There is a need to develop new financial mechanisms that will encourage efficient management of our resources and contain rising costs without, at the same time, impairing the capacity of the health care system to meet patient needs. S. 1470 addresses this issue; S. 1391 does not.

S. 1470 is a reasonable alternative in the development of long-term reforms for the Medicare and Medicaid programs. This bill rewards the effiicent institution and penalizes the inefficient; recognizes the major differences between hospitals; prevents reductions in or the elimination of needed services; and assures continued access to services by those in need of them.

The American Osteopathic Hospital Association supports S. 1470, with appropriate amendments as indicated, and we applaud the many months of work and effort that went into drafting and revising what we believe is one of the more equitable reforms of the Medicare and Medicaid programs to date.

STATEMENT OF THE AMERICAN PHYSICAL THERAPY ASSOCIATION

(Presented by Robert A. Teckemeyer, Associate Executive Director, Professional Relations)

The American Physical Therapy Association (APTA) is the national professional organization of physical therapists. The APTA represents 80 percent of the over 30,000 physical therapists in all 50 states, the District of Columbia, Puerto Rico and the Virgin Islands. Physical therapy services contribute to the rehabilitation and expeditious recovery of patients disabled due to disease or injury, reduce the need for institutional care of the physically handicapped, and permit disabled individuals to achieve the maximum degree of independent living. Such health services are provided to patients in hospitals, long-term care facilities, health maintenance organizations, rehabilitation centers, patients' homes, and in the offices and clinics of physical therapists who are private practitioners.

The APTA is in the forefront of the growing importance and recognition of allied health professionals. The APTA supports Congress and the Administration in their respective efforts to slow the tremendous increase in health care costs, but wishes to stress the importance of legal recognition of allied health fields in any new laws that come out of these efforts. S. 1470 Section 2 (b) amends Section 1861 of the Social Security Act by adding "Criteria for Determining Reasonable Cost of Hospital Services." This new section requires the Secretary of HEW to consult with appropriate national organizations in establishing an accounting and uniform functional cost reporting system and a system of hospital classification.

The APTA wishes to be included in the "appropriate national organizations" consulted. Section (aa) (2) (F) of this new section defines "routine operating costs" as not including "ancillary service costs". While the APTA understands the problems relating to specificity in such definitions, the Association believes that a lack of specificity will cause confusion and unnecessary expenditures that could be avoided by enumerating exactly what costs are controlled by the Section. The APTA would like to reiterate its objection to the language contained in Section 12(b) (2) of the Bill. The language to be added to Section 1842 (b) (3A) of the Social Security Act, by this Section, is virtually identical to the language contained in Section 251(c) of the 1972 Amendments to the Social Security Act. Section 251 (c) of the 1972 Amendments limiting Medicare reimbursement for physical therapists to an amount which does not exceed "an amount equal to the salary which would have been paid for the service" if it had been performed in an employment relationship and Section 12(b) (2) of S. 1470 which creates the same reimbursement system for hospital associated physicians do not encourage productivity and efficiency in the delivery of health care services. If physicians in a given area are all limited to the same basic rate regardless of how efficient or productive they may be, there is no incentive to improve or even to maintain the status quo.

The APTA disapproves of the "salary equivalency" language being applied to any health care professional, but is glad to see that physical therapists will no longer be singled out for this ineffective reimbursement method.

The APTA generally approves S. 1470 as a step in the right direction. All health professionals must realize that the time has come for some limiting of the rise of health care costs and the APTA will continue to work with Congress and with HEW to reach an equitable and workable solution to the problem.

STATEMENT SUBMITTED BY THE AMERICAN SOCIETY FOR MEDICAL TECHNOLOGY

I. INTRODUCTION

The American Society for Medical Technology (ASMT) is most pleased to provide the members of the Senate Finance Health Subcommittee with our views on S. 1470, the Medicare-Medicaid Administrative and Reimbursement Reform Act.

ASMT is a national, professional organization composed of over 29,000 members engaged in the delivery of clinical laboratory services. The Society is composed of 50 constituent state societies, in addition to the District of Columbia, which hold charters granted by the national organization. The country is divided into ten regions with an average of five states per region. An elected House of Delegates forms the governing body of the Society and when not in session, its functions are carried out by an elected Board of Directors. The Society is organized to give each member the opportunity to be an active partner in the development of standards and practices enumerated in ASMT's policies, positions, and publications.

Our membership is made up of a variety of nonphysician categories of clinical laboratory personnel including clinical laboratory administrators, supervisors, educators, technologists, technicians, assistants, and such specialists as microbiologists, clinical chemists, hematologists, immunohematologists, cytotechnologists, histotechnologists, and nuclear medicine technologists.

Approximately seventy-five percent of our membership hold degrees at or above the baccalaureate level while another ten percent hold associate degrees. The remainder of the membership is composed of individuals who fall in specified categories such as students.

ASMT is vitally concerned with both the areas of accreditation and certification. ASMT cooperated with the American Society of Clinical Pathologists (ASCP) in establishing the National Accreditating Agency for Clinical Laboratory Sciences (NAACLS) which is an autonomous agency responsible for the accreditation of education programs for clinical laboratory personnel. Until recently, the Society also participated with ASCP in the certification of clinical laboratory personnel through the ASCP Board of Registry. This past January, however, ASMT endorsed the establishment of an independent certification agency for medical laboratory personnel following the Society's formal withdrawal from the ASCP Board of Registry.

ASMT's rationale for its landmark decision calling for an independent and autonomous credentialing agency was based upon strong professional, publicinterest, and legal considerations. In so doing, the Society called for the cooperation of all groups certifying personnel in the laboratory field to participate in establishing and operating an independent and autonomous agency which would directly benefit the entire profession while avoiding some of the current vested interest problems which plague the field.

In addition to a membership diverse in specialty and generalist functions within the laboratory field, laboratory settings or places of employment range from private or independent laboratories to physician offices, clinics, blood banks, research institutes, to hospital laboratories-both governmental and non-governmental. Thousands, in fact the majority, of our active members work in hospital laboratory settings throughout the country.

On behalf of our membership and in the interest of better health care delivery on a national basis, ASMT has previously gone on public record in support of the basic principle that every American should be assured access to quality health care and that no person should be denied health care because of inability to pay.

Although we continue to favor eventual enactment of a well-conceived national health insurance program, ASMT recognizes that the critical problem of controlling the sharp rise in health costs, particularly as they relate to hospitals must receive priority in the Congress.

II. OVERVIEW

The available evidence involving escalating hospital costs suggests a serious national problem requiring careful congressional evaluation in the process of developing an appropriate and long-range cost containment strategy. For example, over the past decade, hospital charges have constituted the single most inflationary bulge in the Consumer Price Index of goods and services. Moreover,

while the cost of living went up 86% between 1960 and 1976, the average cost per patient day skyrocketed 450%-from $32 to $175. With hospital charges jumping around 15% a year and the national price tag for hospital care approaching a mind-boggling $65 billion, it is not surprising that many knowledgeable observers have increasingly sounded the alarm at runaway hospital costs.

Although the current health care system contains acknowledged strengths, an examination of Titles XVIII and XIX clearly points to some serious problems which must be eliminated before a more comprehensive national health plan is implemented. These two programs alone cost taxpayers about $38 billion in fiscal 1977 and an estimated $47 billion in fiscal 1978, a staggering increase of $9 billion in just one year.

Given such startling statistics it would seem unwise to simply build upon our current health care system until some of its fundamental deficiencies can be eliminated. It was for this reason that ASMT testified last year before the Senate Finance Health Subcommittee that the Medicare-Medicaid Administrative and Reimbursement Reform Act offered a significant opportunity to evaluate certain critical administrative and reimbursement issues related to Titles XVIII and XIX. ASMT is pleased to once again commend the initiative of Chairman Talmadge and the various co-sponsors of S. 1470 for reintroducing a revised version of this important legislation during the 95th Congress.

ASMT is pleased to note that some legislative progress has already occurred with respect to several important issues which surfaced during consideration of S. 3205 last year. Namely, Congress has already approved legislation mandating an Office of Inspector General within HEW and is currently considering the Medicare-Medicaid Anti-Fraud and Abuse Amendments. Meanwhile, the recent HEW reorganization created a separate Health Care Financing Administration similar to the one proposed in S. 3205. Since the Society maintains some strong reservations regarding the potential impact of this reorganization on the administration and coordination of HEW's laboratory regulatory program, this issue is discussed in greater depth later in our statement.

Although there are no easy answers to the serious problem of escalating health care costs, particularly within the Medicare and Medicaid programs, the Society is in strong agreement with the basic approach taken in S. 1470 which proposes a long-term solution involving basic structural changes in hospital and practitioner reimbursement under Titles XVIII and XIX. Although fully cognizant of the need to expeditiously develop a national cost containment strategy, ASMT is concerned over legislative initiatives which offer only a transitional approach to the cost issue in the form of an interim cap on hospital revenues. We believe the proposed short-term solution may in fact cause more problems than it actually solves.

The Society is particularly concerned that the cap proposal could result in a restriction on quality hospital care especially for those services traditionally provided by nonphysician personnel. Given the pressure on hospital administrators to stay within the nine percent limit, it is probable that arbitrary personnel reductions in absolute numbers and/or realignments utilizing lesser qualified personnel would occur which could well result in a decline in quality care.

Moreover, the "cap" concept is arbitrary by its very nature and tends to penalize efficient institutions while rewarding those which have tended to be inefficient. Take the case of an institution which may make every attempt to be efficient and keep within the nine percent limit but finds that its costs from certain outside suppliers have doubled or more within a calendar year. Such an institution which had no fat within its budget would have nothing to cut but would still have to pay higher prices imposed from external suppliers. On the other hand. the inefficient institution which had an inflated budget to begin with could reduce unnecessary expenditures to accommodate higher costs for supplies and equipment.

In our estimation, the ideal approach would be to broaden the long-range proposals contained in S. 1470 to reach beyond Medicare and Medicaid and insure that such a program could begin operating at the earliest possible time. ASMT believes that part of the solution to spiraling hospital costs involves developing positive incentives for hospitals such as promoting the closing and conversion of underutilized facilities as proposed in S. 1470. Merely putting a cap on hospital revenues without also applying positive incentives striking at some of the basic structural problems inherent in the current system could well

convert the cap into a floor-an end result which neither the public nor private sector desires. This is particularly important in light of the fact that on any given day an estimated 25% or about 240,000 of the nation's acute care beds are emtpy.

In this regard, an Institute of Medicine study group last fall concluded that the maximum ratio of short-stay beds to population should be four per 1,000 and recommended that some 90,000 beds would have to be closed in order to achieve that goal by 1981.

As the Congress considers both the pros and cons of the various cost containment proposals ASMT respectfully recommends that the following important areas receive additional emphasis in the development of a long-range strategy: 1. More effective utilization of nonphysician health practitioners.

2. Increased emphasis on out-patient care.

3. Greater reliance on pre-admission testing which, according to the Blue Cross, has cut patient stays from one to two days.

4. Greater utilization of home health care services.

5. Additional public and private support for consumer health education including greater emphasis on good health practices along with a more intensive commitment to preventive health care.

At this point, the Society would like to concentrate the remainder of its comments and recommendations on specific sections of S. 1470 which are of particular interest to our profession.

III. HOSPITAL-ASSOCIATED PHYSICIANS

In evaluating Federal reimbursement practices, ASMT is convinced that the large majority of hospital-based physician specialists do not intentionally abuse the current system. It appears to us that the real issue in need of resolution concerns the relative merit of the present reimbursement process itself.

ASMT supports the development of a reimbursement system which is based solely upon the personal professional effort and amount of time spent by practitioners in the performance of specified functions. In this regard, the Society believes it is extremely important to examine the actual functions and roles performed by hospital-based personnel.

Section 12 of S. 1470 would amend the Social Security Act by distinguishing between physicians' services of an educational, executive or research nature and those personally performed or directed for the benefit of a patient and which are customary and appropriate. The later services would be allowable on a fee-forservice basis while the former would be allowed through reasonable overall compensation related to the time and effort spent by the physician in the performance of the specified services.

A special definition would be applicable to pathology services which defines "physician services" to exclude services performed in carrying out responsibilities for supervision, quality control, and for various other aspects of a clinical laboratory's operation customarily performed by nonphysician personnel. In this regard, ASMT is able to provide the Subcommittee with some background information reflecting the scope of duties which are presently performed by nonphysician personnel in the clinical laboratory.

For illustrative purposes, let us focus on medical technologists who possess a broad background in basic and applied clinical sciences and perform four major roles within the hospital laboratory setting. Primarily, the medical technologist performs the diagnostic testing procedures essential to the diagnosis, treatment and maintenance of a patient's medical condition. In addition to repetitive testing across a broad range of laboratory procedures, medical technologists also perform complex testing in a variety of specialized areas such as microbiology, parasitology, serology, hematology, clinical chemistry, urinalysis, and immunohematology.

Secondly, technologists fulfill the duties and responsibilities of technical supervisors, in both the generalist and departmental/section areas. Thirdly, the Chief or Administrative Technologist assumes a variety of managerial responsibilities within the hospital laboratory. Finally, the medical technologist also plays a direct and primary role in the educational process of clinical laboratory personnel.

As an indication of the degree of nonphysician involvement in clinical laboratory operations, ASMT testified during hearings held last year on S. 3205 providing detailed information relative to the supervisory, administrative and

educational funtcions performed by the medical technologist. Since we believe this topic is of such fundamental importance in understanding reimbursement issues related to hospital-based clinical laboratories, the Society appreciates the opportunity to once again provide this information for the Committee's consideration.

Role of the medical technologist in laboratory supervision.-In the majority of hospitals, medical technologists have traditionally served as technical supervisors of the total laboratory as well as technical supervisors of designated, specialty departments/section areas. Supervisors usually work under the direc tion and in cooperation with the administrative technologists or chief technologist.

Supervisors plan, organize and delineate the duties and responsibilities of personnel working under their direction. They assume the responsibility of instigating new procedures and establishing and maintaining quality control programs. They train personnel, maintain supplies and disseminate information from their department to other members of the laboratory staff. They also maintain procedural directions and ascertain the reliability of test results issued from their departments. Supervisors are also responsible for responding to inquiries concerning their departments.

Medical technologists are unquestionably involved in supervising the planning, processing and reporting of laboratory tests. The degree of involvement depends upon the organizational structure of the institution. In the smaller hospitals, the supervisor's duties are all inclusive and even in the largest medical complex the medical technologist maintains supervisory responsibilities of departments within the laboratory. These nonphysician functions are commonly established and accepted by hospital administrations.

Role of the Chief or administrative technologist in laboratory management.— On December 30, 1975, ASMT issued a Report on a Laboratory Management Survey to document which administrative functions are carried out by the medical technologist holding an administrative level position in the clinical laboratory. The survey was directed and conducted by the Personal and Professional Development Division of ASMT in the fall of 1975. The respondents to the survey totaled 1,292 ASMT members who hold the position of Administrative Technologist or Chief Technologist, with the nationwide distribution of the survey population representing various places of employment, size of institution, geographical regions, and urban and rural settings. A copy of the complete study including statistical analyses has previously been provided to the Committee and the staff.

The study disclosed that according to distribution by place of employment, 61 percent of the respondents were employed in hospitals. Thirteen percent of these were located in 1-99 bed hospitals; 26 percent in 100-299 bed hospitals; and 22 percent in hospitals of 300 or more beds.

Given the expansion of health care services over the past decade, and the associated changes within the medical laboratory, which include increased testing, technological improvements, and changes in roles and functions of certain personnel, the study sought to determine the degree of involvement of medical technologists in the critical areas of management and supervision. The ASMT laboratory management survey clearly indicates that medical technologists are now playing a central role in laboratory management. In fact, according to these data, the administrative medical technologist carries out a majority of the laboratory's administrative functions.

Thirty-three administrative functions common to the medical laboratory were listed on the survey questionnaire. The functions listed ranged from who "interviews prospective employees," to who "evaluates electronic data programs and reports." To aid in reporting the survey results, the functions were separated into three categories of Personnel Management: Clinical Services Management; and General Laboratory Management. Table 1 lists the administrative functions, as categorized.

Five choices of who carries out the functions were available on the questionnaire, consisting of:

(1) Administrative Technologists, Chief Technologist, or Laboratory Manager.

(2) Administrative Technologist and Director of Laboratories-joint function.