[Congressional Record Volume 142, Number 125 (Thursday, September 12, 1996)]
[Extensions of Remarks]
[Pages E1603-E1605]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




           ESSENTIAL HEALTH FACILITIES INVESTMENT ACT OF 1996

                                 ______
                                 

                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                      Thursday, September 12, 1996

  Mr. STARK. Mr. Speaker, today, I am introducing the Essential Health 
Facilities Investment Act of 1996. This legislation will provide a 
financial helping hand to those hospitals and health centers that are 
in the frontlines of dealing with our national health care crisis. This 
legislation allows for the expansion of community health services and 
the capital needs of safety-net health care facilities while at the 
same time attempting to limit the further duplication of unnecessary 
high-technology services.
  This bill is similar to legislation that a number of us introduced in 
the 103d Congress and which was included in the national health reform 
legislation that was approved by the Ways and Means Committee. I am 
introducing this bill now so that groups may focus on it before the 
start of the 105th Congress to see what changes they would recommend 
and, if they agree with the goals of the legislation, begin to work for 
the passage of such legislation in the New Congress.
  In this time of continually shrinking budgets and fiscal austerity, 
it is more important than ever to appropriate Federal moneys in the 
most cost-effective manner available while reaping the most benefit for 
all of our citizens. In terms of health care, this means establishing 
and expanding community health programs designed to provide low cost 
primary care to underserved populations to avoid subsequent high-cost 
emergency room visits. In addition, we must help to support those not-
for-profit and public hospitals that deal with a disproportionate 
number of uninsured patients. Urban public hospitals averaged over 
19,000 admissions, 242,000 outpatient visits, and nearly 4,000 live 
births per hospital in 1986. In comparison, urban private hospitals in 
the same areas registered just 7,000 admissions, 50,000 outpatients 
visits, and 760 live births. These safety-net facilities--the public 
and not-for-profit hospitals that serve a disproportionate share of 
uninsured and low-income patients--are in essence the family doctor for 
many in our country. Though it would be far better to incorporate the 
uninsured into our national insurance pools, giving them access to any 
health care facility they choose to visit, the stark reality is that 
they are dependent upon these safety-net hospitals for any and all of 
their health care.
  Gun violence in our metropolitan areas adds to the burden that our 
safety-net hospitals must bear. Roughly half of all urban safety-net 
hospitals are equipped with a trauma center and thus are the first in 
line to treat the victims of America's growing obession with guns. By 
the year 2003, according to the Federal Centers for Disease Control and 
Prevention, gunfire will have surpassed auto accidents as the leading 
cause of injury and heath in the United States. Unlike victims of car 
crashes, who are almost always privately insured, 4 out of 5 gunshot 
victims are on public assistance. More than 60 urban trauma centers 
have already closed in the past 10 years, leaving less than one-quarter 
of the Nation's population residing anywhere near a trauma center. 
Gunshot wounds account for fewer than 1 percent of injuries in 
hospitals nationwide but account for roughly 9 percent of injury 
treatment costs. It is estimated that for every 1 of the 40,000 
patients who die from a gunshot wound annually, 3 others are injured 
seriously enough to be hospitalized.

  Yet another assault on urban hospitals comes from the influence of 
managed care organizations. Managed care's ability to bring tougher 
competition to the health care sector has decreased the urban safety-
net hospital's ability to cost-shift to offset some of the heavy losses 
incurred providing uncompensated care. As a result, according to a June 
1996, Prospective Payment Assessment Commission [ProPAC] report, 
hospitals in urban areas with high managed care penetration saw their 
payment-to-cost ratio decrease by 2 percent from 1992 to 1994. 
Declining margins have forced many urban hospitals to cut their level 
of charity care. ProPAC found that uncompensated care fell by 4.5 
percent during the same time period, clear evidence that more and more 
of the burden is being shifted to the public safety-net hospitals.


   outline of the essential health facilities investment act of 1996

  In title I of this legislation, Medicare's Essential Access Community 
Hospital Program [EACH] would be expanded to all States and a new urban 
Essential Community Provider Program [ECP] would be created. Funding 
would be provided for the creation of hospital and community health 
clinic networks that improve the organization, delivery, and access to 
preventive, primary, and acute care services for underserved 
populations.
  In title II, financial assistance for capital needs would be provided 
by the Secretary of HHS to safety-net facilities which serve a 
disproportionate share of uninsured and low-income patients. Funds for 
this legislation would be provided by a one-half percent on hospital 
gross receipts tax.
  In title III, financial and technical assistance would be provided to 
States engaged in review of capital expenditures for health care 
facilities and high-technology equipment. Consideration of alternative, 
less costly, and existing services would be considered before any funds 
would be distributed.


                    rebuilding the urban safety net

  Even though these essential access facilities fulfill a pivotal role 
in our Nation's health care system, their infrastructure suffers from 
gross neglect and under-investment. The buildings and systems that 
comprise this safety net are often antiquated. Without future 
reinvestment, the holes in this system will continue to grow, causing 
even more of America's underprivileged population to be medically 
abandoned.
  The average age of the physical plant of urban, public hospitals is 
nearly 26 years, compared to a national average for all hospitals of 7 
years. The average capital expenditure for urban hospitals is $12,600 
per bed compared to a national average expenditure for all hospitals of 
$23,500.
  A national survey of the Nation's safety-net hospitals found that a 
lack of available hospital beds is resulting in severe overcrowding. 
Hospital corridors surrounding emergency rooms have begun to resemble 
triage units at the height of a military campaign. A recent study 
showed that 50 percent of the hospitals in the three most severely 
impacted areas, Los Angeles, Detroit, and New York were forced to 
restrict emergency department access over 25 percent of the time. This 
is occurring in spite of the fact that the occupancy rates of all 
hospitals have steadily decreased during the last decade and are now 
barely above 60 percent. The average occupancy rate for safety-net 
hospitals is roughly 82 percent with some reporting 100 percent, while 
private urban hospitals averaged just 67 percent. At any given time, 
approximately one-third of America's 924,000 staffed hospital beds are 
empty. Our national priorities have created an excess of beds in areas 
where the need doesn't exist and a severe shortage in areas where the 
demand is bulging at the seams. This bill attempts to relieve some of 
the pressure built up within the safety-net system.
  It is wise to remember that while the economic viability of these 
urban safety-net hospitals is crucial for the medically underserved of 
America, these same hospital systems often provide specialty care 
services used by everyone in the community. Burn, neonatal units, 
trauma care centers, and other highly specialized tertiary care 
services are located within safety-net hospitals. All members of a 
community benefit from both a well-maintained safety-net hospital and a 
broad network of community health centers.
  Health care institutions have historically found it difficult to 
secure financing for capital renovation and expansion products. The 
financing exists within the market, but the level of debt service 
required to often too burdensome for the public institution to manage. 
Even when revenue bonds may be supported by local means, oftentimes the 
bond ratings are too low and thus the interest rates are too high. 
Afterall, these safety-net hospitals treat a high proportion of low-
income patients resulting in lower operating margins. These ratings 
often have little to do with the ability of hospital administrators to 
manage their facilities well. It is more often the case that market 
analysts consider the local appropriations that sustain these 
facilities to be too uncertain. Thus, the facility is simply prohibited 
from securing the needed capital.
  For the facilities with the greatest demand placed upon them in our 
inner-city and rural areas, the traditional method of financing, 
Federal funding, is no longer available. Many of these facilities were 
originally built with grants or loans under the Hill-Burton Program. 
These funds have not been available for years. The lack of Federal 
moneys available to repair and rebuild these facilities combined with 
the strain on the resources of local governments, means the capital 
needs of safety-net facilities have gone unmet.
  This legislation does not propose that the Federal Government take on 
a massive rebuilding program like the Hill-Burton Program. Nor does it 
propose that the Federal Government take sole responsibility to solve 
this problem. However, this legislation is designed to support State 
and local efforts to upgrade

[[Page E1604]]

the capacity of these facilities. In drafting this bill, we recognized 
that the Federal Government has limited resources it can tap for this 
purpose. Therefore to fund this program, a 0.5 percent--one half of 1 
percent--tax would be levied against the gross revenues of all 
hospitals. Hospital revenues received from Medicaid would not be 
subject to the tax.

  Revenue from this relatively modest trust fund would be used by those 
inner-city and rural facilities across America with the greatest need 
for assistance. Eligible facilities would be those designated as 
essential access community hospitals, rural primary care hospitals, 
large urban hospitals qualified health clinics that are members of 
community health networks.
  Assistance from the capital financing trust fund would be provided in 
the form of loan guarantees, interest rate subsidies, direct matching 
loans, and in cases of urgent life and safety needs, direct grants. The 
Federal assistance would be used to leverage State and local government 
and private sector financing. Repayment would be made back to the trust 
fund.
  For fiscal years 1997 through 2002, $995 million will be made 
available each year through the capital financing trust fund for these 
safety-net facilities.
  With relatively limited resources available to meet the tremendous 
health facility infrastructure needs across the Nation, decisions to 
finance the reconstruction, replacement or acquisition of facilities 
and equipment must be made only after first considering whether 
existing service capacities could be tapped to meet the needs of the 
underserved more efficiently. The next section of this bill is designed 
to ensure that the capital expenditure decisions supported by this 
legislation are considered within the context of the entire community's 
needs and capacities.


                      Maximizing capital resources

  Many communities, particularly those in rural and inner-city areas, 
lack the facilities and equipment to adequately meet the needs of their 
residents while other hospitals are experiencing a capital oversupply. 
This oversupply leads to inflationary price pressures. The Essential 
Health Facilities Investment Act of 1996 will expand medical services 
to those in need only if the planning authorities feel that the current 
local medical facilities are unable to meet the needs of the community. 
In addition, this bill specifically states that only projects that will 
lead to an increase in the quality of care rendered will be funded. In 
other words, requests for frivolous, redundant facilities will be 
denied funding.
  One area of oversupply is hospital beds. According to the Dartmouth 
Atlas of Health Care, published by the Dartmouth Medical School in 
1996, there were more than 827,000 acute care hospital beds in the 
United States in 1993. The average number of beds per thousand 
residents was 3.3. After adjusting for demographic differences, the 
numbers of hospital beds per thousand persons varied by a factor of 2.8 
across the Nation. The numbers ranged from fewer than 2 beds per 
thousand residents to more than 5 beds per resident. Some of these 
hospitals with excess capacity can and need to be closed, or at the 
very least, denied additional public capital improvement funds. 
However, we must also make every effort to first ensure that every 
geographic and community area receives adequate hospital service. 
Safeguards and criteria for the allocation of Capital Financing Trust, 
EACH, and ECP funds must be satisfied in order to avoid exacerbating 
the oversupply of hospital beds.

  With 4.7 percent of the world's population, we have one-half of the 
world's CT scanners and about two-thirds of the world's magnetic 
resonance imagers [MRI's]. In 1987, the United States had 7.4 times as 
many radiation therapy units and 8 times as many MRI's per million 
people as did Canada. The United States has twice as many open heart 
surgical units per million persons as does Canada. The startup costs 
for each of these open heart surgery programs are between $6 and $13 
million. Annual operating costs average between $7 and $10 million at 
each location. For each open heart surgery center that is not needed 
and not created, millions of dollars can be saved each year.
  Redundancies and inefficiencies of hospital facilities and services 
are well known. In 1991, a study in the Annals of Internal Medicine 
showed that although America had 10,000 mammography machines, we 
essentially only used 2,600 of them. This same study asserts that if 
every women in America had a mammogram every time the American Cancer 
Association suggested it was appropriate, we would use only 5,000 of 
the 10,000 functioning mammography machines.
  In addition to wasting valuable resources, this excess capacity can 
be considered detrimental to the health of patients. Applying the 
guidelines endorsed by the American Hospital Association and the 
American College of Cardiologists, 35 percent of the open-heart surgery 
centers in California perform less than the minimum number of 
procedures required to achieve an acceptable level of competence and 
quality. We should not reward those hospitals that insist upon 
maintaining high cost, redundant, tertiary care services that fail to 
maintain a minimum level of quality. Admittedly, the availability of 
reliable outcome studies covering high-technology procedures is 
limited, but there exists reputable data concerning hip replacement 
surgery and coronary artery bypass surgery [CABS] success factors. The 
October 25, 1995, issue of the Journal of the American Medical 
Association cites a study titled ``Regionalization of Cardiac Surgery 
in the United States and Canada'' which shows that:

     in California, age and sex-adjusted mortality rates in 
     hospitals performing 500 or more CABS operations per year 
     were 49% lower than in hospitals performing fewer than 100 
     CABS operation . . .

     Hip replacement surgery data and this coronary artery bypass 
     surgery study effectively demonstrate a direct correlation 
     between the volume of procedures performed and the resulting 
     success rates.

  I propose that a coronary artery bypass surgery hospital must meet 
the minimum criteria for quality outlined by the Secretary in the 
Medicare Centers of Excellence for CABS operations to be considered for 
Medicare reimbursement. Expanding on this idea, I suggest that any 
hospital wishing to improve a tertiary care service using resources in 
excess of $1 million from the Capital Financing Trust Fund must not 
only demonstrate that they are indeed a safety-net health care provider 
but also meet standards of quality for that particular service outlined 
by the Secretary. As additional reliable outcome studies for other 
expensive, capital-intensive services become available, disbursement of 
Capital Financing Trust Fund for improvements will be dependent upon 
demonstration of adequate quality performance measured by the HCFA's 
chosen quality outcome measurement.


                       expanding the each program

  A third provision of this legislation is designed to facilitate the 
organization, delivery, and access to primary, preventive, an acute 
care services for medically underserved populations by fostering 
networks of essential community providers.
  The Essential Access Community Hospital Program was enacted in 1989. 
This Medicare initiative provides a unique Federal-State partnership to 
assure the availability of primary care, emergency services, and 
limited acute inpatient services in rural areas. The EACH Program was 
created to maximize resources available to rural residents by 
establishing regional networks of full-service hospitals [EACH's] 
connected to limited-service rural primary care hospitals [RPCH's]. 
Since 1991, over $17 million has been awarded in the seven 
participating States.
  In a recent assessment by the Alpha Center, the strengths of the EACH 
Program were clearly articulated. Their March 1993, report stated:

       The EACH Program has released an enormous amount of 
     creative energy focused on the development of regional 
     networks that link health care providers in remote areas with 
     those in more densely populated communities.

  A letter from the project directors of the seven EACH States 
contained the following comment:

       We believe the EACH concept will assist policymakers, 
     regulators and changemakers in the long process of refocusing 
     rural health care delivery.

  I am confident that the EACH Program provides a framework for greatly 
improving the quality and efficiency of primary care, emergency 
services, and acute inpatient services in rural areas across the 
country. As a result, this legislation contains language that would 
extend the EACH Program to all States.
  In addition, creating a new urban Essential Community Provider 
Program [ECP] would carry the network concept to our Nation's inner 
cities. While different from the rural EACH Program, the urban ECP 
Program would concentrate on networking hospitals with primary care 
service centers, particularly federally qualified health centers. In 
addition, ECP networks could combine with rural networks.

  A February 1993, report by the General Accounting Office found that 
``more than 40 percent of emergency department patients had illnesses 
or injuries categorized as nonurgent conditions.'' The growth in the 
number of patients with nonurgent conditions visiting emergency 
departments is greatest among patients with little or no health 
insurance coverage--exactly those populations served by essential 
community providers. Networks of essential community provider hospitals 
and clinics will help steer clients to more appropriate clinical 
settings and, as a result, maximize the resources available in both 
emergency and nonemergency settings.
  The concept of inner-city provider networks designed to ease access 
and improve continuity of care is not new. Initiatives are currently

[[Page E1605]]

being pursued in urban areas across this country to do just that. This 
legislation would boost these efforts through critical financial and 
structured technical assistance.
  Funding under the ECP Program would be available for the expansion of 
primary care sites, development of information, billing and reporting 
systems, planning and needs assessment, and health promotion outreach 
to undeserved populations in the service area. Facilities eligible to 
participate in the ECP networks--those designated as ``essential 
community providers''--include Medicare disproportionate share 
hospitals, rural primary care hospitals, essential access community 
hospitals, and federally qualified health centers [FQHC] or those 
clinics which otherwise fulfill the requirements for FQHC status except 
for board membership requirements.
  In order to facilitate the integration of hospitals and clinics into 
these community health networks, physicians at network clinic sites 
would be provided admitting privileges at network hospitals. In 
addition, the placement of residents at network-affiliated FQHC's would 
be counted in the total number of residency positions when determining 
the indirect medical education [IME] reimbursement to hospitals under 
Medicare. The authorized funding level for rural EACH and urban ECP 
would be increased tenfold, from the current level of $25 to $250 
million annually.
  I am introducing the Essential Health Facilities Investment Act of 
1996 because I believe this legislation is an important and necessary 
component of the effort to reform our Nations' health care delivery 
system. The initiatives in this bill are essential to ensuring access 
to high-quality and efficient services for everyone in our communities.

                          ____________________