The Federation of American Hospitals, Inc., supports this concept as a meaningful tool to strength the State planning agency and to guard against the unnecessary duplication of health services within a community. However, the language of the proposed legislation requires clarification to assure its application only to new facilities, or new portions of existing facilities and, further, to make provision for cases where State planning agencies have not been established or are not functioning properly.

Section 3 of the legislation requires each provider to submit a socalled corporate plan outlining in detail an operation budget including all anticipated expenses and a capital expenditures plan for at least a 3-year period. The plan would also be required to be updated and publicly published annually. The federation is unable to find any meaningful purpose for this section on anticipated expenses other than to provide the State planning agency with some vehicle to coerce providers should such tactic become desirable in the eyes of the agency. We regard it as an interference with normal management prerogatives and the burden of justifying such an interference has not been met by those who have proposed this amendment. The section contains no protection against disclosures of parts of such a report of anticipated expenses out of context and serious questions could arise as a result of publication of corporate objectives of investor-owned hospitals which might violate the rules of other regulatory agencies.

We accept and strongly endorse the idea that hospitals should be encouraged to participate in the planning process but we do not believe section 3 serves to encourage participation but rather will be a cumbersome coercive procedure adding to paperwork and detracting from real participation.

In addition in many hospitals medicare and medicaid patients represent a relatively small portion of the total hospital patient-load. It is our position that the administration cannot justify requiring this extensive extra work and the expense involved as a precondition to reimbursement for this segment of the total patient population.

DEMONSTRATION PROJECTS

Section 4 of the legislation contains broad, and what we regard as extreme procedure for expanding the authority of the Secretary to experiment with proposals to achieve a more economical health care system. We believe the Congress should not delegate the type of open ended authority contained in section 4.

As presently drafted this provision authorizes the Secretary to require, or one might say force, all institutions in a given area to participate in an experiment, if he determines within his sole discretion that the particular experiment is likely to prove beneficial but the extent to which there is voluntary participation is not sufficient to warrant undertaking the project. The only exception to this rather unlimited delegation of power is that the Secretary cannot require participation where at least 20 percent of the proposed participants establish undue hardship.

This section appears to give the Secretary, carte blanche, to personally legislate new reimbursement formulas without the approval of Congress at least for the duration of the experiment when he has

the ability to prolong that experiment for as long as a 4-year period of time.

I would like to make it quite clear at this point that the federation supports an increase in the number and scope of demonstration programs to test new methods of reimbursement and cost control. At the same time we believe any experiment not approved by Congress should be voluntary. The impact of this proposal on an individual facility could be to deprive an owner of his property without due process. We can recall no precedent for compelling the private sector to render services at a rate or under conditions unilaterally established by government.

Similar requests by the Department of Health, Education, and Welfare, referring back to 1967, have been rejected by Congress in the past and we urge you to amend section 4 of the proposed legislation, if it should be adopted, to make participation in these experiments voluntary.

ABUSERS

Section 5 gives the Secretary authority to discontinue payments to suppliers of services who have abused the medicare, medicaid, and child health programs.

Federation supports this approach and pledges its cooperation in ferreting out those few who would exploit these new programs. Recent newspaper articles and congressional staff studies have revealed apparently shocking cases of abuse of medicare and medicaid programs but at the same time have indicated that less than 1 percent of our Nation's physicians and hospitals have acted unethically or illegally.

We urge the committee to assure adequate hearings, due process and judicial review of any decision under this section prior to the implementation of the discontinuance. The legislation in its proposed form permits discontinuance of payments without a prior hearing and the economic consequences could be disastrous. The section presumes guilt before trial.

There can be no doubt, however, that those who are proven to have abused the program should be barred from future participation.

CUSTOMARY CHARGES

Section 6 provides for reimbursement of customary or public charges where less than reasonable cost. This provision would have no impact on investor-owned facilities and the federation takes no position on this section.

UTILIZATION REVIEW

It is the area of utilization review which concerns us more than any other because it is here that some danger exists that the government may try to substitute nonprofessional judgment for the on-the-spot judgment of the patient's physician and the hospital utilization review

committee.

The extension of utilization review to hospital admission and to the furnishing of particular professional services including drugs and biologicals is on its face a reasonable subject for discussion. However, the language of section 7 is sufficiently vague to raise the issue of whether a retroactive denial of coverage may be made.

In this regard, the summary of the legislation submitted even more strongly implies retroactive denial of coverage may be made. Surely if a review committee finds that a patient should not have been admitted to a hospital 5 days or 12 days prior to the decision, the patient and the hospital should not be penalized for a good faith opinion of eligibility by a retroactive denial of payment. The control of admission is, after all, in the physician and not the hospital. Yet it is proposed to penalize the hospital and the patient and not the physician for an alleged medical misjudgment as to eligibility.

If the section is intended to operate only prospectively, the question necessarily arises, "At what point will the review committee decide the medical necessity of admission or drug prescription?" Surely if a physician requests admission, we are not going to wait for the case to be evaluated first by a utilization review committee.

There is also a basic conflict here between the proposal to review a physician's decision to submit and the preamble to title XVIII of the Social Security Act which reads:

31395. Prohibitions against any Federal interference. Nothing in this subchapter shall be construed to authorize any Federal officer or employee to exercise any supervision or control over the practice of medicine or the manner in which medical services are provided, . . . or to exercise any supervision or control over the administration or operation of any such institution, agency, or person.

We do not believe this committee would sanction the substitution of a clerk's judgment for the professional opinion of a physician and his colleagues, yet that is exactly what has in some cases already occurred under Federal review of hospital admissions and what this proposed section would sanction.

The federation cannot in good conscience support this section in its proposed form because it is so vague and leaves so many questions unanswered. In the opinion of our association such a section would give too much power to administrative persons who, based on past experience, might respond by substituting their opinion for sound medical judgment. We certainly do not want our testimony on this point to be construed as meaning we oppose utilization review, which we do support, but we do not believe the end justifies any means.

OVERPAYMENTS

Section 8 of the legislation provides for recoupment of overpayments based on estimates where the Secretary finds this method "will promote the proper and efficient administration of this title." We do not object to the principle that government should have a right to recoup overpayments but such right should be established with reasonable evidence at a hearing.

I might add parenthetically that this pervades all the proposed amendments, no requirement for due process, no hearing, no guidelines, no administrative procedures, merely in the discretion of the Secretary or the Department whenever and however and whatever way they see fit.

We, therefore, urge that this section be amended to specifically limit. such binding unilateral estimates to cases where the right of recoupment and the need and basis for estimates, as opposed to specific proof, have been clearly established under such procedures.

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The Federation of American Hospitals supports much of the proposed Health Cost Effectiveness Amendments of 1969 with the exceptions and suggestion noted above. The major goal of our Nation's health policies must be to provide high quality health care for all people at a reasonable cost. Efficiency is the greatest control over costs and the Federation of American Hospitals believes that investorowned hospitals will continue to be the yardstick by which efficiency is most accurately measured in the delivery of quality health care. The full potential of investor-owned hospitals is just beginning to be understood and we believe we have a significant contribution to make in achieving the Nation's health goals.

There are several other legislative proposals before the committee which we would like to comment on briefly.

THE DISABLED

We would support inclusion of the appropriately entitled disabled under the medicare program, regardless of age. This would be a limited expansion of eligibility to a group which is in need of protection. While we do not encourage any massive expansion of medicare-type coverage while there are so many problem areas yet unresolved and new approaches remain to be explored, we believe the disabled have a special need which warrants such an amendment.

PRESCRIPTION DRUGS

The subject of prescription drugs as a feasible addition to medicare should be reviewed on a high priority basis with particular attention. to the cost and method of administrating such a new element of the program.

APPEALS PROCEDURE

The present Social Security Act does not contain an orderly appeals procedure for providers. There is no administrative recourse from the decisions of fiscal intermediaries and the right of providers to seek judicial relief has been questioned and remains in some doubt and there have been district court decisions in a number of places in the country which, in effect, said that a provider can only complain about not being given a chance to participate in the program or not being given a fair hearing on disqualification but the determinations on whether he is being fairly paid, the law being properly construed or applied to him, he has no rights.

The Federation of American Hospitals urges the adoption of an appeals mechanism to enable providers to seek relief. We would urge that any such amendment include procedures for peer review as well as the right to seek judicial review.

THE FUTURE

The investor-owned hospitals of America as an integral part of the Nation's health industry are ready with government and others to meet the challenges of the future.

During the past 6 months, the Federation of American Hospitals has adopted resolutions supporting experimentation with a negoti

ated rate for providers under health insurance programs leading, we believe, to reliable actuarial predictability of costs to the Government-and that has been discussed by the Society Security Administration recently-and endorsing the concept of access for all of our people to qualify health care under health insurance. We have appointed committees to study these proposals and recommend the means to carry out these goals. We are cooperating with other health organizations in these studies.

We believe that private initiative is the most effective instrument we have to achieve our common goal of high quality health care for all at a reasonable cost. Throughout the proposed legislation the phrase is used "reducing the costs of such programs without adversely affecting the quality of such services." The reduction of health care costs is a meritorious goal but achieving it without adversely affecting the quality of care is difficult. Responsible authorities in the health field concur that hospitals have grown up. We are now major and complex social business, financial institutions. The potential of the profit incentive, we believe, should be explored as a means of achieving that delicate balance between quality care and reasonable costs. I thank the committee and the chairman for the opportunity of appearing.

Mrs. GRIFFITHS (presiding). Thank you, Mr. Memel.

I am sorry that I was not here when you began and I did not have time enough to read your total statement. Have you suggested that there be a way to review, for instance, whether or not Blue Cross will pay their full amount into a privately owned hospital?

Let me give you an example. Where there is a privately owned hospital that meets the State standard of care, Blue Cross has a right to say this is a nonparticipating hospital, and not pay into that hospital. They are, of course, forcing that hospital to carry really the burden of other hospitals or they are putting it out of business. Are you suggesting that there be a judicial review of a Blue Cross decision?

Mr. MEMEL. Well, we would have to separate Blue Cross private program from the Federal programs of medicare and medicaid. Mrs. GRIFFITHS. Right.

Mr. MEMEL. I would like to, if I may, address myself to the two very quickly separately.

No. 1, with respect to the Federal programs, we are definitely recommending that there be an appeals mechanism set up within the social security legislation because there is none and that seems grossly unfair to us.

With respect to Blue Cross as a private insurer, I come from a State, California, where all of the hospitals irrespective of ownership have an excellent relationship. We believe we work very well with our Blue Cross plans there and we don't run into this problem of being excluded. As a matter of fact, we are welcomed and there is a lot of mutual cooperation. I believe this is true in a great many other parts of the country.

Mrs. GRIFFITHS. But certainly it is not true in a great many other parts of the country, and in a great many parts of the country what you really have is Blue Cross plus the hospital administrators determining who can offer hospital services because they keep Blue Cross out of any new hospital that they have not agreed to.