Mr. SPRINGER. I take it, Mr. Secretary, that this modernization would cover just about anything that can be done with those existing buildings. Is that right?

Secretary CELEBREZZE. Of course it would be left up to the determination of the State agency, because even a modernization project has to go through the State agency and that State agency in its total planning of facilities would take into consideration just how far to go. I will admit that the definition is broad, but we, in general, accept what the State agency refers to us as the need for modernization.

Mr. SPRINGER. Would they set the regulations for this, or would you? You mentioned regulations I believe in two places, "(As determined in accordance with regulations)," and "(to the extent permitted by the regulations)."

Who writes those regulations?

Secretary CELEBREZZE. We adopt them, but our practice has been to secure the approval of the Federal Hospital Council.

Under both bills, the administration bill, the Surgeon General can adopt regulations with the approval of the Secretary of Health, Education, and Welfare, but we intend to secure the approval of the Federal Hospital Council.

Mr. SPRINGER. That is in accordance with existing law?

Secretary CELEBREZZE. It isn't changed under either law.

Mr. SPRINGER. But the point I am trying to make is how much then are you putting on the States with their hospitals, or the local community, if you do all this?

Secretary CELEBREZZE. How much are we putting on the States for modernization?

Mr. SPRINGER. You are taking a hospital now, we will say. I take it you could go in and do anything with this with reference to remodeling anything, take walls, lighting, equipment or anything. You use the words "initial equipment" here and I presume that would be new equipment, as I understand initial equipment to mean new equip

ment.

Secretary CELEBREZZE. That is correct.

Mr. SPRINGER. What do you expect the local communities, the State, and the counties to do in connection with the program?

Secretary CELEBREZZE. The local communities have to put up their proportionate share of the total.

Mr. SPRINGER. That is what you would expect them to do under this bill? In other words, your formula here would be the same as it is under Hill-Burton, 331% and 6623?

Secretary CELEBREZZE. For new hospital construction.

Mr. SPRINGER. Is that the same formula to be applied for renovation?

Secretary CELEBREZZE. Yes.

Mr. SPRINGER. For modernization the same formula would apply?
Secretary CELEBREZZE. Yes.

Mr. HEMPHILL. Would the gentleman yield to me at this point?
Mr. SPRINGER. Yes.

Mr. HEMPHILL. Mr. Secretary, but doesn't the Surgeon General have some authority to change the formula under certain conditions? Secretary CELEBREZZE. Yes, subject to certain limitations he may

change the allotment formula, but not the formula for determining the State or local share.

Mr. HEMPHILL. Is that as to a grant, or loan, or as to both?
Secretary CELEBREZZE. It is under the grant provision.

Mr. HEMPHILL. Thank you.

Mr. SPRINGER. Now, Mr. Secretary, may I go to the second point. I am going to list them so I don't take up all of the time of the committee and give some one else a chance to ask questions.

This is on page 4, and I noted these as I ran through this and tried to note what you read.

Secretary CELEBREZZE. Are you referring to my testimony?

Mr. SPRINGER. I am referring to your statement, page 4. Mostly page 4 has to do with planning. Is that a new section in the bill? Secretary CELEBREZZE. Yes. That is completely new, in the bill. That is not in existing law at the present time.

Mr. SPRINGER. Is it your feeling that there is a great deal of need for this kind of money to be spent?

Secretary CELEBREZZE. It is my feeling that in this type of program, as in many of our Federal programs, we can receive greater value for our dollars when there is proper planning, before you construct the projects. I think that in the long run the planning grants that we make will offset themselves in greater efficiency and less cost; if you don't have proper planning in a program of this magnitude, then you are going to have inefficiency. So we think it is best, as I tried to bring forth in my statement, that you have a total community approach to health facilities planning; so that by having proper planning you don't have duplication if you are going into a really comprehensive health facility program in a particular State.

Mr. SPRINGER. Let me ask you this. Suppose that I want to build a hospital, we will say in Decatur, Ill. That is all I want to do, period. Is planning money provided under this? I don't want to make any plan for a region. I want to build a hospital at Decatur, Ill. Is planning money provided?

Secretary CELEBREZZE. To the hospital specifically?
Mr. SPRINGER. Yes.

Secretary CELEBREZZE. No. Not under this provision.

Mr. SPRINGER. That kind of planning money is not involved in any one hospital?

Secretary CELEBREZZE. No, because you would have no control over it. Every hospital in the community would come in and say, "We want money for planning," and then you would be giving money to 100 different people just for planning which may not accomplish anything.

That is why we are trying to get a comprehensive program through the State agencies.

Mr. SPRINGER. Is this for a city, a region, or what is the extent of the planning?

Secretary CELEBREZZE. We have definitions of the areas, what is referred to as a medical trade or service area. For a greater explanation of that I will have to refer you to Dr. Graning.

Mr. SPRINGER. All right, if he would. I think it is interesting to know what is included under the planning.

30-883-64——5

Dr. GRANING. Sir, in your State there are some illustrations of planning groups. There has been one operating in Chicago, Ill. In essence a planning group takes into consideration the presence of existing hospitals. When a particular group, let us say, is thinking about putting in a cobalt bomb and another nearby hospital who is also thinking about a cobalt bomb, they make an effort to get these people together. There is give and take in the development of a coordinated plan, for what would be best for the Decatur area, or the Lake County area, as the case might be.

Mr. SPRINGER. Then this is a large area planning.

Dr. GRANING. It is, sir.

Mr. SPRINGER. I think we have covered modernization and replaceOn page 10 of your statement this mortgage insurance is new. Is that correct?

ment.

Secretary CELEBREZZE. Yes, this is mortgage insurance. I think it will help you, Congressman, if I say there is a mortgage insurance program existing now under the FHA for proprietary nursing homes. Mr. SPRINGER. Yes, I am familiar with that. This would be in the nature of the same thing applicable to hospitals?

Secretary CELEBREZZE. Yes, hospital and other nonprofit health facilities.

Mr. SPRINGER. At the bottom of page 11 and top of page 12, you

say:

If the loan to be insured will be used to construct a proprietary nursing home, however, the amount of the principal obligation may be as much as 90 percent of the value of the complete facility.

In this you are going to insure how much.

Secretary CELEBREZZE. The 90 percent only refers to proprietary nursing home loans.

Mr. SPRINGER. That is correct. How much are you going to spend? Secretary CELEBREZZE. On the nonprofit facilities we can make a loan of 50 percent of the actual value of the facility when it is completed.

Mr. SPRINGER. How much did you say?

Secretary CELEBREZZE. Fifty percent. We are talking about loans

now.

Mr. SPRINGER. And this is as much as you would guarantee?

Secretary CELEBREZZE. Yes.

Mr. SPRINGER. That is 50 percent of the completed facility. Is that correct?

Secretary CELEBREZZE. For nonprofit facilities.

Mr. SPRINGER. All right. Suppose that we make them a grant of 6623. They have a third?

Secretary CELEBREZZE. Yes.

Mr. SPRINGER. Then we come along in the second step and we insure the completed facility for 50 percent of its value.

Secretary CELEBREZZE. No, you can't do that under law. The total grant and the loan cannot exceed 75 percent of the total value of the project when it is completed.

Mr. SPRINGER. Would you repeat that?

Secretary CELEBREZZE. We are talking now about nonprofit facilities. The total value of any loan plus a grant cannot exceed 75 percent of the value of the total facility when it is completed.

Mr. SPRINGER. Then if we insure-how much? Fifty percent of that, how much is that?

Secretary CELEBREZZE. If you insure 50 percent of it, then you can only take a 25-percent grant. I think the logical thing would be to take the grant and take a lesser loan; but in answer to your question, you can only get a 25-percent grant.

Mr. SPRINGER. Then how much would still be outstanding after that? You get 25 percent of 33% percent? I am trying to get the risk that is being taken. I still don't get your formula for the risk that is being taken by the local community.

Secretary CELEBREZZE. I am not sure I follow you. Let's take a concrete example.

Mr. SPRINGER. Say a building costs $100,000. You give them a 66% grant. How much may they get under your mortgage out of that remaining?

Secretary CELEBREZZE. That is the difference between 662% and 75 percent.

Mr. SPRINGER. Fifty percent of that?

Secretary CELEBREZZE. No; all of it. All of the difference up to 75 percent. The total grant plus insured loan cannot exceed 75 percent. So, therefore, if you get a grant of 662%, you may get the balance, up to 75 percent, as an insured loan.

Dr. GRANING. Eight and a third percent.

Mr. SPRINGER. Eight and a third percent would be insured, is that correct?

Dr. GRANING. Yes, sir.

Mr. SPRINGER. In that, since 813 percent would be all that would be insured

Dr. GRANING. Yes, sir.

Mr. SPRINGER. They would have to produce

Dr. GRANING. Twenty-five percent.

Mr. SPRINGER. Twenty-five percent?

Dr. GRANING. Yes, sir.

Mr. SPRINGER. With respect to your amendments, on page 12 you say:

First, the bill would delete the requirement that a private nonprofit diagnostic or treatment center must be sponsored by a corporation or association which owns and operates a nonprofit hospital. From time to time the present provision has prevented the approval of worthwhile construction projects in areas where they were very much needed to meet community requirements.

You would delete this requirement that a private nonprofit diagnostic or treatment center be sponsored by a corporation or association which owns a nonprofit hospital?

Secretary CELEBREZZE. Yes. We found certain instances where a hardship was being worked. Suppose I have Dr. Graning, who has worked in this area, give you an example.

Mr. SPRINGER. All right.

Dr. GRANING. Sir, we recently had a very good illustration of this in Fort Worth, Tex. There were six voluntary health agencies that were interested in getting together to provide services for handicapped children. They had an excellent staff. The six agencies wanted to minimize the duplication of services and build a facility that would meet their joint needs.

The State agency was in favor of this. We were in favor of it. We could not approve the facility under the existing law because of the stipulation that it has to be affiliated with a nonprofit hospital. We are seeking permission in the law so that in such instances when it is truly a worthwhile activity the Surgeon General may approve such

cases.

Mr. SPRINGER. Mr. Secretary, I want to come back to these three bills and then I am through. The Senate bill would cost how much money over 5 years?

Secretary CELEBREZZE. $840 million for hospital construction and

modernization.

Mr. SPRINGER. That is the Senate bill?

Secretary CELEBREZZE. $150 million for 1965 for hospital construction and modernization.

Mr. SPRINGER. The Senate bill would cost how much? $840 million? Secretary CELEBREZZE. You mean the total cost in all three bills? Mr. SPRINGER. Yes.

Secretary CELEBREZZE. The ceiling is $840 million in all three of the bills for hospital construction and modernization.

Mr. SPRINGER. In other words, all of them have $840 million?
Secretary CELEBREZZE. That is right.

Mr. SPRINGER. $150 million a year?

Secretary CELEBREZZE. Well, it will vary.

Mr. SPRINGER. I see what you mean, but the average would be $150 million a year, wouldn't it?

Secretary CELEBREZZE. It goes up in the Senate bill from $150 to $180 million, so it isn't $150 million every year.

Mr. SPRINGER. But it all would cost

Secretary CELEBREZZE. It all would cost $840 million for construction and modernization of hospitals. The only difference is the way in which we divide the $840 million.

Mr. SPRINGER. Thank you, Mr. Chairman.

The CHAIRMAN. Mr. Moss.

Mr. Moss. I have no questions, Mr. Chairman, at this time. I would like to state, however, Mr. Secretary, that I believe you have given us an excellent statement, one most helpful to the committee as we restudy this legislation. Thank you.

Secretary CELEBREZZE. Thank you.

The CHAIRMAN. There is not thing you didn't cover, as I gathered. I thought we should have a clear understanding that I don't believe has been fully developed yet. That is the formula used for allotments to States for the hospital construction part of the bill is different from the formula used for the allotments to the States of the amount that goes to the modernization program. Did you get that?

Mr. SPRINGER. I got the difference between your bill and his bill, but I don't think I got the Senate bill.

The CHAIRMAN. You got the difference in the amounts, but you didn't get the difference in the formula used. The formula used for the allotment for the construction of new hospitals is one thing. The formula that is used for modernization is another thing.

The amounts to the States under the formula for hospital construction will differ from the amounts the States are entitled to under the modernization part of the bill.