Dr. CAYLOR. I think the whole philosophy, sir, of group practice is different than solo practice of medicine. A man interested in group practice must first of all be willing for a team effort. He can't be an extreme individualist and be in a group practice.

Senator PEARSON. It is one of the real necessary developments we are going to have to have in the years ahead.

Dr. CAYLOR. If we want to keep up with what we want to do. I am sold on it. I am biased. I had my training up in Mayo Clinic. I have been in group practice all my life. The patient gets the breaks instead of paying for four or five overheads and four or five specialists' offices it is all lumped in one place.

We have got one typing room that types up all the doctors' letters: and everything else. It is just a good practice if you want to consider it that way. What does a business do when it gets bigger. Look at all the big firms. Lawyers grouping in a group. Architects and engineers, any of the professions. This is just a natural growth.

Medicine is so sophisticated and the volume of literature is so widethat if I did nothing else but read in my specialty of general surgery I would never have time to see any patients.

Senator PEARSON. Back to my original question. What is it that distinguishes medical clinic in group practices from the individual physician owning a pharmacy?

Dr. CAYLOR. For want of a better answer let me say that group practice is the supermarket of medicine. You can go in a clinic and get anything that you want. The specialty is service, and ENT man service, X-ray, physical therapy, even hospitalization in some places and your drugs that you need. This is just a natural growth of this philosophy of taking care of sick people.

Senator PEARSON. Let me ask you this. Is the general practice that in a given clinic, your clinic or the Wichita Clinic that I am familiar with, an outstanding group of people generally speaking? Do all the doctors in the clinic share in the ownership of the pharmacy if one is connected with the clinic?

Dr. CAYLOR. The pharmacy is just one of the facilities just like the hospital and physical therapy or anything else. Generally speaking, the funds that are obtained from physical therapy, from X-ray, from clinical pathology all go into a pot. We are all paid out of it on a salary or whatever the remuneration basis is.

The pharmacists are all on a salary just like the doctors are. It is all a part of the team efforts trying to deliver the best possible health care to the most people in the cheapest possible way by keeping down the overhead.

Senator PEARSON. So, I take it that if a large number of doctors having an interest in the several departments of the clinic, that the incentive which we have heard so much about of prescribing drugs that may not be needed or allegations that the prices are boosted up that are incentives would not be so strong in a group practice as it may be with an individual situation in an individual pharmacy.

Dr. CAYLOR. I think that is true. Because in group practice it is just like a family almost. You are associated, particularly with the doctors. If you get out of line, you don't get out of line very long or somebody corrects your records. You are watched very closely. It is part of the psychology of the whole effort.

Senator PEARSON. Do you believe the professional regulations, the value under the regulations of the medical profession, the AMA and other organizations have been adequate in this field?

Dr. CAYLOR. Well, it depends on what area in time you are talking about. When I started in group practice, group practice was a baby. We were a pariah. Everybody was asking for individual practice. This was it. But now because of the passage of time and all these other things, group practice is coming into its own as the way to take care of sick people.

Senator PEARSON. Do you have a view as to the physical position taken by AMA and other volunteering regulations within the profession as it relates to this particular situation, this particular problem? Dr. CAYLOR. I agree with the AMA code if that is what you are asking me. I am dumb and I am sure I do not get all the implications of the question.

Senator PEARSON. The limitation is not mine, I didn't make my question clear. I was asking whether or not you agreed that the ethical position adopted by the AMA and any other medical associations that have addressed themselves to this problem.

Dr. CAYLOR. Yes. We are trying to follow the way.
Senator PEARSON. That is all.

Senator HART. Doctor, in reply to Senator Pearson's question, you indicated that you thought in the cases of clinics. the economic interest in prescribing would be less, even though the clinic owned its pharmacy. If that would be the case, then what would be the case if an individual physician owned the pharmacy?

Wouldn't you eliminate entirely any question of conflict in clinic operations such as you have prescribed by simply leasing the space to an independent pharmacist?

Dr. CAYLOR. Well, that depends I think on the local situation and this varies. On an average situation it works out better for all of us to be on a salary. There is nothing wrong with it. The greatest incentive is that a good physician should have is to cure the patient. That is it. It is just that simple. All this other razzmatazz about money and things like that-any doctor that is worth his salt and will work can make a living. Just three things.

Honesty, effort, and intelligence.

Senator HART. Would honesty and effort and intelligence be impeded or diluted if we simply said that you would not own your own pharmacy, but you could have a pharmacy in the clinic operated by an independent pharmacist on a straight leased basis?

Dr. CAYLOR. I don't care how you arrange it. A pharmacy should be in a clinic where the sick people are.

Senator HART. Mr. Cary?

Mr. CARY. I have nothing.

Senator HART. Thank you very much, Doctor.

(The attachments to the statement follow:)

EXCERPTS FROM COMMUNICATIONS SUPPORTING THE POSITION OF THE AMERICAN

ASSOCIATION OF MEDICAL CLINICS

OHIO

"The pharmacists are important members of our total health team. Consider these services which they render to our Medical Staff and our patients:

(a) Frequent informal conferences concerning choice of drugs, drug action, incompatibilities, etc.

(b) Formal conferences on occasion when a pharmacist is invited to discuss the professional pharmacy services with our Medical Staff.

(c) Product identification. Many patients with medication prescribed elsewhere which can only be identified by a professional pharmacist. In cases of overdosage and accidental poisoning this service can be vital.

(d) Dissemination of information concerning cost of drugs to physicians. Physicians are generally ignorant of the cost of prescriptions. Our pharmacist has prepared lists to show the cost of various agents so that more economical prescription writing is possible.

(e) Some degree of standardization of prescription writing has been undertaken so that quantity buying of a smaller number of items can accomplish economies. This is a feature which deserves to be further developed in our Clinic. It does not in any way limit the physician in the range of drugs which he can prescribe, but avoids unnecessary and expensive duplication of identical or highly similar products.

(f) Avoidance of over-long refilling of old refillable prescription in which the need may no longer exist. The pharmacists have easy and direct access to the physicians to determine whether such prescriptions should in fact be refilled. The Clinic pharmacists make such inquiries quite frequently-more often, I believe, than do outside pharmacists.

(g) Although the pharmacy operates on a cash basis, there is no hesitance on the part of the Clinic Staff to request some temporary credit for a prescription urgently needed by a patient who is short of funs. Such a request probably would not be made to an outside pharmacy.

(h) In general, as close associates of the physicians, the pharmacists feel a keen interest in total health care. It is to their personal interest to operate efficiently and keep the cost of prescriptions as low as possible. Theirs is a highly regarded profession and in the Clinic setting their education is not wasted in operating a general store.

Senator Hart, of course, implies that we are all tainted with the same commercialism and urge to exploit our patients as a few peddlers of reducing pills who serve as his horrible examples. Certainly, most of us could find far subtler ways of fleecing our patients if this were our motive. As a surgeon my opportunities are legion, for example, to recommend appendectomy for every bellyache. I do not wish to belabor that point. Let my point out that there are strong economic deterrents to prescribing unnecessary drugs of any sort. As a physician my professional income is derived entirely from fees for services which I and my partners render to our patients. It is largely carried on as a credit service and often the patient is hard pressed to meet all of his expenses. It is to my own self-interest not to prescribe any drug unnecessarily, or to advise any service which is not needed; to do so tends to reduce the available funds for the payment of my professional services. Any small profit I might derive from a prescription item is minuscule, by comparison with the direct earnings from my professional services. In the market place my services are in competition with every good which my patient may need or desire. It is self-defeating to add further to the items which he requires."

SOUTH DAKOTA

"I think the clinic owned pharmacy gives another service during these times when physicians are very difficult to obtain, expecially out of the large city areas. The fact that we do have some additional income makes it possible for us to pay physicians a little higher salary than they would be given if it were not for this added income. The same is true of medical facilities. This added income from the pharmacy helps to maintain higher standards as far as equipment is concerned in these outlining areas. I believe that these are some of the definite advantages of clinic owned pharmacies."

MISSOURI

"We opened our pharmacy in 1946 as a convenience for our patients and as a means by which we could control the amount of refills of potent drugs, particularly, those which might be habit forming, and also a way in checking the cost of these drugs to the individual patients. The pharmacy has made it possible for us to keep the cost of our office calls and other out-patient care down to a minimum. As an example, our average office call runs between $3.00 and $5.00 which is much

lower than the national average. Indigent patients who cannot qualify for either Medicare or Medicaid are furnished drugs without cost.

We have a multi-specialty group and in the rural area in which we live the number of indigent patients and cost care patients are much greater than some of the more industrialized areas. In order to support our multi-specialty group and give the patients the care which we feel they are entitled the pharmacy has become one of the necessary means of supporting both our clinic and hospital."

MINNESOTA

"Our clinic has operated a pharmacy since the founding of the group some fifty years ago; it now appears that well intentioned, but probably ill advised, legislation may force its closing. Upon joining the group some ten years ago, I had some reservations regarding clinic operation of pharmacies, but during the ensuing years have developed some different viewpoints.

There is no doubt in my mind that the pharmacy operation has contributed to the development of a high quality group practice in this particular community. Appropriate usage and fair charges for ancillary services contributes to clinic income and has enabled us to offer specialist services in pediatrics and internal medicine in this community with a fee schedule ($5.00 office call) that is low by national standards. No effort is made to have prescriptions filled at the Clinic pharmacy and it is estimated that only thirty (30) per cent of the prescriptions written by our group physicians are filled by our pharmacists. Thus, the pharmacy is not so productive of income that we will be unable to adjust to that loss; it is likely that closing our pharmacy would require upward adjustment of some of our professional fees. As previously stated, the income of physicians is what remains after overhead expenses; and, although we do not unfairly compete with local pharmacists regarding price structure, our patients benefit indirectly by lower professional fees.

Our clinic is over a mile from the nearest pharmacy. Although this is considerably less than the ten mile limit of the proposed legislation, for many patients who come by bus or taxi, it would add considerable expense and time if they would have to fill prescriptions elsewhere. Several of the more aggressive local pharmacies encourage telephone prescriptions which are then delivered; this practice avoids written prescriptions and involved delivery of the medication by an unknowledgeable delivery boy-both of these being undesirable practices. Also, telephone prescriptions encourage patients to later make request for more telephone prescribing for self-diagnosed illnesses that they believe physicians should be willing to treat without examination.

Not to be overlooked are the professional benefits to the clinic practice by having close association with pharmacists. The ordering and stocking of all pharmaceuticals used in the clinic practice is performed or supervised by trained pharmacists. As well as responsibility for the pharmacy stocks, the pharmacists closely supervise all the narcotics, antibiotics, vaccines, biologicals, and other drugs used in the medical group practice so that they are properly stored and rotated to avoid deterioration or expiration dates of potency. Package inserts of drugs are always available in the event that the prescribing physician should desire more detail. Identification of tablets brought in by patients is usually readily accomplished by pharmacists in the building and often this is of great benefit in managing the patient's problem. Pharmacists and physicians can readily consult on available drugs, costs, quality, and effectiveness.

Any physician exploiting such a situation is likely to exploit his patients in other ways and probably should be curbed by other methods.'

ILLINOIS

"Perhaps two additional points can be made based on our experience at out clinic: First, the doctors and nurses make no effort to direct patients to the clinic pharmacy; those who find it convenient and desirable to have their prescriptions filled there do so. It is clearly stated on the bottom of the clinic's prescription form "This Prescription May Be Filled At Any Pharmacy". Secondly, our doctors write generic names of drugs on their prescriptions with few exceptions. This designation permits our pharmacist to dispense that brand which can be purchased at the most reasonable price and this provides a saving to the patient. We have conducted a survey of the regional drug stores and found that we were filling prescriptions at cost below 28%, equal to 63%, and above 49-480-70—5

9% of other pharmacies. The 9% comprised the . . . chain drug stores in the area. It should be recognized that the chain does not provide such services as free delivery of prescriptions, keeping of family records (important for tax purposes), or charge accounts. Patients have furthermore complained that they have to wait between one half to one hour for prescriptions to be filled, which time I presume the management hopes is spent in making other purchases in the store. It would seem, therefore, that the . . chain policy establishes prescription services as a 'loss leader' with the expectation that general merchandising will more than compensate the loss."

KANSAS

"*** It also is a fact that many of the pharmacies located in the small towns in Kansas do not always maintain drug inventories adequate in quality, quantity or variety, comparable to those maintained by pharmacies associated with clinics."

IOWA

"During the past years we have tried to give our patients every advantage possible. The low income group are given 25% discount on medicines and since we extend credit we have numerous persons who never pay anything and we can open our books to prove this.

*** Because of the added income from the pharmacy, we have been able to keep many of our other charges to the patient lower than average for our area. This supports your policy statement that clinic ownership of the pharmacy helps keep down the total cost of medical care for the patient. For your information I am sending samples of our drug, office, laboratory, and X-ray charges with this letter."

PENNSYLVANIA

"*** it allows better quality of supervision of drugs, plus the fact that a patient can probably get started earlier on his or her medication, and that clinic pharmacies usually have all drugs available which are ordered by their physicians which may not be available in the community pharmacy."

ILLINOIS

"The main value of this clinic pharmacy has been the excellent convenience for our patients, which eliminates another stop to pick up the drugs we have prescribed. It allows us to have rather good control over the drugs and it has been our policy to use nothing but standard American pharmaceutical agents. We have never used any mail order drugs or drugs from any company other than the first line American pharmaceutical firms who are engaged in research and such."

SOUTH DAKOTA

"I firmly believe that the patients benefit in many ways from being able to obtain their prescriptions from a pharmacy within the confines of a medical clinic. His records are readily available as to the medicine he receives. The date of refills are also documented and readily available to the physician and a more competent and careful control of the prescriptions for any particular patient is effected in an efficient manner."

WASHINGTON

"We believe that we are entitled to a fair and reasonable profit from the operation of our pharmacy. Further, that becaues of convenience and many other factors when considering the overall costs to the patients, that the medical clinic with its ancillary services and facilities, including the pharmacy in many instances improve the efficiency of the health care delivery system, and thus, contribute to maintaining reasonable medical and health care costs. It may be well to ask the opponents of clinic owned and operated pharmacies to indicate factually the manner in which they provide drugs and appliances contributes to maintaining costs and aids in improving the efficiency of the medical and health care delivery system. Also, perhaps how by making it unlawful for clinics to own and operate pharmacies, improves the health care system and reduces the cost to the public."