1 42 U.S.C. §§ 300k-300t (Supp. V 1975). North Carolina, Nebraska, the American Medical Association, and the North Carolina Medical Society brought suit in 1976 to have the National Health Act declared unconstitutional. A three-judge federal district court ruled unanimously that the Act does not invade state sovereignty nor interfere in the private practice of medicine. North Carolina v. Califano, 445 F. Supp. 532 (E.D.N.C. 1977), affd mem., 46 U.S.L.W. 3642 (U.S. April 18, 1978).

2 42 U.S.C. § 300m-2(a)(4)(B) (Supp. V 1975).

3 Id. § 300m(d).

4 1977 Mass. Acts ch. 945.

5 Mass. Gen. Laws Ann. ch. Ill, §§ 25B-25G (West Supp. 1977-1978). The Massachusetts certificate-of-need statute often is referred to as a determination-of-need statute. Determination of need and certification of need are virtually interchangeable terms conveying the same general concept. For an extended description of the Massachusetts statute and its administration, see Bicknell, & Walsh, Critical Experiences in Organizing and Monitoring a State Certificate-of-Need Program: Massachusetts, 91 Pub. Health Rep. 29 (1976)Google Scholar; Reider, Mason, & Glantz, Certificate of Need: The Massachusetts Experience, 1 Am. J. L. & Med. 13 (1975)Google Scholar.

6 This streamlined approach was suggested in discussions of the Massachusetts Task Force on Research and Education Exemptions from Determination of Need, a committee of hospital administrators and state health officials that was convened by the Massachusetts Commissioner of Human Services to determine an appropriate solution to the problem of certificate-of-need review of research and education expenditures. Massachusetts Task Force on Research and Education Exemptions from Determination of Need, Minutes of Aug. 11, 1977 (on file at the Massachusetts Department of Public Health). The Task Force disbanded in fall 1977 without producing final recommendations when the proposed amendment was filed in the Massachusetts legislature as H. 6674, Massachusetts General Court.

7 The term health care facility includes “hospitals, psychiatric hospitals, tuberculosis hospitals, skilled nursing facilities, kidney disease treatment centers, including freestanding hemodialysis units, intermediate care facilities, and ambulatory surgical facilities….” 42 C.F.R. § 100.102 (1977).

8 Mass. Gen. Laws Ann. ch. Ill, § 25C (West Supp. 1977-1978). The statute defines substantial capital expenditures as

Id. §25B, as amended by 1977 Mass. Acts ch. 945. The statute defines substantial change in services as

Id. § 25B. The Massachusetts definition may profitably be compared with the HEW definition of new institutional health services. 42 C.F.R. § 122.304, § 123.404 (1977).

9 Id. § 25B.

10 Massachusetts Department of Public Health Advisory Ruling to Massachusetts General Hospital 6 (Jan. 12, 1977), citing Massachusetts Department of Public Health Advisory Ruling to Harvard University (Aug. 18, 1975) (both rulings on file at the Massachusetts Department of Public Health). Section 12 of the Massachusetts Determination-of-Need Regulations (Nov. 26, 1976) provides that on the request of an interested person or government agency, the Massachusetts Department of Public Health may make an advisory ruling with respect to the applicability to any person, property, or state of facts, of any provision of the Massachusetts Determination-of-Need Regulations or applicable statute (Mass. Gen. Laws Ann. ch. Ill, §§ 25B-25G (West Supp. 1977-1978)), under which the Regulations were adopted. Upon written request, any advisory ruling is reviewable by the Massachusetts Public Health Council.

11 Massachusetts Department of Public Health Advisory Ruling to Massachusetts General Hospital 6 (Jan. 12, 1976), citing Massachusetts Department of Public Health Advisory Ruling to Harvard University (Aug. 18, 1975) (both rulings on file at the Massachusetts Department of Public Health).

12 1977 Mass. Acts ch. 945, § 3.

13 Id.

14 Id. § 6. For the purposes of this Note, it is unnecessary to discuss the operation of the amendment. However, it is worth noting that the amendment raises several interesting questions. For example, how will the state determine whether the assurances are accurate? Can the state ever investigate the assurance or require additional information? What remedies are available for false or inaccurate assurances?

15 42 U.S.C. § 300m(d) (Supp. V 1975).

16 Glantz, The Impact of P.L. 93-641 on the State Certificate of Need Process, Medicolegal News, Summer 1976, at 4Google Scholar.

17 42 U.S.C. § 300Z (Supp. V 1975).

18 Id. § 300m.

19 Id. § 300m-2(a)(4)(B).

20 42 C.F.R. § 122.304 (HSA), § 123.404 (State Agency) (1977). These sections include additional types of new institutional services. However, substantial capital expenditures and changes in services appear to be the categories within which research and education expenditures are most likely to fall.

21 42 U.S.C. § 300n-l(b) (Supp. V 1975).

22 Id. § 300n-l(c).

23 Id. §§ 300k-l(a) to 300k-l(b). These subsections of the statute state:

• (a) The Secretary shall, within eighteen months after January 4, 1975, by regulation issue guidelines concerning national health planning policy and shall, as he deems appropriate, by regulation revise such guidelines. Regulations under this subsection shall be promulgated in accordance with section 553 of Title 5.

• (b) The Secretary shall include in the guidelines issued under subsection (a) of this section the following:

  1. (1)

     (1) Standards respecting the appropriate supply, distribution, and organization of health resources.

  2. (2)

     (2) A statement of national health planning goals developed after consideration of the priorities, set forth in section 1502, which goals, to the maximum extent practicable, shall be expressed in quantitative terms.

24 42 C.F.R. § 100, § 122, § 123 (1977).

25 The first section of the guidelines seeks to assist HSAs in the identification of excess resources. 42 Fed. Reg. 48,502 (1977) (to be codified in 42 C.F.R. § 121).

26 42 U.S.C. § 300n-l (Supp. V 1975). HSAs and State Agencies must follow the procedures and apply the criteria developed by the State Agency in accordance with the regulations.

27 The standard approach to statutory interpretation includes both an analysis of legislative purpose and an examination of explicit language. See Gaylord, An Approach to Statutory Construction, 5 Sw. U.L. Rev. 349, 360 (1973)Google Scholar; de Sloovère, Preliminary Questions in Statutory Interpretation, 9 N.Y.U.L.Q. Rev. 407, 416 (1932)Google Scholar.

28 42 U.S.C. § 300n-l(c) (Supp. V 1975).

29 Id. § 300n-1(c)(7).

30 42 U.S.C. §§ 282-290a (Supp. V 1975) (National Research Institutes).

31 Id. §§ 292b to 295h-9 (Health Research and Teaching Facilities, and Training of Professional Health Personnel).

32 Id. §§ 296 to 298c-7 (Nursing Training).

33 Id. § 300l-2(e)(l)(B). The Senate Report accompanying the National Health Act expresses the view that certain research projects and education projects should not be subject to state review. In light of its placement in the Report, under a section dealing specifically with § 300l-2, relating to specified federal funding programs, this expression of the Senate’s views cannot be interpreted as a limitation on the Act in its entirety. S. Rep. No. 1285, 93rd Cong., 2nd Sess. 50, reprinted in [1974] U.S. Code Cong. & Ad. News 7889.

34 42 U.S.C. § 300Z-2(e)(2) (Supp. V 1975).

35 Id.

36 42 C.F.R. § 122.304 (1977) (HSA review); § 123.404 (State Agency review).

37 Id. § 122.304(a)(2) (HSA); § 123.404(a)(2) (State Agency). The HEW Regulations use the standard accounting definition of capital expenditures. 42 C.F.R. § 122.304(2) (1977). A capital expenditure is defined under general accounting principles as an expenditure for assets whose benefit is to be utilized over a long period of time rather than in the period of acquisition. S. Davidson, I. Schindler, & R. Weil, Fundamentals of Accounting 919 (1975).

38 42 C.F.R. § 122.304(a)(4) (1977) (HSA); § 123.404(a)(4) (State Agency).

39 42 Fed. Reg. 4007 (comments preceding the regulations) (1977).

40 42 C.F.R. § 122.308(a)(l 1) (1977) (HSA); § 123.409(a)(l 1) (State Agency).

41 42 Fed. Reg. 4021 (1977) (comments preceding the regulations). As a result of this balancing process, an HSA or State Agency may approve a research or education expenditure that will increase patient costs if such expenditure is found to be in the national interest.

42 S. Rep. No. 1285, 93rd Cong., 2nd Sess. 40, reprinted in [1974] U.S. Code Cong. & Ad. News 7878.

43 42 U.S.C. § 300k(a)(l) (Supp. V 1975).

44 Act of Aug. 13, 1946, ch. 958, 60 Stat. 1040 (current version embodied in 42 U.S.C. § 300o-t (Supp. V 1975)). For centuries, the construction of hospitals was entirely a matter of local initiative. Churches, and subsequently city governments, built hospitals to serve local needs. Although European nations began some health planning in the early twentieth century, the first attempt at a national health policy in the United States did not occur until 1946 with the Hill-Burton Act. Roemer, The Expanding Scope of Governmental Regulation of Health Care Delivery, 6 U. Tol. L. Rev. 591, 598, 599 (1975)Google Scholar.

45 S. Rep. No. 1285, supra note 42, at 4.

46 Glantz, supra note 16, at 4.

47 Act of Oct. 6, 1965, Pub. L. No. 89-239, tit. IX, 79 Stat. 926.

48 Pub. L. No. 89-749, 80 Stat. 1180.

49 S. Rep. No. 1285, supra note 42, at 13.

50 Glantz, supra note 16, at 5.

51 S. Rep. No. 1285, supra note 42, at 5.

52 Glantz, supra note 16, at 5.

53 See Note, The National Health Planning and Resources Development Act and State Action: A Reappraisal of the Role of Private Health Care Institutions, 57 B.U.L. Rev. 511 (1977)Google Scholar. The author of that Note contends that the comprehensive nature of the Act increases the likelihood that courts will construe private hospital action as state action for fourteenth amendment purposes.

54 The pattern of federal-state administration was established in the Hill-Burton Act. It was continued in most subsequent federal health statutes, with the notable exception of the statute creating Medicare, which is primarily federal. Lewin, Somers, & Somers, State Health Cost Regulation: Structure and Administration, 6 U. Tol. L. Rev. 647, 648 (1975)Google Scholar.

55 The Act establishes fiscal controls through indirect institutional constraints, rather than direct sanctions on physician wages and salaries (admittedly a substantial part of health care costs). Snoke, & Snoke, The State Role in the Regulation of the Health Care Delivery System, 6 U. Tol. L. Rev. 617, 630 (1975)Google Scholar.

56 42 U.S.C. § 300k(b) (Supp. V 1975).

57 Id. § 300k-2(l) to (10).

58 For an extended explanation and critique of the certificate-of-need analysis, see Havighurst, Regulation of Health Facilities and Services by “Certificate of Need,” 59 Va. L. Rev. 1143 (1973).

59 The modernization of existing facilities and the development of more sophisticated techniques appear to be more responsible for recent increases in health care costs than is new construction. See Bromberg, Financing Health Care and the Effect of the Tax Law, Law & Contemp. Prob., Autumn 1975, at 156, 158CrossRefGoogle Scholar. See also Knox, The Business of Medical Care, Boston Globe, May 15, 1977Google Scholar, which analyzes a recent study by Arthur D. Little, Inc. One portion of that study concludes that the momentum of medical technology will persist through 1978, before it begins to decline to a growth rate of about 6 percent a year through 1983.

60 Rice, & Wilson, The American Medical Economy: Problems and Perspectives, 1 J. Health Pol., Pol’v & L. 151, 155 (1976)CrossRefGoogle Scholar.

61 Havighurst, supra note 58, at 1162.

62 For a description of the “Roemer Effect,” see Bice, & Salkever, Certificate of Need Programs: Cure or Cause of Inflated Costs? Hosp. Prog., July 1977, at 65Google Scholar. For a critique of the “Roemer Effect” analysis, see Feldstein, Hospital Cost Inflation: A Study of Non-Profit Price Dynamics, 61 Am. Econ. Rev. 853, 865 (1971)Google Scholar.

63 Lewin, Somers, & Somers, supra note 54, at 651Google Scholar. See generally Kennedy, Preface: Public Concern and Federal Intervention in the Health Care Industry, 70 Nw. U.L. Rev. 1 (1975)Google Scholar.

64 As of June 1976, government alone paid more than 42 percent of all the nation’s health care expenses, an increase of 17 percent in the last decade. Mueller, & Gibson, National Health Expenditures Fiscal Year 1975, Soc. Sec. Bull., April 1976, at 6Google Scholar.

65 Editorial, Wall Street J., May 18, 1977, at 22, col. 1. The editorial refers to an estimate by economist Martin Feldstein that tax deductions for health insurance premiums lower the cost of such insurance by about 30 percent. Feldstein argues that if patients were to pay a substantial portion of their hospital bills out-of-pocket, medical costs soon would come under the control of supply and demand.

66 It has been suggested that one factor influencing a physician’s decision on a particular medical treatment may be the marginal revenue to him for performing the service. See Lave, & Lave, Medical Care and Its Delivery: An Economic Appraisal, 35 Law & Contemp. Prob. 252, 263 (1970)Google Scholar.

67 Recent developments in the health care field indicate that this situation may be changing. A number of articles have appeared in professional journals suggesting that health care institutions utilize competitive marketing techniques. See, e.g., MacStravic, Marketing Health Services: The Challenge of Primary Care, 2 Health Care Management Rev. 9 (1977)Google Scholar. It is apparent that some hospitals already have adopted this approach. “In order to attract patients, some hospitals in Florida have offered discount coupons to local residents and have agreed to pay either ambulance costs for patients delivered to their emergency rooms or Medicare deductibles.” MacStravic, Should Hospitals Market? Hosp. Progress, Aug. 1977, at 56, 58Google Scholar.

68 The original reimbursement formula for Medicare guaranteed that “actual” patient costs would be reimbursed in full, and that hospitals would receive additional payments above “actual” cost. The excess funds generated in this manner were used to increase capital investments, thereby creating a continuous flow of increasing costs in hospital operations. Weiner, “Reasonable Cost” Reimbursement for Inpatient Hospital Services Under Medicare and Medicaid: The Emergence of Public Control, 3 Am. J. L. & Med. 1, 13 (1977)Google Scholar.

69 Rice & Wilson, supra note 60, at 155. One way in which reimbursement formulas may affect medical decision making is shown by a recent study conducted by Pennsylvania Blue Shield. The study demonstrated that when physicians were paid a fixed fee to hospitalize a patient, rather than being reimbursed for each separate hospital visit, the patient’s hospital stay was reduced by as much as 30 percent, and total physician and hospital costs were reduced by about 5 percent. Penn. Blue Shield Research Report 77-5 (March 1977).

70 Lewin, Somers, & Somers, supra note 54, at 647. But see Anderson, Foster, & Weil, Rates and Correlates of Expenditure Increases for Personal Health Services: Pre & Post Medicare and Medicaid, 13 Inquiry 136 (1976)Google Scholar. Although the authors acknowledge that Medicare and Medicaid were largely responsible for increasing costs, they point out that the institution of those programs was accompanied by the acceleration of some trends already taking place in our society, particularly large increases in the use of health services by the poor and by the elderly.

71 Havighurst, and Blumstein, Coping with QualitylCost Trade-Offs in Medical Care—The Role of PSROs, 70 Nw. U. L. Rev. 6, 7 (1975)Google Scholar. The authors point out that increases in medical costs cannot be substantiated by dramatically improved health, as discerned through such indicators as life expectancy. Id. at 11. The percentage of total outlays by government for health care increased from 4.2 percent in 1967 to 7.3 percent in 1972 and to 8.3 percent in 1977. Federal Spending Facts, Council of State Chambers of Commerce Bulletin No. 288 (Feb. 2, 1976).

72 42 Fed. Reg. 4021 (1977).

73 A recent study found that certificate-of-need controls did not affect total hospital investment but merely altered its composition, from beds to equipment and services, thereby cancelling any cost savings. The authors concluded that certificate-of-need review actually may have resulted in higher per capita health care costs. Bice & Salkever, supra note 62, at 65 (1977).

74 A large capital expenditure undertaken as part of a research project could be financed through one of the following ways:

• —the cost could be completely covered by the grant;

• —the cost could be covered by some combination of grant funds and internal hospital or borrowed (non-patient) funds;

• —hospital (non-patient) funds could be used to finance the entire amount.

Massachusetts Rate Setting Commission, Memorandum to DON Task Force on Research and Education from Massachusetts Rate Setting Commission 3 (Sept. 15, 1977) (on file at the Massachusetts Rate Setting Commission).

Massachusetts Task Force, supra note 6, at 3.

76 “There appears to be some question as to a hospital's recognition of depreciation expense on assets financed in whole or in part by federal funds. It is clear that federal projects cannot be charged for use of such assets.” Massachusetts Rate Setting Commission, supra note 74, at 3.

77 See American Heart Association, Heart Association Grant-in-Aid Form 43-021A (Rev. 1975). See also American Cancer Society, Policies Governing Project Grants in Support of Cancer Research (1974).

78 Rice & Wilson, supra note 60, at 156.

79 The American Cancer Society, for example, funds employee benefits for technicians but does not pay for such associated personnel costs as parking garages, cafeterias, and lounges. See American Cancer Society, supra note 77, at 3.

80 See Berry, On Grouping Hospitals for Economic Analysis, 10 Inquiry 5 (1973)Google Scholar, which examines the relationship between availability of facilities and the capacity of a hospital to provide specific patient care services.

81 “[O]nce grant funding (or other) ends, the potential for the project to become a permanent institutional service supported by the facility’s budget is great.” Massachusetts Task Force, supra note 6, at 2 (defining “rollover”).

82 These recommendations do not attempt to define the substantive content of that procedure.

83 The Massachusetts certificate-of-need review procedure subjects the proposed ex-penditure to HSA review, State Agency review, and a vote of the Public Health Council. If the decision of the Council is appealed, the proposal is brought before the Health Facilities Appeals Board, and can eventually receive judicial review. See Mass. Gen. Laws Ann. ch. Ill §§ 25B-25G (West Supp. 1977-1978). For an example of another system, see Tuohey, & McDermott, Comprehensive Health Planning and Procedures: The California Experience, 11 San Diego L. Rev. 353 (1974)Google Scholar.

84 “[T]he state has been able to delay decision on hospital projects for three or more years. During that period the officials demand increasing mounds of supporting paper. Some hospitals have spent literally thousands of dollars just complying with the information required for one project.” Sanders, Mass. Hospitals in Survival Struggle, Boston Herald American, Oct. 10, 1977Google Scholar.

85 42 C.F.R. § 123.408 (1977). This provision authorizes the Secretary of HEW to grant exceptions to the procedures specified in § 123.407 of the regulations, where such exceptions would result in more effective review.

Sanders, Too Many Curbs Hurt Hospitals, Boston Globe, Oct. 5, 1977Google Scholar.

87 Some experts argue that medical research is growing increasingly expensive and diverting significant resources from the delivery of health care services without corresponding improvement in medical technique. See Belgum, Book Review, 89 Harv. L. Rev. 822, 831-32 (1976).