Here are some of the reasons such as broad diverse cross section of our citizenry agree so emphatically on the principles embodied in Senator Sparkman's bill.

Like the Group Health Association of America, the cooperative league believes in the better and more rational organization of medical care and health services in our country. We believe that there are four basic elements in that more rational and effective organization. One is group practice of medicine by balanced groups of doctors and professional medical personnel. Another is prepayment of the costs of medical care on a budgeted basis so as to bring the best of modern medical care within reach of as large a percentage of our people as possible. A third is preventive, comprehensive, regular care, aimed at maintaining family health and keeping people out of hospitals rather than episodic medical care which is necessarily limited to attempting to cure disease after it has been serious. And the fourth element is the opportunity and the responsibility of groups of our citizens to act voluntarily in the formation of group health plans in collaboration with groups of their doctors and nurses.

Such plans are to be found all across our country, in all sorts of communities, among all kinds and groups of people. Their basic philosophy is that the doctor should be provided with an assured income as a reward for keeping people well instead of having to depend on an uncertain income derived from people after they have become sick.

We support this legislation, S. 3215, because we are convinced it is necessary if voluntary constructive action by consumers of health care is to receive the encouragement it should have and to make the contribution to the better health of our people which such action can bring.

Only where the costs of preventive care are already paid and where doctors' income is thus already assured through the voluntary action of his patientsonly under these circumstances is there incentive on the part of doctor and patient alike to keep people out of hospitals and thus to check the alarming increase in costs of medical care and the alarming and soon to be aggravated pressure upon both hospital space and hospital costs.

We can submit carefully compiled evidence to show that subscribers to group health plans do have hospital utilization rates which are from 50 to 80 percent of those of other insured groups in the population. (See supplementary data at the end of this statement.)

But for easily understood reasons group health plans face a difficult problem of receiving financing for the physical facilities they need. This has always

been true and no one can accurately estimate how much benefit such plans might have brought to our country through voluntary action of its citizens if the financial problem could have been solved.

Such consumer-sponsored plans are nonprofit, of course, to begin with. They therefore cannot offer expectation of substantial earnings as security. Second, the doctors' facilities, clinic buildings, and the like, which are essential if such plans are to operate at all, are single-use buildings and therefore not in the nature of prime objects of investment by financial institutions. Third, in many, many cases the need is greatest in smaller communities where even if the local bank desires to make such loans, it simply lacks the resources with which to do so unless a guarantee is provided such as S. 3215 could give. Fourth, while the members and subscribers to such plans or the potential members and subscribers to such plans could and indeed have put up enough contribution to finance the operations of a plan, there are times when they are quite unable to subscribe the amounts of money necessary to finance expensive modern health facilities.

Let me cite a couple of examples.

First, take the case of a small community threatened with loss of its only hospital and of all its doctors and where families subscribed $100 each to provide their town with desperately needed modern clinic facilities. Some $45,000 was needed to complete construction of these facilities over and beyond what could be raised by the people's efforts. In the absence of legislation like S. 3215, it took 15 years before these earnest people were able to borrow the funds necessary to supplement their own and to provide the facilities their town needed. Another case is one where an already established group health plan in a rural area is ready and willing to construct a branch clinic in a neighboring community. The nearest hospital to this community is 30 miles away. And no facilities exist where efficient medical service could be provided or where, in

fact, well-trained modern physicians are willing to practice. So the need is obvious. The local bank is quite willing to make a loan to finance the needed facility but it simply does not have adequate reserves and is not large enough to take the admitted risk of financing a building which it would obviously have considerable difficulty in selling in case foreclosure became necessary. Were S. 3215 on the statute books the local bank could and would make this loan. doctors could be attracted to this community and the health of the people protected.

Many similar examples could be given, both from other rural areas, to which the legislation would give preference and also from cities where labor-sponsored and cooperative consumer-sponsored group health plans could care for much larger memberships if only they could receive the financing for the additional physical facilities they need.

Earlier in this statement we referred to the comparative studies that have been made concerning actual utilization of in-hospital services by members of the three most popular types of medical protection plans, viz. Blue Cross-Blue Shield, indemnity plans, and group practice.

The results of the studies reveal with force and clarity that members of group practice plans make less use of hospitals than the other two types of protection. reflecting the result of early treatment, preventive medicine, and a program of using our medical resources to prevent or detect at an early stage the conditions which otherwise lead to hospitalization.

The following chart covering 3 recent years is based on number of hospital days per 1,000 persons covered by the three types of protection in the Federal employees health program:

FEDERAL EMPLOYEES HEALTH PROGRAM

Experience for 3 contract years comparing individual group practice plans nommaternity in hospital services, both options

As Dr. George Baehr (chairman of the Hospital Code Committee of the Board of Hospitals of the City of New York, and who was director of clinical research at Mount Sinai Hospital) said in the Michael M. Davis lecture in May 1965:

"The difference of close to 50 percent in the utilization of hospital facilities under the two systems of medical care and payment for physicians' services may perhaps be ascribed in part to the number of surgical operations performed annually on Federal employees and their families under the two different systems of medical care:

“Number of surgical operations performed

"So great a difference in hospital utilization under the two systems of medical care and methods of payment upon the costs of medical care must undoubtedly be an important factor in the magnitude of personal consumer expenditures in the United States for private medical care, which in 1963 reached $23.7 billion

Several cities already have been favored with specific legislation to help them in this manner and I understand that you are very aggressively and intelligently pursuing this for some of the cities in Alabama.

This provision, of course, should apply to redevelopment efforts in all important cities and we so desperately need that kind of help right here in Kansas City where the downtown area is crying for major remodeling.

I would appreciate your introducing this letter in the records of the hearings by the subcommittee and would be willing to appear, if it would be helpful, in attempting to make very clear the condition of the downtown section of Kansas City, which undoubtedly is repeated throughout the United States.

Very truly yours,

MAURICE JOHNSON, Executive Vice President.

METROPOLITAN GOVERNMENT OF NASHVILLE AND

DAVIDSON COUNTY,

Nashville, Tenn., May 3, 1966.

Re S. 3282, amendment to the Housing Act of 1949 for revitalization of central business districts.

Hon. JOHN J. SPARKMAN,

Chairman of Subcommittee on Housing,

Senate Committee on Banking and Currency,

3203 New Senate Office Building, Washington, D.C.

DEAR SENATOR SPARKMAN: Metropolitan Nashville and Davidson County has in planning project No. 1 of the $87 million central loop general neighborhood renewal plan. While we are fortunate that under the metropolitan charter the tax base for the support of this and succeeding projects is countywide, there is, nevertheless, a danger of an unbalanced overall program due to a shortage of resources. For example, we will also have to allocate funds for access roads between the central business district and the Interstate Highway System. The proposed amendment allowing for a greater share of credit for communitywide facilities will be of substantial benefit to us, and I am certain to other communities.

Removal of the residential requirement for central business district renewal would be in keeping with the broadened commitment implicit in the creation by Congress of the Department of Housing and Urban Development. By itself, the residential requirement does not serve the purpose of increasing the quality or quantity of housing. We, in this community as in others, have made and plan to make full use of the aids provided by Congress as well as the additional aids contemplated under the demonstration cities bill.

I would like this letter to be entered in the record of the hearing on this bill.

Sincerely,

BEVERLY BRILEY, Mayor.

Hon. JOHN SPARKMAN,

CITY OF HUNTSVILLE, Huntsville, Ala., May 4, 1966.

Chairman, Subcommittee on Housing, U.S. Senate, New Senate Office Building, Washington, D.C.

DEAR SENATOR SPARK MAN: Let me take this opportunity to respectfully urge your strong support of Senate Bill S. 3282.

In past years, the downtown cores of far too many of our cities have been allowed to deteriorate to such an extent that the only possible cure for all of the ills associated with this deterioration lies in legislation such as this Bill, which will provide Federal aid to the cities in the efforts to arrest and remove this blight and deterioration.

The costs involved in CBD renewal are prohibitive without the Federal aid provided by S. 3282. With this aid, cities will be able to make and carry out effective plans for the revitalization of downtown areas. The provision that site improvements and supporting facilities provided by a public body or entity shall be eligible as part of gross project costs and as a local grant-in-aid will enable cities to provide such needed facilities and at the same time defray portions of the overall cost of such urban renewal projects.

at reasonable, budgeted cost through a group of physicians practicing together as a medical group. The plan assumes the responsibility for providing the service to the member. The medical group assumes responsibility for the health needs of the member in return for a fixed regular payment. The physicians have a built-in interest in keeping the patient well.

Establishing such a plan is a complex and difficult task. A large sum is required to finance the preliminary work: bringing together physicians and consumers, establishing benefits and standards, developing contracts, and a multitude of other organizational details. In addition, another million dollars may be necessary to build a medical center for a group of 20 physicians with appropriate ancillary services. This advance financing need is a very serious problem for people of average means.

Groups of physicians seeking financing for profitmaking medical enterprises seldom have trouble getting financing from their local banking institutions or, in the case of loans of major size, from outside banking and insurance firms. When well-to-do physicians with established practices plan to build in prosperous communities, money for capital expenditures is readily available. For such commercial and profit-oriented ventures, doctors have also found the door of the Small Business Administration open to their needs.

Nonprofit group health plans have had quite different experiences. What is required in the consumer's interest and what must be offered to attract physicians to an economically deprived urban or rural neighborhood may not offer the most attractive prospect for venture capital. Location and design of a consumersponsored medical group facility is based on health service requirements rather than solely on fiscal attractiveness. Planning here is for people—not profits. The difficulties of GHAA affiliates in securing adequate financing is repeated several times in documents presented to the Committee on Interstate and Foreign Commerce in its hearings on H.R. 2987 conducted last year. They can be found in the record of the 1965 hearings at pages 313-317.

They represent lost time and dollars, dedicated people having to pay exceedingly high interest and amortization rates when loans were gained and of the need to tap operating capital to secure as much as two-thirds of the total loan. The expressed need today is greater. Appended are copies of recent statements from these and other organizations regarding needs for financing. Among these, the Medical Foundation of Bellaire, Ohio, is a nonprofit community health organization whose affiliated 16-physician Bellaire medical group serves 7 Appalachia counties in Ohio and West Virginia. This foundation now reports need for financing $1,230,000 of construction, compared with $500,000 to $800,000 reported at the time of last year's hearings.

Group practice plans in St. Paul, Minn., and San Diego, Calif., which reported no construction financing needs last year now state they need respectively $750,000 and $625,000 of financing for needed expansion.

Starting a new plan depends on adequate financing. In New Haven, Conn.. there is a vigorous movement for the development of a group practice facility. This project is unusually important because, although primarily for comprehensive patient care on a prepayment basis, it would operate in the Yale-New Haven Medical Center, where it would also serve as an education center to train future physicians in family type medical care in a group practice setting. The project is sponsored by the Greater New Haven Central Labor Council and other consumer groups and has been assured of cooperative participation by the Joint Board of the Yale University School of Medicine and the Yale-New Haven Hospital. They are confronted with the immediate need for financing of $750,000 for a new facility and an additional $500,000 for later expansion.

Because it is a very rational method of providing medical care, group practice. especially when combined with prepayment, provides very special values to the whole community. The explosion of medical knowledge in recent years has revolutionized the way doctors work. The day has long passed when any single physician can hope to provide to any one person the best of medical care in all of the many areas of medicine.

Application of the vast body of new knowledge requires a battery of complex. expensive facilities and equipment for diagnosis and treatment. Specialization has necessarily grown at a rapid rate. But as medical care has become more effective, it has grown more complex and more fragmented. The struggle of the doctors to achieve effective organization of medical care has been in progress for decades. The full range of specialists are associated in organized fashion in

medical schools and medical school teaching hospitals. The association of specialists in single and multiple specialty groups also continues to increase. Yet the medical school, teaching hospital, and specialty groups find it almost impossible to provide the complete family medical care that consumers need and expect. Group health plans bring together medical groups and consumers. They permit careful planning to provide comprehensive care-preventive, diagnostic, therapeutic, and rehabilitative-through a well-balanced combination of medical specialists and ancillary services. They exert a great influence in helping to maintain quality of medical care and control of medical costs. The 5 million Americans enrolled in GHAA-associated, consumer-oriented plans spent on the average 40 percent less time in our Nation's crowded hospitals in 1962-63 than did patients covered by Blue Cross-Blue Shield or indemnity plans. The consumer needs a means of budgeting or prepaying the cost of medical care. This is well recognized through the rapid spread of health insurance. Only the prepaid group health plans provide a built-in incentive for the doctor to keep the patient well.

President Johnson in his 1966 health message to the Congress noted that "Group practice benefits both physicians and patients. It makes expert health care more accessible for the patient. It enables the physician to draw on the combined talents of his colleagues."

President Kennedy stated that "Group practice offers great promise of improving the quality of medical care, of achieving significant economies and conveniences to physician and patient alike, and of facilitating a wider and better distribution of the available supply of scarce personnel."

Passage of S. 3215 can speed up the development of consumer-oriented plans. It provides for loans, not charity. Experience has shown that without the Federal loan guarantees, nonprofit plans will have a difficult time borrowing from commercial lenders. The plans themselves will generate the income to repay the loans and a reasonable rate of interest. Government guarantees will stimulate investments by welfare funds, foundations and unions in health care that people need and that these organizations will want to support. S. 3215, which provides for guarantees for 25-year periods, makes it possible for nonprofit, consumeroriented group health plans to obtain such loans and, provides for supervision of the program by FHA and the participation of Public Health Service will provide real impetus to socially oriented plans. We urge its adoption.

STATEMENT SUBMITTED BY KAISER FOUNDATION HEALTH PLAN, INC., IN SUPPORT OF

S. 3215

Mr. Chairman and members of the Subcommittee on Housing, my name is Gibson Kingren and I am representing Kaiser Foundation Health Plan. Inc. Last March (1966) I testified before the House Banking and Currency Subcommittee on Housing in favor of H.R. 9256, the group practice health facilities measure which is the companion bill to Mr. Sparkman's S. 3215.

Kaiser Foundation Health Plan, a nonprofit organization, is a part of the largest group practice prepayment health program in the United States, providing medical services on a self-sustaining basis to more than 1,350.000 persons in California, Oregon, Hawaii, and Washington. Kaiser Foundation Health Plan contracts with Kaiser Foundation Hospitals for hospital care required by health plan members and contracts with four independent groups of physicians for professional services.

Kaiser Foundation Hospitals owns and operates 15 hospitals; a 16th is under construction, and 3 other hospitals are scheduled for completion by 1970.

All but two of the Kaiser Foundation Hospitals include extensive out-patient departments as an integral part of the facility. In addition to the out-patient facilities located at hospitals, there are 29 out-patient clinics which are separate from the hospitals. Our estimate is that the current cost of a 10- to 12-doctor out-patient facility-including land, building, and equipment-is between $400,000 and $500,000 and may run significantly above this in densely settled urban areas where land costs are high.

Each new health plan member in the Kaiser Foundation medical care program requires an investment of at least $90 in hospital and medical office facilities and equipment-almost a million dollars to serve 10,000 members. The fixed assets now employed in our medical care program cost more than $90 million and the replacement value is significantly higher.