Lapas attēli

Mr. YOUNGER. Mr. Chairman, may I ask a question?
Mr. YOUNGER. What is the amount of your authorized stock?

Dr. BAILEY. We have two types, an A and B stock; $300,000 A and $150,000 of B.

Mr. YOUNGER. Thank you.
The CHAIRMAN. The committee will recess until a quarter of 12.

(Thereupon, a recess was taken until 12:15 p. m., for the purpose of answering rollcall, after which the following proceedings were had.)

The CHAIRMAN. The committee will come to order.

Dr. Bailey, I assume from the statement that you made this morning that speaking for the Washington Clinic it could be properly said that you are in favor of H. R. 7700.

Dr. BAILEY. Yes; I think so.

The CHAIRMAN. Of course, I am assuming that your attitude toward the bill would be improved if it were, in your opinion, open to your organization and simìlar organizations without respect to prepayment plans.

Dr. BAILEY. Yes; that is correct, according to the statement as you made, changing of the percentage, whether it be 60 percent or eliminating the percentage.

The CHAIRMAN. What, in your opinion, is the probable future for the group plan of practice?

Dr. BAILEY. In my opinion, I think that the group practice plan is the plan that is going to come in in the future. I think it definitely will become more or more groups will be established throughout this country probably, and I think that it is just a segment, geographical segment, actually, as you will see if you go into certain parts of the country. If you go west of Chicago there are numbers of groups throughout the West. East of Chicago, group medicine is lagging in numbers as compared to the Middle West and the West.

The Chairman. In your opinion, what would probably be the most outstanding reason or reasons for the group practice plan being recognized in the future ?

Dr. BAILEY. Well, I think the public, the wishes of the public on the whole, to see what they can obtain under the group type of practice, will be the deciding point. In other words, what the public wants I think is going to decide on what the doctors as a whole are eventually going to do. If they see that the public is more interested and more willing to go to groups than they are to individuals, once groups are presented, then I think that human nature is just going to make the doctors sit up and take notice on the thing and say maybe we had better establish some type of group practice.

The CHAIRMAN. From the standpoint of the public what are the advantages to be gained by the group practice plan?

Dr. BAILEY. I think the advantages to be gained by the patients, No. 1, is the convenience. They get their entire medical care under all of the various types of medicine in one single physical plant.

Then, eventually, I think they will be apt to get more for what they pay, if you want to put it that way; more for their money than they can get in dealing with individuals. In the same sense, I think it follows that the cost might likewise be less to the patients. How much less I do not know.

The CHAIRMAN. Well, the latter consideration that you have mentioned is coming to the benefit of the public. It is possibly the one that actuates this comittee at the present time in these studies more than any other one. In other words, it has been so definitely shown to this committee that the cost of medical care and hospitalization is such that it is in many instances beyond the reach of the individuals and their families, and it is not available except at such a great price that frequently it is financially tragic in its effect upon those families.

So that the committee is naturally interested in any plan that would enable us, with some degree of confidence, to assume that the cost could be curtailed by legislation that we would pass in one way or another. The committee has already expanded the Hill-Burton Act, which met with very favorable opinion in the House. Yesterday we passed another one of the administration health bills, unanimously, all of which is very encouraging and makes it plain to this committee that its efforts to improve health conditions is approvingly recognized generally by the public.

Now, with respect to this bill that is before us, while it is not in the same sense as those that have preceded it-administration bills-yet it is a measure that has grown out of our experience as we have conducted these hearings, last fall and since January of this year.

There is an underlying thought that at times facilities are not available because of the difficulty in providing for them; because of the financial burden.

Your organization has fortunately been able, so far, to finance its efforts without the assistance of a bill of this character, yet you have frankly admitted that if such a facility had been available in the beginning you would probably have taken advantage of its terms.

Is it your opinion that the availability of a statute such as this would have a tendency to obstruct medical facilities in connection with group practice or individual practice in more remote communities in the nations !

Dr. BAILEY. I feel that in the more remote communities that this bill—that they would have a pretty difficult time in fulfilling the requirements of this bill, actually.

I understand in the bill at the present time also you have left it to the discretion of the Surgeon General as to the number of specialists, for instance, that have to be incorporated in the group before they qualify.

I feel that this bill would definitely enhance the development of groups everywhere, but I think it would be a little difficult the way the bill is stated to fulfill the stipulations of the bill in the remote communities.

The CHAIRMAN. Probably I should not have used the term “remote"; use it in the way that enables you to give the meaning to it that you have.

When I speak of remote I have in mind communities that are removed from hospital facilities at the present time. It would not necessarily mean communities so remote that there would only be one, maybe one physician in a great area. I do not mean it particularly in that respect.

But, would it be helpful in providing facilities in communities that at the present time are without some outside assistance, would not be in a position to have the advantages of health facilities that we could recognize might be desirable when there is availability of funds such as this bill would provide.

Dr. BAILEY. Well, I think the answer is yes, to what you are saying: However, I can only think of, for instance, an area which we would call remote-take Washington and Leesburg, for instance, 40 miles from Washington. To go to Leesburg, with money available to establish a clinic under the bill as stated, a group up in Leesburg, I do not think it would facilitate the thing up there. I do not think that you would ever be able to group the medical profession in that area in a group really, from a personal point of view.

I do not mean that the doctors want to have more facilities to do this and work with more comfort and render more care to all of those areas arund Leesburg, but I personally feel that they would not take advantage of the bill. They would not want it.

Now, I am just speaking my own opinion.

The CHAIRMAN. Of course, I would not look upon Leesburg as a place that would necessarily require the facilities that are made available by this bill. I have in mind smaller communities, as well as the larger ones. There is no doubt at all in your mind that this would be very helpful in our large communities.

Dr. BAILEY. I agree with that.

The CHAIRMAN. But, as you go down the line and approach the point of remoteness, why necessarily, the facilities would not be as readily accepted or necessary as they would where there was a larger population. That is your feeling.

Dr. BAILEY. That is the way I feel; yes, sir.

The CHAIRMAN. Now, having in mind the facilities that are available now, using the city of Washington as an illustration, is there a place where a setup such as this could be available in a city the size and within the existing facilities, that Washington has?

Dr. BAILEY. You mean, is there a building already constructed that could be bought?

The CHAIRMAN. No; I mean is there a field of activity open, in your opinion, or fields of activity, that in a city the size of Washington, under the facilities that it has, that could properly and would be expected to use a statute such as this, or take advantage of such a statute?

Dr. BAILEY. Yes: I think that is so.

The CHAIRMAN. I would like for you to explain to me the financial background of your organization. It had to borrow money. Now, in just what form did that borrowing take and from whom?

Ďr. BAILEY. The borrowed money was secured from Walker & Dunlop, which are investment brokers here in the District of Columbia. We obtained our loan from them as, entirely a first trust at a 5 percent interest rate, to be amortized over a 20-year base.

The CHAIRMAN. Now, who secured the trust?

Dr. BAILEY. Walker & Dunlop and the doctors of the clinic. The corporation members, members of the corporation secured the trust.

The CHAIRMAN. Did you execute it as a corporation or as individuals?

Dr. BAILEY. No; we executed it as a corporation.

The CHAIRMAN. Was it necessary to make a financial statement at the time that you obtained the assistance of the investment brokers?

Dr. BAILEY. Yes.
The CHAIRMAN. Before the advancement of the funds ?
Dr. BAILEY. Yes.
The CHAIRMAN. Did you have an equity at the time or not?
Dr. BAILEY. Yes.

The CHAIRMAN. Or was it dependent upon the personnel, or personal wealth of the individuals, or their standing?

Dr. BAILEY. We had an equity at the time.
The CHAIRWAN. You did have an equity at the time?

Dr. BAILEY. We had purchased the land and had already sold a certain amount of stock at that time.

The CHAIRMAN. So that with the land that you had and the stock you had sold, that brought in revenue to the capital of the company and you had a bankable proposition.

Dr. BAILEY. That is right.

The CHAIRMAN. Well, under those circumstances undoubtedly you would have had a bankable proposition under the terms of this from a financial standpoint, I mean.

Dr. BAILEY. Yes.

The CHAIRMAN. I have in mind that the limitation of the bill is that the mortgage could not exceed 90 percent and I assume that the equity that you had, that you would have qualified under that provision at least.

Dr. BAILEY. If you break it down to that, we have about a 65 percent trust on the property.

The CHAIRMAN. Now, what agreement did you have to make or what assurance did you have to give as to your ability to amortize

your loan?

Dr. BAILEY. We took a long-term lease on the building at a certain amount of rental per month, per year, on this building.

The CHAIRMAN. Who owns the building?
Dr. BAILEY. The Clinic Properties Association, Inc.
The CHAIRMAN. And you pay them rent?
Dr. BAILEY. We pay the corporation.

The CHAIRMAN. Is there any provision to the effect that while you are paying the cost of the building, that the title will revert to you?

Dr. BAILEY. To the corporation ?

The CHAIRMAN. Or are the same people in the corporation that are in the clinic?

Dr. BAILEY. Some. All members of the clinic are not members of the corporation.

The CHAIRMAN. Was the stock of the corporation that was sold stock in this clinic?

Dr. BAILEY. No; the stock of the corporation that was sold was stock of the Clinic Properties Association, Inc.

The CHAIRMAN. Is that stock common or preferred stock?

Dr. BAILEY. That stock is common stock. There are two types of stock. We felt this, and I think we will explain the situation, the stock situation, which is a little difficult.

Inasmuch as we issue two types of stock, all common stock, one we called

type B stock, and the other type A stock. Type B stock is only available to the participating doctors in the clinic itself. Type A stock was sold to anybody that wanted to buy it. They could buy the type A stock.

The main difference is, and the reason that we broke it down is, while all participate alike in any dividends or whatever may arise, however the type B stock votes the majority of the board of directors of the corporation and the type A stock votes the minority of the board of directors of the corporation. By doing this, this was the only security that we could have as doctors in such a project. In other words, the board of directors might have decided 2 or 3 years hence that they could make more money for the corporation by renting this building out as an insurance building, for instance, than by renting it to the doctors participating in the clinic. We vote the majority of the board of directors in.

The CHAIRMAN. Well I can see that you had a desire to make certain that you continue as doctors to operate that facility.

Dr. BAILEY. That is right.

The CHAIRMAN. Was there any guaranty given as to the amount of dividends that would be paid?

Dr. BAILEY. No; there is no guaranty of dividends at all.

The CHAIRMAN. That is, that the corporation would be able to pay in dividends. Dr. BAILEY. No. The CHAIRMAN. Has the corporation paid any dividends? Dr. BAILEY. Not as yet.

The CHAIRMAN. Has the reserve been built up since the stock was sold?

Dr. BAILEY. We have not sold all of the stock as yet. We are still selling stock. And, when we reach—we have sold 65 percent of the stock. We do not anticipate that we will sell 100 percent of it, but we are going to sell more stock to the point that we want to raise as much money as we will actually need.

The CHAIRMAN. I have asked these questions of a financial character, because I wanted to see how it was operating and especially in view of the fact it had been a bankable matter, and get what information I could to be applied to applications and loans to be made under the provisions of this bill. So that has been the reason that I have asked so many questions with respect to the financial setup.

Dr. BAILEY. I would like to say that we went, at the onset of this project, we went to a number of places to try to obtain a loan. Some were willing to go along with a small amount; others a little more. The greatest loan that we were able to receive from an actual bank was $275,000. We were able to secure $125,000 more from this other financial organization and therefore, of course, we accepted it, because we needed as much money as possible.

The CHAIRMAN. Now, with respect to the operation of your elinic, approximately how many patients do you care for?

Dr. BAILEY. Well, we do not know. Of course we are not in business yet, sir.

The CHAIRMAN. Oh, I see. I thought you were.
Dr. BAILEY. We are still under construction at the present time.

The CHAIRMAN. I see. Well then, are you paying salaries to your force of 25, preliminary to your actually engaging in business ?

Dr. BAILEY. No, sir. The 25, we have not even completed the list of 25 yet, that is our quota. We have many applications, but we have not picked a sufficient number to fulfill all of those places as yet.

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