Our foremost problem is overcoming ignorance concerning the planning process and its vital importance to cost and quality problems of interests to labor and other consumers. Because of the importance of consumer participation, the state, our universities, and providers should make a special effort to develop educational programs which will help all consumers involved in the planning process to identify health planning issues and problems as they relate to the total health needs of the population, especially the unmet needs of the underprivileged.

PLANNING REQUIRES BROAD BASE

We have learned many additional lessons from our experience with health facilities and services planning in California during this decade. One of the most important is that the voluntary planning process cannot move forward unless existing facilities assume responsibility for planning their own future in reference to the health needs of the community. We have come to accept planning as a process-not some kind of master plan-a process which starts with how facilities perceive their roles in the community in which they are located. It is at this level that local and regional planning agencies can help existing facilities evaluate community needs and adapt their planning to those needs, without the duplication and proliferation of services and facilities that push up costs to the consumer.

The essence of such planning is not alone that it be done, but that the plans themselves should be made public through local and regional planning agencies along with all the supporting information used in developing them. Without this kind of planning and full disclosure of information, it is virtually impossible for consumers who sit on planning agencies to give direction to the planning process so that steps may be taken to take care of community needs that are unaccounted for in the planning of existing facilities.

One of the major responsibilities of the consumer in the planning process is not only to encourage innovations among existing facilities and to experiment with new ways of providing health services more effectively, but to make sure innovation and experimentation is stimulated in the community when the plans of existing facilities fall short of community needs or fail to come to grips with the problems encountered by consumers in obtaining quality health care. In keeping with these expressed views, our Council members agree with the recommendation adopted recently by the State Hospital and Related Health Facilities and Services Planning Committee (the so-called "543" Committee) in its report to the state legislature. The recommendation, in part, reads as follows:

"In cooperation with regional and local health facilities and services planning groups, each health facility in California should develop both a current and a 5-year program for capital expenditure, for replacement, modernization, and expansion. Such programs should be kept up to date and on file with the local and regional planning agencies, through the development of continuing cooperative relationships between the facilities and the planning agencies. They should include a statement of the facility's responsibility to the community in at least the following areas: the people to be served; the area to be covered; the services to be provided; the facility's relationship with other facilities; and the timing and costs of implementing the program."

To repeat, it is crucial that these programs and all the information developed to support them be handled as public information. This means specifically that they should be available not only to the planners, but to the public at large, especially anyone initiating new facilities and those contemplating expenditures for the replacement, modernization and expansion of other health facilities and services.

We share the view that voluntarism seems to work best when government provides a few financial incentives in support of the process. In this connection the "543" Committee has suggested that in the administration of MediCal, the State Health and Welfare Agency should not include in its reimbursement formula for costs any allowance for depreciation to facilities that do not cooperate with regional and local planning agencies in the development and disclosure of their plans. We heartily agree with this viewpoint. But the Council would go further and suggest that facilities unwilling to assume their planning responsibilities toward the public, and unwilling to stand behind their planning with health planning groups, should not be allowed to participate in health care programs financed by the public. Labor organizations and other group purchasers would

do well to follow this lead in their payments to health facilities involved in their programs.

Some might argue that planning under these circumstances is hardly voluntary. It all depends upon how one looks at the concept of voluntarism in the kind of system we have developed in this country to defer the cost of health services. Private group purchasers and government programs have become the collection and disbursement agencies for the bulk of the population. Those facilities that want to go it alone ought to be willing to go it alone all the way.

For the fact of the matter remains that even under the most favorable planning circumstances, the cost of hospitalization can impose an unncessarily heavy burden on group purchase programs when hospitals are misused.

A number of studies have uncovered a disturbing amount of unnecessary utilization of hospitals under health care programs. To the consumer, the escalation of costs that results from over utilization of expensive facilities is no less a factor in the deterioration of the medical dollar that the rising costs of hospital and pesonal health services as such. In fact, the cost of over-utilization is perhaps more disturbing than other forms of medical inflation because it suggests that there may be something very wrong with the balance of benefits in health care programs.

It would be unfair, of course, to place all the blame on hospitals when unnecessary utilization occurs. After all, it is the doctor who controls admissions and who orders the services and determines the length of stays. He is the person who must assume final responsibility through the functioning of hospital review committees.

Yet, organized labor and other group purchasers cannot escape their share of the responsibility. Negotiated programs, like most voluntary health plans, emphasize hospital care at the expense of grossly inferior coverage of outpatient services. This imbalance in benefit structures distorts patterns of utilization of health services and undoubtedly lies behind a great deal of misuse or overuse of hospitals. Labor knows this, and is seeking the assistance of providers to correct the imbalance.

At the same time, however, we cannot overlook the misuse of hospitals that occurs because of the unavailability in the community of other facilities and services that could be used just as effectively, or more effectively, to take care of the patient's needs at a lower cost.

My reference is to the person whose stay in the hospital is stretched out, for example, because quality extended care facilities are not readily available; to the patient who winds up in a hospital because he does not have access to good home health services; and to others who find it difficult to obtain diagnostic services in the community without being hospitalized.

To the extent that this occurs, we must turn again to the hospitals, the doctors and others involved in the health planning process for relief. There no longer is any room for buck-passing, for the day of providing for hospital-based services in splendid isolation from all other facilities and services needed in the community is rapidly drawing to a close. The sheer magnitude of our growing health needs, and the pressures being exerted on existing health resources, make intolerable the waste associated with this kind of fragmented planning.

All of us-individual consumers, providers, vendors, and group purchasers— must come to grips with the basic issues confronting us concerning the organization of health services. Are we interested only in caring for the sick, or are we primarily interested in maintaining health? Or shouldn't we be interested in both?

Hospitals have operated primairly as institutions for healing the sick. Does it follow that they should only be interested in doing a good job for people who get sick and need hospitalization, or should they be equally interested in keeping people well and out of hospitals?

There can be no choice for group purchasers of health care services. Organized labor is interested in both. We seek your assistance along with other providers to do both better.

FOCUS ON HEALTH

As a matter of national policy, the focus today in the health care field is currently on the development of comprehensive systems for delivering health services and maintaining health. Furthermore, planning for facilities and services under federal comprehensive planning is recognized only within the context of total health needs. Health facilities and services planning, in fact, must now be

effectively related to planning for personal health services, manpower development, and environmental health.

We hope hospital groups will accept this as a challenge to break new ground in the provision of services to the community. As recommended by the State "543" Committee, special attention needs to be given "to the development of new systems for delivering health services, especially to meet the needs of the underprivileged and those whose life styles are not compatible with the manner in which health services are currently organized and delivered."

Those of us involved in the work of the Council, as representatives of group purchasers of health services, would welcome the opportunity to develop new group service plans in cooperation with hospitals and others interested in expanding their out-patient services. We simply cannot ignore our 15 years of experience with negotiated programs, which has taught us that money alone does not assure good health care. We have learned the hard way that medical inflation, in part, is the product of irresponsibility of group purchasers who dump millions of dollars into the so-called mainstream without demanding a voice in how medical resources are used and organized. While our dollars have fed the inflationary fires, they have done preciously little to stimulate more efficient use of resources. We have bargained hard to remove the financial barriers to good medical care for the sick, but in the process we have largely forgotten about the needs of our members to stay healthy. Even more seriously, we have contributed to the growth and entrenchment of a system of delivering health services that is not only plagued by rigidities, but is basically incompatible with the level of health education and life styles for many in our population.

I am not only talking about the underprivileged for whom the promise of mainstream health care becomes a mockery without developing new medical delivery systems that penetrate their environment and the socio-economic problems that confront them in our urban society. I am also talking about many of our union members and their families in the so-called middle class of America who also have difficulty in using the prevailing delivery system, even when we try to remove the financial barriers.

It is true that in the development of our groups programs, we have talked a great deal about experimentation. In practice, however, we have done very little to make effective alternative programs available to our members and to others in the population who have become all but medically disenfranchised in a health-care sense.

A burning desire to change our ways lies behind the formation and the work of the Council. In a very real sense, the Council is the spontaneous product of years of frustration in dealing with vendors and other special interests whom we have allowed to engulf our islands of health plans and to decimate our bargaining power and ability to effect change the necessary change that today can no longer be held back.

With the new focus on health, brought about by Medicare, the development of state and regional medical programs, and the requirement of comprehensive planning under federal law, we believe that the time for action is now.

We have served notice on the vendors that while we cannot do without health facilities and the professionals who provide health services through them, we can do without the vendors. We are therefore turning today more directly to the providers to deal with the staggering problems confronting group purchasers of health services.

Our surface focus may appear to be simply on controlling costs, but our real interest is on controlling costs by finding more effective ways of providing health services for people. The experimentation we desire may be more expensive when measured only in terms of providing medical care for the sick, but not in terms of maintaining health, which is our ultimate objective.

If hospitals today are prepared to take a fresh look at health maintenance problems, then we invite those interested to work cooperatively with the Council and interested doctors so that together we may begin some serious experimentation with new ways of relating the use of in-patient facilities to the development of out-patient services to lessen the need for hospitalization and help keep people well.

Immediately, the idea of hospital-linked out-patient clinics and neighborhood health centers comes to mind, based on the development of comprehensive prepaid group practice arrangements. We are very much interested in this approach, but we do not want to rule out experimentation with entirely new ways of bringing both solo and group practices into contact with out-patient services

that are specifically organized and designed to break down utilization barriers, to increase the level of health awareness, to provide for early detection of disease, and to promote more meaningful doctor-patient relationships on a continuing basis.

Some doctors, of course, may view such experimentation as a threat to solo practice arrangements, but it is too late to placate those who fear the competition of group practice arrangements. Group practice is every bit as professional as solo practice, and we know that quality can be good or bad in both. We are not out to destroy solo practice. Our goal is to provide a full range of alternatives available to group purchasers and to individual consumers, including alternatives that reach the individual who is clearly unable for any number of reasons to use the existing system effectively.

To those who still fear the Council's motives, we invite them to help us build into everything we do quality standards that are beyond reproach and beyond anything in operation today in the mainstream of health care.

In concluding, some of you may be wondering why hospitals? Why should they be singled out to give special attention to the organization and provision of out-patient services? There is really no answer, except that hospitals traditionally have been the focus of medical care as it is practiced in this country. Doctors are brought together through hospitals at the most esteemed level of medical practice. Operating through their hospital committees, doctors have set high standards of performance for themselves while they are practicing in hospitals standards which have no counterpart in their solo out-patient practice of medicine.

If hospitals can bring the best out of doctors when they are practicing in their institutions, then it is logical that hospitals should try to help bring the best out of them when they are providing health services outside the hospital, especially since the quality, scope and organization of out-patient services are vital factors affecting hospital admissions.

In any event, it appears to us that hospitals are slowly evolving into health centers, which we believe they should have been all along. It remains to be seen who will rise to the challenge and who will sit back; who will help to build a healthier state and nation, and who will try to hold onto those delivery systems and organizational concepts that are rapidly losing their viability and validity for increasing numbers in our society. We both have our work cut out for us.

ITEM 15: LETTER FROM PAUL D. WARD, EXECUTIVE DIRECTOR, CALIFORNIA COMMITTEE ON REGIONAL MEDICAL PROGRAMS, SAN FRANCISCO, CALIF.

October 15, 1968.

DEAR SENATOR WILLIAMS: Your Subcommittee has already received extensive testimony relative to the problems our elderly population encounters in obtaining health care. The hearings in California undoubtedly will reinforce testimony already received, but probably will produce no problems which have not already been brought out. Before dealing with specifics in regard to Regional Medical Programs, I would like to discuss briefly the major areas already brought before your Subcommittee.

HEALTH MANPOWER

The severe present and predicted future shortages of health professionals, particularly physicians, nurses, and dentists have created problems in obtaining medical care for all age groups. In fact, it is possible that the incentive fee structures of Medicare and Medicaid have increased the provision of services for the elderly in some communities to the point that good medical care, and particularly preventive medical services, for the younger age groups has diminished in availability. It is obvious that expanded or new governmental programs to pay for services rendered will not increase the capacity of the schools of medicine, nursing and dentistry. In fact, conversely, they may make it more rewarding for able instructors to stay out of teaching. Hence, it is imperative as coverage or benefits expand in governmental or insurance third party payment programs that equal emphasis be given to creation of additional educational facilities and incentives which will lead competent professionals to enter the teaching fields.

ALLIED HEALTH PERSONNEL

There has been wide discussion in the health field of developing new "subprofessional" or "allied health" personnel, or expanding the legitimate functions of lower level professionals in order to lessen the work load on physicians, nurses and others who are in short supply. In California recent joint agreements between the medical, nursing and hospital organizations as well as changes in the state law have expanded the legitimate functions of RNs and LVNs. While such actions are undoubtedly helpful in some instances, they do nothing to add to the absolute numbers of health care personnel available they merely push some of the work down the line and create acute manpower problems at lower levels.

The only solution to the manpower problem is more training for more persons at all levels. Every resource should be utilized: teacher incentives, subsidized facilities, scholarships, loans, and outright subsidy of trainees. The health professions must be made available to qualified and interested applicants from all levels of our society, not merely to those qualified applicants who can afford the hight cost of such training.

PAYMENT FOR SERVICES

Much testimony has been presented to your subcommittee regarding the methods of payment for services, particularly through Medicare and Medicaid. The use of the fee-for-service approach, especially the physician profile, has been seriously attacked as provided for unbridled escalation of fees and incentives for over-utilization. It has also been described as deleterious to the development of group practice. Without doubt, the unscrupulous provider can profit unfairly under this-but he will find a way to do so under any system. He can gradually increase his fees and he can have patients return again and again for unnecessary visits.

I feel a note is indicated here to attempt once again to put to rest the misinformation that was widely publicized about the California Medi-Cal program, that 1200 physicians averaged over $70,000 each during the first year. The figure of 1200 represented that number of "vendor codes," most of these. in turn, representing physician groups. In one instance it was a group of 123 physicians. Investigation of those few solo practitioners who received large amounts of money revealed, in most instances, that the payments were justified. These were high volume doctors who worked long hours six and seven days a week in ghetto areas and who represented virtually the only medical services available to the residents.

While the fee-for-service system undoubtedly has its drawbacks and opportunities for abuse, one must consider the alternatives and their potential disadvantages. It is obvious from the testimony presented to the subcommittee that a clinic type approach with salaried physicians would not be very popular with anyone. Both professionals and elderly individuals testified about the long waiting periods and excessive travel requirements involved in clinic medicine. Yet there was some indication that a few preferred clinics and in some areas these were the only places care could be obtained.

The other alternative is the "capitation" method of payment. This means just what it says, a payment "per head" on a flat monthly or annual basis for providing all necessary professional services for a predetermined group of people. It provides a guaranteed income for the doctor regardless of how many or how few services he must provide. This method is not as foreign to American medicine or the American people as one might think. For years it has been a common method of providing well-child care in the private practice of pediatrics for the first two or three years of life. It is of course, the basis of the HIP, Kaiser and Ross Loos program as well as a number of other smaller family group practice plans. It is being developed on a private basis in some places through such organizations as American Medical Services in Los Angeles.

If properly used, the capitation method is a stimulus to the practice of preventive care-it is of obvious financial advantage to keep the patient well, and to discover disease in its early and less costly stages, than to wait until the patient is seriously ill. Conversely, there is a danger of under-utilization, a possible tendency to not see the patient often enough. Regrettably, the only conclusion one can read from this is that any method will require either external or internal review until the system adjusts to the new demands.

The other disadvantage, if it is such, of the capitation method is the possi ble violation of the principle of "free choice" of provider, which was written into the 1967 amendments to Title XIX. Obviously, the method gives a competi