CALIFORNIA COMMITTEE ON REGIONAL MEDICAL PROGRAMS 25 Au@t 1972 C- MacLaggan, M. 0. Paul 0. W,ard Chairman. Mr. James H. Kerr C John Tupper, M. 0. Branch Manager V'vm Chairman DHEW Audit Agency DsvW L Olsscn San Francisco Branch Umlaq-Treasurer 681 Ilarket Street'. Room 609 San Francisco, California 94105 Dear Mr. Kerr: This will acknowledge your letter of August'@7th in which you enclosed a draft copy of the first part of the Audit Report relating to the management of the California R.2. As you ha ve indicated, these findings pertain to an organizational entity composed of the California liedical Education and Re- search Foundation ( @-PF) and the California Committee on 'Regional @fedical Programs (CCI*T, I-.ic.) You have requested our comments regarding these draft documents. No@ll-, we would address our co=.ents to the redo=enda-"ions which appear at the enk-' of each draft; however, since the relationship between CIIIP@T, Inc. -md has played such a prominent role in the preliminary discussions, we believe that it is essential to set forth a historic description of how the CCR:-.,?. Iz CMERF relationship evolved. This history appears to be fundamental to our ensuing comments on other recommendations wnicn you might make. We believe that an accurate description of the past is critical to future ludc7ents an@ developments. 'The California R2-T Program is based upon many volunte-.-y cooperative arr@.-ge- ments, some of which have been set forth precisely in the written record an-@ some of which had been maintained through verbal agreements. When the nitude of these relationships is considered, it is to "he credit of all people involved that thev have functioned so smoothly and amicably. It is 2 we have been able to function in what has been described on several occasions as a highly satisfactory manner. It is our intent to express these agreements as clearly as possible in order that they may function as a backdrop to future decisions that we are required to make. In light of this, I have attempted to .describe in some detail the early historical relationships that developed and pertain essentially to page 1 of the draft enclosed in your August 7th letter. I call particular attention to the last sentence of your first paragraph which states "The Foundation serves as the recipient and disbursing agent of Federal PJW funds and retains the power to overrule any decision or action of CCIL@IP., Inc." This sentence is probably technically correct in a legal sense but is not an accurate-reflection of the relationship that has actually existed between the two organizations. Certain commitments wzre -de between @.IEPF and CC.@ , Inc. We believe'these commitments have been honored to their fullest extent and, as a re- sult, would modify significantly the implications of the above referred to state- ment. Therefore below we have reviewed the historical commitments which are a matter of record, and we have provided our interpretation of their effect. Public Law 89-239 was signed into law on October 6, 1965. Even before the enabling legislation was signed, however, interested parties were meeting together in California to consider the implications of the-proposed program. On June 15, 1965, four months before the law was signed, a meeting of the Deans of the schools of medicine, representatives from the California @ledical Association, and others met in the office of the State Director of Public Health to discuss the possible implementation of this program. Although everl- one present anticipated the passage of the legislation, there was a co=it=ent to pursue the objectives of the program whether or not it passed. Dr. MacLagaan, representing the California.4edical Association, proposed the creation of a statewide planning committee to accomplish in heart disease, cancer and stroke planning what had been done in hospital planning. The group concluded that such a coordinated approach was desirable and that the staff members from the schools and other agencies should get together to plan the next s@eps. Dates were set for future meetings of the Committee, which later became CCRMP, Inc. At that point in time (1965), California enjoyed an unusual insight into the emerging program since one of the staff members of the DeBakey Co=mission which led to the drafting of enablin- legislation to create Regional @ledical Programs was Dr. Borhani, Chief of the Btreau of Cnronic Diseases in the California State Department of Public Health. Dr. Borhani was instrumen a in informing the Committee of the purposes of the new program and he also functioned as staff along with others from the State Department of Public Health to the new Committee. The Committee at this point became known as the California Committee to Consider Implementation of the Recommendations of the President's Commission on Heart Disease, Cancer, and Stroke. Some months later it was incorporated as "The California Coordinating 6o@ttee for Training, Research, Education and Demonstrations in the Fields of Heart Disease, Cancer, Stroke and Related Diseases." This name proved to be unmanageable. Later .he Articles of Incorporation were changed to name the corporation "California Committee on Regional @fedical Programs." To simplify this discussion, we will refer to the organization as CC@T, although this designation came later in its development. CCRMP and its staff group, which became known as the Committee of Staff Consultants, continued to meet in the latter half of 1965. During this ,period they began the development of a statewide planning grant and con- tlnued to enlarge the membership of the organization. The California Hospital Association was the first to be added. Later in the year, the W ifornia Heart Association and the California Division of the American Cancer Society were added, as well as the Deans of the Schools of Public Health, as participating members of the committee. This brought repre- sentation on the Committee up to a total of 18. On September 16, 1965, the Committee had as its guests Dr. William Stewart, who then was Director of the National Heart Institute and later became Surgeon General, and Dr. Stuart Sessoms, Deputy Director of the National Institutes of Health. They outlined the provisions of the Regional Medical Program legislation which was then about to be approved by the Congress. The Committee expressed again its interest in pursuing the goals of the legislation and developing an application to be submitted to the National 'Institutes of Health for a planning grant to develop Regional Medical Programs (then better known as heart disease, cancer and stroke) in Califor- nia. By the time of the next meeting of the Committee, Public Law 89-239 had been signed into law. CCMFP began the consideration of tentative regional boun- daiies and established a subcommittee to draft the application for the plan- ning grant to be submitted to the entire CCZT for its consideration. T% I. -- 1 01 n 9: r, -U- rrnxfn the evolving planning grant application, added to its membership the newly developed School of Medicine at Davis, and then cons idered the question of incorporation into a nonprofit independent organization to carry out the EM program in California. The California State Department of Public Health was asked to act as staff and secretariat to the proposed nonprofit cor- poration and to prepare all documents necessary for incorporation. It was further decided to submit the final draft of the planning grant application ,to Washington as soon as it was fully developed. During the first part of 1966, the Committee continued its refinement of the planning application and the development of the papers necessary for incor- poration. On June 81, 1966, the Secretary of State acknowledged CCRNP as a nonprofit corporation. Earlier, on May 12, 1966, the planning arant appli- cation was submitted to the Division of Regional @ledical Programs for fund- iug. A site visit to review the planning proposal by a committee of the HAtional Advisory Council of DRMP was held on July 14, 1966, in Berkeley. The site visit team considered many pertinent matters, but the end result was that California was designated as a single region and that CCP-MP was to be considered as the applicant agency for planning grants. The original planning grant application had to be modified as a result of the site visit to indicate that California was defined "as a single region for planning" and that CCM.T, which had 18 members at this point, had to be expAnded by 8 advisory members "broadly representative of the public, including labor, Tnanagement, consumer, minority group, and other community interests.to The advisory group members did not become a part of the corporation but when added to the Board of Directors of the corporation the combined groups of people became the Regional Advisory Group to the program. It was decided that those agencies and institutions wishing to participate in the Regional Medical Programs in California would do so by presenting proposals to CCPMP, which would render decisions on them in terms of their applicability to the plan- ning being done by CCMT and its objectives. CCR.@T would then send the applications, along with CCR.NP comments, for consideration by the National Advisory Council and if approved, for funding. On June 30, 1966, the Board of Directors of the California Medical Education and Research Foundation met; as a part of their agenda, the matter of the emerging Regional Medical Programs and-CC@ was discussed. The C, repre- sentatives on CCR.KT discussed the importance of the activities of CCPM and indicated that CMERF should be an active participant in the program. On August 18, 1966, Dr. Nemat Borhani, who had been designated as Coordinator for the emerging Regional Medical Program in California, was informed by tele- phone that the National Advisory Council of DRIIP had recommended award of the amount requested by CCKIP for planning. California had submitted a statewide planning application of $223,400 and an additional request for $2.5 million for contracting with the various medical schools for planning at the Area level. The statewide application was recommended, but the $2.5 million request for contracting was withheld pending further study. It w@'s during this dis-_ cussion that the problem of fiscal responsibility was first noted. The record of the telephone conversation existing at @T offices at the federal level, states that "We then discussed the problem of (CC.@T) as a new nonprofit stitution. Dr.'Borhani said that he had anticipated the need for financial assurances and he would discuss this problem with Dr. Breslow, Director of the California State Department of Health, and officials of the LTniversity of d requesteId specific details from our Grants Cvmeral Accounting office an Mmagement Branch-" 1966, Dr. Borhani received official notifica- In a letter dated August 19 3,000 for planning by CCRMP had been recommended tiou that the amount of $22 maining to the Surgeon General for approval. The letter stated that the re $2.5 million requested would be subject to evidence that the supplemental itutions within the California Region did not reo- grant request made by inst on their art but instead actually coordinated -resent independent actions p ia program for RMP. The latter'pointed efforts emerging through the Californ out the problem of financial accountability of a new nonprofit corporation and made su-,,estions for formal financial backing of the corporation from other sources. CCRMP then referred the matter of financial accountability to its Staff Con- sultant.group. According to the October 3, 1966, minutes of the Staff Con- sultants group, the matter was brushed off lightly with the assurance that it could be handled by securing a bond from an insurance company. The Com=littee advised Dr. Borhani to confer with the Chairman of CCKT and to proceed with the arranging of an appropriate bond. There was reason to believe that this could be accomplished since, by that time, one nonprofit corporation had been established to manace an KT region I-lisconsi a n KT, Inc. had been establi-sned and awarded a grant for planning in September of 1966. Ten Regional @led-Lcal Programs had been funded prior to that but, in each case, the grantee had been an established university or medical school. Wisconsin P@T, Inc. had no funds of its awn and its Board of Directors consisted of three persons --- the two presidents of the universities in Wisconsin, plus a retired insurance executive. 8 This Board of three was ultimately expanded to a much-larger Board but as a Board of three had no problem in securing a'bond that would meet the re- quirements of the granting agency. An insurance group was contacted in order to secure a bond for CCP,@ and arrangements were made for the members of CCRMP to sign the bond at its regular meeting on October 12, 1966. By this @e the planning grant award had been processed, the Surgeon General had been advised of the award, and it was to be made in the group of awards slated for November 1, 1966. According to the minut es of CCPle for October 12 1966, CCPIIP was advise t at it would function as an independent agency and become the sole recipient of funds under the provisions of the planning grant application submitted from California. Dr. Robert Glaser, Dean o.f Stanford Medical School and Chairman of CCRNP, advised the Committee of its responsibilities in processing, re- viewing, and funding proposals throughout the state. October 12, 1966, proved to be one of the more crucial meetings of CCRMP because then the question of financial responsibility for the funds was raised. A telegram from Dr. Ro ert Marston, Associate Director of NIH and Director of DMT, stated that "Supple- ments to a planning grant must be made to a grantee who assumes the same res- ponsibilities involved in the initial grant." This indicated that the sil-q for which CCPIT would be responsible could grow into a substantial amount. When the discussion of the insurance bond came up, the members of CCKT pro- ceeded to sign the pre-arranged bond. Representatives of the insurance co=- pany appeared and proceeded with the necessary signatures. According to the minutes of the meeting of that date, during the discussion with the insurance company representatives, it became apparent that the bond was not to be an insurance bond, but a liability, requiring commitment from Committee members 9 to repay the insurance company up to the total amount underwritten ($100,000) in case of mismanagement." After that discussion, it was decided that the @ers of the Committee could not sign such a document on their own or on behalf of their institutions, which fact seemed, at that point in time, to make them or their institutions liable for the amount of the grant. It was then decided that the lawyers of the California Medical Association, the ,California Hospital Association, and the University of California should discuss the matter further and contact Dr. Harston's office to find a solution to the question of fiscal responsibility. There is an asterisk in those minutes of October 12, 1966, which refer to an explanation later added to the minutes. This explanation states: "After the meeting of October 12, this subject was discussed by the attorneys and the ultimate solution found was to ask the California Medical Education and Research Foundation of the California Nf.edical Association to serve as Fiscal 'Mgent for the California Com.=ttee. This was brou-ht to the attention of the me@-ers of the California Committee (CCKT), who gave their approval. Subsecuently; the Division of Regional @ledical Progra---s was contacted, which also approved of the solution. The face sheet of the crant application was thus revised and mailed to Washinaton for review a- deration. Under this new ar- c id cons rangement, the California @l.edical Education.and .research Foundation three tim reports he area offices on a monthly vides data based on expenditure reports fromt onsideri-ng methods basis. Our Regional Evaluators Committee is currently C s de- of structuring and streamlining fiscal and program reporting and i current reporting form. veloping an improved instrument to replace ou f effective planning$ budgeting We continue to believe that the development 0 ffices and must tale into ac- and reporting systems must involve our area o ources. '-As a result; we have undertaken the develop- count their needs and res f placing useful in- ment of a rational system that assumes the necessity 0 formation in the hands of responsible managers at all levels. Very truly yours,