Studies in Medical Care Administration

Planning and Implementation of the

COMMUNITY HEALTH
FOUNDATION
of Cleveland, Ohio

This Case Study on The Development

of a Prepaid, Group Practice,
Comprehensive, Direct-Service Health Plan
was prepared by Avram Yedidia, Consultant
on Organization of Prepaid Health Care Services,
under contract with
the U.S. Public Health Service.

U.S. DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE

Public Health Service
Division of Medical Care Administration
Arlington, Virginia 22203
1968
PUBLIC HEALTH SERVICE PUBLICATION NO. 1664-3

APRIL 1968

U.S. Government Printing Office

Washington, D.C.

For wJ? by the Superintendent <>

* DrcmnenU, U.8. Guwnment Printing Office
Washing ton, D.C. 20
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FOREWORD

The process by which a prepaid group health plan comes into being is
lengthy and complex. To our knowledge, no detailed chronicle of this process
has been published before.
This study has much to offer the reader concerned with the development
of community health services in general and prepaid group practice in par­
ticular. The program was, by necessity, tailored to the specific needs and built
on the specific strengths to be found in the Cleveland area. The leadership of
labor representatives, the involvement of medical institutions, the counsel and
guidance provided by experienced people in the group health field—all were
important elements in the establishment of the program.
Countless hours of community time and effort are sharply reflected. More
than a decade of exploration, discussion and planning preceded the opening
day of the Community Health Foundation. These years were well spent. The
almost immediate success of the program and its subscriber acceptance has
provided a solid base for expansion of service. Plans for a hospital and a mental
health center in connection with this comprehensive health program are now
well along.
Although this is the Story of one community’s planning for and imple­
mentation of a health care program, it can serve as a valuable resource docu­
ment for many communities. A good set of guidelines to effective community
organization is found in this story. It can serve as a model offering useful ideas
to any community where health delivery systems might be improved through
application of the general principles of planning and the specific principles of
prepaid group practice.
John W. Cashman, M.D., Director,
Division of Medical Care Administration.
Digitized by Google Original from
UNIVERSITY OF MICHIGAN
 PREFACE

This report of the development of a prepaid, group-practice, compre­

hensive, direct-service health plan (hereafter referred to as a "prepaid group-
practice health plan”) is presented as a chronicle of the events that marked
the evolution of one organization: The Community Health Foundation (CHF)
of Cleveland, Ohio.
Each health plan now in existence represents a unique response to the
special circumstances that led to its development. A thorough analysis of the
evolution of any one program in this general category entails discussion of the
factors that, demanded consideration during the incipient and growing phases
of the efforts to provide coordinated health services on a prepaid basis.
These widely divergent factors include, to mention only some of the more
unwieldy, the social and legal background that must exist before a prepaid
group-practice health plan can emerge: The development of a fiscal structure,
the inevitably complex interrelationships between the emerging plan and the
medical professional world, and the manifold aspects of information-exchange
between planners, staff, and prospective and actual subscribers to such a
program.
The story of the planning and implementation of CHF might have read
differently if this report, had been written by one of the other persons who took
part in it. Not that the facts would have been different—or so, at least I
believe—but the emphases might have been changed. No other member of the
planning team should be held responsible for the viewpoints expressed in this
report, or for whatever opinions I may have consciously or unconsciously
conveyed.
Nevertheless, no group effort of this magnitude could have been described
without the patient and imaginative consideration of everyone who participated
in the work itself. I wish particularly to thank Dr. E. Richard Weinerman,
professor of medicine and public health, Yale University School of Medicine,
and director of ambulatory services, Yale-New Haven Hospital, and Mr. Glenn
Wilson, executive director, Community Health Foundation of Cleveland, Ohio,
who were members of the planning team from the beginning, for their helpful
suggestions about the design of this report and for their detailed scrutiny and
discussion of the typescript.
I also am indebted to several other persons who liecame participants in the
planning effort during the year preceding the opening of the health center:
Dr. Ernest W. 8award, medical director, Permanente Clinic, Portland, Oreg.,
and Vancouver, Wash., who served as sole proprietor of the Community Health
Foundation medical group when it was first organized, and gave me the benefit
of his clear insight and excellent advice regarding the preparation of the
report; Dr. Eugene Vnyda and Dr. William R. Young, the first two physicians
to commit themselves to the new health plan, who read and offered welcome
criticism and perspicacious suggestions on several chapters, particularly those
that relate to the organization of the medical group.
The report has gained immeasurably from the empathetic and imaginative
contribution of Mr. Robert A. Little and Mr, George F. Dalton of the firm of
Robert A. Little and George F. Dalton & Associates, architects of the CHF
center, who wrote the central portion of chapter VJLLL
I am grateful to Mrs. Mary Eubanks for technical editorial assistance on
chapters I-IV and to Mrs. Ruth Straus, editor, Department of Scientific Publi­
cation, Kaiser Foundation Hospitals, for assistance in the organization and
writing of chapters V-XI.
AVRAM Yedidla.
Orinda, Calif.
 CONTENTS
Pa«e
Foreword..................................................... iii
Preface ........................................................................ v
Chapter:
I. Climate for New Organization of Health Care 1
II. Focusing on a Unified Course of Action 5
III. Assessing the Potential. .................................... 9
IV. Elements of Planning a Comprehensive Program 15
V. Extent of Physicians' Interest in the Demonstration Project 19
VI. Reappraisal of the Project's Strength and Resources 25
VII. Financial Planning of the Health Care Program 29
VIII. Building the Center 39
IX, Legal Framework and Contractual Relationships 55
X. Recruitment of Physicians and Organization of the Medical
Group 63
XL Recruitment and Continuing Education of Subscribers. 75
Illustrations:
Figure 1. Diagram showing flow of traffic through Cleveland
Health Foundation 46
Figure 2. Site for CHF 46
Figure 3. Synthesis of building and site of CHF 47
Figure 4. Building form of CHF ......... 48
Figure 5. First floor plan 49
Figure 6. Second floor plan 50
Figure 7. Basement plan 51
Figure 8. Air view of CHF from the south 52
Figure 9. The Community Health Foundation (southwest view) 53
Appendices:
A. The Membership Contract .............. 84
B. The Medical Service Agreement 93
C. The Physicians' Partnership Agreement 102
Digitized by Google Original from
UNIVERSITY OF MICHIGAN
 Chapter I
CLIMATE FOR NEW ORGANIZATION
OF HEALTH CARE
The prepaid, group-practice, comprehensive, di­
rect-service health program which was introduced
July 1, 1964, by the Community Health Founda­
tion (CHF) in Cleveland is the fruition of more
than a decade of efforts.
Medical standards in Cleveland have, for many
years, been above the average for comparable com­
munities. The professional climate has gained by
the high levels of knowledge and skill set by West­
ern Reserve University School of Medicine and
by The Cleveland Clinic, one of the leading group-
practice clinics in the country. Nevertheless, there
was uneasiness there, as elsewhere, about the avail­
ability of medical care at a cost the ordinary citi­
zen could afford to pay.
By the early 1950’s, technical and scientific de­
velopments in the medical field had advanced
health care to a degree of effectiveness that created
a wider demand for its benefits. More people were
making use of more medical services. But as these
services improved in quality, they also underwent
a steep rise in cost. More expensive hospital and
physicians’ services, many more drugs, and special
procedures in diagnosis and treatment swelled the
medical bill and tended to generate anxiety. Too
many people felt unable—or feared they might be
unable—to pay for the medical care they might
require.
At the same time, the labor unions, after two
decades of concentration on wage and hour im­
provements, began directing their attention to
such needs as pensions and medical care. Funds for
health insurance benefits were negotiated through
labor-management bargaining. Where health and
welfare funds were made a part of new contracts,
payment was provided for certain medical sevices
needed by employees. Benefits were extended, in
some contracts, to cover some of the needs of em­
ployees’ families.
In this search for new ways to meet medical
expenses, questions were seldom raised regarding
the quality, availability, or organization of medi­
cal services. The major concern of most unions was
to find new methods of payment for medical serv­
ices already available in the community. This con­
cern was shared by many middle class citizens,
wage and salary earners alike, who might be ex­
cluded from certain care or might be excessively
burdened by a serious illness.
In 1952, the annual meeting of the American
Public Health Association (APHA) brought to
Cleveland a number of widely experienced medical
and nonmedical experts associated with the coun­
try’s health programs. A group of Cleveland labor
leaders arranged a meeting with representatives
of several group-practice programs to learn how
other communities were handling the financing
and provision of medical care.
Legal Restrictions
The discussion was circumscribed by the provi­
sions of an Ohio statute governing the establish­
ment of organized health services in the State. The
act had been passed almost 20 years earlier, and
so restrictive were its provisions that no corpora­
tion had been chartered under its limitations.
The Ohio statute required that any health pro­
gram designed to cover a dues-paying membership
permit its members free choice among licensed
physicians in the community who wished to par­
ticipate; that nt least 51 percent of the physicians
in the proposed area agree to participate in the
program; that it be under the control of physi­
cians; and that eligibility be restricted to individ­
uals whose income had been $900 or less in the 6
months prior to applying for membership, and to
families whose total income had been under $1,200
in that same period.
When the APHA again met in Cleveland in
1957, another opportunity was presented for in­
terested union leaders to confer with health care
experts atending the meeting. At this time, their
focus was upon the merits of a comprehensive
program that would involve direct service. How­
ever, it was evident that the strictures of the Ohio
statute would not permit this solution to problems
of medical organization and costs. New legislation
would be necessary to permit development of the
desired type of health program.
In 1958, the wide response to a union-sponsored
program brought Cleveland its first health-related
service with unified labor support—a center for
the prescription and provision of eyeglasses. The
corporate structure of a labor-sponsored coopera­
tive store had been altered to constitute it a “Union
Eye Care Center.” Unions throughout the area
voted to subscribe 25 cents per member toward es­
tablishment of the center and to qualify for repre­
sentation on the board of directors. The center
leased office space in downtown Cleveland, pur­
chased equipment, and hired the nonprofessional
staff.
The center was a success. It has since opened four
branches in northeastern Ohio. A group of optome­
trists lease space on the premises, do the eye test­
ing, and bill patients separately for their services.
The center provides eyeglasses at a reduced rate
to members of affiliated unions. Ophthalmological
care is by referral to specialists practicing in the
community.
When the charter was drawn for the new Union
Eye Care Center, it reflected the thinking devel­
oped, over the years, by union leaders in their
health care discussions with professionals in the
health field. The charter contained a clause stating
that the center was being organized for “the prin­
cipal purpose of promoting and enhancing the
general health, and encouraging welfare educa­
tion of union members * * * and other related
activity.”
Having this broad purpose stated in the charter
proved, some years later, to facilitate important
moves toward development of CHF. Without it,
vital financing might not have been available.
An Opportunity To Untangle
the Legal Snag
During the 1958 election, a right-to-work
amendment to the Ohio constitution was placed on
the ballot. Strong opposition to the amendment
mobilized an intensive labor campaign with a
large turnout of voters. The result was defeat for
the amendment and, with it, election of a State
legislature tlmt included a liberal majority.
The Cleveland group interested in a direct-
service health program recognized a sudden, and
perhaps fleeting, opportunity: The new legislature
might be receptive to a different statute governing
prepaid health plans.
In February 1959, a meeting was called in Co­
lumbus to point out the need for moving swiftly
to develop such enabling legislation. The group
included the majority leader of the Ohio State
Senate, the directors of labor-sponsored clinics in
the State, the legislative representatives of the
Ohio AFL-CIO and of the United Mine Workers
of America, and representatives of the Group
Health Association of America (GHAA).
A former labor official who had been elected
majority whip in the State senate informed the
group that the deadline for introduction of new
legislation was just 1 week away. He agreed to
introduce the measure if a preliminary draft could
be delivered to him before that date. The proposed
measure was fortunate in having the sponsorship
of this key legislator. His bill was assigned to com­
mittee, and a hearing was set.
When the bill came up for hearing in the senate,
the burden of support was carried by Dr. Dean
Clark, general director of Massachusetts General
Hospital, Boston, and president of GHAA, by a
physician practicing in Ohio, and by a representa­
tive of the public, a member of the Cleveland City
Council.
Opposition Hinged Upon Free Choice
Opposition to the bill came from the Ohio State
Medical Association, Ohio Medical Indemnity (an
insurance company) and the Ohio osteopathic
physicians and surgeons. It was based entirely
upon the issue of free choice of a physician and
was presented in the form of an amendment
requiring any health plan established under this
law to include any licensed physician in the area,
who wished to participate. The committee, how­
ever, voted down the amendment 6 to 1, mid the bill
then cleared the senate 30 to 1.
The major contest, took place in the house of
representatives’ committee. Proponents were again
represented by Dr. Clark. The Ohio Farm Bureau
Federation and Ohio AFL-CIO representatives
also spoke for the bill.
The medical society proposed the free-choice
amendment again, including it in three separate
clauses: The freedom of a physician to participate
in any such plan if he so desires; free choice of
participating physician by the patient; and free
choice of an independent physician by the patient
in an emergency. Proponents of the measure
pointed out that participation by physicians prac­
ticing independently would nullify the whole con­
cept of organized medical services financed by
prepaid montidy dues.
After making it clear that a vote for the free-
choice amendment was a vote to kill the purpose
of the bill, proponents rested their case. Members
of the hearing committee took over the task of
clarifying the medical society's reasoning for the
record. The first two applications of free choice
were rejected. "Free choice of physician for emer­
gency care” sounded so reasonable that it was
nearly adopted. However, proponents pointed out
that the bill already provided that emergency care
outside the sendee area of the plan might be se­
cured from any physician, but that within the
area the program would undertake to organize all
necessary services, including emergency care
around the clock.
A poll of the 19-man committee before the hear­
ing had indicated six noncommitted members will­
ing to vote against the free-choice amendment.
After the concept of the program had been dis­
cussed fully, the amendment was defeated by a
vote of 15 to 4. Amendments relating to super­
vision by the State superintendent of insurance, as
proposed by Blue Cross, were accepted by the bill’s
supporters. The house of representatives passed
the bill by a vote of 101 toll, after again defeating
the free-choice amendment on the floor, with bi­
partisan support, by a vote of 70 to 33.
Analysis of the Campaign and the Law
Opposition to the statute had been intense. The
legislative committee members had received a
flood of letters and telegrams. Both the medical
society and the Ohio Citizens for Voluntary
Health Plans had carried on active campaigns, the
former with newsletters to doctors, the latter with
pamphlets conveying the opposite view. Propo­
nents of the bill invested much time and effort
writing and talking to legislators, especially to key
members of committees. This effort, to the extent
that it shed light on the issue of free choice of
physician, had the effect of assuring that a signifi­
cant number of the leaders in both political parties
understood the issue before it came to a vote.
The proponents’ campaign stressed the public
interest, enlisting support for voluntary efforts to­
ward achieving comprehensive health care at
reasonable cost. The medical profession and or­
ganized medicine were not criticized nor pictured
as the enemy. Blue Cross, Blue Shield, and the in­
surance industry were not blamed for existing de­
ficiencies in prepaid medical care. On the contrary,
the accomplishments of these organizations were
acknowledged as a good reason for advancing new
forms of prepaid care. The basic policy was to
take a firm stand on the principle of every person’s
right, to select a closed panel of doctors if that was
his choice of medical care.
The voluntary health plan bill was passed in
May 1959, signed by the Governor in July, and
became law 90 days later. The following are its
major provisions:
The law provides for incorporation of voluntary
nonprofit health care organizations and their oper­
ation under the supervision of the State superin­
tendent of insurance. Such health care organiza­
tions must provide their subscribers with services,
not cash indemnity. Medical benefits may include
physicians’ care in the home, the doctor’s office,
and the hospital or nursing home; hospital and
nursing home services; and dental care for persons
who subscribe to this part of the program.
The law j>ermits indemnity for emergency serv­
ices secured by subscribers only when they are
away from home and outside the “territorial
boundaries” of the health care organization. For
such temporary care the patient may consult, any
physician he wishes.
The board of trustees of the corporation shall be
elected by the subscribers, shall have “nonphysi­
cian and nondentist representatives,” and shall
serve without compensation. The board may be all
nonphysicians, but it cannot be entirely composed
of physicians.
Payment to physicians, hospitals, and dentists
may be on any terms agreed to by the health
organization and the professionals providing the
care. The law requires the State, and any political
subdivision or institution supported in whole or in
part by the State, to honor authorizations of
payroll deductions for employees who enroll in an
approved health care organization.
Summary and Comment
The labor unions’ interest in new patterns of
medical care first centered upon the financing of
health services. As funds were negotiated for
medical care, however, experience proved that more
money did not, of itself, provide for the medical
needs of the worker and his family.
Pressure for some kind of improvement in the
arrangements for medical care continued to bring
union and other community leaders together in
meetings and conferences over a period of years.
The participants became more knowledgable in the
problems and possible avenues to improvement.
but the meetings produced no concrete solutions.
It became clear, as time went on, that meetings
could serve no purpose unless allied with con­
tinuity of effort toward a specific plan of
development.
Growing awareness of unmet needs for medical
care helped to generate popular support for per­
missive legislation in the health plan field and to
prepare the ground for a new approach to health
care.
Although the mobilization of support for the
enabling act united diverse elements concerned
with a new pattern for medical care and began to
educate the public to the nature and feasibility of
voluntary group health plans, its passage did not
bring about a lasting amalgamation of forces. A
continuing effort toward a specific goal had yet to
be initiated.
 Chapter II
FOCUSING ON A UNIFIED COURSE OF ACTION
While there had been little general publicity
about the campaign for new health care legisla­
tion, two groups of Cleveland citizens had heard
a great deal about the subject—the physicians and
the members of labor unions.
The measure had been passed in the Ohio State
Legislature by the time the summer conference of
the State AFL-CIO was held in Athens in 1959.
The interest generated among labor groups was
shown by the prominence given to aspects of
medical care on the program of this educational
conference. Representatives from the Cleveland
area, in particular, expressed their determination
to seek new approaches to health care for union
members.
In September a proposal came from the ranks
of another community group activated by the
legislative campaign. Despite the Ohio State
Medical Association’s official disapproval of the
enabling act, a group of physicians who had more
than a passing interest in the kind of practice
envisioned invited several Cleveland union leaders
to discuss the establishment of a health program
under the new law.
The physicians offered to put up a substantial
building, form a medical staff, and provide medical
care to union members who would be enrolled in
a comprehensive, prepaid direct service program.
A consumer (union) organization was to be re­
sponsible for enrollment of members and for col­
lection of prepayment fees.
The idea of a medical care program under sole
control of physicians differed from the thinking
of Cleveland union leaders. They were sufficiently
informed on different approaches to health care
to prefer a program in which the membership re­
sponsibility would extend beyond raising money to
pay for the program. They undertook, with tech­
nical help, to draw up a statement of the principles
that they considered basic to a successful and satis­
fying medical care program.
The principles submitted to the physicians in a
counterproposal were these :
1. Nonprofit corporation;
2. Control to rest directly with consumer
membership;
A. Ownership of facilities by the consumer
organization;
4. Nonpartisan administration, free from in­
tervention in behalf of either union or man­
agement interests;
5. Membership to be open to other community
groups;
6. Range of services to be broad enough to
cover preventive, diagnostic, therapeutic,
and rehabilitative services in the home, office,
and hospital—according to the capacity of
the medical facilities in relation to the size
of the membership;
7. Medical care to be rendered on a strictly pro­
fessional level, not controlled nor directed
by laymen;
8. Medical services to be rendered by a partner­
ship or association of physicians;
9. Criteria to be established, with the advice of
medical authorities, regarding:
(a) Minimum qualifications of physicians
and other professional personnel; (L) com­
pensation, and other terms and conditions
of work for physicians and other personnel;
and (c) sendees to be rendered and methods
to be sought to assure services of consistent
high quality provided without discrimina­
tion to any member in need of medical care.
10. Physicians to be headed by a chief of staff,
charged with supervision of medical services,
and representing physicians in their rela­
tions with the board of trustees;
 11. Independent medical advisor to advise ttie
board regarding the quality of services be­
ing rendered, adherence to medical stand­
ards, etc.;
12. Overall management of the plan to be in
the hands of a nonmedical administrator
directly responsible to the board of trustees;
13. Area served by any medical unit to be lim­
ited to one reasonably convenient to such
unit and providing emergency out-of-area,
benefits;
14. Corporation to serve individuals as well as
members of groups, and benefits for active
employees and continued coverage for the
retired to be financed, as much as possible,
by employer contributions; and
15. Educational service to be provided to mem­
bers regarding the benefits of their health
plan as well as their responsibility to it and
to themselves.
The physicians expressed reservations about
some of these principles, which appeared to them
to open the door to infringement upon their pro­
fessional prerogatives. After several meetings,
enthusiasm for the project waned and it was
dropped. The principles were not lost, however,
and with some modifications were incorporated in
the structure of CHF when it was established
several years later.
Proponents Move in Various Directions
Meanwhile, several unions had advanced from
discussion to action in the health care of their
memberships. Each chose a different approach.
The retail clerks’ and meat, cutters’ health and
welfare funds concentrated on self-administration
of their health insurance program, and engaged a
physician as consultant to audit costs and advise
on services.
The retail clerks also negotiated with The Cleve­
land Clinic to provide annual health checkups for
union members. The Clinic proposed extensive tests
for all members, including the lower age groups.
After some discussion, the project was set aside.
Other unions carried on negotiations with The
Cleveland Clinic. However, despite patience and
goodwill on both sides, discussants arrived at no
satisfactory arrangements.
In 1960, the GHAA met in Columbus, Ohio.
Several of the union leaders most interested in
health care attended the convention, and their
interest in a comprehensive, direct-service, pre­
paid medical care program was renewed. They
sought opportunities to discuss it.
These pursuits, neither continuous nor inte­
grated, produced no new organization of health
care in the community. The diagnostic center long
maintained in Cleveland by the International
Ladies’ Garment. Workers Union for its own
members offered no base for new development. The
group covered was relatively small, and the center
played no part in extension of services, although
at one time the retail clerks proposed to share the
diagnostic services.
Yet interest, in developing more effective pre­
paid health-care services persisted, and at numer­
ous meetings a wide range of possibilities was
discussed:
Is an overall program for all unions in the area
desirable ?
Are single unions prepared to give up their
present arrangements if something more com­
prehensive is offered?
Should doctors be employed, or should they be
retained on a fee-for-servicebasis?
How should controls be maintained?
What is the best way to obtain hospital services?
Some of the key union leaders were convinced
that, without continued cooperation among the
unions directed toward formulating a sound pro­
gram, each union would go its individual way:
One might, purchase a hospital; another might
develop outpatient ambulatory services; a third,
a diagnostic clinic, etc. In the hope of uniting
efforts and focusing upon a feasible goal that
would be an advance toward health care, Cleve­
land unions planned their Sixth Annual Workers’
Education Conference in March 1961 around the
topic “The Health Business. Direction, Please/’
Planners of the conference included the Cleve­
land labor movement’s veteran proponents of or­
ganized health care. The program committee
divided the topic into three areas: What do we
have? What do wc want? How do we get it? Sev­
eral national authorities in the health field ad­
dressed the conference on these subjects, after
which participants discussed various aspects in
small workshop sessions. The program widely
publicized in advance and supported by contribut­
ing unions, drew a record attendance of nearly 400
members of the AFL-CIO and railroad unions
who cosponsored the meeting.
 The objectives of the undertaking seem to have
been well realized, for the general effect was a
heightening of concern for new methods of financ­
ing and providing health care. A major deficiency
remained, however: No specific direction had been
laid out that could lead to a unified effort.
Union Eye Care Center Takes a
Decisive Step
Several directors of the Union Eye Center, with
the goal of a prepaid, group-practice, comprehen­
sive, direct service health plan as suggested in their
charter, were among those most, anxious to find a
course of action. A few weeks after the conference,
they determined upon a further step. The GHAA
was scheduled to meet in Portland, Oreg., in May
1961. The west coast was the home of several flour­
ishing health plans of the type favored by this
group. The board of the center decided to send
seven delegates to the GHAA meeting, and to
visit the Group Health Cooperative of Puget
Sound and the Kaiser Foundation Health Plan in
Portland. Delegates were to study the plans in op­
eration and make a recommendation on means of
initiating some such program in Cleveland. The
delegates’ expenses for the study were covered by
the charter adopted 4 years earlier.
The Union Eye Care Center delegates were im­
pressed by what they heard in the GHAA sessions
and by what they observed in Seattle and Portland.
They also spent much time in discussing such pro­
grams with experts who attended the health
meeting.
The Cleveland delegation returned with firm
recommendations to the parent organization. They
suggested that professional consultants be retained
to investigate the feasibility of a prepaid health
program in Cleveland. They also urged that
GHAA’s assistance be obtained in applying for a
U.S. Public Health Service (PHS) survey of
medical care in Cleveland that would make current
background information available to the con­
sultants.
The recommendations were accepted by the
trustees of the Union Eye Care Center, who
promptly voted $25,000 to get the project under­
way. Two members of the board were requested
to assume primary responsibility for the project.
Summary and Comment
Two years of keen, but sporadic, interest in or­
ganizing a new approach to medical care for union
members followed passage of the enabling legis­
lation in 1959. The impact of a well-planned and
strongly focused educational conference propelled
the Union Eye Care Centers board of trustees into
action which led to the retention of professional
consultants to supply essential information and
counsel.
The common interests cultivated by several
shared efforts to plan some new form of health care
had built up a readiness for unity in this under­
taking. Union leaders agreed to wait for the find­
ings of the PHS survey and the recommendations
of the consultants before pressing for development
of any other plans.
 Original from
Digitized by
UNIVERSITY OF MICHIGAN
 Chapter III
ASSESSING THE POTENTIAL
The first recommendation of the Union Eye Caro
Center trustees who had attended the GHAA
meeting in May 1961, for a broad study of medical
and health-related resources in the Cleveland area,
was promptly acted upon. GHAA’s aid was sought
in obtaining, for this purpose, a team from PHS—
which had current end continuing interest
in group-practicc development. The Cleveland
group’s request was forwarded to the Surgeon Gen­
eral, who assigned a survey team of three who ar­
rived in Cleveland in June 1961.
A second recommendation of the trustees who
had attended the GHAA faceting also was imple­
mented by the appointment of the following three
consultants: Dr. E. Richard Weinerman, Mr.
Glenn Wilson, and Mr. Avram Yedidia. In June
1961, they met in Cleveland with the PHS survey
team and outlined three major areas of interest:
The number and location of hospitals, physicians,
and health agencies in the Greater Cleveland area;
costs of health services presently available to union
groups, and methods of financing these costs; and
location (by postal zone) of potential subscribers
to a medical care program of organized services.
Meetings were arranged for the consultants with
union leaders interested in the projected health
plan. The presence of the consultants and the
activities of the PHS team created some stir in the
medical community. Uncertainty as to the intent
and dimension of what seemed, perhaps, a sudden
labor-sponsored project aroused a certain anxiety
and coolness among the established providers of
medical services. One of the first acts of the con­
sultants was a move to allay such feeling.
A letter from the union leaders was addressed to
executives of Northeastern Ohio Blue Cross, the
Cleveland Hospital Council, the Cleveland Acad­
emy of Medicine, and the Cleveland Welfare
Federation. The letter recalled the Union Eye
295^902 O—88------ 2
Care Centers continuing interest in various
aspects of medical care for members of the 187
unions affiliated with the center. It explained that
an interest in improving the medical care provided
to families of union workers had led the trustees
to retain consultants to explore the feasibility of
setting up a limited demonstration project. The
proposed program would provide prepaid group­
practice, comprehensive, direct-service health care
for approximately 8,000 union families residing
in an area to be selected.
The letter went on to say that before any de­
cision was made regarding the project, a team
from PHS would study the medical resources of
the area to determine their bearing on the pro­
posal. The cooperation of all recipients of the letter
was requested to facilitate this study.
Anxieties in the medical community were some­
what allayed once the limited-scope project was
defined in its proper context. Further purpose was
served as well: Expectations of the labor people,
whose sights were still fixed upon a goal of city­
wide medical service for all union members
(nearly a quarter of a million in this highly union­
ized city), were reduced to a circumscribed and
feasible objective.
Highlights of the Public Health
Service Survey
By mid-August of 1961, the PHS team had col­
lected extensive information along the lines sug­
gested, and had prepared a preliminary report.. A
review of the survey’s highlights will indicate the
usefulness of such a study.
The PHS team began by outlining briefly the
type of health plan proposed and the interest in
medical care expressed by many labor organiza­
tions of the community. In enumerating the
health facilities available in the area, they used
a survey of hospital care in Cuyahoga County
9
 (including the Greater Cleveland area) made by
a Citizens1 Hospital Study Committee of North­
east Ohio in 1956-57, from which 13 interpretive
reports had been issued, presenting the data with
illustrative tables. These reports provided hospital
information of direct interest to planners of any
new medical care program : Age and medical classi­
fication of hospital patients per 1,000 population;
patients and days of cure in 5-year age groups
from 1 to 80 years; length of stay in hospitals
according to the type of medical treatment—such
as surgical, nonsurgical, obstetrical, orthopedic.
Since the proposed program would relate to an
insured population, many of whom were presently
covered by Blue Cross, the PHS team included in
its report detailed data on hospital utilization by
Blue Cross patients in the 28 Cleveland hospitals.
Hospital occupancy was shown to be high—
about 90 percent in the hospital being considered
for patients in the new medical program. These
patients would not be new cases, however, since
most, prospective enrollees in the new plan were
persons already eligible for hospitalization under
existing insurance plans.
The area of the greatest concentration of hos­
pitals and other medical resources was found to
be the district in the vicinity of University Circle.
Study of the residence of union members showed
the greatest concentration in adjoining postal
zones.
Health Personnel in the Community
The PHS survey team reported that there were,
in 1960, nearly 3,000 physicians in Cuyahoga
County, a rate of 181.6 per 100,000 population.
They compared this to the national average of
125.3 per 100,000 people. The number of certified
specialists was reported to be 953, a rate of 57.8
per 100,000.
Tables in the report showed the number of certi­
fied specialists in Cuyahoga County according to
specialty and location, and the number of phy­
sicians in each of the 46 districts of the county.
The report included informtion on regulations
governing State licensure, and showed that 855
licenses had been issued to physicians in Cuyahoga
County during the preceding year, either upon
examination or on a basis of reciprocity and
endorsement.
Information from the Ohio State Board of
Nursing Education and Nurse Registration was
quoted to indicate the standards governing the
registration of professional and practical nurses,
by examination or by endorsement. A table show­
ing average weekly earnings of nurses and selected
hospital employees in Cleveland was quoted from
U.S. Bureau of Labor Statistics figures for 1960.
Cleveland an Area of High Medical Costs
The study of medical care costs showed that,
according to Howard Whipple Green (Sheet~a-
Week for Sept. 1,1960, vol. XXVIH, No. 1), the
Consumer Price Index for medical care in Cleve­
land in May I960 was 173. This was compared with
the Consumer Price Index of 156.2 in 1960 for the
country as a whole, according to the U.S. Depart­
ment of Health, Education, and Welfare (1961
Trends. GPO, 1961, p. 61). The Cleveland figure
had risen from 113.1 in 1951. No other item in the
Consumers Price Index had increased so rapidly in
the area.
The same trend existed in other parts of the
United States. Personal consumption expenditures
for medical care in the country as a whole in 1960
amounted to nearly $20 billion. The percentage of
these expenditures represented by drugs, hospitali­
zation, and health insurance topped all previous
figures; expenditures for the category “all other
items” declined somewhat
In the annual budget, of $6,199 set by the U.S.
Department of Labor as sufficient to maintain a
modest but adequate level of living in 1959, the
average family of four persons was allotted $349
a year for medical care, about 6 percent of the total
budget. The higher index of medical expenditure
in Cleveland was estimated to point, to a figure in
the neighborhood of $400 per family in 1961.
Since a major item of medical care costs is hos­
pitalization, the expenses basic to hospital charges
were analyzed carefully. A table of expenses per
patient day in 29 short-term hospitals in Cuyahoga
County varied from an average of $13.05 at the
Salvation Army Hospital to $45 at the university
hospitals. Another table giving the age of each in­
stitution, the type of control and service, and num­
ber of beds and occupancy rate, indicated that oc­
cupancy varied from 52.6 percent to 100 percent in
Cleveland, with nine hospitals having a 90-pereent
occupancy during 1959-60.
Despite considerable variation in hospital
charges, the survey identified a number of trends
consistent in all hospitals:
—toward “semi-inclusive” rates, combining
charges for room, board, and general nursing
 with certfl in special services now considered
almost, routine, and which several hospitals
estimated to account for 30 percent of the
charge. (The inclusive rate is usually fixed
for a set number of days, after which it
decreases.)
—toward inclusive maternity rates, adding de­
livery room, anesthesia, and other charges to
the expense of standard care, (A marked in­
crease usually is charged when the infant re­
mains in the hospital after the mother is
discharged.)
—continuance of the requirement for some pay­
ment in advance upon admission.
—toward discounts for payment in full upon
departure.
—toward charges for filling out duplicate in­
surance forms, and for blood transfusions (up
to $50 a pint) for which the patient is re
sensible if blood is not replaced by donors.
The foregoing knowledge would aid the con­
sultants in their selection of existing hospitals for
use by members of the medical care program. It
was thought possible that restriction of use to a
minimum number of hospitals would serve a dou­
ble purpose: Admission procedures would be
smoothed and quickened with the familiarity of
constant usage, and physicians’ time would be
saved and group practice facilitated.
Schedules of surgeons’ and physicians’ fees un­
der certain insurance programs were reported as
guides to the relative costs of common medical
services to any member of the community. A table
of average costs for specified medical care in the 7
years 1954 through 1960 showed a progressive
increase in the costs of medical and dental services
as well as in hospital rates.
Methods of Financing Medical Care
The average 1960 medical care expenditure in
Cleveland was estimated by the survey team at
A123 per person, or $381 for the family unit. Of
that expenditure, $63 per person—$196 per fam­
ily—went to doctors and hospitals, and another
$10 per person for the administrative costs of
health insurance. Expenses for medical and hos­
pital services came to $11 million for union mem­
bers participating in the Union Eye Care Center.
For a group of 20,000—the number suggested for
the demonstration project—the expense of the
same two items was estimated at over $1 million.
An increase in medical costs of 6 percent per
year was anticipated by the PHS survey team,
whose report states:
In 1961 it is estimated that each person in Cuyahoga
County will spend at least $130, each family at least
$403, interested union membership at least $23 million,
and the demonstration group about $2.6 million for
medical care. Of the estimated medical care expenditures
of the demonstration group in 1961, 51.5 percent, or
$1,339,000 will be spent for doctors and hospitals. For
20,000 persons, an additional $1 million or more will be
divided among drugs (20 percent), dentists (10 percent),
ophthalmic and orthopedic appliances (6 percent), and
other professional services (nurses, chiropractors, etc., 5
percent). The operating costs of insurance purchased adds
another 8 percent.
The extent to which all workers in Cleveland
were covered by health insurance was measured
by a survey of the city's health insurance and pen­
sion plans by the U.S. Bureau of Labor Statistics.
It showed that in September I960 about 78 percent
of officeworkers and 82 percent of industrial plant
employees had some hospital insurance, 80 per­
cent of both groups had some surgical insurance,
and 50 percent of both had some insurance for
physicians’ nonsurgical services, most of this
limited to care in the hospital. Only 38 percent of
officeworkers and 15 percent of plantworkers had
catastrophic or major medical care coverage.
All unions reporting their health insurance
coverage to the survey team in 1961 were buying
hospitalization insurance, and nearly all, surgical
insurance. Most had some coverage for physicians’
services in the hospital. There w as very little cover­
age for medical costs outside the hospital except
for emergencies and accidents involving use of a
hospital’s outpatient clinics. Obstetrical care
usually was covered, but allowance was limited in
most contracts.
A great variation in the premiums and benefits
was reported. Employers’ contributions varied
from 100 percent to less than 50 percent; depend­
ents usually were covered. Blue Cross was the most
frequent carrier for hospitalization, and Medical
Mutual of Cleveland for surgical benefits. The sur­
vey presented details of specific benefits in various
groups and of the participation of various large
employers. It was concluded that existing coverage
of hospital costs "is adequate,” This was based on
the fact that a large proportion of the interested
unions had Blue Cross coverage which paid in full
all hospital expenses. Other unions with hospital
insurance coverage by commercial companies in­
dicated that 90 percent of the hospital expenses
were covered by insurance.
Of the projected per capita expenditure of $33
for physicians' services in 1961, only one-third
would be covered by insurance according to the
estimate of the survey.
From the foregoing figures the PHS surveyors
drew the conclusion that:
The existing level of medical care expenditures in Cuya­
hoga County, in terms of at least one plan tn operation, if
channeled Into a prepaid direct-service medical care pro­
gram should provide a wide rang? of services both in and
out of the hospital.
Who Are the Potential Members?
The affiliated membership (about 183,000) of the
Union Eye Care Center was assumed to be the
group most interested in the proposed demonstra­
tion health program.
Data on the place of residence of some 85,000
union members was collected and their distribution
was plotted on a map according to postal zones.
The greatest density of union member residence
appeared in the central core of the urban area,
although the researchers reported a diffused pat­
tern of union homes fairly well distributed
throughout the county.
The concentrated downtown area, as mentioned
before, lay in proximity to University Circle,1*4with
some 40,000 union families living within 15 min­
utes’ public transportation.
The size of the average family in the commu­
nity was found to be 3.1 members. Balancing this
figure with the 2.9-member family established for
the steelworkers in another study, the consultants
later based their estimates on an average family
of three.
Since widely different amounts and types of
health care are needed at different stages of an in­
dividual’s life, a knowledge of the family charac­
teristics of eligible groups was thought, relevant to
preliminary planning. The PHS survey team sug­
gested the value of a household survey, inter­
viewing a representative sample of families to
detennine the age and sex of members, their atti­
1 "Univfr*!tj- Circle is the cultural, educational and medical
center of the Cleveland metropolitan arc*. Comprlaliu; 20
InetltutloitH • • * the city's largest higher educational com­
plex, itn muxi-nntH «if art and natural history, several of 11k major
hospital* • * • symphony orchestra* • * • Institutes of art
and music and • • • churches(,) the circle covers 488 acres of
parks, buildings, streets, parking space and playgrounds about
4 mill's; from downtown Cleveland." Unfvenity Circle Develop-
uiciu /oinutotltN.* The Ftrtf Five Yftara. (Report for 1957-62.)
tude toward group-practice medicine, and their
present utilization of medical and hospital care.
From the “Directory of Services for the Chroni­
cally Ill in Greater Cleveland” (a document pub­
lished by the Cleveland Academy of Medicine and
the Committee of Special Health Organization, a
component of the Welfare Federation of Cleve­
land), the survey team took a wealth of up-to-date
material on available care for patients with chronic
diseases, in general and specialized hospitals, con­
valescent and nursing homes, public health de­
partment facilities, and patients’ homes. This
document also provided information on rehabili­
tative and educational services, social casework,
and services for chronically ill children, veterans,
and older persons.
The PHS survey team recommended that
planning for a prepaid medical care program
should be related to these health resources in the
community, and suggested consultation with some
of the agencies’ staff in the planning stages, to in­
sure a widely disseminated understanding of the
nature and objectives of the new program which
could be invaluable in the years ahead.
Other factors on which the survey team assem­
bled data were:
1. The general demography of the Cleveland
metropolitan area;
2. The relationship of industrial, shopping, and
residential areas;
3. Employment and income levels in the com­
munity ; and
4 Population shifts and changing racial
composition.
Illustrating this material were several tables
composed of census tract data analyzed to show
areas of concentration of population by age, sex,
race, family size, housing conditions, and home
ownership; data on current employment levels and
earnings of production workers; and data relating
to the steady influx of Negroes from Southern
States.
The conclusion drawn from the economic facts
was that diversification created a reasonably stable
economic community in Cleveland, with a tendency
for various groups in the working population to
encounter economic difficulties at different times,
while average conditions for the community re­
mained relatively stable at a high level.
The information briefly summarized in the pre­
ceding pages was in the hands of the consultants
and other planners for study within approxi­
mately 2 months of the PHS survey team’s arrival
in Cleveland.
Consultants Take Their Own Soundings
While the PHS survey was in progress, the con­
sultants made a number of observations in the
community. Their interviews of union and other
community leaders convinced them that many in­
dividuals were strongly committed to the develop­
ment of an organized medical care plan.
Among these committed leaders were people able
to accomplish three important things for the
program:
1. Obtain significant community support.;
2. Bring into the program a substantial enroll­
ment from union memberships already in­
clined to this type of program; and
3. Deliver the necessary financial backing.
Meetings were held with rank-and-file union
members as well as with their officers. The perva­
sive concern related to the cost of medical care, a
major portion of which usually was not covered by
‘insurance. As the discussions proceeded, many
comments also indicated an insecurity and anxiety
associated with the experience of illness. Explana­
tions of how a comprehensive medical care pro­
gram could be organized to meet the medical needs
of a family stirred a high degree of interest.
Of particular interest to the consultants was the
attitude of the medical community toward organ­
ized care. They interviewed a number of physi­
cians, hospital administrators, executives of the
Cleveland Clinic, and faculty members of Western
Reserve University School of Medicine. Many of
these professional people indicated a sympathetic
view toward new developments in the organization
and financing of medical care.
In September, when the report of the PHS sur­
vey had been in their hands for a month, the con­
sultants met with union officials to make their
recommendations. They acknowledged the value
of the compiled material which made “possible
various projections and estimations which could
never have been approached without this work,”
and related it to the prospects for the proposed
pilot program. The director of the PHS study
team attended the meeting and presented the high­
lights of the survey.
The recommendation of the consultants was
that the demonstration project be undertaken inas­
much as there were ample circumstances favoring
its success.
It was recommended that a building to house the
medical care services be sought in the university
area, since most union members lived close by and
since the proximity of important medical resources
made the area particularly suitable for the pro­
posed medical center. The residential area served
by a center in this location would include not only
a large proportion of union groups, but also a cross
section of the community, including university
faculty, members of the symphony orchestra, and
teachers.
The character of the project was outlined as a
prepaid, direct-service health program of compre­
hensive scope, to be offered to a membership of
20,000 to 25,000 persons. Maximum use would be
made of existing hospitals and other medical re­
sources in the community.
The consultants were asked to continue with the
project by acting as the planning staff, and they
agreed to do so.
Summary and Comment
It was the opinion of all the professional people
associated with this introductory phase of the pro­
gram that sound planning can be based only on
wide knowledge of a community’s medical re­
sources. This information was provided in this
instance by the PHS survey team, which per­
formed a difficult task with great skill.
Notwithstanding the size of membership repre­
sented by interested unions, and the magnitude of
their health needs, it would have been unwise and
impracticable to attempt a large-scale project at
the outset. It was decided that a modest program
introducing the new concept would require all the
effort likely to be mobilized.
The proposed project in Cleveland fell short of
the size envisioned by some of the union leadership.
Nonetheless, it received full support. As the con­
tents of the program unfolded, enthusiasm and
commitment to the project increased.
Digitized by Google Original from
UNIVERSITY OF MICHIGAN
 Chapter IV
ELEMENTS OF PLANNING
A COMPREHENSIVE PROGRAM
Early in the project (September 1961), the con­
sultants undertook to outline the essential require-
-ments for developing a health program in Cleve­
land. They agreed that a well-integrated system
of health care must combine, in a balanced struc­
ture, these basic components:
1. A group of consumers (large enough to sup­
port a full-time staff representing family
medicine and the major medical specialties)
who desire prepaid comprehensive medical
care;
2. A qualified medical staff suited to this type of
practice;
3. A program of services that meets the needs of
the consumer and that is within the capacities
of the providers;
4. A building in which to provide the services;
5. Administrative and paramedical personnel
as required;
6. Capital financing to initiate the program; and
7. Adequate financing for the operation of the
program once it has been launched.
The consultants were aware that the character
of each of these elements would be, to some degree,
dependent upon the others. The order of their de­
velopment, therefore, would have an important
bearing upon the nature of each, and upon the
enterprise as a whole. They understood that much
about any one element would be predetermined by
the decisions taken regarding its antecedents. To
insure a priority that would protect the program’s
central purpose, a certain chronology of action
was essential.
The starting point of the projected health care
program was with the people it was designed to
serve. Their medical care needs initiated the proj­
ect and continued to be the dominant influence
in the planning. The prospective membership lay
among the unions comprising the Union Eye Care
Center and certain of their leaders who were com­
mitted to the development of a comprehensive
health program.
The consultants were acutely aware that their
function would be to act as the agents of the union
leadership. They would provide technical assist­
ance in planning a project that was not their own,
but a program that had been conceived by the in­
terested union leaders to serve the people they
represented. Consistent with this function, all
policy decisions were to be made by the leaders
of the interested unions after full discussion of
alternatives based on agenda prepared by the
consultants.
The consultants estimated that from 2 to 3 years
would be required for planning and implementa­
tion of a health program in Cleveland—even if no
major setbacks were to occur. During this period,
it was agreed that the consultants would maintain
continuous communication with the prospective
members in order to: (1) Develop the consultants’
understanding of the needs to be met, (2) inform
the prospective members of the measures being
planned to fulfill these, and (3) to assure that the
members maintained a continuity of identification
with the developing program.
Later events justified this approach. When the
time came to begin enrolling members, the favor­
able response was largely attributable to the edu­
cational base that had been laid, and to the loyalty
of prospective members who had helped shape the
program by their suggestions.
Concurrent with the attention to prospective
consumers, the consultants devoted much time to
the development of relations with the prospective
providers of service—the physicians, hospital ad­
ministrators, and various health agencies of the
community. It was to prove important to the suc­
cess of the project that emphasis was given to the
recruitment of physicians with professional roots
in the community and well established hospital
privileges.
Sufficient data were now available to form the
basis for the development of the concept of the
kind of facility that would be required to house
the prospective program. The PHS study had in­
dicated that the hospital bed capacity in Cleveland
was adequate; the new project would not increase
the demand for hospital beds. On the contrary, it
might be possible to reduce the hospitalization rate
among the population served. The new health
service program could, therefore, plan to continue
use of existing hospitals as needed, and to con­
centrate finances and energies on providing a cen­
ter for complete outpatient services.
The thinking that led to choosing this type of
facility followed these lines: Hospitals are costly
and administratively intricate enterprises. If a
community does not suffer from a shortage of hos­
pital beds, introduction of a new health program
such as that proposed does not create a new de­
mand. However, careful consideration must be
given to the possibility that physicians associated
with the new program might be barred from hos­
pitals previously available for their use. The union
leaders and consultants discussed this possibility
at length.
Such discrimination had been successfully over­
come in other areas of the country through court
action; legislation to correct similar abuses was
pending at the time in New York. Nevertheless,
the Cleveland program probably would not have
been undertaken had there not been a consensus
among the consultants that there was enough com­
munity and professional support to discourage the
development of such a crisis in Cleveland. Since
it appeared that a hospital would not have to be
built, the project could be economically feasible.
To meet the needs of the prospective member­
ship, the program envisioned had to include fam­
ily physicians and specialists. The patient depend­
ing upon this system for his medical care had to
have easy access to his own physician, to the spe­
cialist when necessary, and to various diagnostic
services which are an essential part of medicine.
The contemplated building would have to house
this range of services.
In the decisions regarding such a center, the
following chronology was thought to be most
desirable:
1. Designation of the most suitable area, with
reference to members' residence and to the
location of health facilities of the community
which it might be desirable to associate with
the program;
2. Diligent search within this area for a struc­
ture suitable for remodeling to the program’s
requirements; and
3. This search failing, location of a site within
the designated area on which to construct the
type of building decided upon.
In planning the location and design of the
health center, another major consideration before
the consultants was the financial resources of the
prospective membership group. What could they
afford to invest? A rate structure would have to
be devised which would finance the services agreed
upon and carry the capital debt necessary to under­
write the building expenditure—either new con­
struction or purchase and remodeling of a suitable
existing structure.
The timing of all activities necessary to provide
these components of a functioning program had to
be coordinated so that on a specific date the es­
sential elements previously listed would be ready.
Of vital importance also was a proper balance
among these various elements of the program. The
staff, medical and paramedical, had to be adequate
to meet the needs of the enrolled subscribers; the
building and equipment provided for these services
had to satisfy the needs for space, ease of move­
ment, efficiency of operation, and economic feasi­
bility ; and a sufficient subscriber potential had to
be tapped to assure a sound economic base to pro­
vide the right facility and to support the staff.
The consultants reviewed with the leaders of
the interested unions the planning requirements
as outlined up to this point The complexity of
implementing their proposed health program was
now evident to the trustees. They concluded that
the period of organization would demand the con­
tinuing attention of experienced planners.
They reasoned that the likelihood of obtaining
all the necessary skills in a single person was
slight. A person with medical background was
needed to assess the quality of the community’s
medical care resources, to integrate the services,
to develop a medical staff, and to assure a high
quality of medical care. Of equal importance was
a person with ability to establish an intimate asso­
ciation with consumer groups. Finally, there was
need for a third person with experience in the or­
ganization and financing of the kind of plan pro­
posed. Not all of these three persons would be
occupied full time in the planning and organiza­
tion of the new program.
In addition, it would be difficult to recruit per­
sons of this level of experience for a program that
was still in its incipiency; and, even if that were
possible, the cost would be burdensome. Since the
combined skills and experience of the three orig­
inal consultants fulfilled these requirements, and
each of them could devote brief periods to the proj­
ect as needed, the leaders of the interested unions
assigned to them the task of planning the program.
Summary and Comment
The design of a medical care program must be
built up through many simultaneous activities—
each of which requires skillful attention and
timing. Attaining a balance among the various
elements within the program is a delicate task;
however, it is essential to launching the project and
to providing a workable system for continuity and
future development.
It is not the kind of work that can be success­
fully achieved by volunteers, nor by inexperienced
individuals, no matter how intelligent or well in-
tentioned. Even among experienced leaders in the
health plan field, the many skills needed are not
likely to be found in one person.
If the problem is solved by retention of several
persons with experience in different fields, each
can be assigned to the work in the area of his train­
ing and experience. The consultants divided re­
sponsibilities in this manner and worked jointly
on all matters as well. They found that the com­
bination of disciplines and points of view provided
a wholesome basis for plannning.
Optimum conditions for composite planning
were thus provided: A variety of skills and
backgrounds, coupled with a working relation­
ship that called for full participation of all three
consultants.
Digitized by Google Original from
UNIVERSITY OF MICHIGAN
 Chapter V
EXTENT OF PHYSICIANS’ INTEREST
IN THE DEMONSTRATION PROJECT
One of the first undertakings of the consultants
was to discuss the proposed health care program
with physicians in the community whose possible
interest in such a project was indicated by the fact
that they had participated in one or more of the
following:
1. Support of the prepaid health plan bill dur­
ing the legislative campaign;
2. Proposal of a group-practice plan to labor
leaders immediately after the bill’s passage ;
and
3. Involvement in the medical care of union
members.
The consultants also sought to assess the inter­
est- of leading physicians in the institutions largely
responsible for the high local standard of medical
care: The Cleveland Clinic, and the Western Re­
serve University School of Medicine.
The directors of The Cleveland Clinic, in several
lengthy meetings with the consultants, discussed
the possibility of The Cleveland Clinic's partici­
pating in the proposed health plan. It soon became
apparent that the established character of that
clinic made such participation impracticable.
Three major differences appeared to be irrecon­
cilable:
1. A majority of The Cleveland Clinic’s patients
came to it by referral from physicians in in­
dividual practice, many from outside the city.
The policies and administrative practices of
The Cleveland Clinic were designed with such
referrals in view.
2. The Cleveland Clinic’s staff of specialists were
intent chiefly on the diagnosis and treatment
of single episodes of major illness. The pro­
posed health plan was to focus on compre­
hensive family care aimed at prevention of
disease as well as at diagnosis and treatment
of both minor and major illnesses.
3. The Cleveland Clinic’s pattern of financing
had long been established on a fee-for-servioe
basis. A fundamental principle of the pro
posed health plan was that funds collected
through prepayment were to be used for or­
ganizing and providing the broad health care
program to the members.
Although the discussions with the directors of
The Cleveland Clinic did not lead to cooperative
action, they did provide the consultants with a
valuable index of the interest that existed among
an influential segment of the medical community.
The Clinic’s directors had thoughtfully explored
avenues of cooperation, and had indicated an open
mind toward the ideas proposed. The project con­
sultants took note of The Cleveland Clinic as an
important resource for certain types of superspe­
cialty services, such as cardiac surgery and neuro­
surgery, provided continuity of personal care could
be assured for health plan patients.
At the Western Reserve University School of
Medicine, a few introductory talks brought to­
gether a group of interested faculty members. The
consultants proposed that these faculty members
explore with them methods by which the demon­
stration project might obtain from the medical
school informal assistance in professional plan­
ning and in recruitment of a competent medical
staff. In suggesting this informal relationship, they
emphasized their concern for a high quality of
medical care in the projected health program. The
faculty members responded favorably, and further
meetings were held.
Early in these discussions, interests common to
the medical school faculty and the consultants be­
came apparent, although the ultimate purposes
and therefore the approaches of the two groups
differed.
From the point of view of the medical school's
faculty, the projected health plan held potential
advantages for the education of young physicians.
In the faculty's thinking, the traditional concern
of the medical school took priority; as medical
educators, they were alert to means of providing
the medical student, intern, and resident physician
with patient material that might further their pro­
fessional development. These faculty members be­
lieved that comprehensive medical care is gaining
acceptance in the United States, and felt an obliga­
tion to offer their students training in this field.
From their standpoint, the projected program
of health promotion, disease prevention, diagnosis,
treatment, and rehabilitation might be looked
upon as a continuous and inseparable pattern meet­
ing the ideal definition of comprehensive medical
care. Further, affiliation with a comprehensive
medical care program could provide their medical
students with an opportunity for instruction and
experience in certain methods of organizing such
care. If these goals could be realized, the Western
Reserve University School of Medicine would be­
come the first, medical school in the United States
to extend medical education into the philosophy
and practice of comprehensive health care.
As discussions progressed, other faculty mem­
bers responded to the invitation of their fellow
physicians to participate in them. The doctors
soon suggested that training of medical students
might be facilitated if the medical school's faculty
were to have a direct part in planning and con­
ducting the health plan program. They now
proposed exploring the possibility of formal
affiliation between the medical school and the
projected program.
From the point of view of the consultants, for­
mal affiliation with the medical school was one of
several methods that, had potential for fulfilling
all the pertinent needs of the population for whom
they were seeking to provide comprehensive care.
The consultants considered these needs to be as
follows:
1. Accessibility of a full scope of health services;
2. Continuity of care and coordination of
complex medical resources;
3. High quality of services, with assurance that
this quality would be maintained;
4. Removal of economic barriers to needed care;
5. Efficiency and economy of organization; and
6. A democratic structure of policymaking
processes.
At this early point in the discussions, the con­
sultants foresaw that formal affiliation with the
medical school could be expected to establish and
maintain a first-rate professional staff and to facili­
tate hospital care, since physicians in the program
would have faculty appointments and staff
privileges at the University Hospitals. The plan­
ners also envisioned in such an arrangement an op-
portunity to educate the members of the commu­
nity as a whole with respect to health maintenance
and new patterns of organizations for the provi­
sion of health services. It also would point up the
consumer’s responsibility in the development of an
integrated medical care program of high quality,
as well as demonstrate the values in joint com­
munity effort rather than in separate and competi­
tive efforts by various consumer organizations.
The consultants believed that the health care
program could give the medical school a unique op­
portunity to fulfill its need to demonstrate chang­
ing methods of practice; to accelerate the
application of scientific knowledge to patient care;
to provide training in home care, the treatment of
the chronically sick, and management of minor
and functional illnesses; and to build a resource
for special training of medical students interested
in careers in comprehensive health care. In sum­
marizing the interests common to the medical
school and the consultants which had been touched
on in these early discussions, the physician member
of the consultant team wrote:
From the point of view of the consumers’ interest in
this project, a dose relationship with the medical school
could do much to assure the desired levels of professional
quality In selection of staff, provision of hospital care,
maintenance of proper standards of medical practice, etc.
Reciprocally, it Is our belief that association with such
u prepaid group health center could provide significant
advantages to the school. A firm and growing source of
teaching clinical cases would become available—with full
compensation of physicians' time—representing a cross
section of occupational and social groupings within the
self-supporting Cleveland conununity. As the university
increases its Interest in the teaching of social aspects of
medicine and seeks improved resources for the demonstra­
tion of the “natural" environment of disease and its treat­
ment, the availability of a medical center providing
continuous health service to its prepaid families could
offer an ideal training facility. Finally, the condition.? for
new forms of research, particularly in the social epidemi­
ology of chronic and “functional’’ disease, could represent
a unique opportunity.
 Additional avenues for cooperation suggested by
tho consultants included the selection of physicians
for t'he demonstration program; integration of
home, office, and hospital services; development of
disease prevention services and health education
for the insured population; and study of methods
of teaching and research in the group health
program setting.
Characteristics of the Medical Care Plan
With the strong motivation of these common in­
terests, the interested faculty members and the
consultants held a series of meetings in the fall of
1961. During the interim preceding these meetings,
the dean of the medical school had requested that
the project be studied by the executive committee
of the University Hopsitals’ medical staff. The par­
ticipants in the series of meetings held during the
fall of 1961 were the members of this committee, a
representative of the University Hospitals, repre­
sentatives of the projected program, and their con­
sultants. Together, the participants proceeded to
delineate a system of medical care that would be
characterized by the following elements:
1. Joint cooperation of union, management,
and other community groups;
2. Limitation of membership in the demonstra­
tion project to approximately 8,000 families;
3. Emphasis on health maintenance and quality
of care;
4. Direct health service (rather than cash
indemnity) and comprehensive benefits
(rather than insurance for catastrophic
illness);
5. Membership composed of families rather
than of individual workers;
6. Medical group practice;
7. Assumption by the medical group of con­
tinuing responsibility for protection of
members’ health;
8. Assumption by each family’s personal phy­
sician within the group (or by the child’s
pediatrician) of responsibility for continu­
ity of his patients’ care, with referral to
specialists as required;
9. Coordination of all health resources needed
by the family;
10. Representation of consumers’ interests in the
determination of policy;
11. Maintenance by the medical group of auton­
omy in all professional matters; and
12. Economy and efficiency of administration.
Exploration led to general agreement on the fol­
lowing broad concepts:
It would be necessary to build an outpatient
health center especially designed for family care
by a medical group. Decor and design must con­
note dignity and privacy, and must permit a rea­
sonable degree of efficiency and economy. The
center should be in the University Circle district,
which had been found to be central to the popula­
tion that would be primarily served, and to the
medical school and University Hospitals.
For inpatient care, it was proposed that existing
community hospitals, primarily those of the uni­
versity, be used provided cooperative arrange­
ments could be agreed upon. Such arrangements
must include granting of hospital staff privileges
to all doctors of the medical group, and direct pay­
ment to the hospitals, by the health plan, for serv­
ices received.
Medical school faculty physicians, if called upon
for specialty consultation or services, would be
fully compensated for their time from health plan
funds. They, as well as members of the medical
group, would be readily accessible for consultation
and treatment, yet continuity of care would be
maintained because the health plan member’s per­
sonal physician within the medical group would
continue to be responsible for all phases of his
patient’s treatment.
The health plan membership was expected to
comprise a broad cross section of the community,
and to represent a wide range of occupational and
social groups. Families would be likely to continue
their relationship with the medical group over
long periods and through various phases of illness
and health care. The records of continuous care of
such a socioeconomic segment would constitute a
major resource for research. Interest in the avail­
ability of such a resource was shared by all con­
ferees. With a few exceptions, prepayment would
remove the economic barriers to medical care.
Within such a framework, it was hoped that
care of the Echoic man" might be stressed to medi­
cal students, countering the contemporary ten­
dency to fragmentation into ever-narrowing fields
of specialization. It was believed that medical
school courses in the philosophy and techniques
of comprehensive care could be enhanced by con­
current experience in an environment designed to
facilitate a coordinated approach,
Solutions Through Experience
Intensive exploration was made of the organiza­
tional and technical problems involved in affiliat­
ing a consumer-sponsored, prepaid, group med­
ical practice with a leading medical school. The
working papers appeared to offer reasonable solu­
tions to all but a few questions. These questions
proved not to lie subject to resolution by discus­
sion, and it was felt that their solutions would
have to be worked out through practical expe­
rience. They involved:
1. The possibility that continuity of care by the
health plan member's personal physician
within the medical group would be lost when
the resident physician at the University Hos­
pital assumed responsibility for inpatient
care. Although this problem was felt not to
be insurmountable, it was recognized that a
potential existed for conflict between the
medical school’s obligation to provide medical
training by giving the resident physician re­
sponsibility for inpatient care, and the health
plan’s obligation to provide its consumers
with personal service through continuity of
care.
2. The almost inevitable increase in the cost of
medical care that occurs when the physicians
rendering that care are deeply involved in
the education of young doctors, and must
therefore spend appreciable blocks of time
away from patients. Until experience could
be gained in a functioning program, it was
agreed that no precise solution to this ques­
tion could be determined.
3. The question of what impact the medical
school's graduate students, interns, and resi­
dent physicians might make on patients who
were self-supporting members of a prepaid
health plan and critical of the atmosphere of
a charity clinic. This also, after considera­
tion, was left to demonstration in practice.
Principles of Medical Practice
It was recognized that the concept of medical
practice inherent in the proposed program rep­
resented a departure from the traditional legal
responsibility of the physician which pertains only
to the patient who presents himself for care. Under
the proposed plan, physicians and ancillary per­
sonnel would have to anticipate health needs of the
subscriber population and would be obligated to
organize services to meet those needs.
Thus, the executive committee of the University
Hospitals' medical staff and the consultants—per­
sons qualified in the medical field—laid down prin­
ciples that they considered conducive to a high
level of medical practice under a group-practice
concept.
They next sought to formulate practical means
whereby these principles could be implemented.
Agenda for the ensuing meetings directed discus­
sions into every working phase of the undertaking:
Legal structure, character and enrollment of mem­
bership, financing, services to be offered, selection
and organization of medical staff, arrangements
for hospital care, and requirements for ancillary
staff. Agreement was reached with respect to the
practical purposes, characteristics, and scope of the
project.
Organizational Structure
The consultants now addressed themselves to
designing an overall organizational structure
through which the formulated purposes might be
achieved. Many methods were suggested through
which cooperation between the participating
bodies might be assured. At this time the members
of the medical school faculty were inclined to for­
mal affiliation or none.
To provide for the execution of the joint project,
it was proposed that a new, independent legal en­
tity, tentatively named The Cleveland Health Cen­
ter, be incorporated as a nonprofit health service
organization to represent University, consumer,
and community interests in the projected program,
and to assume contractual responsibility for or­
ganizing and coordinating the health services
agreed upon. At about this time, the union leaders
interested in organizing the new health service
program were in the process of forming a new
corporation whose sole purpose was to develop
such a plan.
The initial name of the corporation was the
“Cleveland Health Foundationsubsequently this
was changed to “Community Health Foundation”
(hereafter referred to as CHF). The responsibili­
ties and interrelationships between these three co­
operating bodies (the medical school, CHF, and
the Cleveland Health Center) were conceived as
follows:
1. The Cleveland Health Center would:
(«) Occupy a facility to be provided by
CHF; (K) have a board of directors consist­
ing of nine persons: three to be nominated by
 the medical school, three by CHF, and three
to be elected by the first six to represent the
community at large; physicians active in the
car® of patients would not be eligible for ap­
pointment to the board of directors; (c) em­
ploy a medical group that would provide a
comprehensive program of medical care to the
subscriber population of the health plan, to
be carried out in the Center, in the members’
homes, and in the hospital as necessary; (d)in
consultation with the medical group, employ
ancillary staff, and provide technical and ad­
ministrative equipment and supplies; (s) ar­
range with the university medical school and
University Hospitals for medical and related
services that would not be provided at the
Center; and (/) appoint a qualified adminis­
trator, with a record of demonstrated ability
to work cooperatively with physicians, to be
responsible for overall management of the
program, including organization of nursing,
technical, clerical, and maintenance services;
the administrator would have a voice, but no
vote, on the board of directors.
2. The Community Health Foundation would:
(a) Educate members of labor and other
groups in the community with regard to the
demonstration program, enroll members and
collect dues for the health plan, and designate
a health service area in the community (per­
sons residing within the health service area,
who were also members of participating or­
ganizations, would be eligible to enroll in the
health plan); (-) contract with the Cleve­
land Health Center for the provision of medi­
cal services to the membership; (c) provide
the health service facility to be occupied by
the Cleveland Health Center, the facility to
be for the exclusive use of the health service
program, designed in consultation with the
Western Reserve University School of Medi­
cine and University Hospitals, and located at
a site convenient to the medical school and
hospitals, and to the health service area; (tf)
participate in efforts to evaluate the experi­
ence of the demonstration program; and (e)
retain the right to explore other means of pro­
viding health services to other interested
community groups in the Greater Cleveland
area. (No obligations with respect to such
other programs would be assumed by the
Cleveland Health Center, the Western Re­
serve University School of Medicine, or Uni­
versity Hospitals.)
3. Western Reserve University School of Medi­
cine would i
(a) Recommend and nominate qualified
physicians for appointment to the staff of)
CHF; (K) provide, under conditions accept­
able to itself, the Cleveland Health Center,
and CHF, certain superspecialty services
(such as cardiac surgery, neurosurgery) that
would not be obtainable at the Cleveland
Health Center; (c) arrange with the Cleve­
land Health Center and with University Hos­
pitals for coordinated care of hospitalized
members; (d) arrange for appropriate teach­
ing and research activities at the Cleveland
Health Center; and (s) participate in the de­
velopment and maintenance of professional
staff education and research in connection
with the medical care program.
4. The Medical Group would be formally or­
ganized as a professional staff employed by
the board of directors of the Cleveland Health
Center. The initial staff would be nominated
by the University school of medicine. Subse­
quent nominations by the University school of
medicine would require concurrence of the
medical group. All nominees would be re­
quired to have qualifications for appointment
to the clinical faculty of the school.
The core of the medical group would consist of
full-time physicians in the basic specialities (in­
ternal medicine, pediatrics, obstetrics-gynecology,
general surgery). Specialists would be added to
the medical group as required for the comprehen­
sive health care of members, unless it were demon­
strated that such care could be obtained more
satisfactorily from the school of medicine or Uni­
versity Hospitals.
The medical group would nominate a clinical
director from among its full-time members. He
would be appointed by the board of directors of
the Cleveland Health Center, after consultation
with the Academic Council of Western Reserve
University School of Medicine. The clinical direc­
tor would represent the medical group in relations
with the board of directors of the Cleveland
Health Center, and would take responsibility be­
fore the board for professional standards. He
would have a voice, but no vote, on the board of
directors.
 When the organizational structure had been
worked out in early 1962 the medical school’s
committee had taken the entire program under
consideration. At a 2 day session with the con­
sultants in mid-March 1962, they indicated the
areas of greatest interest to them and restated the
principles relating to those areas. Their primary
concern was excellence of care. They discussed
factors by which the proposed program might
serve to promote such excellence through stability
of the population to be served, stability of financ­
ing arrangements, and provision of comprehensive
services. They stressed that quality of care de­
pended upon preserving a balance in size of mem­
bership : The population to be served must be large
enough to make the project economically feasible,
yet not so large as to overload the medical staff.
The committee was interested in the framework
of benefits to members of the health plan; prepay­
ment arrangements, scope of coverage, costs, possi­
ble extra charges. They favored the broadest possi­
ble range of health services under comprehensive
prepayment. One of their suggestions was that the
clinical director be made answerable to the school
of medicine for quality of patient care. They were
unanimous in their opinion that physicians in the
Cleveland Health Center should devote their full
professional time to the prepaid health program
and to teaching.
The medical school’s committee concluded by
recommending the project, as amended, to the
executive committee of the University Hospitals,
and the proposal went to the University Hospitals’
executive committee.
After 2 months of consideration, the school of
medicine notified CHF that the university hos­
pitals’ executive committee had now decided that
the University should not assume a formal role in
the demonstration program. The dean of the
medical school wrote cordially, saying that the
many interested physicians on the faculty would
be happy to aid on an individual basis if requested
to do so. The invaluable assistance that the Foun­
dation received from these physicians will be dis­
cussed in the chapter describing selection of the
medical staff.
Summary and Comment
The value of a comprehensive, prepaid, group-
practice, medical care program as a means of pro­
viding high-quality health services to salaried
workers and wage earners was recognized by phy­
sicians of professional stature established within
the community.
The possibility of a direct relationship with the
medically renowned Cleveland Clinic was viewed
favorably by the clinic’s directors, and was dis­
cussed at. some length. Ultimately, the positive
factors proved insufficient to outweigh the obsta­
cles inherent in the incorporation of a new, dis­
similar pattern of practice into that of a long-
established institution.
Members of the faculty of the Western Reserve
University School of Medicine were particularly
attracted by features that might prove advanta­
geous to their effort to provide education in com­
prehensive medical care through formal affiliation
with a prepaid health plan serving a relatively
stable cross section of the working population.
During months of discussion between these phy­
sicians and the project planners, tentative agree­
ment was reached on principles and in detail. The
proposal developed was that the formal relation­
ship be implemented by the creation of a new legal
entity (the Cleveland Health Center), a contract­
ing body responsible for overall direction of the
project.
The board of directors of the proposed Cleve­
land Health Center would represent the medical
school, the University Hospitals, and CHF, and
would assume major responsibility for the profes­
sional quality of the physicians practicing in the
medical group. This complex of organizations
would carry out a demonstration program serving
approximately 8,000 families.
Implementation of this proposal would have
necessitated a significant departure from the med­
ical school’s tradition. The problems inherent in
this relationship did not differ essentially from
those that had outweighed the considerations
favoring a direct working relationship with The
Cleveland Clinic. The university abandoned the
projected affiliation.
This experience suggests that long-established
institutions are unlikely to undertake such far-
reaching readjustments. Nevertheless, it provided
clear indications that if the new pattern of orga­
nized medical care establishes itself outside exist­
ing institutions, common interests may well lead
to cooperative relations between comprehensive
health service centers and existing establishments.
 Chapter VI
REAPPRAISAL OF THE PROJECT’S
STRENGTH AND RESOURCES
Throughout the discussions with the medical
school, the consultants had kept the CHF trustees
informed of progress. During this period, the
trustees, working closely with the consultants,
had taken specific steps to implement the plan by
providing a structural basis for its financial and
related aspects: The Community Health Founda­
tion, a nonprofit corporation, was established for
the purpose of operating a health care program.
The articles of incorporation, bylaws, and descrip­
tion of the plan were approved by the State de­
partment of insurance.
The organization was chartered in May 1962.
The incorporating trustees included representa­
tives of the steelworkers’, painters’, plumbers’,
retail clerks’, meatcutters’, machinists’, and auto­
mobile workers’ unions. Provisions were made to
enlarge the Foundation’s board of trustees by in­
cluding representatives of management and other
community leaders. In conformity with the Ohio
State law, the bylaws of the corporation provided
that, after the program was in operation, the
trustees would be elected at an annual meeting of
the membership.
The planning activities were financed by a dona­
tion of $25,000 a year for 2 years from the Union
Eye Care Center. Several unions had committed
themselves to contribute financially to the planning
effort. Two unions reported having received as­
surance from the management trustees of their
welfare funds that they would make a substantial
loan to aid in initial financing of the capital
requirements of the health care program.
In addition to the data accumulated by the PHS
survey team on the medical resources of the com­
munity and on the programs available to the par­
ticipating union members, detailed information
had been compiled on the premium and health
295-902 O—«8------- 3
benefit structures of each of the participating
unions. The health benefits programs in effect
among the interested unions provided payments
for medical and hospital care on a fee-for-servioe
basis. In order to facilitate the inauguration of a
prepaid group-practice program, it was necessary
to permit each individual in the group to choose
between the existing fee-for service plan and the
new program.
Two of the unions—the retail clerks’ and the
meatcutters’ unions—had already made arrange­
ments for dual choice in their collective bargain­
ing agreements. The automobile workers had a
long-established precedent of dual choice in Cali­
fornia and in Michigan. It was assumed that
similar provisions could be developed for the
Cleveland automobile workers. Other unions had
undertaken to negotiate a dual-choice provision in
their collective-bargaining agreements.
In June 1962, following the decision by Western
Reserve University not to participate in the dem­
onstration program, at the request of the consul­
tants a meeting was held with the board of trustees
of CHF, at which the consultants summarized the
proposal for a prepaid, group practice, compre­
hensive health care program that had been worked
out in collaboration with the committee from the
medical school during the first 11 months of plan­
ning. The consultants then asked the CHF trustees
to determine whether the program could be carried
out substantially as outlined, without formal affil­
iation with the University. Two crucial problems
presented special difficulties in proceeding without
such affiliation: Recruitment of physicians of high
caliber, and assurance that these physicians would
have hospital staff privileges.
It seemed likely that a number of the faculty
members who had become interested in the project
25
during the course of the discussions might assist
in the selection of a competent medical staff It was
hoped that certain physicians of the clinical fac­
ulty who had established reputations in academic
and community circles would ultimately be willing
to form the nucleus of the medical group.
A major uncertainty remained: Would these
physicians’ hospital staff privileges continue in
effect when they joined the medical group? Ex­
perience of prepaid group-practice health plans
in other cities suggested that such continuation of
privileges might not be easily assured.
The board of trustees recognized that these
difficulties might ultimately make accomplishment
of the objectives impossible. Nevertheless, the goal
was so important that the risk was assumed.
As part of the attempt to meet, this risk, three
preliminary steps were proposed:
1. Full exploration of the possibility of form­
ing relationships with other hospitals in the
community;
2. Establishment of a medical advisory com­
mittee, to be composed of physicians in the
community who had consistently expressed
interest, in the project, to assist in establish­
ing and continuing relations with other
interested physicians, give guidance in the
development of principles stressed in conver­
sations with the medical school, such as avoid­
ance of segmentation in medical care, and
provide effective means for promoting the
quality of medicine to be practiced in the pro­
gram; and
3. Assurance, at all stages of development, of
full professional autonomy for the projected
medical group.
The last of these considerations requires
emphasis and explanation. As long as affiliation
with the medical school had been anticipated, pro­
fessional autonomy of the medical group had
presented no serious problem. The physicians
would have been “employees” under an arrange­
ment consistent with the conditions of employ­
ment of physicians on the faculty of the university
medical school. They would have been answerable,
with respect to all appropriate matters, to mem­
bers of the medical profession. Now that affiliation
with the medical school was not contemplated, a
new structure must be developed to guard the doc­
tors’ professional status, rights, and independence.
Unless the physicians’ professional autonomy
were protected, the medical group might not be
tolerated by the institutions and hospitals whose
neutrality would be essential to the group’s exist­
ence and functioning.
Although the university’s decision canceled the
plans for a program developed in common, the
foundation’s board of trustees concluded that the
discussions with the medical school and university
hospitals had produced useful results. Important
concepts had evolved with respect to the structure
and organization of the contemplated program.
The broad interest in the project that had been
manifested by the community could not be over­
looked in any enumeration of assets. Seven strong
unions backed CHF and were expected to aid in
raising funds as needed. Management representa­
tives and other community leaders had also ex­
pressed interest, including willingness to serve on
the board of trustees if invited.
Inquiries had been received from many persons
who wished do become members of the contem­
plated prepaid program. It could be reasonably
said that an important segment of Cleveland had
given evidence of readiness to pioneer in new
methods of organizing, financing, and distributing
medical care. In consideration of this receptive
atmosphere and of the support that could be ex­
pected from members of the medical profession,
the decision of the meeting was to pursue the plan
with increased vigor.
Summarizing the work and decisions of this
June 1962 meeting, the board of trustees of the
CHF adopted the following statement of princi­
ples which included the general outline of the
program:
The Cleveland Health Foundation (CHF) Is a labor
and community-sponsored nonprofit corporation whose
purpose la to organize and arrange medical care services
for its beneficiaries on a prepaid basis in the Greater
Cleveland area. While a variety of methods and plans will
be explored for the future, a demonstration health center
program is now proposed.
Health Center
It is the intention of the CHF to set up a group health
center through which medical care services will be pro­
vided to about 8,000 families and their dependents com­
prising a population of approximately 25.000 persona
This center will be located on the east side of Cleveland
in the area of the University Circle. The population to be
served will generally include those members of the unions
participating in CHF and other community groups who
reside within a reasonable distance from the center, and
who voluntarily choose to Join the medical care program
that will be offered by the center, lion participating union
members will continue to be served by their existing insur­
ance plans.
MedicaI Staff
A staff of physicians and other health personnel will
work as a team in the center and will be responsible for
the provision of the home, office, and hospital care needed
by the enrolled members. The staff will consist of a core of
personal physicians. Including the major specialties of
internal medicine, pediatrics, obstetrics-gyn ecology, and
general snrgery. These physicians will form an association
which, under contract with CHF, will assume responsibil­
ity for the care of the members enrolled in the center.
The nonphysician staff of the center will be recruited
by an administrator who will be appointed by the board of
trustees of CHF. Such recruitment will be with the advice
of the medical staff, particularly in the cane of professional
positions such as nurses, technicians, health educator, and
social worker.
Several medical lenders in the Cleveland community
have agreed to assist the foundation actively in the selec­
tion of physicians who will be interested In and competent
to participate in a medical care program such as is con­
templated by CHF. The selected candidates will be of a
caliber that will be acceptable to the local medical school
for staff and teaching appointments. These physicians will,
therefore, be qualified for staff privileges at the Univer­
sity Hospitals and other accerdited hospitals in the area.
Health Services
The group of physicians staffing the medical center will
function as a team and will jointly be responsible for the
development of comprehensive family health services in
the home, medical center, and hospital for the beneficiaries
of the program. For services in such specialties as are not
represented among the staff of the center, referrals will
be made to the university, the Cleveland Clinic, or other
recognized specialists in the community. The physicians
at the center will have the responsibility for arranging
necessary hospitalization of members. The administration
of the center will make arrangements for the payment of
hospital bills.
The program of the center will Include preventive serv­
ices for adults and children, care for Illness, continued
care for chronic conditions, care at home, In the office, and
in the hospital, and arrangement for special care such as
rehabilitation, home nursing care, and other components
of a comprehensive health program. Necessary services
will be available to members at all times of day and night.
With the coopertalon of leaders in the field of medicine
in the Cleveland area, standards that will assure high
quality of medical care and sound methods for providing
continuity of care to the members will be developed.
Finanoinff
The financing of this program will be predominantly
through prepayment. In the case of union groups, this will
Involve utilization of health and welfare funds negotiated
under collective-bargaining agreements. However, the
services to be provided will not be Limited to those that
can be financed under the existing health and welfare
agreements. As soon as possible, arrangements will be
made and responsibility will be assumed for including the
full range of health care required by the members, in
addition to those services that are usually prepaid. For
such services, extra charges can be made—designed to
spread the costs a« broadly as possible.
Construction and equipment of the health center will
be financed on a loan basis, at an estimated cost of |750,-
000-11,000,000. Principe! and interest will be repaid from
prepayment Income over a specified period.
At the conclusion of the June IW2 meeting, the
board of trustees instructed the consultants to con­
tinue the general planning of the program under
the guidance of the president and the secretary of
the board. The following specific tasks were to be
undertaken:
1. Health center site.—A suitable site on which
to build a medical center was to be found in
the University Circle area. This area was se­
lected as the most desirable because it in­
cluded, according to the PHS study, a large
concentration of members of the seven inter­
ested unions, and because most of the major
hospitals and other medical facilities in
Cleveland were situated within it The deci­
sion to build a center had been approved by
the board of trustees after an extensive search
had disclosed no suitable existing structure
within the area. It was understood that ac­
quisition of land could not be concluded until
the University Development Foundation1
approved the building of a medical center
on the selected site.
2. Financing the program,—A preliminary pro­
posal with respect to capital requirements and
operating budgets was essential to test the
interest, of prospective lenders (union health
and welfare funds, and commercial sources).
(a) Capital financing.—The consultants
were to develop a proposal with respect to the
method of financing the medical center, for
consideration by the board of trustees,
(&) Operating budget.—Projections on the
cost of operating the center, of providing
services to the prospective members, and of
repaying the loans for construction of the
facility were to be prepared simultaneously.
1 “The University Circle Development Foundation ♦ ♦ • wee
founded In 1057 to carry oat a 20-year development plan for
University Circle It wee created by the Institutions In the circle
• • The Foundation • * * guards the basic principles of the
Development Plan • * • and is central arbiter In any decisions
that may tend to modify (them I * • ♦. (It) acta aa a central
clearing house where the interests of etch member institution
• • • are reconciled with • • • University Circle • • • and
• • * the Cleveland community. (It) acts as an administrative
agency to provide services and facilities that benefit member
institutions * • • (such as) land acquisition, traffic control
• • • architectural review • • University Circle Develop­
ment Foundation: The Firet Five Years. (Report for 1057-02.)
 3. Monthly premiums and benefit structure.—
Preliminary proposals with respect to these
two items were necessary to provide basic
material for the financing proposal.
4. Staff recruitment.—The consultants were in­
structed to continue to develop relationships
with interested physicians in the community.
5. Membership education.—During the first 11
months, the education effort had been directed
largely toward union officers and shop
stewards. Development of continuously
widening union participation was now vital.
Need for a well-prepared and illustrated
booklet to support the effect of the spoken
word in this educational effort was stressed.
In assuming these responsibilities, the consul­
tants integrated their capacities and efforts by fol­
lowing a method that had evolved during the past
year. Action on each point was assigned to the
appropriate member of the consultant team and to
the president or secretary of the board of trustees
who were working with them. Deadline dates
were set for completion of each task and for re­
ports on continuing efforts. The work of the five
men was coordinated at meetings held at approxi­
mately monthly intervals.
Summary and Comment
The momentum generated by a year of continu­
ous effort was sufficient to shape a projected health
care program that unified the goals and elicited
the continued support of local leaders. This pro­
gram had developed specific characteristics as to
membership size, location of service area, location
of the health center to be constructed, scope of
services to be rendered, and structure of the rela­
tionship between consumers and providers of
medical services.
During the year, the work had involved the
creative energies of an increasing number of peo­
ple. Leaders within the community had become
fully committed to the program, and were able to
mobilize the necessary resources and to move
others toward the achievement of expressed goals.
 Chapter VII
FINANCIAL PLANNING OF
THE HEALTH CARE PROGRAM
It had not been possible to start financial plan­
ning of the health program until three essentials
had been determined: the extent of services to be
rendered, the organizational framework for the
provision of the services, and the size of the mem­
bership to be served. Now that these points had
been settled, the consultants could work out pre­
liminary estimates of the costs of the program,
and of the revenues that could be expected to meet
those costs.
In preparing these estimates, the consultants
drew heavily on the experience of other prepaid
programs, including methods of financial planning
that bad been used. The technique that the con­
sultants adapted from these observations proved to
be a valuable tool for economic planning, analysis,
and control, and served as a basis for the borrowing
of funds. The specific method of planning applied
to CHF is given in detail because of its historical
interest, but more because it is hoped that this ex­
perience may serve as an example in applied
methodolgy.
The Method
The consultants divided their advance estimate
into schedules to cover two phases: Schedule I
(p. 30) expressed the estimate of costs and reve­
nues covering the period of development of the
program and construction of the center, based on
the assumption that the center would start opera­
tion on January 1, 1964. Schedule II (p. 32)
covered costs and revenues starting with the
center’s first day of operation.
In both schedules, each line was numbered. Ex­
planatory notes pertaining to each numbered line
were attached. The schedules together with the
notes made up an integrated whole. As a planning
method, this integration proved to be useful. The
dollars entered in each line could not explain their
own significance, either as individual items or as
parts of the total plan. The appended notes ob­
ligated the planners to perpetually reappraise the
total program and to relate each item of expense
to the entire project.
In the next few pages, the two schedules are
presented in their entirety, together with their ac­
companying notes slightly edited for clarity. Both
schedules and notes are essentially a transcription
of those that were put into use by the planners in
early October 1962, and are based on the data that
the consultants possessed at that time. This presen­
tation is concluded with a description of the inter­
action that took place between this tool and the
actual project through the planning phase and to
the end of the first year of operation.
Schedule I—Anticipated sources of cash and budgeted capital requirements during preoperating period
(center scheduled to open Jan. 1, IMA)
[Draft of Oct. 4, IMS]

1963
Total Prior to
lit quarter 2d Quarter 3d quarter 4th quarter

Cash will be provided by:

Line 1—Loans from health and welfare funds. $500,000 $150,000 $10, ooo $197, 500 $142, 500 .
Line 2—Assistance from Union Eye Care
Center----------------------------------------------- 51,500 51,500 .
Line 3—Contributions from sponsoring
unions- ----- - ----------------------------------- 100,000 20,000 $80,000
Line 4—Individual sponsoring memberships. 100, 000 _ — ■»
»*
*** 25, 000 75, 000
Line 5—Commercial 1MM-------------------------- 650,000 650,000
Line 6—Others. (See notes.)________________
Line 7—Total cash provided----------------------- 1, 401, 500 201, 500 35,000 272, 500 162, 500 730,000
Caah will be required for: Facility:
Line 8—Land____________________________ 135, 000 135,000 .
Line 9—Building_________________________ 750, 000 187, 500 187, 500 375,000
Line 10—Equipment............................................ 150,000 150,000
Line 11—Architectural fees------------------------ 55, 000 15,000 10,000 10,000 10,000 10,000
Line 12—Contingency______________ ______ 50,000 50, 000
Line 13—Total facility cost.............................. I, 140, 000 150, 000 10, 000 197, 500 197, 500 585, 000
Line 14—Starting-up cost_________________ 147, 300 40, SOO 10, 200 15, 200 25,200 55, 800
Line 15—Interest payments............................... 29, 400 1, 800 1,900 4,300 6,000 15,400
Line 16—Total caah required______________ 1, 316, 700 192,700 22, 100 217, 000 228, 700 656,200
Line 17—Cash increase (decrease) during
period------------------ ---------------------------- 84,800 8,800 12,900 55,500 (66, 200) 73,800
Line 18—Add: Caah at beginning of period__ 8,800 21, 700 77,200 11,000
Line 19—Cash at end of period____________ 84,800 21,700 77,200 11,000 84, BOO
Line 20—Working capital. (See notes.).......... 168, 800
Note.—All figure* rounded up to the nearest *100

Notes Appended to Schedule I

(Draft of October 8, 1962) Schedule of Anticipated Sources of Cash and Budgeted Capital
Requirements During the Preoperating Period (Center Scheduled to Open January 1, 1964)

Cash Will Be Provided by:
Line I—Loans From Health and Welfare Funds
The trustees of the retail clerks’ health and wel­
fare fund passed a resolution to lend the CHF
$300,000 for the purpose of constructing and de­
veloping the health center. The trustees of the
meat cutters’ health and welfare fund voted to lend
CHF $200,000.
Line 2—Assistance From Union Eye Care
Center
One of the objectives of the Union Eye Care
Center was the development of additional health
services for its members. Consistent with this ob­
jective, the Union Eye Care Center subsidized the
cost of exploring the feasibility of organizing a
prepaid direct-service medical care program in
Cleveland. It subsequently also allocated money
toward planning such a program. For the 2 years
ending June 30, 1V63, assistance from the Union
Eye Care Center would amount to an estimated
$51,500.
Line 3—Contributions From Sponsoring Unions
The consultants had been informed that discus­
sions were held in several meetings of CHF board
of trustees regarding the possibility of securing
contributions from the participating unions. Thus
far (October 1962) the meat cutters’ union had
contributed $2,500, the retail clerks’ union, $1,000,
toward this fund. In informal discussions with
several CHF board members, the consultants sug­
gested that the goal of raising $100,000 from the
participating unions be placed on the agenda of an
early board meeting.
Line 4—Individual Sponsoring Memberships
Subject to the approval of the board of trustees
of CHF, it is contemplated that during the fall of
1962 and early 1963, a campaign would be con­
ducted among the members of the participating
unions for individual sponsorship of the health
center building fund. The purpose of this cam­
paign would be to focus the potential enrollees'
attention on the developments underway. Experi­
ences elsewhere had indicated that such a drive, if
properly conducted, would provide an excellent
basis for the subsequent enrollment campaign.
(Such a drive gives the union members an op­
portunity to identify with the program, and makes
for a better educated membership.) It was tenta­
tively recommended that the sponsorship fee be
$10 per family and that the goal be 10,000 sponsors
by mid-1963.
Line 5—Commercial Loans
It was hoped that the commercial mortgage loan
could be limited to $650,000. On the basis of dis­
cussions with several potential lenders, it appeared
reasonably certain that a 20-year loan could be
secured at an interest rate that probably would
range between 5% and 5% percent depending on
circumstances at the time the loan was negotiated.
Line 6—Others
This line is reserved for miscellaneous sources of
funds such as possible grants, etc.
Line 7—Total Cash Provided
Total of lines 1 through 5.
As shown in line 20, additional cash would be
required to provide a sound base for the launching
and operation of this project.
Cash Will Be Required for:
Facility
Line 8—Land
The land under consideration at the time could
be obtained for $135,000. The architects had stated
that the land was suitable for the construction of
the contemplated health center. (See ch. VIII.)
Its proximity to the University Circle also made it
a desirable location. The purchase of the land
would be dependent on the approval of the Uni­
versity Circle Foundation. For purposes of cost
projection, it was assumed that if this land proved
not to be available, another suitable site could be
obtained for the same price.
Line 9—Building
An estimate of $750,000 was based on the as­
sumptions that:
1. The facilities necessary for the health center
would require 25,000 square feet, and
2. the building could be constructed for $30 per
square foot, as estimated by the architects.
Line 19—Equipment
The preliminary estimate of $150/100 was based
on the cost of equipment in similar projects. De­
tailed evaluation of this estimate would be made
in the future. (See also line 14.3.)
Line 11—Architectural Fees
The estimate of $55,000 was based on a minimum
schedule of the State architectural society.
Line 12—Contingency
The size of the project, the many assumptions
that had to be made to arrive at some of the esti­
mates, and the possibility of excess in some ex­
penses indicated that it would be prudent to pro­
vide a contingency fund of $50,000.
Line 13—Total Facility Cost
Lines 8 through 12.
Line 14—Starting-up Cost
This includes:
1. Planning expenses from June 1961 to January
1, 1964, the projected date for opening the
center;
2. Expenses for operating personnel required
prior to the date of opening; and
3. Other operating expenses required prior to
opening date, including supplies and equip­
ment not covered in line 10. Items of equip­
ment entered in this line were not to be
capitalized (see line 10) because they had a
small unit value and a short useful life. Pur­
chase of such items prior to the opening date
of the center would be reflected in preoperat­
ing expense; purchase of such items after the
opening date would be charged to the period
in which the specific purchase was made.
Line 75—interest Payments
The assumptions made in connection with this
line were that:
1. Interest rate on the loans from the health and
welfare funds would be 4% percent.
2. Interest rate on the commercial loan would be
5% percent
3. Interest would be paid quarterly.
 4. No payments would be made on the principals
of loans obtained from health and welfare
funds until July 1,1965,18 months after the
scheduled opening of the center. These loans
were scheduled to be repaid within 20 years
in the following manner: Five annual pay­
ments of 2 percent of the total face value of
the loans would be made commencing July 1,
1965, and 15 annual payments of 6 percent
each thereafter.
5. No principal payments would be made on the
commercial loan until January 1,1965,1 year
after the scheduled opening of the center.
This loan would be repaid in 20 equal annual
amounts of 5 percent each.
Line 16—Total Cash Required
Total of lines 13 through 15.
Line 17—Cash Increase (Decrease) During
Period
This amount, obtained by deducting line 16 from
line 7, shows the cash balance for the period.
Line 18—Add: Cash at Beginning of Period
SCHEDULE II.—Projection of revenue and expense
* commencing with scheduled opening of center on Jan. 1,1964
[Draft of Oct 4, IMS]
Line 19—Cash at End of Period
On the basis of the preceding calculations, it was
estimated that $84300 would be available on Jan­
uary 1, 1964, the scheduled date for opening the
center.
Line 20—Working Capital
The amount shown in this line is equivalent to
the advance estimate for future operating budget
for 1 month, when the program would have at­
tained its full complement of members and its full
complement of staff to serve those members. It was
estimated that the average budgeted needs per
member per month during the initial stages of the
program would amount to $7.56. This figure multi­
plied by the anticipated number of members (an
average of 22,500 per month) is approximately
$168,800. It appeared to be an adequate cash re­
quirement for working capital, provided that the
membership dues would be prepaid on the first
day of the month in which services were rendered.
To make up this sum, $84,000 would be required in
addition to the surplus of $84,800 shown in line 19.

1M& IMS

First half Second half

PM/PMI PM/PM 1 PM/PM > PM/PM 1

Line 1—Membership 13, 000 17, 000 22, 500 22, 500 ..........
Line 2—Number of physicians—
full-time equivalent________ 12 16________ 21 21
Line 3—Dues revenue__________ $585,000 *7. 50 $765,000 $7. 50 $2, 025, 000 $7. 50 $2, 133, 000 $7. 90
Line 4—Over-the-counter
revenue____ .________________
Line 5—Other revenue.__ ______
Line 6—Subtotal_______________
Expenses:
Line 7—Physicians_________ 102, 000 1. 31 136, 000 1. 33 378,000 1. 40 399,000 1.48
Line 8— Referrals................
Line 9—Hospitalization____ 273, 000 3. 50 357, 000 3. 50 993, 600 3. 68 1, 042, 200 3.86
Line 10—Clinic personnel.... 85,800 1. 10 112,200 1. 10 305, 100 1. 13 313,200 1. 16
Line 11—Administrative
personnel______________
Line 12—Supplies, materials.
Line 13—Maintenance,
repairs----- ------------ ------ IS, 500 . 25 25,500 .25 67, SOO .25 67,500 .25
Line 14—Taxes, insurance___
Line 15—Subtotal__________ 480, 300 6l 16 630, 700 6. 18 1, 744, 200 6. 46 1, 821, 900 6. 75
Line 16—Excess before
operating budget of CHF
and debt service and
depreciation___________ 104, 700 1. 34 134, 300 1. 32 280,800 1. 04 311, 100 1. 15
Line 17—Operating budget
of CHF. 17. (39, 000) (. 50) (51,000) (. 50} (135, 000) (. 50) (135,000) G SO)
Line 18—Debt service______ (30, 800) (■ 39) (30,800) (. 30) (101, 600) (. 37) (99, 200) G 37)
Line 19—Total expenses____ 550, 100 7. 05 712, 500 &98 1, 980, 800 7. 34 2, 056, 100 7.62

8m footnote at end of table.

Schedule IL—Projection of revenue and expentea commencing with scheduled opening of center on Jam 1,
1964—Continued
[Dndt o( Oct. 4.1962|
1044
First hslf
FM/PM 1
Expenses—Continued
Line 20—Net cash from
operations at end of
period________________ . $34, 900 $0. 45
Line 21—Working capital
required______________ . 168, 800 ................
Line 22—Working capital
projected at end of
period___________ ___ . 203,700 ________
’ Per number par man th.
Notes Appended to Schedule II
(Draft of October 9, 1962) Projection of Revenue and Expenses Commencing with Scheduled
Opening of Center on January 1, 1964
Line 1—Membership
In this line is entered the consultants' estimate
of the average number of enrolled members on a
semiannual basis beginning with the anticipated
opening of the center on January 1,1964. The total
economic soundness of the operation of the center
would depend largely on the accuracy of this esti­
mate. The forecast of staff was based on the antic­
ipated medical needs of the enrolled membership.
Since salaries would be the major item of oper­
ating expense in this program, overstaffing would
entail losses that could not be recaptured out of
subsequent income. Understaffing would make it
difficult to meet the service obligations to the mem­
bership, and would be equally undesirable.
Line 2—Number of Physicians—Full-Time
Equivalent
It was then anticipated that three categories of
physicians would provide services in the projected
program:
1. The core of physicians in the center would
form an association and contract with CHF
to provide professional services to the mem­
bers. This core would include providers of
services in the following fields: medicine,
pediatrics, obstetrics gynecology, and sur­
gery. These physicians would be expected to
spend either all or a major portion of their
professional time in the CHF program. They
could have teaching or research appointments
at the University not to exceed one-half of
1044 1966
Swxxid half
FM/PM i PM/PM ' PM/PM i
*52, 500 $0. 52 $44, 200 *0. 16 *76, SOO $0. 28
203, 700 256, 200 ........... .. 300,400
256, 200 300, 400 ________ 377, 300
their time. Their annual compensation would
be based on their background and experience,
and on the proportion of their time spent in
CHF work.
2. Session physicians, in specialities other than
medicine, pediatrics, obstetrics gynecology,
or surgery, whose consultation services would
be required frequently: This category was
expected to include an orthopedist, a derma­
tologist, an otolaryngologist, an ophthal­
mologist, a urologist., and a part-time radi­
ologist. These physicians would not be mem­
bers of the association. They would be at the
center at scheduled times, see patients by ap­
pointment, and probably receive compensa­
tion on a session basis.
3. Physicians in other specialities to whom re­
ferrals would be made infrequently would be
expected to see CHF patients in their private
offices. It was anticipated that most such re­
ferrals would be to members of the faculty
of the University medical school. Their com­
pensation probably would be on a fee-for-
service basis.
Since it was difficult more than a year in ad­
vance of the center’s opening to estimate the num­
ber of doctors who would be required in each of
the three categories, this forecast of number of
physicians was based on total doctors in all cate­
gories on a full-time equivalent basis. The tenta­
tive estimate of one full-time physician equivalent
for 1,070 members was made after reviewing the
experience of other plans.
Line A—Dues
It was estimated that an income of $7.50 per
person per month would be required to finance the
range of services to be provided to the member­
ship. These services would include office care, hos­
pital care, and professional services in the hos­
pital. Out-patient drugs and physicians’ visits in
the home would be provided at moderate fee for
service charges.
Most of the participating unions, under the
collective-bargaining agreements now in force,
would not be able to prepay $7.50 per person per
month. In order to supplement the prepaid
amount, charges would be made for certain serv­
ices. Such charges would be moderate to insure
that they would not constitute a barrier to service,
arid would be designed to apply to the largest
number of persons utilizing the services. For pur­
poses of the forecast, $7.50 per member per month
in dues was shown in this line, and line 4 was left,
blank until it could be learned how far the dues
would fall short of $7.50 per member per month.
After that amount could be determined, line 4
would show the revenue that would be generated
from over-the-counter charges. The total of lines
3 and 4 would thus ultimately equal $7.50.
If economic patterns were to continue, an an­
nual increase of 5 percent in the cost of providing
services could be anticipated. For purposes of this
forecast, it was assumed that $7.50 per member
per month would be adequate until 1966. A 5-per­
cent increase is shown for 1966.
Line 4—Over-the-Counter Revenue
See line 3.
Line 5—Other Revenue
Net revenue from sale of outpatient drugs (as­
suming that a pharmacy would be established in
the center) and revenue from house calls would be
shown in this line.
Line 6—Subtotal
This subtotal represents the total revenue from
operations.
Line 7—Physicians
Expenses for physicians during the first year
were estimated at an average of $17,000 per full-
time equivalent physician. It also was assumed
that the average annual expense per full-time
physician equivalent would increase to $18,000 in
1965 and to $19,000 in 1966.
Line S—Referrals
See notes on line 2 and line 7. Expenses for re­
ferrals and session physicians ultimately would be
taken out of line 7 and included in line 8.
Line S—Hospitalization
In estimating the budget for hospitalization,
many factors were taken into consideration, in­
cluding the estimated age of the prospective mem­
bership, the rate of hospital admissions, the length
of stay per admission, and the per diem cost of
hospital services in the community. Information
on the per diem cost, of hospital services in Cleve­
land was available through the 1961 study by the
U.S. Public Health Service, and through data sup­
plied by the meat cutters’ union and the Western
Reserve University Hospitals. Some information
was available on the age distribution of the mem­
bership in two of the seven participating unions.
Since membership in CHF would be on a volun­
tary enrollment basis, it was difficult to perdict,
even in the case of these two unions, what the age
composition of persons selecting CHF would be.
Information was available on the rate of admis­
sions and length of stay of similar direct-service
programs, such as the Health Insurance Plan of
Greater New York and the Kaiser Foundation
Health Plan. It was assumed that the rate of hos­
pital utilization would not exceed three-fourths of
a day per member per year.
Line 10—Clinic Personnel, and
Line 11—-Administrative Personnel
The estimate in these two lines was based on a
list of required personnel, which had been com­
piled by the consultants, and upon a discussion
with administrative personnel at the Western Re­
serve University Hospitals regarding rates of pay
in the Cleveland area. An increase of 3 percent
per year in cost of personnel was indicated for
1965 and 1966. Anticipating that current trends
would continue, an annual increase of 5 percent
for personnel and all other expenses was projected
thereafter. To offset this increase, a commensurate
increase in income from members would have to
take place beginning with 1966.
Line 12—Supplies, Materials,
Line 13—Maintenance and Repairs, and
Line 14—Taxes, Insurance
The amounts anticipated for these bracketed
lines were based on estimates made by the execu­
tive director of CHF; they appear to be consistent
with experiences in other plans.
Line 15—Subtotal of lines 7 through 14 represents
the operating expenses of the center,
Line 16—Excess Before Operating Budget of
CHF and Debt Service and Depreciation, and
Line 17—Operating Budget of the CHF
CHF would carry out the following functions:
1. Promotion of membership;
2. Negotiations of contracts with membership
groups;
3. Negotiations of contracts with providers of
service;
4. Supervision of contracts with providers of
service;
5. Expansion of scope of CHF services after a
preliminary period of operation to provide
for care not covered during the initial stages
of the program (dental care, home care, etc.);
and
K. Further expansion of CHF program to
provide care to new members not covered in
the initial center.
It was deemed unlikely that the membership of
the initial health center would be able to finance
all these activities. It was anticipated that adequate
financing to cover the sixth item would be partic­
ularly difficult to obtain from the membership of
the initial group. It was assumed that 50 cents per
member per month (approximately 7 percent)
would be allocated to this function. During the
initial years of development of CHF, other funds
would have to be secured to augment this budget.
It was anticipated that, as additional centers were
developed and the membership of CHF grew, a
larger membership base would be available to sup­
port the activities of CHF.
Line 18—Debt Service
The assumptions made in developing the figures
in this line were that:
1. Interest on the loan from the health and wel­
fare funds would be4% percent;
2. Repayment of principal on the loan from the
health and welfare funds would commence
July 1,1965, and would consist of five annual
payments of 2 percent each, followed by 15
annual payments of 6 percent each;
3. Interest on the commercial loan would be
5% percent; and
4. Repayment of principal on the commercial
loan would be in 20 annual payments of 5 per­
cent each, beginning January 1,1965.
Discussion of the Method
Two major methodologic points are noteworthy
in these schedules and their appended notes:
1. Their effectiveness as tools for planning and
control, when subjected to continuous review
and revision, and
2. the use of the membership base as the com­
mon denominator for items of revenue and
items of expense. (Seeschedule II.)
Review and Revision.—The significance of the
method would have been lost if the schedules and
notes had not been revised at regular intervals. The
notes reflect the total philosophy and purpose of
the health plan. As initially prepared (and as
presented above) they were a statement of the
planners’ comprehension of the program at the
specific time the budget was drawn up. During its
first year, however, the program did not operate
as was envisioned in 1962 (although at no time
during that year did it operate at a loss). Un­
predictable developments altered the course of
events.
Frequent revision of schedule II forced the
planners to reconcile changes introduced by ex­
perience with the general objectives of the pro­
gram—and to explain the reasons for each change.
The thorough consideration that was entailed in
revision led to clarification of such complex inter­
relationships as those between members and physi­
cians, between members and other personnel, and
between all the people involved in the program
(providers and recipients of care) and the physical
facilities. In addition, continuous revision led to
the discovery of certain errors in the initial projec­
tion of revenue and expenses. The following il­
lustrations demonstrate the specific value of re­
view and revision:
1. When the opening date of the center was
postponed from January 1, 1964, to July 1,
1964, many of the line items in schedule I
were changed. Interpretation of these changes
forced the planners to reappraise the total
preoperating budget.
2. (a) Although the schedules were drawn up
(in October 1962) some 4 months after the
decision had been made that CHF would not
have an integral relation to the Western Re­
serve University School of Medicine, plan­
 ning still was influenced in certain respects
by considerations that had developed during
the discussions with representatives of the
medical school.
For instance, the estimate for average annual
income of physicians on a full-time basis that was
entered into schedule II was $17,000. with a range
of $14,000 to $24,000. This estimate had developed
during the period of discussion with the faculty
members who had taken the position that the in­
come of doctors in CHF should be somewhat more
than the average for full-time faculty of the medi­
cal school but less than the average for doctors in
solo practice in the community.
It had been anticipated during those discussions
that the CHF doctors would be made up largely of
young physicians who had recently completed their
specialty training. After it was concluded that the
health plan would not be affiliated with the Univer­
sity, it became clear that the doctors of the medical
group must be selected from among physicians
who were already well established in the commu­
nity and who had firm hospital connections. (See
ch. VI.) Although this change in the contemplated
initial character of the medical group did not im­
ply a substantial alteration in the estimated range
of physicians’ income during the early years of
operation, it did mean that the starting income for
many of the doctors must be at the upper end of
that range. The shift would produce a much higher
average and total cost than had been anticipated.
As was shown in chapter VI, the impact of non­
affiliation on physician recruitment was a major
topic at the June 1962 meeting of the consultants
with the CHF board. Nonetheless, this aspect of
the change was not reflected in the forecast of ex­
penses compiled in October 1962. Review of the
notes on physician expenses enabled the planners
to detect, analyze. and correct this error in projec­
tion.
(b) Nonaffiliation with the medical school
also made necessary a change in the starting
number of physicians in the medical group
and in its specialty structure. When it was
supposed that the medical school would sup­
ply certain specialty services on a session
basis, and consultation in other specialties by
referral, an initial CHF staff of 12 full-time
equivalent doctors was held to be adequate.
The October 1962 estimate for physician ex­
pense in schedule II was based on this projec­
tion. Without University affiliation, the suc­
cess of the program would be enhanced by a
greater degree of professional self-sufficiency
in the medical group. The actual average
number of physicians during the first year
of operation was approximately 16 instead of
12 as initially estimated in the 1962 forecast.
Periodic review of the notes brought the in­
consistency to the fore., and facilitated plan­
ning for its correction.
3. Closely related to these two problems in fore­
casting was another which developed after the
center was in operation, and which aggra­
vated the difficulties in financial control. It
had been forecast in October 1962 (schedule
II, line 1) that the average membership dur­
ing the first 6 months of the center’s operation
would be 13,000, and during the second 6
months, 17,000. However, a prolonged strike
by one of the major participating unions radi­
cally altered the enrollment timetable. Mem­
bership during the first 12 months of opera­
tion averaged only 10,000. This reduction in
the membership base, added to the increased
physician expense resulting from nonaffilia­
tion with the medical school, produced a
physician cost which could not be supported
by the prepaid membership as initially fore­
cast. in 1962. Constant, reworking of schedule
II and. its notes was essential to focus atten­
tion on the problems produced by these un­
predictable developments.
4. While changes cited above made the prepaid
income inadequate to cover costs, favorable
factors related in a large measure to the same
set of circumstances helped to offset this in­
adequacy :
(a) Many of the physicians in the initial
group had been in private practice in Cleve­
land, and many of their patients followed
them to the CHF center where they continued
to pay on a fee-for-service basis. During the
first year the income from these patients was
equivalent to approximately one-third of the
total physician expense; (-) several of the
participating unions contracted with CHF to
provide complete physical examinations for
their members who were not eligible to enroll
in the program because they did not reside
within the service area. These contracts pro­
vided a further source of revenue that had
not been expected. Adjustment of relation­
ships between these revenue-producing activi­
 ties and the total program wax made possible
by review and revision of schedule II and its
notes.
Membership Base: The Common Denominator
of Revenue and Cost.—In schedule II, each line
item of revenue and expense was expressed in two
ways: in gross dollars, and as an amount per mem­
ber per month (PM/PM). The latter term served
as a common denominator which permitted the
consultants to relate the operation of the program
to the forecast of prepaid members. It proved to
be a second important tool in maintaining the dy­
namic equilibrium of the program.
In applying this concept it was not overlooked
that the costs of serving the individual members of
a prepaid health plan would necessarily differ
through a wide range, since their medical needs
would vary according to age, sex, and other popu­
lation characteristics. Nor would all members con­
tribute equally to revenue. The rate structures of
most prepaid plans are designed to derive a higher
per capita income from adults than from children.
Despite these variations, however, in the opinion
of the consultants the membership base remains
the most logical common denominator for plan­
ning and regulating a prepaid program. Such al­
ternatives as the costs of an office visit, a home
call, or a patient day in the hospital have proved
inadequate, unwieldy, or both.
Relating all items of income and expense to a
per-member-per-month basis continuously focused
the attention of those who were policymakers for
the project on the primary purpose of the pro­
gram—that of organizing medical services to meet
the needs of the prepaid membership. It was this
element in the planning method, more than any
other single factor, that provided the basis for im­
portant policy decisions.
Under the contemplated contractual relation­
ship between the board and the medical group, the
latter was to assume responsibility not only for
professional services and standards but also for the
fiscal affairs related to the physicians’ cost. It was
planned that during the initial phases of the opera­
ting program, cost reimbursement would be used
to compensate the medical group, but that, once
the financial stability of the plan was established,
the relationship would be changed and the medical
group would assume fiscal responsibility for
running its affairs.
Notwithstanding the fact that the experience of
the program during the year beginning July 1,
1964, did not correspond with the forecast made in
1962 as a result of significant shifts that occurred
both in income and expense, the program remained
solvent throughout. Decreases in prepaid income
were offset by a significant fee-for-service income.
Increases in costs of physicians were offset by
hospital costs that were lower than initially
anticipated.
Analysis of the financial affairs of the program
based on the revision of schedule II made it clear,
however, that it would be unwise to develop a fixed
method of compensating the medical group until
such time as the program became self-sufficient on
the basis of its prepaid membership. It was agreed
by the board and the medical group that a perma­
nent framework of economic relationship between
the two parties, established at a time when it was
necessary to rely to a substantial degree on fee-for-
service income, would distort the primary purpose
of the project.
Continued appraisal disclosed that when the
membership base reached 25,000 a contract with
the medical group based on a fixed capitation
would provide a sound basis for the operation of
the prepaid program. Under the formula agreed
upon, the fee-for-service income (which at the
25,000 member level would be proportionately
small although not necessarily reduced in absolute
amount) would be used to offset the amount of
capitation. Thus, let us suppose that the amount
of fee-for-service income were $5,000; this, when
divided by the base of the membership (25,000)
would yield 20 cents per member per month. If the
capitation fee were $2, the health plan’s obligation
to the medical group would then be $1.80 for that
particular month. Under this kind of arrangement,
the medical group would be assured an income
related to the prepaid membership and would not
be favorably or adversely affected by the amount
of income from fee-for-service practice.
In this manner, the schedule, and particularly
the column relating all items of income and expense
to the membership base, focused the continued at­
tention of the board and the medical group alike
on membership growth and services to the
membership.
Use of Forecast for Borrowing of Funds
In preparing their projection of revenue and
expenses in October 1962, almost 2 years before
the center actually opened, the consultants had in
mind not only its value as a tool for internal plan­
ning and control but also its effectiveness in the
borrowing of funds. This effectiveness was clearly
proved.
The planning document satisfied the labor and
the management trustees of two welfare funds. It
may be pointed out that this was not a rigorous test
inasmuch as the trustees of these funds did not
look upon the project as a financial investment;
they were primarily concerned with the develop­
ment of new medical services for their members.
Nevertheless, as fiduciaries they had to satisfy
themselves and their attorneys that the investment
would be sound.
A more stringent proof of the document’s value
as a fund-raising tool was that, on the basis of this
forecast, a bank agreed to lend the project $650,000.
The bank’s lending officers, once they understood
the relationships of the membership of the pro­
posed health plan, the program, and the building,
were particularly impressed with the potential
ability of the operating plan to pay its debts. In
their view, the fact that the membership would be
drawn from groups of employees within the com­
munity, representing diverse enterprises including
production and services, was an important factor
contributing to the anticipated financial stability
and repayment potential. In early 1967, the same
bank expressed an interest in financing the con­
struction of a second center.
Summary and Comment
The October 1962 projections and their review
and revision were invaluable. They served as a con­
stant reminder of the need to consider ail factors
and their interaction in light of the basic objectives
of the program.
 Chapter VIII
BUILDING THE CENTER
In preparing for the selection of architects for
the projected medical center, the consultants ob­
tained from local hospital and medical advisors a
list of five architectural firms, including the lead­
ing hospital designers of the area. During the sum­
mer of 1962, the consultants and the president, of
the board of trustees of CHF interviewed repre­
sentatives of all five firms.
Interviewing Prospective Architects
The interviews were conducted according to a
uniform plan. By comparing the architects’ re­
sponses to specific statements and questions, the
consultants hoped to ascertain the degree to which
each architect comprehended the distinguishing
qualities and purposes of the project:
1. The consultants stated that, in their relation­
ship with the architects, they would act ex­
clusively as representatives of the owners of
the projected center.
The importance of this statement should be em­
phasized. It derives from the following: Loaning
agencies, when they are determining the amount
that they will lend toward construction of a build­
ing, take into consideration its anticipated total
value. Architects’ fees are a part, of this total value.
The amount paid to consultants in remuneration
for time spent with the architects in planning a
building may be included in the architects’ fees.
This method is sometimes considered expedient
when a maximum loan must be obtained. It was
felt, however, that any departure by the consult­
ants from their role as representatives exclusively
of the owners might lead to a conflict of interest
that could result, in distortion of the program.
2 .At each interview, the architects first were
given a uniform, oral, description of the pro­
posed center. In so doing, they stressed that
the building would be owned by the con­
sumers of medical care (the subscribers of the
projected health plan).
The center would, in this respect, differ from
the usual medical facility which is owned (or
leased) by the providers of medical care (the phy­
sicians or a medical institution). The physicians
of the center were to be under contract, with a
foundation whose board of directors would be
composed of representatives of the consumers and
of other community leaders to provide care to the
members of the owning group. The subscriber­
owners would expect to find the center warmly
attractive and conducive to securing medical serv­
ices in a convenient, dignified manner.
The design must be consonant with the develop­
ment of a personal-professional relationship be­
tween patients and doctors and between ancillary
personnel. As many services as possible should be
available under one roof. Because financial sup­
port would be limited, economy must be observed
in construction, and the completed building must
be such as to permit economical operation.
3. The architects were asked four questions:
(a) What would be your method of devel­
oping a building for this program ? (&) Who,
in your firm, would actually work on plan­
ning and designing this project? (s) What
do you estimate as the cost of the project?
(d) What would be your fee?
One of the five architectural firms was selected
on the basis of its response to the introductory
description of the proposed center and to questions
(a) and (6). With respect to answers to questions
(c) and (<Z), there was little variation among the
responses of the five firms: Rough estimates of the
cost, of construction varied so slightly as to be con­
sidered immaterial, and all firms said that they
would adhere to the minimum fee schedule recom­
mended by the local branch of the American Insti­
tute of Architecture.
The responses to questions (a) and (-), how­
ever, revealed a wide disparity among the various
architects in their comprehension of the basic
nature of the project.
Specifically in response to question (a), the
representatives of three firms stated that their first
concern would be to interview the physicians who
were to practice in the center. The architects of the
other two firms immediately understood that the
members were to be the owners of the projected
building; both recognized the comprehensive
nature of the medical care that was to be provided,
and both felt that the medical consultant and
selected professional advisers would be able to
furnish them with all the information necessary
for planning and construction of the center. This
quick grasp of the unique features of the project,
together with evidence of a desire to work coopera­
tively with the consultants, made choice between
the two firms difficult. Selection was finally made
of the firm whose capacity to perform the task
was enhanced by greater resources and richer
experience.
Further in response to question (a), the selected
firm stated that, in order to carry out their method
of developing a plan for the building, they would
require a full, written statement from the con­
sultants covering details of the character of the
program. This statement was to give information
on:
1. Its philosophy and objectives;
2. Nature and size of the membership to be
served;
3. Characteristics and number of patients ex­
pected to emerge from the membership;
4. Type and scope of services to be provided;
and
5. Types and numbers of professional and other
personnel w ho would provide the services.
The architects also were interested in studying
the physical facilities already in use by compa­
rable programs, such as the Health Insurance Plan
of Greater New York, the Kaiser Foundation
Health Plan in the Western United States, and
others.
In specific response to question (6), the selected
firm stated that the two senior partners of their
organization would develop the plans from con­
cept through final drawings. Otherwise there was
no essential difference between the responses to
question (-) by the two nearest competitors for
selection.
On the basis of the forementioned, the consul­
tants recommended to the board of trustees of
CHF that one of the architectural firms be selected
to design and plan the medical center, and the con­
tract was so awarded. The preliminary architec­
tural work was begun in July 1962. Full contract
was approved by the board of trustees on October
22, 1962.
Consultants’ Description of Project
In accordance with the architects’ request for a
written statement, the consultants prepared a de­
tailed account of the project:
Relationship Between Recipients and Pro­
viders of Service.—The recipients of the medical
services were to be members of a prepaid health
plan which would own the physical facility and
its equipment and employ the administrative and
ancillary personnel. The membership was expected
to comprise approximately 8,000 families (25,000
persons) residing within a geographically defined
area whose boundaries were near enough to Uni­
versity Circle to permit convenient access.
The providers of service were to be physicians
and ancillary personnel. The physicians were to
be members of a professional group who must an­
ticipate the health needs of a population enrolled
in a comprehensive program, assume contractual
responsibility to provide and organize such health
services, and direct the continuous operation of
such comprehensive care.
Relationships Among the Providers of Serv­
ices.—A core of full-time physicians was to be
organized into a medical group with doctors in all
major specialties: Medicine, pediatrics, obstetrics­
gynecology, and general surgery. Their services
would be supplemented by part-time physicians in
certain specialties, who would come to the center
to see patients referred to them by the full-time
doctors. Care in rare specialties would be provided
through referral of individual patients to recog­
nized specialists in the community. Each family
in the membership would have a personal physi­
cian in the department of medicine. Each child in
member families would have a personal pediatri­
cian within the medical group. In addition, the
services of all doctors at the center would be avail­
able to each member through consultation and
referral by his individual physician.
 The income of the physician of the medical
group would not depend upon the volume of the
service he would perform.
Sources of Financing the Construction of the
Physical Facility.—Construction of the center
was to be financed through:
1. Long-term loans from several labor-manage­
ment welfare funds;
2. Outright grants for planning from certain
participating unions;
3. In a modest amount, by sponsorship of a
substantial number of potential members;
and
4. Loans from commercial sources.
Sources of Revenue for Operating Costs of
Program.—The main source of revenue for oper­
ating costs was to be a set prepaid monthly fee
covering membership of each participant in the
health plan.
Scope of Services.—A broadly comprehensive
program of services would be available to members
from the start. This would include care for acute
conditions, continued care for chronic illness,
provision of such preventive care as periodic phys­
ical examinations, vaccination, and other im­
munizing techniques. Social service, public health
nursing, and health education would be provided.
Patients who had special requirements such as re­
habilitation services, psychiatric consultation,
nursing home care, or other services not covered
by prepayment would be referred to community
sources, but responsibility for the long-term ob­
servation and guidance of such patients would
remain with the patient's personal physician
within the medical group. It was anticipated that
after 2 years’ experience in operating the health
plan, dentistry, psychiatry, and organized home
care services would be developed as integral parts
of the comprehensive program.
Organisation of Services.—The building must
provide space for three major types of function:
1. Professional services directly to patients:
The number of physicians planned for each
department was given in detail.
2. Ancillary services: A laboratory must be
available within the center, where ordinary
procedures including electrocardiography
would be performed. For certain less com­
mon procedures, specimens would be drawn
in the center’s laboratory and sent to other
facilities for processing; a few special tech
295-802 O—58------4
niques would require sending the patient to
other laboratories in the community. X-ray
services would be similarly divided between
those provided at the center and those for
which patients would be referred elsewhere.
A pharmacy within the center would use a
formulary in order to achieve economy in
the cost of prescribed drugs. A department of
social service must provide for private con­
sultation. There must be an office where mem­
bers and prospective members would be able
to obtain information on enrollment, eligi­
bility, and coverage; a public health nursing
office, and a health education department
which would arrange lectures and discussions
on health and hygiene among its other in­
formational activities. The extent of physical
therapy to be provided was an open question;
decision as to space and equipment was
deferred.
3. Centralized and administrative functions: A
reception center was to be provided at the
main entrance. An appointment office was to
maintain all doctors’ schedules. It would re­
ceive members’ requests for appointment tele­
phoned from outside the center. It would also
receive calls over telephones installed for this
purpose in each appropriate department with­
in the center. Patients would be invited to use
these telephones to call for the next appoint­
ment with their physicians before leaving the
building after office visits. A medical records
office would be maintained. Office space must
be planned for membership eligibility rec­
ords, central bookkeeping, central telephone
switchboard, and other administrative and
clerical functions. Only a small library for
medical books and journals would be required,
since it was anticipated that the center would
be built within a short distance of the Western
Reserve University Medical Center, which has
one of the outstanding medical libraries in the
country.
After this rough outline of the program and its
space needs had been studied by the architects, they
met with the consultants on numerous occasions to
discuss such preliminary matters as the concept
and philosophy of a center that would house—
and express—the Community Health Foundation;
the construction budget; the size of the building
(ultimately settled at approximately 25,000 square
feet); and the desirable features of a site.
41
 Detailed information on these matters, and on
the approach to them, is given by the architects in
their section within this chapter. In addition to
such concerns, it was important that the plans for
the center should obtain the advance approval of
the University Circle Development Foundation,
which was received in December 1N62. The area of
Designing the Community Health Foundation Center
By Robert A. Little and George F. Dalton
Architects, Cleveland, Ohio
WHAT IS DESIGN 7
The successful design of anything depends on
two activities: analysis and synthesis. To construct
a toothbrush, a chair, a health center building, or
a city, the designer must first analyze to the last
detail the needs that are to be fulfilled by the object
he is designing. Second, he must synthesize the ful­
fillment of these needs into the form that the object
will take. The success of the result depends on the
degrees to which the processes of analysis and syn­
thesis are carried. This maxim is so deceptively
simple in appearance, and is so often overlooked,
that it is well to consider its application to a famil­
iar, uncomplicated object; for example, the design
of a chair to be used by a physician in his office:
First, Analysis
The designer must analyze the need that the
chair is to fulfill in terms that are practical as well
as esthetic, and above all, comprehensive. What is
the chair to be used for—for working, reading,
writing, sitting back, and relaxing? Should it roll
on the floor, on a carpet? Should it be light to lift,
heavy to stay in place? Should it be constructed so
that it can be stacked for storage? Should it be
easy to clean, able to take hard usage, easy to repair
or refinish? Should it be bright colored, sombre?
Should it look conservative and leisurely, or effi­
cient and clinical ? What should it cost ? How many
will be produced ? The process of design analysis
goes on until every requirement for this chair is
DESIGN OF THE COMMUNITY HEALTH FOUNDATION CENTER
The design of the Community Health Founda­
tion Center went through the logical, sequential
processes of analysis and synthesis outlined above.
Its eventual degree of success as a building would
depend on how well the processes were thought
through by all persons involved. A review of these
the site selected for the center was 40,000 square
feet. The price of the land was $140,000.
Because the contribution of the architects se­
lected was highly pertinent to the development of
plans of this nature, they were invited to state their
approach to the problem that was presented to
them by the consultants:
understood, evaluated, and stored in the mind of
the designer.
Second, Synthesis
In the full awareness of all requirements, the de­
signer then lets his creative processes take over, to
bring these multifarious needs together in his
thinking, and thus produce a design for a chair.
We will consider the human being who will sit in
the chair—his size, weight, motions as he reads or
writes or turns to talk with his patient. The de­
signer will consider the performance, cost, weight,
and appearance of dozens of materials and many
methods with which to build the chair. He will
try scores of shapes of back and arms, legs and
casters; he will sketch, detail, measure, test, sam­
ple, and weigh them; estimate their cost; visualize
them in color, texture, line, and form. He will
eventually arrive at his design for the chair. The
design will be his synthesis of the requirements
plus his knowledge of ways to meet the require­
ments, plus his creative ability.
The degrees of intelligence, intensity, and per­
sistence that enter into the design analysis will de­
termine whether an object or a building can hope
to be successful. The degrees of imagination, com­
prehensiveness, and taste expressed in the design
synthesis will determine whether the object or
building design will be successful.
processes may be of value for future projects of a
similar nature.
Analysis, Step 1: The Aims, or What Do We
Want To Do?
The consultants presented to us, as architects, a
partly written, partly oral, but very clear general
description of the broad needs and purposes of the
building. They stated that the center was to provide
health care for a group of 8,000 working men and
their families, approximately 29,000 people—care
of the highest quality, for the healthy as well as
the sick; care that was human, warm, personal,
and that provided the attention of the family
physician backed by the technical knowledge of
specialists. The building must be a smoothly work­
ing,'highly functional organism; but it would exist
only to serve people and must therefore be inviting
to the patient, comfortable for the employee, and
pleasant for the staff.
The consultants also presented us with their
considered views on budget, approximate location
desired, types of persons to be involved in the
health program, and some of their major concepts
on how the facility should operate. In describing
the basic purposes and functions, they suggested
the spirit and character of the architecture.
Analysis, Step 2: Detailed Program, or What
Spaces Do We Need To Do It?
In a series of meetings over several months, the
consultants and architects jointly worked out a
detailed list of the number and types of spaces,
rooms, laboratories, waiting areas, offices, toilets,
etc,, that would be required. These meetings were
accompanied by laborious outside research and
questioning. The resulting Program, of Needs was
then written by the architects, approved by the
consultants, and accepted jointly as the basis of
planning. To show the amount of information re­
quired by architects if they are to construct an
intelligent design, a copy of this document follows:
TOTAL PATIENTS
450
PHYSICIAN VISITS
50
MEDICINE PEDIATRICS
1 1
OTHER SPECIALTIES
{OS, GNY.. ETC.)
IM 100 100
<OP 360)
Program of Needs
1. Expected patient totals and distribution:
The total population to be served numbers ap­
proximately 25,000 persons. It is understood,
however, that as family size and age groups become
known the program needs may be somewhat altered
with respect to total size, and with respect to age
distribution within the population to be served.
Flexibility with respect to the affected figures is to
be borne in mind throughout all stages of design.
It is anticipated that about 450 patients will be
seen daily, accompanied by about 250 additional
persons. Below is a distribution breakdown of
these 450 patients as they relate to various depart­
ments and possible referrals to other departments.
Of the 250 guests, it is estimated that 100 will go
to pediatrics, and 150 will go to other scattered
areas.
2. Waiting facilities:
(a) Medicine, 18 chairs; (5) pediatrics, 20
chairs, one room for well and one for sick; (c)
other specialties, 15 chairs; (d) laboratory and
X-ray, 20 chairs; (e) pharmacy, 12 chairs.
These are anticipated maximum figures based
on a 7 hour day and on average lengths of visits:
(a) Medicine, 20 minutes; (ft) pediatrics, 12
minutes; (c) other specialties, 15 minutes.
3. Reception facilities:
(a) Central, one receptionist to direct all per­
sons to a specific department; (&) medicine; (c)
pediatrics; (d) other specialties (one girl in
each department to handle patients and phone
calls); (s) laboratory and X-ray.
ANCILLARY FACILITIES
70 LABORATORIES, X-RAY,
PHARMACY, ETC.
LABORATORY I X-fiAY PHARMACY PHYSICAL THERAPY.
INJECTIONS,
SOCIAL SERVICE
SO 25 15
70 *-»0
 There also will be waiting space requirements,
but without receptionists at the pharmacy and at
the business office.
4. Number of employees:
(a) Reception, five (one central and four
local); (ft) central appointment, three (possibly
four); (<?) P.B.X., one; (d) medical records,
two clerks (no desks), three typists, one librar­
ian; (s) business office, one administrator (in
office), one secretary, one business manager (in
office), five clerks; (/) laboratory, five tech­
nicians, one aide; (g) central supply, two; (A)
X-ray, two and one-half technicians; (i) phar­
macy, two pharmacists, 2 clerks; (;) physical
therapy, one; (&) nursing staff (medicine), one
nurse, three medical assistants; (?) nursing
staff (pediatrics), one nurse, two medical assist­
ants; (m) nursing staff (other), two nurses,
two medical assistants; (n) janitorial, one jan­
itor (day man), two cleaning people (after
hours); (o) social services, one social worker,
one public health nurse, one secretary.
5. Doctors:
(a) Medicine, 10 full-time physicians (in­
cluding dermatology and allergy); anticipated
that only eight will be present at any one time
although 10 rooms must be provided, one for
medical director of entire facility; (ft) pedi­
atrics, five full-time physicians; (s) obstetrics
and gynecology, two full-time physicians; (d)
general surgery, two full-time surgeons; (s)
orthopedics, two-thirds full-time person; (/)
urology, one-third full-time person.
6. Departments:
(а) Medicine, 10 consultation rooms—two to
be the office of the medical director, large
enough for five or six chairs. Fifteen examina­
tion rooms—including two special-purpose
rooms;
(б) pediatrics, five consultation rooms, eight
examination rooms—possibly ninth room for
injections;
(s) other specialists: (1) Obstetrics and
gynecology, two consultation rooms, three
examination rooms; (2) general surgery,
two consultation rooms, three examination
rooms, one minor surgery room; (8) ortho­
pedics and urology—area close to minor surgery
and X-ray, one consultation room, two treat­
ment rooms; (4) E.N.T., one consultation room,
two treatment rooms; (5) eye, one consultation
room, two treatment rooms;
(d) ancillary services: (1) E.K.G., one room
located near laboratory; (2) physical therapy,
small unit possibly with two or three treatment
cubicles and minimum exercise area; (3) lab­
oratory, about 300 square feet of area; (4) cen­
tral supply, centra] sterilizing of all instru­
ments, etc.; (5) pharmacy, formulary size; (6)
X-ray, two radiographic rooms, darkroom, light
room, radiologist’s office, film storage area, and
technician's space; (?) social services, one room;
(8) public health nursing, one room; (9) health
education, one room;
(s) conference room, to handle 20 to 25 peo­
ple and incorporating a small library;
(/) appointment center, central;
(§) medical records, space for possible 25,000
records and 15 percent annual turnover; verti­
cal-file type storage based on six to eight files
per inch;
(A) switchboard;
(i) central eligibility records, card files;
(?) other administrative activities; offices for
administrator, business manager, secretary and
clerks, plus money-collection and waiting areas;
(&) Community Health Foundation offices,
two offices and space for two secretarial per­
sonnel; space may ultimately be used for den­
tistry and might be so placed to perform this
function when needed;
(?) kitchenette and lunchroom, small;
(m) storage, central; about 5,000 square feet.
7. Air conditioning: Entire building to be air
conditioned.
8. Room sizes:
(a) Examination rooms, to house examina­
tion table, treatment stand, small sink, and a
chair; 8- by 10-foot size was suggested and a set
of plans from a previous installation was left
with us; however, it was agreed that this would
be studied considerably before any size was
agreed upon; (ft) consultation rooms, sized to
house doctor plus two to three people; medical
director’s office should be sized to handle a con­
ference with six people.
Not shown in this program of needs are in­
numerable points that came up in oral discussion:
the number of coffee breaks employees will take,
the best height for a child’s drinking fountain,
whether one type of autoclave is better than an­
other, whether a blue ceiling will help quiet a
crying baby, the desired decibel level for the air-
conditioning equipment. Finally, the program is
generally understood, established, and agreed
upon. The most important part of the consultants'
analysis is complete: They have stated their
needs—and the architect hopes he has asked the
right questions!
Analysis, Step 3: Site Study, or Where Shall We
Build?
While the program of needs is being pounded
and argued and reasoned into shape, another an­
alytical activity is taking place: the search for
land. The consultants have decided upon the part
of the city that they consider best to serve the 8,000
families. Now that the architects know the basic
requirements, approximate floor area, and parking
area required, they can recommend a site.
The consultants find several sites within a mile
of the desired location and financially within rea­
son. The design analysts get down to detail: What
are the pertinent zoning boundaries, bus routes,
plans for future freeways, traffic patterns, land
values, nearby hospitals, slum-clearance plans?
Will level or sloping land be better for this build­
ing? How many visitors will come by bus, how
many by automobile ? Will the vibration of heavy
trucks upset a delicate instrument? What about
utilities, type of soil, noise, dust, weather, smog?
From which street will most patients approach the
center? Can you get in and out easily in rush-hour
traffic? Is a prestige location important? Where
will the snow drift? Are there any good trees to
save that would provide shade? Can we get good
north light for the offices ?
The architects visit each site at different times
of day to check these and many other factors. Fi­
nally, they recommend a site and the owner buys
it. An engineer surveys it, locating every physical
factor that could conceivably affect the building:
Contours, trees, legal setbacks, gas, water and elec­
tric lines, sewers, and drainage. We now have a
program and a site. The analysis can conclude, and
the synthesis can begin.
Synthesis, Step 1: Designing an Organism
Buildings are for people. A building is merely
a cloak wrapped around the activities of many
people doing many different things. How do they
move? How many, how fast, how often? In what
directions do they move? Where do they walk,
stand, or sit? What machines and equipment do
they use; how do they use them? Sick and well,
patients and doctors, receivers and givers, the peo­
ple are alive; they are an organism; they are
biology. Their building will be morphology. If we
can construct a flow chart of how people will come
to this building, enter it, use it, and leave it, we
should be able to translate the diagram into a
structure that can be drawn, then built
Figure 1 is a flow chart that was made to show
what this building should do. The building is a
place of exchange between two groups of people:
One group (subscribers to the Community Health
Foundation) comes to receive medical help, the
other (doctors and staff) comes to give that help.
Reading the flow chart, from left to right, we see
people (subscribers) come to the building by car,
bus, taxi, or on foot. They enter, and all must pass
a single control point “C”. Some may be directed
to the pharmacy, the Community Health Founda­
tion office, or administration offices. Along the way,
they may have to wait The building must be
serviced and supplied; various things must, be
delivered and stored.
Most of the subscribers, however, come to see a
doctor or to receive medical help. These continue
past the control point and arrive in the center of
the circle at right. This circle is the key to the
architectural plan that will follow. The subscribers
are now at the hub of a wheel. The doctors are
around the perimeter. The subscriber may move
out from the hub, along any of the spokes, toward
the help he needs. The basic plan is designed to
permit the subscriber to come to the building, enter
the ring, check at the control desk, wait if neces­
sary, go to the examining room, and receive medical
attention, with the mathematically calculated
minimum of travel and interference. Meanwhile,
doctors and staff can communicate around the ring
without crossing the traffic lines of the subscribers.
Thus, the building plan expresses the basic func­
tion of the center, which is to provide an ideal
relationship between the maximum ease of opera­
tion, privacy, and comfort, for the subscriber, and
economy, convenience, and efficiency of the staff.
In order to translate this ideal into a structure
on a piece of flat land at the corner of two streets
in Cleveland, we must set aside the organism for a
while and consider these two streets and the site as
a whole.
Synthesis, Step 2: Factors of the Site
A building design grows from the inside out, but
also from the outside in. Certain aspects of a build­
ing's form are determined by what happens inside;
certain other aspects are conditioned by the site.
Figure 2 shows the site selected for the Community
Fiauu 1.—Diagram showing flow of truffle through Orriantl Ilrolth Foundation.

Fioubk 2 Site for CHF.

Health Foundat ion s center, as seen in a bird's-eye
view from the south, and indicates how some of its
features affected building design.
The land is flat, A major, heavy-traffic avenue
at the right makes that approach too noisy to face
upon, too dangerous for an entrance drive. Yet
the view of the building by approaching motorists
is important: It affects the ease with which the
building can Im* found, and the imprearion that the
building will make on the viewer and its contribu­
tion to the urban scene. The dome in the diagram
represents the conditions of sun and shade for
different, seasons and times of day at this latitude.
These conditions will affect the location of rooms,
position and type of windows, sheltered areas, and
planting. Similar consideration is given to views
from within, noise, winter and summer winds,
neighboring buildings and land, and the appro­
priate visual character for this institution on this
piece of land. Because the site is small, it will Im*
difficult to find adequate parking space.
I'invHK a.- KynthrnlH of building and »it« of CHF.
Many hours of the designer’s time are given to
weighing, interrelating, exploring, sketching, and
finally synthesizing these factors into a mental
picture of the future building.
Synthesis, Step 3: Organism Plus Site Equals
Basic Plan
The synthesis achieved by joining the organism
and the site. Io the maximum advantage of each,
is indicated in figure 3. People will enter from
the quiet street and go to the center of the site.
On the ground floor they will go first to the control
desk: thence they can pass directly to the adminis­
trative offices or pharmacy. A separate function of
the plan, a dental department, was envisioned at
this early stage as completing the ground floor (as
will ln> noted later, provision was made during
construction for a possible alternate use of this
area). Services and deliveries will come from the
roar (indicated by the truck).
But how can we produce the ideal wheel arrange­
ment, with sulwcriljers entering at the hub, doctors
and staff working from the rim? If we put this on
the ground, subscribes going toward the huh must
interrupt communications among the staff around
the rim. By putting it up in flu
* air, we can bring
wutacribera into the huh from below, and the pro­
fessional offices and corridor can encircle the wait­
ing space.
This ring arrangement also provides flexibility
in allotment of space to the various specialties:
The ancillary services may be grouped along one
side: the major specialties, around three sides of
a horseshoe, leaving space toward the end of the
third side for special-purpose treatment rooms. If
one specialty proves to require more space than
foreseen, it can expand around the ring while ad­
jacent departments contract.
Raising the wheel will also leave space beneath
for parking. Thus the l>asic architectural idea will
provide a simple solution to three fundamental
problems: Separation of patient from professional
traffic, parking, and flexibility of space.
Synthetic, Step 4: Basic Plan Become
*
Building Form
After the basic concept has liven established by
the architect, detailed planning begins. Architects
and consultants discuss hundreds of problems of
structure, materials, mechanical and electrical
equipment, lighting, furnishing, colors, finishes,
hardware, planting. The architect directs and co­
ordinates the team of specialists in structural and
mechanical engineering, lighting and equipment,
landscape and interior design. The degree of skill
and effort contributed by each member of the team
determines whether the building will function
properly in all details and whether it will be an
esthetic, visual, and sculptural entity.
The basic plan Ijecomes a building form (fig. 4).
Walls and columns, doors and parking spaces,
planting areas and sculpture begin to locate them­
selves through a sequence of adjustments of space
to function, structure to cost, color to material,
light to shade.
The first floor plan emerges in detail as a long,
narrow block (fig. 5) under the overhanging sec­
ond floor. The building is entered from front or
back (arrows), with easy access from protected
parking between columns under the overhang­
ing second floor (dotted line). Every visitor must
pass the circular reception desk, from which
pharmacy, administrative offices, and dental clinic
are easily readied.
During construction, it became apparent from
the interest that was being expressed in member­
MMU Office
Figure 5.—First floor plan.
ship and from the age-group distribution of the
prospective membership, that it might eventually
prove necessary to put the department of pediat­
rics into the space here allocated to the dental
clinic. If that should prove necessary, the dental
clinic would be housed outside the center. To allow
for later choice between these alternatives, the
area designated “dentistry” in the first floor plan
(fig. 5) was supplied with two sets of plumbing:
A central set to fill the needs of a closely grouped
complex of dental offices, and a peripheral set to
serve pediatric examination and treatment rooms.
Nearest to the visitor at the reception desk are
stairs and elevator to the principal, or second,
floor above (fig. 6). On the second floor, the wheel
FHT FLOOR HJW
 MEDICINE DEFT.

ANCILLARY SERVICE*

matt wa "-an

Figure 6—Second floor plan.

with its essential hub, spokes, and rim has now be­
come a, series of efficient rectangular spaces. The
subscribers have access to these spaces from the
center; the doctors and staff have offices, examin­
ing and treatment rooms, equipment and supply
areas around the rim with unimpeded intercom­
munication along a “professional corridor/’
The central core has four waiting areas, for med­
icine, specialties, pediatrics, and ancillary serv­
ices. Desk and furniture in each waiting area are
of a distinctive, bright color so that subscribers
can be easily directed from the control desk down­
stairs. Each waiting area is controlled by its recep­
tion desk, which is the link between patient and
doctor. In addition, a medical records office, a
snackbar, and staff rooms arc placed on this floor.
In the basement (fig. 7) is an area for the cen­
tral ap|M>intment carousel. Here, all doctors' sched-

Fioube 7.—Basement plan.
ules are kept and all appointments made. In
addition to receiving requests for appointment, by
telephone from outside, the carousel is connected
by an intercommunication system with special ap­
pointment telephones installed for patients' con­
venience in each department, where doctors serve
patients. Thus, patients can make succeeding ap­
pointments immediately on being requested to do
so, without having to traverse traffic lines within
the building. The basement also contains the doc­
Iff
BASEMENT PUN
tors’ library and meeting rooms, public health
nursing, social service, and health education offices,
the central telephone switchboard, the office of the
Community Health Foundation, space for data
processing, storage, and building maintenance.
After repeated study of all details concerning
spaces, people, machines, and materials, final draw­
ings are made, specifications are written, and a
building is built (fig. 8).
 Figure ft.—Air view of CHF from the tvuth.
SYNTHESIS INTO ARCHITECTURE
The final form that a building takes after anal­
ysis and synthesis depends upon the personal view­
point. and artistry of the designer. To put this com­
plex matter most succinctly, the Community
Health Foundation building grew from its needs,
expressed in terms that would fit it to the [>cople
who use and see it (fig. 9).
The building should suggest the dynamics and
humanism of the health care program that it
houses. It. should be a proper participant in its
community and surroundings not an arrogant in­
truder. It should not lie an essay on the latest ex
|>eriment in structural expressionism, or a con­
scious tour de force advertising its architect. It
should lie an organism, closely integrated in func­
tion and in form, and neatly clothed in its protec­
tive skin, like the human organism it serves. Its
appearance should suggest its content and purpose.
In this cose, it should say, as does William Mc­
Vey's sculpture at its entrance, “Care.
**
In summary, in selecting and working with
architects for projects of this type, the following
[mints may well lie lx>rne in mind:
1. The first criterion for selecting an architect,
should lie intellectual and creative ability to
perform the requisite analysis and synthesis.
Experience in this tyjie of laiilding should
be placed second.
L. Architects should be selected for their com­
prehension of the design process as a whole:
Building, interior, furnishings, landscape,
and graphic material.
3. Architects should lie employed as early as
[NMKiblr, certainly *la
fore final selection of
site.
4. Architects can work efficiently with a small
 Figure 9.—The Community Health Foundation (Muthwert view).
group of consultants who know the problem
comprehensively. Discussion with a large
group of doctors and staff would probably
have confused the design process.
ft. Architects in this case could plan efficiently
because a Program of Needs was thoroughly
worked out and written before tlie first sketch
was made. Deficiencies in the final building
(a cramped X-ray department, an undersized
snackbar) resulted from incomplete compre­
hension or inadequate statement of needs.
6. Architects, after receiving detailed require­
ments from the consultants, were permitted
unimpeded use of their analytical, creative,
and esthetic abilities. Consultants com­
mented, contributed, and questioned ex­
haustively, but never tried to restrict, or
direct the architects with respect to design.
It is the client's job to describe what he wants
to do with a building. It is the architect's job to
determine how to do it.
As is evident from the foregoing description,
the architects maintained throughout their rela­
tionship with the consultants continuous com­
munication on all general matters and details
affecting the building of the health center. From
the |>oint of view of the consultants, an important
additional factor contributed to the objectivity of
relationship lietween consultants and architects,
and helped to eliminate possible conflict of inter­
ests. Iliis factor was of particular value inasmuch
as the health program l>eing formulated was
owned by r variety of organizations: The rtm-
xultanfn maintained their role, consistently and
ejrelusirely throughout, ax representatives of the
oimers of the prospective building.
The architects suggested, and the consultants
concurred, that bids for construction be requested
from a limited number of contractors. The archi­
tects then furnished a list of contractors known
to them to lie competent to execute the structure as
planned. The contract was awarded to the lowest
bidder in J uno 1963.
Summary and Comment
Architects were selected from a limited number
of firms whose high qualifications in the field erf
medical facility design were acknowledged in the
community.
Before the consultants interviewed any firm,
they worked out objective criteria for determining
which firm could Ire expected to prove most sensi­
tive to the special nature of thia program. All
interviews were then conducted according to a
uniform plan enabling the consultants to estimate
fulfillment of these criteria.
The most important criterion for selection was
considered to lie comprehension of the program's
philosophy and the relation of this philosophy to
design of the center. The second most important
criterion was held to la> the architectural firm's
ability as demonstrated in previous work.
 The architectural firm selected impressed con­ The objective relationship established by re­
sultants by its approach to the planning and by the stricting the consultants' role to representation
seriousness of its intent as indicated by the full of owners enhanced their effectiveness in the
participation of the two senior partners. planning.
 Chapter IX
LEGAL FRAMEWORK AND
CONTRACTURAL RELATIONSHIPS
It was essential to the success and stability of
the project that each element in the developing
organizational structure foster the basic purposes
of CHF. Fundamental to the attainment of this
goal was establishment of the total undertaking
on a basis of legal documents. The construction of
these documents, and adjustment of interrelation­
ships between their elements, proved to be
intricate matters entailing a wide range of
considerations.
Three basic instruments were developed: The
membership contract, the medical service agree­
ment, and the physicians' partnership agreement.
The membership contract was a statement of the
responsibilities assumed by CHF for the medical
and hospital care of its prepaying members. Since
the board of trustees of CHF was not to engage
in medical practice, it could not directly discharge
those obligations. As stated in the introduction
to the membership contract, "In order to provide
the advantages of organized and planned medical
and hospital services and of group medical prac­
tice, Community Health Foundation operates on
a direct-service, rather than an indemnity, basis.
To this end, Community Health Foundation, on
behalf of its members, contracts with physicians
and employs health and administrative personnel
to provide, organize, and arrange the health ser­
vices described in the attached benefit schedule."
Thus, in order to discharge the responsibility
that the trustees were planning to assume under
the membership contract, CHF had to do two
things: It had to obtain the services of physicians
who would be accountable for the rendering of
all health services that would be needed by the
enrolled population; and it had to insure the avail­
ability of ancillary personnel who, with the phy­
sicians, would form a team responsible for the
delivery of the health services. The doctors in turn,
in order to provide a basis that would assure con­
tinuous and consistent service, had to establish
some form of organizational structure that would
warrant their stability as a group.
Most of the problems that arose in working out
the interrelationships among these contracts
stemmed from the necessity to clarify concepts of
responsibility and liability. From the point of view
of the planners' concern for the members, it ap­
peared desirable that CHF and the medical group
assume maximum responsibility for the health
care of the subscribers. But with the best of will,
if the program was to remain viable, it obviously
had to set limits on its degree of liability. The
planners sought to bring these two pointe of view
into working adjustment.
Membership Contract
The contract bet ween the CHF board of trustees
and the enrolled members was the cornerstone upon
which all other documents, and the framework of
the organization as a whole, were to rest. It was
essential that this paper reflect the philosophy of
the organization, that it delineate the organiza­
tion’s obligations to members, and that it indicate
the manner in which those obligations were to be
discharged.
The fundamental characteristic of CHF was its
use of prepaid funds to organize and provide
health care services. Such a blanket responsibility
could not be undertaken without specifying the
manner in which those benefits were to be rendered.
The membership contract must therefore state in
detail the forms of care that would be organized,
who would discharge them, where they would be
given, and how members could obtain them not
only during the usual office hours but also during
evenings, Sundays, and holidays.
To the reader who is not familiar with the basic
difference between this type of prepayment plan
and other forms of health insurance, the inclusion
of such details in a membership contract may ap­
pear unduly restrictive. When the basic distinction
between this prepaid health care program and in­
demnity plans is considered, the necessity for in­
clusion of such particulars becomes clear. In other
forms of health insurance, the enrolled subscribers
are themselves responsible for securing their own
medical care, the insurer limiting its obligation to
payments of moneys, according to prearranged
rules, for those services that have been so secured.
Contracts covering that type of obligation deal
with little more than the dollar limits of the insur­
ing organization’s accountability. A prepaid
group-practice program organizes and renders
services covering the total spectrum of its subscrib­
ers’ needs—from prevention of disease, routine
examinations, and obstetrical service to highly spe­
cialized diagnostic, medical, and surgical pro­
cedures needed by patients with chronic, acute, and
emergency illnesses.
Nor is the definition of responsibilities under a
group practice prepayment plan confined to the
initial framing of its membership contract. Clari­
fication of accountability is the daily concern of
such an organization throughout its existence. The
question, “How can the health needs of this popu­
lation be met most effectively ?** arises constantly.
It is, indeed, this problem to which the total team
devotes its major attention so long as such an
organization retains its vitality and remains true
to its basic objective.
Nevertheless, in the primary framing of the
membership contract the question of responsibil­
ity assumed another dimension: The document
must clearly state that the organization would be
responsible for the health care of its members, yet
appraise and define the extent of the foundation’s
liability, since any of numerous circumstances
might at any time make it impossible to provide all
necessary health services to members.
An example of such a circumstance could be
discriminatory practices by hospitals against phys­
ician members of CHF, which might make it im­
possible to secure hospital beds for sick members.
The particular handicap with respect to hospital
privileges that might, devolve upon a new group
practice organization in Cleveland, as it had in
other cities, is discussed in chapter IV. Although
CHF was assuming responsibility for payment for
hospitalization, and presumed that its physicians
would make a maximum effort at all times to find
a hospital bed when needed for a sick member, it
was essential to the survival of the program that
CHF be protected from litigation if a hospital bed
were not available when needed.
The dilemma of nonavailability of a hospital bed
had been met by other types of insurers in other
ways. Thus, Blue Cross of Northeast Ohio, which
does not assume accountability for provision of
services, makes allowance for this exigency by the
following statement in its membership contract:
If all bcda of every cl&asiflration in all member hospitala
are filled at the time, Blue Cross will refund to the sub­
scriber a sum equal to twice the amount of the annual
subscription fees for this contract, and the subscriber
agrees to accept said sum as liquidated damages in full
and final discharge of the obligations and liabilities of
Blue Cross and of each and all of the member hospitals.
The Michigan Blue Cross contract retains the
following section:
If a member cannot obtain admission to participating
or nonparticipating hospitals, the Service Association
may refund subscription rates to the subscriber in an
amount not to exceed $65.00, for the expenses of nursing
and other servicesand supplies, restricted to the equivalent
of hospital care, made necessary by the illness or injury,
and such refund shall be full satisfaction of all obliga­
tions of the Service Association and the participating hos­
pitals to furnish hospital service hereunder for the dis­
ability for which admission was sought; provided, how­
ever, that If the admission sought is for care of contagious
or epidemic disease, or injury or disease due to enemy
action, the Service Association and the participating hos­
pitals shall be under no obligation or liability hereunder.
Since the Blue Crees organizations were insur­
ing solely against the costs of hospitalization, their
concern related only to the inability of an insured
member to secure a hospital bed through his own
arrangements. Their responsibility was solely fis­
cal; when, because of circumstances beyond the
organization’s control, an insured person was un­
able to secure a specific benefit for which the in­
surer was liable under the contract, the organiza­
tion’s responsibility could be discharged by simple
reimbursement of cash. It was clear to the planners
of CHF that, in a similar event under the group-
practice prepayment program, the responsibility
of such an organization to its members could not be
satisfied by a mere cash refund.
Maximum Effort Concept
The CHF consultants adopted a basic policy for
application to this juncture should it arise, and to
all problem facets of organizational structure,
work rules, and management procedures: In all
*
area of responsibility, maximum effort would be
exercised by the total team to meet the health need*
of the membership. The specific efforts that would
be made were spelled out in the membership con­
tract wherever possible. The specific obligation to
provide hospitalization, for example, was stated
in the membership contract as follows:
B. HOSPITAL CAKE
1. Admission to a Hospital. Physicians arrange for
Hospital admissions of Members whose Illness or injury
requires Hospital services. In the event that admission
to an appropriate Hospital cannot be promptly arranged,
Physician shall continue the care of the Member at home
and in the Medical Office, while Physician and CHF staff
exert their best efforts to arrange for appropriate
hospitalization.
The following statement was included in the sec­
tion on “Exclusions and Limitations
L Circumstances Beyond CHF's Control. In the event
that, due to circumstances not reasonably within the con­
trol of CHF, such as the inability of Physicians to ar­
range admission of a Member to a Hospital • • • neither
CHF, Medical Group nor any Physician shall have any
liability or obligation on account of such delay or such
failure to provide services.
For more detailed study, the membership con­
tract is reproduced in full in appendix 1.
Medical Service Agreement
In planning for a relationship with the physi­
cians that would enhance mutuality of interest be­
tween the physicians and the board, efforts were
directed to the following objectives:
1. The board of trustees was to be assured that
it could discharge its responsibilities to the
CHF membership.
2. Mechanisms were to be established that would
foster cooperation between the board and the
physicians without compromising the inde­
pendence of either party.
3. The physicians were to be assured that lay
persons would not interfere with medical pro­
fessional matters.
4. The physicians were to be satisfied that they
would have the full, unqualified support of
the board in establishing medical service of
high quality.
Basic to any decision with respect to the rela-
295-902 O—08-------- 5
tionship between the board and the professional
medical staff was the answer to the question, “In
what framework is the physician likely to identify
his interest, to any significant degree, with the in­
terest of the prepaid population?” The board of
trustees, a lay body, could not directly control the
availability and quality of the medical practice on
which they were to depend. That was, and must
remain, a function of physicians. Yet, in order to
meet its obligations to members, the board must
satisfy itself that the physicians who would pro­
vide medical services would be amply motivated to
maintain ready availability and high quality of
care. The consultants therefore analyzed, from this
point of view, the differences of motivation arising
from employment of physicians on the one hand,
and from contracting with a medical group on the
other.
1. A contractual relationship between the CHF
board of trustees and a medical group with
the independent status of a partnership or as­
sociation., rather than the employment of phy-
scians, was deemed suitable for CHF for a
number of reasons.
The consultants recognized that physicians are
employed by several prominent group practice or­
ganizations in the United States, including the
Mayo Clinic, the Henry Ford Hospital, and The
Cleveland Clinic. However, the purposes and op­
erating conditions of these groups differed in sig­
nificant ways from the circumstances contemplated
by CHF. In contradistinction to the position of
the CHF board of trustees, which was direct rep­
resentation of the interests of the) subscribing
membership, the directing boards of the older or­
ganizations only remotely represented the consu­
mers of the medical care given in those institutions.
The prestige of the older organizations was asso­
ciated with a high degree of specialization. The
major portion of their practice was referred, fre­
quently from great distances; before and after the
patient’s visit to such an institution for specialized
diagnostic and therapeutic procedures, his day-to-
day and year-to-year care was at the hands of his
personal physician. Like the personal physician in
solo practice, the CHF physician might occasion­
ally refer a patient to a specialty clinic for specific
procedures, but the bulk of the group’s practice,
and its sustained concern, would be centered on the
lifelong, total health of the subscribing population.
It cannot be too strongly emphasized that, in the
final analysis, the pattern of practice in any medi-
57
 cal institution inevitably reflects the interest and
motivation of the physicians involved. The en­
vironment created by an employer employee rela­
tionship did not appear conducive to developing a
warm, continuing interest on the part of the physi­
cians in maintaining the health of the plan's mem­
bership. The explicit objective of CHF—total
health care for members of a prepaid healt h plan—
could be accomplished only if physicians fully
identified with this aim would organize services to
meet both the day-to-day and the specialized medi­
cal needs of such a population.
Finally, it was essential that the CHF board re­
spect the traditional position of the ethics commit­
tees of local and State medical societies and of the
American Medical Association toward employed
physicians. To have ignored this negative attitude
would have been to invite such problems as diffi­
culty in recruitment of doctors and in obtaining
hospital privileges.
All of these factors contributed to the conclusion
that an independent medical partnership or asso­
ciation, under cont ract with the board of trustees,
would provide the best basis for the CHF program.
The question arose, whether the board would limit
itself to contracting with one such group, or might
encourage the development of several. The decision
in this regard, and the reasoning on which it was
based, were as follows:
2. The board of trustees would contract with
only one medical group in the Cleveland area.
The general design of the CHF program called
for the evolvement of neighborhood health cen­
ters, each to serve approximately 30,000 members.
A center of the requisite size would be large enough
to utilize a staff representing all basic medical spe­
cialties, and the number of doctors required would
be sufficient to make weekend and holiday cover­
age less burdensome than in smaller units. Such a
center could thus give satisfactory service to mem­
bers, provide a stimulating professional atmos­
phere, and nurture a friendly association among
staff members.
The CHF board expected an increase in mem­
bership, and expansion of geographic range, over
time. Thus anticipating several centers, the plan­
ners had to decide nt the outset whether the con­
tract with the initial medical group should limit
that group’s participation in the program to the
staffing of a single medical center, or should state
that CHF would contract only with that group
in the Greater Cleveland area, and would encour­
age its expansion to staff future units.
Each of these two patterns was exemplified in
existing practices with different historical back­
grounds. The Health Insurance Plan of Greater
New York contracts with more than 30 independ­
ent medical groups to serve its membership. The
Kaiser Foundation Health Plan functions in four
west coast, (and Hawaii) regions, in each of which
a single medical group is solely responsible for
the professional services to members throughout
a wide geographic area.
In envisaging the future development of CHF
services, a number of disadvantages were foreseen
in the formation of more than one medical group
for the membership within the Greater Cleveland
area. Problems of jurisdiction and area franchise
would almost inevitably arise and hamper effective
regional planning. A multiple group structure
would fail to utilize one of the most beneficial con­
cepts that has evolved in the practice of modem
regional medicine: the integrated medical team,
working with integrated facilities.
If a parallel and independent medical group
were to be established for each new center, the
same amount of effort in organization and recruit­
ment of staff would have to be made in each new
instance, as for the initial center. This would not
only be expensive in itself, it would raise the ob­
jection among the existing group that funds were
being diverted from its operation to set up new
units elsewhere. It also would complicate the prob­
lem of leadership among the doctors. The only
opportunities for utilizing physicians who might
manifest leadership potential within the initial
group would be through replacement of existing
leaders or, as new groups were scouting for staff,
through raiding existing partnerships. To wait for
a leader to retire or resign is deadening to initia­
tive. To invite raiding appeared likely to be detri­
mental to stability and morale, to prejudice the re­
lationship between the board and the medical
groups, and to interfere with wholesome coopera­
tion among the groups.
If, instead, a single medical group were to be
given responsibility for the total area, growth of
the program would probably be looked upon as an
advantage to the medical group as much as to the
founders. The increase in membership and the
ability of the total organization to develop a
broader spectrum of specialized services and ade­
quate facilities for diagnosis and treatment would
serve the economic and professional interests of
the physicians. Growth demands leaders. Expan­
sion of a single group to cover increasing size
and additional units would encourage the whole­
some expression of emerging leadership among the
physicians.
The consultants and the individual doctors who
were interested in joining the incipient group con­
cluded that few, if any, advantages lay with a con­
tract that would restrict it to one center, and that
a number of gains might be secured by forming a
single group to serve all members of the prepaid
plan throughout its ultimate growth in the Greater
Cleveland area.
3. The medical service agreement would contain
specific provisions to promote quality of
medical care.
It was recognized that standards of quality for
a professional group could not be effectively im­
posed by the board. A medical group, to maintain
its vitality, must promote an atmosphere of self-
development under self-supervision. With this in
view the medical service agreement stipulated that
the medical group was to maintain techniques for
assuring a high quality of medical care for mem­
bers of the plan, and that it should file with the
board of trustees a description of such procedures.
Should the medical group at any time change these
procedures, a statement describing the change and
outlining the new practices must be filed with the
board. Such statements were to become perma­
nent exhibits of the medical service agreement.
In addition, the medical group and the board of
trustees were to form a joint committee whose
responsibility would be the development of mutu­
ally acceptable approaches to periodic appraisal
of member satisfaction, availability of service, and
quality of medical care. A report would be issued
annually, describing the appraisals of these factors
that had been conducted during the year.
A provision in the medical service agreement
that later proved to be of vital importance was that
the schedule of hours during which the medical
center (s) would be open could not be changed
without the approval of the board of trustees; fur­
ther, if the board should find that the hours are
inadequate, it may raise this issue to the medical
group, which must provide a satisfactory answer.
As an important ingredient of the processes in­
tended to encourage cooperation between the doc­
tors and the board, it was explicitly agreed that
revisions in the membership contract and all pro­
motional enrollment material to be given to poten­
tial and actual subscribers would be presented to
the medical group for review, suggestions, and
approval. Similarly, as will be shown later, the
CHF board was to review and approve arrange­
ments among the physicians as they might affect
the continuity of care, development of adequate
professional leadership, fulfillment of appropriate
responsibilities, innovations, quality of patient
care, and equitability of relationships. The finan­
cial statements of CHF and of the physicians'
organization were to be open to mutual inspection.
At all pertinent points, an open exchange of in­
formation was to prevail. The financial relation
*
ship between the CHF board and the medical
group has been touched upon in chapter VII. Its
evolution will be shown in detail in chapter X
4. The board of trustees would maintain re­
sponsibility for employment of ancillary
personnel.
The issue was raised whether the board would
expect the physicans to employ the nurses, admin­
istrative, clerical, and other ancillary personnel,
or would itself assume responsibility for the pro­
vision of such assistants. Both approaches have
precedent. The various medical groups under con­
tract with the Health Insurance Plan of Greater
New York independently employ their own sup­
porting personnel. Within the several regional or­
ganizations of the Kaiser Medical Care Entities,
both approaches have been taken.
To satisfy a basic theme of the developing CHF,
sharing of responsibility by the board and the
physicians for the long-term success of the pro­
gram, and to provide the doctors with all reason­
able assistance that would facilitate a smooth and
rapid start, it was decided that the board would
undertake the task of employing the ancillary
personnel through an executive director. It also
was felt that if the board were not to assume this
responsibility, it might become so detached from
the total operation that it would not give full and
consistent support to the ongoing program.
In electing this alternative, the consultants took
into account the problems that commonly occur in
institutions whose employees have dual account­
ability and allegiance. It was recognized, for ex­
ample, that a nurse employed by the board through
an executive director also would have a close work­
ing relationship and, it was hoped, loyalty to the
doctors to whose service she was attached. The
only practical means of forestalling difficulties
that might arise out of such a dual relationship
was to develop throughout the organization an
atmosphere of cooperation, mutuality of interest,
and the pursuit of common goals.
For detailed study, the medical service agree­
ment is reproduced in full in appendix 2.
Physicians
* Partnership Agreement
For the same reasons that it could not directly
control the quality of medical care, the board of
trustees could not directly authorize the type of
association into which the physicians were to or­
ganize themselves. Nevertheless, it was incumbent
upon the consultants to satisfy themselves that
the conditions of that professional agreement
would be maximally conducive to the production
of a stable, yet progressive, professional organi­
zation whose framework would promote the doc­
tors’ interest in the success of the total CHF
program. Their deliberations on this issue may be
summarized as follows:
1. The board of trustees would expect the medi­
cal group to formulate a type of association
that would promote responsible leadership
within its ranks.
The CHF consultants were aware that the con­
templated program would probably grow to a sub­
stantial size, and would involve increasing respon­
sibilities toward members. A task of such magni­
tude could not be met without trained, effective
leaders. Since it had been recognized that the key
to excellence in medical care was necessarily in
the hands of physicians, and since it had been con­
cluded that the doctors were to have autonomous
status within the CHF program, the board needed
assurance that their contract of association would
be of such a nature as to foster the emergence of
responsible leaders. The consultants therefore
closely scrutinized the advantages and disadvan­
tages of the various approaches to officership in
existent medical groups.
In reviewing partnership and other contractual
agreements of various medical groups engaged in
prepaid practice, one finds wide variations among
the provisions for election of responsible officers.
At one extreme is annual election, which makes
possible a clean sweep each year. At the other is
long tenure in office, in some instances for the du­
ration of the officer’s life. Annual election estab­
lishes leadership without tenure. In order to
remain in his office, the elected physician must
have continuous popular acceptance among the
voting physicians. The CHF planners believed
that leaders so chosen would be encumbered in
efforts to maintain responsible management and
in long-term planning with projection for growth.
At the other extreme, officers entrenched for ex­
tended periods probably would tend to be unre­
sponsive to the changing needs of the medical
group or of the prepaid members.
Throughout their analysis of this and other
problems, it remained obvious to the consultants
that their commitment to the concept of an inde­
pendent medical group entailed cognizance that
the board must not dictate bylaws or constitutional
provisions to the physicians. If the consultants
were to shape the doctors’ agreement even before
the group came into being, they would be acting in
contradiction to the principle on which the long­
term success of the working relationship was to be
based. They therefore devised the technique of
presenting to the medical group, while it was in
the process of formation, a declaration of those
principles that were of legitimate concern to the
board of trustees, with the request that the
founders of the medical group take them into con­
sideration while drawing up their partnership
agreement. Among the principles so expressed was
the hope that the medical group would make possi­
ble opportunities for change in their leadership,
as well as stagger terms of office to provide for
tenure and continuance of managerial responsi­
bilities.
2.The general rules governing the distribution
of income within the projected medical group
would be of material concern to the board of
trustees.
The rules governing distribution of the medical
group’s income to physicians are important to the
entire future of a prepaid health plan. A poor
system of income distribution would endanger the
total working scheme. Once a fiscal system is estab­
lished, no change can be brought about short of a
revolution within such a medical organization.
Even though the original design may have been
faulty, any change brought about under pressure
is likely to benefit some to the detriment of others.
Among the many possible designs that could
have controverted the basic objectives of CHF was
compensation by the partnership to each physician­
member of the group on the basis of the number
of services rendered—in effect, a fee-for-service
arrangement. Placing, as it does, a premium on
 quantity of services, this system directly discour­
ages focus upon quality and teamwork in a group-
practice setting. Equally unsatisfactory are an in­
come structure of broad range, a formula equaliz­
ing income among all physicians, and regular pro­
gression in income meted out uniformly to all
doctors.
To attract and hold competent physicians, the
fiscal schedule of the medical group must take into
account the relative contribution and devotion of
each of its members to the total effort. Such ac­
counting necessitates appraisal of performance,
which creates difficult issues. By what standard
shall the physician’s contribution be measured: By
time spent? By volume of services rendered? By
professional stature? By willingness to meet obli­
gations and responsibilities? Or, by a combination
of these? Assuming that the criteria are adopted,
who is to judge the physicians’ relative competence
according to those criteria? And, once the judge is
identified, who is to judge the judge? The practical
solution to these problems will be discussed in
chapter X.
Closely related to these issues were the stipend
to be offered to newly employed physicians, and
the length of time that must elapse before a new­
comer might become a partner. These matters were
of interest to the trustees because they would influ­
ence the caliber of physicians who would be
attracted to the program.
Once a medical group is at work, questions re­
lated to these issues arise daily. The total effort is
ultimately dependent upon the degree to which the
physicians themselves are satisfied with the an­
swers to such quest ions. After discussion, the board
again stated its concern in writing, without making
specific recommendations, and registered its re­
quest that the medical group, in constructing its
partnership contract, give careful consideration to
the points involved.
3. The hoard of trustees expressed its active con­
cern in the recruitment of physicians.
As a guarantee fundamental to its professional
autonomy, the medical group was assured that it
would have sole responsibility for nominating new
additions to its ranks. It was understood that the
initial group of physicians would use their best
judgment in securing qualified doctors to fill va­
cancies. Before their acceptance, however, the
nominations for such positions would be submitted
to the board of trustees for approval. In deter­
mining the acceptability of candidates, the board
would be assisted by a medical adviser, or by a
medical advisory committee composed of physi­
cians not participating in the medical group. It
was agreed that the board, while having the right
to disapprove the appointment of a candidate,
would not be authorized to consider any physician
not nominated by the medical group.
The physicians’ partnership agreement is dis­
cussed in detail in chapter X and is reproduced in
full in appendix 3.
Tims, the many details in the entire interrelated
group of three contracts—membership contract,
medical service agreement, and physicians’ part­
nership agreement—were built around a central
theme: determination on the part of the planners
that the prepaying members of CHF would re­
ceive a high quality of medical care, under maxi­
mally dependable conditions, from an optimally
stable and professionally progressive medical
group.
Summary and Comment
For the purpose of assuring an integrated
effort to provide high quality organized medical
and hospital services to the prepaid membership
of CHF, two basic contracts and guides for a third
were developed: the membership contract, the
medical service agreement, and guides for the
physicians’ partnership agreement.
Fundamental to the total framework was the
membership contract which clearly reflected the
philosophy and purposes of the organization, de­
lineated obligations to members, and stated the
manner in which they were to be met. This con­
tract for prepaid health services necessarily
contained more detail than is required in member­
ship contracts of health insurance indemnity pro­
grams. Worked into the membership contract
were provisions intended to insure against decline
in responsibility toward the prepaid population.
Every effort, was made to secure working rela­
tionships that would foster a high level of
motivation in the physicians who were to form
the medical team. Such stimulus seemed most
likely to arise from the formation of an independ­
ent medical group under contract with CIIF, and
from restricting contractual arrangements to a
single medical group within the Greater Cleveland
area.
Although both medical ethics and the dynamics
of the total operation dictated that the medical
group develop its constitution independently of
the board of trustees, the consultants recommended
to the consideration of the medical group, at the
outset of its planning phase, a number of issues
basic to the quality and stability of the program.
Among these were important rights with respect
to the preservation of quality reserved to the
board of trustees. By all these means, the board
sought to satisfy itself that the principles stated
in the membership agreement would ramify
throughout the organization, and would find
expression in the actual services rendered.
 Chapter X
RECRUITMENT OF PHYSICIANS AND
ORGANIZATION OF THE MEDICAL GROUP
When in mid-1962 the board of trustees resolved
to pursue the implementation of the CHF pro­
gram, it was only after painstaking exploration
of the key question, “Will this health plan be able
to attract competent physicians?” It was clear
that the initial core of the medical group must,
consist, of doctors having firmly established affili­
ations with Cleveland hospitals, and that each
must have a high professional reputation. With­
out such a nucleus, the project could not recruit
physicians of excellence, and its growth would be
stunted.
The solution that was ultimately achieved could
not have been reached without the continuing ac­
tive interest of a number of highly qualified phy­
sicians. These were the doctors who, during the
incipient stage of inquiry into the feasibility of
the program, had been identified as potential par­
ticipants. Throughout all phases of the project,
the consultants cultivated and deepened their
relationships with these doctors. Insofar as pos­
sible, they held continuous dialogue with them
about, the dimensions of the program and its goals.
The general concepts of the evolving medical serv­
ice agreement, described in chapter IX and its
implications for the organization of the prospec­
tive medical group were discussed in great detail
with a number of these physicians.
Responsibility for Recruitment
In the summer of 1963, when July 1, 1964, was
fixed as the date for opening the center, it was
necessary to start the actual recruitment of pro­
fessional personnel and to obtain definite commit­
ments from doctors who had expressed their in­
terest to this time. A new decision must now be
made: JFAo iroufd recruit physicianfor thia
prog t a rn ?
During this stage of development, all activities
of CHF were carried out by a nonphysician exec­
utive director. This official was one of the three
original consultants and was appointed early in
1963 to the post of executive director as a full-time,
ongoing responsibility. The other two consultants
continued to assist him and the board in the plan­
ning effort. Because the executive director was not
a physician and was an agent of the board, it was
clear that he should not attempt to recruit the
physicians (who were not to be employees of the
board). Although one of the other two consultants
was a physician, he also was an agent of the board
and therefore not in a position to assume the re­
sponsibility for recruitment.
Throughout the period of planning, both the
executive director and the other two consultants
made important gains in attracting physicians to
the project. They frequently discussed its phi­
losophy and structure with prospective members
of the medical group. Only once did they deal with
the precise role that any physician was to assume—
in the exceptional case of one internist whose im­
portance to the program makes it appropriate to
describe his background in some detail at this
point.
He was a Cleveland physician who had consist­
ently evinced great interest in the emerging plan,
and had voluntarily served as coordinator of the
discussions with other physicians in the commu­
nity. A native of the city, he had received his train­
ing nt Western Reserve University School of
Medicine before entering private practice as an
internist 9 years before the start of the CHF health
plan. He had continued his teaching responsibili­
ties at University Hospitals throughout his profes­
sional life, and was highly regarded by the faculty
of the university medical school. He demonstrated
many desirable leadership qualities. Early in the
planning phase, he had committed himself to join
the prospective medical group. It became obvious
that the major responsibility for the recruitment
of physicians should be assumed by him. From
the standpoint of organizational structure, how­
ever, an important new question now arose: In
whose behalf would this physician act?
Timing Group Organization for Optimal
Recruitment Conditions
If the recruiting physician were to serve as an
agent of the board, he would be negotiating on the
one hand with physicians in behalf of the board,
and on the other hand with the board in behalf of
physicians. The prospect of such a dual role ap­
peared unwholesome and it was foreseen that it
could prove detrimental to the development of an
independent medical group.
The recruiting physician could not, however,
serve in behalf of a medical group that did not yet
exist. Nor could the board contract with an entity
that was not yet formed. At that time, it was by no
means obvious at which point in the organizational
development the medical group should actually
come into being. As the consultants were aware, to
create a formal framework before a nucleus of in­
dividuals had had opportunity to test themselves,
or to become acquainted under working conditions,
would be to compound difficulties. If all the local
physicians who had expressed an interest in the
concept were to bind themselves into any formal
structure before they were fully committed to work
together in clinical practice, their enthusiasm and
energies would be dissipated in debate about poli­
cies and methods for the future. Argument in a
vacuum does not forward growth toward a func­
tioning organization. Policies and methods are
proved and improved only in work.
There are additional important reasons for care­
ful timing of formalization of such a relationship.
Among any aggregation of doctors inquiring se­
riously into prepaid group practice, there are some
who will, upon closer acquaintance with this way
of life and on honest self-examination, decide that
they are not likely to make the particular adap­
tation that is necessary for group practice. Rever­
sal of a premature decision to enter group practice
would engender a dissatisfaction that almost cer­
tainly would be reflected in tire physician’s future
attitude toward the group. To doctors who are in­
trinsically well suited to perform in an established
and functioning group, very early formaliza­
tion presents different hazards: They must main­
tain their confidence under the pressure of others’
withdrawals. They must subscribe to regulations
formed before the necessity for those rules has
been demonstrated in practice. Or they must take
part in the drawing up of the working rules—a
task for which they are not prepared by experience
and cannot handle effectively. The complexities
that may surround such an apparently simple mat­
ter are illustrated later in this chapter.
The picture is very different when a physician
enters a smoothly operating organization. His en­
ergies are immediately channeled into clinical
work which forms the natural foundation for
professional interest, enthusiasm, and loyalty.
The doctor’s enthusiasm alone, however, is not
enough to insure 'his long-term satisfaction. If his
wife rejects the group practice way of life, he will
be seriously handicapped in his adjustment The
high social status that is accorded the wife of a
doctor in private practice in our culture is modi­
fied by his entering this type of coordinated effort,
even when his income approximates the net earn­
ings of his colleagues who remain in solo work.
While the wife of a doctor in group practice bene­
fits from his relatively regular schedule and free
time, his vacation privileges, and other aspects of
cooperative planning, she will be happy only if
she likes the other doctors in the group and if she
likes their wives, with whom she will have a close
association. Her acceptance is still more firmly
assured if she is convinced of the significance of
this method of furnishing health care to persons of
middle income.
It remains true, nevertheless, that in the normal
family situation the decisive step toward assuring
her acceptance must be taken by the doctor him­
self. To create and maintain his interest and loy­
alty, a positive structure and an established way of
life must be clearly evident when the first doctors
are recruited. Revisions in the structure can be
made at any time during the life of the group, as
experience shows them to be desirable, and as
members of the organization mature in their ca­
pacity to consider the many facets involved. In
view of these considerations, tike planners were
faced with a perplexing question : How can physi­
cians work in a group-practice setting before the
group is organized?
The Sole-Proprietor Concept
The most logical first step appeared to be de­
velopment of a contract between the board and a
physician ns sole proprietor whose function would
be to recruit and organize a working medical
group. Difficulties inherent in the proposed ar­
rangement were reviewed in great detail by the
consultants together with the board. Firet, by des­
ignating a physician as sole proprietor, the board
would in a sense predetermine the initial leader­
ship of the ultimate medical group. Second, despite
the best intentions on the part of the physician
selected for this task, the proprietorship might
tend to become an end in itself. Transition to group
organization might then be delayed, to the detri­
ment of the total program. Third, it appeared
essential that the sole proprietor be a doctor with
considerable experience in the leadership of a
group-practice prepayment program, who at the
same time would not be interested in unduly pro­
longing his proprietorship.
Although the blueprint of the ultimate organiza­
tional structure was clearly delineated, and the
board and the consultants had achieved remark­
able unanimity as to its framework, at this critical
juncture there was no clear understanding of how
the design could be implemented. A review of simi­
lar programs elsewhere served to emphasize that,
unless the method of implementation were care­
fully worked out, the emerging functioning organ­
ization might bear little resemblance to the struc­
ture that was envisaged.
A novel solution was offered by the CHF group.
It proved to be workable and answered many of
the consultants’ concerns. A physician who for
some 20 years had been the medical director of a
successful medical group practicing on a prepay­
ment basis in another State became interested in
the CHF program and was willing to assume the
transitional responsibility of sole proprietorship
of the medical group. He agreed to contract with
the board to organize a medical group that would
be capable of fulfilling the conditions of the medi­
cal service agreement described in chapter IX.
Fortunately, he was licensed to practice medicine
in Ohio and was willing to spend all the time
necessary to fulfill the obligations imposed upon
him by the contract. The medical group within
which he was affiliated was willing to release him
for the i>eriods necessary to accomplish the task.
As the board had anticipated, the leadership of
an experienced medical director who had no per­
sonal long-term interest in the new group was
reassuring to prospective members of the medical
partnership. It must be stressed that his primary,
lifetime professional interest was in another part
of the country, and that the medical group of
which he was director had no purpose with respect
to the CHF program other than to apply gained
experience to the establishment of a new medical
service organization. His purpose was to help the
new medical group avoid certain mistakes and
birth pains, and thus contribute to the successful
establishment of a new prepaid program. The con­
tractual agreement with the sole proprietor spe­
cifically expressed the transitory nature of his
function.
The sole proprietor was appointed, on an interim
basis, as medical director of the independent phy­
sicians’ partnership which he was to form. He in
turn appointed as associate medical director the1
Cleveland internist described above who had com­
mitted himself to the health plan. The Cleveland
internist reduced his practice to part time to col­
laborate with the sole propietor in the organiza­
tion and recruitment of the medical group.
Recruiting the Nucleus
Balancing the Starting Medical Group With
Subscribers’ Needs.—The first requirement was to
plan for a medical group that would be balanced
to meet the health care needs of the anticipated
number of subscribers. To serve the projected ini­
tial membership of 13,000 persons, it was necessary
to recruit 11 full-time doctors: four internists
and three pediatricians who would act as primary
physicians for adults and children respectively,
two general surgeons, and two obstetrician-gyne­
cologists. In addition, the equivalent of one half­
time physician would be needed in each of the
following specialties: radiology, ophthalmology,
otolaryngology, and orthopedics.
Services in certain subspecialties also had to
be arranged. In the course of developing these
estimates, it was perceived that the professional
complement required to serve 13,000 persons could
adequately serve 17,000, and that the balance be­
tween the medical group and the subscriber group
would not be achieved until membership enroll­
ment reached 17,000 or 18,000. Overstaffing creates
a heavy financial burden on any program, and is
most keenly felt by a new organization.
 Developing a Professional Way of Life
Focused on Patient Care.—More deeply rooted
than these financial problems were certain factors
unique to the operation of a medical group that
plans to work on a prepayment basis. Presuming
that the doctors who join the group are indus­
trious and enthusiastic, their clinical workload
must be sufficient to keep them fully occupied from
the beginning. If it is not, the active professional
man will find other means, such as teaching or re­
search, of forwarding his skills. The group cannot
insist that he remain idle; indeed, it would be
against its interests to do so, for an excellent phy­
sician will not accept such a dictum. Even tem­
porary lapses of professional activity tend to les­
sen a doctor’s acumen.
Moreover, once the doctors begin to schedule
hours for teaching or research, the group is in ef­
fect paying them to carry on extracl inical work.
Such a precedent, once set, is difficult to modify. In
addition, if this emphasis takes precedence over
patient care, the quality of medical services ren­
dered tends to decline. For these reasons, the
amount of extraclinical time spent by group phy­
sicians must, be carefully regulated. The best guar­
antee against excessive complications of this type is
to make certain that the organization’s way of life
is focused, from the outset, primarily on patient
care.
In the CHF experience, the fact that a signifi­
cant proportion of the first doctors to join the
group had established practices within the city
was helpful in this respect With few exceptions,
the initial clinical schedules were full because
many patients who were not subscribers to CHF
continued to rely on these physicians for medical
services.
Staffing the Other Specialties.—In order to
provide part-time services in other specialties
(radiology, ophthalmology, otorhinolaryngology,
orthopedics, etc.), it was necessary to adapt to the
best arrangements obtainable in each category. In
some of the subspecialties, such arrangements
consisted of referring health plan members to
specialties in their own offices who were paid on
a fee-for-service basis. A radiologist and an
ophthalmologist were available for half-time work
in the center.
The Individual Physician's Decision To Enter
Group Practice.—The recruitment of doctors who
will participate in this type of program cannot be
compared with the staffing of any other organiza­
tion, not even with the complex task of acquiring a
medical school faculty. There was no precedent
in Cleveland for the pattern of relationships that
the consultants hoped to see the medical group
establish: a unique set of attitudes tow ard the
patients as individuals, the subscribers as a group,
the physicians’ professional colleagues, and the
governing board. Before entering upon this pro­
gram and committing himself to these objectives,
each prospective member of the medical group had
to acquaint himself with its purposes,and was ulti­
mately required to make a decision that would be
crucial to his career. This decisionmaking process
is illustrated, but by no means exhaustively por­
trayed, by the experience of the first three men to
commit themselves to the CHF program.
The first to join—the Cleveland internist who
was appointed interim associate medical direc­
tor—had to abandon his busy practice, the product
of 9 years’ successful development through his
services to patients and his relationships with col­
leagues. The second doctor to join, also a success­
ful Cleveland internist with a similar background,
had to relinquish not only his practice, but also his
post, as medical director of the student health serv­
ice of Western Reserve University. The third was
a general surgeon who, like the two internists, was
a native of Cleveland and had received his medical
training there. He had an important teaching post
in a major local hospital. For him, the problems
that had been faced by the two internists were
compounded by the fact that, as for all surgeons,
his practice depended primarily upon referrals
from other doctors.
Specialists who necessarily depend upon
referrals usually must practice in a community for
a number of years before they develop a texture
of interrelationships that is sufficiently broad and
firmly knit to assure success. A specialist, with an
established practice therefore cannot join a medi­
cal group as an experiment without risking a sub­
stantial loss.
A young specialist who has just completed his
training finds an important inducement in the con­
ditions of prepaid group practice. He can use his
full talents immediately, without the years re­
quired for building up a solo practice. Young
residents just finishing their training usually have
had no experience in either fee-for-service or
group practice. Most of those who were inter­
viewed for the CHF program had an open mind
on the subject. Perhaps because they had nothing
to lose, many were ready to join the group for a
time, to learn from experience whether or not they
would like it.
The wife of a young physician is more likely
than an older woman to be willing to consider the
advantages of the group-practice way of life. She
may be more informed and look favorably upon
new efforts to solve professional and economic
problems. She and her husband may not yet have
an established position within a community, which
she would be reluctant to abandon. Group practice
offers them an immediate and assured income
which many young wives welcome in contrast, to
the prospect of years of struggle and debt while a
private practice is being developed. If several
young couples enter the group at or about the same
time, most of the wives tend to form cordial inter­
relationships quickly because of their common
interest in the group’s success.
Young physicians were therefore a promising
reservoir for recruitment, but they lacked the sea­
soned leadership and hospital affiliations on which
the success of a new group depends. Fortunately
for CHF, the general surgeon mentioned above
was willing to assume the risks entailed in becom­
ing one of the three who formed the nucleus of
the medical care program.
Measures Used To Crystallize
Physicians’ Decisions
1. Conferences and meetings:
The multiplicity of decisions to be made by
both the physician acting as sole proprietor and
the applicants inevitably slowed the progress of
recruitment for the new medical group. Many
meetings between interested physicians and the
core group were required. Such meetings consti­
tuted a process of education and assessment on
both sides. Doubts and anxieties had to emerge,
be faced, and be resolved. Misgivings arose most
frequently among prospective group members who
had been in solo practice for some years and had
an economic stake to consider. Experience also
showed that anxiety was not confined to the deci­
sionmaking period; during the early months of
formation of the group, a number of staff members
began to have second thoughts about the decision
they had made.
Of importance in resolving uncertainties were
the frequent meetings which the leaders began to
call as soon as the group was of sufficient size to
make discussions fruitful. Participants were ap­
prised of developments, and discussion of problems
and policies was invited. Some of the physicians
felt anxieties and doubts about their lay coworkers.
It took many efforts at reassurance to allay these
misgivings and to gain the mutual understanding
and appreciation that, enabled CHF to function as
an effective unit rather than as a conglomeration of
separate parts. The process of mutual physicians­
lay men education has continued into the opera­
tional phases of CHF.
2. Professional public relations:
The leaders of CHF took every opportunity to
present the overall concept of the group practice
program to the community through dignified, di­
rect presentation of facts. They were aware that
in Cleveland, as in most other communities, there
undoubtedly were physicians who might be inter­
ested in this new type of health care but who prob­
ably could not be reached through any direct
recruitment effort. If knowledge of the program
became widespread, such physicians might learn
of it and seek out the group leaders. Five physi­
cians who might never have been reached by other
methods came into the group as a result of this
public information effort.
3. Channeling recruitment effort to likely
candidates:
Experience showed that time spent in conversa­
tions or meetings with doctors disinclined to join
the group was futile. Since the initial impetus for
the project stemmed from the labor movement,
persons with an ideological aversion to labor un­
ions, or who expressed a fear of union domination,
were not suitable for recruitment.
4. Impetus lent by prominent physician’s identi­
fication with the group:
Toward the end of December 1963, an event of
major importance to the crystallizing of the re­
cruitment effort occurred. A distinguished doctor
who had retired from his post as chief of surgery
in a major teaching hospital in Cleveland, and
who was also a clinical professor of surgery at
Western Reserve University School of Medicine,
joined the group. In addition to his professional
eminence, this physician had been a civic leader for
many years. His interest in group practice was
of long standing. His support of the Ohio enabling
legislation in 1959 (see ch. I) had been of crucial
importance to its passage. Throughout the plan­
ning of the CHF project, he had offered guidance
whenever called upon. His decision to participate
as a senior member in the group’s department of
surgery added immeasurably to the professional
stature of the team.
As a general observation deriving from the total
experience, it is to be emphasized that the first
physicians to be mustered into a prepaid health
plan are the most crucial to the ultimate success of
the effort It is these initial members who will set
the tone and temper of future recruitment If a
number of board-certified specialists of known
ability join the group, its character is thereby
demonstrated and future recruitment becomes
easier. In the present instance, once the new medi­
cal group consisted of four physicians firmly estab­
lished in the Cleveland professional community,
the acquisition of new members took on a new pace.
In a city as richly supplied as Cleveland with po­
tential professional personnel, it was possible to
fill nearly every post with a doctor who had trained
or was in training in the area, or who had some
relationship with its professional circles.
During this phase, it became evident that the
medical group could not afford to compromise in
the caliber of physicians invited to join it. As the
day for opening drew near, and certain positions
were not yet filled, it was tempting to accept the
application of licensed doctors who appeared will­
ing to share the work, even though it could be fore­
seen that some among them would not ultimately
have been able to maintain the performance stand­
ards set by the group. This type of compromise
was avoided. The leaders were aware that, once
patients were being seen, the presence of such a
doctor would have been a serious detriment to
success.
A. Neutrality of local medical society:
In addition to the impetus lent by the affiliation
of outstanding physicians, recruitment was fa­
vored by the enlightened policy that was expressed
toward the newly forming organization by the
Academy of Medicine of Cleveland and the Cuya­
hoga County Medical Society. Making plain the
intention of the former body not to interfere with
the development of the new health plan, the fol­
lowing statement was contained in a letter, dated
January 10,1964, from the president of the Acad­
emy to its members:
• • • Academy of Medicine, as a matter of policy,
neither approves nor disapproves any organization, as
such. It has not approved the Community Health Founda­
tion. Physicians who contemplate such employment should,
as in any other type of medical practice, assure them­
selves that no principles of medical ethics are being vio­
lated, no advertising or solicitation of patients Is Involved,
and that the patient retains a reasonable degree of free
choice of physician.
This nonobstructive policy was in distinct contrast
to the anxiety that has been expressed in the past
by both official and nonofficial medical bodies in
other communities when faced with the formation
of a medical group planning to practice on a pre­
payment basis.
6. Experienced leadership; presentation of spe­
cific offers to candidates:
Finally, recruitment was forwarded by the abil­
ity of the medical director and his associates to
approach each candidate with a definite proposal.
The wealth of experience in the medical director’s
background enabled him to describe to a prospec­
tive member, with considerable precision, the re­
lationship that he might expect to have with his
patients and with his colleagues, the nature of the
practice, the work rules to which he would be re­
quired to adhere, and the economic opportunities
that he might reasonably anticipate.
In this respect, the presence of a person acting
during the initial period as an “employer” was
invaluable. Merely bringing together under one
roof a number of competent physicians represent­
ing different specialties does not create a medical
group. During his years in individual practice,
each of those doctors will have developed work
habits related to the needs of the general category
of patients he has known and to his professional
life. Group practice entails significant alterations
in certain attitudes and work habits; it imposes
new problems, and presents new opportunities-
Without meticulous planning by an experienced
leader, the disadvantages of group practice cannot
be overcome and the advantages cannot be realized
except at the cost of long trial and error.
Work Habits in the New Group
After the basis for a cooperative effort had been
laid through the diligent work of many persons,
the results of planning had to be tested in use. An
excellent example of such a test was the application
of work rules. The regulations that were set up in
advance of the opening date by the interim medical
director proved the importance, once more, of ex­
perienced leadership. A product of his 20 years as
medical director of a successful group practice,
these work rules reflected his recognition of the
needs of the prospective subscribers and demon­
strated his realistic expectations with regard to
the contribution that each physician should make.
 Because the physicians in the CHF group re­
spected this leaders practical knowledge and were
aware that he was a practicing physician in his
own medical group, they accepted his work rules
with little dissent. It will be worthwhile to look
somewhat more closely at an example of these rules,
to see why this was important.
The matter of working hours for doctors may
appear deceptively simple. It was decided early
that the members of the new medical group would
regularly work 5% days a week, this time to be
divided between the center and attendance at hos­
pitals, including patient care and teaching requi­
site to staff affiliation. The medical director, on the
basis of his experience, decided that the offices
should be open for appointments 6 days a week
from 9 a.m. to 6 p.m. During the evenings of
those days from 5 p.m. to 9 p.m., one internist and
one pediatrician should be on duty. The same in­
ternist and pediatrician should then remain on call
during the night from 9 p.m. to 9 the following
morning, to advise patients by telephone and to
make house calls when the doctor himself judged
it necessary. In addition, one internist and one
pediatrician should be on duty at the center from
9 a.m. to 9 p.m. on Sundays and holidays. These
evening, Sunday, holiday, and oncall hours were
to be covered by the internists and pediatricians of
the group in turn, in addition to their 5^-day
week.
The medical director was convinced, on grounds
of his past, observation, that such coverage was es­
sential if the group’s services were to be made ac­
ceptable and available to the subscribers. Failure
to maintain this availability would inevitably pro­
duce an excessive number of demands for house
calls, and would lead to dissatisfaction and com­
plaints from the subscribers. For the small intial
staff, these working hours over and above the 5^-
day week were burdensome.
There is no doubt that, if the physicians of the
group had been given opportunity to vote on such
a proposed schedule, they would have rejected it.
The argument would have been advanced that so
heavy a schedule should not be adopted until need
for it was proved. It happened that during the first
few months of the center’s operation, the workload
on evenings, Bundays, and holidays was light. If
coverage for these hours had not been supplied,
there would have been no objective proof that the
rigorous schedule was serving to avert excessive
demands for house calls and complaints from the
subscribers.
As had been anticipated by the medical director,
the argument was advanced on a number of occa­
sions that the medical center schedule should be
curtailed. This change was not subject to vote by
members of the staff at that time, but could have
been made only at the direction of the medical
director, with the concurrence of the CHF board.
Not until the medical group was organized into a
partnership, in mid-1965, could a majority vote
have produced a formal proposal to change the
hours of service. By that time, the physicians’ in­
dividual experiences proved to them that the avail­
ability of doctors during the evening hours had in­
creased the members’ confidence in the plan. The
subscribers had come to realize that they could
depend on the group to provide service at all times.
To this date, the group’s house call load is negli­
gible. Subscribers have learned, beginning with
their first exposure to the program, that highly
technical modern medical services can be given
more effectively in the equipped medical center
than in their homes.
In this, as in all other aspects relating to patient
care, the fact that the physicians knew that their
appointment to the group was predicated on their
initial acceptance of the work rules presented to
them by the medical director and his associate
made consolidation of the effort possible. Many
problems which in other groups have invited de­
bate into the early hours of the morning were never
on the agenda of this group. As they developed
their own experience, they questioned some of the
rules, modified some, and abandoned some that ap­
peared to be inapplicable to the CHF situation.
The essential contribution of firm leadership at
the outset was to establish a way of life geared
to good patient care. With this as a basis, subse­
quent modifications, even when designed to accom­
modate special interests of the physicians, were
nevertheless considered within the framework of
a structure that was developed to carry out the fun­
damental objectives of the plan. Modifications that
arose out of function had been expected; they were
taken as evidence of the living nature of the or­
ganization.
Continuing Staff Education
Another significant contribution to good patient
care, and to staff quality and morale, was the pro­
gram of staff conferences and case discussions that
was inaugurated immediately after the center
opened. Conferences were held weekly in the de­
partment of medicine, and less frequently in other
departments. Ongoing professional education and
exchange of concepts between specialists is vital.
At all stages in the growth of such an organization,
the right and responsibility of doctors to partici­
pate in the exchange of medical information must,
be protected. Without this stimulus, they cannot
keep abreast of the rapid technical advances that
characterize modern theory and practice.
Physicians within a group are frequently en­
gaged in the care of patients who are members of
the same family; or more than one doctor in the
partnership may be responsible for different as­
pects of the care of a single subscriber. Doctors
working closely together in a group must become
thoroughly familiar with the ways that their col­
leagues care for patients, and with the way that
each approaches specific diseases. The life of a suc­
cessful group will, as a matter of course, foster this
multifaceted exchange through regularly sched­
uled conferences. Such meetings are one of the
important keys to the promotion and maintenance
of quality in group practice.
From the time that the CHF center opened, a
daily census of hospitalized patients was taken and
circulated to the medical director and department
chiefs. This census made possible close surveillance
of the care of subscribers who were in any of the
various hospitals at which the physicians had staff
privileges. The multiplicity of hospital affiliations
among the staff members created difficulties, which
are discussed in the following section.
Hospital Affiliation Problems
At the time the CHF center opened in July
1964, all physicians in the initial medical group
had hospital affiliations. Although such affiliation
is essential, it does not in itself solve the problems
of patient care for the physicians of a medical
group. It introduced into the CHF situation a
complex of concerns that urgently demanded solu­
tion, and which are at the time of this writing still
not solved.
In some of the medical group's departments,
doctors in the same specialty had privileges in
different hospitals. Sharing the responsibility for
patient care is an integral part of the structure of
group-practice prepayment programs; it is a
major factor in staffing, fiscal planning, setting
subscriber rates, and hence, ultimately in deter­
mining the overall feasibility of a health plan.
But if two physicians in the same department
cannot attend a patient in a given hospital because
one of the physcians does not have staff privileges
there, this responsibility cannot be shared.
This difficulty is especially trying in surgery,
with its frequent requirement for operating room
assistance and daily calls on patients while hos­
pitalized, and in obstetrics, where reservations
made for delivery in one hospital might conflict
with the nonavailability of a given obstetrician
on the actual delivery date. In addition, some
hospitalized patients need services or consultation
by a number of specialists. Here again, differences
in hospital affiliation conflicted with the effort to
provide continuity of care within the group.
Shortages in hospital beds make it uncertain
that at any given time a bed would be obtainable
for a sick patient. In an attempt to meet this prob­
lem and to overcome the difficulties inherent in
scattered affiliations, several physicians in the
group secured privileges in more than one hospital.
But to maintain affiliation with certain hospitals,
a physician must fulfill teaching obligations. As
time went on, the teaching obligations in several
hospitals became burdensome.
Toward the end of 1965, after the program had
been in operation for more than a year, it was esti­
mated that 17 percent of the professional time of
the medical group was devoted to teaching asso­
ciated with maintenance of hospital privileges.
This professional activity, although it was indi­
rectly essential to the life of the project, gave no
direct benefit to CHF subscribers.
The long-range implications of using community
hospitals for the inpatient care of the subscribers
to a prepaid health plan proved to be most sig­
nificant. With the growth of the complexities that
arose out of attempts to maintain continuity of
care by the members of the group in a variety of
community hospitals, it became obvious that a
prepaid health plan of this nature can attain its
full development and reach its goals of service to
subscribers only if all of the physicians in the
group are privileged to practice in the same hospi­
tal and maintain their full professional life within
that hospital. This issue is closely related to the
whole area of regional planning of hospitals and
the organization of medical care services—a matter
outside the scope of this report, but closely akin to
it because satisfactory solutions cannot be reached
in regional planning unless the type of experience
outlined here is taken into consideration.
Effect of Fiscal Arrangements on
Physician Recruitment and
Professional Activity
The form of the financial arrangements between
CHF and the medical group that was finally
evolved has been discussed in chapter VII. The
period of sole proprietorship was followed by a
partnership of two, then of three, physicians. (See
section on “Elements in Partnership Agreement”
below.) During these interim phases, all expenses
agreed upon by the board and the physicians who
served as sole proprietor, then as partners, were re­
imbursed to them by the CHF. The medical group
partnership was formally established in mid-1965.
After this date the reimbursement arrangements
were continued on an interim basis. Drafting of the
medical service agreement (the contract between
CHF and the medical partnership) w as completed
early in 1966. At that time, a proper balance be­
tween CHF membership and medical staff had still
not been attained. The design of the program rec­
ognized that the principles that one cannot divorce
professional from fiscal responsibility and that if
the medical group was to become accountable for
the provision of medical services to the health
plan's subscribers, that trust must be fulfilled with­
in a framework that had been agreed upon. The
formula, adopted in principle and spelled out in
the medical service agreement, was that which is
customarily referred to as “capitation”: a fixed
monthly payment for each subscriber to the health
plan. (See ch. VII.)
The medical service agreement provided for the
continuation of the reimbursement arrangement
that had been carried on during the recruitment
phase of the program, until such time as the medi­
cal group’s expenses (as agreed upon between the
group and the CHF board) would not exceed the
income derived from the designated capitation,
over a period of 6 consecutive months. As was in­
dicated in chapter VH, the income from fees paid
by nonmember patients was an offset against the
agreed upon capitation. Under this arrangement,
the income of the group would not be affected by
an increase or a decrease in the number of nonsub­
scriber patients. The medical service agreement
thus contained provisions designed to implement
capitation, and to encourage assumption by the
medical group of total responsibility for profes­
sional services to the health plan membership.
Elements in Partnership Agreement of
Concern to CHF Board
Early in the course of their clinical work in the
center, the physicians began as a group to study the
medical service agreement in order to design a
partnership contract that would be consistent with
its aims. In this connection, the sequence of the
development from sole proprietorship to physi­
cians’ partnership is of interest.
It will lie recalled that the sole proprietor, while
acting as interim medical director, had appointed
to the post of associate medical director the first
Cleveland internist to commit himself to the pro­
gram. By the time the center opened, the sole pro­
prietor had received board approval to enter into a
partnership agreement with the associate medical
director, who upon this occasion became the medi­
cal director in his stead. Before the end of the first
6 months of the center’s operation, the second
Cleveland internist to join the project was also
associated with them as a partner. When in mid-
1965 the entire medical group formed the new
partnership, this interim partnership of three
physicians was dissolved. A six-member executive
committee was formed at this juncture.
By unanimous vote of the medical partnership,
the former sole proprietor was made a member of
the executive committee, with tenure until his
guidance and advice should be deemed no longer
necessary. Similarly, the medical director was
elected to the executive committee and to the post
of medical director of the newly formed medical
group, for a term of 6 years. The other four mem­
bers of the first, executive committee were elected
for terms of 5, 4, 3, and 2 years. As each term ex­
pired, a successor was elected for 4 years. This pat­
tern, after the first 2 years, created one vacancy
each year on the executive committee, to be filled
by election. After the first 5 years of its operation,
all terms were to be for 4 years, with the single ex­
ception that the medical director was to be elected
for a 6-year term. Thus, the first executive commit­
tee consisted of two persons who were members by
virtue of precedent, and unanimous consent of the
group, and four who were elected.
The manner in which the partnership agreement
of the medical group reflected the guidelines (de­
scribed in ch. IX) that had been drawn up by
the consultant-planners and the board may be
summarized as follows:
1. A responsible group with responsible leader­
ship was provided for by the requirement
that only those physicians who would devote
their full professional time to the CHF cen­
ter could become members of the partnership.
If a physician, on a temporary or long-term
basis, maintained professional activities other
than the medical or surgical care of CHF
subscribers, the specific conditions of such
work must first be approved by the partner­
ship, and income derived from such work
would accrue to the medical group. If the
physician reduced his clinical hours in order
to carry on an activity such as teaching or re­
search from which he derived no income, this
activity also was subject to prior approval
and the physician’s income from the group
was to be proportionately reduced.
As has been shown, the leadership of the group
was placed in the hands of an executive committee,
the structure of which provided for continuity
through the electoral mechanism described above.
2. The caliber of physicians in the group was
relatively assured by the provision in the
medical service agreement that the board,
acting upon consultation with their medical
adviser, was to approve all new appointments
to the medical group. This provision was ac­
knowledged in the partnership agreement In
addition, the physicians were alert to the fact
that the caliber of work of each member of
the group would reflect on the partnership
as a whole.
3. Distribution of income within the medical
group, since it would materially affect the
caliber of services rendered, was of legitimate
concern to the board. The terms of each ap­
pointment made before the partnership was
formed, and the range of physicians’ income,
were initially established in joint conferences
between the responsible doctors and the CHF
board. In addition, the partnership agreement
provided that all partners would share
equally in the profits of the group, irrespec­
tive of their regular income level.
Within the first few months of the center’s op­
eration, the leaders of the medical group observed
that wide discrepancies between the incomes of
physicians were not conducive to a smooth work­
ing relationship. Although a young physician
might accept, in rational terms, the statement that
an older colleague in the same department merited
a higher annual income because of his broader ex­
perience, when the two doctors worked the same
number of hours and performed essentially the
same function, the satisfaction of the younger man
was not assured.
The leaders concluded that competent younger
physicians who worked well with the group should
be advanced in responsibility and income as rap­
idly as feasible until discrepancies were narrowed,
even though in some instances this might mean
that there would temporarily be smaller or no in­
creases for the senior members of a department
As this framework became established, the CHF
board felt reassured that its concern for an equi­
table distribution of income was properly reflected
in the articles of organization of the medical
group.
Summary and Comment
To attempt to visualize the structure of a medi­
cal group in advance of its actual operation is es­
sential, but it will not create a functioning
organization. The manner in which implementa­
tion takes place may so divert the program from
the course intended by its planners that it can
never be restored to their original purposes. The
development of a design for action, and detailed
description of that design, produces only an image
of an organization; it cannot, of itself, give birth
to the reality. If reality is to complete the image
rather than distort or destroy it, the planners of
a medical group must give meticulous attention to
every detail of the project and to all pertinent
relationships. They must frequently and persist­
ently survey the emerging result for departures
from those principles which they have determined
to be basic to their intent.
Specific problems that can be only partially
solved in a group-practice prepayment program
are rooted in factors inherent in a relatively free
and, therefore, competitive society: the doctor’s
concern for his continuous development as a phy­
sician, unhampered by group decisions affecting
his expenditure of time and energy; his concern
for success, economic and professional; and his
determination to preserve and enhance his pro­
fessional status. His wife’s wish for parallel gains
in social and economic spheres adds significant
pressure.
 None of these concerns can be dismissed as un­
important or unworthy; they must be met realis­
tically. The group’s economic structure must
provide stimulating incentives. The social rela­
tionships within the group and opportunities for
social life in the community must be attractive to
the doctor and his family. The group must have
status within the professional community that is
commensurate with the doctors’ dignity and in­
terests. The individual physician must have access
265-902 O—SB-------- 6
to hospital and academic activities normally the
focus of medical life. The group itself must
provide for ongoing intramural professional
development.
Differences of opinion will always exist between
interested workers, even in a group that functions
well. The challenge is to provide a structure that
will not stifle opinion or inhibit valid development,
but that will rather coordinate approaches in the
service of common goals.
73
 Original from
Digitized by
UNIVERSITY OF MICHIGAN
 Chapter XI
RECRUITMENT AND CONTINUING EDUCATION
OF SUBSCRIBERS
Need for Subscriber Education
The consultants were aware that the success of
a prepaid, group-practice, comprehensive health
care program serving a population of voluntary
subscribers would ultimately depend on the satis­
faction and loyalty of the subscribers themselves.
They believed that the surest way to achieve and
maintain such loyalty was to inform the potential
subscribers from the start about the character of
the program, its intent, its mechanics, its advan­
tages, and its disadvantages.
They bore in mind that the new program had
been developed in response to a specific need which
had been expressed by the unions themselves. The
unions had concluded that the need existed after
intensive survey and discussion of the health care
problems of their members. This need, in one of
America’s most highly developed cities with out­
standing medical services, was certainly not for
more health care. It was for coordinated health
care. It was for a nucleus of medically sophisti­
cated persons devoted to the service of this popula­
tion group, who would relieve the workers of the
confusion, time waste, and uncertainties that
attend fragmentation of health care through spe­
cialization. And it was need for an economically
feasible structure that would provide compre­
hensive medical services at predictable cost.
The consultants made a lengthy study of various
means by which these needs might be met, but the
plan that evolved was not rigidly preconceived. It
bad emerged from the pooled experience and
thinking of representatives of many interests,
with various points of view. The resultant plan for
giving service would “look and feel different” from
the methods of delivery of medical care to which
the workers had been accustomed. They would have
to be helped to adjust to the new program. Candid
explanations and clear information would form
the most reliable basis for their loyalty.
The delivery of medical care in the prepaid
group-practice setting would necessarily entail
working methods that would differ from the
familiar patterns of medical care as rendered by
the family doctor in individual practice. The pat­
terns developed by a comprehensive prepaid
health plan would become familiar to each mem­
ber when he came to experience the program in
operation. The planners intended to show specific
reasons for the use of these methods and to explain
the advantages that they would ultimately bring
to the user. They knew that, to be effective, such
explanations would have to be made repeatedly, in
a variety of ways, at various stages in the develop­
ment of the health care program. This continuing
process of member education was rooted in the
leaders’ conviction that they must not merely plan
for the population they were planning to serve,
but should work with them to achieve optimal
health care.
Methods of Subscriber Education
The process of education started when the un­
ions, recognizing that dissatisfaction with frag­
mented health care was widespread among their
members, began to consider the development of
coordinated health care benefits and made their
first inquiry into the nature of a prepaid, compre­
hensive program as one of several possible means
of answering their needs. The second major step
in the education process was the exchange of de­
tailed information between the core group to which
the unions delegated the responsibility for explor­
ing the feasibility of organized health care, and
a group of professional consultants familiar with
the planning and operation of various types of
organized health care programs, who were retained
by the core group as their advisers.
The teaching and learning process was continued
throughout the planning phase. With emphasis on
planning with, rather than /or, the users, an edu­
cational interchange was then actively pursued
through to all the potential subscribers, and among
all participants in the planning group. As deci­
sions were made and the program began to take
shape, the planning group became a unit consisting
of a team of consultants and the responsible core
within the sponsoring organizations.
When the health plan moved into its operational
phase, the education process took on momentum,
breadth, clarity, and effectiveness. The subscribers
began to have concrete experience with the pro­
gram." The planners recognized that ways of de­
livering and using the comprehensive services
could always be improved, and directed the on­
going educational process to this end.
Subscriber education thus proved to be a two-
way, unending process. Specifically, the steps just
described took the following forms:
Introducing the Concept:
General Education Conference
for Workers
The first step in subscriber education in the
Cleveland plan was taken in 1961 when the union
leaders opened the question of health care to the
rank-and-file of union membership as a problem
about whose solution the workers themselves should
think. As reported in chapter II, the Cleveland
AFL-CIO organized and held on March 25-26,
1961, the Sixth Annual Cleveland Workers’ Edu­
cation Conference, on the topic “The Health
Business: Direction Please.” This conference was
attended by more than 400 delegates.
In assessing the results of this meeting, it must
be recalled that the rank-and-file of these unions
were not wholly inexperienced with cooperative
action toward improved health care. A specific
need of a large segment of the union membership
had been recognized and had been successfully
met through cooperative action by the operation
of the Union Eye Care Center since 1957. Experi­
ence with this simple venture had taught the union
members that, for a subscription fee of 25 cents
per member per month, they and their dependents
could have a service for a specific health need.
When in 1961 questions about general health care
were introduced to them, they could relate the new
concepts to this favorable experience.
Emphasis at the March 1961 conference was
upon understanding the problems involved in
health care, rather than upon achieving a specific
solution. Well-prepared materials, indicating the
areas to be discussed at the conference, were given
in advance to discussion group leaders who were
appointed before the date of the meeting. These
leaders were reminded that if their discussion
groups attained clear understanding of a few spe­
cific points, this would prove more valuable to the
ultimate structuring of any program that might
develop than if a hurried effort were made to cover
all relevant topics. Among the points suggested for
discussion were “What is meant by ‘good medical
care'?" “How can excellence in medical care be
promoted by the organizing and financing of
care?" “Compare the medical care that we have
today with what we need.”
After the close of the conference the delegates
reported the essence of the discussions to their
constituents. The rank-and-file of the unions were
now aware that the possibility of cooperative ac­
tion to obtain better organized health care and its
financing was being actively considered. This
opened to each worker the opportunity to scruti­
nize his own health care problems; to ask himself,
and to discuss with his family and friends, wheth­
er his current medical and hospital arrangements
were the best that he might reasonably expect.
With this general opening of the field for thought,
the first step in subscriber education had been
taken.
Continuing Information and Feedback:
Union Members and Representatives
Meet With Consultants
The second step was taken by the consultants
who were retained in June 1961 by the directors of
the Union Eye Care Center to advise them on the
planning of a specific health care program. In
order to learn the needs of the population to be
served and to assess their response to the prospect
of a prepaid, direct-service program, these con­
sultants started a continuing series of meetings
with union members and their representatives.
Material was introduced in an orderly fashion, at
a pace designed to promote the potential sub­
scribers’ comprehension of the objectives and
methods under consideration and to permit the
planners to evaluate the degrees of comprehension
achieved. Various types of meetings were held:
1. The consultants and a representative of the
U£. Public Health Service met with shop
stewards from locals of the machinists’, meat-
cutters’, and retail clerks’ unions- The concept
of prepaid, direct-service health plans was
described and discussion of the shop stewards'
reactions was invited.
At this early point in the considerations, the con­
cern of the individual worker for the safeguard­
ing of his personal dignity and the confidential
nature of the patient-doctor relationship was sa­
lient. This concern was expressed at least as em­
phatically as the demand for adequate medical and
surgical care. Because they had never had expe­
rience with the working patterns and staff-patient
relationships that are developed in a well-func­
tioning health plan, the employees' first reaction
was to equate the proposed health plan with a pub­
lic clinic, or with the type of care received in the
emergency room of a community hospital. They
were understandably resistant to the prospect of
relinquishing their personal-doctor relationship
for that type of care.
Women appeared to be more reluctant than men
to abandon the traditional family-doctor pattern.
A Negro delegate expressed a reservation toward
group-practice, prepaid medical care which he as­
sociated with his experience in public clinics. The
patronizing attitude toward patients that he had
sensed in public clinics led him to warn that the
new concept would not prove acceptable if simi­
lar attitudes were to develop in the staff serving
the group practice canter.
This meeting clearly showed the planners that to
bo favorably received by the workers, a voluntary
health care program must meet the following
standards:
(a) The health care itself must be of high
professional and technical quality, (ft) The
mechanics of service must be easily understood,
and convenient for the use of the average mem­
ber. (c) The system must be reliable and sen­
sitive to the members' needs and must provide
rare at the times that care would be needed.
(d) The setting must be dignified and pleasing,
(c) The program must be economical.
2. Ar the CHF plan was being developed
through 1962. the consultants reported each
significant step to the union leaders.
3. Educational materials focused on structural
details of the evolving plan were prepared
by the president of the CHF board and the
consultants.
The materials were used by th© unions in a series
of daylong workshops in March and April 1963.
Individual sessions were attended by 20 to 200
persons, with a total participation of 500 union
leaders, from shop stewards through top-rank un­
ion officers.
The history and objectives of CHF were ex­
plained. Its directors and the consultants were
introduced and their methods of procedure were
described. General information was given on such
key subjects as the nature of group practice, the
concept of direct service and prepayment, and their
application to CHF.
The way in which medical care would be orga­
nized under CHF was depicted diagrammatically
on projected slides and supplemented with full
explanations. The central position of the family
doctor and pediatrician was stressed. The rela­
tionship between these key physicians and the spe­
cialists was made clear. The availability of labora­
tory, X-ray, pharmacy, and other ancillary serv­
ices was pointed out. Statistical tables were used to
demonstrate the size and composition of the pro­
fessional and supporting staff that would be needed
for a subscriber group of 25,000 persons. The size
and type of medical center that would be adequate
for the services envisioned and the number of
hospital beds that would be needed for the pro­
posed population were shown. Architects' sketches
of the projected medical center were displayed and
the rationale of its floor plans was discussed.
The relationship of the new prepaid program to
health insurance coverage already in effect through
the unions was clarified. It was explained that
health insurance currently in effect could be re­
tained by the members. In this connection, the con­
cept of dual choice was expounded, and the con­
tract provisions that would be necessary to permit
dual choice were outlined. Clauses permitting dual
choice had already been negotiated by the meat­
cutters’ and retail clerks’ unions. The auto work­
ers in another area had had a clause for a decade
which permitted use of a direct-service plan as one
alternative in a dual choice. Other unions planned
to raise this point in future negotiations.
At this basic educational conference the con­
sultants stressed that in order to draft the project
they must make a realistic advance estimate of the
kinds of services that would be required by the
subscriber population. In order to arrive at such
an estimate, they must have information about the
health needs of that population. They presented
statistics (on slides) from the experience of an
existing health plan, similar to that projected by
CHF, to demonstrate the effects of member utiliza­
tion upon rate schedules: The number of doctors’
office visits per year per 1,000 members in various
age groups; the number of hospital days per year
by age groups; the number of hospital beds re­
quired per 1,000 members per age group.
The audience then broke up into discussion
groups. Remarks by discussion group participants
indicated their grasp of essential concepts. One
participant commented that older union members
in his shop had been averse to the health plan be­
cause they believed that their subscription would
be paying for the medical care of young members’
children. The statistics showed that they were
wrong. The largest portion of moneys developed
from subscriptions would be expended for the care
of older persons because older members, as a group,
would need more medical attention and more hos­
pital days than younger members.
With this information as a basis for compre­
hension, the participants were introduced to some
considerations basic to ratemaking: The relation
of members’ medical needs to size and composition
of staff and facilities and the relation of budget
to dues. The projected rate structure was compared
with health insurance rates currently being paid
in the Cleveland area. It was noted that if, in prac­
tice, the rates proved to be inadequate to meet the
cost of operation, additional revenue could be gen­
erated from either employee contributions through
payroll deduction or charges for certain services
as obtained. The advantages and disadvantages of
payroll deduction were explored. The principles
applying to service charges were discussed in
detail.
There are two major approaches to fee-for-
service charges as a supplement to dues:
1. A charge may be made for those services
which are less often used by a small propor­
tion of the insured population and which are
especially costly. A typical example is hos­
pitalization. Hospitalization is needed by
about 8 percent of a typical health plan popu­
lation per year. Because of this low percent­
age of utilization, charging for hospitaliza­
tion obviously concentrates a burdensome cost
upon a small group within the subscriber
population, instead of spreading it over a
large proportion of the membership. For the
same reason, the total amount of revenue gen­
erated for the program by this approach is
small, even though the cost of a single hos­
pitalization may be catastrophic for the
individual.
2. An alternative approach to supplementation
of dues by fees is to make a modest charge for
services most commonly used by the largest
percentage of the membership. A typical ex­
ample is a KI fee for each visit to the doctor’s
office. Since an estimated 75 to 80 percent of
the subscribers to a health plan see their doc­
tor at least once a year, this method spreads
the cost of care much more generally through
the covered population.
Neither of these alternatives spreads the cost as
effectively as setting the dues high enough to make
incidental charges unnecessary. The total cost of
the entire program is then spread over the entire
membership, from those who never use the services
to those who have the most drastic need for the
most expensive services. Although this method is
most appealing, it means that subscription fees
must be high. The question whether the member­
ship would be willing and able to pay such high
dues or would prefer another alternative was dis­
cussed.
Sponsorships
In each workshop some time was spent in dis­
cussing $10 sponsorships to the building fund to
be purchased voluntarily by rank-and-file union
members. Such sponsorships were considered to be
an adjunct to the education program in three ways:
1. Campaigning for the purchase of sponsor­
ships would develop interest in the program
on the part of both campaigners and buyers.
2. Each person who purchased a sponsorship
would feel a definitive tic to the evolving plan,
which would hold through the interval of
more than a year before services could begin.
3. Purchase of a large number of sponsorships
would substantially aid the building fund.
At the end of the scries of daylong workshops,
more than 200 of the 500 union members who had
attended signed to assist the sponsorship campaign.
A year later, nearly 4,000 sponsorships had been
purchased, committing approximately $40,000 to
the development of the health center.
Introducing the Plan to Groups Other
Than Unions
The member education program was extended
not only to the labor unions but also to other sectors
of the community. Intensive education was di­
rected toward groups shown by the experience
of other prepaid health plans to have a strong po­
tential of interest in the CHF program. Meetings
were held with representatives of the faculties of
Case Institute of Technology and Western Reserve
University. Committees responsible for enrolling
subscribers to the new health plan were formed of
members of various departments of these two
institutions.
The executive director of CHF assumed respon­
sibility for maintaining contact, with these faculty
committees and with the unions that had been
represented at the workshops.
Continuing Education Before Opening
of the Health Center
At a series of meetings with union representa­
tives of the autoworkers, machinists, meatcutters,
retail clerks, and steelworkers, information was
furnished about the health plan and its develop­
ment. The materials presented were designed with
the specific intent of stimulating and maintaining
rank-and-file interest, and of furthering their
conceptual and factual understanding of the plan.
In February 1964 a series of 26 neighborhood
meetings was begun for prospective subscribers to
the health plan, their wives and adolescent
children, from the five unions mentioned above and
the carpenters' and painters1 unions. Attendance
at each meeting was limited, ns nearly as feasible,
to 75 persons in order to encourage participation
in discussions. Total attendance at the 26 meetings
was about 2,500. At each session a half-hour talk
was given on a topic such as, "Why Was CHF Or­
*'
ganized? or "How Do Members Use This Kind
of Service?
* ’ Discussion usually continued for 2 or
3 hours after each presentation.
Similar meetings were held with faculty mem­
bers of Western Reserve University and Case In­
stitute of Technology.
Uy spring 1964, volunteers from the groups that
had attended these neighborhood meetings were
ready to begin the enrollment of members in the
health plan. A goal was set to sign 13,000 persons
by the opening date of the center, July 1,1964.
Materials Used in Subscriber Education
To explain the program to interested persons
and to provide them with information that they
could pass on to others, well-prepared educational
materials proved essential. The ways in which
these materials were used were observed to make a
critical difference in their impact.
To fund the development of a booklet explain­
ing group medical practice, the CHF planners
received a grant of $2,000 from the education
budget of the Group Health Association of Amer­
ica. They produced a 24-page booklet with text,
photographs, and diagrams explaining the char­
acter of an organized program of prepaid, group-
practice comprehensive health care. The effort was
to present a candid, persuasive statement to the
prospective member or to the officer of a pro­
spective group.
The pamphlet discussed the relationship be­
tween social changes of recent decades and the new
pattern of medical care. It outlined the growth of
medical specialties, the use of complicated equip­
ment for diagnosis and treatment which has
shifted care from the patient’s home to the doctor’s
office or hospital and the coordination of spe­
cialized practice through an organized program
comprising office and hospital care, the basic spe­
cialties, laboratory and X-ray services, nursing,
and unified case records. The differences between
indemnity types of health insurance and such uni­
fied, direct-service programs were clearly drawn.
The inadequacies of indemnity coverage were con­
trasted to the comprehensiveness of CHF
program.
In addition to the booklet, a leaflet was prepared
describing the services to be offered by CHF and
displaying a photograph of the center and a map
showing its location and outlining the area within
which resident members would be eligible to
receive home-call service.
The pamphlet, the leaflet, and a covering letter
from union leaders were mailed to 65,000 union
members. The response was negligible.
The same pamphlet and leaflet were found to be
effective and necessary components of member
education when they were distributed at meetings
of potential subscribers. After a verbal and visual
explanation of the principles and processes in­
volved in the health plan, the printed statements
were distributed for study at home. The concepts
presented in the meeting were new to the experi­
ence and habits of thought of the union members,
and the attractive, thoughtfully designed materi­
als served to remind them of pertinent points, to
clarify details, to explain relationships, and to lay
a firm basis for later discussions.
Specific Problems in Subscriber
Education
The union members who were potential sub­
scribers to the CHF were well adapted to the gen­
eral concept of a cooperative venture. As union
members they were heirs to a long tradition of
group action aud were aware of the benefits to be
derived from such action. This background was
amplified by their pride and satisfaction in the
Union Eye Care Center. It is of particular inter­
est, therefore, that the issues they raised in explor­
ing CHF were precisely those that have been
raised in meetings with other potential subscribers
from widely different middle-income back­
grounds : Will I have my own doctor? Will this be
a voluntary plan? Will I have my choice of type
of coverage?
Will I have my own doctor? This question was
of chief concern to women and the less educated
workers. The urgency expressed by them on this
point stands in striking contrast to the facts of
modem urban life with its shifting populations
and its tendency to depersonalization. Hospital
emergency rooms are increasingly used by persons
of a broad income range when they are struck by
acute disease.
The emphasis upon an individual doctor-patient
relationship is particularly interesting in our era
of ramified specialization: Persons of all classes,
even those with very large incomes, are frequently
bewildered and lose their sense of continuity of
relationship with their personal physician when
he calls upon specialists to handle various aspects
of their care. The benefits of contemporary med­
ical techniques can be delivered only through the
interaction of many specialists. Acceptance of this
by the patient requires a lessening of his
dependence upon a personal relationship with the
physician.
The inconsistencies between wish and fact were
thrown into sharp relief when CHF consultants
explored this question further with audiences of
potential members. A revealing pattern emerged:
Although the less educated person emphasized
"persons!" care most, he often understood- the per­
sonal doctor-patient relationship least. One union
member rose at a meeting and gave a warm testi-
monia.1 to “my personal doctor; a friend who is
always there when I need him,” having thus made
a point against group practice, he sat down. A few
minutes later, he rose to criticize the local medical
society. He had telephoned that society’s office to
ask for the name of a urologist. The secretary had
suggested that he consult his personal physician
about such a referral. He considered the suggest ion
arbitrary and wasteful of his time. Like many
persons, he had not understood the proper use of
his relationship to his own doctor.
The proper form and continuity of the doctor­
patient relationship is most clearly grasped by
those whose education and experience tend to par­
allel those of the doctor. It is, for example, not
surprising that when the Kaiser Foundation
Health Plan first opened its rolls, professional
and white-collar workers were the earliest to re­
spond ; among them, faculty members of the Uni­
versity of California, groups of schoolteachers,
engineers, and other professional or educated
groups. For many persons in our era, the most
satisfactory direction through the maze of speciali­
zation is afforded by a comprehensive group
practice plan.
The emotional needs of many subscribers are
such that a prepaid health program must make ade­
quate provision for them to identify with it as their
plan. They must feel pride and confidence in their
medical center. They must be given every reason­
able cause to feel trust and loyalty toward the doc­
tors and the paramedical staff. One of the most
important bases for such loyalty is certainty that
the physicians and their aides will safeguard the
members’ privacy and personal dignity to the ex­
tent that they are safeguarded by the doctor in
individual practice.
Will this he a voluntary plan? and Will / have
my choice of type of coverage? A realistic answer
to these questions requires exploration of another:
Precisely what is voluntary about “voluntary
health insurance”?
When prepaid medical care was first offered in
the United States, most subscribers joined as in­
dividuals or they decided as individuals to join
through a group. Those early arrangements in­
volved three parties: The subscriber, the providers
of service, and the insurance plan chosen by the
subscriber.
Beginning in the 1940’s, negotiated health and
welfare plans emerged and grew rapidly, establish­
ing large funds for the purchase of prepaid medi­
cal care. Under such arrangements the decision to
enroll in a prepayment plan was no longer a matter
of individual choice. Hundreds of thousands of
workers became enrolled in prepaid medical plans
as a result of group action, such as labor-mange-
ment agreements. In the late 1950's, the trend to
compulsory pooling of funds for medical care was
accelerated by legislation providing government
contributions to health insurance, eventually for
employees of all levels of government—Federal,
State, county, and city.
The bulk of the employed population of this
country is now covered by compulsory health in­
surance. These persons do not have individual
choice as to whether or not to be insured. Each is
free not to uxe the medical wvicea for which a
premium is paid on his behalf, but he cannot use
the allocated money for any other purpose. "Volun­
tary" as applied to health insurance means essen­
tially "nongovernmental”—and even this distinc­
tion becomes blurred for the large number of gov­
ernment employees who are insured by programs
resulting from legislation applying to this cate­
gory of worker.
The trend to compulsory pooling of health in­
surance funds through collective bargaining or
legislation appears irreversible. The Federal Em­
ployees Health Benefits Act of 1959 applied to
nearly 2 million Federal employees who, with their
dependents, constitute a population of almost 6
million. A number of States and local governments
have passed, or predictably will pass, similar
legislation.
Dual Choice
In one important sense, however, a prepaid
group practice health plan based on block member­
ships can and must be truly voluntary if it is to
succeed: within each population of potential sub­
scribers, each individual must be allowed a dual
choice of health plans. The person who does not
like the group-practice, prepayment plan must be
given a fair opportunity to opt for another type
of coverage. Only free choice between alternative
health insurance schemes can produce a wholesome
group of satisfied, loyal subscribers.
The education of union leaders, union members,
and employers concerned with CHF, about this
indispensable concept required much time and the
work of highly trained expositors. Union leaders
and active union members were convinced by
theory and experience that majority rule is essen­
tially right. They tended to consider dual choice a
significant deviation from union policy. Manage­
ment feared that the extra administrative work
involved in dual choice would increase costs.
The administration of dual choice is actually
simple, and entails no significant costs in any of
the numerous places where it has been routinely
offered—California, Hawaii, and elsewhere. The
alternative plans are explained to the prospective
subscriber when enrollment is first discussed. Dual
choice is again offered at set. intervals (as on a
specific date annually). Those who wish to change
may do so on that date The choice stands until
the next option date.
Tile benefit of dual choice to the individual is
obvious from the start. The premium-paying orga­
nization learns with experience that dual choice
offers an alternative to dissatisfied individuals and
provides a continuous opportunity to compare
costs and performances of systems.
Results of the Membership Drive
On the opening date of the center, July 1, 1964,
the initial goal of 13,000 members had not been
reached. One of the major unions with a large po­
tential membership had been involved in a strike
that lasted 4 months. The center opened with
10,000 members; 3 years later, there are more than
27,000 members.
This nearly tripled membership may be the
most satisfactory' evidence that the plan has proved
successful. All its problems have not been solved,
nor have all the subscribers been fully satisfied
with every aspect of the program. Perhaps the
very fact, that it is a new type of service alerts
people to the possibility of problems and tends to
magnify their awareness of difficulties. The expec­
tations of some who have idealized the new plan
may have sharpened their criticism of flaws that
would have been considered negligible in a long-
established institution.
Since the center opened, the program’s leaders
and staff have continued analysis of problems and
comparison of experience with other programs.
Valid criticisms have been recognized, and their
causes traced and corrected. Less objective criti­
cisms may not be ignored. If they arise, it is be­
cause some emotional need has not been fulfilled.
In their ongoing appraisal of patients’ responses,
the CHF leaders recognize that prepaid, group-
practice, comprehensive health plans have not
reached the ultimate in evolution. Their purpose
is not to claim the ultimate but to strive for it.
Summary and Conclusions
The program for the recruitment and education
of subscribers to a prepaid, group-practioe com­
prehensive health plan must be based on precise
recognition of the reasons for the development of
that particular health plan. The CHF health plan
emerged because a large number of employed per­
sons were dissatisfied with certain inadequacies in
the existing organization and delivery of medical
services.
They were fully aware that eminent physicians
were providing medical care of outstanding qual­
ity in their city, but they could not benefit from
this care to a degree that they felt to be reasonable.
As workers and wage earners, they were forced to
compress as much as possible the time spent upon
attention to their health care. Many technical re­
finements in medicine and surgery seemed to them
to be heavily offset by the confusion, inconvenience,
time waste, and uncertain costs that derived from
geographical spread of services, multiplication of
procedures, loss of continuity of care, and other
concomitants of specialization where it was not
counterbalanced by coordination. The CHF plan
offered a new service structure specifically de­
signed to overcome those particular inadequacies.
It is obvious that any new service structure, if
it represents a serious attempt to deal with existing
problems, will noticeably differ from the structure
that produced these problems. In differing from
the old, the new plan will lack certain features to
which people have been accustomed, just as it will
possess certain features with which they have not
been familiar. To take full advantage of the new
mode of service, the subscribers must change some
habits.
Persons who are accustomed to bringing their
emotional responses into line with their rational
choices and to solving problems through coopera­
tive action, readily grasp the concepts fundamental
to a coordinated health service. They see its advan­
tages, and they allow for its disadvantages or sug­
gest ways to overcome them.
Health care is deeply personal. It touches upon
matters about which all human beings are sensi­
tive in some degree, and about which many are
highly sensitive. Any health service that ignores
such sensitivity will, insofar as the prospective
subscriber has free choice, be rejected.
To bridge the unfamiliar, allay concern, and
teach subscribers how to make the most of a new
service structure, its leaders must adhere firmly
to a policy of planning with, not for, the member­
ship. Planning with people entails the develop­
ment of a common conceptual vocabulary. The
ability to think and plan together is fostered by
starting the program of subscriber education dur­
ing the earliest phases of study, before any specific
type of service structure is selected, and by con­
tinuing the interchange as a permanent feature of
the health plan.
Effective subscriber education consists essenti­
ally of the presentation and explanation of facts.
Few subscribers understand the facts about a
health service unless they are explained with many
examples. Meetings and discussion of various types
are useful. So are carefully prepared printed
materials that describe the program and discuss
the concepts on which it is based. Certain difficul­
ties can be clarified through explanation alone, but
others are eliminated only if the staff acts effec­
tively in response to the subscribers’ needs.
Most of the misunderstandings on the part of
potential CHF subscribers arose from their in­
ability to relate comfortably to the projected serv­
ice structure simply because it was not familiar—
or because the few aspects that did appear familiar
reminded them of institutions toward which they
felt an aversion such as the public health clinic or
the hospital emergency room. The education pro­
gram seemed to some to be presenting, in thin
disguise, the stale and unwelcome picture of a
clinic for the indigent.
The only effective way to acquaint persons with
a new mode of delivery of health services is to
allow them to experience it in action. Since no one
can experience a program that does not yet exist,
growth during the first few years of operation of
a health plan is inevitably slow. The first persons
to subscribe will, in the majority, be alert, pro­
gressive, conceptualizing individuals. Once the
program has become established, the less adven­
turous tend to accept it because it is a part of their
community, because it has the approval of others,
and because—in the light of others’ acceptance of
the organization—they are able to appraise its real
advantages to themselves.
The staff develops smoothness of function
through experience. As this occurs, the subscribers
recognize that they are receiving high-quality,
courteously rendered, private care within a frame­
work of coordinated specialty services and prepay­
ment, To the extent that these advantages are
genuine, loyalty is the subscribers natural re­
sponse, Loyal subscribers communicate their satis­
faction to other persons. In doing so, they make
the most significant of all contributions to member
recruitment and education.
Just as some physicians are constitutionally ill-
adapted to practicing as members of a group, so
are there patients who will never subscribe to a
group practice, comprehensive health plan as long
as they are allowed free choice between this and
other modalities. The problems that beset member­
ship recruitment and education for a prepaid,
group-practice, comprehensive health plan do not
differ essentially from those that challenge every
doctor in solo city practice. If he is to succeed, the
physician and his staff must prove to every patient
at every visit that they are worthy of the patient’s
intellectual confidence and emotional trust. The
loyalty of his patients is the only reliable founda­
tion upon which any physician can base his expec­
tation of growth in a medical practice.
 APPENDIX A
THE MEMBERSHIP AGREEMENT

COMMUNITY HEALTH FOUNDATION

A Nonprofit Corporation

GROUP MEDICAL AND HOSPITAL SERVICE AGREEMENT

FACE SHEET

This Service Agreement, consisting of the attached Group Medical and Hospital Service Agree­
ment and Benefit Schedules as supplemented by this Face Sheet, has been entered into between Com­
munity Health Foundation, an Ohio nonprofit corporation, and the group defined in Section 1C below in
order to provide eligible Subscribers and eligible Family Dependents electing to enrol) hereunder with
medical, surgical, hospital, and related health care benefits as specified in the attached Benefit Schedules.

The following provisions supplement corresponding provisions of the attached Group Medical and
Hospital Service Agreement.

Section 1. Definitions.

C. “Group” shall mean -

Section 2. Eligibility and Enrollment.

A.
(l). Subscribers must meet the following additional requirements:

A. (2). Family Dependents must meet the following additional requirements:

Section 3. Relations Among Parties Affected by Agreement.

No supplemental provisions.
Section 4. Rates and Payment.
The periodic payment schedule is as follows;
Subscriber only ,----------------

Subscriber and one Dependent $------------------

Subscriber and two or more Dependents I------------------

I------------ --
 Section L. Services and Benefits.
A. Within the Cleveland Service Area the Benefit Schedule applicable under this Agreement is Bene­

fit Schedule , Sections through .

B. Outside the Cleveland Service Area the Benefit Schedule applicable under this Agreement is

Benefit Schedule, Section

Section 6. Exclusions and Limitations.

No supplemental provisions.

Section 7. Conversion and Transfer.

No supplemental provisions.

Section 8. Term and Termination.

No supplemental provisions.

Section S. Amendment.
This Agreement, including the attached schedules and addenda, may be amended by CHF with re­
spect to any matter other than rates, by mutual agreement between CHF and Group. CHF may amend
this Agreement with respect to any matter, including rates, effective as of any anniversary date by
written notice to Group at least--------- days prior to the anniversary date. All such amendments shall
be deemed accepted by Group unless Group gives CHF written notice of non-acceptance at least
days prior to the anniversary date, in which event this Agreement shall terminate in accordance with
Section 8C effective on such date.

Section 10. Miscellaneous Provisions.

E. The address of Group is--------------

Executed at Cleveland, Ohio,---------------------- , 19------ , to take effect as of-------------- ——, 19

Accepted — , 19 COMMUNITY HEALTH FOUNDATION

An Ohio nonprofit corporation

By ----- --------------------------------------- --------------- By —----------- ----------------------------------------- -----------

Authorized Representative
 COMMUNITY HEALTH FOUNDATION
A Nonprofit Corporation
BENEFIT SCHEDULE "A"

Medical and Hospital Services—Group Membership, "A" Coverage

INTRODUCTION
Community Health Foundation, in consideration of the periodic payments to be paid to CHF by
Group and in consideration of the supplemental charges to be paid by or on behalf of Members, agrees
to arrange Medical and Hospital Services and other benefits during the term of this Service Agreement,
subject, however, to all terms and conditions of this Service Agreement and the attached Benefit
Schedule.
INTERPRETATION OF AGREEMENT. In order to provide the advantages of organized and planned
medical and hospital services and of group medical practice, CHF operates on a direct-service rather
than indemnity basis. To this end, CHF, on behalf of its members, contracts with Physicians and em­
ploys health and administrative personnel to provide, organize, and arrange the health services described
in the attached Benefit Schedule. The interpretation of this Agreement shall be guided by the direct-
service nature of the CHF program.

1. DEFINITIONS

As used In this Medical and Hospital Service Agreement and all attached benefit schedules and ad­
denda (except as otherwise expressly provided or made necessary by the context):
A. 'CHF' shall mean Community Health Foundation, a non-profit corporation organized for the pri­
mary purpose of arranging for Medical and Hospital Services.
B. 'Face Sheet’ is the instrument attached hereto and made a part hereof which contains the execu­
tion of this agreement and specific information relating to each group of subscribers to the Medical and
Hospital Services.
C. ’Group’ is defined In Section 1C of the Face Sheet.
D. 'Subscriber' shall mean a person who meets all applicable eligibility requirements of Section L and
enrolls hereunder, and for whom the prepayment required by Section 4 has been actually received by
CHF.
E. 'Family Dependent’ shall mean any member of a Subscriber’s family who meets all applicable
eligibility requirements of Section 2 and is enrolled hereunder and for whom the prepayment required
by Section 4 has been actually received by CHF.
F. ’Member' shall mean any Subscriber or Family Dependent.
G. 'Medical Group’ shall mean the Association of Physicians under contract with CHF.
H. ’Physician' shall mean any doctor of medicine associated with or engaged by Medical Group;
’Attending Physician’ shall mean the Physician primarily responsible for the care of a Member with
respect to any particular injury or illness.
J. ’Consulting Physician’ shall mean any doctor of medicine to whom a Member is referred for
consolation by Physician.
K. ’Hospital' shall mean any hospital to which a Member is admitted pursuant to arrangements by
a Physician.
L. 'Medical Office’ shall mean the offices of CHF at 11717 Euclid Avenue, Cleveland, and such
other offices as may be designated from time to time.
M. 'Medical Services’ shall (except as expressly limited or excluded by this Agreement) mean those
professional services of physicians and surgeons, and para-medical personnel, Including medical, surgical,
diagnostic, therapeutic, and preventive services, (!) which are generally and customarily provided in the
Cleveland Area, and (ii) which are performed, prescribed, or directed by Physicians or Consulting
Physicians.
 N. 'Hospital Services
* shall (except as expressly limited or excluded by thia Agreement) mean those services for regis­
tered bed patients which are (i) generally and customarily provided by acute general hospitals in the Cleveland Area, and (ii)
which are prescribed, directed, or authorised by a Physician.
O. “Service Area
* shall mean that geographical area within a radius of thirty miles of Medical Office.
P. 'House Call Service Area' shall mean that geographical area of postal tones 3, 4, 6, 8, 10, 12,14, 15, 17, 18, 19, 20, 21,
22, 23, and 27, within which house calls are rendered under this Agreement Such area may be revised without notice from time
to time.

2. ELIGIBILITY AND ENROLLMENT

A. ELIGIBILITY OF INDIVIDUALS. Individuals will be accepted for enrollment hereunder only upon meeting all applic­
able requirements set forth below.
(1) Subscribers. To be eligible to enroll as a Subscriber a person must be either (a) an actual and bona fide member
of Group or (b) entitled under the trust agreement employment contract or other established standard of Group, on his own
behalf and not by virtue of dependency status, to participate in medical and hospital care benefits arranged by Group. Sub­
scribers must meet the additional requirements specified in Section LA (1) of the Face Sheet,
(2) Family Dependents. To be eligible to enroll as a Family Dependent a person must be either (a) the spouse of the
Subscriber or (b) a dependent unmarried child under the age of IS of either the Subscriber or his spouse, Foster children en-
tirely supported by the Subscriber and hia spouse and legally adopted children of either, aa well as natural children, are included.
Newborn children will be treated as Family Dependents from birth if promptly enrolled by a parent.
Family Dependents must meet the additional requirements specified in Section LA (2) of the Face Sheet.
(3) Change of Group Eligibility Rules. The composition of Group and requirements determining eligibility for mem­
bership in Group and for participation in medical and hospital care benefits arranged by Group are considerations material to
the execution of thia Agreement by CHF, During the term of this Agreement no change in Group’s eligibility or participation
requirements shall be permitted to affect eligibility or enrollment under thia Agreement in any manner deemed adverse by CHF
unless such change is effected by mutual agreement with CHF.
B, ENROLLMENT. While enrollment is open for Group, Subscribers and Family Dependents who meet the requirements of
Subsection A may enroll hereunder by submitting complete applications on forms provided by CHF,

3. RELATIONS AMONG PARTIES AFFECTED BY AGREEMENT

The relationship between CHF and Medical Group is an independent contract relationship; Physicians and Hospitals are
not agents or employees of CHF, nor is CHF or any employee of CHF an employee or agent of Medical Group or Hospitals.
Physicians maintain the physician-patient relationship with Members and are solely responsible to Members for all Medi­
cal Services. Hospitals maintain the hospital-patient relationship with Members and are solely responsible to Members for all
Hospital Services.
Information from medical records of Members and information received by Physicians incident to the physician-patient
relationship is kept confidential, and except for use incident to bona fide medical research and education or reasonably neces­
sary in connection with the administration of this Agreement, is not disclosed without the consent of the Member.
Neither Group nor any Member is the agent or representative of CHF, and neither shall be liable for any acts or omissions
of CHF, its agents or employees, or of Medical Group, any Physician, or Hospital, or any other person or organization with which
CHF has made or hereafter shall make arrangements for the performance of services under this Agreement.

4. RATES AND PAYMENT

Payment for CHF coverage shall be made as follows:
PERIODIC PAYMENT SCHEDULE. Group shall remit to CHF on behalf of each Subscriber and his Family Dependents
the amount specified in Section 4 of the Face Sheet. Only Members for whom the stipulated payment is actually received by
CHF shall be entitled to Medical and Hospital Services hereunder and then only for the period for which such payment is
received.
If any payment required above is not timely paid by or on behalf of any Member, all rights of such Member hereunder
shall terminate and may be reinstated only by renewed application and re-enrollment in accordance with all requirements of
this Agreement.

5. SERVICES AND BENEFITS

Subject to all terms and provision of this agreement, Members shall be entitled to receive services and other benefits as
follows:
A. WITHIN THE CLEVELAND SERVICE AREA. Within the defined Service Area in Cleveland, Subscribers and De­
pendents are entitled to receive the services and other benefits specified in the Benefit Schedule described in Section 5A of the
Face Sheet, all as provided, prescribed, or directed by Physicians. Within this Area, services are available only from Medical
Group and under direction of Physicians, and neither CHF nor Medical Group shall have any liability or obligation whatsoever
on account of any service or benefit sought or received by any member from any other doctor or other person, institution or
organization, unless prior special arrangements are made by a Physician and confirmed by written referral from Medical Group.
B. OUTSIDE THE CLEVELAND SERVICE AREA. Members regularly residing in the Cleveland Service Area while
temporarily away from home and outside said Service Area may receive the additional benefits specified In Section 5B of the
Face Sheet.
 6, EXCLUSIONS AND LIMITATIONS
A. EXCLUSIONS. AU services for conditions within any of the following classifications an excluded from the coverage
of tide Agreement.
(1) Employer or Governmental Responsibility. nineties, injuries or conditions covered by services or indemnification
or reimbursement available either:
a. Pursuant to any federal, state, county, or municipal workmen’s compensation or employer's liability law or
other legislation of similar purpose or import; or
b. From any federal, state, county, municipal or other government agency, including, in the ease of service-con­
nected disabilities, the Veterans’ Administration-
In ease of reasonable doubt as to whether a Member should receive benefits under this Agreement or from any
such source, if the Member seeks diligently to establish his rights to benefits from such other source, services will
be furnished under this Agreement; provided, however, that the value of such services, at prevailing rates, shall bo
recoverable by CHF or Its nominee from such other source, or from the Member, if and to the extent it is deter­
mined that monetary benefits should have been provided by such other source.
(2) Custodial, Domiciliary or Convalescent Care. Custodial care, domiciliary care, or convalescent care for which, in
the judgment of the Attending Physician, the facilities and services of an acute general hospital are not medically required.
(8) Cosmetic Surgery and Dentistry. Conditions for which plastic surgery is indicated primarily for cosmetic purposes.
Dental care and dental X-rays or hospitalization for extraction of teeth.
(4) Alcoholism and Drag Addiction.
(6) Effective Date of Coverage. A Member who is a hospital patient on the effective data of this Agreement will not
be entitled to benefits until his discharge from the hospital.
B. LIMITATIONS. Th® rights of Members and obligations of CHF and Medical Group hereunder are subject to the fol­
lowing limitations:
(1) Major Disaster or Epidemic, In the event of any major disaster or epidemic, Physicians shall render Medical
Services and arrange for Hospital Services insofar as practical, according to their best judgment, within the limitation of
such facilities and personnel as are then available, but neither CHF nor Medical Group shall have any liability or obligation
for delay or failure to provide Medical Services and arrange for Hospital Services due to lack of available facilities or personnel
if such lack Is the result of such disaster or epidemic.
(2) Circumstances Beyond CHF’s Control. In the event that, due to circumstances not reasonably within the control
of CHF, such as the inability of Physicians to arrange admission of a Member to a Hospital, or complete or partial destruction
of facilities, war, riot, civil insurrection, labor disputes, disability of a significant part of Medical Group personnel, or similar
causes, the rendition of Medical Services and arrangement for Hospital Services hereunder is delayed or rendered impractical,
neither CHF, Medical Group Dor any Physician shall have any liability or obligation on account of such delay or such failure
to provide services.
(3) Corrective Appliances and Artificial Aids. Artificial aids, such as crutches or canes, and corrective appliances,
such as braces, prosthetic devices, bearing aids, corrective lenses and eyeglasses, are not provided under thia Agreement, but
CHF will attempt to make arrangements whereby such aids and appliances may be obtained at reasonable rates; services neces­
sary to determine the need therefor will be provided.
(4) Injuries Caused by Third Parties. In case of injuries caused by any act or omission of a third party, and complica­
tions incident thereto, services and other benefits requested hereunder will be furnished to the Member. The Member, however,
shall be required to assign to CHF all right, title, and interest be may have in obtaining reimbursement from the third party
for medical services provided by or through CHF.
(6) Psychiatric Conditions. Psychiatric care, including any treatment for insanity, mental illness or disorders, is pro­
vided only in accordance with Sections BS(b) and J of ths attached Benefit Schedule.
(fl) Contagions Diseases. Services for contagious diseases are provided only in accordance with Sections B8(b) and
K of the attached Benefit Schedule.
(7) Rehabilitation. Rehabilitation is excluded except as specifically provided in Section E-2 of the attached Benefit
Schedule.

7. CONVERSION AND TRANSFER

A. CONVERSION TO INDIVIDUAL ENROLLMENT. If any person who has been a bona fide Member under this Agree­
ment for at least ninety (SO) days shall cease to bo qualified to continue as a Member for any reason other than:
(1) Nonpayment of applicable charges or
(2) Termination of Membership rights pursuant to Section 8;
Then said person may, within thirty (30) days after termination of rights under thia Agreement, convert his member­
ship to such classification of CHF individual coverage as may be in effect at the time of his application for conversion.

8. TERM AND TERMINATION

This Agreement shall continue in effect for one year from the effective date hereof and from year to year thereafter, subject
to:
A. TERMINATION ON NOTICE. Termination by either Group or CHF may be accomplished by giving written notice to
the other party at least sixty (60) days prior to the expiration date of this agreement or any subsequent anniversary d>>
 B. TERMINATION BY CHF. In the event that CHF terminates this Agreement pursuant to Subsection A, any Member
who is a registered bed patient in a Hospital at the effective date of termination shall receive these benefits: all benefits other­
wise available hereunder to hospitalized patients, for the condition under treatment, during the remainder of that particular
episode of hospitalization, until either (1) the expiration of such benefits, or (2) determination by the Attending Physician that
hospitalization is no longer medically indicated, whichever shall first occur. In maternity cases under care at the effective date
of termination the CHF may either at its election (a) continue obstetrical care only, through confinement and discharge, sub­
ject to payment of applicable supplemental chargee, or (b) convert the Member from group to individual membership. Except
as expressly provided in this Subsection all rights to benefits shall cease as of the effective date of termination.
C. TERMINATION BY GROUP. In the event that Group terminates this Agreement pursuant to Subsection A, then all
rights to benefits shall cease as of the effective date of termination.
D. DISCONTINUANCE OF CHF OPERATIONS. If, due to circumstances beyond CHF's control, it shall become imprac­
tical, in the judgment of CHF’s Board of * Director to continue the operation of CHF within the Service Area, then CHF may
terminate this Agreement st any time on ninety (SO) days written notice to Group, and neither CHF nor Medical Group shall
have any further liability or responsibility by reaaon of or pursuant to this Agreement after the effective date of such termi­
nation.
9. AMENDMENT
This Agreement, including the attached schedules and addenda may be amended by CHF with respect to any matter, in­
cluding rates, effective as of ths expiration date of this Agreement or any subsequent anniversary date by written notice to
Group in accordance with Section 9 of the Face Sheet

10. MISCELLANEOUS PROVISIONS

A. ACCEPTANCE OF AGREEMENT. Group may accept this Agreement either by execution of the acceptance provided
on the Face Sheet or by making payments to CHF pursuant to Section 4 hereof, and inch acceptance shall render all ter ma
and provisions hereof binding on CHF and Group.
B. AGREEMENT BINDING ON MEMBERS. By this Agreement, Group makes CHF coverage available to persona who
are eligible under Section 2; however, this Agreement shall be subject to amendment, modification or termination in accordance
with any provision hereof or by mutual agreement between CHF and Group without the consent of concurrence of the Members.
By electing medical and hospital coverage pursuant to thia agreement, or accepting benefits hereunder, all Members legally cap­
able of contracting, and the legal *representative of all Members incapable of contracting, agree to all terms, conditions and
provisions hereof.
C. APPLICATIONS, STATEMENTS, ETC. Members or applicants for membership shall complete and submit to CHF such
applications, or other forms or statements aa CHF may reasonably request; Members warrant that all information contained
In such applications, forms or statements submitted to CHF Incident to enrollment under this Agreement or the administration
hereof shall be true, correct and complete.
D. IDENTIFICATION CARDS. Cards issued by CHF to Members pursuant to this Agreement are for Identification only.
Possession of a CHF Identification Card confers no rights to services or other benefits under this Agreement. To be entitled to
such services or benefits the holder of the card must, in fact, be a Member on whose behalf all applicable charges under this
Agreement have actually been paid. Any person receiving services or other benefits to which be is not then entitled pursuant
to the provisions of this Agreement shall be chargeable therefor at prevailing rates. If any Member permits the use of his
CHF Identification Card by any other person, such card may be retained by CHF, and all rights of such Member pursuant to
this Agreement shall be terminable by CHF with the consent of Group.
E. NOTICES. Any notice under thia Agreement may be given by United States Mail, postage prepaid, addressed as follows:
If to CHF: Community Health Foundation
If to a Member: To the latest address provided for the Member on enrollment or change of address form
* actually
delivered to CHF.
If to Group: To the address Indicated in Section 10E of the Face Sheet

BENEFIT SCHEDULE "A"

Medical and Hospital Services—Group Membership, "A" Coverage
Subject to all terms, conditions and definitions In the foregoing Service Agreement, Members holding “A” coverage are
entitled to receive the Medical and Hospital Services and other benefits set forth in this Benefit Schedule. These services and
* CHF Service Area and only if and to the extent that they are provided, prescribed or directed
benefits are available only In th
by Physician.
For services and other benefits available outside the CHF Service Area, see Section L.
A. PHYSICIANS CARE IN HOSPITAL AND OFRCE.
1, Care While Hospitalized. All services of Physicians and para-medical personnel as required or directed by the At­
tending Physician, including operations, other surgical procedures, anesthesia and consultation with and treatment by Consulting
Physicians are provided without charge while the Member is admitted to a Hospital as a registered bed patient.
2. Caro in Medical Offices.
(a) Diagnosis and Treatment. All services of Physkans and para medical personnel, as requested or directed by
th Physician, including surgical procedures, eye examinations for glasses, and consultation with and treatment by Consulting
*
Physicians, are provided at Medical Offices and at such other places as directed and prescribed by Physicians. X-ray and labo­
ratory examinations and X-ray therapy are provided pursuant to Section D.

2fi3-fiO2 o—as----- 7
 (b) Preventive Services. In addition to diagnosis and treatment, Physician's services for health maintenance,
including physical check-ups. and other preventive medical services, are provided. X-ray and laboratory examinations in con­
junction with physical check-ups are provided pursuant to Section D.
Physical examinations required for obtaining or continuing employment or governmental licensing are not pro­
vided Under CHF coverage.

B. HOSPITAL CARE.
1. Admission to a Hospital. Physicians arrange for Hospital admissions of Members whose illness or injury requires
Hospital services. In the event that admission to an appropriate Hospital cannot be promptly arranged, Physician shall con­
tinue the care of the Member at home and in the Medical Office, while Physician and CHF staff exert their best efforts to ar­
range for appropriate hospitalization.
2. Hospital Services include room and board, general nursing care and the following additional facilities, services, and
supplies as prescribed by Physicians; including use of operating room, intensive care room and related hospital services, X-ray
and laboratory examinations. X-ray therapy, special diet, medications and supplies. Prescribed blood transfusions are provided
without charge if blood is replaced. Prevailing rates will be charged if blood is not replaced.
3. Duration of Hospital Services.
(a) Except as limited in paragraph (h) of this section and in section H-2 of this Schedule and elsewhere in this
Agreement and Benefit Schedule, a Member is entitled to 365 days of prescribed Hospital care for each continuous period of
hospitalization or for successive periods of hospitalization separated by leas than SO days. A new maximum benefit period of
365 days will commence only when there has been a lapse of 90 days or more between the last discharge and the next admission
even if the Member did not receive benefits from CHF during his last admission or was confined in a hospital operated by fed­
eral, state, county or municipal government, or in a nursing home or another institution.
(b> Care in the Hospital for contagious diseases and psychiatric conditions including insanity, mental illness or
disorders is limited to 30 days. As in all other admissions, such Hospital care is arranged by Physician in an acute general
hospital. Services in a hospital or other institution specializing in the care of tuberculosis or mental illness are not covered
under this Agreement,

C. HOUSE CALLS FOR EMERGENCIES OR ACUTE CONDITIONS.

All necessary house calls by Physicians for emergencies or acute conditions, and by visiting nurses when prescribed by
a Physician, are provided within House Call Service Area. A charge of $5.00 is made for each house call by a Physician. No
charge is made for prescribed calls by visiting nurses.
If, in the Physician's judgment, more than two house calls are required during a particular episode of treatment on
account of an emergency or acute Condition, no further payment for house calls is required after the second house call.

D. X-RAY AND LABORATORY.

All X-ray and laboratory tests and Services, including diagnostic X-rays, X-ray therapy, fluoroscopy, electrocardio­
grams, laboratory tests, and diagnostic clinical isotope services, are provided without charge when prescribed by Physician.

E. PHYSICAL THERAPY AND REHABILITATION,

1, Physical Therapy, Physical therapy is limited to conditions which, in the judgment of the Attending Physician, are
subject to significant improvement through relatively short-term therapy.
2. Rehabilitation. More extensive specialized physical medicine and rehabilitation services, including physical ther­
apy, are arranged by Attending Physician but *payment for such services are not made by CHF.

F, PRESCRIBED MEDICATIONS.
A reasonable charge is made for medications, for injectablea, for radioactive materials used for therapeutic purposes,
for allergy test and treatment materials, and for supplies furnished to outpatients at Medical Offices or on house calls. Dress­
ings and casts are provided without charge.
Prescribed medications for Members who are hospitalized are provided in accordance with section B-2 of this Schedule.

G. EMERGENCY AMBULANCE SERVICE.

Necessary ambulance service will be provided without charge within the Service Area If such service is ordered or
approved by a Physician.

H. OBSTETRICAL CARE.

L Physician's Care. Full Physician's care, including all applicable benefits set forth above, is provided.
2. Hospital Care. Full Hospital care is provided a Member whose admission to the Hospital is after 270 days continu­
ous membership in CHF. However, in dual- or multiple-choice groups, the Member's tenure in an alternate plan immediately
preceding joining CHF will be counted towards the 270 continuous days for purposes of eligibility to the obstetrical hospital
benefit
 J. PSYCHIATRIC CONDITIONS.
Care for psychiatric conditions, including any treatment of insanity, mental illness or disorders, is limited to Hospital
Care as described in Section B3(b) of this Schedule.

K. CONTAGIOUS DISEASES.
Diagnostic services and house calls are provided for contagious diseases; however, house calls are not provided for
tuberculosis or acute or contagious poliomyelitis after diagnosis.
Benefits for Hospital Care are in accordance with Section B3 (b) of this schedule.

L BENEFITS OUTSIDE THE CHF SERVICE ARIA.

These benefits are added to assist a Member who sustains accidental injury or becomes ill while temporarily away
from his regular residence and from the CHF Service Area. Accordingly, such benefits are limited to emergencies or other cir­
cumstances in which care is required immediately and unexpectedly; elective care or care required as a result of circumstances
which could reasonably have been foreseen prior to departure from Cleveland is not covered.
Subject to all the terms and conditions of the foregoing Service Agreement as modified and supplemented by this Sec­
tion L, a Member, while temporarily away from his residence and outside the CHF Service Area, is entitled to Benefits as pro­
vided in, and subject to the limitations of, this Section L.
1. Accidental Injury Outside CHF Service Area. If a Member, while temporarily more than thirty miles away from his
regular place of residence and outside the CHF Service Area, is accidentally injured and receives emergency treatment, CHF
shall, subject to the limitations hereafter set forth, pay such Member up to an aggregate maximum of $500.00 on account of
expenses actually incurred by such Member for:
a. emergency medical services;
b. emergency hospital services;
c. emergency ambulance service.
2. Emergency Illness Outside the CHF Service Area. If a Member becomes ill and requires emergency hospitalisation
while temporarily more than thirty miles from his regular place of residence and outside the CHF Service Area, CHF shall,
subject to the limitations hereafter set forth, pay such Member up to an aggregate maximum of $600.00 on account of expenses
actually incurred by such Members for:
a. hospital services received as a registered bed patient in a general hospital;
b. medical services received as a registered bed patient in a general hospital;
c. emergency ambulance service.
Obstetrical Cases. Payment as outlined above will be made on account of emergency hospitalisation required as a
result of complications of pregnancy but not for normal delivery.
3. Continuing or Follow-Up Treatment Monetary payment on account of accidental injury or emergency illness is
limited to emergency care required before the Member can, without medically harmful or injurious consequences, return to the
CHF Service Area. Benefits for continuing or follow-up treatment are provided only in the Service Area subject to all the pro­
visions of this Agreement If the Member obtains prior approval from CHF or a Physician, a portion of ths $600.00 allow­
ance may be applied toward the cost of necessary ambulance service or other special transportation arrangements medically re­
quired to transport the Member to the Service Area for continuing or follow-up treatment
4. Notification and Claims. Any Member having an emergency illness within the scope of Section L.-2 shall notify
CHF within forty-eight (48) hours after care is commenced.
No claim pursuant to this Section L shall be allowed unless a complete application for payment, on forms to be provided
by CHF, is filed with CHF within sixty (60) days after the date of the first service for which payment is requested.
Failure to give notice within the times provided in this Section L-4 shall not invalidate any claim if it is shown not to
have been reasonably possible to give such notice and that notice was given as soon as reasonably possible.
 RIDER

MEDICARE COORDINATED BENEFIT SCHEDULE "M"

Subject to all terms, conditions and definitions in the Service Agreement, Members
subject to "M" coverage are entitled to receive the Medical and Hospital Services and
other benefits as set forth in Benefit Schedule "A", as coordinated with the Medicare Act.

A. An individual will be accepted for enrollment hereunder if he/she meets the

qualifications established in Benefit Schedule "A", is 65 years of age or over, is entitled
to benefits and is enrolled in both Part A and Part B of the Medicare Act 42 U.S.C.A.
Section 1395 et seq., hereinafter called "Act," provided first that said individual has
filed with CHF a change of enrollment card notifying said CHF of his/her eligibility
for benefits under said Act. Said change in enrollment shall become effective immediately
after the receipt of the change in enrollment properly completed and executed and the
notification by the Department of Health, Education and Welfare that the individual is
entitled to benefits of both Part A and Part B, and the payment rate for this benefit schedule
shall be reflected within thirty (30) days thereafter.

B. CHF will coordinate Benefit Schedule "A" with the provisions of the Act
Parts A and B and in the event services and care provided for in the Act exceed those
offered under Schedule "A" CHF will exercise its best efforts to make said services and
care available; however, CHF does not assume the responsibility for arranging or providing
and does not guarantee the availability of said services and care and the arrangement
therefor will be the sole obligation of the individual.

C. There shall be no duplication of payments and no individual shall be entitled

to payment nor can he/she collect any fund, refund, monies or reimbursement in any
way, shape, manner or form, whether arising from hospital or medical services or other
services or duties rendered under the provisions of Benefit Schedule "M" Benefit Schedule
"A," and/or the Act; in the event any fund, refund, monies or reimbursement is paid to
the individual he shall immediately assign the same to CHF.

D. Each individual to whom coverage is provided herein shall be entitled to

psychiatric care, not to exceed $250.00 annually to a Physician; however, said visits are
limited to the individual and shall not be available to a Family Dependent.

E. The coordinated coverage under this Benefit Schedule "M" shall be open only
to individual subscribers. No family dependents shall be eligible to enroll herein.

F. The privileges of this Benefit Schedule "M" shall terminate immediately upon
and contemporaneous with the withdrawal or failure of the individual to maintain
coverage under Part B.
 Appendix B
THE MEDICAL SERVICE AGREEMENT
Thia Medical Service Agreement, (the uAgree­
ment”) made and entered into as of the first day of
January, 1966 by and between Community Health
Foundation, Inc
*, an Ohio corporation not for
profit, and The Community Health Foundation
Medical Group, a partnership of physicians
formed and existing under the laws of Ohio,
witnesseth:
Article I. Definitions
Section 1. As used in this Agreement, each of
the following terms (and the plural thereof, when
appropriate) shall have the respective meanings
hereafter expressed in this Article unless mani­
festly incompatible with the intent thereof:
(a) "Medical Group” shall mean The Commu­
nity Health Foundation Medical Group and any
successor thereof
* the Service Area by virtue of Membership Con­
(5) “CHF” shall mean Community Health
Foundation, Inc,, and any successor thereof.
(o) “Physician” shall mean a person who holds
the degree of Doctor of Medicine, is licensed to
practice medicine in the State of Ohio and who is
a partner in or employed by the Medical Group.
(<Z) “Health Plan” shall mean the voluntary
nonprofit health care plan established by CHF in
accordance with and subject to the provisions of
Ohio Revised Code Sections 1738.01 to 1738.19,
inclusive, and any amendments thereof.
(e) “Subscriber” shall mean an individual by
whom or on whose behalf Dues are paid, thereby
entitling him to Hospital Services and Medical
Services by virtue of the respective Membership
Contract under which coverage under the Health
Plan is afforded to him.
(/) "Family Dependent” shall mean an indi­
vidual for whom Dues are paid who is enrolled
under the Health Plan solely by virtue of being
included in the family (as that term shall be de­
fined from time to time in the Membership Con­
tract) of a Subscriber.
(?) "Member” shall mean any Subscriber or
Family Dependent
(A) “Membership Contract” shall mean that
contract under the terms of which a Member is
entitled to coverage under the Health Plan.
(r) “Duefi” shall mean the payments required
pursuant to Membership Contract.
(j) "Service Area” shall mean the geographical
area comprised within the boundaries of the Ohio
Counties of Cuyahoga, Geauga, Lake, Lorain and
Summit and located within a radius of 30 miles of
the offices maintained by CHF at 11717 Euclid
Avenue, Cleveland, Ohio, or 5510 Pearl Road,
Parma, Ohio.
(A) “Hospital Services” shall mean all hos­
pitalization to which a Member is entitled within
tract, including such nursing and incidental serv­
ices such as X-ray and laboratory services as are
customarily furnished by general hospitals in the
Service Area.
(Z) "Medical Services” shall mean all profes­
sional medical out-patient and in-patient services
to which a Member is entitled within the Service
Area by virtue of Membership Contract, exclud­
ing, however:
(i) all professional services rendered by the
Medical Group with respect to illnesses, injuries
or conditions as to which coverage is afforded a
Member pursuant to any federal, state, county or
municipal Workmen’s Compensation or Employ­
ees Liability law or other legislation of similar
purpose or import, or as to which reimbursement
or indemnity is provided a Member from any fed­
eral, state, county, municipal or other govern­
mental agency, including, in the case of military
service-connected disabilities, the Veterans
Administration;
 (ii) such professional services as shall be
rendered to Members in the Service Area by
medical practitioners (who are not serving as
Physicians hereunder) in circumstances under
which as a result of emergency or other factors
the care of the patient is not under the control of
a Physician;
(iii) all professional services rendered by the
Medical Group to persons who are not Members;
and
(iv) all other professional services rendered
by the Medical Group as from time to time shall
be excluded from the definition of Medical Serv­
ices by mutual agreement of CHF and the Medical
Group.
(m.) “Supplemental Charges” shall mean the
charges (not covered by Dues) made directly to
Members for items such as, but not limited to,
office visits, radiology, laboratory, physical ther­
apy, X-ray therapy, emergency room treatment,
transfusions, injections, allergy materials, al­
lergy injections, hearing tests, hearing aids, radio­
active isotope studies, dressings, casts, medical
supplies, hospital room and board, refractions
and glasses.
(n) “Medical Advisor (s)” shall mean such in­
dividual medical practitioner or such group of
medical practitioners (none of whom is serving as
a Physician hereunder) as CHF shall appoint
with the approval of the Medical Group to per­
form the various duties delegated in this Agree­
ment or hereinafter delegated by CHF or by joint
act ion of CHF and the Medical Group.
Aikiaona IL Recitals
Section 1. CHF and the Medical Group desire
by this Agreement to effect arrangements pursuant
to which the Medical Group will perform all of the
Medical Services required to be furnished to each
member within the Service Area pursuant to the
respective Membership Contract under which cov­
erage under the Health Plan is afforded to him.
Sec. 2. CHF and the Medical Group, respec­
tively, acknowledge that they will continue to
maintain separate and independent management
and that, each has full and complete authority and
responsibility with respect, to administering its
respective organization and operation. The Medi­
cal Group agrees that it will make no changes in
its Partnership Agreement data January I, 1966,
without advising CHF in writing of any such
changes prior to adoption thereof by the Medical
Group.
Sec. 3. None of the provisions of this Agree­
ment are intended to create nor shall be deemed or
construed to create any relationship between the
parties other than that of independent parties con­
tracting with each other hereunder solely for the
purpose of effecting the provisions of this Agree­
ment.
Sec. 4. Neither of the parties hereto nor any of
their respective employees is the agent, employee
or representative of the other.
Sec. 5. In order best to service the Health Plan
and promote the best interests of the parties hereto
and each Member, the parties respectively ac­
knowledge to each other that they will attempt in
good faith, to extend from year to year their con­
tractual arrangements hereunder, revised, how­
ever, to take account of such current economic,
professional and other material factors as shall
prevail from time to time.
Sec. 6. CHF acknowledges that as a material
inducement to the Medical Group to enter into and
perform under this Agreement, the parties have
represented and warranted to each other that all
of the actions of the parties in administering the
Health Plan and in performing the respective ob­
ligations to be performed by the parties hereunder
shall at. all times be subject to and governed by
such ethical standards relating to the practice of
medicine as from time to time shall be currently
prevalent
Sec. 7. The parties acknowledge that it is neces­
sary for them to constantly exchange information
and cooperate fully regarding policies affecting
the Health Plan and the administration of this
Agreement, to the end of achieving an orderly and
effective administration of the Health Plan and
this Agreement.
Article III. Covenants of Medical Group
Section 1. Medical Group covenants:
(a) to provide Medical Services to each Member
in accordance with the respective Membership
Contract under which coverage under the Health
Plan is afforded to him;
(K) to use its best efforts in rendering Medical
Services in order to provide a quality of medical
care in conformity with accepted medical and sur­
gical practices prevailing from time to time in the
Service Area;
 (c) to provide for the availability of Medical
Services at such time and in such locations within
the Service Area us shall be necessary and practi­
cal for the prompt and proper rendition thereof;
(d) to make only such changes in the present
hours during which Medical Services are provided
as shall be approved by CHF and to take under
advisement for approval changes proposed by
CHF in the present hours during which Medical
Services are provided.
(«) to file with CHF all schedules and work
rules applicable to Physicians;
(/) to deliver to CHF at reasonable intervals
written reports on the quality of the Medical Serv­
ices rendered by the Medical Group, including
various techniques developed by the Medical
Group to assure a high quality of Medical Serv­
ices;
(ff) to use its best efforts in obtaining such hos­
pital privileges for Physicians as shall be adequate
to meet the requirements for the Hospital Services
to which each Member shall be entitled pursuant
to the respective Membership Contract under the
terms of which coverage under the Health Plan is
afforded to him, provided, however, that it is
agreed that the Medical Group shall not be respon­
sible if such requirements are not satisfied for
causes beyond its reasonable control; and
(A) to only engage the services of such consul­
tants, and specialists engaged in the practice of
medicine (in addition to the Physicians) as shall
be necessary, convenient or appropriate for the
purpose of maintaining a high quality of Medical
Services, it being agreed that the Medical Group
shall not otherwise subcontract nor delegate its
duties hereunder unless CHF shall so approve.
Article IV. Covenants of CHF
Section 1. CHF covenants:
(а) to continue to maintain, equip, furnish, sup­
ply and staff facilities adequate to enable the Med­
ical Group to furnish the Medical Services re­
quired to lie furnished hereunder;
(б) to perform all administrative, accounting,
enrollment, and other functions necessary, con­
venient or appropriate for the administration of
the Health Plan and this Agreement;
(c) to not intervene in any manner with the
rendition of Medical Services by the Medical
Group, it being agreed that the Medical Group
shall have the sole responsibility in connection
therewith;
(d) to pay all hospitals for the services ren­
dered by them to each Member admitted by ar­
rangement with a Physician to such hospitals
pursuant to the respective Membership Contract
under the terms of which Hospital Services are
afforded to such Member;
(e) to effect arrangements under which all CHF
personnel participating in the care of patients
shall be subject in that phase of their duties to the
direction of the Medical Group and the qualifica­
tions of such personnel shall be subject to the ap­
proval of the Medical Group; provided, however,
that such personnel shall be and remain solely the
employees of CHF which shall determine the
terms and conditions of their employment;
(/) to collect all Dues and other items of in­
come to which CHF shall be entitled except for
such Supplemental Charges as the parties shall
mutually agree may be more conveniently collected
by the Medical Group, in which event the Medical
Group shall collect for and remit to CHF such
Supplemental Charges in accordance with the
forms, methods and procedures established by
CHF;
(?) to assume sole financial responsibility for
and to pay all costs for professional services ren­
dered to Members in the Service Area by medical
practitioners (who are not serving as Physicians
hereunder) in circumstances under which as a re­
sult of emergency or other factors the care of the
patient is not under the control of a Physician;
and
(A) to pay all costs for the services performed
by the Medical Advisor (s).
Article V. Compensation of the Medical
Group
Section 1. For all of the services of the Medical
Group rendered pursuant to the provisions of this
Agreement, CHF agrees:
(а) to pay to the Medical Group on or before
the 20th day of each month that amount by which
$2.02 multipled by the number of Members who
during the preceding calendar month were entitled
to coverage under the Health Plan shall exceed for
the preceding calendar month that income (if
any) derived by and comprising the property of
the Medical Group for rendering professional
services not included as Medical Services
hereunder;
(б) to reimburse the Medical Group on or be­
fore January 30th of each year in that amount (if
any) by which during the preceding calendar year
the income received by the Medical Group shall
be exceeded by the expenses (mutually agreed to
by CHF and the Medical Group),including, but
not' limited to, expenses for:
(i) the salaries, drawing accounts and other
benefits paid to or provided for the benefit of
the Physicians;
(ii) premiums on group term life insurance for
each Physician in an amount of $20,000.00.
(iii) disability payments made to each Physi­
cian by the Medical Group pursuant to ar­
rangements as to which CHF shall give its written
approval;
(iv) all applicable local, state and federal ex­
cise, property, payroll, withholding, and other
taxes paid by the Medical Group, except such
personal property, income taxes and the like as,
pursuant to applicable local, state and federal law,
shall be required to be paid by a Physician with
respect to his personal income;
(v) Travel expenses;
(vi) Legal fees; and
(vii) Expenses advanced in connection with
recruiting Physicians.
The provisions with respect to reimbursement as
required under this Section shall terminate effec­
tive as of the first day of the first calendar month
comprised within such period of six consecutive
calendar months during which that amount by
which the aggregate number of Members (deter­
mined by computing separately the number of
such Members for each calendar month during
said period and then by aggregating the total of
such Members for the entire six calendar months
comprised within said period) entitled to cover­
age under the Health Plan during said period
multiplied by $2.02 plus any income derived by
the Medical Group from rendering professional
services not included as Medical Services here­
under shall equal or exceed the aggregate expenses
of the Medical Group for such period. Upon ter­
mination, as hereinabove provided, this Subsection
1(&) of Article V shall be of no further force or
effect. For example, if during the consecutive six-
men th period July 1, 1966 through December 31,
1966 the monthly roll of Mem lie re would be:
For July 19,000
For August 19, 200
For September 19, 400
For October 19, SOO
For November_______ 19, 800
For December _________ 20,000
the total of such Members would be 117,000. Ac­
cordingly, if 117,000 multiplied by $2.02, for a
total of $236,340 plus any income derived by the
Medical Group from rendering professional serv­
ices not included a Medical Services hereunder,
would equal or exceed the amount of the expenses
of the Medical Group for the period July 1, 1966
through December 31, 1966, the provisions with
respect to reimbursement, as required under this
Subsection, shall terminate as of July 1, 1966 and
shall be automatically thereafter of no further
force or effect.
In the event that termination of reimbursement
shall be effective as of the first day of any calendar
month other than January in any calendar year,
the period comprised of all of the calendar months
which shall precede the first day of the calendar
month when termination of reimbursement shall
have liecome effective and which shall be included
in the calendar year of the termination of reim­
bursement shall be deemed to be and shall be
treated as a calendar year for the purpose of deter­
mining if reimbursement is required under this'
Subsection 1(6) of Article V. If such reimburse­
ment is required it shall be promptly effected.
Accordingly, if, for example, termination of
reimbursement became, effective December 1, 1966,
the period January 1, 1966 through November
30, 1966, inclusive, would be deemed to be and
would be treated as a calendar year for the purpose
of determining if reimbursement is required for
such period. If such determination evidences that
the income received by the Medical Group during
the period January 1, 1966 through November
30, 1966, inclusive, is exceeded by its expenses,
reimbursement for the difference shall be
promptly effected. If the determination evidences
the contrary, however, the excess of income shall
be the property of the Medical Group and no re­
imbursement shall be required for such period.
If this Agreement shall terminate on any day
other than December 31st of any year and if at the
date of such termination the provisions requiring
reimbursement under this Section l(-) of Article
V are still in effect, the |>eriod from January 1st
of the year in which such termination shall occur
through the date of such termination shall be
deemed to l>e and shall lie treated as a calendar
year for the purpose of determining if reimburse­
ment is required hereunder for such period. If
such reimbursement is required it shall be
promptly effected.
 (c) to pay the cost of supporting such retire­
ment program for the Physicians as the Medical
Group and CHF shall approve.
Article VI. Relationship Between CHF and
the Medical Group
Section 1. The parties mutually covenant:
(a) that to the extent compatible with the
separate and independent management of each
party, they shall at all times maintain an effective
liaison and close cooperation with each other, to
the end of providing maximum benefits to each
Member at the most reasonable cost consistent
with high standards of Medical Services and Hos­
pital Services;
(ft) that they shall establish a joint committee
charged with the development of mutually ac­
ceptable approaches to periodic appraisals of
Member satisfaction, and availability and quality
of Medical Services; and such appraisals shall be
included in an annual report of CHF;
(<?) that the administration of the Health Plan
and this Agreement shall at all times be subject to
and governed by the ethical principles reflected in
the Article published in June 1957, entitled “Prin­
ciples of Medical Ethics of the American Medical
Association”;
(d) that the Membership Contracts attached
hereto as Exhibits A, B, and C have been reviewed
and approved by the parties and that no revision
or amendment thereof shall be made except in
compliance with the following procedures:
(i) If CHF desires to modify or amend any
Membership Contract, it shall submit such pro­
posed amendment or modification to the Medical
Group for its review and approval. If tJhe Medical
Group within 30 days after receipt of such
proposed amendment or modification shall no­
tify CHF that such proposed amendment or
modification:
A. requires or tends to require within the Serv­
ice Area professional services in addition to the
Medical Services;
B. affects the physician-patient relationship or
professional or ethical aspects of practice by the
Medical Group, or
C. affects adversely the interests of the Medical
Group,
then no such amendment or modification shall be
binding upon the Medical Group.
(ii) If the Medical Group desires to modify
or amend any Membership (Contract, it shall sub­
mit such proposed amendment to CHF for review
and approval. CHF shall endeavor to cooperate
with the Medical Group in effecting such pro­
posed amendment or modification but no such
proposed amendment or modification shall become
effective until CHF shall approve thereof.
(iii) CHF shall notifyy the Medical Group at
least 60 days prior to the effective date of any pro­
posed changes in the amount of Dues or Supple­
mental Charges and the parties agree to discuss
such changes, provided, however, that CHF re­
serves the right to effect such changes without the
approval of the Medical Group.
(s) that the parties shall cooperate to control
enrollment to the Health Plan in order to avoid
exceeding the reasonable capacity of personnel and
facilities, although the parties acknowledge that
in some circumstances enrollment is not entirely
within the control of CHF.
(/) that CHF and the Medical Group shall en­
deavor at all times to freely and fully exchange
information regarding all matters directly or in­
directly related to the Health Plan and this
Agreement
(ff) that no changes in or additions to facilities
presently utilized in operating the Health Plan
and administering this Agreement shall be effected
by either party without the prior consideration
and approval of the other.
(A) all procedures with respect to billing and
collecting for charges (pursuant to the Health
Plan and this Agreement) made directly to persons
who are not Members shall be subject to the ap­
proval of CHF and the Medical Group.
(#) that unless this Agreement shall be termi­
nated in the manner provided in this Agreement,
CHF and the Medical Group shall contract exclu­
sively with each other, to the end that CHF shall
not contract with other medical practitioners to
render the Medical Services in the Service Area
and the Medical Group shall not contract with any
other entity with respect to providing professional
services.
Article VII. Records
Section 1. CHF shall maintain such records and
establish and adhere to such procedures as shall
be reasonably required to ascertain the number
and identity of Members and shall furnish such
information to the Medical Group upon its re­
quest. The Medical Group shall cooperate with
CHF in connection with such records and proce­
dures, to the end of enabling the parties to ac­
complish with maximum efficiency and minimum
administrative cost determinations of eligibility
for coverage under the Health Plan and the amount
of compensation payable to the Medical Group.
Sec. 2. CHF and the Medical Group shall main­
tain, in accordance with standard and accepted ac­
counting practices, such financial and accounting
records as shall be necessary, appropriate or con­
venient for the proper administration of the
Health Plan and this Agreement.
Sec. 3. CHF and the Medical Group shall jointly
maintain such statistical records with respect to
Medical Services, Hospital Services, utilization of
the Health Plan, and the like as shall be necessary,
appropriate, or convenient for the proper adminis­
tration of the Health Plan and this Agreement.
Seo. 4. CHF and the Medical Group shall each
have the right upon request to inspect at all reason­
able times all accounting and administrative books
and records maintained and all facilities operated
by the other.
Article VIII. Health Plan, the Public and
Medical Ethics
Section 1. CHF shall not advertise the medical
practice of nor solicit patients for the Medical
Group.
Sec. 2. CHF shall submit to the Medical Group
for its approval all membership, education, and
informational materials.
Sec. 3. The Health Plan shall be administered in
a manner which shall provide that each person in
any group which desires that each individual com­
prised within its membership be provided an op­
portunity to enroll for coverage under the Health
Plan shall have a free right of choice at the time
of enrollment and from time to time thereafter as
to continuing membership in the Health Plan.
Article IX. Appointment of Physicians
Section 1. The appointment of each medical
practitioner as a Physician shall be made by the
Medical Group in accordance with and subject to
the following procedure:
(a) The Medical Group shall notify CHF of
the nomination by the Medical Group of each
medical practitioner, for an appointment as a
Physician, stating in such notice the professional
qualifications pertaining to such appointment,
plus the proposed effective date of such appoint­
ment, which shall be a date no less than 15 days
subsequent to the date of such notice.
(K) Prior to the proposed effective date of the
appointment of a medical practitioner as a Physi­
cian, CHF shall notify the Medical Group as to
whether CHF approves or disapproves of such
appointment, failing which notice such appoint­
ment shall be automatically deemed approved by
CHF. If CHF disapproves, the Medical Group
shall withdraw its proposal concerning such ap­
pointment. CHF approval or disapproval shall
be solely on the basis of professional qualifications.
(c) CHF shall have no right to nominate any
medical practitioner as a Physician or to remove
any Physician onoe approved.
(d) Except as provided in Subsection 1(5) of
this Article IX, each proposed appointment made
by the Medical Group shall be finalized on the
effective date stated in the notice pertaining to
the same unless the Medical Group, in its sole dis­
cretion, shall postpone finalization thereof or shall
for any reason voluntarily withdraw its proposal
concerning such appointment.
Sec. 2. Notwithstanding the provisions of Sec­
tion 1 of this Article IX, if the Medical Group in
good faith determines that as a result of urgent
factors affecting the quality of Medical Services
it will be unable to give notice in advance to CHF
of the nomination of a medical practitioner for
an appointment as a Physician, the Medical Group
may, nevertheless, appoint such medical practi­
tioner as a Physician upon so notifying CHF, in
which event:
(a) CHF, in its discretion, within 15 days after
receiving notice of the nomination of a medical
practitioner for appointment as a Physician, may
disapprove such appointment solely on the basis
of professional qualifications, in which event
CHF shall so notify the Medical Group and the
Medical Group shall then promptly cancel such
appointment.
(5) If the Medical Group shall cancel any ap­
pointment pursuant to the provisions of Subsec­
tion 2(a) of this Article IX, CHF shall defend,
indemnify and save the Medical Group harmless
from all loss, cost, damages and expense which
may arise directly or indirectly from any claim or
action asserted against the Medical Group as a
result of such cancellation.
Article X Non-Membkrb
Section 1. The Medical Group reserves the
right (to the extent campatible with the rendition
of the Medical Services):
 (a) to provide its professional services to per­
sons who are not Members; and
(&) to provide its professional services to in­
digent persons who are not Members.
Article XI. Insurance and Indemnity
Section 1. CHF, at its sole cost and expense,
shall procure and maintain such policies of general
liability and professional liability insurance and
other insurance as shall be required to insure the
Medical Group, each Physician and CHF against
any claim or claims for damages arising by reason
of personal injuries or death occasioned directly
or indirectly in connection with the performance
of any professional services by the Physicians, the
use by the Physicians of any property and facili­
ties provided by CHF, and the activities per­
formed by the Physicians in connection with this
Agreement; each of such policies (unless the par­
ties shall otherwise designate in writing) shall be
in limits of not less than $300,000. in the event of
injury or death to one person and $500,000. in the
event of injury or death to more than one person
as the result of the same accident. The originals of
each of said policies shall be retained by CHF and
memorandum copies thereof shall be delivered to
the Medical Group. All policies of professional
liability insurance shall require the written con­
sent of the named insured prior to settlement of
any claim or suit
Sec. 2. Except with respect to claims for injury,
damage, or death arising from or in connection
with motor vehicle accidents, CHF shall defend,
indemnify and save the Medical Group and each
Physician harmless from and against any and all
loss, cost, expense or damage with respect to any
claim, liability, demand, controversy, action or
cause of action, at law, equity or administrative
proceeding, arising directly or indirectly out of
or in connection with the Health Plan, the per­
formance of any professorial services by the Phy­
sicians, the use by the Physicians of any property
and facilities provided by CHF, and the activities
l>erformed by the Physicians in connection with
this Agreement, except to the extent as to which
there shall be proceeds of insurance in the full
amount paid in connection therewith. In the event
of any such claim, liability, demand, controversy,
action or cause of action, CHF, nt the request of
the Medical Group, shall assume as the sole lia­
bility and obligation of CHF the adjustment,
settlement and defense thereof and the payment
of all costs and attorneys' fees related thereto.
Article XII. Term of Agreement and
Termination
Section 1. Subject to the provisions of Section
2 of Article XIII, this Agreement shall continue
in effect for the period commencing January 1,
1966 and ending June 30, 1967, and shall be ex­
tended for annual periods thereafter commencing
July 1st and ending June 30th of each year, unless
either party hereto on or before May 1 of any
year shall elect to terminate this Agreement by so
notifying the other; in the event of such an elec­
tion, this Agreement shall terminate on June 30th
of the year in which such notice to terminate shall
be given. Upon extension, this Agreement shall
continue upon the same terms and provisions
herein contained except only that reference to any
year herein shall be superseded by the annual
period for which extension is applicable.
Article XIII. Arbitration
Section 1. Subject to the provisions of Section
2 of this Article XIII, the procedure for resolving
any dispute between the parties which cannot be
resolved amicably between them shall be as
follows:
(a) Each party shall appoint one arbitrator
within 10 days after receipt of written notice
from the other party requesting such appointment;
(-) The two arbitrators so appointed by the
parties shall together appoint a third arbitrator
within 10 days after their appointment;
(<?) If either party fails to appoint an arbitrator
within the alloted time, the Chief Justice of the
Common Pleas Court of Cuyahoga County, Ohio
shall appoint such arbitrator upon application by
the other party;
(rf) If the two arbitrators appointed by the
parties shall fail to appoint a third arbitrator with­
in the allotted time, the presiding judge of the
United States District Court for the Northern
District of Ohio (Eastern Division) shall appoint
the thiixi arbitrator upon application of either
party.
It shall be the duty of the arbitrators to deter­
mine the dispute referred to them as expeditiously
as possible after their appointment. A determin­
ation by a majority of the arbitrators shall be final
and binding and each party shall pay one-half the
costs of such arbitration. Any arbitrator may be
removed by the party or the Court or the
other arbitrators who appointed him (as the
case may be) for failure to perform here­
under and a successor arbitrator shall be ap­
pointed promptly by such party, Court or other
arbitrators (as the case may be). Notwith­
standing any dispute arising hereunder, each party
hereto shall at all times continue to perform the
obligations on its part required to be performed
hereunder.
Sec. 2. If any dispute between the parties shall
involve a bona fide contention:
(i) that the Medical Group has not provided
the Medical Services at a cost which shall enable
CHF to be competitive with other plans of health
insurance providing coverage in the Service Area
comparable to that provided by the Health Plan;
or
(ii) that the Medical Group has failed to per­
form the obligations and responsibilities devolving
upon it hereunder; or
(iii) that CHF has failed to perform the obli­
gations and responsibilities devolving upon it
hereunder,
the party making such contention shall promptly
so notify the other in detail with respect thereto,
in which event the other party shall have a period
of 90 days in which to satisfy the matter as to
which notification has been given. Following such
90 day period, if the party which has given notice
of dissatisfaction hereunder shall remain dissatis­
fied and shall so notify the other, such matter shall
be promptly submitted for arbitration pursuant
to the provisions of Section 1 of this Article XIII.
Upon referral of such matter to arbitration it shall
first be the duty of the arbitrators to determine if
the dispute does in fact involve any of the matters
referred to in Items (i), (ii) or (iii) of this Sec­
tion. If the determination of the arbitrators shall
be that the dispute does not in fact involve any
of such items the arbitrators shall determine the
merits of the dispute and such determination by
the arbitrators shall be final and binding. If the
arbitrators shall determine that the dispute does
in fact involve one or more of such items, the arbi­
trators shall proceed to determine the merits of
such dispute and upon receipt of the determination
by the arbitrators on the merits of the dispute, the
parties shall diligently and in good faith attempt
to abide therewith. If the arbitrators have deter­
mined that the dispute does in fact involve any of
the matters referred to in Items (i), (ii) or (iii)
of this Section, and if either party continues to be
dissatisfied with respect to the merits of the matter
which had been submitted for arbitration, it shall
so notify the other party and the parties during
the ©0-day period following such notice shall dili­
gently and in good faith attempt to amicably re­
solve their differences, failing which either party
hereto shall have the right, upon so notifying the
other, to terminate this Agreement effective upon
the later of 90 days following the date on which
such notice of termination has been given or June
30th of that year in which such notification to
terminate has been given.
Article XIV. Amendment
Section 1. CHF and the Medical Group, with­
out notice to or approval of any Member, reserve
the right :
(a) to terminate this Agreement in the manner,
at the time, and subject to the procedure set forth
in this Agreement; and
(&) to effect any amendment of this Agreement
as to which CHF and the Medical Group shall in
writing jointly approve.
Article XV. Miscellaneous
Section 1. This Agreement shall in no way be
construed in a manner which shall provide any
rights hereunder to Members or to increase the du­
ties or responsibilities of the parties hereto beyond
the requirements established by Membership Con­
tracts, it being agreed that the sole purpose of this
Agreement is to establish the respective rights and
duties of the parties hereto, each to the other, and
that the rights of each Member are derived solely
from the respective Membership Contract under
which coverage under the Health Plan is afforded
to him.
 Sec. 2. Termination of this Agreement shall not In Witness Whereof, the parties hereto have
affect the rights or obligations of the parties hereto executed this Agreement as of the day and year
which shall have theretofore accrued or shall first above written.
thereafter arise in respect of any occurrence prior By--------
to termination and such rights and obligations And
shall continue to be governed by the terms of this COMMUNITY HEALTH FOUNDATION, INC.
Agreement The Community Health Foundation
Medical Group
Article XVI. Notice By Its Executive Committee
Section 1. Any notice required to be given pur­
suant to the terms and provisions hereof shall be in
writing and shall be sent by registered or certified
mail, return receipt requested, postage prepaid,
addressed to each party at its respective last known
address.
 Appendix C
*
THE PHYSICIANS PARTNERSHIP AGREEMENT
This Partnership Agreement made and entered
into at Cleveland, Ohio, as of the 1st day of Jan­
uary 1966, by and among the undersigned, who
are collectively hereinafter referred to as the “part­
ners” and individually by their last names.
Article I. Name and Purpose
Section 1. The partners do hereby form a part­
nership pursuant to the laws of the State of Ohio
under the name of The Community Health Foun­
dation Medical Group for the purpose of and
limited to the practice of medicine in the State
of Ohio, whereby the professional services of the
partners and physicians duly licensed to practice
medicine in the State of Ohio who are employed
by the Partnership (the employee physicians being
hereinafter referred to as the “participating phy­
sicians”) shall be provided to:
(a) Subscribers to the voluntary non-profit
Health Care Plan established by Community
Health Foundation, Inc., an Ohio corporation not
for profit (hereinafter referred to as “CHF”),
and
(K) All other patients of the partners and the
participating physicians.
Sec. 2. The Partnership shall maintain offices
at the Community Health Foundation Health Cen­
ter, 11717 Euclid Avenue, Cleveland, Ohio, or at
such other locations as the Executive Committee
(established pursuant to the provisions of Article
VIII) may from time to time determine.
Article II. Term
Section 1. The Partnership shall commence as
of the effective date of this Partnership Agree­
ment and shall continue until dissolved as herein­
after provided.
Sec. 2. Concurrently with the execution of this
Partnership Agreement, Sa ward, Vayda and
Young have dissolved the partnership established
by their agreement of January 1, 1965 (the “8a-
ward-Vayda-Young Partnership”), and effective
as of the commencement date of this Partnership
Agreement, all of the assets of the Saward-Vayda-
Young Partnership are hereby transferred to the
Partnership, which hereby assumes all of the lia­
bilities of the Saward-Vayda-Young Partnership,
provided, however, that all items of income and ex­
penses for the period prior to the effective date of
the within Partnership Agreement which are at­
tributable to the Saward-Vayda-Young Partner­
ship shall be appropriately prorated and adjusted
between the members of the Sa ward-Vayda-Young
Partnership and the members of the Partnership
as of the effective date of this Partnership Agree­
ment.
Sec. 3. The partners acknowledge that effective
as of the commencement of their association (as
partners or as participating physicians, as the case
may be) with the Community Health Foundation
Medical Group al] fees and remuneration received
by each of them by reason of the practice of medi­
cine and related activities have been the property
of the Sa ward-Vayda-Young Partnership and, ac­
cordingly, they hereby agree that such fees and
remuneration as they shall hereafter earn by rea­
son of the practice of medicine and related activi­
ties (as determined from time to time by the Exec­
utive Committee) shall belong to the Partnership
and that all billings and collections for profes­
sional services of each partner shall be on behalf
of and for the Partnership.
Article III. Capital
Section 1. Each partner shall initially contrib­
ute to the Partnership the sum of One Hundred
Dollars ($100.00).
 Sec. 2. No partner shall bo required to make any
additional contributions to the capital of the Part­
nership. However, if pursuant to arrangements
made with the Executive Committee any partner
shall furnish additional funds to the Partnership,
he shall be deemed to have made a loan of said
funds of the Partnership, subject to such arrange­
ments as shall be established by written agreement
between him and the Executive Committee; pro­
vided, however, that said aid funds may be treated
as an additional capital contribution from said
partner if the Executive Committee shall so in
writing authorize the Comptroller appointed by it.
Seo. 3. No interest shall be paid to any partner
in respect of his capital account, nor in respect to
any undistributed Partnership profits.
Sec. 4. No partner (except as otherwise in this
Partnership Agreement expressly provided in the
event of dissolution) shall withdraw any portion
of his capital contribution unless expressly au­
thorized to do so in writing by the Executive Com­
mittee.
Article IV. Dotteh of Partners
Section 1. Except, as hereinafter otherwise ex­
pressly provided, each of the partners shall devote
all of his professional time and effort to the con­
duct of the Partnership business.
Sec. 2. Subject to further determination by the
Executive Committee, the regular work week to
be devoted by each partner to the conduct of the
business of the Partnership shall consist of five (5)
and one-half (%) working days (each such whole
day—or as the case may be, the fractional parts of
any day which when added together comprise a
whole day—shall hereinafter be referred to as a
“working day”).
Sec. 3. When authorized by the Executive Com­
mittee, teaching and medical research activities
sponsored by the Partnership or CHF shall be
considered as business conducted by the Partner­
ship and any partner engaged in such activities
shall be treated as having devoted professional
time to Partnership business.
Sec. 4. It is the desire of the partners that (to the
extent compatible with the business of the Part­
nership) they be permitted such freedom of time
and hours as exists in private medical practice;
and, accordingly, any partner with the approval of
the Executive Committee may arrange for time
off on “leave of absence”, provided, however, that
as to each partner other than Saward:
(a) The drawing account of a partner for each
month in which he shall have arranged for time
off on leave of absence shall be reduced in the pro­
portion which his time off on leave of absence dur­
ing such month bears to the total working days
comprised within said month;
(b ) The share of the net income of the Partner­
ship for any calendar year in which he shall have
arranged for time off on leave of absence shall be
reduced in the proportion which his time off on
leave of absence during such calendar year shall
bear to the total number of working days con­
tained within said calendar year.
(<?) No time off on leave of absence shall be
granted if, in the determination of the Executive
Committee, the granting thereof shall interfere
with the conduct of business of the Partnership.
Sec. 5. Each partner shall be entitled to a vaca­
tion of three (3) weeks during each calendar year,
provided, however, that an additional week of va­
cation may be taken if used for post graduate
medical education. A partner shall not be permited
to accrue vacation periods in excess of six (6)
weeks of regular vacation, plus two (2) additional
weeks of postgraduate medical education; and ac­
cordingly, any vacation time in excess of the
period authorized herein to be accrued shall lapse.
No reduction shall be made in the drawing account
and share of the Partnership net income of a part­
ner when on vacation for the period authorized
herein.
Sec. 6. Notwithstanding any contrary provi­
sion in this Article IV, Saward shall devote only
such time to the conduct of the business of the
Partnership as he shall be expressly required to
do pursuant to the terms and provisions of such
contractual arrangements as exist from time to
time between the Partnership and CHF.
Sec. 7. Except for his respective drawing ac­
count and share of the net income of the Partner­
ship, no partner shall receive any compensation for
services rendered to the Partnership.
Article V. Net Income and Losses
Section 1. The terms “net income of the Part­
nership” and “net losses of the Partnership” shall
mean the gross income of the Partnerahip from
the practice of medicine, less the expenses, charges
and liabilities attributable thereto or arising there­
from, as determined in accordance with standard
and accepted accounting practices. The Partner­
ship accounting shall be on a calendar year and
cash basis, provided, however, that if any taxable
year of the Partnership shall commence on a date
other than January 1st, or shall end on a date other
than December 31st, such taxable year, for the pur­
poses hereof, shall be deemed to be a calendar year;
and in such cases the Partnership accounting shall
be made on the basis of such taxable year and the
drawing accounts of the partners (if determined
on an annual basis) shall be reduced, to the end
that each partner shall only receive that amount of
his annual drawing account as shall be proportion­
ate to the actual period comprised within such
taxable year.
Sec. 2. The net income of the Partnership for
each calendar year shall be shared and distributed
as follows:
(a) Each partner shall receive each month his
respective drawing account as listed in Schedule
“A” attached hereto and made a part hereof, sub­
ject to such reduction as shall be proportionate to
the drawing accounts of the other partners, in the
event that for any month the net income of the
Partnership shall be insufficient for the purpose of
paying in full the respective drawing accounts of
the partners, provided, however, that the drawing
account of each partner (other than 8aw ard) shall
further be subject to:
(i) Such reduction as shall be required pursu­
ant to the provisions of Section 4 of Article IV;
and
(ii) Such adjustment as shall be required pur­
suant to the provisions of Section 4 of Article VI;
(iii) Such determination as shall be made at the
beginning of each calendar year by the Executive
Committee.
(&) At the end of each calendar year, or as soon
thereafter as feasible, the remaining net income of
the Partnership for such calendar year shall be dis­
tributed equally to all of the partners other than
Saward, subject to such reduction (if any) as shall
be required by the provisions of Section 4 of Ar­
ticle IV, and Section 4 of Article VI.
Sec. 3. All net losses of the Partnership shall be
borne in proportion to the drawing accounts to
which the partners are respectively entitled pur­
suant to the provisions of Subsection 2(a) or this
Article V.
Article VI. Disability
Section 1. For the purpose of this Partnership
Agreement, a partner shall be considered to be
disabled if as a result of physical or mental im­
pairment he is substantially unable to actively en­
gage in the practice of medicine;
Sec. 2. For the purpose of this Partnership
Agreement “disability days” shall mean the days
during which a disabled partner (other than
Saward) shall be entitled to the benefits provided
in Subsection 4(a) of this Article VI.
Sec. 3. At the commencement of this Partnership
Agreement, each partner (other than Saward)
shall be credited respectively with the number of
disability days set forth after his name in the
Schedule “B” attached hereto and made a part
hereof. Thereafter, for each twenty-four (24)
working days devoted by a partner to the conduct
of the business of the Partnership, a partner (other
than Saward) shall be entitled to an additional dis­
ability day. Notwithstanding any provision to the
contrary herein, a partner (other than Saward)
shall be entitled to a maximum of one hundred
forty-four (144) disability days.
Sec. 4. Subject to the provisions of Section 1 of
Article VII, in the event that a partner (other
than Saward) shall become disabled, his drawing
account and his participation in the net income of
the Partnership shall be as follows:
(a) For that period of his disability during
which he shall be credited with or entitled to disa­
bility days in accordance with the foregoing pro­
visions of this Article VT, no reduction shall be
made in his drawing account and in his participa­
tion in the net income of the Partnership;
(&) For that period of his disability following
the period during which he shall be credited with
or entitled to disability days, he shall receive for
each calendar month during which he shall be dis­
abled the sum of five hundred dollars ($500.00)
(prorated for any partial month), subject to the
following provisions:
(i) Payments hereunder shall terminate on the
last day of the twelfth successive calendar month
following the commencement of his disability;
(ii) If following a period of disability, a part­
ner shall be wholly able to resume the active prac­
tice of medicine for a period of ninety (SO) days
or more, any subsequent disability resulting from
or attributable to the same cause or causes shall be
treated as a new period of disability for the pur­
pose of determining eligibility to receive payments
under this subparagraph; but if said period of
ability to resume the active practice of medicine
shall be for a period less than ninety (90) days,
any subsequent disability resulting from or attrib­
utable to the same cause or causes shall be treated
as a continuation of the previous period of dis­
ability and payments under this subparagraph
shall terminate on that date which shall be the last
day of the twelfth successive calendar month fol­
lowing the initial commencement of such disabil­
ity, extended by the number of days during which
such partner shall have actively resumed the
practice of medicine; and
(iii) During such time as a partner shall re­
ceive payments hereunder, he shall not be entitled
to any drawing account nor to any participation
in the net income of the Partnership.
In applying the provisions of Section 4 of this
Article VI, the drawing account of a partner and
his participation in the net income of the Partner­
ship for any calendar year in which he shall be
disabled shall be adjusted in such manner as to
reflect, the respective periods of such calendar year
during which he was not disabled and those re­
spective periods of his disability during which he
is credited with or entitled to disability days. For
example, if a partner shall become disabled on
June 1, 1966, and at such time shall have been
credited with or entitled to twenty-four (24) dis­
ability days, and if his disability shall continue
through November 16, 1966, he shall be entitled to
the following:
(i) His full drawing account for the months of
January through May, 1966, inclusive, during
which period he was not under disability;
(ii) His full drawing account for the month of
June, 1966, during which time he was under dis­
ability but was credited with or entitled to twenty-
four (24) disability days, which equals the number
of actual working days comprised within the
month of June, 1966;
(iii) Five Hundred Dollars ($500.00) a month
for the months of July through October, 1966,
inclusive, in lieu of any drawing account for such
months;
(iv) An amount equal to one-half of his draw­
ing account for the month of November, 1966, plus
Two Hundred Fifty Dollars ($250.00), to reflect
that during one-half of the working days com­
prised within said month he was under disability
(without entitlement to disability days), and dur­
ing the remaining one half of said working days
he was not under disability; and
(v) An amount equal to 62.5% of his share of
the net income of the Partnership for calendar
295-002 O—SS------ 8
year 1966, in order to reflect that he is entitled to
participation in the net income of the Partnership
for the periods January 1st through June 30,1966,
inclusive, and November 16th through December
31, 1966, inclusive; and that he is not entitled to
participation during the period July 1st through
November 16,1966, inclusive.
Sec. 5. The Executive Committee shall make all
determinations of adjustments, credits, computa­
tions and all other matters concerning the applica­
bility of any of the preceding Sections of this
Article VI; and in the event of disability incurred
during the vacation of a partner, the Executive
Committee in its discretion may grant or deny
credits for disability days.
Sec. 6. Except as otherwise provided in Article
VII, in the event of the disability of Saward, he
shall be entitled to receive his respective drawing
account in the same manner and to the same extent
ns if he were not under disability.
Article VII. Termination of a Partner’s
Interest
Section 1. Except for the right to receive the
payments expressly provided in this Article, the
interests of a partner in the Partnership and all
of his rights therein shall terminate as of:
(a) The date of his death;
(5) The date upon which his retirement or
withdrawal shall become effective, or
(c) The last day of a period of twelve (12)
successive calendar months during which he shall
be disabled (as the case may be).
Sec. 2. In the event that a partner’s interest in
the Partnership shall terminate, the Partnership
shall pay to such partner, or to his estate (as the
case may be) a sum equal to the aggregate of:
(a) His capital account, determined at book
value (exclusive of good will) by the Executive
Committee as of the date of the termination of his
interest in the Partnership; and
(L) His proportionate share of the net income,
if any, earned by the Partnership during the period
from the beginning of the calendar year in which
his interest, in the Partnership was terminated,
through the date upon which such interest was
terminated, less such amounts as prior to such
termination of his interest, have been distributed
to him in respect of his drawing account during
the calendar year in which his interest in the Part­
nership was terminated.
105
Not withstanding any provision to the contrary in
this Article VII, in the event the Partnership shall
incur a net loss for the period from the beginning
of the calendar year in which a partner’s interest
was terminated, through the date of the termina­
tion of his interest, the total amount to be paid
by the Partnership to such partner, or to his estate
(as the case may be), shall be reduced by an amount
equal to the aggregate of his proportionate share
of the net loss for such period and the amounts
distributed to such partner as a drawing account
during said period.
Sec. 3. The total of the amounts to be paid by
the Partnership in the event of the termination of
the interest of a partner in the Partnership shall
be paid (without interest) to such partner, or to
his estate (as the case may be), in twelve (12)
equal successive monthly installments (or such
number of equal successive calendar months less
than twelve (12) as the Executive Committee shall
determine), commencing on the first day of the
calendar month following the termination of his
interest and continuing on the first day of each
calendar month thereafter until paid in full.
Sec. 4. Each partner upon giving prior notice
to the other partners shall have the right to volun­
tarily retire from the Partnership, in which event
such retirement shall become effective as of the
last day of the tliird calendar month following the
month in which notice of voluntary retirement was
given.
Sec. 5. A partner shall be required to withdraw
from the Partnership:
(а) At any time and for any reason upon the
determination by no less than a two-thirds vote
of all of the members of the Executive Committee
that such partner’s withdrawal is required for the
welfare of the Partnership; or
(б) At the end of the calendar year in which
a partner shall become sixty-five years of age (as
the case may be);
provided, however, that:
(i) The provisions of Subparagraph 5(6) of
this Section shall not apply to Samuel O. Ereed
lander, M.D.
(ii) In the event that a partner shall be re­
quired to withdraw from the Partnership as a
result of the determination of the Executive Com­
mittee, a majority of the partners within thirty
(30) days following such determination may
request a reconsideration of such determination, in
which event the determination of the Executive
Committee shall be ineffective unless within thirty
(30) days following such request for a reconsider­
ation the Executive Committee shall by a two-
thirds vote of all of its members reaffirm its orig­
inal determination; and
(iii) A partner who has been required to with­
draw from the Partnership as a result of becoming
sixty-five years of age, may be continued as an
employee of the Partnership if the Executive Com­
mittee so determines.
Sec. 6. Upon the termination of the interest of
a partner in the Partnership, the Partnership shall
be dissolved, provided, however, that such dissolu­
tion shall have no effect upon the continuance of
the business of the Partnership, which shall there­
after be continued by the remaining partners, who
shall thereupon be deemed to have -formed a new
partnership consisting of the remaining partners.
Following the termination of the interest of a
partner, the remaining partners shall retain as
their sole property all of the assets, books and
records of the Partnership, and the partner whose
interest has been terminated, or his estate (includ­
ing his widow, children, heirs, legatees, personal
representatives, executor or administrator), as the
case may be, shall have no rights or claims of any
kind therein.
Sec. 7. Effective upon the termination of the
interest of a partner, the Partnership and each
remaining partner thereof covenant and agree,
jointly and severally, to indemnify and hold harm­
less the partner whose interest in the Partnership
was terminated, or his estate, as the case may be,
from and against all loss, cost, expense, claims,
liabilities or obligations arising from, or attribut­
able to, the debts, liabilities or obligations of the
Partnership.
Sec. 8. The provisions of this Article VII pro­
vide for a mode of settlement and disposition of
the interest of a deceased partner different than
that provided for in Ohio Revised Code Sections
1779.04 to 1779.06, inclusive, and it is hereby agreed
that upon the death of a partner the provisions
of Ohio Revised Code Sections 1779.04 to 1779.06,
inclusive (as now constituted or as hereafter
amended) requiring an inventory and appraise­
ment of the partnership assets and a sale of the
deceased partner’s interest therein, are dispensed
with and in lieu thereof the provisions of this
Article VII shall be applicable.
Article VIII. Executive Committee, Manage­
ment and Restrictions
Section 1. (a) In order to cany out the business
affairs, management and administration of the
Partnership, the partners hereby establish an
Executive Committee, consisting of:
(i) Saward, who shall serve as a permanent
member of the Executive Committee until his in­
terest in the Partnership shall lie terminated, at
which time the Executive Committee shall consist
only of the five (5) elected members; and
(ii) Five (5) elected members of the Executive
Committee, who shall be initially:
Vayda—who shall serve as Medical Director (in
accordance with the provisions of Section 5 of this
Article VIII) during his term, which shall expire
on the day prior to the first monthly meeting of
the Partners held in the sixth (6th) calendar year
following the date of this Partnership Agreement.
Young—whose term shall expire on the day
prior to the first monthly meeting of the partners
held in the fifth (Sth) calendar year following the
date of this Partnership Agreement.
Bloomfield—whose term shall expire on the day
prior to the first monthly meeting of the partners
held in the fourth (4th) calendar year following
the date of this Partnership Agreement.
Packer—whose term shall expire on the day
prior to the first monthly meeting of the partners
held in the third (3rd) calendar year following
the date of this Partnership Agreement.
Phillips—whose term shall expire on the day
prior to the first monthly meeting of the partners
held in the second (2nd) calendar year following
the date of this Partnership Agreement.
At the first annual meeting of the partners fol­
lowing the expiration of the initial term of an
elected member of the Executive Committee, the
partners by the affirmative vote of more than one-
half (i£) of the partners shall elect a successor to
fill such vacancy; and such member so elected shall
serve until the first monthly meeting of the part­
ners held in the fourth (4th) calendar year fol­
lowing his election provided, however, that the
partner elected to succeed Vayda (or his successor)
shall serve as Medical Director and as an elected
member of the Executive Committee until the first
monthly meeting of the partners held in the sixth
(6th) calendar year following his election. If an
elected member of the Executive Committee shall
fail for any reason to complete his term, his suc­
cessor shall be chosen by the affirmative vote of
more than one-half of the partners, and such suc­
cessor shall serve during the unexpired portion of
such term. If in voting for an elected member of
the Executive Committee, no candidate receives on
the first ballot the affirmative vote of more than
one-half of the partners, a second ballot shall be
taken, in which the only candidates shall be the
two candidates who received the highest number
of votes on the first ballot, and in such vote, the
candidate receiving the greater number of votes
shall be elected notwithstanding that he shall not
have received the affirmative vote of more than
one-half of the partners.
(K) In the event of a vacancy or vacancies in
the membership of the Executive Committee, the
remaining members thereof shall have all of the
powers vested in the Executive Committee pend­
ing the filling of such vacancy or vacancies.
(t?) No person admitted into this Partnership
after January 2,1966 shall be eligible to be a mem­
ber of the Executive Committee unless he has been
a partner for a period of no less than two (2) years.
Nothing in this Partnership Agreement shall be
construed in a manner which would prevent a
partner from serving successive terms as a mem­
ber of the Executive Committee or as Medical
Director.
(d) The Executive Committee shall have full
and complete, charge of the business affairs, ad­
ministration and management of the Partnership,
including, but not limited to:
(i) The making of all contracts, including con­
tracts with any person or organization for the
rendition of professional services, hospitalization
and the like;
(ii) The hiring and discharging of all em­
ployees of the Partnership, except that the Ex­
ecutive Committee shall not enter into a contract
of employment with an employee providing for
a term of more than two (2) years without the con­
sent of a majority of the partners;
(iii) The lease, purchase or other acquisition
of property, or the lease, sale or other disposal of
property of the Partnership, except that the Exec­
utive Committee, without, the consent of the ma­
jority of the partners, shall not enter into a lease
for a term or more than two (2) years nor enter
into any transaction for the purchase or sale of
property in an amount in excess of Twenty-Five
Thousand Dollars ($25,000.00);
 (iv) The purchase of supplies as required in the
normal operation of the Partnership;
(v) The assignment of the duties of the
partners;
(vi) The determination at least thirty (30)
days prior to the beginning of each calendar year
of the amount of the drawing account of each
partner; provided, however, that if the Executive
Committee does not take any action with respect
to the drawing account of any partner, the draw­
ing account of such partner for such calendar year
shall be in an amount equal to his drawing account
during the preceding calendar year.
(s) All action taken by the Executive Commit­
tee (except as otherwise expressly provided in this
Partnership Agreement) shall be by the affirma­
tive vote of a majority of the members thereof,
and the Executive Committee shall adopt proce­
dures for the conduct of its business and shall meet
at least once each month. All meetings of the Ex­
ecutive shall be open to all partners and the date
of each meeting shall be appropriately publicized
to partners in advance thereof.
Sec. 2. (a) The partners shall determine general
policy matters not inconsistent with this Partner­
ship Agreement. Decisions of the partners in re­
spect of matters herein delegated to the Executive
Committee shall only become effective if approved
by the Executive Committee, and the provisions
hereof shall in no way be deemed to limit the
powers delegated to the Executive Committee by
the provisions of this Partnership Agreement.
(&) The partners may adopt by-laws providing
for periodic meetings of the partners, for the elec­
tion of officers to preside at such meetings, and for
the rules to be applicable in the conduct of such
meetings. Each partner shall have an equal vote
and actions by the partners (except, as otherwise
expressly provided in this Partnership Agree­
ment) shall be decided by the vote of a majority
of the partners present at a meeting at which a
quorum of the partners is present. A majority of
the partners present at a meeting shall constitute
a quorum. Roberts Rules of Order will govern the
conduct of any meeting of the partners, except to
the extent that any provision in said Rules shall
be inconsistent with any provision of this
Agreement
Sec. 3. No partner, except with the approval of
the Executive Committee shall sell, assign, mort­
gage, pledge or otherwise dispose of or hypothe­
cate his share in the Partnership, its assets or
property, nor take any action in the name of or
on behalf of the Partnership. Each partner agrees
that he will not engage in any activity detrimental
to the best interests of the Partnership; that he
will at all times conduct himself in a manner be­
fitting a doctor of medicine; that he will not do or
commit any act in violation of any law or in viola­
tion of any of the canons or rules or ethics appli­
cable to the medical profession; and that he will
not engage in any conduct which will bring dis­
credit to himself or to this Partnership.
Sec. 4. The Executive Committee shall desig­
nate a Comptroller who shall act for and on behalf
of the Partnership:
(a) In the establishment of proper accounting
procedures;
(&) For the maintenance of the books and rec­
ords of the Partnership;
(c?) For the determination of any questions re­
garding accounting procedures that may arise from
time to time;
(d) For the opening of such bank accounts in
behalf of the Partnership as the Executive Com­
mittee shall authorize, as to which accounts the
Comptroller shall be authorized to draw, endorse,
sign and deposit checks and drafts in the name of
and in behalf of the Partnership, and for such
purpose to use a facsimile signature thereon;
At the commencement of this Partnership
Agreement, the Executive Committee hereby des­
ignates Paul Hoffmeyer to serve as such Comp­
troller, subject to removal by the Executive Com­
mittee at any time in its discretion. In the event
of such removal, the Executive Committee shall
have the right to appoint a successor. The Execu­
tive Committee may at any time in its discretion
withdraw any authority delegated to the Comp­
troller and may at any time in its discretion desig­
nate persons other than the Comptroller to draw,
endorse, sign and deposit checks and drafts in the
name of and in behalf of the Partnership, or in
such other name or title as the Executive Com­
mittee shall designate.
Sec. 5. The Medical Director shall serve as the
Executive Officer of the Partnership and subject
to the control of the Executive Committee shall
exercise general supervision over the conduct of
business by the Partnership and shall effect on
behalf of the Partnership all transactions con­
ducted by the Partnership with parties other than
the partners and the Partnership.
 Article IX. Voluntary Dissolution
Section 1. In the event that two-thirds (%) of
the Executive Committee shall agree in writing to
a dissolution of the Partnership, the Partnership
shall promptly thereafter be dissolved and the
Partnership books shall be closed. Promptly fol­
lowing such dissolution, the business affairs of the
Partnership shall be wound up and liquidated,
for which purpose the members of the Executive
Committee then serving in such capacity shall have
possession and control of all Partnership assets
and shall thereafter proceed as a committee for
the purpose of effecting such dissolution and liqui­
dation.
Sec. 2. In effectuating a dissolution pursuant
to the provisions of Section I hereof, the Executive
Committee, after the payment of any expenses
incurred in the winding up and liquidating of the
business affairs of the Partnership, shall distribute
the net assets and proceeds of the liquidation in the
following order:
(a) First, to the payment of the debts and lia­
bilities of the Partnership owing to creditors other
than the partners;
(K) Second, to the payment of the debts and
liabilities, if any of the Partnership owing to the
partners; and
(<?) All remaining assets shall be distributed to
the partners in proportion to the drawing accounts
of the partners, effective as of the last day of the
calendar month preceding dissolution.
Article X Arbitration
If any dispute shall arise among the partners
which cannot be settled by them, such dispute shall
be promptly submitted to the American Arbitra­
tion Association (or its successor), which shall
select an arbitrator to resolve said dispute pursu­
ant to and in accordance with its then prevailing
rules. The determination of such arbitrator shall
be final and binding upon the partners, who shall
each bear an equal share of the cost of such arbi­
tration. Notwithstanding any dispute arising here­
under, each partner shall at all times continue to
perform the obligations on his part required here­
under to be performed.
Article XI. Additional Partners
Section 1. Additional partners may be admitted
to the Partnership upon approval by the Executive
Committee and by the affirmative vote of three-
fourths (%) of all of the partners. In the event
that an additional partner shall be so admitted
to the Partnership, the Executive Committee shall
determine the capital contribution, if any, re­
quired of such additional partner his drawing ac­
count and his participation in the income of the
Partnership. Before being admitted into the Part­
nership, each such additional partner shall execute
an appropriate instrument in writing, wherein he
agrees to be bound by the applicable terms and
provisions of this Partnership Agreement.
Sec. 2. In the event that any physician shall be
employed by the Partnership for a period in ex­
cess of twenty-four (24) successive calendar
months without being provided with the oppor­
tunity of being admitted into the Partnership, the
partners and the Executive Committee shall take
appropriate action to the end of reviewing the
eligibility for membership in the Partnership of
such employed physician.
Article XII. Notices
All notices which may be proper or necessary to
be served hereunder shall be in writing and shall
be served by certified or registered mail, postage
prepaid, and with return receipt requested; all
notices addressed to a partner shall be addressed
to him at the main office of the Partnership or to
such other place as the partner shall by such writ­
ten notice to the other partners hereinafter desig­
nate for such purpose.
Article XIII. Binding Effect
The terms and provisions of this Partnership
Agreement shall be binding upon and shall inure
to the benefit of the partners and their respective
heirs, legatees, personal representatives, executors
and administrators and shall constitute the entire
agreement among the partners. This Partnership
Agreement may be modified or amended by the
affirmative vote of three-fourths (%) of all of the
partners and the written approval of the Execu­
tive Committee.
In Witness Whereof, the undersigned have
signed this Partnership Agreement at Cleveland,
Ohio, as of the day and year first above written.
U4. OOVOWMENT HURTING CWCt; tM8 C— 2H5-UO2
Digitized by Google Original from
UNIVERSITY OF MICHIGAN
 Studies in Medical Care Administration

Planning and Implementation of the

COMMUNITY HEALTH
FOUNDATION
of Cleveland, Ohio

This Case Study on The Development

of a Prepaid, Group Practice,
Comprehensive, Direct-Service Health Plan
was prepared by Avram Yedidia, Consultant
on Organization of Prepaid Health Care Services,
under contract with
the U.S. Public Health Service.

U.S. DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE

Public Health Service
Division of Medical Care Administration
Arlington, Virginia 22203
1968
PUBLIC HEALTH SERVICE PUBLICATION NO. 1664-3

APRIL 1968

U.S. Government Printing Office

Washington, D.C.

For wJ? by the Superintendent <>

* DrcmnenU, U.8. Guwnment Printing Office
Washing ton, D.C. 20
*02 - Price OS cents
 Z r-
**
S.ATffi OF AMCPfotf

FOREWORD

The process by which a prepaid group health plan comes into being is
lengthy and complex. To our knowledge, no detailed chronicle of this process
has been published before.
This study has much to offer the reader concerned with the development
of community health services in general and prepaid group practice in par­
ticular. The program was, by necessity, tailored to the specific needs and built
on the specific strengths to be found in the Cleveland area. The leadership of
labor representatives, the involvement of medical institutions, the counsel and
guidance provided by experienced people in the group health field—all were
important elements in the establishment of the program.
Countless hours of community time and effort are sharply reflected. More
than a decade of exploration, discussion and planning preceded the opening
day of the Community Health Foundation. These years were well spent. The
almost immediate success of the program and its subscriber acceptance has
provided a solid base for expansion of service. Plans for a hospital and a mental
health center in connection with this comprehensive health program are now
well along.
Although this is the Story of one community’s planning for and imple­
mentation of a health care program, it can serve as a valuable resource docu­
ment for many communities. A good set of guidelines to effective community
organization is found in this story. It can serve as a model offering useful ideas
to any community where health delivery systems might be improved through
application of the general principles of planning and the specific principles of
prepaid group practice.
John W. Cashman, M.D., Director,
Division of Medical Care Administration.
Digitized by Google Original from
UNIVERSITY OF MICHIGAN
 PREFACE

This report of the development of a prepaid, group-practice, compre­

hensive, direct-service health plan (hereafter referred to as a "prepaid group-
practice health plan”) is presented as a chronicle of the events that marked
the evolution of one organization: The Community Health Foundation (CHF)
of Cleveland, Ohio.
Each health plan now in existence represents a unique response to the
special circumstances that led to its development. A thorough analysis of the
evolution of any one program in this general category entails discussion of the
factors that, demanded consideration during the incipient and growing phases
of the efforts to provide coordinated health services on a prepaid basis.
These widely divergent factors include, to mention only some of the more
unwieldy, the social and legal background that must exist before a prepaid
group-practice health plan can emerge: The development of a fiscal structure,
the inevitably complex interrelationships between the emerging plan and the
medical professional world, and the manifold aspects of information-exchange
between planners, staff, and prospective and actual subscribers to such a
program.
The story of the planning and implementation of CHF might have read
differently if this report, had been written by one of the other persons who took
part in it. Not that the facts would have been different—or so, at least I
believe—but the emphases might have been changed. No other member of the
planning team should be held responsible for the viewpoints expressed in this
report, or for whatever opinions I may have consciously or unconsciously
conveyed.
Nevertheless, no group effort of this magnitude could have been described
without the patient and imaginative consideration of everyone who participated
in the work itself. I wish particularly to thank Dr. E. Richard Weinerman,
professor of medicine and public health, Yale University School of Medicine,
and director of ambulatory services, Yale-New Haven Hospital, and Mr. Glenn
Wilson, executive director, Community Health Foundation of Cleveland, Ohio,
who were members of the planning team from the beginning, for their helpful
suggestions about the design of this report and for their detailed scrutiny and
discussion of the typescript.
I also am indebted to several other persons who liecame participants in the
planning effort during the year preceding the opening of the health center:
Dr. Ernest W. 8award, medical director, Permanente Clinic, Portland, Oreg.,
and Vancouver, Wash., who served as sole proprietor of the Community Health
Foundation medical group when it was first organized, and gave me the benefit
of his clear insight and excellent advice regarding the preparation of the
report; Dr. Eugene Vnyda and Dr. William R. Young, the first two physicians
to commit themselves to the new health plan, who read and offered welcome
criticism and perspicacious suggestions on several chapters, particularly those
that relate to the organization of the medical group.
The report has gained immeasurably from the empathetic and imaginative
contribution of Mr. Robert A. Little and Mr, George F. Dalton of the firm of
Robert A. Little and George F. Dalton & Associates, architects of the CHF
center, who wrote the central portion of chapter VJLLL
I am grateful to Mrs. Mary Eubanks for technical editorial assistance on
chapters I-IV and to Mrs. Ruth Straus, editor, Department of Scientific Publi­
cation, Kaiser Foundation Hospitals, for assistance in the organization and
writing of chapters V-XI.
AVRAM Yedidla.
Orinda, Calif.
 CONTENTS
Pa«e
Foreword..................................................... iii
Preface ........................................................................ v
Chapter:
I. Climate for New Organization of Health Care 1
II. Focusing on a Unified Course of Action 5
III. Assessing the Potential. .................................... 9
IV. Elements of Planning a Comprehensive Program 15
V. Extent of Physicians' Interest in the Demonstration Project 19
VI. Reappraisal of the Project's Strength and Resources 25
VII. Financial Planning of the Health Care Program 29
VIII. Building the Center 39
IX, Legal Framework and Contractual Relationships 55
X. Recruitment of Physicians and Organization of the Medical
Group 63
XL Recruitment and Continuing Education of Subscribers. 75
Illustrations:
Figure 1. Diagram showing flow of traffic through Cleveland
Health Foundation 46
Figure 2. Site for CHF 46
Figure 3. Synthesis of building and site of CHF 47
Figure 4. Building form of CHF ......... 48
Figure 5. First floor plan 49
Figure 6. Second floor plan 50
Figure 7. Basement plan 51
Figure 8. Air view of CHF from the south 52
Figure 9. The Community Health Foundation (southwest view) 53
Appendices:
A. The Membership Contract .............. 84
B. The Medical Service Agreement 93
C. The Physicians' Partnership Agreement 102
Digitized by Google Original from
UNIVERSITY OF MICHIGAN
 Chapter I
CLIMATE FOR NEW ORGANIZATION
OF HEALTH CARE
The prepaid, group-practice, comprehensive, di­
rect-service health program which was introduced
July 1, 1964, by the Community Health Founda­
tion (CHF) in Cleveland is the fruition of more
than a decade of efforts.
Medical standards in Cleveland have, for many
years, been above the average for comparable com­
munities. The professional climate has gained by
the high levels of knowledge and skill set by West­
ern Reserve University School of Medicine and
by The Cleveland Clinic, one of the leading group-
practice clinics in the country. Nevertheless, there
was uneasiness there, as elsewhere, about the avail­
ability of medical care at a cost the ordinary citi­
zen could afford to pay.
By the early 1950’s, technical and scientific de­
velopments in the medical field had advanced
health care to a degree of effectiveness that created
a wider demand for its benefits. More people were
making use of more medical services. But as these
services improved in quality, they also underwent
a steep rise in cost. More expensive hospital and
physicians’ services, many more drugs, and special
procedures in diagnosis and treatment swelled the
medical bill and tended to generate anxiety. Too
many people felt unable—or feared they might be
unable—to pay for the medical care they might
require.
At the same time, the labor unions, after two
decades of concentration on wage and hour im­
provements, began directing their attention to
such needs as pensions and medical care. Funds for
health insurance benefits were negotiated through
labor-management bargaining. Where health and
welfare funds were made a part of new contracts,
payment was provided for certain medical sevices
needed by employees. Benefits were extended, in
some contracts, to cover some of the needs of em­
ployees’ families.
In this search for new ways to meet medical
expenses, questions were seldom raised regarding
the quality, availability, or organization of medi­
cal services. The major concern of most unions was
to find new methods of payment for medical serv­
ices already available in the community. This con­
cern was shared by many middle class citizens,
wage and salary earners alike, who might be ex­
cluded from certain care or might be excessively
burdened by a serious illness.
In 1952, the annual meeting of the American
Public Health Association (APHA) brought to
Cleveland a number of widely experienced medical
and nonmedical experts associated with the coun­
try’s health programs. A group of Cleveland labor
leaders arranged a meeting with representatives
of several group-practice programs to learn how
other communities were handling the financing
and provision of medical care.
Legal Restrictions
The discussion was circumscribed by the provi­
sions of an Ohio statute governing the establish­
ment of organized health services in the State. The
act had been passed almost 20 years earlier, and
so restrictive were its provisions that no corpora­
tion had been chartered under its limitations.
The Ohio statute required that any health pro­
gram designed to cover a dues-paying membership
permit its members free choice among licensed
physicians in the community who wished to par­
ticipate; that nt least 51 percent of the physicians
in the proposed area agree to participate in the
program; that it be under the control of physi­
cians; and that eligibility be restricted to individ­
uals whose income had been $900 or less in the 6
months prior to applying for membership, and to
families whose total income had been under $1,200
in that same period.
When the APHA again met in Cleveland in
1957, another opportunity was presented for in­
terested union leaders to confer with health care
experts atending the meeting. At this time, their
focus was upon the merits of a comprehensive
program that would involve direct service. How­
ever, it was evident that the strictures of the Ohio
statute would not permit this solution to problems
of medical organization and costs. New legislation
would be necessary to permit development of the
desired type of health program.
In 1958, the wide response to a union-sponsored
program brought Cleveland its first health-related
service with unified labor support—a center for
the prescription and provision of eyeglasses. The
corporate structure of a labor-sponsored coopera­
tive store had been altered to constitute it a “Union
Eye Care Center.” Unions throughout the area
voted to subscribe 25 cents per member toward es­
tablishment of the center and to qualify for repre­
sentation on the board of directors. The center
leased office space in downtown Cleveland, pur­
chased equipment, and hired the nonprofessional
staff.
The center was a success. It has since opened four
branches in northeastern Ohio. A group of optome­
trists lease space on the premises, do the eye test­
ing, and bill patients separately for their services.
The center provides eyeglasses at a reduced rate
to members of affiliated unions. Ophthalmological
care is by referral to specialists practicing in the
community.
When the charter was drawn for the new Union
Eye Care Center, it reflected the thinking devel­
oped, over the years, by union leaders in their
health care discussions with professionals in the
health field. The charter contained a clause stating
that the center was being organized for “the prin­
cipal purpose of promoting and enhancing the
general health, and encouraging welfare educa­
tion of union members * * * and other related
activity.”
Having this broad purpose stated in the charter
proved, some years later, to facilitate important
moves toward development of CHF. Without it,
vital financing might not have been available.
An Opportunity To Untangle
the Legal Snag
During the 1958 election, a right-to-work
amendment to the Ohio constitution was placed on
the ballot. Strong opposition to the amendment
mobilized an intensive labor campaign with a
large turnout of voters. The result was defeat for
the amendment and, with it, election of a State
legislature tlmt included a liberal majority.
The Cleveland group interested in a direct-
service health program recognized a sudden, and
perhaps fleeting, opportunity: The new legislature
might be receptive to a different statute governing
prepaid health plans.
In February 1959, a meeting was called in Co­
lumbus to point out the need for moving swiftly
to develop such enabling legislation. The group
included the majority leader of the Ohio State
Senate, the directors of labor-sponsored clinics in
the State, the legislative representatives of the
Ohio AFL-CIO and of the United Mine Workers
of America, and representatives of the Group
Health Association of America (GHAA).
A former labor official who had been elected
majority whip in the State senate informed the
group that the deadline for introduction of new
legislation was just 1 week away. He agreed to
introduce the measure if a preliminary draft could
be delivered to him before that date. The proposed
measure was fortunate in having the sponsorship
of this key legislator. His bill was assigned to com­
mittee, and a hearing was set.
When the bill came up for hearing in the senate,
the burden of support was carried by Dr. Dean
Clark, general director of Massachusetts General
Hospital, Boston, and president of GHAA, by a
physician practicing in Ohio, and by a representa­
tive of the public, a member of the Cleveland City
Council.
Opposition Hinged Upon Free Choice
Opposition to the bill came from the Ohio State
Medical Association, Ohio Medical Indemnity (an
insurance company) and the Ohio osteopathic
physicians and surgeons. It was based entirely
upon the issue of free choice of a physician and
was presented in the form of an amendment
requiring any health plan established under this
law to include any licensed physician in the area,
who wished to participate. The committee, how­
ever, voted down the amendment 6 to 1, mid the bill
then cleared the senate 30 to 1.
The major contest, took place in the house of
representatives’ committee. Proponents were again
represented by Dr. Clark. The Ohio Farm Bureau
Federation and Ohio AFL-CIO representatives
also spoke for the bill.
The medical society proposed the free-choice
amendment again, including it in three separate
clauses: The freedom of a physician to participate
in any such plan if he so desires; free choice of
participating physician by the patient; and free
choice of an independent physician by the patient
in an emergency. Proponents of the measure
pointed out that participation by physicians prac­
ticing independently would nullify the whole con­
cept of organized medical services financed by
prepaid montidy dues.
After making it clear that a vote for the free-
choice amendment was a vote to kill the purpose
of the bill, proponents rested their case. Members
of the hearing committee took over the task of
clarifying the medical society's reasoning for the
record. The first two applications of free choice
were rejected. "Free choice of physician for emer­
gency care” sounded so reasonable that it was
nearly adopted. However, proponents pointed out
that the bill already provided that emergency care
outside the sendee area of the plan might be se­
cured from any physician, but that within the
area the program would undertake to organize all
necessary services, including emergency care
around the clock.
A poll of the 19-man committee before the hear­
ing had indicated six noncommitted members will­
ing to vote against the free-choice amendment.
After the concept of the program had been dis­
cussed fully, the amendment was defeated by a
vote of 15 to 4. Amendments relating to super­
vision by the State superintendent of insurance, as
proposed by Blue Cross, were accepted by the bill’s
supporters. The house of representatives passed
the bill by a vote of 101 toll, after again defeating
the free-choice amendment on the floor, with bi­
partisan support, by a vote of 70 to 33.
Analysis of the Campaign and the Law
Opposition to the statute had been intense. The
legislative committee members had received a
flood of letters and telegrams. Both the medical
society and the Ohio Citizens for Voluntary
Health Plans had carried on active campaigns, the
former with newsletters to doctors, the latter with
pamphlets conveying the opposite view. Propo­
nents of the bill invested much time and effort
writing and talking to legislators, especially to key
members of committees. This effort, to the extent
that it shed light on the issue of free choice of
physician, had the effect of assuring that a signifi­
cant number of the leaders in both political parties
understood the issue before it came to a vote.
The proponents’ campaign stressed the public
interest, enlisting support for voluntary efforts to­
ward achieving comprehensive health care at
reasonable cost. The medical profession and or­
ganized medicine were not criticized nor pictured
as the enemy. Blue Cross, Blue Shield, and the in­
surance industry were not blamed for existing de­
ficiencies in prepaid medical care. On the contrary,
the accomplishments of these organizations were
acknowledged as a good reason for advancing new
forms of prepaid care. The basic policy was to
take a firm stand on the principle of every person’s
right, to select a closed panel of doctors if that was
his choice of medical care.
The voluntary health plan bill was passed in
May 1959, signed by the Governor in July, and
became law 90 days later. The following are its
major provisions:
The law provides for incorporation of voluntary
nonprofit health care organizations and their oper­
ation under the supervision of the State superin­
tendent of insurance. Such health care organiza­
tions must provide their subscribers with services,
not cash indemnity. Medical benefits may include
physicians’ care in the home, the doctor’s office,
and the hospital or nursing home; hospital and
nursing home services; and dental care for persons
who subscribe to this part of the program.
The law j>ermits indemnity for emergency serv­
ices secured by subscribers only when they are
away from home and outside the “territorial
boundaries” of the health care organization. For
such temporary care the patient may consult, any
physician he wishes.
The board of trustees of the corporation shall be
elected by the subscribers, shall have “nonphysi­
cian and nondentist representatives,” and shall
serve without compensation. The board may be all
nonphysicians, but it cannot be entirely composed
of physicians.
Payment to physicians, hospitals, and dentists
may be on any terms agreed to by the health
organization and the professionals providing the
care. The law requires the State, and any political
subdivision or institution supported in whole or in
part by the State, to honor authorizations of
payroll deductions for employees who enroll in an
approved health care organization.
Summary and Comment
The labor unions’ interest in new patterns of
medical care first centered upon the financing of
health services. As funds were negotiated for
medical care, however, experience proved that more
money did not, of itself, provide for the medical
needs of the worker and his family.
Pressure for some kind of improvement in the
arrangements for medical care continued to bring
union and other community leaders together in
meetings and conferences over a period of years.
The participants became more knowledgable in the
problems and possible avenues to improvement.
but the meetings produced no concrete solutions.
It became clear, as time went on, that meetings
could serve no purpose unless allied with con­
tinuity of effort toward a specific plan of
development.
Growing awareness of unmet needs for medical
care helped to generate popular support for per­
missive legislation in the health plan field and to
prepare the ground for a new approach to health
care.
Although the mobilization of support for the
enabling act united diverse elements concerned
with a new pattern for medical care and began to
educate the public to the nature and feasibility of
voluntary group health plans, its passage did not
bring about a lasting amalgamation of forces. A
continuing effort toward a specific goal had yet to
be initiated.
 Chapter II
FOCUSING ON A UNIFIED COURSE OF ACTION
While there had been little general publicity
about the campaign for new health care legisla­
tion, two groups of Cleveland citizens had heard
a great deal about the subject—the physicians and
the members of labor unions.
The measure had been passed in the Ohio State
Legislature by the time the summer conference of
the State AFL-CIO was held in Athens in 1959.
The interest generated among labor groups was
shown by the prominence given to aspects of
medical care on the program of this educational
conference. Representatives from the Cleveland
area, in particular, expressed their determination
to seek new approaches to health care for union
members.
In September a proposal came from the ranks
of another community group activated by the
legislative campaign. Despite the Ohio State
Medical Association’s official disapproval of the
enabling act, a group of physicians who had more
than a passing interest in the kind of practice
envisioned invited several Cleveland union leaders
to discuss the establishment of a health program
under the new law.
The physicians offered to put up a substantial
building, form a medical staff, and provide medical
care to union members who would be enrolled in
a comprehensive, prepaid direct service program.
A consumer (union) organization was to be re­
sponsible for enrollment of members and for col­
lection of prepayment fees.
The idea of a medical care program under sole
control of physicians differed from the thinking
of Cleveland union leaders. They were sufficiently
informed on different approaches to health care
to prefer a program in which the membership re­
sponsibility would extend beyond raising money to
pay for the program. They undertook, with tech­
nical help, to draw up a statement of the principles
that they considered basic to a successful and satis­
fying medical care program.
The principles submitted to the physicians in a
counterproposal were these :
1. Nonprofit corporation;
2. Control to rest directly with consumer
membership;
A. Ownership of facilities by the consumer
organization;
4. Nonpartisan administration, free from in­
tervention in behalf of either union or man­
agement interests;
5. Membership to be open to other community
groups;
6. Range of services to be broad enough to
cover preventive, diagnostic, therapeutic,
and rehabilitative services in the home, office,
and hospital—according to the capacity of
the medical facilities in relation to the size
of the membership;
7. Medical care to be rendered on a strictly pro­
fessional level, not controlled nor directed
by laymen;
8. Medical services to be rendered by a partner­
ship or association of physicians;
9. Criteria to be established, with the advice of
medical authorities, regarding:
(a) Minimum qualifications of physicians
and other professional personnel; (L) com­
pensation, and other terms and conditions
of work for physicians and other personnel;
and (c) sendees to be rendered and methods
to be sought to assure services of consistent
high quality provided without discrimina­
tion to any member in need of medical care.
10. Physicians to be headed by a chief of staff,
charged with supervision of medical services,
and representing physicians in their rela­
tions with the board of trustees;
 11. Independent medical advisor to advise ttie
board regarding the quality of services be­
ing rendered, adherence to medical stand­
ards, etc.;
12. Overall management of the plan to be in
the hands of a nonmedical administrator
directly responsible to the board of trustees;
13. Area served by any medical unit to be lim­
ited to one reasonably convenient to such
unit and providing emergency out-of-area,
benefits;
14. Corporation to serve individuals as well as
members of groups, and benefits for active
employees and continued coverage for the
retired to be financed, as much as possible,
by employer contributions; and
15. Educational service to be provided to mem­
bers regarding the benefits of their health
plan as well as their responsibility to it and
to themselves.
The physicians expressed reservations about
some of these principles, which appeared to them
to open the door to infringement upon their pro­
fessional prerogatives. After several meetings,
enthusiasm for the project waned and it was
dropped. The principles were not lost, however,
and with some modifications were incorporated in
the structure of CHF when it was established
several years later.
Proponents Move in Various Directions
Meanwhile, several unions had advanced from
discussion to action in the health care of their
memberships. Each chose a different approach.
The retail clerks’ and meat, cutters’ health and
welfare funds concentrated on self-administration
of their health insurance program, and engaged a
physician as consultant to audit costs and advise
on services.
The retail clerks also negotiated with The Cleve­
land Clinic to provide annual health checkups for
union members. The Clinic proposed extensive tests
for all members, including the lower age groups.
After some discussion, the project was set aside.
Other unions carried on negotiations with The
Cleveland Clinic. However, despite patience and
goodwill on both sides, discussants arrived at no
satisfactory arrangements.
In 1960, the GHAA met in Columbus, Ohio.
Several of the union leaders most interested in
health care attended the convention, and their
interest in a comprehensive, direct-service, pre­
paid medical care program was renewed. They
sought opportunities to discuss it.
These pursuits, neither continuous nor inte­
grated, produced no new organization of health
care in the community. The diagnostic center long
maintained in Cleveland by the International
Ladies’ Garment. Workers Union for its own
members offered no base for new development. The
group covered was relatively small, and the center
played no part in extension of services, although
at one time the retail clerks proposed to share the
diagnostic services.
Yet interest, in developing more effective pre­
paid health-care services persisted, and at numer­
ous meetings a wide range of possibilities was
discussed:
Is an overall program for all unions in the area
desirable ?
Are single unions prepared to give up their
present arrangements if something more com­
prehensive is offered?
Should doctors be employed, or should they be
retained on a fee-for-servicebasis?
How should controls be maintained?
What is the best way to obtain hospital services?
Some of the key union leaders were convinced
that, without continued cooperation among the
unions directed toward formulating a sound pro­
gram, each union would go its individual way:
One might, purchase a hospital; another might
develop outpatient ambulatory services; a third,
a diagnostic clinic, etc. In the hope of uniting
efforts and focusing upon a feasible goal that
would be an advance toward health care, Cleve­
land unions planned their Sixth Annual Workers’
Education Conference in March 1961 around the
topic “The Health Business. Direction, Please/’
Planners of the conference included the Cleve­
land labor movement’s veteran proponents of or­
ganized health care. The program committee
divided the topic into three areas: What do we
have? What do wc want? How do we get it? Sev­
eral national authorities in the health field ad­
dressed the conference on these subjects, after
which participants discussed various aspects in
small workshop sessions. The program widely
publicized in advance and supported by contribut­
ing unions, drew a record attendance of nearly 400
members of the AFL-CIO and railroad unions
who cosponsored the meeting.
 The objectives of the undertaking seem to have
been well realized, for the general effect was a
heightening of concern for new methods of financ­
ing and providing health care. A major deficiency
remained, however: No specific direction had been
laid out that could lead to a unified effort.
Union Eye Care Center Takes a
Decisive Step
Several directors of the Union Eye Center, with
the goal of a prepaid, group-practice, comprehen­
sive, direct service health plan as suggested in their
charter, were among those most, anxious to find a
course of action. A few weeks after the conference,
they determined upon a further step. The GHAA
was scheduled to meet in Portland, Oreg., in May
1961. The west coast was the home of several flour­
ishing health plans of the type favored by this
group. The board of the center decided to send
seven delegates to the GHAA meeting, and to
visit the Group Health Cooperative of Puget
Sound and the Kaiser Foundation Health Plan in
Portland. Delegates were to study the plans in op­
eration and make a recommendation on means of
initiating some such program in Cleveland. The
delegates’ expenses for the study were covered by
the charter adopted 4 years earlier.
The Union Eye Care Center delegates were im­
pressed by what they heard in the GHAA sessions
and by what they observed in Seattle and Portland.
They also spent much time in discussing such pro­
grams with experts who attended the health
meeting.
The Cleveland delegation returned with firm
recommendations to the parent organization. They
suggested that professional consultants be retained
to investigate the feasibility of a prepaid health
program in Cleveland. They also urged that
GHAA’s assistance be obtained in applying for a
U.S. Public Health Service (PHS) survey of
medical care in Cleveland that would make current
background information available to the con­
sultants.
The recommendations were accepted by the
trustees of the Union Eye Care Center, who
promptly voted $25,000 to get the project under­
way. Two members of the board were requested
to assume primary responsibility for the project.
Summary and Comment
Two years of keen, but sporadic, interest in or­
ganizing a new approach to medical care for union
members followed passage of the enabling legis­
lation in 1959. The impact of a well-planned and
strongly focused educational conference propelled
the Union Eye Care Centers board of trustees into
action which led to the retention of professional
consultants to supply essential information and
counsel.
The common interests cultivated by several
shared efforts to plan some new form of health care
had built up a readiness for unity in this under­
taking. Union leaders agreed to wait for the find­
ings of the PHS survey and the recommendations
of the consultants before pressing for development
of any other plans.
 Original from
Digitized by
UNIVERSITY OF MICHIGAN
 Chapter III
ASSESSING THE POTENTIAL
The first recommendation of the Union Eye Caro
Center trustees who had attended the GHAA
meeting in May 1961, for a broad study of medical
and health-related resources in the Cleveland area,
was promptly acted upon. GHAA’s aid was sought
in obtaining, for this purpose, a team from PHS—
which had current end continuing interest
in group-practicc development. The Cleveland
group’s request was forwarded to the Surgeon Gen­
eral, who assigned a survey team of three who ar­
rived in Cleveland in June 1961.
A second recommendation of the trustees who
had attended the GHAA faceting also was imple­
mented by the appointment of the following three
consultants: Dr. E. Richard Weinerman, Mr.
Glenn Wilson, and Mr. Avram Yedidia. In June
1961, they met in Cleveland with the PHS survey
team and outlined three major areas of interest:
The number and location of hospitals, physicians,
and health agencies in the Greater Cleveland area;
costs of health services presently available to union
groups, and methods of financing these costs; and
location (by postal zone) of potential subscribers
to a medical care program of organized services.
Meetings were arranged for the consultants with
union leaders interested in the projected health
plan. The presence of the consultants and the
activities of the PHS team created some stir in the
medical community. Uncertainty as to the intent
and dimension of what seemed, perhaps, a sudden
labor-sponsored project aroused a certain anxiety
and coolness among the established providers of
medical services. One of the first acts of the con­
sultants was a move to allay such feeling.
A letter from the union leaders was addressed to
executives of Northeastern Ohio Blue Cross, the
Cleveland Hospital Council, the Cleveland Acad­
emy of Medicine, and the Cleveland Welfare
Federation. The letter recalled the Union Eye
295^902 O—88------ 2
Care Centers continuing interest in various
aspects of medical care for members of the 187
unions affiliated with the center. It explained that
an interest in improving the medical care provided
to families of union workers had led the trustees
to retain consultants to explore the feasibility of
setting up a limited demonstration project. The
proposed program would provide prepaid group­
practice, comprehensive, direct-service health care
for approximately 8,000 union families residing
in an area to be selected.
The letter went on to say that before any de­
cision was made regarding the project, a team
from PHS would study the medical resources of
the area to determine their bearing on the pro­
posal. The cooperation of all recipients of the letter
was requested to facilitate this study.
Anxieties in the medical community were some­
what allayed once the limited-scope project was
defined in its proper context. Further purpose was
served as well: Expectations of the labor people,
whose sights were still fixed upon a goal of city­
wide medical service for all union members
(nearly a quarter of a million in this highly union­
ized city), were reduced to a circumscribed and
feasible objective.
Highlights of the Public Health
Service Survey
By mid-August of 1961, the PHS team had col­
lected extensive information along the lines sug­
gested, and had prepared a preliminary report.. A
review of the survey’s highlights will indicate the
usefulness of such a study.
The PHS team began by outlining briefly the
type of health plan proposed and the interest in
medical care expressed by many labor organiza­
tions of the community. In enumerating the
health facilities available in the area, they used
a survey of hospital care in Cuyahoga County
9
 (including the Greater Cleveland area) made by
a Citizens1 Hospital Study Committee of North­
east Ohio in 1956-57, from which 13 interpretive
reports had been issued, presenting the data with
illustrative tables. These reports provided hospital
information of direct interest to planners of any
new medical care program : Age and medical classi­
fication of hospital patients per 1,000 population;
patients and days of cure in 5-year age groups
from 1 to 80 years; length of stay in hospitals
according to the type of medical treatment—such
as surgical, nonsurgical, obstetrical, orthopedic.
Since the proposed program would relate to an
insured population, many of whom were presently
covered by Blue Cross, the PHS team included in
its report detailed data on hospital utilization by
Blue Cross patients in the 28 Cleveland hospitals.
Hospital occupancy was shown to be high—
about 90 percent in the hospital being considered
for patients in the new medical program. These
patients would not be new cases, however, since
most, prospective enrollees in the new plan were
persons already eligible for hospitalization under
existing insurance plans.
The area of the greatest concentration of hos­
pitals and other medical resources was found to
be the district in the vicinity of University Circle.
Study of the residence of union members showed
the greatest concentration in adjoining postal
zones.
Health Personnel in the Community
The PHS survey team reported that there were,
in 1960, nearly 3,000 physicians in Cuyahoga
County, a rate of 181.6 per 100,000 population.
They compared this to the national average of
125.3 per 100,000 people. The number of certified
specialists was reported to be 953, a rate of 57.8
per 100,000.
Tables in the report showed the number of certi­
fied specialists in Cuyahoga County according to
specialty and location, and the number of phy­
sicians in each of the 46 districts of the county.
The report included informtion on regulations
governing State licensure, and showed that 855
licenses had been issued to physicians in Cuyahoga
County during the preceding year, either upon
examination or on a basis of reciprocity and
endorsement.
Information from the Ohio State Board of
Nursing Education and Nurse Registration was
quoted to indicate the standards governing the
registration of professional and practical nurses,
by examination or by endorsement. A table show­
ing average weekly earnings of nurses and selected
hospital employees in Cleveland was quoted from
U.S. Bureau of Labor Statistics figures for 1960.
Cleveland an Area of High Medical Costs
The study of medical care costs showed that,
according to Howard Whipple Green (Sheet~a-
Week for Sept. 1,1960, vol. XXVIH, No. 1), the
Consumer Price Index for medical care in Cleve­
land in May I960 was 173. This was compared with
the Consumer Price Index of 156.2 in 1960 for the
country as a whole, according to the U.S. Depart­
ment of Health, Education, and Welfare (1961
Trends. GPO, 1961, p. 61). The Cleveland figure
had risen from 113.1 in 1951. No other item in the
Consumers Price Index had increased so rapidly in
the area.
The same trend existed in other parts of the
United States. Personal consumption expenditures
for medical care in the country as a whole in 1960
amounted to nearly $20 billion. The percentage of
these expenditures represented by drugs, hospitali­
zation, and health insurance topped all previous
figures; expenditures for the category “all other
items” declined somewhat
In the annual budget, of $6,199 set by the U.S.
Department of Labor as sufficient to maintain a
modest but adequate level of living in 1959, the
average family of four persons was allotted $349
a year for medical care, about 6 percent of the total
budget. The higher index of medical expenditure
in Cleveland was estimated to point, to a figure in
the neighborhood of $400 per family in 1961.
Since a major item of medical care costs is hos­
pitalization, the expenses basic to hospital charges
were analyzed carefully. A table of expenses per
patient day in 29 short-term hospitals in Cuyahoga
County varied from an average of $13.05 at the
Salvation Army Hospital to $45 at the university
hospitals. Another table giving the age of each in­
stitution, the type of control and service, and num­
ber of beds and occupancy rate, indicated that oc­
cupancy varied from 52.6 percent to 100 percent in
Cleveland, with nine hospitals having a 90-pereent
occupancy during 1959-60.
Despite considerable variation in hospital
charges, the survey identified a number of trends
consistent in all hospitals:
—toward “semi-inclusive” rates, combining
charges for room, board, and general nursing
 with certfl in special services now considered
almost, routine, and which several hospitals
estimated to account for 30 percent of the
charge. (The inclusive rate is usually fixed
for a set number of days, after which it
decreases.)
—toward inclusive maternity rates, adding de­
livery room, anesthesia, and other charges to
the expense of standard care, (A marked in­
crease usually is charged when the infant re­
mains in the hospital after the mother is
discharged.)
—continuance of the requirement for some pay­
ment in advance upon admission.
—toward discounts for payment in full upon
departure.
—toward charges for filling out duplicate in­
surance forms, and for blood transfusions (up
to $50 a pint) for which the patient is re
sensible if blood is not replaced by donors.
The foregoing knowledge would aid the con­
sultants in their selection of existing hospitals for
use by members of the medical care program. It
was thought possible that restriction of use to a
minimum number of hospitals would serve a dou­
ble purpose: Admission procedures would be
smoothed and quickened with the familiarity of
constant usage, and physicians’ time would be
saved and group practice facilitated.
Schedules of surgeons’ and physicians’ fees un­
der certain insurance programs were reported as
guides to the relative costs of common medical
services to any member of the community. A table
of average costs for specified medical care in the 7
years 1954 through 1960 showed a progressive
increase in the costs of medical and dental services
as well as in hospital rates.
Methods of Financing Medical Care
The average 1960 medical care expenditure in
Cleveland was estimated by the survey team at
A123 per person, or $381 for the family unit. Of
that expenditure, $63 per person—$196 per fam­
ily—went to doctors and hospitals, and another
$10 per person for the administrative costs of
health insurance. Expenses for medical and hos­
pital services came to $11 million for union mem­
bers participating in the Union Eye Care Center.
For a group of 20,000—the number suggested for
the demonstration project—the expense of the
same two items was estimated at over $1 million.
An increase in medical costs of 6 percent per
year was anticipated by the PHS survey team,
whose report states:
In 1961 it is estimated that each person in Cuyahoga
County will spend at least $130, each family at least
$403, interested union membership at least $23 million,
and the demonstration group about $2.6 million for
medical care. Of the estimated medical care expenditures
of the demonstration group in 1961, 51.5 percent, or
$1,339,000 will be spent for doctors and hospitals. For
20,000 persons, an additional $1 million or more will be
divided among drugs (20 percent), dentists (10 percent),
ophthalmic and orthopedic appliances (6 percent), and
other professional services (nurses, chiropractors, etc., 5
percent). The operating costs of insurance purchased adds
another 8 percent.
The extent to which all workers in Cleveland
were covered by health insurance was measured
by a survey of the city's health insurance and pen­
sion plans by the U.S. Bureau of Labor Statistics.
It showed that in September I960 about 78 percent
of officeworkers and 82 percent of industrial plant
employees had some hospital insurance, 80 per­
cent of both groups had some surgical insurance,
and 50 percent of both had some insurance for
physicians’ nonsurgical services, most of this
limited to care in the hospital. Only 38 percent of
officeworkers and 15 percent of plantworkers had
catastrophic or major medical care coverage.
All unions reporting their health insurance
coverage to the survey team in 1961 were buying
hospitalization insurance, and nearly all, surgical
insurance. Most had some coverage for physicians’
services in the hospital. There w as very little cover­
age for medical costs outside the hospital except
for emergencies and accidents involving use of a
hospital’s outpatient clinics. Obstetrical care
usually was covered, but allowance was limited in
most contracts.
A great variation in the premiums and benefits
was reported. Employers’ contributions varied
from 100 percent to less than 50 percent; depend­
ents usually were covered. Blue Cross was the most
frequent carrier for hospitalization, and Medical
Mutual of Cleveland for surgical benefits. The sur­
vey presented details of specific benefits in various
groups and of the participation of various large
employers. It was concluded that existing coverage
of hospital costs "is adequate,” This was based on
the fact that a large proportion of the interested
unions had Blue Cross coverage which paid in full
all hospital expenses. Other unions with hospital
insurance coverage by commercial companies in­
dicated that 90 percent of the hospital expenses
were covered by insurance.
Of the projected per capita expenditure of $33
for physicians' services in 1961, only one-third
would be covered by insurance according to the
estimate of the survey.
From the foregoing figures the PHS surveyors
drew the conclusion that:
The existing level of medical care expenditures in Cuya­
hoga County, in terms of at least one plan tn operation, if
channeled Into a prepaid direct-service medical care pro­
gram should provide a wide rang? of services both in and
out of the hospital.
Who Are the Potential Members?
The affiliated membership (about 183,000) of the
Union Eye Care Center was assumed to be the
group most interested in the proposed demonstra­
tion health program.
Data on the place of residence of some 85,000
union members was collected and their distribution
was plotted on a map according to postal zones.
The greatest density of union member residence
appeared in the central core of the urban area,
although the researchers reported a diffused pat­
tern of union homes fairly well distributed
throughout the county.
The concentrated downtown area, as mentioned
before, lay in proximity to University Circle,1*4with
some 40,000 union families living within 15 min­
utes’ public transportation.
The size of the average family in the commu­
nity was found to be 3.1 members. Balancing this
figure with the 2.9-member family established for
the steelworkers in another study, the consultants
later based their estimates on an average family
of three.
Since widely different amounts and types of
health care are needed at different stages of an in­
dividual’s life, a knowledge of the family charac­
teristics of eligible groups was thought, relevant to
preliminary planning. The PHS survey team sug­
gested the value of a household survey, inter­
viewing a representative sample of families to
detennine the age and sex of members, their atti­
1 "Univfr*!tj- Circle is the cultural, educational and medical
center of the Cleveland metropolitan arc*. Comprlaliu; 20
InetltutloitH • • * the city's largest higher educational com­
plex, itn muxi-nntH «if art and natural history, several of 11k major
hospital* • * • symphony orchestra* • * • Institutes of art
and music and • • • churches(,) the circle covers 488 acres of
parks, buildings, streets, parking space and playgrounds about
4 mill's; from downtown Cleveland." Unfvenity Circle Develop-
uiciu /oinutotltN.* The Ftrtf Five Yftara. (Report for 1957-62.)
tude toward group-practice medicine, and their
present utilization of medical and hospital care.
From the “Directory of Services for the Chroni­
cally Ill in Greater Cleveland” (a document pub­
lished by the Cleveland Academy of Medicine and
the Committee of Special Health Organization, a
component of the Welfare Federation of Cleve­
land), the survey team took a wealth of up-to-date
material on available care for patients with chronic
diseases, in general and specialized hospitals, con­
valescent and nursing homes, public health de­
partment facilities, and patients’ homes. This
document also provided information on rehabili­
tative and educational services, social casework,
and services for chronically ill children, veterans,
and older persons.
The PHS survey team recommended that
planning for a prepaid medical care program
should be related to these health resources in the
community, and suggested consultation with some
of the agencies’ staff in the planning stages, to in­
sure a widely disseminated understanding of the
nature and objectives of the new program which
could be invaluable in the years ahead.
Other factors on which the survey team assem­
bled data were:
1. The general demography of the Cleveland
metropolitan area;
2. The relationship of industrial, shopping, and
residential areas;
3. Employment and income levels in the com­
munity ; and
4 Population shifts and changing racial
composition.
Illustrating this material were several tables
composed of census tract data analyzed to show
areas of concentration of population by age, sex,
race, family size, housing conditions, and home
ownership; data on current employment levels and
earnings of production workers; and data relating
to the steady influx of Negroes from Southern
States.
The conclusion drawn from the economic facts
was that diversification created a reasonably stable
economic community in Cleveland, with a tendency
for various groups in the working population to
encounter economic difficulties at different times,
while average conditions for the community re­
mained relatively stable at a high level.
The information briefly summarized in the pre­
ceding pages was in the hands of the consultants
and other planners for study within approxi­
mately 2 months of the PHS survey team’s arrival
in Cleveland.
Consultants Take Their Own Soundings
While the PHS survey was in progress, the con­
sultants made a number of observations in the
community. Their interviews of union and other
community leaders convinced them that many in­
dividuals were strongly committed to the develop­
ment of an organized medical care plan.
Among these committed leaders were people able
to accomplish three important things for the
program:
1. Obtain significant community support.;
2. Bring into the program a substantial enroll­
ment from union memberships already in­
clined to this type of program; and
3. Deliver the necessary financial backing.
Meetings were held with rank-and-file union
members as well as with their officers. The perva­
sive concern related to the cost of medical care, a
major portion of which usually was not covered by
‘insurance. As the discussions proceeded, many
comments also indicated an insecurity and anxiety
associated with the experience of illness. Explana­
tions of how a comprehensive medical care pro­
gram could be organized to meet the medical needs
of a family stirred a high degree of interest.
Of particular interest to the consultants was the
attitude of the medical community toward organ­
ized care. They interviewed a number of physi­
cians, hospital administrators, executives of the
Cleveland Clinic, and faculty members of Western
Reserve University School of Medicine. Many of
these professional people indicated a sympathetic
view toward new developments in the organization
and financing of medical care.
In September, when the report of the PHS sur­
vey had been in their hands for a month, the con­
sultants met with union officials to make their
recommendations. They acknowledged the value
of the compiled material which made “possible
various projections and estimations which could
never have been approached without this work,”
and related it to the prospects for the proposed
pilot program. The director of the PHS study
team attended the meeting and presented the high­
lights of the survey.
The recommendation of the consultants was
that the demonstration project be undertaken inas­
much as there were ample circumstances favoring
its success.
It was recommended that a building to house the
medical care services be sought in the university
area, since most union members lived close by and
since the proximity of important medical resources
made the area particularly suitable for the pro­
posed medical center. The residential area served
by a center in this location would include not only
a large proportion of union groups, but also a cross
section of the community, including university
faculty, members of the symphony orchestra, and
teachers.
The character of the project was outlined as a
prepaid, direct-service health program of compre­
hensive scope, to be offered to a membership of
20,000 to 25,000 persons. Maximum use would be
made of existing hospitals and other medical re­
sources in the community.
The consultants were asked to continue with the
project by acting as the planning staff, and they
agreed to do so.
Summary and Comment
It was the opinion of all the professional people
associated with this introductory phase of the pro­
gram that sound planning can be based only on
wide knowledge of a community’s medical re­
sources. This information was provided in this
instance by the PHS survey team, which per­
formed a difficult task with great skill.
Notwithstanding the size of membership repre­
sented by interested unions, and the magnitude of
their health needs, it would have been unwise and
impracticable to attempt a large-scale project at
the outset. It was decided that a modest program
introducing the new concept would require all the
effort likely to be mobilized.
The proposed project in Cleveland fell short of
the size envisioned by some of the union leadership.
Nonetheless, it received full support. As the con­
tents of the program unfolded, enthusiasm and
commitment to the project increased.
Digitized by Google Original from
UNIVERSITY OF MICHIGAN
 Chapter IV
ELEMENTS OF PLANNING
A COMPREHENSIVE PROGRAM
Early in the project (September 1961), the con­
sultants undertook to outline the essential require-
-ments for developing a health program in Cleve­
land. They agreed that a well-integrated system
of health care must combine, in a balanced struc­
ture, these basic components:
1. A group of consumers (large enough to sup­
port a full-time staff representing family
medicine and the major medical specialties)
who desire prepaid comprehensive medical
care;
2. A qualified medical staff suited to this type of
practice;
3. A program of services that meets the needs of
the consumer and that is within the capacities
of the providers;
4. A building in which to provide the services;
5. Administrative and paramedical personnel
as required;
6. Capital financing to initiate the program; and
7. Adequate financing for the operation of the
program once it has been launched.
The consultants were aware that the character
of each of these elements would be, to some degree,
dependent upon the others. The order of their de­
velopment, therefore, would have an important
bearing upon the nature of each, and upon the
enterprise as a whole. They understood that much
about any one element would be predetermined by
the decisions taken regarding its antecedents. To
insure a priority that would protect the program’s
central purpose, a certain chronology of action
was essential.
The starting point of the projected health care
program was with the people it was designed to
serve. Their medical care needs initiated the proj­
ect and continued to be the dominant influence
in the planning. The prospective membership lay
among the unions comprising the Union Eye Care
Center and certain of their leaders who were com­
mitted to the development of a comprehensive
health program.
The consultants were acutely aware that their
function would be to act as the agents of the union
leadership. They would provide technical assist­
ance in planning a project that was not their own,
but a program that had been conceived by the in­
terested union leaders to serve the people they
represented. Consistent with this function, all
policy decisions were to be made by the leaders
of the interested unions after full discussion of
alternatives based on agenda prepared by the
consultants.
The consultants estimated that from 2 to 3 years
would be required for planning and implementa­
tion of a health program in Cleveland—even if no
major setbacks were to occur. During this period,
it was agreed that the consultants would maintain
continuous communication with the prospective
members in order to: (1) Develop the consultants’
understanding of the needs to be met, (2) inform
the prospective members of the measures being
planned to fulfill these, and (3) to assure that the
members maintained a continuity of identification
with the developing program.
Later events justified this approach. When the
time came to begin enrolling members, the favor­
able response was largely attributable to the edu­
cational base that had been laid, and to the loyalty
of prospective members who had helped shape the
program by their suggestions.
Concurrent with the attention to prospective
consumers, the consultants devoted much time to
the development of relations with the prospective
providers of service—the physicians, hospital ad­
ministrators, and various health agencies of the
community. It was to prove important to the suc­
cess of the project that emphasis was given to the
recruitment of physicians with professional roots
in the community and well established hospital
privileges.
Sufficient data were now available to form the
basis for the development of the concept of the
kind of facility that would be required to house
the prospective program. The PHS study had in­
dicated that the hospital bed capacity in Cleveland
was adequate; the new project would not increase
the demand for hospital beds. On the contrary, it
might be possible to reduce the hospitalization rate
among the population served. The new health
service program could, therefore, plan to continue
use of existing hospitals as needed, and to con­
centrate finances and energies on providing a cen­
ter for complete outpatient services.
The thinking that led to choosing this type of
facility followed these lines: Hospitals are costly
and administratively intricate enterprises. If a
community does not suffer from a shortage of hos­
pital beds, introduction of a new health program
such as that proposed does not create a new de­
mand. However, careful consideration must be
given to the possibility that physicians associated
with the new program might be barred from hos­
pitals previously available for their use. The union
leaders and consultants discussed this possibility
at length.
Such discrimination had been successfully over­
come in other areas of the country through court
action; legislation to correct similar abuses was
pending at the time in New York. Nevertheless,
the Cleveland program probably would not have
been undertaken had there not been a consensus
among the consultants that there was enough com­
munity and professional support to discourage the
development of such a crisis in Cleveland. Since
it appeared that a hospital would not have to be
built, the project could be economically feasible.
To meet the needs of the prospective member­
ship, the program envisioned had to include fam­
ily physicians and specialists. The patient depend­
ing upon this system for his medical care had to
have easy access to his own physician, to the spe­
cialist when necessary, and to various diagnostic
services which are an essential part of medicine.
The contemplated building would have to house
this range of services.
In the decisions regarding such a center, the
following chronology was thought to be most
desirable:
1. Designation of the most suitable area, with
reference to members' residence and to the
location of health facilities of the community
which it might be desirable to associate with
the program;
2. Diligent search within this area for a struc­
ture suitable for remodeling to the program’s
requirements; and
3. This search failing, location of a site within
the designated area on which to construct the
type of building decided upon.
In planning the location and design of the
health center, another major consideration before
the consultants was the financial resources of the
prospective membership group. What could they
afford to invest? A rate structure would have to
be devised which would finance the services agreed
upon and carry the capital debt necessary to under­
write the building expenditure—either new con­
struction or purchase and remodeling of a suitable
existing structure.
The timing of all activities necessary to provide
these components of a functioning program had to
be coordinated so that on a specific date the es­
sential elements previously listed would be ready.
Of vital importance also was a proper balance
among these various elements of the program. The
staff, medical and paramedical, had to be adequate
to meet the needs of the enrolled subscribers; the
building and equipment provided for these services
had to satisfy the needs for space, ease of move­
ment, efficiency of operation, and economic feasi­
bility ; and a sufficient subscriber potential had to
be tapped to assure a sound economic base to pro­
vide the right facility and to support the staff.
The consultants reviewed with the leaders of
the interested unions the planning requirements
as outlined up to this point The complexity of
implementing their proposed health program was
now evident to the trustees. They concluded that
the period of organization would demand the con­
tinuing attention of experienced planners.
They reasoned that the likelihood of obtaining
all the necessary skills in a single person was
slight. A person with medical background was
needed to assess the quality of the community’s
medical care resources, to integrate the services,
to develop a medical staff, and to assure a high
quality of medical care. Of equal importance was
a person with ability to establish an intimate asso­
ciation with consumer groups. Finally, there was
need for a third person with experience in the or­
ganization and financing of the kind of plan pro­
posed. Not all of these three persons would be
occupied full time in the planning and organiza­
tion of the new program.
In addition, it would be difficult to recruit per­
sons of this level of experience for a program that
was still in its incipiency; and, even if that were
possible, the cost would be burdensome. Since the
combined skills and experience of the three orig­
inal consultants fulfilled these requirements, and
each of them could devote brief periods to the proj­
ect as needed, the leaders of the interested unions
assigned to them the task of planning the program.
Summary and Comment
The design of a medical care program must be
built up through many simultaneous activities—
each of which requires skillful attention and
timing. Attaining a balance among the various
elements within the program is a delicate task;
however, it is essential to launching the project and
to providing a workable system for continuity and
future development.
It is not the kind of work that can be success­
fully achieved by volunteers, nor by inexperienced
individuals, no matter how intelligent or well in-
tentioned. Even among experienced leaders in the
health plan field, the many skills needed are not
likely to be found in one person.
If the problem is solved by retention of several
persons with experience in different fields, each
can be assigned to the work in the area of his train­
ing and experience. The consultants divided re­
sponsibilities in this manner and worked jointly
on all matters as well. They found that the com­
bination of disciplines and points of view provided
a wholesome basis for plannning.
Optimum conditions for composite planning
were thus provided: A variety of skills and
backgrounds, coupled with a working relation­
ship that called for full participation of all three
consultants.
Digitized by Google Original from
UNIVERSITY OF MICHIGAN
 Chapter V
EXTENT OF PHYSICIANS’ INTEREST
IN THE DEMONSTRATION PROJECT
One of the first undertakings of the consultants
was to discuss the proposed health care program
with physicians in the community whose possible
interest in such a project was indicated by the fact
that they had participated in one or more of the
following:
1. Support of the prepaid health plan bill dur­
ing the legislative campaign;
2. Proposal of a group-practice plan to labor
leaders immediately after the bill’s passage ;
and
3. Involvement in the medical care of union
members.
The consultants also sought to assess the inter­
est- of leading physicians in the institutions largely
responsible for the high local standard of medical
care: The Cleveland Clinic, and the Western Re­
serve University School of Medicine.
The directors of The Cleveland Clinic, in several
lengthy meetings with the consultants, discussed
the possibility of The Cleveland Clinic's partici­
pating in the proposed health plan. It soon became
apparent that the established character of that
clinic made such participation impracticable.
Three major differences appeared to be irrecon­
cilable:
1. A majority of The Cleveland Clinic’s patients
came to it by referral from physicians in in­
dividual practice, many from outside the city.
The policies and administrative practices of
The Cleveland Clinic were designed with such
referrals in view.
2. The Cleveland Clinic’s staff of specialists were
intent chiefly on the diagnosis and treatment
of single episodes of major illness. The pro­
posed health plan was to focus on compre­
hensive family care aimed at prevention of
disease as well as at diagnosis and treatment
of both minor and major illnesses.
3. The Cleveland Clinic’s pattern of financing
had long been established on a fee-for-servioe
basis. A fundamental principle of the pro
posed health plan was that funds collected
through prepayment were to be used for or­
ganizing and providing the broad health care
program to the members.
Although the discussions with the directors of
The Cleveland Clinic did not lead to cooperative
action, they did provide the consultants with a
valuable index of the interest that existed among
an influential segment of the medical community.
The Clinic’s directors had thoughtfully explored
avenues of cooperation, and had indicated an open
mind toward the ideas proposed. The project con­
sultants took note of The Cleveland Clinic as an
important resource for certain types of superspe­
cialty services, such as cardiac surgery and neuro­
surgery, provided continuity of personal care could
be assured for health plan patients.
At the Western Reserve University School of
Medicine, a few introductory talks brought to­
gether a group of interested faculty members. The
consultants proposed that these faculty members
explore with them methods by which the demon­
stration project might obtain from the medical
school informal assistance in professional plan­
ning and in recruitment of a competent medical
staff. In suggesting this informal relationship, they
emphasized their concern for a high quality of
medical care in the projected health program. The
faculty members responded favorably, and further
meetings were held.
Early in these discussions, interests common to
the medical school faculty and the consultants be­
came apparent, although the ultimate purposes
and therefore the approaches of the two groups
differed.
From the point of view of the medical school's
faculty, the projected health plan held potential
advantages for the education of young physicians.
In the faculty's thinking, the traditional concern
of the medical school took priority; as medical
educators, they were alert to means of providing
the medical student, intern, and resident physician
with patient material that might further their pro­
fessional development. These faculty members be­
lieved that comprehensive medical care is gaining
acceptance in the United States, and felt an obliga­
tion to offer their students training in this field.
From their standpoint, the projected program
of health promotion, disease prevention, diagnosis,
treatment, and rehabilitation might be looked
upon as a continuous and inseparable pattern meet­
ing the ideal definition of comprehensive medical
care. Further, affiliation with a comprehensive
medical care program could provide their medical
students with an opportunity for instruction and
experience in certain methods of organizing such
care. If these goals could be realized, the Western
Reserve University School of Medicine would be­
come the first, medical school in the United States
to extend medical education into the philosophy
and practice of comprehensive health care.
As discussions progressed, other faculty mem­
bers responded to the invitation of their fellow
physicians to participate in them. The doctors
soon suggested that training of medical students
might be facilitated if the medical school's faculty
were to have a direct part in planning and con­
ducting the health plan program. They now
proposed exploring the possibility of formal
affiliation between the medical school and the
projected program.
From the point of view of the consultants, for­
mal affiliation with the medical school was one of
several methods that, had potential for fulfilling
all the pertinent needs of the population for whom
they were seeking to provide comprehensive care.
The consultants considered these needs to be as
follows:
1. Accessibility of a full scope of health services;
2. Continuity of care and coordination of
complex medical resources;
3. High quality of services, with assurance that
this quality would be maintained;
4. Removal of economic barriers to needed care;
5. Efficiency and economy of organization; and
6. A democratic structure of policymaking
processes.
At this early point in the discussions, the con­
sultants foresaw that formal affiliation with the
medical school could be expected to establish and
maintain a first-rate professional staff and to facili­
tate hospital care, since physicians in the program
would have faculty appointments and staff
privileges at the University Hospitals. The plan­
ners also envisioned in such an arrangement an op-
portunity to educate the members of the commu­
nity as a whole with respect to health maintenance
and new patterns of organizations for the provi­
sion of health services. It also would point up the
consumer’s responsibility in the development of an
integrated medical care program of high quality,
as well as demonstrate the values in joint com­
munity effort rather than in separate and competi­
tive efforts by various consumer organizations.
The consultants believed that the health care
program could give the medical school a unique op­
portunity to fulfill its need to demonstrate chang­
ing methods of practice; to accelerate the
application of scientific knowledge to patient care;
to provide training in home care, the treatment of
the chronically sick, and management of minor
and functional illnesses; and to build a resource
for special training of medical students interested
in careers in comprehensive health care. In sum­
marizing the interests common to the medical
school and the consultants which had been touched
on in these early discussions, the physician member
of the consultant team wrote:
From the point of view of the consumers’ interest in
this project, a dose relationship with the medical school
could do much to assure the desired levels of professional
quality In selection of staff, provision of hospital care,
maintenance of proper standards of medical practice, etc.
Reciprocally, it Is our belief that association with such
u prepaid group health center could provide significant
advantages to the school. A firm and growing source of
teaching clinical cases would become available—with full
compensation of physicians' time—representing a cross
section of occupational and social groupings within the
self-supporting Cleveland conununity. As the university
increases its Interest in the teaching of social aspects of
medicine and seeks improved resources for the demonstra­
tion of the “natural" environment of disease and its treat­
ment, the availability of a medical center providing
continuous health service to its prepaid families could
offer an ideal training facility. Finally, the condition.? for
new forms of research, particularly in the social epidemi­
ology of chronic and “functional’’ disease, could represent
a unique opportunity.
 Additional avenues for cooperation suggested by
tho consultants included the selection of physicians
for t'he demonstration program; integration of
home, office, and hospital services; development of
disease prevention services and health education
for the insured population; and study of methods
of teaching and research in the group health
program setting.
Characteristics of the Medical Care Plan
With the strong motivation of these common in­
terests, the interested faculty members and the
consultants held a series of meetings in the fall of
1961. During the interim preceding these meetings,
the dean of the medical school had requested that
the project be studied by the executive committee
of the University Hopsitals’ medical staff. The par­
ticipants in the series of meetings held during the
fall of 1961 were the members of this committee, a
representative of the University Hospitals, repre­
sentatives of the projected program, and their con­
sultants. Together, the participants proceeded to
delineate a system of medical care that would be
characterized by the following elements:
1. Joint cooperation of union, management,
and other community groups;
2. Limitation of membership in the demonstra­
tion project to approximately 8,000 families;
3. Emphasis on health maintenance and quality
of care;
4. Direct health service (rather than cash
indemnity) and comprehensive benefits
(rather than insurance for catastrophic
illness);
5. Membership composed of families rather
than of individual workers;
6. Medical group practice;
7. Assumption by the medical group of con­
tinuing responsibility for protection of
members’ health;
8. Assumption by each family’s personal phy­
sician within the group (or by the child’s
pediatrician) of responsibility for continu­
ity of his patients’ care, with referral to
specialists as required;
9. Coordination of all health resources needed
by the family;
10. Representation of consumers’ interests in the
determination of policy;
11. Maintenance by the medical group of auton­
omy in all professional matters; and
12. Economy and efficiency of administration.
Exploration led to general agreement on the fol­
lowing broad concepts:
It would be necessary to build an outpatient
health center especially designed for family care
by a medical group. Decor and design must con­
note dignity and privacy, and must permit a rea­
sonable degree of efficiency and economy. The
center should be in the University Circle district,
which had been found to be central to the popula­
tion that would be primarily served, and to the
medical school and University Hospitals.
For inpatient care, it was proposed that existing
community hospitals, primarily those of the uni­
versity, be used provided cooperative arrange­
ments could be agreed upon. Such arrangements
must include granting of hospital staff privileges
to all doctors of the medical group, and direct pay­
ment to the hospitals, by the health plan, for serv­
ices received.
Medical school faculty physicians, if called upon
for specialty consultation or services, would be
fully compensated for their time from health plan
funds. They, as well as members of the medical
group, would be readily accessible for consultation
and treatment, yet continuity of care would be
maintained because the health plan member’s per­
sonal physician within the medical group would
continue to be responsible for all phases of his
patient’s treatment.
The health plan membership was expected to
comprise a broad cross section of the community,
and to represent a wide range of occupational and
social groups. Families would be likely to continue
their relationship with the medical group over
long periods and through various phases of illness
and health care. The records of continuous care of
such a socioeconomic segment would constitute a
major resource for research. Interest in the avail­
ability of such a resource was shared by all con­
ferees. With a few exceptions, prepayment would
remove the economic barriers to medical care.
Within such a framework, it was hoped that
care of the Echoic man" might be stressed to medi­
cal students, countering the contemporary ten­
dency to fragmentation into ever-narrowing fields
of specialization. It was believed that medical
school courses in the philosophy and techniques
of comprehensive care could be enhanced by con­
current experience in an environment designed to
facilitate a coordinated approach,
Solutions Through Experience
Intensive exploration was made of the organiza­
tional and technical problems involved in affiliat­
ing a consumer-sponsored, prepaid, group med­
ical practice with a leading medical school. The
working papers appeared to offer reasonable solu­
tions to all but a few questions. These questions
proved not to lie subject to resolution by discus­
sion, and it was felt that their solutions would
have to be worked out through practical expe­
rience. They involved:
1. The possibility that continuity of care by the
health plan member's personal physician
within the medical group would be lost when
the resident physician at the University Hos­
pital assumed responsibility for inpatient
care. Although this problem was felt not to
be insurmountable, it was recognized that a
potential existed for conflict between the
medical school’s obligation to provide medical
training by giving the resident physician re­
sponsibility for inpatient care, and the health
plan’s obligation to provide its consumers
with personal service through continuity of
care.
2. The almost inevitable increase in the cost of
medical care that occurs when the physicians
rendering that care are deeply involved in
the education of young doctors, and must
therefore spend appreciable blocks of time
away from patients. Until experience could
be gained in a functioning program, it was
agreed that no precise solution to this ques­
tion could be determined.
3. The question of what impact the medical
school's graduate students, interns, and resi­
dent physicians might make on patients who
were self-supporting members of a prepaid
health plan and critical of the atmosphere of
a charity clinic. This also, after considera­
tion, was left to demonstration in practice.
Principles of Medical Practice
It was recognized that the concept of medical
practice inherent in the proposed program rep­
resented a departure from the traditional legal
responsibility of the physician which pertains only
to the patient who presents himself for care. Under
the proposed plan, physicians and ancillary per­
sonnel would have to anticipate health needs of the
subscriber population and would be obligated to
organize services to meet those needs.
Thus, the executive committee of the University
Hospitals' medical staff and the consultants—per­
sons qualified in the medical field—laid down prin­
ciples that they considered conducive to a high
level of medical practice under a group-practice
concept.
They next sought to formulate practical means
whereby these principles could be implemented.
Agenda for the ensuing meetings directed discus­
sions into every working phase of the undertaking:
Legal structure, character and enrollment of mem­
bership, financing, services to be offered, selection
and organization of medical staff, arrangements
for hospital care, and requirements for ancillary
staff. Agreement was reached with respect to the
practical purposes, characteristics, and scope of the
project.
Organizational Structure
The consultants now addressed themselves to
designing an overall organizational structure
through which the formulated purposes might be
achieved. Many methods were suggested through
which cooperation between the participating
bodies might be assured. At this time the members
of the medical school faculty were inclined to for­
mal affiliation or none.
To provide for the execution of the joint project,
it was proposed that a new, independent legal en­
tity, tentatively named The Cleveland Health Cen­
ter, be incorporated as a nonprofit health service
organization to represent University, consumer,
and community interests in the projected program,
and to assume contractual responsibility for or­
ganizing and coordinating the health services
agreed upon. At about this time, the union leaders
interested in organizing the new health service
program were in the process of forming a new
corporation whose sole purpose was to develop
such a plan.
The initial name of the corporation was the
“Cleveland Health Foundationsubsequently this
was changed to “Community Health Foundation”
(hereafter referred to as CHF). The responsibili­
ties and interrelationships between these three co­
operating bodies (the medical school, CHF, and
the Cleveland Health Center) were conceived as
follows:
1. The Cleveland Health Center would:
(«) Occupy a facility to be provided by
CHF; (K) have a board of directors consist­
ing of nine persons: three to be nominated by
 the medical school, three by CHF, and three
to be elected by the first six to represent the
community at large; physicians active in the
car® of patients would not be eligible for ap­
pointment to the board of directors; (c) em­
ploy a medical group that would provide a
comprehensive program of medical care to the
subscriber population of the health plan, to
be carried out in the Center, in the members’
homes, and in the hospital as necessary; (d)in
consultation with the medical group, employ
ancillary staff, and provide technical and ad­
ministrative equipment and supplies; (s) ar­
range with the university medical school and
University Hospitals for medical and related
services that would not be provided at the
Center; and (/) appoint a qualified adminis­
trator, with a record of demonstrated ability
to work cooperatively with physicians, to be
responsible for overall management of the
program, including organization of nursing,
technical, clerical, and maintenance services;
the administrator would have a voice, but no
vote, on the board of directors.
2. The Community Health Foundation would:
(a) Educate members of labor and other
groups in the community with regard to the
demonstration program, enroll members and
collect dues for the health plan, and designate
a health service area in the community (per­
sons residing within the health service area,
who were also members of participating or­
ganizations, would be eligible to enroll in the
health plan); (-) contract with the Cleve­
land Health Center for the provision of medi­
cal services to the membership; (c) provide
the health service facility to be occupied by
the Cleveland Health Center, the facility to
be for the exclusive use of the health service
program, designed in consultation with the
Western Reserve University School of Medi­
cine and University Hospitals, and located at
a site convenient to the medical school and
hospitals, and to the health service area; (tf)
participate in efforts to evaluate the experi­
ence of the demonstration program; and (e)
retain the right to explore other means of pro­
viding health services to other interested
community groups in the Greater Cleveland
area. (No obligations with respect to such
other programs would be assumed by the
Cleveland Health Center, the Western Re­
serve University School of Medicine, or Uni­
versity Hospitals.)
3. Western Reserve University School of Medi­
cine would i
(a) Recommend and nominate qualified
physicians for appointment to the staff of)
CHF; (K) provide, under conditions accept­
able to itself, the Cleveland Health Center,
and CHF, certain superspecialty services
(such as cardiac surgery, neurosurgery) that
would not be obtainable at the Cleveland
Health Center; (c) arrange with the Cleve­
land Health Center and with University Hos­
pitals for coordinated care of hospitalized
members; (d) arrange for appropriate teach­
ing and research activities at the Cleveland
Health Center; and (s) participate in the de­
velopment and maintenance of professional
staff education and research in connection
with the medical care program.
4. The Medical Group would be formally or­
ganized as a professional staff employed by
the board of directors of the Cleveland Health
Center. The initial staff would be nominated
by the University school of medicine. Subse­
quent nominations by the University school of
medicine would require concurrence of the
medical group. All nominees would be re­
quired to have qualifications for appointment
to the clinical faculty of the school.
The core of the medical group would consist of
full-time physicians in the basic specialities (in­
ternal medicine, pediatrics, obstetrics-gynecology,
general surgery). Specialists would be added to
the medical group as required for the comprehen­
sive health care of members, unless it were demon­
strated that such care could be obtained more
satisfactorily from the school of medicine or Uni­
versity Hospitals.
The medical group would nominate a clinical
director from among its full-time members. He
would be appointed by the board of directors of
the Cleveland Health Center, after consultation
with the Academic Council of Western Reserve
University School of Medicine. The clinical direc­
tor would represent the medical group in relations
with the board of directors of the Cleveland
Health Center, and would take responsibility be­
fore the board for professional standards. He
would have a voice, but no vote, on the board of
directors.
 When the organizational structure had been
worked out in early 1962 the medical school’s
committee had taken the entire program under
consideration. At a 2 day session with the con­
sultants in mid-March 1962, they indicated the
areas of greatest interest to them and restated the
principles relating to those areas. Their primary
concern was excellence of care. They discussed
factors by which the proposed program might
serve to promote such excellence through stability
of the population to be served, stability of financ­
ing arrangements, and provision of comprehensive
services. They stressed that quality of care de­
pended upon preserving a balance in size of mem­
bership : The population to be served must be large
enough to make the project economically feasible,
yet not so large as to overload the medical staff.
The committee was interested in the framework
of benefits to members of the health plan; prepay­
ment arrangements, scope of coverage, costs, possi­
ble extra charges. They favored the broadest possi­
ble range of health services under comprehensive
prepayment. One of their suggestions was that the
clinical director be made answerable to the school
of medicine for quality of patient care. They were
unanimous in their opinion that physicians in the
Cleveland Health Center should devote their full
professional time to the prepaid health program
and to teaching.
The medical school’s committee concluded by
recommending the project, as amended, to the
executive committee of the University Hospitals,
and the proposal went to the University Hospitals’
executive committee.
After 2 months of consideration, the school of
medicine notified CHF that the university hos­
pitals’ executive committee had now decided that
the University should not assume a formal role in
the demonstration program. The dean of the
medical school wrote cordially, saying that the
many interested physicians on the faculty would
be happy to aid on an individual basis if requested
to do so. The invaluable assistance that the Foun­
dation received from these physicians will be dis­
cussed in the chapter describing selection of the
medical staff.
Summary and Comment
The value of a comprehensive, prepaid, group-
practice, medical care program as a means of pro­
viding high-quality health services to salaried
workers and wage earners was recognized by phy­
sicians of professional stature established within
the community.
The possibility of a direct relationship with the
medically renowned Cleveland Clinic was viewed
favorably by the clinic’s directors, and was dis­
cussed at. some length. Ultimately, the positive
factors proved insufficient to outweigh the obsta­
cles inherent in the incorporation of a new, dis­
similar pattern of practice into that of a long-
established institution.
Members of the faculty of the Western Reserve
University School of Medicine were particularly
attracted by features that might prove advanta­
geous to their effort to provide education in com­
prehensive medical care through formal affiliation
with a prepaid health plan serving a relatively
stable cross section of the working population.
During months of discussion between these phy­
sicians and the project planners, tentative agree­
ment was reached on principles and in detail. The
proposal developed was that the formal relation­
ship be implemented by the creation of a new legal
entity (the Cleveland Health Center), a contract­
ing body responsible for overall direction of the
project.
The board of directors of the proposed Cleve­
land Health Center would represent the medical
school, the University Hospitals, and CHF, and
would assume major responsibility for the profes­
sional quality of the physicians practicing in the
medical group. This complex of organizations
would carry out a demonstration program serving
approximately 8,000 families.
Implementation of this proposal would have
necessitated a significant departure from the med­
ical school’s tradition. The problems inherent in
this relationship did not differ essentially from
those that had outweighed the considerations
favoring a direct working relationship with The
Cleveland Clinic. The university abandoned the
projected affiliation.
This experience suggests that long-established
institutions are unlikely to undertake such far-
reaching readjustments. Nevertheless, it provided
clear indications that if the new pattern of orga­
nized medical care establishes itself outside exist­
ing institutions, common interests may well lead
to cooperative relations between comprehensive
health service centers and existing establishments.
 Chapter VI
REAPPRAISAL OF THE PROJECT’S
STRENGTH AND RESOURCES
Throughout the discussions with the medical
school, the consultants had kept the CHF trustees
informed of progress. During this period, the
trustees, working closely with the consultants,
had taken specific steps to implement the plan by
providing a structural basis for its financial and
related aspects: The Community Health Founda­
tion, a nonprofit corporation, was established for
the purpose of operating a health care program.
The articles of incorporation, bylaws, and descrip­
tion of the plan were approved by the State de­
partment of insurance.
The organization was chartered in May 1962.
The incorporating trustees included representa­
tives of the steelworkers’, painters’, plumbers’,
retail clerks’, meatcutters’, machinists’, and auto­
mobile workers’ unions. Provisions were made to
enlarge the Foundation’s board of trustees by in­
cluding representatives of management and other
community leaders. In conformity with the Ohio
State law, the bylaws of the corporation provided
that, after the program was in operation, the
trustees would be elected at an annual meeting of
the membership.
The planning activities were financed by a dona­
tion of $25,000 a year for 2 years from the Union
Eye Care Center. Several unions had committed
themselves to contribute financially to the planning
effort. Two unions reported having received as­
surance from the management trustees of their
welfare funds that they would make a substantial
loan to aid in initial financing of the capital
requirements of the health care program.
In addition to the data accumulated by the PHS
survey team on the medical resources of the com­
munity and on the programs available to the par­
ticipating union members, detailed information
had been compiled on the premium and health
295-902 O—«8------- 3
benefit structures of each of the participating
unions. The health benefits programs in effect
among the interested unions provided payments
for medical and hospital care on a fee-for-servioe
basis. In order to facilitate the inauguration of a
prepaid group-practice program, it was necessary
to permit each individual in the group to choose
between the existing fee-for service plan and the
new program.
Two of the unions—the retail clerks’ and the
meatcutters’ unions—had already made arrange­
ments for dual choice in their collective bargain­
ing agreements. The automobile workers had a
long-established precedent of dual choice in Cali­
fornia and in Michigan. It was assumed that
similar provisions could be developed for the
Cleveland automobile workers. Other unions had
undertaken to negotiate a dual-choice provision in
their collective-bargaining agreements.
In June 1962, following the decision by Western
Reserve University not to participate in the dem­
onstration program, at the request of the consul­
tants a meeting was held with the board of trustees
of CHF, at which the consultants summarized the
proposal for a prepaid, group practice, compre­
hensive health care program that had been worked
out in collaboration with the committee from the
medical school during the first 11 months of plan­
ning. The consultants then asked the CHF trustees
to determine whether the program could be carried
out substantially as outlined, without formal affil­
iation with the University. Two crucial problems
presented special difficulties in proceeding without
such affiliation: Recruitment of physicians of high
caliber, and assurance that these physicians would
have hospital staff privileges.
It seemed likely that a number of the faculty
members who had become interested in the project
25
during the course of the discussions might assist
in the selection of a competent medical staff It was
hoped that certain physicians of the clinical fac­
ulty who had established reputations in academic
and community circles would ultimately be willing
to form the nucleus of the medical group.
A major uncertainty remained: Would these
physicians’ hospital staff privileges continue in
effect when they joined the medical group? Ex­
perience of prepaid group-practice health plans
in other cities suggested that such continuation of
privileges might not be easily assured.
The board of trustees recognized that these
difficulties might ultimately make accomplishment
of the objectives impossible. Nevertheless, the goal
was so important that the risk was assumed.
As part of the attempt to meet, this risk, three
preliminary steps were proposed:
1. Full exploration of the possibility of form­
ing relationships with other hospitals in the
community;
2. Establishment of a medical advisory com­
mittee, to be composed of physicians in the
community who had consistently expressed
interest, in the project, to assist in establish­
ing and continuing relations with other
interested physicians, give guidance in the
development of principles stressed in conver­
sations with the medical school, such as avoid­
ance of segmentation in medical care, and
provide effective means for promoting the
quality of medicine to be practiced in the pro­
gram; and
3. Assurance, at all stages of development, of
full professional autonomy for the projected
medical group.
The last of these considerations requires
emphasis and explanation. As long as affiliation
with the medical school had been anticipated, pro­
fessional autonomy of the medical group had
presented no serious problem. The physicians
would have been “employees” under an arrange­
ment consistent with the conditions of employ­
ment of physicians on the faculty of the university
medical school. They would have been answerable,
with respect to all appropriate matters, to mem­
bers of the medical profession. Now that affiliation
with the medical school was not contemplated, a
new structure must be developed to guard the doc­
tors’ professional status, rights, and independence.
Unless the physicians’ professional autonomy
were protected, the medical group might not be
tolerated by the institutions and hospitals whose
neutrality would be essential to the group’s exist­
ence and functioning.
Although the university’s decision canceled the
plans for a program developed in common, the
foundation’s board of trustees concluded that the
discussions with the medical school and university
hospitals had produced useful results. Important
concepts had evolved with respect to the structure
and organization of the contemplated program.
The broad interest in the project that had been
manifested by the community could not be over­
looked in any enumeration of assets. Seven strong
unions backed CHF and were expected to aid in
raising funds as needed. Management representa­
tives and other community leaders had also ex­
pressed interest, including willingness to serve on
the board of trustees if invited.
Inquiries had been received from many persons
who wished do become members of the contem­
plated prepaid program. It could be reasonably
said that an important segment of Cleveland had
given evidence of readiness to pioneer in new
methods of organizing, financing, and distributing
medical care. In consideration of this receptive
atmosphere and of the support that could be ex­
pected from members of the medical profession,
the decision of the meeting was to pursue the plan
with increased vigor.
Summarizing the work and decisions of this
June 1962 meeting, the board of trustees of the
CHF adopted the following statement of princi­
ples which included the general outline of the
program:
The Cleveland Health Foundation (CHF) Is a labor
and community-sponsored nonprofit corporation whose
purpose la to organize and arrange medical care services
for its beneficiaries on a prepaid basis in the Greater
Cleveland area. While a variety of methods and plans will
be explored for the future, a demonstration health center
program is now proposed.
Health Center
It is the intention of the CHF to set up a group health
center through which medical care services will be pro­
vided to about 8,000 families and their dependents com­
prising a population of approximately 25.000 persona
This center will be located on the east side of Cleveland
in the area of the University Circle. The population to be
served will generally include those members of the unions
participating in CHF and other community groups who
reside within a reasonable distance from the center, and
who voluntarily choose to Join the medical care program
that will be offered by the center, lion participating union
members will continue to be served by their existing insur­
ance plans.
MedicaI Staff
A staff of physicians and other health personnel will
work as a team in the center and will be responsible for
the provision of the home, office, and hospital care needed
by the enrolled members. The staff will consist of a core of
personal physicians. Including the major specialties of
internal medicine, pediatrics, obstetrics-gyn ecology, and
general snrgery. These physicians will form an association
which, under contract with CHF, will assume responsibil­
ity for the care of the members enrolled in the center.
The nonphysician staff of the center will be recruited
by an administrator who will be appointed by the board of
trustees of CHF. Such recruitment will be with the advice
of the medical staff, particularly in the cane of professional
positions such as nurses, technicians, health educator, and
social worker.
Several medical lenders in the Cleveland community
have agreed to assist the foundation actively in the selec­
tion of physicians who will be interested In and competent
to participate in a medical care program such as is con­
templated by CHF. The selected candidates will be of a
caliber that will be acceptable to the local medical school
for staff and teaching appointments. These physicians will,
therefore, be qualified for staff privileges at the Univer­
sity Hospitals and other accerdited hospitals in the area.
Health Services
The group of physicians staffing the medical center will
function as a team and will jointly be responsible for the
development of comprehensive family health services in
the home, medical center, and hospital for the beneficiaries
of the program. For services in such specialties as are not
represented among the staff of the center, referrals will
be made to the university, the Cleveland Clinic, or other
recognized specialists in the community. The physicians
at the center will have the responsibility for arranging
necessary hospitalization of members. The administration
of the center will make arrangements for the payment of
hospital bills.
The program of the center will Include preventive serv­
ices for adults and children, care for Illness, continued
care for chronic conditions, care at home, In the office, and
in the hospital, and arrangement for special care such as
rehabilitation, home nursing care, and other components
of a comprehensive health program. Necessary services
will be available to members at all times of day and night.
With the coopertalon of leaders in the field of medicine
in the Cleveland area, standards that will assure high
quality of medical care and sound methods for providing
continuity of care to the members will be developed.
Finanoinff
The financing of this program will be predominantly
through prepayment. In the case of union groups, this will
Involve utilization of health and welfare funds negotiated
under collective-bargaining agreements. However, the
services to be provided will not be Limited to those that
can be financed under the existing health and welfare
agreements. As soon as possible, arrangements will be
made and responsibility will be assumed for including the
full range of health care required by the members, in
addition to those services that are usually prepaid. For
such services, extra charges can be made—designed to
spread the costs a« broadly as possible.
Construction and equipment of the health center will
be financed on a loan basis, at an estimated cost of |750,-
000-11,000,000. Principe! and interest will be repaid from
prepayment Income over a specified period.
At the conclusion of the June IW2 meeting, the
board of trustees instructed the consultants to con­
tinue the general planning of the program under
the guidance of the president and the secretary of
the board. The following specific tasks were to be
undertaken:
1. Health center site.—A suitable site on which
to build a medical center was to be found in
the University Circle area. This area was se­
lected as the most desirable because it in­
cluded, according to the PHS study, a large
concentration of members of the seven inter­
ested unions, and because most of the major
hospitals and other medical facilities in
Cleveland were situated within it The deci­
sion to build a center had been approved by
the board of trustees after an extensive search
had disclosed no suitable existing structure
within the area. It was understood that ac­
quisition of land could not be concluded until
the University Development Foundation1
approved the building of a medical center
on the selected site.
2. Financing the program,—A preliminary pro­
posal with respect to capital requirements and
operating budgets was essential to test the
interest, of prospective lenders (union health
and welfare funds, and commercial sources).
(a) Capital financing.—The consultants
were to develop a proposal with respect to the
method of financing the medical center, for
consideration by the board of trustees,
(&) Operating budget.—Projections on the
cost of operating the center, of providing
services to the prospective members, and of
repaying the loans for construction of the
facility were to be prepared simultaneously.
1 “The University Circle Development Foundation ♦ ♦ • wee
founded In 1057 to carry oat a 20-year development plan for
University Circle It wee created by the Institutions In the circle
• • The Foundation • * * guards the basic principles of the
Development Plan • * • and is central arbiter In any decisions
that may tend to modify (them I * • ♦. (It) acta aa a central
clearing house where the interests of etch member institution
• • • are reconciled with • • • University Circle • • • and
• • * the Cleveland community. (It) acts as an administrative
agency to provide services and facilities that benefit member
institutions * • • (such as) land acquisition, traffic control
• • • architectural review • • University Circle Develop­
ment Foundation: The Firet Five Years. (Report for 1057-02.)
 3. Monthly premiums and benefit structure.—
Preliminary proposals with respect to these
two items were necessary to provide basic
material for the financing proposal.
4. Staff recruitment.—The consultants were in­
structed to continue to develop relationships
with interested physicians in the community.
5. Membership education.—During the first 11
months, the education effort had been directed
largely toward union officers and shop
stewards. Development of continuously
widening union participation was now vital.
Need for a well-prepared and illustrated
booklet to support the effect of the spoken
word in this educational effort was stressed.
In assuming these responsibilities, the consul­
tants integrated their capacities and efforts by fol­
lowing a method that had evolved during the past
year. Action on each point was assigned to the
appropriate member of the consultant team and to
the president or secretary of the board of trustees
who were working with them. Deadline dates
were set for completion of each task and for re­
ports on continuing efforts. The work of the five
men was coordinated at meetings held at approxi­
mately monthly intervals.
Summary and Comment
The momentum generated by a year of continu­
ous effort was sufficient to shape a projected health
care program that unified the goals and elicited
the continued support of local leaders. This pro­
gram had developed specific characteristics as to
membership size, location of service area, location
of the health center to be constructed, scope of
services to be rendered, and structure of the rela­
tionship between consumers and providers of
medical services.
During the year, the work had involved the
creative energies of an increasing number of peo­
ple. Leaders within the community had become
fully committed to the program, and were able to
mobilize the necessary resources and to move
others toward the achievement of expressed goals.
 Chapter VII
FINANCIAL PLANNING OF
THE HEALTH CARE PROGRAM
It had not been possible to start financial plan­
ning of the health program until three essentials
had been determined: the extent of services to be
rendered, the organizational framework for the
provision of the services, and the size of the mem­
bership to be served. Now that these points had
been settled, the consultants could work out pre­
liminary estimates of the costs of the program,
and of the revenues that could be expected to meet
those costs.
In preparing these estimates, the consultants
drew heavily on the experience of other prepaid
programs, including methods of financial planning
that bad been used. The technique that the con­
sultants adapted from these observations proved to
be a valuable tool for economic planning, analysis,
and control, and served as a basis for the borrowing
of funds. The specific method of planning applied
to CHF is given in detail because of its historical
interest, but more because it is hoped that this ex­
perience may serve as an example in applied
methodolgy.
The Method
The consultants divided their advance estimate
into schedules to cover two phases: Schedule I
(p. 30) expressed the estimate of costs and reve­
nues covering the period of development of the
program and construction of the center, based on
the assumption that the center would start opera­
tion on January 1, 1964. Schedule II (p. 32)
covered costs and revenues starting with the
center’s first day of operation.
In both schedules, each line was numbered. Ex­
planatory notes pertaining to each numbered line
were attached. The schedules together with the
notes made up an integrated whole. As a planning
method, this integration proved to be useful. The
dollars entered in each line could not explain their
own significance, either as individual items or as
parts of the total plan. The appended notes ob­
ligated the planners to perpetually reappraise the
total program and to relate each item of expense
to the entire project.
In the next few pages, the two schedules are
presented in their entirety, together with their ac­
companying notes slightly edited for clarity. Both
schedules and notes are essentially a transcription
of those that were put into use by the planners in
early October 1962, and are based on the data that
the consultants possessed at that time. This presen­
tation is concluded with a description of the inter­
action that took place between this tool and the
actual project through the planning phase and to
the end of the first year of operation.
Schedule I—Anticipated sources of cash and budgeted capital requirements during preoperating period
(center scheduled to open Jan. 1, IMA)
[Draft of Oct. 4, IMS]

1963
Total Prior to
lit quarter 2d Quarter 3d quarter 4th quarter

Cash will be provided by:

Line 1—Loans from health and welfare funds. $500,000 $150,000 $10, ooo $197, 500 $142, 500 .
Line 2—Assistance from Union Eye Care
Center----------------------------------------------- 51,500 51,500 .
Line 3—Contributions from sponsoring
unions- ----- - ----------------------------------- 100,000 20,000 $80,000
Line 4—Individual sponsoring memberships. 100, 000 _ — ■»
»*
*** 25, 000 75, 000
Line 5—Commercial 1MM-------------------------- 650,000 650,000
Line 6—Others. (See notes.)________________
Line 7—Total cash provided----------------------- 1, 401, 500 201, 500 35,000 272, 500 162, 500 730,000
Caah will be required for: Facility:
Line 8—Land____________________________ 135, 000 135,000 .
Line 9—Building_________________________ 750, 000 187, 500 187, 500 375,000
Line 10—Equipment............................................ 150,000 150,000
Line 11—Architectural fees------------------------ 55, 000 15,000 10,000 10,000 10,000 10,000
Line 12—Contingency______________ ______ 50,000 50, 000
Line 13—Total facility cost.............................. I, 140, 000 150, 000 10, 000 197, 500 197, 500 585, 000
Line 14—Starting-up cost_________________ 147, 300 40, SOO 10, 200 15, 200 25,200 55, 800
Line 15—Interest payments............................... 29, 400 1, 800 1,900 4,300 6,000 15,400
Line 16—Total caah required______________ 1, 316, 700 192,700 22, 100 217, 000 228, 700 656,200
Line 17—Cash increase (decrease) during
period------------------ ---------------------------- 84,800 8,800 12,900 55,500 (66, 200) 73,800
Line 18—Add: Caah at beginning of period__ 8,800 21, 700 77,200 11,000
Line 19—Cash at end of period____________ 84,800 21,700 77,200 11,000 84, BOO
Line 20—Working capital. (See notes.).......... 168, 800
Note.—All figure* rounded up to the nearest *100

Notes Appended to Schedule I

(Draft of October 8, 1962) Schedule of Anticipated Sources of Cash and Budgeted Capital
Requirements During the Preoperating Period (Center Scheduled to Open January 1, 1964)

Cash Will Be Provided by:
Line I—Loans From Health and Welfare Funds
The trustees of the retail clerks’ health and wel­
fare fund passed a resolution to lend the CHF
$300,000 for the purpose of constructing and de­
veloping the health center. The trustees of the
meat cutters’ health and welfare fund voted to lend
CHF $200,000.
Line 2—Assistance From Union Eye Care
Center
One of the objectives of the Union Eye Care
Center was the development of additional health
services for its members. Consistent with this ob­
jective, the Union Eye Care Center subsidized the
cost of exploring the feasibility of organizing a
prepaid direct-service medical care program in
Cleveland. It subsequently also allocated money
toward planning such a program. For the 2 years
ending June 30, 1V63, assistance from the Union
Eye Care Center would amount to an estimated
$51,500.
Line 3—Contributions From Sponsoring Unions
The consultants had been informed that discus­
sions were held in several meetings of CHF board
of trustees regarding the possibility of securing
contributions from the participating unions. Thus
far (October 1962) the meat cutters’ union had
contributed $2,500, the retail clerks’ union, $1,000,
toward this fund. In informal discussions with
several CHF board members, the consultants sug­
gested that the goal of raising $100,000 from the
participating unions be placed on the agenda of an
early board meeting.
Line 4—Individual Sponsoring Memberships
Subject to the approval of the board of trustees
of CHF, it is contemplated that during the fall of
1962 and early 1963, a campaign would be con­
ducted among the members of the participating
unions for individual sponsorship of the health
center building fund. The purpose of this cam­
paign would be to focus the potential enrollees'
attention on the developments underway. Experi­
ences elsewhere had indicated that such a drive, if
properly conducted, would provide an excellent
basis for the subsequent enrollment campaign.
(Such a drive gives the union members an op­
portunity to identify with the program, and makes
for a better educated membership.) It was tenta­
tively recommended that the sponsorship fee be
$10 per family and that the goal be 10,000 sponsors
by mid-1963.
Line 5—Commercial Loans
It was hoped that the commercial mortgage loan
could be limited to $650,000. On the basis of dis­
cussions with several potential lenders, it appeared
reasonably certain that a 20-year loan could be
secured at an interest rate that probably would
range between 5% and 5% percent depending on
circumstances at the time the loan was negotiated.
Line 6—Others
This line is reserved for miscellaneous sources of
funds such as possible grants, etc.
Line 7—Total Cash Provided
Total of lines 1 through 5.
As shown in line 20, additional cash would be
required to provide a sound base for the launching
and operation of this project.
Cash Will Be Required for:
Facility
Line 8—Land
The land under consideration at the time could
be obtained for $135,000. The architects had stated
that the land was suitable for the construction of
the contemplated health center. (See ch. VIII.)
Its proximity to the University Circle also made it
a desirable location. The purchase of the land
would be dependent on the approval of the Uni­
versity Circle Foundation. For purposes of cost
projection, it was assumed that if this land proved
not to be available, another suitable site could be
obtained for the same price.
Line 9—Building
An estimate of $750,000 was based on the as­
sumptions that:
1. The facilities necessary for the health center
would require 25,000 square feet, and
2. the building could be constructed for $30 per
square foot, as estimated by the architects.
Line 19—Equipment
The preliminary estimate of $150/100 was based
on the cost of equipment in similar projects. De­
tailed evaluation of this estimate would be made
in the future. (See also line 14.3.)
Line 11—Architectural Fees
The estimate of $55,000 was based on a minimum
schedule of the State architectural society.
Line 12—Contingency
The size of the project, the many assumptions
that had to be made to arrive at some of the esti­
mates, and the possibility of excess in some ex­
penses indicated that it would be prudent to pro­
vide a contingency fund of $50,000.
Line 13—Total Facility Cost
Lines 8 through 12.
Line 14—Starting-up Cost
This includes:
1. Planning expenses from June 1961 to January
1, 1964, the projected date for opening the
center;
2. Expenses for operating personnel required
prior to the date of opening; and
3. Other operating expenses required prior to
opening date, including supplies and equip­
ment not covered in line 10. Items of equip­
ment entered in this line were not to be
capitalized (see line 10) because they had a
small unit value and a short useful life. Pur­
chase of such items prior to the opening date
of the center would be reflected in preoperat­
ing expense; purchase of such items after the
opening date would be charged to the period
in which the specific purchase was made.
Line 75—interest Payments
The assumptions made in connection with this
line were that:
1. Interest rate on the loans from the health and
welfare funds would be 4% percent.
2. Interest rate on the commercial loan would be
5% percent
3. Interest would be paid quarterly.
 4. No payments would be made on the principals
of loans obtained from health and welfare
funds until July 1,1965,18 months after the
scheduled opening of the center. These loans
were scheduled to be repaid within 20 years
in the following manner: Five annual pay­
ments of 2 percent of the total face value of
the loans would be made commencing July 1,
1965, and 15 annual payments of 6 percent
each thereafter.
5. No principal payments would be made on the
commercial loan until January 1,1965,1 year
after the scheduled opening of the center.
This loan would be repaid in 20 equal annual
amounts of 5 percent each.
Line 16—Total Cash Required
Total of lines 13 through 15.
Line 17—Cash Increase (Decrease) During
Period
This amount, obtained by deducting line 16 from
line 7, shows the cash balance for the period.
Line 18—Add: Cash at Beginning of Period
SCHEDULE II.—Projection of revenue and expense
* commencing with scheduled opening of center on Jan. 1,1964
[Draft of Oct 4, IMS]
Line 19—Cash at End of Period
On the basis of the preceding calculations, it was
estimated that $84300 would be available on Jan­
uary 1, 1964, the scheduled date for opening the
center.
Line 20—Working Capital
The amount shown in this line is equivalent to
the advance estimate for future operating budget
for 1 month, when the program would have at­
tained its full complement of members and its full
complement of staff to serve those members. It was
estimated that the average budgeted needs per
member per month during the initial stages of the
program would amount to $7.56. This figure multi­
plied by the anticipated number of members (an
average of 22,500 per month) is approximately
$168,800. It appeared to be an adequate cash re­
quirement for working capital, provided that the
membership dues would be prepaid on the first
day of the month in which services were rendered.
To make up this sum, $84,000 would be required in
addition to the surplus of $84,800 shown in line 19.

1M& IMS

First half Second half

PM/PMI PM/PM 1 PM/PM > PM/PM 1

Line 1—Membership 13, 000 17, 000 22, 500 22, 500 ..........
Line 2—Number of physicians—
full-time equivalent________ 12 16________ 21 21
Line 3—Dues revenue__________ $585,000 *7. 50 $765,000 $7. 50 $2, 025, 000 $7. 50 $2, 133, 000 $7. 90
Line 4—Over-the-counter
revenue____ .________________
Line 5—Other revenue.__ ______
Line 6—Subtotal_______________
Expenses:
Line 7—Physicians_________ 102, 000 1. 31 136, 000 1. 33 378,000 1. 40 399,000 1.48
Line 8— Referrals................
Line 9—Hospitalization____ 273, 000 3. 50 357, 000 3. 50 993, 600 3. 68 1, 042, 200 3.86
Line 10—Clinic personnel.... 85,800 1. 10 112,200 1. 10 305, 100 1. 13 313,200 1. 16
Line 11—Administrative
personnel______________
Line 12—Supplies, materials.
Line 13—Maintenance,
repairs----- ------------ ------ IS, 500 . 25 25,500 .25 67, SOO .25 67,500 .25
Line 14—Taxes, insurance___
Line 15—Subtotal__________ 480, 300 6l 16 630, 700 6. 18 1, 744, 200 6. 46 1, 821, 900 6. 75
Line 16—Excess before
operating budget of CHF
and debt service and
depreciation___________ 104, 700 1. 34 134, 300 1. 32 280,800 1. 04 311, 100 1. 15
Line 17—Operating budget
of CHF. 17. (39, 000) (. 50) (51,000) (. 50} (135, 000) (. 50) (135,000) G SO)
Line 18—Debt service______ (30, 800) (■ 39) (30,800) (. 30) (101, 600) (. 37) (99, 200) G 37)
Line 19—Total expenses____ 550, 100 7. 05 712, 500 &98 1, 980, 800 7. 34 2, 056, 100 7.62

8m footnote at end of table.

Schedule IL—Projection of revenue and expentea commencing with scheduled opening of center on Jam 1,
1964—Continued
[Dndt o( Oct. 4.1962|
1044
First hslf
FM/PM 1
Expenses—Continued
Line 20—Net cash from
operations at end of
period________________ . $34, 900 $0. 45
Line 21—Working capital
required______________ . 168, 800 ................
Line 22—Working capital
projected at end of
period___________ ___ . 203,700 ________
’ Per number par man th.
Notes Appended to Schedule II
(Draft of October 9, 1962) Projection of Revenue and Expenses Commencing with Scheduled
Opening of Center on January 1, 1964
Line 1—Membership
In this line is entered the consultants' estimate
of the average number of enrolled members on a
semiannual basis beginning with the anticipated
opening of the center on January 1,1964. The total
economic soundness of the operation of the center
would depend largely on the accuracy of this esti­
mate. The forecast of staff was based on the antic­
ipated medical needs of the enrolled membership.
Since salaries would be the major item of oper­
ating expense in this program, overstaffing would
entail losses that could not be recaptured out of
subsequent income. Understaffing would make it
difficult to meet the service obligations to the mem­
bership, and would be equally undesirable.
Line 2—Number of Physicians—Full-Time
Equivalent
It was then anticipated that three categories of
physicians would provide services in the projected
program:
1. The core of physicians in the center would
form an association and contract with CHF
to provide professional services to the mem­
bers. This core would include providers of
services in the following fields: medicine,
pediatrics, obstetrics gynecology, and sur­
gery. These physicians would be expected to
spend either all or a major portion of their
professional time in the CHF program. They
could have teaching or research appointments
at the University not to exceed one-half of
1044 1966
Swxxid half
FM/PM i PM/PM ' PM/PM i
*52, 500 $0. 52 $44, 200 *0. 16 *76, SOO $0. 28
203, 700 256, 200 ........... .. 300,400
256, 200 300, 400 ________ 377, 300
their time. Their annual compensation would
be based on their background and experience,
and on the proportion of their time spent in
CHF work.
2. Session physicians, in specialities other than
medicine, pediatrics, obstetrics gynecology,
or surgery, whose consultation services would
be required frequently: This category was
expected to include an orthopedist, a derma­
tologist, an otolaryngologist, an ophthal­
mologist, a urologist., and a part-time radi­
ologist. These physicians would not be mem­
bers of the association. They would be at the
center at scheduled times, see patients by ap­
pointment, and probably receive compensa­
tion on a session basis.
3. Physicians in other specialities to whom re­
ferrals would be made infrequently would be
expected to see CHF patients in their private
offices. It was anticipated that most such re­
ferrals would be to members of the faculty
of the University medical school. Their com­
pensation probably would be on a fee-for-
service basis.
Since it was difficult more than a year in ad­
vance of the center’s opening to estimate the num­
ber of doctors who would be required in each of
the three categories, this forecast of number of
physicians was based on total doctors in all cate­
gories on a full-time equivalent basis. The tenta­
tive estimate of one full-time physician equivalent
for 1,070 members was made after reviewing the
experience of other plans.
Line A—Dues
It was estimated that an income of $7.50 per
person per month would be required to finance the
range of services to be provided to the member­
ship. These services would include office care, hos­
pital care, and professional services in the hos­
pital. Out-patient drugs and physicians’ visits in
the home would be provided at moderate fee for
service charges.
Most of the participating unions, under the
collective-bargaining agreements now in force,
would not be able to prepay $7.50 per person per
month. In order to supplement the prepaid
amount, charges would be made for certain serv­
ices. Such charges would be moderate to insure
that they would not constitute a barrier to service,
arid would be designed to apply to the largest
number of persons utilizing the services. For pur­
poses of the forecast, $7.50 per member per month
in dues was shown in this line, and line 4 was left,
blank until it could be learned how far the dues
would fall short of $7.50 per member per month.
After that amount could be determined, line 4
would show the revenue that would be generated
from over-the-counter charges. The total of lines
3 and 4 would thus ultimately equal $7.50.
If economic patterns were to continue, an an­
nual increase of 5 percent in the cost of providing
services could be anticipated. For purposes of this
forecast, it was assumed that $7.50 per member
per month would be adequate until 1966. A 5-per­
cent increase is shown for 1966.
Line 4—Over-the-Counter Revenue
See line 3.
Line 5—Other Revenue
Net revenue from sale of outpatient drugs (as­
suming that a pharmacy would be established in
the center) and revenue from house calls would be
shown in this line.
Line 6—Subtotal
This subtotal represents the total revenue from
operations.
Line 7—Physicians
Expenses for physicians during the first year
were estimated at an average of $17,000 per full-
time equivalent physician. It also was assumed
that the average annual expense per full-time
physician equivalent would increase to $18,000 in
1965 and to $19,000 in 1966.
Line S—Referrals
See notes on line 2 and line 7. Expenses for re­
ferrals and session physicians ultimately would be
taken out of line 7 and included in line 8.
Line S—Hospitalization
In estimating the budget for hospitalization,
many factors were taken into consideration, in­
cluding the estimated age of the prospective mem­
bership, the rate of hospital admissions, the length
of stay per admission, and the per diem cost of
hospital services in the community. Information
on the per diem cost, of hospital services in Cleve­
land was available through the 1961 study by the
U.S. Public Health Service, and through data sup­
plied by the meat cutters’ union and the Western
Reserve University Hospitals. Some information
was available on the age distribution of the mem­
bership in two of the seven participating unions.
Since membership in CHF would be on a volun­
tary enrollment basis, it was difficult to perdict,
even in the case of these two unions, what the age
composition of persons selecting CHF would be.
Information was available on the rate of admis­
sions and length of stay of similar direct-service
programs, such as the Health Insurance Plan of
Greater New York and the Kaiser Foundation
Health Plan. It was assumed that the rate of hos­
pital utilization would not exceed three-fourths of
a day per member per year.
Line 10—Clinic Personnel, and
Line 11—-Administrative Personnel
The estimate in these two lines was based on a
list of required personnel, which had been com­
piled by the consultants, and upon a discussion
with administrative personnel at the Western Re­
serve University Hospitals regarding rates of pay
in the Cleveland area. An increase of 3 percent
per year in cost of personnel was indicated for
1965 and 1966. Anticipating that current trends
would continue, an annual increase of 5 percent
for personnel and all other expenses was projected
thereafter. To offset this increase, a commensurate
increase in income from members would have to
take place beginning with 1966.
Line 12—Supplies, Materials,
Line 13—Maintenance and Repairs, and
Line 14—Taxes, Insurance
The amounts anticipated for these bracketed
lines were based on estimates made by the execu­
tive director of CHF; they appear to be consistent
with experiences in other plans.
Line 15—Subtotal of lines 7 through 14 represents
the operating expenses of the center,
Line 16—Excess Before Operating Budget of
CHF and Debt Service and Depreciation, and
Line 17—Operating Budget of the CHF
CHF would carry out the following functions:
1. Promotion of membership;
2. Negotiations of contracts with membership
groups;
3. Negotiations of contracts with providers of
service;
4. Supervision of contracts with providers of
service;
5. Expansion of scope of CHF services after a
preliminary period of operation to provide
for care not covered during the initial stages
of the program (dental care, home care, etc.);
and
K. Further expansion of CHF program to
provide care to new members not covered in
the initial center.
It was deemed unlikely that the membership of
the initial health center would be able to finance
all these activities. It was anticipated that adequate
financing to cover the sixth item would be partic­
ularly difficult to obtain from the membership of
the initial group. It was assumed that 50 cents per
member per month (approximately 7 percent)
would be allocated to this function. During the
initial years of development of CHF, other funds
would have to be secured to augment this budget.
It was anticipated that, as additional centers were
developed and the membership of CHF grew, a
larger membership base would be available to sup­
port the activities of CHF.
Line 18—Debt Service
The assumptions made in developing the figures
in this line were that:
1. Interest on the loan from the health and wel­
fare funds would be4% percent;
2. Repayment of principal on the loan from the
health and welfare funds would commence
July 1,1965, and would consist of five annual
payments of 2 percent each, followed by 15
annual payments of 6 percent each;
3. Interest on the commercial loan would be
5% percent; and
4. Repayment of principal on the commercial
loan would be in 20 annual payments of 5 per­
cent each, beginning January 1,1965.
Discussion of the Method
Two major methodologic points are noteworthy
in these schedules and their appended notes:
1. Their effectiveness as tools for planning and
control, when subjected to continuous review
and revision, and
2. the use of the membership base as the com­
mon denominator for items of revenue and
items of expense. (Seeschedule II.)
Review and Revision.—The significance of the
method would have been lost if the schedules and
notes had not been revised at regular intervals. The
notes reflect the total philosophy and purpose of
the health plan. As initially prepared (and as
presented above) they were a statement of the
planners’ comprehension of the program at the
specific time the budget was drawn up. During its
first year, however, the program did not operate
as was envisioned in 1962 (although at no time
during that year did it operate at a loss). Un­
predictable developments altered the course of
events.
Frequent revision of schedule II forced the
planners to reconcile changes introduced by ex­
perience with the general objectives of the pro­
gram—and to explain the reasons for each change.
The thorough consideration that was entailed in
revision led to clarification of such complex inter­
relationships as those between members and physi­
cians, between members and other personnel, and
between all the people involved in the program
(providers and recipients of care) and the physical
facilities. In addition, continuous revision led to
the discovery of certain errors in the initial projec­
tion of revenue and expenses. The following il­
lustrations demonstrate the specific value of re­
view and revision:
1. When the opening date of the center was
postponed from January 1, 1964, to July 1,
1964, many of the line items in schedule I
were changed. Interpretation of these changes
forced the planners to reappraise the total
preoperating budget.
2. (a) Although the schedules were drawn up
(in October 1962) some 4 months after the
decision had been made that CHF would not
have an integral relation to the Western Re­
serve University School of Medicine, plan­
 ning still was influenced in certain respects
by considerations that had developed during
the discussions with representatives of the
medical school.
For instance, the estimate for average annual
income of physicians on a full-time basis that was
entered into schedule II was $17,000. with a range
of $14,000 to $24,000. This estimate had developed
during the period of discussion with the faculty
members who had taken the position that the in­
come of doctors in CHF should be somewhat more
than the average for full-time faculty of the medi­
cal school but less than the average for doctors in
solo practice in the community.
It had been anticipated during those discussions
that the CHF doctors would be made up largely of
young physicians who had recently completed their
specialty training. After it was concluded that the
health plan would not be affiliated with the Univer­
sity, it became clear that the doctors of the medical
group must be selected from among physicians
who were already well established in the commu­
nity and who had firm hospital connections. (See
ch. VI.) Although this change in the contemplated
initial character of the medical group did not im­
ply a substantial alteration in the estimated range
of physicians’ income during the early years of
operation, it did mean that the starting income for
many of the doctors must be at the upper end of
that range. The shift would produce a much higher
average and total cost than had been anticipated.
As was shown in chapter VI, the impact of non­
affiliation on physician recruitment was a major
topic at the June 1962 meeting of the consultants
with the CHF board. Nonetheless, this aspect of
the change was not reflected in the forecast of ex­
penses compiled in October 1962. Review of the
notes on physician expenses enabled the planners
to detect, analyze. and correct this error in projec­
tion.
(b) Nonaffiliation with the medical school
also made necessary a change in the starting
number of physicians in the medical group
and in its specialty structure. When it was
supposed that the medical school would sup­
ply certain specialty services on a session
basis, and consultation in other specialties by
referral, an initial CHF staff of 12 full-time
equivalent doctors was held to be adequate.
The October 1962 estimate for physician ex­
pense in schedule II was based on this projec­
tion. Without University affiliation, the suc­
cess of the program would be enhanced by a
greater degree of professional self-sufficiency
in the medical group. The actual average
number of physicians during the first year
of operation was approximately 16 instead of
12 as initially estimated in the 1962 forecast.
Periodic review of the notes brought the in­
consistency to the fore., and facilitated plan­
ning for its correction.
3. Closely related to these two problems in fore­
casting was another which developed after the
center was in operation, and which aggra­
vated the difficulties in financial control. It
had been forecast in October 1962 (schedule
II, line 1) that the average membership dur­
ing the first 6 months of the center’s operation
would be 13,000, and during the second 6
months, 17,000. However, a prolonged strike
by one of the major participating unions radi­
cally altered the enrollment timetable. Mem­
bership during the first 12 months of opera­
tion averaged only 10,000. This reduction in
the membership base, added to the increased
physician expense resulting from nonaffilia­
tion with the medical school, produced a
physician cost which could not be supported
by the prepaid membership as initially fore­
cast. in 1962. Constant, reworking of schedule
II and. its notes was essential to focus atten­
tion on the problems produced by these un­
predictable developments.
4. While changes cited above made the prepaid
income inadequate to cover costs, favorable
factors related in a large measure to the same
set of circumstances helped to offset this in­
adequacy :
(a) Many of the physicians in the initial
group had been in private practice in Cleve­
land, and many of their patients followed
them to the CHF center where they continued
to pay on a fee-for-service basis. During the
first year the income from these patients was
equivalent to approximately one-third of the
total physician expense; (-) several of the
participating unions contracted with CHF to
provide complete physical examinations for
their members who were not eligible to enroll
in the program because they did not reside
within the service area. These contracts pro­
vided a further source of revenue that had
not been expected. Adjustment of relation­
ships between these revenue-producing activi­
 ties and the total program wax made possible
by review and revision of schedule II and its
notes.
Membership Base: The Common Denominator
of Revenue and Cost.—In schedule II, each line
item of revenue and expense was expressed in two
ways: in gross dollars, and as an amount per mem­
ber per month (PM/PM). The latter term served
as a common denominator which permitted the
consultants to relate the operation of the program
to the forecast of prepaid members. It proved to
be a second important tool in maintaining the dy­
namic equilibrium of the program.
In applying this concept it was not overlooked
that the costs of serving the individual members of
a prepaid health plan would necessarily differ
through a wide range, since their medical needs
would vary according to age, sex, and other popu­
lation characteristics. Nor would all members con­
tribute equally to revenue. The rate structures of
most prepaid plans are designed to derive a higher
per capita income from adults than from children.
Despite these variations, however, in the opinion
of the consultants the membership base remains
the most logical common denominator for plan­
ning and regulating a prepaid program. Such al­
ternatives as the costs of an office visit, a home
call, or a patient day in the hospital have proved
inadequate, unwieldy, or both.
Relating all items of income and expense to a
per-member-per-month basis continuously focused
the attention of those who were policymakers for
the project on the primary purpose of the pro­
gram—that of organizing medical services to meet
the needs of the prepaid membership. It was this
element in the planning method, more than any
other single factor, that provided the basis for im­
portant policy decisions.
Under the contemplated contractual relation­
ship between the board and the medical group, the
latter was to assume responsibility not only for
professional services and standards but also for the
fiscal affairs related to the physicians’ cost. It was
planned that during the initial phases of the opera­
ting program, cost reimbursement would be used
to compensate the medical group, but that, once
the financial stability of the plan was established,
the relationship would be changed and the medical
group would assume fiscal responsibility for
running its affairs.
Notwithstanding the fact that the experience of
the program during the year beginning July 1,
1964, did not correspond with the forecast made in
1962 as a result of significant shifts that occurred
both in income and expense, the program remained
solvent throughout. Decreases in prepaid income
were offset by a significant fee-for-service income.
Increases in costs of physicians were offset by
hospital costs that were lower than initially
anticipated.
Analysis of the financial affairs of the program
based on the revision of schedule II made it clear,
however, that it would be unwise to develop a fixed
method of compensating the medical group until
such time as the program became self-sufficient on
the basis of its prepaid membership. It was agreed
by the board and the medical group that a perma­
nent framework of economic relationship between
the two parties, established at a time when it was
necessary to rely to a substantial degree on fee-for-
service income, would distort the primary purpose
of the project.
Continued appraisal disclosed that when the
membership base reached 25,000 a contract with
the medical group based on a fixed capitation
would provide a sound basis for the operation of
the prepaid program. Under the formula agreed
upon, the fee-for-service income (which at the
25,000 member level would be proportionately
small although not necessarily reduced in absolute
amount) would be used to offset the amount of
capitation. Thus, let us suppose that the amount
of fee-for-service income were $5,000; this, when
divided by the base of the membership (25,000)
would yield 20 cents per member per month. If the
capitation fee were $2, the health plan’s obligation
to the medical group would then be $1.80 for that
particular month. Under this kind of arrangement,
the medical group would be assured an income
related to the prepaid membership and would not
be favorably or adversely affected by the amount
of income from fee-for-service practice.
In this manner, the schedule, and particularly
the column relating all items of income and expense
to the membership base, focused the continued at­
tention of the board and the medical group alike
on membership growth and services to the
membership.
Use of Forecast for Borrowing of Funds
In preparing their projection of revenue and
expenses in October 1962, almost 2 years before
the center actually opened, the consultants had in
mind not only its value as a tool for internal plan­
ning and control but also its effectiveness in the
borrowing of funds. This effectiveness was clearly
proved.
The planning document satisfied the labor and
the management trustees of two welfare funds. It
may be pointed out that this was not a rigorous test
inasmuch as the trustees of these funds did not
look upon the project as a financial investment;
they were primarily concerned with the develop­
ment of new medical services for their members.
Nevertheless, as fiduciaries they had to satisfy
themselves and their attorneys that the investment
would be sound.
A more stringent proof of the document’s value
as a fund-raising tool was that, on the basis of this
forecast, a bank agreed to lend the project $650,000.
The bank’s lending officers, once they understood
the relationships of the membership of the pro­
posed health plan, the program, and the building,
were particularly impressed with the potential
ability of the operating plan to pay its debts. In
their view, the fact that the membership would be
drawn from groups of employees within the com­
munity, representing diverse enterprises including
production and services, was an important factor
contributing to the anticipated financial stability
and repayment potential. In early 1967, the same
bank expressed an interest in financing the con­
struction of a second center.
Summary and Comment
The October 1962 projections and their review
and revision were invaluable. They served as a con­
stant reminder of the need to consider ail factors
and their interaction in light of the basic objectives
of the program.
 Chapter VIII
BUILDING THE CENTER
In preparing for the selection of architects for
the projected medical center, the consultants ob­
tained from local hospital and medical advisors a
list of five architectural firms, including the lead­
ing hospital designers of the area. During the sum­
mer of 1962, the consultants and the president, of
the board of trustees of CHF interviewed repre­
sentatives of all five firms.
Interviewing Prospective Architects
The interviews were conducted according to a
uniform plan. By comparing the architects’ re­
sponses to specific statements and questions, the
consultants hoped to ascertain the degree to which
each architect comprehended the distinguishing
qualities and purposes of the project:
1. The consultants stated that, in their relation­
ship with the architects, they would act ex­
clusively as representatives of the owners of
the projected center.
The importance of this statement should be em­
phasized. It derives from the following: Loaning
agencies, when they are determining the amount
that they will lend toward construction of a build­
ing, take into consideration its anticipated total
value. Architects’ fees are a part, of this total value.
The amount paid to consultants in remuneration
for time spent with the architects in planning a
building may be included in the architects’ fees.
This method is sometimes considered expedient
when a maximum loan must be obtained. It was
felt, however, that any departure by the consult­
ants from their role as representatives exclusively
of the owners might lead to a conflict of interest
that could result, in distortion of the program.
2 .At each interview, the architects first were
given a uniform, oral, description of the pro­
posed center. In so doing, they stressed that
the building would be owned by the con­
sumers of medical care (the subscribers of the
projected health plan).
The center would, in this respect, differ from
the usual medical facility which is owned (or
leased) by the providers of medical care (the phy­
sicians or a medical institution). The physicians
of the center were to be under contract, with a
foundation whose board of directors would be
composed of representatives of the consumers and
of other community leaders to provide care to the
members of the owning group. The subscriber­
owners would expect to find the center warmly
attractive and conducive to securing medical serv­
ices in a convenient, dignified manner.
The design must be consonant with the develop­
ment of a personal-professional relationship be­
tween patients and doctors and between ancillary
personnel. As many services as possible should be
available under one roof. Because financial sup­
port would be limited, economy must be observed
in construction, and the completed building must
be such as to permit economical operation.
3. The architects were asked four questions:
(a) What would be your method of devel­
oping a building for this program ? (&) Who,
in your firm, would actually work on plan­
ning and designing this project? (s) What
do you estimate as the cost of the project?
(d) What would be your fee?
One of the five architectural firms was selected
on the basis of its response to the introductory
description of the proposed center and to questions
(a) and (6). With respect to answers to questions
(c) and (<Z), there was little variation among the
responses of the five firms: Rough estimates of the
cost, of construction varied so slightly as to be con­
sidered immaterial, and all firms said that they
would adhere to the minimum fee schedule recom­
mended by the local branch of the American Insti­
tute of Architecture.
The responses to questions (a) and (-), how­
ever, revealed a wide disparity among the various
architects in their comprehension of the basic
nature of the project.
Specifically in response to question (a), the
representatives of three firms stated that their first
concern would be to interview the physicians who
were to practice in the center. The architects of the
other two firms immediately understood that the
members were to be the owners of the projected
building; both recognized the comprehensive
nature of the medical care that was to be provided,
and both felt that the medical consultant and
selected professional advisers would be able to
furnish them with all the information necessary
for planning and construction of the center. This
quick grasp of the unique features of the project,
together with evidence of a desire to work coopera­
tively with the consultants, made choice between
the two firms difficult. Selection was finally made
of the firm whose capacity to perform the task
was enhanced by greater resources and richer
experience.
Further in response to question (a), the selected
firm stated that, in order to carry out their method
of developing a plan for the building, they would
require a full, written statement from the con­
sultants covering details of the character of the
program. This statement was to give information
on:
1. Its philosophy and objectives;
2. Nature and size of the membership to be
served;
3. Characteristics and number of patients ex­
pected to emerge from the membership;
4. Type and scope of services to be provided;
and
5. Types and numbers of professional and other
personnel w ho would provide the services.
The architects also were interested in studying
the physical facilities already in use by compa­
rable programs, such as the Health Insurance Plan
of Greater New York, the Kaiser Foundation
Health Plan in the Western United States, and
others.
In specific response to question (6), the selected
firm stated that the two senior partners of their
organization would develop the plans from con­
cept through final drawings. Otherwise there was
no essential difference between the responses to
question (-) by the two nearest competitors for
selection.
On the basis of the forementioned, the consul­
tants recommended to the board of trustees of
CHF that one of the architectural firms be selected
to design and plan the medical center, and the con­
tract was so awarded. The preliminary architec­
tural work was begun in July 1962. Full contract
was approved by the board of trustees on October
22, 1962.
Consultants’ Description of Project
In accordance with the architects’ request for a
written statement, the consultants prepared a de­
tailed account of the project:
Relationship Between Recipients and Pro­
viders of Service.—The recipients of the medical
services were to be members of a prepaid health
plan which would own the physical facility and
its equipment and employ the administrative and
ancillary personnel. The membership was expected
to comprise approximately 8,000 families (25,000
persons) residing within a geographically defined
area whose boundaries were near enough to Uni­
versity Circle to permit convenient access.
The providers of service were to be physicians
and ancillary personnel. The physicians were to
be members of a professional group who must an­
ticipate the health needs of a population enrolled
in a comprehensive program, assume contractual
responsibility to provide and organize such health
services, and direct the continuous operation of
such comprehensive care.
Relationships Among the Providers of Serv­
ices.—A core of full-time physicians was to be
organized into a medical group with doctors in all
major specialties: Medicine, pediatrics, obstetrics­
gynecology, and general surgery. Their services
would be supplemented by part-time physicians in
certain specialties, who would come to the center
to see patients referred to them by the full-time
doctors. Care in rare specialties would be provided
through referral of individual patients to recog­
nized specialists in the community. Each family
in the membership would have a personal physi­
cian in the department of medicine. Each child in
member families would have a personal pediatri­
cian within the medical group. In addition, the
services of all doctors at the center would be avail­
able to each member through consultation and
referral by his individual physician.
 The income of the physician of the medical
group would not depend upon the volume of the
service he would perform.
Sources of Financing the Construction of the
Physical Facility.—Construction of the center
was to be financed through:
1. Long-term loans from several labor-manage­
ment welfare funds;
2. Outright grants for planning from certain
participating unions;
3. In a modest amount, by sponsorship of a
substantial number of potential members;
and
4. Loans from commercial sources.
Sources of Revenue for Operating Costs of
Program.—The main source of revenue for oper­
ating costs was to be a set prepaid monthly fee
covering membership of each participant in the
health plan.
Scope of Services.—A broadly comprehensive
program of services would be available to members
from the start. This would include care for acute
conditions, continued care for chronic illness,
provision of such preventive care as periodic phys­
ical examinations, vaccination, and other im­
munizing techniques. Social service, public health
nursing, and health education would be provided.
Patients who had special requirements such as re­
habilitation services, psychiatric consultation,
nursing home care, or other services not covered
by prepayment would be referred to community
sources, but responsibility for the long-term ob­
servation and guidance of such patients would
remain with the patient's personal physician
within the medical group. It was anticipated that
after 2 years’ experience in operating the health
plan, dentistry, psychiatry, and organized home
care services would be developed as integral parts
of the comprehensive program.
Organisation of Services.—The building must
provide space for three major types of function:
1. Professional services directly to patients:
The number of physicians planned for each
department was given in detail.
2. Ancillary services: A laboratory must be
available within the center, where ordinary
procedures including electrocardiography
would be performed. For certain less com­
mon procedures, specimens would be drawn
in the center’s laboratory and sent to other
facilities for processing; a few special tech
295-802 O—58------4
niques would require sending the patient to
other laboratories in the community. X-ray
services would be similarly divided between
those provided at the center and those for
which patients would be referred elsewhere.
A pharmacy within the center would use a
formulary in order to achieve economy in
the cost of prescribed drugs. A department of
social service must provide for private con­
sultation. There must be an office where mem­
bers and prospective members would be able
to obtain information on enrollment, eligi­
bility, and coverage; a public health nursing
office, and a health education department
which would arrange lectures and discussions
on health and hygiene among its other in­
formational activities. The extent of physical
therapy to be provided was an open question;
decision as to space and equipment was
deferred.
3. Centralized and administrative functions: A
reception center was to be provided at the
main entrance. An appointment office was to
maintain all doctors’ schedules. It would re­
ceive members’ requests for appointment tele­
phoned from outside the center. It would also
receive calls over telephones installed for this
purpose in each appropriate department with­
in the center. Patients would be invited to use
these telephones to call for the next appoint­
ment with their physicians before leaving the
building after office visits. A medical records
office would be maintained. Office space must
be planned for membership eligibility rec­
ords, central bookkeeping, central telephone
switchboard, and other administrative and
clerical functions. Only a small library for
medical books and journals would be required,
since it was anticipated that the center would
be built within a short distance of the Western
Reserve University Medical Center, which has
one of the outstanding medical libraries in the
country.
After this rough outline of the program and its
space needs had been studied by the architects, they
met with the consultants on numerous occasions to
discuss such preliminary matters as the concept
and philosophy of a center that would house—
and express—the Community Health Foundation;
the construction budget; the size of the building
(ultimately settled at approximately 25,000 square
feet); and the desirable features of a site.
41
 Detailed information on these matters, and on
the approach to them, is given by the architects in
their section within this chapter. In addition to
such concerns, it was important that the plans for
the center should obtain the advance approval of
the University Circle Development Foundation,
which was received in December 1N62. The area of
Designing the Community Health Foundation Center
By Robert A. Little and George F. Dalton
Architects, Cleveland, Ohio
WHAT IS DESIGN 7
The successful design of anything depends on
two activities: analysis and synthesis. To construct
a toothbrush, a chair, a health center building, or
a city, the designer must first analyze to the last
detail the needs that are to be fulfilled by the object
he is designing. Second, he must synthesize the ful­
fillment of these needs into the form that the object
will take. The success of the result depends on the
degrees to which the processes of analysis and syn­
thesis are carried. This maxim is so deceptively
simple in appearance, and is so often overlooked,
that it is well to consider its application to a famil­
iar, uncomplicated object; for example, the design
of a chair to be used by a physician in his office:
First, Analysis
The designer must analyze the need that the
chair is to fulfill in terms that are practical as well
as esthetic, and above all, comprehensive. What is
the chair to be used for—for working, reading,
writing, sitting back, and relaxing? Should it roll
on the floor, on a carpet? Should it be light to lift,
heavy to stay in place? Should it be constructed so
that it can be stacked for storage? Should it be
easy to clean, able to take hard usage, easy to repair
or refinish? Should it be bright colored, sombre?
Should it look conservative and leisurely, or effi­
cient and clinical ? What should it cost ? How many
will be produced ? The process of design analysis
goes on until every requirement for this chair is
DESIGN OF THE COMMUNITY HEALTH FOUNDATION CENTER
The design of the Community Health Founda­
tion Center went through the logical, sequential
processes of analysis and synthesis outlined above.
Its eventual degree of success as a building would
depend on how well the processes were thought
through by all persons involved. A review of these
the site selected for the center was 40,000 square
feet. The price of the land was $140,000.
Because the contribution of the architects se­
lected was highly pertinent to the development of
plans of this nature, they were invited to state their
approach to the problem that was presented to
them by the consultants:
understood, evaluated, and stored in the mind of
the designer.
Second, Synthesis
In the full awareness of all requirements, the de­
signer then lets his creative processes take over, to
bring these multifarious needs together in his
thinking, and thus produce a design for a chair.
We will consider the human being who will sit in
the chair—his size, weight, motions as he reads or
writes or turns to talk with his patient. The de­
signer will consider the performance, cost, weight,
and appearance of dozens of materials and many
methods with which to build the chair. He will
try scores of shapes of back and arms, legs and
casters; he will sketch, detail, measure, test, sam­
ple, and weigh them; estimate their cost; visualize
them in color, texture, line, and form. He will
eventually arrive at his design for the chair. The
design will be his synthesis of the requirements
plus his knowledge of ways to meet the require­
ments, plus his creative ability.
The degrees of intelligence, intensity, and per­
sistence that enter into the design analysis will de­
termine whether an object or a building can hope
to be successful. The degrees of imagination, com­
prehensiveness, and taste expressed in the design
synthesis will determine whether the object or
building design will be successful.
processes may be of value for future projects of a
similar nature.
Analysis, Step 1: The Aims, or What Do We
Want To Do?
The consultants presented to us, as architects, a
partly written, partly oral, but very clear general
description of the broad needs and purposes of the
building. They stated that the center was to provide
health care for a group of 8,000 working men and
their families, approximately 29,000 people—care
of the highest quality, for the healthy as well as
the sick; care that was human, warm, personal,
and that provided the attention of the family
physician backed by the technical knowledge of
specialists. The building must be a smoothly work­
ing,'highly functional organism; but it would exist
only to serve people and must therefore be inviting
to the patient, comfortable for the employee, and
pleasant for the staff.
The consultants also presented us with their
considered views on budget, approximate location
desired, types of persons to be involved in the
health program, and some of their major concepts
on how the facility should operate. In describing
the basic purposes and functions, they suggested
the spirit and character of the architecture.
Analysis, Step 2: Detailed Program, or What
Spaces Do We Need To Do It?
In a series of meetings over several months, the
consultants and architects jointly worked out a
detailed list of the number and types of spaces,
rooms, laboratories, waiting areas, offices, toilets,
etc,, that would be required. These meetings were
accompanied by laborious outside research and
questioning. The resulting Program, of Needs was
then written by the architects, approved by the
consultants, and accepted jointly as the basis of
planning. To show the amount of information re­
quired by architects if they are to construct an
intelligent design, a copy of this document follows:
TOTAL PATIENTS
450
PHYSICIAN VISITS
50
MEDICINE PEDIATRICS
1 1
OTHER SPECIALTIES
{OS, GNY.. ETC.)
IM 100 100
<OP 360)
Program of Needs
1. Expected patient totals and distribution:
The total population to be served numbers ap­
proximately 25,000 persons. It is understood,
however, that as family size and age groups become
known the program needs may be somewhat altered
with respect to total size, and with respect to age
distribution within the population to be served.
Flexibility with respect to the affected figures is to
be borne in mind throughout all stages of design.
It is anticipated that about 450 patients will be
seen daily, accompanied by about 250 additional
persons. Below is a distribution breakdown of
these 450 patients as they relate to various depart­
ments and possible referrals to other departments.
Of the 250 guests, it is estimated that 100 will go
to pediatrics, and 150 will go to other scattered
areas.
2. Waiting facilities:
(a) Medicine, 18 chairs; (5) pediatrics, 20
chairs, one room for well and one for sick; (c)
other specialties, 15 chairs; (d) laboratory and
X-ray, 20 chairs; (e) pharmacy, 12 chairs.
These are anticipated maximum figures based
on a 7 hour day and on average lengths of visits:
(a) Medicine, 20 minutes; (ft) pediatrics, 12
minutes; (c) other specialties, 15 minutes.
3. Reception facilities:
(a) Central, one receptionist to direct all per­
sons to a specific department; (&) medicine; (c)
pediatrics; (d) other specialties (one girl in
each department to handle patients and phone
calls); (s) laboratory and X-ray.
ANCILLARY FACILITIES
70 LABORATORIES, X-RAY,
PHARMACY, ETC.
LABORATORY I X-fiAY PHARMACY PHYSICAL THERAPY.
INJECTIONS,
SOCIAL SERVICE
SO 25 15
70 *-»0
 There also will be waiting space requirements,
but without receptionists at the pharmacy and at
the business office.
4. Number of employees:
(a) Reception, five (one central and four
local); (ft) central appointment, three (possibly
four); (<?) P.B.X., one; (d) medical records,
two clerks (no desks), three typists, one librar­
ian; (s) business office, one administrator (in
office), one secretary, one business manager (in
office), five clerks; (/) laboratory, five tech­
nicians, one aide; (g) central supply, two; (A)
X-ray, two and one-half technicians; (i) phar­
macy, two pharmacists, 2 clerks; (;) physical
therapy, one; (&) nursing staff (medicine), one
nurse, three medical assistants; (?) nursing
staff (pediatrics), one nurse, two medical assist­
ants; (m) nursing staff (other), two nurses,
two medical assistants; (n) janitorial, one jan­
itor (day man), two cleaning people (after
hours); (o) social services, one social worker,
one public health nurse, one secretary.
5. Doctors:
(a) Medicine, 10 full-time physicians (in­
cluding dermatology and allergy); anticipated
that only eight will be present at any one time
although 10 rooms must be provided, one for
medical director of entire facility; (ft) pedi­
atrics, five full-time physicians; (s) obstetrics
and gynecology, two full-time physicians; (d)
general surgery, two full-time surgeons; (s)
orthopedics, two-thirds full-time person; (/)
urology, one-third full-time person.
6. Departments:
(а) Medicine, 10 consultation rooms—two to
be the office of the medical director, large
enough for five or six chairs. Fifteen examina­
tion rooms—including two special-purpose
rooms;
(б) pediatrics, five consultation rooms, eight
examination rooms—possibly ninth room for
injections;
(s) other specialists: (1) Obstetrics and
gynecology, two consultation rooms, three
examination rooms; (2) general surgery,
two consultation rooms, three examination
rooms, one minor surgery room; (8) ortho­
pedics and urology—area close to minor surgery
and X-ray, one consultation room, two treat­
ment rooms; (4) E.N.T., one consultation room,
two treatment rooms; (5) eye, one consultation
room, two treatment rooms;
(d) ancillary services: (1) E.K.G., one room
located near laboratory; (2) physical therapy,
small unit possibly with two or three treatment
cubicles and minimum exercise area; (3) lab­
oratory, about 300 square feet of area; (4) cen­
tral supply, centra] sterilizing of all instru­
ments, etc.; (5) pharmacy, formulary size; (6)
X-ray, two radiographic rooms, darkroom, light
room, radiologist’s office, film storage area, and
technician's space; (?) social services, one room;
(8) public health nursing, one room; (9) health
education, one room;
(s) conference room, to handle 20 to 25 peo­
ple and incorporating a small library;
(/) appointment center, central;
(§) medical records, space for possible 25,000
records and 15 percent annual turnover; verti­
cal-file type storage based on six to eight files
per inch;
(A) switchboard;
(i) central eligibility records, card files;
(?) other administrative activities; offices for
administrator, business manager, secretary and
clerks, plus money-collection and waiting areas;
(&) Community Health Foundation offices,
two offices and space for two secretarial per­
sonnel; space may ultimately be used for den­
tistry and might be so placed to perform this
function when needed;
(?) kitchenette and lunchroom, small;
(m) storage, central; about 5,000 square feet.
7. Air conditioning: Entire building to be air
conditioned.
8. Room sizes:
(a) Examination rooms, to house examina­
tion table, treatment stand, small sink, and a
chair; 8- by 10-foot size was suggested and a set
of plans from a previous installation was left
with us; however, it was agreed that this would
be studied considerably before any size was
agreed upon; (ft) consultation rooms, sized to
house doctor plus two to three people; medical
director’s office should be sized to handle a con­
ference with six people.
Not shown in this program of needs are in­
numerable points that came up in oral discussion:
the number of coffee breaks employees will take,
the best height for a child’s drinking fountain,
whether one type of autoclave is better than an­
other, whether a blue ceiling will help quiet a
crying baby, the desired decibel level for the air-
conditioning equipment. Finally, the program is
generally understood, established, and agreed
upon. The most important part of the consultants'
analysis is complete: They have stated their
needs—and the architect hopes he has asked the
right questions!
Analysis, Step 3: Site Study, or Where Shall We
Build?
While the program of needs is being pounded
and argued and reasoned into shape, another an­
alytical activity is taking place: the search for
land. The consultants have decided upon the part
of the city that they consider best to serve the 8,000
families. Now that the architects know the basic
requirements, approximate floor area, and parking
area required, they can recommend a site.
The consultants find several sites within a mile
of the desired location and financially within rea­
son. The design analysts get down to detail: What
are the pertinent zoning boundaries, bus routes,
plans for future freeways, traffic patterns, land
values, nearby hospitals, slum-clearance plans?
Will level or sloping land be better for this build­
ing? How many visitors will come by bus, how
many by automobile ? Will the vibration of heavy
trucks upset a delicate instrument? What about
utilities, type of soil, noise, dust, weather, smog?
From which street will most patients approach the
center? Can you get in and out easily in rush-hour
traffic? Is a prestige location important? Where
will the snow drift? Are there any good trees to
save that would provide shade? Can we get good
north light for the offices ?
The architects visit each site at different times
of day to check these and many other factors. Fi­
nally, they recommend a site and the owner buys
it. An engineer surveys it, locating every physical
factor that could conceivably affect the building:
Contours, trees, legal setbacks, gas, water and elec­
tric lines, sewers, and drainage. We now have a
program and a site. The analysis can conclude, and
the synthesis can begin.
Synthesis, Step 1: Designing an Organism
Buildings are for people. A building is merely
a cloak wrapped around the activities of many
people doing many different things. How do they
move? How many, how fast, how often? In what
directions do they move? Where do they walk,
stand, or sit? What machines and equipment do
they use; how do they use them? Sick and well,
patients and doctors, receivers and givers, the peo­
ple are alive; they are an organism; they are
biology. Their building will be morphology. If we
can construct a flow chart of how people will come
to this building, enter it, use it, and leave it, we
should be able to translate the diagram into a
structure that can be drawn, then built
Figure 1 is a flow chart that was made to show
what this building should do. The building is a
place of exchange between two groups of people:
One group (subscribers to the Community Health
Foundation) comes to receive medical help, the
other (doctors and staff) comes to give that help.
Reading the flow chart, from left to right, we see
people (subscribers) come to the building by car,
bus, taxi, or on foot. They enter, and all must pass
a single control point “C”. Some may be directed
to the pharmacy, the Community Health Founda­
tion office, or administration offices. Along the way,
they may have to wait The building must be
serviced and supplied; various things must, be
delivered and stored.
Most of the subscribers, however, come to see a
doctor or to receive medical help. These continue
past the control point and arrive in the center of
the circle at right. This circle is the key to the
architectural plan that will follow. The subscribers
are now at the hub of a wheel. The doctors are
around the perimeter. The subscriber may move
out from the hub, along any of the spokes, toward
the help he needs. The basic plan is designed to
permit the subscriber to come to the building, enter
the ring, check at the control desk, wait if neces­
sary, go to the examining room, and receive medical
attention, with the mathematically calculated
minimum of travel and interference. Meanwhile,
doctors and staff can communicate around the ring
without crossing the traffic lines of the subscribers.
Thus, the building plan expresses the basic func­
tion of the center, which is to provide an ideal
relationship between the maximum ease of opera­
tion, privacy, and comfort, for the subscriber, and
economy, convenience, and efficiency of the staff.
In order to translate this ideal into a structure
on a piece of flat land at the corner of two streets
in Cleveland, we must set aside the organism for a
while and consider these two streets and the site as
a whole.
Synthesis, Step 2: Factors of the Site
A building design grows from the inside out, but
also from the outside in. Certain aspects of a build­
ing's form are determined by what happens inside;
certain other aspects are conditioned by the site.
Figure 2 shows the site selected for the Community
 Fiauu 1.—Diagram showing flow of truffle through Orriantl Ilrolth Foundation.

Fioubk 2 Site for CHF.

16
Health Foundat ion s center, as seen in a bird's-eye
view from the south, and indicates how some of its
features affected building design.
The land is flat, A major, heavy-traffic avenue
at the right makes that approach too noisy to face
upon, too dangerous for an entrance drive. Yet
the view of the building by approaching motorists
is important: It affects the ease with which the
building can Im* found, and the imprearion that the
building will make on the viewer and its contribu­
tion to the urban scene. The dome in the diagram
represents the conditions of sun and shade for
different, seasons and times of day at this latitude.
These conditions will affect the location of rooms,
position and type of windows, sheltered areas, and
planting. Similar consideration is given to views
from within, noise, winter and summer winds,
neighboring buildings and land, and the appro­
priate visual character for this institution on this
piece of land. Because the site is small, it will Im*
difficult to find adequate parking space.
I'invHK a.- KynthrnlH of building and »it« of CHF.
Many hours of the designer’s time are given to
weighing, interrelating, exploring, sketching, and
finally synthesizing these factors into a mental
picture of the future building.
Synthesis, Step 3: Organism Plus Site Equals
Basic Plan
The synthesis achieved by joining the organism
and the site. Io the maximum advantage of each,
is indicated in figure 3. People will enter from
the quiet street and go to the center of the site.
On the ground floor they will go first to the control
desk: thence they can pass directly to the adminis­
trative offices or pharmacy. A separate function of
the plan, a dental department, was envisioned at
this early stage as completing the ground floor (as
will ln> noted later, provision was made during
construction for a possible alternate use of this
area). Services and deliveries will come from the
roar (indicated by the truck).
But how can we produce the ideal wheel arrange­
ment, with sulwcriljers entering at the hub, doctors
and staff working from the rim? If we put this on
the ground, subscribes going toward the huh must
interrupt communications among the staff around
the rim. By putting it up in flu
* air, we can bring
wutacribera into the huh from below, and the pro­
fessional offices and corridor can encircle the wait­
ing space.
This ring arrangement also provides flexibility
in allotment of space to the various specialties:
The ancillary services may be grouped along one
side: the major specialties, around three sides of
a horseshoe, leaving space toward the end of the
third side for special-purpose treatment rooms. If
one specialty proves to require more space than
foreseen, it can expand around the ring while ad­
jacent departments contract.
Raising the wheel will also leave space beneath
for parking. Thus the l>asic architectural idea will
provide a simple solution to three fundamental
problems: Separation of patient from professional
traffic, parking, and flexibility of space.
Synthetic, Step 4: Basic Plan Become
*
Building Form
After the basic concept has liven established by
the architect, detailed planning begins. Architects
and consultants discuss hundreds of problems of
structure, materials, mechanical and electrical
equipment, lighting, furnishing, colors, finishes,
hardware, planting. The architect directs and co­
ordinates the team of specialists in structural and
mechanical engineering, lighting and equipment,
landscape and interior design. The degree of skill
and effort contributed by each member of the team
determines whether the building will function
properly in all details and whether it will be an
esthetic, visual, and sculptural entity.
The basic plan Ijecomes a building form (fig. 4).
Walls and columns, doors and parking spaces,
planting areas and sculpture begin to locate them­
selves through a sequence of adjustments of space
to function, structure to cost, color to material,
light to shade.
The first floor plan emerges in detail as a long,
narrow block (fig. 5) under the overhanging sec­
ond floor. The building is entered from front or
back (arrows), with easy access from protected
parking between columns under the overhang­
ing second floor (dotted line). Every visitor must
pass the circular reception desk, from which
pharmacy, administrative offices, and dental clinic
are easily readied.
During construction, it became apparent from
the interest that was being expressed in member­
MMU Office
Figure 5.—First floor plan.
ship and from the age-group distribution of the
prospective membership, that it might eventually
prove necessary to put the department of pediat­
rics into the space here allocated to the dental
clinic. If that should prove necessary, the dental
clinic would be housed outside the center. To allow
for later choice between these alternatives, the
area designated “dentistry” in the first floor plan
(fig. 5) was supplied with two sets of plumbing:
A central set to fill the needs of a closely grouped
complex of dental offices, and a peripheral set to
serve pediatric examination and treatment rooms.
Nearest to the visitor at the reception desk are
stairs and elevator to the principal, or second,
floor above (fig. 6). On the second floor, the wheel
FHT FLOOR HJW
 MEDICINE DEFT.

ANCILLARY SERVICE*

matt wa "-an

Figure 6—Second floor plan.

with its essential hub, spokes, and rim has now be­
come a, series of efficient rectangular spaces. The
subscribers have access to these spaces from the
center; the doctors and staff have offices, examin­
ing and treatment rooms, equipment and supply
areas around the rim with unimpeded intercom­
munication along a “professional corridor/’
The central core has four waiting areas, for med­
icine, specialties, pediatrics, and ancillary serv­
ices. Desk and furniture in each waiting area are
of a distinctive, bright color so that subscribers
can be easily directed from the control desk down­
stairs. Each waiting area is controlled by its recep­
tion desk, which is the link between patient and
doctor. In addition, a medical records office, a
snackbar, and staff rooms arc placed on this floor.
In the basement (fig. 7) is an area for the cen­
tral ap|M>intment carousel. Here, all doctors' sched-

Fioube 7.—Basement plan.
ules are kept and all appointments made. In
addition to receiving requests for appointment, by
telephone from outside, the carousel is connected
by an intercommunication system with special ap­
pointment telephones installed for patients' con­
venience in each department, where doctors serve
patients. Thus, patients can make succeeding ap­
pointments immediately on being requested to do
so, without having to traverse traffic lines within
the building. The basement also contains the doc­
Iff
BASEMENT PUN
tors’ library and meeting rooms, public health
nursing, social service, and health education offices,
the central telephone switchboard, the office of the
Community Health Foundation, space for data
processing, storage, and building maintenance.
After repeated study of all details concerning
spaces, people, machines, and materials, final draw­
ings are made, specifications are written, and a
building is built (fig. 8).
 Figure ft.—Air view of CHF from the tvuth.
SYNTHESIS INTO ARCHITECTURE
The final form that a building takes after anal­
ysis and synthesis depends upon the personal view­
point. and artistry of the designer. To put this com­
plex matter most succinctly, the Community
Health Foundation building grew from its needs,
expressed in terms that would fit it to the [>cople
who use and see it (fig. 9).
The building should suggest the dynamics and
humanism of the health care program that it
houses. It. should be a proper participant in its
community and surroundings not an arrogant in­
truder. It should not lie an essay on the latest ex
|>eriment in structural expressionism, or a con­
scious tour de force advertising its architect. It
should lie an organism, closely integrated in func­
tion and in form, and neatly clothed in its protec­
tive skin, like the human organism it serves. Its
appearance should suggest its content and purpose.
In this cose, it should say, as does William Mc­
Vey's sculpture at its entrance, “Care.
**
In summary, in selecting and working with
architects for projects of this type, the following
[mints may well lie lx>rne in mind:
1. The first criterion for selecting an architect,
should lie intellectual and creative ability to
perform the requisite analysis and synthesis.
Experience in this tyjie of laiilding should
be placed second.
L. Architects should be selected for their com­
prehension of the design process as a whole:
Building, interior, furnishings, landscape,
and graphic material.
3. Architects should lie employed as early as
[NMKiblr, certainly *la
fore final selection of
site.
4. Architects can work efficiently with a small
 Figure 9.—The Community Health Foundation (Muthwert view).
group of consultants who know the problem
comprehensively. Discussion with a large
group of doctors and staff would probably
have confused the design process.
ft. Architects in this case could plan efficiently
because a Program of Needs was thoroughly
worked out and written before tlie first sketch
was made. Deficiencies in the final building
(a cramped X-ray department, an undersized
snackbar) resulted from incomplete compre­
hension or inadequate statement of needs.
6. Architects, after receiving detailed require­
ments from the consultants, were permitted
unimpeded use of their analytical, creative,
and esthetic abilities. Consultants com­
mented, contributed, and questioned ex­
haustively, but never tried to restrict, or
direct the architects with respect to design.
It is the client's job to describe what he wants
to do with a building. It is the architect's job to
determine how to do it.
As is evident from the foregoing description,
the architects maintained throughout their rela­
tionship with the consultants continuous com­
munication on all general matters and details
affecting the building of the health center. From
the |>oint of view of the consultants, an important
additional factor contributed to the objectivity of
relationship lietween consultants and architects,
and helped to eliminate possible conflict of inter­
ests. Iliis factor was of particular value inasmuch
as the health program l>eing formulated was
owned by r variety of organizations: The rtm-
xultanfn maintained their role, consistently and
ejrelusirely throughout, ax representatives of the
oimers of the prospective building.
The architects suggested, and the consultants
concurred, that bids for construction be requested
from a limited number of contractors. The archi­
tects then furnished a list of contractors known
to them to lie competent to execute the structure as
planned. The contract was awarded to the lowest
bidder in J uno 1963.
Summary and Comment
Architects were selected from a limited number
of firms whose high qualifications in the field erf
medical facility design were acknowledged in the
community.
Before the consultants interviewed any firm,
they worked out objective criteria for determining
which firm could Ire expected to prove most sensi­
tive to the special nature of thia program. All
interviews were then conducted according to a
uniform plan enabling the consultants to estimate
fulfillment of these criteria.
The most important criterion for selection was
considered to lie comprehension of the program's
philosophy and the relation of this philosophy to
design of the center. The second most important
criterion was held to la> the architectural firm's
ability as demonstrated in previous work.
 The architectural firm selected impressed con­ The objective relationship established by re­
sultants by its approach to the planning and by the stricting the consultants' role to representation
seriousness of its intent as indicated by the full of owners enhanced their effectiveness in the
participation of the two senior partners. planning.
 Chapter IX
LEGAL FRAMEWORK AND
CONTRACTURAL RELATIONSHIPS
It was essential to the success and stability of
the project that each element in the developing
organizational structure foster the basic purposes
of CHF. Fundamental to the attainment of this
goal was establishment of the total undertaking
on a basis of legal documents. The construction of
these documents, and adjustment of interrelation­
ships between their elements, proved to be
intricate matters entailing a wide range of
considerations.
Three basic instruments were developed: The
membership contract, the medical service agree­
ment, and the physicians' partnership agreement.
The membership contract was a statement of the
responsibilities assumed by CHF for the medical
and hospital care of its prepaying members. Since
the board of trustees of CHF was not to engage
in medical practice, it could not directly discharge
those obligations. As stated in the introduction
to the membership contract, "In order to provide
the advantages of organized and planned medical
and hospital services and of group medical prac­
tice, Community Health Foundation operates on
a direct-service, rather than an indemnity, basis.
To this end, Community Health Foundation, on
behalf of its members, contracts with physicians
and employs health and administrative personnel
to provide, organize, and arrange the health ser­
vices described in the attached benefit schedule."
Thus, in order to discharge the responsibility
that the trustees were planning to assume under
the membership contract, CHF had to do two
things: It had to obtain the services of physicians
who would be accountable for the rendering of
all health services that would be needed by the
enrolled population; and it had to insure the avail­
ability of ancillary personnel who, with the phy­
sicians, would form a team responsible for the
delivery of the health services. The doctors in turn,
in order to provide a basis that would assure con­
tinuous and consistent service, had to establish
some form of organizational structure that would
warrant their stability as a group.
Most of the problems that arose in working out
the interrelationships among these contracts
stemmed from the necessity to clarify concepts of
responsibility and liability. From the point of view
of the planners' concern for the members, it ap­
peared desirable that CHF and the medical group
assume maximum responsibility for the health
care of the subscribers. But with the best of will,
if the program was to remain viable, it obviously
had to set limits on its degree of liability. The
planners sought to bring these two pointe of view
into working adjustment.
Membership Contract
The contract bet ween the CHF board of trustees
and the enrolled members was the cornerstone upon
which all other documents, and the framework of
the organization as a whole, were to rest. It was
essential that this paper reflect the philosophy of
the organization, that it delineate the organiza­
tion’s obligations to members, and that it indicate
the manner in which those obligations were to be
discharged.
The fundamental characteristic of CHF was its
use of prepaid funds to organize and provide
health care services. Such a blanket responsibility
could not be undertaken without specifying the
manner in which those benefits were to be rendered.
The membership contract must therefore state in
detail the forms of care that would be organized,
who would discharge them, where they would be
given, and how members could obtain them not
only during the usual office hours but also during
evenings, Sundays, and holidays.
To the reader who is not familiar with the basic
difference between this type of prepayment plan
and other forms of health insurance, the inclusion
of such details in a membership contract may ap­
pear unduly restrictive. When the basic distinction
between this prepaid health care program and in­
demnity plans is considered, the necessity for in­
clusion of such particulars becomes clear. In other
forms of health insurance, the enrolled subscribers
are themselves responsible for securing their own
medical care, the insurer limiting its obligation to
payments of moneys, according to prearranged
rules, for those services that have been so secured.
Contracts covering that type of obligation deal
with little more than the dollar limits of the insur­
ing organization’s accountability. A prepaid
group-practice program organizes and renders
services covering the total spectrum of its subscrib­
ers’ needs—from prevention of disease, routine
examinations, and obstetrical service to highly spe­
cialized diagnostic, medical, and surgical pro­
cedures needed by patients with chronic, acute, and
emergency illnesses.
Nor is the definition of responsibilities under a
group practice prepayment plan confined to the
initial framing of its membership contract. Clari­
fication of accountability is the daily concern of
such an organization throughout its existence. The
question, “How can the health needs of this popu­
lation be met most effectively ?** arises constantly.
It is, indeed, this problem to which the total team
devotes its major attention so long as such an
organization retains its vitality and remains true
to its basic objective.
Nevertheless, in the primary framing of the
membership contract the question of responsibil­
ity assumed another dimension: The document
must clearly state that the organization would be
responsible for the health care of its members, yet
appraise and define the extent of the foundation’s
liability, since any of numerous circumstances
might at any time make it impossible to provide all
necessary health services to members.
An example of such a circumstance could be
discriminatory practices by hospitals against phys­
ician members of CHF, which might make it im­
possible to secure hospital beds for sick members.
The particular handicap with respect to hospital
privileges that might, devolve upon a new group
practice organization in Cleveland, as it had in
other cities, is discussed in chapter IV. Although
CHF was assuming responsibility for payment for
hospitalization, and presumed that its physicians
would make a maximum effort at all times to find
a hospital bed when needed for a sick member, it
was essential to the survival of the program that
CHF be protected from litigation if a hospital bed
were not available when needed.
The dilemma of nonavailability of a hospital bed
had been met by other types of insurers in other
ways. Thus, Blue Cross of Northeast Ohio, which
does not assume accountability for provision of
services, makes allowance for this exigency by the
following statement in its membership contract:
If all bcda of every cl&asiflration in all member hospitala
are filled at the time, Blue Cross will refund to the sub­
scriber a sum equal to twice the amount of the annual
subscription fees for this contract, and the subscriber
agrees to accept said sum as liquidated damages in full
and final discharge of the obligations and liabilities of
Blue Cross and of each and all of the member hospitals.
The Michigan Blue Cross contract retains the
following section:
If a member cannot obtain admission to participating
or nonparticipating hospitals, the Service Association
may refund subscription rates to the subscriber in an
amount not to exceed $65.00, for the expenses of nursing
and other servicesand supplies, restricted to the equivalent
of hospital care, made necessary by the illness or injury,
and such refund shall be full satisfaction of all obliga­
tions of the Service Association and the participating hos­
pitals to furnish hospital service hereunder for the dis­
ability for which admission was sought; provided, how­
ever, that If the admission sought is for care of contagious
or epidemic disease, or injury or disease due to enemy
action, the Service Association and the participating hos­
pitals shall be under no obligation or liability hereunder.
Since the Blue Crees organizations were insur­
ing solely against the costs of hospitalization, their
concern related only to the inability of an insured
member to secure a hospital bed through his own
arrangements. Their responsibility was solely fis­
cal; when, because of circumstances beyond the
organization’s control, an insured person was un­
able to secure a specific benefit for which the in­
surer was liable under the contract, the organiza­
tion’s responsibility could be discharged by simple
reimbursement of cash. It was clear to the planners
of CHF that, in a similar event under the group-
practice prepayment program, the responsibility
of such an organization to its members could not be
satisfied by a mere cash refund.
Maximum Effort Concept
The CHF consultants adopted a basic policy for
application to this juncture should it arise, and to
all problem facets of organizational structure,
work rules, and management procedures: In all
*
area of responsibility, maximum effort would be
exercised by the total team to meet the health need*
of the membership. The specific efforts that would
be made were spelled out in the membership con­
tract wherever possible. The specific obligation to
provide hospitalization, for example, was stated
in the membership contract as follows:
B. HOSPITAL CAKE
1. Admission to a Hospital. Physicians arrange for
Hospital admissions of Members whose Illness or injury
requires Hospital services. In the event that admission
to an appropriate Hospital cannot be promptly arranged,
Physician shall continue the care of the Member at home
and in the Medical Office, while Physician and CHF staff
exert their best efforts to arrange for appropriate
hospitalization.
The following statement was included in the sec­
tion on “Exclusions and Limitations
L Circumstances Beyond CHF's Control. In the event
that, due to circumstances not reasonably within the con­
trol of CHF, such as the inability of Physicians to ar­
range admission of a Member to a Hospital • • • neither
CHF, Medical Group nor any Physician shall have any
liability or obligation on account of such delay or such
failure to provide services.
For more detailed study, the membership con­
tract is reproduced in full in appendix 1.
Medical Service Agreement
In planning for a relationship with the physi­
cians that would enhance mutuality of interest be­
tween the physicians and the board, efforts were
directed to the following objectives:
1. The board of trustees was to be assured that
it could discharge its responsibilities to the
CHF membership.
2. Mechanisms were to be established that would
foster cooperation between the board and the
physicians without compromising the inde­
pendence of either party.
3. The physicians were to be assured that lay
persons would not interfere with medical pro­
fessional matters.
4. The physicians were to be satisfied that they
would have the full, unqualified support of
the board in establishing medical service of
high quality.
Basic to any decision with respect to the rela-
295-902 O—08-------- 5
tionship between the board and the professional
medical staff was the answer to the question, “In
what framework is the physician likely to identify
his interest, to any significant degree, with the in­
terest of the prepaid population?” The board of
trustees, a lay body, could not directly control the
availability and quality of the medical practice on
which they were to depend. That was, and must
remain, a function of physicians. Yet, in order to
meet its obligations to members, the board must
satisfy itself that the physicians who would pro­
vide medical services would be amply motivated to
maintain ready availability and high quality of
care. The consultants therefore analyzed, from this
point of view, the differences of motivation arising
from employment of physicians on the one hand,
and from contracting with a medical group on the
other.
1. A contractual relationship between the CHF
board of trustees and a medical group with
the independent status of a partnership or as­
sociation., rather than the employment of phy-
scians, was deemed suitable for CHF for a
number of reasons.
The consultants recognized that physicians are
employed by several prominent group practice or­
ganizations in the United States, including the
Mayo Clinic, the Henry Ford Hospital, and The
Cleveland Clinic. However, the purposes and op­
erating conditions of these groups differed in sig­
nificant ways from the circumstances contemplated
by CHF. In contradistinction to the position of
the CHF board of trustees, which was direct rep­
resentation of the interests of the) subscribing
membership, the directing boards of the older or­
ganizations only remotely represented the consu­
mers of the medical care given in those institutions.
The prestige of the older organizations was asso­
ciated with a high degree of specialization. The
major portion of their practice was referred, fre­
quently from great distances; before and after the
patient’s visit to such an institution for specialized
diagnostic and therapeutic procedures, his day-to-
day and year-to-year care was at the hands of his
personal physician. Like the personal physician in
solo practice, the CHF physician might occasion­
ally refer a patient to a specialty clinic for specific
procedures, but the bulk of the group’s practice,
and its sustained concern, would be centered on the
lifelong, total health of the subscribing population.
It cannot be too strongly emphasized that, in the
final analysis, the pattern of practice in any medi-
57
 cal institution inevitably reflects the interest and
motivation of the physicians involved. The en­
vironment created by an employer employee rela­
tionship did not appear conducive to developing a
warm, continuing interest on the part of the physi­
cians in maintaining the health of the plan's mem­
bership. The explicit objective of CHF—total
health care for members of a prepaid healt h plan—
could be accomplished only if physicians fully
identified with this aim would organize services to
meet both the day-to-day and the specialized medi­
cal needs of such a population.
Finally, it was essential that the CHF board re­
spect the traditional position of the ethics commit­
tees of local and State medical societies and of the
American Medical Association toward employed
physicians. To have ignored this negative attitude
would have been to invite such problems as diffi­
culty in recruitment of doctors and in obtaining
hospital privileges.
All of these factors contributed to the conclusion
that an independent medical partnership or asso­
ciation, under cont ract with the board of trustees,
would provide the best basis for the CHF program.
The question arose, whether the board would limit
itself to contracting with one such group, or might
encourage the development of several. The decision
in this regard, and the reasoning on which it was
based, were as follows:
2. The board of trustees would contract with
only one medical group in the Cleveland area.
The general design of the CHF program called
for the evolvement of neighborhood health cen­
ters, each to serve approximately 30,000 members.
A center of the requisite size would be large enough
to utilize a staff representing all basic medical spe­
cialties, and the number of doctors required would
be sufficient to make weekend and holiday cover­
age less burdensome than in smaller units. Such a
center could thus give satisfactory service to mem­
bers, provide a stimulating professional atmos­
phere, and nurture a friendly association among
staff members.
The CHF board expected an increase in mem­
bership, and expansion of geographic range, over
time. Thus anticipating several centers, the plan­
ners had to decide nt the outset whether the con­
tract with the initial medical group should limit
that group’s participation in the program to the
staffing of a single medical center, or should state
that CHF would contract only with that group
in the Greater Cleveland area, and would encour­
age its expansion to staff future units.
Each of these two patterns was exemplified in
existing practices with different historical back­
grounds. The Health Insurance Plan of Greater
New York contracts with more than 30 independ­
ent medical groups to serve its membership. The
Kaiser Foundation Health Plan functions in four
west coast, (and Hawaii) regions, in each of which
a single medical group is solely responsible for
the professional services to members throughout
a wide geographic area.
In envisaging the future development of CHF
services, a number of disadvantages were foreseen
in the formation of more than one medical group
for the membership within the Greater Cleveland
area. Problems of jurisdiction and area franchise
would almost inevitably arise and hamper effective
regional planning. A multiple group structure
would fail to utilize one of the most beneficial con­
cepts that has evolved in the practice of modem
regional medicine: the integrated medical team,
working with integrated facilities.
If a parallel and independent medical group
were to be established for each new center, the
same amount of effort in organization and recruit­
ment of staff would have to be made in each new
instance, as for the initial center. This would not
only be expensive in itself, it would raise the ob­
jection among the existing group that funds were
being diverted from its operation to set up new
units elsewhere. It also would complicate the prob­
lem of leadership among the doctors. The only
opportunities for utilizing physicians who might
manifest leadership potential within the initial
group would be through replacement of existing
leaders or, as new groups were scouting for staff,
through raiding existing partnerships. To wait for
a leader to retire or resign is deadening to initia­
tive. To invite raiding appeared likely to be detri­
mental to stability and morale, to prejudice the re­
lationship between the board and the medical
groups, and to interfere with wholesome coopera­
tion among the groups.
If, instead, a single medical group were to be
given responsibility for the total area, growth of
the program would probably be looked upon as an
advantage to the medical group as much as to the
founders. The increase in membership and the
ability of the total organization to develop a
broader spectrum of specialized services and ade­
quate facilities for diagnosis and treatment would
serve the economic and professional interests of
the physicians. Growth demands leaders. Expan­
sion of a single group to cover increasing size
and additional units would encourage the whole­
some expression of emerging leadership among the
physicians.
The consultants and the individual doctors who
were interested in joining the incipient group con­
cluded that few, if any, advantages lay with a con­
tract that would restrict it to one center, and that
a number of gains might be secured by forming a
single group to serve all members of the prepaid
plan throughout its ultimate growth in the Greater
Cleveland area.
3. The medical service agreement would contain
specific provisions to promote quality of
medical care.
It was recognized that standards of quality for
a professional group could not be effectively im­
posed by the board. A medical group, to maintain
its vitality, must promote an atmosphere of self-
development under self-supervision. With this in
view the medical service agreement stipulated that
the medical group was to maintain techniques for
assuring a high quality of medical care for mem­
bers of the plan, and that it should file with the
board of trustees a description of such procedures.
Should the medical group at any time change these
procedures, a statement describing the change and
outlining the new practices must be filed with the
board. Such statements were to become perma­
nent exhibits of the medical service agreement.
In addition, the medical group and the board of
trustees were to form a joint committee whose
responsibility would be the development of mutu­
ally acceptable approaches to periodic appraisal
of member satisfaction, availability of service, and
quality of medical care. A report would be issued
annually, describing the appraisals of these factors
that had been conducted during the year.
A provision in the medical service agreement
that later proved to be of vital importance was that
the schedule of hours during which the medical
center (s) would be open could not be changed
without the approval of the board of trustees; fur­
ther, if the board should find that the hours are
inadequate, it may raise this issue to the medical
group, which must provide a satisfactory answer.
As an important ingredient of the processes in­
tended to encourage cooperation between the doc­
tors and the board, it was explicitly agreed that
revisions in the membership contract and all pro­
motional enrollment material to be given to poten­
tial and actual subscribers would be presented to
the medical group for review, suggestions, and
approval. Similarly, as will be shown later, the
CHF board was to review and approve arrange­
ments among the physicians as they might affect
the continuity of care, development of adequate
professional leadership, fulfillment of appropriate
responsibilities, innovations, quality of patient
care, and equitability of relationships. The finan­
cial statements of CHF and of the physicians'
organization were to be open to mutual inspection.
At all pertinent points, an open exchange of in­
formation was to prevail. The financial relation
*
ship between the CHF board and the medical
group has been touched upon in chapter VII. Its
evolution will be shown in detail in chapter X
4. The board of trustees would maintain re­
sponsibility for employment of ancillary
personnel.
The issue was raised whether the board would
expect the physicans to employ the nurses, admin­
istrative, clerical, and other ancillary personnel,
or would itself assume responsibility for the pro­
vision of such assistants. Both approaches have
precedent. The various medical groups under con­
tract with the Health Insurance Plan of Greater
New York independently employ their own sup­
porting personnel. Within the several regional or­
ganizations of the Kaiser Medical Care Entities,
both approaches have been taken.
To satisfy a basic theme of the developing CHF,
sharing of responsibility by the board and the
physicians for the long-term success of the pro­
gram, and to provide the doctors with all reason­
able assistance that would facilitate a smooth and
rapid start, it was decided that the board would
undertake the task of employing the ancillary
personnel through an executive director. It also
was felt that if the board were not to assume this
responsibility, it might become so detached from
the total operation that it would not give full and
consistent support to the ongoing program.
In electing this alternative, the consultants took
into account the problems that commonly occur in
institutions whose employees have dual account­
ability and allegiance. It was recognized, for ex­
ample, that a nurse employed by the board through
an executive director also would have a close work­
ing relationship and, it was hoped, loyalty to the
doctors to whose service she was attached. The
only practical means of forestalling difficulties
that might arise out of such a dual relationship
was to develop throughout the organization an
atmosphere of cooperation, mutuality of interest,
and the pursuit of common goals.
For detailed study, the medical service agree­
ment is reproduced in full in appendix 2.
Physicians
* Partnership Agreement
For the same reasons that it could not directly
control the quality of medical care, the board of
trustees could not directly authorize the type of
association into which the physicians were to or­
ganize themselves. Nevertheless, it was incumbent
upon the consultants to satisfy themselves that
the conditions of that professional agreement
would be maximally conducive to the production
of a stable, yet progressive, professional organi­
zation whose framework would promote the doc­
tors’ interest in the success of the total CHF
program. Their deliberations on this issue may be
summarized as follows:
1. The board of trustees would expect the medi­
cal group to formulate a type of association
that would promote responsible leadership
within its ranks.
The CHF consultants were aware that the con­
templated program would probably grow to a sub­
stantial size, and would involve increasing respon­
sibilities toward members. A task of such magni­
tude could not be met without trained, effective
leaders. Since it had been recognized that the key
to excellence in medical care was necessarily in
the hands of physicians, and since it had been con­
cluded that the doctors were to have autonomous
status within the CHF program, the board needed
assurance that their contract of association would
be of such a nature as to foster the emergence of
responsible leaders. The consultants therefore
closely scrutinized the advantages and disadvan­
tages of the various approaches to officership in
existent medical groups.
In reviewing partnership and other contractual
agreements of various medical groups engaged in
prepaid practice, one finds wide variations among
the provisions for election of responsible officers.
At one extreme is annual election, which makes
possible a clean sweep each year. At the other is
long tenure in office, in some instances for the du­
ration of the officer’s life. Annual election estab­
lishes leadership without tenure. In order to
remain in his office, the elected physician must
have continuous popular acceptance among the
voting physicians. The CHF planners believed
that leaders so chosen would be encumbered in
efforts to maintain responsible management and
in long-term planning with projection for growth.
At the other extreme, officers entrenched for ex­
tended periods probably would tend to be unre­
sponsive to the changing needs of the medical
group or of the prepaid members.
Throughout their analysis of this and other
problems, it remained obvious to the consultants
that their commitment to the concept of an inde­
pendent medical group entailed cognizance that
the board must not dictate bylaws or constitutional
provisions to the physicians. If the consultants
were to shape the doctors’ agreement even before
the group came into being, they would be acting in
contradiction to the principle on which the long­
term success of the working relationship was to be
based. They therefore devised the technique of
presenting to the medical group, while it was in
the process of formation, a declaration of those
principles that were of legitimate concern to the
board of trustees, with the request that the
founders of the medical group take them into con­
sideration while drawing up their partnership
agreement. Among the principles so expressed was
the hope that the medical group would make possi­
ble opportunities for change in their leadership,
as well as stagger terms of office to provide for
tenure and continuance of managerial responsi­
bilities.
2.The general rules governing the distribution
of income within the projected medical group
would be of material concern to the board of
trustees.
The rules governing distribution of the medical
group’s income to physicians are important to the
entire future of a prepaid health plan. A poor
system of income distribution would endanger the
total working scheme. Once a fiscal system is estab­
lished, no change can be brought about short of a
revolution within such a medical organization.
Even though the original design may have been
faulty, any change brought about under pressure
is likely to benefit some to the detriment of others.
Among the many possible designs that could
have controverted the basic objectives of CHF was
compensation by the partnership to each physician­
member of the group on the basis of the number
of services rendered—in effect, a fee-for-service
arrangement. Placing, as it does, a premium on
 quantity of services, this system directly discour­
ages focus upon quality and teamwork in a group-
practice setting. Equally unsatisfactory are an in­
come structure of broad range, a formula equaliz­
ing income among all physicians, and regular pro­
gression in income meted out uniformly to all
doctors.
To attract and hold competent physicians, the
fiscal schedule of the medical group must take into
account the relative contribution and devotion of
each of its members to the total effort. Such ac­
counting necessitates appraisal of performance,
which creates difficult issues. By what standard
shall the physician’s contribution be measured: By
time spent? By volume of services rendered? By
professional stature? By willingness to meet obli­
gations and responsibilities? Or, by a combination
of these? Assuming that the criteria are adopted,
who is to judge the physicians’ relative competence
according to those criteria? And, once the judge is
identified, who is to judge the judge? The practical
solution to these problems will be discussed in
chapter X.
Closely related to these issues were the stipend
to be offered to newly employed physicians, and
the length of time that must elapse before a new­
comer might become a partner. These matters were
of interest to the trustees because they would influ­
ence the caliber of physicians who would be
attracted to the program.
Once a medical group is at work, questions re­
lated to these issues arise daily. The total effort is
ultimately dependent upon the degree to which the
physicians themselves are satisfied with the an­
swers to such quest ions. After discussion, the board
again stated its concern in writing, without making
specific recommendations, and registered its re­
quest that the medical group, in constructing its
partnership contract, give careful consideration to
the points involved.
3. The hoard of trustees expressed its active con­
cern in the recruitment of physicians.
As a guarantee fundamental to its professional
autonomy, the medical group was assured that it
would have sole responsibility for nominating new
additions to its ranks. It was understood that the
initial group of physicians would use their best
judgment in securing qualified doctors to fill va­
cancies. Before their acceptance, however, the
nominations for such positions would be submitted
to the board of trustees for approval. In deter­
mining the acceptability of candidates, the board
would be assisted by a medical adviser, or by a
medical advisory committee composed of physi­
cians not participating in the medical group. It
was agreed that the board, while having the right
to disapprove the appointment of a candidate,
would not be authorized to consider any physician
not nominated by the medical group.
The physicians’ partnership agreement is dis­
cussed in detail in chapter X and is reproduced in
full in appendix 3.
Tims, the many details in the entire interrelated
group of three contracts—membership contract,
medical service agreement, and physicians’ part­
nership agreement—were built around a central
theme: determination on the part of the planners
that the prepaying members of CHF would re­
ceive a high quality of medical care, under maxi­
mally dependable conditions, from an optimally
stable and professionally progressive medical
group.
Summary and Comment
For the purpose of assuring an integrated
effort to provide high quality organized medical
and hospital services to the prepaid membership
of CHF, two basic contracts and guides for a third
were developed: the membership contract, the
medical service agreement, and guides for the
physicians’ partnership agreement.
Fundamental to the total framework was the
membership contract which clearly reflected the
philosophy and purposes of the organization, de­
lineated obligations to members, and stated the
manner in which they were to be met. This con­
tract for prepaid health services necessarily
contained more detail than is required in member­
ship contracts of health insurance indemnity pro­
grams. Worked into the membership contract
were provisions intended to insure against decline
in responsibility toward the prepaid population.
Every effort, was made to secure working rela­
tionships that would foster a high level of
motivation in the physicians who were to form
the medical team. Such stimulus seemed most
likely to arise from the formation of an independ­
ent medical group under contract with CIIF, and
from restricting contractual arrangements to a
single medical group within the Greater Cleveland
area.
Although both medical ethics and the dynamics
of the total operation dictated that the medical
group develop its constitution independently of
the board of trustees, the consultants recommended
to the consideration of the medical group, at the
outset of its planning phase, a number of issues
basic to the quality and stability of the program.
Among these were important rights with respect
to the preservation of quality reserved to the
board of trustees. By all these means, the board
sought to satisfy itself that the principles stated
in the membership agreement would ramify
throughout the organization, and would find
expression in the actual services rendered.
 Chapter X
RECRUITMENT OF PHYSICIANS AND
ORGANIZATION OF THE MEDICAL GROUP
When in mid-1962 the board of trustees resolved
to pursue the implementation of the CHF pro­
gram, it was only after painstaking exploration
of the key question, “Will this health plan be able
to attract competent physicians?” It was clear
that the initial core of the medical group must,
consist, of doctors having firmly established affili­
ations with Cleveland hospitals, and that each
must have a high professional reputation. With­
out such a nucleus, the project could not recruit
physicians of excellence, and its growth would be
stunted.
The solution that was ultimately achieved could
not have been reached without the continuing ac­
tive interest of a number of highly qualified phy­
sicians. These were the doctors who, during the
incipient stage of inquiry into the feasibility of
the program, had been identified as potential par­
ticipants. Throughout all phases of the project,
the consultants cultivated and deepened their
relationships with these doctors. Insofar as pos­
sible, they held continuous dialogue with them
about, the dimensions of the program and its goals.
The general concepts of the evolving medical serv­
ice agreement, described in chapter IX and its
implications for the organization of the prospec­
tive medical group were discussed in great detail
with a number of these physicians.
Responsibility for Recruitment
In the summer of 1963, when July 1, 1964, was
fixed as the date for opening the center, it was
necessary to start the actual recruitment of pro­
fessional personnel and to obtain definite commit­
ments from doctors who had expressed their in­
terest to this time. A new decision must now be
made: JFAo iroufd recruit physicianfor thia
prog t a rn ?
During this stage of development, all activities
of CHF were carried out by a nonphysician exec­
utive director. This official was one of the three
original consultants and was appointed early in
1963 to the post of executive director as a full-time,
ongoing responsibility. The other two consultants
continued to assist him and the board in the plan­
ning effort. Because the executive director was not
a physician and was an agent of the board, it was
clear that he should not attempt to recruit the
physicians (who were not to be employees of the
board). Although one of the other two consultants
was a physician, he also was an agent of the board
and therefore not in a position to assume the re­
sponsibility for recruitment.
Throughout the period of planning, both the
executive director and the other two consultants
made important gains in attracting physicians to
the project. They frequently discussed its phi­
losophy and structure with prospective members
of the medical group. Only once did they deal with
the precise role that any physician was to assume—
in the exceptional case of one internist whose im­
portance to the program makes it appropriate to
describe his background in some detail at this
point.
He was a Cleveland physician who had consist­
ently evinced great interest in the emerging plan,
and had voluntarily served as coordinator of the
discussions with other physicians in the commu­
nity. A native of the city, he had received his train­
ing nt Western Reserve University School of
Medicine before entering private practice as an
internist 9 years before the start of the CHF health
plan. He had continued his teaching responsibili­
ties at University Hospitals throughout his profes­
sional life, and was highly regarded by the faculty
of the university medical school. He demonstrated
many desirable leadership qualities. Early in the
planning phase, he had committed himself to join
the prospective medical group. It became obvious
that the major responsibility for the recruitment
of physicians should be assumed by him. From
the standpoint of organizational structure, how­
ever, an important new question now arose: In
whose behalf would this physician act?
Timing Group Organization for Optimal
Recruitment Conditions
If the recruiting physician were to serve as an
agent of the board, he would be negotiating on the
one hand with physicians in behalf of the board,
and on the other hand with the board in behalf of
physicians. The prospect of such a dual role ap­
peared unwholesome and it was foreseen that it
could prove detrimental to the development of an
independent medical group.
The recruiting physician could not, however,
serve in behalf of a medical group that did not yet
exist. Nor could the board contract with an entity
that was not yet formed. At that time, it was by no
means obvious at which point in the organizational
development the medical group should actually
come into being. As the consultants were aware, to
create a formal framework before a nucleus of in­
dividuals had had opportunity to test themselves,
or to become acquainted under working conditions,
would be to compound difficulties. If all the local
physicians who had expressed an interest in the
concept were to bind themselves into any formal
structure before they were fully committed to work
together in clinical practice, their enthusiasm and
energies would be dissipated in debate about poli­
cies and methods for the future. Argument in a
vacuum does not forward growth toward a func­
tioning organization. Policies and methods are
proved and improved only in work.
There are additional important reasons for care­
ful timing of formalization of such a relationship.
Among any aggregation of doctors inquiring se­
riously into prepaid group practice, there are some
who will, upon closer acquaintance with this way
of life and on honest self-examination, decide that
they are not likely to make the particular adap­
tation that is necessary for group practice. Rever­
sal of a premature decision to enter group practice
would engender a dissatisfaction that almost cer­
tainly would be reflected in tire physician’s future
attitude toward the group. To doctors who are in­
trinsically well suited to perform in an established
and functioning group, very early formaliza­
tion presents different hazards: They must main­
tain their confidence under the pressure of others’
withdrawals. They must subscribe to regulations
formed before the necessity for those rules has
been demonstrated in practice. Or they must take
part in the drawing up of the working rules—a
task for which they are not prepared by experience
and cannot handle effectively. The complexities
that may surround such an apparently simple mat­
ter are illustrated later in this chapter.
The picture is very different when a physician
enters a smoothly operating organization. His en­
ergies are immediately channeled into clinical
work which forms the natural foundation for
professional interest, enthusiasm, and loyalty.
The doctor’s enthusiasm alone, however, is not
enough to insure 'his long-term satisfaction. If his
wife rejects the group practice way of life, he will
be seriously handicapped in his adjustment The
high social status that is accorded the wife of a
doctor in private practice in our culture is modi­
fied by his entering this type of coordinated effort,
even when his income approximates the net earn­
ings of his colleagues who remain in solo work.
While the wife of a doctor in group practice bene­
fits from his relatively regular schedule and free
time, his vacation privileges, and other aspects of
cooperative planning, she will be happy only if
she likes the other doctors in the group and if she
likes their wives, with whom she will have a close
association. Her acceptance is still more firmly
assured if she is convinced of the significance of
this method of furnishing health care to persons of
middle income.
It remains true, nevertheless, that in the normal
family situation the decisive step toward assuring
her acceptance must be taken by the doctor him­
self. To create and maintain his interest and loy­
alty, a positive structure and an established way of
life must be clearly evident when the first doctors
are recruited. Revisions in the structure can be
made at any time during the life of the group, as
experience shows them to be desirable, and as
members of the organization mature in their ca­
pacity to consider the many facets involved. In
view of these considerations, tike planners were
faced with a perplexing question : How can physi­
cians work in a group-practice setting before the
group is organized?
The Sole-Proprietor Concept
The most logical first step appeared to be de­
velopment of a contract between the board and a
physician ns sole proprietor whose function would
be to recruit and organize a working medical
group. Difficulties inherent in the proposed ar­
rangement were reviewed in great detail by the
consultants together with the board. Firet, by des­
ignating a physician as sole proprietor, the board
would in a sense predetermine the initial leader­
ship of the ultimate medical group. Second, despite
the best intentions on the part of the physician
selected for this task, the proprietorship might
tend to become an end in itself. Transition to group
organization might then be delayed, to the detri­
ment of the total program. Third, it appeared
essential that the sole proprietor be a doctor with
considerable experience in the leadership of a
group-practice prepayment program, who at the
same time would not be interested in unduly pro­
longing his proprietorship.
Although the blueprint of the ultimate organiza­
tional structure was clearly delineated, and the
board and the consultants had achieved remark­
able unanimity as to its framework, at this critical
juncture there was no clear understanding of how
the design could be implemented. A review of simi­
lar programs elsewhere served to emphasize that,
unless the method of implementation were care­
fully worked out, the emerging functioning organ­
ization might bear little resemblance to the struc­
ture that was envisaged.
A novel solution was offered by the CHF group.
It proved to be workable and answered many of
the consultants’ concerns. A physician who for
some 20 years had been the medical director of a
successful medical group practicing on a prepay­
ment basis in another State became interested in
the CHF program and was willing to assume the
transitional responsibility of sole proprietorship
of the medical group. He agreed to contract with
the board to organize a medical group that would
be capable of fulfilling the conditions of the medi­
cal service agreement described in chapter IX.
Fortunately, he was licensed to practice medicine
in Ohio and was willing to spend all the time
necessary to fulfill the obligations imposed upon
him by the contract. The medical group within
which he was affiliated was willing to release him
for the i>eriods necessary to accomplish the task.
As the board had anticipated, the leadership of
an experienced medical director who had no per­
sonal long-term interest in the new group was
reassuring to prospective members of the medical
partnership. It must be stressed that his primary,
lifetime professional interest was in another part
of the country, and that the medical group of
which he was director had no purpose with respect
to the CHF program other than to apply gained
experience to the establishment of a new medical
service organization. His purpose was to help the
new medical group avoid certain mistakes and
birth pains, and thus contribute to the successful
establishment of a new prepaid program. The con­
tractual agreement with the sole proprietor spe­
cifically expressed the transitory nature of his
function.
The sole proprietor was appointed, on an interim
basis, as medical director of the independent phy­
sicians’ partnership which he was to form. He in
turn appointed as associate medical director the1
Cleveland internist described above who had com­
mitted himself to the health plan. The Cleveland
internist reduced his practice to part time to col­
laborate with the sole propietor in the organiza­
tion and recruitment of the medical group.
Recruiting the Nucleus
Balancing the Starting Medical Group With
Subscribers’ Needs.—The first requirement was to
plan for a medical group that would be balanced
to meet the health care needs of the anticipated
number of subscribers. To serve the projected ini­
tial membership of 13,000 persons, it was necessary
to recruit 11 full-time doctors: four internists
and three pediatricians who would act as primary
physicians for adults and children respectively,
two general surgeons, and two obstetrician-gyne­
cologists. In addition, the equivalent of one half­
time physician would be needed in each of the
following specialties: radiology, ophthalmology,
otolaryngology, and orthopedics.
Services in certain subspecialties also had to
be arranged. In the course of developing these
estimates, it was perceived that the professional
complement required to serve 13,000 persons could
adequately serve 17,000, and that the balance be­
tween the medical group and the subscriber group
would not be achieved until membership enroll­
ment reached 17,000 or 18,000. Overstaffing creates
a heavy financial burden on any program, and is
most keenly felt by a new organization.
 Developing a Professional Way of Life
Focused on Patient Care.—More deeply rooted
than these financial problems were certain factors
unique to the operation of a medical group that
plans to work on a prepayment basis. Presuming
that the doctors who join the group are indus­
trious and enthusiastic, their clinical workload
must be sufficient to keep them fully occupied from
the beginning. If it is not, the active professional
man will find other means, such as teaching or re­
search, of forwarding his skills. The group cannot
insist that he remain idle; indeed, it would be
against its interests to do so, for an excellent phy­
sician will not accept such a dictum. Even tem­
porary lapses of professional activity tend to les­
sen a doctor’s acumen.
Moreover, once the doctors begin to schedule
hours for teaching or research, the group is in ef­
fect paying them to carry on extracl inical work.
Such a precedent, once set, is difficult to modify. In
addition, if this emphasis takes precedence over
patient care, the quality of medical services ren­
dered tends to decline. For these reasons, the
amount of extraclinical time spent by group phy­
sicians must, be carefully regulated. The best guar­
antee against excessive complications of this type is
to make certain that the organization’s way of life
is focused, from the outset, primarily on patient
care.
In the CHF experience, the fact that a signifi­
cant proportion of the first doctors to join the
group had established practices within the city
was helpful in this respect With few exceptions,
the initial clinical schedules were full because
many patients who were not subscribers to CHF
continued to rely on these physicians for medical
services.
Staffing the Other Specialties.—In order to
provide part-time services in other specialties
(radiology, ophthalmology, otorhinolaryngology,
orthopedics, etc.), it was necessary to adapt to the
best arrangements obtainable in each category. In
some of the subspecialties, such arrangements
consisted of referring health plan members to
specialties in their own offices who were paid on
a fee-for-service basis. A radiologist and an
ophthalmologist were available for half-time work
in the center.
The Individual Physician's Decision To Enter
Group Practice.—The recruitment of doctors who
will participate in this type of program cannot be
compared with the staffing of any other organiza­
tion, not even with the complex task of acquiring a
medical school faculty. There was no precedent
in Cleveland for the pattern of relationships that
the consultants hoped to see the medical group
establish: a unique set of attitudes tow ard the
patients as individuals, the subscribers as a group,
the physicians’ professional colleagues, and the
governing board. Before entering upon this pro­
gram and committing himself to these objectives,
each prospective member of the medical group had
to acquaint himself with its purposes,and was ulti­
mately required to make a decision that would be
crucial to his career. This decisionmaking process
is illustrated, but by no means exhaustively por­
trayed, by the experience of the first three men to
commit themselves to the CHF program.
The first to join—the Cleveland internist who
was appointed interim associate medical direc­
tor—had to abandon his busy practice, the product
of 9 years’ successful development through his
services to patients and his relationships with col­
leagues. The second doctor to join, also a success­
ful Cleveland internist with a similar background,
had to relinquish not only his practice, but also his
post, as medical director of the student health serv­
ice of Western Reserve University. The third was
a general surgeon who, like the two internists, was
a native of Cleveland and had received his medical
training there. He had an important teaching post
in a major local hospital. For him, the problems
that had been faced by the two internists were
compounded by the fact that, as for all surgeons,
his practice depended primarily upon referrals
from other doctors.
Specialists who necessarily depend upon
referrals usually must practice in a community for
a number of years before they develop a texture
of interrelationships that is sufficiently broad and
firmly knit to assure success. A specialist, with an
established practice therefore cannot join a medi­
cal group as an experiment without risking a sub­
stantial loss.
A young specialist who has just completed his
training finds an important inducement in the con­
ditions of prepaid group practice. He can use his
full talents immediately, without the years re­
quired for building up a solo practice. Young
residents just finishing their training usually have
had no experience in either fee-for-service or
group practice. Most of those who were inter­
viewed for the CHF program had an open mind
on the subject. Perhaps because they had nothing
to lose, many were ready to join the group for a
time, to learn from experience whether or not they
would like it.
The wife of a young physician is more likely
than an older woman to be willing to consider the
advantages of the group-practice way of life. She
may be more informed and look favorably upon
new efforts to solve professional and economic
problems. She and her husband may not yet have
an established position within a community, which
she would be reluctant to abandon. Group practice
offers them an immediate and assured income
which many young wives welcome in contrast, to
the prospect of years of struggle and debt while a
private practice is being developed. If several
young couples enter the group at or about the same
time, most of the wives tend to form cordial inter­
relationships quickly because of their common
interest in the group’s success.
Young physicians were therefore a promising
reservoir for recruitment, but they lacked the sea­
soned leadership and hospital affiliations on which
the success of a new group depends. Fortunately
for CHF, the general surgeon mentioned above
was willing to assume the risks entailed in becom­
ing one of the three who formed the nucleus of
the medical care program.
Measures Used To Crystallize
Physicians’ Decisions
1. Conferences and meetings:
The multiplicity of decisions to be made by
both the physician acting as sole proprietor and
the applicants inevitably slowed the progress of
recruitment for the new medical group. Many
meetings between interested physicians and the
core group were required. Such meetings consti­
tuted a process of education and assessment on
both sides. Doubts and anxieties had to emerge,
be faced, and be resolved. Misgivings arose most
frequently among prospective group members who
had been in solo practice for some years and had
an economic stake to consider. Experience also
showed that anxiety was not confined to the deci­
sionmaking period; during the early months of
formation of the group, a number of staff members
began to have second thoughts about the decision
they had made.
Of importance in resolving uncertainties were
the frequent meetings which the leaders began to
call as soon as the group was of sufficient size to
make discussions fruitful. Participants were ap­
prised of developments, and discussion of problems
and policies was invited. Some of the physicians
felt anxieties and doubts about their lay coworkers.
It took many efforts at reassurance to allay these
misgivings and to gain the mutual understanding
and appreciation that, enabled CHF to function as
an effective unit rather than as a conglomeration of
separate parts. The process of mutual physicians­
lay men education has continued into the opera­
tional phases of CHF.
2. Professional public relations:
The leaders of CHF took every opportunity to
present the overall concept of the group practice
program to the community through dignified, di­
rect presentation of facts. They were aware that
in Cleveland, as in most other communities, there
undoubtedly were physicians who might be inter­
ested in this new type of health care but who prob­
ably could not be reached through any direct
recruitment effort. If knowledge of the program
became widespread, such physicians might learn
of it and seek out the group leaders. Five physi­
cians who might never have been reached by other
methods came into the group as a result of this
public information effort.
3. Channeling recruitment effort to likely
candidates:
Experience showed that time spent in conversa­
tions or meetings with doctors disinclined to join
the group was futile. Since the initial impetus for
the project stemmed from the labor movement,
persons with an ideological aversion to labor un­
ions, or who expressed a fear of union domination,
were not suitable for recruitment.
4. Impetus lent by prominent physician’s identi­
fication with the group:
Toward the end of December 1963, an event of
major importance to the crystallizing of the re­
cruitment effort occurred. A distinguished doctor
who had retired from his post as chief of surgery
in a major teaching hospital in Cleveland, and
who was also a clinical professor of surgery at
Western Reserve University School of Medicine,
joined the group. In addition to his professional
eminence, this physician had been a civic leader for
many years. His interest in group practice was
of long standing. His support of the Ohio enabling
legislation in 1959 (see ch. I) had been of crucial
importance to its passage. Throughout the plan­
ning of the CHF project, he had offered guidance
whenever called upon. His decision to participate
as a senior member in the group’s department of
surgery added immeasurably to the professional
stature of the team.
As a general observation deriving from the total
experience, it is to be emphasized that the first
physicians to be mustered into a prepaid health
plan are the most crucial to the ultimate success of
the effort It is these initial members who will set
the tone and temper of future recruitment If a
number of board-certified specialists of known
ability join the group, its character is thereby
demonstrated and future recruitment becomes
easier. In the present instance, once the new medi­
cal group consisted of four physicians firmly estab­
lished in the Cleveland professional community,
the acquisition of new members took on a new pace.
In a city as richly supplied as Cleveland with po­
tential professional personnel, it was possible to
fill nearly every post with a doctor who had trained
or was in training in the area, or who had some
relationship with its professional circles.
During this phase, it became evident that the
medical group could not afford to compromise in
the caliber of physicians invited to join it. As the
day for opening drew near, and certain positions
were not yet filled, it was tempting to accept the
application of licensed doctors who appeared will­
ing to share the work, even though it could be fore­
seen that some among them would not ultimately
have been able to maintain the performance stand­
ards set by the group. This type of compromise
was avoided. The leaders were aware that, once
patients were being seen, the presence of such a
doctor would have been a serious detriment to
success.
A. Neutrality of local medical society:
In addition to the impetus lent by the affiliation
of outstanding physicians, recruitment was fa­
vored by the enlightened policy that was expressed
toward the newly forming organization by the
Academy of Medicine of Cleveland and the Cuya­
hoga County Medical Society. Making plain the
intention of the former body not to interfere with
the development of the new health plan, the fol­
lowing statement was contained in a letter, dated
January 10,1964, from the president of the Acad­
emy to its members:
• • • Academy of Medicine, as a matter of policy,
neither approves nor disapproves any organization, as
such. It has not approved the Community Health Founda­
tion. Physicians who contemplate such employment should,
as in any other type of medical practice, assure them­
selves that no principles of medical ethics are being vio­
lated, no advertising or solicitation of patients Is Involved,
and that the patient retains a reasonable degree of free
choice of physician.
This nonobstructive policy was in distinct contrast
to the anxiety that has been expressed in the past
by both official and nonofficial medical bodies in
other communities when faced with the formation
of a medical group planning to practice on a pre­
payment basis.
6. Experienced leadership; presentation of spe­
cific offers to candidates:
Finally, recruitment was forwarded by the abil­
ity of the medical director and his associates to
approach each candidate with a definite proposal.
The wealth of experience in the medical director’s
background enabled him to describe to a prospec­
tive member, with considerable precision, the re­
lationship that he might expect to have with his
patients and with his colleagues, the nature of the
practice, the work rules to which he would be re­
quired to adhere, and the economic opportunities
that he might reasonably anticipate.
In this respect, the presence of a person acting
during the initial period as an “employer” was
invaluable. Merely bringing together under one
roof a number of competent physicians represent­
ing different specialties does not create a medical
group. During his years in individual practice,
each of those doctors will have developed work
habits related to the needs of the general category
of patients he has known and to his professional
life. Group practice entails significant alterations
in certain attitudes and work habits; it imposes
new problems, and presents new opportunities-
Without meticulous planning by an experienced
leader, the disadvantages of group practice cannot
be overcome and the advantages cannot be realized
except at the cost of long trial and error.
Work Habits in the New Group
After the basis for a cooperative effort had been
laid through the diligent work of many persons,
the results of planning had to be tested in use. An
excellent example of such a test was the application
of work rules. The regulations that were set up in
advance of the opening date by the interim medical
director proved the importance, once more, of ex­
perienced leadership. A product of his 20 years as
medical director of a successful group practice,
these work rules reflected his recognition of the
needs of the prospective subscribers and demon­
strated his realistic expectations with regard to
the contribution that each physician should make.
 Because the physicians in the CHF group re­
spected this leaders practical knowledge and were
aware that he was a practicing physician in his
own medical group, they accepted his work rules
with little dissent. It will be worthwhile to look
somewhat more closely at an example of these rules,
to see why this was important.
The matter of working hours for doctors may
appear deceptively simple. It was decided early
that the members of the new medical group would
regularly work 5% days a week, this time to be
divided between the center and attendance at hos­
pitals, including patient care and teaching requi­
site to staff affiliation. The medical director, on the
basis of his experience, decided that the offices
should be open for appointments 6 days a week
from 9 a.m. to 6 p.m. During the evenings of
those days from 5 p.m. to 9 p.m., one internist and
one pediatrician should be on duty. The same in­
ternist and pediatrician should then remain on call
during the night from 9 p.m. to 9 the following
morning, to advise patients by telephone and to
make house calls when the doctor himself judged
it necessary. In addition, one internist and one
pediatrician should be on duty at the center from
9 a.m. to 9 p.m. on Sundays and holidays. These
evening, Sunday, holiday, and oncall hours were
to be covered by the internists and pediatricians of
the group in turn, in addition to their 5^-day
week.
The medical director was convinced, on grounds
of his past, observation, that such coverage was es­
sential if the group’s services were to be made ac­
ceptable and available to the subscribers. Failure
to maintain this availability would inevitably pro­
duce an excessive number of demands for house
calls, and would lead to dissatisfaction and com­
plaints from the subscribers. For the small intial
staff, these working hours over and above the 5^-
day week were burdensome.
There is no doubt that, if the physicians of the
group had been given opportunity to vote on such
a proposed schedule, they would have rejected it.
The argument would have been advanced that so
heavy a schedule should not be adopted until need
for it was proved. It happened that during the first
few months of the center’s operation, the workload
on evenings, Bundays, and holidays was light. If
coverage for these hours had not been supplied,
there would have been no objective proof that the
rigorous schedule was serving to avert excessive
demands for house calls and complaints from the
subscribers.
As had been anticipated by the medical director,
the argument was advanced on a number of occa­
sions that the medical center schedule should be
curtailed. This change was not subject to vote by
members of the staff at that time, but could have
been made only at the direction of the medical
director, with the concurrence of the CHF board.
Not until the medical group was organized into a
partnership, in mid-1965, could a majority vote
have produced a formal proposal to change the
hours of service. By that time, the physicians’ in­
dividual experiences proved to them that the avail­
ability of doctors during the evening hours had in­
creased the members’ confidence in the plan. The
subscribers had come to realize that they could
depend on the group to provide service at all times.
To this date, the group’s house call load is negli­
gible. Subscribers have learned, beginning with
their first exposure to the program, that highly
technical modern medical services can be given
more effectively in the equipped medical center
than in their homes.
In this, as in all other aspects relating to patient
care, the fact that the physicians knew that their
appointment to the group was predicated on their
initial acceptance of the work rules presented to
them by the medical director and his associate
made consolidation of the effort possible. Many
problems which in other groups have invited de­
bate into the early hours of the morning were never
on the agenda of this group. As they developed
their own experience, they questioned some of the
rules, modified some, and abandoned some that ap­
peared to be inapplicable to the CHF situation.
The essential contribution of firm leadership at
the outset was to establish a way of life geared
to good patient care. With this as a basis, subse­
quent modifications, even when designed to accom­
modate special interests of the physicians, were
nevertheless considered within the framework of
a structure that was developed to carry out the fun­
damental objectives of the plan. Modifications that
arose out of function had been expected; they were
taken as evidence of the living nature of the or­
ganization.
Continuing Staff Education
Another significant contribution to good patient
care, and to staff quality and morale, was the pro­
gram of staff conferences and case discussions that
was inaugurated immediately after the center
opened. Conferences were held weekly in the de­
partment of medicine, and less frequently in other
departments. Ongoing professional education and
exchange of concepts between specialists is vital.
At all stages in the growth of such an organization,
the right and responsibility of doctors to partici­
pate in the exchange of medical information must,
be protected. Without this stimulus, they cannot
keep abreast of the rapid technical advances that
characterize modern theory and practice.
Physicians within a group are frequently en­
gaged in the care of patients who are members of
the same family; or more than one doctor in the
partnership may be responsible for different as­
pects of the care of a single subscriber. Doctors
working closely together in a group must become
thoroughly familiar with the ways that their col­
leagues care for patients, and with the way that
each approaches specific diseases. The life of a suc­
cessful group will, as a matter of course, foster this
multifaceted exchange through regularly sched­
uled conferences. Such meetings are one of the
important keys to the promotion and maintenance
of quality in group practice.
From the time that the CHF center opened, a
daily census of hospitalized patients was taken and
circulated to the medical director and department
chiefs. This census made possible close surveillance
of the care of subscribers who were in any of the
various hospitals at which the physicians had staff
privileges. The multiplicity of hospital affiliations
among the staff members created difficulties, which
are discussed in the following section.
Hospital Affiliation Problems
At the time the CHF center opened in July
1964, all physicians in the initial medical group
had hospital affiliations. Although such affiliation
is essential, it does not in itself solve the problems
of patient care for the physicians of a medical
group. It introduced into the CHF situation a
complex of concerns that urgently demanded solu­
tion, and which are at the time of this writing still
not solved.
In some of the medical group's departments,
doctors in the same specialty had privileges in
different hospitals. Sharing the responsibility for
patient care is an integral part of the structure of
group-practice prepayment programs; it is a
major factor in staffing, fiscal planning, setting
subscriber rates, and hence, ultimately in deter­
mining the overall feasibility of a health plan.
But if two physicians in the same department
cannot attend a patient in a given hospital because
one of the physcians does not have staff privileges
there, this responsibility cannot be shared.
This difficulty is especially trying in surgery,
with its frequent requirement for operating room
assistance and daily calls on patients while hos­
pitalized, and in obstetrics, where reservations
made for delivery in one hospital might conflict
with the nonavailability of a given obstetrician
on the actual delivery date. In addition, some
hospitalized patients need services or consultation
by a number of specialists. Here again, differences
in hospital affiliation conflicted with the effort to
provide continuity of care within the group.
Shortages in hospital beds make it uncertain
that at any given time a bed would be obtainable
for a sick patient. In an attempt to meet this prob­
lem and to overcome the difficulties inherent in
scattered affiliations, several physicians in the
group secured privileges in more than one hospital.
But to maintain affiliation with certain hospitals,
a physician must fulfill teaching obligations. As
time went on, the teaching obligations in several
hospitals became burdensome.
Toward the end of 1965, after the program had
been in operation for more than a year, it was esti­
mated that 17 percent of the professional time of
the medical group was devoted to teaching asso­
ciated with maintenance of hospital privileges.
This professional activity, although it was indi­
rectly essential to the life of the project, gave no
direct benefit to CHF subscribers.
The long-range implications of using community
hospitals for the inpatient care of the subscribers
to a prepaid health plan proved to be most sig­
nificant. With the growth of the complexities that
arose out of attempts to maintain continuity of
care by the members of the group in a variety of
community hospitals, it became obvious that a
prepaid health plan of this nature can attain its
full development and reach its goals of service to
subscribers only if all of the physicians in the
group are privileged to practice in the same hospi­
tal and maintain their full professional life within
that hospital. This issue is closely related to the
whole area of regional planning of hospitals and
the organization of medical care services—a matter
outside the scope of this report, but closely akin to
it because satisfactory solutions cannot be reached
in regional planning unless the type of experience
outlined here is taken into consideration.
Effect of Fiscal Arrangements on
Physician Recruitment and
Professional Activity
The form of the financial arrangements between
CHF and the medical group that was finally
evolved has been discussed in chapter VII. The
period of sole proprietorship was followed by a
partnership of two, then of three, physicians. (See
section on “Elements in Partnership Agreement”
below.) During these interim phases, all expenses
agreed upon by the board and the physicians who
served as sole proprietor, then as partners, were re­
imbursed to them by the CHF. The medical group
partnership was formally established in mid-1965.
After this date the reimbursement arrangements
were continued on an interim basis. Drafting of the
medical service agreement (the contract between
CHF and the medical partnership) w as completed
early in 1966. At that time, a proper balance be­
tween CHF membership and medical staff had still
not been attained. The design of the program rec­
ognized that the principles that one cannot divorce
professional from fiscal responsibility and that if
the medical group was to become accountable for
the provision of medical services to the health
plan's subscribers, that trust must be fulfilled with­
in a framework that had been agreed upon. The
formula, adopted in principle and spelled out in
the medical service agreement, was that which is
customarily referred to as “capitation”: a fixed
monthly payment for each subscriber to the health
plan. (See ch. VII.)
The medical service agreement provided for the
continuation of the reimbursement arrangement
that had been carried on during the recruitment
phase of the program, until such time as the medi­
cal group’s expenses (as agreed upon between the
group and the CHF board) would not exceed the
income derived from the designated capitation,
over a period of 6 consecutive months. As was in­
dicated in chapter VH, the income from fees paid
by nonmember patients was an offset against the
agreed upon capitation. Under this arrangement,
the income of the group would not be affected by
an increase or a decrease in the number of nonsub­
scriber patients. The medical service agreement
thus contained provisions designed to implement
capitation, and to encourage assumption by the
medical group of total responsibility for profes­
sional services to the health plan membership.
Elements in Partnership Agreement of
Concern to CHF Board
Early in the course of their clinical work in the
center, the physicians began as a group to study the
medical service agreement in order to design a
partnership contract that would be consistent with
its aims. In this connection, the sequence of the
development from sole proprietorship to physi­
cians’ partnership is of interest.
It will lie recalled that the sole proprietor, while
acting as interim medical director, had appointed
to the post of associate medical director the first
Cleveland internist to commit himself to the pro­
gram. By the time the center opened, the sole pro­
prietor had received board approval to enter into a
partnership agreement with the associate medical
director, who upon this occasion became the medi­
cal director in his stead. Before the end of the first
6 months of the center’s operation, the second
Cleveland internist to join the project was also
associated with them as a partner. When in mid-
1965 the entire medical group formed the new
partnership, this interim partnership of three
physicians was dissolved. A six-member executive
committee was formed at this juncture.
By unanimous vote of the medical partnership,
the former sole proprietor was made a member of
the executive committee, with tenure until his
guidance and advice should be deemed no longer
necessary. Similarly, the medical director was
elected to the executive committee and to the post
of medical director of the newly formed medical
group, for a term of 6 years. The other four mem­
bers of the first, executive committee were elected
for terms of 5, 4, 3, and 2 years. As each term ex­
pired, a successor was elected for 4 years. This pat­
tern, after the first 2 years, created one vacancy
each year on the executive committee, to be filled
by election. After the first 5 years of its operation,
all terms were to be for 4 years, with the single ex­
ception that the medical director was to be elected
for a 6-year term. Thus, the first executive commit­
tee consisted of two persons who were members by
virtue of precedent, and unanimous consent of the
group, and four who were elected.
The manner in which the partnership agreement
of the medical group reflected the guidelines (de­
scribed in ch. IX) that had been drawn up by
the consultant-planners and the board may be
summarized as follows:
1. A responsible group with responsible leader­
ship was provided for by the requirement
that only those physicians who would devote
their full professional time to the CHF cen­
ter could become members of the partnership.
If a physician, on a temporary or long-term
basis, maintained professional activities other
than the medical or surgical care of CHF
subscribers, the specific conditions of such
work must first be approved by the partner­
ship, and income derived from such work
would accrue to the medical group. If the
physician reduced his clinical hours in order
to carry on an activity such as teaching or re­
search from which he derived no income, this
activity also was subject to prior approval
and the physician’s income from the group
was to be proportionately reduced.
As has been shown, the leadership of the group
was placed in the hands of an executive committee,
the structure of which provided for continuity
through the electoral mechanism described above.
2. The caliber of physicians in the group was
relatively assured by the provision in the
medical service agreement that the board,
acting upon consultation with their medical
adviser, was to approve all new appointments
to the medical group. This provision was ac­
knowledged in the partnership agreement In
addition, the physicians were alert to the fact
that the caliber of work of each member of
the group would reflect on the partnership
as a whole.
3. Distribution of income within the medical
group, since it would materially affect the
caliber of services rendered, was of legitimate
concern to the board. The terms of each ap­
pointment made before the partnership was
formed, and the range of physicians’ income,
were initially established in joint conferences
between the responsible doctors and the CHF
board. In addition, the partnership agreement
provided that all partners would share
equally in the profits of the group, irrespec­
tive of their regular income level.
Within the first few months of the center’s op­
eration, the leaders of the medical group observed
that wide discrepancies between the incomes of
physicians were not conducive to a smooth work­
ing relationship. Although a young physician
might accept, in rational terms, the statement that
an older colleague in the same department merited
a higher annual income because of his broader ex­
perience, when the two doctors worked the same
number of hours and performed essentially the
same function, the satisfaction of the younger man
was not assured.
The leaders concluded that competent younger
physicians who worked well with the group should
be advanced in responsibility and income as rap­
idly as feasible until discrepancies were narrowed,
even though in some instances this might mean
that there would temporarily be smaller or no in­
creases for the senior members of a department
As this framework became established, the CHF
board felt reassured that its concern for an equi­
table distribution of income was properly reflected
in the articles of organization of the medical
group.
Summary and Comment
To attempt to visualize the structure of a medi­
cal group in advance of its actual operation is es­
sential, but it will not create a functioning
organization. The manner in which implementa­
tion takes place may so divert the program from
the course intended by its planners that it can
never be restored to their original purposes. The
development of a design for action, and detailed
description of that design, produces only an image
of an organization; it cannot, of itself, give birth
to the reality. If reality is to complete the image
rather than distort or destroy it, the planners of
a medical group must give meticulous attention to
every detail of the project and to all pertinent
relationships. They must frequently and persist­
ently survey the emerging result for departures
from those principles which they have determined
to be basic to their intent.
Specific problems that can be only partially
solved in a group-practice prepayment program
are rooted in factors inherent in a relatively free
and, therefore, competitive society: the doctor’s
concern for his continuous development as a phy­
sician, unhampered by group decisions affecting
his expenditure of time and energy; his concern
for success, economic and professional; and his
determination to preserve and enhance his pro­
fessional status. His wife’s wish for parallel gains
in social and economic spheres adds significant
pressure.
 None of these concerns can be dismissed as un­
important or unworthy; they must be met realis­
tically. The group’s economic structure must
provide stimulating incentives. The social rela­
tionships within the group and opportunities for
social life in the community must be attractive to
the doctor and his family. The group must have
status within the professional community that is
commensurate with the doctors’ dignity and in­
terests. The individual physician must have access
265-902 O—SB-------- 6
to hospital and academic activities normally the
focus of medical life. The group itself must
provide for ongoing intramural professional
development.
Differences of opinion will always exist between
interested workers, even in a group that functions
well. The challenge is to provide a structure that
will not stifle opinion or inhibit valid development,
but that will rather coordinate approaches in the
service of common goals.
73
 Original from
Digitized by
UNIVERSITY OF MICHIGAN
 Chapter XI
RECRUITMENT AND CONTINUING EDUCATION
OF SUBSCRIBERS
Need for Subscriber Education
The consultants were aware that the success of
a prepaid, group-practice, comprehensive health
care program serving a population of voluntary
subscribers would ultimately depend on the satis­
faction and loyalty of the subscribers themselves.
They believed that the surest way to achieve and
maintain such loyalty was to inform the potential
subscribers from the start about the character of
the program, its intent, its mechanics, its advan­
tages, and its disadvantages.
They bore in mind that the new program had
been developed in response to a specific need which
had been expressed by the unions themselves. The
unions had concluded that the need existed after
intensive survey and discussion of the health care
problems of their members. This need, in one of
America’s most highly developed cities with out­
standing medical services, was certainly not for
more health care. It was for coordinated health
care. It was for a nucleus of medically sophisti­
cated persons devoted to the service of this popula­
tion group, who would relieve the workers of the
confusion, time waste, and uncertainties that
attend fragmentation of health care through spe­
cialization. And it was need for an economically
feasible structure that would provide compre­
hensive medical services at predictable cost.
The consultants made a lengthy study of various
means by which these needs might be met, but the
plan that evolved was not rigidly preconceived. It
bad emerged from the pooled experience and
thinking of representatives of many interests,
with various points of view. The resultant plan for
giving service would “look and feel different” from
the methods of delivery of medical care to which
the workers had been accustomed. They would have
to be helped to adjust to the new program. Candid
explanations and clear information would form
the most reliable basis for their loyalty.
The delivery of medical care in the prepaid
group-practice setting would necessarily entail
working methods that would differ from the
familiar patterns of medical care as rendered by
the family doctor in individual practice. The pat­
terns developed by a comprehensive prepaid
health plan would become familiar to each mem­
ber when he came to experience the program in
operation. The planners intended to show specific
reasons for the use of these methods and to explain
the advantages that they would ultimately bring
to the user. They knew that, to be effective, such
explanations would have to be made repeatedly, in
a variety of ways, at various stages in the develop­
ment of the health care program. This continuing
process of member education was rooted in the
leaders’ conviction that they must not merely plan
for the population they were planning to serve,
but should work with them to achieve optimal
health care.
Methods of Subscriber Education
The process of education started when the un­
ions, recognizing that dissatisfaction with frag­
mented health care was widespread among their
members, began to consider the development of
coordinated health care benefits and made their
first inquiry into the nature of a prepaid, compre­
hensive program as one of several possible means
of answering their needs. The second major step
in the education process was the exchange of de­
tailed information between the core group to which
the unions delegated the responsibility for explor­
ing the feasibility of organized health care, and
a group of professional consultants familiar with
the planning and operation of various types of
organized health care programs, who were retained
by the core group as their advisers.
The teaching and learning process was continued
throughout the planning phase. With emphasis on
planning with, rather than /or, the users, an edu­
cational interchange was then actively pursued
through to all the potential subscribers, and among
all participants in the planning group. As deci­
sions were made and the program began to take
shape, the planning group became a unit consisting
of a team of consultants and the responsible core
within the sponsoring organizations.
When the health plan moved into its operational
phase, the education process took on momentum,
breadth, clarity, and effectiveness. The subscribers
began to have concrete experience with the pro­
gram." The planners recognized that ways of de­
livering and using the comprehensive services
could always be improved, and directed the on­
going educational process to this end.
Subscriber education thus proved to be a two-
way, unending process. Specifically, the steps just
described took the following forms:
Introducing the Concept:
General Education Conference
for Workers
The first step in subscriber education in the
Cleveland plan was taken in 1961 when the union
leaders opened the question of health care to the
rank-and-file of union membership as a problem
about whose solution the workers themselves should
think. As reported in chapter II, the Cleveland
AFL-CIO organized and held on March 25-26,
1961, the Sixth Annual Cleveland Workers’ Edu­
cation Conference, on the topic “The Health
Business: Direction Please.” This conference was
attended by more than 400 delegates.
In assessing the results of this meeting, it must
be recalled that the rank-and-file of these unions
were not wholly inexperienced with cooperative
action toward improved health care. A specific
need of a large segment of the union membership
had been recognized and had been successfully
met through cooperative action by the operation
of the Union Eye Care Center since 1957. Experi­
ence with this simple venture had taught the union
members that, for a subscription fee of 25 cents
per member per month, they and their dependents
could have a service for a specific health need.
When in 1961 questions about general health care
were introduced to them, they could relate the new
concepts to this favorable experience.
Emphasis at the March 1961 conference was
upon understanding the problems involved in
health care, rather than upon achieving a specific
solution. Well-prepared materials, indicating the
areas to be discussed at the conference, were given
in advance to discussion group leaders who were
appointed before the date of the meeting. These
leaders were reminded that if their discussion
groups attained clear understanding of a few spe­
cific points, this would prove more valuable to the
ultimate structuring of any program that might
develop than if a hurried effort were made to cover
all relevant topics. Among the points suggested for
discussion were “What is meant by ‘good medical
care'?" “How can excellence in medical care be
promoted by the organizing and financing of
care?" “Compare the medical care that we have
today with what we need.”
After the close of the conference the delegates
reported the essence of the discussions to their
constituents. The rank-and-file of the unions were
now aware that the possibility of cooperative ac­
tion to obtain better organized health care and its
financing was being actively considered. This
opened to each worker the opportunity to scruti­
nize his own health care problems; to ask himself,
and to discuss with his family and friends, wheth­
er his current medical and hospital arrangements
were the best that he might reasonably expect.
With this general opening of the field for thought,
the first step in subscriber education had been
taken.
Continuing Information and Feedback:
Union Members and Representatives
Meet With Consultants
The second step was taken by the consultants
who were retained in June 1961 by the directors of
the Union Eye Care Center to advise them on the
planning of a specific health care program. In
order to learn the needs of the population to be
served and to assess their response to the prospect
of a prepaid, direct-service program, these con­
sultants started a continuing series of meetings
with union members and their representatives.
Material was introduced in an orderly fashion, at
a pace designed to promote the potential sub­
scribers’ comprehension of the objectives and
methods under consideration and to permit the
planners to evaluate the degrees of comprehension
achieved. Various types of meetings were held:
1. The consultants and a representative of the
U£. Public Health Service met with shop
stewards from locals of the machinists’, meat-
cutters’, and retail clerks’ unions- The concept
of prepaid, direct-service health plans was
described and discussion of the shop stewards'
reactions was invited.
At this early point in the considerations, the con­
cern of the individual worker for the safeguard­
ing of his personal dignity and the confidential
nature of the patient-doctor relationship was sa­
lient. This concern was expressed at least as em­
phatically as the demand for adequate medical and
surgical care. Because they had never had expe­
rience with the working patterns and staff-patient
relationships that are developed in a well-func­
tioning health plan, the employees' first reaction
was to equate the proposed health plan with a pub­
lic clinic, or with the type of care received in the
emergency room of a community hospital. They
were understandably resistant to the prospect of
relinquishing their personal-doctor relationship
for that type of care.
Women appeared to be more reluctant than men
to abandon the traditional family-doctor pattern.
A Negro delegate expressed a reservation toward
group-practice, prepaid medical care which he as­
sociated with his experience in public clinics. The
patronizing attitude toward patients that he had
sensed in public clinics led him to warn that the
new concept would not prove acceptable if simi­
lar attitudes were to develop in the staff serving
the group practice canter.
This meeting clearly showed the planners that to
bo favorably received by the workers, a voluntary
health care program must meet the following
standards:
(a) The health care itself must be of high
professional and technical quality, (ft) The
mechanics of service must be easily understood,
and convenient for the use of the average mem­
ber. (c) The system must be reliable and sen­
sitive to the members' needs and must provide
rare at the times that care would be needed.
(d) The setting must be dignified and pleasing,
(c) The program must be economical.
2. Ar the CHF plan was being developed
through 1962. the consultants reported each
significant step to the union leaders.
3. Educational materials focused on structural
details of the evolving plan were prepared
by the president of the CHF board and the
consultants.
The materials were used by th© unions in a series
of daylong workshops in March and April 1963.
Individual sessions were attended by 20 to 200
persons, with a total participation of 500 union
leaders, from shop stewards through top-rank un­
ion officers.
The history and objectives of CHF were ex­
plained. Its directors and the consultants were
introduced and their methods of procedure were
described. General information was given on such
key subjects as the nature of group practice, the
concept of direct service and prepayment, and their
application to CHF.
The way in which medical care would be orga­
nized under CHF was depicted diagrammatically
on projected slides and supplemented with full
explanations. The central position of the family
doctor and pediatrician was stressed. The rela­
tionship between these key physicians and the spe­
cialists was made clear. The availability of labora­
tory, X-ray, pharmacy, and other ancillary serv­
ices was pointed out. Statistical tables were used to
demonstrate the size and composition of the pro­
fessional and supporting staff that would be needed
for a subscriber group of 25,000 persons. The size
and type of medical center that would be adequate
for the services envisioned and the number of
hospital beds that would be needed for the pro­
posed population were shown. Architects' sketches
of the projected medical center were displayed and
the rationale of its floor plans was discussed.
The relationship of the new prepaid program to
health insurance coverage already in effect through
the unions was clarified. It was explained that
health insurance currently in effect could be re­
tained by the members. In this connection, the con­
cept of dual choice was expounded, and the con­
tract provisions that would be necessary to permit
dual choice were outlined. Clauses permitting dual
choice had already been negotiated by the meat­
cutters’ and retail clerks’ unions. The auto work­
ers in another area had had a clause for a decade
which permitted use of a direct-service plan as one
alternative in a dual choice. Other unions planned
to raise this point in future negotiations.
At this basic educational conference the con­
sultants stressed that in order to draft the project
they must make a realistic advance estimate of the
kinds of services that would be required by the
subscriber population. In order to arrive at such
an estimate, they must have information about the
health needs of that population. They presented
statistics (on slides) from the experience of an
existing health plan, similar to that projected by
CHF, to demonstrate the effects of member utiliza­
tion upon rate schedules: The number of doctors’
office visits per year per 1,000 members in various
age groups; the number of hospital days per year
by age groups; the number of hospital beds re­
quired per 1,000 members per age group.
The audience then broke up into discussion
groups. Remarks by discussion group participants
indicated their grasp of essential concepts. One
participant commented that older union members
in his shop had been averse to the health plan be­
cause they believed that their subscription would
be paying for the medical care of young members’
children. The statistics showed that they were
wrong. The largest portion of moneys developed
from subscriptions would be expended for the care
of older persons because older members, as a group,
would need more medical attention and more hos­
pital days than younger members.
With this information as a basis for compre­
hension, the participants were introduced to some
considerations basic to ratemaking: The relation
of members’ medical needs to size and composition
of staff and facilities and the relation of budget
to dues. The projected rate structure was compared
with health insurance rates currently being paid
in the Cleveland area. It was noted that if, in prac­
tice, the rates proved to be inadequate to meet the
cost of operation, additional revenue could be gen­
erated from either employee contributions through
payroll deduction or charges for certain services
as obtained. The advantages and disadvantages of
payroll deduction were explored. The principles
applying to service charges were discussed in
detail.
There are two major approaches to fee-for-
service charges as a supplement to dues:
1. A charge may be made for those services
which are less often used by a small propor­
tion of the insured population and which are
especially costly. A typical example is hos­
pitalization. Hospitalization is needed by
about 8 percent of a typical health plan popu­
lation per year. Because of this low percent­
age of utilization, charging for hospitaliza­
tion obviously concentrates a burdensome cost
upon a small group within the subscriber
population, instead of spreading it over a
large proportion of the membership. For the
same reason, the total amount of revenue gen­
erated for the program by this approach is
small, even though the cost of a single hos­
pitalization may be catastrophic for the
individual.
2. An alternative approach to supplementation
of dues by fees is to make a modest charge for
services most commonly used by the largest
percentage of the membership. A typical ex­
ample is a KI fee for each visit to the doctor’s
office. Since an estimated 75 to 80 percent of
the subscribers to a health plan see their doc­
tor at least once a year, this method spreads
the cost of care much more generally through
the covered population.
Neither of these alternatives spreads the cost as
effectively as setting the dues high enough to make
incidental charges unnecessary. The total cost of
the entire program is then spread over the entire
membership, from those who never use the services
to those who have the most drastic need for the
most expensive services. Although this method is
most appealing, it means that subscription fees
must be high. The question whether the member­
ship would be willing and able to pay such high
dues or would prefer another alternative was dis­
cussed.
Sponsorships
In each workshop some time was spent in dis­
cussing $10 sponsorships to the building fund to
be purchased voluntarily by rank-and-file union
members. Such sponsorships were considered to be
an adjunct to the education program in three ways:
1. Campaigning for the purchase of sponsor­
ships would develop interest in the program
on the part of both campaigners and buyers.
2. Each person who purchased a sponsorship
would feel a definitive tic to the evolving plan,
which would hold through the interval of
more than a year before services could begin.
3. Purchase of a large number of sponsorships
would substantially aid the building fund.
At the end of the scries of daylong workshops,
more than 200 of the 500 union members who had
attended signed to assist the sponsorship campaign.
A year later, nearly 4,000 sponsorships had been
purchased, committing approximately $40,000 to
the development of the health center.
Introducing the Plan to Groups Other
Than Unions
The member education program was extended
not only to the labor unions but also to other sectors
of the community. Intensive education was di­
rected toward groups shown by the experience
of other prepaid health plans to have a strong po­
tential of interest in the CHF program. Meetings
were held with representatives of the faculties of
Case Institute of Technology and Western Reserve
University. Committees responsible for enrolling
subscribers to the new health plan were formed of
members of various departments of these two
institutions.
The executive director of CHF assumed respon­
sibility for maintaining contact, with these faculty
committees and with the unions that had been
represented at the workshops.
Continuing Education Before Opening
of the Health Center
At a series of meetings with union representa­
tives of the autoworkers, machinists, meatcutters,
retail clerks, and steelworkers, information was
furnished about the health plan and its develop­
ment. The materials presented were designed with
the specific intent of stimulating and maintaining
rank-and-file interest, and of furthering their
conceptual and factual understanding of the plan.
In February 1964 a series of 26 neighborhood
meetings was begun for prospective subscribers to
the health plan, their wives and adolescent
children, from the five unions mentioned above and
the carpenters' and painters1 unions. Attendance
at each meeting was limited, ns nearly as feasible,
to 75 persons in order to encourage participation
in discussions. Total attendance at the 26 meetings
was about 2,500. At each session a half-hour talk
was given on a topic such as, "Why Was CHF Or­
*'
ganized? or "How Do Members Use This Kind
of Service?
* ’ Discussion usually continued for 2 or
3 hours after each presentation.
Similar meetings were held with faculty mem­
bers of Western Reserve University and Case In­
stitute of Technology.
Uy spring 1964, volunteers from the groups that
had attended these neighborhood meetings were
ready to begin the enrollment of members in the
health plan. A goal was set to sign 13,000 persons
by the opening date of the center, July 1,1964.
Materials Used in Subscriber Education
To explain the program to interested persons
and to provide them with information that they
could pass on to others, well-prepared educational
materials proved essential. The ways in which
these materials were used were observed to make a
critical difference in their impact.
To fund the development of a booklet explain­
ing group medical practice, the CHF planners
received a grant of $2,000 from the education
budget of the Group Health Association of Amer­
ica. They produced a 24-page booklet with text,
photographs, and diagrams explaining the char­
acter of an organized program of prepaid, group-
practice comprehensive health care. The effort was
to present a candid, persuasive statement to the
prospective member or to the officer of a pro­
spective group.
The pamphlet discussed the relationship be­
tween social changes of recent decades and the new
pattern of medical care. It outlined the growth of
medical specialties, the use of complicated equip­
ment for diagnosis and treatment which has
shifted care from the patient’s home to the doctor’s
office or hospital and the coordination of spe­
cialized practice through an organized program
comprising office and hospital care, the basic spe­
cialties, laboratory and X-ray services, nursing,
and unified case records. The differences between
indemnity types of health insurance and such uni­
fied, direct-service programs were clearly drawn.
The inadequacies of indemnity coverage were con­
trasted to the comprehensiveness of CHF
program.
In addition to the booklet, a leaflet was prepared
describing the services to be offered by CHF and
displaying a photograph of the center and a map
showing its location and outlining the area within
which resident members would be eligible to
receive home-call service.
The pamphlet, the leaflet, and a covering letter
from union leaders were mailed to 65,000 union
members. The response was negligible.
The same pamphlet and leaflet were found to be
effective and necessary components of member
education when they were distributed at meetings
of potential subscribers. After a verbal and visual
explanation of the principles and processes in­
volved in the health plan, the printed statements
were distributed for study at home. The concepts
presented in the meeting were new to the experi­
ence and habits of thought of the union members,
and the attractive, thoughtfully designed materi­
als served to remind them of pertinent points, to
clarify details, to explain relationships, and to lay
a firm basis for later discussions.
Specific Problems in Subscriber
Education
The union members who were potential sub­
scribers to the CHF were well adapted to the gen­
eral concept of a cooperative venture. As union
members they were heirs to a long tradition of
group action aud were aware of the benefits to be
derived from such action. This background was
amplified by their pride and satisfaction in the
Union Eye Care Center. It is of particular inter­
est, therefore, that the issues they raised in explor­
ing CHF were precisely those that have been
raised in meetings with other potential subscribers
from widely different middle-income back­
grounds : Will I have my own doctor? Will this be
a voluntary plan? Will I have my choice of type
of coverage?
Will I have my own doctor? This question was
of chief concern to women and the less educated
workers. The urgency expressed by them on this
point stands in striking contrast to the facts of
modem urban life with its shifting populations
and its tendency to depersonalization. Hospital
emergency rooms are increasingly used by persons
of a broad income range when they are struck by
acute disease.
The emphasis upon an individual doctor-patient
relationship is particularly interesting in our era
of ramified specialization: Persons of all classes,
even those with very large incomes, are frequently
bewildered and lose their sense of continuity of
relationship with their personal physician when
he calls upon specialists to handle various aspects
of their care. The benefits of contemporary med­
ical techniques can be delivered only through the
interaction of many specialists. Acceptance of this
by the patient requires a lessening of his
dependence upon a personal relationship with the
physician.
The inconsistencies between wish and fact were
thrown into sharp relief when CHF consultants
explored this question further with audiences of
potential members. A revealing pattern emerged:
Although the less educated person emphasized
"persons!" care most, he often understood- the per­
sonal doctor-patient relationship least. One union
member rose at a meeting and gave a warm testi-
monia.1 to “my personal doctor; a friend who is
always there when I need him,” having thus made
a point against group practice, he sat down. A few
minutes later, he rose to criticize the local medical
society. He had telephoned that society’s office to
ask for the name of a urologist. The secretary had
suggested that he consult his personal physician
about such a referral. He considered the suggest ion
arbitrary and wasteful of his time. Like many
persons, he had not understood the proper use of
his relationship to his own doctor.
The proper form and continuity of the doctor­
patient relationship is most clearly grasped by
those whose education and experience tend to par­
allel those of the doctor. It is, for example, not
surprising that when the Kaiser Foundation
Health Plan first opened its rolls, professional
and white-collar workers were the earliest to re­
spond ; among them, faculty members of the Uni­
versity of California, groups of schoolteachers,
engineers, and other professional or educated
groups. For many persons in our era, the most
satisfactory direction through the maze of speciali­
zation is afforded by a comprehensive group
practice plan.
The emotional needs of many subscribers are
such that a prepaid health program must make ade­
quate provision for them to identify with it as their
plan. They must feel pride and confidence in their
medical center. They must be given every reason­
able cause to feel trust and loyalty toward the doc­
tors and the paramedical staff. One of the most
important bases for such loyalty is certainty that
the physicians and their aides will safeguard the
members’ privacy and personal dignity to the ex­
tent that they are safeguarded by the doctor in
individual practice.
Will this he a voluntary plan? and Will / have
my choice of type of coverage? A realistic answer
to these questions requires exploration of another:
Precisely what is voluntary about “voluntary
health insurance”?
When prepaid medical care was first offered in
the United States, most subscribers joined as in­
dividuals or they decided as individuals to join
through a group. Those early arrangements in­
volved three parties: The subscriber, the providers
of service, and the insurance plan chosen by the
subscriber.
Beginning in the 1940’s, negotiated health and
welfare plans emerged and grew rapidly, establish­
ing large funds for the purchase of prepaid medi­
cal care. Under such arrangements the decision to
enroll in a prepayment plan was no longer a matter
of individual choice. Hundreds of thousands of
workers became enrolled in prepaid medical plans
as a result of group action, such as labor-mange-
ment agreements. In the late 1950's, the trend to
compulsory pooling of funds for medical care was
accelerated by legislation providing government
contributions to health insurance, eventually for
employees of all levels of government—Federal,
State, county, and city.
The bulk of the employed population of this
country is now covered by compulsory health in­
surance. These persons do not have individual
choice as to whether or not to be insured. Each is
free not to uxe the medical wvicea for which a
premium is paid on his behalf, but he cannot use
the allocated money for any other purpose. "Volun­
tary" as applied to health insurance means essen­
tially "nongovernmental”—and even this distinc­
tion becomes blurred for the large number of gov­
ernment employees who are insured by programs
resulting from legislation applying to this cate­
gory of worker.
The trend to compulsory pooling of health in­
surance funds through collective bargaining or
legislation appears irreversible. The Federal Em­
ployees Health Benefits Act of 1959 applied to
nearly 2 million Federal employees who, with their
dependents, constitute a population of almost 6
million. A number of States and local governments
have passed, or predictably will pass, similar
legislation.
Dual Choice
In one important sense, however, a prepaid
group practice health plan based on block member­
ships can and must be truly voluntary if it is to
succeed: within each population of potential sub­
scribers, each individual must be allowed a dual
choice of health plans. The person who does not
like the group-practice, prepayment plan must be
given a fair opportunity to opt for another type
of coverage. Only free choice between alternative
health insurance schemes can produce a wholesome
group of satisfied, loyal subscribers.
The education of union leaders, union members,
and employers concerned with CHF, about this
indispensable concept required much time and the
work of highly trained expositors. Union leaders
and active union members were convinced by
theory and experience that majority rule is essen­
tially right. They tended to consider dual choice a
significant deviation from union policy. Manage­
ment feared that the extra administrative work
involved in dual choice would increase costs.
The administration of dual choice is actually
simple, and entails no significant costs in any of
the numerous places where it has been routinely
offered—California, Hawaii, and elsewhere. The
alternative plans are explained to the prospective
subscriber when enrollment is first discussed. Dual
choice is again offered at set. intervals (as on a
specific date annually). Those who wish to change
may do so on that date The choice stands until
the next option date.
Tile benefit of dual choice to the individual is
obvious from the start. The premium-paying orga­
nization learns with experience that dual choice
offers an alternative to dissatisfied individuals and
provides a continuous opportunity to compare
costs and performances of systems.
Results of the Membership Drive
On the opening date of the center, July 1, 1964,
the initial goal of 13,000 members had not been
reached. One of the major unions with a large po­
tential membership had been involved in a strike
that lasted 4 months. The center opened with
10,000 members; 3 years later, there are more than
27,000 members.
This nearly tripled membership may be the
most satisfactory' evidence that the plan has proved
successful. All its problems have not been solved,
nor have all the subscribers been fully satisfied
with every aspect of the program. Perhaps the
very fact, that it is a new type of service alerts
people to the possibility of problems and tends to
magnify their awareness of difficulties. The expec­
tations of some who have idealized the new plan
may have sharpened their criticism of flaws that
would have been considered negligible in a long-
established institution.
Since the center opened, the program’s leaders
and staff have continued analysis of problems and
comparison of experience with other programs.
Valid criticisms have been recognized, and their
causes traced and corrected. Less objective criti­
cisms may not be ignored. If they arise, it is be­
cause some emotional need has not been fulfilled.
In their ongoing appraisal of patients’ responses,
the CHF leaders recognize that prepaid, group-
practice, comprehensive health plans have not
reached the ultimate in evolution. Their purpose
is not to claim the ultimate but to strive for it.
Summary and Conclusions
The program for the recruitment and education
of subscribers to a prepaid, group-practioe com­
prehensive health plan must be based on precise
recognition of the reasons for the development of
that particular health plan. The CHF health plan
emerged because a large number of employed per­
sons were dissatisfied with certain inadequacies in
the existing organization and delivery of medical
services.
They were fully aware that eminent physicians
were providing medical care of outstanding qual­
ity in their city, but they could not benefit from
this care to a degree that they felt to be reasonable.
As workers and wage earners, they were forced to
compress as much as possible the time spent upon
attention to their health care. Many technical re­
finements in medicine and surgery seemed to them
to be heavily offset by the confusion, inconvenience,
time waste, and uncertain costs that derived from
geographical spread of services, multiplication of
procedures, loss of continuity of care, and other
concomitants of specialization where it was not
counterbalanced by coordination. The CHF plan
offered a new service structure specifically de­
signed to overcome those particular inadequacies.
It is obvious that any new service structure, if
it represents a serious attempt to deal with existing
problems, will noticeably differ from the structure
that produced these problems. In differing from
the old, the new plan will lack certain features to
which people have been accustomed, just as it will
possess certain features with which they have not
been familiar. To take full advantage of the new
mode of service, the subscribers must change some
habits.
Persons who are accustomed to bringing their
emotional responses into line with their rational
choices and to solving problems through coopera­
tive action, readily grasp the concepts fundamental
to a coordinated health service. They see its advan­
tages, and they allow for its disadvantages or sug­
gest ways to overcome them.
Health care is deeply personal. It touches upon
matters about which all human beings are sensi­
tive in some degree, and about which many are
highly sensitive. Any health service that ignores
such sensitivity will, insofar as the prospective
subscriber has free choice, be rejected.
To bridge the unfamiliar, allay concern, and
teach subscribers how to make the most of a new
service structure, its leaders must adhere firmly
to a policy of planning with, not for, the member­
ship. Planning with people entails the develop­
ment of a common conceptual vocabulary. The
ability to think and plan together is fostered by
starting the program of subscriber education dur­
ing the earliest phases of study, before any specific
type of service structure is selected, and by con­
tinuing the interchange as a permanent feature of
the health plan.
Effective subscriber education consists essenti­
ally of the presentation and explanation of facts.
Few subscribers understand the facts about a
health service unless they are explained with many
examples. Meetings and discussion of various types
are useful. So are carefully prepared printed
materials that describe the program and discuss
the concepts on which it is based. Certain difficul­
ties can be clarified through explanation alone, but
others are eliminated only if the staff acts effec­
tively in response to the subscribers’ needs.
Most of the misunderstandings on the part of
potential CHF subscribers arose from their in­
ability to relate comfortably to the projected serv­
ice structure simply because it was not familiar—
or because the few aspects that did appear familiar
reminded them of institutions toward which they
felt an aversion such as the public health clinic or
the hospital emergency room. The education pro­
gram seemed to some to be presenting, in thin
disguise, the stale and unwelcome picture of a
clinic for the indigent.
The only effective way to acquaint persons with
a new mode of delivery of health services is to
allow them to experience it in action. Since no one
can experience a program that does not yet exist,
growth during the first few years of operation of
a health plan is inevitably slow. The first persons
to subscribe will, in the majority, be alert, pro­
gressive, conceptualizing individuals. Once the
program has become established, the less adven­
turous tend to accept it because it is a part of their
community, because it has the approval of others,
and because—in the light of others’ acceptance of
the organization—they are able to appraise its real
advantages to themselves.
The staff develops smoothness of function
through experience. As this occurs, the subscribers
recognize that they are receiving high-quality,
courteously rendered, private care within a frame­
work of coordinated specialty services and prepay­
ment, To the extent that these advantages are
genuine, loyalty is the subscribers natural re­
sponse, Loyal subscribers communicate their satis­
faction to other persons. In doing so, they make
the most significant of all contributions to member
recruitment and education.
Just as some physicians are constitutionally ill-
adapted to practicing as members of a group, so
are there patients who will never subscribe to a
group practice, comprehensive health plan as long
as they are allowed free choice between this and
other modalities. The problems that beset member­
ship recruitment and education for a prepaid,
group-practice, comprehensive health plan do not
differ essentially from those that challenge every
doctor in solo city practice. If he is to succeed, the
physician and his staff must prove to every patient
at every visit that they are worthy of the patient’s
intellectual confidence and emotional trust. The
loyalty of his patients is the only reliable founda­
tion upon which any physician can base his expec­
tation of growth in a medical practice.
 APPENDIX A
THE MEMBERSHIP AGREEMENT

COMMUNITY HEALTH FOUNDATION

A Nonprofit Corporation

GROUP MEDICAL AND HOSPITAL SERVICE AGREEMENT

FACE SHEET

This Service Agreement, consisting of the attached Group Medical and Hospital Service Agree­
ment and Benefit Schedules as supplemented by this Face Sheet, has been entered into between Com­
munity Health Foundation, an Ohio nonprofit corporation, and the group defined in Section 1C below in
order to provide eligible Subscribers and eligible Family Dependents electing to enrol) hereunder with
medical, surgical, hospital, and related health care benefits as specified in the attached Benefit Schedules.

The following provisions supplement corresponding provisions of the attached Group Medical and
Hospital Service Agreement.

Section 1. Definitions.

C. “Group” shall mean -

Section 2. Eligibility and Enrollment.

A.
(l). Subscribers must meet the following additional requirements:

A. (2). Family Dependents must meet the following additional requirements:

Section 3. Relations Among Parties Affected by Agreement.

No supplemental provisions.
Section 4. Rates and Payment.
The periodic payment schedule is as follows;
Subscriber only ,----------------

Subscriber and one Dependent $------------------

Subscriber and two or more Dependents I------------------

I------------ --
 Section L. Services and Benefits.
A. Within the Cleveland Service Area the Benefit Schedule applicable under this Agreement is Bene­

fit Schedule , Sections through .

B. Outside the Cleveland Service Area the Benefit Schedule applicable under this Agreement is

Benefit Schedule, Section

Section 6. Exclusions and Limitations.

No supplemental provisions.

Section 7. Conversion and Transfer.

No supplemental provisions.

Section 8. Term and Termination.

No supplemental provisions.

Section S. Amendment.
This Agreement, including the attached schedules and addenda, may be amended by CHF with re­
spect to any matter other than rates, by mutual agreement between CHF and Group. CHF may amend
this Agreement with respect to any matter, including rates, effective as of any anniversary date by
written notice to Group at least--------- days prior to the anniversary date. All such amendments shall
be deemed accepted by Group unless Group gives CHF written notice of non-acceptance at least
days prior to the anniversary date, in which event this Agreement shall terminate in accordance with
Section 8C effective on such date.

Section 10. Miscellaneous Provisions.

E. The address of Group is--------------

Executed at Cleveland, Ohio,---------------------- , 19------ , to take effect as of-------------- ——, 19

Accepted — , 19 COMMUNITY HEALTH FOUNDATION

An Ohio nonprofit corporation

By ----- --------------------------------------- --------------- By —----------- ----------------------------------------- -----------

Authorized Representative
 COMMUNITY HEALTH FOUNDATION
A Nonprofit Corporation
BENEFIT SCHEDULE "A"

Medical and Hospital Services—Group Membership, "A" Coverage

INTRODUCTION
Community Health Foundation, in consideration of the periodic payments to be paid to CHF by
Group and in consideration of the supplemental charges to be paid by or on behalf of Members, agrees
to arrange Medical and Hospital Services and other benefits during the term of this Service Agreement,
subject, however, to all terms and conditions of this Service Agreement and the attached Benefit
Schedule.
INTERPRETATION OF AGREEMENT. In order to provide the advantages of organized and planned
medical and hospital services and of group medical practice, CHF operates on a direct-service rather
than indemnity basis. To this end, CHF, on behalf of its members, contracts with Physicians and em­
ploys health and administrative personnel to provide, organize, and arrange the health services described
in the attached Benefit Schedule. The interpretation of this Agreement shall be guided by the direct-
service nature of the CHF program.

1. DEFINITIONS

As used In this Medical and Hospital Service Agreement and all attached benefit schedules and ad­
denda (except as otherwise expressly provided or made necessary by the context):
A. 'CHF' shall mean Community Health Foundation, a non-profit corporation organized for the pri­
mary purpose of arranging for Medical and Hospital Services.
B. 'Face Sheet’ is the instrument attached hereto and made a part hereof which contains the execu­
tion of this agreement and specific information relating to each group of subscribers to the Medical and
Hospital Services.
C. ’Group’ is defined In Section 1C of the Face Sheet.
D. 'Subscriber' shall mean a person who meets all applicable eligibility requirements of Section L and
enrolls hereunder, and for whom the prepayment required by Section 4 has been actually received by
CHF.
E. 'Family Dependent’ shall mean any member of a Subscriber’s family who meets all applicable
eligibility requirements of Section 2 and is enrolled hereunder and for whom the prepayment required
by Section 4 has been actually received by CHF.
F. ’Member' shall mean any Subscriber or Family Dependent.
G. 'Medical Group’ shall mean the Association of Physicians under contract with CHF.
H. ’Physician' shall mean any doctor of medicine associated with or engaged by Medical Group;
’Attending Physician’ shall mean the Physician primarily responsible for the care of a Member with
respect to any particular injury or illness.
J. ’Consulting Physician’ shall mean any doctor of medicine to whom a Member is referred for
consolation by Physician.
K. ’Hospital' shall mean any hospital to which a Member is admitted pursuant to arrangements by
a Physician.
L. 'Medical Office’ shall mean the offices of CHF at 11717 Euclid Avenue, Cleveland, and such
other offices as may be designated from time to time.
M. 'Medical Services’ shall (except as expressly limited or excluded by this Agreement) mean those
professional services of physicians and surgeons, and para-medical personnel, Including medical, surgical,
diagnostic, therapeutic, and preventive services, (!) which are generally and customarily provided in the
Cleveland Area, and (ii) which are performed, prescribed, or directed by Physicians or Consulting
Physicians.
 N. 'Hospital Services
* shall (except as expressly limited or excluded by thia Agreement) mean those services for regis­
tered bed patients which are (i) generally and customarily provided by acute general hospitals in the Cleveland Area, and (ii)
which are prescribed, directed, or authorised by a Physician.
O. “Service Area
* shall mean that geographical area within a radius of thirty miles of Medical Office.
P. 'House Call Service Area' shall mean that geographical area of postal tones 3, 4, 6, 8, 10, 12,14, 15, 17, 18, 19, 20, 21,
22, 23, and 27, within which house calls are rendered under this Agreement Such area may be revised without notice from time
to time.

2. ELIGIBILITY AND ENROLLMENT

A. ELIGIBILITY OF INDIVIDUALS. Individuals will be accepted for enrollment hereunder only upon meeting all applic­
able requirements set forth below.
(1) Subscribers. To be eligible to enroll as a Subscriber a person must be either (a) an actual and bona fide member
of Group or (b) entitled under the trust agreement employment contract or other established standard of Group, on his own
behalf and not by virtue of dependency status, to participate in medical and hospital care benefits arranged by Group. Sub­
scribers must meet the additional requirements specified in Section LA (1) of the Face Sheet,
(2) Family Dependents. To be eligible to enroll as a Family Dependent a person must be either (a) the spouse of the
Subscriber or (b) a dependent unmarried child under the age of IS of either the Subscriber or his spouse, Foster children en-
tirely supported by the Subscriber and hia spouse and legally adopted children of either, aa well as natural children, are included.
Newborn children will be treated as Family Dependents from birth if promptly enrolled by a parent.
Family Dependents must meet the additional requirements specified in Section LA (2) of the Face Sheet.
(3) Change of Group Eligibility Rules. The composition of Group and requirements determining eligibility for mem­
bership in Group and for participation in medical and hospital care benefits arranged by Group are considerations material to
the execution of thia Agreement by CHF, During the term of this Agreement no change in Group’s eligibility or participation
requirements shall be permitted to affect eligibility or enrollment under thia Agreement in any manner deemed adverse by CHF
unless such change is effected by mutual agreement with CHF.
B, ENROLLMENT. While enrollment is open for Group, Subscribers and Family Dependents who meet the requirements of
Subsection A may enroll hereunder by submitting complete applications on forms provided by CHF,

3. RELATIONS AMONG PARTIES AFFECTED BY AGREEMENT

The relationship between CHF and Medical Group is an independent contract relationship; Physicians and Hospitals are
not agents or employees of CHF, nor is CHF or any employee of CHF an employee or agent of Medical Group or Hospitals.
Physicians maintain the physician-patient relationship with Members and are solely responsible to Members for all Medi­
cal Services. Hospitals maintain the hospital-patient relationship with Members and are solely responsible to Members for all
Hospital Services.
Information from medical records of Members and information received by Physicians incident to the physician-patient
relationship is kept confidential, and except for use incident to bona fide medical research and education or reasonably neces­
sary in connection with the administration of this Agreement, is not disclosed without the consent of the Member.
Neither Group nor any Member is the agent or representative of CHF, and neither shall be liable for any acts or omissions
of CHF, its agents or employees, or of Medical Group, any Physician, or Hospital, or any other person or organization with which
CHF has made or hereafter shall make arrangements for the performance of services under this Agreement.

4. RATES AND PAYMENT

Payment for CHF coverage shall be made as follows:
PERIODIC PAYMENT SCHEDULE. Group shall remit to CHF on behalf of each Subscriber and his Family Dependents
the amount specified in Section 4 of the Face Sheet. Only Members for whom the stipulated payment is actually received by
CHF shall be entitled to Medical and Hospital Services hereunder and then only for the period for which such payment is
received.
If any payment required above is not timely paid by or on behalf of any Member, all rights of such Member hereunder
shall terminate and may be reinstated only by renewed application and re-enrollment in accordance with all requirements of
this Agreement.

5. SERVICES AND BENEFITS

Subject to all terms and provision of this agreement, Members shall be entitled to receive services and other benefits as
follows:
A. WITHIN THE CLEVELAND SERVICE AREA. Within the defined Service Area in Cleveland, Subscribers and De­
pendents are entitled to receive the services and other benefits specified in the Benefit Schedule described in Section 5A of the
Face Sheet, all as provided, prescribed, or directed by Physicians. Within this Area, services are available only from Medical
Group and under direction of Physicians, and neither CHF nor Medical Group shall have any liability or obligation whatsoever
on account of any service or benefit sought or received by any member from any other doctor or other person, institution or
organization, unless prior special arrangements are made by a Physician and confirmed by written referral from Medical Group.
B. OUTSIDE THE CLEVELAND SERVICE AREA. Members regularly residing in the Cleveland Service Area while
temporarily away from home and outside said Service Area may receive the additional benefits specified In Section 5B of the
Face Sheet.
 6, EXCLUSIONS AND LIMITATIONS
A. EXCLUSIONS. AU services for conditions within any of the following classifications an excluded from the coverage
of tide Agreement.
(1) Employer or Governmental Responsibility. nineties, injuries or conditions covered by services or indemnification
or reimbursement available either:
a. Pursuant to any federal, state, county, or municipal workmen’s compensation or employer's liability law or
other legislation of similar purpose or import; or
b. From any federal, state, county, municipal or other government agency, including, in the ease of service-con­
nected disabilities, the Veterans’ Administration-
In ease of reasonable doubt as to whether a Member should receive benefits under this Agreement or from any
such source, if the Member seeks diligently to establish his rights to benefits from such other source, services will
be furnished under this Agreement; provided, however, that the value of such services, at prevailing rates, shall bo
recoverable by CHF or Its nominee from such other source, or from the Member, if and to the extent it is deter­
mined that monetary benefits should have been provided by such other source.
(2) Custodial, Domiciliary or Convalescent Care. Custodial care, domiciliary care, or convalescent care for which, in
the judgment of the Attending Physician, the facilities and services of an acute general hospital are not medically required.
(8) Cosmetic Surgery and Dentistry. Conditions for which plastic surgery is indicated primarily for cosmetic purposes.
Dental care and dental X-rays or hospitalization for extraction of teeth.
(4) Alcoholism and Drag Addiction.
(6) Effective Date of Coverage. A Member who is a hospital patient on the effective data of this Agreement will not
be entitled to benefits until his discharge from the hospital.
B. LIMITATIONS. Th® rights of Members and obligations of CHF and Medical Group hereunder are subject to the fol­
lowing limitations:
(1) Major Disaster or Epidemic, In the event of any major disaster or epidemic, Physicians shall render Medical
Services and arrange for Hospital Services insofar as practical, according to their best judgment, within the limitation of
such facilities and personnel as are then available, but neither CHF nor Medical Group shall have any liability or obligation
for delay or failure to provide Medical Services and arrange for Hospital Services due to lack of available facilities or personnel
if such lack Is the result of such disaster or epidemic.
(2) Circumstances Beyond CHF’s Control. In the event that, due to circumstances not reasonably within the control
of CHF, such as the inability of Physicians to arrange admission of a Member to a Hospital, or complete or partial destruction
of facilities, war, riot, civil insurrection, labor disputes, disability of a significant part of Medical Group personnel, or similar
causes, the rendition of Medical Services and arrangement for Hospital Services hereunder is delayed or rendered impractical,
neither CHF, Medical Group Dor any Physician shall have any liability or obligation on account of such delay or such failure
to provide services.
(3) Corrective Appliances and Artificial Aids. Artificial aids, such as crutches or canes, and corrective appliances,
such as braces, prosthetic devices, bearing aids, corrective lenses and eyeglasses, are not provided under thia Agreement, but
CHF will attempt to make arrangements whereby such aids and appliances may be obtained at reasonable rates; services neces­
sary to determine the need therefor will be provided.
(4) Injuries Caused by Third Parties. In case of injuries caused by any act or omission of a third party, and complica­
tions incident thereto, services and other benefits requested hereunder will be furnished to the Member. The Member, however,
shall be required to assign to CHF all right, title, and interest be may have in obtaining reimbursement from the third party
for medical services provided by or through CHF.
(6) Psychiatric Conditions. Psychiatric care, including any treatment for insanity, mental illness or disorders, is pro­
vided only in accordance with Sections BS(b) and J of ths attached Benefit Schedule.
(fl) Contagions Diseases. Services for contagious diseases are provided only in accordance with Sections B8(b) and
K of the attached Benefit Schedule.
(7) Rehabilitation. Rehabilitation is excluded except as specifically provided in Section E-2 of the attached Benefit
Schedule.

7. CONVERSION AND TRANSFER

A. CONVERSION TO INDIVIDUAL ENROLLMENT. If any person who has been a bona fide Member under this Agree­
ment for at least ninety (SO) days shall cease to bo qualified to continue as a Member for any reason other than:
(1) Nonpayment of applicable charges or
(2) Termination of Membership rights pursuant to Section 8;
Then said person may, within thirty (30) days after termination of rights under thia Agreement, convert his member­
ship to such classification of CHF individual coverage as may be in effect at the time of his application for conversion.

8. TERM AND TERMINATION

This Agreement shall continue in effect for one year from the effective date hereof and from year to year thereafter, subject
to:
A. TERMINATION ON NOTICE. Termination by either Group or CHF may be accomplished by giving written notice to
the other party at least sixty (60) days prior to the expiration date of this agreement or any subsequent anniversary d>>
 B. TERMINATION BY CHF. In the event that CHF terminates this Agreement pursuant to Subsection A, any Member
who is a registered bed patient in a Hospital at the effective date of termination shall receive these benefits: all benefits other­
wise available hereunder to hospitalized patients, for the condition under treatment, during the remainder of that particular
episode of hospitalization, until either (1) the expiration of such benefits, or (2) determination by the Attending Physician that
hospitalization is no longer medically indicated, whichever shall first occur. In maternity cases under care at the effective date
of termination the CHF may either at its election (a) continue obstetrical care only, through confinement and discharge, sub­
ject to payment of applicable supplemental chargee, or (b) convert the Member from group to individual membership. Except
as expressly provided in this Subsection all rights to benefits shall cease as of the effective date of termination.
C. TERMINATION BY GROUP. In the event that Group terminates this Agreement pursuant to Subsection A, then all
rights to benefits shall cease as of the effective date of termination.
D. DISCONTINUANCE OF CHF OPERATIONS. If, due to circumstances beyond CHF's control, it shall become imprac­
tical, in the judgment of CHF’s Board of * Director to continue the operation of CHF within the Service Area, then CHF may
terminate this Agreement st any time on ninety (SO) days written notice to Group, and neither CHF nor Medical Group shall
have any further liability or responsibility by reaaon of or pursuant to this Agreement after the effective date of such termi­
nation.
9. AMENDMENT
This Agreement, including the attached schedules and addenda may be amended by CHF with respect to any matter, in­
cluding rates, effective as of ths expiration date of this Agreement or any subsequent anniversary date by written notice to
Group in accordance with Section 9 of the Face Sheet

10. MISCELLANEOUS PROVISIONS

A. ACCEPTANCE OF AGREEMENT. Group may accept this Agreement either by execution of the acceptance provided
on the Face Sheet or by making payments to CHF pursuant to Section 4 hereof, and inch acceptance shall render all ter ma
and provisions hereof binding on CHF and Group.
B. AGREEMENT BINDING ON MEMBERS. By this Agreement, Group makes CHF coverage available to persona who
are eligible under Section 2; however, this Agreement shall be subject to amendment, modification or termination in accordance
with any provision hereof or by mutual agreement between CHF and Group without the consent of concurrence of the Members.
By electing medical and hospital coverage pursuant to thia agreement, or accepting benefits hereunder, all Members legally cap­
able of contracting, and the legal *representative of all Members incapable of contracting, agree to all terms, conditions and
provisions hereof.
C. APPLICATIONS, STATEMENTS, ETC. Members or applicants for membership shall complete and submit to CHF such
applications, or other forms or statements aa CHF may reasonably request; Members warrant that all information contained
In such applications, forms or statements submitted to CHF Incident to enrollment under this Agreement or the administration
hereof shall be true, correct and complete.
D. IDENTIFICATION CARDS. Cards issued by CHF to Members pursuant to this Agreement are for Identification only.
Possession of a CHF Identification Card confers no rights to services or other benefits under this Agreement. To be entitled to
such services or benefits the holder of the card must, in fact, be a Member on whose behalf all applicable charges under this
Agreement have actually been paid. Any person receiving services or other benefits to which be is not then entitled pursuant
to the provisions of this Agreement shall be chargeable therefor at prevailing rates. If any Member permits the use of his
CHF Identification Card by any other person, such card may be retained by CHF, and all rights of such Member pursuant to
this Agreement shall be terminable by CHF with the consent of Group.
E. NOTICES. Any notice under thia Agreement may be given by United States Mail, postage prepaid, addressed as follows:
If to CHF: Community Health Foundation
If to a Member: To the latest address provided for the Member on enrollment or change of address form
* actually
delivered to CHF.
If to Group: To the address Indicated in Section 10E of the Face Sheet

BENEFIT SCHEDULE "A"

Medical and Hospital Services—Group Membership, "A" Coverage
Subject to all terms, conditions and definitions In the foregoing Service Agreement, Members holding “A” coverage are
entitled to receive the Medical and Hospital Services and other benefits set forth in this Benefit Schedule. These services and
* CHF Service Area and only if and to the extent that they are provided, prescribed or directed
benefits are available only In th
by Physician.
For services and other benefits available outside the CHF Service Area, see Section L.
A. PHYSICIANS CARE IN HOSPITAL AND OFRCE.
1, Care While Hospitalized. All services of Physicians and para-medical personnel as required or directed by the At­
tending Physician, including operations, other surgical procedures, anesthesia and consultation with and treatment by Consulting
Physicians are provided without charge while the Member is admitted to a Hospital as a registered bed patient.
2. Caro in Medical Offices.
(a) Diagnosis and Treatment. All services of Physkans and para medical personnel, as requested or directed by
th Physician, including surgical procedures, eye examinations for glasses, and consultation with and treatment by Consulting
*
Physicians, are provided at Medical Offices and at such other places as directed and prescribed by Physicians. X-ray and labo­
ratory examinations and X-ray therapy are provided pursuant to Section D.

2fi3-fiO2 o—as----- 7
 (b) Preventive Services. In addition to diagnosis and treatment, Physician's services for health maintenance,
including physical check-ups. and other preventive medical services, are provided. X-ray and laboratory examinations in con­
junction with physical check-ups are provided pursuant to Section D.
Physical examinations required for obtaining or continuing employment or governmental licensing are not pro­
vided Under CHF coverage.

B. HOSPITAL CARE.
1. Admission to a Hospital. Physicians arrange for Hospital admissions of Members whose illness or injury requires
Hospital services. In the event that admission to an appropriate Hospital cannot be promptly arranged, Physician shall con­
tinue the care of the Member at home and in the Medical Office, while Physician and CHF staff exert their best efforts to ar­
range for appropriate hospitalization.
2. Hospital Services include room and board, general nursing care and the following additional facilities, services, and
supplies as prescribed by Physicians; including use of operating room, intensive care room and related hospital services, X-ray
and laboratory examinations. X-ray therapy, special diet, medications and supplies. Prescribed blood transfusions are provided
without charge if blood is replaced. Prevailing rates will be charged if blood is not replaced.
3. Duration of Hospital Services.
(a) Except as limited in paragraph (h) of this section and in section H-2 of this Schedule and elsewhere in this
Agreement and Benefit Schedule, a Member is entitled to 365 days of prescribed Hospital care for each continuous period of
hospitalization or for successive periods of hospitalization separated by leas than SO days. A new maximum benefit period of
365 days will commence only when there has been a lapse of 90 days or more between the last discharge and the next admission
even if the Member did not receive benefits from CHF during his last admission or was confined in a hospital operated by fed­
eral, state, county or municipal government, or in a nursing home or another institution.
(b> Care in the Hospital for contagious diseases and psychiatric conditions including insanity, mental illness or
disorders is limited to 30 days. As in all other admissions, such Hospital care is arranged by Physician in an acute general
hospital. Services in a hospital or other institution specializing in the care of tuberculosis or mental illness are not covered
under this Agreement,

C. HOUSE CALLS FOR EMERGENCIES OR ACUTE CONDITIONS.

All necessary house calls by Physicians for emergencies or acute conditions, and by visiting nurses when prescribed by
a Physician, are provided within House Call Service Area. A charge of $5.00 is made for each house call by a Physician. No
charge is made for prescribed calls by visiting nurses.
If, in the Physician's judgment, more than two house calls are required during a particular episode of treatment on
account of an emergency or acute Condition, no further payment for house calls is required after the second house call.

D. X-RAY AND LABORATORY.

All X-ray and laboratory tests and Services, including diagnostic X-rays, X-ray therapy, fluoroscopy, electrocardio­
grams, laboratory tests, and diagnostic clinical isotope services, are provided without charge when prescribed by Physician.

E. PHYSICAL THERAPY AND REHABILITATION,

1, Physical Therapy, Physical therapy is limited to conditions which, in the judgment of the Attending Physician, are
subject to significant improvement through relatively short-term therapy.
2. Rehabilitation. More extensive specialized physical medicine and rehabilitation services, including physical ther­
apy, are arranged by Attending Physician but *payment for such services are not made by CHF.

F, PRESCRIBED MEDICATIONS.
A reasonable charge is made for medications, for injectablea, for radioactive materials used for therapeutic purposes,
for allergy test and treatment materials, and for supplies furnished to outpatients at Medical Offices or on house calls. Dress­
ings and casts are provided without charge.
Prescribed medications for Members who are hospitalized are provided in accordance with section B-2 of this Schedule.

G. EMERGENCY AMBULANCE SERVICE.

Necessary ambulance service will be provided without charge within the Service Area If such service is ordered or
approved by a Physician.

H. OBSTETRICAL CARE.

L Physician's Care. Full Physician's care, including all applicable benefits set forth above, is provided.
2. Hospital Care. Full Hospital care is provided a Member whose admission to the Hospital is after 270 days continu­
ous membership in CHF. However, in dual- or multiple-choice groups, the Member's tenure in an alternate plan immediately
preceding joining CHF will be counted towards the 270 continuous days for purposes of eligibility to the obstetrical hospital
benefit
 J. PSYCHIATRIC CONDITIONS.
Care for psychiatric conditions, including any treatment of insanity, mental illness or disorders, is limited to Hospital
Care as described in Section B3(b) of this Schedule.

K. CONTAGIOUS DISEASES.
Diagnostic services and house calls are provided for contagious diseases; however, house calls are not provided for
tuberculosis or acute or contagious poliomyelitis after diagnosis.
Benefits for Hospital Care are in accordance with Section B3 (b) of this schedule.

L BENEFITS OUTSIDE THE CHF SERVICE ARIA.

These benefits are added to assist a Member who sustains accidental injury or becomes ill while temporarily away
from his regular residence and from the CHF Service Area. Accordingly, such benefits are limited to emergencies or other cir­
cumstances in which care is required immediately and unexpectedly; elective care or care required as a result of circumstances
which could reasonably have been foreseen prior to departure from Cleveland is not covered.
Subject to all the terms and conditions of the foregoing Service Agreement as modified and supplemented by this Sec­
tion L, a Member, while temporarily away from his residence and outside the CHF Service Area, is entitled to Benefits as pro­
vided in, and subject to the limitations of, this Section L.
1. Accidental Injury Outside CHF Service Area. If a Member, while temporarily more than thirty miles away from his
regular place of residence and outside the CHF Service Area, is accidentally injured and receives emergency treatment, CHF
shall, subject to the limitations hereafter set forth, pay such Member up to an aggregate maximum of $500.00 on account of
expenses actually incurred by such Member for:
a. emergency medical services;
b. emergency hospital services;
c. emergency ambulance service.
2. Emergency Illness Outside the CHF Service Area. If a Member becomes ill and requires emergency hospitalisation
while temporarily more than thirty miles from his regular place of residence and outside the CHF Service Area, CHF shall,
subject to the limitations hereafter set forth, pay such Member up to an aggregate maximum of $600.00 on account of expenses
actually incurred by such Members for:
a. hospital services received as a registered bed patient in a general hospital;
b. medical services received as a registered bed patient in a general hospital;
c. emergency ambulance service.
Obstetrical Cases. Payment as outlined above will be made on account of emergency hospitalisation required as a
result of complications of pregnancy but not for normal delivery.
3. Continuing or Follow-Up Treatment Monetary payment on account of accidental injury or emergency illness is
limited to emergency care required before the Member can, without medically harmful or injurious consequences, return to the
CHF Service Area. Benefits for continuing or follow-up treatment are provided only in the Service Area subject to all the pro­
visions of this Agreement If the Member obtains prior approval from CHF or a Physician, a portion of ths $600.00 allow­
ance may be applied toward the cost of necessary ambulance service or other special transportation arrangements medically re­
quired to transport the Member to the Service Area for continuing or follow-up treatment
4. Notification and Claims. Any Member having an emergency illness within the scope of Section L.-2 shall notify
CHF within forty-eight (48) hours after care is commenced.
No claim pursuant to this Section L shall be allowed unless a complete application for payment, on forms to be provided
by CHF, is filed with CHF within sixty (60) days after the date of the first service for which payment is requested.
Failure to give notice within the times provided in this Section L-4 shall not invalidate any claim if it is shown not to
have been reasonably possible to give such notice and that notice was given as soon as reasonably possible.
 RIDER

MEDICARE COORDINATED BENEFIT SCHEDULE "M"

Subject to all terms, conditions and definitions in the Service Agreement, Members
subject to "M" coverage are entitled to receive the Medical and Hospital Services and
other benefits as set forth in Benefit Schedule "A", as coordinated with the Medicare Act.

A. An individual will be accepted for enrollment hereunder if he/she meets the

qualifications established in Benefit Schedule "A", is 65 years of age or over, is entitled
to benefits and is enrolled in both Part A and Part B of the Medicare Act 42 U.S.C.A.
Section 1395 et seq., hereinafter called "Act," provided first that said individual has
filed with CHF a change of enrollment card notifying said CHF of his/her eligibility
for benefits under said Act. Said change in enrollment shall become effective immediately
after the receipt of the change in enrollment properly completed and executed and the
notification by the Department of Health, Education and Welfare that the individual is
entitled to benefits of both Part A and Part B, and the payment rate for this benefit schedule
shall be reflected within thirty (30) days thereafter.

B. CHF will coordinate Benefit Schedule "A" with the provisions of the Act
Parts A and B and in the event services and care provided for in the Act exceed those
offered under Schedule "A" CHF will exercise its best efforts to make said services and
care available; however, CHF does not assume the responsibility for arranging or providing
and does not guarantee the availability of said services and care and the arrangement
therefor will be the sole obligation of the individual.

C. There shall be no duplication of payments and no individual shall be entitled

to payment nor can he/she collect any fund, refund, monies or reimbursement in any
way, shape, manner or form, whether arising from hospital or medical services or other
services or duties rendered under the provisions of Benefit Schedule "M" Benefit Schedule
"A," and/or the Act; in the event any fund, refund, monies or reimbursement is paid to
the individual he shall immediately assign the same to CHF.

D. Each individual to whom coverage is provided herein shall be entitled to

psychiatric care, not to exceed $250.00 annually to a Physician; however, said visits are
limited to the individual and shall not be available to a Family Dependent.

E. The coordinated coverage under this Benefit Schedule "M" shall be open only
to individual subscribers. No family dependents shall be eligible to enroll herein.

F. The privileges of this Benefit Schedule "M" shall terminate immediately upon
and contemporaneous with the withdrawal or failure of the individual to maintain
coverage under Part B.
 Appendix B
THE MEDICAL SERVICE AGREEMENT
Thia Medical Service Agreement, (the uAgree­
ment”) made and entered into as of the first day of
January, 1966 by and between Community Health
Foundation, Inc
*, an Ohio corporation not for
profit, and The Community Health Foundation
Medical Group, a partnership of physicians
formed and existing under the laws of Ohio,
witnesseth:
Article I. Definitions
Section 1. As used in this Agreement, each of
the following terms (and the plural thereof, when
appropriate) shall have the respective meanings
hereafter expressed in this Article unless mani­
festly incompatible with the intent thereof:
(a) "Medical Group” shall mean The Commu­
nity Health Foundation Medical Group and any
successor thereof
* the Service Area by virtue of Membership Con­
(5) “CHF” shall mean Community Health
Foundation, Inc,, and any successor thereof.
(o) “Physician” shall mean a person who holds
the degree of Doctor of Medicine, is licensed to
practice medicine in the State of Ohio and who is
a partner in or employed by the Medical Group.
(<Z) “Health Plan” shall mean the voluntary
nonprofit health care plan established by CHF in
accordance with and subject to the provisions of
Ohio Revised Code Sections 1738.01 to 1738.19,
inclusive, and any amendments thereof.
(e) “Subscriber” shall mean an individual by
whom or on whose behalf Dues are paid, thereby
entitling him to Hospital Services and Medical
Services by virtue of the respective Membership
Contract under which coverage under the Health
Plan is afforded to him.
(/) "Family Dependent” shall mean an indi­
vidual for whom Dues are paid who is enrolled
under the Health Plan solely by virtue of being
included in the family (as that term shall be de­
fined from time to time in the Membership Con­
tract) of a Subscriber.
(?) "Member” shall mean any Subscriber or
Family Dependent
(A) “Membership Contract” shall mean that
contract under the terms of which a Member is
entitled to coverage under the Health Plan.
(r) “Duefi” shall mean the payments required
pursuant to Membership Contract.
(j) "Service Area” shall mean the geographical
area comprised within the boundaries of the Ohio
Counties of Cuyahoga, Geauga, Lake, Lorain and
Summit and located within a radius of 30 miles of
the offices maintained by CHF at 11717 Euclid
Avenue, Cleveland, Ohio, or 5510 Pearl Road,
Parma, Ohio.
(A) “Hospital Services” shall mean all hos­
pitalization to which a Member is entitled within
tract, including such nursing and incidental serv­
ices such as X-ray and laboratory services as are
customarily furnished by general hospitals in the
Service Area.
(Z) "Medical Services” shall mean all profes­
sional medical out-patient and in-patient services
to which a Member is entitled within the Service
Area by virtue of Membership Contract, exclud­
ing, however:
(i) all professional services rendered by the
Medical Group with respect to illnesses, injuries
or conditions as to which coverage is afforded a
Member pursuant to any federal, state, county or
municipal Workmen’s Compensation or Employ­
ees Liability law or other legislation of similar
purpose or import, or as to which reimbursement
or indemnity is provided a Member from any fed­
eral, state, county, municipal or other govern­
mental agency, including, in the case of military
service-connected disabilities, the Veterans
Administration;
 (ii) such professional services as shall be
rendered to Members in the Service Area by
medical practitioners (who are not serving as
Physicians hereunder) in circumstances under
which as a result of emergency or other factors
the care of the patient is not under the control of
a Physician;
(iii) all professional services rendered by the
Medical Group to persons who are not Members;
and
(iv) all other professional services rendered
by the Medical Group as from time to time shall
be excluded from the definition of Medical Serv­
ices by mutual agreement of CHF and the Medical
Group.
(m.) “Supplemental Charges” shall mean the
charges (not covered by Dues) made directly to
Members for items such as, but not limited to,
office visits, radiology, laboratory, physical ther­
apy, X-ray therapy, emergency room treatment,
transfusions, injections, allergy materials, al­
lergy injections, hearing tests, hearing aids, radio­
active isotope studies, dressings, casts, medical
supplies, hospital room and board, refractions
and glasses.
(n) “Medical Advisor (s)” shall mean such in­
dividual medical practitioner or such group of
medical practitioners (none of whom is serving as
a Physician hereunder) as CHF shall appoint
with the approval of the Medical Group to per­
form the various duties delegated in this Agree­
ment or hereinafter delegated by CHF or by joint
act ion of CHF and the Medical Group.
Aikiaona IL Recitals
Section 1. CHF and the Medical Group desire
by this Agreement to effect arrangements pursuant
to which the Medical Group will perform all of the
Medical Services required to be furnished to each
member within the Service Area pursuant to the
respective Membership Contract under which cov­
erage under the Health Plan is afforded to him.
Sec. 2. CHF and the Medical Group, respec­
tively, acknowledge that they will continue to
maintain separate and independent management
and that, each has full and complete authority and
responsibility with respect, to administering its
respective organization and operation. The Medi­
cal Group agrees that it will make no changes in
its Partnership Agreement data January I, 1966,
without advising CHF in writing of any such
changes prior to adoption thereof by the Medical
Group.
Sec. 3. None of the provisions of this Agree­
ment are intended to create nor shall be deemed or
construed to create any relationship between the
parties other than that of independent parties con­
tracting with each other hereunder solely for the
purpose of effecting the provisions of this Agree­
ment.
Sec. 4. Neither of the parties hereto nor any of
their respective employees is the agent, employee
or representative of the other.
Sec. 5. In order best to service the Health Plan
and promote the best interests of the parties hereto
and each Member, the parties respectively ac­
knowledge to each other that they will attempt in
good faith, to extend from year to year their con­
tractual arrangements hereunder, revised, how­
ever, to take account of such current economic,
professional and other material factors as shall
prevail from time to time.
Sec. 6. CHF acknowledges that as a material
inducement to the Medical Group to enter into and
perform under this Agreement, the parties have
represented and warranted to each other that all
of the actions of the parties in administering the
Health Plan and in performing the respective ob­
ligations to be performed by the parties hereunder
shall at. all times be subject to and governed by
such ethical standards relating to the practice of
medicine as from time to time shall be currently
prevalent
Sec. 7. The parties acknowledge that it is neces­
sary for them to constantly exchange information
and cooperate fully regarding policies affecting
the Health Plan and the administration of this
Agreement, to the end of achieving an orderly and
effective administration of the Health Plan and
this Agreement.
Article III. Covenants of Medical Group
Section 1. Medical Group covenants:
(a) to provide Medical Services to each Member
in accordance with the respective Membership
Contract under which coverage under the Health
Plan is afforded to him;
(K) to use its best efforts in rendering Medical
Services in order to provide a quality of medical
care in conformity with accepted medical and sur­
gical practices prevailing from time to time in the
Service Area;
 (c) to provide for the availability of Medical
Services at such time and in such locations within
the Service Area us shall be necessary and practi­
cal for the prompt and proper rendition thereof;
(d) to make only such changes in the present
hours during which Medical Services are provided
as shall be approved by CHF and to take under
advisement for approval changes proposed by
CHF in the present hours during which Medical
Services are provided.
(«) to file with CHF all schedules and work
rules applicable to Physicians;
(/) to deliver to CHF at reasonable intervals
written reports on the quality of the Medical Serv­
ices rendered by the Medical Group, including
various techniques developed by the Medical
Group to assure a high quality of Medical Serv­
ices;
(ff) to use its best efforts in obtaining such hos­
pital privileges for Physicians as shall be adequate
to meet the requirements for the Hospital Services
to which each Member shall be entitled pursuant
to the respective Membership Contract under the
terms of which coverage under the Health Plan is
afforded to him, provided, however, that it is
agreed that the Medical Group shall not be respon­
sible if such requirements are not satisfied for
causes beyond its reasonable control; and
(A) to only engage the services of such consul­
tants, and specialists engaged in the practice of
medicine (in addition to the Physicians) as shall
be necessary, convenient or appropriate for the
purpose of maintaining a high quality of Medical
Services, it being agreed that the Medical Group
shall not otherwise subcontract nor delegate its
duties hereunder unless CHF shall so approve.
Article IV. Covenants of CHF
Section 1. CHF covenants:
(а) to continue to maintain, equip, furnish, sup­
ply and staff facilities adequate to enable the Med­
ical Group to furnish the Medical Services re­
quired to lie furnished hereunder;
(б) to perform all administrative, accounting,
enrollment, and other functions necessary, con­
venient or appropriate for the administration of
the Health Plan and this Agreement;
(c) to not intervene in any manner with the
rendition of Medical Services by the Medical
Group, it being agreed that the Medical Group
shall have the sole responsibility in connection
therewith;
(d) to pay all hospitals for the services ren­
dered by them to each Member admitted by ar­
rangement with a Physician to such hospitals
pursuant to the respective Membership Contract
under the terms of which Hospital Services are
afforded to such Member;
(e) to effect arrangements under which all CHF
personnel participating in the care of patients
shall be subject in that phase of their duties to the
direction of the Medical Group and the qualifica­
tions of such personnel shall be subject to the ap­
proval of the Medical Group; provided, however,
that such personnel shall be and remain solely the
employees of CHF which shall determine the
terms and conditions of their employment;
(/) to collect all Dues and other items of in­
come to which CHF shall be entitled except for
such Supplemental Charges as the parties shall
mutually agree may be more conveniently collected
by the Medical Group, in which event the Medical
Group shall collect for and remit to CHF such
Supplemental Charges in accordance with the
forms, methods and procedures established by
CHF;
(?) to assume sole financial responsibility for
and to pay all costs for professional services ren­
dered to Members in the Service Area by medical
practitioners (who are not serving as Physicians
hereunder) in circumstances under which as a re­
sult of emergency or other factors the care of the
patient is not under the control of a Physician;
and
(A) to pay all costs for the services performed
by the Medical Advisor (s).
Article V. Compensation of the Medical
Group
Section 1. For all of the services of the Medical
Group rendered pursuant to the provisions of this
Agreement, CHF agrees:
(а) to pay to the Medical Group on or before
the 20th day of each month that amount by which
$2.02 multipled by the number of Members who
during the preceding calendar month were entitled
to coverage under the Health Plan shall exceed for
the preceding calendar month that income (if
any) derived by and comprising the property of
the Medical Group for rendering professional
services not included as Medical Services
hereunder;
(б) to reimburse the Medical Group on or be­
fore January 30th of each year in that amount (if
any) by which during the preceding calendar year
the income received by the Medical Group shall
be exceeded by the expenses (mutually agreed to
by CHF and the Medical Group),including, but
not' limited to, expenses for:
(i) the salaries, drawing accounts and other
benefits paid to or provided for the benefit of
the Physicians;
(ii) premiums on group term life insurance for
each Physician in an amount of $20,000.00.
(iii) disability payments made to each Physi­
cian by the Medical Group pursuant to ar­
rangements as to which CHF shall give its written
approval;
(iv) all applicable local, state and federal ex­
cise, property, payroll, withholding, and other
taxes paid by the Medical Group, except such
personal property, income taxes and the like as,
pursuant to applicable local, state and federal law,
shall be required to be paid by a Physician with
respect to his personal income;
(v) Travel expenses;
(vi) Legal fees; and
(vii) Expenses advanced in connection with
recruiting Physicians.
The provisions with respect to reimbursement as
required under this Section shall terminate effec­
tive as of the first day of the first calendar month
comprised within such period of six consecutive
calendar months during which that amount by
which the aggregate number of Members (deter­
mined by computing separately the number of
such Members for each calendar month during
said period and then by aggregating the total of
such Members for the entire six calendar months
comprised within said period) entitled to cover­
age under the Health Plan during said period
multiplied by $2.02 plus any income derived by
the Medical Group from rendering professional
services not included as Medical Services here­
under shall equal or exceed the aggregate expenses
of the Medical Group for such period. Upon ter­
mination, as hereinabove provided, this Subsection
1(&) of Article V shall be of no further force or
effect. For example, if during the consecutive six-
men th period July 1, 1966 through December 31,
1966 the monthly roll of Mem lie re would be:
For July 19,000
For August 19, 200
For September 19, 400
For October 19, SOO
For November_______ 19, 800
For December _________ 20,000
the total of such Members would be 117,000. Ac­
cordingly, if 117,000 multiplied by $2.02, for a
total of $236,340 plus any income derived by the
Medical Group from rendering professional serv­
ices not included a Medical Services hereunder,
would equal or exceed the amount of the expenses
of the Medical Group for the period July 1, 1966
through December 31, 1966, the provisions with
respect to reimbursement, as required under this
Subsection, shall terminate as of July 1, 1966 and
shall be automatically thereafter of no further
force or effect.
In the event that termination of reimbursement
shall be effective as of the first day of any calendar
month other than January in any calendar year,
the period comprised of all of the calendar months
which shall precede the first day of the calendar
month when termination of reimbursement shall
have liecome effective and which shall be included
in the calendar year of the termination of reim­
bursement shall be deemed to be and shall be
treated as a calendar year for the purpose of deter­
mining if reimbursement is required under this'
Subsection 1(6) of Article V. If such reimburse­
ment is required it shall be promptly effected.
Accordingly, if, for example, termination of
reimbursement became, effective December 1, 1966,
the period January 1, 1966 through November
30, 1966, inclusive, would be deemed to be and
would be treated as a calendar year for the purpose
of determining if reimbursement is required for
such period. If such determination evidences that
the income received by the Medical Group during
the period January 1, 1966 through November
30, 1966, inclusive, is exceeded by its expenses,
reimbursement for the difference shall be
promptly effected. If the determination evidences
the contrary, however, the excess of income shall
be the property of the Medical Group and no re­
imbursement shall be required for such period.
If this Agreement shall terminate on any day
other than December 31st of any year and if at the
date of such termination the provisions requiring
reimbursement under this Section l(-) of Article
V are still in effect, the |>eriod from January 1st
of the year in which such termination shall occur
through the date of such termination shall be
deemed to l>e and shall lie treated as a calendar
year for the purpose of determining if reimburse­
ment is required hereunder for such period. If
such reimbursement is required it shall be
promptly effected.
 (c) to pay the cost of supporting such retire­
ment program for the Physicians as the Medical
Group and CHF shall approve.
Article VI. Relationship Between CHF and
the Medical Group
Section 1. The parties mutually covenant:
(a) that to the extent compatible with the
separate and independent management of each
party, they shall at all times maintain an effective
liaison and close cooperation with each other, to
the end of providing maximum benefits to each
Member at the most reasonable cost consistent
with high standards of Medical Services and Hos­
pital Services;
(ft) that they shall establish a joint committee
charged with the development of mutually ac­
ceptable approaches to periodic appraisals of
Member satisfaction, and availability and quality
of Medical Services; and such appraisals shall be
included in an annual report of CHF;
(<?) that the administration of the Health Plan
and this Agreement shall at all times be subject to
and governed by the ethical principles reflected in
the Article published in June 1957, entitled “Prin­
ciples of Medical Ethics of the American Medical
Association”;
(d) that the Membership Contracts attached
hereto as Exhibits A, B, and C have been reviewed
and approved by the parties and that no revision
or amendment thereof shall be made except in
compliance with the following procedures:
(i) If CHF desires to modify or amend any
Membership Contract, it shall submit such pro­
posed amendment or modification to the Medical
Group for its review and approval. If tJhe Medical
Group within 30 days after receipt of such
proposed amendment or modification shall no­
tify CHF that such proposed amendment or
modification:
A. requires or tends to require within the Serv­
ice Area professional services in addition to the
Medical Services;
B. affects the physician-patient relationship or
professional or ethical aspects of practice by the
Medical Group, or
C. affects adversely the interests of the Medical
Group,
then no such amendment or modification shall be
binding upon the Medical Group.
(ii) If the Medical Group desires to modify
or amend any Membership (Contract, it shall sub­
mit such proposed amendment to CHF for review
and approval. CHF shall endeavor to cooperate
with the Medical Group in effecting such pro­
posed amendment or modification but no such
proposed amendment or modification shall become
effective until CHF shall approve thereof.
(iii) CHF shall notifyy the Medical Group at
least 60 days prior to the effective date of any pro­
posed changes in the amount of Dues or Supple­
mental Charges and the parties agree to discuss
such changes, provided, however, that CHF re­
serves the right to effect such changes without the
approval of the Medical Group.
(s) that the parties shall cooperate to control
enrollment to the Health Plan in order to avoid
exceeding the reasonable capacity of personnel and
facilities, although the parties acknowledge that
in some circumstances enrollment is not entirely
within the control of CHF.
(/) that CHF and the Medical Group shall en­
deavor at all times to freely and fully exchange
information regarding all matters directly or in­
directly related to the Health Plan and this
Agreement
(ff) that no changes in or additions to facilities
presently utilized in operating the Health Plan
and administering this Agreement shall be effected
by either party without the prior consideration
and approval of the other.
(A) all procedures with respect to billing and
collecting for charges (pursuant to the Health
Plan and this Agreement) made directly to persons
who are not Members shall be subject to the ap­
proval of CHF and the Medical Group.
(#) that unless this Agreement shall be termi­
nated in the manner provided in this Agreement,
CHF and the Medical Group shall contract exclu­
sively with each other, to the end that CHF shall
not contract with other medical practitioners to
render the Medical Services in the Service Area
and the Medical Group shall not contract with any
other entity with respect to providing professional
services.
Article VII. Records
Section 1. CHF shall maintain such records and
establish and adhere to such procedures as shall
be reasonably required to ascertain the number
and identity of Members and shall furnish such
information to the Medical Group upon its re­
quest. The Medical Group shall cooperate with
CHF in connection with such records and proce­
dures, to the end of enabling the parties to ac­
complish with maximum efficiency and minimum
administrative cost determinations of eligibility
for coverage under the Health Plan and the amount
of compensation payable to the Medical Group.
Sec. 2. CHF and the Medical Group shall main­
tain, in accordance with standard and accepted ac­
counting practices, such financial and accounting
records as shall be necessary, appropriate or con­
venient for the proper administration of the
Health Plan and this Agreement.
Sec. 3. CHF and the Medical Group shall jointly
maintain such statistical records with respect to
Medical Services, Hospital Services, utilization of
the Health Plan, and the like as shall be necessary,
appropriate, or convenient for the proper adminis­
tration of the Health Plan and this Agreement.
Seo. 4. CHF and the Medical Group shall each
have the right upon request to inspect at all reason­
able times all accounting and administrative books
and records maintained and all facilities operated
by the other.
Article VIII. Health Plan, the Public and
Medical Ethics
Section 1. CHF shall not advertise the medical
practice of nor solicit patients for the Medical
Group.
Sec. 2. CHF shall submit to the Medical Group
for its approval all membership, education, and
informational materials.
Sec. 3. The Health Plan shall be administered in
a manner which shall provide that each person in
any group which desires that each individual com­
prised within its membership be provided an op­
portunity to enroll for coverage under the Health
Plan shall have a free right of choice at the time
of enrollment and from time to time thereafter as
to continuing membership in the Health Plan.
Article IX. Appointment of Physicians
Section 1. The appointment of each medical
practitioner as a Physician shall be made by the
Medical Group in accordance with and subject to
the following procedure:
(a) The Medical Group shall notify CHF of
the nomination by the Medical Group of each
medical practitioner, for an appointment as a
Physician, stating in such notice the professional
qualifications pertaining to such appointment,
plus the proposed effective date of such appoint­
ment, which shall be a date no less than 15 days
subsequent to the date of such notice.
(K) Prior to the proposed effective date of the
appointment of a medical practitioner as a Physi­
cian, CHF shall notify the Medical Group as to
whether CHF approves or disapproves of such
appointment, failing which notice such appoint­
ment shall be automatically deemed approved by
CHF. If CHF disapproves, the Medical Group
shall withdraw its proposal concerning such ap­
pointment. CHF approval or disapproval shall
be solely on the basis of professional qualifications.
(c) CHF shall have no right to nominate any
medical practitioner as a Physician or to remove
any Physician onoe approved.
(d) Except as provided in Subsection 1(5) of
this Article IX, each proposed appointment made
by the Medical Group shall be finalized on the
effective date stated in the notice pertaining to
the same unless the Medical Group, in its sole dis­
cretion, shall postpone finalization thereof or shall
for any reason voluntarily withdraw its proposal
concerning such appointment.
Sec. 2. Notwithstanding the provisions of Sec­
tion 1 of this Article IX, if the Medical Group in
good faith determines that as a result of urgent
factors affecting the quality of Medical Services
it will be unable to give notice in advance to CHF
of the nomination of a medical practitioner for
an appointment as a Physician, the Medical Group
may, nevertheless, appoint such medical practi­
tioner as a Physician upon so notifying CHF, in
which event:
(a) CHF, in its discretion, within 15 days after
receiving notice of the nomination of a medical
practitioner for appointment as a Physician, may
disapprove such appointment solely on the basis
of professional qualifications, in which event
CHF shall so notify the Medical Group and the
Medical Group shall then promptly cancel such
appointment.
(5) If the Medical Group shall cancel any ap­
pointment pursuant to the provisions of Subsec­
tion 2(a) of this Article IX, CHF shall defend,
indemnify and save the Medical Group harmless
from all loss, cost, damages and expense which
may arise directly or indirectly from any claim or
action asserted against the Medical Group as a
result of such cancellation.
Article X Non-Membkrb
Section 1. The Medical Group reserves the
right (to the extent campatible with the rendition
of the Medical Services):
 (a) to provide its professional services to per­
sons who are not Members; and
(&) to provide its professional services to in­
digent persons who are not Members.
Article XI. Insurance and Indemnity
Section 1. CHF, at its sole cost and expense,
shall procure and maintain such policies of general
liability and professional liability insurance and
other insurance as shall be required to insure the
Medical Group, each Physician and CHF against
any claim or claims for damages arising by reason
of personal injuries or death occasioned directly
or indirectly in connection with the performance
of any professional services by the Physicians, the
use by the Physicians of any property and facili­
ties provided by CHF, and the activities per­
formed by the Physicians in connection with this
Agreement; each of such policies (unless the par­
ties shall otherwise designate in writing) shall be
in limits of not less than $300,000. in the event of
injury or death to one person and $500,000. in the
event of injury or death to more than one person
as the result of the same accident. The originals of
each of said policies shall be retained by CHF and
memorandum copies thereof shall be delivered to
the Medical Group. All policies of professional
liability insurance shall require the written con­
sent of the named insured prior to settlement of
any claim or suit
Sec. 2. Except with respect to claims for injury,
damage, or death arising from or in connection
with motor vehicle accidents, CHF shall defend,
indemnify and save the Medical Group and each
Physician harmless from and against any and all
loss, cost, expense or damage with respect to any
claim, liability, demand, controversy, action or
cause of action, at law, equity or administrative
proceeding, arising directly or indirectly out of
or in connection with the Health Plan, the per­
formance of any professorial services by the Phy­
sicians, the use by the Physicians of any property
and facilities provided by CHF, and the activities
l>erformed by the Physicians in connection with
this Agreement, except to the extent as to which
there shall be proceeds of insurance in the full
amount paid in connection therewith. In the event
of any such claim, liability, demand, controversy,
action or cause of action, CHF, nt the request of
the Medical Group, shall assume as the sole lia­
bility and obligation of CHF the adjustment,
settlement and defense thereof and the payment
of all costs and attorneys' fees related thereto.
Article XII. Term of Agreement and
Termination
Section 1. Subject to the provisions of Section
2 of Article XIII, this Agreement shall continue
in effect for the period commencing January 1,
1966 and ending June 30, 1967, and shall be ex­
tended for annual periods thereafter commencing
July 1st and ending June 30th of each year, unless
either party hereto on or before May 1 of any
year shall elect to terminate this Agreement by so
notifying the other; in the event of such an elec­
tion, this Agreement shall terminate on June 30th
of the year in which such notice to terminate shall
be given. Upon extension, this Agreement shall
continue upon the same terms and provisions
herein contained except only that reference to any
year herein shall be superseded by the annual
period for which extension is applicable.
Article XIII. Arbitration
Section 1. Subject to the provisions of Section
2 of this Article XIII, the procedure for resolving
any dispute between the parties which cannot be
resolved amicably between them shall be as
follows:
(a) Each party shall appoint one arbitrator
within 10 days after receipt of written notice
from the other party requesting such appointment;
(-) The two arbitrators so appointed by the
parties shall together appoint a third arbitrator
within 10 days after their appointment;
(<?) If either party fails to appoint an arbitrator
within the alloted time, the Chief Justice of the
Common Pleas Court of Cuyahoga County, Ohio
shall appoint such arbitrator upon application by
the other party;
(rf) If the two arbitrators appointed by the
parties shall fail to appoint a third arbitrator with­
in the allotted time, the presiding judge of the
United States District Court for the Northern
District of Ohio (Eastern Division) shall appoint
the thiixi arbitrator upon application of either
party.
It shall be the duty of the arbitrators to deter­
mine the dispute referred to them as expeditiously
as possible after their appointment. A determin­
ation by a majority of the arbitrators shall be final
and binding and each party shall pay one-half the
costs of such arbitration. Any arbitrator may be
removed by the party or the Court or the
other arbitrators who appointed him (as the
case may be) for failure to perform here­
under and a successor arbitrator shall be ap­
pointed promptly by such party, Court or other
arbitrators (as the case may be). Notwith­
standing any dispute arising hereunder, each party
hereto shall at all times continue to perform the
obligations on its part required to be performed
hereunder.
Sec. 2. If any dispute between the parties shall
involve a bona fide contention:
(i) that the Medical Group has not provided
the Medical Services at a cost which shall enable
CHF to be competitive with other plans of health
insurance providing coverage in the Service Area
comparable to that provided by the Health Plan;
or
(ii) that the Medical Group has failed to per­
form the obligations and responsibilities devolving
upon it hereunder; or
(iii) that CHF has failed to perform the obli­
gations and responsibilities devolving upon it
hereunder,
the party making such contention shall promptly
so notify the other in detail with respect thereto,
in which event the other party shall have a period
of 90 days in which to satisfy the matter as to
which notification has been given. Following such
90 day period, if the party which has given notice
of dissatisfaction hereunder shall remain dissatis­
fied and shall so notify the other, such matter shall
be promptly submitted for arbitration pursuant
to the provisions of Section 1 of this Article XIII.
Upon referral of such matter to arbitration it shall
first be the duty of the arbitrators to determine if
the dispute does in fact involve any of the matters
referred to in Items (i), (ii) or (iii) of this Sec­
tion. If the determination of the arbitrators shall
be that the dispute does not in fact involve any
of such items the arbitrators shall determine the
merits of the dispute and such determination by
the arbitrators shall be final and binding. If the
arbitrators shall determine that the dispute does
in fact involve one or more of such items, the arbi­
trators shall proceed to determine the merits of
such dispute and upon receipt of the determination
by the arbitrators on the merits of the dispute, the
parties shall diligently and in good faith attempt
to abide therewith. If the arbitrators have deter­
mined that the dispute does in fact involve any of
the matters referred to in Items (i), (ii) or (iii)
of this Section, and if either party continues to be
dissatisfied with respect to the merits of the matter
which had been submitted for arbitration, it shall
so notify the other party and the parties during
the ©0-day period following such notice shall dili­
gently and in good faith attempt to amicably re­
solve their differences, failing which either party
hereto shall have the right, upon so notifying the
other, to terminate this Agreement effective upon
the later of 90 days following the date on which
such notice of termination has been given or June
30th of that year in which such notification to
terminate has been given.
Article XIV. Amendment
Section 1. CHF and the Medical Group, with­
out notice to or approval of any Member, reserve
the right :
(a) to terminate this Agreement in the manner,
at the time, and subject to the procedure set forth
in this Agreement; and
(&) to effect any amendment of this Agreement
as to which CHF and the Medical Group shall in
writing jointly approve.
Article XV. Miscellaneous
Section 1. This Agreement shall in no way be
construed in a manner which shall provide any
rights hereunder to Members or to increase the du­
ties or responsibilities of the parties hereto beyond
the requirements established by Membership Con­
tracts, it being agreed that the sole purpose of this
Agreement is to establish the respective rights and
duties of the parties hereto, each to the other, and
that the rights of each Member are derived solely
from the respective Membership Contract under
which coverage under the Health Plan is afforded
to him.
 Sec. 2. Termination of this Agreement shall not In Witness Whereof, the parties hereto have
affect the rights or obligations of the parties hereto executed this Agreement as of the day and year
which shall have theretofore accrued or shall first above written.
thereafter arise in respect of any occurrence prior By--------
to termination and such rights and obligations And
shall continue to be governed by the terms of this COMMUNITY HEALTH FOUNDATION, INC.
Agreement The Community Health Foundation
Medical Group
Article XVI. Notice By Its Executive Committee
Section 1. Any notice required to be given pur­
suant to the terms and provisions hereof shall be in
writing and shall be sent by registered or certified
mail, return receipt requested, postage prepaid,
addressed to each party at its respective last known
address.
 Appendix C
*
THE PHYSICIANS PARTNERSHIP AGREEMENT
This Partnership Agreement made and entered
into at Cleveland, Ohio, as of the 1st day of Jan­
uary 1966, by and among the undersigned, who
are collectively hereinafter referred to as the “part­
ners” and individually by their last names.
Article I. Name and Purpose
Section 1. The partners do hereby form a part­
nership pursuant to the laws of the State of Ohio
under the name of The Community Health Foun­
dation Medical Group for the purpose of and
limited to the practice of medicine in the State
of Ohio, whereby the professional services of the
partners and physicians duly licensed to practice
medicine in the State of Ohio who are employed
by the Partnership (the employee physicians being
hereinafter referred to as the “participating phy­
sicians”) shall be provided to:
(a) Subscribers to the voluntary non-profit
Health Care Plan established by Community
Health Foundation, Inc., an Ohio corporation not
for profit (hereinafter referred to as “CHF”),
and
(K) All other patients of the partners and the
participating physicians.
Sec. 2. The Partnership shall maintain offices
at the Community Health Foundation Health Cen­
ter, 11717 Euclid Avenue, Cleveland, Ohio, or at
such other locations as the Executive Committee
(established pursuant to the provisions of Article
VIII) may from time to time determine.
Article II. Term
Section 1. The Partnership shall commence as
of the effective date of this Partnership Agree­
ment and shall continue until dissolved as herein­
after provided.
Sec. 2. Concurrently with the execution of this
Partnership Agreement, Sa ward, Vayda and
Young have dissolved the partnership established
by their agreement of January 1, 1965 (the “8a-
ward-Vayda-Young Partnership”), and effective
as of the commencement date of this Partnership
Agreement, all of the assets of the Saward-Vayda-
Young Partnership are hereby transferred to the
Partnership, which hereby assumes all of the lia­
bilities of the Saward-Vayda-Young Partnership,
provided, however, that all items of income and ex­
penses for the period prior to the effective date of
the within Partnership Agreement which are at­
tributable to the Saward-Vayda-Young Partner­
ship shall be appropriately prorated and adjusted
between the members of the Sa ward-Vayda-Young
Partnership and the members of the Partnership
as of the effective date of this Partnership Agree­
ment.
Sec. 3. The partners acknowledge that effective
as of the commencement of their association (as
partners or as participating physicians, as the case
may be) with the Community Health Foundation
Medical Group al] fees and remuneration received
by each of them by reason of the practice of medi­
cine and related activities have been the property
of the Sa ward-Vayda-Young Partnership and, ac­
cordingly, they hereby agree that such fees and
remuneration as they shall hereafter earn by rea­
son of the practice of medicine and related activi­
ties (as determined from time to time by the Exec­
utive Committee) shall belong to the Partnership
and that all billings and collections for profes­
sional services of each partner shall be on behalf
of and for the Partnership.
Article III. Capital
Section 1. Each partner shall initially contrib­
ute to the Partnership the sum of One Hundred
Dollars ($100.00).
 Sec. 2. No partner shall bo required to make any
additional contributions to the capital of the Part­
nership. However, if pursuant to arrangements
made with the Executive Committee any partner
shall furnish additional funds to the Partnership,
he shall be deemed to have made a loan of said
funds of the Partnership, subject to such arrange­
ments as shall be established by written agreement
between him and the Executive Committee; pro­
vided, however, that said aid funds may be treated
as an additional capital contribution from said
partner if the Executive Committee shall so in
writing authorize the Comptroller appointed by it.
Seo. 3. No interest shall be paid to any partner
in respect of his capital account, nor in respect to
any undistributed Partnership profits.
Sec. 4. No partner (except as otherwise in this
Partnership Agreement expressly provided in the
event of dissolution) shall withdraw any portion
of his capital contribution unless expressly au­
thorized to do so in writing by the Executive Com­
mittee.
Article IV. Dotteh of Partners
Section 1. Except, as hereinafter otherwise ex­
pressly provided, each of the partners shall devote
all of his professional time and effort to the con­
duct of the Partnership business.
Sec. 2. Subject to further determination by the
Executive Committee, the regular work week to
be devoted by each partner to the conduct of the
business of the Partnership shall consist of five (5)
and one-half (%) working days (each such whole
day—or as the case may be, the fractional parts of
any day which when added together comprise a
whole day—shall hereinafter be referred to as a
“working day”).
Sec. 3. When authorized by the Executive Com­
mittee, teaching and medical research activities
sponsored by the Partnership or CHF shall be
considered as business conducted by the Partner­
ship and any partner engaged in such activities
shall be treated as having devoted professional
time to Partnership business.
Sec. 4. It is the desire of the partners that (to the
extent compatible with the business of the Part­
nership) they be permitted such freedom of time
and hours as exists in private medical practice;
and, accordingly, any partner with the approval of
the Executive Committee may arrange for time
off on “leave of absence”, provided, however, that
as to each partner other than Saward:
(a) The drawing account of a partner for each
month in which he shall have arranged for time
off on leave of absence shall be reduced in the pro­
portion which his time off on leave of absence dur­
ing such month bears to the total working days
comprised within said month;
(b ) The share of the net income of the Partner­
ship for any calendar year in which he shall have
arranged for time off on leave of absence shall be
reduced in the proportion which his time off on
leave of absence during such calendar year shall
bear to the total number of working days con­
tained within said calendar year.
(<?) No time off on leave of absence shall be
granted if, in the determination of the Executive
Committee, the granting thereof shall interfere
with the conduct of business of the Partnership.
Sec. 5. Each partner shall be entitled to a vaca­
tion of three (3) weeks during each calendar year,
provided, however, that an additional week of va­
cation may be taken if used for post graduate
medical education. A partner shall not be permited
to accrue vacation periods in excess of six (6)
weeks of regular vacation, plus two (2) additional
weeks of postgraduate medical education; and ac­
cordingly, any vacation time in excess of the
period authorized herein to be accrued shall lapse.
No reduction shall be made in the drawing account
and share of the Partnership net income of a part­
ner when on vacation for the period authorized
herein.
Sec. 6. Notwithstanding any contrary provi­
sion in this Article IV, Saward shall devote only
such time to the conduct of the business of the
Partnership as he shall be expressly required to
do pursuant to the terms and provisions of such
contractual arrangements as exist from time to
time between the Partnership and CHF.
Sec. 7. Except for his respective drawing ac­
count and share of the net income of the Partner­
ship, no partner shall receive any compensation for
services rendered to the Partnership.
Article V. Net Income and Losses
Section 1. The terms “net income of the Part­
nership” and “net losses of the Partnership” shall
mean the gross income of the Partnerahip from
the practice of medicine, less the expenses, charges
and liabilities attributable thereto or arising there­
from, as determined in accordance with standard
and accepted accounting practices. The Partner­
ship accounting shall be on a calendar year and
cash basis, provided, however, that if any taxable
year of the Partnership shall commence on a date
other than January 1st, or shall end on a date other
than December 31st, such taxable year, for the pur­
poses hereof, shall be deemed to be a calendar year;
and in such cases the Partnership accounting shall
be made on the basis of such taxable year and the
drawing accounts of the partners (if determined
on an annual basis) shall be reduced, to the end
that each partner shall only receive that amount of
his annual drawing account as shall be proportion­
ate to the actual period comprised within such
taxable year.
Sec. 2. The net income of the Partnership for
each calendar year shall be shared and distributed
as follows:
(a) Each partner shall receive each month his
respective drawing account as listed in Schedule
“A” attached hereto and made a part hereof, sub­
ject to such reduction as shall be proportionate to
the drawing accounts of the other partners, in the
event that for any month the net income of the
Partnership shall be insufficient for the purpose of
paying in full the respective drawing accounts of
the partners, provided, however, that the drawing
account of each partner (other than 8aw ard) shall
further be subject to:
(i) Such reduction as shall be required pursu­
ant to the provisions of Section 4 of Article IV;
and
(ii) Such adjustment as shall be required pur­
suant to the provisions of Section 4 of Article VI;
(iii) Such determination as shall be made at the
beginning of each calendar year by the Executive
Committee.
(&) At the end of each calendar year, or as soon
thereafter as feasible, the remaining net income of
the Partnership for such calendar year shall be dis­
tributed equally to all of the partners other than
Saward, subject to such reduction (if any) as shall
be required by the provisions of Section 4 of Ar­
ticle IV, and Section 4 of Article VI.
Sec. 3. All net losses of the Partnership shall be
borne in proportion to the drawing accounts to
which the partners are respectively entitled pur­
suant to the provisions of Subsection 2(a) or this
Article V.
Article VI. Disability
Section 1. For the purpose of this Partnership
Agreement, a partner shall be considered to be
disabled if as a result of physical or mental im­
pairment he is substantially unable to actively en­
gage in the practice of medicine;
Sec. 2. For the purpose of this Partnership
Agreement “disability days” shall mean the days
during which a disabled partner (other than
Saward) shall be entitled to the benefits provided
in Subsection 4(a) of this Article VI.
Sec. 3. At the commencement of this Partnership
Agreement, each partner (other than Saward)
shall be credited respectively with the number of
disability days set forth after his name in the
Schedule “B” attached hereto and made a part
hereof. Thereafter, for each twenty-four (24)
working days devoted by a partner to the conduct
of the business of the Partnership, a partner (other
than Saward) shall be entitled to an additional dis­
ability day. Notwithstanding any provision to the
contrary herein, a partner (other than Saward)
shall be entitled to a maximum of one hundred
forty-four (144) disability days.
Sec. 4. Subject to the provisions of Section 1 of
Article VII, in the event that a partner (other
than Saward) shall become disabled, his drawing
account and his participation in the net income of
the Partnership shall be as follows:
(a) For that period of his disability during
which he shall be credited with or entitled to disa­
bility days in accordance with the foregoing pro­
visions of this Article VT, no reduction shall be
made in his drawing account and in his participa­
tion in the net income of the Partnership;
(&) For that period of his disability following
the period during which he shall be credited with
or entitled to disability days, he shall receive for
each calendar month during which he shall be dis­
abled the sum of five hundred dollars ($500.00)
(prorated for any partial month), subject to the
following provisions:
(i) Payments hereunder shall terminate on the
last day of the twelfth successive calendar month
following the commencement of his disability;
(ii) If following a period of disability, a part­
ner shall be wholly able to resume the active prac­
tice of medicine for a period of ninety (SO) days
or more, any subsequent disability resulting from
or attributable to the same cause or causes shall be
treated as a new period of disability for the pur­
pose of determining eligibility to receive payments
under this subparagraph; but if said period of
ability to resume the active practice of medicine
shall be for a period less than ninety (90) days,
any subsequent disability resulting from or attrib­
utable to the same cause or causes shall be treated
as a continuation of the previous period of dis­
ability and payments under this subparagraph
shall terminate on that date which shall be the last
day of the twelfth successive calendar month fol­
lowing the initial commencement of such disabil­
ity, extended by the number of days during which
such partner shall have actively resumed the
practice of medicine; and
(iii) During such time as a partner shall re­
ceive payments hereunder, he shall not be entitled
to any drawing account nor to any participation
in the net income of the Partnership.
In applying the provisions of Section 4 of this
Article VI, the drawing account of a partner and
his participation in the net income of the Partner­
ship for any calendar year in which he shall be
disabled shall be adjusted in such manner as to
reflect, the respective periods of such calendar year
during which he was not disabled and those re­
spective periods of his disability during which he
is credited with or entitled to disability days. For
example, if a partner shall become disabled on
June 1, 1966, and at such time shall have been
credited with or entitled to twenty-four (24) dis­
ability days, and if his disability shall continue
through November 16, 1966, he shall be entitled to
the following:
(i) His full drawing account for the months of
January through May, 1966, inclusive, during
which period he was not under disability;
(ii) His full drawing account for the month of
June, 1966, during which time he was under dis­
ability but was credited with or entitled to twenty-
four (24) disability days, which equals the number
of actual working days comprised within the
month of June, 1966;
(iii) Five Hundred Dollars ($500.00) a month
for the months of July through October, 1966,
inclusive, in lieu of any drawing account for such
months;
(iv) An amount equal to one-half of his draw­
ing account for the month of November, 1966, plus
Two Hundred Fifty Dollars ($250.00), to reflect
that during one-half of the working days com­
prised within said month he was under disability
(without entitlement to disability days), and dur­
ing the remaining one half of said working days
he was not under disability; and
(v) An amount equal to 62.5% of his share of
the net income of the Partnership for calendar
295-002 O—SS------ 8
year 1966, in order to reflect that he is entitled to
participation in the net income of the Partnership
for the periods January 1st through June 30,1966,
inclusive, and November 16th through December
31, 1966, inclusive; and that he is not entitled to
participation during the period July 1st through
November 16,1966, inclusive.
Sec. 5. The Executive Committee shall make all
determinations of adjustments, credits, computa­
tions and all other matters concerning the applica­
bility of any of the preceding Sections of this
Article VI; and in the event of disability incurred
during the vacation of a partner, the Executive
Committee in its discretion may grant or deny
credits for disability days.
Sec. 6. Except as otherwise provided in Article
VII, in the event of the disability of Saward, he
shall be entitled to receive his respective drawing
account in the same manner and to the same extent
ns if he were not under disability.
Article VII. Termination of a Partner’s
Interest
Section 1. Except for the right to receive the
payments expressly provided in this Article, the
interests of a partner in the Partnership and all
of his rights therein shall terminate as of:
(a) The date of his death;
(5) The date upon which his retirement or
withdrawal shall become effective, or
(c) The last day of a period of twelve (12)
successive calendar months during which he shall
be disabled (as the case may be).
Sec. 2. In the event that a partner’s interest in
the Partnership shall terminate, the Partnership
shall pay to such partner, or to his estate (as the
case may be) a sum equal to the aggregate of:
(a) His capital account, determined at book
value (exclusive of good will) by the Executive
Committee as of the date of the termination of his
interest in the Partnership; and
(L) His proportionate share of the net income,
if any, earned by the Partnership during the period
from the beginning of the calendar year in which
his interest, in the Partnership was terminated,
through the date upon which such interest was
terminated, less such amounts as prior to such
termination of his interest, have been distributed
to him in respect of his drawing account during
the calendar year in which his interest in the Part­
nership was terminated.
105
Not withstanding any provision to the contrary in
this Article VII, in the event the Partnership shall
incur a net loss for the period from the beginning
of the calendar year in which a partner’s interest
was terminated, through the date of the termina­
tion of his interest, the total amount to be paid
by the Partnership to such partner, or to his estate
(as the case may be), shall be reduced by an amount
equal to the aggregate of his proportionate share
of the net loss for such period and the amounts
distributed to such partner as a drawing account
during said period.
Sec. 3. The total of the amounts to be paid by
the Partnership in the event of the termination of
the interest of a partner in the Partnership shall
be paid (without interest) to such partner, or to
his estate (as the case may be), in twelve (12)
equal successive monthly installments (or such
number of equal successive calendar months less
than twelve (12) as the Executive Committee shall
determine), commencing on the first day of the
calendar month following the termination of his
interest and continuing on the first day of each
calendar month thereafter until paid in full.
Sec. 4. Each partner upon giving prior notice
to the other partners shall have the right to volun­
tarily retire from the Partnership, in which event
such retirement shall become effective as of the
last day of the tliird calendar month following the
month in which notice of voluntary retirement was
given.
Sec. 5. A partner shall be required to withdraw
from the Partnership:
(а) At any time and for any reason upon the
determination by no less than a two-thirds vote
of all of the members of the Executive Committee
that such partner’s withdrawal is required for the
welfare of the Partnership; or
(б) At the end of the calendar year in which
a partner shall become sixty-five years of age (as
the case may be);
provided, however, that:
(i) The provisions of Subparagraph 5(6) of
this Section shall not apply to Samuel O. Ereed
lander, M.D.
(ii) In the event that a partner shall be re­
quired to withdraw from the Partnership as a
result of the determination of the Executive Com­
mittee, a majority of the partners within thirty
(30) days following such determination may
request a reconsideration of such determination, in
which event the determination of the Executive
Committee shall be ineffective unless within thirty
(30) days following such request for a reconsider­
ation the Executive Committee shall by a two-
thirds vote of all of its members reaffirm its orig­
inal determination; and
(iii) A partner who has been required to with­
draw from the Partnership as a result of becoming
sixty-five years of age, may be continued as an
employee of the Partnership if the Executive Com­
mittee so determines.
Sec. 6. Upon the termination of the interest of
a partner in the Partnership, the Partnership shall
be dissolved, provided, however, that such dissolu­
tion shall have no effect upon the continuance of
the business of the Partnership, which shall there­
after be continued by the remaining partners, who
shall thereupon be deemed to have -formed a new
partnership consisting of the remaining partners.
Following the termination of the interest of a
partner, the remaining partners shall retain as
their sole property all of the assets, books and
records of the Partnership, and the partner whose
interest has been terminated, or his estate (includ­
ing his widow, children, heirs, legatees, personal
representatives, executor or administrator), as the
case may be, shall have no rights or claims of any
kind therein.
Sec. 7. Effective upon the termination of the
interest of a partner, the Partnership and each
remaining partner thereof covenant and agree,
jointly and severally, to indemnify and hold harm­
less the partner whose interest in the Partnership
was terminated, or his estate, as the case may be,
from and against all loss, cost, expense, claims,
liabilities or obligations arising from, or attribut­
able to, the debts, liabilities or obligations of the
Partnership.
Sec. 8. The provisions of this Article VII pro­
vide for a mode of settlement and disposition of
the interest of a deceased partner different than
that provided for in Ohio Revised Code Sections
1779.04 to 1779.06, inclusive, and it is hereby agreed
that upon the death of a partner the provisions
of Ohio Revised Code Sections 1779.04 to 1779.06,
inclusive (as now constituted or as hereafter
amended) requiring an inventory and appraise­
ment of the partnership assets and a sale of the
deceased partner’s interest therein, are dispensed
with and in lieu thereof the provisions of this
Article VII shall be applicable.
Article VIII. Executive Committee, Manage­
ment and Restrictions
Section 1. (a) In order to cany out the business
affairs, management and administration of the
Partnership, the partners hereby establish an
Executive Committee, consisting of:
(i) Saward, who shall serve as a permanent
member of the Executive Committee until his in­
terest in the Partnership shall lie terminated, at
which time the Executive Committee shall consist
only of the five (5) elected members; and
(ii) Five (5) elected members of the Executive
Committee, who shall be initially:
Vayda—who shall serve as Medical Director (in
accordance with the provisions of Section 5 of this
Article VIII) during his term, which shall expire
on the day prior to the first monthly meeting of
the Partners held in the sixth (6th) calendar year
following the date of this Partnership Agreement.
Young—whose term shall expire on the day
prior to the first monthly meeting of the partners
held in the fifth (Sth) calendar year following the
date of this Partnership Agreement.
Bloomfield—whose term shall expire on the day
prior to the first monthly meeting of the partners
held in the fourth (4th) calendar year following
the date of this Partnership Agreement.
Packer—whose term shall expire on the day
prior to the first monthly meeting of the partners
held in the third (3rd) calendar year following
the date of this Partnership Agreement.
Phillips—whose term shall expire on the day
prior to the first monthly meeting of the partners
held in the second (2nd) calendar year following
the date of this Partnership Agreement.
At the first annual meeting of the partners fol­
lowing the expiration of the initial term of an
elected member of the Executive Committee, the
partners by the affirmative vote of more than one-
half (i£) of the partners shall elect a successor to
fill such vacancy; and such member so elected shall
serve until the first monthly meeting of the part­
ners held in the fourth (4th) calendar year fol­
lowing his election provided, however, that the
partner elected to succeed Vayda (or his successor)
shall serve as Medical Director and as an elected
member of the Executive Committee until the first
monthly meeting of the partners held in the sixth
(6th) calendar year following his election. If an
elected member of the Executive Committee shall
fail for any reason to complete his term, his suc­
cessor shall be chosen by the affirmative vote of
more than one-half of the partners, and such suc­
cessor shall serve during the unexpired portion of
such term. If in voting for an elected member of
the Executive Committee, no candidate receives on
the first ballot the affirmative vote of more than
one-half of the partners, a second ballot shall be
taken, in which the only candidates shall be the
two candidates who received the highest number
of votes on the first ballot, and in such vote, the
candidate receiving the greater number of votes
shall be elected notwithstanding that he shall not
have received the affirmative vote of more than
one-half of the partners.
(K) In the event of a vacancy or vacancies in
the membership of the Executive Committee, the
remaining members thereof shall have all of the
powers vested in the Executive Committee pend­
ing the filling of such vacancy or vacancies.
(t?) No person admitted into this Partnership
after January 2,1966 shall be eligible to be a mem­
ber of the Executive Committee unless he has been
a partner for a period of no less than two (2) years.
Nothing in this Partnership Agreement shall be
construed in a manner which would prevent a
partner from serving successive terms as a mem­
ber of the Executive Committee or as Medical
Director.
(d) The Executive Committee shall have full
and complete, charge of the business affairs, ad­
ministration and management of the Partnership,
including, but not limited to:
(i) The making of all contracts, including con­
tracts with any person or organization for the
rendition of professional services, hospitalization
and the like;
(ii) The hiring and discharging of all em­
ployees of the Partnership, except that the Ex­
ecutive Committee shall not enter into a contract
of employment with an employee providing for
a term of more than two (2) years without the con­
sent of a majority of the partners;
(iii) The lease, purchase or other acquisition
of property, or the lease, sale or other disposal of
property of the Partnership, except that the Exec­
utive Committee, without, the consent of the ma­
jority of the partners, shall not enter into a lease
for a term or more than two (2) years nor enter
into any transaction for the purchase or sale of
property in an amount in excess of Twenty-Five
Thousand Dollars ($25,000.00);
 (iv) The purchase of supplies as required in the
normal operation of the Partnership;
(v) The assignment of the duties of the
partners;
(vi) The determination at least thirty (30)
days prior to the beginning of each calendar year
of the amount of the drawing account of each
partner; provided, however, that if the Executive
Committee does not take any action with respect
to the drawing account of any partner, the draw­
ing account of such partner for such calendar year
shall be in an amount equal to his drawing account
during the preceding calendar year.
(s) All action taken by the Executive Commit­
tee (except as otherwise expressly provided in this
Partnership Agreement) shall be by the affirma­
tive vote of a majority of the members thereof,
and the Executive Committee shall adopt proce­
dures for the conduct of its business and shall meet
at least once each month. All meetings of the Ex­
ecutive shall be open to all partners and the date
of each meeting shall be appropriately publicized
to partners in advance thereof.
Sec. 2. (a) The partners shall determine general
policy matters not inconsistent with this Partner­
ship Agreement. Decisions of the partners in re­
spect of matters herein delegated to the Executive
Committee shall only become effective if approved
by the Executive Committee, and the provisions
hereof shall in no way be deemed to limit the
powers delegated to the Executive Committee by
the provisions of this Partnership Agreement.
(&) The partners may adopt by-laws providing
for periodic meetings of the partners, for the elec­
tion of officers to preside at such meetings, and for
the rules to be applicable in the conduct of such
meetings. Each partner shall have an equal vote
and actions by the partners (except, as otherwise
expressly provided in this Partnership Agree­
ment) shall be decided by the vote of a majority
of the partners present at a meeting at which a
quorum of the partners is present. A majority of
the partners present at a meeting shall constitute
a quorum. Roberts Rules of Order will govern the
conduct of any meeting of the partners, except to
the extent that any provision in said Rules shall
be inconsistent with any provision of this
Agreement
Sec. 3. No partner, except with the approval of
the Executive Committee shall sell, assign, mort­
gage, pledge or otherwise dispose of or hypothe­
cate his share in the Partnership, its assets or
property, nor take any action in the name of or
on behalf of the Partnership. Each partner agrees
that he will not engage in any activity detrimental
to the best interests of the Partnership; that he
will at all times conduct himself in a manner be­
fitting a doctor of medicine; that he will not do or
commit any act in violation of any law or in viola­
tion of any of the canons or rules or ethics appli­
cable to the medical profession; and that he will
not engage in any conduct which will bring dis­
credit to himself or to this Partnership.
Sec. 4. The Executive Committee shall desig­
nate a Comptroller who shall act for and on behalf
of the Partnership:
(a) In the establishment of proper accounting
procedures;
(&) For the maintenance of the books and rec­
ords of the Partnership;
(c?) For the determination of any questions re­
garding accounting procedures that may arise from
time to time;
(d) For the opening of such bank accounts in
behalf of the Partnership as the Executive Com­
mittee shall authorize, as to which accounts the
Comptroller shall be authorized to draw, endorse,
sign and deposit checks and drafts in the name of
and in behalf of the Partnership, and for such
purpose to use a facsimile signature thereon;
At the commencement of this Partnership
Agreement, the Executive Committee hereby des­
ignates Paul Hoffmeyer to serve as such Comp­
troller, subject to removal by the Executive Com­
mittee at any time in its discretion. In the event
of such removal, the Executive Committee shall
have the right to appoint a successor. The Execu­
tive Committee may at any time in its discretion
withdraw any authority delegated to the Comp­
troller and may at any time in its discretion desig­
nate persons other than the Comptroller to draw,
endorse, sign and deposit checks and drafts in the
name of and in behalf of the Partnership, or in
such other name or title as the Executive Com­
mittee shall designate.
Sec. 5. The Medical Director shall serve as the
Executive Officer of the Partnership and subject
to the control of the Executive Committee shall
exercise general supervision over the conduct of
business by the Partnership and shall effect on
behalf of the Partnership all transactions con­
ducted by the Partnership with parties other than
the partners and the Partnership.
 Article IX. Voluntary Dissolution
Section 1. In the event that two-thirds (%) of
the Executive Committee shall agree in writing to
a dissolution of the Partnership, the Partnership
shall promptly thereafter be dissolved and the
Partnership books shall be closed. Promptly fol­
lowing such dissolution, the business affairs of the
Partnership shall be wound up and liquidated,
for which purpose the members of the Executive
Committee then serving in such capacity shall have
possession and control of all Partnership assets
and shall thereafter proceed as a committee for
the purpose of effecting such dissolution and liqui­
dation.
Sec. 2. In effectuating a dissolution pursuant
to the provisions of Section I hereof, the Executive
Committee, after the payment of any expenses
incurred in the winding up and liquidating of the
business affairs of the Partnership, shall distribute
the net assets and proceeds of the liquidation in the
following order:
(a) First, to the payment of the debts and lia­
bilities of the Partnership owing to creditors other
than the partners;
(K) Second, to the payment of the debts and
liabilities, if any of the Partnership owing to the
partners; and
(<?) All remaining assets shall be distributed to
the partners in proportion to the drawing accounts
of the partners, effective as of the last day of the
calendar month preceding dissolution.
Article X Arbitration
If any dispute shall arise among the partners
which cannot be settled by them, such dispute shall
be promptly submitted to the American Arbitra­
tion Association (or its successor), which shall
select an arbitrator to resolve said dispute pursu­
ant to and in accordance with its then prevailing
rules. The determination of such arbitrator shall
be final and binding upon the partners, who shall
each bear an equal share of the cost of such arbi­
tration. Notwithstanding any dispute arising here­
under, each partner shall at all times continue to
perform the obligations on his part required here­
under to be performed.
Article XI. Additional Partners
Section 1. Additional partners may be admitted
to the Partnership upon approval by the Executive
Committee and by the affirmative vote of three-
fourths (%) of all of the partners. In the event
that an additional partner shall be so admitted
to the Partnership, the Executive Committee shall
determine the capital contribution, if any, re­
quired of such additional partner his drawing ac­
count and his participation in the income of the
Partnership. Before being admitted into the Part­
nership, each such additional partner shall execute
an appropriate instrument in writing, wherein he
agrees to be bound by the applicable terms and
provisions of this Partnership Agreement.
Sec. 2. In the event that any physician shall be
employed by the Partnership for a period in ex­
cess of twenty-four (24) successive calendar
months without being provided with the oppor­
tunity of being admitted into the Partnership, the
partners and the Executive Committee shall take
appropriate action to the end of reviewing the
eligibility for membership in the Partnership of
such employed physician.
Article XII. Notices
All notices which may be proper or necessary to
be served hereunder shall be in writing and shall
be served by certified or registered mail, postage
prepaid, and with return receipt requested; all
notices addressed to a partner shall be addressed
to him at the main office of the Partnership or to
such other place as the partner shall by such writ­
ten notice to the other partners hereinafter desig­
nate for such purpose.
Article XIII. Binding Effect
The terms and provisions of this Partnership
Agreement shall be binding upon and shall inure
to the benefit of the partners and their respective
heirs, legatees, personal representatives, executors
and administrators and shall constitute the entire
agreement among the partners. This Partnership
Agreement may be modified or amended by the
affirmative vote of three-fourths (%) of all of the
partners and the written approval of the Execu­
tive Committee.
In Witness Whereof, the undersigned have
signed this Partnership Agreement at Cleveland,
Ohio, as of the day and year first above written.
U4. OOVOWMENT HURTING CWCt; tM8 C— 2H5-UO2
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UNIVERSITY OF MICHIGAN