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through its legislative powers and particularly through its influence on a national health Insurance program, has the opportunity to make ours a healthier society, one with the lowest infant mortality and highest longevity, and one where our motto of "dying young in life, as late as possible" will be fulfilled. With the scientific evidence available today, with the cooperation of the medical and allied health professionals, and with the determination of the American people, asong with legislative stimulus from the Congress, we can make the realization of this motto come true in our lifetime.

STATEMENT OF JOHN G. FREYMANN, M.D.

Dr. FREYMANN. I am John Gordon Freymann, a physician, member of the family practice faculty at the University of Connecticut, and the president of the National Fund for Medical Education. I would like to assure Mr. Duncan I have taken care of patients for 25 years and I am still taking care of them now. I have never been in full-time private practice but I think it is the care of patients, not one's ways of collecting fees that is important. So I understand the problems.

Henry Ford said that history is bunk. I will not argue the point, but history is the only way I know to understand the complex and seemingly irrational organization of the American health care system. My assignment is to take the subcommittee through a brief history to show how our system got to be the way it is. To do this, I will trace three chains of causation which, woven together, have produced what we have today. These three chains are: (1) The organization of health facilities, with particular reference to short-term hospitals; (2) the education of the health professions, with particular reference to physicians; and (3) the financing of health services.

ORGANIZATION OF HEALTH FACILITIES

Pennsylvania Hospital in Philadelphia was the first voluntary— that is, private, nonprofit-hospital in the Nation. Opened in 1750, it was a faithful copy of the hospitals of London. These institutions. had evolved a peculiar, tripartite organization over the centuries. I am interested to find that Mr. Pike is a member of this tripartite organization.

The board of trustees, which owned the corporation, was a mechanism for governance that replaced the church after Henry VIII abolished the monasteries in 1536. The hospital administration was employed by the trustees, but the medical staff was an independent cadre of private practitioners. They were not employees because the original hospitals were hospices for the poor. Centuries passed before they became places exclusively for the sick where an attending staff of doctors was needed. Hospitals eventually employed some doctors, but they were apprentice physicians or surgeons.

This medieval model, brought to the Colonies from the mother country, is still followed throughout the United States. All of our voluntary hospitals, secular and religious, have this same basic organization. So do most city and country hospitals, although here the trustees may be elected or appointed officials. The administrative staffs are employed by the trustees, as are the apprentice doctors whom we

now call residents. In the last 25 years, many hospitals have hired full-time, salaried doctors to head major departments such as surgery and internal medicine. But the vast majority of doctors working in these hospitals are practitioners who receive the privilege of using the facilities from the trustees and are paid directly for their services by their patients or by third-party payers.

In spite of their long history, hospitals played a minor role in the American health care system until the 20th century. In 1873, there were only 178 nongovernmental hospitals; by 1909 there were 4,359. Even then, however, hospitals were still primarily places for the poor. Anyone who could afford it was cared for-even operated on-at home. By the 1920's surgery had moved into hospitals, but in 1940, 44 percent of American babies were still delivered at home. Internists were even slower than the obstetricians. Not until the discovery of a panoply of "wonder drugs" and invention of a variety of highly technical diagnostic and treatment techniques did departments of internal medicine become the key components of every hospital they are today. The magnitude of the change in hospitals-from havens for the poor to social necessity for all-is reflected in the following figures. Between 1936 and 1973, the number of hospital admissions per thousand population rose from 61 to 145. One American in 10 is now admitted to a short-stay hospital at least once every year.

The place of in-patient hospital facilities in the American health care system is important to this committee because half of all national health expenditures occur in this milieu. However, I have another, perhaps more important reason for emphasizing hospitals. They have become the nuclei for medical practice in many, if not most, communities.

Use of hospital ambulatory facilities for diagnosis and treatment has risen far more rapidly than in-patient admissions. Ambulatory visits now exceed admissions by 5 to 1. But since nearly 90 percent of all doctor-patient encounters still occur in doctors' offices, isn't this where the action really is? Yes, if one looks at volume instead of expenditures, the action is in doctors' offices. However, the gravitational pull of hospitals is having a pronounced effect on where these offices are located. Across the Nation, doctors' offices are clustering more and more around hospitals. Thus, although direct fiscal links between hospitals and doctors are infrequent, in a functional sense each hospital has become, or is rapidly becoming, a community health center, or, if you will, a center for community health delivery.

This close association among doctors and hospitals is peculiar to the United States and Canada. In every other major nation, doctors are rigidly divided into an elite cadre of hospital-based specialists, who are usually salaried, and a larger group of less specialized or primary physicians who care for ambulatory patients and are denied access to hospitals. In contrast, the American doctor without hospital privileges is an exception. In fact, the discovery that several thousand doctors in New York City had no hospital association was viewed as scandalous. I come to the end of this first chain of causation in the evolution of our health care system with this point: The machinery for delivering personal health services to the American people may be divided roughly into 6,000-plus clusters. Each of these consists of a relatively

autonomous hospital and a constellation of doctors, most of whom are in private practice. It is a symbiotic relationship. The doctors are dependent on the hospital's diagnostic, treatment, domiciliary and, to a growing extent, educational facilities. The hospitals depend on the doctors to refer the patients who are the source of 95 percent of hospital revenues.

How did this symbiosis develop? Why don't we have the neat pyramid of health services that other nations such as Britain have: a broad base of primary physicians, a network of secondary hospitals, and a few tertiary hospitals at the apex? For the answer we must look at the other chains of causation.

EDUCATION OF PHYSICIANS

After a promising start in the 18th century at Pennsylvania and Columbia, medical education in the United States went into a long century of decline. Over 400 schools-most of them diploma millsbloomed and withered during the 19th century. Doctoring fell to such a low estate that it was said medicine was the career for those who were too lazy to farm, too stupid for the law, and too immoral for the pulpit. Opening of Johns Hopkins Hospital (1889) and Johns Hopkins Medical School (1893) marked the birth of a new era. Hopkins took all that was best in English and French medical education, which was based on clinical experience in hospitals, and combined it with all that was best in German medical education, which was based on researchoriented universities. The result was unique a medical school in which students were taught by clinician-scientists in a hospital. John Shaw Billings, the unsung genius who conceived Hopkins, never intended it to replace other medical schools, which he saw continuing to produce practitioners. To him, Hopkins was a unique school for future teachers and researchers.

A Kentucky schoolmaster named Abraham Flexner changed all that. His report on the state of medical education in the United States was published in 1910 with the powerful backing of the AMA and the Carnegie Foundation. Hopkins was the only school which completely met Flexner's standards because he wrote the report under the influence of members of the Hopkins faculty who believed medicine was emerging as an exact science on a par with physics and chemistry. Like Moses descending from Sinai, Flexner presented the Hopkins curriculum to the other schools. Those that did not accept it eventually closed their doors, and for the next 60 years American medical students marched in lockstep through a curriculum which had been exemplary in 1910.

The other part of Flexner's credo was that this curriculum should be taught by full-time professors who were not distracted by practice. This took longer to achieve. There was not enough money to pay fulltime faculty in most schools until the Congress poured Federal funds into research from 1945 to 1965. This permitted the many schools that had been unable to achieve Flexner's dream of a full-time faculty to finally consumate it.

If I may interject there, Mr. Chairman, this is a beautiful example of how as you said earlier changing one factor in the health care system has completely unexpected results, because this was not Congress intent.

Unfortunately, by the time the last school fell into line the Flexnerian era was over-a victim of its own success. Almost all the infectious diseases that blighted the Nation in 1900 had been conquered by 1954. In that year the death rate suddenly stopped falling and we entered a new era. Now the chief banes of the Nation's health are emotional, environmental, and genetic in origin. Some may be contained but once they are started they cannot be cured but only contained.

But the pattern first cut at Hopkins had been set. Scientific medicine was too complex for a single mind to encompass, so doctors divided into 2 dozen specialists. Scientific medicine, taught on hospital wards full of patients with florid diseases, beguiled students into specialty practice, and general practice whithered and almost died. Scientific medical practice required modern hospital facilities, and two generations of superbly trained specialists brought this message to communities across the land which were eager to provide them with everything they needed.

Thus, we can see how the first two chains of causation intertwined to produce the system we have today. Hospitals flourished and became centers of medical care because scientific practitioners needed them, but post-Flexnerian doctors became what they were largely because they were taught in hospitals where the main thrust was care of and research on acute diseases. The third chain, financing of health services, simply bound the first two more tightly together.

FINANCING HEALTH SERVICES

I will spend the least time on this topic because most of it is well known to the committee.

Health insurance had flitted across the national stage since the early 1900's, but the Great Depression gave it a major role. The earliest plans covered hospital expenses for surgery, and, some years later, surgeons' fees. Over the years, benefits have been extended to cover most hospital expesnes-although many still skimp on psychiatric coverage and most doctors' fees for services rendered in the hospital. Only recently have benefits been available for ambulatory care-and these are still far from comprehensive. Medicare and medicaid perpetuated this undue emphasis on hospitalization. The reason is simple. Discreet services for acute conditions rendered in 6,000 hospitals are far easier to monitor than comprehensive care rendered in 100,000 offices and clinics. But in their eagerness to control costs the accountants put the finishing touches on the system that had been developing for 200 years. Third-party payers dangled incentives to hospitalization before patients, doctors, and hospital administrators that were impossible to resist. To do otherwise meant the patient paid out of pocket, the doctor had less certain fees, and the administrator staffed empty beds.

CONCLUSION

The vast enterprise which some find so confusing that they call it a health care "nonsystem" evolved through a chance coming together of 18th century organizations, 19th century science and education, and 20th century finance. But evolution has not stopped. It is still going on as the Nation experiments with new methods of delivering care, with new educational techniques, and new financing schemes. We have not come to a dead end. Far from it.

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The problems we face today resulted from the successes of our health care system, not its failures, and if it can continue its evolution I am confident that we can lick the problems of the present and prepare for those this Nation will face in the 21st century. The three chains of causation have not come to an end. Knowing the directions they have taken in the past and the effects these changes have had, we should be able to extrapolate each chain into the future. With a knowledge of history, we can substitute a degree of rationality for mere happenstance as we move ahead.

Flexibility, innovation, evolution-these are the keys to success. But let me close with this caveat. Every other nation that has adopted national health insurance has frozen its health care system at that particular moment in its development. No other nation has been able to use national health insurance has made change slower and more difficult. I respectfully suggest that this committee should resist the temptation to think that one piece of legislation can revolutionize health care.

Americans are always tempted to tear down the old and rebuild from scratch, but the history of previous legislation to effect social changes shows that it is impossible to tear down social systems which have taken centuries to evolve. This is even more true when the hospitals of our health care system represent a $40 billion capital investment. a $50 billion annual budget and employ nearly 3 million people. Like it or not, we must build on what we have, not on airy flights of fancy.

The challenge to this committee, as I see it, is to construct an insurance system that will remove all financial barriers to health care but will not raise barriers to the continuing evolution of our health care system.

Mr. Chairman, thank you for this opportunity to present my views. I wish the committee good fortune in the task ahead.

Mr. ROSTENKOWSKI. Thank you, Dr. Freymann.
Professor Fein.

STATEMENT OF RASHI FEIN

Mr. FEIN. Mr. Chairman and members of the subcommittee, I wish I, too, could assure Mr. Duncan that I treat patients but the best I can do is say some of my best friends are physicians.

Mr. Chairman and members of the subcommittee, I very much appreciate the invitation to participate in this panel discussion and am pleased to be able to do so.

National health insurance remains one of the most important, unresolved domestic issues that this Congress faces. In part, the postponement of debate on a universal and comprehensive national health insurance program reflects the fact that other high priority matters have commanded the attention of the legislative and executive branches and of the American public. In part, it reflects the complexity of the issues that surround the medical care sector and its financing. It is, therefore, most encouraging that you have decided to move forward with these sessions. All of us who are concerned with the inequities, inadequacies and costs of existing programs and who are con

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