Additional physicians have recently been recruited to physician-short rural communities in Western New York. The recruitment of these physicians (and others over the years) has been facilitated by the research efforts of the HSA which led to the designation of these areas as federal health professional shortage areas. Such designation is a significant advantage to rural communities competing nationally for primary care physicians.

In the Albany region, the HSA worked with a major medical center and rural health care facilities to form a partnership, the purpose of which was to strengthen rural health services in Warren, Washington, Essex, Clinton, Franklin and Hamilton counties. Over the past few years, that partnership has resulted in the expansion of primary care and prenatal care services in several of these counties as well as programs to support the recruitment and retention of health personnel.

Minimizing Duplicative Service While Enhancing Access To Needed Services

The existence of duplicative or excess health services influences cost, quality, and access. At best, services which are unnecessary, duplicative, and underutilized, result in higher overall cost to the community and the unnecessary consumption of resources that could be better used to provide other needed services. In the worst case, excess capacity provides a financial incentive for increased volume through inappropriate utilization, thus raising both cost and quality issues. HSAs typically are involved in a variety of activities to prevent duplication and development of services in excess of community need. Some examples are noted below.

Because the Rochester area was considered to have a sufficient, if not excessive, supply of acute inpatient psychiatric beds, the Finger Lakes HSA disapproved a certificate of need application for establishment of an additional hospital-based unit. In doing so, however, it acknowledged that there were problems with the patients and physicians from the applicant hospital gaining access to the existing inpatient psychiatric facilities. A planning initiative that involved the facilities was initiated. As a result, the largest inpatient psychiatric facility (with an abnormally long length of stay) agreed to relinquish license of 1/4 of its beds so that the applicant hospital could develop its' own unit; and the hospital relinquishing the beds agreed to establish a specialized short stay program within its remaining bed compliment. Both services are now operational. Recent data indicates that

an additional 750 inpatient admissions are now being accommodated without any increase in overall bed supply and the length of stay in the facility which relinquished beds has fallen to a level more comparable to the community average. Equally important is the fact that psychiatric patients receiving outpatient care at the applicant facility now have greater access to a full range of psychiatric services.

The Western NY HSA was approached by a licensed home care provider expressing an interest in establishing a hospice to serve terminally ill children. While noting that pediatric hospice services were not available, the HSA pointed out that the number of such patients was quite small and a free-standing hospice to meet their needs would be prohibitively expensive. The HSA suggested that the provider contact the existing hospice program serving adults and explore the possibility of a joint venture to serve children. Subsequently, a joint venture was developed. Pediatric hospice services are currently being provided with the two providers pooling their resources and thus significantly containing administrative and overhead costs.

The HSA of New York City identified two Staten Island neighborhoods in need of additional primary care services. Two major providers subsequently sought to develop additional primary care and preventative services in these areas through the submittal of three separate projects. The HSA's initial analysis documented the service duplication and waste of resources which would result from development of three separate programs to serve the same population. A series of meetings were held with both providers to encourage them to respond to the neighborhood's needs in both a collaborative and more cost-effective manner. These discussions led to the withdrawal of the competing proposals and the submission of a single joint application to develop coordinated primary care services. Annual operating cost savings achieved through this collaborative approach are estimated to be $2 million with an additional one time capital cost savings of approximately three quarters of a million dollars.

An Albany area hospital submitted a major renovation/construction project totalling approximately $42 million in capital costs. The project included a proposed increase in the number of operating room suites. At the time, the HSA of Northeastern New York was just completing a study of surgical capacity and utilization in the area. The HSA presented this information to the applicant who agreed to revise and down-size the project as it related to increased operating room capacity. Additional downsizing involved agreed

upon changes in the scope of the project related to the community wide need for obstetrical services and neo-natal intensive care services. The project, as revised by the applicant and approved by the HSA, involved a capital cost of $26 million or $16 million less than originally proposed.

The Nassau-Suffolk HSA collaborated with several area hospitals to eliminate excess acute care capacity and use the vacated space to provide services needed by area residents. In one instance, a hospital converted an underutilized medical-surgical service to a rehabilitation unit; in another, a facility converted a similar unit to an alcoholism treatment facility. In summary, the area's excess acute care capacity was reduced and needed new services were established at significantly less capital cost than would have been required by new construction, i.e. it is estimated that new construction would have required $40 million more in capital cost than was expended through utilizing the vacated space.

In New York City, the HSA and the State Health Department worked with two major hospitals which were both preparing to submit major modernization projects with capital costs of approximately $1 billion each. Review of the facilities preliminary plans indicated an over-emphasis on acute care with fewer project resources be devoted to needed primary care services. As a result of the Agency and Health Department efforts with these facilities, their plans were revised to be more consistent with community needs and capital costs associated with there renovation projects were reduced by approximately $200 million at each facility.

Centralizing Expensive Specialty Services While Promoting Access

Certain specialty services are used infrequently and sometimes involve a high level of expensive technology. The cost-effective development of these services dictates that they be centralized, or shared by hospitals in order to achieve the economies of scale and quality assurance associated with a larger volume of clinical activity. However, centralization of such services necessitates consideration of access issues. Typically, HSAs promote collaboration among facilities so that these types of specialty services are both cost-effective and accessible. Some selected examples of HSA activity in this area are reported below.

In Rochester, the HSA was faced with competing applications from four hospitals for the one additional cardiac catheterization laboratory that was needed. The successful applicant was the only one already performing open heart surgery and was preferred for

that reason (both the State Cardiac Advisory Committee and the HSA have a policy preference for locating these services in facilities that have cardiac surgical backup). However, it was clear during the review process that access issues were in large part responsible for some of the hospitals continuing to pursue the further development of these services in the absence of community need. Therefore, planning was initiated to improve both physician and patient access to existing cardiac catheterization laboratory services. This was accomplished in one case through negotiating agreements whereby cardiologists on staff of one of the hospitals (without a laboratory) would have the right (and laboratory time assigned) to examine their own patients using the existing laboratory at a nearby area hospital. In another case, an agreement was reached between one of the inner city hospitals (without a laboratory) and a nearby hospital which operated two laboratories, an open heart surgery service and a teaching program. The teaching facility agreed to relocate one of its two labs to the inner city hospital while maintaining sponsorship of the service. These changes have resulted in more efficient use of existing resources as well as enhanced access to the service for the community's cardiologists as well as the minority and medicaid-eligible populations. And, importantly, this was achieved without the proliferation of additional laboratories.

At the suggestion of the HSA, three eastern Long Island hospitals initiated a joint magnetic resonance imaging (MRI) service. Since none of these hospitals alone would generate the minimum numbers of procedures to support efficient utilization of this service, a joint venture had the effect of providing patient and physician access to this service in a costeffective manner. Since the average annual operating cost of an MRI unit is approximately $1.5 million, the joint venture makes the service available to all three hospitals while saving several million dollars annually in operating costs (which would be otherwise incurred if all 3 hospitals had individual services).

Chairman STARK. Mr. Stowe.

STATEMENT

OF ARTHUR STOWE, PRESIDENT, PRINTING INDUSTRIES OF MARYLAND, ON BEHALF OF THE TRADE ASSOCIATION HEALTHCARE COALITION

Mr. STOWE. Thank you, Mr. Chairman.

Chairman STARK. This is Maryland. Congressman Cardin has all of his constituents and his friends in here today. He told me he is up in Annapolis working. Is Dick Heintz a member of the Printing Industries of Maryland?

Mr. STOWE. Yes, sir.

Chairman STARK. My neighbor.

Mr. STOWE. Thank you

Chairman STARK. Go ahead. Did you enjoy your meeting with Ira Magaziner?

Mr. STOWE. Yes, sir.

Chairman STARK. Tell us what you learned.

Mr. STOWE. I will tell you later as developments occur whether we truly enjoyed it or not.

Thank you.

The Trade Association Health Care Coalition appreciates the opportunity to testify before the committee. I am Arthur Stowe, president of the Printing Industries of Maryland. Our association is a member of the Trade Association Health Care Coalition, and we are also appearing on behalf of the Association Health Plan Alli

ance.

As in our January meeting with the senior advisor to the President on health care, Dr. Magaziner, our theme today that we want to highlight is to describe the existing association group health benefits plans and point out their uniqueness. We would like to become an integral part of any future American health care system helping to secure comprehensive health care benefits for all Ameri

cans.

Until now, drafters of Federal and State legislation have not focused on and in some instances have not even recognized the existence of group health care benefits provided to small employers under the management of trade and professional associations. This is quite ironic because association plans have for 5 decades been the champions of small employer health plans when the group health needs of small employers were largely underserved or unserved.

The concept of aggregating small employers into professionally administered health risk pools is not new. The association plans have proved to be an effective and economic approach for small employers to provide their employees with access to group health insurance when it is otherwise unavailable.

The associations who belong to the Trade Association Health Care Coalition and the Association Health Plan Alliance are concerned about several aspects of the health care reform bills currently before Congress. If those bills become law they will jeopardize or completely eliminate effective and beneficial association small employer health programs, and will have a detrimental impact on the very groups the law is intended to serve.