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Federal share, except as otherwise provided in paragraph (2) of this subsection, shall be determined as follows

“(A) if the State plan, as of the date of approval of the project application, contains standards approved by the Surgeon General pursuant to section 623 (e), the Federal share with respect to such project shall be determined by the State agency in accordance with such standards;

"(B) if the State plan does not contain such standards, the Federal share shall be the amount (not less than 331/3 per centum and not more than either 6643 per centum or the State's allotment percentage, whicherer is the lower) establ shed by the State agency for all projects in the State: Provided, That prior to the approval of the first project in the State during any fiscal year, the State agency shall give to the Surgeon General written notification of the Federal share established under this subparagraph for projects in such State to be approved by the Surgeon General during such fiscal year, and the Federal share for projects in such State approved during such fiscal year shall not be changed a ter such

approval. “(2) In the case of projects eligible for approval under part G and approved after the effective date of that part, the Federal share shall be determined as provided in paragrah (1) of this subsection, or, if the State so elects, shall be 50 per centum of the cost of construction of the project: Provided, That prior to the approval of the first such project in the State during any fiscal year, the State agency shall give to the Surgeon General written notification of such election; and such election shall not be subject to change during such fiscal year after such approral."

(1) Section 631 of the Public Health Service Act is further amended by the addition of the following subsections:

“(1) The term 'diagnostic or treatment center' means a facility for the diagnosis or treatment, or both, of anıbulatory patients

**(1) which is operated in connection with a hospital, or

“(2) in which patient care is under the professional supervision of persons licensed to practice medicine or sursery in the State. **(m) The term 'hospital for the chronically ill and impaired' shall not include any hospital primarily for the care and treatment of mentally ill or tuberculous patients.

** (11) The term 'rehabilitation facility' means a facility which is operated for the primary purpose of assisting in the rehabilitation of disabled persons through an integrated program of medical, psychological, social, and vocational evaluation and services under competent professional supervision, and in the case of which

"(1) the major portion of such evaluation and services is furnished within the facility; and

*() either (A) the facility is operated in connection with a hospital, or (B) all medical and related health services are prescribed by, or are under the general direction of, persons licensed to practice medicine or

surgery in the State. "(0) The term 'nurs ng home' means a facility for the accommodation of convalescents or other persons who are not acutely ill and not in need of hospital care, but who require skilled nursing care and related medical services,

*(1) which is operated in connection with a hospital, or

"(2) in which such nursing care and medical services are prescribed by, or are performed under the general direction of, persons licensed to practice

medicine or surgery in the State." (g) Subsection (a) and subsection (b), paragraph (1), of section 632 are her by amended to read:

"SE: 6:32. (a) Whenever the Surgeon General, after reasonable notice and opportunity for hearing to the State agency designated in accordance with section 612 (a) (1) or section 617 (1) tìnıls that the State agency is not complying substantially with the provisions required by section 612 (a) or section 617 to be contained in its application for funds under part B or part F, as the case may be, or after reasonable potire and opportunity for hearing to the State agency desig. pated in accordance with section 633 (a) (1) or section 647 (1) finds (1) that the State agency is not complying substantially with the provisions required by section 623 (a), or by regulations prescribed pursuant to section 622, or with the provisions renuired by section 647, or by regulations prescribed pursuant to section 653, to be contained in its plan submitted under section 623 (a) or section 633, as the case may be, or (2) that any funds have been diverted from the pur

liare, except as otherwise provided in paragraph (2) of this subsectie, Ptermined as follows

if the State plan, as of the date of approval of the project appisE, contains standards approved by the Surgeon General purstart 30 = 623 le), the Federal share with respect to such project shall be

ined by the State agency in accordance with such standards; i if the State plan does not contain such standards, the Federal hall be the amount (not less than 3315 per centum and not Dr 7her 683 per centum or the State's allotment percentage, whichDe lower) established by the State agency for all projects in the Prurided, That prior to the approval of the first project in the uring any fiscal year, the State agency shall give to the Surze

written notirication of the Federal share established under this sta: h for projects in such State to be approved by the Surgeon during such tiscal year, and the Federal share for projects in sach [ roved during such fiscal year shall not be changed a ter such

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e case of projects eligible for approval under part G and approred rtive date of that part, the Federal share shall be determined as razrab (1) of this subsection, or, if the State so elects, shall tim of the cost of construction of the project: Prorided, Tha:

pruial of the first such project in the State during any biscal e sency shall give to the Surgeon General written notification un; and such election shall not be subject to change during such sp steh ap roral." 431 of the Public Health Service Act is further amended by the following subsections: "!!! diagnostic or treatment center' means a facility for the dwnt, or both, of ambulatory patientsab is opwrated in connection with a hospital, or ih jeh patient care is under the profess`onal supervision of persons practice medicine or sursery in the State. 11 hospital for the chronically ill and impaired' shall not include larity for the care and treatment of mentally ill or tuberculous

poses for which they have been allotted or paid, or (3) that any assurance given in an application fi'ed under section 625 or section 654, as the case may be, is not being or cannot be carried out, or (4) that there is a substantial failure to carry out plans and specifications approved by the Surgeon General under section 635 or section 654, as the case may be, or (5) that adequate State funds are not being provided annually for the direct administration of the State plan, the Surgeon General may forthwith notify the Secretary of the Treasury and the State agency that no further certification will be made under part B, part C, part F, or part G, as the case may be, or that no further certification will be made for any project or projects designated by the Surgeon General as being affected by the default, as the Suregon General may determine to be appropriate under the circumstances; and, except with regard to any project for which the app ication has already been approved and which is not directly affected by such default, he may withhold further certifi'ations until there is no longer any failure to compls, cr, if compliance is impossible, until the State repays or arranges for the repayment of Federal moneys which have been diverted or improperly expended.

"ib) (1) If the Surgeon General refuses to approve any application under section 625 or section 654, the State agency through which the application was submitted, or if any State is dissatisfied with the Suregon General's action under subsection (a) cf this section, such State may appeal to the United States circuit court of appeals for the circuit in which such State is located. The summons and notice of appeal may be sørved at any place in the United States. The Surgeon General shall forthwith certify and file in the court the transcript of the proceedings and the record on which he based his action." (b) Section 635 is hereby amended to read :

"STATE CONTROL OF OPERATIONS "SEC. 635. Except as otherwise specifically provided, nothing in this title shall be construed as conferring on any Federal officer or employee the right to exercise any supervision or control over the administration, personnel, maintenance. or operation of any hospital, diagnostic or treatment center, rehabilitation facility, or nursing home with respect to which any funds have been or may be expended under this title."

Passed the House of Representatives March 9, 1954.
Attest:

LYLE 0. SNADER,

Clerk.

, 'r hab'litation facility' means a facility which is operated for 'p of assisting in the rehabilitation of disabled persons through kram of medical, psrchological, social, and vocational eraluation por conijetent professional supervision, and in the case of

a les portion of such evaluation and services is furnished within
...d

(1) the facility is operated in connection with a hospital,
pical and relaterl bealth services are prescribed by, or are
Jorul direction of, persons licensed to practice medicine or

State 1,'Tin ng home' means a facility for the accommodation of tout feruus ho are not acutely ill and not in need of hospital ir skilled nursing cure and related medical services w oferited in connection with a hospital. or di sub nursing care and medical services are prescribed by, rot under the seneral direction of, persons licensed to practice

[S. 1052, 830 Cong., 1st sess.) A BILL To assist roluntars nonprofit associations offering prepaid health service programs

to secure necessary facilities and equipment through long-term, interest-bearing loans Be it enacted by the Senate and House of Representatives of the United States Of America in Congress assembled, That this Act be cited as the “Health Serv. ices Facilities Act".

DECLARATION OF PURPOSE SEC. 2. It is hereby declared to be the policy of Congress to encourage the people of the United States to undertake solution of their common problems insofar as pessi ile through roluntary cooperative action at the local community level

. The Congress finds that one su h common problem is that of developing Deans and methods whereby the reople can create for themselves and their corm nities such diagnostic and treatment centers as will help make available to them the benefits of modern medical science and group practice on a prepaid tu l; etable basis and to enable physicians to make the best utilization of their 8 rvices in maintaining the health of the community, and that the accomplishment of these objectives is of particular importance during the present national

The Congress further finds that in many areas of the country and among many groups of people there have been or might readily be formed nonprofit associations for the purpose of enabling the membership of such associations to adequately compensate professional medical personnel and to prepay in an orderly manner the cost of efficiently organized, modern medical care. It is recornized, however, that in many instances, particularly in rural areas, these groups of people, while financially able to maintain such nonprofit medical service plans, do not have access to resources sufficient to provide the capital funris needed for the construction or acquisition of the physical facilities and equipment. Proper facilities and adequate equipment are essential to the

46293_-34-pt. 1-2

defensa emergency

marry in the State"
ili and subarction (b), paragraph (1), of section 632 are
del;
coleter the Surgeon General, after reasonable notice and

to the State agency designated in accordance with section
viti in tin:ls that the State agency is not complýing sub-

1*.vns required br setion 61. (a) or section 617 to be Son for funds under part B or part F, as the case may be,

*** and opportunity for hearing to the State agency desig.
sein wifi tion 6 3 11 (1) or section 647 (1) finds (i) that
Trempling substantially with the prorisions required

rreuisitions prescribed pursuant to section 6:22, or with
is patron titi, or by regulations prescribed pursuant to
mitspan subuuitted under section 633 (a) or section

Catans funds have been diverted from the pur

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economic operation of such programs, to the rendering of effective care, and to the recruitinent of a sufficient number of doctors and related personnel. It is therefore declared to be the purpose of this Act to provide long-term loans at reasonable rates of interest to such groups of people who demonstrate their readiness and ability to join together in and to maintain such voluntary associations and thus to advance the policy of Congress set forth in this Act.

SEC. 3. In order to carry out the purposes of this Act, there is hereby authorized to be appropriated for the fiscal year ending June 30, 1951, the sum of $5,000,000 and for the fiscal year ending June 30, 1952, the sum of $5,000,000 and for each of the next three succeeding fiscal years the sum of $10,000,000,

Sec. 4. Loans for part or all of the cost of acquisition, construction, and equipping of health-service facilities incident to the operation of a healthservice program may be made to nonprofit associations which submit to tbe Snryeon General of the United States Public Health Service satisfactory evidence

(a) of local interest in and financial support for the successful operation of its prepaid health-service program ;

(b) of an organizational structure which vests control over the practice of medicine and dentistry in connection with the health-service program solely in duly licensed members of the professions involved ;

(c) of an organizational structure which vests control over the general administration of the plan's operations in the beneficiary members of said plan or, in the case of plans still in the initial stage, which provides for such vesting of control in the hands of beneficiary members within a reasonable period of time;

(d) that its methods of compensation will be on a basis mutually satisfactory to participating physicians and to the governing board of the plan;

(e) that participation in the plan hy beneficiary members and by physicians shall be voluntary ;

(f) that in cases of emergency the plan will agree to render services to any resident of the cominunity whether or not they are members of the plan, and further that the facilities and services shall likewise be available to nonmember residents and nonparticipating physicians of the area served by the plan at such other times as will not interfere with the proper rendition of services to members of the program: And provided further, That the plan shall be entitled to require compensation on a fair and reasonable basis for all such utilization of its facilities or services by any such nonmembers

and nonparticipating physicians. Sec. 5. In carrying out the purposes of this Act, the Surgeon General, with the advice of the Ilealth Services Facilities Council, shall formulate standards for the making of loans to eligible nonprofit health service plans. Such standards shall provide emitably for

(a) determination by the Surgeon General that the applicant is an association which accords with the requirements of section 4 of this Act;

(b) the making of loans in sufficient amount to cover the total cost of facilities and equipment if desired by the applicant ;

(c) an amortization period of not less than twenty-five years with provision for earlier repayment by the borrower at his option;

(d) an interest rate of not to exceed 2 per centum per annum on unpaid balances;

(e) determination of priorities for the making of loans to eligible applicants in accordance with a formula to be developed by the Surgeon General with the ailvice and consent of the Health Services Facilities Council, which formula shall include, among other factors, the degree to which the plan provides for comprehensive medical care and group-practice hases including preventive as well as errative treatment, sound method of reparment, relatile neeil, extent of local interest and participation in applicant's program, and the relation of the projected facility to an overall development of health

services in the general area of its location. SEC. 6. At the request of groups operating health service plans or at the request of responsible groups contemplating the organization of such a plan, the Surgeon General may provide technical assistance in making needed surveys and in ad. vising on organizational methods and operating procedures. The Surgeon General may expend for such assistance, not to exceed 10 per centum annually, of the appropriation made under this Act for surveys, technical assistance to nonprofit plans, and for the Federal administration of this Act.

Sec. 7. The Surgeon General shall carry out his functions as provided herein under the supervision and direction of the Federal Security Administrator. He

hall, with the approval of the Federal Security Administrator, prescribe such regulatiors as he deems necessary to carry out the purposes of this Act. In carry20 out his functions, the Surgeon General is authorized pursuant to agreement men the Federal Security Administrator and the head of any Federal agency to utilize the services and facilities of such agency and to pay therefor either in abrano? or by way of reimbursement, as may be provided in such agreement.

Sec & The Surgeon General shall make periodic, comparative analyses of the operations of health service plans and shall transmit reports thereon to such p12 and to interested organizations, and shall furnish to Congress at the beginting of each regular session a full report of the administration of this Act. Sier. 9. For the purposes of this Act,

(a) the term “health services" means services such as are provided by physicians and dentists and similar professional groups, members of which are licensed under State laws, laboratory and X-ray services, and other Services related thereto.

(b) the term “States” includes Alaska, Hawaii, Puerto Rico, the Virgin Islands, and the District of Columbia. Ser. 10. The effective date of this Act shall be the date of its enactment.

NATIONAL HEALTH SERVICES FACILITIES COUNCIL

Soc. 11 The Surgeon General, with the approval of the Federal Security Administrator, shall establish a National Health Services Facilities Council to ertsist of one representative of the Department of Agriculture designated by the Sa retary of Agriculture and one representative of the Department of Labor to the designated by the Secretary of Labor, and, in addition, twelve members apfelnted without regard to the civil-service laws by the Surgeon General with the on val of the Administrator. The twelve appointed members shall be leaders in the field of medical economics, medical administration, or public affairs, and titre of such twelve shall be representative of operating nonprofit prepaid medial service plans, three shall be representative of bona fide national farm organ12:lons, three shall be representative of bona fide national labor organizations, asi three shall be members of the medical, dental, and nursing professions. Each appointed member of the council shall hold office for a term of four years except that any member appointed to fill a vacancy occurring prior to the expiration of the lerin for which his predecessor was appointed shall be appointed for the tranainder of such term and except that, of the members first appointed, tiiree status bold office for a term of three years, three shall hold office for a term of two sears, and three shall hold office for a term of one year, as designated by the Surxeon General at the time of appointment. None of such twelve members shall barligible for reappointment until a year has elapsed since the end of his preording term.

Sec. 12. The National Health Services Facilities Council shall advise, consult with, and make recommendations to the rgeon General on matters relating Lo the mporntion of this program. The Surgeon General is authorized to utilize the wrvices of any member or members of the Council in connection with matte related to the operation of this program for such periods, in addition to conference periods, as he may determine.

Str. 13. Members of the National Health Services Facilities Council and members of other national advisory councils established under this Act, other than a officio members, while attending conferences or meetings of their respective concils or while otherwise serving at the request of the Surgeon General, shall bevarilled to receive compensation at a rate to be fixed by the Administrator, but

tceding $50 per diem, and shall also be entitled to receive an allowance for 2 *nal and necessary traveling and subsistence expenses while so serving away from their place of residence.

(The following reports are made a part of the record :)

DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE,

March 19, 1954. Hon. A. ALEXANDER SMITH, Chairman, Committee on Labor and Public Welfare,

United States Senate, Washington 25, D. C. Drag Me. CHAIRMAN: This letter is in response to your request for a report

& 1052, a bill to assist voluntary nonprofit associations offering prepaid health service programs to secure necessary facilities and equipment through koos-term, interest-bearing loans.

The bill would authorize the Surgeon General of the Public Health Service to make loans to nonprofit health associations for part or all of the cost of acquisi. tion, construction, and equipping of facilities incident to the operation of their health service programs. Appropriations to carry out these purposes would be authorized for 5 fiscal years beginning with the fiscal year ending June 30, 1951 (presumably these dates would be changed to begin with the fiscal year ending June 20, 1955). For each of the first 2 years of these 5 fiscal years the authorized appropriation would be $5 million, and for each of the remaining 3 years, $10 million.

To qualify for a loan, the applying association would have to be nonprofit and would have to submit to the Surgeon General satisfactory evidence to show that (a) there was sufficient local interest in and financial support for successful operation; (b) the proposed organizational structure gave entire control of the practice of medicine and dentistry to licensed members of those professions; (c) the general administration of the plan was controlled by its beneficiary members, or in case of plans still in the initial stage, the plan provided for administrative control by its beneficiary members “within a reasonable period of time"; (d) methods of compensation would be on a basis “mutually satisfactory" to participating physicians and to the governing board; (e) participation in the plan by members and physicians would be voluntary; and, (f) in cases of emergency, the plan would render service to any resident of the community, whether member or not, and that the facilities and services would be available to nonmember residents and nonparticipating physicians of the area at such times as would not interfere with services to the members, for which use and services the plan would be entitled to require fair compensation.

The Surgeon General would be directed to formulate standards for determin. ing the eligibility of applicants and for the making of loans. Loans would be made in sufficient amount to cover the total cost of facilities and equipment, if desired by the applicant. All loans would be at not more than 2 percent per annum on the unpaid balances, and would carry an amortization period of not less than 25 years with provision for earlier repayment if the borrower desired. Priorities for making loans to eligible applicants would be in accordance with a formula developed by the Surgeon General which would include, among other factors, consideration of the degree to which the plan provided for "comprehensive medical care and group-practice bases including preventive as well as curative treatment," soundness of the method of repayment, and the interest and participation in and need for the plan in the locality.

In addition to its provisions relating to loans, the bill would also authorize the Surgeon General to provide technical assistance, on request, to groups operating or contemplating the organizition of health service plans.

The Surgeon General would carry out his functions under the supervision and direction of the Federal Security Administrator (now the Secretary of Ilealth, Education, and Welfare). He would also be directed to appoint a 14-member National Health Services Facilities Council, which would advise the Surgeon General and make recommendations on matters relating to the operation of the program. The Council would include ex officio representatives of the Departments of Agriculture and Labor and 12 appointed members: 3 to be representative of medical service plans, 3 to be representative of national farm organizations, 3 to be representative of national labor organizations, and 3 to be representative of the medical, dental, and nursing professions.

While the short title, “Health Service Facilities Act," as well as other provisions of the bill, place emphasis on facilities, it would appear that the primary objective of the bill is not the provision of additional facilities, as such, but rather the encouragement of nonprofit health plans providing comprehensive health services on a prepayment basis. In fact eligibility for loans would be limited to those plans which are generally classified as consumer cooperative associations,

This Department is in agreement with the general objective of stimulating the establishment and expansion of voluntary prepayment health plans providing comprehensive health services. We believe that such plans offer one of the most promising approaches to the extension of adequate medical care to a majority of our people at costs which they can afford to pay. However, for the reasons set forth below, we do not regard the bill as a desirable means of achieving this objective.

First, we doubt the wisdom or propriety of limiting Federal aid to consumer cooperative health plans. While such groups play a valuable role in the organization of health services, health service plans organized on other bases may

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