IN Mr. COHEN. It constitutes a realistic appraisal of the congressional committees, and I am a great believer, as seeing how legislation works and then coming back to sional committees and showing them how it worked w it did not work. I go on the assumption that Congress is to be here and if we can demonstrate that it did not take that into account in considering future legislation Senator DOUGLAS. Senator McIntyre. Senator MCINTYRE. Thank you, Mr. Chairman. Mr. Secretary, I am familiar with the concept of a gr getting together and financing and building a clinic and practice. Now, when you talked about group practic and prepayment plans, and also in your closing page ta lishment of standards for the organization of such profe are you talking about anything different from what I in New Hampshire where a group of doctors of various together, put up a building with all the conveniences, and start practicing? Mr. COHEN. Let me take the two points clearly to ge out. There are two separate items to be considered. call group practice, and one is what we call a prepayme you can have group practice without prepayment, and prepayment without group practice. This bill only problem of the group practice plan, although a number tice plans have prepayment. Now, the four that I am familiar with that you have shire are all group practice plans without prepayment. are a group of doctors working together, such as the H let's say, or the Laconia Clinic, and they work toget common facilities. They use common equipment. The to the doctors in the group, try to maximize the use of t pertise, and they distribute the income to the doctors in agreement that they have made among themselves. Senator MCINTYRE. Okay. You are talking about that I know of. Mr. COHEN. That is right. Senator MCINTYRE. I am not familiar with the pre but we may very well have one in New Hampshire. Mr. COHEN. We have a good example of a prepayn here in Washington, D.C. I happen to be a member Group Health Association. It is exactly in pattern lik Clinic except that I pay my approximately $30 a mont on a monthly prepayment basis, and then when I an availability of all of the medical care, subject to so additional payments in connection with the service. costs ahead of time. The other way, of course, is you pay the doctor wher bill. Now, I think that there are many more group practic prepayment than there are with prepayment. But both be encouraged under this bill. Senator MCINTYRE. Good. Now, just that other worried about: The sensitivity of the medical profession HOUSING LEGISLATION OF 1966 185 shire is beyond description. And you are talking here about someone from Public Health who is going to set up regulations establishing standards for the organization of these groups. Does this mean you are going to require that they have an ophthalmologist as well as an internist? Are there going to be any such strict regulations? Mr. COHEN. No; that certainly was not what was intended. What was intended by that language is this: In order to define a group you must have some minimum number of people that make a group, or otherwise you do not have the economic advantages of a group large enough to distribute these costs. I think what we intended is to define the group practice as distinguished from just a group of doctors who want to put up a building so that each can have a separate office in it. That is not what is contemplated under the legislation. So what we would be defining are the criteria for the group. If the committee felt that they wanted to be more specific in the law and say that there had to be at least three or five or some number, I would be perfectly agreeable to that. The only thought was that the language in the bill would permit us to be a little more flexible until we had a little bit more experience. But if you felt that you would rather have a specific number in and some other criteria, that would be perfectly appropriate. Senator MCINTYRE. I think what I was mostly concerned about was that Public Health was saying that to constitute a group you have to have certain specific specialties or offer a specific collection of services to the prospective patient. Mr. COHEN. Well, there are many different types of group practice, but our general thought was if just a group of doctors got together and wanted to have what is sometimes called a medical arts building and there were a series of doctors that just had seperate offices and they were merely using separate equipment, that that would not meet the definition in the bill. That kind of practice I feel can very easily get money from the private market. Senator MCINTYRE. There would have to be some commonality? Mr. COHEN. There has to be some commonality. There has got to be some sharing. And they have got to be, in effect, providing what I would call a more efficient method of providing the medical services to the people. We should make clear the object here is not the objective of really making more income for the physician, even though that may well be. It is the idea of rendering a greater quantity and a higher quality of medical care to people through rational organization of services. That is really the objective of group practice. Senator MCINTYRE. Thank you, Mr. Secretary. Thank you, Mr. Chairman. Senator DOUGLAS. Thank you. There is one question I would like to ask Mr. Brownstein based upon his reply to the charges in the current Reader's Digest magazine. (See p. 43.) I have had these cases analyzed. I believe you have a copy of your reply before you. I think the charges are very serious. I find that in the case of the Blue Lake Manor this seems to have been first discussed on the 1st of October 1959. Commitment was made on the 18th of December 1961. Is that correct? Mr. BROWNSTEIN. Yes, that is correct, Senator Douglas Senator DOUGLAS. The application on Weequahic Park made in August 1958 and approved in October 1958. Is th Mr. BROWNSTEIN. The commitment was issued Novemb Senator DOUGLAS. November 10? Mr. BROWNSTEIN. Yes. Senator DOUGLAS. The Weequahic Park Plaza. Comm made on the 24th of November 1963 ? Mr. BROWNSTEIN. Yes. Senator DOUGLAS. The Bishop Apartments. Commitm 1957? Mr. BROWNSTEIN. That is correct; yes, sir. Senator DOUGLAS. 3900 Lakeshore Drive was processed Mr. BROWNSTEIN. Yes. Senator DOUGLAS. Savannah Terrace. Prior to 1957? Mr. BROWNSTEIN. Yes. Senator DOUGLAS. Commander Apartments. Feasibilit on the 16th of June 1959, commitment issued on the 21st of Mr. BROWNSTEIN. That is correct, Senator Douglas. Senator DOUGLAS. Hotel 2400. Is it true there was no ] on Hotel 2400 ? Mr. BROWNSTEIN. There was. The comment there d proposal that had been submitted by the Adam Clayton P dation. That proposal failed because they were unable to adjustment that they decided was necessary. Senator DOUGLAS. So no FHA commitment? Mr. BROWNSTEIN. A completely new group came in pletely different proposal for rehabilitating Hotel 2400. been rehabilitated. The mortgage is current. Senator DOUGLAS. The mortgage is what? Mr. BROWNSTEIN. The mortgage is current. Mr. BROWNSTEIN. No default. Senator DOUGLAS. Wesley Manor. Application May Mr. BROWNSTEIN. Yes, sir. Senator DOUGLAS. Clarewood House. Application Au Commitment August 27, 1962. Mr. BROWNSTEIN. Yes, sir. Senator DOUGLAS. The Towers. Commitment August & Mr. BROWNSTEIN. Yes, sir. Senator DOUGLAS. Turtle Creek Square. Application Mr. BROWNSTEIN. Yes, sir. Senator DOUGLAS. I think this dating is very importa there were any errors made I think it should be clear whe they were made and by whom. And I would say that most of these applications seem to have been made prio 20, 1961, and commitments made prior to January 20, 1 Mr. BROWNSTEIN. Many of these go back a good man ator Douglas. Senator DOUGLAS. Thank you very much. I believe you also have a statement, Mr. Brownstein. HOUSING LEGISLATION OF 1966 187 There is a very important measure on the floor which begins at 12 o'clock in which I have to take part, so I wondered if you would be willing to very briefly state your testimony and then file your statement for the record. Mr. BROWNSTEIN. Mr. Chairman, the purpose of my appearance here and the purpose of my statement is to support the provisions of S. 3215 and to support the testimony that has been given by Under Secretary Cohen. I will be very happy to submit my statement for the record. (The prepared statement of Mr. Brownstein follows:) STATEMENT OF PHILIP N. BROWNSTEIN, ASSISTANT SECRETARY FOR MORTGAGE CREDIT; COMMISSIONER, FEDERAL HOUSING ADMINISTRATION, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Mr. Chairman and members of the committee, I am pleased to appear before you again to discuss FHA's participation in the administration of S. 3215, introduced by Senator Sparkman. Under Secretary Wilbur Cohen has discussed the need for a program to facilitate the financing of facilities for the group practice of medicine and dentistry. I will, therefore, confine myself to how we would propose to process applications for mortgage insurance under the bill, if it is passed. On the very important aspects of the proposed legislation which require specialized knowledge in the medical or dental fields, we would rely heavily on the professional advice and technical assistance of the Department of Health, Education, and Welfare. As Under Secretary Cohen has told you, we have already had a number of discussions with HEW staff on the provisions of S. 3215. These conversations have been very constructive and harmonious. I am sure that we can develop a proper blending of the skills of HEW and the FHA needed to administer the chairman's bill in a responsible manner. In drafting regulations and procedures, and in the establishment of minimum standards for construction and equipment, HEW has agreed to provide us with assistance relating to the medical and health aspects. HEW will also provide consultation to communities and groups proposing to establish group practice. HEW will similarly assist us in the processing of applications for mortgage insurance. In the review of applications they have agreed to advise on whether the proposed group practice includes such specialties as are appropriate and compatible with the needs of the area; and on the appropriateness of the arrangements and agreements among the participating physicians or dentists. They will also advise us on the design and equipment of each proposed facility and the need for such a facility in the area in question. To help us in appraising the financial soundness of the proposal HEW has agreed to provide us with estimates of the revenues each group practice facility can be expected to produce. With this very important assistance from HEW, I believe we will have no difficulty establishing procedures for reviewing applications for mortgage insurance under the proposed legislation and in making sound judgments on them, both from a real estate and financial standpoint and from the standpoint of whether the facilities so financed will contribute to the medical and health objective of the bill. In effect, what we contemplate is a joint processing of applications, with FHA reviewing those elements of the proposal relating to the soundness of the mortgage financing and HEW reviewing those elements of the proposal which relate to medicine and health. To speed up this joint review, we would propose that HEW and FHA would carry out many of these steps simultaneously. Because of the need for facilities of this nature and the apparent lack of adequate financing, we would hope that the proposal will receive favorable consideration by the Congress. With your permission, Mr. Chairman, we are submitting suggested amendments, in line with our report on the bill, which we believe would improve the administration of the program. These will include technical and conforming amendments, some of which result from organizational changes in the creation of the Department. [S. 3215, 89th Cong., 2d sess.] AMENDMENTS [Omit the part struck through and insert the part printed in ital IN THE SENATE OF THE UNITED STATES A BILL To amend the National Housing Act to provide mortga authorize direct loans by the Housing and Home Financ Secretary of Housing and Urban Development, to help finance structing and equipping facilities for the group practice of medi Be it enacted by the Senate and House of Representatives of the America in Congress assembled, That it is the purpose of this availability of credit on reasonable terms to units or organizatio group practice of medicine or dentistry, particularly those in sm and those sponsored by cooperative or other nonprofit organiza financing the construction and equipment of group practice faci TITLE I-MORTGAGE INSURANCE PROGR ESTABLISHMENT OF PROGRAM SEC. 101. The National Housing Act is amended by adding & the following new title: "TITLE XI-MORTGAGE INSURANCE FOR GRO FACILITIES "INSURANCE OF MORTGAGES "SEC. 1001 1101. (a) The Commissioner Secretary is authori mortgages (including advances on such mortgages during con such terms and conditions as he may prescribe, in accordance w of this title, and (2) to make commitments for the insuring o prior to the date of their execution or disbursement thereon. be insured under this title after June 30, 1970, except pursuant to insure issued before that date. "(b) To be eligible for insurance under this title, the mort executed by a mortgagor that is a group practice unit or organ by the Commissioner Secretary, (2) be made to and held by a mo by the Commissioner Secretary as responsible and able to serv properly, and (3) cover a property or project which is appro insurance prior to the beginning of construction or rehabilitatic for use as a group practice facility which the Commissioner S be constructed in an economical manner, will not be of elabora design or materials, and will be adequate and suitable for carryin of this title. "(c) The mortgage shall "(1) not exceed 90 per centum of the amount which Secretary estimates will be the value of the property or 1 struction or rehabilitation is completed. and the The valu may, in the Commissioner's discretion, include the land physical improvements, for, in the ease of expansion, ren tion of existing buildings, the land and all improvemen remodeled, or altered), equipment, utilities within the property, architects' fees, taxes, and interest accruing d or rehabilitation, and other miscellaneous charges incide or rehabilitation and approved by the Commissioner Secret "(2) have a maturity satisfactory to the Commissioner to exceed twenty-five years, and provide for complete a principal obligation by periodic payments within such ter sioner Secretary shall prescribe; and "(3) bear interest (exclusive of premium charges f service charges if any) at a rate of not to exceed 5 per cer the amount of the principal obligation outstanding at a exceed such rate (not in excess of 6 per centum per an missioner Secretary finds necessary to meet the mortgage |