[Congressional Record Volume 143, Number 18 (Wednesday, February 12, 1997)]
[Extensions of Remarks]
[Pages E241-E243]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




           ESSENTIAL HEALTH FACILITIES INVESTMENT ACT OF 1997

                                 ______
                                 

                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                      Wednesday, February 12, 1997

  Mr. STARK. Mr. Speaker, today I am introducing the Essential Health 
Facilities Investment Act of 1997. This legislation will provide a 
financial helping hand to those hospitals and health centers that are 
in the front lines 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 was introduced in the 103rd 
and 104th Congresses and which was included in the national health 
reform legislation that was approved by the Ways and Means Committee. 
It is my hope that this new Congress will work toward passage of this 
bill.
  At a time when we are faced with continually shrinking budgets and 
fiscal austerity, it is more important than ever to appropriate Federal 
moneys in the most cost-effective manner available while providing the 
most benefit to all our citizens. In terms of health care, this 
includes 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. In one comparative 
analysis, urban public hospitals averaged over 19,000 admissions, 
242,000 outpatient visits, and nearly 4,000 live births per hospital. 
The urban private hospitals in the same areas registered just 7,000 
admissions, 50,000 outpatient 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 and give 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.
  But the importance and benefits associated with public hospitals do 
not end there. In addition to caring for our Nation's most vulnerable 
populations, these hospitals provide a great deal of specialty care to 
their communities. Services such as trauma, burn units, and neonatal 
intensive care units are frequently found in these hospitals. Many of 
these services are too costly for other hospitals to provide.
  These hospitals are expected to provide quality care under 
extraordinary circumstances. As an example, they are frequently 
confronted with tragedies associated with our Nation's obsession with 
guns. Roughly half of all urban safety-net hospitals are equipped with 
a trauma center and serve as the first-line treatment facilities for 
victims of gun violence. The Federal Centers for Disease Control and 
Prevention predict that, by the year 2003, gunfire will have surpassed 
auto accidents as the leading cause of injury and death in the United 
States. Unlike victims of auto accidents 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. This means that less than one-quarter of the Nation's population 
resides near a trauma center. Gunshot wounds account for fewer than 1 
percent of injuries in hospitals nationwide, yet 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 
suffer injuries serious enough to require hospitalization.

  Serving as a safety-net hospital and community provider places public 
hospitals at great financial risk. With threatened cutbacks and changes 
in the Medicare and Medicaid programs, coupled with tightened local 
budgets, public hospitals face an erosion of traditional sources of 
funding. Additionally, changes in the health care market, particularly 
the evolution of managed care and increased competition among 
providers, have further added to the financial pressures faced by these 
hospitals. Managed care's ability to attract tougher competition to the 
health care sector has decreased the urban safety-net hospital's 
ability to cost-shift some of the heavy losses incurred while 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 
resulted in many urban hospitals cutting their level of charity care. 
In fact, ProPAC found that uncompensated care fell by 4.5 percent 
during the same time period. This represents clear evidence that more 
and more of the burden for providing charity care is being shifted to 
the public safety-net hospitals.
  As safety-net providers, public hospitals have historically provided 
large amounts of uncompensated care. In 1995, for instance, 67 of the 
member hospitals of the National Association of Public Hospitals [NAPH] 
provided $5.7 billion in bad debt and charity care, averaging 
$85,060,641 per hospital. Additionally, bad debt and charity care 
charges represented 25 percent of gross charges at these hospitals in 
the same year. According to data from the American Hospital Association 
[AHA], $28.1 billion in bad debt and charity care was provided 
nationwide. The NAPH member hospitals represent less than 2 percent of 
hospitals in the U.S., yet provide over 20 percent of bad debt and 
charity care nationally.
  During the last 15 years, public hospitals have been shouldering a 
greater portion of the uncompensated care burden. Additionally, private 
hospitals have begun competing for Medicaid patients which further 
erodes support for the public providers. Public hospitals rely heavily 
on payments from Medicare and Medicaid patients to cross-subsidize care 
for the indigent. As dollars from these programs move from the public 
to the private hospitals, the ability to function as a safety-net 
provider is severely tested.


   outline of the essential health facilities investment act of 1997

  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

[[Page E242]]

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 the safety net are often antiquated. Without future re-
investment, the inequities 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 27 years, compared to a national average for all hospitals of 7 
years. The average capital expenditure for urban hospitals is $12,800 
per bed compared to a national average expenditure for all hospitals of 
$23,700.
  A national survey of the Nation's safety-net hospitals found that 
lack of available hospital beds is resulting in severe overcrowding. 
Hospital corridors surrounding emergency rooms have begun to resemble 
triage units seen at the height of military campaigns. A recent study 
showed that approximately 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 despite the fact that occupancy rates of all 
hospitals have steadily declined 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 
occupancy, while private urban hospitals averaged just 67 percent. At 
any given time, approximately one-third of America's 924,000 hospital 
beds are empty. Our national priorities have created an excess of beds 
in areas where need doesn't exist. Likewise, a severe shortage has been 
created in areas where demand is overwhelming. This bill attempts to 
address and alleviate some of the pressure built up within the safety-
net system.
  Historically, health care institutions have found it difficult to 
secure sufficient financing for capital renovation and expansion 
products. The financing exists within the market, yet the level of debt 
service required is often too burdensome for public institutions to 
manage. Even when revenue bonds are supported by local means, the bond 
ratings are frequently too low and interest rates too high. After all, 
these safety-net hospitals treat a high proportion of low-income 
patients which results in lower operating margins. These ratings have 
little to do with the ability of hospital administrators to manage 
their facilities. Rather, market analysts often consider the local 
appropriations sustaining these facilities to be too uncertain. Thus, 
the facility is simply prohibited from securing necessary capital.

  For facilities facing the greatest demand in our inner-city and rural 
areas, the traditional method of financing through 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 dollars available to 
repair and rebuild these facilities, combined with the strain on the 
resources of local governments, means that 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 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, funding for 
this program would be achieved through a 0.5 percent--one-half of 1 
percent--tax which would be levied against the gross revenues of all 
hospitals. Hospital revenues received from Medicaid would be exempt 
from 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 include those designated as 
essential access community hospitals, rural primary care hospitals, 
large urban hospitals, and 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 the case 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 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 significant 
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 effectively. 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, especially those in rural and inner-city areas, 
lack the facilities and equipment necessary to adequately meet the 
needs of their residents at the same time that other hospitals are 
experiencing a capital oversupply. This oversupply leads to 
inflationary price pressure. The Essential Health Facilities Investment 
Act of 1997 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. Following adjustments for demographic differences, 
the number of hospital beds per thousand persons varied by a factor of 
2.8 across the Nation. The range was from fewer than 2 beds per 
thousand residents to more than 5 beds per resident. Some of the 
hospitals with this excess capacity could be closed, or at the very 
least, denied additional public capital improvement funds. Still, we 
must also make every effort to ensure that every geographic and 
community area receives adequate hospital services. In order to avoid 
exacerbating the current oversupply of hospital beds, we must establish 
and satisfy safeguards and criteria for the allocation of Capital 
Financing Trust Fund, EACH, and ECP funds.
  Redundancies and inefficiencies with hospital facilities and services 
are well known. A study in the Annals of Internal Medicine showed that 
even though America had 10,000 mammography machines at the time of the 
report, we essentially used only 2,600 of them. This same study asserts 
that even if every woman in America had a mammography 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 a vast waste of 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 competency 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 operations * * *
       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 in order to be considered for Medicare reimbursement, 
a coronary artery

[[Page E243]]

bypass surgery hospital must meet the minimum criteria for quality 
outlined by the Secretary in the Medicare Centers of Excellence for 
CABS operations. 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 Funds for improvements will be dependent upon 
demonstration of adequate quality performance as measured by HCFA's 
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, and 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 initiatives 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 seven participating 
States.
  In a March 1993 report by the Alpha Center, the strengths of the EACH 
Program were clearly articulated. They 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 report by the General Accounting Office found that ``more than 40 
percent of emergency department patients and 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 patients 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 
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 underserved 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 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 
1997 because I believe this legislation is an important and necessary 
component of the effort to reform our Nation's 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.

                          ____________________