H.R. 9256 is basically similar to H.R. 2987, 89th Congress, upon which the AMA testified before the House Interstate and Foreign Commerce Committee in March 1965. Our objections to H.R. 2987 went to the substance of the bill. While we believe that this proposal, concerning itself as it does with mortgage insurance and direct loans, is more appropriately before this committee, we find that there has not been sufficient change in the legislation or in the circumstances on which our objections were based to warrant a change in our position. Accordingly, not persuaded that this legislation is advisable or necessary, we appear here today to again voice our opposition. At the outset it should be clearly understood that the American Medical Association does not oppose group practice by physicians. It is recognized that such practices may afford some advantages to both the physician and the patient, and that the number of group practices is constantly increasing. It should be also recognized, however, that this type of practice is neither feasible nor desirable for all of the physicians of our Nation. Šince there are different types of group practices, we should keep before us the intent of this bill with respect to the type of group prac tice which it would foster. It is our opinion that H.R. 9256 is designed primarily to provide for the construction of prepaid closed-panel group practices. I will speak more to this point, shortly. Our reasons for objecting to the measure pending before this committee may be briefly categorized. First, physicians do not have difficulty in obtaining conventional loans. Second the number of group practices is increasing without Federal financing. Third, direct loans by the Federal Government are unwarranted. And fourth, the bill is discriminatory in the priorities granted to applicants. PHYSICIANS ENJOY GOOD CREDIT STANDING Physicians enjoy a high credit standing in their community. It is generally recognized that the physician has a high potential earning capacity. That this potential is usually realized may be seen from surveys which have compared the M.D. to other professions or to the businessman and have found the physician to be at the top of the earnings or net income ladder. And when a physician participates in a partnership or in a group practice, his personal income tends to be still greater. As far as we know, there has been nothing shown which would indicate that physicians require any special or unconventional form of assistance when financing the construction of their offices or the equipping of them. THE NUMBER OF GROUP PRACTICES IS INCREASING One might suppose from the emphasis stemming from the bill that a need for group practice is not being met. The implication is there that growth in group practice is being stifled and that special assistance is needed. This is not so. Three surveys with respect to group practice are significant. In 1946 a survey conducted by the Public Health Service, with the cooperation of the AMA, revealed the existence of only 368 group prac tices. A second survey conducted by the PHS in 1959-60, in which the AMA closely cooperated, showed there were 1,546 group practices. gress, uper reign Co 2987 we posal, co ect loans ere has t stances ir position le or ne America sicians In earlier testimony before this committee, on March 1, the Under Secretary of the Department of Health, Education, and Welfare stated that "today, group practices number nearly 2,000." Unfortunately Mr. Cohen did not have the benefit of our latest survey. Just last year, the AMA undertook a direct mail inquiry of all physicians. Responses show that there are now 5,450 group practices with approximately 26,000 physicians participating in such groups. This remarkable growth of group practices, an increase of 350 percent in 5 years, has taken place without Federal subsidization. DIRECT LOANS UNWARRANTED Title II of H.R. 9256 would authorize the Housing and Home Finance Administrator to make loans to any group practice units or organizations to assist in financing the construction cost of group practice facilities. We see no justification for this provision. We have already shown that physicians, perhaps more so than any other group, are able to obtain financing, through usual channels, to meet the cost of constructing facilities. H.R. 9256 is not primarily concerned with physician owned and operated group practices, but is intended to provide preferential assistance to prepaid closed panel group practices, particularly those which may be established by agencies or organizations. We see no justification for such priority. DISCRIMINATORY PREFERENCES Our fourth reason for opposing certain provisions of H.R. 9256 concerns the discriminatory nature of this bill as evidenced by the priorities established. In this respect let us examine pertinent provisions of the bill. H.R. 9256 provides that mortgages may be insured or loans given to the following (sec. 1007(a)): (A) A private agency or organization (including a medical or dental group) undertaking to provide, directly or through arrangements with a medical or dental group, comprehensive medical care or dental care, or both which may include hospitalization, to members or subscribers primarily on a group practice prepayment basis; (B) A public or private nonprofit agency or organization established for the purpose of improving the availability of medical or dental care in the community or having some function or functions related to the provision of such care, which will, through lease or other arrangement, make the group practice facility with respect to which assistance has been requested under this title available to a medical or dental group for use by it; or (C) A medical or dental group. The bill requires certain priorities. Section 302 (a) requires the which criteria shall give preference in the case of applications involving facil- It may be seen from the foregoing excerpt that it is not the medical or dental groups of subparagraph (c) which are intended to be benefited by H.R. 9256, but the agencies or organizations which undertake to provide medical care to members or subscribers primarily on a group practice prepayment basis. Thus the question is not simply whether mortgages should be insured for, or loans given to, “group practices" but whether preference for such loans should be given to corporations, associations, trusts, or other organizations which undertake to make available medical care. During the fourth day of hearings by the Interstate and Foreign Commerce Committee, its chairman, Congressman Oren Harris, who had introduced H.R. 2987 containing substantially similar priorities, stated (p. 321, hearings, Mar. 2, 3, 4, and 5, 1965, on H.R. 2987): We might as well acknowledge the issue involved here. We have been talking around the fringes of it and arguing about whether the funds are available, with most of my colleagues thinking it was primarily for medical groups to get together and organize a group practice facility. In my judgment, this program is not primarily intended for that kind of clinic. I think the facts here are that those who are sponsoring and proposing this are doing so on the basis of organizing and expanding the prepayment type of clinical and medical treatment program, and to operate it on that basis. On another point, Mr. Harris said: This is a program to permit certain groups, private groups or organizations, to go out and organize this kind of a program. This committee and the Congress will have to decide whether we want to put up funds from the Federal Government to establish this kind of a program. That is the way I see it. I quote further from Congressman Harris: The purpose of this legislation is to promote a group-type, prepayment-plan program in order that it can be organized and put into effect in certain of these congested or highly populated areas. We believe that a system of medical care provided through prepaid closed panel clinics should not be subsidized by the Federal Government. We believe that this legislation is unnecessary. In closing we would again emphasize that this legislation is discriminatory, designed to promote a system of furnishing medical care through closed panel prepayment group health plans; that it is unnecessary in view of the rapidly increasing number of group practices being formed without Federal legislation; that direct loans are unwarranted; and that physicians enjoy excellent credit standing in their communities and need no special assistance in financing the construction of office facilities. We urge you to reject this legislation. Mr. Chairman, the American Medical Association is grateful for this opportunity to present its views on this bill. We hope that our comments will be helpful to the committee, and we will be pleased to attempt to answer any questions which may be asked. Mr. BARRETT. Thank you, Dr. Renger. I gather from your statement that your organization feels that the group medical practices bill is unnecessary because private financing for such facilities is available in a conventional mortgage market. Now, there may be others who may disagree with your organization, but I would like your reaction to this. What if this subcommittee were to discard the standby direct loan authorization and were to authorize only FHA insurance loans whenever a private lender is able to make t the medi ed to be be which unde rimarily s not sim en to, "g be given which m and Fore Harris, ar priore 2967): e been fall railable Co get tog ogram is are that th rganizing nizations the Co eral Go it. the loan on an insured basis? Participation would thus be voluntary and there would be no cost or burden to the Treasury. If we can confine this bill to insured loans would your opposition be lessened? Dr. RENGER. With your permission, I would like for Mr. Harrison to answer that. Mr. HARRISON. Mr. Chairman, if the bill were confined to mortgage insurance and it contained no priorities and no direct loan provisions and I don't know whether you indicated that in your comment or not-I don't believe we would be in here opposing the bill. We may still continue to believe that, generally speaking, physicians are well able to handle financing through conventional means. But certainly, our opposition to the bill would be greatly reduced, and while we might not find a mechanism to support the measure as such, I believe we would not be in here opposing this bill, if both those provisions were deleted. Mr. BARRETT. Mr. Harvey? Mr. HARVEY. Dr. Renger, as I understand your testimony, at the present time, what you are saying is that the American Medical Association sees no need for this legislation period, is that not right? Dr. RENGER. That is right. Mr. HARVEY. Let me ask you personally. Do you know of your own knowledge or have you heard of any physicians, young or old, who have had any difficulty whatsoever financing clinics to conduct a group practice whatsoever? Let me ask further, has that ever been discussed in the American Medical Association as one of the problems facing physicians, young or old today? Dr. RENGER. I don't know whether it has been discussed on a national level. I know it has been discussed on a State level. To my knowledge there hasn't been any need at all, because most young physicians, particularly if they get in a group, have a high potential which is recognized by most of the banking concerns; they certainly don't have any trouble getting loans. Mr. HARVEY. That certainly has been my impression in the State of Michigan where I come from, that physicians' credit or dentists' credit is A-1. Frankly, they have been able to walk into our banks and savings and loans the day after graduation from medical school and finance their entire operation if they needed it. I also remember, Dr. Renger, I heard the testimony of Dr. Appel and the other officers of the American Medical Association at that time. I also heard the officers of the American Dental Association testify on this bill and one statement that the representatives of the Dental Association had to say, was that even these loans would not, in his judgment, induce dentists to go into remote areas in the country to practice where they otherwise would not want to practice. Is that, in your judgment, a correct statement? Dr. RENGER. I think that is right. That has been proven, particularly in my own State of Texas. Such loans are certainly not an incentive for groups to move into a small rural area where work is not available for a group larger than three. Mr. HARVEY. What you are saying so that I understand you correctly is that if this bill were enacted as it is, those who would take advantage of it would not be the physicians or the dentists, but would 60-878 0-66-pt. 26 be those who desire to foster the prepaid medical plan, is that about the size of it! Dr. RENGER. We are afraid there is a possibility that with this type bill, organizations might control the care that a patient receives medically and it might be detrimental to that patient. Mr. HARVEY. In other words, what you are saying is, it would not be the same as if the doctors themselves were asserting that control and dictating how that patient would be taken care of? Dr. RENGER. That is right. Mr. HARVEY. Your organization would foster the group prepayment payment plan for the ones dictating it! That is why you are averse to this particular program? Dr. RENGER. That is exactly right. Mr. HARVEY. Let me ask you this other question. Do you think in your testimony that there should be some sort of limit on the amount of support that would be available to any one group if such a bill as this is enacted? Dr. RENGER. I certainly think that would be a good precautionary move. I would agree with that. Mr. HARVEY. Let me ask you further, in your understanding, the provisions of this bill would include financing, not only for the building itself, but would include financing for all the equipment that goes into the building? Dr. RENGER. That is right. Mr. HARVEY. Now, this equipment could be very expensive, is that correct? Dr. RENGER. Yes; it could be so expensive, and one could just keep cascading it to a point where it wouldn't even be a profitable situation. In other words, suppose you went into an area where there wasn't enough demand for a heart-lung machine. You could even buy one of those and set it up, and you could spend tremendous sums of money without any need for it. Mr. HARVEY. Could you give us any idea, for example, just in round numbers or figures, what we are talking about to equip, say a fourdoctor clinic, just as an example? Dr. RENGER. May I use my own personal reference? Mr. HARVEY. Yes. Dr. RENGER. I operate a five-group clinic. Mr. HARVEY. Five men, you mean? Dr. RENGER. Yes; a five-man clinic in the community of Halletts ville, which has a population of 3,000 people. The total cost of my clinic was around $85,000, including the building and the equipment. Mr. HARVEY. This was purchased when, Doctor? Dr. RENGER. I have been in practice a long time. It is over the years. We have had to discard some of the equipment and buy new equipment, but it is set up on an $85,000 inventory. Mr. HARVEY. The $85,000 that you are referring to would be the cost to a group of doctors performing those same services, purchasing the same equipment today? Dr. RENGER. I think it could easily be replaced today for a hundred thousand dollars. Mr. HARVEY. $100,000? Dr. RENGER. Yes. |