you will, a confusing law, sir. I think that we were under the impression at least that we were required to make a decision at that point in time as to how many HSA's we wanted in our State. We felt in the interest of economics and considering the scarcity I suppose of population, we thought one HSA would be the right way to go. We feel now that that was not a correct decision, that we should be permitted, if we are able to do so without any problems, either to have two HSA's or being able to take advantage of the section 1536. We think our system as it originally was structured at the time this bill was enacted that we meet all the qualifications of 1536, it would be logical to be exempt.

Mr. ROGERS. I think the committee certainly wants to be helpful. I was just wondering, if you do qualify under 1536, how do you get broad citizen input?

Governor HERSCHLER. What I would plan to do, Mr. Chairman, is if that occurred, that with your State's Health Planning and Development Agency, that I would include then the members that are presently on SHCC continue with them so there would be citizen input along with our State agency. I think there would be coordination and cooperation which would be very helpful to us. So we would include our present members on the SHCC Council.

Mr. ROGERS. It is my understanding that you would either want to qualify for that exemption or have two agencies.

Governor HERSCHLER. Yes; one or the other. We would prefer to come under 1536. If that is impossible, we would prefer to have two HSA's.

Mr. ROGERS. Governor, thank you. We appreciate your being here and taking time from your busy schedule to do so. We look forward to working with you in this area.

Thank you so much.

Our next witness will be a panel of manufacturers representatives. Mr. Robert G. McCune, division manager, Radiation Imaging Product Division, National Electrical Manufacturers Association; and Mr. Harold O. Buzzell, who is president of the Health Industry Manufacturers Association.

We welcome both of you to the committee. Your statements will be made a part of the record, and you may proceed as you desire.

STATEMENTS OF ROBERT G. McCUNE, ON BEHALF OF RADIATION IMAGING PRODUCTS DIVISION, NATIONAL ELECTRICAL MANUFACTURERS ASSOCIATION (NEMA); AND HAROLD 0. BUZZELL, PRESIDENT, HEALTH INDUSTRY MANUFACTURERS ASSOCIATION

Mr. McCUNE. Thank you.

I am here as a representative of the Radiation Imaging Products Division of the National Electrical Manufacturers Association (NEMA). This divisional trade group consists of 54 manufacturing companies of conventional medical and dental X-ray, diagnostic ultrasound, computed tomography, nuclear imaging and therapy medical technological equipment. In my brief comments today I

would like to share with you our industry views concerning national health planning.

My comments will be a brief summary.

First I would like to offer for your consideration several changes to H.R. 10460. We would propose that:

In section 202, dealing with National Health Priorities, under section 1502, that in the proposed paragraph (11), the word "underutilized" be inserted between (of) and (duplicative);

In section 202, National Health Priorities, under section 1502, that paragraph (12) be revised to include the words "cost effective" between the words (of) and (policies);

Under section 218, certificate-of-need programs, that paragraph (7) of the proposed section 1527 amendment be revised as follows:

(7) For purposes of Sections 1523 and 1527, the term “major medical equipment" means single use medical equipment which is used for the provision of medical and other health services and which costs in excess of $200,000.

In the first suggestion we feel that the inclusion of "under-utilized" will better clarify this priority by establishing more defined criteria than simply "duplicative."

The second suggestion of including the phrase "cost effective" we hope will encourage HSA's to carefully distinguish between policies for purposes of mere implementation and policies that will in fact work toward achieving efficient local solutions relative to problems of health care costs.

Our suggestion for redefining "major medical equipment" in paragraph (7) of the certificate-of-need programs section of the bill is due to the concern that in smaller hospitals, for example, construction of a new multiple patient service room would be requested under a normal certificate-of-need process. But the HSA could also ask for a listing of all the numerous but different types of medical equipment to be used in the patient medical room. If all the installed individual medical equipment were to be considered as an aggregate, it could result in a total dollar figure reaching or exceeding the certificate-of-need requirement for major medical equipment. We have also suggested that the certificate-of-need dollar threshold for major medical equipment be only that equipment in excess of $200,000. We believe this should be considered to avoid the inclusion of lower cost basic medical equipment not envisioned to be covered under the certificate-of-need requirement. Such a dollar level would then allow the local HSA to deal with only major medical equipment of the high dollar-high technology type that is of concern.

We support the efforts of this committee to insure that national and local health planning is an effective approach to achieving a much needed reduction in the health care costs of this country. We would only ask that the role of medical technology be considered a necessary component of all such efforts to contain the rising costs of health care delivery, rather than being too often denounced as a major contributor to these increasing costs. Extreme indeed, when you consider that the diagnostic imaging equipment industry represents only about 0.6 percent of total health care expenditures.

I think there is widespread agreement that the twentieth century biomedical research and technological innovation have been re

sponsible for profound imrovements in human health. Some diseases have been eradicated; others can now be prevented; life itself has been extended; and much pain and suffering has been alleviated. Further, I believe it fair to say that in a number of areas hospitals will have to look to greater utilization of medical technology to effect cost savings. It will be needed in more efficient and accessible emergency centers and out-patient clinics. It will be needed to replace older equipment with high operating and maintenance cost in order to reduce hospital expenses. It is also possible that some hospitals will have to turn to medical technology under new cost reduction measures in order to maintain adequate and safe patient monitoring. Yet, these same hospitals will be faced with artificial limitations on the use of new technology.

We would urge the Congress, and particularly this committee, to be sensitive and alert to any health planning cost containment policies that could inhibit the growth of medical technology, thereby institutionalizing inferior procedures and inefficient practices.

We also believe that another serious question that should be addressed is, what will the impact be on the development of new technology to meet future needs? Obviously, such development is an expensive undertaking with considerable commercial risk. It will become even less attractive to an independent technology manufacturer if its fair market potential is to be arbitrarily reduced or indirectly capped. Health planning legislation could well carry a secondary effect as to whether new technology is to be limited and also how the development may need to be funded.

Some of the concern I have expressed here today I think is best illustrated by the recently published revised proposed National Guidelines For Health Planning. We are specifically concerned with the proposed standard on computed tomographic scanner, but of more importance is the questionable logic of the whole procedure and basis for decision for many of the standards dealing with technological services and facilities.

On the guidelines for CAT scanners, it appears that this proposed HEW standard will be promulgated without full comprehension of the effect of the so-called minimum standard on the use of this technological equipment. Simply stated, the proposed CAT scanner standard will inappropriately restrict proper access to this proven diagnostic medical technology and serious put in question the industry's interest in further pursuing state of the art technology.

In terms of the major procedural issue I mentioned I would like to share with you the following facts. In late summer, 1977, an HEW study team was organized with representatives from the office of the Assistant Secretary for Planning and Evaluation and the office of the Assistant Secretary for Health. The study team was asked to conduct a month-long phase I study of DHEW systems approach to technology management. This phase I study, "Health Technology Management at the Department of Health, Education, and Welfare," was completed on or about November 7, 1977, in draft. form as a report to the Secretary.

Because of DHEW's recent release of revised proposed National Guidelines For Health Planning, and because the majority of the

proposed guidelines deal with technological services and facilities, it is disconcerting to me to note some of the comments contained in the DHEW phase I study, "Health Technology Management at the Department of Health, Education, and Welfare," contained such. comments as:

INTRODUCTION

What market incentive mechanisms can be used to stimulate development of lagging or absent beneficial and cost-saving health technologies?

The "action" agencies of HEW (e.g., BHPRD, medicare, medicaid and PSRO programs) lack both the staff to do technical evaluations of technologies and the links to knowledge development agencies through which they could ensure examination of technologies for which they need action-supporting information. Much effort is placed on efficacy and safety evaluation, but considerably less is done about cost-benefit, cost-effectiveness, or general societal impacts of technologies.

The strategy recognizes that, at the Department level, we cannot hope to systematically address all existing and emerging medical technologies, expert estimates of which range of 8,000 to 150,000.

DHEW decisionmakers and other users are unable to effectively locate and use much of the new and existing information about technologies because they are unaware of its existence; it is not in a form understandable to them; or they lack the resources to integrate such information and bring it to bear in a timely manner.

BHPRD develops standards for access, supply and distribution (through the National Health Planning Guidelines) to assist State and local health planning bodies. A major problem cited by nearly every agency developing or using standards is the need to implement viable standards as quickly as possible and the inadequacy of the technical knowledge base for doing this * * * In part, this state of affairs can be attributed to pressures to produce standards without delay. However, these failures will not be overcome without a far more integrated process.

In fairness, I believe this study is a positive effort to provide the proper technical expertise to HEW in order to properly assess technology in terms of patient and cost benefit. However, in the interim, it does evidence some support for the contention that health planning cost containment policies need careful analysis to insure a balanced objective on the growth of medical technology. There can be effective health planning with health care cost containment, but it should also facilitate, not impede, the research and development of technology.

Before closing, I would like to offer the following recommendation. for your consideration.

Amend section 1503 of Public Law 93-641, National Health Planning and Resources Development Act, to increase the membership. of the National Council on Health Planning and Development from 15 to 16 members. This would facilitate the addition of a qualified technology representative from the health care industry for purposes of bringing professional experience to the deliberations and recommendations of the National Council, particularly with reference to the National Council's responsibility for "(3) an evaluation of the implications of new medical technology for the organization, delivery and equitable distribution of health care services."

Thank you for the opportunity to appear here today and express these views.

26-219 78 pt. 2 13

Mr. ROGERS. Thank you very much, Mr. McCune, for a helpful statement and your suggestions.

Mr. Buzzell.

STATEMENT OF HAROLD O. BUZZELL

Mr. BUZZELL. Good afternoon, Mr. Chairman, and you, too, Dr. Carter. It is good to see you again.

My name is Hal Buzzell and I am president of the Health Industry Manufacturers Association. Our 260 members produce virtually every medical product used in the health care system. These range from crutches to bandages to disposable plastic and paper products, to clinical laboratory products used to measure blood sugar, to surgical instruments and artificial hips, to computerized diagnostic equipment like the CT scanner. The industry numerically has relatively few giants; for example, the bulk of HIMA's membership75 percent has annual device and diagnostic sales of under $10 million.

I would like first, in launching my discussion on the proposed changes in legislation before the subcommittee, to simply state that we support the health planning process and we support that with emphasis on the local level. Your actions 4 years ago in establishing this process are certainly beginning to show dividends. This will be evident in our discussion on certificate-of-need (CON) approval rates for computed tomographic scanning equipment in a few minutes.

Health planning should encourage cost-effective patient benefits. All of our companies are affected by the health planning system to one degree or another. We understand the importance of planning; sound corporate management demands it. Simply said, our specific interest in the health planning system is that it encourage the appropriate introduction of cost-effective medical products and supplies so that the fruits of research and product development can be translated into patient care.

Therefore, it is our concern that the health planning process proceed: Openly, so that all points of view on patient benefits can be heard; soundly, so that the best evidence on all factors, including cost-effectiveness, can be utilized in planning decisions; efficiently, so that patients and providers can promptly benefit from costeffective facilities, services, and products.

A great deal of talk these days assumes that technology is a part of cost and quality problems, not part of their solution. We believe, on the contrary, that it is only through innovation, in products, facilities, services, management, that patients will truly benefit from a system that achieves the best care at the most reasonable price. In order to assure that the planning system encourages the appropriate utilization of technology, whether they be CT scanners or other products, we recommend that the planning law be amended in the following ways:

One: To include, as a factor to be taken into account in developing national planning guidelines and in reviewing proposed health systems changes, the affirmative responsibility of the health plan