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deplorable situations where the solution is as difficult as the problem, and this through no fault of the thousands of sincere, capable, hardworking people who have been shouldering the obligation of providing almost 100 percent of the care of our rapidly increasing aging population.
Although for the past several years voluntary State nursing home associations have been concentrating on improving standards in these homes, it is still impossible to secure construction financing. Lending institutions will not classify these loans because they consider a onepurpose building as insufficient security, although they also seem to recognize the great need for the construction of such facilities. That is why more professional people have not deemed it possible to contribute their services and employ their talents in this ever-broadening field.
By making funds available for use to these people it will result in the establishment of institutions of necessity requiring standards of operation that will be acceptable to voluntary prepayment plans. They will be located in areas most desirable to serve community demands.
These funds will make it possible for persons who have been shouldering this responsibility of care to meet required standards of operation and ultimately solve this problem of inadequate facilities, which is a national problem that is becoming increasingly serious.
Those of us who are anxious to help work out the problem of meeting the needs for improved patient care are glad to see the fine work of this committee, and hope you consider the amendment just offered to include proprietary nursing homes favorably. More than any other one thing, this type of legislation will improve the standards of operation in medical facilities of all types, a goal much desired by all.
I appreciate the opportunity to appear and make this short statement before you. We thank you.
The CHAIRMAN. We thank you, Mrs. Stone, for your appearance today. I assume that you are expressing your views in connection with this as distinct from whatever views the association of Missouri may have? Is that right?
Mrs. STONE. Well, this is just my own personal views that I wanted to express toda
The CHAIRMAN. That is what I understood.
I think maybe Mr. Muse has made some expression here in connection with the form of the bill; I am not sure, but I will look into that.
We certainly thank you for the inconvenience and the trouble you have gone to to be here today to give us your thoughts based on the experience of 20 years of operating one of these homes, and we assure you that your views will be given consideration by the committee.
Mrs. STONE. Thank you.
The CHAIRMAN. I think that concludes all who are present to speak on this bill today, and, if so, we will adjourn until Monday morning at 10 o'clock.
There will be no session tomorrow morning.
(The following information was submitted for the record :)
AMERICAN OSTEOPATHIC ASSOCIATION,
Washington 6, D. C., May 6, 1954. HON. CHARLES A. WOLVERTON, Chairman, House Interstate and Foreign Commerce Committee,
House Office Building, Washington, D.C. DEAR MR. WOLVERTON : I think you will approve of our proposed amendments to H. R. 7700, as per the enclosed statement submitted for the record of the hearings, and I hope you will do what you can to secure committee approval of the amendments. Very truly yours,
C. D. SWOPE, D. O., Chairman.
STATEMENT BY C. D. SWOPE, D. O., CHAIRMAN, DEPARTMENT OF PUBLIC RELATIONS,
AMERICAN OSTEOPATHIC ASSOCIATION
Mr. Chairman and members of the committee, we understand that the time allotted by the committee for consideration of the Wolverton bill, H. R. 7700, relating to medical facilities mortgage insurance, is very limited, and in order to conserve the time of the committee we respectfully submit this statement for the record in lieu of personal appearance.
H. R. 7700 authorizes Federal insurance of mortgages held by private lending institutions on the medical facilities of organizations of physicians in group practice. Group practice is defined as a formal organization of physicians which meets the following criteria : (1) The organization of physicians must have more than one specialty of medicine represented in the group; (2) there must be a joint use of office facilities and auxiliary personnel by the physicians in the group; (3) the group must have a formal organization for administration and financing; and (4) there must be a pooling of income by physicians in the group and a sharing of common overhead expenses with net payments to physicians made according to a preestablished plan. The minimum number of full-time physicians and the minimum number and type of specialties which would be required to constitute such a group would be prescribed by the Surgeon General of Public Health Service.
There are a number of existing organizations of osteopathic physicians in group practice, and others might be expected to qualify under the above-mentioned provisions of the bill. The American Osteopathic Association has established 10 specialty certifying boards. In 1952-53, 37 osteopathic hospitals were approved for 186 residences in the specialty fields of internal medicine, obstetrics and gynecology, roentgenology, diagnostic roentgenology, radiology, surgery, pathology, anesthesiology, ophthalmology and otorbinolaryngology, orthopedic surgery, urological surgery, psychiatry, neurology, neurosurgery, obstetricalgynecological surgery, and pediatrics.
However, in defining the medical facilities which may be the subject of mortgages, the bill limits hospitals, diagnostic or treatment centers, personal health service centers, and rehabilitation facilities, to those facilities in which patient care is under the supervision of “persons licensed to practice medicine in the State.” Such limitations dilute the objectives of the legislation, insofar as they operate to disqualify medical facilities of otherwise eligible group practice units comprised of persons licensed to practice osteopathy and surgery in the State.
Similar limitations contained in the Hill-Burton Amendments, H. R. 8149, were revised by the House on March 9, 1954. We request similar revisions of the pending bill, as follows:
After the word “medicine,” as used on page 4, lines 16 and 22; page 5, lines 4, 9, and 18, insert the words "or surgery.”
The language so revised would include persons licensed to practice medicine or osteopathy and surgery.
The bill further requires that 60 percent of the mortgaged medical facility will be available to serve subscribers to group practice prepayment health service plans. By automatically disqualifying all group practice units or projected group practice units unless 60 percent of their facilities are devoted to subscribers of prepayment plans, the bill establishes an unfair preference and seeks to impose a pattern of medical service. We, therefore, respectfully suggest that such requirement, subsection (d), page 18, lines 7 through 16, be deleted from the bill.
In view of the fact that the General Counsel of the Small Business Administration has recently ruled that group practice organizations of physicians are not eligible for assistance under the Aid to Small Business Act (15 U. S. C. A. 631650), which authorizes Federal cooperation (including immediate or deferred participation) with private lending institutions for financing small-business concerns, the pending bill would operate to remedy to some extent that apparent discrimination, and with the amendments, above mentioned, would serve to improve and increase the availability of medical facilities and services to the American people.
GROUP HEALTH ASSOCIATION,
St. Paul, Minn., March 15, 1954. Hon. CHARLES E. WOLVERTON,
House of Representatives, Washington, D. C. DEAR MR. WOLVERTON : Your letter to Mr. George W. Jacobson regarding H. R. 7700, has been referred to me for reply, during Mr. Jacobson's absence from the city.
Our organization has been intensely interested in legislation of this type, to help prepayment health organizations finance needed facilities, for many years. Our members have formally endorsed a similar measure, which would provide Government credit for such facilities. The proposal embodied in your bill, to provide insurance for private loans to construct such facilities, has not come formally before our membership, but as it is in harmony with the other proposal, I have no doubt that it will have their formal approval when they meet in April.
Our experience, extending over a period of 15 years of work with urban and rural health groups, indicates that one of the greatest obstacles to providing needed medical services in rural areas is the problem of financing the costly facilities needed. If this problem could be solved, it is entirely possible that the other problems would become relatively insignificant.
I believe that it can be demonstrated that such loans, made to plans providing service on a prepayment basis, would be excellent risks, as the people who use such plans have indicated their willingness and ability to meet the full costs of the service if permitted to do so on a prepayment basis. Sincerely yours,
FREDRICK S. GRAM, Director of Public Relations.
STATEMENT WITH REFERENCE TO H. R. 7700 My name is Edward B. Stevens and I am now and ever since the year 1837 have been the business manager of Western Clinic, Perkins Building, Tacoma, Wash., which is a private group clinic comprised of 12 physicians covering all of the major specialties and including general practitioners. The clinic is organized as a partnership and is owned by nine of the physicians on its staff. This group has been offering to groups of employed individuals prepayment medical (care service agreements for more than 25 years last past. In the past 5 years this coverage has been enlarged to include the dependents of group subscribers and during this year we expect to further extend our prepayment coverage by offering medical care to individual families on a prepayment basis. We have at the present time approximately 8,000 subscribers. Our care includes comprehensive medical and surgical care as well as hospitalization. Office calls, home calls, and all diagnostic procedures are included, as well as care for the more catastrophic illnesses.
Basing our opinion on the experience that we have gained in the operation of prepayment medical plans, we are satisfied that comprehensive prepayment medical care can be best and most economically furnished by private group clinics operating on a capitation basis for several reasons, some of which may be enumerated as follows:
(1) There is absolutely no intervening agency, financial or otherwise, between the physician providing the service and the patient who receives it. In this manner medical care is not paid for on a fee basis and the sick patient does not become an asset to the doctor, but rather a liability. Therefore, it must follow that good economics demands the furnishing of the maximum amount of preventive medicine, periodic physical examinations and health education to the subscriber. It also demands that the most modern methods available be used in caring for the patient so that he may be speedily returned to health and employment.
(2) Inasmuch as practically all other types of prepayment medical care programs are based on fee schedules which for the most part recognize as care only the routine sort of office procedures, such as care for a respiratory infection or the major surgical procedures, the use of modern diagnostic methods in the evaluation of the patient's case results in an additional billing by the physician to the patient. The physician is not adequately compensated through the use of fee schedules which give no recognition to the field of specialized diagnostic medicine and provide no compensation to the physician or reimbursement to the patient for the cost of periodical physical examinations or preventive medicine. This results in deterioration of the physician-patient relationship.
(3) The financial arrangements between the patient and the doctor are so interwoven with the amount and quality of medical care or service which the patient may need that misunderstandings are created between the patient and the physician because of the intervention of a third party in the financial arrangements for care and because of the implied supervision by the third party of the amount and type of medical care which the patient may receive. This is true whether the third party is an insurance carrier or whether it is a nonprofit organization sponsored by organized medicine. It is only when a private group clinic offers prepayment medical care directly to the patient that there is no intervening factor between the physician and the patient.
It is my opinion, therefore, based on the foregoing factors and on our experience in prepayment that any type of legislation which will encourage the formation of private group clinics for the purpose of furnishing prepayment medical and hospital care to persons or groups of persons, or which will encourage those private group clinics already in existence to recognize their responsibility to the patient for his financial health, as well as his physical health by going into prepayment care is an important step forward in the distribution of medical care of the highest quality to the public at a cost which will be within their means. Respectfully submitted.
EDWARD B. STEVENS.
PHOENIX MUTUAL LIFE INSURANCE Co.,
Hartford, Conn., May 14, 1954. Hon. CHARLES A. WOLVERTON, Chairman, Committee on Interstate and Foreign Commerce, House of Representatives,
House Office Building, Washington, D. C. DEAR SIR: Mr. Robert Bernheim, one of the partners in Urban Servicing Co., our mortgage representative in New York City, has forwarded to us for reply your recent letter requesting comments on House bill 7700 introduced by you.
There can be little question but that facilities of the type referred to in H. R. 7700 in the main are in somewhat less than adequate supply throughout the country. In certain areas, of course, the lack of such facilities is so stringent as to very definitely become a matter of general public concern. Further, there can be little question but that private financing historically is not easily available for the production of such facilities primarily because of their special-purpose nature. In our opinion there is little question but that a plan patterned after the Federal Housing Act in much the same manner as is proposed in H. R. 7700 could be a feasible means of stimulating the production of such facilities. In the case of our own company, while we have financed a very modest number of buildings owned and occupied by a cooperating group of doctors, I am sure that we would be willing to invest somewhat more substantially in such securities were they guaranteed in some such manner as is proposed.
Having said as much, I trust we would not be out of order to make 3 or 4 suggestions with respect to the administration of such a program,
1. We assume without question that the objective insofar as arranging financing is concerned is to make available to the interested parties not to exceed 90 percent of the actual cost of land and buildings, including architects' fees, carrying charges during construction, and such other usual items. We would assume that there is certainly no intention to make it possible for the borrowers to “borrow out” on any given project and certainly no intention to enable such borrowers to actually pocket a profit out of a loan. To avoid this possibility it
seems to us that commitments should be issued in the alternative, that is to say, a stated number of dollars or 90 percent of the actual cost of the project, whichever sum shall be the smaller. Borrowers, it seems to us, should be required to certify on oath at completion to the proper authorities the total cost involved and support any such affidavit with paid invoices, and perhaps even the private lender should be required to certify that such cost is correct to the best of his knowledge and belief.
2. Would it be better to have the Secretary of Health, Education, and Welfare and the Surgeon General certify to the FHA any proposed project insofar as the health and welfare aspects of the proposal are concerned—that is to say, as to its probable propriety within the meaning of the bill, as to its need within the area involved, as to its compliance with the bill with respect to the ownership and operation insofar as meeting group practice requirements, etc. Having received such certification, the Federal Housing Authority could then proceed with the approval of the physical aspects of the structure, appraisal, planning, the underwriting of the moral risk, etc., carrying the project through to completion and continuing with the servicing thereafter in much the same manner as is now being done with respect to insured mortgages on housing as such.
3. While there may be some disadvantages involved, it would seem to us that there are certain good objectives to be served by requiring that designated public health officials of the State in which such facilities are to be located should likewise be required to certify the soundness and the need for the facilities to the Secretary of Health, Education, and Welfare and the Surgeon General.
4. Would it not be possible within the framework of the bill to offer an incentive to interested parties to invest somewhat more than 10 percent in the equity position. For example, if 10 doctors should form a cooperative group, each investing $10,000, they could quite possibly obtain an approval for a million dollar plant, or by investing $5,000 each, approval for a $500,000 plant could be obtained. A $500,000 plant would seem to be entirely adequate offhand for 10 doctors and by and large 10 doctors should be able and willing to invest somewhat more than $5,000 each. This could be done by charging maximum rate of interest for a 90 percent loan, perhaps one-half percent less for a 75 percent loan, and still another one-half percent less for a 6643 percent or a 65 percent loanall based on actual cost. In addition, it would seem that the insurance premium could likewise be graded downward in a similar proportion.
5. As we understand the proposed legislation, financing would be made available only to persons or associations of persons who expect to own and occupy the facilities being financed. Certainly in this field we see no reason to make such financing available to persons or corporations who expect to own the facilities and lease them to doctors or associations of doctors. This it seems to us would open the way to come of the abuses which have crept into the FHA housing plan.
We trust very much that the above will be of some small service to you and your cohorts in the consideration of this matter. If we can be of any further help, please let us know. Yours very truly,
LYNDES B. STONE, Second Vice President.
MUTUAL SERVICE LIFE INSURANCE Co.,
St. Paul, Minn., May 7, 1954.
Washington, D. C. MY DEAR MR. WOLVERTON : I am writing to express my views on behalf of the Mutual Service Insurance Co. of St. Paul, Minn., with respect to H. R. 7700 which is now before your committee for consideration. I want to start out by saying that we hope very much that your committee will recommend this bill to the House of Representatives in substantially its present form.
The information and data at our disposal are replete with evidence substantiating the statement in your letter of May 5 that a serious shortage of medieal facilities exists in the United States today. There is also ample evidence indicating that under present conditions satisfactory private financing for the construction of medical facilities is difficult to obtain. It seems to me that meeting this critical problem will require a combination of private financing and Federal Government support in the form of loan insurance or guaranties.