GOVERNMENT BY NON-PROFIT CORPORATION

A Discussion of H.R. 16204, 93rd Congress

by Paul D. Ward
Executive Director
California Regional Medical Program

(Presented October 19, 1974 - Seattle, Washington -
to a forum on National Health Insurance co-sponsored
by the University of Washington's School of Medicine
and the Washington State Medical Association),
GOVERNMENT BY NON-PROFIT CORPORATION
by Paul D. Ward

The granting of governmental powers to non-profit corporations is a
concept that should astound most students of the democratic process. It is
almost impossible to believe that Congress is well down the road toward
blanketing the nation with non-profit corporations and intends to place the
destiny of the nation's health care system in their hands. Under the guise
of "keeping the health care system free from politics" they seem determined
to commit the future of health care to corporate boards and staff that have
little or no responsibility to the general public. Further, not only do
Congress and the Administration seem willing at this point to turn many
millions of tax dollars over to these corporations to engage in planning,
development and regulation of the system, but they would also give them
the power to approve or disapprove each proposed use of federal funds for
the support of health services, manpower and facilities in the area they
are assigned.

‘4s incredible as this may seem, a bill to do just that may pass
before the 93rd Congress adjourns.

The bill is H.R. 16204, the "National Health Policy, Planning and
Resources Development Act of 1974," It is slated for vote on the floor of
‘the House of Representatives after election. Too many of us still have a
hard time believing such a proposal could have advanced so far in Congress,
especially in the House, where the links to the peopie of this nation are

the closest. But it has, and it seems only a drastic awakening of the public

will keep it from becoming lav. The irony is that this hardly seems the
year for passing legislation that robs the people of any direct or indirect
voice at the local level, i.e., the traditional means of public accountability.
However, the railroad is in full motion and it may be hard to stop.

It is difficult to explain how this concept developed its current
momentum. Basically, it all began in the spring of 1973. As the authoriza-
tions for many of the programs in the Public Health Service Act were
expiring, leaders in. Congress pledged to rewrite most of the programs "to
prepare the Nation's health care delivery system to meet the challenges of
National Health Insurance." Expiration of authorizations for Comprehensive
Health Planning, Facility Construction (Hill-Burton), Regional Medical
Programs, several manpower training programs, several direct health service
programs (such as Migrant Health, Neighborhood Health Centers, Mental
Retardation and Mental Health) and other programs provided Congress with
the opportunity to redirect them so as to prepare the system for the greater
expectations and demands that National Health Insurance would engender. In
late June 1973, the expiring programs were extended for one year (until
June 30, 1974) to allow time for rewriting.

Congress undertook this task during immensely trying times. The fuel
crisis, Hatergate, inflation, impeacnment hearings -- all issues of unusual
magnitude -- pushed the issue of health care into the background. The
rewriting of the Public Health Service Act took place largely at the Congres-
sional staff level and was, in effect, obscured by the flamboyance of the
other pervading issues. When the revised parts of the PHS Act began to move
in Congress, there was little or no understanding of the actual content of
the bills (let alone the many secondary implications) by those involved in
the provision of health care, by many members of Congress or by the general

public. As we near the date H.R. 16204 will be debated on the floor, the

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general public, some members of Congress and a significant portion of the
health care industry still do not understand it.

H.R. 16204 proposes to do a number of good things which need to be
done, such as developing a nationat health policy, improving funding for
health planning, continuation of the development of our health resources and
providing a means by which that development can be rationalized on a sound
economic base. But the apparatus which it sets up to accomplish these ends
is as faulty as the objectives are sound. Obviously we cannot expect any
bill to be all good, but we should at least hope that the positive aspects
would outweigh the negative. In H.R. 16204 the opposite is true; the objectives
of the bill will be set back two decades because the apparatus proposed for
their implementation is designed to create chaos.

Among other things, H.R. 16204 would create a series of non-profit
corporations known as Health Systems Agencies (HSAs), which would occupy
geographical areas roughly comparable to the CHP b-agencies of today. Thess
corporations would be selected by the Secretary, in consultation with the
Governor of the state in which they are located. They would be responsible
for long and short term planning, development of services ; for: approval or
disapproval of virtually all federal funds used through grants and contracts
for support of health services, manpower. and facilities, for certificate of
need determination, and for review of existing health care services rendered
by facilities to make a determination as to whether they should continue or
not. The financing of the HSA would be almost totally federal, with grants
to the agency of up to 50 cents times the population of the HSA's area and
$1 per capita for development of resources. HSAs would have considerably

more power than the current CHP b-agencies, better funding and less responsibility
to the State. Except for their agreement with the Secretary of HEW, they
would be free-standing agencies with considerable power.

Unquestionably, the major fault with H.R. 16204 is that it does in fact
assign governmental powers to non-profit corporations. It attempts to hedge
the legal question of "public accountability” (i.e., the legal precept that
public policy can be created only by those officials elected by the voters or
an appointee of an elected official duly authorized by law to create policy)
by having the non-profit corporation enter into an agreement with the
Secretary of HEW to perform such functions on the Secretary's behalf. As
such, in theory, the corporation would be an agent of the Secretary's office.
In fact, however, the corporation is an autonomous unit exercising public
powers at the community level, much as any public agency would do, except
that its governing board is neither elected nor appointed by an elected
official duly authorized by law to do so.

Nor is it possible to deny that these organizations would be creating
public policy. Congress has declared health care a right for all citizens,
somewhat in the same sense that education is a "right." Wo one can deny
that influencing the delivery of health care through the planning, development
and regulatory process would not in fact be an act of creating punlic policy.
Further, the fact that nearly 80% of the funds authorized for these functions
are controlled by the HSA's board and staff should be de facto evidence of
where the control lies and where the action occurs. It would be difficult
to argue with any honesty that an "agreement" with the Secretary of HEW
nullifies the de facto powers of an HSA.

If a local citizen or group feels aggrieved by an action of the agency,
to whom does he turn for redress: the mayor, city council, board of supervisors,

governor, or other officials? No. Since they do not select the board or™

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staff, they have no responsibility for the actions they take. There is a
limited recourse to the courts, and in some cases to the Secretary of HEW as
the fund granting agency. About all this assures is abundant court actions
during the first years, if this becomes the way health policy is created.

It is not our intent to condemn non-profit corporations. When they
are used in a proper way, they usually serve as a sound vehicle for needed
accomplishment. They are essentially organizations to provide services
for people without involving the profit motive. They were never intended
to be public policy creating organizations, Certainly the Health Systems -
Agencies created under H.R. 16204 are public policy creating organizations

that do not possess public accountability in the traditional sense.

A Broad Public Policy Authority

HSAs would have broad public policy authority in terms of designing the
local health system, implementing pieces of that system with its developmental
funds and, to a limited degree, regulating that system. No one questions the
legitimacy of a non-profit corporation developing a health plan for the local
community so long as final approval of the plan rests with another public
body meeting the test of pualic accountability. Ho one questions the validity
of a non-profit corporation developing health care services for the communi ty
so long as that corporation is obligated to follow a publicly adopted plan and
so long as its activities are scrutinized by publicly accountable officials.
But one would always question the legality and appropriateness of non-profit
corporations engaging in the regulatory process regardless of the situation,
since this has been a function in our society that has always been assigned
to a public body that is in all respects accountable. But when all of these

functions are. mixed together and placed in a single non-profit corporation

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such as an HSA, and the only link with public accountability is the agree-
ment that exists with the Secretary of HEW, then the historical concept of
democratic government based on elected representatives and their appointees

is critically strained.

"Agents of the Secretary" vs "Agents of the Community"

Eventually, in order to meet any legal test of public accountability,
the HSAs would have to be considered “Agents of the Secretary." This is
a dramatic change in philosophy from the current situation. Our current
health planning agencies ere considered to be agents of the community;
that is, an agency belonging to the community and designed to bring providers
and the public together at the local level to make decisions about the
provision of health care and to develop a plan that is acceptable to the
community. This philosophy is completely reversed if the HSA is made an
arm of the Secretary extending into the local community. Currently the local
planning agency relates to the State A Agency and is considered to be a
relatively autonomous part of the overall state planning apparatus. Under
H.R. 16204 the relationship is between the HSA and the Secretary with the
Secretary consulting the state in an advisory sense only should he decide
to seek information from it.

H.R. 16204 distorts the health regulatory process of the past, which
traditionally has been at the state Tevel and it revises the philosophy of the
development of health resources by making it subject essentially to federal
approval. Although there has been much talk in recent years about the
decentralization of government, this bill, when its implications are taken
into full consideration, could be the most power-centralizing at the

federal level that has been developed in recent times.

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Devices for Policy Endorsement

Not only does H.R. 16204 grant HSAs the ability to create public policy
in regard to the formation of the local health system, but it also creates
the devices for enforcing that policy. Again, it must be emphasized that
these powers are being given to a self-perpetuating board of directors and
staff of a non-profit corporation that has not been elected by the public or
appointed by a public official, and has no direct responsibility to the
electorate except remotely through the Secretary of HEW. This is a self-
perpetuating board which is self-selected in the beginning and is in a
position to be as contemptuous of public opinion as it desires. The first of
these several powers is found in the $75,000 grants that HSAs can make to |
local entities for the development of services. These grants cannot be
considered sufficient in size to develop most of the kinds of health care
services that need to be developed, but they can be used to manipulate the
system by buying support for HSA positions. This js not to say that every
Health System Agency would use its granting ability to bribe local providers
into complying with the HSA's policy. But it is to say that the Congress
and the Administration are at fault in.attempting to create a system that
would allow for and in fact encourage this type of bribery. It takes little
or no imagination to understand that if an institution or a facility applied
for this aid it might be obligated to comply with other demands of the HSA,
be they right or wrong, if urged upon them. The statement, “Either you do
what we say or you don't get your development money," is certainly: implied
and could only lead to the distortion of the planning activity if it were
to be motivated and enforced by this process. Admittedly, much of our
activity is already conditioned by this kind of bargaining, but why give a

sledgehammer to an organization that has little if any responsibility to

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the electorate. These might be beneficial powers if the electorate were
able to respond by removing the board, or the official responsible for
their appointment, when or if the board acted inappropriately, but no such
recourse is available.

Another dangerous power given to the HSA is approval or disapproval
authority over all funds applied for that are authorized and appropriated
through the Public Health Service Act. As has been pointed out in several
trade journals in the health field, this approval and disapproval power can
be interpreted as applying to all grant and contract funds for research,
facilities, manpower, mental health, mental retardation, family planning,
etc., where health services are involved. In fact, it could be read as
inclusion of all. funds appropriated through the Public Health Service Act
if the Secretary so decided. On the surface this approval and disapproval
may appear innocent; however, the fault lies in the fact that the government
is creating a situation wherein the local agency could withhold its approval
of funds solely for the purpose of gaining compliance with other parts of
its self-approved plan. It is obvious that anyone seexing approval for
funding could be compelled to comply with other unrelated desires of the
agency in order to gain that approval. Again, many agencies vould not use
these techniques, but the fault lies in the fact that an apparatus is being
created which encourages it and there is little or no recourse for settling
grievances except for appealing to the Secretary, which might be less than
satisfying since the report on the bill indicates that the Secretary should
not insert himself in these decisions except on rare occasions. Who is to

say how rare is rare?
The Pressures on the Governor

Another major fault with H.R. 16204 is the process by which local
health service areas are created and in turn the HSAs approved to run these
areas. The proposed law would have the governors recommend, within certain
confines, the geographical boundaries of the area and the non-profit agencies
that should be designated as the HSAs. If this legislation is passed and
when it is understood by the providers, a strenuous scramble will result
among certain of the strong providers in an effort to provide favorable
people for the board of any non-profit corporation selected as the Health
Systems Agency. Since the agency must make findings for certificate of need
and then continuously review all services rendered by institutions to
recommend either continuation or termination, naturally the bigger and more
aggressive institutions, facilities and providers will want to protect
their interests in the services being rendered. The governcrs are going
to receive tremendous pressures, especially from urban areas, concerning
the designation of areas and agencies. A tremendous amount of strife will
develop during the first year while these designations are being made. For
any agency that has these powers vested in its board, and any board that is
self-perpetuating after its establishment in that it selects and elects its
new members in perpetuity, it is obviously advantageous to obtain favorable
board representatives (whether they be public or provider) at the time of
agency designation. Later, many institutions, facilities and providers will
find themselves without representation and perhaps will feel the need to
continual ly rebel against the decisions made by the agency. Not only will
the governor be besieged at the outset, but the courts will be besieged

later on the question of public accountability when decisions are made that

are not to the liking of those not represented on the board.

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From Convener to Adversary

H.R. 16204 also completely reverses the philosophy that the local
planning agency's role is to draw the local resources and providers
together and develop a consensus on what the plan should be. H.R. 16204
places the planning agency in an adversary role with the individual provider
at the community level. The agency, at least to a minor degree, regulates
asa superior party in the relationship; jt cajoles and entices with its
$75,000 grants and it acts as the sole creator of the long-term and short-
term plans. It replaces the convening body role with the dominant figure

role in the relationship.

Hopeless Combination of Functions

But perhaps the fatal flaw the bill possesses it that it attempts to
combine three incompatible functions. There are many compelling reasons why
planning, health service development and regulation should not be assigned
to the same agency. Each of these functions requires staff possessing
different skills and boards composed of different constituencies. This 7s
not to say that health service development should not be required to confor
to the needs and priorities set in the olan, nor is it to say that regulation
should not be based on input from the plan where appropriate. But it is to
say that planning agencies and staffs should not attempt to become regula-
tors or health service developers, and service developers should not attempt
either planning or regulation. All three functions require different skills,
different attitudes and approaches, and a different involvement of people. To
the degree that one attempts to do the other's job, it will further compound

our problems.

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The function of planning requires an agency board that knows the community
jt serves and the problems that community faces. It should know how its
citizens will react to certain stimuli and have an appreciation for the
priorities its citizens intuitively place on needs. The function of planning
requires staff leadership imbued with imagination, a deep regard for human
problems and an optimism that human needs can be described and a reasonable
assurance that there will be an appropriate response to try to meet the need.

The function of regulation requires another approach and another set of
interests by its board or commission members. It requires staff leadership
possessing much different skills and interests. Regulation requires more of
the skills and interests of the economist, the manager and the fiscal expert --
an orientation not usually found in today's health planner. Nor do we nor-
mally find persons skilled in the art of regulation who make enthusiastic ©
and imaginative planners. Based on our recent experience in certificate of
need, planning staffs should not manage the regulatory process nor should the
regulatory staff and board manage planning.

The function of health services development requires yet another set of
skills and interests on the part of the staff and its board. It requires staff
leadership that has been involved in the administration and delivery of
health care, a staff that knows how care is or should be delivered at the
patient level, a staff that knows how to create secondary and tertiary
referral patterns, how to make quality judgements and how to lead a patient
from the front door of an institution or facility to the care he needs.

Today's planner looks at the broad health care needs of a given community and
tries to match those needs against resources. If the resources in terms of
care delivery units are not in existence, then they must be created. Neither

‘today's planners or regulators have the skills to design, arrange or implement

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a new service. Also, the governing board of a health care development
organization, if it is to perform its functions successfully, has to possess
a wide technical knowledge of delivery and has to be able to influence the
health care industry sufficiently to obtain its cooperation in providing
resources to meet the indicated needs. That board should be composed of
representatives of the various disciplines: i.e., nursing, hospital administra-
tion, physicians, public health, medical education, and others from profes-
sional and voluntary associations who have the respect of their peers and can
influence their conduct in relation to the described needs. This type of
organization can create and has created new services where they were needed
by drawing on its strengths with the various state professional associations
to gain support for the programs involved. Such support cannot be

gained through the planning agencies as described in this bill.

The Response
Supporters of H.R. 16204 respond to these criticisms by’ stating that the

bill provides authorization for only three years and any faults can be corrected
when and if it is extended. They point out that nearly two years! staff work
has been devoted to the bill and that this effort should not be wasted.
Unfortunately, it is this kind of thinking that has plagued the health
field for the past decade. Relatively few of the Public Health Service Act
programs have had any stability over this period because they do come up for
renewal every three years. Both Congress and the Administration have a
tendency to think in terms of tearing each of the programs asunder every three
years and instituting new programs in their place, instead of making adjust-

ments in ongoing efforts and building on the strengths of the past. It

takes three years or more to build a good staff, educate the public on the

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purposes and utilization of the program, and gain the support of the community
and its resources. If, at the end of each three-year period, the participants
in the programs have to face the turmoil of indecision, possible abrupt

change in purpose and procedure, reorganization and general confusion, we
cannot expect much to be accomplished. The effect on paid staff is obvious,
but the public participants become disenchanted also, because by the time they
become active in and knowledgeable about the program it.is changed and much

of their effort has been wasted. Most public participants who volunteer

their time are too discouraged to try it the second time around.

H.R. 16204 would be a disaster in terms of the turmoil and disillusionment
it would create. It purports to be the amalgamation of Comprehensive Health
Planning, Experimental Health Systems, Regional Medical Programs, Hill-Burton
and the various approval or regulatory processes like those required under
Sec. 1122, State Certificate of Need and Recertification. But in fact, it will
prove to be an entirely new ball game. In most cases the conflict will not
be between the programs and their staffs that are slated for amalgamation.

It will be among the concerned groups in the healtn field that want recog-
nition on the HSA board. It will take place when the acvernor of each state

is asked to recommend to the Secretary of HEW the area boundaries for each
health service area and which non-profit corporation with its specified board .
members should be selected to serve as the HSA. Although some b-agencies

have been told that their selection is pro forma, when the witching hour
arrives they are apt to be in for a surprise. The proposed language is clear:
most of the existing b-agency boards would have to undergo substantial change,

if not complete change, and undoubtedly many area boundaries would be subject

to change.

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With the change in the boards, board members and area boundaries will
come changes in the staff that has been engaged in the planning. This always
raises the question of how much of the plans, planning data and related
efforts of the former agency the new agency will find relevant. In this event
the work of the past years may be lost and the total process begun over again,
committing many of the same errors, suffering the same learning pains and once
again re-inventing the wheel. Add to this the new functions that have been
assigned the agency and it is almost certain to be bogged down in its own
confusion for months -- if not years -- to come. This is history repeating
jtself for we went through this, except on a lesser scale, when the b-agencies
took over from the voluntary health planning agencies six to eight years ago.

At this point, the greatest benefit that could accrue to health care in
our nation is for H.R. 16204 to fail to become Taw. This would permit a new
bill to be written after the first of the year that would preserve the best of
the planning, development and regulatory efforts that have emerged since 1965
when the 89th Congress and certain states put most of these efforts in motion.
Our efforts in these areas can be and shculd be impreved, but that is quite a
different proposition from that presented in H.. 16204, which would discard
the accosplishments and lessons of the past oniy to repeat the same probleis,
‘create innumerable new problems, and set back several years the chance to

prepare the system for National Health Insurance.

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