really would hope that you would give us the opportunity to think it through, come to you with the proposition if and when it is made. There should, we believe, be a system of checks and balances on this

matter.

The Committees on Appropriations will have an interest in it and have an opportunity to participate. I cannot say, as suggested by Mr. Rogers, that the budget process itself has not affected the issue. It probably has. In my experience in HEW, and I came into the Office of the Secretary shortly after the earlier 1965 decision was made, I have watched this particular matter come up in each budget year. This basic question has been asked every year at a time of the budget crunch. It is not really a new question. I think that it is being put under a new dimension this time. I think the crunch is a little more severe than it has been in the past.

Mr. ROGERS. That is the dollar crunch.

By the same token it seems to me as an observer of the passing scene that there is something more than money involved in the answer to the question: Why has not the executive branch carried out the 1965 plan of modernization and renovation?

I think one of the reasons is that the professionals keep running into the basic question of: Is this the right thing to do? Is this the best way to spend money? Is this the best way to carry out our responsibility? That is something that is much deeper, more profound than money. It is a very real element in this whole business. It is one we would ask you to think through very carefully, think through with us very carefully.

The CHAIRMAN. Mr. Burke.

Mr. BURKE. What is the average cost per day per patient in the Public Health cost?

Mr. CARDWELL. About $60.

Mr. BURKE. What is the average cost per day in a private hospital? Mr. CARDWELL. Our experience in contract care for the same beneficiaries show that today we could buy on the average the same care at the same cost.

Mr. BURKE. That does not seem to be consistent with what is happening up in Massachusetts where the Massachusetts General Hospital and Dr. Knowles and other groups are up over the hundred dollar mark today and are having quite a controversy with the State government on what it should pay per day for the patients.

It seems to me what you people are going to do here, if you are successful, is actually double the cost of hospital care for these people. I can't see the justification for it because since medicare was passed with medicaid we have found the rates in these private hospitals have skyrocketed.

What you are doing is taking away from the public a rate of cost in the Public Health Service that could be more or less a guide on hospital cost. You will be eliminating a hospital service that has a low cost of $60 a day and this will only add incentive to the private hospitals to hike their rates even higher.

You have eliminated public service hospitals that have a $60 a day cost as you state here and then you are advocating going into contractual services with the private hospitals who are today hiking their

costs so high that you almost need an investigation on the part of Congress to find out whether these costs are justified.

You people are coming in here saying we will close these public health hospitals at an average cost of $60 per day and we are going to turn around and try to get service in private hospitals that are looking for well over a hundred dollars a day.

So I don't see where you are saving anything.

Mr. CARDWELL, I would like to have Dr. Wilson talk about the cost specifications for hospitals, but I will say this. Referring to the Office of Management and Budget, if the analysis of cost turns out as you suggest, it may then be that we would not close the hospitals.

Mr. BURKE. Of course it will. Once medicaid and medicare were put through some of these people thought that grab bag day had arrived. The costs pyramided up one on top of the other. Today our big problem in this country is taking care of the laws we have on the books and on medicare and medicaid. Now you people are going to come in and say close the public health hospitals that are more or less a guide for costs.

I can see where the AHA and the rest of them would like to close these hospitals. I can see where the private hospital would like to see them closed because it more or less puts them to shame when they can see the patient taken care of for $60 a day whereas they are asking for over a hundred dollars a day.

Mr. MURPHY. Will the gentleman yield?

Mr. BURKE. Yes.

Mr. MURPHY. In the previous hearing that the chairman convened when the Secretary from the Department could not get here it was pointed out, and I wish you would get the record of that previous hearing.

Mr. CARDWELL. We have seen it.

Mr. MURPHY. We have public and private power in this country as a check on each other. Should you get rid of the Public Health Service system and hospital system we will have no Federal standard check on a regional basis as to what quality medical care should cost, let us say, in the port area or in the plains area or the west coast area as opposed to private hospital care at that point.

I think that is a responsibility of the Secretary and not just the Surgeon General.

Mr. CARDWELL. I don't think we can agree with you. If you weigh the relative size of the PHS hospital system against the total Federal hospital system we are very small potatoes.

If you talk about checks and balances it does not come from the functioning of the PHS hospitals per se. The Surgeon General and the Public Health Service do of course play a role in that check and balance, but the hospitals play a very small role.

Mr. ADAMS. Would the gentleman yield?

We have in the city of Seattle a series of downtown hospitals and a large one, and a Veterans' Administration hospital. The point that is being made by Mr. Murphy and Mr. Burke, and this is one that Mr. Rogers and I are concerned about, not from the viewpoint of this committee and the merchant seamen but the overall site in hospital care, is that we have just been through Hill-Burton and we have

just been through this and the conclusions we have come to were two: One, that you have inadequate number of beds in the United States today to take care truly of the health problems and second, you have inefficient and ineffective use of personnel in the private sector.

In other words, the hospital costs in the private sector are going out of sight. I just wish one of you would explain to a country lawyer on a very simple basis how you improve your bed situation by terminating the number of beds.

To me that is curing the matter by killing the patient. The second thing is, How do you provide a yardstick? By a yardstick it does not mean competitive with each one, but private power and public power in the West, and in this area, use the yardstick of saying all right, we can provide 250 beds, Mr. Burke said at $60 a day, then we have a basis for going down to our downtown private hospital, which are now charging $70, $80, $90 for medicaid and medicare and saying why. This goes to the fundamental question, the fundamental health care question in America, why do you want to take away that potential check and why do you want to reduce beds?

Dr. EGEBERG. If I may start on this one I think there is another factor here and that is the utilization of a hospital. You can say that it is hard to get in a hospital and it may be hard to even get into a hospital because for a lot of extraneous reasons a certain hospital is full of patients.

I think the Veterans' Administration has many things to do in connection with patients besides just taking care of them. They have to decide eligibility, whether they have an opportunity for a pension, and a lot of other subtler things which make it necessary to keep a patient in a VA hospital let us say, longer than in a private hospital. The same is true of the Public Health Service hospital. Even the private hospitals do many things in the hospital that need not be done and could be done on the outside.

If you take all those factors together you can do a cheaper job and you can get along with probably the number of beds we have now, possibly even fewer beds.

It is a matter that we use the beds that has been so wrong in the last few years.

Mr. ADAMS. Mr. Burke's point, Mr. Murphy's point and mine is don't you want an alternative system to see if you can't improve utilization because it certainly is not being done in the private sector.

Our figures, and I hope Mr. Rogers will correct me if I am wrong, because he sits as chairman of that health subcommittee on many of these hearings, is that in the private sector the utilization factor is going down and the cost factor is going up and you need an alternative system to look at and see why this is happening and the public health service provides one, the Veterans' Administration provided another, and if we could think of another way to do it I think we should try another one because I think where you are proposing to send these people into the private sector, from the information we have, we would be worse off than where we are now in terms of cost, efficiency, and our utilization.

Tell me if I am wrong about that.

Dr. WILSON. There are several difficulties presented when you try

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to make a direct translation between the Public Health Service hospitals and the private sector. Let me see if I can clarify these two or three areas. No. 1, in the last 3 years the costs in the Public Health Service hospitals have increased at the rate of roughly $10 per patient day. Thus, we are not immune to the same factors which are affecting the private hospitals. This rise is primarily related to labor costs and some increased sophistication in care.

Mr. ROGERS. What is the increase in the private hospital care?

Dr. WILSON. I don't have that figure. That is one of the things we obviously will be studying at the same time.

I came from the private sector as late as July 1 and our increases had been roughly the same in the community from which I came.

Mr. BURKE. The testimony before the Ways and Means Committee indicates that the cost for private hospital care increased higher than any other segment of our economy.

Dr. WILSON. I think this has been true of the Public Health Service hospitals, too. It is related to

Mr. BURKE. It has not been true as to the percentage of the rise in private hospitals.

Those costs have gone almost straight up. The public health hospitals have gone up at a lower rate. There is an awful lot of difference.

What we are trying to point out here, what we are dealing with here, are billions of dollars and the need for a yardstick of public health costs that will cut down the costs in the private hospitals that are hiking up the cost of medicare and medicaid to amounts totaling billions of dollars.

Now we are dealing with something serious here. I can't understand why Health, Education, and Welfare should even contemplate this move. You talk about priorities. I notice here in the statement that it would require at least $140 million in the fiscal year 1971. Did the Bureau of the Budget explain its priorities? They believe the SST is entitled to $207 million rather than have health care for $140 million. Which is the more important?

I am not going to ask you to answer that question. The administration should answer it. But you are coming in here and are removing a yardstick from the economy of the Nation. You are allowing these private hospitals to come in and with nothing to compare to, just continue to hike up their costs.

This will cost the taxpayers of this country billions of dollars,. not $140 million but billions, because you have taken medicaid and medicare and all the costs that these private hospitals are coming into right now and you have removed the one yardstick that we have.

Particularly up in the Boston area where you have all these private hospitals, the Public Health Service hospital in Brighton has been more or less a yardstick-something to hold down costs not only for the Federal Government but the State government as well.

I don't see how you can justify this. This is an almost irresponsible act. I am not complaining to you, gentlemen, I know the pressure is from the Bureau of the Budget. They have a lot to answer to.

Dr. WILSON. I think you and I are starting from two different assumptions. We need to get the facts and figures. We need to bring to you our comparative cost studies in the Public Health Service.

Hospitals, showing their increased costs over a period of time versus the increased costs in the private sector. That is part of the study. We will bring it to you. My experience in the private sector is not in accord with your statement but that may be because I have not had broad enough experience.

(The following was supplied in reference to the above:)

2 Excludes depreciation. Includes some N-P and long-term patients. Includes physicians and dentists costs. Source: Guide issue of Hospitals, Aug. 1, 1970. Excludes physicians and dentists costs.

• Estimate.

Mr. BURKE. The Massachusetts General Hospital headed by Dr. Knowles, I understand, is requesting over $100 a day per patient. Now that is a 40-percent difference in cost.

Dr. WILSON. May I deal with that problem? There are two issues here. One is: What is the increased cost per day? The other is: What is the base cost per day of patient care? I would like to keep those questions separate because I think both the rate of increase in costs in the private sector and in the Public Health Service hospitals have been roughly the same in the immediate past. They started, however, from a different base.

One of the things we learned in closing the hospitals in Chicago, Savannah, and Detroit is that where we had an average patient stay of 19 days in the Public Health Service hospitals, we wound up with approximately a 12- to 13-day stay when these patients were treated in other hospitals. This amounts to cutting the average stay by one-third. The average stay in the private hospital for comparable diagnosis is even lower than that. So that when we talk about the base cost of

care

Mr. BURKE. That problem can be corrected by the Public Health Service. They don't have to encourage these patients to stay that long. That can be handled very well by the Public Health Service without using the same methods that the private hospitals use. That is no justification for this recommendation.

Dr. WILSON. I think what is happening is that the Public Health Service hospital does not have available to it some of the attendant extended care facilities which are available to other hospitals. Again, I think we need to study this further and give you a greater insight into this problem than we can at the moment.

The CHAIRMAN. Will you yield for a moment, Mr. Burke?

You say you are going to have to get more information. Aren't you the one that recommended closing the five hospitals to the Secretary? Dr. WILSON. I submitted to the Secretary

The CHAIRMAN. What did you base it on? You admit now that you