GOVr.,EC@4MENT BY NON-PROFIT CORPORATION A Discussion of H.R. 16204, 93rd Congress b Paul D. Ward y Executive Di,.@cctor California Regional Medical Program (Presented October 19, 1974 - Seattle, Washington to a forum on National Heal@Lli Insurance co-sponsored by the University of I-!ashiiigton's School of Medicine and the Wash-!ng'Lon State ;.'radical 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 na4L-ion's health care system in their hands. Under the guise of "keeping the health care system free frbm politics" they seem determined to commit the future of health care to corporate boards and staff that have -o the general public. Further not only do little or no responsibility 4t, Congress and the Administration seen, 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 fund,, for the support of health services, ipanp,,,-@.,,2r and facilities in the area tliex, assigned. o c!o j a y s as this -r...-y a @i -',,s' bet-'o-,-e the 9'3rd Congress adjourns. The bill is H.R. 16204, the "'stational Health Policy, Planning and Resources Development Act of 1974." It is slated for vote on the floor of L-he 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 people of this nation are tlle closest. But it has, and it seems only a drastic awakening of the public will keep it from beco.-Pirg lcrv!. The iroiy 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 liow 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 I -o expiring, leaders in Congress pl dged to ret,.,rite most of the programs "4L 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 P,rograms, 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 Lo prepare the system for th the opportunity to redirect them so as 4 e greater expectations and demands that National Health Insurance @,,,ould en-ender. In late June 1973, the expiring programs were extended for one year (until June 30, 1974) to allow ]'Or Congress under-Lo o k t 1-i i s t a s I,\ d,,; i- i n g i r r, s t ry i n q -t c s T ii c f Li crisis, Watergate, -inflati-.-,i, hearings -- all issues of unusual magnitude -- pushed the issue of health care in-L-o 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. I-!hen 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 ill 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 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 national 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 en s 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. Thes:-n corporations would be selected by the Secretar , in consultation with the y Governor of the state in which they are located.. They would be responsible. .c lor long A.nd short term plann4ina, development of service-,, for@a,,iprovp-') o@- disapproval of virtually all federal funds used through grants &rd contracts for support of health services, manpower and facilities, for certificate ol' need determination, and for review of existing healthcare 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 tile 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 3 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. I-lor is it possible to deny that these organizations @iould be creating public policy. Congress has declared health care a right for all citizens, so-,,-,&,%ihat in the same sense that eC@"L,Ca-'Lion is a "right." [,,!o one can deny 'Lli,-,,t influencing ti-@e d.31-'Ivcr,,, of care throLig,'-i the award i-i -i-&c't-, b-.@ an act of crL-e,-L--i,-ig panne pol @'Y PI-OCLss L Further, the fact that nearly 80/00 of the funds authorized for these functions are controlled by.tlie HSA's board and staff should be de facto evidence of where the control lies and wliere'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 agenc,,,, to whom does he turn for redress: the mayor, city council, board of supervisors, governor, or other officials? Nc). Since they do not select the board or-- 4 staff, they have no responsibility for the actions they take. There is a f HEW as limited recourse to the courts, and in some cases to tiie'Secretary o 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, t@Ley 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 Publ i c Pol i cy Atk hor@L-v HSAs would have broad public policy authority in terms of designing the l,ocal health system, inioler..,enting pieces of that system with 'Its developr..-,er.-Lal funds and, to a limited degree, regulating that system. No one questions the a -profit corporation de-\te'iop -1 -h plan for legitimacy of non i t,,g ci li eLl t the coll,,,-liunity so long as final a,@)pi-r)val of the r,@sts ,.jith anot,"Ic-i- public body meeting the test o-i@ public accountability. i'lo one questions the of a non-profit corporation developing health care services for the communist 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 junction 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 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 It Vs "Agents of the Co 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 P-re 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 Con, Muni ty. 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 p,@,rt of the overall sta-L,,, planning apparatus. Unde,- H.R. 16204 the Relationship is bet,,ieen ",hn- HSA and the Secretary Keith the L Secretary consulting the sLa-t-,,- in ai a,@@v,ic-ory sense only s!@ould li-n- dc-cici,2 to seek information from it. H.R. 16204 distorts the health regulatory process of the past, which traditionally has been at the state level 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 po@,jer-centi-alizing at the federal level that has been developed in recent times. 6 Devices for Poli@,/ 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 povie rs 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 is not to say that every Health System Agency would use its granting ability to bribe local providers into complying with the IISA's policy. But it is. to say +,hat the Congress and +.he Administration are at fault in,at@Le,n,,pting to create a s@,stem that would alio,@j for aild in fact encourage this type obribenv. It t,;',-,es little n to unders n Ly applied or no imagination ta d that if an institution or a facili-L for this aid it might be obligated to comply with other demands of the HSA, be they right or wron , if urged upon them. The statement, "Either you o 9 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 7 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 rea 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 approva of funds solely for the purpose of gaining compliance with other parts of its self-approved plan. It is obvious that anyone seell,irg --pprov r funding could be compelled to comply with other t!'nrelatc-d desir,@s of the agency in order to gain that approval. Again, arj,,,n@.ics %-;ould not ust-. 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 s oul not insert himself in these decisions except on rare occasions. 1--Iho is to say how rare is rare? 8 - 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 hava 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 governors 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 i,.,,@ile 'L-,h-@e designations are being made. For 4 r, any agency that has these po,,,-crs vr-stcd i 'Lls boFru', Cold @,-,-.v 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 continually 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. 9 From Convener to rsar 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 as a superior party in the relationship,; it 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 regul ation should not be assigned to the same agency. Each of these functions requires staff 'possessing different skills and boards composed of different constituencies. This is not to say that health service development should not be reo,uii-ed to confoi-.-,l., to the needs and priorities set in th-- plan, 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 attemp either planning or regulation. All three functions require different skills, different attitudes and approaches, and a di fferen-t involvement of people. To the degree that one attempts to do the other's job, it will further compound our problems. 10 The function of planning requires an agency board that knows the community it 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 econ omi8t, 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 developirc-;nt L-quir-.s yet another set' of I the staff and its board. It requii r @ts on the part o' skil ls and inte e., es s enn 4,IVOI'Vej j- 4 ., ti leadership that has b - 1, i-i @- a d r, in i s tf o n a, ii d ci t-, i i v e,,,y 0 health care, a staff that knows'ha@q 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 iiriple!-,,Icn'L- 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 administi-a- tion, physicians, public health, medical education, and others'from profes- tional 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 we re need-Id 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 cor,-ec@.cl,d v,.iiien and if it is extended. They point out that nea)-l@, t,,@.to years' staff t.-ioi-Ir has been d@-voted to -th-c bill and that-, -L-.h i s e -f i@ ., -i@'-L should b2 @,,,zs-@.ed. Unfortunately, it is this kind of thin!