ran both it could provide in one way and it has to pay the overhead on whatever the hospital decides the hospital will have, whether the HMO thinks it is smart or not, CAT scanners, for example, or open heart surgery teams to get proliferated around the community.

I have essentially answered the question. I think there are savings in the HMO's having their own hospitals that are not only possible if they buy from other institutions and are not related to scale alone but to unnecessary duplication and overhead and things like that.

There are some other problems with using community facilities. In the first place, a bed is not necessarily a bed. All beds are not the same. They are not in the right places. You cannot use a pediatric bed for adults. Planners don't take that into consideration. Even though there are too many beds they may not be the right kind of bed.

Second, the medictal staff may be opposed. We have been trying to use hospitals in southern California. They go to vote with the medical staff, absolute opposition. In addition, there are other problems. The long-term relationship is very important. We have to build an ambulatory care facility beside the hospital to care for outpatients. Unless the hospital will enter into long-term arrangements, we can't do that. Those criteria are set forth on page 7.

Mr. WALGREN. Thank you.

Mr. PREYER. Thank you. We have to go vote now and will recess at this time until 2 o'clock this afternoon when the panel of equipment. manufacturers representatives, I believe, will be the first up.

The committee stands in recess until 2 o'clock.

[Whereupon, at 12:30 p.m., the committee recessed, to reconvene at 2 p.m., the same day.]

AFTER RECESS

[The subcommittee reconvened at 2 p.m., Hon. Paul G. Rogers, presiding.]

Mr. ROGERS. The subcommittee will be in order.

Continuing our hearings on health planning and resources development, we have a distinguished panel of Governors which we welcome to the committee and I would like to ask Dr. Carter first to have a comment or introduction.

Mr. CARTER. It is my pleasure to introduce the Governor of the State of Kentucky, the Honorable Julian M. Carroll.

Thank you.

Mr. ROGERS. We are honored to have you and Governor Herschler of Wyoming. We do appreciate both of you coming here to help the subcommittee. We are anxious to work with the Governors in trying to develop a health planning system that will be effective. I think it is a most important piece of legislation and we doubly appreciate your being willing to give us your time to be of benefit in our thinking. STATEMENT OF HON. PULIAN M. CARROLL, GOVERNOR, STATE OF KENTUCKY

Governor CARROLL. Mr. Chairman, Congressman Carter, Congressman Walgren, we appreciate the opportunity of coming today. I have an airplane that leaves here at 3 o'clock and will try to immediately proceed into my testimony.

I am going to not read it because obviously it is easy for me to file it with the committee and I will try not to take longer to explain it than it would be to read it.

Mr. ROGERS. That will be a refreshing approach from some of the witnesses we hear. Your statement will be made a part of the record in full, without objection [see p. 1050].

Governor CARROLL. We think that there are some movements that can be made in this legislature that would vastly improve our ability to make it work.

In Kentucky we were fortunate enough prior to the implementation of this legislation to have an excellent planning system. We have had it in operation in Kentucky for about 15 years. We have area development districts that were implemented in our Commonwealth about 15 years ago and those districts have been involved in health planning in our State for a long time. Thus, it was easy for us just to take those districts and divide them along their geographical boundaries and set up our HSA's and just go on to work.

We still do have some problems, though. In one particular instance we have three counties in the north side of Kentucky that I can't get the government of Ohio to let me have to put into my system. I did get the Governors of other States that have our counties to agree so we could operate as an entity. Because of the law and the other Governors, I have three counties under control of the Ohio legislature and we have to report six Ohioans on my State Board to oversee this statewide program. We believe that would then give them a disproportionate share of the oversight of this operation. Surely we don't think the committee ever intended that.

I am an old legislator myself, spent 10 years in the Kentucky Assembly, and beg forgiveness for my mistakes. I am essentially suggesting it is the kind of thing you could not anticipate would happen, but those are things that have happened to us.

Mr. ROGERS. Have you suggested language in your testimony? Governor CARROLL. Not as such, Mr. Chairman, but we would be happy to do it.

Mr. ROGERS. Thank you.

Governor CARROLL. The Governors Association has, I am advised. That takes care of that particular problem.

Additionally, while at this time we are having no problem at all in getting along with the people involved in our two HSA's-we have two in Kentucky-nor do we anticipate any problem with our overall State coordination council, but we do seriously think that it has the great potential for fragmentation and disorientation because there is little or no involvement by State government, who after all, in our judgment, has the overall responsibility for implementing our health planning program in the State.

We have county health departments. We have regional health departments that we designate in some of our counties that have the capacity to reach into other counties that don't have our comprehensive care centers, which is one of the best examples of how not to set up something in Kentucky. We are now working on the problem of how to take those health care centers and make them work since we are losing Federal funding for them. We have that problem in the

current session of the general assembly. They are essentially independent bodies and essentially have just gotten reimbursement of Federal dollars through our State agency and we have had little ability to make them implement statewide policy programs, and so that is what we are fearful we are headed for with our current operation of the HSA's if we don't make some of the slight changes we are suggesting.

I guess one of the most important things for me to suggest to you in my testimony is that I do not believe that I can go to my general assembly and ask for appropriation of dollars, at present about $130 million a year in Kentucky, and then be able to implement our health planning programs in Kentucky without some authority to be a participant in the total policymaking function.

At the moment with the bill as we presently read it, the Governor is totally separated from the decisionmaking implementing State health planning policy, and we seriously think that the Governor ought to participate in that planning operation.

Mr. Chairman, I could cover some other elements, but they are covered in my testimony. I would prefer to use my remaining time to try to answer some questions for you and the members of the committee.

I thank you.

[Governor Carroll's prepared testimony follows:]

STATEMENT OF Gov. JULIAN M. CARROLL, GOVERNOR, STATE OF KENTUCKY CHAIRMAN ROGERS, GOVERNOR HERSCHLER, I am delighted at the opportunity to be here to discuss with you some of our concerns about the National Health Planning and Resources Development Act of 1974 [Public Law 93-641]. We recognize that the intent of this legislation is to upgrade nationwide our health planning effort, and to enact in each State certificate-of-need legislation. These are essential prerequisites for improving the overall level of health care in this country.

There are, however, problems with 93-641 which Congress was obviously not able to anticipate at the time the legislation was enacted. One of our major overall concerns is that the legislation did not recognize differences between the States in problems and needs, or the State's previous efforts in health planning. Two of the major benefits of this legislation-comprehensive health planning and improved funding levels for planning—already were in effect in Kentucky in 1974.

Kentucky is divided into 15 standard districts, and all regional planning groups such as Manpower, Aging, Criminal Justice, and Health-plan for the same geographic area. Our State agencies also are structured to offer services by district.

This system was in place in 1974, and each of our 15 districts was served by professional health planning staff.

As for funding, Kentucky in 1974 was supplementing the planning money available from HEW with funds from the Appalachian Regional Commission and a significant amount of State funds. In fact, the level of funding for our 15 health planning districts in 1974 was only $100,000 less than the funding for our health systems agencies during their first year of operation.

So Kentucky began implementing Public Law 93-641 from a position of strength. After some experience with its workings, we have found some problems which I would like to discuss today:

We feel that 93-641 circumvents the authority and expertise of State government, by setting up a direct relationship between the Federal Government and health systems agencies. It is inappropriate for private, nonprofit, selfperpetuating boards like the health systems agencies to have the kind of au

thority implied in Public Law 93-641 and in subsequent directives from HEW. It has been our experience that these boards should not administer Government programs without significant State oversight, monitoring, and technical assistance.

This kind of situation has created problems with our 15 mental healthmental retardation boards which operate Kentucky's community health centers. These boards have used Federal funds and expanded programs to a level that cannot be maintained with State and local funds, now that Federal aid is winding down.

We think it is inappropriate that a citizens advisory group, the statewide health coordinating council, is allowed to submit health plans to HEW without the Governor's approval. After all, the Governor is the person who has the best overall concept of his State's needs, available alternatives, and resources. The detailed requirements concerning health systems agency membership are too restrictive, especially the one that says a consumer on another board or committee becomes an indirect provider when considered for membership in a health system agency.

Some of Kentucky's leading citizens serve on a local emergency medical board, a hospital board, or local health department board, but they could not be considered for consumer appointments to a health systems agency.

Our existing certificate-of-need law in Kentucky is one of the best in the Nation. We are concerned that 93-641 and subsquent regulations will necessitate changes in the legislation. Kentucky enacted a certificate-of-need law in 1972. We feel that it is a good law and that it has been effective in controlling expansion in construction and services.

The law's provision for maintaining standard metropolitan statistical areas without the concurrence of the Governors involved also has caused Kentucky some problems.

As you know, the population base for health systems agencies was established at 500,000 with the possibility of waivers for smaller agencies in some cases. The legislation also said that if the Governors of neighboring States agreed to split a standard metropolitan statistical area, the Secretary of HEW could grant a waiver.

Although we had reservations about the population base for health systems agencies, we decided not to make an issue of it but rather chose to designate two agencies, each with a population of roughly 12 million people. The Commonwealth of Kentucky was basically divided down the middle with an eastern and western Kentucky health service area.

We felt that this would enable us to coordinate health planning on a wider basis. But we also felt sure that the health systems agencies, once established, would build on the foundations developed by the 15 districts. In fact, both of our agencies have recognized the boundaries of the old districts as their subarea council areas.

The standard metropolitan statistical area provision was a much more significant problem, and we requested waivers for all five areas in which we were involved. With one exception, all of the Governors involved agreed with our request.

HEW approved all of our requests except the three counties in northern Kentucky adjacent to Cincinnati, Ohio. We submitted a redesignation plan last year calling for reuniting Boone, Campbell, and Kenton counties in Kentucky with the eastern Kentucky health systems agency, and we are still awaiting a final decision.

Our desire for redesignation should not be interpreted as opposition to interstate planning. We are committed to complete cooperation with our neighboring States in planning for the population of all five standard metropolitan statistical areas.

We think that adequate cooperation could be achieved through interagency coordination at the State level and between the health systems agencies, and we would be happy to pursue an interstate compact agreement with the State of Ohio in this regard.

Without redesignation, an Ohio-based health systems agency which represents 300,000 Kentuckians would have equal representation on our statewide health coordinating council with our eastern and western Kentucky health systems agencies, each with populations of approximately 1.5 million people.

Neither the law nor subsequent regulations require that Kentuckians be nominated. I could be forced to appoint six citizens of Ohio to our statewide health coordinating council.

We believe that, with some modification, 93-641 can work. We suggest your consideration of the following amendments:

The State should have more opportunity for significant contributions to the final statewide health plan. As it is now designed, the State health plan is merely a composite of health systems agency plans and the State is not an equal partner in formulating it. Also, we feel that a plan should not become final until it has been approved by the Governor of the State.

The Governor, and not the statewide health coordinating council, should make the final recommendation concerning approval or disapproval of any formula grant to the State.

The Governor should be allowed to name the chairperson of the statewide health coordinating council.

The council's recommendation concerning Federal funds allocated to the States should go to the Governor and not directly to the Secretary of H.E.W. The consumer criteria for membership on a health system agency should be less rigid.

All Governors involved should be required to agree to maintain an interstate standard metropolitan statistical area within the same health service area. Without such agreement, the metropolitan area should be automatically split. The present time frame provided for review of certificate of need applications is inadequate and it should be extended to allow a 180-day review cycle. Without these amendments, we seriously question the long-range effectiveness of Public Law 93-641. There is a strong implication in the legislation as it currently exists that State government is not to be trusted, and that a separate system outside State government must be set up in order to provide quality health planning and to contain costs. We believe that the Kentucky experience refutes this belief. Our health planning efforts have been effective because of the development of a local-State partnership, and we think this partnership should be encouraged at the Federal level also.

Thank you.

Mr. ROGERS. Thank you. We appreciate your helpful suggestions. Dr. Carter.

Mr. CARTER. Thank you, Mr. Chairman.

When this became a law, Governor, I realized that we had area development districts, and I did my best to make an imprint on the law to that effect. It was rather difficult, but we did provide that, under certain conditions, recognition of previously-established planning districts would be allowed. In fact, Bill Alexander, the Honorable Bill Alexander from Arkansas, even went further on the floor of the House to make this possible.

I personally, well, I hope it is working the way we planned with the HSA's for the two parts of the State. I support your idea of taking the three counties. You would like those counties to be in the eastern HSA; is that correct?

Governor CARROLL. That is correct.

Mr. CARTER. I think that we could very well do that. Again, I want to compliment you on what you said about the comprehensive care centers. I think you need assistance there.

You are talking particularly in reference to mental health; is that correct?

Governor CARROLL. Yes, sir. That is correct, Dr. Carter.

Mr. CARTER. You don't think-I brought this up before the chairman before, this very thing you are talking about. Tell us a little of the difficulty you are having, if you would like.