oversight

Planning, Construction, and Use of Medical Facilities in the Denver, Colorado, Area

Published by the Government Accountability Office on 1971-11-16.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

    ~T-To-~-suBco~TTEE                        oN   -   ~--

    EXECUTIVE  REORGANIZA
    GOVERNMENT    RE§EARCH
:   COMMITTEE   ON
    GOVERNMENT     OPERATION§
    UNITED STATES SENATE




    Planning, Construction,
    And Use Of Medical Faciliti
    In The Denver, Cobra
                                  B- 167946




    BY THE COMPTROLL
    OF THE UNITED  STATES
                                                        -
                   COMPTROLLER         GENERAL     OF      THE       UNITED       STATES
                                     WASHINGTON.    D.C.         20548




B-167966




Dear        Mr.   Chairman:

       This is our report    on the planning,                                    construction,       and
use of medical    facilities in the Denver,                                    Colorado,       area.
The review     was made pursuant    to your                                   request      of Septem-
ber 18, 1969.

           The responsible    Federal,     State,    and local    health     or-
 ganizations      have not been given an opportunity            to formally
examine       and comment     on this report,        although   most      of the
matters       were discussed    with their      representatives         during
the review.

            We plan to make          no further      distribution      of this report
unless        copies     are specifically       requested,        and then we shall
make        distribution     only after      your agreement           has been
obtained.

                                                    Sincerely                   yours,




                                                    Comptroller                      General
                                                    of the United                    States




The Honorable        Abraham       A. Ribicoff,       Chairman
Subcommittee        on Executive       Reorganization
  and Government          Research
Committee        on Government        Operations
United    States   Senate




                              50TH    ANNIVERSARY                    l92t-       1971
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        COMPTROLLERGENERAL'S REPORT                                               PLANNING,  CONSTRUCTION,   AND USE
        TO THE SUBCGMMITTEEON                                                     OF MEDICAL FACILITIES    IN THE
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        EXECUTIVE REORGANIZATION                                                  DENVER, COLORADO, AREA B-167966
   I    AND GOVERNKENTRESEARCH
   I    COMMI!!'TEE ON GOVERNMENTOPERATIONS
   I
   I    UNITED STATES SENATE
   I
   I
   I
   I    DIGEST
        ------
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   I
   I
   I    WHYTHE REVIEW WASMADE
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   I             At the request           of the Chairman,           Subcommittee         on Executive      Reorganization
    I
    I
                 and Government           Research,      Senate      Committee       on Government       Operations,         the
    I            General      Accounting       Office     (GAO)      examined      into    the coordination            among
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                 Federal      and State       agencies     and     local    health      organizations       in planning          and
    I            constructing         acute-care       hospitals         and skilled-nursing-care             facilities         in
    I            certain      metropolitan        areas.
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    I            GAO also reviewed           the extent    to which          certain      medical      facilities       and ser-
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                 vices were shared           among hospitals.
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                 The reviews        were made in Baltimore,                Maryland;        Cincinnati,       Ohio;     Denver,
    I
    I            Colorado;       Jacksonville,         Florida;      San Francisco,            California;       and Seattle,
    I            Washington.          These areas were selected                 on the basis           of geographic      distri-
    I
    I            bution      and of the levels           of Federal        financial        participation        in the construc-
    I            tion      of hospitals        and skilled-nursing-care              facilities.           GAO did not review
    I
    I            the quality        of care being         provided        by hospitals         and skilled-nursing-care
    I            facilities.          This report        presents       the results         of GAO's review          in the Denver
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                 area.
    I
    I            Federal,      State,  and local    health    organizations  have not been                          given   an op-
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    I            portunity      to formally   examine      and comment on the contents   of                         this  report.
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   1    FINDINGS AND CONCLUSIONS
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   I             Backpound
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   I             The Hospital      and Nursing          Home Division     of the Colorado      Department       of Health
   I             (State   agency)     administers           grants   made under title      VI of the Public       Health
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   I
                 Service    Act (42 U.S.C.           291),     commonly  known as the Hill-Burton         program,       by
   I             the Public    Health        Service      (PHS) of the Department        of Health,    Education,
   I             and Welfare      (HEW) for the construction              and modernization        of hospitals      and
   I
   I             other medical      facilities.
   I
   I             The State       agency annually          prepares     a plan setting       forth an estimate   of the
   I             number of acute-care            hospital       beds and skilled-nursing-care          beds needed for
   I
                 the next 5 years.           Although        GAO verified     the mathematical      accuracy   of the
   I
   I             State    agenc.y's    computation         of future      bed needs,     GAO did not evaluate    the
   I             approprjateness        of‘ the method0 logy prescr ibed by PHS for use by the State
   I
   I             planners      in determining         future     bed needs.      (SekW&h'. 16,i 9 7 1
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         Tear
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Need for     hospi   taZ beds
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Hospital    bed capacity    in the Denver area was increasing,      although the
occupancy    rates for many hospitals       were low. According to the 1971 State
plan,    the Denver area will      need 5,770 hospital    beds by 1975. As of
December 31, 1970, facilities         for 5,851 beds were in operation      or under
construction     in the Denver area.       By 1975 the capacity,   estimated by
GAO on the basis      of plans   for future construction,     will be about 6,642
beds, or about 872 beds more than the projected            need. (See p. 8.)
Of the    18 non-Federal    hospitals    in the Denver area. 12 had 1,194 beds in                               I

use or available       for use,'which    complied with State licensing      requirements                        I
but which did not fully conform to Hill-Burton           construction    standards.                             I
                                                                                                                I
A State agency inspector         advised GAO that, in his opinion,     the 12 facilities                        I
containing    the nonconforming       bed spaces were safe for patient      care.
(See p. 8.)

Need for skiZZed-nursing-care         facilities
                                                                                                                    I
The Denver      area has more skilled-nursing-care      beds than it    may need by 1975.                           I
                                                                                                                    I
According to the 1971 State plan, the Denver area will need 5,984 skilled-
nursing-care beds by 1975. As of December 31, 1970, facilities       for 6,698
beds were in operation  or under construction.  By 1975 the capacity,     esti-
mated by GAOon the basis of plans for future construction,      will be about
9,254 beds, or about 3,270 more beds than the projected    need.    (See p. 12.)
                                                                                                                    I
Of the 55 skilled-nursing-care       facilities in the Denver area, 10 had 616                                      I
beds in use or available       for use, which complied with State licensing         require-                        I
ments but which did not fully       conform to Hill-Burton  construction       standards.                           I
                                                                                                                    I
A State agency inspector advised GAO that, in his opinion, the 10 facilities                                        I
containing the nonconforming       bed spaces were safe for patient      care.     (See                             I
                                                                                                                    I
p.   12.)                                                                                                           I


Contra 2 over development
of medica faci%itfes
If a proposed hospital or skilled-nursing-care         facility    is to be financed
with a Hill-Burton   grant, the State agency must determine that the project                                            I
                                                                                                                        I
is needed before the grant can be made. The Federal Housing Administration                                              I-
and the Small Business Administration      have instituted      procedures recently                                     I
                                                                                                                        I
whereby they will not provide financial       assistance to a proposed project                                          I
unless the State agency has issued a certificate          of need. (See p. 14.)                                         I’
                                                                                                                        I
                                                                                                                        I
When the Federal Government is not involved       in the financing     of the con-
struction of facilities,   State agencies charged with the responsibility          for
planning new hospitals   and skilled-nursing-care     facilities    do not have the
authority to ensure that only needed facilities        are constructed.      (See
p.   14.)
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                              Sharing    of medical       facilities
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          I                   Sharing     of specialized       services,        such as cobalt          therapy      and open-heart
          I                   surgery,     can result      in hospital        care at less cost.               There is some sharing
          I                   of specialized       medical     services       in the Denver area.                (See pp. 17 to 21.)
          I
          I                   Some Denver area hospitals             have     initiated        projects      to reduce       operating
           I                  costs and to provide           more effective           service     through      cooperative        programs,
           I
           I                  such as group purchasing            and the       sharing       of administrative           services.        (See
           I                  pp. 22 to 25.)
           I
           I
           I                  Recent     legislation--         Public    Law 91-296--increases         Federal       financial    participa-
           I
                              tion    in projects         involving      the sharing     of health     services.          This legislation
           I
           I                  should    provide        hospitals      which are seeking        Federal    grant      funds with an in-
           I                  centive      to share services.
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           I

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                                 Contents
                                                                          Page

        DIGEST                                                              1

        CHAPTER

           1      INTRODUCTION                                              4
                      Hill-Burton    program                                4
                      Denver area health     complex                        5
                      Other health-planning     organizations               6

           2      PLANNING AND CONSTRUCTION OF HOSPITALS                    8
                      Planned changes in bed capacity    of hos-
                         pitals                                             8
                      Utilization   of existing hospital  beds             10
                      Federal hospitals                                    11

           3      PLANNING AND CONSTRUCTION OF SKILLED-NURSING-
                  CARE FACILITIES                                          12
                      Planned changes in bed capacity    of
                         skilled-nursing-care facilities                   13

           4      CONTROL OVER DEVELOPMENT OF MEDICAL FACIL-
                  ITIES                                                    14
                        Questionable  issuance of certificate of
                          need for proposed hospital                       15

           5      COORDINATION AMONG ORGANIZATIONS FOR SHARING
                  MEDICAL FACILITIES                                       17
                      Cobalt services                                      18
                      Hemodialysis        services                         19
                      Open-heart       surgery                             19
                      Obstetrical        services                          20
                      Pediatric      services                              21
                      Cooperative        efforts   of health-care
                        facilities        for sharing medical and
                        other services                                     22
                           Craig Rehabilitation         Center and
                                and Swedish Hospital                       22
                           Swedish Hospital         and
                                                     ,  Porter Memorial
                                Hospital                                   22
                                                                                  .   -




CHAPTER                                                                    Page

                      Formation     of Midtown Hospital     Asso-
                         ciation    to study hospital     cost
                         control    and improvements    in quality
                         of patient    care                                 23
                      Group purchasing                                      25

     6    SCOPE OF REVIEW                                                   26

                                ABBREVIATIONS

COPAC     Commodities         Purchasing     Association     of Colorado

GAO       General     Accounting        Office

HEW       Department      of Health,        Education,     and Welfare

PHS       Public     Health     Service

VA        Veterans     Administration
COMPTROLLERGENERAL'S REPORT                                                PLANNING, CONSTRUCTION,   AND USE
TO THE SUBCOMMITTEEON                                                      OF MEDICAL FACILITIES   IN THE
EXECUTIVE REORGANIZATION                                                   DENVER, COLORADO, AREA B-167966
AND GOVERNMENTRESEARCH
COMMl1'TEEON GOVERNMENTOPERATIONS
UNITED STATES SENATE

 DIGEST
------


WHY THE REVIEW WASMADE

          At the request           of the Chairman,           Subcommittee         on Executive      Reorganization
          and Government           Research,      Senate      Committee       on Government       Operations,         the
          General      Accounting       Office     (GAO)      examined      into    the coordination            among
          Federal      and State       agencies     and     local    health      organizations       in planning          and
          constructing         acute-care       hospitals         and skilled-nursing-care             facilities         in
          certain      metropolitan        areas.

          GAO also reviewed           the extent    to which          certain      medical      facilities       and ser-
          vices were shared           among hospitals.

          The reviews        were made in Baltimore,                Maryland;        Cincinnati,       Ohio;    Denver,
          Colorado;       Jacksonville,          Florida;     San Francisco,            California;       and Seattle,
          Washington.          These areas were selected                 on the basis           of geographic      distri-
          bution      and of the levels           of Federal        financial        participation        in the construc-
          tion      of hospitals        and skilled-nursing-care              facilities.           GAO did not review
          the quality        of care being          provided       by hospitals         and skilled-nursing-care
          facilities.          This report        presents       the results         of GAO's review          in the Denver
          area.

          Federal,      State,  and local    health    organizations  have not been                          given   an op-
          portunity      to formally   examine      and comment on the contents   of                         this  report.


FINDINGS AND CONCLUSIONS

          Background
          The'Hospital        and Nursing          Home Division     of the Colorado     Department        of Health
          (State     agency)      administers          grants   made under title     VI of the Public        Health
          Service      Act (42 U.S.C.            291),    commonly  known as the Hill-Burton         program,       by
          the Public       Health        Service      (PHS) of the Department       of Health,    Education,
          and Welfare        (HEW) for the construction              and modernization        of hospitals      and
          other    medical      facilities.

          The State       agency annually          prepares     a plan setting       forth an estimate   of the
          number of acute-care            hospital       beds and skilled-nursing-care          beds needed for
          the next 5 years.           Although        GAO verified       the mathematical    accuracy   of the
          State    agency's     computation         of future      bed needs,     GAO did not evaluate    the
          appropriateness        of the methodology             prescribed      by PHS for use by the State
          planners      in determining        future      bed needs.        (See p. 8.)

                                                                 1
Need for      hospita2      beds

Hospital     bed capacity     in the Denver area was increasing,             although    the
occupancy     rates   for many hospitals       were low.       According   to the 1971 State
plan,     the Denver area will       need 5,770 hospital        beds by 1975.        As of
December 31, 1970, facilities            for 5,851 beds were in operation             or under
construction       in the Denver area.        By 1975 the capacity,        estimated     by
GAO on the basis        of plans   for future    construction,        will be about 6,642
beds, or about 872 beds more than the projected                   need. (See p. 8.)
Of the 18 non-Federal        hospitals            in the Denver area,           12 had 1,194 beds in
use or available     for use, which               complied     with State       licensing      requirements
but which did not fully         conform           to Hill-Burton        construction        standards.
A State    agency inspector      advised            GAO that,      in his opinion,        the 12 facilities
containing     the nonconforming       bed          spaces were safe for patient               care.
(See p. 8.)

Need for      skiZZed-nursing-care             faciZities

The Denver       area    has more      skilled-nursing-care              beds    than    it   may need      by 1975.
According    to the 1971 State  plan, the Denver area will       need 5,984 skilled-
nursing-care    beds by 1975.   As of December 31, 1970, facilities           for 6,698
beds were in operation    or under construction,    By 1975 the capacity,           esti-
mated by GAO on the basis of plans      for future construction,        will    be about
9,254 beds, or about 3,270 more beds than the projected           need.      (See p. 12.)

Of the 55 skilled-nursing-care            facilities      in the Denver area,            10 had 616
beds in use or available         for use, which complied            with State       licensing       require-
ments but which did not fully            conform     to Hill-Burton      construction          standards.
A State    agency inspector      advised      GAO that,      in his opinion,       the 10 facilities
containing     the nonconforming       bed spaces were safe for patient                  care.      (See
p. 12.)

Control over development
of medica faciZities

If a proposed      hospital        or skilled-nursing-care                 facility       is to be financed
with a Hill-Burton          grant,     the State         agency must determine                that   the project
is needed before       the grant         can be made.             The Federal         Housing      Administration      ,
and the Small      Business        Administration           have instituted            procedures       recently
whereby they will         not provide          financial        assistance          to a proposed       project
unless  the State      agency has issued                a certificate         of need.          (See p. 14.)           .

When the      Federal      Government      is not involved       in the financing      of the con-
struction      of facilities,         State   agencies      charged with the responsibility        for
planning      new hospitals        and skilled-nursing-care           facilities     do not have the
authority      to ensure       that only needed facilities            are constructed.       (See
p. 14.)
  ,Guzring of medical        facilities

  Sharing     of specialized       services,        such as cobalt          therapy      and open-heart
  surgery,     can result      in hospital        care at less cost.               There is some sharing
  of specialized       medical     services       in the Denver area.                (See pp. 17 to 21.)
  Some Denver area hospitals             have     initiated        projects      to reduce operating
  costs and to provide           more effective           service     through      cooperative       programs,
  such as group purchasing            and the       sharing       of administrative           services.        (See
  pp. 22 to 25.)

  Recent    legislation--         Public    Law 91-296-increases         Federal         financial    participa-
, tion    in projects        involving      the sharing     of health    services.            This legislation
  should    provide       hospitals      which are seeking       Federal    grant        funds with an in-
  centive     to share services.




                                                      3
                                     CHAPTER 1

                                  INTRODUCTION

HILL-BURTON      PROGRAM

        Title   VI of the Public Health Service Act (42 U.S.C.
291), commonly known as the Hill-Burton              program,    authorizes
the Public      Health Service       of the Department     of Health,     Ed-
ucation,      and Welfare      to make grants to States for the con-
struction      of medical facilities.        PHS, under the Hill-
Burton program, requires           each State to designate       a single
agency to administer           the program and to prepare a State
plan annually,        projecting     for each designated     service    area
of the State the need for medical facilities                and comparing
that projected        need with the resources       expected to exist.

        The Hospital       and Nursing Home Division        of the Colorado
Department       of Health     is the State agency responsible        for
administering        the Hill-Burton      program in Colorado.       The
State agency annually            prepares a plan setting      forth  an es-
timate of the number of acute-care              hospital    beds and
skilled-nursing-care          beds needed for the next 5 years.            Sep-
arate estimates         are made for each service        area within    the
State.

        The basic data used by the State agency to estimate
the need for hospitals            and skilled-nursing-care            facilities
consists     of current       and projected      population      data furnished
by the Bureau of the Census and of hospital                    and skilled-
nursing-care      facility      utilization      data, expressed         in terms
of patient-days         during    the most recent year, furnished                  by
the hospitals      and the facilities.            The PHS guidelines             for
preparing      the State plan do not require              that PHS, Veterans
Administration       (VA), or military         facilities      be considered
in the planning        process,       nor do they require        that the days
of care rendered          in these facilities          be considered.

        To arrive    at an estimated     average daily    census of
patients,     the State agency multiplies        the projected    popula-
tion by the current          use rate (the number of days of inpa-
tient     care in the most recent year for each 1,000 population)
and divides       the result    by 365.   The resulting    average daily


                                          4
.   .




        census is divided      by 80 percent        for hospitals         and 90 per-
        cent for skilled-nursing-care            facilities        to arrive     at an
        estimate      of beds needed, assuming an 80-percent                 occupancy
        rate for hospitals      and a go-percent            occupancy rate for
        skilled-nursing-care       facilities.           This provides       an estimated
        ZO- or lo-percent      vacancy rate to meet emergencies.                   An
        extra 10 beds are added to the estimated                  number of hospital
        beds needed as an additional           precaution        to ensure that
        emergency patients      can be treated.

                 A total   of about $7.2 million in Hill-Burton               funds was
        allotted      to the State of Colorado in fiscal      years           1968
        through 1970.        About $6.6 million, or 92 percent,               of these
        funds had been encumbered at June 30, 1970.            About            $1.4 mil-
        lion of the encumbered funds, or 21 percent,           were           granted
        to projects      in the Denver area.

        DEWERAREAHEALTH           COMPLEX

                 The State agency has divided     the State into 24 service
        areas.      According  to PHS regulations    a service  area is:

                 "The geographic  territory from which patients
                 come or are expected to come to existing    or pro-
                 posed hospitals  *** or medical facilities    ***.I'

        The Denver area includes        Adams, Arapahoe,      Clear Creek, Doug-
        las, Gilpin,      and Jefferson   Counties;    the city and county of
        Denver; and the western half of Elbert            County.    About
        50 percent     of the State's    population    resides    in this ser-
        vice area.      In designating    service   areas, the State agency
        considers    travel   time and distance,     geographic     barriers,
        population,     and other factors.

                 There are 20 hospitals  and 55 skilled-nursing-care
        facilities     in the Denver area.    Of the 20 hospitals,      two
        are operated      by the Federal Government--one      by VA and the
        other by the U.S. Army (Fitzsimons       General Hospital).       The
        map on page 7 shows the location       of hospitals      in the Denver
        area.
               Generally    there are two types of nursing-care                facili-
        ties:      (1) those which provide       care for convalescent            or
        chronic-disease       patients requiring      skilled nursing          care and


                                                5
which are under the general direction                 of persons licensed
to practice       medicine     or surgery    in the State and (2) those
which provide       domiciliary      care.     Only the facilities     pro-
viding    skilled    nursing     care qualify      for Hill-Burton    grants.
Our review included          only those facilities         providing  skilled
nursing    care.

OTHER HEALTH-PLANNING          ORGANIZATIONS

       Public   Law 89-749, approved November 3, 1966, created
the Partnership      for Health Program which introduced                 the
concept of comprehensive          health planning.          Under this new
type of planning,       it is envisioned          that both providers         and
consumers of health        services      will participate        in identifying
health    needs and resources,         in establishing       priorities,        and
in recommending courses of action.
       The Colorado Office        of Comprehensive         Health Planning,
a division     of the State Planning           Office,    is responsible        for
administering     and coordinating           comprehensive     health    plan-
ning at the State level.
      The Central     Area Health Planning        Association,    Inc.,
was incorporated      in January 1968 with the intention            of be-
coming the comprehensive         health-planning      agency   for the
Denver area.      The association,        however, was unable to ob-
tain necessary     funding     and staff     to become an operational
comprehensive    health-planning        agency.
        Subsequently     the association      joined     with the Medical
Technical     Advisory     Committee of the Denver Regional             Council
of Governments       to form the Interim        Advisory     Council    for
Comprehensive      Health Planning       with the primary       objective       of
developing     an application      to the Colorado Office           of Compre-
hensive Health Planning         to establish        a comprehensive       health-
planning    agency for the Denver area.              At the time of our
fieldwork,     the interim    advisory      council    had not completed
its application.
MAP OF HOSPITALSIN DENVERAREA

                                                    KEY
                                       1. ST. LUKE’S          HOSPlTAL
                                   2.     CHILOREN’S           HOSPITAL
                                  3.     ST. JOSEPH           HOSPITAL
                                  4.     PRESBYTERIAN              MEDICAL
                                           CENTER
                                  5.     MERCY       HOSPITAL
                              6.         NATBNAL          JEWISH      HOSPITAL
                              7.         COLORADO          GENERAL
                                           HOSPITAL
                              8.        VETERANS    ADMINISTRATION
                                          HOSPf TAL
                             9.         GENERAL         ROSE     MEMORIAL
                                          HOSPITAL
                            10.         ROCKY    MOUNTAIN            OSTEO.
                                          PATHIC   HOSPITAL
                        11.            FKZSIMONS          GENERAL
                                         HOSPITAL         (ARMY)
                        12. LUTHERAN                     HOSPlTkL         AND
                              MEDICAL                    CENTER
                       13.             BRIGHTON         COMMUNITY
                                         HOSPITAL
                       14.         PORTER           MEMORIAL         HOSPITAL
                       is.         DENVER           GENERAL         HoSPiTAL
                       16.         VALLEY           VIEW HOSPITAL            AND
                                    MEDICAL            CENTER
                       17.         BETH      JSRAEL        HOSPITAL
                       18. biERfc.kN                   MEDICAL       CENTER
                       9.         ST. ANTHONY’S               HOSPITAL
                      20.         SWEDISH          HOSPITAL
                      21.         ST. ANTHONY    HOSPITAL                 NORTH
                                    WDER    CONSTRUCTION)
                                   CHAPTER 2

              PLANNING AND CONSTRUCTION OF HOSPITALS

         According    to the 1971 State plan prepared            by the State
agency, the Denver area will             need 5,770 hospital       beds by
1975.       The bed capacity     of non-Federal        hospitals    in the
Denver area as of December 31, 1969, was 5,667 beds, or 103
beds less than the projected             need.   As of December 31, 1970,
facilities       for 5,851 beds were in operation             or under con-
struction.         We estimated    that,    if current     plans of hospital
officials       were carried    out, the total       bed capacity     by 1975
would be increased         to 6,642 beds, or 872 beds in excess of
the need projected         in the State plan.

       Of the 18 non-Federal        hospitals      in the Denver area, 12
had 1,194 beds in use or available             for use, which complied
with State licensing       requirements       but which did not fully
conform to Hill-Burton         construction      standards.        Most of the
1,194 beds did not conform because the buildings                    in which
the beds were located        did not meet certain           safety require-
ments of the Hill-Burton         construction        standards.      A State
agency inspector     advised us, however, that,              in his opinion,
the 12 facilities     containing       the nonconforming          bed spaces
were safe for patient        care.

         PHS regulations       require   that    nonconforming      bed spaces
be considered        in determining      whether the number of beds in
facilities      in operation        or under construction        is sufficient
to meet current          and future    bed requirements.         The State
plan recognized          that the 1,194 nonconforming           bed spaces
were available         to meet current        and future   patient-care      re-
quirements.

      We noted that hospital       bed capacity  in the Denver area
was increasing,   although     the occupancy rates for many hospi-
tals were low,    We estimated      that the occupancy rates for
Denver area hospitals      averaged about 74 percent during 1969.

PLANNED CHANGES IN BED CAPACITY OF HOSPIT%LS

        In accordance   with     PHS regulations for including      facil-
ities     in the State plan      to meet the need for beds for the
next    5 years,   the State     agency does not consider    planned

                                        8
increases  or decreases    in bed capacity--only          facilities
under construction.      Therefore      we interviewed     hospital                                        offi-
cials and local planning      officials      to determine       plans                                    for
increasing   or decreasing    hospital     bed capacity.

         We were informed        that 11 hospitals          planned to,increase
their     total    bed capacity        by 1,147 beds by 1975 and that two
hospitals       planned to reduce their          total      bed capacity      by 172
beds, or a net increase             of 975 beds.       With regard to the
planned increase           of 1,147 beds, nine hospitals             planned to
expand their        existing     facilities     and two hospitals           were con-
 structing,      or planned to construct,            satellite     facilities     in
suburban Denver.

     Following      is our analysis                              of the projected             changes in
bed capacity--planned      or under                              construction--in             the Denver
area by 1975.

                                                            Increase or                       Planned
                                                Bed         decrease(-)         Bed        increase or   Projected
                                            capacity at        in beds     capacity at     decrease(-)       bed
                                           December 31,        in 1970    December 31,   in beds from    capacity
     Comunitv     and   hoSDitd                1969           (note a)        .ggQ       1971 to 1975    for 1975
Aurora:
      Presbyterian     Medical Center                                                         138            138
Brighton:
      Brighton Community                               69                        69                              69
Dearer:
      Beth Israel                                     140                       140           100            240
      Children~s                                      213                       213                          213
      Colorado General                                379                       379                          379
      Denver General                                  354        -98            256                          256
      General Rose Mmorial                            417                       417           128            545
      Mercy                                           416                       416             6            422
      National    Jewish                              189                       189            65            254
      Porter Memorial                                 245                       245                          245
      Presbyterian     Medical Center                 498                       498                          498
      Rocky Mountain Osteopathic                      188                       188                          188
      St. Anthony's                                   595                       595           -74            521
      St. Joseph                                      621                       621                          621
      St. Luke's                                      453                       453             28           481
Edgewater :
     American Medical Center                           81                        81           100             181
Fnglewood:
      Swedish                                         280                       280           150            430
Thornton :
      Valley View                                     252                       252           150             402
Westminster:
      St. Anthony Hospital     North                             115            115                           115
Wheat Ridge:
      Lutheran                                 -2.72             167                                       444
          Total                                5.667             184          5.851                        6,642
aUnder construction         or completed   in 1970.




                                                             9
UTILIZATION           OF EXISTING              HOSPITAL BEDS
      To measure the utilization         of existing  hospitals     in
the Denver area, we computed the occupancy rate for each of
the 18 non-Federal     hospitals.        On the basis of the average
daily   patient  loads (patient-days        divided  by 365) of hospi-
tals in the area during        calendar    year 1969, we estimated
that the average occupancy rate for the non-Federal                hospi-
tals was about 74 percent.          PHS guidelines    prescribe     an oc-
cupancy factor     of 80 percent      for use in computing      the num-
ber of beds required      in a service      area.
     The following                    table shows the bed capacities  and the oc-
cupancy ratesofthe                       non-Federal hospitals in the Denver area.

                                       Bed Capacities      and Cccupancv Rates
                                               Denver Area HosDitals

                                                              Capacity at               Cccupancy rate (note a)
                                                            January 1. 1970            Percent of      Percent of
                                                        Licensed       S-Y              licensed         survey
          Communitv   and   hoSPitd                     (note b)      (note cl          caoacitv        capacity
     Brighton:
           Brighton    Community                               69            69               61                  61
     Denver:
           Bath Israel                                      144           140                 86                  89
           Children's                                       221           213                 57                  59
           Colorado General                                 450           379                 72                  82
           Denver General                                   311           354                 78                  64
           General Rose Memorial                            400           417                 86                  83
           Mercy                                            368           416                 84                  75
           Rational    Jewish                               180           189                 88                  83
           Porter Memorial                                  264           245                                     83
           Presbyterian     &dical Center                   476           498                 zi                  65
           Rocky Mountain Osteopathic                       177           188                 70                  66
           St. Anthony9s                                    555           595                 70                  65
           St. Joseph                                       534           621                 87                  75
           st. Luke's                                       466           453                 81                  84
     Rdgewater :
           American Radical Center                             85            81               70                  73
     Englewood:
           Swedish                                          252           280                 76                  68
     Thornton:
           Valley View                                      184           252                 89                  65
     Wheat Ridge:
           Lutheran                                      280           277                    91                  22
                                                         5,416         5,667                  77                  74
     aBased on occupancy statistics    for calendar year 1969.
     b Licensed beds represent   the maximum number of beds that                  the State    authorized   the
      hospital  to use.
     'Survey beds represent    the available    capacity determined by the               State agency by apply-
       ing the PRS formula.    This determination      is based primarily on             a minimum requirement
       standard of square footage of usable floor space for each bed.                     Minimum required
        square footage is deCined as 100 square feet for each bed in a                   single room and as at
       least 80 square feet for each bed in a multibed room.
FEDERAL HOSPITALS

       VA and the U.S. Army      each operate a hospital      in the Den-
ver area.     The VA hospital     is a general    medical and surgical
hospital   having a 484-bed      capacity.    During calendar    year
1969 the occupancy rate of        the VA hospital    was 70 percent.

         The U.S. Army hospital,    Fitzsirnons   General Hospital,
has    a capacity   of 1,657 beds.     During calendar    year 1969
the    occupancy rate of this hospital        was 70 percent.    Hospi-
tal    officials  informed   us that plans for a 284-bed addition
were    being formulated.




                                    11
                                                                                     .




                                  CHAPTER 3

                    PLANNING AND CONSTRUCTION OF

                   SKILLED-NURSING-CARE         FACILITIES

        According    to the 1971 State plan, the Denver area will
need 5,984 skilled-nursing-care                beds by 1975.    As of Decem-
ber 31, 1970, facilities              for 6,698 beds were in operation
or under construction.              Local nursing-home     and hospital      of-
ficials     had plans to increase           the bed capacity    of skilled-
nursing-care      facilities        by 2,556 beds by 1975.       If the plans
of these officials           are carried      out, the capacity    of skilled-
nursing-care      facilities        in the Denver area by 1975 will          to-
tal 9,254 beds.           Therefore      we estimate  that by 1975 the Den-
ver area may have 3,270 more skilled-nursing-care                   beds than
the projected       need of 59984.

       According     to PHS guidelines      skilled      nursing  care is
the provision      of 24-hour service       sufficient       to meet the to-
tal nursing      needs of all patients.           This includes    the em-
ployment of at least one registered               professional    nurse re-
sponsible     for the total     nursing    service      and of a registered
nurse or a licensed       practical     nurse in charge of each tour
of duty.

        Of the 55 skilled-nursing-care            facilities        in the Denver
area, 10 had 616 beds in use or available                    for use, which
complied with State licensing             requirements        but which did not
fully    conform to Hill-Burton         construction         standards.     Most
of the 616 beds did not conform because the facilities                       had
not been constructed         of fire-resistant         materials       or because
certain     structural    elements of the facilities              adversely    af-
fected    the functioning      of nursing       and service       units.

         A State agency inspector          informed us that,       in his opin-
ion, the facilities         containing       the nonconforming       bed spaces
were safe for patient         care.      The 1971 State plan stated that
these bed spaces would require               modernization      to conform to
Hill-Burton      standards.       The State plan also recognized,           as
required     by PHS regulations,         that these beds were available
to meet current       and future      patient-care       needs.



                                        12
       On the basis of patient-day      statistics    for calendar
year 1969, we estimated       that the occupancy rate for skilled-
nursing-care   facilities     was 89 percent.      An occupancy rate
of 90 percent    is prescribed     in PHS regulations     for use in
computing the number of beds needed in a service             area.

PUNNED CHANGES IN BED CAPACITY OF
SKILLED-NURSING-CARE FACILITIES

        In accordance with PHS regulations            for including         facil-
ities     in the State plan to meet the need for beds for the
next 5 years, the State agency does not consider                     planned in-
creases or decreases in bed capacity--only                facilities       under
construction.        We interviewed       officials   of 54 of the 55
skilled-nursing-care         facilities       in the Denver area to deter-
mine plans for increasing             or decreasing   bed capacity.

       Our survey indicated        that by 1975 the bed capacity      of
the area's    skilled-nursing-care       facilities  might signifi-
cantly   exceed the need projected         in the 1971 State plan.
In the 1971 State plan, the State agency projected            a total
need for 5,984 beds in the area by 1975.

      As of December 31, 1970, 5,836 skilled-nursing-care
beds were in operation            and'facilities     having a total         capa-
city of 862 beds were under construction,                  local      nursing-
home and hospital        officials       had plans to add 2,556 beds by
1975.     We estimated       that,     if these plans were carried           out,
the total    capacity'of        skilled-nursing-care       facilities        in
the Denver area by 1975 would be increased                 to 9,254 beds,
or 3,270 beds in excess of the 5,984 beds projected                       in the
State plan.




                                         13
                                   CHAPTER4

         CONTROL OVER DEVELOPMENT OF MEDICAL FACILITIES

        If a proposed hospital       or skilled-nursing-care            facility
is to be financed       with a Hill-Burton       grant,      the State agency
must determine      that the project       is needed before         the grant
can be made.      The   Federal Housing      Administration         and   the
Small Business Administration          have instituted          procedures
recently    whereby they will      not provide       financial      assistance
unless the State agency has issued a certificate                    of need,

       The certificate      of need is issued by the State agency
on the basis of the need for the medical facility              as shown
 in the State plan.       In this way the State agency can pre-
vent Federal financial        assistance   for the construction      of
medical facilities       which it considers      to be in excess of
the needs of an area.         As discussed    below, however,    the
State agency issued a certificate          of need in February      1971
for a hospital       for which the need was questionable.

        If a proposed project           is to be financed     privately       and
 if its design and specifications              meet State construction
standards,     the State agency cannot disapprove               the project
even if the facilities           will    be in excess of projected          needs.
Also the Colorado       Office       of Comprehensive     Health     Planning,
which is responsible          for comprehensive       health    planning      at
the State level,       has no effective         means of preventing         the
construction      of facilities        in excess of projected         needs; it
can only recommend that construction               not be undertaken          and
attempt     to persuade project          sponsors to curtail       construction
plans.

        In 1969 a bill         was introduced       in the Colorado General
Assembly,     providing        that a certificate        of public     necessity
would be required          for the construction          of any new hospital
or health     facility       to be licensed       by the State Department
of Health.       A certificate         of public     necessity     also would be
required    for the substantial           modification       of an existing
hospital    or health        facility.

      The bill   provided    that an application  for a certificate
of public   necessity     be made to the State Department of Health
which, after    eliciting    the advice and recommendations      of

                                        14
. ,
  -.   .




           local     and State health-planning           organizations,        would deter-
           mine whether       the proposed      facility     was needed.        The State
           Department     of Health       would not be permitted          to license      a new
           or modified      facility      if the facility       had not first       obtained
           a certificate        of public     necessity.       The legislation       was not
           enacted.

                     We believe        that the lack of an effective                means of pre-
           venting      overconstruction              can result      in the construction         of
           unneeded medical              facilities        in the Denver area.            (See pp. 8
           and 12.)        Facilities             in excess of needs result          in under-
           utilization        of facilities,             and underutilization          generally
           results      in higher          operating      costs for each patient-day.
           Since the Government                  reimburses     hospitals       and skilled-
           nursing-care         facilities           under the Medicare          and Medicaid
           programs,       the Government             can be expected         to share in the
           higher      operating         costs.

           QUESTIONABLE ISSUANCE OF CERTIFICATE                    OF NEED
           FOR PROPOSED HOSPITAL

                  On December 2, 1970, the sponsors          of a proposed     138-
           bed hospital      in suburban Denver applied       to the State     agency
           for a certificate      of need.    The sponsors      anticipated    re-
           questing    the Federal    Housing Administration         to insure   a
           mortgage    of $4,133,263.

                    As discussed     previously     the Federal       Housing Administra-
           tion has instituted          a procedure     recently      whereby       it will
           not provide       mortgage     insurance    unless    the State         agency has
           issued a certificate           of need for a proposed          facility.         The
           decision      to issue a certificate          of need is based on a com-
           parison     of existing      bed capacity      of facilities          (in service
           and under construction)            in a service      area at the time the
           certificate       of need is being considered             with the projected
           need shown in the State plan.

                    On February    18, 1971, the State agency issued       a cer-
           tificate     of need for the proposed        138-bed hospital.     The
           1971 State plan,       prepared    on the basis of data as of Decem-
           ber 31, 1969, showed that the Denver area needed 5,770 hos-
           pitalbeds       by 1975.     The plan showed also      that 5,637 beds
           were in operation        or under construction,      or a net need of
           133 additional       beds.    Because of an error,     however,  the


                                                     15
total   number of beds under construction         at one hospital    was
understated   by 99 beds.      Also construction       of a 115-bed hos-
pital   began in July 1970 and should have been recognized            by
the State agency at the time the certificate             of need was
considered.     Therefore,    at the time the certificate        of need
for the proposed     138-bed hospital      was issued,    5,851 beds
were in operation      or under construction,      or 81 beds more
than the projected      1975 need,

       We brought    this matter      to the attention       of the State
agency and appropriate         Federal   officials.       On March 31, 1971,
the Regional     Director,     Region VIII,       HEW, informed    us that
his staff    was aware of the circumstances            involved    in the
issuance    of the certificate        of need for the proposed        138-
bed hospital     and that his staff       was working       with the State
agency to resolve        this matter,




                                     16
                                      CHAPTER5

                    COORDINATION AMONG ORGANIZATIONS

                     FOR SHARING J9EDICAL FACILITIES

        In a report1      by an advisory        committee to the Secretary
of Health,       Education,    and Welfare on hospital             effectiveness,
it was noted that one of the most promising                     opportunities
for advances in hospital            effectiveness       might be expected            to
result    from the combined efforts             of health-care        institutions,
areawide planning         agencies,     and State licensing           authorities
to encourage and, when necessary,                to demand the development
of cooperative        programs among institutions             for the sharing
of specialized       medical services         and facilities.           The report
stated that planning          agencies and licensing            authorities         must
make decisions        for shared services          on the basis of total             ef-
fectiveness       for the whole population           rather     than on the basis
of institutional         autonomy or the convenience              of individual
physicians.

         Under the provisions            of section     113 of Public           Law 91-
296, which amends the Public Health Service Act, States are
entitled       to receive      Hill-Burton      grant funds up to 90 percent
of a project's           cost if the project        offers       "potential.       for re-
ducing health         care costs through          shared services            among
health      care facilities"          or "through     interfacility           coopera-
tion."'      This legislation,           which increases         Federal      financial
participation          in those projects        which involve          sharing,       should
provide      hospitals       which are seeking Federal grant funds with
an incentive        to share services.

        We obtained     information       on the extent    to which certain
medical facilities         and services        were shared among the Denver
area hospitals.         Our review included         cobalt   and hemodialysis
units,    open-heart-surgery        facilities,      and obstetrical    and
pediatric     beds.     We also examined into the efforts            of Denver


 Secretary's     Advisory Commission on Hospital                     Effectiveness,
 Report,     (Washington, D.C.:   U.S. Government                    Printing     Of-
 fice,   19681, pp. 15 and 16.


                                            17
area hospitals      to reduce operating      costs through cooperative
programs,    such as group purchasing        and the sharing of ad-
ministrative     services.

       F7e noted that no authority        existed   which could control
the establishment      of these specialized        services;     conse-
quently 2 any hospital       could establish      specialized      services
regardless     of the potential      for sharing    existing     facilities.
We believe     that controls     should be established         by State and
local health-planning        agencies over the number of special-
ized services      to be developed      in a community,       to ensure that
the needs of the medical community are met in the most eco-
nomical and effective        manner.

COBALT SERVICES

       At the time of our fieldwork,      six Denver area hospitals
had seven cobalt machines in operation.           The service  of an
eighth machine located     at General Rose Memorial Hospital        was'
discontinued    in July 1969.     The cost of each machine was
estimated    at $40,000,  and the cost of each machine's       energy
source was estimated     at an additional     $40,000;   the energy
source has an approximate     life    of 4 years.

        The following table shows utilization     data for five of
the seven cobalt machines as estimated        by hospital  officials.
We did not obtain utilization    data for equipment at two hos-
pitals.
                                        Number of             Utilization
Hospital                             cobalt machines                 rate

St. Anthony's                                2                60% to 75%
St. Joseph                                   1                       75
Colorado General                             1                       70
Fitzsimons    General    (Army)              1                       41.:

       Two Denver area hospitals       provide    cobalt    therapy    ser-
vices to other hospitals.         During calendar      year 1969 VA paid
the Colorado General Hospital         $28,323 for 130 cobalt         treat-
ments provided    to VA patients.       An official      of Presbyterian
Medical   Center informed us that the center provided               Chil-
dren's Hospital    with approximately        34 cobalt    treatments      a
month.
HEMODIALYSIS      SERVICES

      At the     timeof our fieldwork,       seven non-Federal     hospi-
tals  in the   Denver area provided        hemodialysis  services.
Fitzsimons    General Hospital      has three bemodialysis      units.
Three Denver area hospitals         which did not provide      hemo-
dialysis   services    had plans,    at the time of our fieldwork,
to install    hemodialysis     equipment,     Officials  of several
hospitals   informed     us that the normal capacity       of a hemo-
dialysis   unit was one treatment         each workday.

      Colorado    General Hospital,       which fully     utilizes      its
hemodialysis     machines,   had an agreement to furnish             the VA
hospital    with hemodialysis      services,      During the period
February     to June 1969, VA paid the Colorado General Hospi-
tal $6,718 for chronic       dialysis     service   provided       to a VA
patient.

        General Rose &morial         Hospital,      which has one hemo-
dialysis    machine, had a 44-persent           utilization        rate during
the first     6 months of 1969.         Presbyterian        Medical    Center had
not accumulated       utilization      data for its three hemodialysis
machines.      An offisdal        of the center said, however,            that
two machines were used every day and that the third                      machine
was in a standby capacity.

          Lutheran      Hospital  used its one hemodialysis         machine
only 10 times during 1969.               Rocky    Mountain  Osteopathic     Hos-
pital      has one machine which is owned by a physician.                 No
utilization          data was available,       but we were informed      by hos-
pital      officials      that the machine was used very seldom.
Fitzsimons          General Hospital     provided    us with utilization
data for its three hemodialysis                machines for 4 months during
1970, which showed a utilization                rate of about 83 percent.

OPEN-HEART SURGERY

       Four non-Federal    hospf&ls         and the two Federal     hospi-
tals in the Denver area provgde             apen-heart  surgery.     Offi-
cials   of two hospitals    informed        us that each open-heart-
surgery facility     could accmmodate          one open-heart    procedure
each day.



                                       19
       We obtained         information      on the utilization         of open-
heart-surgery        facilities        at three non-Federal          hospitals.
At St. Luke's Hospital              we were advised that 132 open-heart
procedures      were performed          at the hospital        during 1969.          We
were advised by officials               of Children's       Hospital     that 32
open-heart       procedures       were performed        at the hospital         during
1969.     We were advised also that 87 open-heart                     procedures
were performed         at St.. Joseph Hospital           during fiscal        year
1970.     At a fourth         non-Federal     hospital,       General Rose Memo-
rial   Hospital,       we were advised that a special                operating       room
for cardiac       surgery was completed on March 1, 1970, at a
cost   of $750,000.           We did not obtain utilization              data for
this facility.

       During calendar     year 1969, five open-heart       procedures
were performed     at the VA hospital.        A hospital   official
stated that the case load was about 5 percent             of capacity.
We did not obtain      data on the utilization        of open-heart-
surgery facilities      at Fitzsimons    General Hospital.

OBSTETRICAL SERVICES

       At the time of our fieldwork,              13 non-Federal          hospitals
in the Denver area offered            obstetrical     services.           The aver-
age utilization       of obstetrical       beds in the Denver             area for
1969 was 70 percent;       utilization         rates for the 13           individual
hospitals      ranged from 27 percent to 111 percent.

       Two hospitals       which previously        offered     obstetrical     ser-
vice no longer provide            this service.       In March 1965 Beth
Israel   Hospital     discontinued        its obstetrical       service    because
of the declining         birthrate      in the Denver area and because
of the high cost of continuing               to provide     this service,
Beth Israel     refers      its obstetrical       cases to St. Anthony's
Hospital    for care.         The administrator       of Beth Israel       Hospi-
tal said that the discontinuance                of obstetrical      services    at
his hospital      had resulted        in cumulative      savings of $175,000.

       Presbyterian        Medical Center        discontinued       its obstetrical
service    on July 1, 1969, because              the service       was not finan-
cially    self-supporting.
PEDIATRIC     SERVICES

       Pediatric    services   were offered     by 14 non-Federal      hos-
pitals   in the Denver area.       During 1969 the average utiliza-
tion of pediatric       beds was about 62 percent.        The utiliza-
tion rates for the 14 individual          hospitals   ranged from
6 percent      to 112 percent.

        For a number of years, residents               in pediatrics         at the
University        of Colorado Medical Center received                part of their
training       at Children's      Hospital;    for the past 2 years, the
hospital       and the center shared pediatrics             staff.       In Decem-
ber 1970 Colorado Medical             Center and Children's            Hospital
agreed to share clinical             and professional       facilities        and to
develop a single,          specialized,     comprehensive        pediatric
health      service   to serve the needs of the Rocky Mountain                    re-
gion.      'Officials    were considering        relocating       Children's      Hos-
pital    adjacent     to Colorado Medical          Center;    the estimated
cost of the proposed relocation              was about $30 million.




                                         21
                                                                                                    ,           l

                                                                                        .
                                                                                                .           -

                                                                                                                    .
                                                                                                        .
                                                                                            .
                                                                                                                E




COOPERATIVE EFFORTS OF HEALTH-CARE FACILITIES
FOR SHARING MEDICAL AND--OTHER SERVICES

      Some health-care   facilities       in the Denver area shared,
or planned to share, certain         medical and administrative   ser-
vices to reduce operating        costs and to provide    medical ser-
vices more effectively.

Craig Rehabilitation          Center
and Swedish Hospital

         Craig Rehabilitation             Center and Swedish Hospital        partic-
ipated in what was described                  by area health officials       as the
first     significant       step in Colorado toward areawide compre-
hensive health          planning        by two separate health-care       facili-
ties.       Craig Rehabilitation            Center leased land on the
grounds of Swedish Hospital                 for the construction      of an 80-
bed rehabilitation            facility.        The plan developed     by the fa-
cilities       provided     that they furnish         each other with certain
services      at cost, which would eliminate              the duplication         of
such services.

       The plan provided        also that Swedish Hospital              furnish
 such services     as laboratory,        X-ray,    operating-room,         phar-
macy, food, steam, air-conditioning,                 plant maintenance,          pur-
chasing,    and accounting        services.       Craig Rehabilitation           Cen-
ter would furnish       such services         as physical      therapy,      occu-
pational    therapy,    recreational        therapy,     language and speech
evaluation,      and vocational       counseling.

      The administrator    of Craig Rehabilitation           Center esti-
mated that $1 million    in construction     costs had been saved
because the center did not have to build          facilities       for ser-
vices which were available     from Swedish Hospital.

Swedish    Hospital     and Porter      Memorial    Hospital

        Swedish Hospital       and Porter Memorial        Hospital engaged
hospital    consultants      to suggest means by which the two hos-
pitals    could provide,       singly   or jointly,     the most effective
and efficient      medical-care       services     to southern Denver and
Arapahoe County.



                                         22
.
    L’   -



                Included      in the consultants'           recommendations       were:

                1. Study      the feasibility   of developing              a single       medical
                   staff      for the two hospitals.

                2. Consider  establishing           a hemodialysis          program       in one
                   of the hospitals.

                3. Concentrate  and broaden             emergency-room         services       at
                   Swedish Hospital.

                4. Reorient      emergency-room         facilities        at Porter       Memorial
                   Hospital      to outpatient         surgical       services.

                5. Combine the pediatric            services     of Porter Memorial
                   and Swedish Hospitals            at the earliest      possible  time
                   and consider combining            obstetrical     services.

                6. Analyze the need Esr radiation                    (cobalt)    therapy in
                   the entfre   Denver metropolitan                  area before deciding
                   to establish   radiation  therapy                 capability.

                At the time of our review,     both hospitals       were consid-
         ering the consultants'   reccsmmendations,        The hospitals     were
         considering   also, as a joint    project,     the establishment     of
         an emergency room and an outpatient        f&lity      in southeast
         Denver to serve the medical needs of that area.

         Formation   of Midtown Hospital     Association
                                                     --.__-
         to study hosbital    co& dontrol      and
         improvements$n     quality of patient      ogre

                The Midtown Hospital          AssociatSon,       consisting     of five
         hospitals     and a rehabilitation          facirity      in the Denver area,
         was organized       in August 1967 and became operational                 in July
         1969.     Financial      assistance     to eseablish        the association
         was provided       by HEW md by a privste            foundation.       The pur-
         pose of the association            is to develop approaches          to the
         problems of hospital           cost containment        while continuing       to
         upgrade the quality          of patient     cay@. The association           is de-
         voting    much of its study effort           toward achieving        (1) the
         sharing    of services,        equipment,    and personnel        and (2) the
         combining     of facilities        and services      of member hospitals.


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        The following    projects     have been completed              or under-
taken    by the association       since its inception.

        1. Members share        a combined      credit     union.

        2. Members, as a group, have contracted                     with a collec-
           tion agency to achieve a significant                     reduction   in
           the cost of collection  services.

        3. Members share an electronic              data     processing     unit     and
           a records-microfilming    unit.

        4. Members use common medical              records     forms with the an-
           ticipation      that a combined         medical     records library
           will     be established.

        5. The association      set up an office equipment repair
           team which serves all member hospitals       at a cost
           that is 25 percent less than that of commercial        re- *
           pair service.      Future savings of $140,000 a year are
           considered    possible.

        6. The association         makes the services      of physical ther-
           apists     and clerical     personnel   available    to member
           hospitals.

        7. The association        completed    a study of the home loca-
           tions of patients        who received     care in member hos-
           pitals    and, at the time of our fieldwork,         was con-
           ducting    studies     of the utilization     of emergency and
           pediatric     services    of member hospitals.

         Midtown Hospital          Association        has prepared a master fa-
cility      plan.     The association          anticipates      that the Denver
Urban Renewal Authority              will    make funds available           to create
a hospital        park complex which will              geographically       encompass
all but one of the six institutions                     in the association.
The master plan envisions                a common transportation            system,
common parking         facilities,        and shared medical and supportive
facilities.         The association          anticipates      that funds for
these facilities          can be obtained           from private      enterprise,
Federal assistance             programs,     and member hospitals.



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Group purchasing

       In 1963 eight Colorado hospitals              formed the Commodities
Purchasing       Association     of Colorado     (COPAC) in an effort         to
reduce costs through group purchasing                of goods and services.
In 1969 membership of COPAC increased                to 12 hospitals.         Dur-
ing 1969 purchases by member hospitals                 through COPAC con-
tracts     with manufacturers       and distributors         of hospital    sup-
plies    totaled     $3 million.     COPAC officials         estimated   that
member hospitals          had saved about $460,000 by purchasing
through COPAC.

       At the time of our fieldwork,               17 health-care   facilities
in Colorado,        including    12 facilities         in Denver (10 acute-
care hospitals,          one psychiatric       hospital,    and one rehabili-
tation   facility),         were members of COPAC.




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                                   GLAPTER 6

                                SCOPE OF REVIEW

       We reviewed        the coordination         among Federal     and State
agencies     and local organizations             in planning     and constructing
acute-care     hospitals       and skilled-nursing-care           facilities     in
the Denver area.            We reviewed      the planning     for and construc-
tion of medical facilities              financed     with private       funds or
with Federal      financial       assistance.        We compared the existing
and planned capacity           of acute-care        hospitals    and skilled-
nursing-care      facilities        with the projected        needs determined
by the State agency.             Although      we verified    the mathematical
accuracy of the State agency's computation                    of future      bed
needs, we did not evaluate              the appropriateness         of the method-
ology prescribed          by PHS for use by the State agency in deter-
mining future       bed needs.

      We reviewed        also   the actions  taken to effect  the sharing
of certain    facilities        and equipment among the various   hospi-
tals.

       Information       was developed       primarily         on the basis of dis-
cussions with Federal,            State,    and local officials.           We made
our review at the Colorado Department                    of Health and at Denver
area hospitals,        skilled-nursing-care            facilities,     and other
health    organizations.




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