Full text of "Health care opportunities for minorities : hearing before the Subcommittee on Minority Enterprise, Finance, and Urban Development of the Committee on Small Business, House of Representatives, One Hundred Third Congress, first session, Washington, DC, November 9, 1993"

% HEA LTH CARE OPPORTUNITIES FOR MINORITIES

Y4.Sf1 1:103-58

Health Care Opportunities for flinor...

HEARING

BEFORE THE

SUBCOMMITTEE ON MINORITY ENTERPRISE,
FINANCE, AND URBAN DEVELOPMENT

OF THE

COMMITTEE ON SMALL BUSINESS
•HOUSE OF REPRESENTATIVES

ONE HUNDRED THIRD CONGRESS
FIRST SESSION

WASHINGTON, DC. NOVEMBER 9, 1993

Printed for the use of the Committee on Small Business

Serial No. 103-58

SEP Mi

U.S. GOVERNMENT PRINTING OFFICE
74-197 CC WASHINGTON : 1994

For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
ISBN 0-16-044720-8

'\{\ ' HEAL TH CARE OPPORTUNITIES FOR MINORITIES

Y 4. SM 1:103-58

Health Care Opportunities for Hinor...

HEARING

BEFORE THE

SUBCOMMITTEE ON MINORITY ENTERPRISE,
FINANCE, AND URBAN DEVELOPMENT

OF THE

COMMITTEE ON SMALL BUSINESS
HOUSE OF REPRESENTATIVES

ONE HUNDRED THIRD CONGRESS

FIRST SESSION

WASHINGTON, DC, NOVEMBER 9, 1993

Printed for the use of the Committee on Small Business

Serial No. 103-58

SEP \k

.^1 '•fe.'>T|-

U.S. GOVERNMENT PRINTING OFFICE
74-197 CC WASHINGTON : 1994

For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
ISBN 0-16-044720-8

COMMITTEE ON SMALL BUSINESS

JOHN J. LaFALCE, New York, Chairman

JAN MEYERS, Kansas

LARRY COMBEST, Texas

RICHARD H. BAKER, Louisiana

JOEL HEFLEY, Colorado

RONALD K. MACHTLEY, Rhode Island

JIM RAMSTAD, Minnesota

SAM JOHNSON, Texas

WILLIAM H. ZELIFF, JR., New Hampshire

MICHAEL A. "MAC" COLLINS, Geoiigia

SCOTT McINNIS, Colorado

MICHAEL HUFFINGTON, California

JAMES M. TALENT, Missouri

JOE KNOLLENBERG, Michigan

JAY DICKEY, Arkansas

JAY KIM, California

DONALD A. MANZULLO, Illinois

PETER G. TORKILDSEN, Massachusetts

ROB PORTMAN, Ohio

NEAL SMITH, Iowa

IKE SKELTON, Missouri

ROMANO L. MAZZOLI, Kentucky

RON WYDEN, Oregon

NORMAN SISISKY, Vii^nia

JOHN CONYERS, JR., Michigan

JAMES H. BILBRAY, Nevada

KWEISI MFUME, Maryland

FLOYD H. FLAKE, New York

BILL SARPALIUS, Texas

GLENN POSHARD, Illinois

EVA M. CLAYTON, North Carolina

MARTIN T. MEEHAN, Massachusetts

PAT DANNER, Missouri

TED STRICKLAND, Ohio

NYDIA M. VELAZQUEZ, New York

CLEO FIELDS, Louisiana

MARJORIE MARGOLIES-MEZVINSKY,

Pennsylvania
WALTER R. TUCKER III, California
RON KLINK, Pennsylvania
LUCILLE ROYBALrALLARD, California
EARL F. HILLIARD, Alabama
H. MARTIN LANCASTER, North Carolina
THOMAS H. ANDREWS, Maine
MAXINE WATERS, California
BENNIE G. THOMPSON, Mississippi

Jeanne M. Roslanowick, Staff Director
Steven Lynch, Minority Staff Director

Subcommittee on Minority Enterprise, Finance, and Urban Deveix)pment

KWEISI MFUME, Maryland Chairman

JOHN CONYERS, JR., Michigan
FLOYD H. FLAKE, New York
NYDIA M. VELAZQUEZ, New York
WALTER R. TUCKER III, California
CLEO FIELDS, Louisiana
LUCILLE ROYBAL-ALLARD, California
EARL F. HILLIARD, Alabama

RONALD K. MACHTLEY, Rhode Island
JAMES M. TALENT, Missouri
JOE KNOLLENBERG, Michigan
JAY DICKEY, Arkansas

Bruce Gamble, Subcommittee Staff Director
Skip Leonard, Minority Subcommittee Professional Staff Member

(II)

CONTENTS

Page

Heanng held on November 9, 1993 1

WITNESSES

Tuesday, November 9, 1993

Broadnax, Walter, Deputy Secretary, U.S. Department of Health and Human
Services accompanied by Veri Anders, Deputy Director, Office of Small

and Disadvantaged Business Utilization 15

Cooper, Warren 0., president, ACCU-LAB Medical Testing 27

Fountain, George L. Jr., Vice president, Distric Scientific and Medical Supply

Inc 24

Gutierrez, Hon. Luis V., A Representative in Congress from the State of

Dlinois 8

Lawrence, Leonard E., president. National Medical Association 21

Stokes, Hon. Louis, A Representative in Congress from the State of Ohio 6

APPENDIX

Opening statements:

Machtley, Hon. Ronald K 49

Mfume, Hon. Kweisi 36

Roybal-AUard, Hon. Lucille 48

Serrano, Hon. Jose E 41

Prepared statements:

Broadnax, Walter 54

Cooper, Warren 99

Fountain, George L. Jr 82

Lawrence, Leonard E 75

Stokes, Hon. Louis 112

Additional material submitted for the record:

Coleman, Rudolph A 136

Dalton, David L 140

Raffel, Bruce ^ 145

WilUams, Pemell J 117

(III)

HEALTH CARE OPPORTUNITIES FOR

MINORITIES

TUESDAY, NOVEMBER 9, 1993

House of Representatives,
Subcommittee on Minority Enterprise,

Finance, and Urban Development,

Committee on Small Business,

Washington, DC.

The subcommittee met, pursuant to notice, at 11:20 a.m., in room
2359-A, Ravbum House Office Building, Hon. Kweisi Mfume
(chairman oi the subcommittee) presiding.

Chairman Mfume. Ladies and gentlemen, the subcommittee
hearing will come to order.

I am going to say good morning and thanks to those of you who
have waited because of the delay cause by the vote. I would like
to welcome those members of the subcommittee who will be coming
back from that vote, as well as our distinguished witnesses and
those of you in the audience.

Today, the subcommittee will take up an issue that has been the
topic of much debate and controversy since President Clinton's na-
tional address on September 22. That issue is national health care
reform.

Not since the New Deal has a President proposed such a grand
plan that appears to offer so much to so many. The debate over this
plan, however, has generated, as most of you know, acclamation as
it has criticism partly because of the details of the legislative pro-
posal, details that have not yet been totally released or worked out.

Meanwhile, the Congress has been engaged in the consideration
of a broad range of proposals to control the growth in health care
spending, which is at the center of the debate. Another fundamen-
tal element in this debate is the issue of how to expand health care
access for an estimated 36 million uninsured Americans and a
large number of underinsured, without, at the same time, fueling
inflation in health care costs and without imposing significant cost
on the Federal or State governments.

It should be noted that the Federal Gk)vernment now spends 42
cents out of every health care dollar. There are a lot of different
estimations as to what that is being spent on.

But it is fair so say that all sectors of the health care industry
hope to influence the shape and the scope of the President's plan
to address their individual concerns and are currently staking out
positions for the strugg:le that lies ahead in the months to come.
The distinct and, oftentimes, divergent interests surrounding these
debates is not surprising when one takes time to consider that the

(1)

President's plan could lead to a massive redistribution of income
among American workers and businesses within the estimated
$800 billion health care industry.

Many of my colleagues and myself believe that the hallmark of
any health care package should be quality coverage for every citi-
zen that is accessible and affordable.

To paraphrase one writer, the quality of our lives is best meas-
ured by how the poor and disenfranchised among us are treated.
Accordingly, many of us have challenged any proposal that makes
low- and fixed-income elderly citizens to be forced into a position
where they have to choose between copayments for health care and
meals and other sustenances necessary for their basic survival.

As I mentioned earlier, the debates surrounding health care have
been focused on the need to contain medical-related costs and how
to expand health care access.

When we examined the current variety of health care reform pro-
posals, I, like perhaps some of you, see little evidence that that con-
sideration is being given, particularly to minority communities be-
yond health care status and beyond its role as an ultimate
consumer of health care services, which many in the minority com-
munity are.

We have not seen yet any manifest regard for Hispanic Amer-
ican, African -American, or Native American primary care physi-
cians and those practitioners, insurers, managed care organiza-
tions, generic drug makers and distributors and others, frankly,
that are involved in this massive undertaking where the Federal
Government plays such a large and such an overwhelmingly criti-
cal role. n u •

In addition to concerns about the potential costs that will be im-
posed on minority-owned small businesses, this subcommittee is
also concerned about the potential for managed competition propos-
als and others to limit, by exclusion, opportunities for minority pro-
viders or suppliers of health care services to be able to participate
in a meaningful fashion in the day-to-day operations of a national
health care system.

While many questions and many details concerning the imple-
mentation of a national care system still remain unresolved, many
of us believe that we should at least recognize the courage exhib-
ited by this President and the First Lady to bring this issue to the
forefront of our current political debate.

Far too often I think it is fair to say that, as a Nation, we tend
to permit major problems to grow unrestrained while we remain
paralyzed by their complexity. Someone once called it "analysis
that causes paralysis." Since all of the elements of this multibillion
dollar health care industry are delicately intertwined and require
proper balance, it is imperative that we build into any comprehen-
sive reform measure an obligatory and effective mechanism for in-
clusion of minorities and every facet to be able to expand health
care coverage in such a way that we really make it available to all
of our citizens.

So that, ladies and gentlemen, really is the focus of our hearing
today and what we hope to do. The testimony that we receive today
we expect will help to undergird our intent to ensure that future

debates on national health care reform address the entire range of
economic interests of the minority community.

The subcommittee is quite honored, I should say, to welcome two
of our distinguished colleagues who are here today and present to
outline, in their own way, their respective proposals for national
health care reform that contemplates a broad range of health care
needs of the minority community.

We are also pleased to have the Deputy Secretary of the U.S. De-
partment of Health and Human Services who has been invited, like
others, to share with us in this instance the commitment of that
specific agency to the participation of minority businesses in the
framework of health care reform and more generally within the
overall mission of the Department.

Finally we will hear from the President of the oldest African-
American physicians group in the United States and representa-
tives of a medical testing and medical supply company.

Before I take a moment to introduce our two distinguished wit-
nesses, I would advise Members that we will proceed today under
the 5-minute rule.

Witnesses are further advised that your full statement shall be
printed in its entirety in the official hearing record and that record
will be kept open for 5 legislative days to permit testimony from
individuals not yet present and to allow Members also to revise
and extend their remarks.

At this time, I would yield to the Ranking Minority Member of
the subcommittee, the Honorable Ron Machtley, for opening re-
marks.

[Chairman Mfume's statement may be found in the appendix.]

Mr. Machtley. Thank you Mr. Chairman. I am pleased to be
here and very appreciative of this hearing and our colleagues and
others who will testify.

As we as a Nation begin to debate and look at the issues related
to health care, it is particularly important that we understand how
these changes affect the small businesses, minorities, and other
segments of our Nation. Mandated costs and higher taxes may not
be the answer to our health care dilemma if, in fact, it means that
fewer people are able to participate in full employment in this Na-
tion.

Since two-thirds of our businesses in the United States are small
firms, it seems to me that we cannot force unreasonable costs and
regulations on these job generators without having a reciprocal loss
of jobs. While these issues are being debated, there is another im-
portant issue that has been often overlooked, the effects of health
care reform as it relates to minority enterprises within the health
care industry and as health care relates to minorities in general.

This is an issue that will not often attract public attention, but
it is an important one that we ought to address. I commend the
Chairman for holding this hearing this early in the debate on
health care. This morning our focus is to center on the problem of
minority business participation within the health care industry;
but, nevertheless, we should also focus on what will be the impact,
particularly from urban areas of some of these changes. As an ex-
ample, within the United States, there are only approximately

seven minority-owned HMO's. Less than 3 percent of the physi-
cians in this Nation are minorities.

An industry that generates $800 bilHon a year, the lack of minor-
ity participation should be considered not only from a health care
standpoint but from a jobs standpoint. During my preparation for
this hearing, it became clear to me and to those who were working
with me that there is, frankly, very little information available on
the participation of minority-owned enterprises within the health
care industry.

I am concerned that such limited information will, in fact, not
permit us to begin a debate on how to encourage minorities to par-
ticipate in the health care industry.

This hearing today, I hope, will provide us more information and
will also open up the spectrum so that others will gather informa-
tion that will be increasingly important to us. Increasing the num-
ber of minority-owned enterprises within the health care industry
is extremely important.

Two thoughts come to mind. If we take into account that most
minority small businesses are located in urban areas where Medic-
aid recipients are highest, then the creation of minority-owned
small health care enterprises will certainly benefit those who are
able to participate in the ownership but also those who are able to
participate as receivers of the health care services.

Job creation is second. It is an important benefit. In my home
State of Rhode Island, the health industry is the fastest growing
segment of our economy. I think we should make sure that all of
our people in this country are able to access that growth and that
jobs are, in fact, available to minorities in the growth that we an-
ticipate.

I am anxious and look forward to the testimony today, and I
hope that it will shed more light on how we can ensure a full serv-
ice health care delivery system that takes care of all Americans as
well as how we can have more minority-owned enterprises in the
delivery of that service.

Thank you, Mr. Chairman.

Chairman Mfume. Thank you. .

We have been joined by Mr. Conyers of Michigan. The Chair
would ask if Mr. Conyers has any opening statements before I in-
troduce the first panel.

Mr. Conyers. Thank you very much, Mr. Chairman. I am de-
lighted that we are here. This part of health care reform is one
that has been neglected, except for in the Congressional Black Cau-
cus, Louis Stokes has been manning the health care area for many,
many years. We are delighted that, across the years, he has mar-
shalled together the medical authorities, the paraprofessionals, and
those that support equity in our health care system for many,
many years. We are delighted that he is joined by our distin-
guished friend from Illinois, who has also worked in his area with
great diligence. . .

It talking about the minorities and health care, we now join in
the national debate on an area that has been very, very long ig-
nored, r. V XT

It is a pleasure to know that the present president of the Na-
tional Medical Association, Dr. Lawrence, is with us today to join

in with that discussion as the major sponsor of the most popular
bill in the House. We should come very directly to the point that
battle being developed here has several sectors. One of them is, will
the powerful institutions in health care delivery, which are larger
than the Pentagon, than the military lobbies, one out of seven peo-

Ele are connected with health care. It is a trillion dollar annual
usiness. More than 40 million people have not got a nickel's worth
of insurance.

The tragedies inside our city can be measured almost by the de-
gree of the dislocation of health services that are available. People
getting their health care out of engineer rooms. We all know the
stories, and we will hear more about them.

But this is a wonderful opportunity for us to begin this examina-
tion of not only how America fits in but how we get up to par. So
it goes beyond as important delivery health care to every American
is, it goes to the question of who is going to deliver health care and
who is going to be trained and what are the circumstances; and
where can the public health model be reclaimed; and how can we
deliver services to beleaguered communities.

I congratulate you on putting together a more representative
panel to begin in discussion.

Chairman Mfume. Thank you very much, Mr. Conyers.

As the Chair noted earlier, we are particularly happy to have
with us this morning Lou Stokes of Ohio and Luis Gutierrez of Illi-
nois.

Mr. Stokes is a senior Member of the House of Representatives,
one of our more distinguished Members. He serves, as many of you
know, on the Appropriations Committee where he Chairs a sub-
committee of that full committee.

Mr. Stokes has served as Chairman of the House Ethics Commit-
tee. He has been called upon by previous Speakers of the House to
serve on the Intelligence Committee.

In crucial times facing this country and facing this Nation, often-
times it was Lou Stokes who was singled out among so many of
us to take up very difficult and responsive tasks.

He was a founding member of the Congressional Black Caucus.
Called upon to help this Nation wrestle with the assassination of
President Kennedy and to do the proper research and background
work affiliated with looking at that tragic issue and reporting back
to our country.

The same holds true with his service as a member of the Iran
Contra team and a number of other delicate and sensitive matters
upon which he has been called upon to provide his leadership.

Mr. Conyers is absolutely correct when he talks about the num-
ber of years that Mr. Stokes has dedicated to the issue of health
care, long before it ever got on anybody's radar screen. So we are
extremely happy to have Lou Stokes here on this first panel to
offer his testimony this morning. We welcome it. We look forward
to it.

We are particularly happy to have with us Luis Gutierrez of Illi-
nois, a member of the House Banking Committee, a member of the
Hispanic Caucus, one of the brightest stars in the freshman class
and one who has begun to distinguish himself in the House of Rep-
resentatives.

Leadership that he has given so long to the city council in Chi-
cago is now leadership that our Nation benefits from.

Thank you for — because of your difficult schedules, for being with
us. Mr. Stokes, proceed in any manner that you see fit.

STATEMENT OF HON. LOUIS STOKES, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OHIO

Mr. Stokes. Thank you, Mr. Chairman.

Mr. Chairman, Mr. Machtley, and Chairman Conyers, it is, in-
deed, an honor and a great privilege for me to appear before you
this morning. Mr. Chairman, I appreciate that opportunity, be-
cause of your great Chairmanship of the subcommittee. I also ap-
preciate the great leadership that you give as Chairman of the
Congressional Black Caucus, here in the Congress, an organization
that I am proud to be a member of under your leadership.

Also, I am very pleased to be here with Mr. Gutierrez as co-pan-
elist.

Mr. Chairman, I will summarize my statement, and ask that my
formal statement be entered into the record in its entirety.

I appear before the subcommittee this morning to discuss a very
pressing national issue: Health care reform and, more specifically,
minority participation in the resulting health care industry enter-
prise.

As Chairman of the Congressional Black Caucus Health Brain
Trust and as a member of the Appropriations Subcommittee on
Labor, Health, and Human Services and Education, I would also
like to take this opportunity to thank you for the cooperation and
assistance you have afforded my advocacy to help bring health care
to the forefront and to help ensure minorities' fullest participation
in the Nation's health care enterprise at all levels.

The reform of our Nation's health care system affects each and
every one of us individually, collectively, personally, and profes-
sionally. As our Nation stands poised to effect major changes in the
health care delivery system, whether the legislation which gets en-
acted, mirrors single-payer, or managed computation or some mix-
ture thereof, to be effective in addressing the health care needs of
Airican -Americans, it is vital that the legislation includes provi-
sions for the expansion, strengthening and enhancement of the mi-
nority health enterprise.

It must be recognized that minority health professionals have an
intimate knowledge about the large segments of the African-Amer-
ican and minority communities that have been abandoned to suffer
high mortality rates, shortened life expectancy, debilitating pov-
erty, disability and disillusionment, frustration and loss of hope.

Minority health care professionals are in the trenches every day
diagnosing, treating, serving, and counseling underserved popu-
lations across the Nation, urban as well as rural.

Mr. Chairman and members of the subcommittee, I am sure that
you would agree that having universal health insurance, in and of
itself, does not guarantee the actual receipt of quality comprehen-
sive care for all Americans.

I would like to also mention the Minority Health Improvement
Act of 1993, that I will be introducing in the next few weeks. That
bill is the reauthorization of my original Disadvantaged Minority

Health Improvement Act of 1990 bill, and it is designed to help ad-
dress the minority health crisis.

I want to express my appreciation to Chairman Conyers who,
along with Chairman Waxman, brought that bill to the floor in
1990, enacted it into law, and made it possible for that to be the
law of the land today.

What is key to addressing the health care crisis is the enactment
of a comprehensive health care reform bill to ensure quality, acces-
sible, affordable, and comprehensive health care for all Americans.

What is equally crucial to alleviating the dire minority health
care crisis is full participation of minorities in the health care en-
terprise at all levels. It is vital that we realize that health care re-
form is evolving against a reported backdrop of minority-owned
HMO's and other health care organizations, extracting patients
from African-American health care providers. As a result, minority
health care providers are losing their practice at an alarming rate.
This situation will only ensure the continuation of the minority

health care crisis. . .

Mr. Chairman and members of the subcommittee, as the crisis
of minority health continues, the enacted health care reform legis-
lation must include provisions to ensure minorities have a level
playing field, to strengthen Historically Black Colleges and Univer-
sities, to ensure the viability of African-American HMO's and the
few remaining African-American hospitals. We are down to about
11 African-American hospitals in the entire Nation today between
1961 and 1988, some 57 closed. As Mr. Machtley mentioned, there
are only seven African-American HMO's in the entire Nation.

We also need to ensure an adequate supply of minority health
care professionals, not only minority primary care providers but
specialists as well.

Additionally, it is absolutely paramount that the entrepreneurial
opportunities of health care reform not be overlooked. They include
a vast array of health careers and entrepreneurial opportunities
ranging from African-American health plans and networks, to test-
ing laboratories, to health information systems. To level the play-
ing field in an effort to ensure that these and similar entrepreneur-
ial opportunities become business realities for minorities, there
must be built in protections for minorities on a set-aside type of

Equally important as the minority health crisis remains, enacted
reform legislation must not allow malpractice to be disguised as
discrimination. It must include provisions to ensure minority con-
sumers and health care providers active involvement at all levels
of regional alliances, as well as the national boards, commissions
and councils.

As our Nation further embarks upon health care reform, minor-
ity involvement will become even more crucial. The solutions to
health care reform are complex, but they are not impossible. The
challenges, it seems to me, are ours, for health care is not a right
for some Americans; it is a right for all Americans.

I thank you for the privilege of testifying and would be pleased
to answer any questions.

Chairman Mfume. Thank you.

Mr. Gutierrez.

STATEMENT OF HON. LUIS V. GUTIERREZ, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF ILLINOIS

Mr. Gutierrez. I come before you as the Chairman of the Con-
gressional Hispanic Caucus and Health Judiciary Task Force
Chairman to represent Congressman Serrano, the Chairman of the
caucus who regretted that he cannot be here with you today.

Mr. Chairman, I appreciate the opportunity to testify on the di-
rection of health care reform and how it must be taken to improve
health care infrastructure and manpower in the Hispanic commu-
nities.

The testimony today will focus on the following Hispanic health
service and needs: The need for infrastructure and manpower de-
velopment in the Hispanic community and the responsiveness of
the Department of Health and Human Services to the needs of His-

panics.

No single group is more negatively affected by the health care
crisis than Hispanics, one out of three lacks health care coverage
in this Nation. That is more than any other major group.

In 1992, Mr. Chairman, a staggering 44 percent of employed His-
panic males between the ages of 16 and 64 were uninsured, com-
pared to 32 percent of African-Americans and 18 percent of white
males.

What is more, their working poor status often makes them ineli-
gible for public coverage through Medicaid.

Hispanic children are uninsured at twice the rate of other chil-
dren. Hispanic elderly are the least likely in their age group to
have health insurance coverage through Medicare.

Providing health insurance coverage may be the single most im-
portant stroke to lifting many Hispanic working families and indi-
viduals from poverty. Many preventable diseases such as diabetes,
tuberculosis, AIDS, and certain cancers are major killers of His-
panics; although, early treatment could remedy the situation.

According to a 1991 article in the Journal of the American Medi-
cal Association, Hispanics have the lowest level of medical and
mental health care utilization in the country.

Aside from improvements needed in financing comprehensive
health services and assuring basic health care for all Americans,
the vitality of community-based health care delivery systems and
availability of physicians affects Hispanic access to health care.

In April, the Hispanic Caucus adopted health care reform prin-
ciples. One states that a reformed health care system must improve
and enhance medical teaching hospitals, solo practitioners, health
maintenance organization, community health centers, and other
community-based health clinics that serve Hispanics and other un-
derserved population.

A second principle calls for greater minority access to medical
education and creation of incentives to increase the number of bi-
lingual and bicultural primary physicians and other health care
providers.

The GAO, in January 1992, to give you an example, Mr. Chair-
man, reported in El Paso, Texas— where Hispanics represent about
75 percent of the population— only 30 of the city's 800 doctors
maintained practice in the poorest parts of the city. That means

that 4 percent of the city's physicians served 32 percent of El
Paso's population.

Many Hispanics and disadvantages communities currently obtain
health care through a fragile network of providers. Hispanic com-
munities are in need of linguistically and culturally appropriate
services. Indeed, the lack of appropriate language services violates
the civil rights of and often results in human suffering for individ-
uals who require such services in order to access health care.

Health care reform must maintain and strengthen minority-run
and -owned health care facilities as part of a viable public health
network.

It is important to remember that the U.S. Department of Health
and Human Services will be responsible for administering the pub-
lic health component of health care reform. Existing programs and
hiring practices strongly suggest that DHHS is currently not sen-
sitive to the health needs of the Hispanic communities. Hispanic
employment in the DHHS labor force is dismal, particularly at high
level policy and administrative positions.

As of June 30, 1993, only 5 percent of the total 124,363 people
employed at DHHS were Hispanic.

Only 2.7 percent of the management and top level policy posi-
tions were Hispanics. Those are GS and GM-14 and above or
equivalents.

As of the first quarter of fiscal year 1993, only 1.6 of the Federal
labor force at the National Institutes of Health were Hispanics and
only four-tenths of one percent of NIH manager positions were held
by Hispanics.

During the same period 2.7 percent of professional positions at
Health Resources and Services Administration were held by His-
panics. It is difficult to comprehend these low staffing patterns at
a time when Hispanics are a growing pattern in the United States.

Hispanics represent 1 out of every 11 persons in the United
States. The Hispanic Caucus sponsored H.R. 3230, the Minority
Health Opportunity Enhancement Act of 1993 and takes a thor-
ough look at existing programs in DHHS and reviews their respon-
siveness to the health care needs of Hispanics. I will share a few
brief findings which were deeply troubling.

Hispanics are grossly underrepresented in health care profes-
sions. However, Hispanic participation is very poor key DHHS Pro-
grams that focus on increasing the number of minority health pro-
fessionals. Data indicates that, although Hispanics represent 9 per-
cent of the U.S. population, Hispanics make up 4 percent of the
U.S. physicians; and half of these physicians are foreign medical
graduates.

Second, two of the criteria used in designating medically under-
served areas, MUA's, exclude Hispanics. The 65 and over factor
works against Hispanics, since Hispanics tend to have a large
young population.

Also, although Hispanic communities experience poor health sta-
tus, the emphasis on infant mortality fails to consider Hispanic
health needs. Infant morbidity is more appropriate in measuring
Hispanic health status. MUA designation helps in directing com-
munity health center and other resources to develop and strength-
en community-based health care capacities.

The M-HOPE Act does not attempt to broadly reform the current
U.S. health care system and, thus, is not intended to compete with
the administration's Health Security Act or any other reform of our
Nation's health care system.

Instead, by improving existing DHHS Programs, M-HOPE acts to
complement health care proposals and is meant to be used as a
blueprint for improving the service of Hispanics by programs at
DHHS.

The Hispanic Caucus is committed to working you with, Mr.
Chairman, and with this subcommittee to look for avenues to en-
sure that quality health care opportunities are available to all.

Thank you very much, and I ask that the complete testimony of
the Chairman of the Hispanic Caucus be entered into the record.

Chairman Mfume. Without objection it is so ordered.

[Mr. Serrano's statement may be found in the appendix.]

Chairman Mfume. Thank you. Extend our thanks to Mr. Serrano
for making sure that that testimony is a part of formal record of
our proceedings.

Mr. Stokes and Mr. Gutierrez, I know that you have a busy
schedule; but I have a couple of questions. Could you share with
the subcommittee what steps you think might be taken to ensure
the viability of minority-owned. HMO's in the overall framework of
national health care reform.

Second, how you think we might be able to ensure an adequate
supply of minority health care professionals well into the future.

Third, why incentives such as the one outlined in your bill that
devotes specific financial assistance to individuals wishing to serve
medically underserved and minority communities really becomes
absolutely essential in constructing a framework for the delivery of
services as we know them. .

Mr. Stokes. Mr. Chairman, if I might I would like to start with
the 1990 bill, the Disadvantaged Minority Health Improvement
Act. The enactment of that legislation marked the realization on
the part of the Congress that there is a real dearth of health pro-
fessionals to attend the health care needs of rural and urban com-
munities, particularly our large urban communities and nation-
wide.

The problem is exacerbated by the fact that most of the mmority
doctors in this country are produced by our Historically Black Col-
leges and Universities. In fact, over 50 percent of them are pro-
duced by colleges such as Morehouse, Howard University Medical
School, and Meharry Medical School.

Even today, we are still finding that our major universities are
not providing the opportunities to minority students. Therefore, in
that legislation, we created what is known as Centers of Excellence
to attract and recruit more minorities into the medical profession.

We also provide an opportunity for some of the loans to be
waived in terms of service. This provision enable, more minority
students to overcome the financial problems related to the profes-
sion.

If we are ever going to be able to attack the type of disparities
that both Mr. Gutierrez and I have talked about here this morning,
we certainly have to have more minority health care and health re-
search professionals. Additionally, we have to have legislation to

make this a reality. Because, in the system that we are confronted
with in this country, it is just not occurring. We need implementa-
tion through legislation like that that I sponsored in 1990, and like
that which I am now preparing for reenactment in 1993.

This past September, at the Congressional Black Caucus Health
Brain Trust Meetings, representatives from the six HMO's African-
American HMO's, that exist in the country, testified about the pre-
carious financial position that they operate in.

Basically, they are confined to Medicaid patients. They don't
have the opportunity to exist on the same playing field as the big
majority population owned HMO's. Their primary source of funding
is through Medicaid, and that is a very precarious source of income
for them.

We must examine that whole situation and buttress how African-
American owned HMO's will continue to exist. Then, we must de-
termine how best to expand upon them, as opposed to phasing
them out of existence through the new health care legislation that
is enacted. That is where we have to look. Taking their rec-
ommendations as to how we can best support and strengthen them,
we can then be sure that African- American owned HMO's not only
remain a part of the Nation's health care system but also a visable
partner in it.

Chairman Mfume. Thank you very much, Mr. Stokes.

The Chair would recognize the Ranking Minority Member, Mr.
Machtley.

Mr. Machtley. Thank you veiy much.

Mr. Stokes, in looking at the issue of how do you keep minority

physicians and health care providers in urban areas, one of the

problems I think you have, as you alluded to, is that you have the

arge Medicaid population in these communities. So iust getting

lealth care providers into the system is only part of tne problem.

Have you looked at ways of changing the Medicaid formula so
that people who decide to participate in health care delivery in
urban areas have the economic incentive to stay there.

In other words, you can say we will give you help to become a
physician or a health care provider to get through medical school
provided that you will then spend a certain number of years in an
underprovided area, but once that happens and then they are free
to go, obviously our system will encourage, economically, those phy-
sicians leave. I know in some of the urban areas I am familiar
with, it is always a problem of getting the physicians to stay long
term.

Have you looked at any ways of just changing the whole formula
for reimbursement under Medicare in urban areas?

Mr. Stokes. In terms of the African-American health care pro-
viders, most of them are confined, once they graduate from medical
school, to the inner city for their practice. Relatively few of them
have the opportunity to practice in suburban areas. African-Amer-
ican health care providers are the ones who basically provide the
care to the indigent and the uninsured in our inner cities, that sys-
tem is just built in.

That is one of the reasons why, under any type of meaningful
health care reform, African-American health care providers must
be protected. They are the ones who have stayed in the inner cities

all of these years providing all of the health care. They didn't have
the liberty and the luxury of being able to go out to suburban com-
munities and enjoy the more luxurious type of practices. They are
in the heart of the cities providing indigent care.

Also, one of the things that we must realize and be concerned
about, when we talk about the Medicaid and Medicare systems, is
that we are still talking about two tiers of care. We talk about
Medicaid for the poor and Medicare for the middle class.

We must stop classifying people in categories, because they get
a different type of care when we classify them as the poor, or the
upper class, or the middle class. Ideally we need to merge the two,
and give everybody the same type of care without distinctions
whether they are poor people or middle class people.

Chairman Mfume. Mr. Hilliard.

Mr. Hilliard. Mr. Chairman, it has occurred to me that it seems
as if we are trying to Catch-22, and we don't know which one of
the 2's to begin with. As I see what might be the future of health
care in the future, I am very concerned about now. So it occurs to
me that while we are trying to catch the fleeting star of tomorrow
that we need to reassess where we are now. It occurred to me, as
I heard the statistics of minority health care as it is now, and so
on.

I would ask the panel to tell me what happens if the health care
system is not changed in the next 2 years? What do we do in the
meanwhile? That is the first question.

Then I want to go beyond that. But let me ask you that. What
do we do in the next 2 years?

Mr. Stokes. The fact is that the health care system is broken.
If it is not repaired, you continue to have the growing type of
health care crisis that the President has referred to and almost ev-
erybody who has talked about health care in America.

There are 37 million Americans who have no health insurance,
another 20 million Americans work every day but have inadequate
health insurance. If you are talking about continuing that system
for 2 more years, then, you add to it the type of problems that my
colleague and I have talked about this morning as relates to the
African-American health crisis. We have known since 1985, from
the report of the Secretary's Task Force on Black and Minority
Health, that there are 60,000 excess deaths per year in the Black
community. That number has now gone to 75,000. These excess
deaths are related to the disparity in health care in the areas of
heart attack, stroke, cardiovascular disease, diabetes, suicide, and
homicide, just to name a few. Therefore, if you are talking about
not doing anything in the system, you are talking about the further
exacerbation of that precise situation which exists today.

Mr. Hilliard. Not so much not doing anything, but what to do?

Mr. Stokes. We must enact health care reform legislation. Now,
obviously, there are about six major plans before the Congress
today. However, the single-payer form is probably the best ap-
proach to it, and also we have the President's plan. The enactment
of any one of those forms would certainly help bring some degree
of solution and cure to the currently existing system.

Mr. HiLLlARD. What about the phase-in part of the plans? If you
add the phase-in period on to the 2 years, then what do we do dur-
ing this period of time for the health care individuals?

Mr. Stokes. Ultimately, the Congress is going to have to, in its
wisdom, make the decision whether or not to enact the law, as it
should be, in its entirety, or it in phases. When I served on the
Pepper Commission, we recommended that we start with just a
window in certain areas. For example we considered legislation
that would take care of all children and pregnant mothers. Then
we considered long-term care and made recommendations for home
care and institutionalized long-term care. We didn't try to do it all
at once, because we felt that we just couldn't afford it.

Congress took that report and put it up on the shelf and did
nothing. Now, we are confronted again with the same decision. Can
we do it all at one time, or do we phase in integral parts? Of
course, that is a decision that the Congress has to make.

Mr. HiLLIARD. Thank you, Mr. Chairman.

Chairman Mfume. Thank you, Mr. Hilliard,.

Ms. Roybal-Allard.

Ms. Roybal-Allard. Thank you, Mr. Chairman. I apologize for
being late.

I simply wanted to state that this is a very important hearing
because I think it is critical, as has already been stated, that mi-
norities participate in the business opportunities that will result
from health care reform.

That with health care reform, those who need specific kinds of
care are able to get that care, which is not being received today be-
cause of cultural differences or even the fact that there are linguis-
tic differences.

So very often, many of the programs that are put in place today
are not reaching those that need it most. I think a perfect example
is the fact that there is an extremely high incidence of AIDS among
the Latino population.

One reason for that is because the information and the education
that has been available in the past is not reaching that population.

It is critical that we make sure that, as we move on to health
care reform, that it is done in a way that reaches all the population
so that they receive the education and the proper training to make
sure that the health care needs of all are dealt with.

I believe that Congressman Gutierrez has mentioned the M-
HOPE bill which the Hispanic Caucus has put forward. So I will
reserve my comments and questions for later.

Mr. Gutierrez. Just to respond quickly to many of the questions,
I think that one of the most important things that we need to do,
Mr. Chairman, is to look at the work that Chairman Stokes has
done over the years, because a lot of what the work on the M-
HOPE bill is based on is based the bill that he was able to pass
in 1990 to bring it current.

If one error that we could make is not discussing among minori-
ties here in the Congress of the United States, whether they be in
the African-American, the Asian, or the Latino community and dis-
cussing and sensitizing ourselves to the differences, the unique dif-
ferences amongst ourselves so that we can work together.

Or what could happen is that there will be a pool for quote, un-
quote, the minority community which is kept smaller instead of ex-
panding it as each group attempts to get what they feel is needed
for themselves.

So there needs to be a discussion of how you expand the re-
sources, not simply attack the resources that we currently have
and each person fighting for those Hmited resources. I think those
discussions are ongoing.

I just thought it would not be a good idea, Mr. Chairman, for me
to be here today and not clearly state that the Hispanic Caucus
recognizes the work of Chairman Stokes in this area. What we
need to do is continue to follow it because the Chairman has been
doing this for quite a while. So it shows that you don't need health
care reform in a big bill to change and ameliorate the problem.

Mr. Stokes. I want to thank Mr. Gutierrez for his comments. I
am in accord with his statements with reference to the fact that,
when it comes to health care disparity, African-Americans, His-
panics, and other minorities are in the same, identical boat. We
need to spend our energ>' working together in a coalition.

I would also like to say, with Ms. Roybal-Allard here, your father
and I sat next to one another on the Labor Health and Human
Services and Education Subcommittee on Appropriations for about
20 years. Over that period, most of the gains made in terms of leg-
islation enacted through that subcommittee and funds appropriated
for minority programs and health education resulted from our joint
efforts. He was a real champion in that regard and epitomized ex-
actly what my colleague has talked about here today. The two of
us were a real team there.

Chairman Mfume. Well, the Chair would like to again thank
both of you for your time and your testimony and to remind you
that we are keeping the record open for 5 legislative days if there
are additional things that you would like to contribute to it.
Thank you very much for being with us.
Mr. Stokes. Thank you, Mr. Chairman.
Mr. Gutierrez. Thank you.

Chairman Mfume. The Chair wishes to call the second panel, the
Honorable Walter Broadnax. He is Deputy Secretary, U.S. Depart-
ment of Health and Human Services; Dr. Leonard Lawrence is
President of the National Medical Association; Mr. George L. Foun-
tain, Jr., vice president, District Scientific and Medical Supply Inc.;
and Mr. Warren 0. Cooper, president of Accu-Lab Medical Testing.
Let me again just remind all of us that the major focus of this
subcommittee hearing is the larger question of whether or not
health care reform is healthy for minority enterprise, whether it
contributes to it.

I would call your attention back to my original remarks in which
I said that I still have not seen any manifest regard for African-
Americans, Asians, or Native American, primary health care physi-
cians, or nurse practitioners, insurers, managed care organizations,
generic drug makers, and distributors and others that would be in-
volved in this massive undertaking in terms of business opportuni-
ties where the Federal Government plays such a large and critical
role.

I wanted to reemphasize that and urge that you take the time
that you have to speak to our larger question; the question of
whether or not minority enterprise finds health care reform par-
ticularly healthy or not and what your own views are on that larg-
er question.

Dr. Broadnax, we are happen to have you. We recognize that Sec-
retary Shalala could not be with us because of a competing sched-
ule. I understand that there is someone with, and if you could iden-
tify that person.

Dr. Broadnax. Mr. Veri Zanders is here with me this morning.
He is Director of our Office of Small Business Utilization.

Chairman Mfume. Dr. Broadnax, feel free to proceed.

STATEMENT OF WALTER BROADNAX, DEPUTY SECRETARY,
U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES; AC-
COMPANIED BY VERI ZANDERS, DEPUTY DIRECTOR, OFFICE
OF SMALL AND DISADVANTAGED BUSINESS UTILIZATION

Dr. Broadnax. Thank you, Mr. Chairman and members of the
subcommittee.

I am pleased to appear before you today to discuss HHS's strong
commitment to the participation of small businesses and small dis-
advantaged businesses in the framework and mission of the De-
partment of Health and Human Services.

HHS has an outstanding record and continually increases the
number of prime and subcontract awards being made to small busi-
nesses in general and to small disadvantaged businesses in par-
ticular.

HHS oversees over 250 vital, health-related programs including
AIDS research, cancer treatment, alcohol and other drug abuse
prevention, immunization, Medicare, Medicaid, and Social Security;
from ensuring that the medicines we take are safe to helping fami-
lies, again, self-sufficiently through financial aid and job training
to making sure all babies get a healthy start through good prenatal
care. HHS affects nearly everyone.

In the letter of invitation, the committee requested that my
statement address a number of questions with respect to HHS's
small disadvantaged business programs. I welcome this oppor-
tunity to talk about HHS's small disadvantaged business program
because I believe it is one of the best programs of its kind in the
U.S. Government.

I will provide summary statements in response to the questions
outlined in your invitation. Detailed responses are contained in my
formal statement that has been provided to the committee.

The Small Business Act, as amended by Public Law 100-656, re-
quires that the President establish annual Government-wide goals
for acquisition awards to small businesses and small disadvantaged
businesses. The statutory goal for small business participation and
at least 20 percent of the total value of prime contract awards.

The statutorial goal for small disadvantaged business participa-
tion is at least 5 percent of the total value of prime contract awards
and 5 percent of the total value of subcontract awards.

Historically, HHS has exceeded all of the statutory goals for
small business participation on a consistent basis. In fiscal year
1992, HHS awarded approximately 40 percent, over $1 billion, of
its total acquisition awards to small businesses. Of that amount,
approximately 13 percent, which is over $328 million, was awarded
to small disadvantaged businesses. We think this is particularly
noteworthy.

In addition, small disadvantaged businesses received approxi-
mately 8 percent, or $18 million, of the total subcontracting dollars
from prime contract it is awarded by the Department. This achieve-
ment is made probably because of institutional acceptance and sup-
port of the preference program throughout the Department. I am
proud to be a part of one of the top small and small disadvantaged
business programs in Government.

The Office of Small and Disadvantaged Business Utilization en-
joys complete support from the Office of Secretary. This support is
evidenced by the fact that the Director reports directly to the Dep-
uty Secretary in accordance with the provisions of Public Law 100-

656.

The Department's Assistant Secretary for Management and
Budget provides the needed administrative and logistical support
for the office. This arrangement ensures all necessary resources are
available to the OSDBU.

The OSDBU establishes and maintains outreach programs to
provide a flow of information about HHS small business programs
to small, small disadvantaged, and women-owned businesses.

OSDBU staff provided personal counseling and marketing assist-
ance to over 2,000 small businesses during fiscal year 1992.

OSDBU distributed over 7,000 copies of various publications de-
signed to assist individuals and organizations in understanding the
mission and programs of HHS. These publications included "Doing
Business With DHHS," "HHS's Annual Report on the Small Busi-
ness Programs," a "Forecast of HHS's Contracting Opportunities
for Small Business," and the "Subcontracting Directory." Each pub-
lication provided information to explain current and potential con-
tractors with continuing and available acquisition opportunities.

HHS is an active participant in most of the congressionally
responsored Federal procurement conferences held each year.

Component agencies in HHS sponsor many procurement fairs to
assist firms in understanding the mission and objectives of that
particular agency. Hundreds of small and small disadvantaged
businesses are invited to meet directly with the Agency's technical
and contracting personnel. The interest in these conferences has
been high, and attendance has been very good. We have utilized
the Commerce Business Daily to publicize the event.

During this year's MED Week activities, OSDBU conducted a
session in which several of our prime contractors participated in a
forum discussion on techniques for affording SDB the maximum
opportunities to be potential subcontractors.

Mr. Chairman, I would like to personally assure you that HHS
places the highest priority on the full participation of small busi-
ness and small disadvantaged businesses in the HHS Programs.

This concludes my opening statement. I will be pleased to re-
spond to any questions that the committee may have for me. Thank
you.

Chairman Mfume. Thank you very much.

[Dr. Broadnax's statement may be found in the appendix.]

Chairman Mfume. We are going to — as we afford all Agency
heads and others who are Deputy Secretaries — the distinct oppor-
tunity — I don't know if it is a privilege — for you to be questioned
first and separate and apart from our panel.

I would like to call your attention back to page 16 of your written
statement in which you indicate that the Department has not yet
at a point in finalization of the national health care reform initia-
tive where contractual requirements can be identified.

If we recognize that — and I think we do — that significant oppor-
tunities will exist in the claims processing, auditing, accounting,
medical waste disposal, medical specialize, health promotion, and
marketing, and food services, can you tell the subcommittee wheth-
er or not the Department of Health and Human Services envisions
any role for every minority — ^for minorities in the national health
care reform beyond the four strict procurement categories that you
have outlined in your statement for which awards have been let in
the past?

Dr. Broadnax. Mr. Chairman, I can say very directly in all hon-
esty that in conversations that I have had directly with the Sec-
retary in the very recent past about our opportunities to expand
opportunities for minority participation in the Department, not
only in terms of being able to do business with the Department
through our contracting and procurement mechanisms but more
broadly as well, any avenue — whether it is direct employment,
whether it is serving on Departmental advisory committees — we
are professionally dedicated to making sure that every opportunity
can be explored and exploited. There will be no difference in regard
to opportunities for minorities to do business subsequent to what
we hope will be the new Health Security Act.

Chairman Mfume. So you expect opportunities beyond those four
strict categories that are outlined?

Dr. Broadnax. I guess what I am trying to say, not knowing
what the final outline will look like in terms of the legislation that
we are hopeful that will emerge from the Congress — that I am say-
ing that we would look as broadly as would be required, depending
on what the parameters of the particular piece of legislation was.

Chairman Mfume. Well, Doctor, I wish and hope that you would
communicate back to the Secretary my desire that she would com-
municate to us, as soon as possible, when, in fact, she envisions a
larger role for minority entrepreneurs beyond those categories in
some of the other areas that I have delineated, specifically a mo-
ment ago, so that we might have some idea or at least some assur-
ance that the Agency is sensitive, as we are, to being able to make
sure that possibilities exist in the broader context of this reform
package and that they are far ranging and not very narrow in their
perspective.

Let me go back to your written testimony. You suggested that
your office recently developed a model subcontracting back to as-
sure consistency of information that is being submitted by prime
contractor.

Could you or he take a moment to talk about this model plan and
to make it available all at some date in the not too distant future
to the subcommittee?

Mr. Zanders. Thank you. The model plan that was developed
was the result of a consensus of looking at various plans at other
Government agencies as well. What we did with our plan basically
was to ensure consistency and even to the point of some standard-
izations in portions of it. Individual goals, as relating to contracts,
is what the contractor would have to submit.

But what we tried to do in terms of responsibilities and some of
the recordkeeping procedures that prime contractors were required
to do, we tried to standardize that portion of it. Again that was
just, basically, to ensure consistency and standardization.

Chairman Mfume. Are you in touch with other OSDBU's at
other agencies?

Mr. Zanders. Yes.

Chairman Mfume. Are they looking at developing similar plans?
Or are they just standing in admiration of yours.

Mr. Zanders, No, sir. I think that all agencies have pretty credi-
ble plans as well. This serves us as to what we were looking for
from our prime contractors.

Chairman Mfume. You will make it available to the subcommit-
tee?

Mr. Zanders. Yes, sir.

[The information may be found in the appendix.]

Chairman Mfume. Mr. Machtley.

Mr. Machtley. I just had a quick question. On page 4, Doctor,
of your testimony, you indicated that about 13 percent of the total
awards was awarded to small disadvantaged businesses. We think
this is particularly noteworthy.

In addition, small disadvantaged businesses receive approxi-
mately 8 percent of the total subcontracting dollars.

Do you have a goal in your Department? Is this the goal? Or do
you have a goal that is higher than this?

Dr. Broadnax. Well, wnat we were looking at for our guidance
was, of course, the guidance that is provided statutorily in terms
of 5 percent, if you look at the subcontracting goal. Of course, in
terms of prime, the goal there being 20 percent. So we looked at
those as benchmarks to measure ourselves against.

But again we would come back and say that, in terms of our de-
sire, our desire is to try as much as we possibly can to maximize
these opportunities and to stimulate as much growth in terms of
opportunities for groups to exploit as we possibly can.

So we are certainly not satisfied, but we are proud of what we
have aachieved thus far. But we would be the first to admit that
there is still much more that we could do. But we use those as our
benchmarks.

Mr. Machtley. So you are above the 5 percent on the disadvan-
taged prime subcontractors but you are below the goal of 20 per-

cent that was established by statute as the amount of contracts to
small disadvantaged businesses?

Dr. Broadnax. No. I had said that the 20 percent for small busi-
ness was the prime contract figure, and there we had 40 percent.
So we are above the 20 percent there in the statute as well.

Mr. Machtley. OK. So this 13 percent that you referred to,
where does that — that is the total, 13 plus 8? Maybe I missed that
20 percent.

OK I see where the 13 percent comes in.

Do you anticipate doing any other special marketing techniques
to try and get new people, new minority groups into this

Dr. Broadnax. I think it is fair to say that we intend to continue
to intensify our marketing efforts. We have engaged in very active
marketing efforts heretofore. Some 2,000 businesses in our last
budget cycle were contacted by us, and we have engaged in various
fairs and all kinds of outreach activity. We think the marketing ac-
tivities are paying off, and I would think that we would certainly
intensify those over the next coming years and months.

Mr. Machtley. Thank you very much for your time.

Chairman Mfume. Dr. Broadnax, Health and Human Services
requires, as I understand it, that all companies that provide drug
testing services be NIDA certified, that is National Institute of
Drug Abuse. That certification creates, because of its requirement,
a cost that is sometimes almost prohibitive for small and minority-
owned firms.

It is $55,000 in the first year of certification, $35,000 in the sec-
ond year of certification, and then $35,000 every year thereafter. It
seems that the National Institutes of Drug M>use, or whoever
charges that, makes an awful lot of money. But it is a factor that
can be prohibitive in terms of whether or not you are able to be
certified and qualified to provide drug testing services.

Can you tell the subcommittee whether or not there are any pro-
grams, policies, or plans under way or envisioned that would assist
these same firms to be able to enter this increasingly lucrative field
of business?

Dr. Broadnax. I must confess that I don't know of any program
that is currently in existence to achieve this. But I would quickly
say that it is something certainly worthy of review at my level.
This is not something that I had focused on prior to the hearings,
but I do understand the question clearly.

Chairman Mfume. It represents a hurdle, a big hurdle, particu-
larly if you are a new or young business trying to get started.

I didn't know those costs were that high for that type of certifi-
cation. But that is a lot of money just to be eligible, then, to be able
to receive some considerations. I would hope that when you get a
moment you would look at that; and if there are some ways that
we can perhaps allow for the entry into that field to be easier for
those minority businesses, it is something that this subcommittee
would like to take under consideration and to be able to work with
you and the Secretary on.

One other thing. Dr. Broadnax, before I go to the other persons
who are here. This is a little off the subject. But you are here, and
it is in the universe of things.

You know that there have been a number of reports regarding
the virtual exclusion of minorities in management positions at the
National Institutes of Health. It is something that concerns all oi
us, because it is something that suggests that there is a problem.

I have not had a chance to talk directly with the Secretary, but
I would be less than honest to not say that it is something that is
taking up more and more of my time.

Can you tell me if there is something that may have evolved
since the recent reports that the Secretary may have undertaken
to try to put an end to that very discouraging statistic?

Dr. Broadnax. I am proud to be able to report to the Chairman
and this committee that there is a whole series of actions that have
been taken since the Secretary and I arrived at the Department.

As you very will know, we found a situation that was not good.
We have taken hold. The Secretary personally went out and spoke
to the employees at NIH, basically outlining how she was not going
to tolerate discrimination in any shape or form.

I personally went out with the Assistant Secretary for Health,
Dr. Lee, and the Secretary's Chief of Staff, and spent a half day
with the research institute directors and the leadership of NIH
talking about how we are going to turn NIH around.

At that meeting we talked about, and we have been following
through on, the need to really change the culture of the National
Institutes of Health. We believe that the new leadership there is
committed to that.

I also oversee, for the Secretary, on a quarterly basis, a full re-
port and update from the leadership at NIH in terms of their
progress in terms of putting into place the requisite set of proc-
esses, procedures, and data reporting to keep us abreast of their
progress along the line in terms of recruiting, particularly young
scientists through fellowship programs, and other programs that
will help them to begin to do what we call growing their own sci-
entists and then attracting senior scientists through various routes,
minorities to come into the institute.

Dr. Varmus has told me personally that he is committed to this
and so is the deputy director. We will continue to monitor the situ-
ation, and we are demanding progress.

Chairman Mfume. Has the Secretary or the Agency sought to
reach out to some of the existing professional organizations that
may be Latino or African -American or Asian or any other minority
group that has a professional organization of physicians or sci-
entists who clearly would be not only a clearinghouse but certainly
a great resource in helping you to find the people who you are look-
ing for?

Dr. Broadnax. We have not personally done that at the Office
of the Secretary level and certainly not specifically related to this
particular issue.

A lot of that outreach, though, has begun to take place at the
NIH level. But, clearly, anything that we can do in that regard to
help facilitate interest and attention, we certainly would be willing
and want to do that. But I do know it has begun to take place at
the NIH level.

Chairman Mfume. Well Doctor, thank you for allowing me to
take you away from our primary focus today; but it is kind of hard
to have you here and not ask that question.

Thank you also very much for your presence. If you would like
to sit through the rest of the panel, you are certainly welcome to.
I know that you have a lot of competing interests at the Depart-
ment; but, again, we want to thank you for your presence.

The Chair would like to recognize Dr. Leonard Lawrence, presi-
dent of the National Medical Association.

STATEMENT OF DR. LEONARD E. LAWRENCE, PRESmENT,
NATIONAL MEDICAL ASSOCIATION

Dr. Lawrence. Mr. Chairman, members of the committee, good
afternoon. I am Leonard E. Lawrence, president of the National
Medical Association, the oldest national African-American physi-
cians group in the United States.

As I have listened to the introductory comments and questions
of you, Mr. Chairman, and the members of your committee and
Congressman Stokes and Congressman Gutierrez, I say that I am
quite pleased that this process is under way.

Please allow me to share a story which captures the heart of my
concern about this estimated $900 billion business of health care.

She lay on a cart in the emergency room. Her 8-year-old grand-
son stood beside that cart wondering when the doctors would come
to see her. He had little awareness that when he had been born
in that same hospital some 8 years earlier Black physicians were
not allowed to come into that hospital to deliver babies, nor could
he have anticipated that 22 years later he would be the chief resi-
dent in psychiatry in that same hospital system.

What struck him to the core, however, were the words he heard
from a white-clad doctor: "We don't need to worry about her. She's
just an old nigger." She died, in diabetic coma on that cart in that
hallway.

I am the grandson mentioned in that story — a 1962 graduate of
Indiana University School of Medicine and currently the Associate
Dean for Student Affairs and Professor of Psychiatry Pediatrics
and Family Practice at the University of Texas Health Science
Center at San Antonio.

I am a child psychiatrist by training and a community advocate
by choice.

Now, whether that earlier experience contributed to the career
path I chose, I cannot say. Yet it is the keen recollection of that
experience which motivates much of my activity and continually
stimulates my resolve that no person's relative will ever again suf-
fer such an indignity.

All of us are aware that these indignities do continue to occur
and that racism is alive and well. The principles of reform pre-
sented in the President's proposed Health Care Security Act of
1993 are phenomenal perhaps; but when you factor in racism, the
end result is potentially problematic.

The racial and ethnic composition of the Nation's physicians
clearly does not reflect the general population and contributes to
access problems for underrepresented minorities. Although earlier
drafts of the President's plan mentioned the concept of affirmative

action, there are now several nondiscrimination provisions in the
President's proposal based on existing law.

The National Medical Association is concerned that the proposal
does not fully embrace affirmative action. African-Americans and
other minorities have had experience with in the terms of "equal
access" and "equal opportunity." To us that is not enough.

Therefore, the National Medical Association strongly rec-
ommends that the legislation require health plans to hire, appro-
priately and equitably, minority health providers as active partici-
pants within those processes.

We must address the issue of minority physicians, dentists, and
other health professionals as entrepreneurs. The Washington Post
recently ran an article entitled, "A Rush To 'Buy' Doctors. ' The ar-
ticle began, "Amid the uncertainty over medical reform, some com-
panies are gobbling up what they bet will be the health care's hot-
test commodity in the 1990's: Doctors,".

Our NMA physician members are included in this number of
physicians being gobbled up. Some of our physician members are
included in the number holding out from being gobbled up, losing
their patients to HMO's and subsequently losing their practices.

The National Medical Association does not want to have to ap-
pear before this committee in 1998 to testify to what is now a cur-
rent fear and what may become a reality that there will only be
a few major companies delivering all of the health care in the Unit-
ed States. But that is a possibility in this kind of monopoly ar-
rangement where competition is the major theme; and if we do not
build in some protections for minority provider networks, then we
are in big trouble.

The National Medical Association, therefore, recommends estab-
lishing an African-American and other underrepresented minority
business set-aside programs within regional health alliances to en-
sure proportional representation of providers from underserved
communities.

Such a program could be implemented through provisions similar
to those contained in the Defense Department contracting set aside

goal.

Right now there are approximately 500 HMO's in the United
States and fewer than 10 are owned or operated by African-Ameri-
cans. In Detroit, there are three thriving African-American owned
or operated HMO's: Comprehensive Health Services/The Wellness
Plan, United American Health Services, which manages OmniCare,
and LifeChoice Quality Health Plan.

The oldest of these three is Comprehensive Health Services,
which reports some 100,636 members, making it the fourth largest
HMO in the State of Michigan, the largest among the African-
American owned and operated entities. It is still Medicaid based;
but according to the Senior Vice President for Business and Fiscal
Affairs, Isadore King, the key to their continued success will be
vertical integration, i.e. active participation within alliances of hos-
pitals, pharmacies, HMO's, in physician associations, et cetera.

But they need help to do it. Therefore, the NMA recommends
that low-interest loans, tax and other incentives be available to
strengthen the capacity of minority provider networks, most of
whom function clearly in underserved areas.

A shortage of minority providers exists not only in primary care
but in some specialized areas also. Among the specialty areas are
general surgery, adult and child psychiatry, preventive medicine.
We also need generalists with additional training in geriatrics.
There must be clear acknowledgment of these training deficits with
built-in incentives for training programs to correct these defi-
ciencies.

Within the framework of the present health care system, the cur-
rent physician-to-population ratio in the Nation is inadequate, and
further increases in this ratio will do total enhance the health of
the public or to address the Nation's problems of access to health
care.

Continued increases in this ratio will, in fact, hinder efforts to-
ward cost containment. The Health Care Security Act seems to pro-
vide for education and training of primary care physicians, and
there are specific references to underrepresented minorities but no
references to proportional representation.

The NMA recommends proportional representation of minorities
not only in primary care training programs but also in specialty
training programs. As you have heard earlier, African-American
populations are dying at a rate in excess of 75,000 per year over
what would ordinarily be expected. That means that we need both
primary care and specialty care.

The NMA suggests the following mechanisms for recruitment:
Establishing Federal grants for specialty care training, especially
targeted for African- American and other underserved minorities;
changing reimbursement policies for graduate medical education
and focusing on those people who will provide care in the areas
where the needs are greatest; strengthening the National Health
Service Corps and loan repayment programs; and clearly develop-
ing competitive compensation packages for those people who will
provide service in underserved areas — that is a major problem. Our
physicians are there, but they are not getting paid for what they
are doing compared to what their peers in the suburbs are get-
ting — increasing research on issues related to medically under-
served populations — and in this regard, the NMA clearly supports
the questions of this committee about activities within the National
Institutes of Health — and actively recruiting students for health ca-
reers in underserved areas. That means going into underserved
areas to look for potential candidates.

Of the almost 60,000 students currently matriculating within
medical schools throughout this Nation, only slightly more than
4,000 are African-American. The disparity is even more glaring
concerning the other three underrepresented minority populations.

The National Medical Association supports the efforts of the As-
sociation of American Medical Colleges Project 3,000 by 2000. This
project seeks to increase to the number 3,000, the number of
underrepresented minority medical school students entering by the
year 2000.

Theoretically, all medical schools have agreed to participate in
this endeavor. While most of the discussion centers on increasing
the numbers of minority applicants in the pipeline, little attention
is paid to the obstacles to current admission of current candidates.

As a 21-year faculty member, I can tell you the obstacles are
many; and in many respects, they are race-based. The medical col-
lege admissions test does not reflect accurately the potential of
many minority students to complete a medical education. This test
has been standardized on some populations. But schools have been
resistant to fully embrace alternate methods of assessing a stu-
dent's potential both to complete a medical curriculum and to be-
come a competent practitioner.

Until the 1970's, most African-American physicians were edu-
cated either at Howard or Meharry. Morehouse and Drew have
contributed significantly to the total number of African-American
physicians in practice. But these four schools cannot do it all. They
serve their students well by teaching concepts of healing in addi-
tion to concepts of securing by teaching concepts of respect for pa-
tients and how to relate to minority patients. Unfortunately, these
same concepts are not taught in majority medical schools; and, un-
fortunately, this contributes to the lack of quality care that many
underrepresented minorities that many African-American patients
receive.

The NMA recommends, therefore, that specific language be in-
cluded in any legislation which gives educational funding directly
to historically Black colleges and universities to include consider-
ation of active funding of an increased capacity for medical student
education within these entities.

The bottom line is this: Without an adequate and continuing sup-
ply of competent, well-trained African-American physicians, a pro-
portional number of African-American-owned and operated physi-
cian groups, and specific mandates stressing African- American in-
clusion, we can talk reform until we are blue in the face. Our pa-
tients and our communities will continue to suffer.

The National Medical Association promises to be persistent and
precise in the advocacy of a fair and equitable health care system.
I, as a representative of the National Medical Association, will be
clear, direct, and, at times, passionate in my own call for equity
and excellence in health care delivery because none of us wants
anyone's relative to lay on a cart and be labeled an "old anything."

Thank you.

Mr. CoNYERS. [presiding.] Thank you, very much. Mr. President,
NMA's record is very well known to most of us working in this
area. You have a very awesome chore as the current president to
continue to move us forward, and you have been doing a great job.
We look forward to continuing to work with you.

[Mr. Lawrence's statement may be found in the appendix.]

Mr. CoNYERS. We are delighted to have George Fountain to bring
us some abbreviated remarks considering the time constraints that
we are under. All of you have prepared statements, they will be in-
cluded in the record.

Mr. Fountain, we are pleased to have you here.

STATEMENT OF GEORGE L. FOUNTAE*^, JR., VICE PRESmENT,
DISTRICT SCIENTIFIC AND MEDICAL SUPPLY, INC.

Mr. Fountain. Thank you, Mr. Chairman Conyers and members
of the subcommittee. I am George L. Fountain, Jr., and I am the
vice president of District Scientific and Medical Supply, a Black

American-owned and operated medical and laboratory supplier. I
am here to provide suggestions to increase opportunities for minor-
ity medical suppliers under national health care reform.

I would like to begin by providing general background informa-
tion on the industry and then discuss briefly the problems faced by
Black and other minority and scientific suppliers in three areas:
The ability to win private contracts, the ability to win public con-
tracts, and the ability to obtain distribution agreements from major
manufacturers.

The medical and research industries are made up of hospitals al-
ternative care facilities, health maintenance organizations, nursing
homes, teaching facilities, private physicians, and research labora-
tories.

The medical supply industry is primarily controlled by one large
national distributor, where the research product industry is con-
trolled by four large distributors. Distributors in these industries
rely upon distribution agreements with major manufacturers; how-
ever, these major manufacturers only allow the large firms to dis-
tribute their products. This must be changed.

The smaller distributors, especially the Black and other minority
distributors, must purchase products from the larger distributors at
inflated prices. Our situation is made more difficult by large buying
groups. These groups have hospitals and other medical providers as
their members. What these groups do is consolidate the medical,
scientific, and even pharmaceutical purchases of their members
and bid these requirements to only large distributors and manufac-
turers.

These multimillion dollar contracts that result have no minority
participation. This, too, needs to be changed.

The large buying groups, coupled with no requirement for hos-
pitals and other private medical providers to use minority vendors,
makes private contracting by Black and other minority medical and
scientific suppliers virtually nonexistent.

Simply put, minority firms are not being given opportunities by
most private medical suppliers even though most receive some type
of Federal funds.

Therefore, I recommend that all medical providers that receive
any type of Federal funds be required to establish specific goals to
meet the socioeconomic needs of the minority suppliers within their
communities. The Black and other minority suppliers must be
given the equal opportunity to compete within these private facili-
ties.

Public medical and research facilities also have invisible barriers
to preclude Black and other minority medical and scientific suppli-
ers. There is no requirement or preference given to minority suppli-
ers under current small purchase procedures, and this is where the
vast majority of medical and scientific purchases originate through
small purchases.

The Federal supply schedule process is cumbersome at best and
difficult at the least. As a result, there are few Black and other mi-
nority firms that hold medical or scientific Federal supply schedule
contracts.

The Federal supply schedule process, Public Law 95-507 and the
Walsh Healy Public Contracts Act are barriers and must become
more friendly to Black and other minority firms.

I have listed a number of recommendations in mv written testi-
mony. Essentially, medical research supplies flow through a good-
old-boy network in this country; and this must be changed if Black
and other minority suppliers are to be given an opportunity to ob-
tain distribution agreements with major manufacturers.

Because of this network. Black and other minority medical and
scientific suppliers cannot be as competitive as this industry re-
quires. However, if given the same opportunity to obtain distribu-
tion agreements with major manufacturers, the same opportunities
to compete for private and public contracts, you will find that the
minority Arms can be just as competitive as other firms.

It is often easier to set up distribution agreements with foreign
manufacturers than it is to establish distribution agreements with
American medical and scientific manufacturers.

Therefore, I also recommend that those manufacturers who hold
Federal contracts and utilize distribution networks, be required to
utilize at least one Black or other minority distributor for their
products.

In closing, the area of medical scientific and pharmaceutical sup-
plies. Black and other minority firms are far behind their majority
contemporaries. The free enterprise system has not worked to cre-
ate a level playing field, and there is little interest in pubUc or pri-
vate industry to reverse these trends.

Therefore, it is important that these paradigms be changed and
that we move toward providing equal opportunities for every Black
and other minority medical scientific and pharmaceutical supplier.

It is clear that the industry is not interested in correcting the
problems that exist. Therefore, legislation is desperately needed.

I thank you for this opportunity.

[Mr. Fountain's statement may be found in the appendix.]

Mr. CoNYERS. Thank you. I want to congratulate you because
you said a lot very briefly, and it was very important testimony.

This is an area— the business side of health care delivery, espe-
cially among medium and small-sized businesses — that we are not
unaware of. We are very sensitive to the issue that you brought
forward. I am very, very pleased that this gets in the record right
off the bat as we begin the national debate.

Mr. Fountain. Thank you, sir.

Mr. CONYERS. Is there an association of minority supply persons
in the country?

Mr. Fountain. There is none that I am aware of

Mr. CoNYERS. There might be a need for one. I know that we
have plenty of organizations in America, but we may want to look
at that because, coming together as a group could be very, very im-
portant in helping us pinpoint this situation.

But your testimony, if there were such an association, you cov-
ered it very, very well. I commend you again.

I am pleased now to recognize Warren Cooper, who represents
other parts of the supply business in health care.

We are welcomed to have your testimony at this time.

STATEMENT OF WARREN O. COOPER, PRESffiENT, ACCU-LAB

MEDICAL TESTING

Mr. Cooper. Thank vou, Mr. Connors and members of the sub-
committee. Thank you for the opportunity to appear before you.

I am Warren Cooper. I am president of Accu-Lab Medical Testing
in the inner city of Chicago, IlHnois. I have been asked to talk
today about some of the obstacles that my minority-owned business
faces in the current health care industry.

Accu-Lab opened in the fall of 1991. We invested over $170,000
in startup cost, and we do forensic drug chemistry, hair analysis,
and drug testing. To my knowledge, we are the country's first Afri-
can-American owned forensic drug testing laboratory. We have cer-
tifications from the State of Illinois, the College of American Pa-
thologists, and the Department of Health and Human Service
through their CLEA Program.

We continue to be denied the opportunity to compete for public
and private drug testing contracts that we are qualified to execute,
solely because of our non-NIDA certification.

The best description I can give about the NIDA certification is
to compare it to a modern day Hydra, which I spelled out in my
written testimony.

Mr. CONYERS. Well, let's talk that out for just a minute.

Mr. Cooper. The Hydra part of it?

Hydra was a mythical creature where, if you cut off one head,
it grew two others. The problem in the drug testing industry is that
NIDA requires a fee of $55,000 for the first year, as the Chairman
alluded to earlier. The NIDA requirement for companies to use labs
that are NIDA-certified is only a smart part of the market. It is
only those programs that were under an executive order, not even
a vote in Congress. That is some transportation programs and
some programs identified in the Government and safety and sen-
sitive position.

But because that is standard out there now, now you have all of
private industry saying, well if the Government uses NIDA, then
we want to use it, too. Therefore, we are barred out of that particu-
lar aspect of health care. That is a growing business. This is a $7
billion a year industry. It continues to grow.

Mr. Conyers. Thank you very much. The Chair is going to have
to declare a very brief recess until Chairman Mfume returns be-
cause there is only a few minutes for the vote. He will likely be
here within minutes.

So let's stand in recess for just a short while.

Mr. Cooper. OK. Thank you.

[Recess.]

Chairman Mfume. [presiding.] We would like to resume. I apolo-
gize for the inconvenience that the votes tend to cause.

Mr. Cooper, you were in the middle of your testimony. Please feel
free to proceed.

Mr. Cooper. Currently there are no minority laboratories that
are NIDA certified. They lose a share of a $7 billion industry. The
NIDA fee is extremely high. Startup costs for NIDA certification is
greater than $55,000 plus a yearly fee of $30,000.

This cost is prohibitive for startup or disadvantaged business
such as Accu-Lab. This fee is inequitable when compared to similar

fees. For example, an average hospital of 1,000 beds in Chicago
pays roughly $46,000 for a 3-year certification to perform all types
of tests, from hematology to Pap smears, toxicology, and others.

The need for the NIDA certification has fostered the growth of
a parasitic industry that feeds off minorities, yet bars minorities
from participation. The Federal Government, by Executive Order
12564, requires that labs performing drug testing on certain Fed-
eral employees be NIDA certified. This certification requirement
has created the "me too" syndrome which has public and private
industry saying if NIDA is required for Government employees,
then we should require it also.

Now, nearly all public and private agencies are following the
Government by insisting that the lab performing their drug testing
be NIDA certified, even where it is not a legal requirement.

I would like to cite quickly two examples of a long list of personal
experiences that demonstrate inequity and a significant amount of
dollar loss at a crucial time in my business.

The Brach Candy Company tests their employees back from a
more than 6 week layoff. Their senior officers examined my lab and
agreed to send their employees to my lab for testing. A week later
they got the "me too" syndrome and cited my lack of NIDA certifi-
cation and withdrew the business from me, causing me to lose
$150,000.

There was no mandate or no law that required the lab to be
NIDA certified. Simply the "me too" syndrome.

The State of Illinois Department of Alcohol and Substance Abuse,
better know as DASA, awards contracts to labs to test patients in
methadone rehabilitation. The value of this contract is over
$200,000. Testing done on patients under doctor's care is defined
as diagnostic testing. Only forensic testing is regulated by NIDA.
Diagnostic testing is not. Nevertheless, DASA required all labs to
be NIDA certified. Again, the "me too" syndrome prevailed causing
Accu-Lab to lose substantial revenue.

The whole "me too" phenomenon does more than take business
away from Accu-Lab. It creates a vicious Catch-22 situation. Here
is how it works: Accu-Lab needs contracts to enable us to pay for
NIDA, but we need the NIDA certification to obtain even the non-
NIDA contracts. With NIDA as a condition of award, we can't com-
pete. We can't get contracts or loans.

Joint venturing in subcontracting with the industry's leaders has
been attempted but not successfully. I was told by one that, "We
already have the contracts. What do we need you for?" Another
said, "We give some money to the United Negro College Fund. That
is the extent of our minority participation."

WTiat fostered these attitudes is the nonenforcement of set aside
programs and the inability of the past administration to monitor
the efficacy of programs designed to help small and disadvantaged
businesses.

One such program is the failed SBA 8a certification program in
which I was denied certification. But I must say that, today I am
under reconsideration.

Today I ask you to give strong consideration and make steps that
would enable Accu-Lab to receive the same consideration as the

first 50 nonminority labs that applied and paid over 30 percent of
NIDA certification fee, with the Government paying the balance.

I also ask this committee, as leaders of this country, to take a
very active role in the enforcement of minority participation legisla-
tion and to be a watchdog over health reform ensuring that there
is opportunity and equality for small businesses as full partners in
healtn reform.

Mr. Chairman, members of the committee, thank you for the op-
portunity to share my experiences and concerns. I welcome any
questions that you may have.

Chairman Mfume. Thank you very much, Mr. Cooper.

[Mr. Cooper's statement may be found in the appendix.]

Chairman Mfume. Let me suggest that the importance of these
hearings goes to the ability of this subcommittee to establish a pub-
lic record of testimony that subsequently and, in the future, would
undergird any legislative efforts by Members of Congress.

It gives us, if you will, what we need to proceed in many in-
stances. It has been the absence of this public record which has
been pointed to by opponents of legislation, which oftentimes we
like to think of as progressive, as a rein why that legislation should
not be considered.

So I want to underscore how important your testimony and the
testimony of others who have preceded you is in that regard. I do
have a couple of questions, and I would like to begin with Dr. Law-
rence.

Doctor, HMO's servicing the Medicaid population operate under
what is known as the 75/25 rule, which speaks to and sets up per-
centages of memberships delineated by groups.

Can you tell the subcommittee, and for the record, how you think
the 75/25 rule has impacted minority-owned and operated HMO's
and whether, in this larger scheme of*^ things as we deal with health
care reform, it ought to be reviewed in the light of its impact?

Dr. Lawrence. Mr. Chairman, I don't know the details of 75/25.
But I do know that if you have 500 HMO's in the Nation and only
10 are African-American owned and operated, or less than 10, we
have a major problem.

Our people cannot get financing. Our people are excluded, if you
will, from major insurance companies who do provide much fund-
ing. We don't sit on the corporate boards. We are not invited to the
table in that regard, not because we are not qualified, but from
that perspective and the perspective of my organization because
racism continues to characterize the only interaction pattern.

If you talk about who is in control economically, obviously the
more you keep minority populations out, the more you keep their
communities subject to the whim of a majority population. I don't
mean to say that everything that is racist is based on economics,
although there clearly are some people who feel that way. I don't
think that minorities are being protected in their opportunity to be
full participants within the economic structure of our Nation.

Yet, we are expected to participate fully in the military; we are
expected to participate fully as taxpayers; we are expected to pro-
vide our bodies if we are indigent for medical students to practice
upon while they are in school. I think that that kind of participa-
tion dictates that we have full and active access in all other areas

-iQT n — 04 - 2

to include the structure and development and the financing and the
management and operation of health maintenance organizations
and regional health alliances, should they come to be.

We must be full decisionmakers and participants those processes
and without legislation, without Federal legislation, we cannot be
guaranteed that kind of participation.

Chairman Mfume. Well, I appreciate your earlier remarks about
looking at the prospects of setting up set asides that are in line
with current set asides in this instance with regard to regional alli-
ances.

The reason I wanted to talk about the 75/25 rule is because, in
that percentage of HMO's that are minority-owned and operated,
that rule says that Medicaid membership cannot exceed 75 percent
of the total. I didn't know whether or not the National Medical As-
sociation had some position on whether or not we ought to be re-
viewing that ratio and to what extent it impacts negatively on
those individuals who are already minorities who are operating
HMO's.

Dr. Lawrence. We don't have specific data in that regard but it
is something that we can develop and provide to the committee. We
can do that.

[The information may be found in the appendix.]

Chairman Mfume. I feel that everything that is not reformed in
this bill, won't get reformed. I don't know when we will revisit this
issue.

You also mentioned. Doctor, in your testimony, that a number of
minority physicians were losing tneir patients to HMO's and then
subsequently losing their practices.

Does the National Medical Association have or have you devel-
oped statistics on the number of physicians, minority physicians,
that, in fact, have lost their practices over the last 5 years as a re-
sult of this outflow to HMO's?

Dr. Lawrence. At this point, it is anecdotal. We are attempting
to develop this to be able to provide hard and specific data.

Many of the people who we are talking about don't have the re-
source, if you will, to constantly reach out and provide this data.
They are struggling to feed their families and maintain some kind
of viable income.

But, again, this is another area where we can see if we can gen-
erate some kind of hard data.

[The information may be found in the appendix.]

Chairman Mfume. Mr. Fountain, you have suggested that Public
Law 95-507 and the Federal Supply Schedules and Contracts Act
in other things are starting to act as barriers to preventing you
from being successful at what you do.

Mr. Fountain. Yes, sir.

Chairman Mfume. I think that it is fair to say that there are a
lot of people who will read this testimony whose eyebrows may
have been raised to 95-507 because it was set up to ensure the
kind of set aside and to assure a guarantee of participation by mi-
nority-owned firms.

So I am very interested in knowing how it is negatively impact-
ing at least those in your field because if there are ways of correct-
ing that, we want to be in the business of doing that.

I welcome your response to that.

Mr. Fountain. If you read 95-507 correctly, it creates a pref-
erence to small business. There is no reference to a preference for
small and disadvantaged business. As a result, Federal contracting
officers and purchasing agents are systematically, by passing the
small disadvantaged firms and going to majority small businesses.
There is no preference for them to utilize disadvantaged firms.

Chairman Mfume. I am a bit confused because I thought 95-507
was developed to ensure minority business involvement and that it
was a set aside primarily within the Defense Department to begin
something that would ensure and allow that. The question that has
previously existed around 95-507 does not so much, with the word-
ing of the law, but rather the definition of minority which tended
to create problems.

You are suggesting that that is not the case?

Mr. Fountain. That is correct. Public Law 95-507 Chapter 3 sec-
tion 221(j) establishes small purchase procedures and reserves
these purchases exclusively for small business concerns. There is
no mention of the utilization of Black or other minority disadvan-
taged firms.

Chairman Mfume. Does the language say socially or economi-
cally disadvantaged?

Mr. Fountain. No, it does not.

Chairman Mfume. I am going to get the law. This is new to me.
I appreciate your calling my attention to it. Before we wrap up, we
will take a look at what is exactly in the law.

I am going to go, instead, to Mr. Cooper. There was something
that you said that majority-owned firms are doing testing and they
have been waived from the full requirement of NIDA certification
and are being allowed in paying 30 percent of that certification.

Mr. Cooper. That was the first 50 labs that made application for
it. I understand that the first 8 to 10 actually received a grant from
the Government to set up the mechanism and then they just de-
clared themselves as certified. Then when they needed 50 more,
they said, we will let them in at a 30 percent cost.

Chairman Mfume. When did that occur?

Mr. Cooper. 1988 and 1989. There was an article in the Wash-
ington Post 4 years ago that referenced those labs that received the
grant from HHS and set up this type of mechanism.

Chairman Mfume. I am sorry that I dismissed Dr. Broadnax, be-
cause that goes to the heart of the question that, how do you facili-
tate entrepreneurs who are doing blood testing to come in and par-
ticipate in what is an increasingly lucrative field in light of NIDA
regulations.

So we have got — ^you are telling me we have about 100 different
providers on — or 50 or more

Mr. Cooper. We have 90 NIDA certified laboratories as of today.
None of those are minority, and none of them have been.

In the past 10 years since this executive order was enacted, all
the drug testing for the Federal Government and Federal mandates
programs had to go to those laboratories.

But then you have got other startup companies because a com-
pany like AT&T or a drug rehab center, they don't have to use a

NIDA lab; but because that is the standard, now they are forcing
a startup company from making any type of money.

There is $750 billion that is slated to go into a crime bill. That
money is to be used for testing incarcerated prisoners and
aftercare. If they make NIDA the standard for that in that bill,
then a small company like mine won't be able to play in the NIDA
field.

So you constantly have legislation being enacted that requires
testing. But if they write that NIDA in there, they know that they
are writing out minorities or small and disadvantaged companies
at that time. The Justice Department is exempt for NIDA.

It is clearly in the Federal regulation that the Justice, the Post
Office, and the military is exempt from the NIDA requirements.
Yet the $11 million that is spent in Justice, someone wrote in the
contract, you must use a NIDA certified lab.

The Post Office tests 150,000 people a year, and NIDA is written
into that as well.

So a small company cannot get involved in this. There can't be
minority participation, because no matter how much you set aside,
if you write "NIDA" there, the set aside is right out the window;
the guy comes back and says, we don't have any minorities who are
certified so we don't have to worry about this.

Chairman Mfume. So all of the drug testing where it is required
for a Federal agency to use the NIDA certification, and increasingly
where it is not a requirement but it is something now that other
agencies are looking at as a benchmark, is being done by 90 or so
firms in the country, none of which are minority?

Mr. Cooper. That is correct, sir.

Chairman Mfume. Fifty of which had 30 percent of their entry
fee waived. Is that correct.

Mr. Cooper. That is correct.

Chairman Mfume. Was the waiving done by the National Insti-
tutes of Drug Abuse?

Mr. Cooper. The waiving was done by the contractor that HHS
paid to go out and look at these labs. That is called Research Tri-
angle Institute. It is on the first page of the appHcation which says
that the first 50 labs have that waived.

Chairman Mfume. Mr. Zanders, could you come back to the
panel table for a moment since you do, in some capacity, represent
Dr. Broadnax and the Agency.

Would you be kind enough to share with Dr. Broadnax this por-
tion of the testimony that he did not have an opportunity to hear,
which goes back to my original question to him regarding the cer-
tification requirements.

Could you request that he submit to the committee some sort of
response to the suggestions by Mr. Cooper that this waiver oc-
curred allowing 50 firms in and that we are now in a situation
where we have almost 90 firms in the country operating, working
through HHS, and working with other agencies now, none of which
represent any minority-owned businesses of any type.

I would appreciate it if he could communicate back to members
of the full committee some type of response with respect to these
new aspects of this interesting

predicament.

Mr. Zanders. All right, I will.

[The information may be found in the appendix.]

Chairman Mfume, Mr, Cooper, what is the prospects of Accu-
Lab's longevity should you not be able to gain NIDA certification?

Mr. Cooper, My company is going to suffer. The inner-city that
we serve is going to suffer. As more firms and more Grovernments
require the NIDA certification, the less work we will have to do,
unless we go and branch out into another field, which, after all, the
money we have spent on the equipment that we use now, that
might be a little bit frivolous.

Chairman Mfume, Mr, Fountain, on page 4 of your testimony,
you say Federal contracting officers and general purchasing agents
tend to routinely and consistently bypass Black and other minority
medical scientific suppliers.

How do you see that taking place?

Mr. Fountain. Under small purchases, most purchasing agents
are required to solicit telephone quotes from three sources of sup-
ply. In the event that there are five sources of supply and three of
those sources are nonminority firms, small business firms, the pur-
chasing agent normally will go to those three firms first.

Public Law 95-507 gives no preference for that purchasing agent
to utilize the services of the minority firms whatsoever. They only
have to utilize the services of small businesses.

Chairman Mfume. OK. I have received from staff Public Law
95-507, which, as you know, became law October 24 1978. I want
to try, if I might, to clarify your reference earlier about it being an
impediment because it doesn't set up a standard for procurement
for minority-owned businesses.

What the law actually does is to break out small purchase proce-
dures and then general purchase procedures. Small purchase proce-
dures are considered to be those that have an anticipated value of
less than $10,000 and which are subject to small purchase proce-
dures generally and exclusively heretofore used and mentioned for
small business concerns, unless the contracting officer is unable to
obtain offers from two or more small business concerns.

So, I assume, then, that your remarks were set aside to reflect
the law as it relates to small business purchases, those that are
10,000 or less?

Mr. Fountain. Yes, sir.

Chairman Mfume. And let me read further, to suggest that gen-
eral business purchases by small business concerns owned and con-
trolled by socially and economically disadvantaged individuals in
procurement contracts of such agencies having values of $10,000 or
more would, in fact, be set aside for a group of people who would
then fall under this category of economically and socially disadvan-
taged.

I was not in the Congress at the time the law was written, but
I have reviewed it many times and have seen similar laws. I think
there was a deliberate effort here to set up a system that, on major
purchases, based as — possibly it was on the testimony of minority
entrepreneurs — that on major purchases over $10,000 that you
ought to put in guarantees that there be a set aside for either to
participate.

Probably what was considered small purchases, less than
$10,000, were left this way for the general pool of individuals,
whether you were a white-owned business, female-owned business,
minority-owned business to compete from.

I wanted to clear the record on that, not to suggest that your con-
cern is not a valid concern whether or not it creates an impediment
for you; but at least, to you, then, we are talking in this instance
about small business or small purchases.

Mr. Fountain. Yes, Mr. Chairman. I would just like to add that
it is important to realize that the purchases for less than $10,000,
it is at that level that most new firms are entering into this mar-
ketplace.

Purchases over $10,000 are very good. However, most new firms
entering into the arena with purchases where purchases are very
small. I think it is very important that Public Law 95-507 go one
more step and give a preference to Black and other minority firms
in the arena of small purchases, which right now it does not.

Chairman Mfume. The small purchases are not the purchases by
the company. It is the small purchases by the Government con-
tracting agencies. So, if an agency needs to purchase, let's say
2,000 pencils, it would fall under that category and they would try
to look for the individual who, in a general sense, as a small busi-
ness, not necessarily a minority, to make that purchase with.

Well it helps, certainly, to give us an idea of whether or not we
ought to look, as a Congress, about modifying 95-507. Part of our
overwhelming disability has been the inability to make sure that
just the law itself, in terms of purchases over $10,000, was adhered
to. This was an ongoing battle, one that we thought was close to
playing out at the expiration of the original law. It has been contin-
ued, and it is something that has generated and taken a great deal
of time by this committee and other members who are concerned
about minority business development.

Mr. Zanders, you wanted to comment?

Mr. Zanders. Just as an add-on, there is current legislation now
where the SDB set aside is coming through Congress now that I
think has frill support, where all agencies, Government agencies,
can utilize SDB set asides, which I think would help Mr. Fountain
as well. But at this point, we do not have it. But I think before the
year is out or something, those SDB set asides will address the
question that Mr. Fountain as.

Chairman Mfume. Do OSDBU's have, currently or implicitly, the
ability to contract out these small purchases to minorities if, in
fact, they realize that they are minority entrepreneurs who are out-
side of the agency who can provide the product or the service? Or
are they limited by law here?

Mr. Zanders. By law in terms of we could not restrict that just
to SDB's. By law we cannot do

Chairman Mfume. I understand that. But if purchases under
$10,000 are to be made to the general small business community,
of which there happened to be minority business members, it
doesn't count one out of the competition. It just means that the
competition is broader.

But I think that what Mr. Fountain is suggesting is that there
is some other layer here in which the contracting officer is perhaps
deHberately overlooking minority businesses.

Whether or not that is the case, I don't know; and we won't find
out in this hearing. But I wanted to know if OSDBU's or others or
purchasing agents, to the best of your knowledge, look at the uni-
verse of qualified suppliers, or are the awards made in a different
way through an RFP, or arbitrarily? I don't know.

Mr. Zanders. It is more from a universal inclusion, more so than
we can set aside just for a particular group in the small purchases
at this point.

Chairman Mfume. Well we will try, Mr. Fountain, to look at it
as a subcommittee. I need to be honest with you, it is not a matter
that has come before us before; but there are a lot of matters that
don't come before us until we have a hearing.

But we certainly want to thank you and Dr. Lawrence and Mr.
Cooper, for sitting with us for the morning and part of the after-
noon so that we might be able to benefit from your testimony and
certainly that you responded to the questions of the Chair.

As I indicated earlier, it is extremely important for us to put in
place a public record and body of evidence that there are, in fact,
problems that allow some justification for moving legislation, par-
ticularly in the minds of those who may be opposed to anv kind of
legislation,. So these hearings go a long way in achieving that.

I want to dismiss this panel and to declare this subcommittee ad-
journed.

Thank you very much.

[Whereupon, at 1:27 p.m., the subcommittee was adjourned, sub-
ject to the call of the Chair.]

3€
APPENDIX

STATEMENT OF

THE HONORABLE KWEI8I MFDME

CHAIRMAN

SUBCOMMITTEE ON MINORITY ENTERPRISE, FINANCE
AND URBAN DEVELOPMENT

HEARING ON

"IS HEALTH CARE REFORM HEALTHY

FOR MINORITY ENTERPRISE?"

NOVEMBER 9, 1993

The committee will come to order. First, I would like to say
good morning, and welcome, to the members of the Subcommittee, our
distinguished witnesses, and ladies and gentlemen in the audience.
Today, the Subcommittee will take up an issue that has been the
topic of much debate and controversy since President Clinton's
national address on September 22. That issue is national health
care reform.

Not since the New Deal has a President proposed such a grand
plan that appears to offer so much to so many. The debate over
this plan however, has generated as much acclamation as it has
criticism, partly because the details of the legislative proposal
have not yet been released. Meanwhile, Congress has been engaged
in the consideration of a broad range of proposals to control the
growth in health care spending, which is at the center of the
debate. Another fundamental element in this debate is the issue of
how to expand health care access for an estimated 36 million
uninsured Americans and a large number of under insured, without
fueling inflation in health care costs, and without imposing
significant costs on the Federal or state governments. It should

be noted that the Federal government now spends about 42 cents out
of every health care dollar.

All sectors of the health care industry hope to influence the
shape and scope of the President's plan to address their individual
concerns, and are currently staking out positions for the struggle
that lies ahead. The distinct and divergent interests surrounding
these debates is not surprising when one considers that the
President's plan could lead to a massive redistribution of income
among American workers and businesses within the estimated $800
billion health care industry.

My colleagues and I in the Congressional Black Caucus, believe
the hallmark of any national health care reform package should be
quality coverage for every citizen that is accessible and
affordable. To paraphrase one writer, the quality of our lives is
best measured by how the poor and disenfranchised among us are
treated. Accordingly, we would strongly challenge any proposal
that makes low- and fixed-income elderly and poor citizens choose
between co-payments for health care and meals or other sustenance
necessary for basic survival.

As mentioned earlier, the debates surrounding health care have
focused on the need to contain medical care related costs, and how
to expand health care access. When we examine the current variety
of health care reform proposals, we see little evidence that

consideration is being given to the minority community beyond its
health status or its role as ultimate consumer of health care
services. We have not yet seen any manifest regard for Hispanic
American, African-American, or Native-American primary-care
physicians and nurse practitioners, insurers, managed care
organizations, generic drug makers and distributors, and others
involved in this massive undertaking, where the Federal government
plays such a large and critical role. In addition to concerns
about the potential costs imposed on minority-owned small
businesses, this Subcommittee is concerned about the potential for
managed competition proposals and others to limit, by exclusion,
opportunities for minority providers and suppliers of health care
services to participate in a meaningful fashion in the day-to-day
operations of a national health care system.

While we all may question the details and implementation of a
national health care system, we should recognize the courage
exhibited by the President and the First Lady, to bring this issue
to the forefront of political debate. Far too often, we as a
nation, permit major problems to grow unrestrained while we remain
paralyzed by their complexity. Since all elements of the multi-
billion dollar health care industry are delicately intertwined, and
require proper balance, it is imperative that we build into any
comprehensive reform measure an obligatory and effective mechanism
for inclusion of minorities in every facet of the effort to expand
health care coverage to all citizens. That, ladies and gentlemen.

is the focus of our hearing today. Through the testimony we

receive today, it is our intent to ensure that future debates on

national health care reform address the entire range of economic
interests of the minority community.

The Subcommittee is honored to welcome two of our
distinguished colleagues who are here today to present, in outline
fashion, their respective proposals for a national health care
program that contemplates a broad range of health care interests of
the minority community. We are also pleased to welcome the Deputy
Secretary of the U.S. Department of Health and Human Services, who
has been invited to share with us HHS' commitment to the
participation of minority businesses in the framework of health
care reform and more generally within the overall mission of the
Department. Finally, we will hear from the President of the oldest
national African American physicians group in the U.S., and
representatives from a medical testing and a medical supply
company .

Before I introduce our first two witnesses, I must advise the
members and witnesses that we will proceed under the five minute
rule. Accordingly, I would ask that witnesses limit their oral
presentations to 5 minutes. Witnesses are further advised that
your written statement shall be printed in its entirety in the
official hearing record. Finally, the hearing record will be kept
open for 5 legislative days to permit additional testimony from
individuals not present today, and to allow Members to revise and
extend their remarks. Hearing no objection, it is so ordered.

At this time, I would like to yield to the Ranking Minority
Member of the Subcommittee, the Honorable Ronald K. Machtley (RI) ,
for opening remarks.

Congressional
Hispanic Caucus
NEWS RELEASE

244 Ford Building, Washington, D.C. 20515 • (202) 226-3430

Testimony of Congressman Jose E. Serrano
Chairman, Congressional Hispanic Caucus

Before the House Small Business Subcommittee on
Minority Enterprise, Finance and Urban Development

Tuesday, November 9, 1993

Mr. Chairman, I come before you as Chairman of the Congressional Hispanic Caucus.
I appreciate the opportunity to testify on direction health care reform must take in improving
health care infrasuucture and manpower in Hispanic communities. Health care reform that
does not invest in our communities and empower them to develop responsive, community-
based health care systems is not serious reform. A restructured health care indusuy must
promote the development of health care providers that truly meet the needs of Hispanic and
other low-income communities and must not foster a two-tier health care system.

My testimony will focus on the following:

• Hispanic health service and access needs;

• The need for infrasuaicture and manpower development in Hispanic communities; and

• The responsiveness of the Department of Health and Human Services (DHHS) to the
health needs of Hispanics.

HISPANIC HEALTH SERVICE AND ACCESS NEEDS

No single group is more negatively affected by the health care crisis than Hispanics.
Despite the fact that they work and play by the rules, one out of three Hispanics lack health
insurance coverage (33%). This is more than any other major group.

Hispanic males have the highest labor force participation rate in the nation, but they
tend to be employed in low-wage occupations and industries that typically do not provide
health insurance benefits. In 1992, a staggering 44% of employed Hispanic males 16-64
years were uninsured, compared to 32% of African American and 18% of White males.
What's more, their working-poor status often makes them ineligible for public coverage
through Medicaid.

Hispanic children are uninsured at twice the rate of other children, and Hispanic
elderly are the last in their age group to have health insurance coverage through Medicare.

The lack of health insurance contributes to the disadvantaged socioeconomic status of
Hispanics because they must spend a larger share of their disposable income on health care.
Providing health insurance coverage may be the single most important stroke to lifting many
Hispanic working families and individuals from poverty.

In more human terms, lack of preventive care and early treatment mean that Hispanics
are getting sick and dying unnecessarily. Many preventable diseases such as diabetes,
tuberculosis, AIDS and certain cancers are major killers of Hispanics. According to a 1991
article in the Journal of the American Medical Association, Hispanics have the lowest level of
medical and mental health care utilization in the country.

HISPANIC INFRASTRUCTURE DEVELOPMENT AND MANPOWER NEEDS

Aside trom improvements needed in financing comprehensive health services and
assuring basic health care for all Americans, the vitality of community-based health care
delivery systems and the availability of physicians affect Hispanic access to health care.

In April, the Hispanic Caucus adopted health care reform principles. One principle
slates that a reformed health care system must improve and enhance medical teaching
hospitals, solo practitioners, health maintenance organizations, community health centers, and
other community-based health clinics that service Hispanic and other underserved populations.
A second principle calls for greater minority access to medical education and creation of
incentives to increase the number of bilingual and bicultural primary physicians and other
health care providers.

For Hispanics, a simple matter such as finding a doctor or a primary care facility,
something most of us take for granted, poses a huge problem. The General Accounting
Office, in January of 1992, reported that in El Paso, Texas, - where Hispanics represent
about 75% of the population - only 30 of the city's 800 physicians maintained practice in the
poorest part of the city. That means that 4% of the city's physicians serve 32% of the El
Paso population. In addition, there are only two federally funded health centers to serve the
entire El Paso County.

In my district in the Bronx, we experience similar shortages, particularly a lack of
health care providers offering primary care to Hispanics. A study by the Health Systems
Agency of New York City found that the major health problems and barriers in the South
Bronx included 1) adverse birth outcomes, 2) high hospital admission rates for preventable

conditions, 3) AIDS, 4) substance abuse, and 5) high proportions of non-English-speakir.g
residents. The study noted that interventions needed to ameliorate these health risks and
barriers included improved access to primary, preventive care. Yet. the few available health
centers do not have the capacity to meet the demand for services by the 552,000 persons who
reside in the South Bronx.

The need for improvements in the basic health care infrastructure and manpower to
meet the health care demands in Hispanic communities is extensive. Many Hispanics and
disadvantaged communities currently obtain health care through a fragile network of "safety-
net" providers, local family practitioner, and others. Hispanic communities are in need of
linguistically and culturally appropriate services. This includes interpretation and translation
services for Limited-English-proficient populations. Indeed, the lack of appropriate language
services violates the civil rights of, and often results in human suffering for, individuals who
require such services to access health care.

Hispanic community-based and -run practices and community health centers have a
proven record of meeting the needs of Hispanics. For this reason, health care reform must
maintain and strengthen minority-run and -owned health care facilities as part of a viable
public health network. Also, by investing in minority health care providers and community-
based infrastructure, we can avoid the development of a two-tier health care system.

DEPARTMENT OF HEALTH AND HUMAN SERVICES (DHHS) RESPONSE TO
HISPANIC HEALTH CARE NEEDS

It is important to remember that U.S. Department of Health and Human Services
(DHHS) will be responsible for administering the public health component of health care
reform. Existing programs and hiring practices strongly suggest that DHHS is currently not
sensitive to the health needs of Hispanic communities.

Hispanic employment within the DHHS labor force is dismal, particularly at high level
policy and administrative positions. As of June 30, 1993, only 5% of the total 124,376
persons employed at DHHS were Hispanics. Only 2.7% of the management and top level
policy positions were Hispanic (GS/GM 14 and above and equivalents). As of the first
quarter of FY93, only 1.6% of the federal labor force at the National Institutes of Health
(NIH) were Hispanics, and only 0.47o of NIH manager positions were held by Hispanics.
During the same period, 2.7% of the professional positions at the Health Resources and
Services Administration were held by Hispanics.

It is difficult to comprehend these low staffing patterns at a time when Hispanics are a
growing presence in the U.S. Hispanics represent one out of every 1 1 persons in the U.S.

The Hispanic Caucus-sponsored H.R. 3230, the Minority Health Opportunity
Enhancement (M-HOPE) Act of 1993. takes a thorough look at existing programs within
DHHS and reviews their responsiveness to the health care needs of Hispanics. I will share
with you a few of the findings which were deeply troubling.

First, Hispanics are grossly underrepresented in the health professions. Data indicate
that Hispanics represent 4% of U.S. physicians, although Hispanics represent 9% of the U.S.

population. Let me clarify that many of these physicians are foreign medical graduates,
whereas the U.S. medical education system seems to be graduating only half of those
Hispanic physicians. However, Hispanic participation is very poor in key programs that focus
on increasing the number of minority health professionals. The M-HOPE Act addresses this
inequity by encouraging certain programs to more equitably allocate resources and services
among groups served. It also includes an outreach and peer review process to ensure that
such efforts are inclusive and target all racial and ethnic groups.

Second, two of the criteria used in designating medically underserved areas (MUAs)
exclude Hispanics. The 65-and-over factor works against Hispanics since Hispanics are a
young population. Also, although Hispanic communities experience poor health status, the
emphasis on infant mortality fails to consider Hispanic health needs. Infant morbidity is more
appropriate in measuring Hispanic health status. MUA designation helps in directing
community health center and other resources to develop and strengthen community-based
health care capacities. The M-HOPE Act attempts to remedy this inequity by including
additional factors to the MUA index that more suitably measure health status and medical
underservice, such as uninsurance and morbidity rates.

The M-HOPE Act does not attempt to broadly reform the U.S. health care system, and
thus is not intended to compete with the Administration's Health Security Act or any other
effort to reform our nation's health care system. Instead, by improving existing DHHS
programs, the M-HOPE Act compliments health care reform proposals and is meant to be
used as a blueprint for improving the service of Hispanics by DHHS programs.

I applaud the principles that underiie President Clinton's health care reform plan.
These principles form the core of an effective and equitable overhaul of our nation's
inefficient and often unfair health care system. Secretary Shalala has demonstrated an early
interest in listening to our serious concerns on how things have been done in the past.

The Hispanic Caucus is committed to working with this subcommittee to look for
avenues to ensure that quality health care opportunities are available to all. Thank you.

The Honorable Lucille Roybal-Allard
Statement

Subcommittee on Minority Enterprise, Finance and Urban Development

Opportunities for Minorities in Health Care

November 9, 1993

Mr. Chairman:

It is a pleasure to be here today.

Thank you for holding this hearing to consider the current opportunities for
minorities in the health care industry, the impact of health care reform on the
opportunities for minority business, and the performance of the Federal government
in meeting its responsibility to develop minority health care business.

I welcome our distinguished guests. Thank you for coming. I look forward
to your testimony.

The health care industry, as a whole, and the Federal government, in
particular, have not done a good job in making sure that minorities have a chance
to participate equally and fully in the business of health care.

Minorities are under-represented as doctors, technicians, specialists and other
health care professionals. Minorities are equally under-represented as owners,
managers and administrators in the non-medical business of health care.

Worse, in some ways, is the record of the Federal government. Even though
the official policy is one of equal opportunity and affirmative action, the Federal
government has not done a good job in recruiting, hiring, training, educating and
promoting minorities in the field of health care.

As you may know, the Congressional Hispanic Caucus has introduced the
Minority Health Opportunity Enhancement Act of 1993, the M-HOPE bill. This
Minority-HOPE legislation is designed to correct past inequities and to ensure full
and equal participation for minorities in the future.

My esteemed colleague and Chairman of the Hispanic Caucus,
Representative Jose Serrano, will have more to say about the M-HOPE legislation,
so I will leave that to him.

I will say, as the great debate on health care reform goes forward, it is
appropriate and necessary to confront the inequities of minority opportunities in the
health care industry. It is also part of our oversight responsibility to ensure that the
Federal government meets its responsibility to provide opportunities for minority
business and to hire and promote fairly.

Finally, it is completely appropriate for this committee to look for and to find
ways to help minorities meet the challenge of health care reform.

I look forward to working with the Chairman, with members of the
committee and with our special guests to make sure that opportunities exist for all
in the business and in the profession of health care.

Thank you, Mr. Chairman.

Thank you Mr Chairman,

I would like to welcome our distinguished guests here today. I appreciate the

time you took out of your busy schedule to appear before us today.

I am deeply concerned about the effects of health care reform on small

businesses. The president's health package demonstrates how insensitivity this

administration is in dealing with small businesses as it relates to health

care reform.

Mandated costs and higher taxes are not the answer to our health care

dilema. Since 2/3 of all businesses in the United States are small firms, we

cannot force unreasonable costs and regulations on these jobs generators.

While these issues are being debated, there is another issue that has

been overlooked and for the most part forgotten. The effects of health care

reforms as it relates to the minority enterprises within the health care

industry.

This is an issue that will not attract public attention but it is

important none the less. This morning, our focus will be centered on the

problem of minority businesses participation within the health care industry.

As an example, within the United States there are only approxiinately 7

minority owned HMOs and less than 3°i minority physicians. In an industry that

generates $800 billion, the lack of minority participation should become part

of the overall health care discussions.

During my preparation for this hearing, it became clear to me that there is

little information available on participation by minority owned enterprises in

the health care industry.

I am concerned that, with such limited information available, these firms may

go unnoticed as the health care debate on Capital Hill begins.

This hearing today will be an iniportant step to understanding the

probleiDs and frustrations facing those minority firms already in the health
care industry as well as others who wish to become part of it. Increasing the
number of minority owned enterprises within the health care industry can only

have benefits.

Two in particular come to mind.

1) If we take into account that most minority small businesses are located in

urban areas where medicaid recipients are the highest, then the creation of

more minority owned, small health care enterprises can only benefit those in

need, by providing them easier access to health care providers.
2) Job creation is an another important benefit. In my home state of Rhode

Island, the health industry is the fast growing segment of our economy with

most job growth occurring in this area. Any new opportunities for minority
businesses in this industry can only result in even greater job growth.

If we are truly to address the issues of reform, we must understand all

the players in it. An open, honest debate can only occur when all are allowed

to participate. I look forward to the testimony this morning. I am here to

listen and to learn.

Statement of

Walter D. Broadnax, Ph.D., Deputy Secretary

Department of Health and Human Services

Before The

Subcommittee on Minority Enterprise, Finance, and Urban Development

Committee on Small Business

United States House of Representatives

Mr. Chairman and Members of the Subcommittee:

I am pleased to appear before you today to discuss HHS' strong commitment to the
participation of small businesses and small disadvantaged businesses in the framework and
mission of the Department of Health and Human Services. HHS has an outstanding record,
and continually increases the number of prime and subcontract awards being made to small
businesses in general, and to small disadvantaged businesses in particular.

As you may already know, the fundamental mission of HHS is to protect and advance the
health of the American people and to improve their quality of life. In one way or another,
HHS touches the life of almost every person in the United States. HHS oversees over 250
vital health-related programs including AIDS research, cancer treatment, alcohol and other
drug abuse prevention, immunization, Medicare, Medicaid and Social Security. From ensuring
that the medicines we take are safe, to helping famiUes gain self-sufficiency through financial

aid and job training, to making sure all babies get a healthy start through good prenatal care
- HHS Affects Nearly Everyone.

We at HHS embrace the notion that the small business and the small disadvantaged
business communities contribute to the economy in several critical ways: being the key
generators of new jobs; applying new technologies; introducing new products; and serving
new markets. This contribution is especially true of the small businesses and small
disadvantaged businesses that participate in the acquisition programs at HHS. The
significant contributions made by small businesses and small disadvantaged businesses, for
HHS, are evidenced by the fact that there are no areas of biomedical or behavioral research
in which small businesses and small disadvantaged businesses are prevented from
participating. The demonstrated capabilities and competencies of small businesses and small
disadvantaged businesses ensure that they are second to none in satisfying the programmatic
needs of this Department. HHS remains committed to the development and expansion of
acquisition opportunities which can, and will, encourage small business and small
disadvantaged business participation. Small businesses and small disadvantaged businesses
provide a vehicle for the transfer, dissemination, and replication of new technology that is
developed in the various programmatic areas of HHS.

In order to carry out our mission responsibilities, it is the policy of HHS is to stimulate
competition among potential contractors and to make awards on a basis consistent with
quality, efficiency, and economy. Equally important, it is HHS' policy to ensure that

opportunities to compete for, and receive a fair share of, the Department's acquisition
expenditures are provided to small businesses, small disadvantaged businesses,
women-owned small businesses and labor surplus area concerns.

In the letter of invitation, the Committee requested that my statement address a number of
questions with respect to HHS' small disadvantaged business programs. I welcome this
opportunity to talk about HHS" small disadvantaged business program because I believe it
is one of the best programs of its kind in government.

I will provide summary statements in response to the questions outlined in your invitation.
Detailed responses are contained in my formal statement that has been provided to the
Committee. - ■

The Small Business Act, as amended by Public Law 100-656, requires that the
President establish annual Govemment-wide goals for acquisition awards to
small businesses and small disadvantaged businesses. The statutory goal for
small business participation is at least 20 percent of the total value of prime
contraa awards. The statutory goal for small disadvantaged business
participation is at least 5 percent of the total value of prime contract awards
and 5 percent of the total value of subcontract awards. Historically, HHS has
exceeded all of the statutory goals for small business participation on a
consistent basis. In Fiscal Year 1992, HHS awarded approximately 40 percent

(over $1 billion), of its total acquisition awards to small businesses; and about
13 percent of total awards (over $328 million) was awarded to small
disadvantaged businesses. We think this is particularly noteworthy. In
addition, small disadvantaged businesses received approximately 8 percent
($18 million) of the total subcontracting dollars from prime contracts awarded
by the Department. This achievement is made possible because of
institutional acceptance and support of the preference programs throughout
the Department. I am proud to be a part of one of the top small and small
disadvantaged business programs in government.

The OfGce of Small and Disadvantaged Business Utilization (OBSDBU)
enjoys complete support from the Office of the Secretary. This support is
evidenced by the fact that the Director reports directly to the Deputy
Secretary of HHS, in accordance with the provisions of Public Law 100-656.
The Department's Assistant Secretary for Management and Budget provides
the needed administrative emd logistical support for OSDBU. This
arrangement ensures all necessary resources are available to OSDBU.

The OSDBU establishes and maintains outreach programs to provide a flow
of information about HHS" Small Business Programs to small, small
disadvantaged, and women-owned businesses. OSDBU staff provided
personal counseling and marketing assistance to over 2,000 interested small

businesses during Fiscal Year 1992. ■

OSDBU also developed and distributed over 7,000 copies of various
publications designed to assist individuals and organizations in understanding
the mission and programs of HHS. These publications included - DOING
BUSINESS WITH DHHS, HHS' ANNUAL REPORT ON THE SMALL
BUSINESS PROGRAMS, a FORECAST OF HHS'CONTRACTING
OPPORTUNITIES FOR SMALL BUSINESS, and the SUBCONTRACTING
DIRECTORY. Each publication provided information to acquaint current and
potential contractors with continuing and available acquisition opportunities.

HHS is an active participant in most of the congressionally-sponsored Federal
Procurement Conferences held each year. Component agencies within HHS
sponsor mini-procurement fairs, which assist firms in understanding the
mission and objectives of that particular agency. Hundreds of small and small
disadvantaged businesses are invited to meet directly with the agency's
technical and contracting personnel. The interest in these conferences has
been high, and attendance has been very good. We have utilized the
Commerce Business Daily to publicize the event. During this year's MED
Week activities, OSDBU conducted a session in which several of our prime
contractors participated in a forum discussion on techniques for affording
SDB the maximum opportunities to be potential subcontractors.

Mr. Chairman, I would like to personally assure you that HHS places the highest priority
on the full participation of small business and small disadvantaged businesses in the HHS
programs. This concludes my opening statement. I would be please to respond to any
questions the Committee may have.

######

RESPONSES TO COMMITTEE QUESTIONS SUBMITTED IN WRiriNG

OUESnON! DESCRIBE YOUR AGENCVS CERTIFICATION PROCESS OF SMALL
DISADVANTAGED BUSINESSES :

Standard acquisition practices allow HHS to accept potential offerors' and bidders' good
faith, self-certification representation for specific bids and/or proposals. However,
challenges of, and questions concerning, a specific representation will be referred to the
SBA in accordance with the Federal Acquisition Regulation 19.302.

QUESTION: DESCRIBE THE DEPARTMENTS METHODS FOR COMMUNICATING
PROSPECTIVE CONTRACTING OPPORTUNITIES

HHS employs a number of methods which insure that the maximum practicable opportunity
to participate in contracting opportunities is afforded to small disadvantaged businesses.
Like many other federal agencies, HHS is anticipating the implementation of a govenmient-
wide Small Disadvantaged Business set-aside program.

This program will be modeled after the program now in effect at the Department of
Defense, and will complement the 8(a) Program by providing additional contracting
opportunities for firms, both while they are participating in the 8(a) program, and after they
have graduated. However, until the actual passage of the SDB Program legislation, HHS
will continue to utilize the following methods to inform small disadvantaged businesses of
contracting opportunities with HHS.

With few exceptions, HHS' acquisition officials will continue to
publicize all acquisitions of $25,000 or more in the Commerce Business
Daily .

Departmental Small Business Managers will continue to routinely
include the names of small disadvantaged businesses on the solicitation
mailing lists.

In certain acquisition areas that support research and development
programs, Sources Sought Synopsis notices will continue to be
published in the Commerce Business Daily . These notices specifically
request only small businesses to respond in order to assist in the final
determination to set-aside an acquisition when there are questions
concerning the availabihty of small business with the prereqixisite
capability. The notices provide potential sources with information
concerning an upcoming acquisition and give the potential sources an
opportunity to submit information which demonstrates their
capabilities. This process essentially serves as a "market survey" of
potential sources.

The Office of Small and Disadvantaged Business Utilization (OSDBU)
will continue to develop and disseminate the Department's aimual
Forecast of HHS' Contract iny QpDortnnitlM for Small Business. This
publication is published pursuant to Public Law 100-656. The Forecast
is a marketing tool to assist small businesses and small disadvantaged

74-197 0-94-3

businesses in determining where to market their products and services
for potential contracting opportunities. The Forecast specifically
indicates the acquisition opportunities for small business and 8(a)
firms.

OSDBU will continue to conduct bi-monthly "Marketing and
Counselling Sessions," which provide information on how to do
business with HHS. These sessions offer; 1) a comprehensive overview
of the component agencies under HHS; 2) Marketing techniques for
potential contractors on how to make their capabilities and services
known; 3) a point of contact for acquisition assistance within a
particular component, and 4) the dissemination of technical assistance
publications, which include How To Do Busines s With HHS.
Subcontracting Director/, and Location Di rectory of Small Purchase
Bulletin Boards .

OSDBU participates in numerous small business conferences
throughout the fiscal year. These conferences included state and local
government sponsored fairs, congressionally sponsored procurement
conferences, and the SBA/MBDA MED Week activities. In addition,
OSDBU facilitated HHS' participation in several national events
hosted by the National Business League, the National Contract
Management Association, the National Association of Black
Procurement Professionals, the National AssociaUon of Professional
Asian American Women, and the Latin American Management

Association.

OSDBU is participating in an effort with National Institute of
Standards and Technology to meet the elecuonic small business notice
requirements under the President's memorandum for streamlining
procurement through electronic commerce.

OIIFSTION: WHAT ARE THE HISTORICAL (FY 1990. 1991 AND 1992) AND CURRENT
TARGET PERCENTAGES FOR CONTRACTS AWARD ED TO SDBs. fTHIS DATA
SHOULD BE PROVIDED SEPARATELY FOR PRIME C ONTRACTORS AND
SimCONTRACTORS AND SHOULD ALSO RE SEGREGATED BY ETHNICITY* AND

GENDER) . ,

(•) HHS does not maintain contract award information that reflect ethnicity.

See Attachment #1

QUESTION-. DESCRIBE THE PROCUREMENT CATEGORIES FOR WHICH THE
AWARDS HAVE BEEN LET

Attachment #2 depicts how HHS spends contract dollars for various commodities. For
purposes of simplicity, the commodity categories have been divided into four (4) groups:

1. Management Consulting services • includes such areas as studies, conferences, training,
technical assistance, surveys, program evaluations, logistical-management and research
support, and biomedical research requirements.

2. ADP Services - includes database development and management, data entry services,
hardware and software maintenance, computer systems analysis, computer repairs,
information retrieval services, and computer programming requirements.

3. Products - Includes the purchase of equipment, office and, business suppUes, textile
goods, office furniture, paper products, laboratory equipment, and chemicals.

4. Construction Services - includes activities such as architectural and engineering services,
construction of dwellings and office buildings, general contractors and special trade
contraaors, renovation and alterations, and excavation and demolition work.

QITFSTION! PROVIDE AN KXPLANATTON OF W HY THE ACTUAL AWARD
PFRrENTAGF. TO SDBs ArHIKVED DEVIATES FRO M THAT WHICH HAS BEEN
MANDATED.

HHS has exceeded all of the statutory minimums for the past several years. In Fiscal Year
1992, of the total value of prime contracts awarded, HHS awarded 40 percent to small
businesses, and over 13 percent to small disadvantaged businesses. Over 50 percent of the
total value of subcontracting awards went to small businesses.

The Small Business Act, as amended by Public Law 100-656, requires that the President
establish annual Government-wide goals for acquisition awards to small businesses and small
disadvantaged businesses. The statutory goal for small business participation is at least 20
percent of the total value of prime contract awards. The statutory goal for smaU
disadvantaged business participation is at least 5 percent of the total value of prime contract
awards and 5 percent of the total value of subcontract awards.

This impressive record of achievement can be directly attributed to the Department-wide
support of the spirit and intent of the small business program and to the capability and
competence of the small businesses and small disadvantaged businesses participating in the
acquisition process at HHS.

QUESTION; PROVIDE AN OVERVIEW OF ANY PROGRAMS OR INmATTVES
DEDICATED TO MINORITY ENTERPRISE DEVELOPMENT.

HHS' Office of Small and Disadvantaged Business Utilization conducts one of the most
extensive outreach efforts in all of Government to identify potential small disadvantaged
business contractors who can participate in HHS' programs.

The Small Business Act, as amended by Public Law 95-507, established the Office of Small
and Disadvantaged Business Utilization (OSDBU) in each federal agency. The primary
responsibility of the OSDBU is to foster the use of small and small disadvantaged businesses
as federal contractors. Within HHS, this task is effectively carried out by our OSDBU.
OSDBU develops and implements appropriate outreach programs aimed at heightening the
awareness of the small disadvantaged business community to the contracting opportunities
available with HHS. These outreach efforts include activities such as sponsoring and
participating in small business fairs, procurement conferences, trade group seminars, and
other forums which promote the utilization of small and disadvantaged businesses as
potential contractors. The OSDBU also conducts bimonthly counseling sessions for anyone
interested in knowing about how to do business with HHS.

The OSDBU, after consultation with the Small Business Administration, establishes and
monitors HHS' acquisition goals to ensure that the maximum practicable participation of
small disadvantaged businesses in all Departmental acquisition processes is carried out. In
order to assist the Department in achieving the established acquisition goals for the
procurement preference programs, the OSDBU provides technical advice and assistance to

Departmental acquisition officiads as needed.

Additionally, the Office of Small and Disadvantaged Business Utilization enjoys complete
support from the Office of the Secretary. This support is evidenced by the fact that the
Director, OSDBU reports directly to the Deputy Secretary of HHS, in accordance with the
provisions of Public Law 100-656. The Department's Assistant Secretary for Management

and Budget assists in this effort by providing the needed administrative and logistical
support for OSDBU. This collaboration insures all necessary resources are available to
OSDBU.

/ 69

QUESTION: WHAT IS THE ROLE OF SMALL AND DISADVANTAGED BUSINESS
ENTERPRISE UNDER THE PROPOSED NATIONAL HEALTH CARE REFORM

The stated acquisition policy of HHS is to stimulate competition among potential
contractors and to make awards on a basis consistent with quality, efficiency, and economy.
It is also HHS' stated policy to ensure that opportunities to compete for, and receive a fair
share of, the Department's acquisition expenditures are provided to small businesses, small
disadvantaged businesses, women-owned small businesses and labor surplus areas.

At this particular time, finalization of the National Health Care Reform initiative is not to
the point that we can accurately identify any type of resulting contractual requirements.
However, the acquisition review process employed by HHS requires first consideration be
given to the 8(a) Program for possible award, then to small business set-aside consideration
and finally to open or unrestricted competition. This review process is appUcable to ALL
potential acquisitions prior to being released to the general public. All acquisitions must
have approval of from the Contracting Officer, the Small Business Specialist, and the SBA
Procurement Center Representative. These three individuals must concur with the method
of procurement for the acquisition prior to being issued.

With the existing exemplary record of small disadvantaged businesses' participation in all
facets of acquisition within HHS, we are confident that there will be ample opportunities
available when the National Health Care Reform program is established.

OITFSTION: IS THE AGENCY IN COMPMANCE WITH SECTIONS 211 A>a) 221 OF

PI. TAW 9S-Sft7 REIATINC. TO CONTR ACT OPPORTUNITIES AND

SirRCONTRACn^C. PIAN REQUIREMENTS FOR INCL USION OF SMALL BUSINESS
CONCERNS OWNED AND CONTROL! -FD BY SOC IALLY AND ECONOMICALLY
niSADVANTACED INDIVIDUALS :

I am pleased to report that HHS is in full compliance with Public Law P.L. 95-507, Sections
211 and 221, relating to increasing contract opportunities for small business concerns
through the placement of subcontracting plans in contracts, and the establishment of goals
for small business participation. For the past several years, HHS has met or exceeded its
subcontracting goals for small disadvantaged businesses.

Our OSDBU recently developed a "Model Subcontracting Plan" which is included in
soUcitations issued by our acquisition offices. This "Model Subcontracting Plan" was
developed to ensure the consistency of information being submitted by prime contractors.
We at HHS are especially proud that the "Model Subcontracting Plan," developed by HHS'
OSDBU, has been incorporated as a guidance tool in SBA's Standard Operating Procedures
for the Subcontracting Assistance Program.

QUESTION: PROVIDE AN ORGANIZATIONAL CHART ILLUSTRATING REPORTING
LINES BOTH ADMINISTRATIVELY AND ORGANIZATIONALLY AND THE NAME OF
THE APPOINTED DIRECTOR OF THE OFFICE OF SMALL AND DISADVANTAGED
BUSINESS UTILIZATION .

Mr. Verl Zanders is the Acting Director for the Office of Small and Disadvantaged Business
Utilization for HHS. Mr. Zanders has been serving in this capacity since February 1993.
Mr. Zanders develops and implements policies and procedures that are designed to foster
the awareness of the small and minority business community to the contracting opportunities
available through HHS.

Prior to this appointment, Mr. Zanders had been the Deputy Director of the Office since
1989. He was responsible for the day-to-day operation of the office as it related to policy
and management of the small business program. Mr. Zanders has the distinction of serving
as the SBA Procurement Center Representative for HHS for over 9 years. During his
tenure as the SBA Representative, he was directly responsible for assisting HHS in
increasing small disadvantaged businesses participation in previously untapped areas of
procurement Mr. Zanders was honored by HHS, while he worked for SBA, for his
contribution to the SDB programs for HHS. Additionally, Mr. Zanders was honored by the
SBA with the 1992 Federal Advocate Award.

Mr. Zanders is a participating member of the HHS' Executive Commitee for Acquisition,
which allows for the exchange of information concerning departmental acquisition poUcies
as well as issues pertaining to the socio-economic programs.

DEPARTMENT OF HEALTH AND HUMAN SERVICES

1
CATEGORY

FY 90

FY 91

FY 92

/Dollars In Millionsi II

TOTAL ACQUISITION

$2,188.0

$2.6/ /.O

$2,571.0

TOTAL MINORITY BUSINESS AWARDS

(Includes 8(a)) Percent

$270.0
12.3

$285.0
10.6

$328.0
12.8

GOALS - 8(a)

Percent
ACHIEVED - 8(^

Percent

$129.0
5.9

$189.0
8.6

$154.0
5.8

8.3

$190.0
7.4

$238.0
9.3

GOALS - MINORIT\r BUSINESS

(Nori 8(a)) Percent
ACHIEVED - MINORITY BUSINESS

(Non 8(a)) Percent

$39.0
1.8

$31.0
1.4

$46.0
1.7

$63.0
24

$86.0
3.3

«,.o

3.5

GOAI S - WOMEN-OWNED BUSINESS

Percent
ACHIEVED - WOMEN-OWNED BUSINESS

Percent

$fif>.0
3.4

$89.0
4.1

$78.0

3.7

$116.0

4.3

$98.0

4.5

$104.0

4.1

TOTAL SUBCONTRACTING DOLLARS

GOALS - SMALL DISADVANTAGED BUSINESS
1 Percent
ACHIEVED - SMALL DISADVANTAGED BUSINESS

Percent

$252.0

$120
4.8

$19.0
7.5

$271.0

$12.0
4.4

$24.0
8.9

$227.0

$21.0
9.3

$18.0
7.9

NATIONAL INSTITUTES OF HEALTH 1

CATEGORY

FY 90

FY 91

FY 92

Dollars In Millions) II

TOTAL ACQUISmON

TOTAL MINORITY BUSINESS AWARDS

(Includes 8(a)) Percent

$937:3

$67.3

7.2

$960.3

$90.5

9.4

$1,007.3

$80.3

8.0

GOALS - 8(a)

Percent
ACHIEVED - 8(a)

Perc»nt

$23.0
2.5

$50.0
5.3

$46.0
4.8

$7^5
7.5

$52.0
5.2

$62.0
6.2

GOALS - MINORITY BUSINESS

(Non 8(a)) Percent
ACHIEVED - MINORITY BUSINESS

(Non 8(a)) Percent

$39.0
4.2

$14.0
1.5

$46.0
4.8

$15.0
1.6

$65.0
6.5

$16.0
1.6

GOALS - WOMEN -OWNED BUSINESS

Perc»nt
ACHIEVED - WOMEN-OWNED BUSINESS

Percent

$18.0
1.9

$24.0
25

$27.0
2A

$27.0
2.7

$25.0
2.5

TOTAL SUBCONTRACIING DOLLARS

GOALS - SMALL DISADVANTAGFD BUSINESS

Percent
ACHIEVED - SMALL DISADVANTAGED BUSINESS

Percent

$26.0

$8.0

30.8

$1.0

3.8

$28.0

$9.0

32.1

$1.0

3.6

$41.0

$15

366

$30

7.3

r — "

M COHOL. DRUG ABUSE AND MENTAL HEALTH ADMINISTRATION

1
CATEGORY

FY 90

FY 91

FY 92 1

Dollsrs In MiUions) l{

TOTAL ACQUISITION

$163.0

$161.0

$176.0

TOTAL MINORITY BUSINESS AWARDS

$44.0

$53.0

$46.0

(Includes 8(a)) Percent

27.0

32.9

26.1

GOALS - 8(a)

$18.0

$31.0

$35.0

Percent

11.0

19.3

19.9

ACHIEVED - 8(a)

$51.0

$41.0

Percent

31.3

25.5

23.3

GOALS - MINORITY BUSINESS

$1.0

$2.0

$4.0

(Non 8(a)) Percent

0.6

1.2

2.3

ACHIEVED - MINORITY BUSINESS

$3.0

$7.0

(Non 8(a)) Percent

1.8

1.9

4.0

GOALS - WOMEN-OWNED BUSINESS

$11.0

$17.0

$22.0

Percent

6.7

10.6

12.5

ACHIEVED - WOMEN-OWNED BUSINESS

$25.0

$24.0

$22.0

Percent

15.3

14.9

125

TOTAL SUBCONTRAC I ING DOLLARS

N/A

$1,100

$0,250

GOALS - SMALL DISADVANTAGED BUSINESS

N/A

$0,750

$0,025

Percent

68.2

10.0

ACHIEVED SMALL DISADVANTAGED BUSINESS

N/A

0.153

0.430

Percent

13.9

1720

Testimony of

Leonard E. Lawrence, MJ>.

President, National Medical Association

before tiie

House SmaO Business Subcommittee on Minority Enterprise,

Finance and Urban Development

l^esday, November 9, 1993

Mr. Chairman, Members of the Committee, Good Morning. I am Leonard E. Lawrence, President
f the National Medical Association, the oldest national African American physicians group in the
United States. Please allow me to share a story which captures the heart of my chief concern about
this business of health care.

She lay on a cart in the emergency room. Her eight year old grandson stood beside
that cart wondering when the doctors would come to see her. He had little awareness
that when he had been bom in that same hospital some eight years earlier, Black
physicians were not allowed to come into that hospital to deliver babies. Nor could
he have anticipated that twenty-two years later, he would be the chief resident in
psychiatry in that same hospital system. However, what struck him to the core were
the words he heard from a White -clad doctor, "We don't need to worry about her.
She's just an old Nigger. " She died, in diabetic coma on that cart in that hallway.

I am the grandson mentioned in that story — a 1962 graduate of Indiana University School of
Medicine and the Associate Dean for Student Affairs and Professor of Psychiatry, Pediatrics and
Family Practice at the University of Texas Health Science Center in San Antonio. I am a child
psychiatrist by training and a community advocate by choice. Now, whether that experience
contributed to the career path I chose, I cannot say. Yet it is the keen recollection of that
experience that motivates much of my activity and continually stimulates my resolve that no
person's relative will ever again suffer such an indignity.

All of us are aware that these indignities continue to occur and that racism is alive and well. The
principles of reform presented in the President's proposed Health Security Act of 1993 are
ohenomenal, but when you factor in racism, then the end result is potentially problematic.

Point #1

The racial and ethnic composition of the nation's physicians does not reflect the general population
and contributes to access problems for underrepresented minorities. Although earlier drafts of the
President's plan mentioned the concept of affirmative action, there are now several non-
discrimination provisions in the President's proposal based on existing law. The National Medical
Association is concerned that the proposal does not fully embrace affirmative action. African
Americans and other minorities have had experience with the terms "equal access" and "equal
opportunity". That is not enough.

♦ Therefore, the NMA strongly recommends that the legislation require health plans
to hire, appropriately and equitably, minority health providers as employees.

We also must address the issue of minority physicians, dentists and other health professionals as
entrepreneurs. The Washington Post recently ran an article entitled /I Rush to 'Buy' Doctors. The
article began, "Amid the uncertainty over medical reform, some companies are gobbling up what
they bet will be health care's hottest commodity in the 1990s: doctors." Our NMA physician
members are included in this number of physicians being "gobbled" up and our physician members
are included in a number holding out, losing their patients to HMOs and subsequently losing their
practices. The National Medical Association does not want to appear before this Conimittee in
1998 to testify to what is now a current fear and what may become a reality that there will be only
^ few major companies delivering all of the health care in the United States. But that is a
possibility in this kind of monopoly arrangement where competition is the major theme and if we
do not build in some protections for minority provider networks, now.

♦ The National Medical Association recommends establishing an African American
and other underrepresented minority business "set-aside" program within Regional
Health Alliances to ensure proportional representation of providers from underserved
communities. Such a program could be implemented through provisions similar to
those contained in Public Law 99-661, Section 1207 (The Department of Defense
Contracting Goal).

There are approximately five hundred (500) HMOs in the United States, less than 10 are owned or
operated by African Americans. In Detroit, there are three thriving African American owned or
operated HMOs — Comprehensive Health Services/The Wellness Plan, United American Health
Services which manages OmniCare, and LifeChoice Quality Health Plan. The oldest of these three
is Comprehensive Health Services/The Wellness Plan which reports some 100,636 members. This
report makes it the fourth largest HMO in the state and the largest among the three African
American owned and operated HMOs. It is still Medicaid based but according to the Senior Vice
President for Business and Fiscal Affairs, Isadore King, the key to their continued success will be
vertical integration — the alliance of hospitals, pharmacies, HMOs, independent physician
associations, etc.

♦ The NMA also recommends that low-interest loans, tax and other incentives are
available to strengthen the capacity of provider networks in underserved areas.

Point #2

Shortages of minority providers exist not only in primary care but some specialized areas. Among
the specialty areas are general surgery, adult and child psychiatry and preventive medicine, and
generalists with additional geriatrics training. There must be clear acknowledgement of these
training deficits with built in incentives for training programs to correct these deficiencies.

Point #3

Within the framework of the present health care system, the current physician-to-population ratio
in the nation is inadequate. Further increases in this ratio will do little to enhance the health of the
pubUc or to address the nation's problems of access to health care. Continued increases in this ratio
will, in fact, hinder efforts to contain costs. The Health Security Act provides for education and
training of primary care physicians (who will get fifty-five percent of the training slots). There are
specific references to underrepresented minorities but no references to proportional representation.

♦ The NMA recommends proportional representation of minorities not only in primary
care (generalists) but specialty training programs. The NMA suggests the following
mechanisms for recruitment: (1) establishing federal grants for specialty care training,
especially targeted for African American and other underserved minorities; (2)
changing reimbursement policies for graduate medical education; (3) strengthening
National Health Service Corps and loan repayment programs; (4) developing
competitive compensation packages; (5) increasing research on issues related to
medically underserved populations; (6) and actively recruiting students for health
careers in underserved areas.

Of the almost 60,000 students currently matriculating within medical schools throughout this nation,
only slightly more than 4000 are African American. The disparity is even more glaring concerning
the other three underrepresented minority populations (Mexican Americans, Mainland Puerto Ricans,
and Native Americans). The National Medical Association supports the efforts of the Association
for American Medical Colleges' (AAMQ Project 3000 by 2000. This project seeks to increase the

number of underrepresented minorily medical school applicants to 3000 by the year 2000.
Theoretically, all medical schools have agreed to participate in this endeavor. While most of the
discussion centers on increasing the numbers of minority applicants in the pipeline, little attention
is paid to the obstacles to the admission of current candidates. The Medical College Admission
Test (MCAT) does not reflect accurately the potential of many students to complete a medical
education. The test has been standardized on some populations but schools have been resistant to
fully embrace alternate methods of assessing a student's potential both to complete a medical
curriculum and to become a competent practitioner.

Until the 1970s, most African American physicians were educated at either Howard University
College of Medicine or Meharry Medical College. Morehouse and Charies R. Drew have
contributed significantly to the total number of African American physicians in practice. These four
schools served their students well by not only teaching the concepts of healing but respect for
patients and how to relate to those patients. Today the majority of African American students are
being educated in majority institutions. The number of African American physicians needed in this
health care crisis is too great for our four African American medical institutions to address.
Unfortunately, however, the acceptance of African American students within the majority
educational environment is sometimes filled with prejudice, insensitivity, and racism, as oppose to
education, nurture, and support.

♦ The NMA recommends that specific language is included which gives educational
funding directly to Historically Black Colleges and Universities (HBCUs) to include
consideration of funding and increased capacity for medical student education.

The bottom line is this ~ without an adequate and continuing supply of competent, well-trained
African American physicians, a proportional number of African American owned and operated
physician groups, and specific mandates stressing African American inclusion, we can talk "reform"
until we are blue in the face. Our patients and our communities will continue to suffer. The
National Medical Association promises to be persistent and precise in the advocacy of a fair and
equitable health care system. I, as a representative of the National Medical Association, will be
clear, direct and at times passionate in my call for equiuble and excellent health care delivery
system — because none of us want anyone's relative to again lay on a cart and be labeled an "Old
Anything." Thank you.

Testimony of

George L. Fountain Jr.

Vice President

District Scientific and Medical Supply, Inc.

a Black owned and operated distributor of medical and laboratory supplies

Gaithersburg, MD

Submitted to:

The U.S. House of Representatives
Committee on Small Business

Subcommittee on Minority Enterprise, Finance,

and Urban Development

Representative Kweisi Mfume, Chairman

November 9, 1993

Testimony of George L. Fountain Jr.

Vice President

District Scientiflc and Medical Supply, Inc.

a Black owned and operated distributor of medical and laboratory supplies

Gaithersburg, MD

Submitted to the VS. House of Representatives
Committee on Small Business Representative Kweisi Mfume, Chairman

November 9, 1993

Thank you for the opportunity to provide information, as it pertains to being a Black-
American medical and scientific supply company. I am submitting this testimony to provide
suggestions on the utilization of minority medical suppliers under National Health Care Reform.

I would like to begin by providing general background information on the industry, and
then discuss the problems faced by Black and other minority medical and scientific suppliers in
three areas: 1. The ability to win public contracts; 2. The ability to win private contracts and 3.
The ability to obtain distribution agreements from manufacturers.

General Background; y

The medical and research industry is made up of hospitals (public and private), alternate
care medical facilities, health maintenance organizations, private physicians, nursing homes,
teaching facilities, and laboratories. The medical supply industry is primarily controlled by one
large national distributor (Baxter Healthcare); numerous regional distributors; and many small
local distributors. The scientific industry is controlled by four large distributors (Fisher
Scientific; Baxter Scientific; VWR Scientific and Curtain Matheson Scientific). These large
distributors often own some manufacturing companies; however; most distributors in both
industries rely upon distribution agreements from key manufacturers. The major manufacturers
within these industries (i.e. Johnson & Johnson; 3M; Becton Dickenson, Coming Glass, Nalge
just to name a few) only allow the large firms to distribute their products. The smaller
distributors, especially the Black and other minority distributors, must purchase these products

from the large distributors at inflated prices. The major manufacturers have no interest or
requirement to set up distribution through small, or Black or other minority suppliers.

In the medical industry the situation is further complicated for Black and other minority
suppliers, by large buying groups. The Volunteer Hospital Association; Sun Health; The
University Buying Group; The Daughters of Charity; and The National Area Shared Services are
some of these buying groups. These groups have hospitals and other medical facilities as their
members. What these groups do is consolidate the medical purchases for all of their members
and send these purchase requirements to only large distributors and/or manufacturers for bidding.
However, this bidding process is not open to small. Black or other minority suppliers. In fact,
there is only one buying group that I am aware of that has any small. Black or other minority
contract holders - The National Capital Area Shared Services.

The bids, and ultimately the contracts, issued by these buying groups are so large that
they are usually awarded to manufacturers or large distributors only. When the manufacturers
are awarded contracts, they usually designate a distributor to perform the contract. This
distributor is often given a rebate by the manufacturer for the special pricing that is offered.
However; the distributors designated by these manufacturers are not Black or other minority
businesses.

Problems to winning public contracts

Black and other minority medical and scientific suppliers face numerous challenges in
competing for public contracts. It is important to note that a large percentage of the items
procured within this industry are through small purchases, less than $25,000. The following are
the major problems that I have encountered in seeking public contracts for medical and scientific
supplies as a Black American business person:

Problem # 1:

Public Law 95-507 Chapter 3 Sec. 221(j) establishes small purchase procedures, and
reserves these purchases exclusively for small business concerns. However; there is no mention
of the utilization of Black or other minority, disadvantaged business concerns. As a result.
Federal contracting officers and general purchasing agents are consistently bypassing Black and
other minority medical and scientific suppliers, which limits their opportunity to provide market
pricing for small purchases. I can only imagine that this is also occurring within other small
piu'chases as well.

The area of small purchases is well suited for Black and other minority firms to compete.
It is also at this level that you will find most new businesses enter the public contracts market.
These types of procurement opportunities are well suited for Blacks because the purchases are
easily financed through either vendor trade credit, or short term private financing. Small
purchases are labor intensive, and require extensive sales marketing and follow-up on the part of
the supplier. In other words, small purchases is hard work, and Black and other minority
businesses are accustom to hard work. However; it is imperative that legislation be provided to
assist these firms in receiving more small purchase opportunities..

Recommendation to correct problem # 1:

Public Law 95-507, must include a statement that gives Black and other minority
businesses a preference over non-minority small business firms. I also recommend that purchases
from to $5000 be completely set aside for Black and other minority businesses when such
firms are available, and that small purchases be included in 8(a) set aside contracts. Such a set
aside would dramatically expand opportunities for Black and other minority firms, in all
industries. This set aside would not only help to create short term jobs, but would increase
employment for the segment of our population that needs help - Blacks.

In addition, this recommended change would cause large manufacturers to seek out Black
and other minority businesses to distribute the manufacturers' products. There are only a few
Black or other minority medical and scientific suppliers nationwide, and those that survive in this
industry often find themselves competing against their supplier - large distributors and
manufacturers. As a result, the Black and other minority firms prices will be higher, and we find
ourselves being ridiculed by customers for not being price competitive. If given the same
opportunity of dealing directly with the manufacturer. Black and other minority distributors can
be extremely competitive with the large distributors. Our general overhead is much lower,
therefore, our profit margins can be lower and these savings can be passed on to the ultimate
consumer. However; as a Black or minority medical or scientific supplier, you only get one
chance to be competitive in this industry. If you are labeled as being non competitive, in public
or private industry, your business will have a difficult time in receiving any additional
opportunities.

Problem # 2:

The Federal Supply Schedule system is a major problem for Black and other minority
medical and scientific suppliers. The Schedule contract often will take precedent over small
purchase procedures, as outlined in PL 95-507. Moreover; you will find very few Black or other
minority medical and scientific suppliers that hold Federal Supply Schedules. As a result, the
large businesses that are on the Federal Supply Schedule are getting around PL 95-507 by
receiving small purchase orders for the items they have on the schedule. Thus further eroding
the opportunities for small. Black and other minority firms, to participate in small purchase
orders.

The process in obtaining a Federal Supply Schedule is difficult and seems impossible for
many small businesses, especially Black businesses. Therefore few even try. The forms that are

required are cumbersome, and difficult to understand, and the information requested, often has
no bearing on the applicants ability to perform. There are just too many obstacles that prevent
Black and other minority firms from being awarded Federal Supply Schedules, i.e. the test for
commerciality, and the Buy American Act.

Under the Federal Supply Multiple Award Schedule program, there can be hundreds of
supply schedule contracts for the same basic item. There is no requirement that a Black or other
minority schedule holder be used over any other firm. As a result, for those minority firms that
do receive Federal Supply Schedule Multiple Award contracts, marketing these contracts to the
thousands of Federal agencies is expensive. In my experience the overall sales that we have
generated through these multiple award schedules do not pay the cost for our being involved in
this program.

Recommendation to correct problem # 2;

1. The opportunities for Black and other minority businesses to obtain Federal
Supply Schedule Contracts and Schedules must be increased. There must be greater emphasis
placed on the using activities to utilize the Federal Supply Schedules of Black and other minority
firms with a priority. Multiple award schedules should be eliminated all together. The amount
of time spent by the user searching all the Multiple award schedules is greater than locating the
same item on the open market at a lesser price.

2. The General Services Administration along with the Department of Veterans
Affairs which administer Federal Supply Schedule Contracts for medical, scientific and chemical
supplies, must seek to establish a set aside for Black or other minority suppliers. Furthermore;
these agencies must assist the Black or minority contractor in marketing and identifying specific
opportunities to increase the value of the contract held. The office of Small and Disadvantaged
Business Utilization (SADBU) within these two agencies must be empowered to do more to help

the businesses they supposedly represent.

3. I further recommend that a match maker program be established to pair Black and
other minority businesses with specific Federal facilities to utilize the products that they provide.
I would also recommend that the SADBU Specialist (SADBUS) conduct regular meetings with
minority vendors from all industries to access the programs offered and continue to make
improvement upon these programs.

4. Federal agencies must be required to utilize the Federal Supply Schedules of
Black or other minorities. The SADBUS in all agencies should constantly be striving to identify
and increase the percentage of business done with Black Federal Supply Schedule contractors.
Black and other minority Federal Supply Schedule contractors should receive a reasonable
percentage of procurements from Federjil agencies. I recommend that incentives be established
in each agency, that will help Federal agencies locate Black and other minority Federal Supply
Schedule contractors, and utilize their services.

Problem # 3:

The Walsh Healy Public Contracts Act (WHPCA), which defines a regular dealer as "a
person (or concern) who owns, operates, or maintains a store, warehouse, or other establishment
in which the materials, supplies, article, or equipment of the general character listed are bought,
kept in stock, and sold to the public in the usual course of business". This definition can create a
hardship for Black medical and scientific suppliers. Contracting officers often will take a strict
interpretation of the Walsh Healy Act when evaluating Black and other minority firms for
contracts. For instance a medical item such as "Catheters" has over two hundred variations, most
distributors can not afford to maintain stock of each item. Most firms will monitor the demand
for the entire product line and begin to stock as the demand requires. However; WHPCA does

not take this basic business principal into consideration when evaluating a firm as a "regular
dealer".

My firm was recently denied an opportunity at the National Institutes of Health (NIH)
because we did not inventory enough of a certain commodity to be classified as a regular dealer
for that commodity. The term "enough" is a subjective call by the contracting officer, as there
are no specific guidelines as to what constitutes enough inventory in the WHPCA. We had sales
for the commodity in question, we simply had not reached sufficient demand within our
accounting period to justify stocking these items. The NIH contracting officer took a strict
interpretation of the WHPCA, and did not take into consideration that our business, like so many
others, has to have sufficient demand for a product before that item can be stocked. The
WHPCA does not take into consideration economic order points, product demand, or just in time
inventory systems.

The only recourse a business has to appeal an adverse ruling by a contracting officer as to
the regular dealer status is to appeal to the Small Business Administration or to the Department
of Labor. Both appeals processes are costly in the terms of the revenue lost, and the time
consumed during the appeal process; therefore, it usually is not pursued.

Recommendations to correct problem # 3:

The WHPCA needs to be updated so that a firms ability to perform on public contracts, as
a regular dealer, is not based solely on how much or how little inventory they have on hand. The
fact that a firm has performed adequately in the past should be the only gauge for future
performance. It seems that the true intent of the WHPCA is to ensure performance by public
contract holders. Today's "regular dealer" has access to the inventory of it's major suppliers
through electronic data interchange, fax capabilities, next day delivery services, and other

91 /

methods of rapid performance. The WHPCA originally written in 1929 could not possibly have
foreseen the changes in technology that so greatly affects it's definition of a "regular dealer".
Nor could the WHPCA have taken into consideration the needs of Black and other minority
businesses when it was written.

1. Therefore, I am recommending that the WHPCA be amended to redefine a
"regular dealer" as a firm that can show consistent abiUty to perform on public contracts, and
meet the required delivery schedules. The stocking levels should be at the discretion of the
supplier and their own internal requirements and C2^)abilities.

Problem # 4;

The newest and most detrimental program to affect Black medical suppliers is the
Defense Logistics Agencies "Prime Vendor Program". The Defense Personnel Support Center
(DPSC), Directorate of Medical Materiel is selecting regional prime vendors for brand name
specific medical supplies covering two product classes pharmaceuticals and medical/surgical.
The medical/surgical items must be disposable, consumable items. Many of these items were
previously purchased under small purchase procedures, and in several cases from small and often
minority firms. As a part of the Prime Vendor Program. DPSC establishes Distribution and
Pricing Agreements (DAPA's) with pharmaceutical and medical/surgical product suppliers.
Under a DAPA, the agreement holder consents to allow the Prime Vendor (usually a large
business distributor) to distribute its products to participating hospitals and agrees that the prime
vendor will be charged no more than the prices set forth in the agreement.

The problems with the Prime Vendor program, as it pertains to Black and other medical
and scientific suppliers, are numerous. The prime vendor program takes preference over the
traditional purchasing avenues utilized by Black and other minority suppliers, i.e., small
purchases, and 8(a) set asides. The Prime Vendor Program also has a preference over Federal

Supply Schedule contracts. The Prime Vendor contract that was awarded for the Washington
D.C. area is valued at $100 million dollars over a five year period. The contractor is a large
business distributor that has agreed to subcontract 25% to minority firms. I have spoken with the
Prime Vendor, and they have clearly stated that they will utilize minority delivery services,
janitorial services, secretarial services and lastly, other minority medical suppliers. The Prime
Vendor went on to state," That in order to be utilized, a minority medical suppliers must have:
(1.) A DAPA (2.) An order from a hospital for the exact itenns that company has on DAPA (3.)
Substantial inventory levels and (4.) Provide immediate delivery."

The procedures in obtaining a DAPA are cumbersome and are not friendly to Black and
other minority medical and scientific suppliers. In fact, there is no requirement that if a Black
medical supplier were to be awarded a DAPA, that the Federal hospital will purchase that
specific brand. As a result, it is not a good business decision for any company large or small to
stock merchandise under these parameters. In essence, the Prime Vendor program has taken
responsibility to use Black and other minority firms away from the Federal activity. The DPSC
now expects the Prime Vendors to meet socioeconomic requirements, even though these firms
have had very poor track records in meeting these goals in the past. The Prime Vendor program
not only closes the door of opportunity for many Black and other minority medical and scientific
suppliers, it also prevents new firms from entering this vast marketplace.

Recommendations to correct problem # 4:

1. The area to be serviced by the Prime Vendor should be much more narrow in
scope, to cover one or two medical facilities per contract, not regional. The result would be a
much higher probability that a Black or other minority medical supplier could compete and win a
Prime Vendor contract. This contract could then be used as a stepping stone for larger Prime
Vendor opportunities. Furthermore; at least one faciUty within any given region could be totally

set aside for participation by Black and other local minority suppliers only. This will greatly
help to develop the minority businesses located within the communities of these Federal
facilities, instead of placing more Federal dollars with large national distributors that usually
have few ties to the immediate local community, or Black and other minority medical and
scientific suppliers.

2. The DAPA program should require the medical and pharmaceutical manufacturers
who sell their products to the Federal Government, to have some Black and other minority
sources of distribution. This will force these firms to seek out minority business involvement
and open a door of opportunity that has otherwise been closed.

3. The DPSC, along with the SBA must work together to decrease the barriers that
have been established that prevent Black and other minorities from being awarded Prime Vendor
contracts, and DAPA's. For example, the numerous complicated forms, representations and
certifications that are required should be reduced or eliminated. The DAPA agreement, as it
stands, is still no guarantee of sales for any DAPA holder. Therefore, they should be awarded
with the least amount of restrictions.

4. Prime Vendor contracts awarded to large businesses, should not over ride small
purchase procedures. The Prime Vendor program must not take away the few opportunities
Black and other minority firms have had at these Federal facilities and give them to a large
business. This program should not have a preference over 8(a) set asides or Federal Supply
Schedule contracts.

5. If the Prime Vendor is required to use Black and other minority fuins, they must
be consistent with the scope of the contract award. For instance, if the contract is for medical
supplies, and the Prime Vendor has stated a 25% minority business participation, this

74-197 0-94-4

participation must be 25% of the medical purchases from minority firms. Unrelated non-medical
services, i.e., secretarial, janitorial, should not be included towards this percentage.

6. The Federal facilities that use the Prime Vendor program, should not be expected
to meet their obligations to Black and other minority medical suppliers, solely through the
subcontracts of the Prime Vendor. These Federal facilities must still be held accountable in other
programs for the dollars spent in the area of medical and scientific supplies with Black and other
minority suppliers. Under the current Prime Vendor program, I know of no such accountability
that is required. These facilities must be made aware of the DAP As that are held by Black and
other minority medical and scientific suppliers, and every effort must be made by the Small
Disadvantaged Utilization Specialist at these facilities to ensure that these DAPA's are utiUzed to
the maximum extent possible. This can be done by coordinating meeting with suppliers and
department end users, trade shows, or even set asides of specific commodities. If this program is
to work for Black and other minority medical and scientific suppUers the Federal facilities that
use the Prime Vendor must be required to utilize Black and other minority DAPA holders.

Problems with private industry:

The number one problem encountered by Black medical suppliers in dealing with private
medical facilities (hospitals, health maintenance organizations, and alternate site facilities) is the
lack of opportunity. Black medical suppliers are not afforded the equal opportunity to compete
for contracts with most 'private hospitals, health maintenance organizations (HMO) or private
physicians. These facilities are not required to utilize Black medical suppliers, and most do not.
Even though, these facilities receive Federal funding of some type, few have minority outreach
programs that really work to attract Black or other medical and scientific suppliers. I have had
personal experience with Johns Hopkins Hospital, George Washington University Hospital, and
GHA (a Washington DC based HMO) just to name a few facilities. These facilities have no

interest or requirement to increase opportunities for Black medical and scientific suppliers. They
receive hundreds of millions of Federal dollars, they serve large Black populations, yet their
combined purchases from Black or other minority medical or scientific suppliers would not
exceed 1% of annual medical supply purchases. Even though there are numerous Black and
other minority medical and scientific supply firms that are available.

HMO's, alternate care medical centers, religious affiliated hospitals, and private
physicians are the least interested in dealing with Black and other minority suppUers. Even
though, these facilities claim to be cost conscious, they actually do very little comparative
shopping, and comparisons of alternate brands. Making a sales call onto one of these facilities,
as a Black business person, is one of the most unproductive activities that one can do. In this
arena the "good old boy network" is alive and well.

Recommendation :

1; I would strongly reconunend that under Healthcare Reform, any medical facility
that receives Federal funds of any type be required to follow the guidelines of Public Law 95-
507. In addition; Public Law 95-507 must be enhanced to clearly state that Black and other
minority businesses be given a preference for small purchases Without this preference Black
firms will not receive any opportunities from a large majority of medical providers. Even though
many medical providers are small businesses themselves, this should not preclude them from
seeking Black and other minority firms from which to do business.

If the Black or other minority firm is given the opportunity to bid, they are bid against the
large distributor. In some instances we are even bid against the manufacturer, thus making it
virtually impossible to be competitive.

2. Private medical facilities must be required to set specific goals for participation by
Black and other medical and scientific suppliers. The Federal agency that issues funds to these
facilities, must monitor their progress on a regular basis. Corrective action must be taken by
those facilities that ignore socioeconomic programs.

3. Hospitals, medical centers, medical teaching facilities and even private doctors
that receive Federal funds must be required to establish minority outreach programs. These
programs should concentrate on locating and utilizing Black and other minority suppliers within
their locjd community. In some cases a mentor-protege program may have to be implemented to
enhance opportunities for Black and other minority medical and scientific suppliers.

4. In order for Black and minority medical suppliers to effectively compete for
private contracts, these facilities must provide Black suppliers a preference in procurement
opportunities. For example, a particular product line can be bid to smsdl businesses, and another
product line to Black businesses. A percentage preference on all purchases less than $5000 can
be given when small or Black firms are involved in the purchase process at these facilities.

5. The major hospitals have a tremendous amount of influence with the
manufacturers and the large buying groups that provide them with supplies and services. I
recommend the hospitals use their influence to insist that their major manufacturers and buying
groups provide products through Black and other minority medical and scientific suppliers. It is
just as simple as the hospital telling it's primary manufacturers that they desire to purchase their
products through a Black or other minority supplier. This will open the door of opportunity for a
Black or other minority supplier. This approach is very effective as it ensures that the facility
will continue to enjoy favorable pricing levels set by the manufacturer. Moreover, it allows the
Black or other minority medical or scientific supplier to add a major product line that can be
marketed to similar faciUties.

6. Last, but surely not least it is imperative that Black and other minority medical
and scientific suppliers be paid for the goods and services rendered in a timely manner. Even the
most competitive business with all the right product lines, can not survive without adequate cash
flow. If fast payment discounts are offered, they should be taken by private institutions. Taking
these discounts not only saves these facilities money, it helps reduce the need for a Black or
other minority firm to seek outside financing.

Problems in obtaining distribution agreements:

1. The major medical, scientific and pharmaceutical manufacturers have long
established distribution networks. These networks do not include Black or other minority
medical or scientific suppliers. In fact, when applying for a dealership with a major medical,
pharmaceutical or scientific manufacturer, the standard response for a Black or other minority
distributor is "There is adequate coverage within your area, please apply again later." This is the
response that my firm has received from major manufacturers. In several instances, we even held

Federal contracts to provide their products and we were still denied distributorships. As a result,
we were forced to purchase the products from large distributors at inflated prices, thus limiting
our profit margins and our ability to remain in business.

2. Black and other minority medical and scientific suppliers will not be able to grow
to the maximum extent possible under a free enterprise system, without being able to obtain
distribution agreements with major manufacturers. In essence our businesses are being held in
economic slavery by the major manufacturers in the country. In fact, it is easier to establish
distribution agreements with foreign manufacturers as a minority business than it is to obtain
distribution agreements from major American manufacturers.

Recommendation :

Most major medical, scientific, and pharmaceutical manufacturers hold some type of
Federal contract. It is imperative that manufactures begin to provide information on the number
of Black and other minority distributors that are authorized to carry their products. The
contracting officer, the SADBUS, and the SBA should work together to help manufacturers
locate Black and other minority firms for distribution opportunities. Whenever possible,
manufacturers should be required to provide at least one Black or other minority distributor on
all Federal contracts that utilize a distribution network.

Closing :

In closing I feel it is important to restate that the Black and other minority businesses are
employing a large percentage of minority workers in this country. Therefore, it is critical to our
nation's development that we do all we can to assist businesses that create jobs for this segment
of our population.

In the area of providing medical, scientific and pharmaceutical supplies. Black and other
minority firms are far behind their contemporaries. The free enterprise system has not worked to
create a level playing field for all participants, and there is little emphasis in public, or private
industry to reverse these trends. Therefore; it is so important that, as we move towards
Healthcare reform, and providing Healthcare to every American, that we also move towards
providing opportunities for every Black and other minority medical, pharmaceutical and
scientific supplier. In doing so, we must never forget those that helped to build this great
country. Those that lost their lives on slave ships, or those that lost their dignity building the
railroads, just to name a few. Furthermore; let us not lose sight of those Black medical and
scientific entrepreneurs of today that are working to shape the future. It is imperative that laws
be enacted that will continue to see that the future growth of Black and minority businesses are
enhanced within the land of the free and home of the brave.

100

• ACCU-Lab Medical Testing •

1310 South Wabash • Chicago. Illinois 60605 • (312)939-3535 • Fax 935-3597

Written Testimony

For the U.S. House of Representatives

Committee on Small Business

Sub-Committee on Minority Enterprise, Finance, and Urban Development

November 9, 1993

From Warren O. Cooper

President

ACCU-Lab Medical Testing Inc.

Chicago, IL

Forensic drug chemistry • Drug analysis for biological samples • Blood analysis

101

November 3, 1993

The Hon. Kweisi Mfume

Chairman

Sub-Committee on Minority Enterprise, Finance, and Urban Development

United States House of Representatives

Room 568-A

Ford House Office Building

Washington, DC 200515

Dear Chairman Mfume:

Please find enclosed 50 copies of the testimony I have been asked to provide the Sub-
Committee on Minority Enterprise, Finance, and Urban Development on November 9, 1993.

Thank you for the opportunity to testify about this important matter. I look forward to
meeting you and the other members of the Sub-Committee next week.

Sincerely,

Warren O. Cooper
President

wcx:/cvjc

Enclosures

102

BL Introductory Statemeist

Mr. Chairman, members of the Sub-Committee, guests. My name is Warren Cooper. I am
president of Accu-Lab Medical Testing Inc. in Chicago, IL. Thank you for the invitation to
share with you today my experiences as principal of a minority-owned drug testing lab. I
commend you for being the first to take a comprehensive look at the serious issues within the
drug testing industry. And I applaud your commitment to ensuring that minority-owned firms
participate as full partners in healthcare reform.

Background

I graduated from Arizona State University with a B.S. degree in Business; I spent in year in
business school before returning to Chicago. In 1974 1 joined the Cook County Sheriffs
Department - two years later I was shot on duty. The wound left me paralyzed on my left side,
unable to move my left arm. It was then that I decided to go to law school. While a student at
Sl Louis University, 17,000 air traffic controllers were fired, opening up a new career field to
me. I needed money because funds for grad school had been cut; I took the test, scored 97 out of
100, and began work as an Air Traffic Controller assigned to Midway Airport

As an Air Traffic Controller I broke new ground. I helped negotiate the drug testing
implementation in the Federal Aviation Administration (FAA) between the union and then-FAA
Administrator Elizabeth Dole. I developed and implemented a curriculum for the City Colleges
of Chicago to enhance employment opportunities for minorities in the FAA. The program
resulted in 15 minorities being employed by the FAA. I later became the first African- American
certified Air Traffic Control Specialist assigned to Chicago OUare Intemational Airport

Methadone clinics in the heart of Chicago offered me seats on their boards. And it was then that
I realized there was a serious lack of information in my community. That's when I decided to

Written Testimony. 2

103

become one of the teachers my community desperately needed, one of those "Fll tell you"
people. That's how I came to open Accu-Lab in 1991.

We do forensic drug chemistry, hair analysis and drug testing. And to my knowledge, we are the
only African- American-owned drug testing lab in the country. Our competition consists of drug
testing labs such Roche Bio Med and Smith-Kline-Beecham, Met-Path, National Laboratory
Services and Med-Tox. My clients run the gamut from individuals seeking a second opinion on
test results to private companies such as Marshall Fields, Arrow Lumber and Handy Andy stores.

Unlike our competitors, Accu-Lab Medical Testing is located in the city proper, minutes from
the central business district and less than three miles north of the nation's largest concentration of
public housing complexes. It is imperative, we believe, to be visible in our community. To be a
role model that lives and works in, and hires from the community.

You have invited me here to provide testimony in a number of areas that affect my ability to
compete in an adolescent industry ~ drug testing. Specifically my testimony covers the
following:

a. Arrogance of existing players in industry

b. NIDA experience

c. Ability to win public/private contracts

d. 8a certification

e. Suggestions for rectifying the situation

Written Tesliinony, 3

104

n. A Closed Industry

The United States government, through Executive Order 12564 and subsequent legislation
enabling creation of National Institute on Drug Abuse (>fIDA) lab certification standards, has
created an industry that is monolithic in reach, parasitic in growth and arrogant in attitude.

This industry, drug testing, is populated by names familiar to those involved in the debate over
healthcare -- Roche, Smith-Kline and others who have prospered and made their fortunes on a
segment of society either plagued by drug abuse, or seeking to protect itself from the effects of
drug use. It is a $7 billion industry so removed from new competition that major players can say
with impunity things like "we have the contracts, what do we need you for?" and "I give to the
United Negro College Fund - that's the extent of my minority participation." Ladies and
gentleman of this committee, meet Hydra.

You may recall from Greek mythology that Hydra was a many-headed monster that grew two
heads to replace each one that was cut ofif. Hercules finally killed Hydra by cauterizing each
neck as a head was cut off. What we have here today, in the NQDA certification standard, is the
modem-day equivalent of Hydra.

First parallel

Hydra had many heads; NIDA certification erects multifaceted obstacles for minority-owned
labs. Its high cost - $55,000 the first year, $30,000 annual renewal fee - effectively bars new
entrants into the drug testing industry. NIDA creates its own catch-22 for new labs: we need
NIDA certification to get clients, but we need clients to pay for NIDA. When contracts require
NIDA as a condition of award, we can't compete. And we can't get credit Again, that catch-22.
Without clients that represent sufficient accounts receivables - or huge collateral ~ banks won't
make you a loan.

Written Tesliniony, 4

105

Healthcare reform promises to expand the scope of drug testing in our society. Heightened
emphasis on education and rehabilitation means a likely increase in funds for diagnostic drug
testing. A shift from interdiction toward rehab and aftercare represents a major opportunity for
labs such as mine to succeed in the marketplace.

But if current trends continue, healthcare reform wUl become another of Hydra's heads. As more
agencies identify the need for diagnostic drug testing, they will want assurances that the labs
doing the testing are "qualified". They will look to NIDA as the arbiter of a lab's qualifications
and the lock-out will continue unabated. This can occur in spite of the legislative intent which
focuses on forensic testing which can be replicated for a court of law, and not diagnostic, defined
as those tests ordered for persons under a doctor's care. Let me cite an example of how this can
and is happening.

The State of Illinois' Department of Alcohol and Substance Abuse (DAS A) awards drug testing
contracts to labs to test patients in methadone rehabilitation. Diagnostic testing. The value of
this contract exceeds $200,000. Although there are no provisions in the NIDA certification
standards that address diagnostic testing, DASA requires all labs that test methadone clients to
be NIDA-certified. As a result, my lab was locked out of that contract

Second parallel

Cut off one of Hydra's heads and it grows two new ones to replace it The same can be said for
NIDA-certification: it sprouts in areas exempted by the legislation, creating a "me-too"
syndrome among local, state, county and government agencies that contract for drug testing.
Executive Order 12564 covered all agencies of the Executive Branch; exempted from the Order
(and the scientific and technical guidelines for drug testing programs the Secretary of Health and
Human Services was authorized to promulgate) were the United States Military, the United

Written Testiinony, 5

106

Postal Service and "employing units in the Judicial and Legislative Branches." In short, these
agencies are exempt from NIDA-certification requirements, yet they use it as a benchmark of
qualification. What we are experiencing now is quasi-governmental bodies such as the Chicago
Park District jumping on the NIDA bandwagon.

In that instance, the Chicago Park District conducted employee drug testing in-house by non-
technical personnel. A change in policy prompted the agency to stop in-house testing and seek a
lab for this purpose. I won the contract and went to bed one Thursday evening with the contract
a done deal By 3 p.m the next day, it was yanked. Why? Because a Park District employee
complained that Accu-Lab was not NIDA-certified.

Time and again we have watched private agencies use NIDA certification to prevent minorities
from getting drug testing contracts. A vice president and the medical director of Brach's Candy,
a major employer on Chicago's west side, decided it made good business sense to expand their
use of minority businesses and agreed to award Accu-Lab the contract to test their Chicago
workforce. Yet they were overruled by Brach's legal department Again, the issue was our lack
of NIDA certification. Now that company is spending in excess of $100,000 for drug testing
with a lab in Wisconsin.

What's disturbing about these and other examples I could cite is how this "me-too" syndrome
affects inner city communities. This isn't just about Accu-Lab being locked out of the drug
testing industry — it's about starving inner city communities of desperately-needed role models,
of fostering an environment where no minority-owned lab will prosper, or be in a position to
give back to the community. A corollary issue is that the labs getting the business are located in
the suburbs. They aren't hiring community residents, doing outreach in inner city schools, or
providing pro bono services to organizations that need the service but can't afford it We are.

Written Testimony, 6

107

Since we opened our doors in 1991, Accu-Lab has provided pro bono services to several
community-based organizations. One such group, the Ada S. McKinley Community Services
Foster Care, requires natural parents to be tested for drugs as a condition for reuniting their
families. This testing had been provided Ada McKinley by community-based organizations, but
was suspended due to federal funding cuts. We provide free drug testing to families that cannot
afford the service and, in the process, help reunite families separated by drug abuse.

Another program, Families with a Future, works with pregnant women who are drug abusers.
Participants who wish to mentor others in the program must be screened for drug use. Again, we
provide this service at no charge. This is another community program that cannot survive
without getting some type of drug testing. And nobody's giving it out free. I don't see any
programs in America that are reaching into the community as we are and it's necessary.

Another of the multifaceted barriers NIDA certification standards erects is in the area of
govenunental set-aside programs. As it stands, agencies required by federal law to set-aside a
percentage of contracts for minority business enterprises are off the hook when it comes to
NIDA. All one need do is write ^fIDA certification into the specs for forensic or diagnostic
testing, and set-aside becomes a moot issue. If the specs require NIDA certification, it makes no
difference how much is set-aside. If there are no NIDA-certified minority labs, how can that be
done? You have frustrated the set-aside intentions by simply writing in NIDA. Regardless of
whether it's required or not, you've frusti^ted it

Also frustrated by this requirement are any attempts at joint- venturing with larger labs. I have
tried repeatedly to joint-venture and sub-contract with the two leaders in the drug testing
industry. The first problem: I needed NIDA certification to do any portion of the work. But the
second, and more insidious, was the attitude of these firms. Roche Bio Med told me, "we
already have the contracts? What do we need you for?" Smith-Kline-Beecham told me, "We

Written Testunony, 7

108

give some money to the Untied Negro College Fund. That's the extent of our minority
participation." Whether intentional or by default, the high price of NIDA certification fosters
such arrogance because it's common knowledge there is no enforcement of set-asides and that
emerging labs such as mine will be hard-pressed to generate enough business to pay the fees.

8a certification process •

Muddying the waters is the Small Business Administration's (SBA) 8a certification prograia To
qualify for set-asides mandated by federal law, I need to be certified as a minority-owned
business. Fine. But in testimony before a hearing of the Commerce, Consumer and Monetary
Affairs Sub-Committee of the Committee on Government Operations, SBA Administrator Jane
Palsgrove-Butler said approximately 475 firms were 8a certified in 1992. These firms
represented from all 50 states and included the District of Columbia and Puerto Rico. This
means approximately 9.13 business in each state were certified 8a in a 12-month period.

Accu-Lab began the 8a process in May, 1992, yet we still are not certified. At the time, I was
still employed as an Air Traffic Control Specialist I flew to Washington, met with an
administrator for the program and was assured my application package was in order. One catch:
I had to quit my federal job. I complied, quit a job that paid nearly $90,000 in salary and
bonuses, and still I am not certified. Now I'm wondering: "What do I do next?"

Were it not for the fact that most federal agencies will require this certification to do business
with them, I'd scrap 8a certification. The process is laborious and confusing, the questions
onerous and sometimes without merit. What is the relationship to my being a minority business
enterprise of W-2s for the spouses of all members of your board of directors?

Written Testimony, 8

109

A request for Access

Executive Order 1 2564 covered forensic drug testing of Executive Branch employees and called
for certification of labs conducting urine drug testing. Public Law 100-7 1 required the Secretary
of DHHS to publish standards for laboratory certification. Early players in this process were the
National Institute on Drug Abuse, which was comprised largely of technical specialists and
scientists who ultimately left to form their own drug testing labs. Another key early player was
the Research Triangle Institute (RTT), which was contracted by NIDA to implement a program
for certifying labs.

To my understanding, the first 10 labs were ^fIDA-certified at no cost to the owner. Under the
contract, 50 more labs applied for NIDA certification. NIDA paid 70% of their certification
expenses. Subsequent labs are certified at their own expense; these fees which total $55,000,
must be paid in advance and are non-refundable.

The present structure of NIDA certification perpetuates exclusion of minority-owned labs and
presents an effective barrier to all but the most deep-pocketed of new entrants. I converted all
my assets to cash to finance Accu-Lab's start-up. It's almost unconscionable to ask a start-up
business to invest that kind of money with no guarantee of business. Because, you realize,
NIDA certification does not guarantee me one specimen. It simply says I qualify to do any and
all specimens. Trying to generate the $55,000 fee in advance for NIDA certification gets me
right back to the catch-22 1 described earlier: I need NIDA certification to get clients and I need
clients to pay for NIDA certification. It's time, I believe, to level the playing field.

This administration didn't create this problem - they have a rare opportunity to rectify the
problem. An opportunity to extend President Clinton's promise of fairness and equality of
opportunity for all Americans to this industry. An opportunity, quite simply, to right a wrong.
This admiiustration was elected on a plank, on a promise of fairness and equality for aU

Written Testimony, 9

110

Americans. Mr. Clinton was elected by young people, people who want to do something with
their lives, because they believed in his promise of fairness and opportunity. This Committee
realizes that small business has a vital place in America. And the results of what this Committee
is doing is partly why I'm here testifying today.

IIL Strategies for Slaying Hydra

First of all, I don't think that you take away NIDA certification. Accu-Lab fully recognizes and
understands the goals of NDDA. We think it brings stability, standardization and uniformity to
this type of testing. Even though it seems to frustrate me to no end, I still think that you need
uniformity in drug testing, you need to have guidelines, you need to have accountability.
Therefore, the key is to make NIDA-certification accessible to minority labs. And there are
several ways to do it

We believe the first 10 labs got NIDA certification free -- they didn't pay a thing. The next 50
labs paid 30%, the government absorbed 70% of the cost We ask the Committee to consider the
following:

1. Certify the first 10 minority labs free, as was done for first 10 NIDA-certified labs.

2. Defer fees for the first 10 minority labs over a three-year period. Waive the fees until
that firm shows some income, not a profit but an income of $150,000. Then they would
be able to set-aside payment to be able to sustain the NTDA certification. Then protect
them against annual fee increases with a grandfather clause. Give them a year with the
NIDA certificate, a chance to go back to those same people who said you've got to have
NIDA; if those contracts begin to flow into that lab, then they'll have income to be able to
pay the NIDA fees. And I would say no more than three years. K a business can't sustain
itself to pay that type of fee in three years, it's not going to happen.

Written Testimony, 10

Ill

3. The other part of it is to review, monitor and if necessary, revise government

procurement practices among those agencies exempt from NIDA. Allow them to set-
aside part of those drug testing contracts to enable non-NIDA labs to compete in area of
diagnostic testing. If they're exempt, then why are they making NIDA certification a
requirement?

These three actions alone would end the near monopoly deep-pocketed labs have on this
industry.

rv. Closing

This hearing is a symbol of hope at Accu-Lab that this administration, the leadership of this
committee, will be able to look seriously at these problems and find some solutions. That's our
quality of life. We all have our own private lives and our famiUes to raise. However, we all
have a commitment to the inner city and we all have a commitment to what we do. What we're
seeking are solutions, support, and your help as we try to make American history and become
first Afiican- American NDDA-certified in the country, and that beacon of hope for our
community.

Moreover, this hearing offers the hope that finally, we wUl have the opportunity to compete.
Now I can't sit here and say if you stamp NIDA on my forehead today and I walked into Ryerson
Steel, I would have a contract I still have to be competitive. I still have to be able to deal with
my major competitors who are profiting, profiting a million plus a year. The only thing that
NIDA does is it just makes me eligible. I still have to sell myself, have to sell my services, I
have to sell my abilities. What I don't have to sell anymore is my qualifications to do this
because now the government has said I'm qualified.

Wiitten Testimony, 11

112

It may help me enter the government maze of doing drug testing, and it will take further support
from this committee to do that I may have to call on The Qiairman, I may have to call on the
Hon. Qeo Fields or the Hon. John Conyers. I may have to do a lot of things. But now I'm
qualified and that's the difference. That's all NIDA does - it qualifies me.

Finally, though, what we're talking about is people's lives, their welfare, whether they're going to
go forward or back up. It's cheaper for me to do a test for them, to try and get them back with
their family, to try and keep them off drugs than it is for them to go out, commit a crime and now
we have to pay $75 a day to incarcerate them and we still have to dry them out The more I can
do for the community, the better the community becomes. The more I get business, either
private or public, the more I can do for the community. The goal is to have a balance of both.
Thank you.

Written Testimony, 12

113

REMARKS CF

THE HONORABLE LOUIS STOKES
•:D-0H)

BEFORE THE

HOUSE SUBCOMMITTEE ON MINORITY ENTERPRISE, FINANCE AND

LTIBAN DEVELOPMENT

MINORITY PARTICIPATION IN THE HEALTH CARE ENTERPRISE

NOVEMBER 9, 1993

114

Mr. Chairman and members of the Subcommittee, I
appreciate the opportunity to appear before you to discuss a
very pressing national issue, "health care reform," and more
specifically, minority participation in the resulting "health
care industry enterprise." As the Chairman of the
Congressional Black Caucus Health Braintrust, and as a
member of the Appropriations Subcommittee on Labor, Health
and Human Services, and Education, I would also like to take
this opportunity to thank you for the cooperation and
assistance you have afforded my advocacy to help bring health
care to the forefront, and to help ensure minorities' fullest
participation in the nation's health enterprise at all
levels .

Mr. Chairman, the reform of our nation's health care
system affects each and every one of us -- individually,
collectively, personally and professionally. As our nation
stands poised to affect ma] or changes in the health care
delivery system -- whether the legislation which gets enacted
mirrors single payer or managed competition, or is some
mixture thereof - - to be effective in addressing the health
care needs of African Americans, it is vital that the
legislation provide for the expansion, strengthening, and
enhancement of the minority health enterprise.

Also crucial to the reform debate is recognition of the
fact that minority health professionals have an intimate
knowledge about the large segments of the African American
and minority communities that have been abandoned to suffer
high mortality rates; shortened life expectancy; debilitating
poverty, disability and disillusionment; frustration and loss
of hope. Minority health care professionals are in the
trenches everyday, diagnosing, treating, serving, and
counselling underserved populations across- the -country, urban
as well as rural.

Mr. Chairman and members of the Subcommittee, I am sure
that you would agree that having universal health insurance -
- in and of itself -- does not guarantee the actual receipt
of quality, comprehensive care for all Americans. As such,
health care reform is a matter that Americans in general, and
minorities in particular cannot afford to passively await.
The cost is just too great. For the African American
community, that excess cost has already translated into far
too many startling statistics. Let me take a moment to share
just a few of them with you.

The infant mortality rate for African Americans is more
than twice the rate for whites.

Both cancer incidence and mortality rates are higher
for African Americans than for whites.

115

In 1990, the life expectancy for white males was 8.2
years longer than for African American males.

African American children continue to be at greatest
risk for vaccine -preventable infectious diseases.

African American elderly suffer a greater prevalence of
chronic conditions.

AIDS, HIV infection, is now the 6th leading cause of
death for African Americans while it is the 10th for
whites .

African Americans are two times more likely to die from
a stroke than whites.

Homicide is the number one cause of death for African
American males and females ages 15 to 24.

As this data reveals, minority health is in a crisis.

Mr. Chairman, I would like to mention that the Minority
Health Improvement Act of 1S93 that I will introduce this
week, which is the reautnorization of my original
Disadvantaged Minority Health Improvement Act of 1990 bill,
is designed to help address -.he crisis. This bill
compliments health care reform.

However, what is key to addressing the health care
crisis is the enactment of a comprehensive health care reform
bill to ensure quality, accessible, affordable, and
comprehensive health care for all Americans. What is equally
crucial to alleviating the dire minority health care crisis
is full participation of minorities in the health care
enterprise at all levels. In fact, for African Americans and
other disadvantaged minorities, health care reform is truly a
matter of life and death.

It is vital that we realize that health care reform is
evolving against a reported backdrop of majority population
owned -- HMOs and other large health care organizations --
extracting patients from African American health care
providers. This adverse situation is coupled with reportings
that these HMOs and other large health care providers are
refusing to accept African American physicians, dentists, and
other health professionals as members of their
organizations. As a result, not only are minority health
care providers losing their practice at an alarmingly
escalating rate, minorities' jobs in general are at stake.
This situation will only ensure the continuation of the
minority health care crisis.

116

Mr. Chairman and members of the Subcommittee, as the
crisis in minority health continues, the enacted health care
reform legislation must include provisions to ensure
minorities a level playing field. The enacted reform
legislation must include provisions to strengthen
Historically Black Colleges and Universities, institutions
that have graduated the maiority of the nation's minority
health care providers; and to ensure the viability of African
American HMOs and the few remaining African American
hospitals. Mr. Chairman, these are badly needed health care
delivery organizations, and their very survival is threatened
as the minority health care crisis continues.

With regard to health care manpower, the enacted reform
legislation must include provisions to ensure an adequate
supply of minority health care professionals. This includes
not only minority primary care providers but specialists as
well. For minorities, an emphasis on primary care alone
will only exacerbate the already dire minority health care
crisis .

As the minority health care crisis continues, the
enacted reform legislation must include provisions that
require health plans to hire minority health care providers
and administrators as well.

The entrepreneurial opportunities of health care reform
must not be overlooked. They include a vast array of health
careers and entrepreneurial opportunities ranging from
African American health plans and networks, pharmacies,
testing laboratories, health information systems, medical
supplies and equipment ser-zices, elderly care facilities,
health promotion and marketing services, and education
outreach services. These are just a cross section of the
many other health related career opportunities.

To level the playing field in an effort to ensure that
these and similar entrepreneurial opportunities become
business realities for minorities, there must be built-in
protections for minorities on a "set aside " basis.

Equally important, as the minority health crisis
remains, the enacted reform legislation must not allow
malpractice to be disguised as discrimination. Additionally,
the enacted legislation must include provisions to ensure
minority consumers and health care providers - - active
involvement at all levels of regional alliances as well as
the national boards, commissions, and councils.

So, Mr. Chairman and members of the Subcommittee, as
our nation further embarks upon health care reform, minority

117

involvement will become ever more crucial. The solutions to
health care reform are complex, but they are not impossible.
The challenge is ours, for health care is not a right for
some Americans, it is a right for all Americans.

118

DISTRICT HEALTHCARE & JANITORIAL SUPPLY, INC.

FLORIDA OFnCE

12350 S W 132 Ct. Unil 107

Miami, FLorida 33186^)0

(305) 233-9717

Fax (305) 233-8493

1-800-299-9717

"Small Minority Business"

HOME OFFICE

3152 Bladensburg Rd., N.E.

Washington, DC. 20018

(202) 832-2900

Fax (202) 832-1003

1-800-355-1031

"Ctrtified Sa"

Mr
District

Testimony for the Record:

. Pernell J. Williams, President
Healthcare and Janitorial Supply, Inc.
3152 Bladensburg Road, N.E.
Washington , D .C .

November 9, 1993
Impact of Health Care Reform on Minority Businesses

Committee on Small Business
Subcommittee on Minority Enterprise,
Finance and Urban Development
United States House of Representatives

119

Mr . Chairman and Members of the Subcommittee

I am Pernell J. Williams, founder and President of
District Healthcare and Janitorial Supply, Inc. ( DHC ) of
Washington, D.C. I am pleased to have this opportunity to
present testimony with respect to the impact of health care
reform on minority businesses relative to current and future
business opportunities with the Department of Health and
Human Services ( HHS ) . I wish to thank Representative Mfume
and his staff for allowing my testimony to be submitted to
the record.

District Healthcare and Janitorial Supply, Inc. is a
8(a) certified African-American small business in the
medical supply distribution industry. Since 1985, we have
serviced local government hospitals in the metropolitan area.

I have discussed with Mr. Verl Zanders, of HHS, on
numerous occasions improprieties on procurement procedures at
the National Institute of Health (N.I.H.) for small purchases
under $10,000 without any remedial action on the following:

1. Continuous awards to certain medical suppliers for repeat
procurement without rotation for those particular supplies
being routinely purchased.

2. Minority small business given no preference as
"historically disadvantaged status" when N.I.H. continues to
award bids up to $10,000 to majority small businesses that
have up to 500 employees and are "self certified being a
small business" utilizing "good ole boy networks".

3. Percentage given of 13% minority business utilization are
questionable considering only a handful of selected "self
certified minority firms" get majority of business shown in
this report to inflate and mislead exactly how many different
minorities contribute to this 13% data.

4. No documentation on 8(a) medical supplier contracts
utilizing small and minority small manufacturers are
available. Not one single 8(a) medical supply contract
awarded in the past 5 years without any projected forecast
for future 8(a) medical supplier contracts.

120

Recommendations:

1. Once a small business or minority small business

is repeatedly awarded a particular contracts, mandatory
rotation of that business after three (3) awards to provide
competitive mix.

2. Establish set-aside preference to small minority
businesses and integrate as part of contracting officer and
agency's performance review to utilize local certified
minority small businesses.

3. Utilize local certification from local and federal
government agencies (i.e. MD , DC, VA certifications along
with 8(a) certified firms) to deter false "self
certifications" of small businesses and minority business
status. Document number of firms that constitute the 13% to
clarify using only a few "self certified" firms having a
overwhelming majority of the minority small business pie.

4. Project real dollars to be spent with 8(a) firms in the
medical supply distribution industry. Make awards with
preference to local 8(a) certified medical suppliers.
Provided documentation on 8(a) contracts awarded (if

any). \4e know hou to do business with HHS through contacts -
now we need contracts .

5. Promote local certified small and minority small business
in the medical supply industry to stimulate the local
economy within each agency in partnership with the local
minority trade small business associations.

In summary, statistics show small businesses are
dominant in creating new jobs. It is necessary that small
business is not hurt while implementing new procurement
policies as well as looking at and changing old procurement
policies. As a local minority small business, we employ
minorities who would otherwise not have jobs, provide
scholarships to minority youth to encourage not discourage
productivity .

Small and minority businesses and particularly
African-American small businesses are vital to reducing local
unemployment and crime, while stimulating economic growth
that not only will benefit Uashington, D.C. but the entire
nation. At this point, I believe Congress is the only hope
for minority small business to generate fairness, trust and
confidence throughout all agencies within the federal
procurement system.

121

incog

THE DEPUTY SECRETARY OF HEALTH AND HUMAN SERVICES
WASHINGTON D C 20201

DEC 7 1993

The Honorable Kweisi Mfume

Chairman

Subcommittee on Minority Enterprise,

Finance and Urban Development
568-A Ford House Office Building
Washington, D.C. 20515

Dear Mr. Chairman:

First and foremost, please accept my apologies for the delay in
responding back to the Committee with the requested information
that resulted from HHS' recent testimony before the Committee.

Under Enclosure #1, copies of the "Model Subcontracting Plan" and
Enclosure #2, the optional subcontracting plan Review Form are
provided for your information. The "Model Subcontracting Plan"
has been designed to be consistent with the Federal Acquisition
Regulations (FAR) , however, other formats of a subcontracting
plan may also be accepted. All of the essential information
necessary to meet the criteria of the FAR have been incorporated.
The optional subcontracting plan Review Form incorporates a
check-off format for the review of the elements in order to
determine an acceptable subcontracting plan. Additionally, this
Review Form reflects a single record of the review
recommendations/comments of the Contracting Officer, the Small
Business Specialist, and the SBA Procurement Center
Representat i ve .

There were several questions raised during the testimony of
Mr. Warren 0. Cooper, President, ACCU-Lab Medical Testing, before
the Committee referencing ability of a small and/or
minority-owned business to enter into the drug testing arena and
to become and remain certified as an approved testing laboratory.
These issues and related discussion are as follows:

ISSUE : In order to be a viable competitor in the drug testing
industry, ACCU-Lab is required to meet National
Institute on Drug Abuse (NIDA) (currently the Substance
Abuse and Mental Health Services Administration
(SAMHSA) certification standards.

RESPONSE ;

The National Laboratory Certification Program (NLCP) was
developed to implement "The Mandatory Guidelines For Federal
Workplace Drug Testing Programs," adopted in April 1988. The
NLCP which established the scientific and technical guidelines

122

Page 2 - The Honorable Kweisi Mfume

for Federal drug-testing programs. These guidelines detail
comprehensive standards for laboratory procedures, specify drugs
for which Federal employees can be tested, and establish
appropriate standards and procedures for periodic review of
laboratories, and the criteria for certification and revocation
of certification of laboratories engaged in urine drug testing
for Federal agencies. Under the NLCP, SAMHSA has a contract with
Research Triangle Institute (RTI) to certify laboratories for
Federal drug testing.

In addition, the requirement for certification under the NLCP has
been adopted by the U.S. Department of Transportation and the
Nuclear Regulatory Commission for the federally regulated
industries of transportation and nuclear power. Various levels
of government and other non-Federal organizations have also
accepted the NIDA/ SAMHSA certification standards for use in their
own programs. Therefore, what began as a Federal standard for
testing of Federal employees has been expanded by practice — not
by Federal practice — to performing drug testing for other
organizations.

ISSUE ; During the initial phase of the Federal drug testing

program, the Federal Government subsidized part of the
costs of obtaining certification. Today, the costs of
obtaining and maintaining certification effectively
preclude entry into the market by new companies,
particularly small disadvantaged businesses.

RESPONSE ;

At the time of the initiation of the NLCP, an -insuff icient number
of laboratories were available to perform the necessary drug
testing in accordance with Federal standards within the time
required to implement the Executive Order. In an effort to
stimulate interest by testing laboratories, NIDA waived 70
percent of the fees associated with initial performance testing
(PT) and on-site inspections requirements for the first 50
laboratories to request certification. The availability of the
NIDA waiver was advertised in the Commerce Business Daily in
1988, and in scientific journals, newswire services, and through
direct mail. There was an overwhelming response to these
announcements, and a total of 94 applications were returned to
RTI. These applications were subsequently reviewed by RTI, and
the application, and other fees, for the first 50 laboratories
were waived. After completing the various testing cycles and
on-site inspections, 37 of the first 50 laboratories were awarded
certification. Even these laboratories, however, have had to pay
all costs associated with maintaining their certification
annually.

123

Page 3 - The Honorable Kweisi Mfume

Since that initial effort at certification, the NIDA program has
been continued with subsequent testing contracts awarded to RTI.
There are now approximately 92 laboratories certified under this
program, with a number of other laboratories in the process of
obtaining certification. Currently, laboratories are evaluated
based on their technical competence alone; the only prerequisite
to application and consideration of certification is the payment
of the necessary fees. Once certified, laboratories are
inspected on a periodic basis to ensure continued adherence by
the standards. The cost of these inspections is borne solely by
the laboratories. Because there is currently an adequate number
of certified laboratories capable of meeting testing requirements
for Federal employees, SAMHSA is not actively soliciting new
testing facilities. Laboratories do continue to apply for
certification by NIDA because the NLCP standards have become the
accepted standard for forensic drug testing.

The costs associated with applying for, achieving, and
maintaining certification have increased only slightly since the
program's inception. The increases are due mainly to increased
travel costs, inspection fees, and certain other administrative
costs. However, for a firm trying to enter the industry a
significant cash outlay is required in the first year including
an initial application fee of $750, an initial certification fee
of $16,010 and annual certification fees totaling $27,750.

ISSUE ; There is no requirement in the NIDA/ SAMHSA

certification program to set-aside a portion of the
contracting/subcontracting opportunities for
participation by minority business enterprises.
Further, Federal agencies/activities specifically
exempted from coverage by the Executive order, but
which have otherwise adopted the NIDA/ SAMHSA standard,
are bypassing the set-aside requirements.

RESPONSE ;

As indicated, the NLCP has been primarily concerned with the
technical qualifications of the laboratories and has not sought
to influence the representation of small and small disadvantaged
businesses in the pool of certified laboratories. Currently,
SAMHSA has no reliable statistics regarding the size or business
status of the laboratories receiving certification.

HHS will work with the Public Health Service to develop a
comprehensive methodology to determine the constraints — including
financial — which may contribute to the lack of participation by
small and small disadvantaged businesses. If this effort proves
that small and small disadvantaged businesses are

124

Page 4 - The Honorable Kweisi Mfume

underrepresented as a result of impediments created by the NLCP,
HHS will consider ways to modify the certification process to
insvire increased participation by such organizations.
Additionally, if the proposed effort identifies the primary
impediment to be financial, HHS will work collaboratively with
NLCP and other federal agencies such as the Small Business
Administration, to identify possible remedies such as subsidies
or exemption from the fees.

We will also work with the exempted agencies and programs to
evaluate the appropriateness of their using minority-owned
laboratories.

We will advise your office of the results of our efforts. If you
have additional questions or comments, or require additional
information, please feel free to contact me or Verl Zanders,
Director, Office of Small and Disadvantaged Business Utilization,
on (202) 690-7300.

Sincerely,

Walter D. Broadnax
Enclosures

125

Enclosure 1

SMALL BUSINESS AKD SMALL DISADVAKTAGED BUSINESS
MODEL SUBCONTRACTING PLAN OUTLINE *

Identification Data

Contractor:
Address:

Solicitation or Contract Nvunber:.
Item/ Service:

Total Amount of Contract (Including Options) $_

Period of contract Performance (DAY, MO. & YR.).

Federal Acquisition Regulation (FAR), paragraph 19.708(b)
prescribes the use of the clause at FAR 52.219-9 entitled 'Small
Business and Small Disadvantaged Business Subcontracting Plan. "
The following is a suggested model for use when formulating such
subcontracting plan. While this model plan has been designed to
be consistent with FAR 52.219-9, other formats of a
subcontracting plan may be acceptable. However, failure to
include the essential information as exemplified in this model may
be cause for either a delay in acceptance or the rejection of a bid
or offer where the clause is applicable. Further, the use of this
model is not intended to waive other requirements that may be
applicable under FAR 52.219-9.

74-197 0-94-5

126

1. Type of Plan (Check One)

Individual plan (All elements developed specifically for
this contract and applicable for the full term of this
contract) .

Master plan (Goals developed for this contract; all other
elements standard; must be renewed annually) .

Commercial products plan (Contractor sells large
quantities of off-the-shelf commodities to many
Government agencies. Plans/goals negotiated by a lead
agency on a company-wide basis rather than for individual
contracts. Plan effective only during year approved.
Contractor must provide copy of lead agency approval) .

Goals

State separate dollar and percentage goals for small business

concerns and small disadvantaged business concerns as

subcontractors, for the basic and each option year, as specified
in FAR 19.704.

Total estimated dollar value of all planned
subcontracting, i.e., with all types of concerns under
this contract, is $ .

Total estimated dollar value and percent of planned
subcontracting with small businesses (includes small
disadvantaged businesses) : (% of "A")

$ and %

Total estimated dollar value and percent of planned
subcontracting with small disadvantaged businesses:
(% of "A")

and

127

Total estimated dollar value and percent of planned
subcontracting with OTHER THAN SMALL BUSINESSES:
(% of "A")

S and % .

E. Provide a description of all the products and/or services
to be subcontracted under this contract, and indicate the
types of businesses supplying them: (i.e., OTHER THAN
SMALL BUSINESSES (OTHER), SMALL BUSINESS (SB), SMALL
DISADVANTAGED BUSINESS (SDB))

(check all that
apply)
Subcontracted Product /Service OTHER SB SDB

(Attach additional sheets if necessary.)

F. A description of the method used to develop the
subcontracting goals for small and small disadvantaged
business concerns (i.e., explain the method and state the
quantitative basis (in dollars) used to establish the
percentage goals, in addition, how the areas to be
subcontracted to small and small disadvantaged business
concerns were determined, and how the capabilities of
small and small disadvantaged businesses were determined
— include any source lists used in the determination
process) .

128

G. Indirect costs have been have not been included

in the dollar and percentage subcontracting goals stated
above. (check one)

H. If indirect costs have been included, explain the method
used to determine the proportionate share of such costs
to be allocated as subcontracts to small business and
small disadvantaged business concerns.

Program Administrator

Name, — title, position within the corporate structure, and
duties and responsibilities of the employee who will
administer the contractor's subcontracting program.

Name:

Title:

Address:

Telephone:

Duties : Has general overall responsibility for the
contractor's subcontracting program, i.e., developing,
preparing, and executing individual subcontracting plans and
monitoring performance relative to the requirements of this
particular plan. These duties include, but are not limited
to, the following activities:

A. Developing and promoting company-wide policy initiatives
that demonstrate the company's support for awarding
contracts and subcontracts to small and small
disadvantaged business concerns; and assure that small
and small disadvantaged businesses are included on the

129

source lists for solicitations for products and service
they are capable of providing;

B. Developing and maintaining bidder's lists of small and
small disadvantaged business concerns from all possible
sources;

C. Ensuring periodic rotation of potential subcontractors
on bidder's lists;

D. Ensuring that procurement "packages" are designed to
permit the maximum possible participation of small and
small disadvantaged businesses;

E. Make arrangements for the utilization of various sources
for the identification of small and small disadvantaged
businesses such as the SBA's Procurement Automated Source
System (PASS) , the National Minority Purchasing Council
Vendor Information Service, the Office of Minority
Business Data Center in the Department of Commerce, and
the facilities of local small business and minority
associations, and contact with Federal agency's Small and
Disadvantaged Business Utilization Specialist (SADBUS) •

F. Overseeing the establishment and maintenance of contract
and subcontract award records;

G. Attending or arranging for the attendance of company
counselors at Business Opportunity Workshops, Minority
Business Enterprise Seminars, Trade Fairs, Procurement
Conferences, etc;

H. Ensure small and small disadvantaged business concerns
are made aware of subcontracting opportunities and how
to prepare responsive bids to the company;

I. Conducting or arranging for the conduct of training for
purchasing personnel regarding the intent and impact of
Public Law 95-507 on purchasing

J. Monitoring the company's performance and making any
adjustments necessary to achieve the subcontract plan
goals;

K. Preparing, and submitting timely, required subcontract
reports;

L. Coordinating the company's activities during the conduct
of compliance reviews by Federal agencies; and,

130

M. Other duties

Equitable Opportunity

Describe efforts the offeror will make to ensure that small
and small disadvantaged business concerns will have an
equitable opportunity to compete for subcontracts. These
efforts include, but are not limited to, the following
activities:

A. Outreach efforts to obtain sources:

1. Contacting minority and small business trade
associations;

2. Contacting business development organizations;

3. Attending small and minority business procurement
conferences and trade fairs; and

4. Requesting sources from the Small Business
Administration's Procurement Automated Source System
(PASS) .

5. Newspaper, magazine ads which encourage new sources

131

Internal efforts to guide and encourage purchasing
personnel:

Presenting workshops, seminars, and training
programs ;

Establishing, maintaining, and using small and small
disadvantaged business source lists, guides, and
other data for soliciting subcontracts; and

Monitoring activities to evaluate compliance with
the subcontracting plan.

C. Additional efforts:

Flow-Down Clause

The contractor agrees to include the provisions under FAR
52.219-8, "Utilization of Small Business Concerns and Small
Disadvantaged Business Concerns", in all subcontracts that
offer further subcontracting opportunities. All
subcontractors, except small business concerns, that receive
subcontracts in excess of $500,000 ($1,000,000 for
construction) must adopt and comply with a plan similar to
the plan reguired by FAR 52.219-9, "Small Business and Small
Disadvantaged Business Subcontracting Plan." (FAR 19.704 (a)
(4)).

132

Reporting and Cooperation

The contractor gives assurance of (1) cooperation in any
studies or surveys that may be required; (2) submission of
periodic reports which show compliance with the subcontracting
plan; (3) submission of Standard Form (SF) 294,
"Subcontracting Report for Individual Contracts, "and SF-295,
"Summary Subcontract Report," in accordance with the
instructions on the forms; and (4) ensuring that
subcontractors agree to submit Standard Forms 294 and 295.

Reporting Period

Report

Due

Due Date

Oct 1 - Mar 30

SF-294

04/30

Apr 1 - Sep 30

SF-294

10/30

Oct 1 - Sep 30

SF-295

10/30

ADDRESSES

(a) SF-294 to be submitted to cognizant Contracting Officer

(b) SF-295 to be submitted to:

Office of Small and Disadvantaged Business Utilization
Department of Health and Human Services
200 Independence Avenue, SW
Humphrey Building, Room 517-D
Washington, D.C. 20201

Recordkeeping

The following is a recitation of the types of records the
contractor will maintain to demonstrate the procedures adopted
to comply with the requirements and goals in the
subcontracting plan. These records will include, but not be
limited to, the following:

A. Small and small disadvantaged business concerns
source lists, guides, and other data identifying
such vendors;

B. Organizations contacted in an attempt to locate
small and small disadvantaged business sources;

C. On a contract-by-contract basis, records on all
subcontract solicitations over $100,000 which
indicate for each solicitation (1) whether small
business concerns were solicited, and if not, why

133

not; (2) whether small disadvantaged business
concerns were solicited, and if not, why not; and
(3) reason for the failure of solicited small or
small disadvantaged business concerns to receive
the subcontract award;

D. Records to support other outreach efforts, e.g.,
contacts with minority and small business trade
associations, attendance at small and minority
business procurement conferences and trade fairs;

E. Records to support internal guidance and
encouragement provided to buyers through (1)
workshops, seminars, training programs, incentive
awards; and (2) monitoring of activities to evaluate
compliance; and

F. On a contract-by-contract basis, records to support
subcontract award data including the name, address
and business size of each subcontractor. (This item
is not required for company or division-wide
commercial products plans.)

G. Additional records:

This subcontracting plan was submitted by:

Signature:.
Typed Name:
Title:

Date Prepared:.
Phone No. :

134

Enclosure 2

SUBCONTRACTING PLAN REVIEW

ORIGINAL SUBMISSION
REVISED SUBMISSION #

DATE:
DATE:

Part A - Genera] Information:

1. RFP or Contract Number

2. Title of Requirement

1 4. Contractor's Name

5. Contractor'* Address

6. Period of Performance

(Base & Options)

7. Contract $ Amount (Base)

Option #1

Option #2

Option #3

8. Contracting Officer

9. Date Received by
SADBUS for Review

Part B - Plan Requirements:

1. Subcontracting Goal Data:

a. Total Subcontracting Dollars and Percentages

8ADBUS

SBA/PCR

b. Total Subcontracting with Small Business and Percentages - Percent
of la.

c. Total Subcontracting with Small Disadvantaged Business and
Percentages - Percent of 1 a.

--•

d. Total Subcontracting with Other than Small Business and Percentages
- Percent of 1 a.

2. a. Subcontracting Opportunities (Description of a list of all principal
products/services to be subcontracted to all types of concerns)

COMMENTS;

b. Methodolgy used to Develop Goals (e.g., historical tt'ends, information on
technical and competitive bidding, formula for calculating the goals, etc.)
COMMENTS:

3. Subcontracting Plan Administrator's Name and Duties
COMMENTS:

4. Description of Efforts to Ensure Small Business and Small Disadvantaged
Business Equitable Opportunity to Compete for Subconti-acts
COMMENTS:

135

SUBCONTRACTING PLAN REVIEW

Part B - Plan Requirements - Continued

5. Required Flow -Down Clause to be Irtcluded in Prime Contractor's
Subcontracts
COMMENTS:

8ADBUS

8BA/PCR

Reports and Records:

a. Agreement to submit required reports
COMMENTS:

b. Agreement to cooperate In studies, surveys, etc., conducted by the ACO,
PCO, SBA and ottiers
COMMENTS:

Part C - CO Determination — SADBUS and SBA Recommendations:

1 . The Proposed Ran meets the requirements of FAR 1 9.708(b)

2. The Proposed Plan requires an additional pre- award review

ADDITIONAL COMMENTS:

YES NO

SADBUS

SBA/PCR

YES NO

CO Date SADBUS

*NOTE: A = Acceptable U = Unacceptable

Date SBA/PCR

Date

REMINDER: Final •ubcon»«cting plant ahoutd ba dia»lbu«ad In aeeofdanea wWi FAA l«.703-e and othar aupplainantal
agancy ragulationa/dlracllvat: La.. DHHS OSOBU, Aganey SADBUS and SBA/PCR

136

IS HEALTH CARE REFORM
HEALTHY FOR MINORITY ENTERPRISES"

COMMENTS BY:

Rudolph A. Coleman
President and CEO

137

In spite of numerous public policies of remediation, the asymmetrical patterns which
characterize minority groups in American society continue to prevail. Indeed, the data are
so familiar that its citation constitutes the repetitive. Minority groups are disproportionately
represented amongst the unemployed, the impoverished, and the socially disadvantaged.
And, given the intimate linkages between the socio-economic and the etiological, it is not
surprising that morbidity and mortality rates are also higher for minority populations.

Accordingly, the minority community necessarily applauds any effort to reduce health costs
and simultaneously enhance accessibility to health care for minority as well as majority
Americans. However, the outcomes associated with various policies often embody
unanticipated outcomes and unintended effects. Thus, it becomes important to assess the
impact of the proposed health reform upon minority populations.

Such a discussion is, however, implicitly bifurcated. On the one hand, one must assess how
the various proposals will affect minority populations' demand for health care. However,
an equally important but less overt consideration is the potential impact of health reform
upon minority enterprises in general, and African American enterprises in particular. The
comments herein address the latter, rather that the former, issue. It is important to
disaggregate the potential impact and examine African American businesses because African
Americans businesses are losing ground amongst minority businesses'. From 1982 to 1987,
for example, African American businesses dropped from 40% to 35% of all minority
businesses. Similarly, African American businesses receipts dropped from 27% to 25% of
all minority receipts'.

When African Americans firms are separately profiled, it becomes clear that less than 3%
of all firms or 424,165 firms, are African American. Approximately 47% of these firms
gross $5,000 or less in sales receipts, 80% earn $25,000 or less, and a mere 1/2 of 1%
gross $1 million or more'. Nearly, half of all African American firms are in services
(209,547) and 30,026 or 14.3% are in health services'. It is this segment of minority firms
which are the subject of this discussion. These health firms are distributed across a number
of SIC codes'.

The health care industry has a number of important characteristics. First entry and exit is
somewhat restricted. Educational requirements, legal rules and regulations, licensure
requirements, and in some cases, the costs associated with medical technology, as well as
other factors comprise significant barriers to entry. Second, because health care is a
service, the quality of its delivery cannot be objectively appraised. Accordingly, health care
providers, health managers, etc. from African American business enterprises are more likely
to be subject to bias and subjectivity in the appraisal of performance because of their
historicity. Third, the administrative and organizational apparatus for entry into the market
includes significant gatekeepers with the power to skew the decision-making process away
from African American and other minorities. Fourth, because African Americans health
care firms are small, their costs may be higher because they are below the minimum
efficient size. Thus, the higher cost structure may lead to lower survival rates. Taken
together then, African American health firms exist within a market structure which

138

represents a constant challenge to their survival. Will the proposed health reform package
exacerbate these already threatening conditions and/or create new opportunities?

Health Management Resources, Inc. (HMR) feels that there are a number of elements in the
proposed health reform package which may, without additional safeguards, have adverse
consequences for African American firms. These areas can be briefly summarized.

First, HMR applauds the fact that the Health Security Act does fund an armual Health
Profession Workforce Account. In particular, this program includes a special provision to
extend training to minorities and disadvantaged persons in the areas of medicine, osteopathy,
dentistry, nursing, public health etc. It also includes special programs to retrain some
categories of workers through the Department of Labor. However, the statues do not
include measures to ensure that minority business enterprises are included in the solicitation
and selection process for firms to deliver such services.

Second, the health reform proposals are platformed upon a managed care model of service
delivery. Simultaneously, it includes special provisions for training health care professionals
and administrators in managed care. However, the managed care model has developed in
isolation from most minority firms and minority health care professionals. Thus, measures
are needed to promote the acceptance of managed care amongst African American health
service enterprises and to train then to integrate themselves into this model.

Third, and of, perhaps, the greatest concern to HMR, the Health Security Act introduces
a complex administrative mechanism for the execution of its mandates. The regional
Alliances, the National Health Board, etc., all constitute new gatekeepers in the criteria.
The administrators may be able to screen out African American enterprises from
procurement activities. As currently written, the Act provides no 'new guidelines for the
affirmative inclusion of minority firms.

Fourth, while there are approximately nine African American managed care organizations,
more African American managed care firms are needed to ensure equity in the new health
care climate. However, the $500,000 minimum capital requirement may comprise a barrier
to entry. Additionally, if such firms service high risk patients, even the subsidy for special
populations and patients/mix based capitation rates may not offset the risks implicit to their
unique clientele. Thus, African American managed care organizations may encounter
special problems in formation and continuation. Again the current law does not include
sufficient safeguards in this regard.

Concluding Remarks

Health Management Resources, Inc., fully recognizes and supports the President's bold and
pioneer efforts. The comments herein are designed to ensure that the expected outcomes
are equitable as well as efficient.

139

'U.S. Department of Commerce, survey of Minority Owned Business Enterprises:
Series MB87-4 Summary: 1987, pg. 6.

'ibid, pg. 6

'ibid, pg. 17

'ibid, pg. 2

'ibid.

140

Medical Service Agency, Inc.

MAILING AOORESS

20 ERFORD ROAD
LEMOYNE. PA 1 7043

(717) 761-5266
Fax (717) 761-6213

WRITTEN TESTIMONY

«/

Dr. David L. Dalton

President and CEO

MEDNET^"^

a minority owned prescription drug benefit provider and administrator
Lemoyne, Pennsylvania

Submitted to the U.S. House of Representatives Committee on Small Business

Sub-Committee on Minority Enterprise, Finance, and Urban Development

Representative Kweisi Mfume, Chairman

Submitted November 18, 1993

Mr. Chairman, I am submitting this written testimony for the record to address the
problems MEDNET has encountered as a minority owned and operated prescription drug
benefit provider.

I would like to begin with the background of the company. Since its inception in 1987,
MEDNET^M has earned national recognition as a prescription drug benefit provider and
administrator specializing in formulary development, flexible plan design with aggressive cost
containment features and state-of-the-art, on-line claims processing and adjudication. The
fundamental strength of the MEDNET program is the active involvement of all elements
of the pharmacy community, including academic and clinical pharmacists, over 45,000
independent and chain retail pharmacies, mail-order options, and drug manufacturers. This

141

combined effort results in aggressive management programs. We also provide a Consumer
Prescription Drug Card Program for individuals who have no prescription coverage or whose
drugs are covered under the major medical portion of their health insurance. MEDNET is
managed and directed by individuals with over 80 years of pharmacy experience and solid
financial credentials.

In your letter, you encouraged us to provide our views on the problems hindering minority
owned business from winning public and private contracts as well as suggestions as to how
minority businesses can be given fair and equitable treatment under the proposed health
care reform. Our views on problems hindering minority owned businesses include:

• Decline of African-American participation in the health care and
pharmaceutical industries;

• Compliance with Public Law 95-507;

• No standard set-aside program across all Federal agencies;

• Lack of minority participation in developing Affirmative Action programs;

• Artificial barriers within procurement practices;

• Sole-source or Prime Vendor program is exclusionary to minority vendors.

Let me now amplify these various views. First, as you may know, less than 1% of all health
care providers are African-American. African physicians and dentists have been forced to
care for the very ill, indigent population with access to minimum resources. There are no
African-American pharmaceutical companies. Only one African-American pharmacy

142

administrator that is continually fighting for equal access. African-American hospitals have
declined to only six (6) and there are seven (7) African-American HMOs in the nation.

These statistics documented by others continue to verify that African-American participation
in the health care system is effectively non-existent. Therefore, it is clear that a level playing
field must be created to permit development, training and bidding opportunities to occur.

With regard to compliance of Public Law 95-507 and other federal laws governing access for
small, socio-economically disadvantaged businesses in the competitive subcontracting bidding
process, I recommend enforcement with serious penalties through a central compliance
monitoring system reporting to a minority oversight administrater possibly within the Equal
Opportunity Commission staff. An example of inconsistency among federal laws is clear in
the following scenario: the federal law governing the Federal Employees Health Benefits
(FEHB) Program exempts contracts vdth health benefits carriers from the competitive
bidding requirements applicable to other government contracts.

As to the problem of set-aside programs, it is my view African-American and other minority
providers need additional equal access which would mirror Public Law 99-661, the
Department of Defense Contracting Goal. Public Law 95-507 should be amended to
specifically legislate the utilization of African-American or other minority disadvantaged
businesses into government contracts.

143

Next in the area of Affirmative Action, MEDNET agrees with the National Medical
Association's recommendation that heahh care reform legislation requires health plans to
hire and contract appropriately and equitably, minority health provider. A study by the
National Minority Health Association found no African-American corporate officers in
majority controlled managed care entities.

A major problem for African-American business is the "artificial" barriers found within the
procurement system such as the perpetuation of the "good old boys" network and sole-source
provider vendor programs. A solution to this problem could be to strengthen the role of the
Office of Small and Disadvantaged Business Utilization (OSDBU) by providing responsibility
for establishing procurement programs to ensure and increase minority participation.
Enhance the OSDBU's role of recruiting minority owned businesses for maximizing sub-
contracting opportunities.

Last, but not least, is the Prime Vendor and Sole Source providers programs within various
federal agencies eliminates participation of African-American and other minority suppliers
including small purchases under $25,000.00. Not only does this close the door of
opportunity, it prevents new firms from being considered as prospective prime contractors.
This happens because prime vendor programs have released the obligation to use minority
owned businesses from federal agencies. Most put the responsibility to meet the socio-
economic requirements of Public Law 95-507 on the contractor.

144

As this related to health care reform and its Regional Health Care Alliances, there must be
adequate provisions for minority providers to compete at all levels of the Alliance.

In conclusion, I want to thank the Committee for allowing MEDNET to respond to your
request to focus on minority enterprise participation in the health care industry. We stand
ready to continue to work with the Committee to support ways to ensure minority
participation in the delivery of health care services.

145

STATEMENT OF BRUCE RAFFEL

VICE PRESIDENT

RAFFEL HEALTHCARE GROUP, INC.

BALTIMORE, MARYLAND

BEFORE THE SMALL BUSINESS COMMITTEE

SUBCOMMTITEE ON MINORITY BUSINESS OPPORTUNITY

U.S. HOUSE OF REPRESENTATIVES

NOVEMBER 9, 1993

Mr. Chairman and Members of the Subcommittee:

Thank you for inviting our company to testify before the Subcommittee on the
important issue of health care reform, and in particular the impact it may have on
minority owned businesses. President Clinton has proposed comprehensive legislation
which attempts to take on the dual problems of our health care system, the lack of
access of too many to health care and the steadily increasing costs to individuals and
employers of providing access to that system.

In 1975 my mother founded our firm, which today ranks as the third largest
woman-owned firm in the Baltimore Metropolitan area, as well as the seventh largest
minority categorized firm, according to the State data. Our business is the operation of
nursing homes. We now own and operate three nursing homes, two in the City of
Baltimore and one in Baltimore County, caring for almost 600 patients and employing
approximately 525 staff members. We are proud of the quality service we offer. Our
company was the first and still one of the few long term care facilities in Maryland to
accept HIV positive patients. We serve a diverse population group, with patients from
the inner city as well as the suburbs and more rural areas. We naturally have an interest
in reforms which will further access of individuals to long term care.

146

ftaffel Healthcare Group
November 22, 1993
Page 2

But peiiiaps even more important to us is the immediate impact this series of
reforms will have on our own employees and the way we operate our business. Almost
since the founding of our company we have offered comprehensive and a^ordable health
care access to our employees. Over the years we have continued to refine our health
care program, as the interest of our employees evolved and as our costs changed. Within
the past decade we have utilized nearly every form of health coverage, from traditional
indemnity insurance to PPO's and HMO's. We presently self fund our plan, offering our
employees fully paid individual coverage for a generous benefit package. Family and
dependent coverage is also available with an employee contribution.

As we have read about the Clinton proposal, we have a very real concern that the
structure of the program will not permit us to continue this effective and flexible
coverage which we are able to provide our employees. This is because we would have to
join a regional health alliance in order to purchase coverage from a third party. We
would not be able to retain our present coverage because our firm is not large enough to
opt out of the plan by meeting the threshold test of 5,000 employees, which the President
proposes for obviously big business. We are confident that our benefits package already

147

Raffel Healthcare Group
November 22, 1993
Page 3

meets and exceeds any govemmentally mandated standard. Our package offers the same
coverage from a starting level position to the President of the company. We can afford
such benefits because we can manage our own plan effectively. Being tossed into the
health alliances disturbs us because it will remove any opportunity for the employer to
manage and fine tune the benefits his employees want.

Let me provide an example. Our employees are typically women, mostly nurses
and nurses assistants. Family planning is a concern for many employees. Under
previous insurance plans, the insurance carrier or HMO usually provided coverage only
for a specific method of birth control, prescription drugs. When we changed to a self
funded plan, whose coverage details we were able to design, we responded to the interest
of several employees by ensuring that Norplant and other non-medication options were
available to our employees and their families. This decision was not driven by cost or
regulation, but simply by our interest in being responsive to our employees, and actually
caring about their health needs.

When we changed from purchase of coverage to a self funded plan, our costs
immediately were reduced by more than 20 percent. This reduction in costs was
primarily attributable to cutting out layers of bureaucracy and middlemen, and dealing
directly with our employees and their health care providers. We are now offering our
employees annual flu shots for half of our costs of acquiring the vaccine. We offer as
part of our coverage HIV screening; insurance experts tell us this benefit is not typically

148

Raffel Healthcare Group
November 22, 1993
Page 4

available. In fact, our coverage is more comprehensive now than it was under older
plans, even though our costs are less. One major reason is that we stress preventative
health care Our plan is regulated through ERISA, and we carry stop loss coverage to
financially protect the plan in the case of very large claims.

But the important point is not simply that the employer has been able to save
money wdth self funded plans, but that we have been able to take those savings and use
them for additional employee health benefits which we could not previously afford. We
have established a stop smoking program, and a comprehensive employee assistance
program for alcohol or substance abuse issues. This is very unusual for a small company.

In summary, we stopped dealing with large insurance companies and HMO's,
because their bureaucracy was inflexible, their coverage was not comprehwisive and their
costs were high. Our self funded plan has allowed us to expand coverage and control

our costs.

One argument that we know has been made against our type of system is that it
would allow companies with "healthy" employees to go off on their own, leaving the
alliance plans to receive only the higher medical risk consumers. This makes no sense to
us. Our own company has an employee profile tiiat many insurance brokers have
advised us is "high risk," urban and female in health care professions. With our large
workforce we have the usual variety of health problems, from minor to catastrophic and
long term. But we are offering our employees and their families very comprehensive

149

Raffel Healthcare Group
November 22, 1993
Page 5

coverage at a cost affordable to our company, precisely because we have gone around
these insurance experts and their bureaucracies. If some system of "risk adjustment"
were imposed on plans which are not part of the central health alliances, it would
probably benefit us, given the population we cover under our self funded plan.

OPPORTUNITIES FOR MINORITY BUSINESS

The key to our success is our ability to provide quality and cost effective service
to our patients, with a motivated workforce. Long term care is a labor intensive
business. Hiring, training and retaining quality employees is an essential part of our
efforts. Providing those employees with comprehensive and generous benefits is a
constant goal. In this we are no different than most businesses, including most minority
businesses. This is why we are gravely concerned about the proposals for exclusive
health alliances, which most employers would have to join. Forcing such action will
eliminate the ability of the employer to structure and manage health care costs. We do
not need a large state-run health alliance bureaucracy taking over for the large insurance
companies. Because of our positive experience with self funding, we have learned that
our employees are most satisfied with their health care coverage when it is most directly
under their control. Our own self funded plan allows that employee input. Eliminating
that possibility in the name of health reform would be a step backward for our
employees and their families.

150

Raffel Healthcare Group
November 22, 1993
Page 6

We can better achieve the objectives set forth by the President -- including choice,
universal coverage and portability ~ through reforms in the marketplace, not elimination
of the marketplace.

We ask the members of this Subcommittee, as well as other members of Congress
to support voluntary Health Alliances, keeping the option of employers to self-insure.

74-197 (160)

BOSTON PUBLIC LIBRARY

3 9999 05983 103

ISBN 0-16-044720-8

9 780160"447204

90000