detail. The chairman of the committee and the ranking minority member of the full committee are ex officio members of all of the subcommittees, but there are too many subcommittees to keep up with the hearings all of the time.

Can you give me sort of an illustration of relative value schedules or scales?

Tell me how this would be arrived at.

Dr. HUTCHENS. May I ask Dr. Schenken to respond to your question, Senator?

Dr. SCHENKEN. Senator, relative value schedules are basically a way to relate one service that a pathologist provides to another, and they are developed in many ways, but basically they are an average of the various efforts and expenses of technical, professional and medical personnel, equipment, services and so on that it takes to provide the final result.

Those are put into dimensionless numbers that only relate to one another. One procedure might have a value of 10, another one 8, another one 12. Therefore, the 12 was more complex, the 8 less complex. They just relate the one study to the other.

Senator TALMADGE. The fee would be based on the relative value thereof?

Dr. SCHENKEN. It will be, and has been in many instances in the past.

Senator TALMADGE. If the Senator would yield, let me see if I can simplify it further.

Suppose lancing a boil had a relative value of 1 and an X-ray had a relative value of, say 20. The X-ray then would be worth 20 times the fee of lancing the boil. Would that be a correct analysis?

Dr. SCHENKEN. If that was the schedule used, that would be an absolutely correct analysis.

Senator TALMADGE. I just took that out of thin air as an assumption in order to try to simplify it in my own mind and simplify it for the record.

Dr. SCHENKEN. If I could amplify on that a little bit, I am glad you brought that up, because it does demonstrate that relative value scales are not limited to pathology but have evolved in all phases of medicine.

Senator TALMADGE. I thank the Senator.

Senator CURTIS. If what we are talking about becomes law, who determines relative value? The physician that performs it, or is that a function that will be exercised by the Government.

Dr. SCHENKEN. We commented on that in our testimony. In the past, relative value scales have been consensus agreements among professional societies and we are certainly and strongly advocating that professional societies have great input into the development of any relative value scales.

Senator CURTIS. The relative value scales, then, are something that has been used in the medical profession in some time in the past; is that right?

Dr. SCHENKEN. For many years. The College of American Pathologists had worked on this for several years, but we are now precluded by our consent decree.

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Senator CURTIS. It is an accepted procedure?

Dr. SCHENKEN. Yes.

Senator CURTIS. Within the profession, by practice?
Dr. SCHENKEN. Yes, sir.

Senator CURTIS. I think I know, but clear up for me how a lease type arangement operates. Does that have something to do with hospitals in small communities, say my own, where the pathologists serve the hospital but none live in the immediate area?

Dr. SCHENKEN. If I might explain our own situation as an example. in our major institution, we have a lease arrangement with a hospital in which we assume 100 percent of the responsibility for all aspects of the provision of pathology services to the patients. We are subject to the same rules and regulations of the medical community as anybody else on our staff, but we have an arrangement with the hospital so that we assume all the responsibilities thereof, rather than the hospital assuming some of those responsibilities.

Senator CURTIS. In other words, patients in the Methodist hospital in Omaha, as far as pathology is concerned, are not dealing with the hospital, but dealing with your center?

Dr. SCHENKEN. Yes, sir.

Senator CURTIS. I observed your point about the definition of physician's services. I have also glanced at the additions proposed to the definition in the bill as it presently printed.

It does strike me that the more complicated and lengthy the term physicians' services become, the greater volume of interpretations, regulations and explanations will be required.

Is that true?

Dr. SCHENKEN. We feel so, yes, sir.

Senator CURTIS. I know that it would be very hard to write an explicit definition for the practice of law. I assume it would be somewhat the same.

I have before me the term "physicians' services" that appears in the present social security law. The term "physicians' services" means "professional services performed by physicians including surgery, consultation, at home, office and institutional calls, but not including services described in subsection (d) (6).”

Do you feel that it would eliminate confusion and problems and a lack of clearness if that definition were enlarged upon as suggested in this present print of the bill? Is that correct?

Dr. SCHENKEN. We believe the present definition in law is preferable. We also feel, Senator, that the circumstances which we feel caused the drafters of the bill to introduce that change have been eliminated by some of the arrangements provided for in the bill by Senator Talmadge elsewhere in other sections, and therefore, we feel that the elimination of this redefinition will not injure that effort.

Senator CURTIS. That is all I have, Mr. Chairman.

Senator TALMADGE. Senator Dole?

Senator DOLE. No questions.

Senator TALMADGE. Thank you very much, gentlemen. We appreciate your helpful and constructive testimony.

[The prepared statement of Dr. Hutchens follows. Oral testimony continues on p. 358.]

STATEMENT OF TYRO T. HUTCHENS, M.D., PRESIDENT-ELECT OF THE COLLEGE OF AMERICAN PATHOLOGISTS

SUMMARY

The College of American Pathologists is a medical specialty society representing more than 7,000 physicians.

The College statement offers comment on several sections of the bill with particular emphasis on Sections 12 and 15. In addition, this testimony offers comment on Sections 2, 4, 10, 11, 30, 32, 33, and 44.

The College statement reflects general support for certain Sections of the bill and suggests modification of other Sections. There are a limited number of Sections which it opposes.

The initial portion of the statement is devoted to identifying actions taken by the College to appropriately deal with pathologist's responsibility and pathologist's staffing requirements for institutions. Also included in this discussion is the effort being made by the College to assist in resolving local disagreements on hospital/pathologist compensation.

The major portion of the statement is devoted to comment on Sections 12 and 15.

Section 12

While we are in support of certain provisions of this Section, we have offered language which, in our opinion will better identify the role of the pathologist as a physician. A significant portion of the discussion of this Section outlines the duties and role of a pathologist as a physician.

There is also a discussion of the role the autopsy plays as a medical service and the need for identifying it as a reimbursable service under the provisions of S. 1470. In addition, there is rationale on the need for considering the medical responsibility of the pathologist in regard to services performed by nonphysician personnel in the laboratory as a physician service. We feel they also should be reimbursable as a physician service under the bill. We have offered language changes in subsection (a) (2) of Section 12-“(3) pathology services" which we feel will serve this purpose.

Under subsection (b) (1), we have offered rationale supporting the provision of this subsection which we believe will permit lease arrangements for laboratory services in certain situations.

Subsection (d) (1) concerns us and we have suggested that this provision be dropped from the bill.

Subsection (a) (1) is also a problem area. We feel that the administrative problems which would be created by regulators attempting to define certain conditions in this section would defeat the intent of the section.

Section 15

The College generally supports the majority of the provisions of this section. In our discussion of this section, we point out the role we have played in the development of procedural terminology, not only in the specialty of pathology, but in Medicare.

We also indicate our past experience in the development of Relative Value Schedules.

The major portion of our comment on this section deals with an explanation of Relative Value Schedules and their application to pathology services.

We discuss the three variables which exist in an equitable Relative Value Schedule for pathology services and how they function.

We develop the rationale for a physician component as an integral part of every clinical laboratory procedure. We point out that the physician component is determined separately for each item and therefore is not a disguised percentage agreement.

The statement offers modifying language to subsection (b) which will include physician component as a part of the Relative Value Schedule for hospitalassociated pathologists.

The statement points out problems we see developing under the language for subsection (e) and we have offered the suggestion that clarification is needed.

The statement also offers some comment on the following sections:

Section 2

Brief comment supporting the provision for ancillary services not to be included as routine operation costs.

Section 4

We express our concern with the provision providing funds from the Hospital and Medical Insurance Trust Funds for payment of services rendered by State Health Planning Agencies.

Section 11

We go into considerable detail outlining our opposition to the provision of subsection (C) and its possible application to clinical laboratory services. Section 30

We support the formal recognition of a Health Care Financing Administration in this bill.

Section 32

The statement points out our concern with the use of the "urgent" designation by the Secretary as a mechanism to avoid receiving comments on proposed regulations.

Section 33

The statement offers our opposition to the elimination of the Health Insurance Benefits Advisory Committee.

Section 44

The Statement indicates our support for this section.

STATEMENT

Mr. Chairman and Members of the Committee, I am Tyra T. Hutchens, M.D., President-Elect of the College of American Pathologists. With me is Jerald R. Schenken, M.D., of Omaha, Nebraska.

We welcome the opportunity to appear here today to represent the College of American Pathologists and to present its views on S. 1470, the Medicare-Medicaid Administrative and Reimbursement Reform Act.

The College is a nonprofit medical specialty organization of physicians with headquarters in Skokie, Illinois. We represent more than 7,000 physicians who practice the medical specialty of pathology. College Fellows are certified by the American Board of Pathology.

Our members practice in hospitals, in independent medical laboratories, in medical schools, in military institutions, and in various facilities of the federal, state and local governments. In addition, our members work in medical laboratory research institutions and in industries producing medical devices and in vitro diagnostic products.

We would like to take this opportunity to thank the Chairman for the sincere and complimentary remarks he made about the specialty of pathology during hearings held last year and in a well received speech that he delivered at the Joint Spring meeting of the College and the American Society of Clinical Pathologists in March of this year.

During the hearings on S. 3205, Mr. Chairman, you said, "your specialty, which I greatly admire it is the basis of science, and is the basis of medicine . . . Speaking for our colleagues, we are pleased and honored by these comments. It is with the same sense of respect that you have expressed for pathology, Mr. Chairman, that the College of American Pathologists supports the intent of S. 1470. S. 1470 is a long and complex bill. Many of its provisions are urgently needed to help contain the spiraling costs of Medicare and Medicaid. Many provisions are innovative and equitable. We do, however, have concerns about specific areas of the bill.

We appreciate the immense effort that you, Committee members, and staff have devoted to a review of the constructive revisions offered in testimony on S. 3205. S. 1470 reflects the benefits of this analytical review.

The College, through its committees and staff, also has spent much time and effort in analyzing this legislation. Much of this effort by the College was di

rected at finding an appropriate alternative to the reimbursement mechanism offered to hospital-associated physicians in S. 3205.

The introduction of S. 1470 with its recognition of relative value schedules utilizing acceptable procedural terminology systems encouraged the College to consider the relative value schedule approach as an equitable alternative.

Over a year ago, the College convened a Task Force of 35 pathologists, broadly representative of the various practice modes of pathology, to develop constructive proposals for changes in S. 3205. This Task Force has continued its work and has considered S. 1740. It has developed some proposals and recommendations which have been approved by our Council on Government Relations and Board of Governors and are reflected in the statement that we are presenting today. The official College policy statement provides for:

(a) A study of local review mechanisms to resolve disagreements in hospital pathologist contractual relations, with implementation of such mechanisms as soon as a satisfactory format has been developed ;

(b) A study of the professional responsibilities of pathologists and pathologists' staffing requirements for institutions, using existing data as well as additional, readily available data to validate the results of the study. In addition, the College policy statement:

(a) Reaffirms existing College policy that all pathologists' services are physician's services and are an integral part of the practice of medicine; (b) Supports the definition of physicians' services that is contained in the Social Security Act (Section 1861(q));

(c) Continues College support of multiple approaches to contractual relations between pathologists and institutions;

(d) Reaffirms College support of relative value scales that include suitable professional components for all pathologist's services as a satisfactory mechanism for reimbursement, and further, such relative value scales should include pathologist's services when performing autopsies; when providing quality control in the pathology department; when providing professional direction and supervision of departments of pathology; and when participating in educational programs related to patient services;

(e) Supports the use of appropriate relative value scales as well as other suitable reimbursement mechanisms for pathologists, in lieu of percentage agreements between pathologists and institutions.

The second portion of this policy statement relates directly to the reimbursement of pathologists. In effect, it states that the College supports the use of relative value schedules which include physician's component for each clinical pathology, laboratory procedure as well as other suitable reimbursement mechanisms.

Mr. Chairman, those engaged in the delivery of clinical laboratory services have recently received unfavorable publicity in the media and have come under scrutiny by committees of the Congress. Much of this publicity has been related to fraud. If one looks closely at the information presented, it is clear that fraud usually appears incident to the delivery of clinical laboratory services in so-called "Medicaid Mills". Fraud apparently has not occurred with any frequency in hospital laboratories or pathologist-directed independent laboratories. Because of our concern that perhaps pathologists were involved in the so-called "Medicaid Mills", we have requested information from the Senate Select Committee on Aging about pathologist (s) who may have been involved in fraudulent activity.

There has also been publicity about seemingly inappropriate reimbursement of individual pathologists relative to the services provided by them.

In our opinion, the College has responded in a positive way by designating committees and working groups of the College to identify the problems and work on solutions without interfering with the many fine relationships which presently exist between pathologists and institutions throughout the United States.

The first portion of the College policy statement referred to earlier in this testimony mentions this committee activity.

One activity involves a study of pathologist's work patterns and performance. Because pathology is a broad and varied discipline, it is difficult to categorize and quantitate activities in which pathologists spend most of their time. The reasons for this are: