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Senator Nunn. Our next witness is Mr. Edward Fechtel, president of the Georgia Hospital Association.

We are delighted to have you and you may proceed in whatever manner you see fit.

TESTIMONY OF EDWARD J. FECHTEL, JR., ADMINISTRATOR,

ST. MARY'S HOSPITAL, ATHENS, GA., AND PRESIDENT, GEORGIA HOSPITAL ASSOCIATION

Mr. FECHTEL. Mr. Chairman, I am Edward J. Fechtel, Jr., Administrator of St. Mary's Hospital, Athens, Ga. and president of the Georgia Hospital Association, representing over 200 health care institutional providers as member institutions, including most of the hospitals in Georgia and over 1,500 personal members. We appreciate this opportunity to present the views of our association on matters of Congressional control of administrative rulemaking.

Our association wishes to commend the subcommittee for holding hearings and considering this issue in Georgia. We especially commend you as one of our distinguished Senators from Georgia and as chairman of the Senate Government Operations Subcommittee on Oversight Procedures and the distinguished Representative Elliott N. Levitas of Decatur, Ga., as principal sponsors of two major bills to deal with this very difficult issue.

In the course of our testimony, we would like to briefly discuss some of the problems that the hospital field faces with the regulatory process at the present time; to give some indications of the magnitude of the issue; to provide briefly some specific references to regulations and assessment of their impact on hospital operations; and finally to provide a series of recommendations for the subcommittee's consideration in the future study of the matter.

The published Code of Federal Regulations is separated into 50 titles by subject matter. Over 60,000 pages of regulations were published in the Federal Register in 1975. As of January 30, over 4,800 pages of regulations have been published in the Federal Register.

During the past decade, hospitals have been hit with a barrage of governmental regulations which, as the committee knows, have the force of law. These regulations are developed and promulgated by a variety of governmental agencies, boards, and departments in the executive branch. Not infrequently, the uncoordinated promulgation of regulations have included requirements that do not appreciably improve care to patients but significantly increase costs. At the same time, actions are being taken to hold down payments for services to levels that do not take into account the cost increases mandated by Government. Sometimes payment limits seem to be imposed in ignorance of the differences between holding down Government payments and holding down hospital costs. Regulatory actions have not only dealt with matters affecting the very financial integrity of institutions but have also intruded directly and inappropriately into the operation of such institutions.

During the year ending September 30, the American Hospital Association identified some 105 proposed regulations as having specific relevance to hospitals. Six of the 50 titles in the Code of Federal

Regulations as mentioned earlier are of special interest to hospitals with title 20 regarding medicare and title 45 regarding medicaid being of primary interest.

Regulations for these two titles alone are so voluminous that many institutions must subscribe to a publication service to assure receipt of current changes. One such service currently includes three volumes of information relating solely to title 20 and title 45, numbering over 10,000 pages. The January 20 issue of page changes to these three volumes numbered over 280 pages. Mr. Chairman, we agree with you in your earlier testimony in this issue, that “Today we are paying the price of growing Government in terms of over-regulation and a mountain of Federal paperwork," and Congress "must end it by effective oversight of the bureaucracies."

The volume, frequency, and complexity of initial and revised regulations applicable to medicare and medicaid is overwhelming. In addition to the three-volume reference index of 10,000 pages our State has recently instituted, though somewhat belatedly, 12 separate volumes of provider procedure manuals for the administration and operation of our medicaid program. Additionally, administrators must abide by over 70 pages of State rules and regulations on the operations of licensed hospitals in Georgia.

I wish to assure the committee that our hospitals of Georgia do not uniformly staff any "regulatory interpretation or compliance sections,” for the timely, effective, and economical application of such regulations. Such actions are usually accomplished by a host of bureaucratic "checkers checking the checkers” from life safety codes, Occupational Safety and Health Act regulations, utilization review of facilities, and a host of other regulatory issues to comply with specific requirements to have a prescribed sign posted to advertise a hospital's policy on "uncompensated on free charity care” which it may be required to provide by Federal regulations.

Sixty percent of the hospitals in Georgia are of less than 100 beds in size and usually staffed by one administrator-seldom an assistant administrator and with few department heads who could appropriately interpret the column of Federal regulations applicable to the myriad of medicare and medicaid requirements.

I assure the committee that such staffs are not frequent callers on the newly established "Dial-a-Reg”-phone No. 323-5022—in Washington for any advance look at the Federal regulations to be published tomorrow—they are trying to remain current with the regulations published yesterday or the day before.

Mr. Chairman, I would like now to present some specific references to various regulations of financial significance to hospitals and a very brief assessment of the impact of such on hospital operations.

In 1969, in adopting the nursing cost differential the Social Security Administration provided by regulations that "further studies will be conducted periodically to determine the amount of inpatient routine nursing salary cost differential and how such a differential should be applied in the future.” Nevertheless, in 1975 the Administration promulgated a regulation eliminating this justified differential. This regulatory action was taken precipitously as a cost-cutting measure with no justification based on new studies or any other evidence of the change in the cost of providing nursing care to the aged. With broad membership support, the American Hospital Association considered this unlawful and sued for relief. The U.S. district court issued an injunction prohibiting implementation of this unlawful regulation. This final regulation was published despite extensive comments pointing out the illegal and inappropriate aspects of the regulation and congressional sponsorship of legislation to prohibit this regulation from taking effect which had been cosponsored by almost half of the Members of the House of Representatives. With over 180 medicare provider hospitals in Georgia, one can easily surmise the financial impact on such institutions should the present 812-percent nursing cost differential for medicare be omitted as a consideration of reasonable payment for costs incurred by hospitals.

Legislation authorizing the setting of limits on reimbursable costs provides the Secretary of Health, Education, and Welfare with the power to establish limits on inpatient costs within groups of similar hospitals. The groupings of hospitals would allow for differences that could result from hospital size, the nature and scope of services provided, the type of patients treated, the location of the institution, and other factors affecting the patient delivery of needed health services.

The initial system for grouping hospitals needed a full trial before its adequacy could be appraised and its defects corrected. Yet before any of this could be done, the system was revised and limitations made much more severe so as to place some 753 hospitals, according to the Social Security Administration's own estimates, outside the limitations, thereby arbitrarily penalizing the institutions. The penalty of inadequate reimbursement falls upon such institutions immediately, and relief, if it is granted, will only come many months after the hospitals have experienced serious financial problems and have been forced to go to a high-cost money market for operating funds. The net effect is to generate new and unnecessary costs which will ultimately have to be paid by purchasers of health services.

The result is simply to place more hospitals outside the limitations -not to insure that the system will more accurately identify hospitals in which costs are unreasonable. It is also clear that this action is not motivated by promised improvements in the classification system but was undertaken simply to produce budget savings. These savings will not derive from cutting unnecessary costs but will result in further subsidization of the medicare program by other users of health care facilities and other third-party-payment programs. Our association and the American Association are convinced that departmental officials have chosen to utilize this carefully enunciated program of cost limitation as a vehicle for budgetary manipulation without regard to its deleterious impact on the ability of many hospitals to render needed care to medicare and other beneficiaries. We believe that its regulatory action is not consistent with congressional intent nor the basic limits of the statue.

During the past year, the promulgation of regulations relating to utilization review also was carried out for budget reduction purposes. The basic legislation underlying this provision was enacted in 1965. During 1975, the executive branch seemed to have concluded that the requirements it could apply based on this authority could drastically change and might well reduce Government expenditures. In carrying out this intention, insufficient time was provided for adequate develop

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ment of regulations, conflicting directives were disseminated, and the first 6 months of 1975 was a period of complete confusion regarding these proposed governmental requirements. Legal action finally resulted in HEW withdrawing key portions of these regulations.

Based on such regulations, each hospital within Georgia established a position for a utilization review coordinator to administer the program who, by recent studies, are exceeding the salary of head nursesthose providing supervision of direct patient care functions within the institution. Based on survey information of our member institutions, the added annual average cost of this program to hospitals will vary from over $8,000 in small hospitals to over $35.000 in hospitals over 200 beds. See appendix A1 for related survey information and costs.

LACK OF COMPLIANCE WITH ADMINISTRATIVE PROCEDURES ACT

Not all regulations are required to follow the Administrative Procedure Act. Rules relating to loans, grants, benefits or contracts are not covered by the act and are issues of great importance to the health field.

Examples of such are as follows:

The PSRO program enacted in 1972 is being operated under policies that for the most part were not spelled out in the regulations and therefore did not follow the Administrative Procedure Act. This should not be permitted to continue.

30-DAY COMMENT PERIOD

Although the APA provides for a notice of proposed rulemaking before final publication, the health field often finds regulations so significant and so complex that the 30-day comment period generally allowed is totally insufficient to permit adequate analysis and comment. Efforts to comment on regulations are thwarted because of the unreasonable time commitment. Yet a 300-day comment period is almost always prescribed and requests for extension of time usually go un'heard. It is essential that proposed regulations involving complicated and important issues be accomplished by comment periods of no less than 10 days and an additional comment period of 30 days should be granted when justified.

Specifying the size of a sign related to "uncompensated or free services” to be provided by an institution. Posting of a sign relating to a facility providing uncompensated or free services being large enough to be read by persons with correctible 20–20 vision at 10–12 feet is an absurd bureaucratic example of overburdening regulatory requirements on a hospital versus its basic objective to provide patient

care,

Yet this requirement is an inspection/certification item for an inspector to determine a facility's compliance with Federal regulations. One could appropriately ask, why not have the inspector check a more related patient care issue ?

1 See p. 70.

Mr. Chairman, the Georgia Hospital Association would like to make the following specific recommendations for your subcommittee's further consideration as it studies this matter.

Though oversight/regulatory reform legislation should not be considered to be a panacea for all problems with Federal rules and regulations in the health care field, it could assist in providing another alternative for meaningful input in the administrative rulemaking process. Out of 105 proposed regulations, referenced earlier, only a small percentage should merit legislative review because they appear to be contrary to law or inconsistent with congressional intent or go beyond the mandate of the legislation they are designed to implement. Admittedly, the vast majority of the regulations will not require detailed review by any congressional committee. Legislation which you and Representative Levitas have proposed will provide a mechanism by which a limited number of regulations requiring congressional intention can be identified. Then either House of Congress can deal directly with these regulations and can refer them to relevant committees for review and action. With only a limited number of key issues requiring specific action by Congress and relevant committees, the additional workload would be small and thus be a task that Congress could accomplish without undue effect on its legislative program.

Such legislation to reform the regulatory process should amend the Administrative Procedure Act to include at a minimum the following points:

Remove the present exemption from coverage under the act of regulations relating to Federal loans, grants, benefits, and contractsthus requiring by statute that all such regulations be published in the Federal Register and full opportunity for public comment be afforded:

Provide at least a 60-day comment period on all significant regulations, with the opportunity to extend the time to 90 days if necessary;

Develop a method whereby Congress may prevent the adoption by the executive branch of rules and regulations which are contrary to law or inconsistent with congressional intent; and

Insure that publications of guidelines, intermediary letters, et cetera, which develop new policy or change existing policy follow the requirements for rulemaking of the Administrative Procedures Act.

In summary, recent history demonstrates both a need for legislative reform of the regulatory process and, we believe, the practicality of such reform to remedy existing defects in the Administrative Procedure Act. Legislative action in concert with your proposed bills will provide the method by which Congress, in its continuing review, may prevent the adoption by the executive branch of rules and regulations that are contrary to law or inconsistent with congressional intent or go beyond the mandate of the legislation it is designed to implement. Such legislation will also provide a more accurate means by which the public may participate more effectively in the Federal rulemaking process.

Mr. Chairman, we thank you and your subcommittee for this opportunity to appear before your committee on this issue of intense interest and concern to the health and hospital field in Georgia.

[Prepared statement of Edward J. Fechtel, Jr. follows:]

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