Philip R. Lee, M.D., Assintant Secretary February 16, 1968 for Health and Scientific Affairs Associate Directors NIHO and Director Division of Regio6al Medical Programs Projected Need for Regional Medical Program Grant Funds Fiscal Years 1969-1973 approach congressional hearings on the legislation extending the authority for Regional Medical Program grants, we believe strongly that the most important objective to be sought in the legislative on level for future years sufficient to insure action is an authorizati the continued viability of the Regional Medical Programs. The I submitted by NIH on October 12, 1967p stated the legislative proposa levels needed-through fiscal yes 1973 as follows: authorization r Fiscal Year Authorization (million of dollars) 1969 $100 1970 200 1971 1972 400 1973 500, Further information and analysis confirms and strengthens these projections of need. Prolected Operational Grant Awards The essential component of our projection of needs is the estimate of effective demand for operational grants based on our initial experience with operational grant applications extended to'the other Regional Programs and projecte Medical d to 1973. This projection of program needs is based on our initial experience with the award of operational grants during fiscal years 1967 and 1968, and the subsequent growth of the first operational Regional Medical Program through supplemental grant awards. Thin projection is confirmed by information obtained from all Regional Medical Programs during the week of February 12g 1968, However,, we should emphasize that the projections given are not regucnts for funds but estimated micros allowing for, reduction of reques to by action of the National Advisory Council. A full description of the derivation of the projections is given in a@ later section of-this memorandum. Projectcd Operatioral Grant Ai@ards Fezional I'cdic8l Pro,-,rams l@67-1973 (million of dollars). 1972 1973 FY 1967 1968 1969 1970 1971 Initial operational award' during fiscal year 1967 6.1 9.2 16.1 21.7 28.2 33.3 40.0- (4 regions) initial operational award; during fiscal year 1968, 40.5 60.8 116.4 157.1 204.2 255.3@ (20 regions), Initial operational award 5 durin- fiscal year 1969 5.0 77.5 135.5 182.9 237.8 "ions) Total e:-@Ective demand for operational grant wards. 6.1 49.7 131.9 215.6 320.8 420.4 533.1'- a 3 It in obvious that these projections of need give a totally different picture of the future of Regional ll(,dical Programs than the projections included in the Health Memorandum for the Programming, Planning. and Budgetin" System. In fact, the divergence is no great that it is our firm conviction that if the PPB projections were trannlated into authorization ceilings for the next five years the efforts now underway in Regional Medical Programs would fall for short in achieving the regress already made will program objectives and in many regions the p be dissipated. The following factors strengthen the force of our conclusion* The requests for funds received by the DiviFjion of Rer( ,ional medical Programs represent the end product of a regional decinion-making process that has net priorities for action qnd has provided a review of the quality of specific projects being proposed. The grant application represents a selection of the 101? level among the activities to meet patient needs proposed from within the region. The establishment and functioning of this regional decision-making framework which involves considerable investments of donated time by the participants, can be maintained only if there is-a reasonable expectation that their efforts will result in a workable program that can make substantial progress towards their regionally determined health goals. 2. The previous history of this program, including the original IIE,14 cost projection stated during the hearings and the authorization ceilings of P.L. 89-239 have set the expectation levels of the individuals and institutions involved in the Regional Medical Programs. If these expectations are atiettered, these groups could legitimately claim that they have been misled by the Federal Government and the resulting disillusion could impede further Federal efforts to stimulate cooperative action in the health field. 3. The mqi-,nitude of the challenge represented by the charge to Regional rlcdical Programs has become more apparent so regions have organized themselves for this effort. The size and difficulty of the initial organizational efforts has delayed movement of the programs into the operational phase, but these some factors contribute to the magnitude of the operational activity that emerges from these organizational and .,planning efforts. It takes longer to plan and organize a large activity ma than a s 11 one. For these reasons, we are absolutely convinced that the authorization ceilings proposed by the Administration during the hearings on extension of the program must approximate the projections provided in this memorandum if Regional Medical Programs are to succeed,in accomplishing their role in achieving major national health goals. %" ' II . I. II .I . . ii I I ; I , 11i; I :, 'I II . . I I I i 4 Bnoin for the Prolections Operational experience to date, coupled with recent Regional Program estimates of their future fund "requirements*" indicates that the aggregate effective demand"@for MIP grant funds will be as follower rY 69 r-Y 70 r-Y 71 FY 72 FY 73 Planning 24.8 12.5 Operational $131.9 $215.8 @320.8 $420.4 @$533.1 TOTAL $156.7 $228.3 .$320.8 $420.4 $533.1 L/Continued planning becomes an integral part of operational programs as IM develops The principal factors shaping aggregate effective demand are: The number of operational Regional Programs; and the salient characteristics of those Regiona (e.go# health resources, incidence an goal, d prevalence of diso population). Their "demand" for funds as expressed by operational grant requests (iia., applications already reviewed and approved by the Regional Advisory Group). The merits of such proposals in terms of achieving the review the purpose of the program as determined by recess (e.g., National Advisory Council). And approval p The grant requests reflect regional judgments and decisions with respect to their particular needs and scheme of priorities, taking into account existing resources and their own state of readiness. 'As indicated, projected aggregate effective demand will substantially exceed 0100 million in 1969, surpass $300 million by 1971, and reach $500 million or more by 1973. The calculation of these projections is set forth in Table 1. In summary: By the end of the current fiscal year, approximately 24 (or slightly loss than one-half) of the 54 Regional Medical Programs will have entered the initial operational phase; and@by the and of fiscal year 1969, all of the Regional will be operational. 5 The aggregate effective demand of the 20 additional Regions that will become operational this year totals about $40 million in their base year (01); and that of the 30 Regions becoming operational in fiscal year 1969, approximately $55 million. tinfy, the initial aggregate effective demand In extropolo of operational Re-ions, a growth rate or factor of 507. is indicated in their second year (02); and 75% in their third year (03). A declining growth rate is indicated in succeeding years--04 (35%), 05 (307.), 06 (25%). and 07 (20'/.). Several assumptions have been made in the above projections of W aggregate effective demand through 1973. Regions will become operational during fiscal years 1968-1969 as predicted. operational experience to date, though limited.. provides a reasonably valid and relevant basis for gauging the aggregate effective'domand for RMP funds over the next 3-5 years. That is: Initial operational grant requests and approvals will couglily follow the pattern established by the first operational awards' already made. The ligrowtil rate" will roul,,Iily correspond to that already suggested by the first operational programs and the considered predictions of the Regional Programs. The level of M4P appropriations during this period will not be so significantly below the aggregate effective demand as to materially alter that demand in succeeding years6 Eight Regions already have been awarded initial operational grants. Applications of 9 others have been submitted and are under review$ and a large number of Regions are known to be developing applications. It is anticipated that 7 or 8 of thin group will submit their initial operational grant applications in time for them to be acted upon and awards made by June @0::(see Table 2)., Theso operational Regions--the. 6 4 funded in fiscal year 1967 and the 20 that it in anticipated will be funded thin year--ancoiiipaon approximately 45% of the Notionla population# It in fully anticipated that the remaining 30 Regions will enter the operational phone in fiscal year 1969. A recent survey of all Regional Programs support thin estimate as does the general pattern of operational grant submissions to date. The aggregate effective doinaid for the base period--20 Regions in -fiscal year 1968 and 30 in fiscal year 1969--has been calculated no as to correspond roughly to that reflected by the 8 initial operational oxqards made to date. (See Table 3) In per capita terms, the aggregate -ectiva demand reflected by these awards comes to nearly $.50; and off thus, the firat-year amounts for the 20 Pegions (population 81 million) bcdoming operational this year would be @40.5 million, and @55.5 million for the 30 Regions (population 110 million) in fiscal year 1969. Crowth rates of 50% to 75% respectively in the second and third years wore employed since available date provides good evidence tlint the ni,,Srerate bffcctive demand will more than double in the first three years, For example, the projected second-ycar increase for tl-iorc 4 Regional Medical Prograinn which were awarded their initial oporntional (See Table 4) grants in fiscal year 1967 is roughly two thirds. This increase reflects the fact, c)cpected to be typical, that initial tional awards represent only the first stage of the operational opera r)ro-,ram. The expectation of stepwise development is Btatcd in the I)ivision of Regional Iledical Pro3romal Guidelines. All repionf3 vicre recently surveyed as to their estimated annual fund requirements during the pcrioct 1969-73. A comparison of the estimated third-year requirements for those 8 Regionn which already have firct-year operational programs underway shows an anticipated third-year need tlint is nearly double their first-ydar level of funding. (See Table 7) Thus. the growth rates applied would appears if anything, to "understate" the ai2regate effective demand. Because there is little or nothing in the way of a relevant data base and since regional "predictions" three or four years hanco are doubtless loon reliable indicators of aggregate effective demand, foreenatilig growth rates for nuccooding years in far more difficult. Regional ttl)redictionall do suggest decline in the growth rate in the fourth an(I fifth years but there is no indication that a sharp leveling off will occur and a "plateau'' reached until the sixth or seventh years at the earliest. Thus, a rate declining to 20% in the seventh year has been used., Such a percentage increase# it might be noted$ perhaps comas close to what cost-of-living increases# population gVowthp and similar factors might require, Adcli.tintinl Groi@itli Factors A number of other important factors which are likely to influence the future development of regional 14odical Proorems during the 5 years ahead are not specifically encompassed by the projections described in this memorandum since the projections are based on extrapolations from current KIP experience. This is not the place for a full discussion et a brief mention of some of the more important of those factors y providas a better sense of the framework of the problems of the organization and delivery of health services into which Regional Medical Programs are being projected: 1. Regional Medical Programs came into being because of the idonti- fiention of the gap between the level of care being made possible by the advance of medical knowledge and the actual care being delivered to most of the population. With the continued development of medical science and the full realization of our still limited experience with a si.-lable medical research establishment, the next 5 ycnrn arc likely to witnosa important advances in medical capabilities that will need to be implemented into the broader healtli-cnro rystcm. Many of the major medical research activities already underway, such as the nrtific;al heart-myocardial infarction research proorom, the virus-lcukemia program 4i and others, are deliberately intended to create the kind of medical advance that could logically be implemented through the Regional Medical Programs. 2. The initial operational activities of the Regional Medical Programs now underway do not affect equnlly all of the population groups and geographical areas within the Region. Most of the Regions are developing subregional frameworks for planning and tion, which will insure the 4c extension of IOIP activities to all areas of the Region over time. However, the initial operational fronts do not reflect in any cn!,c the full coverage of the population of a Region. Thin underestimation of the ultimata magnitude of an lUIP is further accentuagcd by the slower re on groups pro;, so in developing MT activities for specific populati which rniso particularly difficult health-care problems, such as the population of the "urban core." The ultimate involvement in effective action of the full array of health resources within a Region and the extension of the benefits of the program to the total population, which is its ultimate objective, could expand the scope of Regional Medical Programs beyond that reflected in those projections. 3. The particular needs for improvement in the organization and delivery of health services for which the Regional Medical Program mechanism is wall designed will become more clearly evident in the coming 5 years* The need for improved mechanisms of ambulatory carat for example, an4 ti,.o ):clationsliip of those rnccliniii@-i-n.,; -to $--lie broader health-care -@y.'Itcr.1 will be a particular ctinllcnge for tl,,o )Zcl,,ion.)l I,lc(licnl they to relate the full cipio)ility of- a 'region for liif;ll-c,,uility health soL-vices to the )rray of needs x,,itliiii that region. The pro:-,:jurea from the rining costs of medical care will nlno lend ,rpator craplinnis to improvements in -lie efficiency n,-,(l cff(@ctivonc.@,s of the honILti-cnro systcrii with LlOrO.att(,ution to the interrclationaiiip5 of the specialized elements of the system. 4. Tlicra will be n crot;5-fertilizntio-,i o' ideas and proven dcvolopricnts rnioni, Ijcdicil Pro-rzirns -I., coca Of' the Re@ion@.11 I.,Lcclic.-Il Pro$, roma develops. The Potential of the Re,-ioiinl iModical Progriais Icarnin,-, A'rom each o-.Iicr in the developriient of eff-(!ctive program,.; %i@i3 dc,.mon-Icri,,--cd -arcncc-14orlrrtioli on rc-ionil I.,',c(lic.11 irlnracnivcly nt the recent ConC Progra;a@- attended by over 800 parsoao. T[iis ConferCncc-l-,Iorlcrlio,-) was the first f;all-scale oxcrnple of the ability of Regio-Linl Yicdical Programs to learn from each other. This factor is inadequately represented in -inva risen primarily from ideas the first oporntional activities, %,ihicli I within the particular r%cgion's capabilities. 14 Robert Marston, M.D, cc: lr. Corli-im ml-. l@c 1 ly Dr. Stewart Dr, Shannon TABLE I ?'ROJECTION OF RMP AGGREGATE EFFECTIVE DEMAND (in millions) 4 Regions at 01 level (Base) @PY67: -@6.2 TOTAL' $6.2 4 Regions at 02 level ($6.2 x 1.5) $ 9.2 PY68s'l,, 20 Regions at 01 level (Base) 40.5 TOTAL 49.7 FY69: 4 Regions at 03 level'($9.2 x 1.75) 16.1 20 Regions at 02 level ($40.5 x 1.5) 60.8 30 Regions at 01 level (Base) 55.0 TOTAL $131.9 FY70: 4 Regions at 04 level ($16.1 x 1.35) 21.7 t@ 20 Regions at 03 level ($60.8 x 1.75) 116.4 .30 Regions at 02 level ($55 x1.5) 77.5 TOTAL $215.6 4 Regions at 05 level ($21.7 x 1.3) $ 28.2 20 Regions at 04 level ($116.4 x 1.35) 157.1 -($77.5 x 1.75) 30 Regions at 03 level 135.5 TOTAL 3 20. 8 FY72 4 Regions at 06 level ($28.2 x 1.25) 33.3 20 Regions at 05 level ($157.1 x 1.3) 204.2 30 Regions at 06 level ($135.5 x 1.35) 182.9 TOTAL $420.4 ,,FY73: 4 Regions at 07 level ($33.3 x 1 2) 40.0 20 Regions at 06 'level'@, ($204.2 x .25) 255.3 30 Regions at. 05, level" ($182.9 x 1.3),, 237.8 $533. 1 ,@@:TOTAL TABLE 2 OPERATIONAL REGIONS ACTUAL AND ANTICIPATED (By June 300 1968) 4 Awarded (4) y Alban Kansas Missouri Intermountain PY68 20 (est.) Awarded (4) Rochester Washington-Alaska Tennessee Mid-S Wisconsin outh' Pending Review (9) California North Carolina Central New York Oregon Metropolitan D.Co' 'South Carolina Mountain States Western New York New Mexito Applications under, Development or Anticipated (13) Alabama Michigan Central Ohio Northeas tern Ohio Connecticut Northern New England Northlands Georgia Oklahoma a Haw i i xas Indiana @@Te Iowa ; . I i,.II..i',II - @ i . II . . I ,. I ; I ) I.. @ I@ @@: ,I TABLE 3 s IAL OPERATIONAL INIT (Awagded to Date) First Year Population Region Grant Av7ard -(in millions) Albany 915,000 1 1.9 Kansas $1,077,000 2.3 Intermountain $1,748,000 2.2 Missouri $2,494,000 2.2 Rochester $ 255,487 1.3 Tennessee mid-South $1,630,304 2.7, Washington-Alaska $1,0')2,003 3.4 Wisconsin 541,434 4.2- TOTAL $9,693,228 20.2 TABLE 4 ESTIi%t%TES OF SECOND-YEAR F[INDING OF FIRS'R FOUR OPER.AT10NAL REGIONS (Rounded to nearest thous.) (1) (2) (3) (4)@ (5) (6) (7) Supplementals First Year Second Year Total ,Grant Xi,7ard Region Approved Pending Anticipated Est. Base Second Year $ 919,000 Albany 4,000 $ 160,000 919,000 $1,180,000 1,791 000 Kansas 445,000 2,000,000 1,076,000 2.1299,000 .1 1,076,000 Intermountain 247 000 - 800 000 1,791,000 2 439,000 .1 . .9 3 2,494iOOO ilissouri- 387 000 1,252,000 880,000 2,494,000 3,954,000 $6,280,000 $637.,Ooo $1,692,000 $3,840,000 $6,280,000 $102482,000 NOTE: Total second Year (col. 7) computed on the basis of continuation of the actual initial First Year upplements already Approved (col. 3), plus 50% ,ti.iard (col. 1) at that same level (col. 6), plus s of Pending (col. 4) and Anticipated (col 5.) supplements Anticipated supplements are based upon a recent telephone survey. Past experience indicates that amount actually requested exceeds such lipredictions". (See Table 5.) Furthermore, approvals of both initial and supplemental operational grant applications has been approximately 60% of the a,-aounts requested. (See Table 5.) This gives a projected increase for these Regions of $4.2 million or 67% over their, first year totals.-, 4t TABLE 5 ANTICIPATED AND ACTUAL OPERATIONAL GRANT REQUESTS Ref,,ion Indicated Actual California $1,200,000 $3,500,000 Central New York 320,000 251,775 District of Columbia 800pooo 696,328 Mountain States 100,000 206,913 p New Mexico 180 000 634p974 North Carolina 1,000,000 1,570,067 Oregon 200,000 179,242 Rochester 210,000 359,985. ,,Tennessee Mid-South 2,400,000 3,059,872 Washington-Alaska 1,000,000 1,234,293 Subtotal $7,410,000 -$11.693,449 (158%) Kansas (Supplement) $2,400,000 $ 446,671 _a/ @Missouri (Supplement) 1,100,000 1,251,818 Subtotal $3,500,000 $1,698,489 (49%) ToTAL $10,9100000 $13,391,938 (123%) NOTE: Based upon a telephone survey of all Regional Prpgrams made in early October 1967, it was estimated that 34 initial and 13 supplemental operational grant proposals would be submitted by Julie 30, 1968, with 20 of these submissions ,;scheduled to take place by February 1, Twelve of the 20 were actually submitted by that date. While submissions have been slower than was indicated, the .),amounts actually requested exceed those "predicted" by the regional respondents at the time of the survey _a/ Region has since indicated that it plans to submit another supplemental request for $2 million later this year$ TABLE 6 OPERATIONAL GRANT AMOUNTS, REQUESTED AND AWARDED Region Requested Aviarded Initial: $1,702,423 918,665 Albany Kansas 2,811,072 1,076,600 1,790,603 2,238,315 Intermountain .4,326,996 2.,493,841 Missouri 279,040 255,487 Rochester @Tennessee Mid-South -3,033,514 1,630,304 1,290,919 1,032,003 ",'Washingt6n-Alaska Wisconsin 541,434 541,434 Subtotal..- $16,223,713 $9,738,937 (60%) S"plemental. 2,845 2,84 A .-lbany Intermountain 798,480 247,520 Missouri 387,000 394,062 Wisconsin 99,215 88,715 Subtotal $1,297,040 $733,142 (57.4%) '$17,520,753 $10,472,079 (59.7%) OTAL@' ;T t'l, @4 TABLE 7 PROJECTED THIPD-YEAR OPERATIONAL FUND REQUIRE",E',@TS FOR SELECTED REGIONS (Rounded to the nearest thousand) First Year Third Year Projected Increase Region Grant Award Fund Requirements Amount Per Cent Albany $ 918,000 $3,155,000 @2,236,000, 243% Intermountain 1,790,000 4 200,000 2,410,000 135% Kansas 1,076,000 4,400,000- 3,323,000 309% Ilissouri@ 2,493,000 6,000,000 3,506,000, 1417.- .Rochester 255,000 2,300,000 2,045,000 802% Tennessee Mid-South 1,630,000 3,000,000 1,370,000 847. lqashington-Alaska 1,032,000 2,600,000 1,568,000 152% Wisconsin 541,000 4,000,000 3i549,000 640%- TOTAL $9,739,000 $29,655,000 $19,126,000 197% K-OTE: There is astrong correlation between those Regions projecting significant increases in their third year requirements and those with small initial operational grants in per capita terms, e.g., Wisconsin (13@), Rochester (21@), and Kansas (49@). Application of the a--regate effective demand "formula" for these same 8Re,-,ions indicates a third-year fund requirement of $25.6 million..