Therefore, I hope you will have an opportunity to look at what Senator Douglas has just now said and what he has thus far introduced and see if it does not resolve the situation to some degree. There are those who would like to have us pass legislation which would throw all these people under hospital care. Others want to take them all out of hospital care. It is pretty hard to say why the ones who are now there on the hospital payroll should not be allowed to stay.

If it is your desire to take them off that salary list, then you ought to say so, it seems to me, frankly that is what your purpose is.

If it is possible to work out in a satisfactory fashion that problem, we would all be better pleased. So if you will consider the statement, fine.

Mr. NEIBEL. We will be pleased to submit a supplementary statement. Thank you.

(The document referred to follows:)

(The following statements were subsequently submitted for the record regarding the above relating to Senator Douglas' amendment No. 156:)

Senator HARRY F. BYRD,

Chairman, Committee on Finance,
U.S. Senate, Washington, D.C.

COLLEGE OF AMERICAN PATHOLOGISTS,

Chicago, Ill., May 18, 1965.

DEAR SENATOR BYRD: Following the appearance of the College of American Pathologists' witness, Dr. Victor B. Buhler, and at the close of the hearings on May 13, 1965, Senator Douglas of Illinois read a statement for the record concerning his proposed amendments to H.R. 6675, amendments Nos. 79 and 156. At the conclusion of Senator Douglas' statement, upon the request of Mr. Neibel, general counsel of the College of American Pathologists, both Senator Douglas and Senator Anderson (who was then presiding) invited the College of American Pathologists to submit a supplementary statement for the record, further explaining our position with respect to the proposed amendments Nos. 79 and 156 and commenting on Senator Douglas' statement. This letter is being written in compliance with this request and we respectfully ask that it be made a part of the record of the hearings of the Senate Finance Committee on H.R. 6675.

In large measure, the objectives sought by those sponsoring amendments 79 and 156 and the objectives of the College of American Pathologists are apparently similar. Both the sponsors of the amendments and the college desire that if Federal legislation is enacted, providing medical and hospital care for the aged, that such legislation will be in the manner and form which will be least disruptive to existing arrangements between physicians and hospitals and other institutions. Those sponsoring the amendments believe this objective would be best accomplished by adoption of the proposed amendments. The College of American Pathologists is of the opinion that this objective is best achieved by approving H.R. 6675 as presently written with respect to physicians' services whereby the professional services of all physicians are treated alike and all hospital costs are likewise treated in the same manner.

We have carefully examined both amendment No. 79 and amendment No. 156 and cannot find any significant difference between these two amendments. Both of these amendments would provide that the professional services of doctors of medicine practicing in the fields of pathology, radiology, physiatry, and anesthesiology would be classified as "hospital services" and payment for the services of these physicians would be in the same manner and mode as payment for hospital costs. Both of these amendments would separate the four medical specialties involved from the mainstream of American medicine and make physicians practicing these specialties something less than a doctor.

At the outset, we believe that it is important to recognize that H.R. 6675, as presently written, will not alter or disrupt a single arrangement between any physician and any hospital. Those who choose to practice on a salary, a percentage of the gross or net, or on a lessee basis may continue to do so. The bill

as now written does not give preferential treatment to any particular arrangement between physicians and hospitals. The charge that enactment of this legislation will result in widespread renegotiation of contracts is simply not true. The bill merely requires that these four physicians' services will all be billed under part B of the bill and hospital costs will all be billed as hospital services under part A of the bill. What is done with the fees and costs collected under part B and part A, respectively, is subject to any arrangement which the physician and hospital might work out to their mutual advantage and the advantage of the patient.

We readily admit that if either amendment 79 or 156 were to be approved, that the professional services of pathologists, radiologists, anesthesiologists, and physiatrists would be available to those over 65 in both part A (hospital services) and part B (physicians' services) of the bill. It should be recognized, however, that hospital services under part A of the bill are only subject to a $40 deductible for inpatient diagnostic services and only a $20 deductible if such services are to be provided to a patient as an outpatient. After these deductibles have been satisfied, both physicians' fees and hospital costs are paid in full. Contrast this benefit pattern with the benefits provided under part B of the legislation. Professional services rendered and billed under this part are subject to a $50 annual deductible and 20 percent coinsurance for all charges billed after satisfying the deductible.

The differences in benefits under part A and part B of the bill make any alleged freedom of choice for the physician illusory. A careful reading of the testimony of the American Hospital Association cannot help but reveal that hospitals will bring almost insurmountable pressures to bear upon physicians to have them provide their services as a hospital service and to have the hospital bill the patient for the service thus provided. If the physician resists, he will be accused of holding out on the old folks inasmuch as the same services will cost the individual patient more if rendered as a physician's service under part B of the bill. Furthermore, as indicated in our testimony before the committee, over 70 percent of laboratory procedures are now performed outside the hospital. Were these services to be provided "free" as hospital inpatient or outpatient services after a minimal deductible is satisfied, the result cannot help but be to magnetize patients from the private practice sector into the hospital for there the bills for services rendered will not be subject to the 20-percent coinsurance requirement and the larger deductible. Accordingly, it is the position of the College of American Pathologists that adoption of amendments 79 and 156 would be extremely disruptive to existing patterns of medical practice, add immeasurably to the costs of the social security financed program, separate physicians practicing the four named specialties from the rest of medicine and inevitably result in hospital domination of medical practice in these four areas.

Now a word about "hidden profits." It is true that most hospitals are "nonprofit" organizations. It is also true that these nonprofit organizations have been ringing up the cash register with profits in the laboratory and X-ray departments. This does not mean that hospitals generally are overall making a profit. What is does mean is that patients needing diagnostic X-ray and laboratory services are subsidizing patients not needing or utilizing these services.

Let us look at some figures. According to Hospital Administrative Services (a nonprofit organization affiliated with the American Hospital Association) for the month of December 1964 in hospitals with between 200 and 299 beds, the median laboratory accounted for 11.4 percent of the total income of the hospital while the expense of operating the laboratory (including the professional services of the pathologist) were only 6.9 percent of total hospital expenses.

We believe in any federally financed program that hospital costs and physicians' fees should be laid on the table for all to see.

Where hospitals are making a hidden profit in laboratory and X-ray, the charges for these services to patients should be reduced. Patients needing these services should not subsidize other areas of hospital operation. The best way we know to accomplish this is by approving H.R. 6675 as now written, so that hospitals can be paid “reasonable costs" of providing laboratory and X-ray services, and the professional services of physicians in these areas may be compensated along with other physicians in part B of the bill.

Finally, it has been charged that failure to approve amendments 79 or 156 will result in the denial of substantial benefits to those over 65 in need of medical and hospital care. Let's look at the facts. For purpose of illustration, assume a total hospital bill of $1,040 (much larger than the average hospital bill of individuals over 65). Approximately 20 percent or $200, after the hospital deducti

47-140-65-pt. 2-19

With a

ble is satisfied, on the average will go for laboratory and X-ray services. Assume that 60 percent or $120 is the hospital cost of providing the services and 40 percent or $80 is the professional fee of the pathologist and radiologist. hospital bill of $1,000, certainly the annual deductible of $50, under part B, would already have been paid to other physicians. Thus, the aged patient would have to pay to the pathologist and radiologist 20 percent (the coinsurance factor) of $80 or $16. It does not seem reasonable to say that payment of $16 out of a hospital bill of $1,040 is a substantial reduction in benefits.

In conclusion, we would like to state once again that we are of the firm conviction that passage of H.R. 6675, with respect to physicians' services and hospital costs, will result in the greatest freedom for physicians and hospitals to negotiate their own arrangements, will not segregate a substantial segment of physicians from their professional brethren, will not operate to dissuade young doctors from entering these specialties, will tend to lower costs, and will be in the best interests of patients, doctors, hospitals, and the Federal Government. Thank you, Mr. Chairman, for the opportunity you have afforded us to extend our remarks before your committee.

Respectfully,

OLIVER J. NEIBEL, Jr.,

General Counsel.

THE AMERICAN COLLEGE OF RADIOLOGY,
Chicago, Ill., May 17, 1965.

Hon. HARRY F. BYRD,

Chairman, Committee on Finance,

U.S. Senate, Old Senate Office Building,
Washington, D.C.

DEAR SENATOR BYRD: On May 13 Senator Paul H. Douglas presented a statement for the record of the hearings of the Senate Finance Committee on H.R. 6675. Later, from the chair, Senator Clinton P. Anderson invited comments for the record on this statement and on amendment 156. With your permission, the American College of Radiology offers the following comment for the record of the hearings:

1. Under amendment 156 payments for physicians' services in pathology, radiology, physiatry, and anesthesiology are available to hospitals in part A if the hospital bills for the services of these physicians as hospital services, and payments for physicians' services in these specialties are available under H.R. 6675 in part B if the physician bills for his services as medical services. Total hospital costs under part A are, however, subject only to a $40 deductible if the individual is a bed patient, or $20 if he is an outpatient, and then are covered in full. In contrast, physicians' charges under part B are subject to a $50 deductible and are then subject to a coinsurance provision under which the patient is liable for 20 percent of reasonable charges. This fact that payments for physicians' services in the specialties cited are less expensive to the covered individual under part A than under part B-if the Douglas amendment is enactedwill be used by hospitals to pressure the physicians involved into permitting the hospital to bill for their services. If the physician resists, he will be accused of "holding out on the old folks," depriving the aged of possible benefits, etc. These pressures can be anticipated on the basis of testimony presented by the American Hospital Association and statements of many hospital administrators. 2. It has been implied and stated that H.R. 6675 as written will require physicians and hospitals to renegotiate current arrangements under which physicians receive salaries, lease space in a hospital, or have some sort of contract calling for a sharing of collections on a percentage basis. Insofar as the language of the bill is concerned, H.R. 6675, if enacted, will not alter, or disrupt, so much as one such arrangement between one doctor and one hospital. H.R. 6675 only requires that all physicians designate reasonable charges for their services, accept responsibility for the level of these charges and collect these charges in the form of physicians' fees. H.R. 6675 does not deal with the disposition of fees after they are received.

Today, without reference to any legislation, all physicians on the staffs of a number of hospitals present patients bills for their services, collect these bills, assign collections to the medical school or hospital, and receive salaries from the medical school or hospital. H.R. 6675 will not change this practice arrangement of any internist, general surgeon, radiologist, etc. H.R. 6675 treats all

physicians and all hospitals alike insofar as presentation of reasonable charges is concerned; no physicians are specifically placed in an administratively disadvantageous position insofar as hospital relationships are concerned; but the bill does not interfere with physicians or hospitals in evolving locally satisfactory practice arrangements.

3. Those hospitals that are not-for-profit corporations could not be characterized as greedy. It is true, however, that under the single charge billing system in radiology that reimburses the hospital and the doctor's fee in one payment, patients who need radiology services pay charges in excess of costs of de livering the service plus the fee for the service. A patient who has a $10 radiology charge under this system is paying the hospital $5 for the accountable costs; the physician a fee of $3.50 to $4; and the hospital an excess amount of from $1 to $1.50 which is applied to underpriced services provided some other patient. This excess of charges to a patient over all costs of serving that patient is the hospital "profit" that has been mentioned. The principal, indirect beneficiaries of H.R. 6675 with its requirement that physicians' fees and hospital costs be separately stated will be patients not covered by the bill. This is because excessive hospital charges for these services will become apparent when stated separately from the doctor's fee, and this fact will tend to reduce costs of radiology, pathology, etc. for the 90 percent of Americans who are not beneficiaries of H.R. 6675. It would seem that there is little reason to perpetuate a system that charges John Doe, an outpatient who needs an X-ray chest examination, an excessive amount for the benefit of Richard Roe who is occupying a hospital bed.

4. Some Senators have expressed a concern that H.R. 6675 has materially reduced the benefits proposed under S. 1. If you assume, as virtually all witnesses have assumed, that nearly all eligible will voluntarily enroll in part B, H.R. 6675 would not seem to materially reduce benefits in the cited specialties. Further, of course, H.R. 6675 has added under part B the full range of physicians' services, and this is all a plus.

To illustrate: assume a large, $1,200 hospital bill; assume radiology charges of 9 percent of this bill and pathology charges of 11 percent, or $108 and $132, respectively (in keeping with insurance company experience). Fifty percent of the $108 radiology charge and 60 percent of the $132 pathology charge, or $133, will be reimbursed to hospitals under part A of the bill as written as "reasonable costs." Even if we assume the physicians' fees to be the remainder, or $107, the amount payable by the patient is only $21.40, or 20 percent, because any patient with a hospital bill of $1,200 will have other physicians' charges that will satisfy the $50 deductible under part B. If we assume that the fees of radiologists and pathologists will be set at levels approximating 35 percent of the present charge of $240, or $84, the patient will be personally liable for just under $18. It is believed that a requirement to pay an added $20 in a situation involving a hospital bill of $1,200 is not a substantial reduction in benefits.

As another example, assume a patient who requires radiology and pathology services costing $200 on a not hospitalized basis and that his patient is referred to a radiologist and a pathologist at a hospital for these services. The patient pays a $20 deductible and a little more than half of the remaining $180, or about $100, is reimbursable to the hospital as "reasonable costs." Again, a patient requiring radiology and pathology services of this magnitude is certain to have other doctor bills in excess of $50, and thus the patient will be personally liable for 20 percent of $80, or $16. If we again assume that the fee of the radiologist and pathologist will be set at 35 percent of $200, or $70, the patient will be personally liable for $14. This again would not seem to be a substantial reduction in benefits.

In addition, in either instance, if the patient is truly medically indigent, he would in most States receive aid under the Kerr-Mills law.

As noted in a statement submitted to the committee, our principal objections to amendments 79 and 156 are medical. They center upon our recognition of increased medical service and recruitment difficulties we face if either amendment is incorporated into H.R. 6675. We are interested only in high-level radiology services for patients now and in the future. We cannot now provide such under hospital domination and we cannot recruit bright young doctors to provide such in the future if we are segregated from the mainstream of medical practice under a Federal law.

Thank you very much for the opportunity of offering this comment.

Sincerely,

WALLACE D. BUCHNAN, M.D., President.

Senator CURTIS. Mr. Chairman, I have an appointment. It is now 12:30, and I cannot stay here. I wanted to ask some questions. But I want the record to show-I cannot ask them now. I just want the record to show that I will pursue his testimony, and I am glad he is here.

Senator ANDERSON. Senator Curtis, if you desire we will ask per mission now that you may submit some written questions to Mr. Hill, and if he desires to answer them for the record he may do so.

to

Senator CURTIS. I do not think I will avail myself of that. I have go. Senator ANDERSON. Paul D. Hill?

STATEMENT OF PAUL D. HILL, COCHAIRMAN, LEGISLATIVE COMMITTEE, INTERNATIONAL ASSOCIATION OF HEALTH UNDERWRITERS; ACCOMPANIED BY ROBERT FINNEGAN, MANAGING DIRECTOR

Mr. HILL. Mr. Chairman, I am Paul D. Hill, of Indianapolis, cochairman of the Legislative Committee of the International Association of Health Underwriters.

With me is Robert Finnegan, of Chicago, who is the managing director of the International Association of Health Underwriters, and we are well aware that in order to be eternal any statement does not have to be interminable, and we think you gentlemen have been extremely patient this morning.

Mr. Chairman and members of the committee, this is the statement of the International Association of Health Underwriters, the profes sional agents' organization made up of men and women who sell and service health insurance all over the country. Our association is composed of about 5,000 members in nearly 100 State and local organizations blanketing the United States. It is the members of our organization, along with the members of the National Association of Life Underwriters and the property-casualty insurance agents who sell and service the insurance plans that today are used so widely to offset the costs of hospitalization, surgery, and doctor's bills, and to replace earned income during periods of disability due to sickness or accident. Our position, which we were privileged to present in person to this committee last year, is this: We favor the best medical care available for every person in these United States, regardless of his or her age, and regardless of his or here ability to pay for it. We further believe that every individual should use his own resources before he should turn to any public program at the Federal, State, or local level. It is the duty of the public at large to provide for those who are financially incapable of caring for themselves; it is not the duty of the public at large to tax everyone to pay for medical costs of those who are able and in most instances willing to pay their own expenses. This being true, we believe that the present Kerr-Mills law should be expanded to every State, and that it should be broadened to cover any demonstrable and proven need for medical care among those age 65 and over in our population.

At the same time, we are totally opposed to socialistic programs whose avowed goal is to cover everyone, regardless of need, and whose ultimate purpose, as stated by their most vocal adherents, is to make