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The CHAIRMAN. Yes, Doctor.

Dr. BAEHR. I am a member of the central executive committee of the Health Insurance Plan, but the credit really, and the story that you should hear, is that of the doctors who have done this kind of thing against great difficulties and against resistance within their own profession and have believed in the ideal of complete service at low cost for people of moderate income and I am sure, and I hope that they will have an opportunity either today or sometime, to present the story that they have to tell you, and show you the facts and figures they have.

They can show you how they have gone to banks and insurance companies in trying to get loans in the early days.

The CHAIRMAN. That is exactly what we want to hear.

Dr. BAEHR. They can quote times and places and incidents, and I should think it would be valuable.

The CHAIRMAN. It is extremely so. And, we will devise some ways and means that we will get this whole story.

Dr. BAEHR. And, one of my associates, Dr. Pickard will portray to you in actual figures the comprehensiveness of the service of all of the different types that people actually have secured under this kind of a program.

Mr. HESELTON. Mr. Chairman, I will be more than happy to work with you, and I am sure that the other members of the committee will, to the end that these hearings may be continued just as long as we need them to get this record clear.

The CHAIRMAN. What we are up against is not our desire. If that could prevail we would go right along.

Mr. HESELTON. I think that we can arrange to be on the floor, if anything comes up when we are needed. .

The CHAIRMAN. Of course, that requires the consent of the management and also of the House. What I am hopeful for is that we will hear as much as we can and they will not ring those bells as quickly as the House convenes at 11 o'clock, and that we will be able to hear as much as we can today, and I do hope that the interest of these gentlemen who will come here today will be sufficient that, with the unfortunate situation that has developed, that we can count on them on another occasion, that we will fix very shortly, when we will be more sure of the time that we would like to give to hearing their testimony.

I think that without exception the testimony that you have given, Dr. Baehr, and the indication of what your associates will give, will constitute as important a contribution to this bill as can or would be given by any other organization and I certainly hope that we will continue to have your help. We are working along lines here that, as you say, can meet with objection, but let us have fortitude enough for that and we will face those conditions with courage and with determination.

Of course, as Mr. Heselton has just called to my attention, those who testify can revise and extend their remarks just as fully as they would like, even though the question period might be cut short.

So, I want you to feel free to give us every possible bit of information that will be helpful to us in this important matter in which we are engaged.

Dr. BAEHR. Mr. Chairman, my associates would be pleased either to remain today or to come back at any other time, at the convenience of the committee.

The CHAIRMAN. Thank you.

Dr. BAEHR. And I would like, before I leave, to distribute, or have distributed the last annual report of the health-insurance plan which is just off the press.

The CHAIRMAN. Thank you.
Now, who do you suggest as

the next witness ? Dr. BAEHR. Dr. Robert E. Rothenberg, who has already been introduced as the medical director of the central group of Brooklyn, Health Insurance Plan of Greater New York.

STATEMENT OF DR. ROBERT E. ROTHENBERG, MEDICAL DIRECTOR,

CENTRAL GROUP OF BROOKLYN, HEALTH INSURANCE PLAN OF GREATER NEW YORK

The CHAIRMAN. Dr. Rothenberg, we will be pleased to hear from you.

Dr. ROTHENBERG. Mr. Chairman and gentlemen of the committee. The passage of the Wolverton bill, H. R. 7700, would make a fine contribution toward a solution to the people's health needs and should be supported actively by everyone interested in expanding medical

carc.

It is obvious that there is great need to promote and extend voluntary, prepayment health-service plans and to encourage physicians to form medical groups. Modern medical trends demand the pooling of knowledge and point the necessity for the pooling of equipment and facilities.

There is just too much to know today for any one doctor, no matter how brilliant or highly trained he may be, to be able to handle alone all the illnesses of one patient.

Similarly, there are so many costly instruments of diagnosis and treatment (such as X-ray machines, electrocardiographic machines, basal metabolism apparatus, laboratory equipment, etc.) that the average doctor would be unable to purchase them should be desire to establish a truly, complete medical facility of his own. If he did, the costs of medical care to his patients would rise even higher than they are now.

Under existing circumstances, the costs of diagnostic tests and the charges which hospitals are forced to make, have placed private medical care beyond the reach of the majority of our people.

The old system of a fee for each service, or "c. o. d. medicine”, must therefore give way to a more sensible pattern of payment of medical bills. As a direct consequence of the high cost of medical care, we are witnessing the rapid development of prepayment health service plans which permit the patient to budget in advance for his medical expenses and which give comprehensive care without the limitations brought about by a fee for each service.

In the concluding chapter of a book published in 1949, entitled “Group Medicine and Health Insurance in Action,” I stated:

Medical achievements during this century have been nothing short of miraculous, but the gains have been almost entirely along scientific lines. There is justifiable pride in the realization that today people get to places via stratoliner and streptomycin instead of stagecoach and squill. Unfortunately, the profession has been rather slow to recognize that it is just as difficult for the average man to afford the stratoliner and streptomycin in this era as it was for his grandfather to afford the stagecoach and squill of former days. By the same token, it is wonderful to contemplate that sepsis and shock, when treated early and properly, no longer present such great dangers to life. However, it is less pleasant to admit that too many of our people are unable to get to a place where they can receive proper treatment and that too many of them would be unable to pay for it even if they did get there.

It is medicine's responsibility not only to discover new preventions and cures but to keep pace with economic advances. The problems of distribution and cost of medical care are as much the doctor's business as the proper dosage of digitalis or the correct procedure for cure of gallbladder. No American should be so isolated that he cannot obtain the services of a competent physician, and so service should be so expensive that it is beyond his ability to pay. Although experience in this field has been of relatively short duration, it can be stated with certainty that the solution to many of the country's medical problems can be found in group practice on an insurance basis.

Group medical practice embodies the modernization of old techniques and permits the tired, overworked solo physician to share with highly trained colleagues the burden of his struggle against disease. Since no doctor can possibly achieve proficiency in all branches of medicine, the cooperation and specialization which exist in group medical practice offer much more efficient care. It is an obvious fact that the consultation technique often leads to the cure of otherwise obscure ailments. However, the improvement of practice methods by the formation of medical groups is of little help if the patient is unable to meet the costs of these services. For this reason, the organization of prepayment health insurance in combination with group practice has been a natural outcome. Even at this early date, several million of our people are receiving aid in payment of their medical bills from health insurance plans or companies. It is now the duty of physician and public alike to see to it that the benefits of this type of insurance are extended, by one means or another, to all our people who need and want it.

It is my conviction, and the conviction of the 1,000 HIP physicians whom I represent as chairman of their Medical Group Council, that group practice units throughout the country should be encouraged to develop and should be given financial aid to establish their physical facilities. This aid should come from private sources and the groups should be owned and controlled by the doctors themselves. At this time, there are from 650 to 700 medical groups in the United States. By enabling physicians to borrow funds from lending institutions, the Wolverton bill, H. R. 7700, would stimulate the formation of additional groups in urban and rural communities throughout the country. Lack of sufficient medical groups with adequate diagnostic, treatment and hospital facilities has been the main deterrent to greater expansion of comprehensive, voluntary, prepaid health service plans. The people want the benefits of these plans and

are literally begging existing organizations such as HIP and the Kaiser Foundation to expand their activities and build new facilities.

The Central Medical Group of Brooklyn, of which I am the medical director and chief of surgery, is one of the 30 HIP medical groups. This one group alone serves 32,000 New Yorkers and has 39 family physicians and specialists on its staff. It has its own medical center, à 24,000 square feet building, fully air-conditioned and fireproofed, costing over $900,000 to build and equip. It is not the purpose of this presentation to urge the committee to act in favor of H. R. 7700 so that this group or any of the other HIP groups may benefit from its provisions. Rather, it is our purpose to tell you a few of the problems and difficulties we in the Central Medical Group encountered when we attempted to obtain financing for the construction of our group center.

The kind of discouragement we faced over and over again in our search for a mortgage commitment has been experienced by many other groups in the process of formation and has been responsible, in large measure, for their failure to actually come into being. The enactment of H. R. 7700 into law would mitigate most of these difficulties.

From 1947 to 1952, the Central Medical Group put aside approximately 25 percent of its doctors' earnings, before taxes, to finance a group medical center. This amounted to $491,500 but comprised only half of the moneys necessary for the construction and equipment of a facility adequate to care for its patients. The group therefore went to banks and insurance companies for the purpose of obtaining, a mortgage loan. At least 15 savings banks and insurance companies turned down our requests for a mortgage. Nine mortgage brokers were approached to lend their aid. All of them requested bonuses ranging from 11/3 percent to 3 percent of the face amount of the mortgage. They too, failed to obtain a commitment. Many banks asked for personal net-worth statements from each of the physicians in the group, and even though these were invariably judged to be satisfactory, it did not convince them to issue a mortgage. (From this somewhat unusual request for net-worth statements, one might predict the added difficulties that would beset a group of young beginners or veteran physicians who had not yet been in practice and who, therefore, could present no satisfactory net-worth statement.)

Upon analysis of the causes of our failure to obtain help, we discovered the following:

1. A group medical center or diagnostic and treatment center is a speciality building and therefore an unattractive mortgage risk in the eyes of savings banks and insurance companies.

2. A group medical center is an unfamiliar type of building and differs considerably from the standard professional building.

3. The concept of voluntary prepaid, comprehensive, health insurance was difficult for banks and insurance companies to grasp. Some looked upon us as bold plungers into an uncharted field and felt that their loans would be insecure in our hands.

4. The cost per square foot of constructing a group medical center is almost double that of an ordinary office building. There is much more plumbing needed for treatment rooms; special wiring, special outlets and heavy electrical conduits are required to service X-ray and other specialized equipment; an elaborate intercommunication system is essential, and an exceptional number of partitions are required for the many treatment rooms, consulting rooms, and nurses stations. As a result, banks and insurance companies were discouraged from participating in such a venture or in advancing sufficient funds to do the job properly.

5. The geographic location of a group medical center may be medically desirable and necessary but, mortgagewise, may be considered a highly undesirable neighborhood. Some of the poorest urban localities and some of the least developed rural area may be most suitable for the placement of a diagnostic and treatment center and yet would seem to a bank or insurance company, an undesirable location in which to invest mortgage money.

The inability to obtain financial aid delayed construction for 1 year until finally, the group was fortunate in discovering a forward-looking insurance company who agreed to issue a 20-year mortgage in the amount of $250,000 at a 434 percent interest rate. This mortgage amounted to approximately 30 percent of the cost of construction whereas the group would have liked to have obtained a mortgage covering 50 percent to 60 percent of the total construction costs. Had the group been successful in obtaining a mortgage for 50 percent to 60 percent of the costs of its center, there would have been capital available to apply toward the construction of its own hospital. While such a project is still the aim of the group's doctors, they have been forced, because of lack of funds and available mortgage possibilities, to abandon plans for the construction of this much-needed facility.

The enactment of H. R. 7700 would lend dignity and stability to voluntary, prepayment health service plans and would aid in the establishment of more medical group practice units. It is my opinion that 15 to 20 additional medical groups would have come into HIP if the young doctors interested in such an association had been able to finance proper diagnostic and treatment centers. These young physicians, many of them just recently released from the armed services, are willing to risk a little capital they possess but their funds must be supplemented by mortgage moneys. Also, it must be remembered that a large share of the money which the doctors do have available, must go into furniture and equipment. Such items cannot, of course, be financed through long-term loans.

The ultimate effect of H. R. 7700 would be to encourage private enterprise to play a larger part in providing a wider distribution of medical care at a cost more nearly within reach of the public.

The CHAIRMAN. Doctor, we certainly thank you. While this statement is brief, yet the contents of it is such as to be very helpful to the committee and it certainly points up the necessity of some assistance, if we expect this worthwhile service that is being rendered to be expanded. And, as you have so well pointed out, the young doctors coming out of the service are not in a position, from a personal standpoint, possibly, to obtain the loans that would be required, and it is, therefore, one of those things that if we believe in promoting the health of our people then there are continuing duties, in my opinion, on the part of the Government to do its part to bring that about and supplement the work that is being done by your organization in the city of New York, which is certainly not only a pioneer, but it is of a type that should give encouragement to others engaged in such important work.

Dr. ROTHENBERG. Thank you, Mr. Chairman.
The CHAIRMAN. Dr. Baehr, whom do you want to present next?

Dr. BAEHR. Mr. Chairman, as the time is short, I would appreciate it if you would listen to a brief statement by Dr. Richard M. Carey, who is medical director of the Upper Manhattan Medical Group.

The CHAIRMAN. Very well, we will do so right now.

STATEMENT OF DR. RICHARD M. CAREY, M. D., MEDICAL DIRECTOR OF THE UPPER MANHATTAN MEDICAL GROUP, HEALTH INSURANCE PLAN OF GREATER NEW YORK

Dr. CAREY. H. R. 7700 recognizes the need to encourage the extension of voluntary medical insurance plans, and to encourage physi

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