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The state committees have also been asked to consider existing voluntary or governmental rate review programs and control activities when implementing this part of their program.

Capital Expenditure Goal

A national capital expenditure goal has been established of significantly reducing new capital investment over the next two years. Two national objectives have been set. First, there should be no net increase in the nation's total stock of hospital beds; and second, new capital investment during 1978 should be reduced to no more than 80 percent of the price-adjusted 1975 through 1977 average of hospital capital investment. Capital expenditures having already received certificate-of-need approvals as of December 31, 1977 will not be included for purposes of these objectives.

To accomplish this goal the National Steering Committee has urged "all hospitals to reassess their capital budgets to see if any further reductions can be achieved either through the development of alternatives to capital investment or reductions or postponement of capital spending."

To achieve the capital expenditure goal of the program, the state committees are asked to establish state goals for hospital capital expenditures in light of the national goal but reflecting the special needs of their area. The state committees will also consider ways to coordinate their program's capital expenditure activities with state and local planning activities.

The state capital expenditure goals will also be reviewed by the National Steering Committee.

Other Goals

Other goals and objectives have also been established for the program. One of these seeks the expanded study and development by the state committees of programs to significantly improve productivity in hospitals, including the development of appropriate standards for effective measurement of productivity gains. Hospitals are asked to achieve an improvement in productivity of at least two percent per year over the next two years. While better techniques and standards are being developed to measure hospital-wide productivity improvement, the continued use of existing traditional measures such as staffing ratios, outputs per labor hour in such departments as food services, laboratories, etc., is recommended.

The National Steering Committee has also requested that all hospital medical staffs reaffirm their commitment to carry out effective, ongoing voluntary utilization review programs to assure the efficient provision of services. Hospital medical staffs are urged to consider ways to further improve utilization review programs and to cooperate closely with hospital management and the governing board in carrying out this effort.

Finally, hospitals are asked to accelerate current trends to improve the health delivery system through multi-hospital systems and shared services.

The National Steering Committee has called for the cooperation and support of many other groups which have a strategic role in determining what hospitals must pay for the goods and services they purchase and in determining hospital usage patterns. These important allies in the fight to contain costs include: Hospital suppliers, called on to independently exercise restraint in their pricing policies; insurance carriers, other purchasers of care, business, organized labor, and government, who are requested to examine cost-effective alternatives to existing health insurance programs and to further reduce administrative costs; the Department of Health, Education, and Welfare, and other national and state agencies, who are asked to carry out cost effectiveness studies on all existing regulations affecting hospitals; the federal government, labor and industry who are called on for broad support and cooperation in this voluntary effort; and, the general public, who need become more aware of the reasons for increasing health care costs and to become more involved in efforts to contain these costs.

Changes in demand for hospital services will affect the attainment of all of these objectives. The National Steering Committee is developing a public education program to explain the effect of demand on hospital expenditures and is also developing a statistical monitoring system to evaluate and report the effect of demand changes on total hospital expenditures. Increases in hospital costs resulting from federal legislation and regulations such as the change in the minimum wage and increased Social Security contributions will also be monítored and reported.

Further details regarding the Voluntary Cost Containment Program will be forthcoming from your state Voluntary Cost Containment Committee which is now being formed. Each state has been asked to have created its committee and to have begun defining its state goals and objectives for the program by the end of January.

Hospital Action Now

To assist the National Steering Committee and the state committees in monitoring and evaluating the program, hospitals occasionally will be asked to provide a few items of data already routinely available in your financial records. The first of these data requests is included with the copy of this letter to the hospital chief executive. This postcard survey seeks the following information: Total actual expenditures for your previous fiscal year and your budgeted expenses for your current fiscal year. The return of this postcard no later than January 16 would be greatly appreciated.

We also ask that your hospital governing board now begin consideration of a resolution supporting the Voluntary Cost Containment Program and to establish budget goals for the institution's coming fiscal year consistent with the national goals and objectives and those established by your state voluntary cost containment committee.

This expanded effort to contain the rate of increase in hospital expenditures and in total health care costs presents one of the greatest challenges that the health care industry has ever had to face. Recent evidence indicates that the efforts undertaken by many hospitals already have begun to produce a moderation in the rate of increase in hospital expenditures. However, even greater efforts are needed on the part of all hospitals if the health care industry is to meet the goal established for this program.

Senator SCHWEIKER. All right. The next panel is Mr. Mott, Mr. Suter, and Ms. Hoskin.

Mr. Mott, do I understand that you are going to present a group statement for everyone?

STATEMENTS OF ANTHONY MOTT, EXECUTIVE DIRECTOR, FINGER LAKES HSA, ROCHESTER, N.Y.; JAMES SUTER, EXECUTIVE DIRECTOR, WEST VIRGINIA HSA, INC., CHARLESTON, W. VA.; AND DOROTHY HOSKIN, CHAIRMAN OF THE GOVERNING BODY, WESTERN COLORADO HSA, GRAND JUNCTION, COLO., A PANEL

Mr. MOTT. Yes, Mr. Chairman.

I am Anthony Mott, the executive director of the Finger Lakes Health Systems Agency of Rochester, N. Y., and also president-elect of the American Health Planning Association. I am joined by two colleagues who will make some comments later on. I will make the basic presentation.

Senator SCHWEIKER. Either pull the mike closer or turn it up. Mr. MOTT. With your permission, we will depart from the text as with the previous witnesses. We have presented extensive testimony which we will be submitting.

Senator SCHWEIKER. Your full statement will be presented in the record, and we appreciate your highlighting the key points.

Mr. MOTT. Thank you.

What we would like to do today, Mr. Chairman, is make some introductory statement from the American Health Planning Association, which is the organization which represents the Health Systems Agency and, more importantly, the roughly 50,000 consumers and providers who serve on the various committees and boards of the HSA's.

Senator SCHWEIKER. And you are president-elect of that group? Mr. MOTT. Yes, I am, sir.

Senator SCHWEIKER. Fine. Go ahead.

Mr. MOTT. It is a great honor for us to be here today in the sense that we recognize that this committee has been instrumental in creating Public Law 93-641. And as we review Senate bill 2410, we see basically a piece of legislation which we think will strengthen the process, will better clarify the situation and put us in a better situation as far as health planning in the country is concerned.

As we have experienced in the last few years of health planning in the country, and the implementation of Public Law 93-641, and as we awaited this particular set of hearings and awaited the review and renewal of Public Law 93-641, we obviously reviewed the initial law and what problems there have been across the lands. As a starting point the AHPA came to a set of conclusions with two basic thrusts.

First: we have a set of organizations set up across the land that are up and going and ready to do health planning. It is absolutely critical that we not have renewal legislation at this point that does anything major in terms of restructuring or realinement, anything of that sort to these organizations.

Second, we felt Public Law 93-641 has done an extremely good job of building upon previous planning programs, picking up the good points and eliminating the bad points and starting the work to looking toward implementation.

Again we see in S. 2410 a logical expansion upon this, and we will have specific comments later.

We believe the key to the renewal legislation lies in setting meaningful tasks for the planning agencies, and for evaluating them carefully, both in terms of their public responsiveness, and in terms of the technical quality of the work they do.

We do not operate under any illusions at this point as far as the State and local health planning agencies are concerned. The job that is to be done out there by these agencies, at Federal, State, and local levels, is a very difficult one. It is frequently a misunderstood one, and often an unpopular one, particularly cost containment. I am sure you know, in the abstract, that your constituents or ours, says they are for cost containment. The difficult role all of us have is how do you get from abstract support of cost containment, to the highly specific implementation of this idea. I think we all know the degree of public understanding and support for the specific cost containment activities, thus far.

That is the job HSA's and SHPD's try to do-to build an understanding within our own organizations, and the community, of why things happen, and how we can come up with action plans to create a change.

The recent controversy over the national cost containment guidelines, which was discussed by the previous witnesses, clearly demonstrates what difficulties can result when the intent of Congress is misrepresented.

The American Health Planning Association fully supported the concept of using quantitatively based guidelines as a benchmark in the planning process, and made suggestions for a local general adjustment process, and for adjustments to specific standards, such as obstetrics, pediatrics, and neonatal intensive care.

It is our conclusion, after reviewing the guidelines, that we do not have quite as much difficulty in ferreting out the intent of the guidelines and standards as some others do.

I would say, as we have reviewed this with people representing health planning agencies across the United States of America, there is a general concensus of strong support for the recent addition of the national guidelines as issued, and for the adjustment process as detailed in it. However, there was, from within the ranks of the health planning agencies themselves, a number of agencies and people who had very deep concerns about the lack of clarity in the original submission of the national guidelines.

It is our feeling that a great deal of good has been done in terms of clarifying this. It is our feeling that indeed it is not only appropriate but necessary that there be benchmarks, that there not be 205 HSA's each trying to come up with their own initial benchmark of how many of few new cancer patients should be there before you move and accelerate controls on radiation therapy. So AHDA accepts them as written, and the concepts behind them.

Having said all that, what we would like to do is quickly go into some of the more important sections of the legislation as written.

I will leave for the moment the whole area of redesignation which Mr. Suter will speak to in a moment. We would like to support the Section 104: Conflict of Interest. This is a very important problem; it is an area that we think needs clarification.

We have offered, within our organizational structure, wording to try to bring about such conflicts of interest clauses within the local area. We clearly support this section.

Another very important feature in the section is section 106, which clarifies substantially the selection process for HSA boards, committees, subcommittees, task forces. This has been an area of lack of clarity. This has been an area of a fair amount of diversity across the land. The intent of section 106 is laudable and appropriate. We have one area of fairly strong concern. As we read section 106, it sets up a very open nonperpetuating process for board selection. This is fine. However, the next step, which is included to require similar procedures to produce a non-self-perpetuating process for the councils underneath the board of directors, gives us problems.

Not only do we not see a need for it philosophically, but it could practically tie up the planning work of the HSA's at the local level."

We strongly endorse the requirement that each agency make their board selection process public, and report this process to the Secretary. We also call upon the Secretary to strenuously enforce clear violations of the principles of broad representation, or failure to implement democratic procedures in board selection.

Section 109 is one we strongly support. We operate completely under all aspects of the sunshine law, there are obviously, as has been seen by the subcommittee, and by staff in preparation of this, areas like personnel records where privacy required are generally beneficial. We support this section.

To go on to section 118, which has to do with certificate of need, which is an area that there has been some discussion today, there are many aspects of this that we strongly support.

We support, under section 118, where there is language in terms of the inclusion within the health plans of descriptive information about. the system. We think it is extremely important that these plans describe the system, of what exactly exists out there.

We do think some clarification is needed in the language. There is a statement in there that the plans should not include any reference to specific institutions. We assume this means that the specificity has to come in other iterations of the plan. But we would strongly oppose any provision which denied HSA's ability to collect organizational data on patient origin, utilization, costs and charges by types of service.

The role of the Governor is strengthened in relation to his health plan. We believe that the role of the Governor is important and substantial at this point. We have some concerns with the language of the section.

Our concerns have to do with the problem of the State health plan. Basically, this plan is meant to start at the grass roots, with HISA board providers and consumers spending untold hours putting an individual health systems plan together. The sum of the health systems plans of the separate ISA's in effect became with suitable adjustment the State health plan. A veto, threat of veto or "nonconcurrence" on the part of the Governor, can have a devastating impact on the volunteers who have put the plan together. If they feel they have no real role or responsibility their involvement will flag. We have had examples in my HSA in New York over the last few years where a reversal, when