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CHAPTER I INTRODUCTION In 1974, Congress enacted the National Health Planning and Develop- ment Act (Public Law 93-641), which created and provided federal funds for a two-tiered, nationwide network of 205 areawide Health Systems Agencies (HSAs) and 57 State Health Planning and Development Agencies (SHPDAs).* The areawide agencies are responsible for health planning and making recommendations concerning what new institutional health services and facilities will be permitted to develop in their service areas. The state level agencies plan for the state as a whole and can approve or disapprove new capital investments. The goals of both types of agencies are to improve the health of the residents of the area, ensure access to needed quality health services, and restrain the rising costs of care. Enactment of Public Law 93-641 followed extensive congressional hearings on problems in the health system. The legislators concluded that a more rational distribution of health services was essential, that the rate of increase in health care expenditures was intolerably high, and that earlier attempts to foster regional planning and rationally develop health resources had not been successful. The 1974 planning Act consolidated, replaced, and expanded on earlier planning and development activities of the Hill-Burton program, the Regional Medical Program, Com- prehensive Health Planning, and the Experimental Health Services Delivery Systems. The 1974 planning program replaced those programs with a nationwide structure and received new regulatory power over pro- posed services and facilities. For example, health services institu- tions cannot open new services, construct facilities, or purchase expen- sive equipment unless the state agency certifies that there is a need based partly on a recommendation of the areawide agency. Moreover, applicants for certain funds under the public health services Act and related programs need the local HSA's recommendation to obtain support. Although the Department of Health, Education, and Welfare (DREW) can disagree, it is not expected to override the HSA often. The Act, discussed in Chapter II, is an amalgam of sometimes incom- patible elements. It attempts to meld the complex and occasionally * The exact number of agencies may vary DREW approved changes, court suits, and legislative changes. 1 from time to time depending on

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2 contradictory aims of older health planning and development legislation, to share authority among levels of government, and to introduce certain regulatory activities into a framework of planning. Some of the expecta- tions written into the law may have been shaped by the mid-70s period of particularly antagonistic relations between the executive and legislative branches. In other cases, the Congress derived requirements of the pro- gram by applying information gained from good and bad experiences of the past. One of those experiences was that previous planning efforts had faltered because there was no national health policy to guide agencies, and there was no coherent systematic planning at the federal level. In response, Congress mandated the development of a national health planning policy that could provide guidance for the development of resources throughout the nation (especially medical facilities and new technology) and assistance in setting priorities for federal programs and investments. To ensure that a process of developing such a policy would begin immediately, the Congress required that the Secretary of Health, Educa- tion, and Welfare issue--within 18 months and by means of regulation-- guidelines for national health planning goals and standards. Included in those guidelines were to be (1) standards respecting the appropriate supply, distribution, and organization of health resources; and (2) a statement of national health planning goals to be expressed in quantita- tive terms to the maximum extent practicable. As initial guidance, Con- gress specified ten national health priorities. They are the provi- sion of primary care services especially for the underserved, develop- ment of multi-institutional arrangements for coordination or consolida- tion of services and for shared services, development of group practices and health maintenance organizations, increased training and utilization of physician assistants, improvement of quality of care, development of arrangements to provide levels of care on a geographically integrated basis, health promotion and disease prevention programs, adoption of uniform cost accounting, simplified reimbursement and reporting systems and better institutional management, development of effective methods for public education for personal health care and use of health services. The guidelines were to be used in the development of areawide and state health plans and, through the plans, in making decisions on proposed capital investments under Certificate of Need and Section 1122* review programs. Thus, the guidelines could have a marked influence on the eventual shape of the health system. * Certificate of Need (CON) and Section 1122 are two kinds of capital investment review programs, discussed in more detail in Chapter II, in which a state planning agency determines a "need" for an institu- tion's proposed capital investment, partly on the basis of the area- wide agency's review and recommendation. under CON, which is a state statute, the institution cannot make the expenditure without violating the state law. Under Section 1122, a voluntary program between (contd)

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3 In 1977 and 1978, 11 resource standards (not accompanied by any goals) were issued as a proposal in the Federal Register, covering 9 services: general acute care hospital beds; obstetri- cal, pediatric, and neonatal units; cardiac catheterization labora- tories; renal disease networks; computerized tomographic scanners; open heart surgery; and radiation therapy.* Widely reported' the proposal aroused a strong unfavorable reaction from the public in some communities. Thousands of citizens wrote to the Department of Health, Education, and Welfare and to their congressmen protesting the proposed standards. Much of the reaction stemmed from fears that rural hospitals would be closed and that obstetrical and pediatric services would be eliminated in many communities for lack of utilization. In addition, planners expressed concern that the standards and the process developing them violated the planning Act's emphasis on local planning and that the federal government was being insensitive to the diversity of conditions in the United States. Others charged that the specificity and compulsory nature of the stan- dards did not take into account existing technical and data limita- tions. The standards also brought more attention to fundamental ques- tions about intergovernmental relationships, the linkages between planning and regulation, the balance between regulation and other in- struments for addressing social problems, and how public policy is made and executed in this country. The public outcry was directed against the hastily-proposed resource standards (there was little reaction to the final ones), but the potential difficulties of guide- lines development had been recognized early, and government documents had long emphasized the protracted time that would be required for their evolution to a workable form (DHEW 1977a, 1977b, 1976~. Against this background, the Health Resources Administration of DREW requested the Institute of Medicine to develop and conduct selected policy studies related to health planning guidelines. The Institute established a multi-disciplinary committee to (a) examine the policy and research issues related to the national guidelines, including the need for research to strengthen and extend the knowledge base and data resources needed; and (b) recommend methods for devel- oping guidelines that would help assure that future goals and standards benefit from the best professional advice at the time of consideration, are as defensible as possible on scientific grounds, (contd.) the governor of a state and the secretary of DREW, the capital costs (interest and depreciation) associated with a proposed project would be reimbursed under Titles XVIII, XVIV, and V only after approval by the designated planning agency. * Two of the services, general acute care and pediatric have both a standard for the number of beds per thousand and a standard for an occupancy rate.

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4 are open to public and professional scrutiny before issuance, and are flexible enough to permit re-examination and revision as new knowledge emerges. A Conceptual Framework for the Study Any attempt to develop a national health planning policy, in the form of guidelines, will first have to address existing policies that are sometimes inconsistent and complicate the goals of planning. National health planning guidelines are one possible way to bring about increased coherence and consistency among health policies. There are many examples of inconsistencies and conflicts in health policies. For instance, the nation is committed to health care for the elderly and poor, but has implemented Medicare and Medicaid in a way that provides incentives for more expensive care than is sometimes necessary. The resulting increases in health care expenditures produce heightened interest in better planning, changes in financing, and more controls. Success in achieving some of the goals of the 1960s has created another set of problems, some of which were unanticipated. Further problems arise in the contemplation of systems for devel- oping national health planning guidelines, because, depending on the subject, different combinations of participants are required. Chapter IV contains specific suggestions for program administrators working on guideline development. The variety of difficulties, present and potential, attendant to health planning led the committee to study closely three topics, each having different policy and technical problems, to discover how they would lend themselves to the development of national guidelines. The three cases were selected to be illustrative for the purpose of study- ing guidelines development, and are not intended to be exhaustive. One topic is access to care. A goal of federal policies since the 1930s has been to increase access. Progress toward the goal, especially in the 1960s through public programs, tended to increase expenditures and make a larger share of those expenditures a public responsibility, and, in turn, to raise public concern about health care costs. But efforts to contain costs also tend to reduce access. Another topic is care for the elderly. It has been the subject of a number of federal policy decisions, but continues to pose such dif- ficult issues as how to differentiate between health and social services when the two are so closely linked. The third topic is configuration of hospital services. Configura- tion of services is a term that can embrace a wide range of options from increasing access and efficiency to reducing hospital bed supply.

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5 - National guidelines could be drawn on the basis of either option or something in between. The committee commissioned and guided staff background papers on each of these three "case illustrations." The papers helped the committee to crystalize its observations and recommendations concerning ways to approach the development of guidelines that require policy agreement, as well as a sound quantitative base. Discussions ranged from the utility and desirability of national guidelines to the pitfalls of applying national planning guidelines at the local level. Scope of the Study This study is concerned with national health planning guidelines. Although an examination of the health planning program and related policy issues was undertaken as a framework, the study was not intended to be a formal evaluation of the health planning program itself, nor did it assess the first 11 resource standards issued by DHEW. Tes- timony concerning the guidelines and review of earlier planning experi- ence, including interviews with principal planning officials, have been used as sources of information from which to draw conclusions and arrive at recommendations. Organization of the Report This report contains five chapters. Chapter II has background in- formation on the history of health planning, the planning program as it operates under Public Law 93-641 and subsequent legislative changes. It also discusses major health policy issues that intersect with, or influence, health planning. In it, the committee discusses its views on expectations of the current health planning program and what it believes are reasonable intermediate measures of the program's effec- tiveness. Chapter III describes the national guidelines--defined in the statute as goals and standards--and what is known, at least in general, about national health planning goals and standards. Chapter IV contains recommendations of methods for developing national health planning guidelines. Particular attention is given to the need for agenda development and an open, participatory process. Chapter is the summary of recommendations. In addition, a separate statement by Clark Havighurst on the report is given in Appendix A. Activities of the Study In conducting its study, the committee reviewed the most pertinent research and descriptive literature on health planning and regulation. Planning agency documents, especially Health Systems Plans and State Health Plans, were reviewed. The search for documents was aided by several of the Centers for Health Planning. Several Health Systems Agencies and State Health Planning and Development Agencies, especially in the Washington, D.C., area, were consulted for advice on procedures and their views of needed research. Individual committee members and

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6 staff attended meetings of the boards and the working subcommittees, as well as public hearings on Health Systems Plans and State Health Plans. Selected information on activities that planning agencies regard as most important in cost containment and health promotion was abstracted from questionnaires submitted to the American Health Planning Association in a recent survey. A report on those results constituted a background paper of the study. Because this country has had little experience with national health planning guidelines, letters were sent to administrators and planners in other countries. The committee wanted to be certain that important strengths or weaknesses in the use of guidelines by others were not overlooked. This is discussed in Chapter IV. A summary of the results of those inquiries formed another background paper. All American planning agencies and hundreds of other agencies, institutions, and individuals were asked to present their views on the national guidelines--and particularly on the policy issues and research agenda for guidelines development--at a public meeting at the National of Academy of Sciences. The results of the testimony, including an anal- ysis of written comments by individuals who could not attend the meet- ing, are woven into the text of this report, principally in Chapter III. In addition, a special session directed by the Chairman of the committee was convened at the annual meeting of the American Health Planning Association to explore issues and concerns related to the study. More than thirty-five planners came to the session to express their opinions on the guidelines; some also responded to the inquiry by letter. The testimony has been a source of ideas and opinions, especially for Chapters III and IV. Information also was obtained from the Health Resources Administra- tion and other governmental agencies, including the National Center for Health Care Technology, the Health Care Financing Administration, and the Office of Technology Assessment. Searches for literature from the field were helped by the use of an automated bibliographical search mechanism and an abstracted file of Health Systems Plans, both main- tained by the National Health Planning Information Center.