answer hem.

The CHAIRMAN. Thank you very much, Senator Fannin.

I will say that you are certainly striking at something that has been ifficult for us over the years, and we have legislated two or three imes, not reaching out as far as your bill proposed to do, but we have irected, authorized the Secretary of the Housing Department to make se of new techniques and new materials, and so forth, in order to ry to bring into housing these things that will improve it and will ake it possible to build the units that we need.

I believe you make some reference to last century techniques and ethods of operating, and so forth. We certainly recognize the need f bringing this up to the very finest of operation in order that we can et the number of units we need for the American families.

And thanks very much for your very fine presentation this morng. You can be assured that we will be working on this when we take p the bill for drafting purposes.

Senator FANNIN. Well, thank you, Mr. Chairman, and with your ermission I would like to furnish some additional information for e record.

The CHAIRMAN. Yes.

Senator FANNIN. Thank you.

The CHAIRMAN. Do you have it there?

Senator FANNIN. I have it here.

The CHAIRMAN. Fine. That will be printed in the record.

Senator FANNIN. Thank you very much.

(The information follows:)

FURTHER STATEMENT OF SENATOR PAUL J. FANNIN

Even though on-site labor costs are only about 20 percent of today's homeilding expense, recent agreements calling for 20 percent wage increase a ar over the next three years will drive costs upward.

Building codes have been in existence in the U.S. since 1626 and have prolifered ever since with 80,000 separate jurisdictions now controlling housing velopment across the country. Many of the codes now in force are outdated id needlessly raise the price of home construction-up to $2,000 per house some areas where special codes are enforced.

The outmoded codes hit hardest at low and moderate income housing. Many bor unions are cooperating in changing rules toward mass producing of homes factory building of modular units, but at the local level, restrictive intra-union risdictional disputes and wage agreements are thwarting the modernization of e housing industry.

An ordinance proposed in Memphis, Tennessee would have added an estimated 25 to the cost of an average home by requiring a specific type of cable for eleccal wiring, barring an available substitute that was less costly and just as fe.

In Alabama, an attempt was made to enact a state law barring plastic pipe in me construction even though 63 communities in the state were already pertting its use.

A recent survey conducted for Harvard, by Charles Field, discovered that 47% the responding local governments still prohibit the use of ABS or PVC plastic es; 38.5% prohibit off-site assembly of combination drain, waste and vent imbing systems for bathroom installations; 32.3% prohibit the use of 2" x 3" ids in non-load-bearing interior partitions and 42.6% prohibit the use of x 4'' studs 24" on center in non-load-bearing partitions. Taken in late 1970, s survey asked that same question that had been raised by the Douglas Comssion in 1967, and found that the percentages of prohibiting authorities had vered only slightly—and in some instances had increased. Time alone, it seems 'e to say, will not solve the problem.

Field's work also drew comments from hundreds of builders. Asked what the major code problems really were, the survey showed four front-runners: lack of uniformity, hidebound traditionalism which delays or precludes change, low level of ability and consistency on the part of inspectors and the labor or product oriented specifications of the codes.

Some of the actual comments Field received are worth noting. Asked what made it so difficult to change or amend codes, various builders replied: -"We are only one-officials must feel pressure from quite a few before changes are made."

-"Union pressure on the building department."

-"hard headed old men that won't change with the times are in positions of responsibility."

-"Opposition by local town officials who want to keep 'undesirables out by the high cost of construction."

Department of Commerce indexes reveal that since 1966 construction costs have been climbing at a rate almost double that of the economy as a whole-with some contractors anticipating 14 to 18 percent increases this year alone.

The inflation bill imposed on the nation by this one industry may well reach $10 billion in 1971. According to the Department of Housing and Urban Develop ment, a new house that cost $20,000 in June 1969 cost $22,000 a year later. If that rate of increase continues, this same house will cost $57,000 in another ten years

The CHAIRMAN. Now Dr. John Chenault, member of the board of trustees of the American Medical association. I may say that Dr. Chenault is from Decatur, Ala.

Dr. CHENAULT. That is correct, Mr. Chairman.

The CHAIRMAN. I have known him, his family, his wife's family for many years. We welcome you to this table again, Dr. Chenault.

STATEMENT OF DR. JOHN M. CHENAULT, MEMBER OF THE BOARD

OF TRUSTEES, AMERICAN MEDICAL ASSOCIATION

Dr. CHENAULT. Thank you, Senator Sparkman.

Mr. Chairman, I am Dr. John M. Chenault, a physician in genera practice in Decatur, Ala. I am a member of the board of trustees of the American Medical Association. With me is Mr. Roy S. Bredder. an attorney in the AMA legislative department.

We are pleased to be here, Mr. Chairman, to present the views of the American Medical Association in support of your bill to pro vide assistance in establishing certain medical practices in rural areas small towns and low income inner-city areas.

S. 2269 will amend the National Housing Act to authorize mortgag insurance for the construction and rehabilitation of certain medic practice facilities. In 1966 a program was enacted to provide mortgag insurance to certain groups to assist financially in establishing gro practices. The bill before you would specifically extend this progra to small groups of physicians who would practice in certain physicia shortage areas. Under the amendment, the program would then spe cifically include facilities in which one or more-not to exceed fourphysicians practice, where the facilities are located in the specifie areas. The extent of the mortgage guarantee for such practices con not exceed $150,000.

One of the problems is our health care delivery system today lates to a shortage of necessary manpower, as well as the lack of prop distribution. The shortage is particularly emphasized in rural areas and areas of low income. The failure of such areas to attra physicians can be attributed to many factors-tangible and intang ble-and the problem is a complex one. We should, however, provis

ncentives and encouragement to physicians to meet the needs of the eople in those areas.

The American Medical Association supports a pluralistic system of elivery of health care embracing various forms of health care devery. It has long been the policy of the American Medical Associaon to favor freedom for a physician or a group of physicians to pracce in the manner best suited to meet the needs of their patients. We re pleased to note that the program of mortgage insurance under . 2269 would not be limited to nonprofit groups, and therefore ould enable one, two, three, or four physicians to receive benefits nder the bill while having the right to work in the setting and the pe of practice they choose.

Each type of health care delivery mechanism, including group ractices, has its advantages. The group type of practice, however, neither feasible nor desirable for all of the Nation's physicians. As he form, it has existed and has been developing and expanding for any years. In 1965 such groups totaled 5,450, with more than 26,000 hysicians participating. A survey in 1969 showed that approximately 375 groups existed with about 40,000 physicians participating, and at about two-thirds of such groups are composed of three or four hysicians. The groups vary in many characteristics, such as size, loca on, specialization, payment, reimbursement, and so forth.

It is readily apparent that not all areas will attract the same kind fgroup practice, nor could a rural area support the establishment of he same type of practice as might be set up in larger, more urban >mmunities.

S. 2269, by providing financing assistance, may help to stimulate the tablishment of a medical practice by an individual practitioner or small group of physicians in small and rural communities and inner ty areas having physician shortages. We think that this is one of e strongest points of the bill, that it does provide an incentive to lp the distribution of physicians.

Mr. Chairman, in considering these amendments, we believe the prosions in the bill concerning the maximum loan should be reviewed. e recommend that the limitation of $150,000 should be raised so as t to preclude the establishment of a facility with potentially broad alth delivery capability where such facility and staff were warranted a community. The figure proposed in the bill might act to limit conuction of beneficial facilities in certain areas.

In this connection we particularly refer to an inner city area where rhaps four physicians might be faced with buying a fairly large gment of a block or an entire city block and demolishing old existing y buildings which were there.

Mr. Chairman, we thank you for this opportunity of presenting ese views in support of S. 2269. We hope that your committee will ve favorable consideration to the bill.

If you have any questions we would be pleased to try to answer

em.

The CHAIRMAN. Thank you very much, Dr. Chenault. I appreciate e fine analysis that you have made of this in your statement. Tell me this, what figure would you suggest in lieu of the $150,000? Dr. CHENAULT. We are really not competent to put a dollar value it. We could foresee how four doctors perhaps in South Chicago

might have to buy a city block. They might spend a lot of money for the land, then they might spend another large sum of money in de molishing buildings, setting up parking facilities.

My personal feeling is, off the top of my head, it probably ought to be raised to $250,000 under certain circumstances.

The CHAIRMAN. Now wait-ought to be how much?

Dr. CHENAULT. I woudl guess about $250,000 rather than $150,000 The CHAIRMAN. Yes. I thought you said million.

Dr. CHENAULT. Well, I don't think so. I meant to say $250,000. The CHAIRMAN. Well, fine. Glad to have your suggestion. I think there is something in it. Of course, that was just a figure more or less thrown in.

Dr. CHENAULT. Mr. Chairman, I have here a booklet which gives the distribution of group practices in this country as they now exist. and if you would like, I would be happy to leave this with you.

The CHAIRMAN. We will be very glad to have it in our exhibits. Of course, that will not be printed in the record. We will keep it in the committee files in connection with this program.

Thank you very much. We do appreciate it. Before the conclusion of today's hearing, let me include in the record at this point, a statemen: from the Federation of American Hospitals.

(The statement is reprinted as follows:)

That completes the hearings for this morning. Tomorrow we wil have a further hearing. That hearing tomorrow will be concerned pr marily with the proposed housing bill by Senator Williams.

The committee will stand in adjournment now until 10 o'clock tomorrow morning.

(Whereupon, at 11:55 a.m., the subcommittee recessed, to reconvene at 10 a.m. the following day.)

STATEMENT OF MICHAEL D. BROMBERG, DIRECTOR, WASHINGTON BUREAU, FEDERA TION OF AMERICAN HOSPITALS

As the Director of the Washington Bureau of the Federation of Amerien Hospitals, I would like to thank you for this opportunity to present to the Senat Subcommittee on Housing some of the Federation's views on the health crisist America and some of our recommendations in the housing field for meeting the health care needs of our nation.

Your Subcommittee, Mr. Chairman, has been the source of some of the most inportant and far reaching legislation in the field of Housing-both rural a urban-and our Federation is particularly grateful for this opportunity f presenting our views on the various bills, presently before your Committee. W hope that we may contribute to your search for improved housing programs, per ticularly those which relate to the construction, expansion and modernization of health facilities.

The Federation of American Hospitals is a national non-profit associatio representing the interests of more than 500 investor-owned (proprietary) ho pitals through its members and affiliated state organizations. Our member stitutions range from small rural facilities to the largest investor-owned coprehensive medical care complex in the nation. There are more than 14 acute short term proprietary hospitals in the United States representing appro mately 20 percent of the non-government hospitals. In some areas of the count investor-owned facilities represent up to 100% of the hospitals. These hospi have to a great extend served to prevent a health crisis by filling a gap in e struction of hospitals in both those communities which were too poor to fin tax-exempt hospitals, or in those new towns which grew so rapidly that the ar could not keep up with exploding populations.

The vast majority of investor-owned hospitals was founded by local citizens fulfill a critical community need. But more significant to the scope of these her ings is the fact that investor-owned hospitals have consistently been able

operate at a rate commensurate with or lower than the rates of other hospitals. This is true even though investor-owned hospitals pay taxes and are subject to the same requirements for licensing and accreditation and for certification for Medicare, Medicaid, and various Blue Cross programs, as are other hospitals. Not only are our hospitals committed to providing quality health care at reasonable cost, but we believe the free enterprise sector of the hospital field can make a significant contribution in the development of a more efficient, more effective delivery system.

This Subcommittee has previously recognized the contributions of investorowned health care providers and the importance of attracting private capital to invest in needed health care facilities. That is why proprietary nursing homes, intermediate care facilities and hospitals are eligible for FHA mortgage insurance.

Mr. Chairman, in light of those programs, the Federation would like to bring to the attention of the Subcommittee a matter of some concern to us.

Under the National Housing Act a "group practice facility" is defined as a facility of a private non-profit corporatica or association-proprietary facilities are not included in this category.

That definition is continued in the Administration's Omnibus bill, S. 2049, Section 503 (a) (4). Subsections A (1) (2) and (3) of Section 503 restate existing law and specifically include proprietary in the definitions of "hospital”, “nursing home", and "intermediate care facility". That is due in large part to the leader. ship of Chairman Sparkman and this Subcommittee and we urge you to extend the inclusion of proprietary organizations to group health facilities.

The Federation is convinced that the pluralistic approach is the best approach for alleviating America's health crisis. We would hope that you agree and will amend S. 2049 to include proprietary group practice facilities in Section 503 (a) (4) to eliminate the inconsistency in definitions.

FAH appreciates, also, the opportunity to comment upon S. 2269, introduced by Chairman Sparkman, which would amend the National Housing Act to authorize mortgage insurance for the construction or rehabilitation of medical practice facilities in certain areas where there is a shortage of doctors.

FAH supports and endorses the thrust and intent of S. 2269; however, we would suggest certain modifications in this proposed legislation.

It is the view of our membership that the language restricting a "medical prac tice facility" to a number of qualified practitioners-not more than four-should be deleted. The Federation also differs with the language restricting the mortgage insurance to group medical practice facilities "situated" in a rural or small town or in a low income section of an urban area, in which there exists, as determined by the Secretary, a critical shortage of physicians.

It is our view that the intent of S. 2269 can best be served by substituting language that will require medical practice facilities applying for FHA mortgage insurance to obtain a "certificate of need" from the appropriate health planning agency in the locality concerned.

Our primary reason for opposing the limiting language "one or more (not to exceed four) persons licensed to practice medicine"-is that this restriction will necessarily eliminate the opportunity for urgently needed experimentation and innovation in the area of prepaid group practice.

In recent months, a new method for delivering health services has achieved growing respect and attracted increasing interest. This new approach has two essential attributes. First, it brings together a comprehensive range of medical services in a single organization so that a patient is assured of convenient access to all of them. Second, it provides needed services for a fixed contract fee which is paid in advance by all subscribers. These Health Maintenance Organizations, as they are called, cannot be fostered with such limitations as are contained in S. 2049 or S. 2269.

The Federation of American Hospitals supports vigorously any and all legislation that will encourage innovation and competition among health care providers in both the non-profit and the proprietary sectors. It is our conviction that the pluralistic approach is the best one and we believe that the National Housing Act mortgage provisions can lend great assistance in this area if thesc modifications to S. 2049 and S. 2269 are adopted.

In addition we believe that to restrict mortgage insurance for group practice facilities to limited areas does not address itself to the problem at hand. We feel that S. 2269 should be broadened by establishing "need" as the sole criteria for granting the mortgage insurance. This can be accomplished by substituting the

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