hospital and need for hospitalization being the key in determining eligibility.

Senator CRANSTON. Our bill S. 59 goes a long way toward accomplishing that.

Thank you very much, you have been very helpful, and I apologize for my erratic behavior during your particular testimony.

QUESTIONS SUBMITTED BY SENATOR CRANSTON SUBSEQUENTLY TO
DR. SCHMIDT

Q. 1. For the first time since World War II, there is a potentially reduced level of funding for VA medical research programs. In Fiscal Year 1973, the VA appropriation for medical and prosthetic research was $76.8 million and in fiscal year 1974, the requested appropriation amount is $71.0 million.

What do you believe the level of funding for VA research programs should be in fiscal year 1974?

A. With respect to the level of funding for the V.A. Research Program in fiscal 1974, it is my considered opinion that reduction in the appropriation to 71 million dollars would be a serious blow to an exceptionally well developed and productive research program in the Veterans Administration. The actual reduction in research capabilities is reflected well beyond the difference in dollars. Thus, to my knowledge there are at least two new hospitals which could be expected to develop research programs and this will further effectively be reduced by the increased costs of conducting research because of inflation.

More specifically, I believe that the original request coming from the leadership in the Veterans Administration would be entirely appropriate at the level of 87.5 million dollars.

Q. 2. By what percentage do you estimate that research funding must increase in fiscal year 1974 just to maintain existing program levels?

A. I estimate that research funding must increase in fiscal year 1974 by at least ten percent to maintain existing program levels. I have reached this figure by examining increased costs within our own institution which include salary raises and price increases for supplies, equipment and animal care.

[The prepared statement of Dr. Schmidt follows:]

STATEMENT OF DR. RICHARD P. SCHMIDT, DEAN OF THE COLLEGE OF MEDICINE, UPSTATE MEDICAL CENTER, STATE UNIVERSITY of New York, SYRACUSE, N.Y.

Mr. Chairman, members of the Committee, my name is Richard Penrose Schmidt, My position is Vice President for Academic Affairs and Dean of the College of Medicine at the Upstate Medical Center, a unit of the State University of New York in Syracuse. I have previously served on the medical faculties of the Universities of Louisville, Washington and Florida. Immediately before accepting my present position in August 1970, I served as Chief of Staff of the Gainesville, Florida Veterans Administration Hospital.

The contributions of the Veterans Administration to health science education have been great and have been amply documented by others. Suffice it to state that a very large proportion of practicing health professionals in the United States have had portions of their education and training with Veterans Hospitals. In turn, the partnership between the Veterans Hospitals and Academic Health Science Centers has materially benefited the veteran patient in terms of the quality of his care. Largely because of this partnership, patients in veterans hospitals have had available to them most of the skills and resources that modern scientific medicine and technology can offer. This partnership has not been free of stress or critics and there are admitted points of weakness. In my testimony, however, I would prefer to dwell on opportunities, especially as they concern the three major missions of patient care, education and research. These three are interdependent and no one of them can be of highest quality without each of the others.

PATIENT CARE

The emphasis of the entire program is and should be the delivery of high quality services to the veteran patient in whatever circumstances he may be found. For the aim to be anything less is, to me, personally repugnant. Perceptions of the meaning of high quality service may vary and there may be real

istic limitations and the necessity for priorities to be established but there can be no compromise with the basic objective. One of the greatest concerns now facing us in health care is a change from a concentration on episodic treatment of illness to that of comprehensive delivery of services including those of prevention. Furthermore, there is a shifting emphasis toward improvement of services to the ambulatory patient with the hospital becoming to an increasing extent a center for intensive care of the seriously ill. This has a rather interesting side-effect which some have difficulty in understanding. The costs of a hospital rise because of more intensive care and more serious illness but our means of recognizing this in budgeting are inadequate. It is my perception that Veterans Hospitals are funded largely upon the basis of hospital bed occupancy. I believe they should be funded as a care-system with the incentive more toward comprehensive medicine on an ambulatory basis. If a veteran or his dependent is eligible for care, I believe that he should be eligible for comprehensive care whether or not hospitalization is required.

Costs of medical care have increased tremendously and will continue to rise, especially with technological advances which improve the ability to diagnose and treat. The American public demands the best but the best is very expensive. The most efficient medical care system I have seen is that of the Veterans Administration. As I observe the microcosm within my personal view, however, I believe there are some real and inherent dangers because of a general anemia of funding that does not provide adequate numbers of staff to perform the mission of high purpose to the same level of quality the purpose portends. If the veteran is, indeed, to receive care of the highest type, the acute care hospitals must be more adequately funded and special programs reflecting scientific advance supported.

Significant changes have been made and the leadership of the Veterans Administration has worked hard and effectively in developing means by which the care system can be progressively improved. I believe that any legal barriers that may exist should be removed. There should be a continuation and strengthening of the concept of sharing resources with other institutions in the public and private sectors and there must be sufficient freedom for unique or novel arrangements. One of the more interesting challenges we face are the cooperative arrangements among those who function under widely varying regulatory systems, federal, state, and private.

EDUCATION

The Veterans Administration Hospitals in cooperation with universities, have served as a major resource for education of health professionals needed to serve our nation. The capacity of our country to educate young people for careers in medicine and the health related professions has expanded tremendously. In medical schools alone, there has been an approximate 50% increase in entering students in the past five years. I welcome the opportunity for an increased participation of the Veterans Administration in this task, especially as it may increase the capability of existing institutions to meet the demands. We need space, teachers and the appropriate philosophic climate for this to be done.

I will not dwell long upon the value of an educational program to patient care. My career has been devoted to medical education and I have always believed that excellence in care and excellence in clinical teaching go hand in hand. I believe strongly that the veteran patient has benefited from the remarkable foresight of those who were the planners of the association of hospitals and medical schools after World War II.

RESEARCH

I need not speak to this Committee of distinguished senators of the current debate with respect to federal support for biomedical research and research training. I know that each of you has been amply supplied by rhetoric as well as by reasoned arguments from the affected scientific community and from others.

The Congress has acted wisely in providing funds for research within Veterans Administration Hospitals and there has been ample documentation of the value of this research in terms of pay-offs such as in the evaluation of the treatment of tuberculosis and the development of the cardiac pacemaker. More difficult to demonstrate, perhaps, are the indirect benefits. A research program

brings with it a spirit of active enquiry which, in turn, is reflected in the quality of education and of patient services. An institution with active research attracts the best staff and those who are at the forefront of abilities and knowledge.

Perhaps the greatest economic and human impact will be from the discoveries of basic biomedical research but this is now under the greatest liability of damage in the emphasis placed upon directed research. One cannot question the motivation behind this change but many of us fear the results if it is not balanced by fundamental investigation. A fundamental breakthrough in molecular biology could unlock the mystery of cancer and lead to the saving of millions of lives and billions of dollars. The bed-rock of technological development is pure scientific research and we must not shift too far in diverting support to the former lest the latter crumble.

It is my belief that the Veterans Administration should continue to support research on a broad base extending from that of basic biomedical science to that of clinical trials and patient management. There must be an equal demand for quality and accountability at each level.

CONCLUSION

I have directed my remarks to general principles which ultimately must be brought into practical terms of law, policy, finance, and rules. We have many problems facing the health care system in our country and none of us has a simple or cheap means for solution. The problems, however, are also opportunities and as the largest organized health care system in the world, the Veterans Administration is in a unique position to provide leadership. It must be responsive to need and it must have the resources to meet the needs perceived by our people and their leaders. I am sure that there will be many changes and that there will be much resistance to each. I believe deeply that measures which can strengthen the partnership with Academic Health Science Centers will be of mutual advantage and will serve the veteran and the public responsibly. We do have the very real problems of conflicting perceptions of purpose and disparate systems of identification, regulation and control. Without our own microcosm in Syracuse these are much in evident with a medical center including hospitals with five different management systems and health professionals who are paid by strict salary, modified salary or the entrepreneurial fee-for-service basis. Fundamental to much of our future will be our ability to amalgamate these successfully with a lessening of the gross differences in rewards among them.

Senator CRANSTON. Our next witness is Dr. Clayton Rich, vice president for medical affairs and dean of the school of medicine, Stanford University.

Dr. Rich, I am particularly delighted to welcome you from California and appreciate your coming all the way back here.

STATEMENT OF DR. CLAYTON RICH, DEAN OF THE SCHOOL OF MEDICINE, STANFORD UNIVERSITY, STANFORD, CALIF.

Dr. RICH. I am very pleased to have the opportunity to address this subcommittee. I might say, as additional background for the remarks I will make, that I spent the 10 years between 1961 to 1971 as a full-time VA physician. I was the Chief of Staff for the last 2 of those years, at the VA hospital in Seattle, Wash.

I plan to comment principally on some relationships that are related to this professional experience, and to draw on it as dean of a medical school that is very closely affiliated with a VA hospital. I will comment on the relationship between physicians of the staffs of VA hospitals and the quality of the medical programs conducted in these hospitals. This is a relationship which is very dependent upon the budget and which is jeopardized by the 1974 President's budget for the Veterans' Administration.

I will comment primarily on the affiliated hospitals, in part, because this is where my own personal experience had been, and in part because this group represents a very major portion of the entire Veterans' Administration medical system.

Comprising 87 of the 168 hospitals and 176,000 of the 786,000 admissions per year, this group of hospitals is critical for the VA and for the patients it serves. It is an extremely important component of the system, both quanitatively and qualitatively. I believe it is fair to say at this point that these hospitals now generally provide care at the top level of quality of care delivered in this country. This quality is expressed, not only in the high level of diagnostic and therapeutic activities, but also in personalized service to the veteran patients.

enormous

In addition, these hospitals are responsible for an amount of training of medical students, residents, nurses, and other health workers. Our medical school, for example, simply would not be able to maintain either the quality of its present programs or the size of its medical student and residency programs if we did not have the affiliation with the Veterans' Administration hospital.

A third major contribution of the VA hospital system, which has more than proved itself, are the research programs carried out in the VA hospitals. It is worth noting that although they do contribute to fundamental knowledge about health and disease to a very substantial extent, these programs do concentrate mainly on diagnosis and treatment. They do relate directly and intimately to the care of patients that is carried on in the wards in this group of hospitals. Let me say that the present and continued success of VA in maintaining the quality in these different programs is absolutely dependent upon the ability and quality of the physicians who serve on the staffs of the hospitals. This dependence of medical care on the quality of physicians occurs because it is the physicians who make judgments about diagnosis and treatment. If the judgments are of low quality, then backup by nurses or technical backup can be to very little avail.

Because of the critical relationship between the physician staff and the services received by the veteran patient, it is fair to say that the key to success that the VA has had in upgrading its medical programs since World War II has been its ability to attract and retain exceedingly able groups of physicians.

The basis for this success was the decision of the VA at the end of World War II to enter into a partnership with medical schools. The result has been that the VA hospitals have shared to an increasing degree with the medical schools, a class of exceedingly able, highly motivated physicians, which would not otherwise have been available to it.

I would like to comment on why I view these affiliations as having been critical in this success, since these factors will be important in maintaining the quality of VA programs in the future.

At the risk of oversimplificaition, let me say that the majority of physicians who are highly able and effective as physicians, have certain characteristics in common. These include independence, a high level of self-respect, strong motivation, and a capacity for hard work.

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These are the characteristics that are required if one is to become technically competent, to stay abreast of a rapidly changing field such as medicine and to make the kind of judgments that physicians often have to make under conditions of considerable uncertainty.

These exceedingly able physicians can be subdivided into a majority who work as independent entrepeneurs, who satisfy their self-respect as a result of the quality of the care they deliver and financial reward. A second, smaller group, who work in medical schools, are oriented more toward intellectual achievement in patient care, research, education, and are oriented more toward identification with the institutions where these activities are carried out, than toward financial reward.

It is the second group that the VA shares with the medical school as a consequence of the policy of affiliation that has been underway now since World War II. I make the point because it is quite important if the VA is to continue to be able to retain and recruit these physicians, that the services provided in the hospitals be such as to characterize VA hospitals as first-class institutions, with which they can identify.

These men and women identify with institutions and would not possibly continue to make career decisions in favor of institutions which they don't consider to provide adequate clinical and academic services.

I will touch briefly on four policies which appear to me to have been instituted at the end of World War II and which, I believe, have been particularly important in the success that VA has had in recruiting and retaining physician staffs of high caliber. Several of these are threatened by budgetary restraints at the present time. I will close with a couple of examples from my knowledge of the programs of the Palo Alto VA hospital, that illustrate, to some extent, these points.

Senator CRANSTON. I will be particularly eager to hear about that. Dr. RICH. I will get to them shortly.

The five policies are, first, the affiliations with medical schools. This has allowed physicians to have faculty appointments and to work in an academic setting.

Second, and exceedingly important, has been the improvement in the nursing-staff pattern of the hospitals. This improves the quality of care and is important both for the patients and for the physicians in the VA hospitals.

The third policy is the development of medical student and residency programs in the VA. This makes it possible for VA physicians to carry out patient care activities in a teaching setting.

The fourth policy is the provision of facilities and operational support for research. This has an obvious and absolutely essential role in maintaining an effective academic environment.

As a result of these policies and practices, the VA has steadily increased its reputation in the past 25 years and is now recognized widely as a system which maintains high quality institutions. As a result, it can recruit topflight professional staffs, not only in the affiliated hospitals, but to an increasing degree, in the nonaffiliated hospitals as well.

I believe that the VA now has a great chance to make impressive advances in the quality of staffing in its hospitals. This chance oc