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

69-084 - 76-6

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 unheard. 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 contracts— thus 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:]

PREPARED STATEMENT BEFORE SENATE SUBCOMMITTEE OF OVERSIGHT PROCEDURES ON CONGRESSIONAL OVERSIGHT OF FEDERAL REGULATIONS

Mr. Chairman, I am Edward J. Fechtel, Jr., Administrator of St. Mary's Hospital, Athens, Georgia, and President of the Georgia Hospital Association, which represents over 200 health care institutional providers as member institutions, including most of the hospitals in Georgia and over 1500 personal members. We appreciate this opportunity to present the views of our Association on matters of Congressional control of administrative rulemaking.

As you know, we have filed a more detailed statement for the record of the position of the Georgia Hospital Association with you. As time does not permit proper and adequate description here, I am presenting an abstract which is more of a philosophical and conceptual statement of our position. In this public hearing, we find ourselves echoing the sentiments of all of the industries which are subjected to the deluge of government regulation. Like others, we are fully cognizant of the fact that rules and regulations in our society are necessary, but there are limits. The Georgia Hospital Association and its member hospitals perhaps do not have the number of years of experience in living with government regulations as some of the other industries testifying here today, for in our industry government involvement in the admininistration and supportive functions has really come about only in the past decade beginning principally with the inauguration of the Medicare program in 1966. We have not, as many other industries have, developed the expertise in the mere problem of understanding, much less coping with these regulations and certainly most hospital administrators find the regulations to be voluminous, confusing, and at times completely overwhelming.

The government involvement in hospitals has come about in large measure through its increasing role in paying the bills of health care for its citizens, yet the government regulatory process entered an industry in which various complex elements must be put together. The hospital itself does not have total control over its business affairs. Patients are admitted and discharged only by physicians who also prescribe what treatments and diagnostic tests will be administered to patients in our hospitals. Our physicians are independent, private practitioners, whose judgments relating to the care of our patients are solely theirs and not of the institution. The vast majority of the regulations intended to control costs are principally institutional regulations, thus, we have a very awkward situation in the implemntation of regulatory controls.

We are genuinely perplexed by the callous manner in which our problems ar viewed by the Administration and the regulatory agencies. There is a reckless attempt to reduce the budget, chop out large amounts earmarked for health care, and ignore the consequences that will result because we do not have the control over the costs of health care that everyone thinks we have. Price increases in fuel, food, medical supplies, life-restoring and life-sustaining equipment and other related expenses are beyond our control. Therefore, the proposed 7 percent cost increase limitation for Medicare in Fiscal Year 1977 simply confounds us beyond human reason as we would have to reduce, restrict, or eliminate the quality or quantity of diagnostic and therapy programs. Moreover, the regulations passed by Congress add to that cost. One of the best examples is the Utilization Review regulations which hospitals must spend the money to provide a review mechanism without the government defraying the full cost of providing that requirement. In short, we are expected to spend money to help the government save money. Hospitals, however, do not enjoy the benefits of that saving. We have seen the Department of Health, Education, and Welfare arbitrarily remove the 81⁄2 percent nursing cost differential which recognizes the higher cost of caring for Medicare patients. This was removed without the necessary study and preparation to support the action and appeared to be simply an arbitrary attempt to reduce spending on their part. The American Hospital Association, through litigation, had this cost differential restored.

Another regulation arising out of Public Law 92-603 arbitrarily sets cost limitations on routine service costs without regard to the many variables which go into the provision of hospital care, the general economic conditions in an area, and so forth. The preoccupation with per diem costs overlooks a simple arithmetic fact that as length of hospital say is reduced through pressures exerted by Utilization Review or economic factors and as the higher cost of equipment, food, fuel, medical supplies, personnel, etc. increase the rise in the

cost per day is accelerated. Finally, the mere fact that regulatory agencies can take months in preparing complex and lengthy regulations but only allows the industry affected 30 days to respond, and in some cases no time to respond, simply makes us wonder where the concern for the health care in our society lies. We see some signs our concerns are being shared in the Congress about the long term effects of current trends in regulation on the ability of our industry to fulfill its mision in society. The well intentioned promotion of the health and welfare of our citizens by regulatory agencies has become more cumbersome. The key social decisions that must be made relating to future health care are drifting from the control of the Congress and into the regulatory agencies. Hospitals are complex and they are faced with the tremendous pressure of deciding what demands must be met, as we are now presented with an unlimited array of demands for patient care and increasingly more limited resources to provide that care.

Such decisions must be made with a clear oversight and control of the Congress who is responsive to the people and not solely made by the regulatory agencies responsive only to the Administration.

The health care industry is an environment where the demands for diagnostic expertise, treatment, facilities, and qualified personnel must be balanced by the resources to deliver them. If it is decided that this country cannot afford to provide all of the resources to meet all of the demands for care, then the most responsible body in our society, the U.S. Congress, must take the lead in making those decisions. Without adequate oversight, the Congress cannot fulfill the function which we believe they should have.

We fully understand that the oversight function of Congress will not be one which mitigates the needs for regulatory agencies. We do thing, however, it will stimulate the proper environment in which we need to operate effectively. By this I mean we must have the full cooperation and understanding of our complex problems by the regulatory agencies. Their actions and many of the issues cited in the statement we have submitted to you demonstrates, with few exceptions, the sometimes arbitrary and uncooperative manner in which this has been carried out.

In summation, in considering all that is said of the delivery of health care and the regulatory process, I hop we can overcome the preoccupation that Congress and our regulatory agencies have with what abuses there may be in the health care system. Much of this overlooks the overwhelming good that is provided by so many. Furthermore, there seems to be a general lack of understanding with respect to the sometimes conflicting relationship between concepts of efficiency in delivering health care for federal programs and the effectiveness of delivering such health care. In short, we regret that unless more of our legislators such as yourself, exhibit the concern that you have shown to us, the handicaps placed upon the health care system to respond to the demands for the quantity and quality of diagnostic and treatment facilities and programs will have serious long-range consequences and we will fail to meet public expectations. We must have health policy through Congressional legislation and oversight and not by regulatory fiat.