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HEALTH / PAC BULLETIN Health Policy Advisory Center No. 77 July August / 1977 1 Politics Makes Strange Beds NEW YORK AS A LABORATORY FOR COST CONTROLS. After a 13 year - war employing every other cost control ploy, New York State now turns to cutting excess hospital beds. 11 Columns WASHINGTON: NHI: Expanding the Horizons WOMEN: The Womb - Boom NEW YORK: Children Beware; HHC Circus WORK ENVIRON / : Carter's Little Business Pill 22 Lahey Clinic AN OFFER THEY COULDN'T REFUSE. A renowned Boston medical institution fights a pitched battle to expand and transplant itself to the suburbs. Politics Makes Strange Beds AL ANBEOWR AYTOROKR YA SI nI nA ugust 19,7 6 New York State Commissioner FOR COST of Health, Dr. Robert Whalen, having just been CONTROLS granted extraordinary powers by the state legislature to close hospital beds, issued a " hit list " of 13 New York City hospitals he deemed to be " unnecessary. " Targetting unnecessary beds and institutions for closing is the latest battle in 13 year -, K. BENDIS increasingly serious war on hospital costs in New York State. This war is of particular interest because it offers a preview, at the state level, of virtually every existing or prospective cost control weapon from certification of need and massive Medicaid eligibility cuts, to prospective reim- bursements and hospital revenue caps - in the federal arsenal. Certification of Need Defining " Unnecessary Beds " Unnecessary Unnecessary hospital beds usually mean unused or underused hospital beds. One basic approach has been used to determine. their number: First the number of beds in an New York State enacted the first certificate of need legislation in the country following release of the findings of the 1963 Governor's Committee on Hospital Costs (Folsom Commission) warning that " If costs continue to rise as they have in the re- cent past, by 1973 the average day in New York hospitals will cost nearly $ 100. " The law required that all hospital capital expenditures in excess of $ 100,000 receive prior approval from the appro- priate planning body. Certificate of need requirements, however, ap- pear to have been an ineffectual means of con- trolling costs. The rate of increase in hospital costs which had so alarmed the Folsom Commission continued unabated. (In fact, the Folsom Commis- sion had underestimated the rise by 43 percent; by 1973, an average day in a New York hospital cost not $ 100, but 143 $.) New York State found its cost per patient day rising faster than that in the rest of the country where no such regulation exist- ed. Between 1960 and 1965 New York's annual increase in the cost per patient day averaged 7.5 percent compared to 6.5 percent nationally. In retrospect, according to a report cited by Walter McClure in his comprehensive review of the liter- ature, " Certificate of Need controls did indeed. area is calculated and the areawide occu- pancy rates are estimated by dividing the average daily census by the number of hos- pital beds. Then what is considered to be an optimal occupancy (usually 85 percent) is subtracted from the average occupancy, and the result is an estimate of the number of surplus beds in the area. " The cost of overbedding is generally de- rived by multiplying the number of surplus beds by the estimated cost of an empty bed, resulting in an estimate of the total cost of overbedding. The cost of an empty bed is usually taken from one of two econometric studies. Paul Feldstein in 1961 estimated the cost of an empty bed to be 80 percent of the cost of an occupied one, 2 while Lester and Judith Lave in 1970 found the cost to vary from 45 to 60 percent. This method grossly underestimates the magnitude of the problem. First, the number of beds in a hospital is only one measure of hospital capacity. Hospital capacity also includes employees, capital assets, service programs and equipment. McClure in his comprehensive study of slow the growth in hospital beds but accelerated the growth in intensity per bed, so that capital cost increases (and hospital operating cost increases) remained unaffected. 114 " While the certificate of need program failed to dampen the state's rate of health care inflation, the introduction of Medicare and Medicaid in 1967 simply opened the floodgates. New York State established the most generous eligibility standards in the country - an income ceiling of $ 6,000 for a family of four compared with that of $ 3,900 in California, New York's closest competitor. The federal government funds half of the New York State Medicaid program, matched by 25 percent local and 25 percent state monies. Health care providers were quick to recognize a bonanza. to impose more stringent eligibility criteria forcing the state to severely limit Medicaid enrollment.. But even dumping over one million people from the Medicaid rolls, which was done in 1969, failed to take the steam out of the inflationary engine of New York's health care system. Costs per patient day increased by 14.2 percent per year betweeen 1965 and 1970 nearly - 14 percent above the national average. 6 Between 1966 and 1971 the state's own contribution to health care expendi- tures in New York City more than doubled, from $ 292.3 million to $ 678.1 million. " Prospective Reimbursement During its first full year of operation, New York's Medicaid program cost the federal government $ 277 million, more than had been anticipated for 2 the entire country. 5 The reaction of Congress was By early 1969 state lawmakers began to focus on hospital reimbursement policies as the main culprit of cost inflation. As a temporary measure, Medicaid reimbursement was frozen for a period overbedding suggests that the more appro- priate concept should be " hospital intensity capacity.. "'4 While no studies take on this more ambitious concept in toto, studies of particular services suggest the magnitude of the problem. It has been established, for in- stance, that to maintain optimal skills, an open heart surgery unit must perform at least 100 procedures a year; 200-300 are preferable. In 1969 only 16 percent of all hospitals with cardiac surgery units performed over 100 procedures a year, and only seven percent performed over 200. How many other services such as CAT scanners and radiation therapy units are similarly underutilized is not addressed by traditional estimates of overbedding and can only be imagined. If maintaining unused or underutilized beds and services is expensive, however, overutilization is even more expensive - a concept totally overlooked by traditional es- timates of overbedding. These accept current patterns of hospital utilization as ap- propriate and pinpoint only empty beds, while unnecessarily utilized beds may prove more serious in both number and cost, if not also in their impact on health care. The most concrete evidence for hospital overutilization lies in the " Roemer Effect " which shows that, instead of the number of patients generating the need for hospital beds, the reverse seems to occur: bed supply seems to generate patients. Roemer found in 1959 that hospital utilization was most strongly correlated with the number of hospital beds available and not with population characteristics or rates of illness. in the community. His finding has since been substantiated by several studies and is widely accepted. The second most important factor in hospital utilization rates appears to be the number of specialists in the community.B No one can say precisely how much of this hospital usage is unnecessary, but a number of different studies provide an ink- ling. Hospital utilization among matched pa- tient populations enrolled in HMO's, for example, runs 30 to 50 percent less than that of the same patients dependent on fee- for service - care. Per capita hospital admis- sions and lengths of stay for the same pro- cedures vary up to 50 percent among dif- ferent regions of the U.S.10 Variation in the frequency of particular hospital procedures such as tonsilectomies, appendectomies and hysterectomies is even better documented. Although no one can pinpoint precisely the amount of unnecessary hospital use, what Roemer's and related studies show is that current utilization patterns are a totally improper basis upon which to project hospi- tal bed need. Ignoring the Roemer Effect puts the projection of bed need on a con- tinuous upward escalator: additional beds promote additional usage which, of course, points to the need for even more beds. of three years. Later in that same legislative The state hoped that prospective reimbursement session, legislators superceded the freeze with would force hospitals out of their spendthrift what they thought was a more permanent solution prospective - reimbursement. The New habits. According to Ralph Berry, a Harvard economist, " the legislated rate reimbursement was York Cost Control Law of 1969 established a per specifically intended to contain costs by discour- diem rate setting - mechanism which limits, in ad- aging the expansion of new services, by vance, reimbursement increases to hospitals. Be- encouraging the phasing out of excess capacity, cause the law extends to Blue Cross as well as Medi- and constraining hospital cost inflation to the rate caid, approximately 60 percent of all patient reve of input cost inflation. " 8 nues in the state have been subject to prospective * New services were discouraged by permitting reimbursement since January 1970. no inflation or adjustment for new capital expen- a Published by the Health Policy Advisory Center, 17 Murray Street, New York, N.Y. 10007. Telephone (212) 267-8890. The Health / PAC BULLETIN is published 6 times per year: Jan./Feb., Mar./Apr., May June /, July / Aug., Sept./Oct Sept./Oct. and Nov./Dec. Special reports are issued during the year. Yearly subscriptions: $ 8 students, $ 10 other individuals, $ 20 institutions. Second - class postage paid at New York, N.Y. Subscriptions, changes of address and other correspondence should be mailed to the above address. New York staff: Barbara Caress, Oliver Fein, David Kotelchuck, Ronda Kotelchuck, Ken Rosenberg and Loretta Wavra. Associates: Robb Burlage, Len Rodberg, Washington, D.C.; Constance Bloomfield, Desmond Callan, Michael Clark, Nancy Jervis, Kenneth Kimmerling, Louise Lander, Steven London, Marsha Love, New York City; Vicki Cooper, Chicago; Barbara Ehrenreich, John Ehrenreich, Long Island; Robin Baker, Elinor Blake, Judy Carnoy, Dan Feshbach, Carol Mermey, Ellen Shaffer, San Francisco; Susan Reverby, Boston, Mass. BULLETIN illustrated by Keith Bendis. Health Policy Advisory Center, Inc., 1977. 3 Y' ditures. Thus, while increases, based on an index of hospital input prices, were granted each year for operating costs, capital costs were calculated on a fixed basis. * The state forced hospitals to withdraw unused beds from service by building an automatic penalty for low occupancy rates into the formula. Consequently, some 6,000 general, acute care hospital beds in New York State have been shut down since 1972.9 Yet neither gross expenditures nor net bed complement has diminished since the 1969 adoption of prospective reimbursement. Even while some hospitals reduced their bed counts, others were adding beds (and most of the reduc- tion has taken place in the public hospital sector). Thus, the number of general care beds in the New York metropolitan area increased by 3.5 percent between 1966 and 1976.10 Voluntary hospital general care beds increased by over four times that amount - by 15.3 percent. " The reimbursement system failed to cut gross. expenditures because the hospitals appear to have compensated for reduced reimbursement rates by increasing their volume. Thus while the length - of - stay and occupancy rates in the nation. have fallen, New York's have remained constant or actually increased. Between 1970 and 1974 the occupancy rate for general care hospitals across the country dipped from 80.1 percent to 77.8 percent. 14 Yet the occupancy rate in the state remained constant at 85.2 percents while New York City's actually rose from 85.4 percent in 1970 to 86.5 percent in 1974.16 Even more dramatic is what happened to New York's length - of - stay. As the length of stay fell na- tionally by 3.7 percent (from 8.2 to 7.9 days) it in- creased in New York State by 1.0 percent (from 9.7 to 9.8 days). 17 " The industry tries to make up Table I Growth of Beds in Acute Care Hospitals Year 1960 1965 1970 1974 Total Beds 640,000 742,000 848,000 931,000 Hospital Beds 1000 / Occupancy Persons Rate 3.6 74.7% 3.8 76.0% 4.2 78.0% 4.4 75.3% Source: Institute of Medicine, " Controlling the Supply of Hospital Beds, " 1976; Hospitals J.A.H.A. Guide Issue, August, 1975 through volume, " commented Joseph Giglio, Deputy New York State Health Commission for Fi- nances, " anything we save by curtailing costs. " 18 The reimbursement system did seem to dampen the unit, or per diem, costs of care in New York. Between 1970 and 1973 New York state, with an average annual increase of 11.5 percent in the cost per patient day, fell below the national increase of 11.8 percent. By 1974 the results were more conclusive; the average cost per patient day increased by only 9.4 percent in New York compared with 11.3 percent in the nation. 19 A recent study by William Dowling of the effects of prospective reimbursement in southern New York State estimate that the reimbursement system Table II Acute Care Hospital Expenditures Per Capita Year 1960 1965 1970 1974 Amount $ 31.08 (100%) 47.08 (151%) 95.46 (307%) 154.56 (497%) Source: Hospitals. J.A.H.A. Guide Issue, August, 1975 saved Blue Cross and Medicaid a total of $ 204 million between 1970 and 1974. The Reimbursement Game Gets Rough State officials undoubtedly welcomed the rela- tive reduction in health care inflation in the state. But the improvement became less and less ade- quate as the state's fiscal problems worsened. By 1974, New York State was spending 21.4 percent of its entire expense budget on health and hospi- tals. 21 The whopping total of nearly $ 3 billion in state funds was 140 percent greater than it had been in 1968. Governor Carey responded by promulgating the Emergency Medicaid Law of 1976, giving the state budget director veto power over total health expenditures. All reimbursement rates thus became subject to prior approval by the budget director who was instructed to " take into consider- ation economic factors within the state which ef- fect the economic resources available to meet the cost of government funded medical services.'" 122 If the budget director finds that " economic conditions will have a serious adverse effect on the ability of the state government to pay for medi- cal care at the proposed rates, " he can order the rate setting bodies to revise the rates. 23 With this law in effect, the state can effectively cap its yearly health expenditures, regardless of what any reimbursement formulas might indicate. At the height of the fiscal crisis, 1975-76, the state virtually froze its total expenditures. With little or no adjustment for inflation, hospitals took cuts in revenue. The average statewide Medicaid reimbursement rate in 1977 actually fell slightly below that of 1976- 181.40 $ a patient day in 1977 compared with $ 181.90 for 1976.24 Such revenue cuts appear to have taken their toll. Roosevelt Hospital, a 595 bed - voluntary in Table III Indices of Acute Hospital Utilization Year 1960 1965 1970 1974 Admissions / 1000 Persons 127.1 (100%) 136.2 (107%) 142.8 (112%) 155.5 (122%) Average Length of Stay (days) 7.60 7.77 8.26 7.77 (100%) (102%) (109%) (102%) Source: Hospitals J.A.H.A. Guide Issue, August, 1975 Manhattan, claims a $ 9 million deficit for 1974, a net loss of $ 7.5 million in 1975 and, after the layoff of about 100 employees, a 1976 operating deficit of $ 1.3 million. This rather dismal situation caused the firing of Roosevelt's chief adminis- trator and his replacement by Hospital Affiliates, a large outside management company. 25 Columbia- Presbyterian Hospital and Mount Sinai Hospital have also reportedly hired outside management consultants to help them adjust to the new fiscal realities. St. Luke's Hospital, another Manhattan volun- tary, estimates that its costs will rise by 7.5 percent during 1977 but its Medicaid reimbursement rate has fallen by 8.5 percent. During 1976 the hospi- tal fired 400 employees in order to keep its oper- ating budget out of the red. " We wonder if the state knows the difference between a squeeze and a stranglehold, " commented St. Luke's vice- president for administration.26 The state's 1976 move against rising hospital re- imbursement rates produced not only a pained outcry from the hospitals but a rash of lawsuits challenging the legality of the action as well. " We have to be prepared to defend, in a lawsuit, every action we take these days, " commented one state health official. Shrinking the System, a.k.a. Hospital Rubouts Responding to the pinch of heavy reimburse- ment controls, a special task force of the now- defunct Health and Hospitals Planning Council (HHPC), a publicly authorized - but privately- constituted planning body dominated by powerful voluntary interests, posed an alternative strategy: " It is the feeling of the Task Force that this ap- proach to reducing costs [across - the - board - cuts] is not in the public interest, since it adversely affects the ability of all providers of health care to meet the needs of those seeking health care ser- vices. The Task Force believes that a sounder ap- proach to decreasing expenditures is to elimi- nate entirely expenditures for services in institu- tions which are not needed to meet the public's re- quirements for services. " 27 The HHPC then proceeded to list 27 hospitals it thought should be sacrificed for the greater good of the remaining institutions. The bulk of the beds it so generously offered up were from the city's municipal system. Of the remaining 21 hospitals, 12 were small proprietary hospitals and the other nine, with one exception - a hospital already in bankruptcy court - were very small voluntary hospitals. The big medical empires Columbia - , Mt. Sinai, and NYU went - untouched. This strategy of shrinking the system had also occurred to the state, and in a second, major legislative move, the State Health Commissioner was given power to close down those institutions considered unnecessary. Prior to this the Commissioner could only decertify a hospital on the grounds that the institution was in flagrant vio- Table IV Indices of Capacity at Acute Care Hospitals Year Beds 1000 / Persons Hospital Hospital Employees / Assets / 1000 Persons 1000 Persons 1960 3.53 (100%) 6.0 (100%) $ 65 (100%) 1965 3.81 (108%) 7.1 (118%) 1970 4.14 (117%) 9.4 (157%) 84 (129%) 130 (200%) 1974 4.39 (124%) N A / 197 (303%) Source: Hospitals J.A.H.A. Guide Issue, August, 1975 5 lation of the state hospital code, an event that occur- red rarely, if ever, in the past. Now, the Health Com- missioner may decertify beds simply on the grounds of excess capacity. It was on the heels of this legislation that Commissioner Whalen pro- claimed the list of 13 unnecessary hospitals in New York City. Whalen's list looked suspiciously like an abbre- viated version of the HHPC list. All 13 hospitals cited by Whalen had also been named by the HHPC. The major difference was the significant omission of public hospitals from the Health Com- missioner's log. But then, in the interim between publication of the HHPC and Whalen lists, four acute care municipal hospitals bit the dust. Of the 13 hospitals fingered by Whalen, only one French Polyclinic, a voluntary with a long history of financial woes - was of significant size. Although proprietary beds number less than five percent of the city's total, six of Whalen's 13 hospi- tals were proprietary. It would also seem that the chosen hospitals were among the city's least expensive. While reimbursement rates in the city average about $ 190 a day, the average among the unlucky 13 was under $ 140. Clearly Whalen's hit list was not representative of New York City's hospital system. Curiously, in November, 1976, three months after the Whalen announcement, the New York State Health Planning Commission issued a new estimate of the need for acute care beds in New York State. By revising the beds population - to - standard downward, from 4.1 1000 / to 3.75 / 1,000, New York City suddenly, by fiat, went from being underbedded to having a bed surplus 28 As the president of Long Island Jewish Hillside - Medical Center, Dr. Robert K. Match, complain- ed, " Counties which were underbedded in Sep- tember became overbedded in November, e.g., Queens County, which was underbedded by 638 beds in September became overbedded by 938 beds in November - a total differential of over 1,500 beds in two months time. " 29 On the basis of the new calculations, the State Health Planning Why Is There An Excess? The most significant factor in construction. of hospital beds has been the growth of health insurance programs, both public and private. These have ended the dependence of hospitals on philanthropy and on the fed- eral Hill Burton program and have built the funding of construction into the mainstream of hospital financing by creating surpluses and guaranteeing equity for bank loans. There is a growing consensus that these pro- grams Blue Cross, Medicare, Medicaid and commercial insurors - are responsible not only for the overbuilding of hospitals, but for runaway hospital costs in general. ' Health insurance has come to constitute over 90 percent of all hospital income and its effect has been to insulate the health system from virtually any cost control constraints. Thus the patient, having paid his premium, wants the best the health system can offer. Neither he nor, more to the point, the doctor who decides what treatment is appropriate, need consider its cost, since that cost is paid largely by the insuror. For 6 the hospital, insurance coverage offers a vir- tual blank check, paying on the basis of costs incurred. Higher costs thus generate higher revenues. Consequently the hospital system oper- ates largely outside any market system and is virtually free of cost restraints. Health care costs, while they eat tangibly into the con- sumer dollar, do so in a largely invisible way. They often bypass the individual en- tirely, and are paid instead by his employer or union to an insurance carrier or through taxes. Thus the whole process is insulated. The reimbursement system feeds at least two other generators of health care cost, both well outlined by McClure in his com- prehensive study of overbedding, " Reduc- ing Excess Hospital Capacity. " 2 (1) The indefinitely expansible style of modern medicine: " The nature of a system's product is one of the most important struc- tural elements. The quality, quantity and style of medical care are indefinitely expansible. The medical care system can le- gitimately absorb every dollar society will make available to it... Providers can always try to provide ever greater safety margins for treatable patients, treat more and more hopeless patients, and screen for Commission announced that there were 5,000 ex- cess beds in New York City. To the state, closing beds offered yet another strategy for reducing state health expenditures- a strategy it seemed prepared to pursue both di- rectly and indirectly. Dr. Roger Herdman, Deputy Commissioner of Health, expressed this most bluntly: " All the strategies imposed by the state are directed at shrinking the supply. We will do this frontally or by trying the whittle them away by making the climate unbearable. " 30 According to Herdman, the state is looking for a total reduction of 20 percent in its bed complement. If the Health Commissioner's newly granted - , if somewhat raw, power represented the direct route to closing unneeded institutions, reimburse- ment policy offered an indirect attack. By reducing or holding constant an institution's reim- bursement rate, the state anticipated that a number of financially marginal institutions would be forced into bankruptcy. This was a reasonable hypothesis, considering that more than 60 per- less and less probable diagnoses... Even- tually the final check on what gets done is the dollars available. " (2) The nature of hospital competition: Physicians often hold the key to the financial well being - of a hospital since they control the flow of patients admitted. Thus consumers of hospital services may rightly be seen as doctors and competition among hospitals is most frequently competition for physicians with the bait being new, elaborate and specialized facilities. Acquisi- tion of these facilities also coincides with the prevalent notion of what is considered pres- tigious in the medical world - itself a powerful incentive for a hospital. Since funding is often no constraint, a hospital not only has no incentive to control costs, but would be foolish to do so. States the Insti- tute of Medicine study of overbedding, " The committee finds that the decision - making processes in the health care industry vir- tually guarantee the widespread develop- ment of excess hospital bed capacity for short - term general care. This situation cannot effectively be remedied without ad- dressing some fundamental problems with the current structure of the health care in- dustry. " 4 cent of the hospitals in New York City were re- porting operating deficits by 1975 and only the large, more established voluntaries had consider- able reserves to fall back on. The major voluntaries themselves subscribed to the hospital closure strategy. They reasoned that, if a famine was in the offing, it was better to have fewer mouths to feed. So long as the state con- centrated its fire on the smaller hospitals, repre- sentatives of the major institutions were not un- happy to see the fiscal crisis take its toll on their weak sisters. The City Joins the Chorus By late 1975, New York City added its stamp of approval to the bed closing strategy. For nearly two years Mayor Beame waged a massive cam- paign to close a substantial piece of the city's pub- lic hospital system. Critics constantly charged that the campaign was one sided -, however: " What about the voluntaries and proprietaries? It isn't fair to just close public hospitals. " Thus in December 1975, just as the public hospital crisis was coming to a head, Beame announced his intention to have nine small, non public - hospitals closed. He in- structed the newly created Health Systems Agency (HSA) to produce a hospital closing plan. In May, 1976 the HSA prepared to make its re- port. The draft was published with a singular dis- claimer: " This report is obviously not a final and definitive document but a vehicle to focus on the problem and stimulate the discussion and debate needed to arrive at a decision point and agree on a course of action. Clearly any implementation which will occur must take place in a phased man- ner or time. " This disclaimer is testimony to the intense struggle which must have taken place in- side the agency while the document was produced. The report itself is a tedious and tentative rendi- tion of the problem. It cites the uneven historical development of New York City's tripartite public, voluntary and proprietary hospital system as reason for the maldistribution of beds among the city's five boroughs (Staten Island and Queens each have 3.0 beds per thousand residents, the Bronx and Brooklyn 4.0 per thousand residents and Manhattan has 10.9 beds per thousand resi- dents). Next, it reviews demographic trends, pro- jecting a population decline in the City of about 5 percent between 1975 and 1985. By cataloging the supply of beds, reviewing both length - of - stay and occupancy data, the HSA concluded that New York City will have a surplus of 6,500 general care beds by 1985.32 7 Savings from the Closing of Beds Hospital Hospital utilization increases with the availability of beds, according to Roemer's Law. Will it decrease as hospital beds are re- duced? Several studies indicate that it will. ' One study estimates that a ten percent re- duction in beds per thousand population re- sults in approximately a four percent de- crease in utilization (patient days per thousand population). But how much money is saved by closing beds? This is more difficult to answer and depends largely on the type of closing. What kind of closings are possible and the resultant savings are both in turn highly de- pendent on the nature of the community and its facilities. The following very tentative estimates are based on a national average. 3 (1) Closing of entire hospitals effects the greatest savings. A ten percent reduction. due to entire hospital closings will bring a savings of approximately eight percent of the annual per capita hospital expenditures. McClure estimates that if hospitals must be purchased in order to be closed, the investment would constitute approximately 22 percent of annual per capita hospital cost, and would be repaid by the resulting savings in three to four years.'Entire hospitals are also most suitable for conver- sion to alternate uses which can help to offset the purchase cost. 2 () Individual bed closings are least effec- tive in cost savings since many specialized assets and personnel must be retained. A ten percent bed reduction attained by closing individual beds saves roughly from.5 to 2.5 percent in annual per capita hospital expen- ditures. McClure estimates the purchase cost of these beds to be 15 percent of annual per capita expenditures, recover- able in five to 15 years from the resultant savings. Individual beds are most difficult to convert to alternate use. (3) Closing of service departments such So long as the HSA's work remained at the level of a general review, no one was particularly alarmed by its findings. As soon as the task force began to get specific about which institutions should be closed, all hell broke loose. The presi- dent of the Greater New York Hospital Associa- tion, John V. Connorton, called the HSA process " unauthorized " and suggested that closing hospitals would throw the City's health system into chaos and deprive the people of New York of criti- cal, needed services.33 The main difference between the HSA's approach and that of the HHPC and the Health Commissioner was the inclusion by the HSA of several major voluntary hospitals. The HSA ar- gued that " closure solely of small voluntary and proprietary hospitals could be counterproductive -the patients from these institutions might well simply be redistributed among the relatively more expensive hospitals providing a more intensive and unnecessary level of care. " Thus, the HSA called for closing two large voluntary hospitals- Brooklyn Jewish (751 beds) and Flower Fifth Ave- nue (332 beds -and) substantial reduction in the bed complement at a third Montefiore - (close 332 beds). 8 As a consequence of the outcry, the HSA draft report was never finalized. As a matter of fact, the final version of the agency's Health Services Plan for New York City - the comprehensive plan re- quired before the agency receives final designa- tion contained - not a single mention of the issue of excess beds. An Imperial Buffer Due largely to stagnation on the hospital closure front the Governor in January, 1977 strongarmed the Mayor into announcing their intention to joint- ly appoint a health " czar " for New York City. Ac- cording to press reports, a chief role of the " czar " would be to close " excess institutions. " With the mayor facing a tough primary this year and the governor up for re election - next year, bed closing was too volatile an issue for either to view with equanimity. The appointment of a czar for this purpose would add a protective buffer for both. According to Stephen Berger, Director of the Emergency Financial Control Board, the state's agency for controlling New York City fi- nances, the czar " would take the heat and both public officeholders would be in a position to step back. " 34 The ideal candidate according to Berger is someone " equally well liked and disliked by both the municipal hospitals and the voluntaries, as obstetrics or pediatrics results in cost savings intermediate between closing entire hospitals and individual beds. McClure estimates the savings from a ten percent bed reduction by closing entire service depart- ments to be two to four percent of annual per capita expenditures; the purchase cost is estimated to be 18 percent of annual per capita expenditures, recoverable from savings in five to ten years. (4) Moratorium on new beds. The savings from a moratorium on the building of new beds accrue as the population grows and the number of beds to population falls. Savings are thus negligible in the early years, but increase with population growth. Because it does not require the closing of existing facilities, a moratorium is by far the most politically feasible way of reducing the number of beds to population, although it freezes existing distribution of beds in place. Reductions in utilization and costs stemming from reductions in hospital beds rest on the assumption that hospital admin- istrators will be forced to manage patient flow more efficiently and that physicians will exercise more stringent judgment in deciding who should be hospitalized and how long they should stay. These judgments are also constrained, however, by the avail- ability of alternatives to hospitalization- e.g., day surgery and home care - not to mention insurance coverage for alternative forms of care. Better management of patients, while it may result in a community - wide savings, will increase the unit cost of the remaining hospital care, since those patients who are hospitalized will be, on the average, sicker and will require more intensive care than is now the case. Also, of hospitals chosen for closing, the most vulnerable will be small hospitals considered marginal medically and / or economically. These hospitals invariably have the lowest costs and reim- bursement rates, and in their absence patients will depend on the larger, high unit- - cost facilities. regarded by both with equal trust and equal fear, able to redesign the health system with equity and rough justice. " In spite of the hoopla, no czar has been named to date. The buffer itself may have proven politi- cally too hot to handle, or perhaps no suitable candidate has emerged for this kamikaze post. In either case, the idea of a czar seems to be in hiber- nation. It has, however, accomplished one impor- tant thing already. Like Jimmy Carter's hospital cost control program, it has put the hospitals on notice that if they will not yield an inch, the state may embark on a course that will force them a mile. Extortion as a Tool of Public Policy The latest episode in the state's campaign sur- faced in March, 1977 when the State Health De- partment ordered a review of all previously- approved hospital expansion or renovation projects not yet actually under construction (call- ed " pipeline projects "). The Health Department's Special Subcommittee for the Re evaluation - of Acute Care Projects, chaired by Joseph Terenzio, president of the United Hospital Fund, looking over renovation plans of several large hospitals decided it could demand tit for - - tat - no renovation or construction approvals from the state until the hospitals - this time some major ones including New York University Medical Center, Columbia- Presbyterian Medical Center and Terrace Heights Hospital - agreed to give up beds. This included withdrawal of approvals already given, providing the project had not reached construction stage. The affected institutions responded with unmiti- gated fury. " It smacks of blackmail, clear and sim- ple, " said Irving Wilmot, executive vice president - of NYU Medical Center. " The idea that they are going to stop everything to cut beds is just crazy at worst and naive at best, " Wilmot continued. " I guess were going to have to have it out with them. " 35 The negotiations between the state and the hospitals has now moved into a less public arena with the exchange of documents and letters. As of July 1, 1977, no hospital had announced any bed closings. Losing the Battle; No Bets on the War New York State's war on hospital expenditures has had a limited success; its frontal attack on excess hospital capacity, however, has for the mo- ment produced more flack than results: 9 Key National Studies of Hospital Overbedding " A Statistical Profile of Short - Term Hospitals in the United States as of 1973, " by Fredric Sattler and Max D. Ben- nett (Minneapolis: Interstudy, 1973). Issued. in 1974 by Interstudy, health policy think- tank headed by Nixon advisor and HMO- promoter Paul Elwood, this study was the first to carefully assess the problem. The report estimated a national surplus of 69,000 beds - 7.5 percent of the nation's existing 914,787 hospital beds. This surplus, Interstudy claimed, cost the public some $ 1 billion a year. " The $ 8 Billion Hospital Bed Overrun, " by Barry Ensminger (Public Citizen's Health Research Group, 2000 P Street, N.W., Washington, D.C., 1975). This 1975 report by Ralph Nader's Health Research Group found an excess of 100,000 hospital beds. In addition, they estimated that another 250,000 beds were unnecessarily utilized, and together the tab came to $ 8 billion a year in unnecessary costs. " Controlling the Supply of Hospital Beds. " Institute of Medicine (Washington, D.C., October 1976). This prestigious group put the stamp of officialdom on the is- sue in a special task force report calling for a 10 percent reduction in hospital beds within five years to be followed by additional re- ductions. " Assessing the Need for Hospital Beds: A Review of Current Criteria, " by Mara Melum (Minneapolis: Interstudy, December, 1975). Comprehensive review. of methodologies used by Hill Burton, state planning agencies, selected HMOs and others to determine bed need. " Reducing Excess Hospital Capacity, " by Walter McClure (Minneapolis: Inter- study, October, 1976; available from Na- tional Technical Information Service, US Dept. of Commerce, Springfield, Va. HRP. 0015199.) Single most comprehensive re- view of all issues relating to issue of over- bedding. 10 | * No hospital has been closed by Commission- er Whalen despite his expanded powers. * No hospital closing plan has been adopted by New York City's HSA. No health " czar, " to reign over hospital clos- ings, has been appointed. * No beds have been closed in exchange for renovation approvals. This notable lack of results to date, if not this en- tire saga, points to the difficulty with which serious regulation comes to the health system. With the exception of government budgeteers, little con- stituency exists for closing hospitals. Institutions are understandably reluctant to volunteer them- selves for extinction. Hospitals workers are hardly enthusiastic about sacrificing their jobs. Similarly, users and the immediate community surrounding a hospital rarely wish to see it closed. Although the public will certainly benefit in general from at- tempts to control costs, measured against the loss of an institution, these benefits appear abstract indeed. In the context of a contracting economy, the public rightly suspects it is being asked to give up something - however dubious its quality or ef- ficiency - for nothing. HSA's, comprised of these consumer and pro- vider representatives, are not an ideal setting for achieving a consensus on the issue. Recently created, HSA's are anxious to establish their com- munity - wide legitimacy and calling for closings is hardly the best strategy. All of this adds up to an enormous political headache for elected officials who must balance their obeisance to budget directors against public reaction. New York State has, theoretically, just granted its Health Commissioner the power to cut through all of these parochial and political interests and to close institutions solely on the basis of their being unnecessary. The problem with this power, however, is a bit akin to that of the atom bomb- the price of using it is so enormous that it may prove largely unusable, at least until the state reaches a new level of desperation. It is no won- der, then, that the state has more often turned to subtler means of reducing bed supply in New York: * Reductions in reimbursement rates severe enough to push marginal institutions into bank- ruptcy. Penalties for low occupancy which encourage hospitals to take under utilized - beds out of service. * Utilization review teams, now deployed in more than 50 hospitals, which are establishing the procedures and baseline data necessary to penal- ize hospitals for overutilization. (Continued on Page 19.) hensive hensive. accessible care to be available without discrimination WASHINGTON and without charge through neighborhood - based health care institutions controlled by con- sumers and health workers. the Administration's health plan- ners, asserting that the problems they are attempting to solve by cost containment and fiscal incen- Dellums declared his willingness to introduce legislation embody- ing these principles, and a com- mittee, originally formed from tives are inherent in the privately- MCHR members but later ex- controlled, piecework - financed health care institutions that dom- panded to include other health analysts and economists, began NHI: EXPANDING THE HORIZONS What ever happened to national health insurance? The people, polls show, are to the " left "; they want more than federal under- writing; they want comprehen- sive, cost controlled - services as a inate this country's health indus- try. He has brought forward a radically different but straightfor- ward plan for addressing these now federally acknowledged - ills of the health system. Ronald V. Dellums (D., Ca.), a leader of the Congressional Black Caucus, introduced on May 4 his long awaited - Health Service Act (H.R. 6894), providing for com- prehensive, community - based the drafting process. The commit- tee felt the need for a coherent legislative package to counter- pose in consistent detail even the most comprehensive national in- surance approaches and to con- tribute to organizing toward a re- structured health system. The committee and Dellums ' staff sought advice from progres- sive health professionals and or- ganizers across the country. right for everyone. The Carter health services with progressive Administration is to the " right "; it national financing. Dellums'pro- is backing off from more govern- posal puts on the national agenda ment spending, preoccupied with cost, emphasizing that more medicine won't lead to health as the issue of whether to proceed with more and more stringent controls from the " top, " imposed The Dellums propo- sal would guarantee they cut back services to those who already have the least access. Carter's unwillingness to con- on an essentially uncontrollable and chaotic private system, or to move toward a democratically- high quality health services available in front the dominant interests in this highly inflationary, high high tech- - - tech- nology system - now openly planned, community - controlled, nationally - financed health - ser- vice. In sharp contrast with the every community and accountable to those called " too fat " by HEW Secre- various proposals for national communities. tary Califano - has led the Admin- health insurance - which would istration to be more conservative only prop up with federal and / or about comprehensive restructur- employer employee - money an in- ing through public financing. Al- adequate, maldistributed, and in- though the President told the flationary private system - a Model bills were prepared by the United Auto Workers at an health service such as Dellums is Community Health Alternatives impressive national forum for the proposing would guarantee that Project (originally at the Institute " served under - and over charged - " high quality health services be for Policy Studies but now located in mid June - that he would have a available in every community at the newly created - Public Re- proposal by 1978 and Califano's and accountable to the residents source Center in Washington, NHI Task Force is flying around of those communities. DC) and by the Committee for a the country visiting progressive The " Dellums Bill " has been National Health Service. community health centers, a fog under discussion since the early The Health Service Act that still hangs over prospects for a 1970s when the Medical Com- emerged from this lengthy comprehensive program surfac- mittee for Human Rights pro- process hews remarkably closely ing from this Administration. posed a set of principles for a to the original MCHR principles. In this frozen setting, a progres- national health program. These It would establish the United sive Congressman has challenged included such basics as compre- States Health Service Organiza- 11 tion, a non profit - corporation. progressive federal income tax ranks have expressed nervous- mandated to provide, without that would impose a much smaller ness about whether it will detract charge, comprehensive health financial burden on low income - from a united national health services (including, notably, oc- and working Americans than they insurance movement or from the cupational health advocacy ser- now bear for health care. Funds most effective local organizing vices) to everyone within the would be distributed on a capita- (see, for instance, S. Axelrod and boundaries of the United States. tion basis to the various levels of M. Roemer, American Journal of The governance of the Organi- the health services. It is in this pre- Public Health, May, 1977). Inter- zation parallels the organization of paid, community - based budget- estingly, top Kennedy - Corman health care delivery. It would be ing and financing, and the provi- Bill advocates continue to express controlled from " below " through sion of services through an organ- keen interest in the introduction of a process of " community federal- ism " that begins with elected com- ization that employs salaried health workers, that makes the such a bill to expand the breadth of national debate - in fact, to munity health boards (communi- " Dellums Bill such a departure relieve Kennedy of holding up ties " are defined as geographic from any of the national health in- the lonely left flank. areas containing about 25,000 surance proposals now extant. All The Dellums - backed political people, less for isolated rural others would, in essence, provide education effort, on the other areas). These oversee the provi- varying degrees of federal fund- hand, will emphasize such imme- sion of primary, outpatient health ing and planning for the existing diate community - based actions as care as well as any nursing homes private, fee service - for - system. defending community health cen- and multi service - facilities located When confronted with the ter budgets, democratizing health in the community. General hos- charge that his plan is utopian planning, and organizing health pitals would serve " districts " of and " can't pass, " Dellums replies: workers through such media as about 250,000 people and would be governed by district health " I realize it is unlikely that this Congress - or, in fact, the next regional hearings and _ local action - study groups. boards elected by communities. several Congresses - will adopt The important question, of These district boards, in turn, this legislation, but I firmly believe course, is whether the Dellums Bill choose members of of regional regional that a health service will increas- will succeed in raising the con- boards which oversee specialized ingly be seen as the real alter- sciousness and activating health (tertiary " ) medical centers. native. The United States must service users and workers. When asked why the health ser- move towards a health care deliv- Obviously this will take more than vice is set up as a private corpora- ery system based on the prin- the introduction of a piece of leg- tion rather than the expected ciples enunciated in this bill. It is islation. Will they demand that government agency, Dellums'of- imperative that the debate begin politicians get off the dime and fice explains that by current in- now. " support the right to health care terpretations of the US Constitu- Even before the bill was intro- through a comprehensive com- tion, such a democratic, " bottom- duced, the American Public munity - based health service? up " structure cannot be part of Health Association (APHA) went the Executive Branch; it is uncon- on record, at its most recent Dellums is supporting the crea- stitutional. annual meeting, in favor of the tion of Health Service Action as a This necessitated the adoption principles embodied in the vehicle to conduct educational of a corporate form for the Health Dellums Bill. The United Electrical activities in support of the con- Service Organization. Under the bill, health care facil- ities will be operated on a day - to- Workers (UE) favors it; and the Gray Panthers, the activist senior citizens organization, has declared cepts embodied in the Health Ser- vice Act, in cooperation with community, labor and health day basis through democratic worker self management - appro- priate to each facility. Health workers would, in addition, be its support for the Bill. However, left health critics and organizers have debated the " re- formist " character of this approach worker groups across the country, and to gather comments and sug- gestions on the Bill. For information or copies of the Bill, write Health able to organize collectively. Pa- tients would be assured extensive (see, for instance, Sander Kelman in review of Health Care Politics Service Action, PO Box 6586, T Street Station, Washington, DC rights and access to a grievance (Health / PAC BULLETIN, No. 70, 20009. and advocacy system. Under the Dellums proposal, the Health Service Organization May June / 1976) or Louise Lander, " National Health Insur- ance " Health / PAC Special Re- -Len Rodberg and Robb Burlage 12 would be funded by a special port, 1975.) Some left liberal - smears smears. This would save WOMEN some 13 13 000 women who would otherwise have died of cancer, a gain in life expectancy for the entire group of 0.2 years. At the O During the 1960s the US had a hysterectomy rate more than twice that of England and Wales and about four times higher than that in the rest of Europe. Rates vary in the US depending on such factors as geographic loca- tion, types of insurance coverage and numbers of obstetricians- mortality rates for the operation (estimates range from 0.06 to 0.2 percent) some 600 to 2,000 women would have died from the operation itself and another 300,000 to 450,000 would have suffered such complications as in- fection, bleeding and blood clots (complication rates run 30-45 WOMB - BOOM While the sky seems to be the limit for American physicians per- forming hysterectomies, the prov- ince of Saskatchewan has found gynecologists (Gyn Ob - is a sur- gical specialty). Among Medicaid recipients, for example, the rates range from a low of 0.34 per 1,000 in Mississippi to highs of 12.8 in North Carolina and 24.9 per 1,000 in Nevada. Hysterectomy has long been an accepted medical procedure percent). The monetary cost would be $ 2.9 billion. These figures do not reflect the psychological costs of a hys- terectomy. There are many re- ports of women experiencing se- vere depression after surgery. A 1973 English study, for example, found that one third - of the women that public education and simple scrutiny has sent the hysterecto- my rate in the province plum- metting. for treating cancer of the cervix, uterus and ovaries and other seri- ous gynecological problems, but its use as a birth control method within three years of undergoing surgery were treated for depres- sion. Other potentially harmful side effects may result. Hysterec- Hysterectomy (surgical removal of the uterus) may be acceptable as a treatment for anxiety, states Dr. James Sammons, the AMA's senior staff physician. Sammons, and as a preventive measure accounts for the enormous varia- tions in rates. (In the mid 1800s - hysterectomies were performed for symptoms ranging from " trou- blesomeness " and " erotic ten- tomy appears to affect ovarian function and, if estrogen levels are thus impaired, higher rates of coronary artery disease could result. Even a one percent in- crease in death rates from heart testifying before a recent subcom- mittee hearing of the House Com- merce Committee, advocated use dencies " to such problems as " eating like a ploughman " and " simple cussedness. ") Dr. R. C. of this major surgical procedure as the treatment of choice for Wright, writing in Obstetrics and Gynecology, journal of the Am- " pregnaphobia. " erican College of Obstetrics and Judging from available statis- tics, there are many American doctors who share Sammons ' opinion. The National Center for Health Statistics estimated that 794,000 women underwent hys- Gynecology, in 1969 promoted what have come to be called " birthday hysterectomies. " " The uterus has but one function: re- production. After the last planned pregnancy the uterus becomes a THE UTERUS HAS BUT ONG FUNCTION: REPRODUCTION. AFTER THE LAST PLANNED PREGNANCY THE UTERUS BECOMES A USELESS, SYMPTOM - PRODUKING POTENTIALLY CANCER BEARING 'f A ORGAN AND THEREFORE SHOULD BE REMOVED! ", terectomies in 1976. This opera- tion - up 15 percent in just three years is performed at a higher rate than any other surgical pro- cedure. Approximately 10 of every 1,000 women underwent useless, cancer bearing -, symptom producing -, potentially cancer bearing - organ and there- fore should be removed. " Risks and Benefits hysterectomies in 1976. At the Removing the uteri of all current rate, more than half of the women in the US will have had their uteruses removed before women at age 35 about - one million a year would - prevent 34,800 cases of uterine cancer they reach 65 years of age. (a disease easily detected by Pap 13 disease would offset any possible gain from cancer prevention. Outrageous as elective hyster- ectomy sounds for relief of anxiety, sterilization, or the gen- eral prevention of cancer, such uses were informally endorsed at the 1971 meeting of the Ameri- can College of Obstetrics and Gynecology. Following debate on prophylactic hysterectomy, the assembled doctors were ask- ed to register approval or disap- proval by their applause. An peared in the July 9, 1977. New England Journal of Medicine: " The so called - sterilizing, pro- phylactic or birthday hysterecto- Medical Indications for Hysterectomy audiometer registered 25 sec. The following is the list of medi- onds of applause from those in cal conditions the Saskatchewan favor of prophylactic hysterectomy and 10 seconds from those Study identified as acceptable against. Hysterectomy solely for the purpose of sterilization - hystero- sterilization is now performed routinely in many hospitals. At the Los Angeles County Univer- - sity of Southern California Med- ical Center, for example, the number of elective hysterecto- mies increased 742 percent be- tween July, 1968 and December, 1970. indications for hysterectomy: * Malignant and premalignant lesions of the female repro- ductive tract. * Endometriosis: the appear- ance of uterine lining tissue in the abdominal cavity where it does not belong. * Adenomyosis: ingrowth of the endometrium (lining) into the uterine musculature. * Leiomyosis with a uterine weight of 200 grams or more The Saskatchewan Solution (fibroid tumors). In 1972 the Saskatchewan De- partment of Health noticed an alarming increase in the number of hysterectomies performed in the province. The number jumped 72.1 percent between 1964 and 1971 while the number of women over 15 years in- creased by only 7.6 percent. This rise occured despite the presence of required second opinions for all major surgery. Obviously, most doctors simply rubber stamped - their colleagues ' recommendations. The Provincial College of Physicians and Surgeons organ- ized a committee comprised of both medical and nonmedical personnel to study the problem. The Committee drafted a list of acceptable indications for hyster- ectomy (see box). According to a * Salpingitis and oophoritis: in- fections, generally chronic, of the tubes and ovaries. e Hysterectomy associated with complications of preg- nancy. * Benign ovarian neoplasms: tumors which are not cancer- ous and will not metasticize. * Cervical dysplasia: thought by some to be premalignant cellular changes. Hyperplasia of the endomet rium: an overgrowth of the uterine lining. .* Dysfunctional uterine bleed- ing: bleeding not related to normal menses. i Pelvic congestion syndrome: a disputed category including such symptoms as low back pain and extreme menstrual pain. my was not accepted as a justified hysterectomy when not as- sociated with other factors since, in our opinion, hysterectomy solely for the purpose of steriliza- tion does not conform to good gynecological practice. " Based on these criteria the Committee found that the number of unnecessary hysterectomies performed in five major provin- cial hospitals ranged from a high of 59 percent to a still unaccept- - able low of 17 percent. Although no penalties were invoked against doctors operating for rea- sons other than those listed, the Committee considered its activi- ties very effective. By 1974 the number of unjustified hysterecto- mies had dropped to 7.8 per- cent. In those hospitals where unjustified operations were still being performed, the College of Physicians and Surgeons met with administrators and medical staffs and " recommended that unneces- sary operations should cease. " The authors of the report noted in conclusion that: " It is also of interest that the start of the de- cline in hysterectomy rate was co- incident with the publicity given to the high rate of hysterectomies in Saskatchewan in the news media in 1972 and the announce- ment of the formation of the Com- mittee. " Maybe the women got smart. Or the doctors got frightened. --- Barbara Caress References 1 National Center for Health Statistics, " Surgical Oper- ations in Short - Stay Hospitals, US, 1973, " Vital and Health Statistics, Series 13, No. 21. Washington, DC, 1976. 2. P. Bunker, " Elective Hysterectomy: Pro and Con, " New England Journal of Medicine, July 29, 1976, pp. 264-268. 3. Frank J. Dyck et al., " Effects of Surveillance on the Number of Hysterectomies in the Province of Sas- katchewan, " New England Journal of Medicine, July 9. 1977, pp. 1326-1328. 4. Deborah Larned, " The Greening of the Womb, " New Times, December 1975, pp. 35-29. 5. New York Daily News, May 10, 1977. 14 report by participants which ap- the New York State De- partment of Health: NEW YORK efter oo [The younger of these two children had been seen in an out- patient department of a major medical center eight times in two years but had received no im- a new outbreak of diptheria would munizations. During one visit M mean. (The city's last outbreak had been in 1963.) One of the children had already been im- munized and, fortunately, an- other simply never got the di- there, she had a scalp laceration sutured, but no tetanus immuni- zation was given. [Childhood tetanus immunizations routinely include diphtheria immunizations sease. But the five year - - old daugh- -ed.] In addition she had been CHILDREN BEWARE ter of Dominican immigrant par- ents died on March 22, and her hospitalized there at age three for twenty - four hours for another six year - - old sister survived only problem. The older child had also S` n March 22 and 26 of this year, two New York City children, ages 5 and 6 respectively, died needlessly from a serious but easily preventable disease. At the time the two children were stricken, both press and medical attention focused on two four days longer. When it was determined that none of the chil- dren attended day care centers or schools, and no further cases appeared (19 known contacts were checked), the potential. nightmare of a diphtheria epidemic subsided. been seen previously in this clinic and she also lacked immuniza- tions. " [emphasis added] " If you checked the records of any major key facts, each alarming in its own right: First, the disease was diphtheria, an often fatal condition that at- tacks the throat membranes and is highly infectious. When the five- year - old was diagnosed by phy- sicians at Columbia Presbyterian - Meanwhile the second major voluntary hospital in focus of attention - and the high- light of press coverage - con- the area, you would cerned the circumstances where- by the two girls had not been immunized. find they just don't take histories for According to early news sto- ries based on a statement by the dead girls'mother taken by a immunizations. " New York City Health Official NYC Department of Health of- " The younger of these two children had been seen in an outpatient department of a major medical center eight times in two years but had received no immunizations. " New York State Department of Health Medical Center's Babies Hospital, health officials hospitalized her three sisters immediately, realiz- ing the public health hazard that ficial the trouble lay with one of those notorious " Medicaid mills. " According to the mother - al- though obviously distraught and despite some translation dif- ficulties she had sought im- munizations from a Medicaid faci- lity when the children were young but was turned away when one became too unruly. This account apparently satis- fied everyone concerned at the time. Unfortunately, it contained only a fragment of the truth. There is no reason to disbe- lieve the mother's statement about the Medicaid mill. What was left out of the statement, however- and has been ignored publicly to date was hinted in the March, 1977, " Disease Control News- - But the newsletter stopped short of revealing one key fact: the name of the hospital involved. Its identity was known to both City and State officials soon after the story broke, so why the si- lence? One City health official ex- plained it this way: " We depend on the coopera- tion of these hospitals for report- ing public health information and for [voluntarily] implementing im- munizations. We didn't see any particular purpose in revealing the hospital involved. Besides, if you checked the records of any major voluntary hospital in the area, you would find they just don't take histories for im- munizations. " 15 At Columbia Presbyterian - , the " major medical center " referred to in the State newsletter, one physician admitted, " most of the children coming through here- sadly enough - just don't get asked [for immunization his- However, these otherwise laudable efforts come in the midst of a major curtailment of child health services by this same New York City Department of Health. To cite a single indicator, of the 81 child health stations that once nabling legislation, which in- tended a semi autonomous - , pub- lic benefit agency free of control by City Hall. City Hall responded quickly to the suit, instructing the majority of HHC board members who are tories]. These two girls just slipped through. " Were lessons learned from two young girls'needless deaths? New York City Deparment of Health officials report they have initiated several new attempts to encourage voluntary taking of im- Of the 81 child health stations that once served the children of the city, 24 have been closed in recent months. served the children of the city (providing immunizations and boosters free of charge), 24 have been closed in recent months. Could it be fewer preventive ser- vices are needed for the city's children? Hardly. A recent study by the Depart- ment reveals that in many New York neighborhoods, as many as one third - of all children entering school lack one or more of the major immunizations mandated by law (P.H. Law 2164). In sum- mary: large numbers of children lack necessary immunizations in New York. Voluntary hospitals cannot be relied upon to provide them. The Department of Health is curtailing its own provision of immunizations. The lesson seems crystal clear. New York City children should live live somewhere else. Beame loyalists to abolish the interim operating group and re- place it with a " transition com- mittee " holding considerably less power. At the same meeting, Joseph T. Lynaugh was upgraded from first executive vice president to acting HHC president. The Coalition still argues in its suit, however, that HHC executive powers continue to be wielded, in reality and illegally, from Beame's office. Lynaugh himself has plunged headlong into managing the HHC's circus - like affairs, al- though some predicted he will have trouble wielding an iron fist with one hand tied to city hall. So far, he has begun moving in his own new management team while making himself inaccessible to the press. This latter " initiative " reportedly extends to the Execu- tive Directors of the individual municipal hospitals. Lynaugh's style may be better HEALTH AND HOSPITALS CIRCUS suited to the current political cli- mate than that of his relatively open, press concious - predeces- munization histories in out- patient departments of the city's voluntary and municipal hospi- Mayor Beame's spring offen- sive against the NYC Health and Hospitals Corporation (HHC) was temporarily ambushed in early June be a single, well aimed - shot fired by a group known as the Coalition to Preserve the sor. It will certainly minimize em- barassment during Beame's re- election campaign. Unfortunate- ly, it augurs poorly for even the limited public accountability of the municipal hospitals in the past, and it allows every Mayoral tals. Laminated cards have been prepared instructing physicians Municipal Hospital System. The Coalition - a citizens candidate the luxury of treating HHC policy as a non issue - in this on the necessary vaccinations, booster schedules, etc. group formed following the ouster of HHC President, Dr. campaign. In a city with the fast- est disappearing - public health Efforts are reportedly also underway to convince the New York State Medicaid office to use the taking of immunization his- tories as an indicator of quality of John L. S. Holloman, Jr., in Janu- ary filed - suit in State Supreme Court in June against Beame and the interim operating committee he named last April to replace and hospitals services in the coun- try, this is good news for only that handful of vested interests who have always felt the public's business should be conducted in care, thus potentially affecting the eligibility for reimbursement of Holloman. The grant of executive power to such a committee, the private. -Michael E. Clark 16 any physician treating any child. suit charges, violated the HHC WORK ENVIRON ENVIRON compliance " with OSHA stan- dards by small business. * Appointment of a special as- F11 sistant to Bingham for small busi- ness matters. * Revision of all OSHA stan- dards and elimination of those having " no direct relationship " to safety and health. ' With All Deliberate Delay The The 20 percent of small firms which are considered highly haz- ardous, such as auto repair or building supply firms, will now suffer nitpicking OSHA inspec- tions once every 21 years instead of every 23. So when Marshall and Bing- ham strongly press _ self- compliance by small businesses through educational programs, they know the need whereof they speak. If the firms don't volun- tarily comply there'll be few if any OSHA inspectors around to make them. This shift in emphasis will mean CARTER'S LITTLE BUSINESS the concentration of OSHA in- Zero Base - Cutbacks PILLS spection efforts on large establish- ments, since 40 percent of these are considered high - risk com- The need to take inspectors from low hazard industries in order to more frequently inspect The Carter Administration has finally shaped its own thrust in occupational safety and health - a thrust that signals a major retreat from OSHA monitoring of small business. pared with 20 percent of small industry. Moreover, OSHA policy already favors inspection. of large plants in order to broad- en the total number of workers covered. This allocation of re- high hazard - industries stems directly from President Carter's attempt to hold the line on gov- ernment expenditures. In his Labor Department memo Mar- shall states clearly, " We have In a widely reported press con- ference on May 19, President Carter's Secretary of Labor, F. Ray Marshall, and the Assistant Secretary of Labor for OSHA, Eula Bingham, announced an end to " nitpicking " regulations and en- forcement of the federal Occupa- sources to large, high hazard - in- dustries makes sense only so long as an adequate inspection rate is maintained for workers in low- priority industries. Even the present rate of in- spections for small, low risk - in- dustries, however, is appalling. been told not to expect any signi- ficant increase in the Depart- ment's outlay for controllable pro- grams or in employment ceil- ings. " He goes on to say, in a re- vealing comment on the role of zero base - budgeting: " base Zero - budgeting requires tional Safety and Health Act (OSHA) and a return to a " com- mon sense approach " to health According to OSHA figures, a small, low - risk industry such as a wholesale and retail business or you to rank your proposals in order of priority. We believe that this ranking is the most critical and safety in the workplace. service establishment, stands only These goals seem reasonable one chance in 500 of being in- enough. Who would favor nit- pected in any given year. 2 Put picking regulations or argue less charitably, a small, low risk - against common sense? What they mask, however, is an effort to placate small business while firm can expect an inspection about once every 500 years (Think for a moment of the situa- At the present rate, a small, low risk - leaving millions of workers unpro- tected. Four major actions character- tion an OSHA inspector might have encountered on tour of a typical supermarket during his or industry stands only one chance in 500 of ize the thrust of the Administra- tion program: Increased inspection of high- her last semi millenial - visit.) Due to its new policy of concentrating on high hazard - industries, being inspected in any given year. hazard industries accompanied OSHA will now slow this dizzying by decreased inspection of low- pace of inspections for small, low- hazard industries. risk firms to one visit every 1,300 An expanded educational years. The present owners should effort to encourage " self- live so long! 17 job you as a manager will per- form in this budget cycle. Particu- lar attention will be given to your ranking since, in order to allocate resources to the high priority ob- jectives discussed here, and other possible new alternatives, we must cut back on lower priority ongoing programs. " (Emphasis added.) So instead of adding new per- sonnel to target high hazard - in- dustries, OSHA must take them from already depleted resources in the low hazard - industries. For those concerned with worker protection, this is nothing more than robbing Peter to pay Paul. Small Business Fatalities This attempt to modify OSHA through Executive action must be seen, of course, in the context of strong legislative and judicial attacks on OSHA. Small busi- ness organizations, abetted by right wing - political and big busi- ness groups. MO lobbied against OSHA in the US Congress, where they traditional- ly have had political strength. Bills to exempt small businesses from OSHA coverage have re- peatedly been introduced in re- cent sessions of Congress and failed by the narrowest of mar- gins - and new attempts are now in the works. These attempts would have an even more serious impact on OSHA than the Carter Ad- ministration cutbacks. A recent report by the Indus- trial Union Department, AFL- CIO makes clear the heavy cost in worker protection that will re- sult if small establishments are exempted from OSHA coverage. The report notes that workplaces with 25 or fewer employees con- stitute 90 percent of all US firms, employ 30 percent of all workers and are responsible for almost half (45 percent) of all job related - fatalities reported by employers.4 Effect of Exempting Small Firms from OSHA Inspections Number of Employees in Firm 3 or less 5 or less 10 or less 25 or less Percent Firms Exempt 53% 66% 80% 90% Percent Exempt Workers 6% 10% 18% 30% Source: IUD Report, Ref. 4. References Bureau of National Aftairs, Occupational Safety and Health Reporter. Current Reports May 26, 1977 1977, p 1587, and June 9, 1977. p 51.. Op. cit. May 26, 1977, p. 1587 2. 3 Op. cit. June 9. 1977. p. 67. 4 UD Fants and Analysis The Annual, Unwarranted Attack on OSHA, Report No 30R, June 16, 1977 Due to its new policy of concentrating on high hazard industries, OSHA will now slow its pace of inspections for small, low risk - firms to one visit every 1300 years. " To exempt workplaces with three or fewer employees, for example, exempts 3.9 million. workers. In the logging industry such an exemption deprives from protection 59 percent of workers. Among these workers, according to employer reports, one of four will be injured this year. " In small foundries with less than 20 employees, the employ- ers report double the rate of new cases of illness than is found in the industry as a whole. " OSHA hygienists have found. illegal levels of leukemia - causing benzene ten times more often in workplaces with 25 or fewer em- ployees than in larger shops. " The impact of the Carter Ad- ministration's retreat from OSHA coverage of small firms will be less severe than an across - the- board Congressional exemption. Time will tell whether the Carter actions reflect a basic Administra- tion attitude or a strategic retreat in the face of imminent Congres- sional action. In either case, for an Administration supposedly friend- ly to labor, this one now looks suspiciously similar to its immedi- ate predecessors. -David Kotelchuck 18 Beds (Continued from Page 10.) Reimbursement is frequently counterposed to planning as a strategy for reducing hospital bed supply, and it has many things -- both good and bad going - for it. Many experts agree that reim- bursement practices lie at the source of the prob- lem and are therefore a key to its solution. (See box.) Compared with the unilateral power of the Health Commissioner or the political liabilities fac- ing a governor or mayor, use of reimbursement to achieve bed closings seems impersonal, invisible and largely inevitable - like the silent hand of the market. The state will not be held accountable for providing health services and retraining workers in the same way if a hospital goes into bankruptcy as if, through executive action, it closes the in- stitution. And finally, the reimbursement squeeze has been quite effective at creating at least one key constituency - powerful voluntary hospitals - for the closing of institutions, so long as those to be closed are small, proprietary or public. A recent, full page - ad in the New York Times placed by the boards of trustees of New York City's largest and most prestigious hospitals, stated the case most bluntly. Entitled " A Message to All New Yorkers An Outline of Federal Policy Regarding Bed Supply Hill Burton - Since its beginning in 1948, the Hill Burton Hospital Construction Pro- gram has channelled over $ 3 billion of fed- eral funds into the building and modernizing of health facilities - 15 percent of annual hospital construction costs. The program was originally designed to address regional and urban - rural imbalances in the supply of hospital beds a goal it has largely accomp- lished. In its last decade Hill Burton shifted priorities from new construction to the modernization of existing facilities, and from rural to poverty areas; it also began to make money available for ambulatory care. Medicaid and Medicare reimbursement for depreciation costs, as well as federal loans and loan guarantees (not to mention private insurors) have largely replaced pri- vate philanthropy and Hill Burton as the ma- jor source of hospital construction funds in the last decade. These sources have also made it possible for hospitals to finance their own construction through bank loans and the sale of bonds. The Comprehensive Health Planning Act, enacted in 1966, provided funding for the establishment of a network of state and local planning agencies. These agencies were changed with drawing up a compre- hensive plan for each state and local area and with making non binding - reviews of proposed capital expenditures. In the late 1960s, individual Blue Cross plans began adopting " conformance clauses, " penalizing hospitals that proceded with building plans without CHP approval. Section 1122. Social Security Amend- ments, enacted in 1972, required that states adopt certificate of need programs, requiring states to certify that all capital in- vestments of $ 100,000 or more are, in fact, needed. Several states had already adopted such programs prior to these amendments; New York State has had such a program since 1964. HEW may deny Medicare and Medicaid reimbursement for depreciation or interest costs if a facility builds without prior state approval. Section 1122 was the first attempt to directly link planning with reim- bursement policy. By 1975 all but one state had such programs and, increasingly, commercial lenders and governmental loan programs have begun to require certificate of need approvals before financing a project. The National Health Planning and Re- sources Development Act of 1974 (PL93-641), supplanted the old CHP net- work with a new network of planning agen- cies endowed with expanded powers. Most significant, perhaps, is that HSAs, the local planning bodies, are mandated to review the appropriateness of existing facilities. every five years, although they are not em- powered to act upon their findings. 19 About Your Health, " the ad called upon Governor Carey " to promptly close those institi- tions designated by the State Department of Health " instead of trying to save money by cutting back further on Medicaid and Blue Cross rates. " 36 Since state officials have not yet settled on an ef- fective strategy for closing excess hospital capa- city, it is doubtful they have resolved some of the more difficult questions that may arise should they succeed. For example: since it is clear for reasons of political and economic power that small institu- tions will be squeezed out, how will the state deal with the consequent impact of further monopoliza- tion? What cost saving will result if patients formerly using low cost -, small hospitals now shift into large, expensive teaching hospitals? As the cost of this high intensity - medicine increases and the state becomes more desperate about cutting costs, what will be the alternative to severely limited access? With increasing monopoly power, who will deal with the increased ability of the large institutions to pick and choose the patients they prefer and to set their own prices? Do these problems portend snowballing, piecemeal and equally ineffective - intervention of the state into the internal affairs of the hospital industry, each step to correct the unforeseen exigencies of the last? Must hospital costs then join death and taxes as unresolvable problems? Hardly. The only effective and humane means of reducing hospital utilization on the one hand and excess supply on the other lies not in cutting back, consolidating around, and then attempting after - the - fact to regulate high - cost, high- technology medical centers. It lies instead in pro- viding the alternative - low cost, badly needed - , preventive and primary services - on the com- munity level so that patients will not be forced to inappropriately seek these from the only institutions to which they have access at a stage in their illness when human and monetary costs can no longer be controlled. Control of unnecessary expansion of costly and medically marginal services will remain an un- reachable goal only for those public officials un- willing or unable to challenge the dominance of this kind of medicine. -Barbara Caress and Ronda Kotelchuck K BENDIS 2200 References 1. Quoted in " The Cost of Health Care in New York State, " The Temporary State Commission on Living Costs and the Economy, New York, April, 1974, p. 6. 2. Ibid. 3. Ralph E. Berry, Jr., " Prospective Rate Reimbursement and Cost Containment in New York, " Inquiry, Vol XIII, No. 3 (September, 1976), pp. 288-301. 4. Walter McClure, Reducing Excess Hospital Capacity, Excelsior, Minnesota: Interstudy, October 1976. p. 65. (Available from National Technical Informa- tion Service, US Dept. of Commerce, HRP. 0015199.) 5. Wall Street Journal, August 15, 1968. 6. Berry, op. cit. 7. Nora Piore, et al., " Health Expenditures in New York City: A Decade of Change. " Columbia University Center for Community Health Systems, New York, 1976, p. 31. 8. Berry, op. cit., p. 293. 9. McClure, op. cit., p. 62. 10. United Hospital Fund of New York, " 1976 Hospitals and Related Facilities in Southern New York, " New York, 1976, pp. 4-5; Health and Hospitals Planning Council of Southern New York, " 1967 Hospitals and Related Facilities in Southern New York, " New York, 1967, pp. 4-5. 11. Ibid. 12. Ibid. 13. Ibid. 14. Ibid. 15. Berry, op. cit., p. 298. 16. Health Systems Agency of New York City. " Report of the Task Force for the Committee on Restructuring Hospital Facilities. " New York. May 25, 1976, Appendix E 17. Berry, op. cit., p. 298. 18. Wall Street Journal, June 21, 1977. 19. Berry, op. cit., p. 298. 20. Wall Street Journal, June 21, 1977. 21. Hospital Association of New York State, Inc., " Statement for Provision of Health Services to the Citizens of New York State, " New York, March, 1977. pp. 11-12. 22. 22. David P. Picker, " Executive Health Care Policy Making, Planning and Regula. tion in New York State, " New York State Health Advisory Health Council, Al- bany, March 18, 1977, p. 5. 23. Ibid. 24. Wall Street Journal, June 21. 1977. 25. New York Times, April 9, 1977. 26. Wall Street Journal, June 21, 1977. 27. Health and Hospitals Planning Council of Southern New York, " Unneeded Fa cilities for General Hospital Care in New York City, " New York, February 5, 1976, p. 2. 28. New York State Health Planning Commission, " Acute Care Need Estimates, " Albany, November 9, 1976. 29. Robert K. Match, M.D., " A Reduction of the Institutional System Providing Health Care, " Testimony before the New York State Assembly Program Sub- committee on Hospital Costs and Financing, New York, May 20, 1977. pp. 1-2. 30. Roger C. Herdman, M.D., speech at Urban Needs and National Health Policy Conference, New York Academy of Medicine, New York, June 15, 1977. 31. HSA, op. cit. 32. Ibid. 32. New York Times, May 28, 1976. 34. New York Times, February 18, 1977. 35. New York Times, March 23, 1977. 36. 36. New York Times, March 25, 1977. Box References Defining Unnecessary Beds (Page 2) 1. Dan Feshbach, " Evaluating Excess Capacity in the US Hospital System, " un- published paper, 1976. 2 Paul Feldstein, " An Empirical Investigation of the Marginal Cost of Hospital Services. 3 Judith and Lester Lave, " Hospital Cost Functions, " The American Economics Review, 1970. 4. Walter McClure, " Reducing Excess Hospital Capacity, " Excelsior, Minnesota: Interstudy, October 1976, p. 11 5. Scannell, et al., " Optimal Resources for Cardiac Surgery, " Circulation XLIV, September 1971 6. M. Shain and M. Roemer, " Hospital Costs Relate to the Supply of Beds, " Mo- dern Hospitals, Vol. 92, April, 1959. 7. J. May, " Utilization of Health Services & the Availability of Resources, " in Equi- ty in Health Services, Anderson et al., ed, Cambridge, Mass.: Ballinger, 1975; B. Chiswick, " Hospital Utilization, An Analysis of SMSA Differences, " Nat. Bur. of Econ. Res., New York City, Mimeo, June 1976; M. Feldstein, " Hospital Cost Inflation, " Amer. Econ. Rev, December 1971. 8. D. Hill, " Identification of Hospital Cost Determinants, " Inquiry, XIII, March, 1976, pp. 61-70. 9. McClure, op. cit., p. 23; A. Donabedian, " Prepaid Group Practice, " Inquiry, VI, 3, September 1969, pp. 3-27; M. Roemer and W. Shonick, " HMO Perfor- mance, " Milbank Mem. Fund Qtly., Summer 1973, pp. 271-317. Why Is There An Excess? (Page 6) 1. McClure, op. cit., pp. 54-58; Institute of Medicine (IOM), " Controlling the Supply of Hospital Beds: A Policy Statement, " National Academy of Sciences, Wash. D.C., October, 1976; Martin Feldstein and Amy Taylor, " The Rapid Rise of Hospital Costs, " Council on Wage and Price Stability. Wash., D.C., Jan- uary 1977. 2. McClure, op. cit., p. 54. 3. Ibid. 4. IOM, op cit., p. 19. Savings from the Closing of Beds (Page 8) 1. See McClure, op. cit., pp. 35-39. 2. May, op. cit. 3. McClure, op. cit., pp. 35-39. SUBSCRIBE TO THE HEALTH / PAC BULLETIN Name Address Student subscription $ 8 Regular subscription $ 10 Institutional subscription $ 20 Enclosed is my check for $ Mail to: Health / PAC, 17 Murray Street, New York, N.Y. 10007 21 L ENTRI Lahey Clinic AN OFFER Even as the regulatory and fiscal net tightens THEY COULDN'T over hospitals, the story of Lahey Clinic's attempt REFUSE to relocate from downtown Boston to suburban Burlington illustrates how difficult effective regulation will be. This story underscores the power of special interests, while even themselves desperately threatened, to win their way on an issue of vital concern, however dubious that con- cern may be for the public interest. It also points to the paucity of groups whose interest is cost con- trol when the issue is a concrete, local one. Finally, it also portends the fierce competition and subsequent monopolization that is likely to result from an era of contracting resources available to the health system. The prestigious Lahey Clinic is an organized group practice located in Boston, Massachusetts. The physicians around which it is organized are salaried, highly specialized and attract many patients from areas well outside the Boston Metro- politan area. In fact, 40 percent of their patients 22 come from outside Massachusetts. SSeS Back in the 1960s, Lahey decided it needed its own full sized - hospital. The Clinic presently uses 300 beds in various teaching hospitals in the area. It also owns a small 60 bed - hospital in neighbor- ing Brookline. Lahey first explored several sites within the city and even bought acreage in the Mission Hill community of Boston. Low income housing occupied most of the land purchased. In the spirit of hospital expansion of the day, Lahey cleared the land of housing before even finalizing its plans. Those plans were never finalized. Sometime after clearing the site, Lahey selected a new one in Burlington, a suburb of Boston. Ideally situated at the junction of two major arteries, the Burlington site rests in the heart of an established suburban community. In the early 1970s Lahey completed plans for the new site. The new facility would include a new 250 bed - hospital and a complete replacement of the institution's clinical facilities in Boston. It would be half hospital, half staffed clinic - by member physicians of the Lahey group. Just as Lahey was completing its new plans, however, the Massachusetts Legislature passed a Certificate of Need statute, creating what it called a " Determination of Need Program " under the jurisdiction of the Department of Public Health. (see box). The basic function of the program is to review major capital expenditures for health facili- ties to determine if these expenditures are, in fact, necessary. The staff reviews applications and sub- mits recommendations to the Public Health Council which, acting as the Department, makes the final decisions. Lahey's planned construction thus became one of the first expenditures to be reviewed by the program. In 1972 Lahey informed the Determina- tion of Need Program that it intended to build a fa- cility which would be 400,000 square feet in size and cost $ 43.1 million. With virtually no analysis of Lahey's plans (basic schematic drawings had yet to be drawn up) and over the objections of the local planning agency, the Department approved a 200 bed - hospital - all private rooms - and the clinic component at an associated capital cost of $ 43.1 million. It was only after the approval that Lahey instructed its architects to begin designing the facility. The Clinic apparently did not inform the architect of any size or dollar limit on the construction. An Empire Doubles While No One Notices From the start, Lahey was beset with financing problems. Since Lahey had little of its own equity, almost the whole cost of the facility would have to be borrowed. Also, during this period, the bond market Lahey's - hoped - for source of financing- suffered severe jolts from the failure of New York State's bonds among other assorted financial troubles stemming from the general economic crisis being experienced throughout the country. At this point, Lahey sought out the lender of last resort. In general, whenever the money market fails to provide financing because a project is con- sidered too risky for conventional lenders, indus- try turns to the federal government, and the hospi- tal industry is no exception. Because of unpre- dictable reimbursement policies, private money lenders have become reluctant to finance hospital construction; instead, the industry has turned to the Federal Housing Authority for assistance in the form of loan guarantees approved by the De- partment of Housing and Urban Development. If the project should fail and the hospital go into bankruptcy, the taxpayer, not only the institution, bears the financial penalty for the error. Lahey filed its application and was informed that ap- proval would be forthcoming as long as the Deter- mination of Need was clear of any and all appeals. Meanwhile, Lahey's architects proceeded with a free hand. The facility first grew to 510,000 square feet, then on to 610,000 square feet. During this time, the Department of Public Health sent out a questionnaire asking all Certificate of Need holders to inform the Department if the costs of their projects had increased and why. Lahey dutifully responded that, yes, its costs had risen to $ 67,000,000 and claimed that inflation was the major factor in the increase. There was no men- tion of the change in size in this submission to the Department. (Lahey had been submitting archi- tectural drawings indicating the size changes to another arm of the Department. That bureau, however, was unaware of any size limitations on the project.) In March, 1975 the Department, in an unprece dented and incomprehensible attempt to " clear the decks " of a backlog of requests to approve cost overruns, decided that any hospital whose Whenever a project is considered too risky for conventional lnd- ers, industry turns to the federal government, and the hospital industry is no exception. cost overrun ran less than 386 percent of the ap- proved cost would be granted automatic approval without the increases receiving any scrutiny by the Department. Lahey, however, had not finished growing. Nor had the cost of building the facility. In August, 1976, Lahey submitted another cost overrun re- quest. In the request, the Clinic stated that the costs had risen to $ 79,000,000 while the facility had grown to 674,000 square feet. In four years, the costs had risen nearly 100 percent, and the size was two thirds - greater than the original pro- posal approved in 1972. 23 Initial Skirmishes At this point, Lahey's hassle - free voyage through the bureaucracy ended. The Department balked at approving a cost overrun of such mag- nitude. They had been stung by previous mistakes. (The Department had earlier approved a request by Faulkner Hospital agreeing that personnel would be cut in half as a result of an expensive, mechanized hospital design. The number of em- ployees doubled, however, and were it not for emergency aid from the federal government, the hospital would have been bankrupt the day it opened.) The Council requested more information before it voted on the cost overrun request. The Public Health Council ordered the Determination of Need Program Director to investigate why the facility was costing so much and whether the project changed so substantially that it could no longer be considered the same project that was approved in 1972. During the investigation, a division developed within the Department. Some staff members con- cluded that the project had changed substantially. They further believed that the project would result in such a high daily hospital cost that third party reimbursers, especially Medicare, would be un- willing to pay the full costs. The State Rate Setting Commission stated that the all inclusive - daily rate would be $ 380 while a single outpatient visit would cost $ 70. These staff members felt that the project would prove financially unfeasible and that the hospital would face bankruptcy the moment it opened. It also became clear that the The stakes are high. The regula- tory and economic climate make it clear that the entry of Lahey into the community will drive out one or more of the existing hospitals. Department had never adequately analyzed the project from the beginning. This group therefore 24 reasoned that the Determination of Need should Determination of Need Program in Massachusetts The Determination of Need process is a program of the State Department of Public Health. It reviews any capital expenditure for a health care facility which falls under the following categories: (1) The capital expenditure is over $ 100,000. (2) A substantial change in service is in- volved. For example, changing beds from a medical surgical / use to inten- sive care use. (3) The capital expenditure involves the approval of an original clinic license, alcohol detoxification facility or half- way house. The applicant submits a description of the project with associated capital expenditure to the Determination of Need Program, the be revoked. If Lahey still wished to proceed, its plans would then be opened to public scrutiny via a new Determination of Need application. Opposing the staff findings were those in the Department who believed that revocation would not stand up in court, that Lahey had not intended to deceive the Department (since Lahey had indeed filed drawings indicating the change in size) and that the Determination of Need Program might not survive the political repercussions that would result from a revocation decision. This group included two assistant commissioners and, as it turned out, the Secretary of Human Services- a cabinet officer to whom the Public Health Com- missioner reports. In an highly unusual meeting on the Lahey mat- ter, the Secretary of Human Services informed the staff that he had received calls from many poli- ticians, including Senator Edward Kennedy, all urging that the project be allowed to proceed. He agreed with the assistant commissioners and recommended the staff permit Lahey to construct the facility as designed with no further investi- gation. The staff finally conceded and recommended to the Public Health Council that, although the proj- local HSA, to other State Agencies as ap- propriate and to the Department of Elder Af- fairs, Mental Health, or Environmental Affairs whichever is appropriate. Once an application has been submitted, any ten or more taxpayers may petition the Department of Public Health for recognition as a " Ten Taxpayer Group. " Once recog- nized, they may then receive all correspon- dence transmitted among the parties of record. A Ten Taxpayer Group can call for a public hearing and submit comments con- cerning the application to the Department of Public Health. Once all parties have submitted com- ments to the Determination of Need Pro- gram, a staff summary is drawn up which includes the Determination of Need Pro- gram recommendations and the recommen- dations and comments of all the other parties of record, including those of any " Ten Taxpayer Group. " This staff summary is submitted to the State Public Health Council which makes the final decision con- cerning approval or denial of the project. The Public Health Council is made up of nine members appointed by the Governor; the Commissioner of Public Health serves as chairperson. (Numbers are specified for seats for doctors, other providers and con- sumers.) After the Public Health Council reaches a final decision, any party can appeal it to the Health Facilities Appeals Board, which re- views procedural questions. This Board is also appointed by the Governor and made up mostly of lawyers. The Health Facilities Appeals Board can remand a decision back to the Public Health Council for its recon- sideration. If upon reconsideration any party still believes itself to be aggrieved, it can go to court to seek an overruling of the decision. Several hospitals in Massachusetts have also sought legislative relief. That is, upon denial by the Public Health Council, they submitted a special exemption bill to the leg- islature. To date, all significant special exemption bills have been either voted down or vetoed. ect had changed, no punitive action should be taken. The Public Health Council voted on December 14, 1976, with one dissenting vote, to support the staff recommendation. Two staff members later wrote a memo to the file revealing the internal dissension within the De- partment. A UPI reporter subsequently gained ac- cess to the memo. When interviewed, the Secre- tary of Human Services claimed it did not accurately reflect the meeting. Senator Kennedy's office denied that the calls made were intended to influence the decision; rather he simply wished to ascertain the progress of the investigation. The Kennedy aide further claimed the calls were unre- lated to Kennedy's status as a long time trustee of Lahey Clinic. Full Scale War Lahey successfully hurdled one obstacle only to find a host of others. Just as its officials thought they had cleared the bureaucratic woods, and the long simmering - turf battle between Lahey and its suburban competition boiled over into full scale war. In January, 1977 four area hospitals filed suit to prevent construction of the facility, and the Battle of Burlington commenced in earnest. The opponents of Lahey charged the move would have an adverse economic effect on their hospitals. In addition, a group of physicians from the Burlington area constituted itself as a " Ten Taxpayer Group, " and filed an appeal with the Health Facilities Appeals Board stating that the Department's action was improper and that it should have revoked the Determination of Need. This group also argued that the construction of the Lahey facility would have an adverse economic effect on the health care system. The (Health Facilities Appeals Board decides whether the Public Health Council actions are within its regula- tions and all parties have been accorded proper due process. The " Ten Taxpayer Group " is a mechanism for public participation in the Determination of Need Process. See box.) The stakes in the fight are high. The regulatory and economic climate in the health industry make it clear that the entry of Lahey into the community will drive out one or more of the existing hospi- tals. On a less dramatic scale one community hospital has already been denied the acquisition of a brain scanner on the grounds that the Lahey scanner will be sufficient to serve the area and they recognize this as a portent of the future. 25 Lahey would become the logical locus for the re- gionalization of many different services. The stakes for Lahey, however, were equally high. It had already invested $ 11 million in the project. With this investment as outstanding debt, a decision to stop the project might create a finan- " In spite of what they say about planning and grass roots, there are three or four people up there who make the decisions. " A Burlington Hospital Administrator cial crisis the Clinic could not survive. Regardless of the risks and expense, Lahey officials were de- termined to proceed. Lahey quickly enlisted the aid of the Executive Director of the Boston HSA, who assumed the role of moderator between Lahey and its opponents. When the opponents held firm, Lahey decided to pull out its big guns. The Clinic threatened to file a $ 40 million countersuit against the hospitals and doctors on the grounds of malicious prosecution, restraint of trade or both. Faced with virtually un- limited legal expenses for their defense plus the possible jeopardy of their own building programs (since no bank will lend to an institution with a multi million - dollar suit pending against it), the doctors and hospitals capitulated and signed a memorandum of agreement dropping all suits and appeals. In resulting newspaper articles, one of Lahey's opponents characterized the memorandum as a " whitewash. " One of the defeated hospital administrators said that the experience confirmed his belief that " in spite of what they say about plan- ning and grass roots, there are three or four people up there who make the decisions. " One Down, How Many to Go? And so it appeared that Lahey had succeeded in crushing its critics once and for all, were it not for the Health Facilities Appeals Board. The Board reluctantly accepted the withdrawal of the doc- tors'and hospitals'ten taxpayer groups from the 26 appeals process and invited the parties of record of the original Determination of Need to submit appeals. The Health Facilities Appeals Board also made it clear that it felt the Department had erred and that it might rule against Lahey if anyone appealed. Three of these parties of record were area HSAs (then CHP " B " agencies) which had parti- cipated in the original 1972 approval. This devel- opment threw the three into a two week - paroxysm of special Board meetings to decide whether they should get involved or not. By this time, the affair had garnered an unusual amount of public atten- tion, including headlines, editorials, and even letters to the area's major newspapers. Over 450 Burlington residents met to register their support of the project. The HSAs were thus forced to make their decisions in the glare of public scru- tiny. Until this point these agencies, responsible for planning in the area, had been conspicuous by their silence on the issue. The first agency to meet, the North Shore Health Planning Council, voted to file an appeal. The second, the Merrimack Valley Health Planning Council, voted not to appeal primarily on the grounds that it could not afford the legal expenses involved in an appeals fight. Finally, the Health Planning Council for Greater Boston voted against appealing largely due to efforts of its Executive Director, who earlier mediated the con- flict for Lahey. All the classic tools have been used - from political arm- twisting to the extensive use of public money to pay the legal costs involved in avoiding full public disclosure. Perhaps more significantly, however, a new, much larger physician consumer / ten taxpayer group formed and also submitted an appeal. This group has allegedly stockpiled $ 100,000 to carry on the case. The war had grown in intensity. Lahey was now faced with a determined, well- financed opposition which was not easy to intimidate. Lahey made the next move. Its lawyers filed a brief with the Suffolk Superior Court requesting an injunction against the Health Facility Appeals Board from hearing the case. They argued that the Board no longer had jurisdiction since the other appellants had withdrawn. The Chief Justice heard two weeks of arguments. He separated the case into two questions: () 1 Did the Board still have jurisdiction in the case? and (2) Had the De- partment erred in its decision? On the first question the judge issued a permanent injunction against the Board from ever hearing the appeals; he continued the other questions and after hearing weeks more of evidence will decide shortly. Although that question is still open, it is likely the judge will rule in Lahey's favor. The language of the injunction indicated his conviction that the fault lay with the bumbling of the Department of Public Health and not with Lahey. Some time later, after intensive negotiations with HUD, Lahey received approval of the FHA loan guarantee in spite of the fact that appeal is still pending. If a final determination is not made in Lahey's favor by the end of the year, however, Lahey must repay HUD whatever amount has been used from the $ 70 million bond issue. Conclusion It appears then that Lahey will finally win the war. But many valuable questions have been raised for public discussion and some lessons can be learned from the struggle. Lahey has pulled out every stop in its effort to avoid full public dis- closure of its plans and intentions. All the classic tools have been used from -- political arm twisting - within a supposedly non political - planning process to the extensive use of public money to pay the legal costs involved in avoiding full public disclosure. The state government and the courts have become the battleground upon which Lahey fought its way into Burlington's health market. One can only conclude that serious regulation will require massive public support. This story may also provide a glimpse into the future when major hospitals in the inner city de- cide to follow their doctors and middle - class clientele to the suburbs, rather than rebuilding in the cities. This is especially true where fiscal contraction forces inner city residents back to the municipal hospitals, as has happened in both Atlanta and New York City as well as in Boston. The Lahey affair also portends a fierce struggle for survival among hospitals engendered by the tightening flow of federal and state dollars - a struggle that will force decisions out into the open in a manner unprecedented in the health system, and that will give birth to alliances even stranger than that of Burlington's doctors and community hospitals. One can only conclude that serious regulation will require massive public support. And finally, the Burlington story illustrates that the health system does provide mechanisms for citizen involvement - such as HSAs and Massachusetts'Ten Taxpayer Groups - which used skillfully can influence the priorities of health expenditures and programs. Ten Taxpayer Groups, for instance, have successfully increased the primary care in an area, reached agreements on the limits of a hospital's expansion and even negotiated no attached - strings - financial assistance from major teaching institutions. To the extent that the health system will always reflect the irrationalities of the American economic system, health care allocation decisions will also reflect those irrationalities. But vigorous public scrutiny and involvement will allow for public influence on the decision - making process so that some of these decisions may be more rational and in the public interest. Postscript A final postscript on the Lahey affair aptly illus- trates the irrationality of the present order of federal priorities. It is tragically ironic that HUD gave its approval to a Federal Housing Authority guarantee of Lahey's $ 70 million bond issue, in spite of the fact that Lahey needlessly destroyed inner - city low income housing and to this day allows the land to become an overgrown, vacant lot. Thus a housing guarantee goes to assist an overpriced, oversized, financially unfeasible hos- pital instead of providing decent, low cost - housing for those who, in the final analysis, will end up paying for both the government's and Lahey's mistakes, not only with their money but with their health as well. -David Gaynor (The author is a health planner working in Boston.) 27 CONFERENCE ON HEALTH POLICY Announcements AND RESOURCE ALLOCATION The National Legal Center for Bioethics is presenting a conference in Washington, D.C., SPECIAL URPE HEALTH ISSUE NYC MAYORAL CANDIDATES: on October 20-22, 1977, on " Po- The Political Economy of Health, a special issue of the Re- view of Radical Political Economics, has just been published and is available from Health / PAC. Contents include: " Related Stress - Mortality and So- cial Organization " by Joseph Eyer and Peter Sterling, " The Political Ecology of Disease " by Meredith Turshen, " Political Power, the State and Their Implications in Medicine " by Vicente Navarro, " Malaria, the Politics of Public Health and the International Cri- sis " by Harry Cleaver, " The Health Care Industry in Ad- vanced Capitalism " by Leonard Rodberg and Gelvin Stevenson, SEE THEM RUN Perhaps the best hope for pre- venting all New York City's mayoral candidates from ignor- ing health and hospitals lies with a task force of community and health worker organizations form- ed by the New York City Coali- tion for Community Health, Inc., for the purpose. of conducting a " " Mayoral Mayoral Forum on Health Care. " The forum scheduled - for 7-10 p.m., Tuesday, August 23, at the G.H.I. Building, 326 West 42 St.- will feature all the candidates re- sponding to questions from com- munity groups on city health issues. licy Making and Health Resource Allocation. " Experts in law, medi- cine, ethics and economics will examine public policy and life- prolonging technology, concepts of distributive justice, relation- ships between definitions of health and societal responsibility, and the constitutional parameters of the policy making process. Special attention will be given to the underlying rationale of policy making methodologies. For further information, contact: Joseph F. Sedlak, Conference Coordinator, PO Box 24021, Washington, DC 20024, (310) 649-4421. " Emerging Ideologies in Medicine " by Howard S. Berlin- er, " Monopoly Capital and the Reorganization of the Health Sector " by J. Warren Salmon and " The Political Economy of Rural Health Care in China " by Robert C. Hsu. Copies cost $ 3.00 plus $.30 for postage and must be prepaid. ERRATA Grace Ziem's article " Medi- cal Education Since Flexner, " in the May / June, 1977 BUL- LETIN, carried a graph com- paring class, racial and sexual composition of medical school students since 1950 (p. 13). Lines indicating the percent of Black medical stu- dents and the percent of women medical students are correct but their titles were transposed. We apologize for any confusion that resulted. HEALTH AND HEALTH CARE IN THE SOUTH In order to present the prob- lems of obtaining and providing health care in the South and sug- gest directions for change in the future, Southern Exposure, the quarterly journal of the Institute. for Southern Studies, is preparing an issue devoted to health. " A his- tory steeped in self reliant - tradi- tions of healing enables us in the South to try bold experiments in community - controlled health care delivery. At the same time, it makes our region a woefully un- derserved " market, " ripe for ex- ploitation by the burgeoning health corporations and medical / educational complexes. We invite health workers, community peo- ple, organizers, students and others interested in Southern health care to submit articles, photographs and suggestions. " Deadline: December 1, 1977. Write for quidelines. Send to Southern Exposure, PO Box 230, HEALTH / PAC TO REQUIRE PREPAYMENT Health / PAC has just adopted a system whereby orders for literature, packets, BULLE- TIN, and subscriptions will have to be prepaid. This was necessitated by the inordinate staff time invested in billing and trying to collect bills, and by Health / PAC's general fi- nancial plight. We regret the inconvenience. SACCHARIN CONFERENCE The Society for Occupational and Environmental Health will hold a public conference on the scientific and public policy issues surrounding the proposed ban of saccharin as a food additive at The Mayflower Hotel, Washing- ton, DC on September 16-17, 1977. For more information contact: Sandy Zimmerman, SOEH, 1714 Massachusetts Ave- Chapel Hill, North Carolina nue, NW, Washington, DC 28 27514. 20036, (202) 785-8177.