community is 30 miles away. And no facilities exist where efficient medical service could be provided or where, in fact, well trained modern physicians are willing to practice. So the need is obvious. The local bank is quite willing to make a loan to finance the needed facility but it simply does not have adequate reserves and is not large enough to take the admitted risk of financing a building which it would obviously have considerable difficulty in selling in case foreclosure became necessary. Were H.R. 9256 on the statute books the local bank could and would make this loan, doctors could be attracted to this community and the health of the people protected. If the guarantee were available other instances would come forward without drawing any real assistance from the Government except that guarantee.

Many similar examples could be given, both from other rural areas, to which the legislation would give preference and also from cities where labor-sponsored and cooperative consumer-sponsored group health plans could care for much larger memberships if only they could receive the financing for the additional physical facilities they need.

Finally, we submit that with the advent of the medicare program, the pressure upon existing health facilities will be greatly intensified. indeed something approaching a crisis in this respect may result What better way of forestalling such a crisis than by encouraging through a loan guarantee program the kind of constructive action on their own behalf which groups of our people are endeavoring to take through developing of group health plans like those about which I have been speaking?

In times like the present it indeed seems the part of both wisdom and statesmanship to encourage voluntary action by the people of this country in attacking and solving their own problems-that of health economics at their forefront.

For these reasons The Cooperative League of the United States hopes that this distinguished committee will report favorably upon H.R. 9256 and the other measures now before you and that they can be enacted into law at an early date.

(The following letter was submitted for the record:)

Hon. WILLIAM A. BARRETT,

THE COOPERATIVE LEAGUE OF THE U.S.A..
Washington, D.C., March 21, 1966.

Chairman, Housing Subcommittee of the House Banking and Currency Committee, Washington, D.C.

DEAR CONGRESSMAN BARRETT: In recent testimony concerning H.R. 9256, the medical facilities loan guarantee bill, the Cooperative League referred to the comparative studies that have been made concerning actual utilization of inhospital services by members of the three most popular types of medical protection plans, viz, Blue Cross-Blue Shield, indemnity plans, and Group Practice. The results of the studies reveal with force and clarity that members of group practice plans make less use of hospitals than the other two types of protection. reflecting the result of early treatment, preventive medicine, and a program of using our medical resources to prevent or detect at an early stage the conditions which otherwise lead to hospitalization.

The following chart covering 3 recent years is based on number of hospital days per 1,000 persons covered by the 3 types of protection in the Federal employees health program:

Federal employees health program-Experience for 3 contract years comparing individual Group Practice plans, nonmaternity in-hospital services, both options

As Dr. George Baehr (chairman of the Hospital Code Committee of the Board of Hospitals of the City of New York, and who was director of clinical research at Mount Sinai Hospital) said in the Michael M. Davis lecture in May 1965: "The difference of close to 50 percent in the utilization of hospital facilities inder the two systems of medical care and payment for physicians' services may perhaps be ascribed in part to the number of surgical operations performed anually on Federal employees and their families under the two different systems of medical care:

"Number of surgical operations performed

"So great a difference in hospital utilization under the two systems of medical care and methods of payment upon the costs of medical care must undoubtedly be an important factor in the magnitude of personal consumer expenditures in The United States for private medical care, which in 1963 reached $23.7 billion. The ratio of personal expenditures for medical care to total personal consumption xpenditures by the American people increased from 4.3 percent in 1948 to 6.3 ercent in 1963. Of this sum, 29.2 percent represents hospital costs, 27.9 percent ysicians' charges, and 26.5 percent drugs and appliances used for the care of the ek (19.9 percent for drugs and 6.6 percent for appliances). In New York City ivate citizens spend about $1 billion a year for personal health services through urance and direct out-of-pocket payments and an additional $750 million a r is spent by the State and local governments for the health and medical care idents of the city of all economic levels."

would be appreciated if this could be made a part of the committee report. Sincerely,

*EMENT OF GIBSON KINGREN, REPRESENTING KAISER
FOUNDATION HEALTH PLAN, INC.

INGREN. Mr. Chairman and members of the subcommittee my
Gibson Kingren, representing the Kaiser Foundation Health
aiser Foundation Health Plan, a nonprofit organization, is
est group practice prepayment health plan in the United
roviding medical services on a self-sustaining basis to more

STATEMENT OF JAMES BRINDLE, PRESIDENT, HEALTH INSURANCE PLAN OF GREATER NEW YORK, ON BEHALF OF THE GROUP HEALTH ASSOCIATION OF AMERICA; ACCOMPANIED BY DR. W. P. DEARING, EXECUTIVE DIRECTOR, GROUP HEALTH ASSOCIATION OF AMERICA

Mr. BRINDLE. Mr. Chairman and members of the committee, my name is James Brindle. I am president of the Health Insurance Plan of Greater New York, an active member organization of Group Health Association of America. With me are Jerry Voorhis, president and executive director of the Cooperative League of the United States of America and secretary of Group Health Association of America, Dr. W. P. Dearing, executive director of Group Health Association of America, and Gibson Kingren of the Kaiser Foundation Health Plan. My testimony today is on behalf of Group Health Association of America and in strong support of H.R. 9256.

Some background on Group Health Association of America may be helpful in evaluating my support of H.R. 9256.

Group Health Association of America is a nonprofit organization dedicated to improving the availability, efficiency and quality of medical care. Toward this end the association works especially for the creation and expansion of group health prepayment plans. These plans are actually organizations of consumers and physicians banded together to provide comprehensive health care on a nonprofit basis directly to the individual through group medical practice. The consumer pays a regular monthly fee, in advance, for his health care. I would like to emphasize some key words and phrases in this definition of Group Health Association of America and apply them to the reasoned need for H.R. 9256.

Very important is the word "nonprofit." It represents a blessing to the consumer, we believe on the basis of our experience, in the form of more quality comprehensive medical care for the dollar. Yet it represents years of financial difficulty and frustration for consumers who establish sponsoring organizations to try to build a modern group health program.

Our hope is that you will make it more feasible for these nonprofit groups of consumers, working cooperatively with physicians, to finance group health plans.

Groups of physicians seeking financing for profitmaking medical enterprise seldom have trouble getting financing from their local banking institutions or, in the case of loans of major size, from outside banking and insurance firms. When well-to-do physicians with established practices plan to build in prosperous communities, money for capital expenditures is readily available. For such commercial and profit-oriented ventures, doctors have also found the door of the Small Business Administration open to their needs.

Many nonprofit group health plans have had quite different experiences. What is required in the consumer's interest and what must be offered to attract physicians to an economically deprived urban or rural neighborhood may not offer the most attractive prospect for venture capital. Location and design of a consumer-sponsored medical group facility is based on health service requirements rather than

solely on fiscal attractiveness. Planning here is for people—not profits.

Even for programs that do not involve prepayment, there are areas such as New York City where it is very difficult to attract numbers of highly qualified physicians into practice. I think Harlem is one of the instant areas.

The agonizing trials of Group Health Association of America affiliates in securing adequate financing is repeated several times in documents presented to the Committee on Interstate and Foreign Commerce in its hearings on H.R. 2987 conducted last year. They can be found in the record of the 1965 hearings at pages 313-317.

The expressed need today is greater. The Medical Foundation of Bellaire, Ohio, is a nonprofit community health organization whose affiliated 16-physician Bellaire Medical Group serves seven Appalachia counties in Ohio and West Virginia. This foundation now reports need for financing $1,230,000 of construction, compared with $500,000 to $800,000 reported at the time of last year's hearings.

Group practice plans in St. Paul, Minn., and San Diego, Calif., which reported no construction financing needs last year now state they need respectively $750,000 and $625,000 of financing for needed expansion.

Starting a new plan depends on adequate financing. Just this week I was in New Haven, Conn., where there is a vigorous, movement for the development of a group practice facility. This project is unusually important because, although primarily for comprehensive patient care on a prepayment basis, it would operate in the Yale-New Haven Medical Center, where it would also serve as an education center to train future physicians in family type medical care in a group practice setting. The project is sponsored by the Greater New Haven Central Labor Council and other consumer groups and has been assured of cooperative participation by the joint board of the Yale University School of Medicine and the Yale-New Haven Hospital. They are confronted with the immediate need for financing of $750,000 for a new facility and an additional $500,000 for later expansion.

Appended are copies of statements from these and other organizations regarding needs for financing.

They represent, gentlemen, a story of lost time and dollars, of dedicated men having to pay exceedingly high interest and amortization rates when loans were gained and of men tapping their operating capital to secure as much as two-thirds of the total loan. That has been our own experience in New York City.

A brief note was sent by me, as president of the Health Insurance Plan of Greater New York, at that time. In it I noted that after great difficulty in securing any financing in our early days-between 1945 and 1955-we are now able to get a certain measure of facilities financing. But only up to about one-third of the capital cost. This has forced HIP and its affiliated group partnerships to use assets to carry the other two-thirds of all construction costs. Further, under New York State insurance law, there are serious limitations on HIP's ability to use funds for facilities.

To operate in this financial straitjacket has meant that at times we have had to settle for less than adequate facilities and locations for our medical group. We have been delayed for years in relocating, mod

ernizing, and expanding our medical centers to meet the demand in certain areas. This year we need new facilities urgently. Within the next 2 or 3 years we will require another five centers providing comprehensive medical care. Passage of this legislation will bring these medical care units into being faster and with less difficulty.

The sick want and need our attention. We wish to provide it. We cannot for the lack of available financing under reasonable terms. That is one reason why we urge favorable action on this bill.

A second key phrase pertaining to group practice is "comprehensive health care." This embodies utilizing as extensively as possible the virtual explosion of medical knowledge and equipment that have, during the past 30 years, vastly increased the power of modern medicine to save life and restore and preserve health. Yet this explosion of medical knowledge has produced fragmentation of service to the patient among an increasing array of specialists and the family physician. Group practice plans eliminate this fragmentation and provide essentially "one-stop" medicine.

The comprehensive, nonprofit group health programs have been hailed by many as a significant means of delivering medical care to those in need.

President John F. Kennedy, in his health message to the Congress in 1962, said:

Experience in many communities has proven the value of group medical and dental practice, where general practitioners and medical specialists voluntarily join to pool their professional skills, to use common facilities and personnel, and to offer comprehensive health services to their patients. Group practice offers great promise of improving the quality of medical care, of achieving significant economies and conveniences to physician and patient alike, and of facilitating a wider and better dstribution of the available supply of scarce personnel. President Johnson, in his health message to the Congress this year, noted that:

Group practice benefits both physicians and patients. It makes expert health care more accessible for the patient. It enables the physician to draw on the combined talents of his colleagues.

May I add that it also requires substantial investments in specialized buildings and equipment.

The very cost of complex equipment needed for diagnosis and treatment, together with the specialization demanded by the exploding volume of new knowledge in the medical field, has made the nonprofit group health movement a growing necessity for informed consumers The U.S. Public Health Service reports a substantial increase since 1946 in the number of medical groups as well as in the number of doc tors participating in group health practice. However, the growth of consumer-sponsored group practice prepayment plans has been impeded by the difficulties they face in raising the capital necessary to build and equip their facilities.

Because of the heavy emphasis on preventive medicine, and the con. trols inherent in these consumer-oriented plans, the 5 million Americans enrolled in GHAA-associated organizations spent, on the aver age, 40 percent less time in our Nation's crowded hospitals in 1962 and 1963 than did patients covered by Blue Cross-Blue Shield or indemnity plans. Obviously this represents an economic and social gain, on a national scale, which deserves recognition and support.