Title. Subsection (k) defines the term title, when used with reference to a site for a project, as a fee simple or any other estate or interest (including a leasehold if the rental therefor does not exceed 4 percent of the land's value) which the Surgeon General finds sufficient to assure at least 50 years' undisturbed use and possession for the project.

This is the same as the definition in section 631 (j) of the existing law. Mortgage. The term "mortgage" is defined in subsection (n) to mean a first mortgage (1) on real estate, in fee simple, or (2) on such other estate or interest (including a leasehold on which the rental does not exceed 4 percent of the land's value) as the Surgeon General finds sufficient to secure the mortgage debt and to assure, for a period of at least 50 years from the execution date of the mortgage, undisturbed use and possession for the project. The term "first mortgage" is defined to mean such classes of first liens as are commonly given to secure advances on, or the unpaid purchase price of, real estate under State law, together with any credit instrument secured thereby, and any such mortgage may create a security interest in initial equipment, whether or not attached to the realty.

Mortgagee.-Subsection (o) provides that the term "mortgagee" shall include the original lender under a mortgage, and his or its successors and assigns, and the holders of credit instruments issued under a trust mortgage or deed of trust who act by and through a trustee named therein.

Mortgagor.-Subsection (p) provides that the term "mortgagor" shall include the original borrower under a mortgage and its successors and assigns.

EFFECTIVE DATES

Section 3(b) of the bill provides the effective dates for the revision of title VI of the Public Health Service Act which would be effected by section 3(a) of the bill.

How

The revision would in general be effective upon the date of enactment. ever, applications approved by the Surgeon General under the existing law prior to such date, and allotments of sums appropriated prior to such date, would be governed by the existing law. In addition, the allotment percentages which would otherwise be promulgated by the Surgeon General for purposes of title VI of the Public Health Service Act during 1962 will be effective for fiscal year 1965. The terms of office of the members of the Federal Hospital Council who are serving on the Council on the date of enactment will expire on the date they would have expired if this bill had not been enacted. This will assure continuation of the staggering of the terms of office of present members of the Council. An application for a modernization project may not be approved before January 1, 1965, and may be approved after such date only if the requirements of section 604 (with respect to the State plan) have been met, including the requirement that the State plan set forth the extent to which existing hospitals and other medical facilities are in need of modernization.

Section 3 (c) of the bill provides that no application for insurance with respect to a mortgage on a nursing home under section 232 of the National Housing Act (12 U.S.C. 1715w) shall be approved by the Federal Housing Commissioner unless such application is filed before the close of the sixth month after enactment. (This would permit the Federal Housing Administration to process applications on which work has been done preparatory to the actual filing thereof.) In connection with the transfer of the mortgage insurance program for proprietary nursing homes to the Public Health Service, as part of the new mortgage insurance program which this bill would authorize, it should be noted that the present provisions in section 232 of the National Housing Act which require State or local standards of licensure and methods of operation and assurance of enforcement with respect to such nursing homes would be replaced by the requirement in section 604(a) (4) (7) that States provide and enforce minimum standards of maintenance and operation and the requirement that the applicant give assurance of compliance with such standards. These requirements will be applicable to all projects assisted or provided mortgage insurance under title VI (including private nonprofit facilities for long-term care).

Section 3(d) of the bill contains amendments to various Federal laws applicable to banking or other investing institutions operated or regulated by the Federal Government or the District of Columbia, and an amendment to the Bankruptcy Act, which amendments would accord the same status to loans

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secured by mortgages insured under the bill as that accorded to loans secured under other Federal loan insurance programs.

The CHAIRMAN. We are glad to have the Secretary with us this morning. Mr. Secretary, we welcome you back to this committee. We realize fully the importance of this program and the difficulties that we are having with it, but we do observe the tremendous accomplishments of it over the past several years throughout the United States. We will be glad to have your presentation. In the meantime, before you start, it might be helpful for the record if you would identify your associates this morning who have assisted you in the development of the proposal.

STATEMENT OF HON. ANTHONY J. CELEBREZZE, SECRETARY; ACCOMPANIED BY WILBUR J. COHEN, ASSISTANT SECRETARY (FOR LEGISLATION); BOISFEUILLET JONES, SPECIAL ASSISTANT TO THE SECRETARY (HEALTH AND MEDICAL AFFAIRS); DR. DAVID E. PRICE, ACTING SURGEON GENERAL, PUBLIC HEALTH SERVICE; DR. HARALD M. GRANING, CHIEF, DIVISION OF HOSPITAL AND MEDICAL FACILITIES, BUREAU OF STATE SERVICES, PUBLIC HEALTH SERVICE; AND WILLIAM B. BURLEIGH, SPECIAL ASSISTANT, DIVISION OF HOSPITAL AND MEDICAL FACILITIES, BUREAU OF STATE SERVICES, PUBLIC HEALTH SERVICE, DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE

Secretary CELEBREZZE. Mr. Chairman, I have with me this morning Wilbur J. Cohen, Assistant Secretary; Boisfeuillet Jones, Special Assistant to the Secretary (Health and Medical Affairs); Dr. David E. Price, Acting Surgeon General; Dr. Harold M. Graning, Chief, Division of Hospital and Medical Facilities of the Bureau of State Services of the Public Health Service; and William B. Burleigh, Special Assistant, Division of Hospital and Medical Facilities, Bureau of State Services of the Public Health Service.

Mr. Chairman, if it pleases the committee, I would like permission to present my opening statement in full.

The CHAIRMAN. You may proceed.

Secretary CELEBREZZE. I am pleased to have the opportunity to appear before you today regarding H.R. 10041, the Hospital and Medical Facilities Amendments of 1964, introduced by the distinguished chairman of this committee, Mr. Harris.

The bill, which is identical in most major respects to the draft bill submitted by the administration to the Congress, proposes to enlarge the Hill-Burton program of Federal aid for the construction of health facilities and to authorize operation of the revised program for an additional 5 years.

The great success of this program over the last 17 years speaks for itself. It is one of the most widely known and well-accepted programs of the Department of Health, Education, and Welfare. Enactment of the Hill-Burton legislation in August 1946 marked the beginning of a national policy recognizing the responsibility of the Federal Government to assist in the construction of needed hospital and other health facilities throughout the land. These facilities are now a part

of our national resources and are essential to the growth and strength of the country.

It has helped to improve the health of our citizens in a very prac tical way-by assisting communities to plan and build needed hospitals and other health facilities. It has accomplished this by relying primarily on the States for direct administration and supervision of the program and on community initiative for the design and construction of the facilities.

The Federal Government sets the broad requirements and relies on the States for the initial selection of projects. The results of this combination of a worthwhile program and local initiative can be measured by the modern and efficient hospitals which have been built throughout the country, particularly in smaller towns and rural areas. As of June 30, 1963, a total of 6,810 Hill-Burton projects had been approved. The total cost of these projects is $6.19 billion, involving Federal funds in the amount of $1.96 billion. These funds have been transformed into 290,000 general, mental, tuberculosis, and chronicdisease hospital and nursing-home beds.

In addition, Hill-Burton funds have helped construct 1,992 rehabilitation facilities, public health centers, diagnostic and treatment centers, and State health laboratories.

In 1948, for example, this country had only 59 percent of the general hospital beds it needed-today, 83 percent of current need has been met. But State agencies report that we still need 133,000 additional new beds if the Nation's requirements are to be adequately met.

Systematic planning of hospitals and other medical facilities has been undertaken in this country on a continuing basis as a result of the Hill-Burton program. It has stimulated improved hospital design and construction, raised State licensing standards for maintenance and operation and for construction and equipment, and encouraged efficient and economical care through coordinated planning for hospitals and other health facilities.

Further, by encouraging more even distribution of health facilities throughout the country, the program has helped attract vitally needed physicians and other health specialists to rural areas.

Despite these gains in improving and expanding the Nation's health facilities, many unfinished tasks remain. Our hospitals have to keep pace with a constantly expanding and shifting population. Serious shortages still exist in many fast-growing suburbs, in the central cities of metropolitan areas, and in some sparsely settled rural areas. Older hospitals in our cities are deteriorating at a disturbing rate.

New concepts of treatment and care require new kinds of facilities to provide services to the aging and the chronically ill. Changes in our society have occurred which should be reflected through program emphasis and direction in the Hill-Burton program. Since the HillBurton authorization expires this coming June 30, 1964, we should adjust its provisions to meet additional needs and extend its life for an additional period of years. The bill before you proposed to extend the program to June 30, 1969.

During the last session of the Congress, we saw the enactment of legislation to develop the facilities so badly needed for the mentally retarded and the mentally ill. The proposed amendments to the HillBurton legislation will help close other significant gaps in our plan

ning and health-facility needs. I should like now to review briefly each of the major amendments contained in the bill and explain why I think they will extend and expand the Hill-Burton program to meet the changing health needs of the Nation.

Under planning, because of the number and variety of facilities, services, and organizations in most communities today, which are concerned with the health of their citizens, no community facility stands alone. It is part of an interrelated and interdependent web of facilities and services. The program decisions of one organization frequently influence the program needs and decisions of several others. Organizations and consumer groups can react and accommodate themselves as best they can to the decisions of other organizations, or they can come together and agree on some common approach to their problems. Areawide health-facility planning is a mechanism for achieving this goal.

While State-level planning has improved significantly under the Hill-Burton program, most Hill-Burton State agencies are not staffed or equipped to coordinate or conduct detailed planning in metropolitan areas and apply the complex planning techniques which have evolved in recent years.

Accordingly, more planning must be developed in regions, metropolitan areas, and local areas to implement plans for the construction and coordination of health facilities.

Proper planning is the best guarantee that large sums of capital funds-Federal, State, and local-are spent wisely. Approximately $1.5 billion is spent annually for construction of health facilities. For these reasons, the bill authorizes $45 million over a 5-year period for special project grants to responsible groups in communities and metropolitan areas for comprehensive planning of health facilities. A limited amount of aid has been provided to some communities in the last 3 years to demonstrate the role and feasibility of area wide health-facility planning agencies. The response from communities and from those in the hospital field, we feel, justifies going forward on a more formal basis.

In other words, the area wide planning agency is no longer a hopeful experiment but an accomplished fact that has demonstrated its value in almost 30 major metropolitan areas.

Sponsorship by the Public Health Service of the development of area wide health-facility planning agencies represents in my opinion, an effective effort by the Federal Government to encourage maximum value received for each health-facility dollar expended.

Under the terms of the bill, $5 million would be authorized during fiscal year 1965 and $10 million for each of the next 4 fiscal years. Public and nonprofit agencies and organizations would be eligible for grants paying up to two-thirds of the cost of an approved project. However, the Surgeon General may, if he feels it is necessary to stimulate the local planning agency, make a grant of a larger percentage of the cost during the first 3 years of the project.

In keeping with the philosophy of the Hill-Burton program of State responsibility and to assure statewide coordination, the bill provides that a planning grant will be made only if it has been first approved by the State Hill-Burton agency.

Not only should each health facility be related to the whole network of health facilities and services in the community and metropolitan area, but it should also be planned in relation to the neighborhood, community, and urban area in which it is located.

Therefore, the Surgeon General will take steps to assure that health facilities and services are developed in close coordination with plans and planning for the general development of communities and metropolitan areas.

In addition, we recognize the need for coordinated efforts by Federal agencies and plan to take all appropriate steps to assure coordination with other Federal programs which are related to ours.

In the area of modernization, in spite of the success of the HillBurton program in bringing needed health facilities to many areas, an additional serious growing problem has emerged which needs to be met. Many of our big city hospitals are becoming obsolete and increasingly inefficient to operate. Yet these are the hospitals on which we rely for specialized services and for setting standards of quality care. These are the hospitals which conduct research, put into practice the latest advance in medical science, and help train our future health specialists. They are, in short, the cornerstone of quality hospital care.

There is no more urgent need in the hospital field today than the modernization of these facilities. A 1960 Public Health Service study indicated that it would cost an estimated $3.6 billion just to modernize and replace existing hospitals without attempting to construct additional beds. This estimate, undoubtedly, would exceed $4 billion today.

The bill would authorize, beginning July 1, 1965, a program of grants to States for needed modernization of public and nonprofit hospitals and other medical facilities. The amount of Federal funds authorized to be allocated to the States for modernization is set forth in the bill as a specific fraction of the total annual sums appropriated for new hospital and public health center construction and for modernization.

Over a 5-year period, $840 million would be authorized for both programs. The bill, for example, provides that one-eighth of the amount appropriated for the fiscal year beginning July 1, 1965, would be allotted to the States for modernization of hospitals and public health centers. Thus, if the full authorization of $160 million were appropriated in that fiscal year, $20 million-that is, one-eighth of $160 million-would be available for modernization and $140 million for new hospital construction. Each year slightly larger fractions are specified in the bill for modernization.

The bill would also authorize a State to request the Surgeon General to transfer a specified fraction of its modernization allotment each year to its allotment for new hospital construction if the State HillBurton agency certifies that the need for new hospitals and public health centers is substantially greater than the need for modernization of health facilities. The fraction of a State's modernization allotment which could be transferred each year is one-half in fiscal year 1966, three-sevenths in 1967, two-fifths in 1968, and five-elevenths in 1969.