In Defense of the 'Arrogant Bureaucrats

Excellus Health Plan, Inc.

In Defense of the 'Arrogant Bureaucrats'Author(s): Howard N. NewmanSource: Inquiry, Vol. 16, No. 1 (Spring 1979), pp. 3-8Published by: Excellus Health Plan, Inc.Stable URL: http://www.jstor.org/stable/29771206 .

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Invited Paper In Defense of the 'Arrogant Bureaucrats'

Howard N. Newman

"Arrogant bureaucrats" is a term which, if not coined by Howard Jarvis in his successful

campaign in support of Proposition 13 earlier this year in California, has certainly been ef?

fectively exploited by him and his disciples. To the leaders of the current "tax revolt" in this country, the term bureaucrat has taken on a pejorative connotation?he is bloated and

self-serving and clearly the villain of the piece. Despite the inherent appeal of such symbols

and caricatures, I shall attempt to present and defend the proposition that the issues involved in the regulation of the health industry are so

complex and so inextricably tied to a larger set of social values that to place the blame for the problems in this field on the so-called ar?

rogant bureaucrats is both ingenuous and a terrible waste of time and energy.

That reference to time is not made casually. It is my sense that the public's concern over the rising costs of health care and the costs of

educating health professionals, especially physicians, is fast approaching the moment of serious threat to the private voluntary sector of our pluralistic health system. As we know, there is an enormous public investment in health resources in this country. Consider, for

example, the $163 billion, or $737 per person, expenditure in the United States during FY 77. This rate of expenditure has risen to 8.8% of

the GNP. Yet, a strident, litigious, and gen? erally adversarial posture on our part may well turn out to be counterproductive. Rather, in

my view, institutions involved in the provision of health services and the education of health

professionals must acknowledge a fundamen? tal relationship between their missions and the

public interest?not as they may unilaterally define that interest, but as it is defined by the

interplay of forces among which they must

participate. I shall attempt to present my arguments in

the form of two case histories?one drawn from experience in the public sector, the other from my current responsibilities in the private sector. In the final portion of the paper, I will offer some specific recommendations toward what I would consider constructive change.

Nursing Homes and Medicaid

In 1970, like many of my colleagues whose

professional interests lay in the area of the

management of health-related institutions, I

thought of Medicaid as a large and complex public program whose purpose was to finance medical services for the poor in this country. The principal difference between us, however, was that I was invited to try to run the pro? gram, or at least the federal government's part of the program.

As the Commissioner of the Medical Ser? vices Administration, I learned rather quickly that one significant misconception I had about

Medicaid involved the term "medical ser? vices." As defined in that program, the term was substantially broader than the physician and hospital-oriented care with which I had been accustomed. In fact, because eligibility for Medicaid was a function of the system (to

Howard N. Newman has been President of the Dartmouth Hitchcock Medical Center, Hanover, NH 03755, since

July 1974. Prior to that he served for four and one-half

years as Commissioner of the Medical Services Admin?

istration, DHEW.

This paper is based upon a speech delivered by Howard N. Newman at the annual meeting of the Association of American Health Centers, Oct. 6, 1978, Ponte Vedra

Beach, FL 32082.

Inquiry 16: 3-8 (Spring 1979). Copyright ? 1979 by the Blue Cross Association. All rights reserved. 3



Inquiry/Volume XVI, Spring 1979

use the term loosely) of determining eligibility for welfare (i.e., cash assistance and social

services), it was not always easy to draw the line between a state's medical service and its social service responsibilities. Since both are

federal grant-in-aid programs with variations in the percent of federal matching funds for certain services within a state (as well as

among states, of course), a further complica? tion resulted from the states' pursuit of their

logical interest in maximizing potential federal

matching funds. When I arrived in Washing? ton in February 1970, nowhere were these is? sues better illustrated than in the coverage of

nursing home benefits that represented $1.4 billion, or 30%, of the total federal costs of Medicaid.

Because all of the actions of an administra? tive agency are commonly viewed as a single and often massive regulatory assault, it may be useful at this point to consider three dis? tinct aspects of the process. Put in the form of questions, they would be: 1) What has Con?

gress intended to accomplish with a particular piece of legislation? 2) How should that intent be translated into clearly understood expec? tations for performance by those whose ac?

tions are to be affected by that law? 3) How does the administrative agency determine that that which was intended has, in fact, oc?

curred? The answer to each question requires discretionary judgment that I believe can be illustrated by the case at hand.

What has Congress intended to

accomplish with a particular piece of legislation?

It is now generally acknowledged that Med? icaid was the hidden part of the iceberg oth? erwise known as the 1965 Social Security Amendments. Rooted in the tradition of social welfare legislation in this country, the original Medicaid law was quite vague. True, it intro? duced the term "skilled nursing home ser?

vices" as a covered service, but the 1965 law contained no reference to nursing home stan? dards nor to any federal authority to set such standards. Given legislative intent as limited as this, it should come as no surprise that those opposed to the imposition of standards of participation were able to prevail through issuance of implementing regulations that es

tablished a fairly meaningless definitional level.

All of this was changed by the Moss Amendments of 1967. As chairman of the sub? committee on long-term care of the Senate

Special Committee on Aging, Senator Moss of Utah took a special interest in what he viewed to be the scandalous conditions in nursing homes in this country. Acknowledging the

flimsy legal base on which DHEW had issued its original skilled nursing home regulations (technically, these were plan requirements), he succeeded in making the requirements for

nursing home standards explicit in the law

through the Moss Amendments. The intent of

Congress was at this point clear, or so it seemed until the next stage of the process.

How should that intent be translated into clearly understood expectations

for performance by those whose actions are to be affected by that law?

It was about two years after the effective date of the Moss Amendments that I entered the scene. Implementing regulations had been the source of great contention within DHEW,

with nursing homes protesting that the pro? posed regulations were too restrictive. In fact, the proposed regulations were essentially re? statements of the statute, as amended. To be

understood, this must be viewed in the broad? er context of the Medicaid program generally.

Among the clearest purposes of the struc? ture of Medicaid was that states were to be afforded the opportunity to respond flexibly, according to local needs and resources. Along with the voluntary participation by providers, this commitment to pluralism meant that each state had a different program with regard to

benefits and eligibility standards, yet each was

expected to manage its program according to certain federally defined expectations. Here

again, we see the federal executive (or bu?

reaucrat, if you prefer) having to define intent in the presence of multiple and often conflict?

ing expectations. One way to state the dilemma is as follows:

If you force nursing homes to close, say their

owners, you will be putting old people out on

the street. If you don't enforce the standards, say the lawyers, you violate the law. If you

4



waffle on the requirements, say the patients' advocates, you open the system to abuse. The

temptation is to waffle and pray. We chose another course and decided to

take on the battle?namely?to attempt to im?

prove the quality of nursing homes and the

quality of care provided in them by creating a set of circumstances which would produce a greater commitment of resources to the fed? eral oversight function. That seems to lead

logically to my third question:

How does the administrative agency determine whether that which was

intended did, in fact, occur?

Probably the most frustrating aspect of my re?

sponsibility emanated from the almost total

disregard of this issue in the organizational planning within DHEW, and the staffing pat? tern that resulted. Relatively early in my ten?

ure, I decided to try to find out whether the states were carrying out their statutory re?

sponsibilities with regard to the participation of nursing homes in the program.

To my dismay I learned, as a result of a

special study by a small in-house team formed for that purpose (because there was virtually no regular monitoring of state management practices), that what was going on was even worse than the charges from critics in the Moss Committee. Rudimentary requirements, such as evidence of agreements with partici? pating institutions indicating that statutory re?

quirements were being met, were blatantly disregarded. Widespread absence of evidence that adequate professional supervision, rou?

tine administrative services, even adequate physical safety precautions, was documented. Evidence of responsibilities and relationships among public agencies within a state, usually the welfare and health departments, was also

generally absent. In retrospect, it is difficult to say how suc?

cessful we were in our effort to upgrade the standard of care in nursing homes. We did

manage?using methods that would require another paper to describe?to get a White House commitment. Indeed, a Presidential statement was prepared that urged strength? ening the federal role in upgrading standards of nursing homes in this country. We even obtained a supplemental appropriation that

In Defense of 'Arrogant Bureaucrats'

earmarked additional resources for this pur? pose.

However, we greatly underestimated the re? silience of the system?at the level of both the

nursing home industry and the states, which had a substantial vested interest in maintain?

ing the status quo, and within DHEW, where a different kind of equilibrium, one involving programmatic jurisdiction, existed. In some

respects, this latter circumstance was even more difficult to deal with.

That there were competing interests also should have been apparent?such as maintain?

ing the positive reputation of Medicare, a fed? eral (as distinct from a federal/state) program, or taking care not to upset mutually support? ive relationships with provider groups. Un?

derlying both of these sets of factors, how? ever, is the absence of an organized and effective constituency to represent the inter? ests of the recipients of these services, and a condition of such instability in the postitions of leadership within DHEW that no matter how well-meaning the particular individuals, any organized and effective follow-through on the stated objectives is virtually precluded.

I shall return to several of these points a bit

later, but let me now present my second illus? trative case, this one drawn from the private sector. It involves the regionalization of health care services in northern New England.

Regionalization and the Dartmouth-Hitchcock Medical Center

The Dartmouth-Hitchcock Medical Center

(DHMC) is an unusual organization. It is a

voluntary association of four principal insti? tutions?Dartmouth Medical School, Mary Hitchcock Memorial Hospital, the Hitchcock

Clinic, and the Veterans Administration in White River Junction, VT. Together with sev? eral organizations of lesser size, these insti? tutions are involved in three distinct but mu?

tually interdependent activities: tertiary level medical services to people in a relatively wide

geographic area; primary care services within a smaller subset of that region; education at the undergraduate, graduate, and practitioner levels in medical and related disciplines. How it attempts to accomplish these tasks, gener? ally, is not the subject of this paper. However,

5



Inquiry /Volume XVI, Spring 1979

a brief description of the organization may be

helpful. The Medical Center has a governing body,

which is a joint council consisting of trustees and chief executive officers of the component institutions, as well as a Center management committee. Officers of the Medical Center are as follows: president; senior officer for aca? demic affairs (who also is dean of the Dart? mouth Medical School); senior officer for clin? ical affairs (who also is president of the staff board of governors of the Mary Hitchcock Memorial Hospital); clinical department chair?

men, who are jointly recruited and compen? sated in equal shares by the clinic, hospital, and medical school. Other Center officers in? clude a director of the Norris Cotton Cancer

Center, and the director of a medical center office of graduate and continuing medical ed? ucation.

With that brief and, it is hoped, not too

mind-boggling description, let us look at some

aspects of regulation as they affect the Medi? cal Center's interests in regionalization.

The portion of northern New England that serves as the principal catchment area of the

Medical Center is rural in nature, sparsely populated, and characterized by a series of

communities, many with small local hospitals. In the aggregate, the region covers an area of about 8,000 square miles with a population of

only about 300,000 people. Within the region, the DHMC is the only major referral center

(the imprecision of the catchment area is ob?

vious, but it is believed that there is only slight overlap with the University of Vermont Med? ical Center located in Burlington, about 100

miles to the northwest). Our Medical Center includes the only medical school in the state of New Hampshire, the two largest hospitals in the region, and a large, multispecialty group practice. Occupancy rates in the community hospitals in the region have fallen, some rather

drastically in recent years. Meanwhile, in the two hospitals associated with the Medical

Center, occupancy has remained at a high level despite decreasing lengths of stay.

New Hampshire is a state with a single HSA and a single state PSRO. Both exemplify the

growing involvement of external bodies in re?

sponsibilities that traditionally have been in

6

stitutionally and professionally oriented. In New England, those traditions have been rein? forced by a strong sense of local pride and individual self-reliance. In fact, due in part to this strong sense of individual responsibility, New Hampshire is the only state in the U.S. without a broadbased tax?neither a state in? come tax nor a value added or sales tax. The

expectations of the HSA in particular?con? cerning the avoidance of unnecessary dupli? cation of services, effective utilization of ex?

isting resources, and involvement of consumers in the planning process?represent a departure from at least some of these tradi? tions.

If a medical center such as ours cannot overcome a tradition of looking inward, of

saying that in providing high quality medical care its responsibility ends at the door of the

institution, then its potential conflicts with HS As, SHPDAs, SHCCs, PSROs, state rate

setting commissions, certificate-of-need agen? cies, etc. will only ripen into open war. If, on the other hand, there is a willingness to forge new relationships, to look at new ways of re?

lating to other institutions, providers, and con? sumers of health services, then I for one am

optimistic about the possibilities of success in our new regulatory environment.

In our regionalization program, for exam?

ple, we have begun a dialogue with some of the community hospitals that I described ear? lier. We believe they have a continuing role in the provision of most of the primary care and some of the secondary level of care of the peo? ple who reside in that local community. We believe that, as a regional academic referral

center, we have a role in supporting them in that effort through administrative and profes? sional services as well as through educational

programs, including continuing education. Whether motivated by a desire to keep the

proverbial wolf from the door or some higher sense of social responsibility, we think our efforts in regionalization exemplify a volun?

tary solution to a public problem. If we are successful in this approach, I believe we have the potential to serve as a model for private sector leadership within the contemporary regulatory environment. I prefer not to think of the consequences if we are unsuccessful.



Some Concluding Thoughts and Recommendations These brief case presentations were intended to reveal two dimensions of the complex sub?

ject of regulation in the health field. In sub?

jecting myself to the discipline of examining some of my own personal experiences, I was

struck by how obvious the problems are, and how elusive the solutions seem to be. I am sure many readers of Inquiry have been sub?

jected to the 20-minute tour de force on the

problems of the health care system in this

country. The cocktail party is the common

setting for this barrage, which usually consists of declarations about escalation of health care costs caused by unnecessary duplication, ex? cess capacity, and incentives for inefficiency. Despite the superficiality of the analyses, however, the criticisms are not infrequently justified; and the conventional wisdom not far from the mark. It is rather in the absence of feasible solutions to the problems that our 20-minute expert fails us. Even among profes? sionals, the dilemma remains with us that de?

spite extravagantly sophisticated technical ca?

pacity to identify problems, we remain in need of accomplishable solutions.

One approach?to throw up one's hands and declare that improvements in the system should be made only through external regu? latory control?is no more tolerable to me than to say that regulation is the cause of the

problem. Unless the financing system pro? vides positive incentives for change, there just aren't enough policemen, auditors, or inspec? tors-general to oversee and monitor the pro? viders of health services.

Unfortunately, for those who would seek

simple solutions, the issues that remain after the 20-minute cocktail party oration rarely pose problems of good versus bad choices. It

is, generally, rather a matter of judging among competing worthwhile objectives. And all such choices?equity or cost containment, ac? cess or quality, technology or comfort?must be made in the context of a finite amount of available resources.

With some trepidation, therefore, I will of? fer four suggestions that I think may point us toward accomplishable improvements in the health care system.

In Defense of 'Arrogant Bureaucrats'

1 Sunshine. Given my view that economists have been handed much too prominent a role in the formulation of health policy in recent years, it might seem odd that I be? lieve people generally will make the right choices when free to do so, and when hav?

ing a reasonable degree of information about the alternatives. This is the corner? stone of our system of political democracy, and I believe it could be successful in the health care system if both conditions were met. The catch is that while we pay great homage to the concept of freedom of choice

(frequently as a way of protecting the pro? vider's rather than the consumer's choice), we have done almost nothing about inform?

ing the consumer about the system?about fees, costs, charges, salaries, standards, li?

censes, certification, etc. I believe, for example, that if periodic

summaries of audited financial statements of health institutions were published in local

newspapers, the resulting public under?

standing and awareness would increase re?

sponsiveness to the legitimate concerns of the public and produce support rather than

skepticism for the many strengths of the

system. I believe we are too preoccupied with maintaining the mystique and we suffer

immeasurably from the lack of sunshine. 2 Aggregate institutional financing. One of

the loudest cries one hears these days is about excessive paperwork. Generally, of

course, this is attributed to regulations of one sort or another. In the midst of those

cries, it is sometimes noted that hospitals now account for something on the order of 90% of their income, not directly from pa? tients but from third parties?Medicare,

Medicaid, Blue Cross, and commercial in? surance companies. In the case of the first

two, complaints are frequently made that reimbursement doesn't meet the full finan? cial needs of the institutions. The paradox, of course, is that these programs (I refer

particularly to the public programs) were not established to finance institutions, but rather to purchase health services for ben? eficiaries and recipients. This is not to say that the institutions' needs are not legiti?

mate. Indeed, if revenues do not at least

7



Inquiry/Volume XVI, Spring 1979

equal expenditures, the institution, over the

long run, cannot continue to exist. One way of resolving this conflict be?

tween the public program, which is obliged to be a prudent buyer, and the institution,

which must remain financially viable in or? der to serve the public interest, is to nego? tiate aggregate payments that will serve both purposes. If both parties agreed in ad? vance to a fixed number of dollars for a giv? en number of anticipated services to entitled

recipients of care, it would provide the in? stitutions with predictability of income

which it now does not have, and assure the

public purchaser in advance of the level and cost of the service; and, it would save a lot of paperwork.

3 Permanent under secretary. I commented earlier in this paper about the instability in

positions of leadership in DHEW. This is referred to by some as the state of perma? nent reorganization. The problems resulting from such turnover cannot be overstated. In the last decade, for example, we have seen a continuing disintegration of morale in the career public service ranks. One re? sult is an almost total absence of "institu? tional memory." Each new administration and each new Secretary of DHEW seems to arrive with the view that if the monster can't be tamed, it will at least be disregarded. Since loyalties are suspect, an inner circle must be relied on for advice and counsel. If the inner circle doesn't know the difference between Medicare and Medicaid, no matter, since that is an operational issue and they are involved in policy. And when they have been there long enough so that people ex?

pect them to know the difference, it's usu?

ally about time to move on. I would suggest that it is in our interest

and the interest of the institutions which

employ us that we try to renew the self-re?

spect of the public servant. One way to help bring this about would be to adopt an ap? proach used elsewhere, namely, to have a

senior career civil servant designated as

8

permanent under secretary of DHEW. His

primary role would be to provide continuity and stability at the highest levels of DHEW. He would also epitomize the aspirations of the career civil servant, thereby serving as a role model for professional development, aiding in the recruitment of capable and dedicated young professionals.

4 Council of health advisors. There are some who advocate a fundamental restructuring of DHEW with a resulting separate Depart? ment of Health. I do not agree with this ap? proach. The benefits of linkage and mutual

support reflected in the structure of local

community services, such as Head Start, school health programs, and various pro? grams for the elderly, outweigh the cost in? cident to maintaining a complicated man?

agement structure. The most telling point on the other side of this argument is that the

magnitude of the national investment in health justifies a very high degree of inde?

pendence and separate departmental iden?

tity. The force of these latter arguments have

sufficient weight, in my view, to merit con?

sideration for creating a council of health advisors to the President. Like the role of the Council of Economic Advisors vis-a-vis the Secretary of the Treasury, the health advisors' function would not be to manage DHEW nor to second-guess the operational decisions of the Secretary. They would, however, institutionalize the White House health policy activities that have developed progressively and almost casually in recent administrations. Another benefit of this ap? proach would be the possibility of reducing the tremendous dissipation of energy that has resulted from the highly adversarial pos? tures of the private and public interests in health. Finally, a council of health advisors could provide the President with sophisti? cated advice while permitting DHEW to continue to function as an integrated man?

agement unit.



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In Defense of the 'Arrogant Bureaucrats