Quite obviously there is no shortage of beds, especially when you realize that the above figure does not include any county homes or other public institutions.

I have the further assurance from the department that the above homes are sufficiently well distributed throughout the State so that there is no local shortage of beds.

The final statistic to be determined now is the number of beds per 1,000 of population.

The population of Indiana is just under 4 million. Dividing the total number of beds in both categories into 4 million gives an average of 4.3 beds per 1,000 of population.

Again, that does not include the county homes or public institutions. Senator HILL. What you might call the welfare homes?

Mr. LATHAM. Pardon.

Senator HILL. What you might call the welfare homes?

Mr. LATHAM. Or formerly was called the county poorhouse, or something of that nature.

Senator HILL. That is right.

Mr. LATHAM. Certainly private facilities for the care of the aged are more than adequate in Indiana, and we have reason to believe that the situation in a large number of other States, particularly those who are members of the American Association of Nursing Homes would compare favorably with the Indiana situation.

Of course, it must be presumed that the argument will be advanced that the standards of these homes are not sufficiently high. If the ridiculous figure of $8,000 per bed for the construction of nonprofit nursing homes as suggested in Mrs. Hobby's report is the criterion, then it must be admitted we cannot compete with that. I don't believe, though, that even the most rabid advocate of this Federal intrusion into the field of private enterprise would honestly and sincerely champion such a fantastic figure once he took the time to really investigate the problem. Further, the Board of Health of the State of Indiana has just completed an exhaustive survey of all nursinghome facilities in Indiana, which incidentally, gentlemen, was conducted under the auspices of the United States Public Health Service Commission on Chronic Illness-they are making this survey in a number of States, particularly about nursing homes-and this survey includes proprietary, charitable, fraternal, and public homes; and, as a result of this survey, they have come up with some very interesting facts and observations.

In connection with the matter of the standards of the private nursing homes in Indiana, it has been officially stated by those charged with conducting said survey-and most of them were Public Health nurses that they were very favorably impressed with the facilities and felt that the homelike atmosphere maintained in the private homes was of great value to the patients' general welfare. They further stated that those homes that were owned and operated by professional

people, that is, registered nurses and doctors, were more or less institutionalized and did not have the homelike atmosphere of those homes owned and operated by nonprofessional people.

This is very significant and substantiates our contention that the nursing home as now constituted is meeting the problem of the care of the aged correctly.

There is one additional point that was raised over in the committee. They wanted to know how much profit was being made. Now, here is a statistic gained, which was just released about the middle of February, as a result of this survey in Indiana.

An additional statistic obtained from this survey is that the patient is being cared for in the private home at an average cost of from $4 to $5 per day. When you consider this is complete care, including food, clean linen, 24-hour a day service, 7 days a week, any profit is very modest to say the least. In fact, it was the observation of those conducting the survey that, generally speaking, the private operator was making no more than a reasonable living from this business.

While this same bill was being considered in the House Interstate and Foreign Commerce Committee, two questions were asked by mem bers of said committee, the first of which is as follows:

Will this bill place the Federal or State governments in competition with private enterprise especially in the case of nursing homes? Let's examine the bill for the answer to that question.

This bill is an amendment to the Hill-Burton Act.

There are numerous hospitals already built and there are others being built by counties and cities here in Indiana under this act. The State, itself, has built facilities under it. Furthermore, section 654 of the bill states "applications under this part by States, political subdivisions," et cetera, which, of course, inferentially provides for the participation by States and/or political subdivisions thereof. Absolutely, the State, its subdivisions, and municipal corporations will be in competition with private enterprise-360 of them in Indiana. Of course, it follows that the Federal Government will be in competition, albeit indirectly. Doesn't it supply up to 6623 percent of the money to build the facilities?

The second question that was asked in said committee was: Would it be possible for private individuals, doctors, and nurses, to secure funds, build facilities, operate them on a nonprofit basis, and then later repay the obligation to the Government and operate the home on a profit basis?

To answer this, first I call your attention to the definition of "nonprofit nursing home" in the bill, which is as follows:

The terms... and, "nonprofit nursing home" mean any . . . and nursing home... which is operated by one or more nonprofit corporations or associa tions no part of the net earnings of which inures, or may lawfully inure, to the benefit of any private shareholder or individual.

The nonprofit corporation is one of the neatest vehicles for making a long-term capital gain in existence today.

I'll illustrate how it could operate under S. 2758.

Three doctors or a doctor and two other persons-form a nonprofit corporation and qualify for State and Federal funds.

They build the nursing home at no cost to themselves.

They employ themselves at salaries determined by themselves as the directors of the corporation.

A director of a nonprofit corporation may receive a salary for service to the corporation; also the act specifically provides, in defining nursing home, that the facility may be under the formal supervision of "persons licensed to practice medicine in the State."

They staff the home, paying sufficient salaries to get the best help, nurses, dietitians, et cetera.

Can you visualize doctors doing otherwise?

They charge sufficient to pay the expenses-salaries, food, utilities, maintenance, medicines, linens, et cetera-and possibly a little more, since a nonprofit corporation can make a profit, the only prohibition being against distribution of that profit to shareholders.

I refer you to the definition in the act, and also to various State nonprofit laws.

After several years' operation, they take the accumulated profit, pay back the original construction cost to the Federal and State Government, and begin operating as a for-profit corporation.

By all means, yes, doctors and/or nurses could secure the funds, construct the home and, after paying back the obligation, operate as a profitmaking facility.

I can even conceive of a particularly enterprising group setting up a chain of these throughout a given area or an entire State.

If you think I'm exaggerating, then you underestimate the perspicacity and ingenuity of our citizenry in general and lawyers, doctors, politicians, and businessmen in particular. Why should the Federal Government jeopardize the livelihood of some 20,000-estimated number of nursing homes in the United States-little business people with this potential Frankenstein monster?

Certainly not for any alleged better care at lower cost.

If the nursing home is built by a governmental unit, it must be staffed and operated. To staff and to operate takes money. If the patient can't pay, then the taxpayer must and, as you well know, we are terribly overburdened by taxation on every governmental level

now.

Then, too, there is no governmental unit that operates as efficiently as private enterprise. This is made so by our form of government itself which sets up a series of checks and balances upon every administrative operation. Democracy by its very nature is inefficient. So, you see, there is no lower cost here.

If the nursing home is built by the private nonprofit corporation or association, where is the lower cost there?

Can you believe any lower cost would result from an operation. like or similar to the illustration heretofore given?

Believe me, that example would be the rule rather than the exception. So here, again, we have no lower cost.

In neither case is the aim of better care at lower cost achieved. You may ask, then, "What are you worried about? Certainly, if the cost is higher than that paid to the private nursing home, there is no cause for alarm."

To answer this, you must understand first, that many of our homes accept welfare patients, being paid therefor through old-age assist

ance.

Next you must comprehend that phenomenon of the past decade or so best described as the welfare mind.

Here is the way that mind operates: It will use every strategem and argument at its command to reduce the fee paid for the placing of one of its recipients in a proprietary nursing home; but let the magic phrase "nonprofit" enter the picture and it will give the maximum payment immediately, and move heaven and earth to increase the amount of local and State contribution, so as to be able to pay more to the nonprofit home.

Let these nonprofit homes appear in all their 8,000 per bed glory and you will find them immediately filled with welfare patients and at a greater cost than would be entailed by placing such patients in a proprietary home.

With the spread of these so-called nonprofit homes, would occur the gradual elimination of the private home.

While this argument is somewhat speculative, it is based upon knowledge gained through a number of years of close association with the general problem.

There are many additional arguments we could give against the pasage of this bill. However, we feel it is not sufficient to just be against the bill, but rather should we present that which we believe would be a plausible solution to the problem.

Earlier in this statement I stated that we had definite suggestions. I will set them out at this point.

First, I would seriously suggest that at this time part 4 of section 651 be deleted from the bill pending the results of the survey provided for in section 641.

Second, I would suggest that, by proper legislative means, the Small Business Administration be instructed to earmark a given sum of money to be made available to proprietary nursing homes for enlargement and improvement of present facilities, this money to be paid back at an appropriately low interest rate.

This might call for an appropriation and, also, the creation of certain regulations to qualify for such loans. We would be glad to assist in any way in promulgating such regulations.

Third, I would suggest that there be made available, to the proprietary nursing home operator, long-term, insured, low-interest bearing loans, FHA, for new nursing-home construction.

Fourth, by whatever means possible require that States and counties participating in the old-age-assistance program make their percentage contributions high enough so that, in event nursing-home care is required, the recipient will be assured of having adequate facilities available.

If the proprietary operator knows that he will receive fair rates for accommodating this type of patient, he will take them more readily and will have the money to improve his physical plant to make it more comfortable and attractive.

It is our honest and sincere opinion that, if the Congress should see fit to adopt the foregoing suggestions within a very short time the problem of care of the aged would be solved, the overall economy of The Nation would be improved, and the specter of socialism, like Banquo's ghost, would be laid-at least, insofar as this segment of our way of life is concerned.

I have one more comment. I wish Senator Goldwater could have been here, because I have a comment insofar as his question on 8149 is concerned, when he read this on page 15:

The term "nursing home" means a facility for the accommodation of convalescents or other persons who are not acutely ill and not in need of hospitai 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 nurgery in the State.

You have to go back to one other definition on page 12, where they define nonprofit nursing home:

The term "nonprofit hospital," "nonprofit diagnostic or treatment center," "nonprofit rehabilitation facility," and "nonprofit nursing home" means any hospitaland so forth, and so forth

and nursing home, as the case may be, which is owned and operated by one or more nonprofit corporations or associations no part of the net earnings of which inures, or may lawfully inure, to the benefit of any private shareholder or individual.

Well, there is a gimmick in the whole thing, if I may use that term, gentlemen.

The so-called nonprofit corporation is one of the slickest tricks for making a profit that you ever saw. You can take a doctor-and I illustrated this in my statement-and two other people in the State of Indiana-a doctor and two other people in the State of Indiana, for instance, can form a nonprofit corporation, make themselves the board of directors; they can hire themselves to the corporation, because the board of directors of a nonprofit corporation may render service, pay themselves whatever salary they see fit, and just so long as the net profits they can realize from this they are not distributed to themselves, as such-they can take it as salaries-they say net profitand they can hold that back there and eventually build up enough to pay back the money they have borrowed from the United States Government, and they have got a beautiful facility there, a little private hospital of their own that they have lived off of for 10 or 15 or 20 years, and at the end of 20 years they don't even have to pay the Government back.

As I said in my remarks earlier, I can conceive of a very enterprising group setting up at least one of these, and if they are particularly enterprising setting up a series of them throughout an entire area or an entire State; and let these appear and you will find your welfare people putting your patients in there, and you will find the nursing home, the private nursing home, being forced out of business, and then when they are forced out of business, there is no competition, and they can charge any price they want to charge.

Senator HILL. Of course, you realize it would have to be under a State plan. They couldn't get any funds unless they were in the State plan.

Mr. LATHAM. Yes, sir.

Senator HILL. By your State agency.

Mr. LATHAM. That is entirely correct, sir, and I well realize that fact, and I know how influential some people can be in certain State plans and get things set up the way they want to. I have been in politics myself.

I have one additional thing, if I may impose upon you gentlemen, to show you that we are not standing still. We are increasing our standards.