Mrs. Hobby has testified-hearings before the House Committee on Interstate and Foreign Commerce, February 4 and 5, 1954, page 19: A diagnostic and treatment center is a facility in which a number of medical specialists and technicians operate as a team. It is a well-recognized factsaid she

that the team approach results in earlier diagnosis and better treatment for the patient. The full extent of the need for diagnostic and treatment centers is unknown.

A significant and hopeful trend is taking place in the building of doctors' offices and outpatient clinics in connection with hospitals. The Commission on the Financing of Hospital Care has pointed out the importance of utilizing outpatient services as much as possible. Visits by amulatory patients to doctors often make their admission to costly hospital care unnecessary. The practice of preventive medicine-early diagnosis and early detection of disease-can cut the public's health bills and at the same time assure the people much better health.

H. R. 7700 can make an invaluable contribution by helping make possible diagnostic and treatment centers, operated exclusively and independently by local doctors in every community. They would be good business for the doctors; they would readily pay for themselves, and most important of all, the patients would get a great dividend of better care, reasonable costs and healthier lives.

INSURANCE OF PRIVATE LOANS ON A SOUND BASIS

The Government's role under H. R. 7700 would be the well-established and eminently successful role of insuring private loans by banks, insurance companies, and other private lending institutions for construction of financially sound medical and hospital facilities. This is a true American private-enterprise way.

Various large lending institutions with which we have discussed this type of insured mortgage loan have indicated they would be willing to make such loans upon presentation of facts which clearly support the financial soundness of proposed medical facility projects.

The bill spells out that the only ones eligible for insured loans are those approved as responsible and able to repay the obligations for facilities.

Certainly the banks and insurance companies will exercise their high standards of prudent judgment and factfinding to ascertain to the maximum the responsibility of borrowers and their projects. It has been amply proved over the years that Government insurance or guaranties of loans does not result in lending institutions relaxing their credit standards. They have their own standing and reputation for soundness to safeguard.

Moreover, severe penalties are imposed upon a lending institution granting an unsound insured loan. Under this bill, the lender in such cases would receive a low rate of interest-and no banker is interested in low rates of interest-and would have to wait 10 years to obtain full repayment of a defaulted balance.

You well know the remarkable record of the Nation's financial institutions in the tremendously successful insured-loan programs of generating billions of dollars of private capital for homes for mil

lions of American families; houses, businesses, and farms for veterans, and defense emergency factories built by private industries. H. R. 7700 would extend for medical facilities this same insurance principle that has worked so effectively in the programs of the Federal Housing Administration for home building; the Veterans' Administration for veterans' small businesses, homes, and farms; and the Federal Reserve Board's work with V-loans.

The expenditures for the mortgage-insurance program provided by Chairman Wolverton's bill would be paid out of the premiums collected for such insurance. It is pertinent to note that under FHAtype loans, the Government never has had to pay out any public funds for losses incurred. As a matter of fact, the FHA has shown a 45percent surplus of fees and premiums received above all expenses and losses. Here are the figures:

FHA-From Inception Through June 30, 1953

Income: Fees, premiums, interest, dividends, etc....

Expenses :

Operating, etc_____

Interest

Losses and chargeoffs.

Reserve for possible losses_.

$768, 372, 312

$308, 432, 199

24, 478, 801

25, 402, 373

56, 299, 727

Total expenses--.

Net income above expenses--.

414, 523, 100

353, 849, 212

A major purpose of Federal mortgage insurance is to provide a reasonable trial period to demonstrate to private lending institutions that certain publicly desirable facilities can and should be financed on a normal commercial basis. Thus FHA-type loans started a housing boom, and financial institutions have invested more than $23,600 million through insured loans in the building of about 4 million dwelling units. Financial institutions likewise have invested $20,600 million under Veteran's Administration insured loans in 3,290,000 units of veterans' businesses, farms, and homes. The insurance provided the assurances and underlying stability which brought forth huge amounts of private capital.

Similarly, some additional experience with the financing of medical and hospital facilities organized to operate on a completely self-supporting basis is necessary to convince private lending institutions that they can be financed on a normal commercial basis. This is a desirable Government objective and is the function of H. R. 7700.

As an illustration, the banks would not initially finance the construction of hospitals by the Kaiser Foundation without a private Kaiser guaranty. Now, as the result of experience with a number of Kaiser Foundation hospitals, they are lending an additional new hospitals without any guaranty.

Already there are approximately 630 groups of doctors successfully operating around the United States today, numbers of them already possessing clinics and anxious to build their own hospitals or other needed facilities. They would be well qualified as applicants for loans under H. R. 7700 to expand diagnostic and treatment centers and build new hospitals.

Certain outstanding leaders of the medical profession have testified that, in their firm opinion, hundreds of new groups of doctors would establish group practice, voluntary prepayment health service plans if long-term financing for necessary facilities were made available to them.

If the sole accomplishment of the Wolverton bill were to release hundreds of millions of dollars of private capital, not now obtainable, to help build needed medical facilities, that would be a lasting service to the people. Yet the purposes and potentialities are even greater.

MODERN MEDICINE FOR MILLIONS OF AMERICANS

H. R. 7700 is designed to provide facilities for the modern practice of medicine on a teamwork basis.

In facilities financed through insured loans, doctors representing general practice and the major specialties can practice the highest form of group teamwork medicine in modern facilities with modern equipment-to the end that the full use of advanced medical skills is made available for the prevention and treatment of disease.

However, modern medicine practiced in modern facilities is still not an adequate answer to the vast majority of our fellow citizens who today auxiously ask "What will happen if serious illness or a costly operation hits me or my family?"

Modern medicine practiced in modern facilities must be brought within the financial means of the people. For this reason, a fundamental element of H. R. 7700 is the combination of prepayment with the principles of group practice in integrated hospital and outpatient medical centers, where major emphasis is placed on preventive medicine.

Through prepayment, the well help pay for the sick and payment for medical services is budgeted in an orderly fashion.

Through group practice in integrated hospital and medical facilities, great economies are achieved in eliminating duplication of overhead expenses, duplication of equipment and auxiliary personnel, and in the elimination of unnecessary hospitalization where outpatient services are available and are medically indicated.

Preventive medical services serve not only to prevent disease, arrest it in its early stages, or bring it under effective control, but also serve to keep the costs of medical care down, since it is much more costly to provide services for the treatment of disease in its advanced stages. Also, preventive medical services are the major weapons in our attack upon the chronic diseases.

These elements-prepayment; group practice; well-planned integrated hospital and medical facilities; and preventive medical carewhich I described at some length in my earlier appearance before this committee on January 11-comprise the new economics of medical care. These elements are not untried nor untested.

In all parts of the country, these principles have been tested during the past two decades and longer. Groups of physicians practice on a teamwork basis in the Mayo Clinic, the Crile Clinic, the Leahy Clinic, and in university hospitals, like Johns Hopkins, and in hundreds of medical-group clinics.

Prepayment is a well-established principle familiar to us all.

The advantages of well-planned, integrated facilities are well known not only in medicine, but in all phases of industrial and commercial enterprise.

Emphasis upon disease prevention and the development of preventive medical services have been principal objectives of the leaders in the field of medicine and public health for many decades.

The fusing of these elements in group practice health service prepayment plans have been described to you by Dr. Russell V. Lee, Palo Alto Clinic: Dr. Clifford H. Loos, of the Ross-Loos Clinic; Dr. George Baehr, of the Health Insurance Plan of Greater New York; and, in addition to ourselves, by other witnesses who have come before this committee. The spread of these tried and tested elements by other groups throughout the country will be a basic development out of H. R. 7700. The insured loans will remove the major obstacle that is, the lack of funds for long-term financing of the necessary hospital and related facilities-the obstacle standing in the way of the rapid growth and development of the new economics of medical

care.

H. R. 7700 rejects the idea that the best medical care has to be limited to the well-to-do; rejects the idea that modern advances in the technique of disease prevention and cure have become so expensive that only the few, not the many, can realize their benefits.

This, unfortunately, has been true where outmoded, inefficient organization of services and facilities has not kept pace with the great scientific advances in medicine. In fact, this is the fundamental paradox of medical care in the United States today-20th century medical knowledge, skills and technique and ancient form of organization of medical services. The new economics of medical care embodied within the Wolverton bill makes it eminently practical for the full and comprehensive benefits of 20th century medical knowledge, skill and technique to be brought within the means of the people to pay for it.

Spokesmen for million upon millions of Americans are demanding that the people be afforded the advantages of modern medical science with all its wonderful skills for preserving health, saving lives and extending the life span. But outdated, disorganized, topsy-turvy forms of supplying medical services nullify and deny to too many people the advances of modern medical science.

Those people who live in areas where group practice prepayment plans are operating can enjoy the advantages of modern, comprehensive medical care services at costs within the means of the average person. Many millions of our citizens who do not now have access to group practice prepayment plan membership, would be given this opportunity, however, through the enactment of H. R. 7700.

Much has been said and written about so-called free choice in discussions of the changing pattern of medical economics. It is significant to point out that in these discussions of free choice, little if any attention is given to the basic fact that many millions of our people are not afforded real freedom of choice

The tardiness in bringing the organization of health services up to 20th century standards is the basic threat to free choice in medical care today.

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There is no real freedom of choice where millions of people are cut off from adequate medical care, because the inherent weaknesses of the fee-for-every-service system, with its costly, helter-skelter disorganization, result in prohibiting doctor and hospital bills.

There is no real freedom of choice where tens of thousands of physicians have to diagnose or treat their patients to a greater or lesser extent in accordance with the patients' ability to pay rather than solely on the basis of the medical needs of the patients.

There is no real freedom of choice when tens of millions of people in this country do not have the opportunity to choose, if they so desire, modern, group practice, prepaid, comprehensive medical care with its many great advantages.

There is no real freedom of choice when the overwhelming majority of physicians in this country lack the opportunity to practice on a teamwork basis in modern well-planned facilities, because of their inability to obtain long-term financing for such facilities.

H. R. 7700, if enacted, would constitute the greatest stimulus to real freedom of choice in medicine today. It would give millions of people throughout the country the freedom of choosing group practice prepaid comprehensive medical care, if they so desired. It would give all physicians the freedom of choosing group practice, if they so desire.

The health organizations which we represent wholeheartedly support the principle of freedom of choice. It is our fundamental belief that the people of this country must have this right to free choice. The millions of persons who desire to obtain their care on a prepaid basis from physicians practicing as a team in a modern well-planned integrated facilities must have this right to obtain such care. I know of no more effective way of accomplishing the objective of promoting real freedom of choice in medical care than through the enactment of H. R. 7700.

In conclusion, I deeply appreciate this opportunity to state our views on H. R. 7700. As you see, we give our unqualified endorsement to this bill

Because it will assist in filling the critical need for additional hospital and medical facilities;

Because it will accomplish this purpose through the enlistment of the forces of private enterprise and private capital;

Because it will afford thousands of doctors of the country the opportunity to practice modern medicine on a teamwork basis;

And because it will open up to many millions of our citizens the opportunity of obtaining comprehensive, modern medical-care services at reasonable cost.

Now, there was a question brought up by one of your committee during the testimony of Mr. Cruikshank and Mr. Biemiller, the question of whether the administration of the program should be vested in the Surgeon General. That question has been brought up before and I would like to offer my comments on it at this time. Apparently, the administration of H. R. 7700 was vested in the Surgeon General of the Public Health Service because of the basic health-program features of the bill and, specifically, to permit coor