to this Act. These amendments deal with areas of concern to the hospital field which we believe warrant modifications that will improve the basic statute.

We believe that health planning must be based on health needs identified by Health Systems Agencies (HSAs) and others through a number of planning techniques. The methodology of planning must take into account a variety of factors which apply to the planning area, including the incidence and prevalence of disease, the socio-demographic characteristics of the population, the present status of the health care delivery system, and the attitudes of the community regarding the delivery of health care services.

The key objective of such planning is the development of a health care delivery system that meets the health needs of all the people in the area and is adaptive to changes in these needs. Because of its important role in the provision of health care services, the hospital has a special responsibility to plan effectively; indeed, it is a major focus of attention in the planning effort. Therefore, it is particularly important that hospitals be represented and participate in the planning process at all levels--local, state, and national.

We strongly support and encourage the development by HEW of sound health planning tools, guidelines, standards, and methodologies to assist the planning agencies at the local and state levels, without imposing rigid formulas from the top. The health planning process can work most effectively through a "bottom-up" approach. Such an approach must provide for a clear-cut distinction between health planning at the local level; health planning and regulation on the state level; and the role of the federal government in providing guidelines and support at the national level.

An important problem in the implementation of this Act has been the difficulty encountered by planning agencies in establishing viable and up-to-date health care plans for the areas served. Only 9 of the 206 HSAs have been fully designated,

indicating that they have approved Health System Plans (HSPs). In addition, while more than 70 percent of all the states have certificate-of-need (CON) laws, only one state has had its CON program approved under the P.L.93-641 implementing regulations. The exigencies of developing regulations, recruiting staff, and securing adequate funds have combined to impede the development of the health plans that are essential to such state-level regulatory processes as CON for the control of capital expenditures.

Health planning, CON, and quality assurance programs are some of the cost containment efforts which have been, and are, underway. The voluntary effort to control costs currently being undertaken by this Association, together with the American Medical Association and the Federation of American Hospitals, will complement these statutory programs. This voluntary effort is headed by a National Steering Committee on Voluntary Cost Containment, which includes representatives of hospitals, physicians, insurers, consumers, industry, and management. State-level committees, under the leadership of state hospital associations and state medical societies, with similar representation, are being established to adapt the national objectives of this steering committee to local situations. The voluntary program is seeking to address inflation in health care costs which have been impacted by such factors as rises in the costs of goods and services hospitals must purchase, improvements in the services they offer, and increases in the intensity and demand for the care they provide. He would be pleased to supply for the record additional materials concerning this program, if the committee desires.

Summary of AHA Recommended Amendments to P.L.93-641

As we have stated previously, the issue of health planning has been a top priority of the Association. The following recommended amendments to the law address certain problems that we have observed in the implementation of this program. We are pleased

to note that some of these problems are also addressed in the changes provided for

in your bill, H.R.10460.

consider our recommendations in revising the law.

Mr. Chairman, we urge you and the committee to favorably Detailed rationales and legislative language for each of our suggested amendments are appended.

National Guidelines for Health Planning

As a first step in ensuring a sound and effective planning process, at the local and state levels, we strongly believe that the National Guidelines for Health Planning should serve as a flexible guide to the development of local health plans and objectives. Mandatory federal guidelines, imposed uniformly by each HSA and in each state, with modifications only through a cumbersome exceptions process (as previously proposed by HEW in regulations), would prevent the development of viable health service plans adapted to local needs. They would also make the federal government the preeminent planner and others mere agents carrying out the will of those at the top.

We believe that whenever standards, numbers, and formulas are developed

in HEW guidelines, they should be considered in the light of and adapted to local situations. To clarify the relationships between local and national authorities,

as intended in the original law, the Association proposes an amendment to Section 1513(b) which will make it clear that the National Guidelines be taken into consideration

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by HSAS, in the formulation of health plans, rather than be imposed as inflexible, mandatory rules, to be rigidly followed at the local level.

Functions and Procedures of Planning Agencies

We firmly believe that the scope of CON should be broadened and that the functions and procedures of planning agencies should be more adequately defined, to increase the effectiveness and equity of the health planning program. Following are several amendments which are designed to achieve these goals.

26-219 78 pt. 25

A.

B.

The first of these amendments would expand the scope of the requirement for state CON laws to encompass health capital expenditures without regard to ownership or location. We believe that the private offices of health practitioners should be subject to CON review to the extent that those offices are proposing to obtain highly specialized equipment or develop facilities that are typically provided in an institutional setting. It is our belief that the scope of the CON process should not be limited to a portion of the health system. For example, the requirement for CON must prevent not only the undue proliferation of hospital-based CAT scanners, but also the proliferation of such scanners in other settings. In addition to the application of CON to the physician's office as we have described, CON coverage should also apply to such activities as health maintenance organizations, ambulatory surgical centers, extended-care facilities, and home health services. Health facilities and services can now be established in a variety of settings, without following local and state health plans and without obtaining CON approval while in other settings these same facilities and services are subject to rigorous controls.

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We also are recommending a group of related amendments that are designed to clarify the advisory roles of HSAs and Statewide Health Coordinating Councils (SHCCs) with regard to review of applications for various types of federal funds. Current law suggests that the federal government has delegated to HSAs, and, in some instances, to SHCCs, the decision-making authority over applications for federal health grants to local entities or to states. We do not believe that this is, or should be, the practice.

The distinction which we propose between advisory and decision-making roles would keep local planning agencies in the business of planning and out of the realm of making grant awards. The final decision regarding federal project grants rests with the responsible federal agency, taking into account the recommendations of local planning units.

In a related issue, we believe that the provisions of P.L.93-641 which would provide area health services development funds to HSAs should be changed. This authority dilutes the focus of HSA planning activity by extending the functions of the agency to grant making and grant managing. While we agree that these development funds should be available to meet certain identified local needs, we believe that grant making and grant managing in this program should be the responsibility of the state agency, rather than of the HSA. Statewide health services development funds should be earmarked for projects which have been identified and recommended by HSAs.

C. Additional amendments we propose would consolidate all of the P.L.93-641 requirements for review procedures into Section 1532, where most of them now appear. These amendments would (1) require that proposed projects shall be deemed to be approved unless they are rejected by written opinion within the 90-day statutory review period; (2) provide for a public forum to be held by the HSA, at the local level, at which all interested persons may appear and present statements or evidence on the application being considered or the review being conducted; and (3) permit a formal hearing to be requested by either the HSA or the applicant, prior to the decision of the state agency, on a CON application or appropriateness review.

D.

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Our Association believes that the planning process would be strengthened if HSAs were permitted initially to phase in their functions in an orderly manner, according to their capabilities and resources. We are proposing an amendment to Section 1513 (b) to accomplish this purpose. We believe that our amendment would improve the credibility and effectiveness of HSAs by requiring them to perform functions within--rather than beyond--their capabilities and resources.