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Mr. DOLLIVER. I suppose that the objective of the corporation would be to have a well-rounded group, including specialists in all branches of medicine, as well as a considerable number of general practitioners; is that true?

Dr. BAILEY. We hope to have two or three general practitioners. In addition to the general practitioners, the rest of the doctors in the clinic will form the various specialists of medicine.

Mr. DOLLIVER. Where is the clinic located?

Dr. BAILEY. It is located right at the juncture of Wisconsin Avenue and Western Avenue, across from Woodward & Lothrop's new store. It is in the District of Columbia, just across the line from Maryland.

Mr. DOLLIVER. This enterprise has been carried on and developed without any governmental assistance of any kind, either by direct or indirect, by the District of Columbia or by the Federal authorities?

Dr. BAILEY. We have not asked for and have not received any help from the government at all.

Mr. DOLLIVER. I wonder, have you had some financing problems, however, in connection with the erection of the building?

Dr. BAILEY. Yes, we have had considerable financial troubles.

First of all, of course, the only thing we started with was the six doctors buying a piece of land. And then incorporating and getting a franchise to sell stock in the Clinic Properties Association. We turned that land in to the corporation for return of stock.

Now, we have gone out as individuals selling stock to our patients and to our friends in the Clinic Properties Association, Inc., which, of course, will own the land, the buildings, and lease all equipment.

Then they own all of the equipment in the building also.

Of course, the main thing that we have to guard against when we try to go out and ask people to invest and buy our stock, the one thing we have to keep straight with them is the fact that they are not investing in the private practice of medicine. In other words, they are not going to share in the income from the practice of medicine. Their total income will be derived from rental and leasing of equipment and that rental is calculated on a certain return to the stockholders.

Mr. DOLLIVER. There are some rather difficult financing problems, undoubtedly, connected with this enterprise and other similar enterprises, are there not?

Dr. BAILEY. Of course, the financial problem has been particularly in getting our money.

Mr. DOLLIVER. That is what I mean. Do you think you would have found such Federal aid or Federal loan advantageous in the enterprise that you are speaking of or are interested in?

Dr. BAILEY. Well, as we stand, as of today, our finances are satisfactory. In other words, we have received from private sources money sufficient enough to go through with our project.

Of course, in working up and receiving the final loan here of $400,000 on a first trust, we had to go through many other situations in which it was not $400,000, so that it gradually worked itself up. In other

: words, it was difficult at first to finance a building of our kind, as it is any one-purpose building, as you might put it, to finance.

Mr. DOLLIVER. Let me put the question in a little different way.

Do you believe that if this legislation now under consideration had been law at that time, at the time you started this enterprise, and Federal funds had been available for loaning to you to build the clinic, that you would have taken advantage of those provisions of the law?

Dr. BAILEY. I think we probably would. Mr. DOLLIVER. As a rather quick and easy solution to the problem which

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have now overcome. Dr. BAILEY. That is right.

Mr. DOLLIVER. By the way, would you care to reveal what your financial condition is or what the investment is!

Dr. BAILEY. The final investment?
Mr. DOLLIVER. The final investment; yes.

Dr. BAILEY. The final investment will come pretty close to a million dollars, with the total value of the land, the building, and equipment; the total assets will be close to a million dollars.

Mr. DOLLIVER. That, of course, as you say, will be private money that has been brought together by the various means you have suggested?

Dr. BAILEY. Yes; outside of the $400,000.

Mr. DOLLIVER. Well, the $400,000 was actually private money. It was not borrowed from any public organization. It was a first trust loan on the property, was it not?

Dr. BAILEY. That is right.
Mr. DOLLIVER. I think that is all, Mr. Chairman. Thank you.
Mr. PRIEST. Mr. Chairman.
The CHAIRMAN. Mr. Priest.

Mr. PRIEST. Just one or two question, Dr. Bailey. Mr. Dolliver has asked most of the question that I had in mind.

Mr. DOLLIVER. Excuse me.

Mr. PRIEST. That is quite all right. Information is what the commitee wants.

I understood you to say, Dr. Bailey, that you had no voluntary prepayment plan; that the clinic would function under a fee for service plan.

Dr. BAILEY. That is right.

Mr. PRIEST. I want to ask whether there has been any contemplation of a voluntary plan by the organizers of the clinic; by the group of doctors interested in the clinic.

Dr. BAILEY. As of the present time we have not contemplated any prepayment voluntary plan.

Mr. PRIEST. I think you made a very apt observation when you pointed out that the success of any voluntary plan depends largely on the practicing physicians who may engage in it. As you have aptly put it, if the public is satisfied with the care it receives under a prepayment plan it will be successful, and if they are not satisfied and the doctor-patient relationship is not entirely satisfactory, then it will not be a success.

I have been interested for some time, as most of the members of the committee have been interested, in any possible ways of expansion of the prepayment plan for medical services, and I was just interested to know whether you had contemplated up to this point, entering into any such plan in this clinic. You say that you have not. But that does not preclude, I am sure, that you might consider such a plan at a later date.

Dr. BAILEY. No; it does not preclude it at all; no. But as of now, we have not even thought of it, actually.

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Mr. PRIEST. And as understood, Dr. Bailey, in response to one of Mr. Dolliver's questions, that you feel that if the provisions of H. R. 7700 had been in effect, when you and your group started in with this clinic, the probabilities are that you might well have availed yourselves of the opportunity offered under the bill. Was that substantially your answer!

Dr. BAILEY. I would say possibly; yes. You see, we went through so many turmoils in getting money-it was not easy to obtain the money.

Mr. PRIEST. I can appreciate that fact. That is all, Mr. Chairman.
The CHAIRMAN. Any further questions?
Mr. O'HARA. Mr. Chairman.
The CHAIRMAN, Mr. O'Hara.

Mr. O'HARA. Doctor, I would like to ask you two or three questions.
One of them is, what rate of interest are you paying on your trust?

Dr. BAILEY. We are paying 5 percent interest on our trust over a 20-year period.

Mr. O'HARA. Amortized loan?
Dr. BAILEY. Amortized; that is right; yes, sir.

Mr. O'HARA. Then the relationship of the doctors themselves are, they are on full time, or a part time basis? In other words, as I understand your testimony it is a flat agreement with the doctor who enters into the co-partnership, co-partnership arrangement with the clinic.

Dr. BAILEY. Yea, sir.

Mr. O'HARA. In addition to that, does the doctor have his own outside practice and hours in which he is not engaged in the clinic, or is all of his time and all of his fees derived from his services paid into the clinic?

Dr. BAILEY. Yes; no one of the 25 doctors that I spoke of will have outside practice. They will all be full time members of the clinic, with no outside, so-called practice, with offices somewhere else.

In addition to that 25, however, when we are starting this clinic, for instance, we are not going to have, for instance, a brain surgeon; a neurosurgeon, because we feel that a neurosurgeon at this stage of the game may be a little difficult for the clinic to obtain, so far as paying the amount necessary or having the amount of work that will be done. So, we have made agreements with a neurosurgeon outside of the clinic who will see our patients at our clinic for us on a consulting basis.

When the time arrives that we are doing enough neuro surgery to support a full time neurosurgeon, then we will take on a full time neurosurgeon, and that applies to several other fields.

Mr. O'HARA. Doctor, I notice that you had a fellowship at the Mayo Clinic.

Dr. BAILEY. Yes, sir.

Mr. O'Hara. And you are generally familiar with a small town practice which exists out in Minnesota, which would be, I suppose, comparable with the small town practice in most States.

Dr. BAILEY. Yes, sir.

Mr. O'HARA. And having in mind the problems that arise, would the provisions of H. R. 7700 be of particular benefit to the doctors in the small towns who might want to form a similar clinic?

Dr. BAILEY. I can answer that question—I think the answer is probably “Yes.” I think there is one thing though that must be kept

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in mind, and that is this, that because funds are available to establish a clinic, it does not make that clinic. The going out and getting a group of doctors that will work together is one of the biggest difficulties in establishing a clinic.

Mr. O'HARA. It is about like getting married?

Dr. BAILEY. That is right. This is exactly right. In other words, the doctors that you get, unless they come out of, or just finishing their training, have never entered private practice—they lose their independence in a certain sense of the word. It is not really independence, but, for instance, they cannot take off 2 or 3 days here or 2 weeks here, and jeopardize the rest of the group. You must get men

. that want to practice group practice in order to make it a success. You just cannot say, “Here is so much money. Form a group.” We have got to get men who will practice together.

Mr. O'HARA. The whole success of it, Doctor, is not only the ability of the copartners to get along, but to be measured in some degree by the skill of the group that are doing it, is that true?

Dr. BAILEY. That is exactly true.

Mr. O'HARA. And I suppose you are familiar with the fact that even in the small towns out in Minnesota, in many, many instances the doctors have joined together, or part of the doctors in small towns, and formed a clinic-sometimes all of the doctors—and heretofore that has all been a matter largely with their own arrangement, their own financing

Do you think this bill might unduly encourage more of that type of operation which would still be dependent upon the elements which are so important if they are to get along together; and the skill of those engaged in the enterprise ?

Dr. BAILEY. Well, I think from the bill's point of view that in order to have the prepayment type of plan put into effect, as well as have a group to administer it, so to speak, that the group must be complete, because the way I look at it, that is, the patient buying a prepaid medical plan, he buys all fields of medicine, and, therefore, if he buys it from, say, the Washington Clinic, then the Washington Clinic must supply to him all of the various fields. We cannot have just a couple of branches, if he buys prepayment.

And, the small towns in Minnesota, I do not know whether, unless you import doctors from the outside to staff the so-called groups, whether you would ever be able to establish what I think you are talking about.

Mr. O'HARA. Well, I do not think, Doctor-I am now speaking of clinics in the small towns that I am aware of 'I do not think one of them has a prepayment plan. The pateient is the only one that has the accepted types of medical prepayment plans, and I think that is the only practical solution in those communities.

Dr. BAILEY. I think so, too.

Mr. O'HARA. Where you do have a clinic such as you have set up here. It is very possible and very practical to have a prepayment plan arrangement, but I think that would entirely centered in the larger centers of population. Would not that be true?

Dr. BAILEY. I would believe so, yes.

Mr. O'HARA. And, of course, you still have the reality of experience to go through with and there will probably be a lot of headaches; but

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you do anticipate general success from the viewpoint of giving service, in Washington, and the patients that are patients of your clinic. Is that true?

Dr. Bailey. We certainly hope so.
Mr. O'HARA. Thank you. That is all, Mr. Chairman.
Mr. ROGERS. Mr. Chairman.
The CHAIRMAN. Mr. Rogers.

Mr. ROGERS. Dr. Bailey, I wonder if you are in favor of the provisions of this bill.

Dr. BAILEY. I do not remember all of the provisions of the bill. If I remember correctly, there are certain stipulations that must be fulfilled in order for the bill to apply to a group. Correct me if I am wrong.

Mr. ROGERS. Since you must have voluntary prepayment plan in your clinic, it would not do you any good, or any clinic the like of which you have under the provisions of this bill, as I understand it, because this would merely help, provided you had a voluntary prepayment plan.

The CHAIRMAN. Will you pardon me there. The bill has a limitation of 60 percent which must be made available for that type, voluntary type.

Mr. ROGERS. And the other 40 percent may be made up of the other type ?

The CHAIRMAN. Yes.

Mr. ROGERS. Does that mean 40 percent of the patients; does that mean that 40 percent of the patients treated must come under that provision

The CHAIRMAN. 60 percent of the facilities shall be available to prepayment plans.

Dr. BAILEY. The way I look at the bill, the only way we would be a beneficiary under it, we would have to convert into a prepayment plan and do 60 percent, of which 60 percent of our facilities under the prepayment plan.

The CHAIRMAN. Will the gentleman yield?
Mr. ROGERS. Yes, I will yield to the chairman.

The CHAIRMAN. I think you have misunderstood it. The bill would not have that effect, that you would be justified in saying in organizations such as that represented by Dr. Bailey would not be available. It would be available. It does provide that whatever facilities are available, 60 percent of them must be for the use of voluntary prepayment plan patients.

Mr. KLEIN. Will the gentleman yield at that point ?
The CHAIRMAN. Mr. Klein.
Mr. KLEIN. I would like for this all to be cleared up.

Does that mean then that 40 percent of the funds available would be available to clinics such as this one where you do not have any prepayment plan, do you mean 40 percent of the facilities of the clinic must be available ?

The CHAIRMAN. I might say for the benefit of the gentleman that serious consideration is being given to whether there should be any restriction such as I have just mentioned in the bill and whether it: should not be broad enough to include all organizations such as Dr. Bailey has described in the Washington Clinic.

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