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Health Care in a Context of Civil Rights (1981)

Chapter: APPENDIX E: Case Study: Cook v. Ochsner

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Suggested Citation:"APPENDIX E: Case Study: Cook v. Ochsner." Institute of Medicine. 1981. Health Care in a Context of Civil Rights. Washington, DC: The National Academies Press. doi: 10.17226/18680.
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Suggested Citation:"APPENDIX E: Case Study: Cook v. Ochsner." Institute of Medicine. 1981. Health Care in a Context of Civil Rights. Washington, DC: The National Academies Press. doi: 10.17226/18680.
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Suggested Citation:"APPENDIX E: Case Study: Cook v. Ochsner." Institute of Medicine. 1981. Health Care in a Context of Civil Rights. Washington, DC: The National Academies Press. doi: 10.17226/18680.
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Suggested Citation:"APPENDIX E: Case Study: Cook v. Ochsner." Institute of Medicine. 1981. Health Care in a Context of Civil Rights. Washington, DC: The National Academies Press. doi: 10.17226/18680.
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Suggested Citation:"APPENDIX E: Case Study: Cook v. Ochsner." Institute of Medicine. 1981. Health Care in a Context of Civil Rights. Washington, DC: The National Academies Press. doi: 10.17226/18680.
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Suggested Citation:"APPENDIX E: Case Study: Cook v. Ochsner." Institute of Medicine. 1981. Health Care in a Context of Civil Rights. Washington, DC: The National Academies Press. doi: 10.17226/18680.
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Suggested Citation:"APPENDIX E: Case Study: Cook v. Ochsner." Institute of Medicine. 1981. Health Care in a Context of Civil Rights. Washington, DC: The National Academies Press. doi: 10.17226/18680.
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Suggested Citation:"APPENDIX E: Case Study: Cook v. Ochsner." Institute of Medicine. 1981. Health Care in a Context of Civil Rights. Washington, DC: The National Academies Press. doi: 10.17226/18680.
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Suggested Citation:"APPENDIX E: Case Study: Cook v. Ochsner." Institute of Medicine. 1981. Health Care in a Context of Civil Rights. Washington, DC: The National Academies Press. doi: 10.17226/18680.
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Suggested Citation:"APPENDIX E: Case Study: Cook v. Ochsner." Institute of Medicine. 1981. Health Care in a Context of Civil Rights. Washington, DC: The National Academies Press. doi: 10.17226/18680.
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Suggested Citation:"APPENDIX E: Case Study: Cook v. Ochsner." Institute of Medicine. 1981. Health Care in a Context of Civil Rights. Washington, DC: The National Academies Press. doi: 10.17226/18680.
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APPENDIX E CASE STUDY: COOK v. OCHSNER* Chapter 5 indicates that the Office for Civil Rights (OCR) in the Department of Health and Human Services (DHHS) is undertaking more rigorous enforcement of its civil rights-related responsibilities in the health care field. It may, therefore, be useful to review the status of the decade-long dispute concerning the discriminatory practices of New Orleans hospitals. It is in the context of this dispute that OCR first exercised a more expansive view of its civil rights authority and demonstrated its ability to assess the compliance of health facilities with civil rights laws. This controversy also brings into focus the problems of applying Title VI to the peculiar circumstances of health care delivery, first for OCR, and subsequently to DHHS's administrative decision-making apparatus and the courts. The original lawsuit, Cook v. Ochsner Foundation Hospital et al., was filed in 1970 by black residents of metropolitan New Orleans who alleged that New Orleans hospitals were engaged in racial discriminatory practices in violation of Title VI and were not providing a "community service" or "uncompensated services" in violation of their obligations as recipients of Hill-Burton funding. In May 1971, DREW was added as a party defendant under the allegation that DREW had failed to provide for an enforcement program under Title VI and Hill-Burton and had allowed the defendant hospitals to operate in violation of their Title VI and Hill-Burton obligations. By agreement of the parties, the Hill-Burton issues and the Title VI issues were severed and litigated as separate lawsuits. The ensuing litigation of the Hill-Burton issues in Cook resulted in several landmark interpretations of the "uncompensated service" and "community service" obligations of Hill-Burton hospitals and was largely responsible for the issuance of the first federal regulations in 1972 and for the judicially mandated enforcement efforts taken by DHEW since that time. ^Prepared as background for the IOM Committee by Kenneth Wing, University of North Carolina School of Law, Chapel Hill, North Carolina. 174

175 The Cook litigation had a similar impact on the Title VI enforcement effort. While the Hill-Burton issues were being tried by the courts, the racial discrimination issues were largely ignored. In 1974, however, after plaintiffs exhibited a renewed interest in litigating the discrimination issues, a formal settlement was negotiated between plaintiffs and defendant DHEW under which plaintiffs agreed to dismiss the allegations against DHEW, if DHEW's OCR would undertake compliance reviews of the defendant hospitals under conditions listed in a court-approved timetable. OCR's attempt to assess the services delivered by the 18 defendant hospitals met with resistance; several of the hospitals initially refused to provide OCR with any compliance data and only did so under court order. OCR also faced the difficulty of formulating for the first time the form and amount of data that they would require to assess compliance by a hospital with the Title VI assurance and of determining in measurable terms their interpretation of what constituted compliance with Title VI. Relying heavily on the concepts of compliance that had been developed in reviews of educational institutions, the data request that was finally devised asked primarily for two kinds of data: data on the racial composition and privileges of staff physicians and data on total inpatient and emergency room admissions broken down by race, method of payment, and source of referral. The data request did not ask for a breakdown of services by service area within the facilities, or request a description of the services actually delivered, or in any way try to assess appropriateness or quality of treatment. But even the available data were difficult to collect. Much was collected by OCR personnel collating information from hospital and patient records. The entire data-collection effort required several years and a major commitment of OCR regional office and central office staff. In 1977 OCR announced its findings with regard to the New Orleans hospitals under investigation. OCR found that, prior to 1964, New Orleans hospitals were formally and openly segregated. While there were no laws requiring patient segregation, there is little doubt that state and local government would enforce this practice of segregation, and hospitals were required by state laws to segregate restrooms, cafeterias, and water fountains for employees and were required to label blood according to the donor's race. White patients were referred by their physicians to any hospital in New Orleans except Flint-Goodridge, a private hospital affiliated with Oillard University, generally regarded as the hospital for black patients who could pay for their medical services. Blacks, on the other hand, were admitted to either Charity Hospital, the segregated public hospital for indigents of all races, or Flint-Goodridge. This segregated pattern was perpetuated by the practice of dual admissions. Many physicians maintained staff privileges at two or more hospitals, at least one white and one black, and would admit only white patients to the white hospital and black patients to Charity or Flint-Goodridge.

176 This pattern of open and governmentally sanctioned segregation was finally broken in 1966. Following the enactment of Medicaid and Medicare, hospitals were required by Title VI to execute non-discrimination assurances as a condition to participation and to terminate discriminatory policies and practices. By 1970 all of the New Orleans hospitals had executed assurances and terminated overt policies of discrimination. Most all-white New Orleans hospitals began admitting black patients as early as 1966. Nonetheless, OCR's 1974-77 analysis of admission practices by each hospital showed that de facto discrimination still persisted, and hospital care in New Orleans, for all practical purposes, continued to be racially segregated. Of the 16 hospitals in the metropolitan New Orleans area, 75 percent of the black population went to Flint-Goodridge and Charity hospitals. The patient populations of many of the remaining hospitals were virtually all white, and blacks were grossly underrepresented in all hospitals except Flint-Goodridge and Charity. In general, OCR concluded that the all-white or all-black images of New Orleans hospitals were unchanged since 1966. Many practices that affected hospital service to minorities had continued. For example, the policy and image of Charity Hospital as the "hospital for the poor," allowed most physicians to restrict the number of Medicaid and Medicare patients that they accepted and, consequently, that were admitted to private hospitals. Black physicians were also discouraged from applying for privileges at the predominantly white hospitals by a requirement that applicants for medical staff privileges be members of the local AMA-affiliate medical society, which had traditionally been all white. Prior to 1964 the medical staff of Flint-Goodridge was predominantly white. After the passage of the Civil Rights Act, the hospital board of trustees enacted a policy prohibiting white physicians from admitting only black patients to the hospital; following the enactment of this policy and the initial assessment of Title VI compliance incident to initial Medicare certification, most of the white physicians dropped their Flint-Goodridge privileges. As of 1978 there was only one white physician practicing at Flint-Goodridge; most of the white physicians who dropped their privileges also stopped treating black patients. The findings with respect to Hotel Dieu, Mercy, and Southern Baptist hospitals (the hospitals that eventually were found to be out of compliance with Title VI) reflect this segregated pattern of delivery in New Orleans following 1964. In 1978 the New Orleans population was estimated to be 55 percent black, and the New Orleans standard metropolitan area 33 percent black. Of the patients that Hotel Dieu served, 78.6 percent were from the New Orleans area. Assuming that blacks and whites were served according to their proportion of the population, Hotel Dieu should have served, at the very least, 25.9 percent black patients (78.6 percent of 33 percent). (This assumes that the remaining 21.4 percent of the patients came from totally white populations.) However, Hotel Dieu was only serving 18.4 percent black patients in 1978. This

177 proportion had, however, increased from the 0.2 percent proportion of black patients it served in 1965. Data on black admissions at Mercy Hospital, Hotel Dieu, and Southern Baptist Hospital are presented in Table 25. Of Mercy Hospital's patients, 89.4 percent were from the New Orleans area. Theoretically, Mercy Hospital should have served, at the very least, 29.5 percent black patients (89.4 percent of 33 percent). However, Mercy Hospital only served 9.2 percent blacks in 1978, an increase from the 0.01 percent black patient population in 1967. Only 53.3 percent of Southern Baptist's patients were from the New Orleans area. Thus, at the very least, 17.6 percent (53.3 percent of 33 percent) of Southern Baptist's patients should have been black. Yet, in 1978, only 7.4 percent of the patients admitted into Southern Baptist hospital were black. This represented an increase from the 2.8 percent black patients served in 1974. A similar analysis is shown in Table 26, in which method of payment is controlled and shows, again, that race was a factor in admissions to the three hospitals. Similar patterns were found in the racial composition of the medical staff. At the time of the hearing, there were 55-60 licensed black physicians in the New Orleans area, approximately 2 percent of all the physicians. In 1978, Hotel Dieu had 10 black physicians on its staff, which amounted to 3.0 percent of its medical staff. Mercy Hospital had only two black staff physicians, equaling 0.8 percent of its medical staff, and Southern Baptist had two black staff physicians, or 0.4 percent of its medical staff. With the exception of one black representative on the lay advisory board of Mercy Hospital, there have been no known black representatives on any of the hospitals' boards of trustees or lay advisory boards. On July 19, 1977, DHEW notified these three hospitals that it had finished its investigation and that each hospital had been found to be out of compliance with Title VI. As required by the Title VI regulations, DHEW's OCR and the three hospitals entered into negotiations in an attempt to secure voluntary compliance. These negotiations were protracted and not always amicable. Each of the hospitals denied any discrimination on their part but, nonetheless, agreed to a limited amount of negotiations. Again, DHEW was faced with a task it had not attempted before—formulating remedial steps for non-complying health facilities. Eventually DHEW made similar requests to all three hospitals. The requests included (1) establish an outpatient primary care clinic where patients needing hospital services would be advanced into the hospital, (2) develop a referral system from outside clinics whereby patients who needed to be admitted would be referred to a staff physician who would take responsibility for admittance and treatment, (3) require as a condition of staff privileges that physicians treat Medicaid patients, (4) find out which physicians provided care for the black community and encourage them to apply for staff privileges, (5) embark on an extensive publicity campaign to change their images in the community as all-white institutions, and (6) appoint leaders of the black community to the hospital's board of trustees and other lay boards.

178 Table 25. BLACK ADMISSIONS AT THREE NEW ORLEANS HOSPITALS: 1965-78 Mercy Hospital Total Number Total Number Percent Black Year Patients Black Patients Patients 1967 11,059 77 0.7 1963 11,226 118 1.0 1969 10,368 214 2.1 1971 10,116 433 4.3 1974 9,877 641 6.5 1975 7,991 506 6.0 1977 7,618 716 9.3 1978 7,645 704 9.2 Hotel Dieu Hospital Total Number Total Number Percent Black Year Patients Black Patients Patients 1965 12,322 19 0.2 1966 11,754 5 0.04 1967 9,559 190 2.0 1968 9,289 217 2.3 1969 8,420 225 2.7 1974 8,779 711 8.1 1975 10,673 1,185 11.1 1976 10,861 1,360 12.5 1977 (8 mo's) 7,867 1,004 13.6 1978 10,660 1,965 18.4 Southern Baptist Hospital Total Number Total Number Percent Black Year Patients Black Patients Patients 1968 2 1969 25 1970 90 1974 20,591 571 2.8 1975 20,673 729 3.5 1976 20,229 955 4.2 1977 20,680 1,206 5.8 1978 20,731 1,534 7.4 Note: Included are data collected in 1978 while the negotiations and subsequent hearings were taking place.

179 Table 26. EXPECTED AND ACTUAL BLACK ADMISSIONS, BY SOURCE OF PAYMENT, AT THREE NEW ORLEANS HOSPITALS, 1974 Method of Payment Private Health Insurance Medicare Medicaid Private Pay Hotel Dieu Hospital Expected Observed Number of Black Black Standard Patients Patients Deviations 651 366 11.6 334 98 13.5 84 38 5.0 175 46 9.8 Method of Payment Private Health Insurance Medicare Private Pay Mercy Hospital Expected Black Patients 728 369 236 Observed Black Patients 364 75 68 Number of Standard Deviations 14.1 16.1 11.3 Southern Baptist Hospital Expected Observed Number of Black Black Standard Method of Payment Patients Patients Deviations Private Health Insurance 1229 229 30.7 Medicare 544 49 22.9 Medicaid 51 4 6.6 Private Pay 800 69 26.8 Free Care 157 17 11.3 Hotel Dieu eventually refused to undergo any type of compliance negotiations or submit a corrective action plan to OCR, arguing that it was in compliance with Title VI and could not be required to take any remedial steps. Mercy Hospital, while denying non-compliance with Title VI, did enter into negotiations and offered to (1) have formal and informal discussions with its medical staff to encourage the staff to admit their black Medicare and Medicaid patients into Mercy Hospital; (2) encourage black physicians in the community to apply for staff privileges; (3) establish a referral system with the New Orleans

180 Health Corporation Clinics (NOHC), whereby Medicare and/or Medicaid patients in need of inpatient hospital care would be referred to the hospital; and (4) encourage nomination for appointments of blacks to the board of trustees. (Mercy Hospital did not agree to require its staff physicians to treat referral patients; rather it agreed to encourage such referral agreements.) Southern Baptist Hospital also denied violation of Title VI but agreed to negotiations and eventually to take the following measures: (1) send a letter of inquiry to all hospital staff physicians asking them if they would accept referrals from community health clinics; (2) send a letter to the medical staff reminding them of the hospital's policy of non-discrimination and encouraging them to refer their black patients to the hospital; (3) informally encourage black physicians to apply for staff privileges; (4) pass a resolution reaffirming its policy of non-discrimination in patient referrals; (5) publicize the hospital's policy of non-discrimination; (6) recommend qualified blacks to the board of trustees and make efforts to increase the number of blacks on local advisory boards; and (7) encourage, but not require, staff physicians to treat Medicaid patients. Southern Baptist was operating a clinic at the time of the hearing, but it only admitted the indigent patients of staff physicians. The hospital refused to expand this clinic to include all indigent walk-in patients because the costs would be excessive. On May 24, 1978, OCR staff determined that further negotiations with the respondent hospitals would be futile; according to required procedures, the cases were referred to the General Counsel of DHEW for enforcement and fund termination proceedings. The process for terminating funding under Title VI is long and cumbersome—so cumbersome as to discourage DHEW from initiating proceeding in any but the most extreme cases. The initial "trial" of the issue takes place before an administrative law judge (ALJ). The findings of the ALJ can be appealed to the Reviewing Authority, a three-person board appointed by the Secretary that acts as an appellant body. Final decision within the agency is made by the Secretary. This decision is subject to review by the courts. The initial ALJ decision, particularly with regard to fact-finding, has a great deal of importance, but represents only an initial adjudication of the facts and the resulting issues. The ALJ held hearings from April to June 1979. Many substantive, jurisdictional, and procedural issues were raised by all parties (including representatives of the plaintiffs in the original lawsuit). The relevant substantive issue can be summarized as two basic questions: (1) do the disparities between treatment of whites and treatment of minorities constitute either present discrimination or vestiges of prior discrimination and (2) if so, what remedies can be required of defendant hospitals? While exhibiting considerable sympathy for defendants' argument that they were only part of a larger system over which they had little control, the ALJ found that vestiges of prior discrimination continued to exist and that it was unlikely that "time alone" would remedy the situation or prevent discriminatory practices by any of the defendant facilities.

181 Recognizing that Title VI regulations require remedial steps to eliminate vestiges of prior discrimination, the ALJ then reviewed the substance and history of negotiations between the defendants and OCR and evaluated OCR's proposals. The ALJ felt that reference to a "white-only" image was only the subjective impression argued by the government. Thus it was "not appropriate to eliminate the white-only image, but it is appropriate to inform the public, including the black minority, that the respondent hospitals will comply with the Act and will treat patients without regard to race or color." The ALJ also downplayed the significance of efforts to recruit black physicians as a remedial requirement, relying heavily on the fact that there are few black physicians in the area. Since there are so few black physicians in New Orleans, the ALJ concluded that no statistical determination of "racial identiflability" of the medical staffs could be made. Therefore nothing over and above the informal recruitment of black physicians (already undertaken by the hospitals) was required. On the other hand, the ALJ found that the referral agreement between NOHC and the defendant hospitals was a reasonable step to eliminate vestiges of past discrimination. However, these referral agreements did not bind the hospitals' staff physicians to treat these patients. Admittance into the hospitals was still contingent on the decision of a staff physician. The staff physicians were encouraged, but not required, to take referred patients. The ALJ also found that a requirement to take Medicaid patients as a condition of staff privileges was inappropriate, relying on the facts that no showing had been made that the defendants' medical staffs had engaged in discrimination in patient care or referral and that the physicians were not parties to the proceedings. "While enforcement of equal opportunity requirements on subcontractors may be appropriate, their imposition on subcontractors is only appropriate after they are given the same right to a hearing as in the case of a prime recipient." The requirement that the respondent set up outpatient clinics was also rejected by the ALJ because the costs were considered excessive. Finally, the ALJ concluded that qualified blacks must be given serious consideration for membership on the defendants' boards of trustees and advisory boards. The ALJ would not accept an absolute requirement that a certain number of blacks be put on these boards. This conclusion was reached, "because of the remoteness from direct patient contact, and, in the case of Hotel Dieu and Mercy, the requirement of religious order membership for qualification." Based on these general conclusions regarding DHEW's compliance requests, the ALJ looked at each of the respondents to determine if they were out of compliance with Title VI. He found that, given the racial composition of its patient population, Hotel Dieu was no longer "racially identifiable." However, the hospital was required to take appropriate steps in order to increase utilization by blacks. These requirements included: (1) notify its staff and the public that it would admit and treat patients regardless of race or color, (2) either establish a patient referral system at its existing walk-in clinic or

182 set up a referral agreement with NOHC, and (3) give serious consideration for qualified blacks for boards other than the board of trustees where all members were part of the sponsoring religious order. Mercy Hospital was found to be "racially identifiable" by patient population. The hospital was required to take appropriate steps in order to reach compliance with Title VI. These requirements included: (1) notify its staff and the public that it would admit and treat patients regardless of race or color, (2) continue its informal efforts to recruit black physicians to its medical staff, and (3) give serious consideration to blacks for board positions. (By the time of the hearing, Mercy Hospital had completed an agreement with NOHC under which Mercy agreed to accept all referrals from the clinic.) The ALJ found Southern Baptist was also "racially identifiable." However, the ALJ accepted Southern Baptist's compliance proposals as complete and sufficient to eliminate the continuing vestiges of past discrimination and therefore required no specific remedial steps by Southern Baptist. At this point in the proceeding, many at the OCR view the ALJ decision as little more than a hollow victory. If the factual findings and legal conclusions of the ALJ are upheld through the appellate procedures, the jurisdiction of OCR under Title VI will be severely limited in several ways. First, the ALJ adopted a limited interpretation of the scope of Title VI. There was little question but that the New Orleans hospitals had practiced racial discrimination in the past and that there continued to be disparities in the services provided to whites and minorities. The ALJ found that there was sufficient linkage between the disparate treatment and the prior discrimination to constitute a violation of Title VI. But in doing so, the ALJ expressed considerable sympathy for the argument that this linkage was complicated by a number of variables beyond the hospitals' control. He also used a 20 percent variance as a criteria in evaluating the materiality of the apparent disparities. Under a slightly different set of circumstances, such a method of analysis would lead to the conclusion that Title VI had not been violated. In particular, it seems evident that this ALJ would not have found discrimination had there not been a clear pattern of discrimination prior to 1966; that is, the ALJ would require a finding of either past or present discriminatory intent in addition to substantial disparities. Thus, the ALJ's decision calls into question DHEW's (and presumably the DHHS) interpretation of Title VI and the guidelines issued in 1969. A test of discrimination relying so heavily on an overt showing of intent and on such a narrow test of material disparity would limit DHHS' jurisdiction to only the most blatantly discriminatory health facilities. The ALJ's view of appropriate remedies, even when Title VI has been violated, also follows a conservative pattern. The ALJ rejected virtually all concrete (and controversial) steps proposed by OCR and required little more than expressions of good faith and non-discriminatory intentions by the facilities—again, rejecting the implications of the Title VI regulations and guidelines.

183 The characterization by the ALJ of the relationship between hospitals and their medical staffs as being primarily contractual also demonstrates the ALJ's view of the limits of OCR's authority in this case. This case is concerned with the medical staff relationship. At the origin of the hospital, the hospital management establishes the original medical staff by-laws. These medical staff by-laws provide for procedures or admissions to practice, hospital rules affecting physician procedures, hospital policies, and disciplinary or removal procedures. Once the medical staff by-laws are in place and the hospital is functioning, changes in the by-laws are customarily a subject of negotiation between hospital management and the medical staff represented by a by-law committee. Ultimately, the hospital retains the authority to unilaterally change medical staff by-laws. The hospital's readily apparent need for support and participation by a highly qualified medical staff of physicians acts to restrain the hospital's arbitrary unilateral changes in the by-laws. . . . Upon acceptance [of staff-privileges by a physician] the physicians agree to abide by the by-laws. This arrangement becomes an agreement or contract between the physician and the hospital. The hospital agrees to provide hospital services to patients admitted by the physician. During its term, the contract is subject to change only under its terms. (emphasis added) OCR has historically taken the position that private physicians, who are participating providers under Medicare, are not covered by Title VI, apparently on the theory that there is no contractual agreement between DHEW/DHHS and individual physicians participating in Medicare—a position that has no apparent basis in law. But paired with the ALJ's narrow view of the incidental obligations of a medical staff physician, this interpretation would virtually quash any effort to enforce Title VI in health facilities unless facilities make discrimination a matter of institutional policy. It must be noted that the interpretation of the ALJ does not conform to the interpretation of virtually all modern courts of the hospital-physician relationship, at least in the context of medical staff privilege decisions, malpractice liability, or even the Hill-Burton "charity care" obligations. As indicated earlier, the New Orleans litigation may well be the context within which these (and many other) issues will be adjudicated for the first time. It is possible that all or some of the defendants will negotiate an acceptable settlement and the findings, both favorable and unfavorable to DHHS, will never be tested in the courts. But since it represents the major hospital compliance effort of OCR, the precedential value of whatever outcome is achieved, either through litigation or negotiations, will not be lost on any of the parties to the 10-year dispute or on the provider community.

184 It also serves as a model, for better or worse, of OCR's technical and administrative capabilities. The manner in which OCR formulated and conducted its data-collection effort and developed the remedial practices that become the focus of the negotiations demonstrate the administrative "state of the art" as OCR enters this "new era" of civil rights enforcement.

Next: APPENDIX F: Speakers Presenting Testimony at Open Meeting of the Committee on Health Care of Racial/Ethnic Minorities and Handicapped Persons »
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