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Our College is composed of osteopathic physicians who by their post-doctoral training have achieved the status of "specialist". Specifically, the osteopathic physician pathologist possesses a learned expertise in the laboratory phases of medical practice, and who integrates this special expertise with patient care, either directly by himself, or through the physician who is directly attending the patient.

While the osteopathic specialty of pathology is comparable, in degree of training and certification to other specialties, in other respect it is a very unique specialty.

In the osteopathic profession, virtually all pathologists are "General Pathologists", and are "Hospital-Associated". The few exceptions practice in one of the subspecialties of pathology, for example, research pathology, industrial pathology, forensic pathology, etc. Thus, we are first unique in the restriction of our practice setting.

Next, the specialty of osteopathic pathology is unique in that, while it is at the hub of nearly all hospital services, it involves the least direct patient contact of all specialties. The Professional services of the "Hospital-Associated" pathologist vary with the size of the hospital, the extent of its pathology service and the scope of his services, in providing health care to the patient. These services may include, but are not limited to, the following:

1. Direct operating room and bed-floor medical patient consultation.

2. Diagnosis and interpretation of all materials derived or expressed from the human body.

3. Interpretation of clinical findings, and laboratory data whether performed by himself or other technical personnel, in order to establish a diagnosis for the patient's ailment, and a therapeutic program to be conducted by the attending physician.

4. Performance of autopsies and interpretation of the findings to constantly improve the professional confidence in medical practice and knowledgeability in all displines of medical practice.

5. Maintaining the proper quality control programs necessary to insure accurate and reproducible results of all laboratory examinations.

6. Responsibility for organizing and maintaining a proper technical staff in the laboratory. This function requires ongoing teaching and training of paramedical staff, the instituting and monitoring of all new procedures, medico-legal responsibilities of work performed by himself or others under his jurisdiction,

etc.

7. Fiscal management of the laboratory to control the cost and expenditures at a reasonable level, as required by third-parties.

8. The execution of other duties, beyond the customary activities of general staff members, which are required, either by law or directive. These duties may include the maintenance of a tumor registry, the statistical documentation of surgical tissue analysis, and program teaching of resident and visiting staff, etc. Because of the uniqueness of our specialty several unique patterns of service and methods of compensation therefore have evolved, as working agreements between osteopathic hospitals and their "Associated Pathologists".

All of the foregoing brings us to our concern over the provisions of S. 1470 which relate to "Hospital-Associated" physicians.

We, in the American Osteopathic College of Pathologists, are not blind to the acceleration in hospital care costs during the past several years and are fully aware of the impact of these increases on the administration of the Medicare and Medicaid programs. We are also aware that increases in laboratory services have contributed to the overall problem of increasing hospital costs. We must respectfully submit, however, that neither the increase in laboratory costs nor the overall cost in patient care have been significantly affected by the level of compensation of "Hospital-Associated" pathologists.

We do not contend that there have not been isolated instances where hospitalassociated pathologists have obtained excessive compensation, nor do we condone such practice. We do affirmatively assert, however that the varying contact forms presently employed, most hospital-associated pathologists are now fairly and reason bly compensated for their highly specialized and unique services. I would add, that the American Osteopathic College of Pathologists does not, and has not at any time, endorsed the use of any particular method of compensation, but rather accepts the premise that a pluralistic approach is most reasonable, since circumstances affecting reimbursement policy may differ from hospital to hospital.

While we fully sympathize with the Congress' feeling of obligation to curtail rising hospital costs in order to concommitantly curtail Medicare and Medicaid costs, we do not feel that the provisions of Section 12 of the bill as they relate to pathology services are either reasonable or fair. As we have said above, pathology services are unique in their remoteness from direct patient contact. We feel it is most unfair and frankly, just plain wrong, to limit reimbursement to pathologists to instances "only where the pathologist personally performs, acts or makes decisions with respect to a patient's diagnosis or treatment which required exercise of medical judgment". As we have said above, the scope and function of our professional services is far more pervasive and far less easy to categorize, in reality. We strongly maintain that compensation to the "HospitalAssociated" pathologist must, in all cases, reflect the true extent of the total activities and service rendered by him, since, ultimately, his total effort enures to the benefit of the patient.

It is our belief that the adoption of Section 12 of S. 1470, as presently drawn, would not only be an injustice to those now practicing as "Hospital-Associated” pathologists, but in the long run, would precipitate a drastic decline in the number of qualified physicians entering the specialty. The specialty requires an expertise acquired only after years of training and study. If an immutable and inequitable level of compensation is established and perpetuated by Federal Act, then prospective candidates for residencies in pathology are likely to pursue more lucrative specialties requiring no more training. Any depletion in the number of osteopathic pathologists now, or in the foreseeable future, would jeopardize the high quality of health care being delivered in osteopathic hospitals.

Recently, the American Osteopathic College of Pathologists queried Pathology Department Chairmen about the type of compensation arrangement between the hospital and the pathologist being used by the institution involved. Of those responding 52 percent are salaried employees of the hospital. The remaining three categories are as follows:

(a) Pathologists being compensated by percentage contract are 22 percent. (b) Pathologists being compensated by a fee-for-service basis are 8 percent. (c) Pathologists being compensated by a combination of the above methods are 18 percent.

As you can readily see, most osteopathic pathologists are compensated as salaried hospital employees. However, the AOCP strongly supports pluralistic compensation methods. We believe it is for more preferable to permit hospitals and pathologists the opportunity to negotiate varied forms of compensation which may accommodate the individual hospital's circumstances.

The location of the pathology laboratory, size and activity of the laboratory and the hospital, dictates that pluralistic compensation methods are necessary rather than mandating pure salary arrangements which have proven to be unworkable in many instances.

The AOCP does, however, urge the Subcommittee to give close attention to the fee for service concept based on relative value schedules including the professional component of all test performed in clinical pathology and anatomical pathology laboratories. This method allows closer scrutiny by the hospital administrator and the government as well as providing compensation rates commensurate with the professional status of the pathology specialist.

One final point, osteopathic hospitals are generally smaller community oriented facilities providing a continuum of the primary care offered in the individual osteopathic family practitioner's office. Our patients are essentially from the middle and lower income levels. We do not, unfortunately, benefit from endorsements and other funds as do many allopathic hospitals which tend to be larger, well established facilities and often university affiliated. Donations of costly technologically advanced equipment is virtually non-existent. In many cases it would be a burden too large to bear for our hospitals to include in their budget a salary for pathologists which is competitive with the specialty compensation on a whole. Therefore, we once again reiterate the desirability of other forms of compensation.

For all the reasons we have recited, we respectfully request that this Committee consider an alternative approach to the language of Section 12 which will insure truly equitable reimbursement.

Your serious consideration of the issues we have raised herein will be most appreciated.

STATEMENT OF AMERICAN OSTEOPATHIC COLLEGE OF RADIOLOGY

(By Martin S. Landis, D.O., Past President)

This statement is offered on behalf of the approximately 370 osteopathic radiologists who are members of the American Osteopathic College of Radiology. The College is grateful for the opportunity to state its views to the Senate Subcommittee which is presently reviewing U.S. Senate Bill No. 1470.

The American Osteopathic College of Radiology ("College") is the national professional society of osteopathic physicians who specialize in the practice of radiology. The College has the responsibility for supporting activities leading to the most efficient and economical delivery of the services provided by its members in accordance with the highest professional standards of medical care. We are well aware of the need for legislative improvements in federal funding programs which provide payment for health services. We also recognize the spiraling costs of the equipment, materials and support services necessary for the practice of radiology. Therefore, we are certainly in accord with the purposes of S. 1470, and we offer this statement in the spirit of cooperation in an effort to make this legislation the best legislation possible for the achievement of medical cost containment and the retention of the highest quality of medical care. The members of the College are also members of other medical societies including the American Osteopathic Association. Our members are engaged in both purely hospital-based practice and purely private practice with some members having a combination of both types of practice. We understand that the American Osteopathic Association will be providing this Committee with a statement dealing generally with the practice of osteopathic medicine in relationship to S. 1470. We will confine our comments to those sections of S. 1470 directly affecting the practice of osteopathic radiology.

In preparing this statement, we have had the benefit of reviewing a draft of a statement submitted to the Committee by the American College of Radiology, and we will make reference to that statement at appropriate places in our statement. For the sake of brevity, we will refer to that statement as the "ACR statement" whenever we refer to it in our statement.

We would like to note one other significant fact concerning our position with respect to S. 1470. Normally, osteopathic physicians and osteopathic hospitals are engaged in primary care and not in large scale medical research. Osteopathic hospitals tend to be smaller than other hospitals, and they often are less expensive than other hospitals. Thus, our members not only believe in the purposes evidenced by S. 1470 but also have actually consistently practiced the concepts embodied in S. 1470. It is important to keep this in mind so that you will understand the perspective from which we comment on Section 2 and on the other sections of S. 1470.

We agree with the ACR statement that the provisions in Section 2 of S. 1470 which permit a state reimbursement system to supersede the federal system need to be expanded upon to provide assurance that there is a standard approach adoptd by the various state systems which guarantees the same concern expressed by the federal government for the maintenance of readily available high quality medical service at the lowest cost possible. We also share the ACR's concern with the conflict between the deletion of the costs of interns, residents and non-administrative physicians from the term "routine operating costs" in Section 2(b) and the provision of Section 2(e) (2) which refers to all revenue sources for hospital services. It would appear that a fair solution to the problem would be to permit the inclusion of cost of interns, residents and non-administrative physicians within the term "routine operating costs."

Section 4 (c) raises the specter of having to comply with the requirements of several different planning agencies with all the delay that such compliance would involve. In fact, it is even possible that compliance with one agency might make it impossible to comply with another agency's requirements. We would suggest that the Act designate a particular agency which would have sole authority for approving or rejecting proposed capital expenditures. Although the 180-day requirement for action by the various agencies does help somewhat with the delay problem, it would seem better to put this authority within the Jurisdiction of a single agency which would have a time limit of perhaps 90 to 120 days within which it would have to act or else the expenditures would be deemed approved.

We are certainly encouraged by the provisions of Section 10 which make real strides towards streamlining the payment system to eliminate some of the current inequities. We also appreciate the provisions which simplify the procedure for submitting claims. However, we do not feel that the discrimination against X-ray services which is contained at the end of Section 10(a) is justified. To fully implement the purposes of the Act, the $1.00 administrative cost saving allowance should certainly be extended to all X-ray services without regard to whether they are for hospital in-patients or out-patients or are performed outside the office of the participating radiologist. The current language of that section seems both unfair and inconsistent with the purposes of the Act.

Section 12 (a) (1) also contains discriminatory language which discourages efficient practice by the use of qualified technical or paramedical assistants. The physician should not be forced to perform services that should not really require his time and a patient should not have to bear the extra expense connected with a physician's performance. We would suggest that this problem could be solved by changing the word "and" which precedes clause (B) of the existing Section 12 (a) (1) to "or" or by deleting clause (B) completely. We have no problem with the requirement that the service must be either personally performed by or personally directed by a physician because this is in keeping with the normal radiological practice. However, the additional requirement that the service be of such a nature that its performance by a physician is both customary and appropriate is not at all reasonable in view of normal radiological practice. There are a number of procedures which would be personally directed by a physician for the benefit of a patient which would not be of a nature that would make them customarily or appropriately performed by the physician himself. A few examples of this are provided in the ACR statement.

We concur in the philosophy behind the provisions of S. 1470 which deal with percentage contracts between a hospital and a physician. However, Section 12 of S. 1470 does not deal adequately with the situation where a percentage arrangement may be essential such as a small rural hospital. This same situation also has the additional problem of not providing an adequate standard of comparison as required by Section 12 since there may not be physicians actually employed by the hospital. This means that there would be no salary to which the percentage arrangement could be compared.

Furthermore, in some states it is illegal for a hospital to practice medicine. It follows from that fact that a hospital may not have doctors in its employ in those states. What comparison could be drawn in those situations between a charge based on a percentage arrangement and a salary paid to a physician if he had been employed by the hospital?

We are certain that Section 12 is not intended to refer to any compensation arrangements other than percentage arrangements. However, perhaps Subsection (c) of Section 12 could be rephrased to make it absolutely clear that it is not referring to any fee for services or compensation based on a relative value schedule. Conceivably, the argument could be made that where the basis for compensation is a relative value schedule, that this is "related to the amount of income or receipts of the hospital." To eliminate such an erroneous interpretation of Section 12, perhaps the phrase "percentage of the income of receipts" could be substituted for the existing language.

We concur with the ACR statement on Section 15 of S. 1470. We believe that any professional society which has had a relative value scale should be permitted to submit this scale to the Secretary of Health, Education, and Welfare without waiting to be asked by the Secretary to submit this information and without fear of reprisal on the part of the Federal Trade Commission or the United States Justice Department either for the violation of an existing consent decree or by the initiation of a new investigation or legal proceeding. We also agree that for such information to have validity, the society must have the right to test the figures contained in such a scale on at least a limited basis before they are submitted to the Secretary.

We agree with the ACR statement in commending the provisions of Sections 31, 40 and 41 of S. 1470. We especially want to emphasize the necessity to cover transportation of patients to and from special types of treatment and care facilities besides the one type mentioned in Section 41.

We wholeheartedly approve of the intent expressed by Section 44 of S. 1470, and we would suggest that the words "be required" following the phrase "the

State title XIX agency" be deleted so that the State agency will have no greater power to make available this information to the public than does the Secretary of Health, Education, and Welfare.

We sincerely appreciate this opportunity to present our comments on S. 1470. We will be happy to provide additional comments if you so desire, and we wish your Subcommittee success in your efforts to prepare this significant legislation for passage by the United States Congress.

STATEMENT OF AMERICAN OSTEOPATHIC HOSPITAL ASSOCIATION

This statement is presented by Michael F. Doody, President of the American Osteopathic Hospital Association, 930 Busse Highway, Park Ridge, Illinois 60068.

The AOHA maintains its Headquarters in Illinois, with an office in Washington, D.C., and represents the 203 osteopathic hospitals which are located in 28 states. These institutions serve as the primary institutional care facilities for those patients (individual consumers) who choose to receive their health care from one of the approximately 15,000 practicing osteopathic physicians in the country.

Osteopathic physicians comprise a second school of medicine. The osteopathic profession is a politically and philosophically separate and administratively independent school of medical practice. Osteopathic physicians are largely providers who concentrate in the areas of general practice and family medicine. Approximately 85 percent of all practicing osteopathic physicians are engaged in the delivery of primary care. Osteopathic physicians, numbering slightly over 4 percent of all the physicians in this country, represent in excess of 17 percent of all general practitioners.

The 203 osteopathic hospitals provide more than 23,400 in-patient beds and employ approximately 62,000 people. In 1976, osteopathic hospitals had more than $1 billion in total expenses and rendered health care services for more than 810,000 in-patient admissions and 3.1 million out-patient visits. Osteopathic hospitals are cost conscious institutions whose primary objective is the delivery of quality health care in a cost-effective manner.

A large number of osteopathic hospitals are engaged in the teaching of interns and residents and as such represent an important community health resource. Many of our hospitals are located in rural or semi-rural areas and provide a very necessary community health service. In some instances, the osteopathic hospital is the only hospital present within the community.

INTRODUCTION

This Association supports the basic premises which prompted the distinguished Chairman of this Subcommittee to introduce S. 1470:

We cannot continue with a program which increases in costs faster than the rate of rise in federal revenues.

We must make Medicare and Medicaid more efficient and economical or benefits will have to be ultimately reduced.

We must avoid arbitrary controls on payments to hospitals.

We must provide incentive payments to encourage efficiency.

Such changes must be made prior to any expansion of the federal role in providing more health insurance to more people since without such changes any expansion would be an open invitation to fiscal disaster.

The American Osteopathic Hospital Association and its Member Hospitals have consistently supported long-term efforts to overhaul the present hospital reimbursement system. We believe the present practice of grouping hospitals according to bed size and geographic area should be altered to include such other factors as patient mix, level of sophistication and scope of services, labor costs, and the extent of teaching programs. In addition we have often advocated the undertaking of a positive program to develop incentives for hospitals to participate in programs which have proved themselves to be effective in containing hospital costs, including prospective payment systems.

Under the present system, if two hospitals of similar bed size in the same geographic area have a variation in costs, at least one is assumed to be inefficient and have poor management and unreasonable costs. This is a premise which we

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