Hospital City, Health Care Nation: Race, Capital, and the Costs of American Health Care 9781512823929

Table of contents :
CONTENTS
Abbreviations Used in Text
Introduction. Crisis in the Hospital City—and the Health Care Nation
PART I. BUILDING THE HOSPITAL CITY
1. The Public Foundations of the Hospital City
2. Urban Renewal in the Hospital City
3. Medicare, Hospitals, and “the Gold at Fort Knox”
4. Johns Hopkins in the Hospital Metropolis
PART II. LIVING WITH THE HOSPITAL CITY
5. The Hospital City and the National Health Insurance Struggle
6. Wages, Jobs, and Cost in the Hospital City
7. Hospital Cost Control in Maryland
8. To Stay or Go, and How to Pay for It
PART III. COSTS OF THE HOSPITAL CITY
9. “The Dream Shall Never Die” . . . but It May Be Compromised
10. “A New Emphasis on Market Strategies”
11. Markets, Medicaid, and Mergers
Conclusion. Reform in the Hospital City—and the Health Care Nation
Abbreviations Used in Notes
Notes
Index
Acknowledgments

Citation preview

Hospital City, Health Care Nation

POLITICS AND CULTURE IN MODERN AMER­I ­C A Series Editors: Keisha N. Blain, Margot Canaday, Matthew Lassiter, Stephen Pitti, Thomas J. Sugrue Volumes in the series narrate and analyze po­liti­cal and social change in the broadest dimensions from 1865 to the pre­sent, including ideas about the ways p ­ eople have sought and wielded power in the public sphere and the language and institutions of politics at all levels—­local, national, and transnational. The series is motivated by a desire to reverse the fragmentation of modern U.S. history and to encourage synthetic perspectives on social movements and the state, on gender, race, and ­labor, and on intellectual history and popu­lar culture.

HOSPITAL CITY, HEALTH CARE NATION Race, Capital, and the Costs of American Health Care

Guian A. McKee

U N I V E R S I T Y O F P E N N S Y LVA N I A P R E S S PHIL ADELPHIA

 Copyright © 2023 University of Pennsylvania Press All rights reserved. Except for brief quotations used for purposes of review or scholarly citation, none of this book may be reproduced in any form by any means without written permission from the publisher. Published by University of Pennsylvania Press Philadelphia, Pennsylvania 19104-4112 www​.­upenn​.­edu​/­pennpress Printed in the United States of Amer­i­ca on acid-­free paper 10 9 8 7 6 5 4 3 2 1 Hardcover ISBN: 978-1-5128-2393-6 eBook ISBN: 978-1-5128-2392-9 Library of Congress Cataloging-­in-­Publication Data Names: McKee, Guian A., author. Title: Hospital city, health care nation : race, capital, and the costs of American health care / Guian A. McKee. Other titles: Politics and culture in modern America. Description: 1st edition. | Philadelphia : University of Pennsylvania Press, [2023] | Series: Politics and culture in modern America | Includes bibliographical references and index. Identifiers: LCCN 2022032476 | ISBN 9781512823936 (hardcover) Subjects: LCSH: Johns Hopkins Hospital. | Medical care, Cost of—United States. | Medical policy—Economic aspects—United States. | Urban hospitals—Economic aspects—United States. | Urban hospitals— Social aspects—United States. | Health care reform— United States. | Racism in medicine—United States. Classification: LCC RA410.53 .M386 2023 | DDC 362.1109173/2—dc23/eng/20220808 LC record available at https://lccn.loc.gov/2022032476

 For Joanna, ­Reece, and Nathaniel

CONTENTS

Abbreviations Used in Text

Introduction. Crisis in the Hospital City—­and the Health Care Nation

ix

1

PART I. BUILDING THE HOSPITAL CITY

1. The Public Foundations of the Hospital City

15

2. Urban Renewal in the Hospital City

30

3. Medicare, Hospitals, and “the Gold at Fort Knox”

61

4. Johns Hopkins in the Hospital Metropolis

82

PART II. LIVING WITH THE HOSPITAL CITY

5. The Hospital City and the National Health Insurance Strug­gle

111

6. Wages, Jobs, and Cost in the Hospital City

127

7. Hospital Cost Control in Mary­land

149

8. To Stay or Go, and How to Pay for It

164

viii Contents

PART III. COSTS OF THE HOSPITAL CITY

9. “The Dream S­ hall Never Die” . . . ​but It May Be Compromised

193

10. “A New Emphasis on Market Strategies”

223

11. Markets, Medicaid, and Mergers

249

Conclusion. Reform in the Hospital City—­and the Health Care Nation

271

Abbreviations Used in Notes

287

Notes 293 Index 353 Acknowl­edgments

377

ABBREVIATIONS USED IN TE X T

ACA Patient Protection and Affordable Care Act AFDC Aid to Families with Dependent C ­ hildren AFL American Federation of L ­ abor AHA American Hospital Association AMA American Medical Association BCH Baltimore City Hospitals BDC Broadway Development Corporation BMC Broadway Management Corporation BRC Baltimore Redevelopment Commission BURHA Baltimore Urban Renewal and Housing Agency CDBG Community Development Block Grant (Program) CIO Congress of Industrial Organ­izations CON Certificate of Need CPPA Chesapeake Physicians Professional Association CUA Center for Urban Affairs DRG diagnosis-­related group DSH disproportionate share hospital (payments) EBCC East Baltimore Community Corporation EBDI East Baltimore Development Initiative EBMP East Baltimore Medical Plan EMIC Emergency Maternity and Infant Care, U.S. Public Health Ser­v ice FAH Federation of American Hospitals FHA Federal Housing Administration FSA Farm Security Administration FTC Federal Trade Commission

x

Abbreviations Used in Text

GBC Greater Baltimore Committee GIR guaranteed inpatient revenue HEW U.S. Department of Health, Education, and Welfare HHFA Housing and Home Finance Agency HHS U.S. Department of Health and H ­ uman Ser­v ices HIBAC Health Insurance Benefits Advisory Council HIP Health Insurance Plan of Greater New York HMO health maintenance organ­ization HSA Health Systems Agency (Mary­land); also generic health system agencies (HSAs) HSCRC Health Ser­v ices Cost Review Commission (Mary­land) HUD U.S. Department of Housing and Urban Development JHH Johns Hopkins Hospital JHHP Johns Hopkins Health Plan JHU Johns Hopkins University MECO ­Middle East Community Organ­ization MHA Mary­land Hospital Association MPD Medical Planning and Development Committee of the Johns Hopkins Medical Institutions NAACP National Association for the Advancement of Colored ­People OEHO Office of Equal Health Opportunity PHS U.S. Public Health Ser­v ice PPS prospective payment system S-­CHIP State ­Children’s Health Insurance Program SSA Social Security Administration TEFRA Tax Equity and Fiscal Responsibility Act UAW United Autoworkers Union UDAG Urban Development Action Grant (Program) URA Urban Renewal Administration

INTRODUC TION

Crisis in the Hospital City—­and the Health Care Nation

T

he long strug­gle over health care in the United States has been based on a misunderstanding: the idea that the aim of the American health care system is to provide medical ser­v ices. It does this, of course, but since World War II, it also has become something much more. It is now an industry that occupies a massive segment of American economic life, one on which entire communities depend for their very survival, material as well as medical. Hospitals in par­tic­u­lar have become crucial sources of jobs and economic viability for communities around the country. Increasingly, they also have taken on responsibility for addressing their communities’ most pressing social prob­lems, even as their own actions and practices have sometimes exacerbated ­those very prob­lems. It is this centrality of hospitals—­and of the health care industry more generally—­across multiple facets of community life that constitutes what this book characterizes as the “hospital city.” This importance extends beyond cities alone. Hospitals and health care are dominant forces in suburban and rural communities as well. In all such areas, the social and economic functions of health care have become particularly impor­tant as older sources of community viability have dis­appeared. Yet cities, especially ­those that have experienced massive deindustrialization alongside the intentional concentration of racialized poverty, offer especially incisive insights into this phenomenon and its significance. The role and significance of the hospital city constitutes the first of three core concerns of this book. Si­mul­ta­neously, ­t hese same hospitals are also a key source of the U.S. health system’s excessive costs relative to other countries. It is t­ hose very costs

2 Introduction

that underwrite hospitals’ vital economic, social, and medical functions. Yet ­t hose costs have made the system im­mensely difficult to reform in a comprehensive manner. This is ­because of the top-­line expense that they impose on all proposals for expanded coverage of Americans lacking health insurance and ­because such spending creates a range of influential interests that would be directly harmed by cost reduction. Quite simply, reformers have been unable to overcome the real­ity that most members of Congress not only have a hospital in their district but also constituents who depend on it for both medical care and jobs. This relationship between the hospital city and the strug­gle for reform represents the book’s second core concern: the broader po­liti­cal, economic, and social framework that constitutes—­and limits—­t he “health care nation.” The third focus of Hospital City, Health Care Nation lies in how the hospital city has contributed to serious prob­lems of racially unequal access to health care. This issue is tied most obviously to lack of universal health insurance, but this story is incomplete. Racial inequity in the hospital city reflects not only inequalities in access to insurance coverage but also in housing, income, and education. Where a person lives and how much they earn affects where they are treated and the quality of care they receive. In the United States, such determinants have been profoundly s­haped by both systemic and institutional discrimination. This has produced deep racial disparities in health outcomes. ­These disparities have been exacerbated by a history of unequal and discriminatory treatment, beginning in slavery and extending through the rise of scientific medicine, by medical professionals and— ­especially—­hospitals. How has this happened? What forces, choices, and policies created the hospital city, with all its consequences? The answer lies in the dysfunctional system through which the United States finances the health care of its citizens. Readers who have followed the debates, now many de­cades old, over how best to provide health insurance w ­ ill not be shocked by that general observation. The specific nature and under­lying cause of that dysfunction, though, is less familiar but critical to understanding the crisis facing American health care. The prob­lem lies not merely in the malfeasance of private insurance companies but in the way that the system, in both its public and private components, pays hospitals and funds their capital needs. That payment system, rooted in larger financing structures, has forced hospitals to engage in competitive profit-­seeking be­hav­ior simply to survive. When combined with pervasive dysfunction in the “market” for hospital ser­v ices,



Crisis in the Hospital City 3

this has driven costs higher, constrained reform, l­imited access, generated inequalities—­and made pos­si­ble the emergence of the hospital city as the economic backbone of American communities. The prob­lem, then, is much worse than most Americans understand. It is not simply a ­matter of replacing private insurance with a public system. It is a m ­ atter of fundamentally restructuring the provider payment system, embedded as it is within existing models of health care finance, even as coverage and equity questions are addressed. Such a solution requires altering how hospitals are reimbursed for their legitimate operating expenses and how their capital costs are funded. A single-­payer system would make such steps easier, but its success would also depend on their implementation. The conundrum is that the opposition generated by the requisite changes to the payment system would make achieving a shift to single-­payer much harder. In addition, such a transformation must be accomplished without devastating the communities that now depend on the health care economy for survival. A simplistic approach of “cutting hospital costs” would do exactly that, along with hurting t­ hose who rely on ­t hese institutions for care—­even as they experience disparate health outcomes. We must, in other words, devise ­v iable and sustainable modes of community economic development that include health care jobs but avoid overreliance on them. Si­mul­ta­neously, we must develop a more rational structure for funding and paying hospitals. In assessing the health system and its history, I draw on two foundational insights from the expansive field of health economics. The first perspective relies on the pathbreaking ideas of Kenneth Arrow in the early 1960s. Arrow’s work emphasized the peculiar nature of health care markets and in par­ tic­u­lar the extreme information asymmetries that exist between patients and providers (that is, doctors and hospitals). Arrow also highlighted the effective insulation of patients from price considerations ­because of the presence of insurers who acted as financial intermediaries. B ­ ecause the consumer lacks complete information about both the product and its true price (the latter is usually true among producers too), price signals do not function in health care, and market forces do not operate according to standard economic expectations. Market failure is rampant.1 This is critical in understanding the hospital city, as hospitals are run as businesses but do not exist in functional markets that meet societal needs or achieve efficiency through price competition. Although po­liti­cal theorists have long demonstrated that the state always constitutes markets, its role becomes particularly vital in health care and specifically in the hospital city.

4 Introduction

The second insight is drawn from economists Gerard Anderson, Uwe Reinhardt, Peter Hussey, and Varduhi Petrosyan, who in 2003 published an influential paper with the striking title “It’s the Prices, Stupid” in which they challenged the then reigning view that the United States spends more on health care than other countries b ­ ecause Americans consume more health services—­whether b ­ ecause of insulation from prices or b ­ ecause of the incentives that the payment system offered providers to deliver more ser­v ices ­whether needed or not. The paper analyzed comparative data that showed this to be false: per capita health ser­v ice consumption in the United States was not consistently higher than that in other countries, and in key areas such as physician visits and hospital days consumption was actually lower. Instead, excess spending in the United States came from the higher prices that health care providers ­were able to charge. Neither public (Medicare and Medicaid) nor private insurers could effectively challenge that pricing power. Hospitals, though not the only provider group driving up prices, are the major contributor. A revised version of the paper updated the data in 2019 and showed that the same basic relationships persisted.2 ­These two ideas—­t hat market forces fail in health care due to its inherent characteristics and that the power of hospitals and other providers to set prices drives higher U.S. health care spending—­provide the under­lying conceptual framework for this book’s analy­sis of the hospital city and how it has ­shaped the health care nation. The high costs that support hospital cities are rooted in the history of the health care system, in its organ­ization, in its financing, in its racial politics, and in its basic assumptions about what constitutes quality medical care. This book untangles the messy history of the hospital city, explains how it has ­shaped the health care nation that the United States has become, and suggests a path forward from the deep dysfunction of the status quo.

From Smokestacks to Hospitals Most of our high-­profile debates over health care reform have focused on the reor­ga­ni­za­tion, subsidy, or regulation of health insurance coverage. For all their drama, such fights have obscured a basic real­ity about the U.S. health care system: health care is a critical source of economic viability in American communities. In large cities, hospitals are a particularly impor­tant source of such jobs, accounting for six of the top ten private employers in Baltimore, five of the top ten in Philadelphia and Boston, three of the top four in Cleve-



Crisis in the Hospital City 5

land, three of the top six in Houston, and three of the top ten in Detroit.3 ­These statistics illuminate a broader historical trend: as manufacturing declined in the United States ­after World War II, hospitals increasingly replaced factories at the core of the urban economy.4 Among the cities that had been the nation’s twelve leading manufacturing centers in 1967, hospitals by 2012 constituted the largest overall employment sector in Detroit, Cleveland, Buffalo, Philadelphia, Cincinnati, Pittsburgh, St. Louis, Baltimore, and Boston, the second largest in Minneapolis, the fourth largest in Chicago, and the fifth largest in New York.5 This key urban transformation, from centers of manufacturing to centers of health care delivery, has taken place in smaller communities too. While the latter are worthy of historical study as well, this book focuses on larger cities for three reasons. First, such cities generally wrestled ­earlier with the structural economic transformations wrought by deindustrialization and thus offer a longer historical perspective on the consequences of such changes; second, they are the nearly exclusive location of large academic medical centers, the institutions that form the scientific and economic core of the “health care nation”; third, deeply rooted patterns of racial discrimination in housing, employment, and health care access have made ­these cities—­and often their hospitals—­crucibles of the nation’s broader racial crisis. The implications of ­these f­actors in such hospital cities have not been fully understood. Although health care has s­ haped American cities in determinative ways, we know very l­ ittle about the history of its development as a specifically urban institution. Similarly, we have not adequately considered how health care’s significance in American communities has ­shaped wider policy debates about its potential reform. Cities offer a key win­dow into the latter question. This book takes one such city, Baltimore, and its leading hospital system, Johns Hopkins, as a central subject. This narrative is part of a much larger story about the U.S. economy during the second half of the twentieth c­ entury. Health care spending in the United States in 2019 equaled 17.7 ­percent of gross domestic product (up from 4.3 ­percent in 1950), for a total of almost $3.8 trillion. Of this figure, the largest single contributor was hospital care, for which the country spent nearly $1.2 trillion (a 6.2 ­percent increase over 2018).6 Numerous costs, from technology to debt ser­vice, contribute to hospital spending, but one of the most impor­ tant is l­abor—­accounting for 59  ­percent of the cost of inpatient ser­vices.7 Hospitals quite simply employ large numbers of ­people. Nationally, hospitals in 2017 accounted for more than 6.17 million jobs, the fifth largest employment category in the nation. Employment in the health care sector as a w ­ hole totaled

6 Introduction

20.5 million workers. By comparison, all categories of manufacturing together combined for a total of just ­under 11.5 million jobs.8 ­These statistics show how profoundly the United States has under­gone a transition not just from manufacturing to ser­vices generally, but to a health care economy specifically. This economic significance for communities across the country and especially for large cities is a root cause of the explosively dysfunctional politics that have made reform of the U.S. health care system so challenging.

Hospitals, Cities, and Health Care Policy Health care’s centrality in the economy of U.S. cities is thus inextricable from its high and almost certainly unsustainable rate of cost increase. Hospitals in par­tic­u­lar represent an extremely cost-­intensive way to provide health care ser­v ices, and in the de­cades before and a­ fter World War II, federal policy makers consciously chose to emphasize the hospital sector as the key delivery mechanism for health care. In ­doing so, they rejected alternative systems that would have relied on smaller clinics, preventive care, and public health, with hospitals reserved for complex, advanced ser­v ices. This choice coincided with the emergence of the “insurance com­pany model” as the primary mechanism for financing health care coverage. It supplied insurance through employment-­based plans offered by private insurers (both for-­profit and nonprofit) who reimbursed hospitals and physicians for each ser­vice that they provided—­what we call “fee-­for-­service” medicine—at prices the providers set. Federal tax exemptions for employee health benefits heavi­ly subsidized the system. Providers effectively controlled the par­a meters of this system and structured it in their interests—to retain autonomy and control over the doctor-­patient relationship, to secure stable revenue streams, and, for hospitals, to achieve reliable access to the capital that funded new construction and the acquisition of medical technology.9 Over the longer term, the insurance com­pany model thus changed not only the be­hav­ior of hospitals but also their basic character. Faced with the opportunity and, increasingly, the need to develop revenue streams that supported capital access, this model created incentives for hospitals to compete for patients by building new wings or purchasing the latest curative devices. Over time, such pressures led many hospitals, even t­ hose in the nonprofit sector, to adopt characteristics of profit-­seeking businesses without the corresponding pressure to increase efficiency.10



Crisis in the Hospital City 7

The resulting drive for the profitability that would fund the growth that would allow individual institutions to secure their competitive position generated intense upward cost pressure on the system as a w ­ hole. In recent de­ cades, waves of mergers and consolidations have yielded hospital systems and networks that enjoy extensive pricing power in many markets. Th ­ ese forces have meant that hospital costs have been, and remain, a key cause of the larger health care cost crisis that threatens the fiscal soundness of federal and state bud­gets and the economic competitiveness of U.S. companies—­and that has undermined comprehensive health care reform since at least the early 1970s. ­Here, the national and the local intersect, for it is this drive for capital and the costs it has produced that has facilitated the sector’s vital economic role in U.S. cities: hospital costs are the financial foundations of health care’s centrality in urban economic development. Yet since the 1970s, health care reform efforts have strug­gled with an imperative, real or perceived, to control hospital costs as they sought to expand coverage. Such efforts have mostly failed, in part b ­ ecause of the economic importance of health care spending for the institutions, interest groups, workers, and communities that have come to depend on the current, high-­cost hospital system. This tension, between health care costs as a key source of stress on both the public and private sectors and health care spending as a means of community development—­a nd even survival—­lies at the core of Hospital City, Health Care Nation. As such, the book weaves together a retelling of the national narrative of health care policy, or­ga­nized around the power of the hospital industry as positioned against presidents and congressional leaders, with a detailed account of the growth, importance, and prob­lems of the hospital city in Baltimore. Racial inequalities play a key role in this story. Hospitals located in areas with concentrations of insured patients could generate reliable revenue streams, which, beginning in the 1960s, they used to secure access to capital markets and, more specifically, to both tax-­exempt and taxable bonds. Many such hospitals w ­ ere in heavi­ly segregated white suburbs. This allowed them to undertake expansions and modernizations that made them even more competitive for patients. It is impor­tant to note that such competition was not based on price. Instead, it was based on ser­v ices, facilities, and hospital amenities. Such competition did not serve as a check on inefficiency. Urban hospitals serving low-­income and often minority patients, in contrast, lacked such reliable revenue, relied on the poorly funded Medicaid program, and had far more difficulty accessing the debt markets. Over time, this produced

8 Introduction

a decrease in the quality of care that many such hospitals offered, further exacerbating racial health disparities. The story that Hospital City, Health Care Nation tells is not only about health care, then, or about cities: it is about a larger narrative of racial in­equality across metropolitan space, as expressed in the transformation of formerly social, community-­based institutions by core cap­i­tal­ist financial structures.

A Hospital City in a Health Care Nation Hospital City, Health Care Nation thus moves across multiple scales: local, state, and national. This approach requires careful attention to why and how the local or regional ­matters for the broader story of the U.S health care system. The particularity of Baltimore informs such questions as how the hospital industry delimited possibilities for reform and how American financial capitalism influenced local patterns of racial health disparity. Conversely, the book’s openness to the specific and the local demonstrates precisely what is at stake in other­wise abstract debates over health policy options: the lives, livelihoods, and neighborhoods ­shaped by the hospital city. Baltimore, home of the massive Johns Hopkins Health System, provides an ideal case study of the hospital city. The Johns Hopkins Hospital and Medical School are iconic institutions that in the late nineteenth ­century created the model of modern academic medicine. Following a period of racial turnover ­after World War II, they have existed in an urban, African American neighborhood. Baltimore, meanwhile, emerged by 1900 as a leading manufacturing city with a strong presence in industries such as steel, sugar refining, and shipping, but it in turn experienced a devastating combination of deindustrialization, intense—­a nd intentional—­racial segregation, and impoverishment during the second half of the twentieth c­ entury. Race and the politics of racial exclusion and white supremacy s­ haped the city’s history in profound ways. During the late nineteenth and early twentieth centuries, Baltimore pioneered the devastating land control tactics that entrenched racial segregation in neighborhoods around the region and the country, from a municipal segregation ordinance that the U.S. Supreme Court overturned in 1913 to the more subtle but power­f ul techniques of deed and zoning restrictions and exclusionary realtor practices that allowed developers to build all-­ white residential communities. Before and a­ fter World War II, key figures in the local real estate and development industry continued to shape national



Crisis in the Hospital City 9

housing and urban renewal policy through their roles in government and professional associations and in their own business practices.11 In light of this history, it was not an accident that the 2015 Baltimore uprising made the city a national symbol of continued desperation in U.S. cities. More recently, the COVID-19 pandemic highlighted the vast racial health disparities that persist despite Baltimore’s world-­leading hospitals. In this, once again, Baltimore has unfortunately been typical of the nation as a ­whole. The scale of Johns Hopkins and other Baltimore health systems is also representative of larger patterns. Health care dominates Baltimore’s economy:

Figure 1. ​Map of central Baltimore showing the location of Johns Hopkins Hospital, the East Baltimore Medical Center, and Baltimore City Hospitals.

10 Introduction

when combined with the medical school, the Johns Hopkins Health System is the city’s largest single employer, and health care is—by far—­the city’s biggest overall employment sector. The Hopkins system extends throughout the region to other areas of the United States and even around the world. Despite the presence of such power­f ul institutions, however, Mary­land has also been a national leader in hospital cost control through its state-­level Health Ser­v ices Cost Review Commission (HSCRC). The commission’s history and its policies provide pos­si­ble models for shaping health care reform nationally. Johns Hopkins and Baltimore, though, cannot be understood in isolation. Along with connecting the Baltimore case to its broader reconsideration of the national health care policy story, Hospital City, Health Care Nation raises questions about the nature of the American state. In recent years, historians and po­liti­cal scientists have reassessed the nature of state power in the United States.12 In par­tic­u­lar, this work has challenged the traditional assumption that the nation possesses an exceptionally weak state. Such scholars argue that the American state in fact wields considerable power through decentralized means, relying on local and state governments and on cooperative, voluntary arrangements with intermediary institutions in the private sector.13 Based on voluntary relationships with for-­profit and not-­for-­profit corporate associations empowered to accomplish state ends, this “associational state” is a form of national power that operates without the centralized bureaucratic structures of classical state theory. The balance between public and private varies, changes in form, and shifts over time, but the American associational tradition has proved capable of building a state with tremendous power both domestically and globally.14 Few sectors illustrate the blurred character of the public-­private distinction more clearly than health care, and urban hospitals and especially medical centers offer a particularly formidable example of the associational state in action. Though nominally “private,” such institutions draw on direct government expenditures through Medicare and Medicaid and benefit from the “hidden” subsidies of the federal tax exemption for private insurance benefits. Hospitals and medical centers have also frequently relied on a range of public subsidies, both federal and local, for construction of their physical facilities. They continue to provide varying degrees of charity care, taking on a pos­si­ble public function in d ­ oing so. More recently, they have assumed a wider range of governmental responsibilities—­acting as employers, ser­v ice providers, coordinators of redevelopment, providers of security and policing ser­v ices, and in a few cases even reconstructing entire communities.15 All



Crisis in the Hospital City 11

t­ hese functions, along with hospitals’ core responsibilities for providing medical ser­v ices and conducting medical research and teaching, can be seen as part of an associational arrangement ­under which the state assigns basic public responsibilities to nominally private actors, who then receive both direct and indirect subsidies to support their activities.16 Fi­nally, ­there is the question of the health care sector’s relationship to cap­ i­tal­ist economies more generally: although many health care institutions and most prominent medical centers are nominally not-­for-­profit institutions, the largest bring in billions of dollars in annual revenue. This ties the urban health care economy to the history of capitalism. That field can be broadly defined by attention to the po­liti­cal construction of markets and the movement of capital through the economy—­a focus that brings health care’s dominant institutions within its purview. The pursuit and ser­v ice of capital has ­shaped not only for-­profit hospitals but since the 1960s the not-­for-­profit sector as well. Regardless of their formal ­legal status, hospitals behave like businesses. Through hospitals (not to mention private insurers), capitalism has thus s­ haped the U.S. health care system, with significant negative effects that must be addressed if the nation is to have a system that is just and provides cost-­effective care for all. Ultimately, attention to t­ hese issues raises a final question for Hospital City, Health Care Nation: if urban health care institutions are si­mul­ta­neously cap­i­tal­ist corporate entities, charity institutions, and associational actors invested with state powers, what exactly do we as a society expect of them? How have they acted in the city, and how do we need them to act? Should health care institutions take on social responsibilities outside of patient care, research, and teaching? Do we expect or even want them to act as a kind of quasi-­government ser­v ice in the uncertain urban spaces between public and private? Do such responsibilities interfere with their capacity to be the social institutions the health system actually needs? Such queries in turn generate other questions, about the basic identity of hospitals as institutions and about the role they should play in the health care system, in the economy, and even in our democracy itself. ­These are critical ­matters for how we understand the modern city, the health care system, and society. In order to begin answering them, we must understand how the hospital city came to be.

PA R T I Building the Hospital City

CHAPTER 1

The Public Foundations of the Hospital City

T

he American state spurred the growth of the hospital city. During the de­cades ­after World War II, the federal government enlisted hospitals as agents for its goals of advancing medical research and expanding access to health care facilities. This approach had distinct drawbacks, ­r unning up against inadequate health insurance coverage for millions of Americans and generating costs that vastly exceeded ­those of other countries’ health systems. ­These flawed health structures also contributed to the reordering of American cities and metropolitan areas during a period of profound transformation that saw shifts of population away from central cities, intensified racial segregation in metropolitan areas, and the decline of manufacturing and its mass production–­ mass employment economies. Health care’s expansion, with its mounting economic power and its concentration in urban areas, ­shaped this pro­cess and its outcome. We live with the consequences ­today. The state interacted with the hospital industry and helped build the hospital city through four federal programs: the Hill-­Burton hospital loan and grant program, the urban renewal program, and the Medicare and Medicaid programs. Of ­t hese programs, only urban renewal was explic­itly conceived as an urban policy. Yet all four expanded the connection between urban hospitals’ traditional role as providers of medical care—­especially for the urban poor—­a nd their increasing economic importance in what w ­ ere soon to become postindustrial cities. ­These programs served two key hospital industry goals: Hill-­Burton and urban renewal provided public capital for hospital construction, while Medicare and Medicaid improved hospital revenue streams generally and compensated hospitals for charity care specifically. The federal programs, though, had more far-­reaching effects, as they

16 Chapter 1

reshaped hospitals’ financing, operations, and under­lying character. In d ­ oing so, they laid the foundations for the hospital city. Hospitals during the period moved away from their traditional dependence on voluntary philanthropy, first ­toward reliance on public grants as sources of capital and eventually ­toward deep engagement with private financial markets, regardless of the niceties of for-­profit or not-­for-­profit ­legal status. Such intersections blur distinctions between policy areas, as well as between public and private spheres, to the extent that health care policy operated as a critical but largely unrecognized form of urban policy. Feedback effects from t­hese social and economic characteristics in turn structured the limits of health policy reform. What the resulting system did not do was provide the best health care for the most ­people at the lowest pos­ si­ble cost.

World War II and the Origins of the Hospital City At the close of World War II, health care accounted for less than 1 ­percent of national income, and the sector employed 892,000 workers, with 505,000 of them in nonprofit, for-­profit, and state or local government hospitals. To place the relatively small size of the sector in perspective, manufacturing in 1945 employed more than 15 million workers and accounted for 28.4 ­percent of national income.1 In many re­spects, the nation’s hospitals ­were actually in crisis. ­After a period of growth and investment in new facilities and medical technology during the 1920s, most private, voluntary hospitals (­t hose supported by donations voluntarily given) had suffered from a de­cade and a half of economic depression and war, during which they had seen l­ ittle in the way of modernization or upgrades. Public, tax-­supported hospitals (federal, state, or municipal) had benefited from public works spending during the New Deal, but private hospitals had not been eligible for such funds. In addition, philanthropic donations from wealthy individuals, the traditional source of capital for voluntary hospitals, had dried up during the Depression. Although war­t ime spending and high employment had eased the extreme financial stress that hospitals experienced during the 1930s, charity care expenditures remained high at most urban hospitals, and the sector as a ­whole faced continued uncertainty.2 Despite ­these prob­lems, the contours of the ­future health care empire had begun to emerge. Hospital insurance coverage developed during the 1930s



Public Foundations 17

with the hospital-­based Blue Cross network. By the end of the de­cade, Blue Shield plans sponsored by state medical socie­ties offered coverage of physicians’ bills as well. Most of t­ hese insurance plans tied coverage to employment ­because of the innate availability of large risk pools among workers in a mass industrial economy. Spurred by a federal tax exemption for insurance benefits and the exclusion of such benefits from the war­time wage freeze, the number of Americans with private health insurance increased from around 3 million in 1937 to 12 million in 1940 and 32 million, or 59.4 ­percent of the nonfarm civilian ­labor force, in 1945.3 The rapid expansion of corporate health insurance promised steadier revenues for hospitals, particularly t­ hose located in major industrial centers with a high rate of ­union contracts. This helped to stabilize hospital operating bud­gets.4 Even more impor­tant, the rise of this “insurance com­pany model” of health care financing established norms for provider reimbursement. This development is central to the story of the hospital city and to the wider fate of health care policy in the United States ­because payment patterns and incentives s­ haped the be­hav­ior of hospitals and other providers in fundamental ways. Herman and Anne Ramsay Somers, two leading health care scholars of the mid-­century period, ­were prescient when they noted that “the method of payment is not just a neutral financial mechanism to ‘pay the bills.’ For good or ill, it inescapably affects costs, quality, and patterns of ser­vice.” Over time, the resulting payment structures and the provider interests they encouraged constrained f­ uture reforms of the wider system.5 The payment systems created ­under the early insurance com­pany model did three t­ hings: first, they accommodated the priorities of both physicians and hospitals. For physicians, the insurance com­pany model paid fees for the ser­v ices that doctors provided, a key demand of the American Medical Association (the primary physicians’ professional organ­ization, also known as the AMA) ­because of the belief that such a structure protected physician autonomy over medical decisions, as well as the privacy of the doctor-­patient relationship. For hospitals, it maintained the centrality of the hospital as the core of the system, the provider of major medical ser­vices, and the workplace of the physician. Insurers paid institutions one of two ways: on the basis of reimbursable costs per patient day in the hospital, the system ­adopted by most Blue Cross plans and l­ ater used in Medicare; or on the direct reimbursement of (generally higher) patient charges, the structure used by the for-­profit commercial insurers who began to challenge the dominance of “the Blues” during the 1940s and 1950s. All of ­these mechanisms created inflationary

18 Chapter 1

incentives for doctors and hospitals. The more care, or ser­vices, they provided, the more revenue they would receive. Second, the insurance com­pany model ­limited the spread of alternative financing structures or­ga­nized around the princi­ple of subscriber prepayment and nonprofit group practice, such as the Kaiser Foundation Health Plan on the West Coast or the Group Health Plan of New York. Prepaid group practices reversed the incentives of fee-­for-­service medicine, as the provider received only their share of a patient’s monthly fee (along with t­ hose of all other plan members, including ­t hose who remained healthy). They did not receive extra fees for additional ser­v ices that might not be needed. By emphasizing prevention and lower-­cost clinic ser­v ices, the prepaid group practice approach also decentered the expensive institutional care of the hospital. The dominance of the insurance com­pany model, along with the pressure exerted by the AMA, pushed such alternatives to the sidelines in much of the country ­until the 1970s and 1980s. Third, and critically, the insurance com­pany model established the principle of reimbursing hospitals’ capital costs. Blue Cross typically included a flat-­rate capital allowance in its payment schedules, while the commercial insurers paid patient charges that covered depreciation and interest costs. Such payments allowed hospitals to build capital reserves that could be used to pay for expansions and improvements or leveraged into borrowing to pay for even more growth. Over time, this would radically re­orient the business practices of even nonprofit hospitals t­oward the maximization of revenues and in turn allow hospitals to move away from reliance on philanthropic and governmental sources of capital.6 Meanwhile, the private, voluntary hospital sector also began to articulate a new concept of its role both in the emerging public-­private health care system and in the broader U.S. associational state. Private hospitals succeeded in claiming status as “public” institutions in order to avoid the collective-­ bargaining requirements of New Deal l­ abor laws and the employee coverage requirements of the Social Security unemployment and old-­age insurance programs. The hospitals justified ­t hese exemptions on the idea—­a nd the ideal—­that they had a core mission of public ser­vice, which they con­ve­niently extended to the personal motivations of their employees. The psychic rewards of participating in this mission, hospital lobbyists explained, compensated hospital workers for low wages, lack of access to collective bargaining, and exclusion from social insurance. Building on this rather manipulative invocation of the ser­v ice ethos, the industry thus promoted what historian Rose-



Public Foundations 19

mary Stevens describes as a “dual ‘public’ hospital system” that included not only hospitals operated directly by government entities but also t­ hose run by nominally private, nonprofit associations.7 This positioning at the interface of public and private would provide the ideological framework for the growth of the hospital city in the de­cades ­after the war. Health insurance and ideology aside, World War II created impor­tant pre­ce­dents for federal subsidy of hospital construction. The 1941 Lanham Act provided federal public works funds to support construction of community facilities in areas vital to the war effort. Hospitals received 25 ­percent of all funds spent through the program. In contrast to the New Deal public works programs, which had funded only public hospitals, private nonprofit hospitals ­were eligible. As such, the act established a model for postwar federal funding of hospital expansion and modernization.8 The Lanham Act, along with an unsuccessful 1942 bill that proposed a follow-up hospital construction program, led the American Hospital Association (AHA) to undertake its own planning effort for the postwar period. In 1944, the AHA established the Commission on Hospital Care to study the needs of the nation’s postwar hospital system and shape any programs of federal funding—or regulation. The 1943 introduction of proposals for national health insurance by Senators Robert Wagner of New York and James Murray of Montana and Representative John Dingell Sr. of Michigan gave further impetus to the AHA’s effort, as did the success of depression and war­time experiments in comprehensive primary care and prepaid group medical practices. Along with Kaiser and a number of other prepaid group experiments, ­t hese included the Farm Security Administration’s (FSA) sponsorship of medical cooperatives and clinics and the U.S. Public Health Ser­v ice’s Emergency Maternity and Infant Care (EMIC) program for the wives and c­ hildren of ser­vice members during World War II. Th ­ ese efforts provided care for more than a million ­people and offered models for the public delivery of clinic-­ based health care services—­a pos­si­ble alternative to voluntary hospitals as the system’s core. At the same time, EMIC actually preceded Blue Cross in reimbursing hospitals for costs and in including capital expenses (such as depreciation and interest) in such cost calculations. A progressive public health care program thus contributed significantly, if unintentionally, to the development of the insurance com­pany model of hospital finance.9 The AHA commission provided a means to block the wider threat that the EMIC and FSA programs posed to hospitals. Its final report identified gaping inadequacies in the nation’s hospitals and called for a massive program

20 Chapter 1

of hospital construction, modernization, and coordination that would create 195,000 new hospital beds (40 ­percent more than the existing supply) at a cost of $1.8 billion. This approach reflected a belief system that assumed technologically oriented hospital care represented a necessity for improving health. As such, the report deflected attention from clinic-­based, preventive, and prepaid group alternatives. The commission also took pains to separate its call for hospital expansion from the wider debate about national health insurance.10 The emergence of the hospital city would be grounded in the ­wholesale national adoption of this perspective and, with it, the rejection of the possibility of building a coordinated health care delivery system, linked to a program of national health insurance, that would encompass hospitals but also extend beyond them.

The Hill-­Burton Program, Capital, and the Hospital City The choice to emphasize hospital construction rather than a more comprehensive approach to health care occurred amid the social and po­liti­cal ferment of the immediate postwar period. It took concrete form, quite literally, in the Hill-­Burton hospital construction program, which Congress enacted in 1946. Yet such an outcome was not inevitable. As late as November 1945, President Harry Truman listed the construction of hospitals and public health centers as just one component in a program that would also include federal funding for public health, maternal and child health ser­v ices, medical education and research, protection from lost wages due to illness or disability, and prepaid national health insurance covering both physician and hospital ser­v ices. Hospital construction, though, represented the first priority within such a program, and Truman argued that “it should be pos­si­ble to meet deficiencies in hospital and health facilities so that modern services—­for both prevention and cure—­can be accessible to all the ­people.”11 In 1945, hospitals could be portrayed as an unquestioned good, bringing the unalloyed benefits of medical science to the American ­people. Supporters and opponents of national health insurance alike endorsed the idea of federal support for hospital construction, and it would be the only part of Truman’s package to become law. In contrast to national health insurance or public health programs, both of which the AMA bitterly opposed, federal aid for hospital construction had few natu­ral enemies. It also had a cohesive base of interest group support. In par­tic­u­lar, Hill-­Burton resulted as much



Public Foundations 21

from the AHA’s push for increased hospital construction through the Commission on Hospital Care as it did from Truman’s advocacy.12 Well before Truman’s health message, AHA executive secretary George Bugbee sought bipartisan sponsorship for hospital construction legislation from Republican senator Harold Burton of Ohio and Demo­cratic senator Lister Hill of Alabama. Bugbee’s greatest success, though, came in winning over Ohio Republican Robert Taft, the Senate minority leader. Taft, who attacked Truman’s national health insurance proposal as “the most socialistic mea­sure this Congress has ever had before it,” hoped to run for president in 1948 and needed a health position of his own to ­counter Truman. Taft acknowledged that the U.S. health care system was “inadequate in spots,” but he did not believe it needed comprehensive reor­ga­ni­za­tion. As a result, he insisted that the Hill-­Burton legislation (formally known as the Hospital Survey and Construction Act) primarily benefit the poorest states with the worst hospital facilities and that it limit support for hospitals in richer states. Lister Hill readily agreed (by that time Burton had been appointed to the Supreme Court) and the staff of the Social Security Board designed an aid formula that met ­t hose criteria. The formula gained the support of Hill’s fellow Southern Demo­crats, whose generally poor region stood to benefit disproportionately. It also required local and state contributions of two dollars for ­every one dollar of federal aid, with contributions permitted from private sources as well as from state and local governments.13 In an impor­tant contrast with the Truman-­backed Wagner-­Murray-­ Dingell bill for national health insurance, Hill-­Burton would be administered through the U.S. Public Health Ser­v ice rather than the Social Security Board, with the surgeon general approving all plans and grants. This feature made the program acceptable to conservatives who associated the Social Security Board with the federal government’s capacity to dictate policy in local communities, including especially racial integration. Members of Congress from both parties also recognized that Hill-­Burton would create jobs in the construction and operation of new hospital facilities.14 Together, ­these ­factors contributed to the development of broad support for Hill-­Burton and even won the support of the AMA. In contrast, the Wagner-­Murray-­Dingell bill for national health insurance found­ered from lackluster backing from the White House and withering opposition from the AMA.15 Hill-­Burton passed the Senate in December 1945 and the House in July 1946. The town of Langdale in Lister Hill’s home state of Alabama received the first proj­ect ­under the program, an eighty-­seven-­bed general hospital completed in 1949. Capturing

22 Chapter 1

the mood of the moment, the journal Architectural Rec­ord noted that Langdale’s new hospital had been “planned for considerable expansion.”16 Along with construction, Hill-­Burton funded state-­level surveys of existing hospital facilities. The surveys demonstrated that 40  ­percent of U.S. counties did not have a hospital. Using this data, the Public Health Ser­v ice calculated that the nation needed 255,000 additional hospital beds, heavi­ly concentrated in rural areas. To begin meeting ­t hese needs, Hill-­Burton provided $75 million for hospital construction during the program’s first five years.17 The legislation also established a formal limit of 4.5 hospital beds per 1,000 p ­ eople, above which an area could not receive federal grants. Rather than serving as a cap on hospital construction, the 4.5-­bed standard instead became a de facto goal for the program.18 This reinforced the “more is better” ideology of hospital construction that underpinned the entire approach. By 1948, e­ very state but Nevada had hospital construction plans.19 The legislation required ­t hese plans to create regional hospital systems ­under which advanced care hospitals in an area would collect sicker patients from progressively less sophisticated facilities. But Hill-­Burton failed as a regional planning system ­because the legislation defined planning only in the narrowest pos­si­ble context of overall bed levels and b ­ ecause it entrenched the status of individual hospitals as discrete, autonomous units rather than as true components of regional systems. This form of “soft planning” provided ­little capacity or incentive to coordinate the facilities, technology, and l­abor that hospitals in a region deployed or the ser­v ices that they delivered. As a result, it inflamed the cost inflation prob­lem by encouraging overbuilding and overinvestment in advanced technology at multiple hospitals in an area. It also l­imited the development of lower-­cost options for basic care and initiated a never-­ending cycle in which hospitals sought additional capital to support further growth to keep up with their competitors.20 Hill-­Burton’s limitations as a planning device reflected a larger pattern in the U.S. health care system. Since the late 1930s, hospital administrators, local corporate leaders, and philanthropic organ­izations had been concerned about the inefficiencies created by ser­v ice and technological duplication among multiple small hospitals in the same area. To address this prob­lem, business, health, and po­liti­cal leaders in some areas created metropolitan hospital planning councils, beginning with the Hospital Council of Greater New York in 1938. Staffed by professional planners, ­t hese councils sought to rationalize hospital facilities across cities and regions by encouraging hospitals to voluntarily coordinate—­and limit—­capital expenditures. Councils be-



Public Foundations 23

came eligible for Hill-­Burton funding in 1964, and their numbers increased from eight in that year to fifty in 1965. The planning councils, though, had ­little or no statutory authority to enforce their goals. With the exception of ­those in Pittsburgh and Rochester, where large corporate interests temporarily succeeded in establishing and controlling community-­wide hospital capital funds, voluntary planning councils had to rely on persuasion based on appeal to the public good and on hospitals’ collective interest in maintaining their legitimacy as responsible, community-­oriented institutions. Overall, this strategy had minimal impact.21 The failures of planning aside, Hill-­Burton’s true purpose and core accomplishment consisted of the provision of capital to hospitals by government. As such, it marked a break from traditional methods of hospital capital development. Previously, hospitals had relied on private philanthropy, usually from wealthy individuals, to obtain the capital necessary to renovate or expand their physical facilities. This left them dependent on donors’ wishes as to what would be built rather than on careful capital planning based on rational assessments of institutional needs. It also tended to produce inefficiency through the duplication of facilities within a region, a prob­lem exacerbated by the role of religious and ethnic associations in supporting separate hospitals for their constituent groups. Voluntary donations also fluctuated with the state of the economy. Hill-­Burton provided an alternative way to access capital: through public grants. With its rigid formula and typically generous funding, Hill-­Burton at least partially freed hospital administrators and directors from the tyranny of philanthropy.22 A Hill-­Burton proposal could set the par­ameters of a proj­ect according to hospital administrators’ wishes, while the grant itself could then be used as a tool to convince donors of the viability of the proj­ect. Such leveraging of grants facilitated hospital efforts to raise the remaining local share. Johns Hopkins Hospital’s new C ­ hildren’s Medical Center illustrated such a pro­cess. Along with just over $1.9 million in Hill-­Burton grants, in 1960 it received a gift of $668,000 from the Hoffberger f­ amily, ­owners of the Baltimore-­based National Brewing Com­pany and the Baltimore Orioles baseball team.23 Initially, the Hill-­Burton program primarily offered federal matching grants for the construction of new hospitals and, a­ fter 1954, nursing homes and ambulatory care centers. Between 1947 and 1971, it allocated $3.7 billion in federal funds for hospital construction, which helped support approximately 30 ­percent of all such proj­ects in the United States. The program’s matching requirement meant that state and local funds added another

24 Chapter 1

$9.1 billion. Combined, this covered about 10 ­percent of total hospital construction costs.24 By the late 1970s, 3,800 hospitals, or 60 ­percent of all U.S. hospitals, had benefited from Hill-­Burton.25 This contributed to a substantial overall increase in hospitalizations that continued into the 1980s. The spread of employment-­based hospital insurance reinforced this trend, and by 1965, spending on hospital care was four times higher than it had been in 1950. Hospital employment increased from 662,000 to 1,386,000 during ­t hose years.26 Hill-­ Burton thus helped to entrench the hospital-­ based, technology-­focused model of health care in the United States. Support for the physical expansion of hospitals worked in tandem with the postwar growth of federal funding for medical research. With its emphasis on the hospital, Hill-­Burton explic­itly cast hospital construction and by extension medical science—­rather than national health insurance or public health—as the key to solving the nation’s health prob­lems. The technological, scientific hospital thus solidified its status as the American alternative to socialized medicine.27 Into the 1960s, this framing made hospital expansion, and with it the growth of the hospital city, seem uncontroversial and unequivocally positive.28 But hospital care is more expensive than other forms of health care delivery. As a result, the hospital sector’s growth contributed significantly to the increasing cost of American health care. Hill-­Burton played a key part, as its provision of capital helped to shift overall health care spending t­ oward hospitals, which soon exceeded physicians as the largest category of national health care expenditures.29 This would shape the health care system and the national debate over health care policy for the remainder of the twentieth ­century and beyond. The Hill-­Burton program also embraced some of the most nefarious aspects of states’ rights in the age of Jim Crow. With Alabama senator Lister Hill as its cosponsor, the legislation nominally prohibited racial discrimination but allowed local communities to meet the standard through “equitable provision” of separate facilities for African Americans. The Public Health Ser­ vice left enforcement of even this loose requirement to state agencies. While Hill-­Burton did lead to the construction of some new hospital facilities for African Americans, it also reinforced segregated health care in much of the country. ­These practices went largely unchallenged ­until 1963, when the Supreme Court ruled against the separate-­but-­equal practices of two Greensboro, North Carolina, hospitals in the case of Simkins v. Cone. The l­imited ruling, though, had no retroactive effect, as it applied only to ­f uture Hill-­ Burton grants and not to past recipients. The federal Department of Health,



Public Foundations 25

Education, and Welfare (HEW) took only ­limited steps to enforce Simkins. Hill-­Burton thus maintained, and in places worsened, the racial health inequities of the status quo.30 Nor did Hill-­Burton lead to an increased commitment to charity care by hospitals. Although the legislation included the requirement that hospitals supported by Hill-­Burton provide a “reasonable volume of ser­v ices to persons unable to pay,” states rarely enforced this rule.31 With the emergence of Blue Cross and commercial hospital insurance, both of which covered some patients who had previously been unable to pay hospital bills, the overall amount of hospital charity care prob­ably declined a­ fter World War II.32 ­After the Simkins case, HEW a­ dopted new regulations that required Hill-­Burton hospitals to increase their charity care, as did a 1970 court case. Enforcement of the complex provisions of t­ hese standards, however, proved difficult.33 During the 1950s and 1960s, for example, Johns Hopkins Hospital’s annual reports did not even list its charity care activity in terms of Hill-­Burton requirements.34

Hill-­Burton and the Urban-­Rural Divide As a result of the program’s original emphasis on areas without hospitals, most scholars have argued that Hill-­Burton had only a ­limited effect on urban hospitals.35 Examining the full scope of the program over its quarter ­century of operation, including a review of variations between regions, demonstrates that such a conclusion is not wrong, but it is incomplete. Initially, the bulk of Hill-­Burton money did go to small communities. From 1948 to 1971, cities with populations greater than 250,000 received only about 13.3 ­percent of Hill-­Burton funds, despite having 22 ­percent of the total U.S. population in 1960. Communities with populations between 2,500 and 25,000 received 43.9 ­percent of funds, even though they ­were home to just 19.5 ­percent of the population. This category included many new suburbs as well as rural areas. The program’s matching requirement meant that it disproportionately benefited moderate-­income communities, as poorer areas often lacked the fiscal capacity to make the requisite local contribution—­even though they too had been a priority in the legislation.36 This rural-­u rban disparity declined slightly a­ fter Congress’s 1964 Hill-­ Burton amendments established a new grant category that funded the modernization or replacement of existing, outmoded hospitals. In a recorded

26 Chapter 1

telephone conversation on August 4, 1964, White House bud­get director Kermit Gordon explained the rationale for the new approach to President Lyndon Johnson: “It’s r­ eally a question, Mr.  President, of where the need is greatest, and I think every­body who’s studied it would agree that over the last ten years, ­we’ve done a ­great deal of construction in suburban and rural areas, and the ­great need now is in modernizing urban hospitals.”37 In the years ­after the 1964 amendments, such modernization proj­ects skyrocketed as a share of Hill-­Burton activity, increasing to almost 90 ­percent of proj­ects between 1966 and 1971. Even so, the urban-­rural gap remained: from 1966 to 1971, cities with populations of 250,000 or more received only 19.1 ­percent of Hill-­Burton funds.38 Despite the funding disparity, 36.6 ­percent of the total inpatient beds the program funded between 1947 and 1971 ­were located in central cities; another 19.5 ­percent ­were outside central cities but within metropolitan areas, or what can be broadly defined as suburbs.39 Such national patterns, though, masked variations in par­tic­u­lar places. Baltimore, for example, illustrated the potential power of the emerging hospital city, even in a program that prioritized rural areas. Mary­land’s 1948 Hill-­ Burton hospital survey revealed that the “Baltimore Base Area” (defined as the city plus the immediate surrounding counties) had a deficit of 1,442 general hospital beds.40 As a result, with its ­great concentration of hospitals and its centrality for health care in the state, Baltimore actually received a disproportionately large share of Mary­land’s Hill-­Burton grants. With 23 ­percent of the state’s 1970 population (down from 40.5 ­percent in 1950), the city accounted for about 40 ­percent of the state’s total Hill-­Burton funding from 1947 to 1971. In comparison, suburban counties received 32 ­percent of total Hill-­Burton funding and rural counties 26 ­percent. Seventy of Mary­land’s 170 total Hill-­Burton proj­ects took place in Baltimore, and of the 112 hospital-­ specific proj­ects in the state, Baltimore was the site for 47 (Hill-­Burton also funded a much smaller number of non-­hospital facilities such as nursing homes and rehabilitation facilities). The suburban counties received 44 total and 29 hospital-­specific proj­ects, respectively; rural counties received 57 total and 34 hospital-­specific proj­ects. The predominance of Baltimore hospitals in Mary­land’s Hill-­Burton program predated the 1964 amendments: 32 of the 47 Baltimore hospital proj­ects took place before 1966, when the Hill-­ Burton modernization grants became available.41 Within the city, Hill-­Burton provided support for thirteen dif­fer­ent hospitals across a range of institutional types. Municipally owned Baltimore City Hospitals, for example, won five Hill-­Burton grants totaling $2,707,258; Prov-



Public Foundations 27

ident Hospital, established by and focused on serving Baltimore’s African American community, received three grants worth $911,013; Mary­land General Hospital received $1,075,085 in two grants; the University of Mary­land affiliated University Hospital won four grants worth a total of $1,573,590; the Catholic Bon Secours Hospital received the smallest Hill-­Burton sum—­ $291,718 split over two grants.42 All of ­t hese proj­ects received additional support from other sources, including not only philanthropy but also federal programs for medical research that grew during the postwar de­cades and allowed institutions to include debt ser­v ice on research buildings as an indirect cost on individual grants. This funding structure played a critical role in financing the new construction.43 Hill-­Burton’s support of smaller, less wealthy institutions such as Bon Secours is significant. ­These institutions generally lacked the capacity to raise large philanthropic sums; ­later, they would have difficulty accessing private financing when more prosperous hospitals turned t­ oward debt markets. Public capital funding in the form of Hill-­Burton grants put them on something closer to an equal footing—­a lthough the two-­ thirds local contribution still had to be raised. Support for smaller institutions aside, Baltimore’s biggest recipient of Hill-­ Burton funds by far was Johns Hopkins Hospital. Between 1954 and 1969, Hopkins received eleven Hill-­Burton grants worth $3,607,016; philanthropic and other federal funds provided an additional $12,304,516. Faced with an aging physical plant and—­despite its use of urban renewal—­limited space for outward expansion, Hopkins during the 1950s began a construction program on the main hospital lot. Two ­factors drove this building boom: first, the increased specialization of medicine in the postwar de­cades, which led to a demand for dedicated research, teaching, and clinical spaces, and second, the ready availability of Hill-­Burton and other federal funding for hospital construction. All of the new building at Hopkins in the 1950s and early 1960s relied on Hill-­Burton and other federal dollars. Hopkins paired Hill-­Burton grants with private donations and research funds from the National Institutes of Health, for example, to build the new ­Children’s Medical and Surgical Center, which in 1964 replaced the “beloved but dilapidated” Harriet Lane Home for Invalid ­Children. Hill-­Burton funds also supported construction of the Wood Basic Science Building, completed between 1959 and 1964. The Public Health Ser­v ice provided $1.5 billion in research funds for the building. The Blalock Clinical Science Building received $485,000 from the National Heart Institute for cardiovascular research laboratories and $750,000 from the

28 Chapter 1

Figure 2. ​The Johns Hopkins Hospital complex from across Broadway, showing the main hospital (Billings) building and its dome, as well as the new Clinical Science Building, built with funding from the National Heart Institute and National Cancer Institute, 1959. The Chesney Archives of Johns Hopkins Medicine, Nursing, and Public Health, Baltimore.

National Cancer Institute for oncology research facilities. In addition to its support of the C ­ hildren’s Center, the National Institutes of Health provided funds for a new biophysics building, for total renovation of the medical school’s half-­century old Hunterian II building, and for a six-­story research wing at the Wilmer Eye Institute, all of which ­were completed by 1964.44 All of t­ hese proj­ects took advantage of the ability to claim debt ser­v ice on the fa­cil­i­t y as an indirect research cost ­under the grants.45 Overall, the medical



Public Foundations 29

institutions built more than 500,000 square feet of new space between 1945 and 1968, with much of the capital expenses funded by the federal government.46 In the case of Baltimore, Hill-­Burton’s relevance for cities cannot be overstated. While the program did have a rural and suburban focus, especially in its early years, it still helped to build the hospital city. In par­tic­u­lar, it had a power­f ul effect in cities like Baltimore that already possessed a mix of major academic medical centers and smaller voluntary hospitals. Such cities, along with their medical institutions, formed a center of gravity that pulled in Hill-­Burton funds despite the program’s overall prioritization of communities that lacked hospital beds. When combined with postwar spending for medical research, Hill-­Burton allowed major hospitals in Baltimore and similar cities to expand and update the health care and research complexes that formed the core of the hospital city. It did this by providing them with capital, reducing the amount that had to be raised through philanthropy or generated by increased operating revenues. As such, the program represented an advance of the associational character of the U.S. health care system, as it folded public funding and subsidy into private institutions charged with achieving public purposes. The public-­private distinction increasingly blurred in health care. This system of funding, however, would not prove stable. It would soon be subverted by a combination of changing priorities within government as well as hospitals’ ability, bolstered by the operating revenues provided by the insurance com­pany model and then Medicare, to meet their ever-­increasing capital needs through other sources. Before this happened, though, hospitals would become partners in a deeply problematic federal proj­ect to rebuild the American city: urban renewal.

CHAPTER 2

Urban Renewal in the Hospital City

D

ea Mae-­Hor fled the Chinese Revolution only to encounter urban renewal in Baltimore: in 1959, she lost her home and business ­because of an urban renewal proj­ect undertaken for the benefit of Johns Hopkins Hospital. Dea’s was one of 83 businesses and more than 1,300 h ­ ouse­holds displaced by the Broadway urban renewal proj­ect, and Dea differed from her displaced neighbors only in the exceptional nature of her background. Her business, the Sam Wing Laundry, had been established in 1927 by her husband, Dea Bing-­Horn, who had come to Baltimore from China in 1918. Located just a block from Johns Hopkins Hospital, at the corner of North Broadway and Orleans Street, the laundry relied on a clientele of hospital personnel. Over the years, Bing-­Horn built up the business by investing in top-­ grade laundry equipment. In the mid-1930s, he married Mae-­Hor during a visit to China. He returned to Baltimore and the laundry, and she remained in China u ­ ntil 1949, when she fled the communist forces sweeping into Canton and (­after two years as a refugee in Macao) joined her husband in East Baltimore, ending a separation of fifteen years. The Deas and their three ­children lived in the upper floors of the three-­story brick building that ­housed the laundry. ­After Bing-­Horn’s death in 1958, Mae-­Hor took over the laundry, despite not speaking En­glish. A loyal customer base from Hopkins supported the business through the transition, but in February 1959, the Baltimore Urban Renewal and Housing Agency informed Dea that the building would be condemned for the Broadway 3-­C renewal proj­ect—­a nd that she, her ­family, and her business would be evicted. In its place, Johns Hopkins would build a parking lot, to be replaced at an unspecified ­later date with a medical building.



Urban Renewal 31

The urban renewal agency’s l­ imited relocation assistance proved of l­ ittle help for Dea, as her laundry depended on proximity to its Hopkins customer base. Relocating elsewhere in the city, even if the equipment could be moved or replaced, would require starting over without customers. Speaking through a translator to a Baltimore Sun reporter, Dea asked, “­A fter all I’ve been through, why does this have to happen to me?” Ultimately, she received compensation for the laundry equipment and moved into public housing. Her ­daughter helped to support Dea on her own salary as a clerk at Johns Hopkins Hospital, a position that reflected the vast postwar expansion of the health care workforce at Hopkins and around the United States. Dea, meanwhile, began working in a nearby laundry owned by a cousin, who explained, “She’s so lonely that ­every after­noon she comes over and helps me out with my laundry. I guess it’s in her blood.”1 ­Today, the site of the Sam Wing Laundry is occupied by Hopkins’s Hackerman-­Patz Patient and ­Family Pavilion, a temporary housing fa­cil­i­t y for patients receiving specialized cancer care at Hopkins and their families. ­Behind it, across the old 3-­C renewal area, lie the David Rubenstein Child Health Building, a heating and mechanical plant, and a massive Hopkins parking garage. The full implications of the national policies that ­shaped the hospital city—­urban renewal, Hill-­Burton, Medicare and Medicaid, capital subsidies, and debates over cost control and national health insurance—­can only be understood through careful attention to their effects at the local level and to stories of personal harms such as that of Dea Mae-­Hor. The policies that facilitated the growth of the hospital city s­ haped Johns Hopkins and East Baltimore, and their consequences run through the story recounted in this book.

Hospitals and Urban Renewal Hill-­Burton’s ultimate importance was that it allowed hospitals to meet at least some of their capital needs without recourse to private philanthropy or financial markets. The federal urban renewal program did this as well, but indirectly, through the subsidization of property acquisition and clearance. Urban renewal, though, added a power­f ul and problematic second feature: the deployment of public powers of eminent domain to secure land for hospital expansion without regard for the wishes of preexisting users of the land. While this gave hospitals the capacity to grow beyond existing bound­aries,

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it created the possibility, even the likelihood, of clashes with p ­ eople who, like Dea Mae-­Hor, wanted to remain in their existing neighborhoods. In Baltimore and around the United States, the hospital city emerged in large part through exactly such conflicts, which almost always played out along lines of racial and class in­equality. Linking capital to eminent domain in this way made clear its connection to power over the city. Although less impor­tant than Hill-­Burton in its overall contribution to hospital growth, urban renewal proved significant for the urban hospital sector. Urban renewal redefined American cities during the postwar period, usually for the worse. Existing studies have focused on how urban renewal destroyed intact, often minority population neighborhoods; displaced residents; exacerbated segregation; and facilitated the expansion of high-­end ser­ vice industries even as manufacturing declined in the central cores of U.S. cities. Urban institutions such as universities and hospitals have frequently been identified as among the leading contributors to such negative consequences.2 ­These institutions’ participation in urban renewal reflected tensions that had been built into the program from its inception. The Housing Act of 1949, which provided the legislative basis for the program, explic­itly stated that its purpose was to provide “a decent home and a suitable living environment for ­every American ­family.” In order to gain the support or at least the acquiescence of the urban business and real estate interests that w ­ ere well represented in Congress, advocates of low-­income housing tied this goal to the related but not identical objective of clearing “blighted” areas from the urban core. As a result, urban renewal (known before 1954 as “urban redevelopment”) offered local governments a “write-­down” subsidy that covered two-­t hirds of the costs of assembling and clearing land that could then be made available for redevelopment, usually by private developers. The legislation also required that proj­ects merely be “predominantly residential.” The word “predominantly” opened the possibility of including commercial and institutional developments along with housing as part of urban renewal proj­ects.3 Amendments to the legislation in 1954 further loosened the constraints on nonresidential urban renewal by raising the percentage of proj­ect funds that could be employed for purposes other than housing. Prominent Baltimore developers James Rouse and Guy Hollyday helped to develop and implement t­ hese changes. By the mid-1950s, universities and hospitals began to work with local governments in using the urban renewal write-­down to undertake expansions of urban campuses and medical facilities. Surveys con-



Urban Renewal 33

ducted by the federal Urban Renewal Administration (URA) during the late 1950s indicated that at least fifteen hospitals had participated in urban renewal proj­ects.4 One of the earliest large-­scale deployments of urban renewal by a hospital took place in Chicago, where Michael R ­ eese Hospital—­t he city’s largest private institution at the time—­undertook a massive redevelopment proj­ect in the heavi­ly African American Douglas neighborhood that surrounded its South Side fa­cil­i­ty. Deploying the talents of leading planners such as Reginald Isaac of the Harvard Gradu­ate School of Design and the influential modernist architects Walter Gropius and Ludwig Mies van der Rohe, the proj­ect provided new hospital and research facilities supported in part by a $375,600 Hill-­Burton grant, along with a vastly expanded, Mies-­designed modernist campus for the nearby Illinois Institute of Technology. But much of the cleared area in the proj­ect sat vacant for de­cades with former occupants scattered and private investors uninterested.5 Racial integration in both public and private housing proved ­limited and difficult to sustain, and the proj­ect displaced 4,575 h ­ ouse­holds, all but 5 of them African American.6 Only a fraction of ­t hese families found rehousing in the proj­ect’s public housing units or in its market-­rate apartment buildings; most simply dispersed into already overcrowded housing in Chicago’s segregated neighborhoods.7 Still, through the 1950s, the Michael ­Reese Hospital–­Illinois Institute of Technology proj­ect received widespread positive attention as an example of how urban renewal could benefit institutions—­and cities. It influenced hospitals around the country, leading them to undertake similar efforts of their own.8 By the 1960s, institutional urban renewal took place ­under an altered policy structure. As a result of the federal Housing Act’s original requirement that federally supported redevelopment proj­ects had to be “predominantly residential,” Michael ­Reese Hospital and the Institute of Technology had to focus much of their early effort on housing rather than purely on institutional needs. This forced them to at least consider the wider housing needs of the surrounding community. Hospitals and universities, however, chafed at the constraint. Julian Levi, who had overseen an early urban campus expansion program at the University of Chicago, explained to the House Subcommittee on Housing that universities could not “live with the 51 ­percent residential requirement . . . ​­because what we need are campus facilities. . . . ​You ­can’t ­because the moment you try to use the urban renewal tool, you are confronted with the fact that your proj­ect ­isn’t eligible and the only way you can make it

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eligible is to put housing back; and if you put housing back, you defeat the ­whole purpose of the operation.” 9 Beginning in 1959, however, linking institutional expansion to urban renewal became far simpler. U ­ nder Section 112 of that year’s amendments to the Housing Act, Congress made universities eligible for urban renewal funds with no housing requirement. Two years ­later, hospitals received the same privilege. Levi served as a primary drafter of Section 112. His comment about “the w ­ hole purpose of the operation” made plain the objectives of hospitals and universities in shifting urban renewal further away from its original housing purpose and t­oward an explicit emphasis on transforming cities through institutional expansion. Testifying in support of the 1961 amendments before a Senate subcommittee, Dr. Karl Klicka of the American Hospital Association’s Committee on Hospital Planning touched on two aspects of the urban environment that would only become more pressing in the coming de­cades: parking and crime. In regard to the former, he posed the image of a doctor rushing to a hospital “in the interest of saving lives. . . . ​only to find virtually impossible parking conditions.” Section 112, he held, could prevent such nightmares by providing “more land for parking areas.” Space for the automobile would be a constant focus in nearly e­ very urban hospital proj­ect undertaken a­ fter World War II, and it has played an unrecognized part in increasing health costs—­because such facilities must be paid for. In regard to crime, Klicka noted that hospitals operated around the clock, often “in environments of slum and blight.” This 24-­hour schedule left hospital employees vulnerable to robbery, or worse, which in turn drove away “good needed employees.” Section 112 would address this prob­lem by making it easier for hospitals to remove the nearby slums where, it was assumed, criminals who preyed on staff and patients resided. All such rhe­toric barely concealed racial and gender subtexts about African American criminals and vulnerable white ­women (who ­were presumably among the “good needed employees”).10 Section 112 did have another critical feature. It allowed cities to claim any expenditures made by universities or hospitals for urban renewal–­related purposes as “grants-­in-­aid” that counted t­ oward the required local contribution to urban renewal’s two-­to-­one federal–­local matching ratio. If ­t hose grants-­ in-­a id exceeded the necessary local expenditure, the federal government would provide credits of equal value ­toward ongoing or ­future urban renewal proj­ects in the city.11 This provision did two t­ hings. First, it created an incentive for cities to expand their institutional urban renewal programs in order



Urban Renewal 35

to reduce immediate costs to local governments (as the institutions would make the expenditures) while also generating subsidies for the city’s overall urban renewal program. Indeed, by 1961, officials with the URA became concerned that some local redevelopment authorities had come to view Section 112 as a way “to undertake ­t hese proj­ects without local contribution.”12 Second, it erased what­ever weak distinction still remained between public and private in urban renewal. Private institutional purposes ­under this conception w ­ ere presumed to be inseparable from the public good. Over the following de­cade, this unexamined assumption would drive urban hospital expansion programs in the United States and complicate the associational relationships that increasingly defined the U.S. health care system. Congress, though, passed the 1959 and 1961 amendments without debate.13 While Congress may not have noticed what it was ­doing, urban po­liti­cal and institutional leaders certainly did. By 1964, the Housing and Home Finance Agency (HHFA) reported that 154 urban renewal proj­ects around the country, involving 120 colleges and universities and 75 hospitals, had already taken advantage of Section 112’s institutional provisions.14 ­These included major urban medical centers, such as the Detroit Medical Center and Johns Hopkins Hospital, as well as such smaller institutions as Druid City Hospital in Tuscaloosa, Alabama, and Mercy Hospital in Des Moines, Iowa.15 In 1964, Julian Levi conducted a study of Boston that demonstrated the existing plans of colleges, universities, and hospitals in that city alone could generate almost $31.7 million in Section 112 credits.16 By 1966, the URA reported that 14 proj­ects claiming Section 112 credits had been completed and that another 82 had active contracts. Th ­ ese 96 proj­ects represented 8 ­percent of all urban renewal proj­ects across the United States, and they had generated nearly $93 million in Section 112 credits. Additional proj­ects remained in the planning stages.17 In Baltimore, University Hospital undertook one of the first Section 112 proj­ects in the nation.18 Located on the University of Mary­land’s cramped downtown Baltimore campus, University Hospital served as the teaching hospital for the university’s medical school. By 1960, it had already received four Hill-­Burton grants, the last of which helped to build a $530,000 radiation fa­ cil­i­t y for cancer treatment. The availability of Section 112 credits also supported an aggressive wave of urban renewal construction on the campus.19 Over the following de­cade, the university and the city used Section 112 to fund the local share of three renewal proj­ects that expanded the University of Mary­land at Baltimore campus from 10.2 to 23.6 acres and allowed a 50 ­percent

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increase in the number of students. The proj­ects included a new Health Sciences Library, outpatient facilities, a new basic science building for the medical school (in a renovated department store building), a dental school building, a gradu­ate dormitory—­a nd multiple parking facilities. Together, they displaced 258 total ­house­holds, 62.7 ­percent of them nonwhite.20 Across the three proj­ects, the hospital generated a total of $2,059,000 in Section 112 credits for the city by 1966.21 By making it easier to secure approval of the proj­ects and fund the local share of urban renewal, Section 112 helped to construct the physical architecture of the hospital city in Baltimore.22 Johns Hopkins’s Broadway proj­ect, however, would more fully illustrate the complications and costs—in h ­ uman suffering and in hospital-­community relations—of deploying the urban renewal strategy.

Urban Renewal in East Baltimore Baltimore began planning for urban redevelopment even before the end of World War II. The state of Mary­land passed authorizing legislation for redevelopment in May 1943, and in November 1944, voters amended the state constitution to give local governments powers that facilitated slum clearance. In June 1945, the Baltimore City Council established a new Redevelopment Commission, and in May 1947, the council designated eight areas as official redevelopment sites. One of ­these areas, known as Broadway 3-­A, lay directly west of Johns Hopkins Hospital on twelve blocks just across North Broadway. In 1950, the Baltimore Sun described it as “a terribly blighted area.” In real­ity, it consisted of a long-­established, largely low-­income, African American neighborhood.23 ­Because of its interest in the area, Hopkins joined housing reformers, developers, real estate brokers, ­unions, and the city’s major newspapers in a citywide co­a li­tion that pushed for redevelopment.24 In November 1948, the co­a li­tion achieved a major victory when Baltimore voters overwhelmingly approved a $5 million bond issue to finance redevelopment proj­ects in the city. ­After Congress passed the Housing Act of 1949, the resulting bond revenues provided the local matching funds required to access federal redevelopment dollars.25 As early as 1945, Hopkins had announced a $15 million, ten-­year campaign to fund “expansion and modernization” of the hospital, and hospital and university officials participated in planning meetings for the city’s rede-



Urban Renewal 37

velopment program.26 As a result of such engagement, as well as the relatively advanced state of Hopkins’s internal planning, the Broadway area moved to the top of the Redevelopment Commission’s priority list. In early 1949, the university and hospital trustees received a proposal for the proj­ect from Henry Knott, a local developer, and James Rouse, a dynamic young Baltimore mortgage banker who would ­later achieve fame for his work on some of the most prominent urban renewal proj­ects in the United States, including Baltimore’s Charles Center; the “new town” of Columbia, Mary­land; and “festival marketplaces,” such as Baltimore’s Inner Harbor and Boston’s Faneuil Hall. But Rouse’s urban renewal ­career began with the Broadway proj­ect.27 Rouse’s involvement is significant, as it directly links Johns Hopkins to an influential group of Baltimore real estate executives and mortgage brokers—­Rouse, John Mowbray, and Guy Hollyday—­who ­shaped housing and urban renewal policy in ways that reinforced racial segregation in Baltimore and in the United States as a ­whole. Mowbray, the president of the Roland Park Com­pany, served in a number of impor­tant positions with the power­f ul National Association of Real Estate Brokers, where he guided that organ­ization’s opposition to public housing and its efforts to deploy urban renewal in a way that would strengthen racial bound­aries. Hollyday, the head of the Baltimore Real Estate Board (and Rouse’s mentor), served for a brief but impor­tant period as commissioner of the Federal Housing Administration (FHA). The youn­gest of the three, Rouse by 1949 had already engaged the nation’s housing policies in complicated ways, first in his early work enforcing the FHA’s discriminatory mortgage insurance policies during the 1930s and then in his role leading the mayor’s Advisory Council for the “Baltimore Plan.” Operating through the newly formed Housing Bureau of the city Health Department, the Baltimore Plan involved a program of aggressive building and health code enforcement intended to force property o ­ wners to improve housing conditions, beginning in a single South Baltimore block in 1947 and expanding to a fourteen-­block area in East Baltimore three years ­later. The meaning of the Baltimore Plan depended heavi­ly on the perspective of the observer. For African American residents, it could mean improved housing or simply higher rents (or for ­t hose who owned, greater code compliance costs). For real estate professionals like Mowbray and Hollyday, it offered a chance to demonstrate that the private sector could upgrade housing conditions, thus negating the need for public housing while containing Black residents far away from the elite housing developments they built for whites.

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For housing reformers such as Frances Morton of Baltimore’s Citizens Planning and Housing Association (of which Rouse was a member), in contrast, the Baltimore Plan represented the rehabilitation component of a multipronged strategy that also required expansion of public housing. Rouse did not oppose public housing outright but saw the Baltimore Plan as a way to build citizen responsibility and community identity while embedding the private sector deeply into urban redevelopment—­a princi­ple he would pursue in the Broadway proj­ect and throughout his long ­career. This approach would have profound consequences for Hopkins’s engagement in urban renewal.28 The Knott and Rouse proposal for the Broadway proj­ect initially covered just three blocks immediately west and slightly south of the hospital, and recommended the construction of “an addition to the nurses’ residence, a dor-

Figure 3. ​View of backyard conditions in East Baltimore taken by the Citizens Planning and Housing Association as part of its campaign to build support for urban redevelopment in Baltimore, early 1950s. Broadway Slum Redevelopment, Citizens Planning and Housing Association Rec­ords (R0032-­CPHA), Series 8, Box 1, Folder 21, University of Baltimore Special Collections and Archives.



Urban Renewal 39

mitory for medical students,” and related facilities. It quickly gained the support of Hopkins and the Redevelopment Commission. Significantly, the proposal did not include any housing for local residents. Instead, the developers focused solely on the needs of the medical institutions.29 Most of the existing structures in the area, however, consisted of housing, almost all of it occupied by African Americans and much of it in poor condition. Nearly 97 ­percent of the housing units had been built before 1900 (and mostly before 1880), and according to the 1940 U.S. Census, 76 ­percent ­either lacked a private bath or required major repairs (compared to 29 ­percent citywide). Photographic evidence, admittedly selected by housing reformers for maximum impact, showed dirty yards and alleyways and significant physical deterioration in many of the neighborhood’s row h ­ ouses. Most residents rented their homes, with monthly rents far lower than the city average (and hence more affordable). Many w ­ ere poor, with a welfare case rate more than double the city average. Rates for such varied mea­sures as tuberculosis incidence and juvenile delinquency ­were similarly high.30 All of the residents would be displaced. Initially, planners assumed that they would be relocated in new public housing units being built elsewhere in East Baltimore.31 Seeking to provide a model of what the private sector could accomplish in low-­ income housing, however, the developers and the Redevelopment Commission de­cided to expand the Broadway proj­ect west to Central Ave­nue in order to accommodate the construction of new housing for some of the residents displaced from the medical center area.32 Yet this led to even more de­mo­li­tion and displacement. From the perspective of the Redevelopment Commission and housing reformers such as the Citizens Planning and Housing Association, that just meant that more “slums,” almost entirely housing African Americans, would be cleared. Finalized in May 1950, the expanded plan proposed the construction of 178 new, privately owned garden apartments, located on ­either side of Dunbar High School in the southwestern and northwestern corners of the Broadway 3-­A area and intended exclusively for Black residents. In the early 1950s, such passive (in the sense that it was accomplished by clear intent and developer-­realtor practices rather than by ordinance) segregation in federally subsidized housing was still tolerated. The Redevelopment Commission noted that this would constitute “the first instance of modern apartments being built by private enterprise for Negroes in a central and con­ve­nient location.” This reliance on the private sector, the report noted, “is obviously an experiment, but if it succeeds, the same ­t hing can be done to a far greater

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extent in other slum areas.”33 The new proposal represented a larger shift in urban renewal ­toward the private-­sector provision of low-­income housing, which would become a central strategy of U.S. housing policy beginning in the late 1960s. But in 1950, it remained a new and untried approach.34 On the east side of the proj­ect, adjoining the hospital, the plan proposed to build an additional 328 garden apartments “for married personnel together with a small school and playground,” as well as a 150-­unit high-­rise apartment building, three dormitories, and a small medical office building. Every­ thing would be “designed to modern planning standards” with “ample off-­street parking and generous play lots throughout the entire proj­ect.” In contrast to the apartments housing African Americans on the west side of the Broadway 3-­A proj­ect, all of the housing near Johns Hopkins would be reserved for medical and nursing students and ­house staff.35 In 1950, ­t hese groups ­were all white and with ­limited exceptions would remain so ­until the early 1970s.36 Indeed, when the Rouse Com­pany conducted a survey of demand for housing among hospital personnel, it excluded ser­vice workers, who constituted the majority of Black employees of the hospital, on the dubious grounds that “they bear the most casual relationship to the hospital of all personnel and are unduly difficult to reach for purposes of interview.” In all practical effect, the medical housing would be for whites only, thus establishing segregated housing for the proj­ect.37 To implement the plan, Knott and Rouse formed the Broadway Development Corporation. This new entity would lease the land from the Redevelopment Commission, act as the official developer, and sublease the hospital-­related properties to the medical institutions. Hopkins would not have an owner­ship stake. This had an impor­tant consequence: if Hopkins had taken owner­ship, the proj­ect would have been exempt from city property taxes; lease-­hold by the developers kept it on the tax rolls.38 The Redevelopment Commission’s letter of conveyance to the Baltimore City Council noted the community facilities that would be created, including new playgrounds for the neighborhood’s Dunbar School and Chick Webb Recreation Center and a new building for the city’s Eastern District Health Center, as well as new parking areas near the hospital. But it also struck a slightly ominous note: “Innumerable benefits w ­ ill flow from this proj­ect. Perhaps the greatest is the assurance that the provision of the vari­ous housing facilities contemplated w ­ ill make certain the continuation of the Johns Hopkins Hospital in its pre­sent location where it is needed most to continue its ­great work on behalf of persons living in the crowded sections of the city.”39

Figure 4a and 4b. ​Baltimore Redevelopment Commission maps of Broadway Redevelopment Area 3-­A showing the existing neighborhood (4a) and the original redevelopment plan (4b, including the garden apartments (southwestern and northwestern corners) designated for African Americans displaced by clearance, 1950. Courtesy of the Map Collection, Sheridan Libraries, Johns Hopkins University, Baltimore.

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Implicit in this statement was the possibility that without such attention to its needs, Hopkins might not remain in East Baltimore.

The Renewal Co­ali­tion Quick approvals of the developer contract by the city Board of Estimates and of the proj­ect plan by the Redevelopment Commission followed, allowing the Broadway proj­ect to move on to the City Council for consideration (along with another Rouse proj­ect in the Waverly neighborhood four miles to the north).40 At this stage, the first signs of opposition emerged. Race represented the key divide. Seventeen African American community leaders submitted a petition to Mayor Thomas D’Alesandro, claiming that while the Broadway 3-­A proj­ect would “relieve the congestion of population and increase the facilities for health and recreation of the area, we believe that the distribution of its facilities is unfair to the colored population of the area and of East Baltimore.” Among the petitioners ­were seven ministers, an attorney, a funeral home operator, and two physicians. The latter included Dr. Ralph Young, who in 1947 had become the first African American to receive a staff appointment at Johns Hopkins Hospital. Despite this connection, Dr. Young’s medical office on Broadway was in the area set to be cleared. The petitioners pointed out that 900 Black families would be displaced but that only 200 of the proj­ ect’s 650 new housing units would be reserved for African Americans. In addition, the proj­ect would remove two Black schools “and a large number of general business places catering almost exclusively to [the] Negro trade.” Redevelopment would change the area’s population from approximately 90 ­percent African American to approximately 30 ­percent. As an alternative to the proj­ect’s proposed transfer of land to Hopkins, the petitioners requested that two-­t hirds of the housing and commercial sites be reserved for African Americans, that “comparable” replacement housing be provided, and that ­people displaced from the proj­ect area receive priority “in securing accommodations as tenants in the area.” U ­ nless their concerns w ­ ere addressed, they 41 argued, City Council should reject the ordinance. ­These requests suggested a vision for the ­f uture of the area very dif­fer­ent from the one proposed by Hopkins, Rouse, and Knott—­a vision that regarded the needs of the existing African American community as at least equal to t­ hose of Hopkins. At a June 5 joint meeting of the Redevelopment and City Planning Commissions, the group further articulated what was at stake. Backed by more



Urban Renewal 43

than a hundred residents who attended the meeting, Dr. Young commented that “­there’s no use kidding ourselves, colored ­people ­can’t buy any place they would like, much less rent.” In a segregated city, with ­limited housing open to African Americans, displacement meant severe hardship. Young also emphasized that the area included established Black-­owned businesses that could not easily be moved. An attorney for property ­owners in the area added that they had invested significant sums in improvements to meet city code compliance ­orders, likely as part of the “Baltimore Plan.” 42 Two days l­ater, at a meeting of the Board of Estimates, Mayor D’Alesandro commented that he favored redevelopment, “but not if it means confiscation.” Ignoring the contradictory nature of his comment—­confiscation was an integral part of urban renewal—­t he mayor called on the Redevelopment Commission to find a compromise.43 At the request of the Board of Estimates, Redevelopment Commission director Richard Steiner agreed to conduct a formal public hearing. Held on June 12, it proved contentious. J. Calvin Carney, the attorney for o ­ wners of several rooming ­houses near Johns Hopkins Hospital, dismissed the claim that the Broadway proj­ect was about public benefits. Instead, he lodged a charge that would persist through multiple de­cades and across many proj­ ects: “This is not slum clearance. It’s being done for the benefit of the Hopkins. If they want it (the property), they should go out and buy it, the way any other private person would have to do.” 44 Carney rejected the view that the hospital’s needs had to be met b ­ ecause of the public purpose of its work, and he highlighted how urban renewal effectively represented a transfer of capital to the hospital. He maintained that the distinction between private and public, between Hopkins and the city, should remain real. Instead, public power and capital w ­ ere simply being used for the benefit of a wealthy private institution. Other redevelopment opponents noted “the sound condition of the structures t­ here and the amount of commercial enterprise” in the Broadway area. Seventy-­seven-­year-­old Emma Bush Hammer spoke while holding a framed photo­graph of her great-­grandparents, from whom she had inherited property in the area. She asked, she said, only for fair compensation but stated that she did not trust the city “one bit.” Hammer closed her testimony by singing a World War I hymn: “Are you downhearted? No! No! No!” The Sun condescendingly dismissed her testimony as “a light touch at the two-­hour hearing.” But her participation demonstrated that re­sis­tance to the redevelopment proj­ect encompassed not only local business o ­ wners, ministers, and

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middle-­class professionals who had or­ga­nized the petition but also a broad repre­sen­ta­tion of the neighborhood’s residents.45 Over the following weeks, opposition to the proj­ect further coalesced. When the City Council itself held a lengthy hearing on the Broadway and nearby Waverly proj­ects on June 29, 1950, more than 200 ­people “packed the City Council Chambers,” the Afro-­American reported, “in opposition to redevelopment plans that would displace over 1,000 families.” Reverend W. A. Showell of East Baltimore’s Apostolic Faith Church noted the damage caused by breaking up long-­standing neighborhood connections: “How can they rehabilitate themselves when you scatter them about the city?” 46 At the hearing, the Baltimore Urban League joined the fight, adding an influential Black po­liti­cal voice. The league’s acting director, Cecil Scott, announced that the organ­ization would oppose the Broadway and Waverly proj­ ects ­until city agencies completed a coordinated master plan “for total housing redevelopment.” Such a plan should provide for the relocation of every­one displaced by redevelopment, particularly African Americans who faced ­limited rehousing options elsewhere in the segregated city.47 The Afro-­ American endorsed the league’s position, concluding that “this undertaking, as presently proposed, would be better left undone.” 48 In a July 8 memorandum to Mayor D’Alesandro and the City Council, Scott and Urban League president Edgar Ewing further explained the group’s position. The proj­ects, they noted, would destroy far more housing than they would create. With only one public housing proj­ect ­under construction and with an existing vacancy rate for African American housing of only 0.005 ­percent in Baltimore, such displacement would lead inevitably to further overcrowding and deterioration in nearby Black neighborhoods: “The l­imited access of Negro tenants to the Hopkins proj­ect and the creation of added blight by rehousing displaced Negro families in areas which are now overcrowded does not constitute redevelopment.” While the Urban League did not oppose redevelopment in princi­ple, they made clear that the group would withhold any endorsement of the two proj­ects u ­ ntil a more comprehensive approach had been developed.49 The Redevelopment Commission, though, had power­f ul allies. The Sun published a defensive editorial arguing that rejection of the proj­ects would discourage private builders from becoming involved in Baltimore’s redevelopment program, while the executive committee of the Citizens Planning and Housing Association, which had led the push for both urban redevelopment and low-­income housing construction in Baltimore, called on its members



Urban Renewal 45

to testify in f­ avor of the proj­ect.50 Redevelopment Commission chair Clark Hobbs in turn argued that “this proj­ect is the first instance in which it has been pos­si­ble to interest a private builder in providing attractive modern apartments for colored p ­ eople at a con­ve­nient location.” Involving the private sector, defined by the commission and its supporters as a necessary condition, required downplaying concerns about displacement.51 Local real estate and development interests also rallied to the proj­ect. At the City Council hearing, Baltimore Home Builders Association president Robert Bready noted that “long, arduous efforts” had been required to build support among developers. He warned that if the Broadway 3-­A and Waverly proj­ects did not go through, the private sector would have ­little interest in becoming involved in ­f uture redevelopment work. Guy Hollyday of the Baltimore Real Estate Board put the m ­ atter in terms common among redevelopment advocates in the late 1940s and early 1950s. “You c­ an’t have any big development in a metropolitan area,” he claimed, “without casualties, difficulties and prob­lems.”52 Lost in such martial meta­phors was the point that in urban redevelopment it was the bulldozers of the city government rather than the bombs of a foreign e­ nemy that inflicted casualties. In the case of Broadway, the city’s largest medical center would join with the local and federal state as the implementer of this destruction. In 1953, President Dwight Eisenhower would appoint Hollyday as commissioner of the Federal Housing Administration. Hollyday’s perspective on the acceptability of redevelopment’s casualties remained the dominant one.53 Hopkins officials sided with the pro-­renewal co­a li­tion. On the day of the Redevelopment Commission’s hearing, Johns Hopkins president Detlev Bronk issued a statement strongly endorsing the plan. In addition to emphasizing the need for institutional housing, Bronk argued that the patients and physicians who visited Hopkins “annually bring millions of dollars to the business enterprises of the city,” and they conveyed “the impression they gain of Baltimore” when they returned to their homes or continued their ­careers in medicine.54 All this was true, but Bronk’s statement went to the core of the dim view that the medical institutions took of the neighborhood and its ­people. On July 11, 1950, the City Council unanimously approved the Broadway and Waverly proj­ects. The Afro-­American lamented the action, given the racial discrepancies in displacement and the lack of clear rehousing plans: “This is, in our estimation, no solution to our housing dilemma.” All that would result, the paper argued, was the worsening of “the already acute housing condition

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in other already crowded and substandard areas.”55 The Sun, in contrast, editorialized that “by their approval the councilmen earned the gratitude of the city.” The white newspaper’s editors acknowledged that most of ­t hose displaced would be Black and called on the city “to work out a ­really efficient and effective method of smoothing the way for t­ hose who are the short-­run victims of long-­run communal pro­gress.”56 Paired with the expression of racial power—­the disproportionate displacement of Black residents, with a supply of public housing inadequate to the demand—­t his idea of the greater good lay at the heart of the redevelopment ideology. The city, the developers, and Hopkins would never achieve even the degree of fairness hoped for by the Sun. In the years that followed, they would instead betray the community, creating a legacy of deeply rooted distrust of the Hopkins medical institutions.

Broken Promises in Broadway During the final months of 1950, the Redevelopment Commission began appraising properties within the Broadway and Waverly proj­ect bound­aries and negotiating with property ­owners regarding compensation.57 De­mo­li­tion in Waverly began in July 1951.58 In that Rouse proj­ect, replacement housing would be entirely for white residents, with all of the area’s displaced Black residents forced to move—­somewhere. Discontent among African American residents and activists regarding the program continued to simmer, and in December, the local National Association for the Advancement of Colored ­People (NAACP) leadership joined a group of Black Baltimore ministers in a last-­ditch appeal to the HHFA. Assisted by NAACP Washington Bureau director Clarence Mitchell (part of a f­ amily of leading Baltimore civil rights activists), the group demanded that HHFA Slum Clearance and Redevelopment director Nathaniel Keith cancel all aid to the Baltimore redevelopment program. The lack of open housing in the Broadway and Waverly proj­ects, they argued, v­ iolated federal policy and acted as the functional equivalent of the racially restrictive deed covenants that the Supreme Court had banned in the 1948 Shelley v. Kraemer decision. Keith, however, claimed that the HHFA lacked the authority to override local decisions about the racial composition of redeveloped areas and rejected the Baltimore appeal. The proj­ ects ground forward.59



Urban Renewal 47

The Broadway proj­ect moved far more slowly than Waverly. This created prob­lems in the federal–­local relationship. In 1949 and 1950, the FHA had issued more than $5 million in mortgage insurance guarantees to support the construction of housing in the two redevelopment areas. This federal insurance was critical: granted u ­ nder Section 608 of the federal Housing Act, it removed risk from the mortgage loan, allowing the developers to borrow at lower interest rates and reducing the overall cost of the proj­ect. This made the private, African American housing units v­ iable b ­ ecause the developers could then lease the garden apartments at a rental level affordable for low-­ and moderate-­income residents ($65 a month instead of $80). Section 608, however, had been established during World War II as a tool for financing the quick and cheap construction of housing for war workers and returning veterans. The program implicitly encouraged builders to borrow more than actually needed for a proj­ect (in some cases, pocketing the difference), and with the war long concluded, the Housing and Home Finance Agency (the parent agency of the FHA) sought to end its use completely. Although the agency granted Baltimore an extension u ­ ntil late 1951 following lobbying efforts that went all the way to President Harry Truman, the reprieve proved temporary. In February 1952, Congress ended the Section 608 program without providing a substitute financing device for rental housing, and the FHA canceled the Baltimore commitments.60 Loss of the mortgage insurance forced the developers, the medical institutions, and the city to consider alternative financing arrangements for the Broadway proj­ect. This led to a series of decisions that would undermine Hopkins’s credibility in the community and mar relationships far into the ­future. In May 1952, Rouse wrote to university vice president Lowell Reed and proposed that Hopkins finance the proj­ect out of endowment funds. This approach, he argued, would allow the plan to be developed as an integrated ­whole rather than as separate units. The result would be “a perhaps more appealing and effective overall plan.” More to the point, financing by Hopkins would “make it pos­si­ble to design the proj­ect t­owards the single target of the needs of the Johns Hopkins Medical Center.” 61 This focus on Hopkins’s needs was the key to what would ultimately happen in the Broadway proj­ect and proved a causative force in the community’s long-­term grievances against the hospital. By this point, de­mo­li­tion had fi­nally begun in the Broadway area. Eventually, e­ very structure in the redevelopment area would be cleared: a total of 1,175 housing units in 774 structures. African American h ­ ouse­holds made up

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nearly 97 ­percent of ­t hose displaced. In November, just 26 of t­ hese families moved into a new section of the Cherry Hill Homes public housing proj­ect on the far southern side of Baltimore.62 A key step in facilitating clearance came in early 1953, when the HHFA’s Redevelopment Division announced that Baltimore would receive a $3,373,861 redevelopment grant to support ongoing acquisition and clearance in the Broadway area. In addition to constituting formal federal approval of the proj­ect, the HHFA grant provided much-­needed cash to supplement the $5 million 1948 bond issue. For all practical purposes, this represented the equivalent of a capital grant to Hopkins.63

Figure 5. ​Aerial view of Broadway Urban Renewal Area 3-­A with de­mo­li­tion partially completed, circa 1954–1955. The negative has been reversed, so the south edge of the area is on the right (showing the Douglas and Lafayette Homes public housing areas). Dunbar High School is on the left, the dome of the Billings Building is on the right, and the downtown skyline is vis­i­ble in the distance. “Baltimore Skyline—­from Hopkins Hospital Looking West, 1959-09-02,” Blakeslee Lane, Incorporated Photo­graphs Collection (R0013-­BLI), Box 1, Folder 49, University of Baltimore Special Collections and Archives.



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The federal funds covered only the write-­down costs of acquiring and clearing the Broadway properties. They did not resolve the remaining prob­ lem of financing construction of the new facilities outlined in the redevelopment plan. During 1953 and 1954, Johns Hopkins worked with Rouse, Knott, and the Redevelopment Commission to craft an agreement ­under which the developers would transfer their interest in the site of the new medical dormitory to Hopkins. U ­ nder the terms of the Housing Act of 1950, institutional owner­ship of the land made it easier to obtain an HHFA construction loan for the dormitory—­yet another form of capital provision through urban renewal. The HHFA approved this loan in April 1955. The proj­ect went out for construction bids over the summer, and formal transfer of the property from the city to Hopkins took place in October, with construction set to begin in 1956.64 Institutional owner­ship, though, had a second effect: it meant that the dormitory site would be removed from the city’s tax rolls ­because of Hopkins’s status as a nonprofit.65 Crucially, the agreement covered only the medical dormitory. It did not include the apartments that had been planned for African Americans displaced by clearance. With the original FHA mortgage insurance unavailable, Rouse and Knott could not obtain private financing at rates that would preserve the apartments as a low-­to-­moderate rent fa­cil­i­ty, despite strong demand among Baltimore African Americans for such rental housing.66 The unavailability of financing put the apartments in jeopardy. With Hopkins ready to move forward on the medical dormitory, the developers and the Redevelopment Commission drafted a new version of the Broadway plan that completely eliminated the African American housing. The revised plan replaced the smaller apartment complex at the northwestern corner of the redevelopment area with a new elementary school and the larger apartment block south of Dunbar High School with a massive playground that covered two full city blocks. In addition, the plan converted an area in the southeastern corner of the redevelopment area from garden and elevator apartments to commercial facilities, including a h ­ otel, a shopping center, and a medical office building. Compared to the original total of more than 400 garden apartments and 150 elevator apartments, the new plan included only 125 garden apartments, all of which would be reserved for residents associated with Hopkins.67 This decision to break the promise that new housing would be provided within the Broadway urban renewal proj­ect for African Americans displaced by clearance of their homes was the under­lying source

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of the East Baltimore community’s long-­term grievance against Johns Hopkins Hospital. The changes met immediate opposition. In early 1955, a­ fter the plan became public, members of the Urban League, ­owners of area businesses, East Baltimore ministers, leaders of a local community center, and residents met with the Redevelopment Commission. One area attorney charged that the elimination of the housing “goes beyond being a ­matter of good faith and approaches being a fraud.” A representative of the Urban League objected that the commission had failed in its responsibility to provide “facilities for low-­ income families, particularly Negroes.” Nearby business o ­ wners (some of them presumably Black) complained of increased competition from the planned shopping center.68 Even the Sun, formerly an out­spoken supporter of urban renewal, published two lengthy editorials criticizing the changes, though relying on racialized tropes to do so: “For years of work and planning we have only a jungle of rubble. And ­t here is nothing certain about its fate.” 69 James Rouse countered with a lengthy letter to the editor of the Sun, arguing that the changes had been made with the sole intent of creating “a much better plan for the Johns Hopkins medical center, for the East Baltimore community, and the city as a ­whole.” Rouse pointed to the existence of three nearby public housing complexes that, he now argued, rendered the provision of housing in the Broadway area superfluous. He noted that ­t hese large proj­ects lacked both recreational space and access to stores (­t hose proj­ects’ construction had demolished more than 200,000 square feet of commercial space), and the revised plan provided both. Notably, Rouse also linked the revision of the Broadway plan to the larger evolution of urban redevelopment in the United States. The Housing Act of 1954 had transformed the program into “urban renewal” and refocused it on housing rehabilitation and conservation as well as clearance, along with comprehensive planning to achieve the “highest and best use” of urban land in terms of overall community benefits and tax revenues. As chair of the president’s Advisory Committee on Government Housing Policies and Programs’ urban redevelopment subcommittee, Rouse (along with Guy Hollyday at the FHA) had played a key role in shaping the 1954 legislation. He now emphasized the resulting shift in focus, which in practice meant that institutional, commercial, and corporate uses would receive priority over housing. It also entailed a slippage in the nature of the “public benefit” supposedly created by urban renewal. Previously, the benefit to the public had consisted of slum



Urban Renewal 51

clearance and improved housing; now it could consist solely of strengthening the city’s tax capacity and employment base.70 Rouse’s focus on the existing availability of low-­income housing in the area ignored continuing shortages of such units in the city, the racialized nature of displacement in the Broadway proj­ect, and, above all, the symbolic importance of eliminating the housing for p ­ eople not associated with the medical institutions. Yet his arguments still prevailed. In early March 1955, the City Planning Commission approved the revised plan.71 The exact motivations b ­ ehind the decision to remove the African American housing are not completely clear. The developers’ inability to secure financing played a critical and possibly determinative role. Some sources, however, suggest that judicial rulings against segregation led the developers and the redevelopment commission to conclude that they could not build segregated housing proj­ects using federal redevelopment money. ­Earlier, the Baltimore Housing Authority cited the Supreme Court’s May 1954 Brown v. Topeka Board of Education decision banning segregated schools as a f­actor in its decision to adopt an open occupancy policy in public housing proj­ects. An internal Hopkins account written in 1969 directly claimed that “before the developer had arranged financing for other segments of the proj­ect, a Supreme Court decision of May 1954 terminated federal assistance in financing segregated housing and this doomed the prospect of low-­cost financing of the proj­ect as planned.”72 The specific court decision referred to by the Housing Authority, however, may not actually have been Brown, which the 1969 source never specifically mentions. Instead, the reference may have been to the California case of Banks v. San Francisco Housing Authority, which the Supreme Court declined to hear shortly ­after Brown. In Banks, a lower court ruled that the San Francisco Housing Authority could not discriminate by race in its housing proj­ ects. The refusal to hear the case suggested that the court might extend the princi­ples of Brown to federally funded housing. This perception proved faulty, at least in the short term, as neither the courts nor federal agencies would even begin to push local governments on the issue u ­ ntil 1961, when President John Kennedy signed an executive order banning such discrimination. In the spring of 1954, however, even the possibility that the court would take such steps produced an outcry among Southern Demo­crats in Congress who threatened to withdraw their support for President Eisenhower’s housing proposals.73 Baltimore redevelopment officials and developers ­were aware of t­ hese debates and likely considered them when they de­cided

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to eliminate the African American housing in the Broadway urban renewal area. Other than the difficulty of securing financing, of course, nothing other than a racist status quo would have prevented them from including open-­ occupancy housing. As an unnamed representative of the proj­ect’s opponents observed, it seemed that in urban renewal, “it is always the Negro community that is hurt.”74 Such perceptions—­and the real­ity that underlay them—­would be permanent. Though ­there are no rec­ords of involvement by hospital or university administrators in the decision to eliminate the African American housing, for many in the community, Hopkins remained culpable. The hospital was the largest and most power­f ul institution in the area, and it was the sole beneficiary of the revised plan. Hopkins could also have provided financing for the African American apartments. At no point, however, was such an option considered; nor did Hopkins object to the elimination of the African American housing. Instead, and crucially, it took explicit steps to finance aspects of the Broadway proj­ect from which it benefited, such as the medical dormitory, but

Figure 6. ​De­mo­li­tion in the Broadway Urban Renewal Area 3-­A, with Johns Hopkins Hospital buildings in the background, circa 1954–1955. Broadway Slum Redevelopment, Citizens Planning and Housing Association Rec­ords (R0032-­CPHA), Series 8, Box 1, Folder 21, University of Baltimore Special Collections and Archives.



Urban Renewal 53

not t­ hose that supported housing for displaced residents. The community did not know the details of t­ hese arrangements, but the overall patterns and the consequences w ­ ere clear enough. Soon Hopkins exerted even greater control over the Broadway proj­ect. In December 1955, a special trustee committee reached an agreement with the developers u ­ nder which the institutions would provide the Broadway Development Corporation (BDC) with loans of up to $4 million to finance remaining ele­ments of the proj­ect. The trustee committee acted on the advice of the power­f ul real estate executive John Mowbray, who had been hired as a con­ sul­tant. Mowbray’s involvement highlighted how closely intertwined Hopkins had become with the local development industry—­w ith its history of racial exclusion. Rouse and Knott would also receive a payment of costs plus 11 ­percent, providing their profit on the proj­ect. On completion, they would transfer BDC itself to Johns Hopkins, placing the Broadway renewal area ­under full institutional control. This gave Hopkins power over the se­lection of tenants, a feature that the trustees viewed as “essential to the f­ uture development of the medical environment.”75 Meanwhile, the city waited months for federal approval of the proj­ect. At one point during this interim, the Fire Department declared the weeds growing in the area a fire ­hazard, prompting a threat from Mayor D’Alesandro to plant it with winter wheat and claim federal agricultural subsidies if urban renewal administrators failed to give the go-­a head. E ­ arlier, he suggested the site for a traveling circus that had strug­gled to find a suitable location for its big top and elephants.76 Approval of the revised plans fi­nally arrived in March 1956, and the developers began construction on the garden apartments and dormitory building—­located directly across Broadway from Hopkins— in July.77 With construction u ­ nder way, the medical institutions established the Broadway Management Corporation (BMC) to operate the apartment complex. Although technically a subsidiary of the medical institutions (hospital director Russell Nelson served as its president), the management corporation was taxable. This meant that the property would remain on city tax rolls, at least u ­ ntil BDC came formally u ­ nder Hopkins owner­ship in 1966. The management corporation in turn subleased the property from the developers and made rental payments “exactly sufficient” to cover taxes, insurance, rental payments to the city for the land, and interest payments on the loan from Hopkins. The latter provision meant that the management corporation, a subsidiary of the institutions, covered the developers’ borrowing costs on a loan

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made by the institutions themselves. The developers effectively bore no risk (a feature furthered by the cost-­plus contract), and the loan yielded no interest income for the Hopkins endowment. The management corporation even hired a com­pany owned by Knott to oversee day-­to-­day operations of the apartments.78 It was, in short, a very good deal for Henry Knott and James Rouse. What the agreement provided for the institutions was the critical f­ actor of control over urban space: through BMC, Hopkins could select tenants affiliated with the medical institutions; it could also choose the occupants of the office and commercial spaces.79 This also meant that the community would see Hopkins as responsible for the entire outcome of the Broadway proj­ect—an outcome that many viewed as unjust ­because of the elimination of the relocation housing. As a 1969 analy­sis noted, “The hospital bore the major burden of ill w ­ ill that was generated by the transaction and its lack of good faith t­ oward the black community.” 80 ­These developments are critical to understanding both Hopkins’s ­actual part in the Broadway proj­ect and the community’s perception. Although the institutions’ leaders did not directly cause the elimination of the original, African American housing, they also did not oppose it, and they actively ­limited community access to housing areas in the revised plan. The garden apartments that would soon be built between Caroline and Bond Streets, just one block from the famous dome of the original hospital building, would be reserved for t­ hose associated with the Johns Hopkins medical institutions. Surrounded by a fence that was locked each night, the apartment complex would soon be referred to as “the compound.” The fence itself became known as “the wall,” symbolizing, as one neighborhood resident put it in 1969, “civilization h ­ ere, savagery t­ here.” 81 Which side was which, in this description, is uncertain. Regardless, the compound and the fence became an intense focus of community resentment. The exact financing mechanisms that built them might not have been clear to the community, but the overall structure of institutional racism in the proj­ect—­and its consequences—­was obvious.

The Broadway Urban Renewal Proj­ect and East Baltimore The Broadway Development Corporation completed the Broadway garden apartments—­“the compound”—in February 1957, and the medical dormitory known as Reed Hall during the summer.82 ­Earlier that spring, the development corporation began construction on the shopping center located just to



Urban Renewal 55

Figure 7. ​The newly completed Johns Hopkins Hospital apartment compound for medical students and residents, with Dunbar High School and the Somerset Homes public housing area in the background, June 1957. The Chesney Archives of Johns Hopkins Medicine, Nursing, and Public Health, Baltimore.

the south of the apartments. The following April, a Food Fair grocery store became the center’s first major tenant.83 In July 1958, the corporation announced an agreement to build a ­hotel in the southeastern corner of the renewal area, across Broadway and southwest of the main hospital. Sheraton signed a long-­term lease for the ­hotel, anticipating a customer base of patients and other visitors to the medical institutions. Oliver Winston, the director of the Baltimore Urban Renewal and Housing Agency (BURHA, which in 1956 combined the operations of the Redevelopment Commission and the Housing Authority, partially on Rouse’s urging), noted at the Sheraton announcement that the proj­ect “is most significant in that it demonstrates a basic renewal princi­ple . . . ​the ability to attract private investment.” He also observed that Baltimore’s overall renewal program, which by then included

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the downtown Charles Center proj­ect, “has achieved a quality of re­spect.” The Sun predicted that the ­hotel proj­ect would be closely observed by “hospitals throughout the nation . . . ​for it is part of the constant endeavor to make patients’ stay as pleasant as pos­si­ble.” 84 The ­hotel, along with a combined medical office and apartment building (the “550 Broadway Building”) that would soon be built on a lot to the north, employed the loan-­financing arrangement between the university, the hospital, and development corporation that had been used for the apartment compound.85 BMC would operate both facilities. The development corporation completed the Sheraton and the office-­apartment building in 1961, along with a swimming pool adjoining the new Reed Hall medical dormitory.86 Fi­ nally, BURHA built a new Episcopal church along Broadway, just north of the office-­apartment building. A number of other churches received additions or expanded facilities through the proj­ect.87 Despite the work that had gone into developing t­ hese facilities, BMC continually strug­gled. The shopping center proved “a relatively poor operation,” the 550 Building never achieved full occupancy and ran deficits, and rents in the compound failed to cover costs.88 By 1965, the university’s vice president for finance noted that apartments “appear to be deteriorating faster than the rate of depreciation recorded”—­placing their long-­term ­future in doubt.89 Initially, the Sheraton ­Hotel did better, with hospital president Russell Nelson even describing it in 1964 as a “­great success from the standpoint of the medical institutions.” Over time, however, it strug­gled to attract guests from Hopkins, while Sheraton’s management proved inconsistent. Throughout the late 1960s and 1970s, BMC repeatedly searched for new management and marketing solutions for the h ­ otel. None proved fully satisfactory.90 Over time, the prob­lems highlighted the serious limitations of urban renewal even as a business proposition. Long before t­ hese prob­lems emerged, the City Council in June 1956 approved a four-­block, ten-­acre extension of the Broadway urban renewal area immediately south of the main hospital and directly across Broadway from the Sheraton ­hotel site. Known as Area 3-­C, the neighborhood consisted almost entirely of residential buildings, all of which would be cleared and their residents relocated. The area would be completely replanned, with some internal streets removed and another re­oriented on a diagonal to better serve traffic flow.91 Land to the west of the new diagonal street—­including the site of Dea Mae-­Hor’s laundry—­would be transferred to Hopkins for eventual use in “educational, residential, and scientific purposes” of the hospital.



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More immediately, the tract would be devoted to parking.92 Hopkins board members initially believed the lot was excessively large, but within two years it had become overcrowded with cars. It also produced profits of 89 ­percent over costs.93 Parking had emerged as a prime concern for urban hospitals, and this use of Area 3-­C reflected the pressure that the automobile increasingly forced on Hopkins. Shortly ­after completion of the 3-­C plan, the Sun wrote that “nothing could be more in line with need than this. Trying to find a place to park near the Johns Hopkins Hospital is always a thankless, and sometimes an impossible, task.” 94 In September 1956, hospital director Russell Nelson requested that the Redevelopment Commission formally designate Hopkins as the redeveloper of Area 3-­C, noting the medical institutions’ public functions in medical care, education, and research—­and arguing that the added parking “would materially aid us in carry­ing out ­these objectives.” 95 Nelson thus drew a notable connection between the most mundane of urban spatial activities—­parking a car—­and the noble purposes of an academic medical center. His statement also demonstrated the strains that the automobile had placed on every­one charged with ensuring that cities and their institutions functioned effectively. Reliance on cars led directly to neighborhood destruction, targeted at the city’s most vulnerable residents. Property acquisition in Area 3-­C began in January 1959, relocation of residents commenced in March, and clearance started in July. By 1961, Hopkins had its new parking lot, accommodating 496 cars. On the remaining land in Area 3-­C, Hopkins added a new laundry fa­cil­i­t y that would be shared by six other Baltimore hospitals. By the end of 1962, BURHA closed out the proj­ ect, completing the Broadway urban renewal effort.96 Overall, the Broadway proj­ect cleared a total of 774 dwellings in Area 3-­A, along with 42 buildings that mixed residences with other functions, 61 commercial structures, 4 industrial buildings, and 3 public or institutional facilities. With most of the Hopkins-­controlled land u ­ nder the control of the taxable Broadway Development and Broadway Management Corporations, the total tax assessment of the area ­rose from $2.08 million in 1950 to $3.4 million in 1961, with tax revenues to the city rising from just over $75,000 to $122,268. Costs to acquire and clear the land totaled $4.57 million, with Baltimore contributing $1.52 million in local funds and the federal urban renewal program providing the remaining $3.05 million—­a ll of it, in effect, a capital grant to the hospital. Hopkins in turn invested a total of $3.13 million, through BDC, to develop the apartment compound, the shopping center, the ­hotel, and the 550 Building. In Area 3-­C , BURHA demolished

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176 dwellings, 16 mixed-­use buildings (including Dea’s laundry), 4 commercial structures, and one industrial building. B ­ ecause the land in 3-­C passed from private, taxable owner­ship to Hopkins’s tax-­exempt owner­ship, the area’s tax assessment fell from $523,450 to zero, with the corresponding elimination of $18,844 in tax revenues. Acquisition and clearance costs for 3-­C totaled $2.93 million, split between a $1.93 million local share and a $999,596 federal contribution (the federal share was lower b ­ ecause of the proj­ect’s nonresidential nature).97 Other statistics highlight the ­human impact of renewal in East Baltimore. In Broadway 3-­A, a total of 1,175 ­house­holds lost their homes. Of ­these, 97 ­percent ­were nonwhite, and 91 ­percent ­were renters. Sixty-­five businesses ­were displaced. As many as three-­quarters of displaced residents received some assistance from the Housing Authority’s Relocation Ser­vice, the operations of which the Afro-­American described in 1952 as “cool” and “efficient.” Yet the relocation effort displayed deep racial inequity: 18 ­percent of displaced nonwhite families purchased new homes compared to 46 ­percent of displaced white families. Thirty-­nine p ­ ercent of nonwhite families and 13.5 ­percent of white families secured private rental housing, while 26 ­percent of nonwhite families entered public housing compared to ­under 3 ­percent of white families (exactly one f­ amily). As many as half of t­ hese families moved to ­either the Douglass or Somerset Houses adjoining the Broadway area, meaning that they at least remained within the neighborhood but in highly segregated environments. A percentage of families remained untraceable, totaling 37.8 ­percent of white families and 16.8 ­percent of nonwhite families. In Broadway 3-­C, 199 ­house­holds ­were displaced, 96 ­percent of them nonwhite and 87 ­percent renters. Business displacements totaled 18. An additional 56 presumably unoccupied dwelling units w ­ ere also demolished. Their vacant status reflected the real­ity of the dilapidated conditions in the area, suggesting the complexity of the clearance issue. Compared to the original Broadway area, more of t­ hese residents (white and nonwhite) moved into private rentals; fewer purchased homes or moved into public housing. Significantly, 14.6 ­percent of nonwhite residents moved into rentals classified by the city as substandard, demonstrating that clearance did not always lead to improved conditions.98 Housing conditions aside, clearance still came at a high and sometimes brutal ­human cost, as indicated by the story of Dea Mae-­Hor. While her situation was more dramatic than most, it illustrated the difficulties and extreme life disruption that urban renewal frequently created for t­ hose in its



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path. Nor was she alone. In the original Broadway 3-­A area, 70-­year-­old Emma Widgeon, a ­widow who suffered from a heart condition, had rented a nine-­room ­house on North Eden Street since 1915. ­After months searching for a comparable rental ­house, she accepted an apartment in a public housing proj­ect. Machine operator James Folk did find a new rental for his f­ amily, but at a weekly cost $5 higher than their old home in the Broadway area. The relatively few property o ­ wners in the redevelopment area faced their own difficulties. Thomas Whittaker, a member of the Coast Guard, was forced to sell his North Eden Street home (a few doors away from Widgeon’s rental) to the Redevelopment Commission at a price $800 below what he had paid for it seven years e­ arlier.99 Meanwhile, 88-­year-­old Henry Herzinger sued the commission to keep his small h ­ ouse on North Caroline Street. The court found in ­favor of the commission but awarded Herzinger $13,000 for his home. The Sun reported that on the day that he fi­nally moved from the ­house, by then the last one standing in the 3-­A area, Herzinger “sat on his bed, just before he left, wiping the tears from his eyes.”100 Surveying relocatees from the 3-­C area in 1961, the Sun found that el­derly homeowners like Herzinger and Widgeon had been particularly vulnerable to the tactics of city negotiators, who often offered less than the full market value of properties in the area. This left the displaced residents with insufficient funds to purchase an equivalent home elsewhere, assuming one was available and that they could get a mortgage. Of the twenty-­five relocated families interviewed, “twelve w ­ ere found to be living in what was considered ‘standard’ housing, five in ‘borderline’ housing, and eight in ‘substandard’ or slum-­level housing.” This was a more negative picture of relocation than that reported by BURHA, which found that the percentage of relocated families from 3-­C living in homes without hot ­water, private baths, central heat, or sound structures declined dramatically from the percentages prior to renewal. Both the Sun and BURHA found that overcrowding had not improved, reflecting the continuing lack of open-­occupancy housing.101 The experience of another area resident captured a dif­fer­ent aspect of urban renewal’s price. Lucille Gorham and her f­ amily had moved to Baltimore from North Carolina in the 1930s, when she was a child. In the early 1940s, they had been displaced from their home on Bond Street when it had been cleared for the Douglass Homes public housing proj­ect. They then moved a few blocks to the north into what in the 1950s would become the Broadway proj­ect. Years l­ater, Gorham explained, “We lived t­ here u ­ ntil once again urban renewal moved us out and Johns Hopkins got the land. . . . ​So the promise

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of p ­ eople ever moving back stuck in my head and I just thought the neighborhoods ­were—­I never thought they needed urban renewal for one ­t hing, and then the second ­t hing is I just thought about how they broke up families and neighbors ­really without meaning, you just broke up neighborhoods, ­people moved away. You ­didn’t know where they moved to anymore. So that stuck in my head for a long time.”102 ­Under such conditions, rehousing the displaced in the rebuilt neighborhood required careful planning and deliberate intent, a lesson Gorham would employ when she ­later became one of East Baltimore’s leading housing activists. Her long ­career in that field would begin in the late 1960s, when she and her own ­children faced urban renewal yet again in the Gay Street area north of Johns Hopkins. All of this was made worse by the university’s and the city’s broken promise to provide new housing within the redevelopment area. Neighborhood residents saw the maneuver for what it was: Hopkins was white; most of ­those displaced w ­ ere Black. Arguments that the federal government had made the financing impossible had ­little bearing in the neighborhood, and the claim that Brown v. Board of Education or other federal court cases made the construction of segregated replacement housing illegal was even less persuasive. When Richard Steiner returned to BURHA in 1959 following a stint in Washington as commissioner of the Federal Urban Renewal Agency, the Afro-­American noted that during his ­earlier tenure, Baltimore’s first two redevelopment proj­ects had “displaced large numbers of colored families, who w ­ ere never located in the new h ­ ouses. . . . ​In the f­ uture t­ here should be no more Waverlies and Broadway-­Hopkinses.”103 The newspapers appendage of “Hopkins” to the proj­ect’s name was notable: Hopkins was implicated in what urban renewal had done. Nuances of court cases or federal financing aside, all that r­ eally mattered w ­ ere the choices made by local actors—­and specifically, by Johns Hopkins. The acquisition of capital through urban renewal, when linked to the removal of Black residents and a failure to fulfill rehousing commitments, had done g­ reat harm. Through urban renewal, Johns Hopkins had linked itself directly to, and participated in, the racial practices of the government and the real estate industry that made the hospital city and the metropolis that surrounded it sites of intense segregation and racial in­equality. The inadequate, overcrowded housing that resulted, rife with lead paint and other physical dangers, would itself emerge as a critical determinant of ill health, greatly exacerbating racial disparities in East Baltimore and around the nation.

CHAPTER 3

Medicare, Hospitals, and “the Gold at Fort Knox”

W

orking late at the Brookings Institution one eve­ning in early 1966, health economist Rashi Fein encountered the Washington think tank’s vice president, Kermit Gordon, in one of the building’s elevators. Fein noticed that Gordon appeared exhausted, and when he politely inquired as to his associate’s well-­being, Gordon admitted that he had been drained by his work implementing the new federal Medicare and Medicaid programs, which ­were scheduled to start on July 1. Gordon, who had previously held the post of director of the Bureau of the Bud­get for Presidents Kennedy and Johnson, now served as the chair of the Health Insurance Benefits Advisory Council (HIBAC), an entity established by the Medicare legislation to assist the Social Security Administration (SSA) in setting detailed rules for Medicare and Medicaid. Gordon’s fatigue, he said, resulted from his prob­lems with the hospital industry, which was represented on HIBAC by Russell Nelson, the president of Johns Hopkins Hospital and past president of the American Hospital Association (AHA). HIBAC had been wrestling with its final recommendations about hospital reimbursement rules ­under the new programs, and the pro­cess had left Gordon feeling as though he was “all that stood between the American Hospital Association and the gold at Fort Knox.”1 This exchange between two economists in a Brookings elevator captured a critical moment in the development of both the U.S. health care system and the American city: the rise to economic significance and po­liti­cal power of the hospital industry and, in par­tic­u­lar, of large medical centers like Johns Hopkins. Further, it highlighted the deep tensions between ­these institutions and the American government. It was the power of the emerging hospital city

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and with it the health care nation that was keeping Kermit Gordon awake at night. Despite his efforts, Gordon ultimately failed to keep the hospital industry away from the federal gold. Hospitals received a generous reimbursement formula ­u nder Medicare, fueling their expansion and helping to entrench their institutional presence in the U.S. economy, especially in large cities. The development of the hospital city, ­whether through national programs like Hill-­Burton or local efforts like Johns Hopkins’s Broadway urban renewal proj­ect, occurred in direct proportion to the broader growth of the American state generally and the health care system specifically. The hospital city si­mul­ta­neously resulted from and ­shaped that system, relying on its core features to fund operations and growth but also reinforcing the system’s defining characteristics: re­sis­tance to expansion of public health insurance coverage, a reliance on employer-­provided insurance plans to cover employees, the centralization of high-­cost hospitals as the core of the delivery system, and the creation through the insurance com­pany model of reliable revenue streams for hospitals.2 The latter, in par­tic­u­lar, generated new sources of cost growth by reimbursing hospitals’ capital costs through payments for patient care. Increased patient revenue thus facilitated hospital expansion (and the acquisition of new medical technology), drove costs higher, and led even not-­for-­profit hospitals to engage in quasi-­commercial practices. The extension of this hospital-­friendly payment structure to Medicare and Medicaid was what Kermit Gordon meant when he referred to hospitals taking “the gold at Fort Knox.”3 ­Future reformers would be forced to construct their plans in a context of health care costs far higher than global averages. This would make the tasks of e­ ither providing universal coverage or controlling t­ hose costs far harder. Intimately tied to the size and economic power of the hospital city, this cost structure and its context and meaning in communities around the country constitute the unexamined constraint that has defined much of the ensuing debate over the U.S. health care system, including con­temporary strug­gles over Medicare for All and racial equity, even as it ­shaped the development of Johns Hopkins, Baltimore, and the wider hospital city.

The Creation of Medicare and Medicaid The passage of Medicare and Medicaid in 1965 did not transcend this constraint. Instead, it reflected and reinforced it. Medicare and Medicaid resulted



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from a narrowing of liberal ambition from the universal coverage proposals of the Truman years to coverage only of the el­derly, disabled, and a subset of the poor. Bitterly opposed by the American Medical Association (AMA) and a co­a li­tion of congressional conservatives and Southern Demo­crats, Medicare still required a difficult fight that lasted for eight years, from the initial 1957 proposal of legislation for health coverage of the el­derly to final passage in July 1965.4 In contrast to the AMA, the hospital industry’s opposition to Medicare and Medicaid was by no means monolithic. In 1963 and early 1964, for example, Johns Hopkins Hospital president Russell Nelson served on the National Committee on Health Care for the Aged, a small, privately funded task force that New York Republican senator Jacob Javits convened to study the feasibility of a Social Security–­based program that would involve private insurance companies. The committee reported positively, recommending a public Medicare program covering hospital and nursing home care for se­ niors along with new antitrust exemptions allowing private insurers to create nonprofit, tax-­exempt insurance pools covering the remaining medical expenses of the el­der­ly.5 Nelson noted, however, that although “it was a pretty conservative statement . . . ​t he anti-­Medicare forces in the AHA and in Blue Cross . . . ​t hought it was pretty bad. They w ­ ere vocal about it, that I would, from my position in the AHA, join the national committee and go out endorsing Medicare. I thought it was a bunch of poppycock, . . . ​but they ­were kind of nasty about it.” 6 Many other hospital leaders agreed that such attacks ­were poppycock. Hospitals, and especially struggling urban institutions, increasingly welcomed the prospect that federal funds might pay for the uncompensated care they provided for as many as half of their el­derly patients. In 1962, the AHA endorsed a version of Medicare that would include Blue Cross as the claims administrator. By 1964, only a conservative AHA faction, “heavi­ly invested with the AMA virus,” remained opposed.7 Lyndon Johnson’s landslide victory in the 1964 election, with its accompanying Demo­cratic congressional majorities, changed every­t hing. With a new pro-­Medicare majority on the critical Ways and Means Committee in the House of Representatives, Chairman Wilbur Mills of Arkansas declared his intention to move a Medicare bill to the full House. One of the leading social policy and taxation experts in Washington and among the most power­ ful members of Congress, Mills had previously blocked Medicare legislation in committee. Faced with the real­ity that some form of legislation would likely pass, Medicare opponents offered compromise mea­sures. Moderate

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Republicans, seeking to regain the center ­after Senator Barry Goldwater’s seemingly disastrous presidential campaign, supported a “Bettercare” bill written by Aetna Insurance and sponsored by Wisconsin representative John Byrnes that provided federal subsidies for private insurance coverage of physician bills. Significantly, the administration bill still covered only hospital and nursing home ser­v ices, and Chairman Mills worried about the absence of coverage for doctors’ bills. Meanwhile, the AMA, increasingly unpop­u­lar with the public and chastened by its inability to blunt popu­lar support for Medicare, proposed an expansion of the existing Kerr-­Mills program of state-­based coverage of the el­derly poor (known as “Eldercare”).8 During committee hearings on the legislation, Mills made a dramatic move, proposing to combine all three mea­sures in a single comprehensive bill. For observers at the hearing, Mills’s move seemed sudden and even inspired, but recorded telephone conversations indicate that he had actually discussed such a strategy with President Johnson nearly a year before, in June 1964. The combined mea­sure passed both h ­ ouses, and on July 30, 1965, President Johnson signed it into law in a ceremony at the Harry S. Truman Presidential Library, with the former president sitting at his side.9 In final form, the legislation included three ele­ments. Medicare Part A, consisting essentially of the Kennedy-­Johnson administration’s original bill, covered hospitalization and short-­term nursing home care. Se­niors would be enrolled automatically, and their coverage would be financed through a dedicated Social Security payroll tax paid by both workers and employers. The second component, Medicare Part B, incorporated the basics of the Republican “Bettercare” proposal: coverage of physicians’ fees and hospital outpatient ser­vices, with enrollment voluntary and financed through a combination of general federal tax revenues and participant premiums. Significantly, Part B also included cost-­sharing through enrollee copays that could be paid directly or through “Medigap” policies offered by private insurers. The third ele­ment, dubbed Medicaid, covered “medically indigent” el­derly who received old-­age assistance through Social Security, recipients of Aid to Families with Dependent ­Children (AFDC; at the time, primarily low-­income ­mothers and ­children), and ­people who ­were blind or had disabilities. Like Kerr-­Mills, from which it was derived, Medicaid would operate through federal matching grants to the states, which had discretion over exact coverage levels and qualifying rules.10 This led to extensive state-­by-­state variations, with funding levels often inadequate to meet a­ ctual needs. It also meant that Medicaid would be seen as a program for the poor, while Medicare would be perceived



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as an earned benefit for the general population. This structure replicated the existing divide between the AFDC (“welfare”) program and Social Security: the former viewed as a “handout” to the poor, the latter as an earned benefit. This misperceived difference would shape the delivery, financing, and equity of health care throughout the United States, but especially in cities.11 At their core, Medicare and Medicaid ­were financing mechanisms. Participants continued to purchase all medical ser­v ices from in­de­pen­dent providers who billed the program for reimbursement. Private “fiscal intermediaries” then administered their claims, a function fulfilled by Blue Cross or commercial insurers for part A and usually by Blue Shield for part B. With the federal government bearing the risk, this intermediary role proved highly profitable for insurers. In impor­tant re­spects, Medicare entrenched key ele­ments of the existing insurance com­pany model, including private practice and fee-­for-­service reimbursement. Crucially, hospitals and physicians maintained their power to set prices. Somewhat ironically, Medicare’s expansion of government involvement strengthened the employer-­ based insurance system by removing from commercial insurance the segment of the population that was most expensive and least likely to be adequately covered: the el­derly and many of the poor. This cut insurers’ costs and eliminated an impor­tant potential source of pressure for national health insurance.12

Hospitals Get the Medicare Gold The passage of Medicare and Medicaid had crucial implications for the growth of the hospital city. The AHA and the other leading hospital interest groups had broken with the AMA and supported Medicare b ­ ecause it provided coverage for patients who had previously received charity care from hospitals. Medicaid, although often deeply problematic for hospitals in its funding and payment pro­cessing, did the same. Even more significantly, the new programs provided a massively advantageous reimbursement structure for the hospital industry—­t he prob­lem referred to by Kermit Gordon during his Brookings elevator conversation with Rashi Fein. This outcome resulted from the context of the legislation’s passage. Both Wilbur Mills and the Kennedy and Johnson administrations had assumed throughout the debate over Medicare that hospitals would be reimbursed for the “reasonable costs” they incurred in providing ser­vices. During the 1940s and 1950s, this had become

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the payment standard for roughly two-­t hirds of Blue Cross plans, particularly in the eastern part of the country. The remaining plans, along with commercial insurers, paid on the basis of individual charges to covered patients, although by the mid-1960s many plans had begun trying to control charges by linking them to under­lying hospital costs. The AHA’s 1953 Princi­ples of Payment for Hospital Care endorsed cost-­based reimbursement as the most appropriate basis for hospital payment, a position that it reaffirmed in 1963 and 1965 as Congress debated Medicare. It is impor­tant to note that during this period before the computer revolution, hospital cost-­accounting practices remained primitive. In real­ity, hospitals usually divided total costs for covered patients by the number of patient days in the hospital to produce an imprecise but workable reimbursement mea­sure. As developed by the AHA during the 1950s and early 1960s, the reasonable cost standard included one other critical feature: the calculation included not just the direct cost of patient care but also allowances for a range of additional costs related to r­ unning a hospital, such as charity care, bad debts, teaching, and—­crucially—­capital costs, including both working capital and equity capital used for hospital modernization or expansion proj­ects. In effect, this recognized that such capital could have earned interest if held in reserve. Its use thus had a cost, which the AHA held to be reimbursable—­a “plus f­ actor,” in the parlance of Blue Cross and hospital cost calculations.13 In order to maintain the hospital industry’s support, Medicare proponents agreed to use the existing reasonable cost standard. As passed, the legislation extended it to Medicaid as well but left the formulation of detailed payment rules for both programs to the secretary of Health, Education, and Welfare. But AHA standards and Blue Cross practices would provide the starting point for negotiations.14 To assist HEW in establishing the formulas used for determining reasonable costs, the Medicare legislation provided for the creation of an expert-­led Health Insurance Benefits Advisory Council. In November 1965, President Johnson named former Bureau of the Bud­get director Kermit Gordon as HIBAC’s chair and appointed Hopkins president Russell Nelson as one of the sixteen council members, reflecting Hopkins’s national importance and behind-­the-­scenes influence. Though largely forgotten ­today, the council played a critical part in the development of Medicare’s inflationary cost structure.15 Together with other physicians and industry representatives, Nelson helped form a block that significantly influenced HIBAC’s deliberations as it advised the SSA on the exact structure of provider compensation u ­ nder Medicare.16



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A key divide emerged over the reimbursement of capital costs. The AHA and hospital leaders demanded that the reimbursement formulas cover the costs to hospitals of both working and equity capital. The advisory council, though, initially recommended that the SSA study the issue for an additional year (the poor quality of hospital accounting meant that relatively l­ ittle was known about a­ ctual hospital cost structures) and issue an initial set of reimbursement princi­ples without a capital allowance. At this point, the hospitals seemed ready to withdraw their cooperation. At a meeting with HEW secretary John Gardner, they demanded that the cost calculation include an allowance for capital and that the SSA drop a formula for allocating costs between Medicare beneficiaries and other patients in ­favor of a straightforward per-­diem cost calculation (which would have increased Medicare hospital payments dramatically). U ­ nder pressure to release the detailed Medicare payment rules, Gardner, the SSA, and the remainder of the advisory council agreed to a compromise. The hospitals would drop the per-­diem demand, while the formula would include a “plus ­factor” of 2 ­percent of costs “in lieu of a specific interest return on equity capital.” Nuances aside, the hospitals viewed the plus ­factor as a payment for capital. The AHA even referred to it as a “capital improvement allowance” in a May 1966 letter to Senate Finance Committee chair Russell Long. The reimbursement formula proved extremely generous to providers, especially to hospitals. It not only preserved the traditional fee-­for-­service payment structure and the reasonable cost standard but also, through the plus 2 ­percent f­ actor, provided a guaranteed profit margin without requiring hospitals to control their costs. To the contrary, it offered an incentive for cost increases, as e­ very dollar of increased expenditure would return an additional 2 cents in guaranteed revenue.17 The hospital industry received an additional major concession when the SSA allowed them to claim interest expenses and the accelerated depreciation of physical assets in their base cost calculations. Similarly, doctors’ fees would be set on a regional basis according to a “prevailing local standard.” Together, Medicare’s payment systems for hospitals and physicians created an inherently inflationary structure in an environment already experiencing rapid cost increases. The federal government quite simply a­ dopted this approach to avoid po­liti­cal conflict with hospitals and doctors and in the pro­cess ensured that the cost pressures on the existing system would become the cost pressures on Medicare and Medicaid.18 Predictably, in the years immediately ­after the legislation’s passage, both hospital and physician fees—­and thus health care costs in general—­soared far above the rate of inflation.19

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Although their passage represented a crucial and unpre­ce­dented expansion of coverage for a vulnerable segment of the U.S. population, the financial structure of Medicare and Medicaid locked the United States into a health care cost spiral that would make f­ uture efforts to secure universal public coverage far more difficult. In effect, they applied the inflationary characteristics of the preexisting insurance com­pany model to the public sector and then added further accelerants. Yet the availability of Medicare (and to a lesser extent Medicaid) also funded the growth of health care generally and hospitals specifically as a dominant economic sector. The financial foundation of the hospital city had been laid on the base of employer-­provided insurance, and its “bricks-­a nd-­mortar” structures had been built in part with Hill-­ Burton and urban renewal funds; but Medicare and Medicaid financed a critical share of a­ ctual medical ser­v ices, while also funding vast new capital resources for hospitals. Over the de­cade that followed, major hospitals such as Johns Hopkins would reverse years of operating deficits and begin to accumulate surpluses, in no small part ­because of Medicare funding. This liberated them to create capital reserves, construct new buildings, offer additional ser­v ices and technology, and hire more employees. In d ­ oing so, they would become ever more impor­tant economic actors in the communities where they ­were based. Health care financing can seem abstract. Its implications and consequences, however, are concrete: quite literally so, in the buildings and jobs created nationwide in the hospital city.

Debt, Planning, and the Hospital City Hospitals’ increased ability to accumulate capital accelerated an ongoing shift during the 1960s ­toward financing hospital construction by borrowing. Taking on debt, of course, created pressure to acquire even more capital to meet the financing costs of borrowing. ­These developments marked a major step away from ­earlier capital funding strategies that relied on philanthropy or public grant programs such as Hill-­Burton. In the pro­cess, hospitals ceased to be the community-­oriented, public service–­focused, social institutions of the voluntary ideal (an ideal, of course, never matched in real­ity). Instead, they became economic and po­liti­cal players capable of shaping both the larger health care system and the communities in which they operated. Medicare and Medicaid encouraged ­t hese developments by strengthening the financial position of hospitals and reimbursing their capital costs. This



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made them better credit risks, made it easier to qualify to borrow, and reduced their financing costs. Taking on debt in turn allowed individual hospitals to expand ser­v ices, add technology, and build new facilities. This produced new revenue streams that facilitated yet more capital accumulation. Further, competition with other institutions meant that if hospitals did not adopt such practices, they could be left b ­ ehind. Such pressure created a cycle that undermined the cooperative premise of planning efforts, stymied regulatory solutions, and contributed to rapid increases in overall health care costs. Th ­ ose increased cost levels in turn directly constrained efforts to achieve national health insurance. This competitive cycle also deepened existing inequities between wealthier suburban hospitals and poorer institutions located in inner-­city or rural areas, particularly smaller hospitals with ethnic or religious affiliations. Even prestigious academic medical centers increasingly strug­gled to compete. As a result, they intensified their already aggressive programs of construction and investment in medical technology to maintain their place at the core of the hospital system. Such be­hav­iors soon eroded distinctions between ­these institutions and for-­profit hospitals—­while deepening the disparities faced by patients who had few choices for care other than weaker hospitals.20 Not only did hospital borrowing become financially feasible, but tools to do so became more available. Initially, hospital debt took the form of mortgage loans. The share of voluntary hospital construction financed through mortgage loans ­rose from 25 ­percent in 1965 to 40 ­percent just three years ­later.21 This strategy received further encouragement when the federal government began to guarantee hospital mortgages in 1968. The role of the Federal Housing Administration’s home mortgage insurance program in promoting suburbanization in the post–­World War II United States is well known, but the FHA also provided mortgage insurance for hospitals. Just as in housing, the availability of federal insurance reduces the risk to a lender in the event that a borrower defaults on a loan. This lower risk means that the lender can offer the loan at a lower interest rate, which significantly cuts the cost of credit to the borrower and, in turn, reduces the overall costs of a proj­ect.22 Authorized by Section 242 of the Housing and Urban Development Act of 1968, the hospital mortgage insurance program remains in operation t­ oday. As of January 2010, it had guaranteed $15.7 billion of hospital mortgages. It has been a heavi­ly urban program. Approximately $7.48 billion of the guarantees issued by that date went to cities that ranked among the fifty largest

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in the United States in the previous decennial census. Many additional guarantees have gone to smaller but still distinctly urban places, as well as to the suburbs of major cities. U ­ ntil recently, the program has been heavi­ly oriented ­toward the Northeast and Midwest.23 Although the program has guaranteed a relatively small portion of overall U.S. hospital construction during this period—­about 4.5 ­percent of total private hospital construction—­its role in urban areas has been far more significant.24 Mortgage loans, however, did not represent the only mechanism for hospitals to access debt. Tax-­exempt bonds represented another, ultimately more significant source of large-­scale capital access. This brought hospitals into new relationships with the financial industry. A key step in this pro­cess came during the late 1960s and early 1970s. During t­ hese years, states and localities around the country created new public finance authorities to assist hospitals in issuing tax-­exempt revenue bonds. This further spurred the use of debt. It also involved not-­for-­profit hospitals in the bond markets. The tax exemption on the bond, which was available to hospitals ­because of the public charter of the issuing authorities, allowed hospitals to access capital at lower rates b ­ ecause bond purchasers do not have to pay taxes on the income. They also required a lower equity contribution from the hospital. Revenue derived from Medicare and other third-­party payments facilitated the development of capital reserves that could meet such requirements, with security for the bond provided by a pledge of ­f uture hospital revenues. The “insurance com­ pany model” of hospital payment, as adapted through Medicare, thus enabled hospitals’ move into the capital markets by providing ­t hose revenues.25 ­These changes also pushed hospital administrators to adopt profit-­ oriented management techniques. Bonds have to be repaid, with interest, out of ­future revenues. Hospitals that relied on the tax-­exempt bond markets thus had to generate revenues sufficient to meet ­these obligations, which they usually owed to large institutional bond investors like life insurance companies, pension funds, and banks. If a hospital failed to repay its bonds on time, its management could be replaced by the lender, and f­ uture access to the tax-­exempt market could be restricted or even cut off. ­These investors, especially insurance companies, treated hospitals as they treated borrowers in other industries. In par­tic­u­lar, they exerted pressure on hospital management to engage in increasingly competitive business practices. The move from philanthropic and grant funding of hospital capital to debt funding thus refocused hospitals on revenue maximization in order to serve their bond obligations. While Medicare had been designed to protect hospitals



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from government control, it ultimately contributed to a significant erosion of hospital autonomy through increased private control by outside financial interests.26 Data from the AHA indicate that the share of voluntary hospital construction financed with tax-­exempt bonds soared from about 16 ­percent of funds in 1973 to 56 ­percent in 1981. Including taxable bond debt (also an option) increases the share of construction funds derived from bonds to 80 ­percent.27 For-­profit hospitals partook with even more enthusiasm in the taxable bond market, but the use of debt instruments meant that even the not-­for-­profit hospital sector became part of broader cap­i­tal­ist finance structures. The tax-­exempt market alone became significant enough that thirty leading investment banks—­including Goldman Sachs, Merrill Lynch, Paine Webber, and E. F. Hutton—­formed an industry association, the Hospital Financing Study Group, which sought to influence policy debates during the period.28 All this had consequences. The need to produce revenue to meet the new obligations to bondholders not only reduced hospitals’ in­de­pen­dence; it also changed their very nature, shifting their character from community-­based, essentially social institutions to market-­oriented, quasi-­commercial enterprises. According to one account, the AHA during ­t hese years even began referring to voluntary hospitals not as “nonprofit” but as “not-­for-­profit.” The shift was subtle but telling. Voluntary hospital man­ag­ers might not seek shareholder value as a guiding purpose in the way that a business corporation would, but they could and presumably would pursue positive revenues to achieve their other objectives. Administrators’ personal and professional incentives u ­ nder this system pushed them in exactly such a direction. All this drove hospital costs higher and made the overall health care system more expensive.29 Repeated federal efforts to promote hospital system planning and regulation during this period did ­little to mitigate ­t hese developments. ­W hether through hospital-­level Utilization Review Boards required by the Medicare legislation, through state-­and local-­level comprehensive health planning agencies established in 1966, or through regional health systems agencies established ­under the 1974 National Health Planning and Resources Development Act, Congress hesitated to give planners power to regulate hospitals’ capital allocation decisions. As one AHA analyst appreciatively put it in 1975, the agencies had to “build pluralistic consumer-­provider leadership co­ ali­tions in their governing bodies and committees” and could not take an

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adversarial position. Such consensus-­oriented planning meant that few hard decisions, much less confrontations with hospitals, would be undertaken by the planning bodies.30 State efforts, at least for a time, had somewhat more success. Certificate-­ of-­need laws originated in New York State in 1964. They required that hospitals and nursing homes prove the ­actual need for new hospital beds prior to the start of construction or expansion proj­ects. Supported by the AHA, which saw the laws as a way to control competition, this model spread rapidly following the 1967 launch of Medicaid and its resulting pressure on state bud­ gets.31 By 1973, twenty-­two states had some form of law that linked approval of capital expenditures to an analy­sis of regional bed capacity and needs. Mary­land’s law, for example, required institutions to obtain a certificate for any change in beds or ser­v ices or for any capital expenditure greater than $100,000 or 2 ­percent of annual operating expenses.32 This approach received federal support in Section 1122 of the Social Security Amendments of 1972, which authorized HEW to disallow Medicare payments for capital-­related costs if hospitals failed to follow a certificate-­of-­need process—if it existed in their state—­prior to making such investments. The 1974 federal health planning act further bolstered state-­level review of capital expenditures by requiring all states to establish certificate-­of-­need programs that conformed to a minimum federal standard. In 1979, forty-­one states had such laws, and all but Missouri reviewed hospital capital expenditures in some way.33 By that date, however, evidence showed that t­ hese systems had not ­really controlled overall capital expenditures. Instead, the laws led to a shift of capital into other forms of spending such as on medical equipment, which produced their own inflationary consequences. They also produced a sometimes insidious form of insider bargaining over hospital expansion proposals within planning agencies and state health commissions.34 The rising health care costs that motivated such regulatory efforts w ­ ere driven by the reimbursement policies of Medicare specifically and the insurance com­pany model of health care financing more generally, both of which allowed hospitals to build their reserves and receive generous reimbursement for capital costs and depreciation. This produced a paradox: Medicare si­mul­ ta­neously shifted public responsibilities for patient care onto the hospitals while also facilitating their engagement with private systems of capital and finance. Such was the nature of health care capitalism in the late de­cades of the twentieth ­century, taking on new associational arrangements with the



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state while at the same moment building (quite literally) the hospital city and embedding it in the problematic cost and payment structures of the wider health care system.

Medicare Funding and Hospital Integration Nonetheless, the financing mattered, not least b ­ ecause it gave the federal government new leverage over the day-­to-­day practices of hospitals. In par­tic­u­ lar, the passage of Medicare intersected with the still-­new Civil Rights Act of 1964 to create momentum for hospital desegregation. Title VI of the act barred institutions that discriminated by race from receiving federal funding—­such as that provided by the new Medicare and Medicaid systems. The nondiscrimination requirement applied not only to patient care, access, and room assignments but also to the granting of staff privileges. At the time, most southern hospitals remained fully segregated, while many northern hospitals practiced vari­ous forms of discrimination against Black patients and denied Black doctors staff privileges. Title VI, though, provided no direct enforcement mechanisms. It relied on victims of discrimination to file complaints, which the federal government could then investigate. During the first year a­ fter passage of the Civil Rights Act, HEW encouraged hospitals to voluntarily desegregate, but it made l­ittle pro­gress.35 Nonetheless, Title VI did have an impor­tant consequence. With HEW’s quiet endorsement, civil rights activists from the National Medical Association (the professional association for African American physicians), the Medical Committee for ­Human Rights (a group of medical professionals that had or­ga­nized in 1964 to provide health care support for civil rights workers in Mississippi), and the NAACP ­Legal Defense Fund all undertook field investigations of southern hospitals that had received Hill-­Burton funds and filed more than three hundred complaints. The effort sparked a fraught alliance between activists and the federal officials who enforced Title VI in hospitals. The complaints also gave HEW a baseline of valuable data about hospital discrimination in the South.36 During the run-up to Medicare’s 1966 implementation, the situation changed. Now, significant amounts of federal funding could be withheld ­unless hospitals desegregated. The policy experts who had developed Medicare had avoided the racial implications of the legislation during the long congressional debate, and many within the SSA feared that a focus on hospital

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desegregation could hinder Medicare’s launch or even undermine its success. They thus preferred to maintain separation between Medicare and civil rights.37 Faced with uncertainty about how vigorously federal officials would pursue Title VI compliance as they certified hospitals for Medicare eligibility, civil rights activists stepped up pressure, staging protests at HEW secretary John Gardner’s office and issuing a L ­ egal Defense Fund report on hospital segregation. Gardner responded by appointing a special assistant for civil rights in January 1966 and establishing the Office of Equal Health Opportunity (OEHO) ­under the U.S. Public Health Ser­v ice (PHS) in February. This had the effect of allowing the SSA to concentrate on the technical details of Medicare’s start-up, thus freeing it from the responsibility of Title VI enforcement. Gardner also allowed voluntary transfers of HEW staff to OEHO. More than a thousand staff members volunteered, many of them with interests and in some cases experience in the civil rights movement.38 Beginning in April 1966, OEHO launched a nationwide program of site inspections. Despite some re­sis­tance, such as efforts to fool federal inspectors by temporarily integrating patient rooms and at least one instance of deadly vio­ lence, the overall effort proved remarkably successful. Frequently, sympathetic hospital employees worked secretly with local activists to reveal institutional efforts to distract federal investigators from remaining aspects of segregation.39 Some hospitals quietly welcomed the cover that federal desegregation requirements provided b ­ ecause it allowed them to admit additional patients and eliminate the duplicative facilities of nominally “separate but equal” health care. A ­Virginia hospital administrator commented on this point: “Sometimes we used to have shortages of colored beds. Other times we had shortages of white beds. Now that a bed is a bed, we always have one available.” 40 The combined efforts of activists and the federal government had an effect. When Medicare went into operation on July 1, 1966, just 327 hospitals across the country (out of 7,004 that applied) failed to qualify for Medicare ­because of Title VI noncompliance. By fall, all but twelve hospitals had qualified.41 Yet such pro­gress masked remaining limitations. Southern hospitals, especially in rural areas, applied for Medicare certification at lower rates than institutions elsewhere. In addition, many hospitals found ways to meet the official requirements while still maintaining features of segregation, such as converting shared rooms to private occupancy. In some cases, Black and white patients alike continued g­ oing only to their traditional segregated hos-



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pitals. Many hospitals avoided offering full staff privileges to nonwhite doctors, which effectively denied their patients admission.42 Still, the combined effect of federal funding and antidiscrimination law created a power­f ul new lever to secure desegregation—­and to influence the be­hav­ior of health care providers. Baltimore provides a typical example. As late as 1959, ten of Baltimore’s seventeen hospitals did not offer private or semiprivate rooms to African Americans; of the seven hospitals that did, some restricted the number of rooms. Beginning in early 1964, the city’s African American physician association, the Monumental City Medical Society, met with Baltimore hospitals to discuss ending discrimination in patient accommodations, physician staff privileges, and employment. A member of the physicians’ group reminded the hospitals that “­t here are always organ­ izations that can throw a picket line around them,” and the effort made some pro­gress ­toward integration.43 By late June 1966, the PHS certified ­every hospital in the city as eligible for Medicare. A few Baltimore hospitals did strug­ gle to gain approval. Mary­land General Hospital was in the final group of eight Mary­land hospitals to be certified, while the Greater Baltimore Medical Center trustees had to issue a new nondiscrimination statement to qualify, even though its constituent hospitals (­Women’s and Presbyterian Hospitals) had previously a­ dopted such policies prior to the merger that created the combined medical center.44 Johns Hopkins had gradually (and quietly) integrated its public and patient areas, drinking fountains, rest­rooms, and staff cafeterias during the 1950s and early 1960s.45 As a result, the hospital received “complete approval in regard to the care of Medicare patients.” Nonetheless, Russell Nelson recalled that ­after a “complaint that Negro doctors ­were excluded from staff membership at the hospital,” he had to meet with HEW compliance officers to go over the hospital’s staff appointment procedures and review statistics about the appointment of African American physicians.46 Nelson’s assurances to HEW aside, the ac­cep­tance of African American physicians on the Hopkins staff remained l­ imited. The first staff appointment (of Dr. Ralph Young) had been made only in 1947, and the first appointment of an African American to a faculty position in the medical school occurred in 1952. In the same year, the nursing school admitted its first African American student. The medical school did not admit an African American student ­until 1963 (a Nigerian student had been admitted the year before).47 In the late 1960s, community members campaigned for adding local physicians

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to the hospital staff. Hospital administrators accepted their demands. Still, complaints of discrimination in patient care and employment recurred periodically through the 1970s, and African American enrollment in the medical school remained low u ­ ntil a concerted recruitment effort during the 1970s produced higher numbers. The nursing school and ­house staff made even slower pro­gress.48 In Baltimore and around the country, full desegregation would require continuing local activism, increased federal enforcement, and court challenges. Nonetheless, the advent of Medicare and the availability of federal dollars that required desegregation marked a fundamental break in health care practices in the United States.49

Medicaid, Capital, and the Cost of the Hospital City The strains inherent in the financing structures ­adopted from the insurance com­pany model would first become apparent not in Medicare but in Medicaid. In contrast to the 1966 launch of Medicare, which overall had gone remarkably smoothly, the rollout of Medicaid proved problematic nearly everywhere. Added to the legislation at the last minute, Medicaid had received ­little attention during the debate. Even a­ fter the bill passed, few observers recognized that the program would quickly grow into a significant—­a nd expensive—­component of the U.S. health care system. What did become apparent immediately was that Medicaid would be challenging to implement. While Medicare fell u ­ nder the administrative purview of the well-­resourced and influential Social Security Administration, Medicaid would be run out of HEW’s Welfare Administration, which had fewer resources and l­ittle experience ­r unning health programs. This meant that at the federal level, it would suffer from shortfalls of both staff and expertise. Medicaid also required cooperative action and funding by the states, which would have broad latitude over exactly who would be covered, what ser­v ices they would receive, and how the program would be administered. Tied to the AFDC program, Medicaid also bore the negative stigma long associated with welfare. Where Medicare had “beneficiaries,” signifying its status as an “earned” form of social insurance, Medicaid had “recipients,” marking it as a “hand-­out” to the poor. Most problematic of all, Medicaid’s costs soon soared wildly above expectations. Where HEW had projected an initial annual expenditure of $238 million, ­actual costs soared to $1.59 billion in 1966, ­rose to $2.27 billion in



“The Gold at Fort Knox” 77

1967, and reached $3.45 billion in 1968. In part, the program’s cost reflected higher-­than-­a nticipated enrollment ­because of unmet health care needs among lower-­income Americans. But it was also closely tied to the rapid rise in hospital costs, which represented the largest source of Medicaid spending. Medicaid’s strug­gles w ­ ere thus the first consequence of the new competitive cycle of hospital capital development, funded by the payment practices of the insurance com­pany model as implemented in Medicare and Medicaid itself. Reflecting frustration with the program’s cost, as well as growing congressional re­sis­tance to Johnson’s ­Great Society, Congress in 1967 amended the legislation by lowering the program’s maximum qualifying income level to 133 ­percent of a state’s highest welfare payment. Taking effect in January 1970, this action significantly l­imited the number of “medically needy” Americans—­people with incomes too high for welfare programs but too low to meet their medical expenses—­who could qualify for Medicaid.50 Cutting coverage was always one solution to the prob­lem of higher-­than-­desired health care costs. It did not, of course, actually solve the prob­lem. Medicaid cost increases quickly placed intense pressure on state bud­gets. Mary­land’s experience proved typical but also consequential in terms of wider cost-­containment policies. The state had run a ­limited medical program for the poor—­k nown as a vendor payment program—­since the early 1950s. ­Under this arrangement, providers received ­limited, often token, reimbursement from the state for patients with no means to pay their medical bills.51 In anticipation of Medicaid’s July 1, 1966, launch, the Mary­land General Assembly directed the state health department to meld this program into the new Medicaid structure. Working hastily to meet federal deadlines, the health department did not consult with providers or other state agencies as it drafted its Medicaid plan. The resulting program more than doubled the number of eligible recipients, from 147,000 u ­ nder the ­earlier program to 297,000 u ­ nder Medicaid. It also increased physician payments from $3.50 to $5 per visit, covered phar­ma­ceu­ti­cal bills, and, as required by the federal legislation, ­adopted the “reasonable cost” standard for hospital payments. Previously, the state program had provided only minimal reimbursement for hospitals, instead expecting them to provide charity care for low-­income patients. The Mary­ land General Assembly approved an initial bud­get of $29 million for fiscal 1967, including both state and federal funds. By late 1967, a survey by the Baltimore city health department showed that 16 ­percent of the city’s population had enrolled in Medicaid—­a reflection of the vast need for coverage but also of the strain that would soon be placed on the program’s bud­get.52

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Expenditures immediately overran all projections. In late 1967, facing a $6.5 million shortfall, Governor Spiro Agnew announced that 27,000 medically indigent recipients would be cut from the state’s Medicaid rolls. In the Baltimore Sun, Johns Hopkins Hospital president Russell Nelson noted that the proposed cuts would have a disproportionate racial impact: “It’s the inner-­ city p ­ eople. And though I d ­ on’t know the exact figure, a lot of t­ hese are Negroes.” Social tensions, he warned, would worsen. Privately, Nelson notified the Hopkins trustees that the action could cost the hospital, which treated roughly one-­t hird of the affected recipients, as much as $1 million in annual revenue. Yet he also acknowledged that the rising cost of health care, specifically the cost from hospitals, was the ultimate cause of the prob­lem. ­Under pressure from hospital leaders like Nelson, as well as Baltimore officials and the state’s Medicaid advisory committee, Governor Agnew agreed in early January 1968 to transfer $5 million from a state construction fund to close the Medicaid shortfall and maintain enrollment.53 The reprieve proved temporary. Less than two weeks l­ ater, the governor’s fiscal 1969 bud­get once again proposed the removal of the 27,000 recipients from Medicaid as part of a larger effort to balance the state’s bud­get. In a surprising contrast to the po­liti­cal persona he would soon adopt as Richard Nixon’s divisive vice president, Agnew lashed out at spending for the Vietnam War, which he argued had led the federal government to underfund Medicaid (during this period, Agnew supported liberal Republican Nelson Rocke­fel­ler for the party’s presidential nomination). But Agnew also directed specific blame for the bud­get prob­lems t­ oward the state’s hospital industry, emphasizing that over the previous year, the average cost of a day in a Mary­ land hospital had increased from $47 to $60, and to as high as $77 in some Baltimore hospitals. Federal payment rules prevented the state from limiting Medicaid hospital coverage or paying hospitals less than their reasonable costs. All this placed the state in a fiscal bind. In the short term, Agnew argued, the funding gap that resulted could only be resolved through cuts.54 Seeking to address the crisis on a longer-­term basis, Agnew established a special committee to consider solutions to the prob­lems plaguing the state’s health care system, including Medicaid. He called on the committee to consider, among other reforms, “the establishment of reasonable hospital cost control.” Although no state had yet passed such a control regime, discussion of pos­si­ble policy strategies had intensified as Medicaid shifted hospital costs onto state bud­gets around the country. Agnew appointed Russell Nelson, who the previous year had indicated that some form of hospital regulation and



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planning would be desirable, as chair of the committee. Other key appointees included Baltimore attorney Francis X. Gallagher, who had served as counsel for the state public utility regulation commission, and state delegate Rosalie Silber Abrams of Baltimore, who in 1967 had proposed legislation establishing a hospital regulatory commission. Their presence on the committee strongly suggested that Agnew believed that the state’s hospital industry could be treated as a form of public utility subject to direct regulation.55 Ultimately, the Nelson committee shied away from regulatory action, possibly in order to avoid an internal deadlock over the issue. Abrams issued a scathing dissent to the official report in which she chastised her fellow committee members for dodging the issue of hospital cost control. Governor Agnew publicly seconded her charges.56 The committee itself took a dif­fer­ ent tack in its official report, sharply criticizing the Agnew administration for its “short-­term, stop-­gap approach” to the Medicaid crisis. Charging that the state was not “living up to its responsibilities” if it simply cut off the 27,000 medically indigent recipients, the Nelson committee recommended instead lowering the maximum annual income eligibility level, which would cut off 9,500 recipients who would become ineligible in 1970 anyway ­because of the 1967 federal amendments, along with an additional 5,500 medically indigent recipients. The committee also suggested that 7,000 additional recipients could be shifted to Medicare. This would yield a total of 22,000 p ­ eople removed from Medicaid. The committee proposed that the remaining medically indigent recipients should be required to make copayments for hospital stays, outpatient treatment, doctor visits, and prescriptions. Fi­nally, the committee called for a tax increase to address longer-­term funding shortfalls, as well as administrative changes to improve program efficiency. Agnew embraced all but the tax increase, and on July 1, 1968, 22,000 Mary­land residents lost their Medicaid benefits, while o ­ thers faced new copayments.57 Implemented in the aftermath of the rebellions that swept through Baltimore (and many other U.S. cities) following the April 4 assassination of Martin Luther King Jr., the cuts solved ­little beyond the immediate year’s bud­get shortfall. And they generated a range of consequences. Along with cutting off recipients, Agnew’s bud­get reduced Medicaid payments to physicians, which led the state medical society to consider a boycott of the program. The society’s members ultimately de­cided against such a step, instead adopting a resolution that “taxpayers and voters are being deceived by the disparity between the promises of elected officials and their willingness to allocate funds for the fulfillment of t­ hese promises.” The medical society’s

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president also pointed out that many of the p ­ eople cut off from Medicaid might easily end up on welfare b ­ ecause they had no financial margin to meet higher medical expenses or ­because illness reduced their already low earning power.58 Civil rights activists, already angered by Agnew’s racist criticism of the April uprising and his jailing of African American student protesters at Bowie State College, rallied against the cuts. A local health rights group known as Activists, Inc. (which had split off from the Congress of Racial Equality) staged rallies to defend Medicaid and appealed to HEW secretary Wilbur Cohen for a restoration of the cuts. Activists, Inc. leader Sampson Green described Agnew’s action as “genocide committed by indifference.” In August, the Baltimore L ­ egal Aid Bureau filed a Cir­cuit Court request for an injunction blocking the cuts and for a declaratory judgment that the state had ­v iolated Congress’s intent as expressed in the original Medicaid legislation. ­L egal Aid filed the suit on behalf of a seventy-­t wo-­year-­old ­woman with chronic asthma whose annual income from Social Security and a railroad pension placed her just $34.80 above the new eligibility cutoff of $1,500.59 Meanwhile, in October, Johns Hopkins Hospital privately estimated that its annual revenues would fall by $600,000 ­because of the Medicaid cuts.60 Impressed by the aggressiveness and barely concealed racism of Agnew’s response to the Baltimore rebellion, Richard Nixon in August unexpectedly selected the little-­k nown Mary­land governor as his vice-­presidential ­running mate. As the campaign proceeded that fall, Mary­land’s Medicaid trou­bles continued. In October, HEW secretary Cohen overturned Agnew’s Medicaid copayment system, noting that federal regulations required that any Medicaid copays be scaled to the recipient’s income. Mary­land instead implemented its copays at a flat rate. This change added approximately $1 million in costs to the state’s Medicaid bud­get. The state health department did not announce the federal ruling u ­ ntil the day before the November 5 election, avoiding any potential embarrassment—­and electoral cost—­for the governor as he sought the vice presidency.61 ­After succeeding Agnew as governor in January 1969, Demo­crat Marvin Mandel (the former House of Delegates speaker) restored all 22,000 former recipients to the Medicaid rolls. In his bud­get message, Mandel made the significance of the move clear: “Let this be the signal that in this new order of priorities, this administration is as concerned with the plight of its citizens as with new buildings or miles of concrete.” This resolved the immediate crisis but left the under­lying hospital cost issue unresolved. A ­little more than



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two years ­later, it would lead to the creation in Mary­land of one of the nation’s most significant state efforts at hospital rate control.62 Even more immediately, the Medicaid crisis highlighted critical questions about how care would be provided and for whom and how it would be paid for in the hospital city itself and throughout the metropolitan region. All of this linked back to the question of hospital capital development, as funded by the insurance com­pany model, Medicare, and Medicaid, and to the high costs that such financing practices created in the wider system.

CHAPTER 4

Johns Hopkins in the Hospital Metropolis

M

edicaid’s strug­gles in Maryland—­and across the United States—­ coincided with an impor­tant shift in the mission of hospitals, especially ­those in the city. The revenue streams provided by Medicare and, at less generous levels, Medicaid supported new forms of capital access for hospitals, both directly and through financial markets. Yet they also formalized hospitals’ quasi-­public responsibilities for patient care, regardless of wealth or race. What had previously been informal (or at least unenforced) systems of hospital charity care w ­ ere structured by the new programs into financial relationships with the state itself, even as the new programs reinforced existing inequities through their differing structures and funding levels. Meanwhile, activist pressures emerging from the civil rights movement raised additional questions about the role of hospitals in urban areas and even about the meaning of medical care itself: How far did a hospital’s responsibilities for health extend? What actions constituted care? Who should provide it, who should receive it, where should it be provided, and who should pay? Johns Hopkins Hospital’s approach to providing medical care for low-­ income residents of Baltimore reflected t­ hese lingering uncertainties. Such work had been established as a priority in 1873 by founder Johns Hopkins himself, who instructed that the hospital should care for “the indigent sick of this city and its environs, without regard to sex, age, or color.” Hopkins’s charge had been fulfilled primarily through charity care for the city’s poor, but in 1963, a study by the Greater Baltimore Committee recommended something much broader: that the hospital also accept responsibility for the physical and social reconstruction of surrounding neighborhoods. Hopkins administrators and board members rejected that proposal as unrealistically



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expensive, but amid the growing ferment and activism of the mid-­and late 1960s, discussions continued about the hospital’s responsibilities.1 Hospital leadership ultimately proved more amenable to assuming new social responsibilities in the area of Hopkins’s original charge: creating new mechanisms to provide medical care for the city’s poor. Yet even this commitment did not emerge as a ­simple, unfettered expansion of the existing mission. Instead, the new effort became intertwined with the goals of securing access to insured patients in the suburbs and the revenues they generated, as well as developing new systems of health care delivery and financing that might be applied on a broader scale. Such objectives w ­ ere not unique to Johns Hopkins and Baltimore. In metropolitan areas across the country, city hospitals began to look to the suburbs to shore up their bottom line. The hospital city became part of debates over structure, financial organ­ization, and societal values that soon roiled the wider health care system. In the case of Johns Hopkins Hospital, t­ hose discussions played out in practical, on-­the-­ground form in two programs: one in the new suburban city of Columbia, Mary­land, and the other in the East Baltimore neighborhoods surrounding Johns Hopkins. Together, t­ hese efforts forced the medical institutions to wrestle with what it meant to be a power­f ul, historically white institution in a section of the city that had under­gone racial turnover, within a region characterized by decentralization, intense racial segregation, and entrenched economic in­equality. As with hospitals in other big cities, Hopkins began to reassess its place in the changing health care system and, far more slowly, in regional systems that reinforced racism and in­equality. Residents of the surrounding neighborhoods, meanwhile, once again confronted the real­ity of living in the shadow of Johns Hopkins. All this would play out not just through issues of control of urban space, as with urban renewal, but also around questions of access to medical ser­v ices, the financing and organ­ ization of care, the control of its costs, and the consequences of in­equality across metropolitan space and ultimately the health care nation.

The Pull of the Suburbs It is a not insignificant irony that the origins of Hopkins’s expanded commitment to providing health ser­vices for the urban poor lay in a bold experiment to recast the American suburb by none other than James Rouse, the developer partially responsible for the controversial Broadway urban renewal

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plan. Rouse’s new city of Columbia, Mary­land, located on 24,000 acres in Howard County, roughly midway between Washington and Baltimore, would be a carefully planned city of a hundred thousand that would seek to minimize the sprawl, class and race segregation, and car dependence of postwar suburbia. By the early 1960s, Rouse had moved from conventional urban renewal to a more transformative vision that melded what he held to be the best ele­ments of city and suburb. One manifestation would be urban “festival marketplaces” like Baltimore’s Inner Harbor or Boston’s Faneuil Hall; the other would be the new city of Columbia. ­There, in the rolling farmland of Howard County, Rouse offered a new model for how Americans could live in the age of the automobile: a “Garden for ­People” that proposed to combine the vitality and ­human connection of urban areas with the lower density and modern amenities of the suburbs. In Rouse’s vision, Columbia would demonstrate that capitalism could deliver high-­quality living conditions across income levels and lines of race—­while still generating a profit.2 To develop specific plans for Columbia, Rouse in 1963 convened working groups of experts in areas relevant to life in the new community. One group focused on health and welfare, and it wrestled with the question of how to build a comprehensive, prevention-­focused health program for the new city’s residents.3 Sam Shapiro, the director of research and statistics at the Health Insurance Plan of Greater New York (HIP), suggested an approach that matched Rouse’s vision of a better suburbia with that of a transformed health care system. Established in 1947 by New York mayor Fiorello La Guardia, HIP was one of a number of midcentury alternatives to the insurance com­pany model of health care finance. U ­ nder the HIP model, individuals or group subscribers such as ­labor ­unions paid a monthly fee that covered physician ser­ vices, which HIP provided through contracts with groups of salaried physicians. This represented an impor­tant contrast with the model employed by Blue Cross, Blue Shield, and commercial insurers, which used subscriber premiums, copayments, and deductibles to cover the fees of individual physicians on a service-­by-­service basis ­after care had been provided. By replacing fee-­for-­service with prepayment and by placing physicians on salary, HIP and other prepaid group practice models changed the basic incentives facing doctors. Rather than paying more for each additional test, procedure, and medical intervention performed, prepaid group plans rewarded doctors for practicing preventive care and seeking efficiencies—­and thus lowering costs—­ because payment had already been received and would not increase with additional ser­v ices.



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Prepaid nonprofit group practice thus represented a third major alternative to the often-­assumed dichotomy between private and public health insurance. The American Medical Association, whose leaders held a near fanatical belief that private practice and fee-­for-­service payment represented bulwarks for physician incomes and autonomy, as well as the doctor-­patient relationship, had successfully opposed the prepaid group practice approach, especially rural health cooperatives that operated on such princi­ples. But it had less success against urban-­based experiments: along with HIP, key examples included Kaiser Permanente in California and other western states, the Group Health Cooperative of Puget Sound in the Seattle area, and the Group Health Association in Washington, D.C. By the 1950s, Kaiser and HIP each covered half a million subscribers.4 Columbia, with its ambitions of rationalized community, seemed a perfect opportunity to build such a system from the ground up for an entire new city. HIP provided hospital care through an affiliation with the medical group at New York’s Montefiore Hospital, and Shapiro saw a similar relationship with Hopkins as potentially ideal for Columbia. The new city’s projected population, he argued, could easily support a general hospital, with Hopkins providing access to advanced ser­vices, and a Hopkins connection would draw both patients and physicians to the experiment.5 Such a program could even influence “other aspects of community structure . . . ​t he willingness to keep the aged at home; the willingness to commit oneself to stable interpersonal relationships; all ­t hese and o ­ thers may well be affected by the reduction of par­tic­u­lar stresses concerning one’s own and one’s ­family’s health.” 6 Rouse quickly embraced the idea. New modes of health care delivery and financing thus became an integral part of the envisioned model community. In the fall of 1964, Rouse proposed the idea to Johns Hopkins Hospital president Russell Nelson. Although Rouse reported that Nelson was “very interested,” Hopkins did not immediately join the proj­ect.7 Instead, the idea prompted three years of often acrimonious internal debate. During this period, a $500,000 grant from the Commonwealth Fund supported the development of a proposal that emphasized Columbia’s potential as an experiment with new forms of health care delivery and finance: a comprehensive, primary care–­focused approach that would ensure “the best use of the health care dollar.” 8 Completed in early 1967, the proposal inspired impassioned objections from many Hopkins faculty members. Opponents fell into two broad groups. One set of critics objected to any shift away from the institutions’ traditional

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focus on teaching, research, and advanced medical care.9 A second set of concerns, however, emerged from a group of mostly younger, liberal faculty members who maintained that Hopkins should not undertake a large-­scale comprehensive care program in the suburbs when it had not yet done so in East Baltimore. This proved the more consequential objection, and it s­ haped key aspects of the hospital’s engagement with the city and the wider region. Its emergence suggested a nascent concern among some at Hopkins about the surrounding neighborhood and about the hospital’s social and medical responsibilities to the p ­ eople who lived t­ here.10 Although Hopkins had rejected the Greater Baltimore Committee’s 1964 recommendation that it embrace a wider role in the redevelopment of East Baltimore, it had taken a few steps to increase its community engagement. The effort had not gone well. A wealthy donor’s 1963 proposal to create a model elementary school for the ­children of Hopkins medical students and ­house staff had been broadened to include c­ hildren from the surrounding neighborhoods. Local community groups, however, objected to the top-­down planning of this “Town School” proj­ect, to the appointment of a white principal for the school, and to the potential closure of an existing public school nearby. The model school never opened.11 Fear of the hospital’s ­f uture plans for expansion also ran deep among neighborhood residents. In 1965, public hearings about the city’s Gay Street urban renewal proj­ect, located a few blocks northwest of Hopkins, revealed the depth of distrust in the aftermath of the Broadway proj­ect. Residents worried that the new proj­ect would become, as one local minister described it, another “land grab” by Johns Hopkins. Nathan Irby, chair of Citizens for Fair Housing, emphasized that “our fear is Johns Hopkins—­t hat’s our ultimate fear.”12 The Hopkins leadership originally hoped to secure at least some land in the Gay Street proj­ect but ultimately de­cided not to participate in the new effort.13 At the same time, Hopkins increasingly strug­gled with bud­get shortfalls driven by the high cost of care for the uninsured in the hospital’s clinics and emergency room. In this context, the Columbia proj­ect’s “suburban approach” highlighted a problematic relationship between health care finance and the metropolitan geography of wealth and race. Speaking to the hospital trustees in April 1967, Nelson and Dean of Medicine Thomas Turner noted that it might soon be necessary “both from a fiscal, quality medical care and teaching standpoint, for the Hopkins to specifically delimit the population area in East Baltimore from which it would accept patients whose care was paid for by government”—­meaning, in par­t ic­u ­lar, Medicaid. Gesturing to



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Columbia, Nelson and Turner added that “a corollary to this action w ­ ill be the need to expand our area of responsibility for the care of other­wise insured and self-­supporting patients.” This observation emphasized an issue that had run implicitly through the deliberations over Columbia: adding the satellite would draw in patients with insurance coverage. By the mid-1960s, more of t­ hose insured patients lived in the suburbs than in the city. Attracting them would strengthen the hospital’s revenue position, which would in turn allow it to build its capital reserves and undertake the modernization necessary to remain competitive with newer suburban hospitals. All such talk of “suburban” and “urban” population groups had a clear if unspoken racial dimension.14 Yet the faculty call to improve care in East Baltimore proved power­f ul. Through 1967 and early 1968, a series of internal faculty committees endorsed the concurrent creation of a new comprehensive health care program for East Baltimore along with the Columbia program.15 This took place amid significant administrative turnover at Hopkins. Former U.S. ambassador to Brazil Lincoln Gordon replaced Milton Eisenhower as university president in June 1967, and in December, David Rogers, the forty-­one-­year-­old chair of the department of medicine at Vanderbilt University, replaced Turner as dean of the medical school. Rogers came to Hopkins with a reputation as a progressive thinker in both medicine and health care policy. In an interview with the Baltimore Sun, he posed what would become the defining question during his tenure as dean—­and, in many re­spects, for Hopkins through the entire second half of the ­century: “Is a medical school like Hopkins a ‘timeless’ institution, concerned only with the in­de­pen­dent pursuit of medical knowledge, or should it become actively a participant in the prob­lems of the Inner City, a general community (like Columbia) and the social prob­lems of the country?”16 Although Rogers strongly supported such a shift in Hopkins’s core mission, his own interests veered ­toward the regional. Writing to the trustees as they considered the two proj­ects, he maintained that Hopkins needed to be involved in Columbia: “Ghetto groups, while representing the crisis of our times, are not the entire world of medicine. . . . ​In Columbia, Johns Hopkins is being offered a unique opportunity . . . ​to plan the entire health system, to control its financing, to try new experiments in using doctors and other health personnel and to work with a population of manageable size, composed of the kinds of ­people who represent the achievers in American society.” The final statement about “achievers” highlighted aspects of Rogers’s views, which

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suggested that critics who protested the Columbia proj­ect in racial and class terms w ­ ere not wrong.17 Nonetheless, Rogers had captured the institutional importance of the two proj­ects: they represented a new level of involvement by Johns Hopkins in the key challenges of controlling costs, experimenting with new financing and delivery systems, and meeting the health needs of diverse populations. ­These ­were the same prob­lems that drove the national debate over health policy during ­t hese years. Health care policy might take shape in Washington, but its specific form would be developed and implemented at the local level, in the hospital city and metropolis. With the support of Rogers and the Medical Planning and Development Committee, the university and hospital trustees unanimously approved the East Baltimore and Columbia programs on April 1 and 2, 1968, “subject to the securing of adequate financing.”18

Rebellion and Planning Two days l­ ater, Martin Luther King Jr. fell to an assassin’s bullet in Memphis. Cities around the country exploded in revolt. For two more days, Baltimore remained quiet, but late in the after­noon of April 6, crowds began to gather on Gay Street, the major East Baltimore commercial thoroughfare a few blocks from Johns Hopkins Hospital. By morning, upheavals had spread to most of Baltimore’s African American neighborhoods. Before the uprising ended on April 14, 6 p ­ eople would die in Baltimore; more than 700 would be injured; 5,800 would be arrested (more than one-­fifth of the national total); and 1,000 businesses would be destroyed. The city suffered $12 million in property damage, second only to Washington, D.C.19 Baltimore’s April 1968 rebellion did not drive Hopkins’s decision to undertake a new health care experiment in East Baltimore, as the board had already approved the proj­ect. The unrest, however, reshaped the context of Hopkins’s efforts, as well as the hospital’s wider interactions with the surrounding city. The vio­lence of the rebellion came within blocks of the hospital itself, and particularly during the initial night of unrest, Hopkins (in Russell Nelson’s words) “witnessed a large number of casualties in our Emergency Department, mostly young males, and consisted largely of laceration injuries, the result of widespread breaking of plate glass win­dows in shops and stores in the vicinity as well as the breaking of glass in automobiles parked around and near the Hospital.” The hospital also treated five gunshot wounds



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and a stabbing. And though the number of emergency patients dropped off ­after the first night, many patients and staff found themselves stranded at the hospital ­because of ­either curfews or uncertainty about pos­si­ble danger in the surrounding streets. The medical and public health schools closed, and Hopkins evacuated families from the Broadway apartment compound into the nearby Reed Hall apartment building. Afterward, Russell Nelson concluded that the garden apartments would be “too dangerous” to maintain long term, and in July the hospital reversed an informal but long-­standing expectation that medical residents live in the surrounding neighborhood. Only two resident families out of twenty accepted Hopkins’s offer to release them from their leases, but in the months ­after the rebellion, the hospital experienced a net departure of twenty-­four nurses, enough that it had to close beds.20 Hopkins’s long-­term response to the unrest remained an open question. In the aftermath of the uprising, East Baltimore community activists won a long strug­gle with the Baltimore City School Board to replace the area’s aging Dunbar High School. Prompted by the U.S. Office of Education, the school district agreed to hold a participatory planning “charette” that would give the community a decisive voice in developing the new school’s physical design and educational program. In February 1969, community activists, Dunbar parents and students, and city and school officials conducted an extraordinary two-­week discussion that set out a range of goals for the school, from curriculum to community ser­v ices to educational relationships with Hopkins. At a session on the latter topic, Russell Nelson endured a withering litany of community criticism, ranging from Hopkins’s urban renewal history, to the fenced apartment compound, to basic medical ser­v ices. The combined effect was power­f ul, and in response Nelson publicly pledged that the hospital would limit its ­f uture development to a defined area consisting of the sixty-­six acres on the original hospital lot, the Broadway urban renewal land, and a few immediately adjacent blocks where Hopkins already owned many ­houses. His statement represented a major concession to the community’s concerns about ­future hospital expansion. Although many participants viewed it skeptically, Nelson’s pledge ­shaped the hospital’s use of space through much of the 1970s and 1980s.21 The pledge dealt only with the issue of direct hospital expansion, however, and Hopkins’s wider responsibilities in the community soon became a subject of intense debate within the medical institutions. One option emerged out of a detailed report, commissioned by the Hopkins trustees following the

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April  1968 unrest, from the Hopkins Center for Urban Affairs, a Ford Foundation–­funded, interdisciplinary research unit that Lincoln Gordon had established to coordinate the university’s response to the rebellion. Eugene Feinblatt, a prominent l­awyer who had previously been deeply involved in Baltimore’s downtown renewal program and now served as director of the Center for Urban Affairs, wrote the report.22 He called on Hopkins to take a leadership role in issues ranging from housing, economic development, and education to cooperative neighborhood planning with community groups and the city. Such steps would push Hopkins beyond its core expertise in health care, research, and teaching. Yet without such action, Feinblatt warned, the area “is in danger of becoming a wasteland” marked by high poverty, disinvestment and abandonment, racial isolation, physical decay, and crime.23 The trustees responded coldly to Feinblatt’s suggestions, endorsing only joint planning with the city, pursuit of foundation funding for further planning, and a $25,000 non–­interest bearing loan to a local community corporation to develop “new housing for ­middle income families.”24

Prepaid Group Practice in the New City Even as debate continued over how to respond to the 1968 rebellions, work continued ­toward implementation of the Columbia program. In July 1968, Rogers hired Robert Heyssel, with whom he had worked closely at Vanderbilt University, to oversee the new initiatives. A specialist in nuclear medicine and hematology, Heyssel had begun his ­career far from the elite institutions of academic medicine. Born in 1928 in Jamestown, Missouri, Heyssel had grown up in the slightly larger town of California, Missouri, where his f­ ather ran a furniture store. Inspired by a local doctor, Heyssel de­ cided in high school to become a physician, with the intention of practicing in the small towns where he had spent his childhood. ­After graduating with a biology degree from the University of Missouri, he completed medical school at St. Louis University. Heyssel first gained notice for his work with the U.S. Public Health Ser­v ice’s Atomic Bomb Casualty Commission from 1956 to 1958. Th ­ ere, he completed pathbreaking studies of the relationship between radiation exposure and the development of leukemia among survivors of the atomic bombs in Hiroshima and Nagasaki. Returning to the United States and accepting a faculty position at Vanderbilt, Heyssel developed an interest in health care delivery systems and community medicine.



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Impressed with Heyssel’s “incisive thinking in this complex area” and his ability to connect to patients, community members, faculty, and administrators, Rogers recommended his appointment as Hopkins’s associate dean for health care programs. This new position had broad responsibility for the hospital’s ambulatory and outpatient ser­v ices, which would be coordinated through a new Office of Health Care Programs. Heyssel joined Hopkins on July 1, 1968; just over four years ­later, he would be named director of Johns Hopkins Hospital.25 More than any other individual at the medical institutions, Heyssel understood the relationship between health care finance, delivery systems, and the hospital’s emerging social and economic role. ­Under Heyssel’s leadership, the Columbia proj­ect moved forward quickly, but despite its experimental promise ultimately proved disappointing. As implemented, the new Columbia Medical Plan operated with a triangular structure. First, Connecticut General Life Insurance, which had financed the development of Columbia itself, provided capital for clinic and hospital facilities, covered operating losses, underwrote the insurance plan, and made a fixed or “capitated” payment for each enrolled plan member. Second, the nonprofit Columbia Hospital and Clinics Foundation operated the plan’s clinic facilities and eventual hospital. It also served as the main negotiating agent between the medical group and the insurer over the benefits and ser­ vices included in the plan, the level of the capitation payments, and the plan’s enrollment targets. Johns Hopkins provided eight of the foundation’s ten board members, thus effectively controlling its operations. Third, the newly created Johns Hopkins Medical Partnership, a physicians’ group overseen by the dean of the medical school, provided ­actual medical ser­v ices for plan members through its subsidiary Columbia Medical Group. The plan officially began operations on October 1, 1969, in a specially built (by the Rouse Com­ pany) clinic space located in the Columbia Town Center.26 The plan appealed to early Columbia residents. A ­woman with six ­children commented, “I moved h ­ ere two months ago. I w ­ ouldn’t know where to turn for a ­family doctor. And the name ‘Johns Hopkins’ is one I know I can have faith in.” Given her ­family’s size and medical history, the monthly fee of $43.50 seemed reasonable.27 In April 1970, the New York Times profiled the plan, highlighting a w ­ oman in her thirties whose first physical exam ­after joining revealed an undiagnosed breast cancer, for which she received treatment at Hopkins. Senator Edward Kennedy, who had already included support for prepaid group practices in his national health insurance proposal, lauded the Columbia Medical Plan on the Senate floor as a promising experiment in

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Figure 8. ​Station wagon entering the parking lot of the Columbia Medical Plan and Columbia Hospital and Clinics Foundation, Columbia, Mary­land, mid-1970s. Courtesy of Columbia Mary­land Archives, Photo­graphs Collection, Columbia, Mary­land.

delivery reform.28 In July  1970, the state Comprehensive Health Planning Agency approved the Columbia Hospital and Clinic Foundation’s proposal to build a sixty-­bed hospital in Columbia to serve the plan’s patients, along with emergencies. The resulting Columbia Medical Center opened in July 1973. In one rather dubious cost-­saving innovation, the new hospital did not include a kitchen fa­cil­i­t y, instead serving patients prefrozen meals reheated in micro­wave ovens. No rec­ord has been found of patient reactions. More significantly, the opening of the hospital brought the Columbia plan into full operation, fulfilling the vision suggested nearly a de­cade before. By 1978, the plan had hospitalization rates half that of Blue Cross and successfully relied on a range of nonphysician prac­ti­tion­ers, from physician assistants to nurse-­midwives.29 Despite ­t hese accomplishments, Heyssel and other Hopkins administrators soured on their experiment in the suburbs. Slower than anticipated residential development in Columbia caused enrollment in the plan to lag below minimum levels. In addition, the assumption of the plan’s underwriting risk



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Figure 9. ​Howard County General Hospital, Columbia, Mary­land. The hospital opened in 1975. Courtesy of Columbia Mary­land Archives, Photo­graphs Collection, Columbia, Mary­land.

by Connecticut General rather than by the physician group or Hopkins undermined the provider incentives at the core of the prepaid group practice concept. Fi­nally, a b ­ itter dispute with Bon Secours and Lutheran Hospitals over the certificate of need for Howard County threatened the hospital’s ­f uture expansion, which had been assumed as the basis for long-­term economies of scale. Together, ­t hese ­factors l­ imited the Columbia effort’s ongoing economic value for Hopkins, ­either as a base for referrals or for regional capital development. As a result, Hopkins in mid-1974 reached an agreement with the Columbia physicians u ­ nder which the medical group became in­de­ pen­dent of Hopkins, while the foundation reincorporated as Howard County General Hospital. The latter began operations in July as a general hospital with a community-­controlled board. Connecticut General, meanwhile, assumed administrative control over the Columbia Medical Plan (assisted by Blue Cross). It soon negotiated full risk-­sharing agreements with the reor­ga­ nized medical group, which although formally in­de­pen­dent continued to provide ser­vices for plan members (its physicians continued to draw salaries from the plan and remained on the Hopkins faculty, which meant the connection

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did not completely end). Neither the plan nor the medical group had an exclusive relationship with Howard County General.30 The reor­ga­ni­za­tion temporarily ended Hopkins’s regional expansion. Yet within a de­cade, regional and national pressures would dictate its return to the suburbs and eventually even to Howard County General (which became part of the Johns Hopkins Health System in 1998). The forces that brought Hopkins back to the suburbs reflected competition with other hospital systems, intensifying pressure to secure capital flows and more generally the subordination of the prepaid group practice alternative that the original Columbia experiment had imperfectly represented. That shift helped to define the character of the hospital city and, with it, to limit the possibilities for reform of the wider system of health care in the United States.

The East Baltimore Medical Program During the busy 1968–1969 period in which Heyssel and Rogers set up the new Office of Health Care Programs and established the Columbia Medical Plan, they also developed the program of comprehensive medical care for East Baltimore. Although more complex and slower to implement than the Columbia plan, it would have greater impact. Recognizing that community relationships ­were so frayed that Hopkins could not implement the proj­ect unilaterally, Heyssel sought a community organ­ization with whom to partner. Through the fall of 1968, the most promising relationship seemed to be with Baltimore’s Model Cities agency, which had identified health care as one of its areas of emphasis. The prospective arrangement, though, fell apart in early 1969 when the Model Cities agency faced a funding shortfall.31 Another alternative emerged from the Dunbar High School planning charette at which Russell Nelson pledged to limit Hopkins’s expansion. During the charette, activists concluded that they needed a permanent community organ­ization to pursue a wide range of proj­ects beyond the new high school, including in health ser­vices.32 Over the following months, two of the charette leaders, Clarence “Du” Burns and City Councilman Robert Douglass, or­ga­ nized the East Baltimore Community Corporation (EBCC) to fill this role. As part of a wave of new community development corporations established in U.S. cities during the late 1960s, EBCC and similar organ­izations sought to move beyond the War on Poverty’s emphasis on po­liti­cal mobilization and social ser­vice reor­ga­ni­za­tion in f­ avor of direct, community-­based



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deployment of government and foundation funds in support of locally directed housing, ser­vice, and economic development programs. In ­doing so, community development corporations pursued the autonomous, resident-­ driven development of their neighborhoods. Over the following de­cades, they would form one of the most significant institutions in U.S. cities, particularly in the housing field.33 More than most community development corporations of the period, EBCC had deep po­liti­cal ties. For de­cades, African American politics in Baltimore had been dominated by a po­liti­cal organ­ization based in West Baltimore’s older and more established neighborhoods and led by the influential Mitchell ­family—in par­tic­u­lar, State Senator Clarence Mitchell III and Baltimore Community Action Agency director and f­ uture congressman Parren Mitchell, who would become Mary­land’s first African American representative and the first from a state south of the Mason-­Dixon line since 1898. Beginning in 1967, however, Du Burns and Robert Douglass had built up their Eastside Demo­cratic Organ­ization to challenge this arrangement. Douglass had been elected to City Council in 1967; Burns would follow in 1971. The son of a Black ward leader in the Eastside’s old, white ethnic–­dominated Young Men’s Bohemian Club, Burns ascended to a ward leader position himself ­after helping Mayor Thomas D’Alesandro Jr. win key East Baltimore precincts. ­Earlier in his ­career, while unsuccessfully pursuing a ­career as a jazz saxophonist, he had held a patronage job as locker room attendant at Dunbar High School. He was, in East Baltimore community activist Lucille Gorham’s description, more of a “practical politician” than an activist (a remark she intended as a compliment). Robert Douglass was the son of a longshoreman, and he worked as a math teacher and an engineer before starting an electrical manufacturing com­pany and then entering politics. Seeking, in Douglass’s words, “to use po­ liti­cal power to deliver ser­vices to East Baltimore,” the two formed alliances with Mayor Thomas D’Alesandro III (known as “Young Tommy” to distinguish him from his ­father, the former mayor) and City Council chair and ­later mayor William Donald Schaefer. In addition, they worked closely with influential Demo­cratic po­liti­cal organ­izations in middle-­class white neighborhoods, while also allying themselves with the power­ful businessman William “­Little Willie” Adams (believed to be the wealthiest African American in Mary­land).34 Such connections meant that the East Baltimore group would have access to the highest levels of po­liti­cal power in Baltimore, but ­those relationships also risked implicating the community corporation in Douglass’s and Burns’s sometimes controversial maneuverings.

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Yet EBCC relied on East Baltimore residents for much of its organ­izing energy. For example, Lucille Gorham served on the group’s executive committee, as well as its personnel and public relations committees.35 Gorham, the w ­ oman whose f­amily had been displaced by both the Douglass Homes and Broadway redevelopment proj­ects, was the leading representative of a younger generation of grassroots activists who emerged in East Baltimore during the late 1960s. Most of them had no ties to e­ ither Baltimore’s po­liti­cal organ­izations or to traditional civil rights groups like the Urban League or the NAACP. Following the death of her husband, a foundry worker, in 1966, Gorham found a part-­time job with the Baltimore city schools, and in 1967, she became involved in Citizens for Fair Housing, a new community-­based organ­ization founded by postal worker and War on Poverty activist Nathan Irby in response to the Gay Street urban renewal proj­ect north of the medical institutions. Gorham quickly impressed Irby with her public-­speaking and organ­izing skills. Looking to shift his own efforts into local politics (he would serve on City Council from 1972 to 1982 and as a state senator from 1983 to 1994), Irby nominated Gorham to serve as the housing group’s president. In her first major proj­ect with the organ­ization, Gorham led the creation of “Our House,” a community center that provided meals for neighborhood residents, programs for local ­children, a cooperative store—­ and a focal point for the neighborhood’s recovery efforts a­ fter the 1968 uprising (during which Gorham and a d ­ aughter had narrowly escaped serious injury). Citizens for Fair Housing soon emerged as the primary citizen participation organ­ization for the Gay Street proj­ect and led the development of a series of low-­income housing facilities in the area. Gorham also fought the Town School proposal, chaired a working group at the 1969 Dunbar High School planning charette, and then helped Burns and Douglass or­ga­nize EBCC. Her involvement provided EBCC with her skills as an or­ga­nizer and her growing credibility as a community leader.36 She would also prove fearless in challenging Hopkins leadership. As Gorham’s simultaneous work with Citizens for Fair Housing indicates, EBCC was far from alone in activist community work during the late 1960s. Since the early 1950s, the city had an active chapter of the Congress of Racial Equality, now increasingly split between integrationist and radical factions. Welfare rights organizers had become increasingly active in Baltimore’s public housing complexes, while groups such as Union for Jobs and Income Now (an interracial offshoot of Students for a Demo­cratic Society), the Poor ­People’s Campaign, and the Black Panther Party pursued a range of racial



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and economic justice proj­ects. The Panthers even briefly worked with a group of feminist activists and progressive doctors and nurses (some of them from Johns Hopkins) to found the ­People’s ­Free Medical Clinic in West Baltimore. Fearing FBI infiltration, the Panthers soon quit the proj­ect, but the clinic operated for four de­cades as a community health center.37 As an institution, Johns Hopkins did not form a connection with the ­Free Clinic or the many other community initiatives of the period.38 Instead, seeking a legitimate partner for its new East Baltimore program, Robert Heyssel turned to the pragmatic, services-­oriented leaders of the still nascent EBCC. Nonetheless, this decision drew the hospital into an unpre­ce­dented relationship with the community organ­ization. In January 1970, Hopkins’s Office of Health Care Programs provided $15,000 to support EBCC’s start-up costs, and Hopkins accepted two seats on the new corporation’s board.39 Throughout late 1969 and early 1970, Burns and Douglass negotiated with Heyssel and his assistant Torrey Brown (who would be elected to the Mary­land House of Delegates in 1971) about the details of the proposed program. Supported by an $80,000 planning grant from the federal Department of Health, Education, and Welfare and a three-­year, $800,000 research grant provided jointly by the Car­ne­gie Corporation, the Commonwealth Fund, and the Rocke­fel­ ler Foundation, the discussions focused on three key prob­lems: the relationship of East Baltimore ­family doctors, mostly African Americans, to Hopkins; the financing of the new medical program; and fi­nally, control over the program itself.40 The first prob­lem revolved around the implications of the new health program for the private practices of the local doctors still in East Baltimore. ­These physicians feared that “we ­will be robbed of our patients,” as Dr. Stan Madison put it: “It may force some of us to move.” 41 In this way, the new medical program had the potential to echo urban renewal as a form of displacement. The East Baltimore physicians also hewed strongly to the traditional fee-­for-­service princi­ple b ­ ecause, historically, it had maximized both their autonomy and their chances of being paid. For them, prepaid group practice was an anathema.42 ­These physicians, however, had long wanted staff appointments and admitting privileges at Hopkins. That issue now took on ­great symbolic meaning for the community groups, and it provided a means to defuse the doctors’ opposition to prepaid group practice. At one highly charged meeting, EBCC members maintained that Hopkins had to demonstrate its good intentions through “its commitment to local black physicians in ways that ­were obvious or that ­t here would be no community program

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and that, perhaps, [Hopkins] ­ought to move to Columbia.” ­After the meeting, Councilman Douglass privately told Heyssel that Hopkins had to deliver on the issue: “If you shoot me out of the air on this one, this time, I am ­going to sit home and watch it on TV.” 43 Heyssel took the point. His argument to Nelson and Rogers, that a few local physician appointments would hardly undermine the overall quality of a physician staff of over a thousand, addressed the disdainful attitude that many at Hopkins had ­toward the private physicians who served the surrounding community.44 This rationale secured the hospital leadership’s backing, and Heyssel and Brown negotiated the appointment in March 1970 of five Black East Baltimore physicians, including two specialists and three general prac­ti­tion­ers. Additional appointments took place in the following months. Heyssel noted that “at the moment we are faced, ­every time we deal with the community, with showing good faith by action and actually ­going beyond what even the community expects.” This was the only way, he held, to improve community relationships.45 The second prob­lem involved the complexities of state and federal funding. Heyssel warned the trustees in late 1969 that financing posed a prob­lem “of a dif­fer­ent order of magnitude” than in Columbia. Rather than one commercial insurer, “ten dif­fer­ent government agencies have to be negotiated with—­a ll with dif­fer­ent guidelines, administrative rules, etc.—­a herculean task.” Key pos­si­ble sources of public support included Medicaid, Medicare, the Social Security Administration, and the U.S. Public Health Ser­vice’s community health ser­v ices program.46 In early 1970, Office of Health Care Programs assistant director Robert Blendon noted with frustration that the financing prob­lem had come to dominate the development of the program to the detriment of its medical and social dimensions: “That the financing of health ser­vices should have such a significant effect on their delivery is a tragedy.” Blendon identified other f­ actors that w ­ ere more “significant in terms of the effect on the lives of the h ­ uman beings residing in East Baltimore,” including fragmentation or lack of ser­v ices, the attitudes of Hopkins medical professionals t­ oward community residents, the attitudes of residents ­toward the professionals, and the “lack of integration of preventive and outreach ser­ vices.” 47 Yet the financing challenge took far longer to work out than the accord with East Baltimore’s Black doctors; in some re­spects, it would never be satisfactorily resolved. When compared to the relative ease with which private financing had been secured for the Columbia plan, it revealed the under­lying disparities of access and funding endemic to the American



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health care system. ­These inequalities played out directly along lines of race, between city and suburb.48 Eventually, Hopkins and EBCC reached an agreement with Governor Marvin Mandel to make the new program eligible for Medicaid funds. Facilitated by a federal waiver allowing Medicaid to be used for preventive ser­ vices, the arrangement represented an effort to move Medicaid past its early crises. For each Medicaid recipient enrolled, the state provided a capitation payment. If the program held costs ­under the total capitation level, it would retain 50 ­percent of the savings, with the remainder returned to the state. During a start-up period, the state would cover any costs that exceeded the capitation payments. All of this reflected the basic princi­ples of prepaid group practice but applied in a Medicaid environment. Early projections indicated that Medicaid would insure 70 ­percent of enrollees, while the other 30 ­percent would be covered through funds from as many as twelve other federal and state programs. Heyssel described the resulting funding structure as “an administrative nightmare” ­because enrollees frequently fell out of one funding category and into another—or none at all. Still, the arrangement allowed the program to function.49 The third prob­lem consisted of establishing administrative authority over program funding and staffing. EBCC activists held that ­t hese powers should be vested in the community corporation, and they also sought to control wages, qualifications, and hiring decisions.50 ­These demands sparked a yearlong debate. Heyssel, Brown, and Blendon lobbied for giving EBCC as much authority as legally pos­si­ble and for eventually transferring full control to the community. In April 1969, Heyssel argued to Nelson and Rogers that Hopkins should err on the side of community control: “I agree fully with the concept of decentralization. I ­don’t think decisions—­a nd good decisions—­relating to issues at the level of Ensor and ­Eager [Streets; the location of the proposed program clinic] can be made at City Hall any longer.” By City Hall, Heyssel meant Hopkins, and he implicitly referred to the wider decentralization of control over social ser­vices begun by the Johnson administration’s War on Poverty.51 Heyssel, it seemed, actually believed in the experiment in health care delivery reform that he was ­running. Russell Nelson took a much dif­fer­ent stance, maintaining that “if Hopkins is to hire professionals, contract for delivery of ser­v ices in or out of the clinic, and sign a long-­term lease for the land and building it must have final authority over finances which means operations.” For Nelson, and the Hopkins administration by extension, the community could participate in both

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planning and operating the program but should not fully control it.52 Heyssel tried to steer a ­middle course. In October, he cautioned Douglass, Gorham, and o ­ thers from EBCC that Hopkins would need to have administrative oversight of outside funds and that financial audits would be required. The key to making such arrangements work, he held, would be choosing a program administrator who had the confidence of EBCC.53 As negotiations proceeded into the spring of 1970, it became clear that the po­liti­cal situation in East Baltimore had rendered Nelson’s position untenable. Hopkins could retain influence b ­ ecause of its resources and expertise, but to gain the community’s cooperation, it had to cede control. The hospital president gradually modified his stance, noting that the issue r­ eally came down to risk: if Hopkins controlled the program, it would take on all the standard risks of normal medical and financial operations; if the community controlled it, Hopkins would assign corresponding risks to EBCC.54 In June, the issue moved suddenly to a decision point. Federal officials from both Model Cities and the Office of Economic Opportunity indicated that funding from ­t hose programs would not be available u ­ nless Hopkins accepted significant community control. In addition, HEW imposed a June 19 deadline for approval of a working agreement as a condition for authorizing a $2.5 million federal grant designating the program (along with Columbia) as a “Center for Research in Health Care Ser­v ices.”55 The federal government’s action effectively forced Hopkins’s hand. With the deadline imminent, Heyssel and his team reached an agreement with EBCC. The latter would own the program and the permanent clinic fa­cil­i­t y, and it would appoint a majority of the board of directors; it would also select the program administrator, with consultation from Hopkins. Funding would go into an EBCC account overseen by the administrator, subject to in­de­pen­ dent and government audits; Hopkins, in turn, would appoint the medical director, with consultation from EBCC. EBCC would contract with Hopkins for hospital ser­v ices and with the Johns Hopkins Medical Partnership for physician ser­v ices at the clinic; EBCC would also be responsible for securing financing for the clinic building.56 ­These contractual features meant in practice that the community would control the program’s administrative and financial operations. Hopkins, through the medical group, would control the medical ser­v ices. Heyssel expressed reservations, worrying that “they involve risks of conflict between the administrator and the medical director, and their success ­will depend heavi­ly on the community group’s active interest in cost control



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and efficient operation.” He also warned that the community would expect Hopkins to finance the clinic building in the event that EBCC could not raise the necessary funds. Nonetheless, he urged the Hopkins trustees to approve the agreement or face a complete loss of credibility: “Our failure to sign at this time undoubtedly would lose us an established working relationship with the community which would take years to reestablish. . . . ​The East Balti­more Community Corporation was a committed, highly vis­i­ble, and relatively moderate group, who was establishing real community leadership. Their inability to work with Hopkins would be very apparent to the more militant groups in a community which has a high level of antagonism ­towards Hopkins.” In addition, Heyssel noted that the Columbia program had been operating “for almost nine months with nothing vis­i­ble in East Baltimore.” Both the Hopkins faculty, who had demanded a parallel East Baltimore program, and the foundations that had provided the initial planning grant ­were growing restless.57 With no apparent alternative, the trustees approved the agreement on June 10.58 HEW soon issued the $2.5 million grant, along with a $471,000 Public Health Ser­v ice grant, to support the program’s launch. Fi­nally, on November 15, 1971, the East Baltimore Medical Program (EBMP) opened for patients in a converted church leased from the Archdiocese of Baltimore and renovated at a cost of $107,000 with funds from the Public Health Ser­v ice’s 314-­e program. An EBMP dental clinic opened the same day in the Broadway Shopping Center.59 Initially, the program accepted enrollment from residents of four East Baltimore public housing proj­ects. By March 1972, 2,500 p ­ eople had enrolled in EBMP, halfway to the initial goal of 5,000 but far from the 25,000 needed to make the program financially v­ iable. Funding came primarily from Medicaid and the 314-­e program but also from Medicare, the federal ­Children’s Bureau, the National Institutes of ­Mental Health, the local Model Cities agency, and the city’s Department of Health and Welfare. Hopkins officials helped the EBMP administrator and medical director negotiate capitation payments from ­t hese agencies equal to the estimated yearly expenditures on all categories of care. EBMP physicians in turn worked on salary for the Johns Hopkins Medical Partnership.60 Prepaid group practice medicine had been achieved in East Baltimore. But the work went beyond health care alone. Using a grant from the U.S. Department of L ­ abor, EBCC in 1971 began training community residents to work in a variety of nonphysician roles at EBMP. The first category of workers consisted of “health care advocates” who engaged in community outreach

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Figure 10. ​City councilman and East Baltimore Community Corporation chair Clarence H. “Du” Burns at a reception for the East Baltimore Medical Center, February 1972. The Chesney Archives of Johns Hopkins Medicine, Nursing, and Public Health, Baltimore.

and health screening. Beginning in the fall of 1971, the newly trained health advocates worked in nearby public housing proj­ects to inform residents about EBMP and encourage their enrollment. A second tier of “health care specialists” received more extensive training and oversaw the work of the health care advocates while assisting the medical staff. Fi­nally, the program part-



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Figure 11. ​Entrance to the original location of the East Baltimore Medical Center on Asquith Street, February 1972. The Chesney Archives of Johns Hopkins Medicine, Nursing, and Public Health, Baltimore.

nered with Johns Hopkins’s new School of Allied Health Ser­vices to train residents to work as “health associates,” a new category similar to physician assistants. ­These training efforts helped meet the pressing need of the East Baltimore community for jobs and potentially even opened up medical ­careers. The use of allied health professionals also cut costs by freeing EBMP’s physicians to focus on more complex medical issues.61 During 1972, EBMP opened enrollment to all residents of East Baltimore—­ more than 61,000 mostly low-­income ­people. By the end of the year, the plan offered comprehensive f­ amily care, ambulatory and hospital ser­vices, f­ amily planning, prenatal and well-­baby care, specialist referrals, dental care, ­mental health ser­v ices, venereal disease treatment, and health education programs. In partnership with the community corporation, the Office of Health Care Programs also developed drug and alcohol treatment programs a­ fter East Baltimore community groups identified them as a priority. It transferred ­t hese programs to EBCC in 1972 and 1974, respectively. This added a critically impor­tant ele­ment to the overall ser­v ice offerings, but also further increased the expense and management challenges of the health program.62

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Even with ­these ser­vices in place, EBMP strug­gled to attract new patients and to reduce high rates of disenrollment.63 ­These prob­lems reflected not only ongoing dissatisfaction with the quality of care provided but also the complex financial model on which EBMP relied. Each of the public programs from which EBMP received funding had dif­fer­ent priorities and dif­fer­ent eligibility standards. With no overarching national health insurance system, public health care programs targeted ­either specific categories of patients or specific types of care, and EBMP administrators had to determine each patient’s current status in order to establish their eligibility. Medicaid, meanwhile, worsened EBMP’s disenrollment prob­lem ­because it required that each patient’s eligibility be recertified e­ very six months. During EBMP’s first six months of operation, 135 plan members became ineligible solely b ­ ecause their certification lapsed. Plan administrators also had to proj­ect enrollments for each program in order to determine the capitation payments that EBMP should receive and then convince the agencies to accept the projections. Fi­ nally, programs such as Medicare and Medicaid preferred to work through large institutions such as Hopkins, while programs that originated with the Office of Economic Opportunity and the Public Health Ser­vice promoted community control as a core mission. “How,” Robert Blendon wrote, “within one administrative framework, can a program be developed which gives decision-­making power to the East Baltimore community and at the same time also gives the same power to the Johns Hopkins Hospital?” 64 Hopkins and EBCC thus found themselves dealing less with a divided welfare state, split between public and private, than with a categorically splintered welfare state that did not offer a consistent mechanism or programmatic philosophy for meeting the health care needs of the poor. Such large financing structures reinforced overall racial inequity in health.65 Such prob­lems aside, EBMP met a key need in East Baltimore. Enrollment gradually increased, and by the mid-1970s, the program had become popu­ lar among its target population. Eventually, a­ fter years of delays, EBMP in 1979 at last moved into its permanent clinic fa­cil­i­ty at E ­ ager and Ensor Streets.66 Yet by definition, EBMP represented a medical approach rather than a comprehensive community development strategy. This meant that often the program could only indirectly address the under­lying c­ auses of medical prob­ lems that patients brought to the clinic. EBMP doctors and nurses quickly realized that they ­were treating the symptoms of larger social prob­lems. Robert Heyssel recognized this as early as 1972, when he told a Baltimore Sun



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reporter that “­there are many prob­lems of health in the community that medicine i­sn’t ­really equipped to solve ­because ­t hese are commonly social and economic prob­lems. . . . ​And so we can sew up the rat bite that comes into the emergency room, but ­we’ll be sewing it up the next night ­unless someone does something about the rat, the housing, the job prob­lem, the education prob­lem. . . . ​Medicine as such ­isn’t the answer to most of ­t hese prob­lems.” 67 In 1977, EBMP medical director Ira Morris put the ­matter even more directly: “Many of our patients have social prob­lems that override their medical prob­ lems.” He cited such examples as asthma attacks induced by poor air quality and a lack of access to air conditioning, chest pains in an el­derly w ­ oman stressed by frightening encounters with teen­agers skipping school, and high rates of obesity and hypertension caused by diet and inadequate access to affordable, healthy food. EBMP and Hopkins attempted to train ser­v ice providers to address social and economic issues, but the under­lying disjuncture remained.68 In pursuing this relatively narrow, health care–­based strategy for increasing its community engagement, Hopkins had medicalized its engagement with the neighborhood’s social prob­lems.69 Such medicalization formed part of a much larger pattern in the postwar United States. Health care spending far outstripped funds allocated to poverty interventions or community development, and in neighborhoods such as East Baltimore, few nonmedical options remained for addressing ­t hese issues. Moreover, none of ­t hose other options had access to the capital or personnel available to academic medical complexes like Johns Hopkins. The ultimate effect was that the American state supplied public funding through an associational relationship with a nominally private health care institution, which in turn deployed a portion of t­ hose dollars to address, through health ser­vices, the highly racialized consequences of the poverty that the state—­and society—­other­wise chose to ignore. As a further source of tension in t­ hese relationships, Hopkins itself contributed to the community’s economic stress through the low wages that it paid to residents (and ­others) who worked at the hospital. Even so, a critical question remains: why exactly did Hopkins choose to focus on the provision of health care ser­v ices in East Baltimore rather than adopt a more comprehensive approach as called for by the Feinblatt report? In part, the answer is a ­simple one: the hospital was a health care institution, not a community development agency, and it was not clear that trying to serve as the latter was within the scope of its mission, its capacity, or even its social

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obligations. Yet this seemingly ­simple question about the extent of institutional responsibility lies at the core of any assessment of the role of academic medical centers as urban institutions.70 Other considerations s­ haped the decision as well. Hopkins’s own financial position played a significant part, as the hospital ran annual deficits throughout the period and had to take out a series of loans against endowment to provide working capital. The provision of efficient basic health care ser­v ices in a more appropriate environment than the hospital’s emergency room offered the promise of substantially improving Hopkins’s finances. In addition, by 1970 Hopkins operated in an aging and outdated fa­cil­i­t y that badly needed to be replaced or renovated. Such a proj­ect would require hundreds of millions of dollars. Much of this would be financed through debt, but ­doing this required capital reserves that had to be built by increasing the hospital’s revenues. Together, ­t hese ­factors meant that Hopkins’s leadership felt constrained, and even financially threatened, by a combination of costs and capital needs. Positioned in the often unclear nexus of private and public that constitutes the U.S. health care system and the associational state itself, administrators and trustees did not see any likely sources of significant outside aid for a comprehensive program. A focus on the provision of community health care ser­v ices, in contrast, seemed realistic.71 Robert Heyssel and his team at the Hopkins Office of Health Care Programs, however, had another, much broader ambition: both the East Baltimore and Columbia programs reflected their intense interest in reforming the core system of health care delivery in the United States. They believed that nonprofit, prepaid group practices such as EBMP and Columbia could change the under­lying incentives that s­ haped physician and patient be­hav­ ior in ways that would make health care si­mul­ta­neously cheaper and better. The model was part of a movement in the early 1970s to reor­ga­nize health care in the United States around such nonprofit organ­izations.72 Although this idea would soon be modified into a for-­profit version by the Nixon administration, Heyssel and other liberals during the period saw prepaid, nonprofit group practices as an essentially progressive mechanism for delivering cheaper and superior care while expanding access. In a 1972 speech about EBMP to the Hopkins Department of Pediatrics, Heyssel observed, “I happen to believe that to move in the direction of a system of accessible, quality, efficient, equal as far as pos­si­ble and eco­nom­ical care for every­one—­regardless of former or pre­sent status, regardless of socio-­ economic status, regardless of place of residence, or of color—­should be our



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goal as a medical center as well as the goal of the nation.”73 In both Columbia and East Baltimore, Heyssel pursued an opportunity to explore t­ hese ideas and goals in settings with vastly dif­fer­ent populations. Yet the two programs ultimately highlighted the stark racial and economic divisions in the U.S. health care system and, more generally, in the emerging hospital city. EBMP’s financial structure contrasted starkly with that in middle-­class Columbia: even with the involvement of Hopkins, significant private financing was simply not available in East Baltimore. The suburban, mostly white new city had access to the nominally private but tax-­subsidized system that most Americans thought of as a health insurance market, while the racially and eco­nom­ically marginalized community relied on a jerry-­built maze of public programs that strug­gled to provide new forms of health care to a subset of the racially and eco­nom­ically marginalized poor. This, in short, was what structural racism in health care financing looked like. Played out on a national scale, ­these contradictions would generate a renewed national debate over rationalization of the wider system—an effort that would fall prey to the constraints of cost and particularly the costs of hospital care. The racial disparities in health outcomes that resulted have plagued the United States into the twenty-­first ­century.

PA R T II Living with the Hospital City

CHAPTER 5

The Hospital City and the National Health Insurance Strug­gle

J

ohns Hopkins’s development of new health care delivery programs in East Baltimore and Columbia took place amid wider ferment in the U.S. health care system. Along with the continued lack of health insurance coverage for many Americans, Medicare’s and Medicaid’s built-in incentives for providers to charge more, offer more ser­v ices, and pursue capital for expansion led to rapid increases in health care costs. Stanley Jones, who worked on health care issues as an aide to Mas­sa­chu­setts senator Edward Kennedy during the late 1960s and 1970s, explained in a l­ater interview that “the hospitals, the doctors, got a huge windfall from Medicare, and that got converted into higher costs.”1 The prob­lem became apparent almost immediately. As early as December  1965, New Mexico senator Clinton Anderson, one of the original cosponsors of the Medicare legislation, held hearings in the Senate Finance Committee on the programs’ provider reimbursement formulas.2 A year ­later, in a special message to Congress, President Johnson highlighted a new study by the Department of Health, Education, and Welfare that found an accelerating pattern of cost increases, particularly in hospitals. Johnson announced that a special, high-­level conference would meet to consider pos­si­ble solutions. Held in August, the resulting National Conference on Medical Costs identified inefficiencies in health care delivery and poorly aligned incentives as c­ auses of the cost increases. Many of the economists and policy makers who participated in the conference called on providers and insurers to embrace rather than resist reform. In the conference’s closing address, HEW secretary John Gardner argued that “we cannot go on as we have in the past.

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New patterns ­will be necessary.” The health professions, he warned, could increase efficiency themselves, or other parties would do it for them.3 As ­t hese discussions continued at subsequent meetings, panels, and conferences, Secretary Gardner’s threat would per­sis­tently reappear. But what would it actually mean to “not go on as we have in the past”? The questions this raised about health care planning, regulation, and finance would shape the larger debate over the system’s trajectory and, specifically, the question of w ­ hether the federal government should create a system of national health insurance to cover all Americans while—­somehow—­controlling costs. Throughout, the hospital city and all that it reflected about how health care costs had become embedded in the economic life of American communities would both define and limit the available po­liti­cal options, a real­ity that would become brutally apparent in the 1970s and persist to the pre­sent.

The Nixon Administration and the Push for National Health Insurance Just weeks ­after Richard Nixon’s election to the presidency, the health care debate shifted dramatically when Walter Reuther, president of the United Autoworkers (UAW), announced an ambitious new campaign for national health insurance. Reuther, who had been working ­toward this goal since the Truman administration, or­ga­nized the Committee for National Health Insurance, a group of leading policy experts, scholars, ­labor leaders, civil rights activists, physicians, and religious leaders. Although clearly led by ­labor, Reuther intended the committee to be broadly representative of the American population—or at least, of its left-­leaning components. The committee’s technical director, Max Fine, recalled that Reuther took on the national health care issue b ­ ecause he “was a visionary. He could see t­ hings that other p ­ eople ­couldn’t see.” What Fine meant was that Reuther recognized the implications of the health care cost crisis for ­labor: specifically, that the high costs of employer-­provided health care would increasingly make American manufacturers less competitive than foreign companies, which would cost u ­ nion jobs.4 ­Under the leadership of Fine and veteran social policy expert I. S. Falk, who had helped to write both the Social Security Act and the Medicare legislation, the Committee for National Health Insurance soon developed a program known as “Health Security.” This sweeping plan proposed the con-



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version of all existing public and private insurance into a unified national health insurance program offering first-­dollar coverage (meaning no premiums, copayments, or deductibles) for all Americans, financed through a combination of payroll taxes and general tax revenues. Health Security also sought to shift physicians into prepaid group practices and proposed the creation of an overall national health bud­get that would cap aggregate health care spending—­including for hospitals—at a predetermined limit. Physicians would remain in private practice and nongovernmental hospitals would remain private, but all financing would be public.5 Reuther personally recruited Senator Kennedy to lead the congressional fight for Health Security. Kennedy had developed an interest in health care from his involvement in creating the War on Poverty’s community health centers, as well as his personal and ­family experience with illness and accident.6 Kennedy also saw the importance that u ­ nions and other key supporters placed on the issue and recognized that leadership in the fight would perfectly position him for a f­ uture presidential bid. With polls indicating strong public support, passage of some form of national health insurance seemed inevitable.7 This initial momentum evaporated late on the eve­ning of July 18, 1969, when Kennedy’s car plunged off a bridge on the Mas­sa­chu­setts island of Chappaquiddick. His passenger, campaign worker Mary Jo Kopechne, drowned. Kopechne’s possibly avoidable death marred Kennedy’s reputation and undermined his ability to push Health Security forward. In May 1970, the effort suffered a second blow when Reuther died in a fiery plane crash while traveling to the UAW’s education center in northern Michigan. The loss of Reuther deprived the national health insurance cause of a persuasive and power­f ul advocate. But new UAW president Leonard Woodcock soon finalized discussions about a reconciliation with George Meany and the AFL-­CIO (American Federation of L ­ abor–­Congress of Industrial Organ­izations), from which the UAW had split in part b ­ ecause of the health care issue. This allowed the l­abor movement as a w ­ hole to unite b ­ ehind the drive for Health Security.8 Although Edward Kennedy de­cided against a 1972 presidential bid, he used the national health insurance issue to stage a comeback. In 1971, he launched a nationwide series of field hearings on the issue, seeking to reassemble the po­liti­cal co­ali­tion that his b ­ rother Bobby had begun to build prior to his 1968 assassination. The hearings led to the publication of a book, titled In Critical Condition, that highlighted the health care crisis.9

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Figure 12. ​Senator Ted Kennedy speaking to members of the American Federation of County, State, and Municipal Employees (AFSCME) about his proposed Health Security Act, June 9, 1971. Courtesy of the Library of Congress Prints and Photo­ graphs Division, U.S. News & World Report Magazine Photo­graph Collection (Marion Trikosko, photographer).

For its part, the Nixon administration had at first moved slowly on health care, but Kennedy’s and Reuther’s efforts raised the prospect that a national health insurance bill might become a key issue in the 1972 presidential campaign. This forced Nixon’s team to develop a counterproposal. In a February 1971 message to Congress, Nixon detailed a “National Health Insurance Partnership” as part of a larger strategy for reforming the nation’s health care system. Nixon’s proposal had two components: a “­Family Health Insurance Plan” that would provide ­free coverage for the poor with gradually decreasing subsidies for higher incomes (up to $5,000), and a “National Health Insurance Standards Act,” which would mandate that most employers provide coverage for their workers. Nixon’s plan marked the first appearance of the mandate concept in the health care debate, but the idea had pre­ce­dents in other social policy areas, such as workers’ compensation.



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Cuts in Medicare would partially fund the low-­income coverage. The plan also required both coinsurance and deductibles, a step recommended to Nixon by economist Martin Feldstein on the grounds that it would make consumers of health care at least partially sensitive to cost. The latter idea represented a significant departure in thinking about how health care coverage should function, and it reflected an emerging effort to use market forces in health care. It also created a key contrast with Kennedy’s Health Security plan, which offered first-­dollar coverage of medical expenses.10 Leaving as many as 40 million Americans uninsured, Nixon’s plan represented primarily a po­liti­cal rather than a policy tool that was intended to stake out ground on national health insurance so that Kennedy did not control the issue. Kennedy blasted it as “poor­house medicine,” and Nixon adviser Stuart Altman ­later described it as “a pretty minimal attempt.”11 Expanding coverage, though, represented just part of Nixon’s strategy. The administration’s proposal also offered planning grants and loan guarantees for the creation of new “health maintenance organ­izations,” or HMOs, which repackaged the prepaid group practice idea by including, on the suggestion of Minnesota physician and health care entrepreneur Paul Ellwood, a for-­profit version of the approach. Both public and private insurance plans would be required to offer subscribers an HMO option. The HMO strategy formed the core of Nixon’s proposal. Like prepaid group practice, it sought to move away from the prevailing model of hospital-­dominated, fee-­for-­ service care and ­toward one that emphasized prepaid, preventive ser­v ices integrated across medical specialties within a single organ­ization—­and that sought to remove the incentives for excess ser­v ice provision created by fee-­ for-­service payment. Supporters also believed that HMOs would lead to greater competition and reduced prices.12 Over the coming de­cades, the Nixon plan’s core princi­ples of mandates, cost-­sharing, and HMOs would become defining components of the larger health care debate. Kennedy and Nixon ­were not the only players. The health insurance industry, the American Medical Association, and the American Hospital Association also offered plans. All of the industry plans operated on the princi­ple of proposing something the interest group found acceptable rather than allowing Kennedy to define the field. The AHA even endorsed the idea of health care as a right and proposed expanding Medicare to cover all Americans. At the other end of the policy spectrum, Senate Finance Committee chair Russell Long of Louisiana joined with liberal Connecticut senator Abraham Ribicoff to offer a much cheaper catastrophic cost bill that covered medical

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expenses over $2,000 and hospital stays longer than sixty days. The Finance Committee had primary jurisdiction over health policy issues in the Senate, and Long, along with other conservatives on the committee, opposed full national health insurance b ­ ecause of the cost overruns already experienced with Medicare. Lee Goldman, the staff director of the Senate Health Subcommittee u ­ nder Kennedy, recalled that Long’s Finance Committee during the period was “the killing field for national health insurance.” Separately, he commented that “Russell Long was sitting ­t here like a troll on the top of the Senate Finance Committee bridge.” Critics on the left warned that although the Long-­R ibicoff proposal required far less in direct spending than e­ ither the Kennedy or Nixon plans, its $2,000 deductible and its minimum hospital stay requirement would actually create incentives to increase health care spending so patients could reach ­t hose coverage thresholds. The bill nonetheless provided a rallying point for congressional moderates and conservatives. Yet Senator Long knew that his bill also lacked the votes to pass. Goldman thus saw it as analogous to Nixon’s in “that neither of them intended to enact it.” The profusion of plans soon led to stalemate, and none of the bills advanced out of committee.13 Meanwhile, House Ways and Means Committee chair Wilbur Mills launched a quixotic bid for the Demo­cratic presidential nomination. Lacking both charisma and widespread name recognition despite his significance on Capitol Hill, Mills stood l­ ittle chance of winning the nomination outright. He hoped, however, to emerge as a compromise candidate at the convention or possibly to secure the vice-­presidential nomination. Health care represented a key part of this unlikely strategy. This dynamic, along with Mills’s skill at crafting legislation that could actually pass, made him a far more promising partner for Kennedy than Russell Long. Kennedy’s team quietly reached out to Mills about a pos­si­ble compromise that might position both men as f­uture presidential candidates and possibly even as a ticket. In June 1972, Kennedy and Mills worked to shape the Demo­cratic convention platform, which provided a tool for the eventual nominee, South Dakota senator George McGovern, to attack President Nixon for ­doing nothing on the health care issue. The tactic failed to hinder Nixon’s landslide reelection in November, but Kennedy, Mills, and their policy teams quietly continued their discussions about f­ uture legislation.14 ­These early strug­gles and po­liti­cal maneuvers illuminated basic contours of the health care debate that would persist for de­cades. When Finance Committee staff member James Mongan tried to convince Senator Long that



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Kennedy’s national health bud­get would make it easier for the federal government to control health care costs, the senator compared the concept to the Post Office, which had recently increased the price of stamps. If the government c­ ouldn’t control the price of stamps, Long reasoned, how would it limit health care costs? Even more tellingly, Long pointed to how health care financing intersected with the politics of taxation: “Right now, p ­ eople pay for their health insurance through premiums they pay to Blue Cross or Aetna. If you pass Kennedy’s bill, it becomes a tax. They blame me for the tax. They ­don’t blame me for the premium.” Mongan explained that Kennedy, in contrast, believed that “it’s g­ oing to be better b ­ ecause p ­ eople ultimately pay less than what t­ hey’re paying in their premiums, and ­those insurance companies ­won’t be ripping off their share.” The diverging views of Long and Kennedy highlighted the core challenges of the health care debate: how to contain the costs that sustained the health care economy, how to pay for expanded coverage, and how to allocate the po­liti­cal credit and blame for difficult but unavoidable choices.15 Although national health insurance failed in 1972, Long did succeed in pushing through the first significant change to the health care system since the passage of Medicare. A ­ fter a multiyear effort, the 1972 amendments to the Social Security Act extended Medicare coverage to Americans who received Social Security disability insurance, allowed Medicare recipients to enroll in HMOs, and established new “professional standards review organ­ izations” that would undertake physician peer review of hospital admissions and procedures to determine if Medicare payments w ­ ere justified. The latter concept assumed incorrectly that physicians would check costly and unnecessary care within hospitals, thus limiting cost increases.16 In addition, Section 223 of the amendments allowed Medicare to place limits on payments for hospitals’ routine “­hotel” costs. “Ancillary” costs resulting from unique features of individual patient care would continue to be paid without limitation. Although Section 223 provided a basis for cost control, it set off endless debates about the difference between routine and ancillary costs.17 Health delivery experimentation received another boost the following year with the passage of the Health Maintenance Organ­ization Act of 1973. Along with funding for health manpower, the HMO bill represented the only part of Nixon’s 1971 health proposal that became law. Nixon’s own interest in health care had waned as his attention shifted to the 1972 election and to foreign policy initiatives, such as opening diplomatic relations with China. Meanwhile, the AMA’s dogged defense of fee-­for-­service payment princi­ples

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led the administration to limit its advocacy of HMOs. HEW secretary Elliot Richardson, who had championed the HMO concept, moved to the Department of Defense, and his replacement, Caspar Weinberger, viewed HMOs as just a demonstration program rather than the cornerstone of a health policy strategy. Kennedy, who saw HMOs as an instrument to control costs while extending health ser­v ices, became the primary champion of the HMO legislation.18 As passed, the act provided $375 million in loans and grants for HMO development and, building on the 1972 Social Security amendments, required private employers to offer an HMO as an alternative insurance plan. This requirement for an HMO option represented the bill’s most impor­tant feature, as it granted HMOs access to the insurance market. The ­limited funding for the program, though, meant that the legislation essentially created an experiment in HMO development rather than the long-­term program that Kennedy wanted. A Senate-­passed HMO bill the previous year, for example, had provided $5.1 billion compared to the relatively paltry $375 million in the final 1973 legislation. Kennedy also insisted that the legislation require HMOs to offer comprehensive benefits, charge all participants the same (community rating), and allow annual open enrollment regardless of preexisting health conditions. Conservatives such as Colorado Republican senator Peter Dominick forced Kennedy to accept a broadened definition of HMOs that included both for-­profit organ­izations and a structure favored by the AMA known as in­de­pen­dent practice associations, ­under which insurers offered coverage on a prepayment basis but reimbursed a loose network of approved private practice physicians on fee-­for-­service terms. The insurer, in this model, acted as a kind of distant gatekeeper to the ser­v ices of in­de­pen­dent physicians, but the integrated, comprehensive nature of the group practice model was lost completely, as ­were the direct cost-­reduction incentives that prepayment created for physicians. Th ­ ese components of the legislation contributed to the eventual emergence of a form of corporate “managed care” very dif­fer­ent from the original HMO concept. More generally still, the HMO act represented yet another step in a broader shift away from a regulatory model and t­ oward a policy approach that looked to competition and market-­based solutions in health care.19 In practice, the legislation had ­little immediate effect. ­Because private insurers did not have to meet the requirements of comprehensiveness, community rating, and open enrollment, they generally had lower costs than HMOs. The ­limited subsidies that HMOs received ­under the act did not make



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up the difference. Instead, the commercial insurance practice of experience rating—or setting premiums based on a beneficiary’s health history—­put the early HMOs at a significant disadvantage. Kennedy had not been able to fund the subsidies at a level sufficient to compensate HMOs for the costs that resulted from the coverage requirements. For Kennedy’s team, HMOs represented less a solution in themselves, as in the original Nixon model, than a moving piece in the kaleidoscopic puzzle of health policy reform.20 HMOs failed in limiting costs during the 1970s. Nonetheless, a threshold had been crossed: Congress had indicated that it would attempt to use the power of the federal government to control the cost inflation that had followed the passage of Medicare and Medicaid. Meanwhile, with a direct regulatory move, President Nixon delivered a similar message from the executive branch.

Nixon’s Price Controls By the time the 1972 Social Security amendments and the 1973 HMO Act passed, the cost issue dominated the health care debate. Although the rate of increase in hospital costs slowed somewhat a­ fter 1969, it remained higher than before 1966 and above the general rate of inflation. When combined with the wider politics of inflation and the economy, this put significant pressure on President Nixon. U ­ ntil August 1971, Nixon pursued an economic policy of “gradualism” that emphasized a cautious policy of managing the overall money supply to produce slow but steady growth with ­limited inflation. The policy achieved modest success, but by 1971 it seemed to be faltering, as increases in wages led businesses to raise prices, which then necessitated further wage increases, creating an ongoing upward spiral known as “cost-­push inflation.” Fearing that this cycle might endanger his reelection, Nixon abandoned gradualism in f­ avor of what he called a “New Economic Policy” that combined cutting taxes, increasing spending, abandoning the gold standard to stabilize the dollar, and—­most crucially for health care—­instituting government controls on wages and prices.21 Known as the “Economic Stabilization Program” and overseen by a Cost of Living Council headed by Trea­sury secretary John Connally, the Nixon administration’s controls went through three phases. “Phase I” consisted of a ninety-­day wage and price freeze across all economic sectors; although temporary, it achieved the largest single-­month decline in w ­ holesale prices in

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five years. In October 1971, Nixon issued Executive Order 11625 establishing phase II, which sought to cut the rate of inflation in half over a year. It took effect in mid-­December.22 Phase II established controls that capped wage increases at 5.5 ­percent per year and ­limited price increases to changes in a firm’s input costs, minus productivity gains in its industry. The complexity of the health care sector’s pricing and reimbursement structures, however, required a special set of regulations. Th ­ ese capped hospitals’ aggregate annual revenue increases at 6 ­percent, with further limitations on under­lying cost increases that could be used to justify price increases that produced the revenue gains: hospitals could “pass-­through” to prices just 5.5 ­percent of wage increases (as in the economy-­wide controls), 2.5 ­percent of nonwage expenses, and 1.7 ­percent of expenses from new technology or ser­vices. The prob­lem with t­ hese phase II mea­sures was that hospital accounting remained crude and the basic economics of hospital “prices” and “costs,” and the relationship between them, remained poorly understood. As a result, the Cost of Living Council strug­gled with the difference between costs and charges, with criteria for exceptions, and with how to assess hospital compliance.23 Nonetheless, like its pre­de­ces­sor, phase II appeared to produce positive, if provisional, results: the consumer price index for health care as a ­whole showed a decline through much of 1972, with mea­sures such as hospital room-­ and-­board rates falling by half. Hospitals trumpeted their cooperation with the price controls, and just a week before the election, President Nixon met with members of the council’s Health Ser­v ices Industry Committee to highlight the effort’s apparent success.24 Real­ity proved more complicated. The consumer price index statistics mea­sured only hospital charges, which provided a poor mea­sure of hospital inflation ­because most third-­party payers actually reimbursed hospitals on the basis of costs. Th ­ ese declined by much less, which meant that the limitation of hospital inflation was superficial.25 In addition, the rate of hospital cost increase had been slowing since 1969, suggesting that much of the decrease would have occurred even without the controls. ­Later econometric analyses of this prob­lem in fact concluded that the phase II regulations had l­ ittle mea­ sur­able effect on costs.26 Seeking to roll back controls where pos­si­ble, the council implemented phase III on January 11, 1973. Phase III replaced mandatory controls with a system of voluntary cooperation for all industries except food, construction, and health care. This shift unleashed pent-up inflationary pressures and led



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to rapid price increases. Although phase III eased a number of hospital regulations, such as the allowable increase for nonwage expenses, the overall effect of rising prices for supplies and equipment proved devastating for hospitals. With their own prices still capped, hospitals could not recover ­these cost increases. Faced with the sudden resurgence of inflation, the Cost of Living Council in June instituted a sixty-­day price freeze across the economy (leaving wages unaffected) while it worked to develop a new phase IV program of more-­targeted controls. While this relieved some of the pressure on hospitals, it still prevented them from raising prices to match the price increases that had already occurred.27 At this point, the hospital industry’s grudging cooperation with the federal control regime broke down. Increasingly, hospital associations and individual institutions challenged the policies and under­lying premises of the council’s actions. Johns Hopkins Hospital provides an illustrative example, typical in its concerns yet exceptional in its reputational and po­liti­cal influence. Since the spring of 1972, Hopkins had pursued a series of exemptions to account for wage increases for low-­wage workers, which the council had previously established as an allowable justification for “pass-­t hroughs” of costs into rate increases.28 But to qualify for wage pass-­t hroughs, the council also required hospitals to show ongoing operating losses. ­Here, the imperatives of hospital capital finance—­and with it, the growth of the hospital city as employer and economic engine—­came into direct tension with the Nixon administration’s cost-­control regime. Since taking over as hospital director in October  1972, Robert Heyssel had worked to implement a construction and modernization program on the main hospital lot. Hopkins sought to finance the proj­ect by taking on debt through the bond market. Access to affordable debt financing, however, required reduction of the hospital’s long-­standing operating deficits.29 By reducing its operating losses to a break-­even point, which Heyssel gradually accomplished through an aggressive internal cost-­control campaign, Hopkins could reduce its borrowing costs, but only at the price of jeopardizing its case for exemptions from the federal controls. Hopkins thus found itself in a kind of circular trap in which it could not borrow at low cost u ­ nless it further reduced its losses, which in turn risked the pass-­throughs it needed from the council to account for its wage costs.30 In April 1973, Johns Hopkins University president Steven Muller appealed directly to Cost of Living Council director John Dunlop regarding this conundrum. Muller pointed out that Hopkins had reduced its average length

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of stay, even as the number of admissions held steady. This had increased the hospital’s average daily cost per patient to a level that ­v iolated regulations. “We are being penalized,” Muller argued, “for greater efficiency in patient care.” In addition, Muller emphasized the imperative for Hopkins to cut its operating deficit in order to improve the attractiveness of the bond issues needed to finance the construction program.31 Hopkins’s reduced deficit and its shorter length of stay should not, he argued, impede other priorities such as the construction program. Muller implored Dunlop to develop a regulatory regime more sensitive to the specific context of his and other institutions.32 Dunlop rejected Muller’s appeal, and Hopkins responded with a lawsuit against the council. In its formal complaint, Hopkins emphasized that it needed to modernize and expand in order to maintain “a competitive posture with newer suburban hospitals and thus retain its patient population.” This point brought the regional dimensions of the hospital city—­and the cost crisis—­into sharp focus. Even an institution as prominent as Johns Hopkins faced pressure to grow or risk losing out to suburban competitors. Nixon’s cost-­control regime, and perhaps any such regime, threatened its ability to do so.33 The lawsuit also highlighted the gap between the Nixon administration’s attempt to construct a federal cost-­control structure across a huge range of institutions and the on-­t he-­ground realities of the hospital city, such as ­labor negotiations, regional competition, and capital financing requirements. Over the following months, the po­liti­cal consequences of this divergence brought the Nixon effort to an end. On January 23, 1974, the Cost of Living Council released new phase IV regulations, scheduled to take effect on April 1. Developed by specialists at HEW rather than by less-­expert council staff, ­t hese features of the proposed phase IV regulations offered a more sophisticated model than the e­ arlier phases.34 Yet t­ hese very innovations, and with them the prospect of potentially effective cost control, attracted the ire of the hospital industry. Although the council had consulted with leading hospital associations, circulated draft regulations, and held hearings before finalizing phase IV, the AHA, the Association of American Medical Colleges, and the Council of Teaching Hospitals (led by Hopkins’s Heyssel) all opposed the new regulations. Heyssel warned that as drafted, phase IV would force teaching hospitals like Hopkins to cut back on both existing and planned ser­v ices ­because they could not raise prices enough to cover wage and price inflation.35 On January 28, the AHA filed suit against the council on the grounds that the phase IV regulations exceeded the commission’s authority, “are contrary



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to sound medical practice,” and offered hospitals no ­v iable means to comply. The core objection focused on phase IV’s admission control mechanisms, which the AHA argued would undermine quality of care by exerting “direct influence on the utilization decisions of a hospital’s medical staff.” This, of course, was precisely the point. Existing health care delivery structures and the payment systems that financed them and supported the hospital city had to be restructured if regulators hoped to control health care costs.36 By early 1974, the po­liti­cal situation had shifted against aggressive hospital cost regulation. With the Watergate crisis bearing down on Richard Nixon, the administration had l­ittle ability or w ­ ill to fight for the cost-­control apparatus. In the aftermath of the 1973 OPEC oil embargo, inflation had returned to the overall economy, this time accompanied by a painful recession. The public had lost faith in wage and price controls as a tool to resolve the crisis, as had members of Congress who had called for such policies just a few years before. On April 30, 1974, Congress rejected the reauthorization of the Economic Stabilization Act, effectively bringing wage and price controls to an end. The courts soon ruled the Hopkins and hospital association lawsuits moot.37 Yet the hospital industry’s forceful opposition to the system, and particularly to the new phase IV regulations, would influence all f­ uture efforts to impose controls on cost.38

Cost Control, Watergate, and National Health Insurance The hospital industry’s challenge to the Economic Stabilization Program also had impor­tant consequences for the ongoing debate over national health insurance. Any new federal health program would have to incorporate some form of cost control in order to be fiscally ­v iable, and the hospital industry’s hostility to the existing Nixon controls posed a warning for national health insurance supporters. How, as the hospital city grew, could reformers limit costs without raising insurmountable industry and interest group opposition? In the coming de­cades, this prob­lem would strictly delimit the range of national health insurance possibilities. Such questions had suddenly become impor­tant again. ­After taking over as HEW secretary in early 1973, Caspar Weinberger unexpectedly embraced national health insurance. In his previous position as head of the Office of Management and Bud­get, Weinberger had been known as “Cap the Knife” for his enthusiasm in cutting spending. But at HEW, Weinberger concluded

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that market forces simply did not function well in health care. As a result, he ordered the Office of Planning and Evaluation, u ­ nder Stuart Altman, to develop a new national health care plan. Weinberger also worked to sell the president on the advisability of his approach. Desperate to distract public attention from Watergate and show that he could still govern, Nixon ignored the opposition of other cabinet members and publicly embraced Weinberger and Altman’s proposal in his January 1974 State of the Union speech.39 The new administration program consisted of two parts: first, a Comprehensive Health Insurance Plan, which relied on an employer mandate to provide coverage for employees through plans administered by private insurers; second, an Assisted Health Insurance Plan, u ­ nder which individual states would contract with insurers to cover the uninsured on a means-­tested basis. The two programs would offer the same minimum benefits, and participation would be voluntary. In offering the new proposal, the administration sought to preserve private insurance, expand coverage, and secure the support, or at least the acquiescence, of doctors, hospitals, and insurers. It also sought to take the initiative on health care away from the Demo­crats and, in ­doing so, to draw attention from the Watergate scandal.40 With the perspective of thirty years, Senate Finance Committee staff member James Mongan described the Nixon proposal as “a bill that would have been a very good bill now. But we all missed that opportunity.” 41 At the time, this outcome did not seem inevitable. With Nixon attempting to seize the center, Ted Kennedy and Wilbur Mills brought their lengthy negotiations to completion in April 1974. Unlike the original Health Security bill, the new Kennedy-­Mills proposal included consumer cost-­sharing in the form of means-­tested premiums, 25 ­percent copayments, and deductibles of the first $150 in expenses (as in the Nixon plan), up to a total annual limit of $1,000. Financing came from Social Security payroll taxes rather than the more progressive mechanism of general tax revenues. Unlike the administration bill, participation would be compulsory. Private insurers would act as fiscal intermediaries, as they did in Medicare, between patients, physicians, and the Social Security Administration. They could also offer supplemental benefits. The plan would cost approximately $40 billion annually, roughly the same as the Nixon proposal. Both plans preserved Medicare for the el­der­ly.42 Reflecting the pressure of the inflation crisis and the rising costs of health care, ­t hese compromises—­cost-­sharing, a role for insurers, and payroll tax financing—­marked Kennedy’s first steps away from a pure, public model of national health insurance. Largely ­because of the cost, Mills would not sup-



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port the health security approach that Kennedy had previously favored. Kennedy’s pragmatism prompted a break with his allies in the ­labor movement and the Committee for National Health Insurance. The cost prob­lem thus represented a limiting ­factor for Kennedy: it meant that a pure Health Security bill would never get past Wilbur Mills, much less Russell Long, while ­labor and the Committee for National Health Insurance would not accept any compromise or tradeoff from Health Security. At its core, the health care coverage prob­lem was a prob­lem of cost—­and its po­liti­cal consequences.43 For a time, optimism about a pos­si­ble deal reigned among observers unaware of t­ hese dynamics, as continued negotiations made it seem that the Nixon plan and the Kennedy-­Mills plan could be brought into alignment.44 Such hopes ignored a number of realities. Continued support in the Senate for the Long-­R ibicoff catastrophic care bill meant that any comprehensive compromise bill would have difficulty getting past Senator Long’s Finance Committee.45 In addition, the UAW and AFL-­CIO remained opposed to compromise with e­ ither Mills or Nixon and believed (erroneously) that the midterm elections would yield a Congress more favorable to a Health Security approach and possibly even a veto-­proof majority.46 Nor did l­abor possess a mono­poly on intransigence: negotiations between the Nixon and Kennedy teams ultimately stalled when Weinberger refused to accept any use of Social Security taxes in financing the program.47 Shortly ­after Nixon’s resignation, President Gerald Ford met with leaders of key ­unions and the Committee for National Health Insurance to suggest joint sponsorship of legislation based on the Nixon bill. Wilbur Mills and the Ways and Means Committee began marking up the Nixon bill in executive session, and even Senator Long indicated pos­si­ble openness to such an approach. But pro­gress soon halted as opposition from the health insurance industry, the AMA, business groups, and l­ abor stalled the legislation in Ways and Means. Although the committee voted sixteen to fifteen in ­favor of the bill (with Kennedy in the room observing), Mills refused to report it to the full House b ­ ecause of the narrow margin. Afterward, Kennedy told adviser Phil Caper, “You have no idea how power­ful t­ hese insurance guys are. ­They’ve just begun to flex their muscles.” 48 Mills intended to bring the bill up again during the fall, but before that could happen, his own c­ areer collapsed in spectacular scandal following public, drunken incidents with an exotic dancer. Without Mills’s leadership and influence, the hy­po­thet­i­cal Ford compromise evaporated.49 A key moment of opportunity for some form of national health care in the United States had slipped away.

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Although not as widely recognized, the experience of the Nixon administration’s cost-­control program formed a key limiting f­ actor on the drive for national health insurance. The AHA and the other hospital associations all testified before Ways and Means regarding the prob­lems that they had experienced ­u nder the Economic Stabilization Program, about their concerns with cost-­control models based on the proposed phase IV, and on their views of provider reimbursement mechanisms ­u nder national health insurance. Citing the renewed pressure of inflation, President Ford in 1976 withdrew the administration plan, substituting instead a new catastrophic care plan for the el­derly and a flat limit on increases in hospital and physician payments ­under Medicare. The quest for national health insurance had stalled again.50 The first half of the 1970s, and specifically the period surrounding Watergate, marked one of the best opportunities to pass a national health insurance mea­sure in the United States. The question of how to deal with the system’s excessive costs, and specifically ­those generated by hospitals, played a critical role in the failure to bring that opportunity to fulfillment. The prob­ lem of cost meant that a universal health security approach could not get through Congress. The ­unions and their allies on the Committee for National Health Insurance, however, would not accept a compromise on the issue, even one brokered by Ted Kennedy.51 On the other side, hospitals stood ready to fight too, as did the insurance industry. The hospital city and its financial under­pinnings served as a constant, constraining ­factor in this debate and thus ­shaped the broader trajectory of health care policy in the United States. As a result, no solution—to e­ ither the coverage prob­lem or the cost prob­lem itself—­emerged from this moment of national possibility.

CHAPTER 6

Wages, Jobs, and Cost in the Hospital City

C

oretta Scott King’s flight from Atlanta arrived at Baltimore’s Friendship Airport shortly before noon on August 26, 1969. Twenty-­one hospital workers and organizers from Local 1199E of the Hospital and Nursing Home Employees Union waited at the gate to greet the ­widow of the late Martin Luther King Jr., who had come to Baltimore to assist her husband’s “favorite u ­ nion” as it fought to or­ga­nize Johns Hopkins and other hospitals and nursing homes. Before leaving the airport, King and the u ­ nion del­e­ga­tion enjoyed a lunch of crab cakes and then drove to the ­union headquarters near Johns Hopkins Hospital in East Baltimore. King had already been involved in hospital organ­izing efforts in New York City and, most recently, Charleston, South Carolina, as part of the Poor P ­ eople’s Campaign that her husband had launched before his assassination the previous year. As a result, organ­izing hospital workers had become a personal cause for Coretta Scott King. Dressed in a black suit accented with a red r­ ose and a blue and white Local 1199E paper cap, King held a press conference at u ­ nion headquarters. Th ­ ere, she explained the connection between racial and workplace issues, as well as the gender dynamics of hospital employment and poverty: “My interest in the organ­ization of hospital workers stems from the fact that an overwhelming majority of our nation’s two and a half million hospital workers are w ­ omen—­black w ­ omen, white w ­ omen, Puerto Rican w ­ omen. They have only one t­ hing in common—­a ll are poor. H ­ ere, as in Charleston, most of them are black ­women.” She also lauded Local 1199E as a “combination of soul power and u ­ nion power.” Flanked by basketball player Ray Scott of the NBA’s Baltimore Bullets and 1199E lead or­ga­nizer Fred Punch, King shook hands with as many as six hundred workers on their way in or out of the hospital

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for an after­noon shift change. She encouraged each of them to sign cards pledging to vote for the ­union in the recognition election that would take place at Hopkins two days l­ater. Nurses, doctors, and community members also joined the line to shake King’s hand.1 The ­union organ­izing effort that Coretta Scott King supported at Hopkins took place just as Johns Hopkins sought to reshape its relationship with

Figure 13. ​Coretta Scott King during a visit to Baltimore in support of Local 1199E’s campaign to u ­ nionize Johns Hopkins Hospital, August 26, 1969. Permission from Baltimore Sun Media. All rights reserved.



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the surrounding community through the creation of the East Baltimore Medical Program and at the same time that Ted Kennedy and Walter Reuther launched their new push for national health insurance. The coincidence of ­t hese very dif­fer­ent movements for change suggests the tensions that ran through the hospital city. Even as employment at Hopkins and other hospitals surged during the 1950s and 1960s, wage levels for hospital workers remained low compared to t­ hose in other industries.2 Low-­skilled workers also faced ­limited opportunities for promotion or ­career advancement. Yet as manufacturing began its long decline in Baltimore and other industrial centers, hospital employment (and other health care jobs) became increasingly impor­tant. The new jobs of the hospital city—­orderlies, cooks, custodians and cleaners, maintenance workers, nurses, and many o ­ thers—­did not represent a one-­to-­one switch with manufacturing. They usually paid far less than ­unionized factory jobs, did not necessarily provide better working conditions, and, as King’s comments suggested, employed minority ­women who had typically been excluded from the most desirable manufacturing jobs. Th ­ ese shifts had profound effects in terms of who worked, what they w ­ ere paid, and how the po­liti­cal economy of the hospital city operated: who had power, who received what, and how key decisions ­were made. Local 1199E set out to challenge such power relationships. It would succeed in organ­izing Hopkins in August 1969 and three months l­ater would sign its first, hard-­won contract. Yet the u ­ nion’s victory did not resolve the deep contradictions of the hospital city. In the years that followed, the victory would further highlight them, as the fight for better wages and benefits for hospital workers would come into direct conflict with the emerging imperative to contain the growth of health care costs, and specifically hospital costs, in the United States. Mary­land would be a central venue in this strug­gle. Like many other states during the early 1970s, Mary­land established a hospital cost-­containment agency that implemented innovative but controversial mechanisms to set hospital rates. In its quest to control costs, that same agency became caught up in the negotiations between hospitals and ­unions. Such relationships have not been understood or explored in their full, intersecting context, but they reflect the fundamental conflict that beset the hospital city at the time that Local 1199E or­ga­nized Hopkins and that still plagues the United States ­today: the hospital city’s economic significance and, specifically, its role as an indirect replacement for the lost jobs of the old industrial city are heavi­ly dependent on the payment systems and

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financing structures that produce the excess costs of the U.S. health care system.

The ­Labor Movement and Johns Hopkins Hospital Hopkins had been challenged by u ­ nions before. In 1946–47, the Congress of Industrial Organ­izations (CIO) targeted the hospital as part of its postwar “Operation D ­ ixie” organ­izing campaign in the South. Fliers distributed by the United Public Workers of Amer­i­ca reminded Hopkins workers that “Johns Hopkins’ Reputation W ­ on’t Pay the Grocery Bills” and demanded increases in wages, a forty-­hour week with overtime pay, vacation time, f­ree medical care, and improvements in working conditions. Management responded by arguing that the hospital faced mounting losses that prevented such concessions and claimed as well that strikes and u ­ nion work rules would endanger patient safety.3 It also offered l­imited improvements in wages and working conditions, such as reduced hours and higher pay rates. The u ­ nion tried to c­ ounter the hospital’s emphasis on costs and patient safety by pointing out that high workforce turnover jeopardized patients’ interests by putting them in the care of “untrained orderlies and attendants” and raised costs due to the constant training of new workers. But their efforts fell short, and the organ­izing effort collapsed.4 In the aftermath of the 1946–47 ­union organ­izing drive, Johns Hopkins sought successfully to shape national l­abor policy. Hospital director Edwin Crosby and a number of Hopkins trustees worked closely with the American Hospital Association to ensure that Congress exempted nonprofit hospitals from the organ­izing and collective-­bargaining rights guaranteed to workers ­u nder the 1935 National L ­ abor Relations Act. The trustees filed a statement with both the House and Senate ­labor committees supporting AHA president John Hayes’s request for such an exemption. The statement claimed that if u ­ nions w ­ ere allowed to or­ga­nize and bargain for hospital workers, Hopkins and other hospitals would be forced to increase patient fees, limit charity care, increase fund­-­rais­ing demands on an already tapped-­out philanthropic base, and potentially close. Meanwhile, Hopkins Board of Trustees president W. Wallace Lanahan wrote a letter for Hayes to distribute to ­every AHA-­member hospital in the country. The letter supported the AHA position on Taft-­Hartley, described Hopkins’s experience with the CIO drive, and argued that “­there ­aren’t any profits over which ­unions and hospital man-



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agement can bargain. What we would be bargaining away is our ser­v ice to the sick.” With the letter, Lanahan directly deployed Hopkins’s prestige and national leadership to mobilize other hospitals in the campaign to restrict the rights of hospital workers. Congress proved responsive. The 1947 Taft-­ Hartley Act included the hospital exemption as part of a broader effort to limit the organ­izing tools available to ­unions and to roll back the advances they had made during the New Deal and World War II. In effect, Taft-­Hartley enshrined not-­for-­profit hospitals’ special status as public ser­v ice providers in law.5 With this key limit on hospital organ­izing in place, Hopkins did not face another u ­ nion drive u ­ ntil 1959. That campaign proceeded in the same fashion as the 1946–47 drive, with similar arguments and claims from hospital management. In par­tic­u­lar, Hopkins leaders maintained that the hospital’s vital public purpose gave it a special status. In September 1959, hospital director Russell Nelson explained this position in a letter to employees: “Our hospital has only one purpose: the care of the sick and injured. We are not an ordinary business trying to make a profit.” Nelson thus advanced a specific claim of public responsibility that transcended normal patterns of ­labor relations.6 The regional AFL-­CIO leadership, which led the 1959 effort, tried to ­counter this position by proposing “a binding agreement never to disrupt the work schedules necessary in continuously caring for the welfare of the sick and injured.” Although the organ­izing campaign focused on the possibility of raising Hopkins’s low wage rates, AFL-­CIO regional director Oliver Singleton privately conveyed to hospital leaders that the u ­ nion’s real goal was recognition as the workers’ bargaining agent. This would serve the AFL-­CIO’s true priority of expansion into the health care sector. Wage increases and other official u ­ nion demands would not be sticking points. ­After a private meeting with Singleton in September, Nelson observed that the ­union boss “would be willing to sell the employees down the river. I would have respected him more if he had been stronger in his push for employee improvements.”7 Unwilling to undertake a strike against Hopkins and two other Baltimore hospitals, the ­union in October 1959 claimed victory on the basis of minor wage increases granted by the hospitals—­and abandoned the campaign for recognition.8 Although Hopkins fought off the first two ­unionization drives, the broader urban conditions and politics of the late 1960s transformed the situation. Race, in par­t ic­u ­lar, played a central role when the new organ­i zing effort emerged in 1969. Union organizers had avoided any mention of race in 1946–47

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and 1959, focusing solely on wages, benefits, and ­union recognition—­even though the hospital ser­v ice workers that they sought to represent ­were primarily African American. In the aftermath of the broader civil rights movement and the April 1968 uprising, however, race became a central issue in the 1969 campaign.9 Led by a more po­liti­cally conscious ­union, Local 1199E of the AFL-­CIO’s Hospital and Nursing Home Employees Union, the 1969 effort merged l­ abor and civil rights issues. Originally New York City–­based, Local 1199 had ­adopted a national strategy, beginning with a highly publicized, hundred-­day hospital strike in Charleston in which it had worked directly with Coretta Scott King, Ralph Abernathy, and the Southern Christian Leadership Council. As Local 1199E moved into Baltimore, it sought to extend this civil rights emphasis by attacking Johns Hopkins’s racialized employment structure. Baltimore Local 1199E area director Fred Punch directed this move. Punch emphasized racial identity, describing his upbringing to the Afro-­American as that of “a Black boy who grew up in the ghettos of Brooklyn, New York.” His path to ­union activism reflected the postwar economic shift ­toward health care jobs: “[I] came out of the [military] ser­vice, c­ ouldn’t find a job, and wound up as an orderly in a hospital.” He advanced from orderly to oxygen therapist but “floated from hospital to hospital, looking for a better wage.” While working at St. Boniface Hospital in the Bronx, Punch joined Local 1199 and soon served as chair of the ­union’s organ­izing committee for the hospital. ­After the success of that effort, he joined the ­union’s full-­time staff, and in 1969, received the assignment to lead the Baltimore campaign. ­There, he replaced two u ­ nion officials who had been “trying to or­ga­nize from their desks.” Punch, in contrast, reached out to local activists, including the local branch of the War on Poverty’s Community Action Program—­a nd then hit the streets outside the city’s hospitals, seeking to win over workers as they began their shifts at 5:00 a.m. He found a receptive audience: “They ­were dissatisfied with their working conditions, their salaries; fed up with the discrimination, the prejudice, with the lack of promotional opportunities . . . ​and they just grabbed on to the ­union idea fast.”10 Throughout the Baltimore organ­izing effort, Local 1199E emphasized the industry’s race-­based inequities. At Hopkins, Punch charged that even though Baltimore’s population was half African American, “Johns Hopkins has: more Black p ­ eople pushing brooms than White; more Black p ­ eople washing pots than White; more Black p ­ eople pushing bedpans than White. It is not an accident that at Johns Hopkins: more White ­people supervise than Black;



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more White ­people attend the Nursing School than Black; more White ­people have the better paying jobs than Black. No, ­Brothers and ­Sisters, ­t hese are no accidents. If the situation at Johns Hopkins Hospital makes the issues racial, it’s not my fault that’s how I found it.”11 Union handbills described management as “hospital slave d ­ rivers,” while pickets carried signs reading “Johns Hopkins Hospital Is Racist.”12 Hospital workers themselves echoed such charges. At a large rally before the vote on ­union recognition, nurses’ aide and ­union activist Willa Turman argued that “when we vote on August 28, we w ­ ill vote down slavery and discrimination. We w ­ ill vote for a new life.”13 Employment at Baltimore-­area industrial facilities such as U.S. Steel’s Sparrows Point mill had long been highly segregated, with whites occupying the best and highest-­paid jobs. As Fred Punch and 1199E advocates like Turman emphasized, a similar overall pattern existed at Hopkins. Local 1199E, though, almost exclusively targeted the low-­wage ser­v ice workers who made up the largest share of the Hopkins workforce and who ­were predominantly African American and a majority of whom w ­ ere w ­ omen.14 The u ­ nion’s strategy thus reflected the dramatic shift in the racial and gender makeup of the l­ abor force that accompanied Baltimore’s transition to a hospital economy. Hospital administrators bitterly resented Local 1199E’s organ­izing strategy. At one meeting of the hospital trustees, the chairman indulged in an inversion of the charge of racial bias by describing the ­union as “power­f ul, well run and prob­ably racist.”15 In the end, hospital leadership recognized that it had few options. As one administrator put it, Hopkins “could not risk winning a reputation as ­union baiters and racists.”16 Local 1199E leaders knew this. Robert Muehlenkamp, a young or­ga­nizer who had been sent to Baltimore by the ­union’s New York leadership to assist Fred Punch, ­later recalled that in the aftermath of the 1968 uprising, “Fred was a dynamo at that time. He scared the shit out of ­t hose white power structure ­people at Hopkins.”17 Hopkins management agreed to a recognition election in early July, and two days ­after Coretta Scott King’s visit, the hospital’s eligible employees voted by a two-­to-­one margin in ­favor of repre­sen­ta­tion by Local 1199E.18 Hopkins would have a ­union. Following the repre­sen­ta­tion vote, contract negotiations proceeded u ­ nder the imminent threat of a strike. Negotiators for the two sides actually resolved wage and benefit issues relatively easily, but a sticking point emerged over Local 1199E’s demand for a closed ­union shop. Along with their own preference to avoid such an arrangement, hospital administrators felt they had to defend the interests of “employees who voted against this ­union . . . ​and in

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many instances ­were working at Hopkins ­because they preferred the open shop situation.” Many of the antiunion workers, a majority of whom ­were white, held positions in the hospital maintenance department and “in the trades.”19 One maintenance worker, interviewed by the Sun the day before King’s visit, commented that the u ­ nion effort had “too many racial overtones. If they get in, ­we’ll have to get a trade ­union in ­here”—­referring to the white-­ dominated building trades ­unions. Meanwhile, opinions about Local 1199E among Hopkins’s professional staff, physicians, and students remained mixed. The local chapter of the Medical Committee for H ­ uman Rights supported recognition, but other­wise no or­ga­nized support emerged internally for the ­union.20 During this period, hospital leadership also attempted, as it had in 1959, to c­ ounter the u ­ nion’s demands by emphasizing Hopkins’s position on the boundary between public and private and contrasting it with for-­profit businesses. As Nelson put it in early December, “The hospital is not a profit-­ making institution, but is a charitable organ­ization rendering essential public ser­vices.” Nelson claimed that ­these associational arrangements, ­under which Hopkins claimed a public purpose and identity, allowed the health care system to function. According to this view, its employees should have the same status as federal, state, and local government workers: an open-­shop ­labor contract. Hopkins officials even described Hopkins during this period as a quasi-­public agency.21 The negotiations soon became a focus of attention in the wider East Baltimore community. On December 5, Local 1199E held a community-­w ide meeting that drew 350 participants ready “to show their support and concern for the hospital workers of Local 1199E.” The following day, a group of community leaders and activists, ranging from Parren and Clarence Mitchell III, to prominent ministers, to the Black nationalist Benjamin “Olugbala” McMillan, sent a tele­gram to Russell Nelson requesting an immediate meeting “for emergency testing with Board of Directors.” The trustees agreed, and on December 8, thirty to forty representatives from a broad swath of local organ­izations arrived at the hospital board room. They ­were met by Nelson, Board of Trustees chair John Cooper Jr., and trustees Robert Levi and William McGuirk. Parren Mitchell, the former Baltimore Community Action Agency director who was preparing for a second and ultimately successful congressional bid, served as spokesperson for the visitors. Notably, the group did not include any representatives of Robert Douglass and Clarence Burns’s Eastside Demo­cratic organ­ization, which at the time was challenging the



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West Baltimore–­based Mitchell f­ amily’s dominance of local African American politics while also working with Hopkins on the East Baltimore Medical Program.22 Tensions quickly ran high. The visitors sought to place 1199E’s organ­izing effort in the context of the community’s history with Hopkins, focusing in par­tic­u ­lar on its long-­standing practices of employment discrimination. Relatedly, they argued that the hospital’s opposition to 1199E’s closed-­shop demand represented an attempt “to protect the white employees in the bargaining unit from joining the ­union.” One participant (unidentified in the rec­ord of the meeting) made the impor­tant observation that the campaign was about far more than just the hospital and the ­union: it constituted instead a test of ­whether “the white economic power structure as represented by the Johns Hopkins Board of Trustees members ­will meet the economic needs of the black community.” This characterization of the board was entirely accurate, as it consisted of top executives from Baltimore banks, real estate and development interests, and corporations, and this was exactly what was at stake, particularly in light of the growing economic significance of the health care industry. Although Nelson described the meeting as an “open free-­for-­a ll,” the activists made their point. Cooper, Levi, and McGuirk reported back to their fellow trustees that the “representatives of the community ­were serious in their feeling that a strike against the Hospital at this time would inflame the entire Negro community about the Hospital and negate the advances made in the last several years in the relationships between the Hospital and the black community.” ­A fter the meeting, both Mitchell and Nelson spoke to tele­v i­sion reporters waiting in the corridor outside.23 Within hours, the hospital accepted a compromise, agreeing to a closed shop for all new hires and current u ­ nion members, with an exception for current employees who had chosen not to join the u ­ nion. The new contract granted significant wage, benefit, and working condition improvements for Hopkins workers. Even more impor­tant, it established Local 1199E’s efficacy at Hopkins while providing a huge boost for organizers in other cities who used it as direct evidence of the national ­u nion’s legitimacy and potential power. The 1199 Organ­izing Committee at Duke University Hospital, for example, passed out handbills claiming that the Hopkins workers had won “one of the best contracts ever awarded to institutional workers. . . . ​They have left the plantation for good—­and so ­will we!” For Hopkins, the agreement avoided an even greater conflict with the community. As such, it reflected the intense

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pressure of the urban environment during the late 1960s. ­Future negotiations would take place in a very dif­fer­ent context.24

Hospital Cost Containment in Mary­land The issue of rising hospital costs played a significant but still l­ imited part in the 1969 organ­izing drive at Hopkins. An analy­sis released in June 1969 by the Hospital Council of Mary­land noted that over the previous twelve years, hospital ­labor costs in Mary­land had grown five times faster than the consumer price index. In a September 1969 letter to employees about the contract negotiations, Hopkins president Nelson picked up on this point: “At Johns Hopkins, we are concerned about the rising costs of health care. We hope the u ­ nion shares this concern, for the bargaining soon to begin is not simply between the ­union and the Hospital, but is between the u ­ nion and the public.” Yet again, Nelson claimed a public status for Hopkins: higher hospital ­labor costs would be borne by patients, by public payers such as Medicare and Medicaid (supported by taxes), and by private payers such as Blue Cross (supported by premiums). Nelson reiterated this argument a­ fter the hospital reached an agreement with Local 1199E in December, informing the press that Hopkins’s payroll would rise from $6.6 million to $8.6 million. The contract, he noted, also formed a benchmark for negotiations at other Baltimore hospitals. The conservative Baltimore News American even inserted the concern into its headline about the contract: “Hopkins Strike Off; Costs to Spiral.” Local 1199E leader Fred Punch acknowledged the cost argument but countered it with an equity claim: “It ­isn’t fair that the ­people who can least afford it should carry the burden. . . . ​How can you put wage controls on ­those ­people making substandard wages? Th ­ ese p ­ eople have to catch up.”25 Punch’s point was an impor­tant one: the salaries of administrators, doctors, nurses, and other professionals ­were significantly higher than the wages 1199E members earned and thus accounted for a larger share of the hospital’s overall l­abor costs. Such exchanges aside, the cost issue played only a secondary role in 1969, well ­behind the debates over ­union recognition and the closed shop. By the time the ­union’s first contract with Hopkins expired in late 1972, the national debate over health care inflation had moved the cost issue to the forefront of hospital-­labor relations. As early as September 1971, the National Union of Hospital and Nursing Home employees—­L ocal 1199E’s parent union—­held rallies in Baltimore, New York, Newark, and Philadelphia to pro-



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test President Nixon’s phase II wage-­price freeze on the grounds that it would be unfair to workers b ­ ecause it capped wages regardless of income level.26 ­Little came of the u ­ nion’s opposition to presidential policy, but the issue of cost quickly became central as contract negotiations with Hopkins began in the fall of 1972. An article about the negotiations in a Communist Workers League of Baltimore newsletter described the cost-­control system as an effort by “U.S. Businessmen” to limit wages and raise corporate profits, casting the fight at Hopkins as part of a larger strug­gle against capitalism. The writer, an 1199E member, argued that “it’s clear what side the Pay Board is on, and it’s clear that we ­can’t just accept what they say.”27 Separately, Fred Punch indicated that the u ­ nion’s focus would be gaining the maximum wage increases allowable u ­ nder phase II of the federal controls, along with improved benefits and standardized contracts across multiple Baltimore hospitals. It was unfair, Punch held, to make low-­wage workers bear the brunt of inflation control.28 The state of Mary­land had also begun to engage the prob­lem of rising hospital costs. This became a pressing m ­ atter in the aftermath of the state’s 1968 Medicaid crisis. Although Governor Marvin Mandel had quickly reversed Spiro Agnew’s Medicaid cuts, he could not as easily resolve the bud­get pressure on the state’s program. Spiraling hospital costs accounted for the largest part of this prob­lem. The previous spring, Baltimore delegate Rosalie Abrams had written a vigorous dissent to the official Nelson committee report on Medicaid in which she chastised her fellow committee members for avoiding the issue of hospital cost control.29 Previously, in 1967, Abrams had introduced legislation that would have created a new Council for Hospital Affairs to study the hospital industry, assess new fa­cil­i­t y plans, and promote utilization review in the state’s hospitals. The hospital industry would have been represented on the council but would not have held a majority. The bill did not make it out of committee. The Nelson committee did call for a hospital commission similar to Abrams’s council, except that it would have been industry dominated—­which led to Abrams’s dissent. Abrams in turn introduced a follow-up bill proposing a commission with “record-­keeping and rate-­setting powers.” This represented the first proposal for true rate-­setting in Mary­land. In 1970, Senator Harry McGuirk made a major push for hospital regulation on a public utility model, proposing legislation that would have established detailed standards and procedures for setting hospital rates.30 Although the state’s hospitals succeeded in defeating the McGuirk bill, events soon led the industry to try to shape the form that regulation would

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take. First, the state insurance commissioner rejected a prospective payment plan proposed by Blue Cross, the state’s dominant hospital insurer, on the grounds that Blue Cross would use the system to appeal for increases in the rates it charged plan enrollees. The hospitals had supported the Blue Cross plan b ­ ecause it addressed some of their concerns about the existing payment system (such as ­limited payment for capital costs and the bad publicity generated by rising hospital costs). In its absence, they turned to the idea of a regulatory commission in the hope that they could influence its decisions. Second, in 1970, the Mary­land Hospital Council reor­ga­nized as the Mary­ land Hospital Association (MHA). In d ­ oing so, it severed all financial ties with Blue Cross and shifted its focus from hospital administrators to hospital trustees, who, at least in theory, ­were “community leaders . . . ​more interested in policy and more likely to take a broad view of the situation.” Third, regional disparities between hospitals in Baltimore and ­t hose in the remainder of the state became difficult to ignore. A few Baltimore hospitals had moved to the suburbs, and ­others faced serious financial difficulties, in large part ­because of the pressure of charity care and bad debts (essentially, unpaid bills) resulting from their location in high poverty areas. Together, ­these developments broke the traditional alliance between the hospitals and Blue Cross. Unlike other private payers or self-­pay patients, who paid a share of charity and ­free care, Blue Cross did not pay for bad debts (neither did Medicare nor Medicaid). This deprived hospitals with high bad-­debt loads of critical revenue. State rate regulation, the MHA believed, could change this situation. The hospital association set up a committee to study the regulation concept, and its l­egal counsel soon drafted legislation based on the American Hospital Association’s guidelines and policy statements. In 1971, Abrams (now a state senator herself) and McGuirk introduced the resulting bill in the General Assembly with the backing of Governor Mandel, who promoted it as part of a rather uneven consumer protection agenda (the other components of which consisted of regulating cable tele­vi­sion companies and licensing tele­v i­sion repair technicians). Aided by a state senator who sat on its board, Blue Cross introduced amendments that would block any requirement that it pay a share of bad debts. But ­after negotiations with Abrams, McGuirk, the MHA, and the governor’s office, Blue Cross agreed to withdraw the amendments and take a neutral position on the bill. This allowed the legislation to pass but deferred the bad-­debt issue u ­ ntil the new rate regulation program took effect. With this imperfect compromise in place, the Mary­land General Assembly in early



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March approved the creation of an in­de­pen­dent Health Ser­vices Cost Review Commission. The legislation authorized the cost commission to evaluate, beginning on July 1, 1974, ­whether the rates charged by the state’s hospitals and nursing homes ­were “reasonable and fair” in relation to under­lying costs and conducive to the “effective and efficient” delivery of health care “on a solvent basis.” It also required the new commission to ensure patient access to hospital care, implement a uniform hospital accounting system, and publicize hospital financial and cost information.31 While specific to Mary­land, the move ­toward rate regulation formed part of a national wave of such state efforts during the 1970s. Unlike most other states, though, the Mary­land legislation established only broad goals for the program and charged the new commission’s staff and board with developing the detailed methodology for rate-­setting in the state. This flexibility would prove critical to its long-­term success.32 Although Governor Mandel appointed consumer rights advocates such as University of Mary­land economist Mancur Olson to the commission, the MHA played a central part in crafting the legislation. As a result, observers of Mary­land politics believed that the new commission would serve primarily as a vehicle to advance the interests of the state’s hospitals.33 Governor Mandel’s appointment of Alvin Powers, the director of Baltimore’s Bon Secours Hospital, as the cost commission’s first chair did ­little to assuage such concerns. The Baltimore Sun repeatedly called for Powers to resign on the grounds that his dual role created a conflict of interest. In practice, however, the cost commission proved unexpectedly aggressive, sometimes supporting the hospital industry’s agenda but in other cases rejecting the priorities of major hospitals such as Johns Hopkins. In the contested arena of l­abor relations, however, it came down aggressively on the side of the hospitals and, specifically, Hopkins. The cost commission succeeded in transforming the debate about hospital workers’ wages into one about health care cost control.

The HSCRC, Johns Hopkins, and Hospital Workers In the aftermath of Local 1199E’s victory at Hopkins, the ­union succeeded in organ­izing additional Baltimore hospitals. By 1974, a series of tense collective-­ bargaining episodes and occasional strikes had led to significant wage and benefit concessions from the hospitals. The effect of such agreements on health care costs emerged as a key issue even before the HSCRC became fully

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operational. In par­tic­u­lar, the 1972 negotiations between Hopkins and Local 1199E posed an early test of the still-­nascent commission’s influence. With the expiration of the ­union’s contract pending at the end of November, Hopkins and the ­union agreed on annual wage increases of 25 cents an hour each year of the new contract. Th ­ ese increases exceeded the Nixon administration’s limit of 5.5 ­percent and thus required federal approval before they could be implemented. Local 1199E filed for approval of the increase with the newly or­ga­nized Cost of Living Council on the grounds that its members made less than $3.50 an hour, a key standard for exceptions to the federal wage controls. With improvements in dental, eye care, and phar­ma­ceu­ti­cal benefits, the hospital announced that costs would rise by $4.17 per patient day and $800,000 per year ­under the new contract. The Hopkins contract was also widely expected to provide a baseline for other hospitals’ upcoming negotiations with 1199E.34 Although the commission was not yet operational, HSCRC members reacted strongly to the contract. Commission member and Baltimore surgeon Bernard Kapiloff charged that the agreement “­will defeat the entire purpose of this commission.” Natalie Bouquet, a “Bethesda h ­ ouse­wife” who served as one of the commission’s consumer representatives, noted that “if we ­don’t get a ­handle on it [wage settlements], we ­won’t have anything to set when we get rate-­setting power.” HSCRC chair Alvin Powers pointed to the national situation, arguing that hospitals would agree to ­union demands to avoid a strike—as Hopkins had done—­k nowing that the Cost of Living Council would have the final word and might lower the wage increase. Still, on January 12, 1973, a day ­after the Nixon administration launched the controversial phase III controls, the HSCRC voted to endorse the federal effort. Kapiloff pushed for an even stronger resolution that would have urged the council to reject any wage agreement that exceeded the guidelines.35 The Greater Baltimore Medical Center, Mary­land General, Provident, Sinai, and Lutheran Hospitals soon signed agreements with 1199E that, as the cost commission had feared, broadly followed the standard set by the Hopkins settlement.36 In a pattern typical of its operations, the Cost of Living Council delayed ruling on the Hopkins contract for over a year before fi­nally approving it in early 1974. Meanwhile, the HSCRC’s attention temporarily shifted away from l­abor issues and t­oward preparation for the start of ­actual rate-­setting in 1974, as well as to new prob­lems such as a financial crisis at Baltimore’s Provident Hospital. Local 1199E leadership focused on



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implementation of the contract, as well as on a series of ­bitter internal strug­ gles between Fred Punch and a dissident faction over the control and direction of the u ­ nion.37 As the 1974 expiration of the agreement approached, however, the cost issue moved once again to the forefront of hospital ­labor relations. Although the federal cost-­control program expired at the end of April, inflation remained a pressing national issue, so much so that President Ford in October launched his ill-­conceived “Whip Inflation Now” program of voluntary, personal inflation control mea­sures. On June 30, the New York branch of the National Union of Hospital and Health Care Employees won significant concessions in bargaining with New York City hospitals, setting an apparent pattern for other cities—­including Baltimore. The next day, by coincidence, the Mary­land commission officially began regulating hospital rates in the state. A short time l­ater, Fred Punch sent a copy of the final New York arbitration decision to commission chair Powers, noting that “we know that ­these [wage and benefit] awards w ­ ill have substantial bearing on the coming negotiations.” On July 11, another new ­factor emerged when Congress amended the Taft-­Hartley Act to provide collective-­bargaining rights to workers in private, nonprofit hospitals. This meant that hospital workers could request federally mandated, secret-­ballot ­u nionization votes, potentially jump-­ starting efforts to or­ga­nize nonunion hospitals. In Baltimore, new hospital organ­izing had been stalled since 1970 (a source of growing tension between Punch and many in the Local 1199E rank and file). It also meant that federal mediators could participate in the upcoming contract negotiations and possibly support 1199E’s demands.38 Johns Hopkins itself turned to the corporate world for assistance with bargaining. In August 1974, Robert Heyssel hired Lawrence Phillips as the hospital’s director of employee relations. Phillips had previously served as man­ag­er of employee relations at General Electric’s Columbia, Mary­land, appliance manufacturing fa­cil­i­ty, and he soon brought in two additional G.E. executives. The move represented both a new professionalization of ­labor management at the hospital, as well as the adoption of practices developed in the for-­profit corporate sector. When combined with the new financial management techniques being applied at Hopkins through Heyssel’s decentralization program (which G.E. management con­sul­tants had helped develop), t­ hese steps showed a movement away from the traditional management of academic medical institutions and ­toward the practices of

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for-­profit businesses. The emerging hospital city would reflect this corporate mindset as much as or more than the imperatives of medicine, research, and teaching.39 The HSCRC, meanwhile, continued to see the pattern of hospital wage and benefit concessions that had begun in 1969 not as a ­matter of economic justice for low-­income workers but as a threat to its capacity to control hospital costs. As a result, when hospital u ­ nion contracts in the city expired just a few months ­after the HSCRC began regulating rates, the agency encouraged hospitals to resist ­union demands. Even more powerfully than in 1972, this dynamic illustrated the tension between the economic role of hospitals and the pressure of health care cost inflation. A few weeks before bargaining began, Heyssel met with HSCRC chair ­Alvin Powers and director Harold Cohen to discuss the negotiations. Powers stated that he felt the ­union demands at his own hospital, Bon Secours, would lead to its closure if accepted. He urged Heyssel to take a tough line. Powers also indicated that Governor Mandel shared this view and “was not ­going to let a ­union break the state of Mary­land.” Cohen in turn commented that the large wage increases recently granted by hospitals in other eastern cities “­were ridicu­lous and had no part in real­ity.” Most significantly, Powers and Cohen both encouraged Heyssel to claim that he could not meet the ­union demands ­because “we are u ­ nder the constraints of the Health Ser­v ices Cost Review Commission”—­and assured him that the commission would support such a stance.40 At least in part, hospital cost control in Mary­land had become an instrument for containing u ­ nions. In mid-­November, 1199E reached an unexpectedly generous agreement with Sinai Hospital, increasing pressure on Hopkins and other Baltimore hospitals.41 Despite its financial prob­lems, Provident Hospital soon agreed to a comparable contract in order to avoid a strike—­but immediately froze all nonessential hiring and indicated that it might further reduce its workforce.42 Lutheran Hospital followed a day l­ater, and its director similarly warned of ­f uture cuts.43 As the ­u nion’s December 2 strike deadline neared, Hopkins made extensive use of the HSCRC justification for resisting 1199’s demands. In a letter to “friends of the hospital,” Heyssel noted both the potential of increased costs from a new ­union contract and the pressure from the HSCRC to constrain Hopkins’s costs. “On the one hand,” Heyssel observed, “­t here are ­union proposals which indicate a significant impact on Hospital costs. On the other hand, ­t here are government agencies such as the Health Ser­ vices Cost Review Commission with the power to approve or deny the Hos-



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pital rate increases that would be necessary to pay for ­t hese added costs.” Heyssel concluded that a strike was pos­si­ble and appealed for volunteers to maintain staffing levels in such an event.44 Negotiations quickly stalled not only over wage and benefit issues but also over 1199E’s proposal for new pension and training programs funded by multiple Baltimore hospitals and run by the u ­ nion. Hopkins rejected this on the grounds that 1199E had been unable to manage an existing health and welfare fund (administration of the plan had been shifted to the national ­union), that Hopkins’s existing pension plan was far better financed than t­ hose of other local hospitals, and that a ­u nion training fund could be focused on workers at other hospitals. Also at issue was a “most-­favored nation” clause in the Sinai contract, which allowed hospital management t­ here to roll back health and pension benefits, and possibly wage increases, if another hospital

Figure 14. ​Local 1199E president Fred Punch responds to a police officer’s order for ­union picketers to clear a traffic lane outside Johns Hopkins Hospital during the 1974 strike, December 2, 1974. Permission from Baltimore Sun Media. All rights reserved.

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succeeded in negotiating lower amounts.45 This meant that 1199E had a strong incentive to fight for comparable terms at Hopkins and the other hospitals. Additional bargaining sessions made l­ ittle pro­g ress, and when the old contract expired on December 1 without a settlement, Local 1199E prepared to strike at Hopkins, along with Mary­land General Hospital and the Greater Baltimore Medical Center. The following morning at 7:00 a.m., more than four hundred picketers arrived at Hopkins. During that first day of picketing, police arrested thirteen strikers, including Local 1199E vice president Isaiah Spriggs, for attempting to block access to the hospital. Although passions on the picket lines cooled thereafter, the strike itself went on for ten days. During the strike, the ­union sought to turn the inflation issue to its advantage. An 1199E handbill asking other hospital employees not to cross the picket lines explained that one cause of the strike had been the actions of Hopkins and other Baltimore hospitals to use a “hypocritical posture of fighting inflation” as a tool to undermine the rights of workers.46 On the picket line, cost-­ of-­living concerns served as a key motivator. One 1199E member, a Hopkins cafeteria worker, told the Baltimore Afro-­American, “I have three ­children. I’m having trou­ble making ends meet. I spend $65 a week for food.” Another man, a surgical technician, linked the issue to the demand for a better retirement plan, noting that “­people work 10–20 years and get nothing for their time and ser­v ices. I have five kids, it’s not easy.” 47 The u ­ nion, meanwhile, prepared to implement a strike fund to support the workers and ran a soup kitchen at a local Community Action Center to feed t­ hose on the picket lines and their families.48 Key African American po­ liti­cal figures became involved as well. ­After his office received hundreds of calls complaining that striking hospital workers had to wait multiple months before receiving food stamps, Congressman Parren Mitchell intervened with the Department of Social Ser­vices to speed the pro­cessing of the strikers’ applications. The tactic of delaying food stamp eligibility, Mitchell warned, had been used elsewhere to undermine strikes.49 In order to continue operating, Hopkins kept nurses and supervisors at the hospital around the clock and relied on up to two hundred volunteers a day—­compared to a normal complement of twenty—to complete basic tasks. Newspaper accounts described cots and suitcases lining the administrative offices. Motivations of the volunteers ranged from dedication to the hospital to antipathy to 1199E. One volunteer explained, “I have a conviction about ­people lying ill and unattended.” Although she acknowledged the workers’



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need for wage increases, she also stated that “I think perhaps that the other demands of the ­union are unreasonable.”50 In at least one case, however, a worker who crossed the picket line out of a feeling of obligation to her patients nonetheless sympathized with the strikers. She sent the u ­ nion her week’s earnings as a donation to the strike fund, explaining that “I could not enjoy it or in conscience use it.”51 The Baltimore strike was the first to be conducted at a hospital ­under the new Taft-­Hartley amendments. This meant that a federal mediator served as a go-­between, or­ga­nized bargaining sessions, and offered compromise proposals to both sides. Hopkins and the other hospitals agreed almost immediately to the ­u nion’s wage proposals but held firm on the demand for union-­run pension and training funds. Local 1199E, meanwhile, rejected federal mediator W. J. Usery’s suggestion that the parties submit their differences to an impartial fact-­finding board. Fred Punch instead argued that any such board should provide only binding recommendations.52 As the strike moved into its second week, it became clear that its continuation would harm both sides. ­After ten days, the mediators managed to bring the two sides back to the bargaining ­table and reach an agreement. Although the ­union maintained the wage gains won in the Sinai contract, it abandoned its demand for citywide, union-­run pension and training programs. Instead, the hospitals maintained separate plans while increasing their contributions and accepting joint union-­hospital management of the plans. Despite the wage increases, the overall effect seemed to be a victory for the hospitals: the Baltimore Sun argued that the normally out­spoken Fred Punch’s “subdued statement” at the press conference announcing the settlement “made it clear that the u ­ nion had not won the victories it had sought in its strike.” In a letter thanking “Volunteers, Police and Non-­Striking Staff,” Steven Muller and Robert Heyssel noted that Hopkins and the other hospitals had held the line on pensions, training, and management rights, and though “the wage settlement was high . . . ​ we proved to the u ­ nion and to ourselves that we could cope with a strike successfully.” This point, they emphasized, would shape ­f uture negotiations.53 Although the wage and benefit issue faded during the ­actual strike, its centrality reemerged in the aftermath. As 1199E members gradually returned to work, Hopkins quickly moved to file requests with the HSCRC for both temporary and permanent rate increases. The hospital also announced that it would increase wages for its nonunionized workers, with some of the raises larger than t­hose for 1199E members. This marked the end of cooperation

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Figure 15. ​Local 1199E pickets march during the December 1974 hospital strike. Permission from Baltimore Sun Media. All rights reserved.

between the hospital and the cost-­control agency. Two days a­ fter Christmas, the HSCRC denied Hopkins’s rate requests, intensifying a multiyear ­battle over the extent of the agency’s authority over Mary­land’s hospitals.54 Unionized Hopkins workers soon found themselves caught between their employer and the regulator. In October 1975, Hopkins laid off sixty hospital workers in order to demonstrate that it was attempting to hold down costs. The hospital denied that it had taken the action in response to the HSCRC’s rejection of a rate increase request the day before, even though commission staff had directly criticized Hopkins for not matching layoffs that had recently taken place at other hospitals.55 Local 1199E’s response, however, linked the



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cost-­control agency directly to the layoffs. A u ­ nion handbill charged the HSCRC with undermining patient care at Hopkins by “condoning and in fact, demanding a reduction in the quality of care provided by Johns Hopkins Hospital.”56 Notably, the ­union’s tactic deflected attention from the hospital’s actions to t­ hose of the commission, even though the charge could just as easily have been one of collusion between the two. This pattern of commission involvement in ­labor issues, followed by ­union protests, emerged at other hospitals as well. In February 1975, Local 1199E held a rally at Baltimore’s Lutheran Hospital to protest ser­vice cuts proposed by the HSCRC. Handbills distributed at the rally attributed the cuts “to the unrealistic and inhuman guidelines set by the Health Care Cost Review Commission” and suggested that savings could instead be extracted from “the do-­nothing, high-­paid management” of the hospital.57 A year ­later, the commission voted to limit an inflation adjustment to Bon Secours’s rates ­because of what its staff saw as an overly generous wage settlement with the ­union. Chief HSCRC rate analyst Jack Cook commented that “my recommendation is that you treat them tough.” AFL-­CIO Metropolitan Council president Thomas Bradley responded almost immediately, criticizing the HSCRC’s entry into collective bargaining generally and arguing that the Bon Secours decision put “the burden of health care costs on the backs of the consumer and the responsibility of holding the costs down on the back of hospital workers.”58 Nonetheless, the cost situation posed a difficult dilemma for the ­unions, as health care inflation constituted a legitimate prob­lem in the local, state, and national economy. Increasingly, it weighed not only on government and business but also on workers in other industries. As such, the prob­lem could not simply be dismissed as an issue of cost versus quality of care or cost versus consumer and worker rights, and the HSCRC’s activity provided management with a power­f ul bargaining tool. The commission’s intervention in hospital ­labor relations during the 1970s, though, suggests an even broader point. Hospitals, and the health care sector more generally, are massive employers. Although prob­lems such as inefficient payment systems, provider pricing power, capital-­seeking be­hav­ior, and the incentives of fee-­for-­service medicine also contribute significantly to the cost crisis in American health care, this economic role helps to explain why it has been so difficult to contain costs. Quite simply, large numbers of p ­ eople rely at least indirectly on excess health care costs for their very economic survival. This effect is particularly

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pronounced in postindustrial hospital cities such as Baltimore where health care is a dominant local economic sector—­and employer. Income, of course, is also an impor­tant determinant of health, as it shapes life options ranging from housing to nutrition to education. Given that the majority of 1199E members ­were Black, the cost issue thus ultimately connected not only to the politics of health care but also to long-­term racial disparities in health itself. Hospital workers who earned more and received better benefits quite simply would be more likely to have better health outcomes.

CHAPTER 7

Hospital Cost Control in Mary­land

A

lthough it strug­gled to influence hospital l­abor disputes, the Mary­ land Health Ser­v ices Cost Review Commission found more success in other, critical components of health care cost. Th ­ ose victories ­were hard fought, but the result was that by the end of the 1970s, the HSCRC had successfully imposed a new regulatory regime on the Mary­land hospital industry. In 1980, a federal Health Care Financing Administration assessment concluded that “the HSCRC has gone much further in its intervention than any part of the industry anticipated.”1 The HSCRC succeeded in d ­ oing so in part b ­ ecause of the inflationary pressures besieging the economy during the mid-1970s, but also ­because even as it challenged key health care interests in the state, it si­mul­ta­neously delivered critical benefits for each group. This pattern made it difficult for any interest to launch a sustained or coordinated po­liti­cal attack against the commission. The commission’s actions also served to increase health equity in Mary­land, delivering a critical public benefit that went beyond cost control alone. The result was a model for a regulatory approach to cost control—­a model with enduring lessons for the entire United States. The commission accomplished this through three actions that balanced the costs imposed on each major health care interest. The first of t­ hese actions, already discussed, clearly supported the hospitals by opposing wage increases during collective bargaining with hospital workers. The second also favored the hospitals, as it reduced discounts that hospitals granted to large payers such as Blue Cross, Medicare, and Medicaid and required ­t hose payers to cover a share of hospitals’ bad debts. This helped shore up the books of financially struggling urban hospitals that served low-­income and often minority patients. The third action, requiring detailed hospital rate reviews and

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then imposing rate reductions, directly benefited insurers. As much as they disliked the decisions that went against their interests, neither the hospitals nor the insurers could afford to cast aside what they gained from the commission’s policies. By building a functional system that effectively counterposed ­t hese costs and benefits, the commission established conditions that allowed the full development of Mary­land’s unique “all-­payer” cost-­control model during the following de­cades.

The Blue Cross Discount The discount issue emerged during the 1950s and 1960s when Blue Cross of Mary­land used its early mover status in health insurance to establish a near-­ monopoly position in the state’s individual and group hospital insurance markets. As the primary purchaser of hospital ser­v ices in Mary­land, Blue Cross had been able to institute a payment system that effectively exempted it from paying a share of the “bad debts” that the state’s hospitals incurred from the 5 ­percent of patients who could not, or did not, pay their bills. This meant that Blue Cross effectively received a discount that averaged 15 ­percent statewide. Medicare and Medicaid paid on the same total cost basis as Blue Cross, which furthered the discount disparity. At its core, the discount issue was a ­matter of health equity: the system posed a particularly acute prob­lem for urban hospitals ­because their generally low-­income patient base had a significantly higher rate of nonpayment than that of suburban hospitals. Their budgets—­both operating and, ultimately, capital—­t hus had to absorb more bad debts. For Hopkins, this threatened the ability to raise capital for new construction; for smaller hospitals like Sinai or the African American–­run Provident, it threatened their very survival. ­These hospitals tried to address this dilemma by increasing other charges, but that mea­sure burdened self-­ pay patients and commercial insurers who did not receive the discounts. Other hospitals, such as Franklin Square and St. Joseph, dramatically improved their bottom lines by leaving the city for new suburban locations. In all t­ hese ways, the spatial arrangements of wealth, poverty, and race across the metropolitan region ­shaped the hospital city and its finances.2 During the period preceding formal rate regulation, the HSCRC publicly identified this prob­lem for the first time. It concluded that the discount practice constituted a form of price discrimination among dif­fer­ent classes of



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purchasers and that it did not constitute a “fair and reasonable” rate structure as required by the commission’s authorizing legislation. In March 1974, the HSCRC announced that it would thus require Blue Cross to pay a share of hospitals’ bad debts.3 In May, it released a controversial rate-­setting plan that cut the discount for Blue Cross, Medicare, and Medicaid to 4 ­percent, while also imposing up to a 10 ­percent cut in hospital rates. The latter action meant that the hospitals and Blue Cross now stood against the HSCRC, although for dif­fer­ent reasons.4 Mary­land Hospital Association president Richard Davidson reported to AHA headquarters that “the Commission is in trou­ble. The rules, regulations and procedures are so complex that the Commission may ‘self-­destruct,’ ” thus undermining the AHA’s broader strategy for shaping the emerging hospital regulatory regime.5 Although the HSCRC’s tactic of alienating every­one who mattered appeared untenable, the commission had actually offered each of ­these key constituencies something they cared about: hospital rate cuts for Blue Cross and bad debt coverage for the hospitals. Th ­ ese potential benefits kept both sets of actors at the t­ able despite their distaste for the commission. ­Under pressure from all sides, including the General Assembly, the HSCRC delayed implementation of the rate regulation plan in f­ avor of a blanket freeze on hospital rates.6 Months of investigatory hearings into the rate structures of individual hospitals followed, culminating in a January 1975 HSCRC order that Baltimore’s Sinai Hospital should proceed with the cut of the Blue Cross discount. While threatening to request that the General Assembly limit the commission’s authority, Blue Cross president Thomas Sherlock offered an incisive analy­sis when he observed that the HSCRC is “trying to do something that has never been done—to jam some pretty stiff cost controls down the throats of the hospitals and they are trying to use Blue Cross money as a lubricant.”7 This was narrowly true, but it ignored how the bad debt prob­lem undermined the financial position of urban hospitals that served the poor and racial minorities. The next stage of the strug­gle came in the courts. In February 1975, Baltimore County Cir­cuit Court judge Kenneth Proctor mocked the commission’s guidelines as “gobbledygook” and criticized its sloppy rule-­making pro­cess, but he nonetheless upheld the HSCRC’s authority to review and approve hospital rates in the state. That power, he ruled, simply needed to be implemented in accordance with the law, including publication of proposed rules, followed by public hearings.8 A month l­ ater, Judge Proctor also upheld

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the legality of the commission’s attempt to limit the Blue Cross, Medicare, and Medicaid discounts. The commission’s task, Proctor found, was “to determine that, in each hospital, total costs are reasonably related to total services—­ not that each purchaser of hospital ser­v ices pays only for exactly what he receives.” This ruling meant that hospitals could charge Blue Cross subscribers, or ­those insured by Medicare or Medicaid, for a portion of overall bad debt loads. Although the “gobbledygook” criticism represented a widely publicized embarrassment, the substance of the ruling represented a huge victory for the commission.9 Blue Cross fought the commission for another year, u ­ ntil Governor Mandel brokered an agreement between the HSCRC and Medicare and Medicaid ­under which the public programs accepted the commission’s hospital rate determinations, including its policy of charging bad debts to all payers. Medicare had never before granted such a waiver to a state regulatory body. The decision reflected the federal government’s growing interest in finding solutions to the cost increases plaguing Medicare and Medicaid. Despite its early difficulties, the HSCRC had begun to show some success in constraining Mary­land’s rate of hospital cost increase. The potential benefit of such state-­ level innovation gave federal policy makers a reason to cooperate, even at the cost of Medicare and Medicaid covering a portion of bad debts.10 More broadly, granting the waiver connected the prob­lems of urban hospitals to federal policy through a state agency. The effect on the Blue Cross controversy was transformative. With Medicare and Medicaid now sharing the bad debt burden, Blue Cross’s concern about the elimination of its discount diminished. Within months, it refocused on the possibility that the HSCRC might succeed in limiting hospital cost growth and completely shifted its stance ­toward the commission. As 1976 came to a close, the insurer gave the HSCRC a $50,000 grant that would speed the statewide implementation of the HSCRC’s hospital rate regulation system. More generally, Blue Cross recognized that its own interests could best be served not by fighting the HSCRC but by serving in a watchdog role to ensure hospital compliance with HSCRC policy.11 The resulting system of payment for uncompensated care represented one of the HSCRC’s most impor­ tant long-­term accomplishments. By improving the financial stability of hospitals that served low-­income patients, the removal of the discount increased ­those hospitals’ ability to provide quality care, and in some cases even to survive at all. The action did not resolve the prob­lem of equity in the hospital city, but it marked a rare step in the right direction.



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The HSCRC and the Regulation of Hospital Rates Although cutting Blue Cross discounts benefited the state’s hospitals, the HSCRC’s core work of reviewing and regulating rates placed hospitals in a problematic position. Johns Hopkins Hospital figured centrally in this pro­ cess. Although the commission’s review of rates at four Baltimore Hospitals reached conclusions that ­were quite critical—in regard to Union Memorial Hospital, commission member Mancur Olson noted that “if only one-­half of what is in the report is correct, it is very alarming indeed”—it initially avoided a direct confrontation with Hopkins.12 The l­ abor issue, however, made conflict unavoidable. When Hopkins resolved the ten-­day December 1974 strike by granting significant wage concessions to its workers, the HSCRC refused the hospital’s resulting requests for a rate increase. This signaled a new readiness on the part of the commission to engage Hopkins and kicked off what would be the most consequential strug­gle of the cost-­control agency’s early existence. Although Hopkins posed its rate requests specifically in terms of the wage consequences of the strike, the HSCRC’s order rejecting the increase responded only indirectly to the ­labor issue. Noting that the proposed rates ­were not reasonably related to the hospital’s costs, the commission concluded that “even allowing for increases in cost brought about by inflation ­factors, the requested rates are much higher than the costs.”13 The comment strongly suggested that the commission intended to limit increases to the rate of inflation for hospital inputs. The HSCRC raised another f­ actor in its decision to reject the increase, pointing out that the application did not account for Hopkins’s transfer of $30 million into its endowment fund. This marked a broader attack on Hopkins management practices that facilitated the accumulation of capital. Although the commission’s official objection rested on Hopkins’s failure to disclose the endowment transfer, as HSCRC staff indicated that they learned of it only by reading “an old Hopkins financial statement,” the under­lying issue concerned how Hopkins planned to use income and principal from the endowment. Following a meeting with Hopkins administrators, HSCRC director Cohen commented to the Sun that “hospital officials told the [commission] staff the endowment fund w ­ ill be used primarily for expansion.”14 By early 1975, Hopkins was in the final stages of planning for the massive renovation and expansion of its aging hospital facilities. For the HSCRC, this posed a prob­lem, as it had developed guidelines for hospitals’ use of unrestricted endowment specifying that charity care constituted the top priority

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for the use of such funds, followed in order by research, education, and, fi­ nally, a “plant fund.” “No monies,” a Hopkins trustee explained, “may be applied to a lower priority component u ­ nless the cost of the higher priority 15 component is reduced to zero.” If rigorously enforced, this meant that Hopkins could not use unrestricted endowment funds for its expansion proj­ect ­until it had completely funded bad debts and charity care. Cohen’s comment about the funds being used for expansion suggested that the HSCRC understood the rule in exactly this way and that it intended to challenge the patterns of hospital capital development and use that had emerged since the 1960s. Ultimately, what was at stake in the strug­gle over cost control in Mary­ land was the structure of hospital financing in the United States as a ­whole. For much of the winter and spring, Hopkins focused on preparing a revised rate increase application.16 In June 1975, however, hospital counsel Robert Shelton pointed out that the HSCRC’s authorizing statute required it to specify by rule the “types and classes of charges” that required commission approval and that one of Judge Proctor’s rulings had invalidated the commission’s previously issued guidelines. No new guidelines had been issued, and thus, he concluded, Hopkins could change its rates at w ­ ill, without HSCRC approval.17 This gave Hopkins an opportunity to use its prominence and prestige to challenge the regulator directly. On June 17, the hospital announced that it would immediately implement a 7 ­percent rate increase without commission approval. Pointing to the financial stress that many hospitals faced during the period, Hopkins trea­surer W. Thomas Barnes noted that “the planned increase in rates ­will cover less than half the increase in expenses.” “Surprised and angered by the hospital’s move,” the HSCRC immediately sought an injunction to block the increase.18 The executive director of suburban Franklin Square Hospital, meanwhile, congratulated Robert Heyssel on Hopkins’s action, noting that while he had been an advocate of creating the commission, “none of us in our wildest dreams ever expected that we would have to deal with individuals such as are responsible for commission decisions and staff shenanigans.” Heyssel responded, “I personally, and the Hospital as a policy m ­ atter, have no desire to destroy the Rate Review Commission. . . . ​The prob­lem is as you stated it with regard to the actions of the commission and its staff. It is the pro­cess of rate review we want clarified.”19 Hopkins quickly objected to the commission’s injunction request and stated an intent to test the commission’s authority over rate review and approval.20 The HSCRC responded by launching a full review of Hopkins’s new rates on the grounds that they appeared “unreasonable, inequitable, or un-



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duly discriminatory.”21 HSCRC chair Powers lashed out that “the hospital is defying the law. ­Either they have something to hide or they have not maintained the accounting system they should have been maintaining or their business is out of control.”22 The Hopkins public affairs office noted that the increases resulted largely from the strike settlement and that the HSCRC had denied Hopkins any assistance—­suggesting how much the issue of l­ abor costs remained part of the dispute. The statement also highlighted the hospital’s ongoing operating losses and tied them directly to the disjuncture between its location in a low-­income, urban neighborhood and its status as a world-­ class research institution: “Hopkins’ unusual position of serving as both ‘­family doctor’ to a poor, inner-­city population and con­sul­tant to the world for specialized care often puts it in a high price range.”23 The hospital’s wider social role, along with its economic function and its pursuit of capital, which in turn reflected its need to fight off suburban competitors, thus ­shaped its relationship to the prob­lem of hospital costs. Such wider context aside, Hopkins increasingly came ­under public pressure to resolve the dispute. The Sun editorial page lambasted Hopkins and other local hospitals for making it difficult for the commission to function and suggested that such actions “are now making it seem as though Mary­ land hospital officials only wanted a state seal of approval on rates to make hospitals look good, and not a genuine system of accountability and controls.”24 Faced with a potential backlash, Heyssel cut short a vacation in Ocean City, Mary­land, and accepted a judge’s proposed compromise just before the injunction request went to trial. U ­ nder the agreement, Hopkins’s unilateral rate increase would be treated by the HSCRC as an application for a temporary rate increase pending the wider review of the hospital’s costs. In return for the hospital’s revocation of the full 7 ­percent increase, the commission would make Hopkins eligible for a smaller, inflation-­based rate adjustment that it had recently announced for hospitals that ­were not undergoing rate review. Meanwhile, the commission’s broader assessment of Hopkins’s costs and rates would proceed. Robert Heyssel returned to the beach.25 Given Hopkins’s centrality to the Maryland—­and national—­hospital industry, the review took on tremendous significance. If the HSCRC could successfully impose final rates on Hopkins, its authority in the state would be established, and the Mary­land cost-­control proj­ect would move forward. State-­level rate regulation would gain legitimacy both in Mary­land and around the country. Reflecting its importance, the review pro­cess took over a year as both sides collected and analyzed data about rates and cost structures.

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Conflicts continued during this period: the commission angered Hopkins when it released to the media a General Electric Con­sul­tants’ report that evaluated potential cost savings at the hospital; in another case, Heyssel challenged HSCRC rate analyst Jack Cook as to why the commission was proceeding with the review if it already knew that Hopkins’s rates would be cut.26 Despite such tensions, the central issues gradually became clear, particularly a­ fter the rate review moved into a phase of extended, extraordinarily detailed hearings in early 1976. Some disagreements, such as the endowment dispute that had so concerned hospital officials initially, moved t­ oward resolution. In that case, the commission determined that it simply wanted Hopkins to use more of its available resources for charity care, so that Blue Cross would not be forced to cover all of the hospital’s bad debts. Baltimore’s L ­ egal Aid bureau proposed the solution of distinguishing between charity care (­free or discounted care for patients who lacked financial resources) and bad debts (bills that patients had failed to pay ­after receiving care), planning for charity care in the hospital bud­get, and, when pos­si­ble, identifying charity patients at the time of treatment. This approach satisfied both Hopkins and the HSCRC. Other questions addressed technical issues about a wide range of hospital cost sources. As with the endowment ­matter, the two sides eventually reached agreement, sometimes grudgingly, about w ­ hether the HSCRC should allow Hopkins’s bud­geted costs in ­t hose areas.27 No consensus could be found, however, about how Hopkins’s wage increases, as well as its staffing levels and personnel policies, contributed to the hospital’s overall rate of cost inflation. More than half a de­cade a­ fter Local 1199E had or­ga­nized Hopkins, such questions remained unresolved and continued to plague the debate. Hopkins alternately challenged HSCRC objections or attempted to justify its practices. For one, it claimed that as a major teaching hospital with high technological costs and a complex case mix, its ­labor (and other) costs could not fairly be compared to t­ hose of any other Mary­land hospital with the pos­si­ble exception of the University of Mary­land. The commission rejected this argument, pointing out that wage rates had less to do with hospital functions than with the local employment market, both generally and specifically for hospital workers. The commission staff accepted Hopkins’s claim that its wage levels ­were lower than that of other large hospitals in the region but questioned w ­ hether this was an appropriate basis for comparison, given the “mindless and simplistic” pro­cess (in the words of commission staff) by which ­t hose hospitals had reached wage agreements.



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The wage rates of large, nonhospital employers, the HSCRC argued, should instead provide the relevant standard. Commission staff dismissed Hopkins’s interpretation of data comparing its wages to other employers as “mathematically and statistically unsound” and concluded that the hospital actually paid higher wages. Further, and even more problematically, Hopkins’s rate of wage increases during the 1975 fiscal year had exceeded the inflation rate by nearly 4 ­percent. All this had occurred, the staff pointed out, during a period in which unemployment in Baltimore reached 10 ­percent.28 This argument reflected the degree to which the HSCRC implicitly rejected any larger economic and social role for the growing health care sector in the hospital city. In this view, unemployment, poverty, and racial in­equality did not provide a justification for employment or wage increases. Poor economic and social conditions ­were instead merely a circumstance that would help constrain hospital cost inflation. Hopkins itself never embraced the idea that part of its cost reflected a wider “social function” as employer and institutional anchor in an increasingly deindustrialized urban location with high rates of deep, racially concentrated poverty. It did, however, make the argument that “Hopkins’ location in the inner city is considered less desirable by many potential employees, particularly ­women, than other institutions located in suburban areas. . . . ​ Consequently, Hopkins may have to pay higher wages in order to compete with other hospital and non-­hospital employers.”29 The issue went beyond the comparison to suburban hospitals, though, as Hopkins emphasized that “other prob­lems not shared by some hospitals include the need to deal with an aggressive u ­ nion and b ­ ecause of the hospital’s inner city location and percentage of minority employment the necessity to direct considerable attention to equal employment programs.”30 This was the true larger issue at the core of the hospital cost prob­lem: in a country that during the 1970s rejected national employment policy and that since World War II had failed to develop a v­ iable program for the revitalization of racially—­and eco­nom­ically marginalized—­cities, major health care–­sector institutions such as Johns Hopkins Hospital had become a de facto jobs program. At the same time, hospital payment rates not only had to cover the wages for such jobs; they also had to generate the capital accumulation necessary for such inner-­city hospitals to undertake the growth and modernization they believed necessary to compete with newer suburban institutions. Race ran through all of this, from the urban-­suburban financial disparities, to the preponderance of African Americans in u ­ nionized jobs at the hospital, to the question of Hopkins’s

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responsibilities to the surrounding community. The HSCRC’s decisions would not be—­could not be—­race neutral, even if race would never explic­ itly be mentioned in its deliberations. The resulting differences seemed unbridgeable. Hopkins closed its final reply brief with the claim that b ­ ecause “the conclusion of the Commission’s staff exists in­de­pen­dent of the facts . . . ​careful scrutiny indicates that six months of evidentiary hearings may have been a sham.”31 The HSCRC staff offered a final supplement to its own brief, in which it noted that the issue was not its re­sis­tance to changing facts but simply the disjuncture between two sides “employing dif­fer­ent standards of reasonableness” in regard to the evaluation of hospital costs.32 ­Matters of s­ imple pettiness increasingly fouled the relationship as well: when the staff released its final brief on the hearings to the media in late June, it included briefs from ­Legal Aid and Blue Cross but neglected to send the Hopkins brief. This resulted in a round of what the hospital viewed as unfair newspaper and tele­v i­sion news stories. Regardless of such m ­ atters, the HSCRC issued its opinion on September 16 and ordered Hopkins to make rate cuts of as much as 17.5 ­percent, for a total reduction in projected revenue of $2.5 million. A copy of the opinion in Robert Heyssel’s files is filled with detailed marginal notes disputing the findings, along with occasional exclamations such as “what absolute nonsense!”33 Publicly, Heyssel rejected the commission’s conclusions and warned that the revenue cuts might force Hopkins to delay its expansion plans and reduce outpatient programs.34 Although Hopkins again contested the ruling at a public hearing in October, the HSCRC issued its final order imposing the cuts on October 21, 1976.35 Heyssel remained ­bitter about the decision, stating in an internal memorandum in December that the HSCRC had “acted arbitrarily or with faulty logic or, in fact, in most instances invaded the prerogatives of management.” Turning to the l­ abor issue, he complained that the commission “totally ignores the fact that the Hospital in an attempt (certainly partially successful) to constrain costs took a ten-­day strike.” The increases that it had granted reflected the real­ity that the hospital needed to raise wages to match “the prevailing market” and reduce turnover. Initially, Heyssel favored ­legal action to block the commission’s cuts. But on the advice of Hopkins’s attorneys, Heyssel and the hospital administration ultimately concluded that a judge would most likely remand the ruling back to the HSCRC for further revision, leading “to a series of reviews, actions, reactions and litigation which are essentially unending.” Litigation would also risk further harming rela-



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tions with the commission and hence undermining what Hopkins had already won, such as the issue of how it could use its endowment capital, and ­f uture concerns, such as the rates that it would be allowed to charge at its newly opened cancer center.36 In the end, Heyssel wrote a strongly worded letter to Alvin Powers protesting the points on which “the Opinion of the Commission is patently wrong” but also informing him that Hopkins intended to resolve the disagreements through “cooperation and on-­going negotiation” rather than through the courts.37 The effect was clear. Johns Hopkins Hospital did not like or agree with the results of rate review, but it would accept them. The HSCRC had won. By imposing its findings on Mary­ land’s most power­ful hospital, its authority to regulate hospital costs had been confirmed.

The HSCRC and the Promise of State-­Level Cost Control Over the following months, the relationship between Hopkins and the HSCRC improved. The commission issued rates for the cancer center that Hopkins viewed as acceptable, approved technical adjustments upward in other rates at the hospital, and gradually worked to refine its rate evaluation methodology.38 At a personal level, HSCRC rate analyst Jack Cook asked Heyssel for comments on a paper he had written on state cost-­control initiatives. Heyssel praised the paper, offered suggestions for revision, and sent Cook a paper of his own in return.39 With an initial rate review completed for all hospitals in the state, the HSCRC implemented a new “inflation adjustment system” that hospitals could choose as an alternative to f­ uture rate reviews. Relying on a complex formula that adjusted rates based on “an inflation ­factor for ­labor and non-­labor components” as well as a series of retroactive adjustments for other variables, the new system minimized the commission’s potentially subjective interpretation of hospital data. The formula would determine the outcome. This simplification of the pro­cess also allowed hospitals to avoid the cost of rate reviews and the pos­si­ble embarrassment of public hearings. Yet the new system suffered from a potential vulnerability: even with the average rates of individual departments set, hospitals could still increase revenues and hence overall cost levels by manipulating the volume of care delivered at the HSCRC-­approved rates for each patient. Hospitals did this by increasing the number and type of billable ser­ vices that patients received. Seeking to limit such volume increases, the

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commission in 1975 implemented a form of prospective payment for larger hospitals—­one of the first such efforts in the country. This system established a standard charge per case for each diagnosis and payor, multiplied it by the hospital’s total number of patient discharges in each area, and summed the results to generate a figure for expected, or prospective, total revenue. This was the hospital’s guaranteed inpatient revenue (GIR). If the hospital’s ­actual revenue exceeded the GIR, the difference would be returned through the next year’s inflation adjustment system. Conversely, if ­actual revenue came in below the GIR, the hospital could keep the variable portion of the difference, which was the part immediately affected by patient care decisions. In theory, at least, this provided an incentive for hospitals and physicians to control volume even as they adhered to the HSCRC’s rates. The combined inflation adjustment and GIR systems quickly became the HSCRC’s primary rate-­control methodology.40 The full system became operational in 1977. The GIR would operate effectively for nearly two de­cades, although it would eventually be diluted during the 1990s and removed entirely in 2001, following pressure from hospitals and in the mistaken belief that managed care would provide a market-­based substitute. Nonetheless, in the 1970s, the GIR anticipated a federal prospective payment system by more than half a de­cade and provided an impor­tant pre­ce­dent and model. With the new rate systems in place, the HSCRC soon broadened its attack on sources of cost growth in the hospital system. In par­tic­u­lar, commissioners and staff alike challenged the effectiveness of the regional health planning system in controlling costs. During the late 1970s, the commission publicly questioned the Central Mary­land Health Systems Agency’s approval pro­cess for high-­cost computed axial tomographic (CAT) scanners, successfully arguing that only a l­imited number of hospitals in the region needed such devices and that smaller community hospitals and physician groups should refer patients needing scans to advanced-­care facilities such as Johns Hopkins or the University of Mary­land. This meant that the hospitals and groups denied scanners would lose a lucrative revenue source. In this campaign, the HSCRC had the support of both Blue Cross and Hopkins’s Robert Heyssel.41 In addition, the commission objected to the common hospital practice of cross-­subsidizing high-­cost ser­v ices such as obstetrics and emergency care through increased charges to patients receiving other, lower-­cost ser­v ices. This practice facilitated the overexpansion of hospital capacity in the region, as it allowed hospitals to offer duplicative ser­v ices that would not have been cost-­effective without the subsidies. In contrast to the scanner is-



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sue, Hopkins sided with smaller hospitals against the HSCRC. Its obstetrical ser­v ice in par­tic­u­lar relied heavi­ly on such cross subsidies to cover the cost of providing this critical form of care for the hospital’s many low-­income, uninsured patients.42 ­These moves led the HSCRC to confront the Health Systems Agency over the mechanisms for approval of additional hospital beds in the region. Quoting an economic concept known as Roemer’s law, Harold Cohen maintained that “a supply of hospital beds creates its own demand” and argued that many currently hospitalized patients did not actually need to be t­ here.43 In the coming de­cades, this general point would lead to significant reductions in hospitalization rates and length of stay for many common conditions. More immediately, in January 1978 the commission called attention to the Health Systems Agency’s approval of five hundred new beds in the Baltimore metropolitan area between 1974 and 1977, a period when patient volumes had declined so much at five smaller, inner-­city hospitals that the HSCRC had to approve rate increases simply to keep them afloat. This contradiction had a clear regional dimension: t­ hese hospitals had lost patients as new suburban facilities (such as Columbia) opened and expanded. In highlighting ­these issues, the HSCRC in effect pointed out that in granting certificates of need (CON) for hospital proj­ects, the planning system had failed to consider the relationship between such spatial patterns and overall cost pressures in its determination of ser­v ice needs. In par­tic­u­lar, planners had not been specific in identifying where the HSCRC should “encourage growth and where it should curtail existing capacity” through its rate-­setting powers—­which could limit hospitals’ capacity to develop the capital necessary to finance growth. The commission thus called for forms of planning that centralized cost control, up to and including, as Powers suggested, “the planned consolidation of the hospital industry.” Although Jack Cook warned that if no consolidation occurred by 1980, the commission “­w ill push e­ very inner-­city hospital with a low volume to the wall” by rejecting their requests for rate increases, Powers issued a more temperate call for a series of negotiations between hospitals, the commission, the planning agencies, and private and public insurers to identify excess capacity and determine in an orderly fashion which hospitals should be closed or consolidated.44 By the end of 1978, the HSCRC went so far as to call for a moratorium on new hospital capital proj­ects. The idea generated significant pushback, and planned closure or consolidation remained more of a threat than a real­ity.45 In a few cases where it strongly opposed the granting of a CON, the commission

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refused to issue a “comfort order” assuring the state’s bonding agency that the hospital in question could meet its debt obligations. This step could undermine the viability of the hospital’s obligations in the bond market, throwing the financing of the proj­ect into jeopardy. The commission’s leadership, though, feared being perceived as “overstepping its authority” and thus deployed the tactic only in the most egregious situations.46 Hospital capital development and debt financing remained mostly unchecked in Mary­land. For all of the controversy its sometimes aggressive actions produced, the HSCRC began to develop a consistent view of the ­causes of the health care cost crisis in Baltimore, in Mary­land, and in the United States. Excess bed capacity resulting from expansions, the perverse incentives of fee-­for-­service medicine, and the high cost of hospital ­labor served together as the key variables for the commission and its staff in explaining—­and attacking—­the cost issue.47 The HSCRC’s approach during the period differed significantly from that of the Car­ter administration’s hospital cost-­containment legislation (discussed in Chapter  9). Carl Schramm, a commission member and health economist at the Hopkins School of Public Health, noted in a letter to Deputy Assistant Secretary of Health Karen Davis that a new, large-­scale study of hospital discharge rec­ords by a group of Hopkins faculty and HSCRC staff had found that along with case-­mix complexity, wage levels provided the “single strongest predictor” of overall hospital costs. This contradicted the analy­sis by Martin Feldstein and the federal Council on Price Stability, which had assigned l­abor costs a lesser role. Schramm argued to Davis that if the new study proved correct, “the pre­sent administration’s cost containment bill which permits ­labor pass-­t hroughs ­will be of ­little use in checking the rate of hospital inflation.” Davis’s reply is not known, but the Car­ter administration’s approach remained unchanged, largely ­because of its need to maintain its shaky relationship with ­labor.48 By 1979, the HSCRC’s annual statistical summary noted that Mary­land had achieved a rate of increase in the cost per adjusted hospital admission “well below the increase proposed by the President and described as unattainable during Congressional debates.” 49 This pattern had been consistent. In 1976, hospital costs in Mary­land ­rose 11.78 ­percent compared to 14.8 ­percent for the United States as a w ­ hole (for cost per equivalent inpatient day), producing an estimated $22 million in savings; in 1977, the same mea­sure ­rose 9.71 ­percent in the state and 15.85 ­percent nationally, for $48 million in savings; in 1978, Mary­land’s hospital costs r­ ose just 8.75 ­percent while the na-



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tion’s increased by 12.73 ­percent, producing a savings for the state of $36 million. A number of struggling Baltimore hospitals aside, Mary­land hospitals as a w ­ hole prospered u ­ nder HSCRC regulation, r­ unning a net surplus of $7.6 million in 1977 and $14.2 million in 1978.50 This occurred even as growing antiregulatory sentiment swept the country and the Car­ter cost proposals went down in defeat. Despite the HSCRC’s differences with the Car­ter administration, Carl Schramm noted this disjuncture in an op-ed published in the spring of 1978 as the initial Car­ter cost-­containment bill strug­gled to move out of committee. Market-­based approaches to cost control might be coming into f­ avor in Washington, Schramm observed, but Mary­land had shown that a regulatory model could work, as had similar efforts in New York, Connecticut, and Mas­sa­chu­setts.51 While ­t hose and other states l­ater abandoned their efforts in an aggressive push ­toward deregulation and managed care, the HSCRC has survived as a rare model of state-­based, all-­payer cost control. Further, it has succeeded in holding Mary­land’s rate of hospital cost increases substantially below the national average; has increased equity between urban, rural, and suburban hospitals; and is now held out as a pos­si­ble model for renewed state-­level efforts at cost control. The HSCRC represents an example of a vibrant regulatory approach to the health care cost prob­lem during an era in which the idea of the regulatory state has fallen out of po­liti­cal ­favor—­but may be poised for a potential return.

CHAPTER 8

To Stay or Go, and How to Pay for It

T

hrough the 1970s, as hospital ­unions or­ga­nized and debates swirled in Annapolis and Washington over health care cost containment, construction cranes swung again over East Baltimore. As steel, concrete, and brick went into place at the rebuilt Hopkins, the hospital city continued to grow unchecked in Baltimore. Funded by insurer and government payments and financed by the bond markets, Hopkins was representative of a wave of competitive, debt-­supported hospital expansion during the de­cade and into the early 1980s. Although Hopkins achieved needed modernization, the overall effect would be to expand the hospital sector and with it the health care nation, putting institutions like Hopkins in a long-­term position where they could gain market share, shape prices, and further influence the politics of health care reform. Meanwhile, health care costs in the United States ­rose ever higher. All of this began, though, with an internal debate over ­whether Johns Hopkins Hospital should even remain in the inner city and, if it did, how far its responsibilities to the community should extend. That debate continued throughout the hospital rebuilding effort and—­despite a brief Hopkins experiment during the 1980s with building housing for the community—­remained unresolved long ­after the construction proj­ects had been completed.

“Not a Commitment Dictated by Economics” In the aftermath of the 1968 uprising, Johns Hopkins deepened its medical involvement in the nearby community through the East Baltimore Medical Program. This was not, however, the only option considered. Hopkins lead-



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ers also weighed the possibility of moving some or all of the hospital’s operations to a suburban location such as Columbia. Such a step would have radically altered Johns Hopkins’s position in the city and the region and launched East Baltimore itself on a very dif­fer­ent trajectory. The idea of moving emerged from discussions led by David Price, a physician and the director of the hospital’s new Office of Planning and Development. Seeking focus prior to starting detailed site planning for the main hospital lot (according to the bound­aries delimited by Nelson at the Dunbar School charette), Price posed a series of questions in early 1970 about the scope of Hopkins’s ­future educational, research, medical ser­v ice, and community outreach programs—­a nd their location.1 Just days ­a fter the release of the Feinblatt report—­which called for a greatly expanded Hopkins commitment to community rebuilding—­Price convened a meeting of the chiefs of ser­v ice of the hospital clinical departments at the Hopkins-­owned Evergreen House conference center. The department heads considered planning options very dif­ fer­ent from ­t hose proposed by Hopkins Center for Urban Affairs director Eugene Feinblatt, including the possibility of moving the hospital e­ ither to the main university campus or to a suburban site in Columbia. Ultimately, Price suggested a less radical option, which participants in the Evergeen House meeting endorsed: that Hopkins partially decentralize its ser­v ices through the city and metropolitan area, outsourcing nearly all primary and intermediate-­level care to a combination of neighborhood clinics and a regional consortium of community hospitals (possibly including a new, two-­hundred-­bed hospital in East Baltimore). Hopkins itself would focus on advanced, tertiary care, with effectively no specific engagement in East Baltimore.2 This combination of ser­v ice decentralization and insulation from the urban poor would have been problematic by itself. The final “Price report” on the Evergreen conference, however, drew a series of negative conclusions about East Baltimore, noting that “a hostile black community, constantly reminded of past expansion, limits ­future enlargement.” Completed in early April 1970, the report also maintained that while “the educational program needs the contact with the inner city poor and their special burdens of physical and social pathology, . . . ​it [also] needs the dif­fer­ent pathology of the more affluent, who can communicate deeper insights on the history of their ailments to illumine the learning and research pro­cesses of students.” Along with such barely concealed racism, Price suggested that the hospital’s “uncongenial” surroundings had begun to push many patients to choose other

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institutions ­because of “a general repulsion from the inner city.” This was the exact inverse of Feinblatt’s position: rather than helping itself by improving conditions in East Baltimore, as Feinblatt advocated, the Price report maintained that Hopkins needed to limit the damage caused by its location. If it could not do so, relocation remained an option: the report noted that “­t here is . . . ​a site plan in connection with the development of the Columbia Hospital that offers one pos­si­ble relocation point should a major move of the Medical Institutions be indicated as an alternative.”3 Hopkins, in other words, had already prepared an escape plan for moving to the suburbs. The Price report generated a wave of outrage from Hopkins faculty and staff physicians. Many noted the racist assumptions under­lying its analy­sis.4 On September 3, the Baltimore Sun published a detailed synopsis of the report’s recommendations and quoted Russell Nelson offering his support for decentralization away from East Baltimore.5 Joseph Hall, the assistant director of planning and development and the sole African American in the Hopkins leadership group, reported two weeks ­later that “as viewed by the Black community . . . ​[Hopkins] has scored an absolute zero. . . . ​The proposals dealing with community aspects especially are viewed as pompous, colonial, patronizing, self-­seeing and straight out of the separate but equal doctrine.” Failing to include the community in planning had rendered the idea of a separate community hospital unacceptable, and any decision to decentralize would produce “a spill-­over of rage and frustration” and a deepening of the community’s sense of victimization. Hall placed this in a broader context: “JHMI has ­either set itself up to be or has evolved a role not only as the provider of Health Care Ser­v ices, but paterfamilias as well—in the context of employer, friend, neighbor, advocate and a court of last resort, . . . ​a city-­wide component of acutely and chronically ill-­persons who view the hospital not only as a health care provider but as a panacea for other life prob­ lems as well.” Hopkins now had no choice, Hall believed, but to work with the community to define how extensive this role should be.6 Dr. Emerson Walden, a Baltimore doctor who served as board chair for the National Medical Association (the leading Black physicians’ professional association), offered a similar analy­sis. ­After warning Russell Nelson that the Price report portended a return to the era of “separate but equal” segregation, Walden indicated that “it is still my view that Hopkins can and should set an example for the entire country as to how a large university complex can lead a successful war against the socio-­economic c­ auses of disease and ­human misery. I cannot accept Hopkins, with all of its resources in the Med-



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ical Institutions and in the Arts and Sciences divisions of the University, in a position of retreat from the challenge of our civilization.”7 Walden and Hall, and before them Eugene Feinblatt, and before Feinblatt, the 1964 Greater Baltimore Committee study, had together raised the core question of the hospital city: Could, or should, an institution of Johns Hopkins’s size and wealth take the lead in addressing the prob­lems of the inner city in ways that transcended medical care alone? If government—­local, state, or federal—­would not do it, did Hopkins have a choice? The controversy about the Price report, however, led Hopkins neither to decentralize nor to assume full responsibility for community development but back to where it had been when unrest broke out in April 1968. Over the remaining months of 1970, Price and the Medical Planning and Development Committee met repeatedly with hospital staff and medical school faculty to formulate detailed, department-­level statements about long-­term needs and goals. ­These efforts culminated in a second Evergreen conference on January 29–30, 1971. Attended by over ninety members of the hospital and medical school staff, as well as representatives of other Baltimore hospitals, the gathering produced a consensus that Hopkins would stay in East Baltimore, that no significant decentralization would take place, that it would continue to serve “all kinds of illness,” and that it would seek “improvement in the methods of dealing with the ­people and the external environment and way of life of East Baltimore.” Hopkins would also rebuild or renovate as much as half of the hospital and medical school facilities at an estimated cost of $100 million.8 This decision, a 1973 report noted, “was not a commitment dictated by economics”—­with the implication that it would have been cheaper to build anew elsewhere.9 The decision would become something of a touchstone at Hopkins, referred to repeatedly in the coming years (in annual reports and other documents) as the moment when leadership de­cided that the medical institutions “would not abandon East Baltimore” for the suburbs and would instead rebuild on-­site.10 The ensuing reconstruction of the medical institutions’ physical facilities would be the focus of intense effort at Hopkins for more than a de­cade. The hospital would remain, but it would not take up Dr. Walden’s challenge to lead a broad-­based war against “the socio-­economic c­ auses of disease and misery.” Nor would it pursue Eugene Feinblatt’s vision of large-­scale, hospital-­ led community redevelopment in the surrounding neighborhoods. The resulting redevelopment proj­ect would be unpre­ce­dented in its scale, but it would be focused almost entirely internally. Hopkins’s engagement with

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surrounding neighborhoods would continue to occur primarily through medical means. Only in the mid-1980s, ­under pressure from the community and its own students, would Hopkins undertake a l­ imited housing program on a scale far smaller than the prob­lems that beset East Baltimore.

Finance Comes to Health Care Johns Hopkins’s reconstruction of the hospital lot highlighted the contradictions of the hospital city. Hopkins plugged directly into core flows of American financial capital to rebuild its facilities within a de­cade and within the bound­aries set by Russell Nelson at the 1969 Dunbar charette. Although Hopkins achieved economies and internal efficiencies in the pro­cess, it also expanded its economic footprint in Baltimore. Its growth and increased technological sophistication in turn facilitated further marketplace competition throughout the region, as other hospitals raced to respond to Hopkins’s efforts, if they could. Repeated throughout the nation, such competitive expansion raised the overall costs of the health care system—­and fundamentally ­shaped the policy debates that resulted. The Hopkins rebuilding proj­ect took place in two phases. By the fall of 1971, a trustee committee had determined that 80 ­percent of the proj­ect’s costs should be funded through tax-­exempt bonds issued on Hopkins’s behalf by Mary­land’s newly established Health and Higher Educational Facilities Authority. The trustees selected Alexander Brown and Sons of Baltimore and First Boston to serve as financial con­sul­tants for that pro­cess.11 Planning and design work occupied most of the next two years, and in September 1973, the trustees approved a conceptual plan for phase I of the proj­ect at a cost of $41.5 million. New facilities in phase I included a comprehensive cancer center, an expanded power plant, and an eight-­story, 180-­bed patient care tower that linked the existing Osler Medical and Halsted Surgical buildings, both of which would be renovated and reor­ga­nized into “activity zones” based around the systems of the ­human body. This change facilitated the easy movement of patients, hospital personnel, and materials. Function aside, the new construction offered patients greater comfort and increased privacy in a far more attractive setting. Private and semiprivate rooms also reduced the potential for conflicts over racially integrated patient care facilities.12 Public discussions of the rebuilding proj­ect made clear that its core goal consisted of increasing Hopkins’s appeal to suburban patients and doctors



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in order to maintain occupancy rates at a level that would generate revenues sufficient to meet the debt ser­v ice requirements of the rebuilding proj­ect itself.13 The Baltimore Sun observed that “the Hopkins hospital stayed b ­ ehind as several other hospitals moved to the suburbs” and that without improvements in aesthetics and patient comfort, it risked isolation in East Baltimore. Dr. Guy McKhann, who headed the Hopkins building committee overseeing the proj­ect, told a Sun reporter, “If ­we’re ­going to have to compete with the suburban hospitals, ­we’re ­going to have to have comparable facilities.”14 The rebuilding of Johns Hopkins Hospital represented a direct consequence of the decision to remain in the city while seeking patients from across the region. Funding for phase I reflected the national transition from the old funding sources of philanthropy and federal Hill-­Burton grants to the emerging strategy of debt financing. The new cancer center, one of seven such facilities in the United States, received a $6.4 million federal grant ­under the National Cancer Act of 1971. Large donations funded an additional $11 million of the phase I costs, mostly covering furnishings and equipment. The remainder of the proj­ect, however, required borrowing, which necessitated “planning and decision making as complex as the development of the master plan itself” according to the hospital’s 1974 Annual Report.15 At least part of this complexity resulted from the necessity of improving the hospital’s finances before the bond issue could even be arranged. This required a fundamental re­orientation of Johns Hopkins’s operating model and even of its basic character. Throughout its history, Johns Hopkins Hospital had experienced operating losses literally ­every year. Such shortfalls had to be covered out of income from the hospital’s endowment. A ­ fter World War II, the operating losses accelerated, even accounting for inflation. With the expansion of the health care sector more generally, revenue also increased during the postwar years but failed to keep pace with expenses. By 1972, when Heyssel and Muller took over the hospital’s leadership, losses over the preceding five years averaged more than $1.56 million annually in inflation-­ adjusted terms, worse than any five-­year period during the G ­ reat Depression 16 and worse than any single year other than 1932. Most of ­t hese losses had been concentrated in the hospital’s outpatient ser­vices, with their direct connection to the East Baltimore community and their high levels of bad debts. The Nixon administration’s cost controls threatened to worsen the situation ­because of the 6 ­percent limit they placed on hospital price increases at a time when Hopkins’s l­abor costs had increased due to the wage settlement with

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Local 1199E and its per diem patient costs had increased due to reduced occupancy rates (leading to the Hopkins lawsuit discussed ­earlier).17 If the losses continued to mount, the hospital would eventually have to take the dangerous step of dipping into the endowment itself rather than just the income it generated. More immediately, high operating losses threatened Hopkins’s ability to access affordable debt financing for its modernization proj­ect, as it would have to pay bond purchasers a higher interest rate—if it could enter the market at all. Robert Heyssel’s sweeping program of internal decentralization sought to reverse such losses by placing responsibility for bud­geting, staffing, patient care, and total costs with each department’s chief of ser­vice. This reversed a top-­down bud­getary and administrative structure that had existed since the hospital’s founding and that was typical of hospitals around the country. With Hopkins’s rapid postwar growth, that system had become unwieldy. The departments, or functional units, had ­little direct input into bud­get decisions, and administrators allocated 70 ­percent of costs on an averaged basis across the hospital rather than to the units where the costs actually originated. Such unsophisticated cost accounting meant that inefficiencies abounded, particularly in overstaffing of some areas of the hospital (which had contributed to a more than 40 ­percent increase in the total number of hospital employees during the previous de­cade), overutilization of laboratory and other basic ser­v ices, and low bed occupancy rates. At the same time, a shortage of nurses forced the hospital to close beds in ser­v ice areas where patient demand did exist. Unhappiness among nurses grew so extreme that turnover approached 50 ­percent.18 Heyssel’s decentralization program sought to change all of this through modernization of the hospital’s management. Chiefs of ser­v ice would now run each “functional unit” like an autonomous small business, albeit within an overall policy and planning framework set by hospital administrators and trustees. Assisted by a nonphysician administrative director, usually drawn from the business world, the chief of ser­v ice would oversee the department’s financial operations, tracking costs and revenue and bargaining with other units for necessary ser­v ices. As Heyssel put it in 1979, “This kind of system allows the entrepreneurial juices to flow.” Laboratory, radiology, h ­ ouse­keeping, security, and food ser­v ices would continue to be provided centrally, but the units would now “purchase” them, as from an external vendor. House­keeping, in fact, would be contracted to a­ ctual outside providers for the first time. Nursing would be decentralized, and each department would have a nursing director who reported directly to the unit’s chief of ser­v ice and occupied



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a rank equal to that of the departmental administrative director. Departments would in turn rely on detailed, newly developed internal information systems to negotiate purchase prices for ser­v ices from one another and from the central ser­vice departments. The recent availability of advanced computing systems provided the analytical capacity that made such “intracompany” transactions pos­si­ble—­demonstrating the effect of nonmedical technological change on health care. Outside business con­sul­tants, particularly from General Electric, assisted with the difficult pro­cess of creating the new information, communications, and personnel systems necessary to make the decentralized model work. They also helped to bring a corporate, managerial mindset to the hospital in a way that had never been pre­sent before. At the central administrative level, Heyssel hired additional man­ag­ers with nonhospital business experience.19 ­Under the new system, Hopkins physicians would, at least in theory, be forced to consider hospital finances in their patient care decisions. As an incentive, departments that showed positive profit-­and-­loss results would receive “extra points in the consideration of new programs, equipment, and personnel.” Put another way, prior to decentralization, the departments controlled only about 30  ­percent of their costs, with the remainder allocated across the hospital on a general basis by management. A ­ fter the change, departments directly controlled 85 ­percent of their costs.20 All of ­these decisions, from the functional unit level up through the hospital as a w ­ hole, took place within new short-­and long-­term planning structures. ­Under the decentralization program, for example, Hopkins for the first time employed a rigorously developed annual operating plan. In 1975, Heyssel added a “Cost Improvement Program” (run by a young administrator, Ronald Peterson, who would eventually become president of the Johns Hopkins Health System) that relied on new “cross-­functional teams” to examine daily operations and identify potential savings in areas ranging from energy and materials use to maintenance and patient care. The program also solicited ideas from employees, offering cash bonuses while seeking to create a nonthreatening approach to cost containment. In its first year, the effort saved $500,000; by 1983, total efficiencies had reached an estimated $10 million. Savings had been derived from ideas ranging from a suggestion by cafeteria staff to eliminate lids on drinks, which saved $2,000, to a new cardiac surgery technique for irrigating the heart with cold saline solution during surgery, which improved outcomes and reduced in-­hospital recovery time, saving $237,000 annually.21

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Along with the state’s new hospital rate review system, the decentralization and Cost Improvement Programs helped to slow Hopkins’s rate of cost growth and reduce its operating losses. Nursing shortages ceased, as did the bed closures they had necessitated. In 1976, Hopkins achieved a positive operating position for the first time, and by 1978, it achieved an operating surplus of more than $2.3 million. Meanwhile, the hospital’s rate of cost growth declined at a steady 2 ­percent a year from a high of 14.6 ­percent in fiscal year 1975 to 8.2 ­percent in 1978. This was an outlier among major American hospitals, and in June 1979, Fortune profiled the Hopkins efforts as a national model. Meanwhile, the Car­ter administration cited Hopkins as a benchmark for hospital per­for­mance standards in its own cost-­containment proposals. Yet Hopkins’s success also provided a justification for the American Hospital Association to claim that hospitals could in­de­pen­dently contain costs without federal regulation.22 National implications aside, the internal effects of the decentralization and Cost Improvement Programs ­were profound at Hopkins itself. By securing the hospital’s finances and limiting its cost growth, the shift in management philosophy improved the hospital’s position relative to the new state regulators and the federal cost controls (while the latter lasted). Even more impor­tant, improving the hospital’s bottom line facilitated Hopkins’s access to the tax-­exempt bond market for the construction proj­ect that its leaders believed would allow it to remain competitive in the region. All this was not necessarily bad. Rising hospital costs represented a legitimate prob­lem for the health care system and hence for other economic sectors, even as hospital employment helped to prop up the wider economy. Professionalizing the hospital’s management and modernizing its accounting and planning functions helped it run more efficiently and provide better care. Yet the change in orga­nizational philosophy had power­f ul, long-­term consequences for the character and basic orientation of Johns Hopkins and similar medical centers. Adopting practices drawn from corporate management, organ­izing operational practices around profit and loss, and relying more heavi­ly on nonphysician man­ag­ers meant that such hospitals would become a dif­fer­ent kind of organ­ization: they would act less like voluntary social institutions and more like profit-­oriented businesses, regardless of their technical “not-­for-­profit” corporate status. From this point forward, the hospital might not be for-­profit in its purpose, but it would seek to earn profits. As such, it would not hesitate to pursue its interests and assert its power both locally and nationally. In the coming de­cades, it would do so with increas-



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ing success, with massive consequences for the health care system and the U.S. economy.

Race, Regulatory Pro­cess, and the Bond Markets Hopkins’s phase I bond sale represented only the third such transaction since the establishment in 1971 of the Mary­land Health and Higher Educational Facilities Authority. On February 10, 1975, the authority issued $24 million in gross revenue bonds, which in a prearranged agreement ­were immediately purchased by six Baltimore banks and investment trusts. Effectively, Hopkins received bank loans at a lower interest rate b ­ ecause of the tax exemption secured by pro­cessing them through the authority.23 Construction on the Cancer Center had already begun, and work commenced on the remainder of phase I shortly a­ fter the bond issue. Over the course of the proj­ect, overall costs ­rose to $50 million due to a combination of “additional radiation therapy equipment, some building contract delays and strikes.” Hopkins made up the balance through an ongoing fund­-­rais­ing campaign that marked the hospital’s one-­hundredth anniversary. The Cancer Center opened in September 1976, and much of the research space followed l­ater that year. The new patient tower opened the following August, nine months ­behind schedule.24 By 1976, the hospital’s occupancy rate had already risen to 82 ­percent, from 76 ­percent in 1972.25 By the time the new building opened, planning was well advanced for phase II.26 In early January 1978, the hospital trustees approved a $79.9 million phase II plan that included a new, nine-­story psychiatry and neurosciences tower (“the first such center at a major medical institution to bring psychiatry, neurology and neurosurgery together ­u nder one roof ”), along with a renovated pathology building, a relocated (and modern) emergency room, a radiation therapy addition at the Oncology Center, a neonatal intensive care unit, a new Basic Sciences Building for the medical school, renovations to the Marburg medical building (one of the remaining original hospital buildings) and Phipps Psychiatric Clinic, power plant additions, and vari­ous improvements at the Reed Hall dormitory.27 Reflecting the growing emphasis on outpatient care, as well as the excess of hospital beds in the Baltimore region, phases I and II together would not produce an increase in the total number of beds in the hospital, which would remain at approximately a thousand. ­These beds, though, would be in single or double rooms, and the

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organ­ization of space would allow more flexibility in assigning patients to available beds regardless of illness.28 The university would provide the medical school’s share of the proj­ect costs as rental payments to the hospital ­because the latter could recover interest costs through indirect cost recovery payments permissible ­under insurance reimbursement rules and principal costs through state-­approved rates. The hospital would also refinance the cost of its remaining debt from phase I, bringing the total value of the bond issue to just over $100 million.29 The proj­ect, however, required approval from the Mary­land Health Systems Agency (HSA), the state’s recently designated health care planning body. Although generally weak, such structures still represented a checkpoint where ­t hose outside the orbit of hospital and financial institutions could raise concerns. It was at this point that questions about the proj­ect’s effect on hospital costs in Mary­land intersected with ongoing complaints about racial practices at Hopkins in a way that complicated the hospital’s previously untroubled path to accessing capital. The regional office of the Mary­land HSA, which had planning authority over the Baltimore area, had recently developed a regional plan that sought to deemphasize inpatient care in order to limit hospital cost increases. In mid-­May 1978, an HSA staff report recommended against the approval of Hopkins’s phase II proj­ect due to concerns about occupancy rates, total beds created, pos­si­ble ser­v ice overlaps with other hospitals, and probable rate increases to fund debt ser­v ice on the proj­ect.30 At the same time, a simmering fight over racial discrimination at Hopkins spilled into the HSA approval pro­cess. The Community Health Council of Mary­land, a group of African American health care providers and consumers, had formed in the late 1960s “to devise a system which insures that our poor and deprived black p ­ eople receive care with the same dignity . . . ​ afforded our more fortunate citizens.” In what could be seen as a critique of Hopkins’s health care activities in East Baltimore at the time, the council’s founding statement noted that “­these professionals and consumers have worked and lived with the prob­lem long before the ‘Establishment’ became so acutely interested in it.”31 Since then, the group had successfully fought discriminatory practices by the United Fund and other charitable organ­ izations and had worked to resolve the financial and management difficulties of Baltimore’s Black-­run Provident Hospital.32 In May 1976, the council filed complaints with the state ­Human Relations Commission and the U.S. Equal Employment Opportunity Commission, alleging that Johns Hopkins placed African Americans disproportionately in wards with lower staffing



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levels, more patients per room, and inferior patient care. Joined by the health care workers ­union, Local 1199E, it also charged that Hopkins discriminated in hiring, promotion, and termination and that Black employees experienced harassment on the job.33 Hopkins ­adopted a defensive and uncooperative attitude to the charges, even refusing to provide data and documents that the ­Human Relations Commission repeatedly requested.34 Evidence of unequal treatment at Hopkins existed. In 1977, two Hopkins researchers had published a study that showed over the previous two de­cades African American surgical and emergency patients “­were 2.3 to 4.3 times more likely than whites to be u ­ nder the care of surgeons in training.”35 Hopkins’s stonewalling on data, though, made it difficult for the council, 1199E, or the H ­ uman Relations Commission to do more than collect anecdotal stories of patients and hospital workers. On the basis of such accounts, the council demanded that the hospital create affirmative action plans for both employment and, more controversially, patient care. The hospital issued a plan for employment late in the year, compiled the requested data, and agreed to consider programs for “educating and sensitizing personnel.” But administrators argued that the demand to take affirmative action in patient care, at a unit-­by-­unit level within the hospital, could not be practically accomplished. They countered that variations in disease incidence between racial groups rather than discrimination caused racial differences in the patient census. The hospital acknowledged that its practice of placing patients admitted by private physicians in private or semiprivate rooms deepened such variations, as the generally poorer and often African American patients admitted by the Hopkins general staff ­were placed in group rooms with up to four patients and no private bathrooms. Hopkins officials also pointed out that patients admitted by the East Baltimore Medical Plan, most of whom ­were Black, ­were counted as private patients and received rooms accordingly.36 Regardless of prob­lems with its proposed remedy, however, the Community Health Council had touched on something very real: the way that formal health care systems intersected with under­lying inequalities and societal discrimination to produce racial disparities in health care practices and outcomes.37 The official approval pro­cess for Hopkins’s phase II proj­ect provided an opportunity for health activists to raise such concerns. At a May 18, 1978, meeting of the HSA’s Baltimore subcouncil, Community Health Council president Howard “Pete” Rawlings called on the HSA to block the phase II approval ­until the hospital provided satisfactory affirmative action plans for

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employment and patient care. Acting on both the racial concerns and the agency staff report about the proj­ect’s cost implications, the subcouncil voted ten to nine to defer a decision on w ­ hether to recommend the state-­level approval of phase II. In response, Hopkins officials pointed out that Hopkins already had a nondiscrimination policy and an affirmative action plan for employment and argued that permitting phase II would further the goal of equal treatment by completing the replacement of the multipatient wards with private or semiprivate rooms, regardless of the doctor making the admission.38 For a time in the spring and early summer, it appeared that the complaint might force additional action at Hopkins. In early July, the Central Mary­land HSA’s Certification and Review Committee included the creation of affirmative action plans for both employment and minority patient care as a condition for proj­ect approval by the HSA’s Executive Committee.39 On July 19, the Executive Committee initially voted nine to seven in f­ avor of the condition. At that point, two African American members of the committee, one from the mayor’s office and another representing the East Baltimore Community Corporation (the latter having initially sponsored the mea­sure) suddenly reversed their votes, and the condition failed. A furious Pete Rawlings indicated that he would appeal to the state planning agency and the governor, or possibly even sue the HSA.40 Meanwhile, the state planning pro­cess moved forward. In September, the Health Systems Agency approved the proj­ect, and, separately, the state Health Planning and Development Agency granted it a certificate of need. Although the certificate of need did require that access to the Phipps Psychiatric Clinic be expanded for East Baltimore residents, primarily through the East Baltimore Medical Plan, neither agency requested an affirmative action plan as a condition of approval.41 ­After the Community Health Council appealed the approvals, Hopkins attorneys moved to challenge its standing as an aggrieved party in the case. As part of that effort, they requested meeting minutes, as well as names of specific council officers or members who had been injured by the approvals. Pete Rawlings interpreted this as an attempt to intimidate council members, stating in December 1978 that release of “that kind of information would destroy our effect as a Black advocacy group.” 42 Although Hopkins dropped the demands, the state Department of Health denied the council’s appeal in August 1979.43 Ultimately, the state health care planning pro­cess had not significantly altered the phase II proj­ect in regard to ­either costs or racial equity.



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With the planning approvals granted, Hopkins moved forward to finalize debt financing for the proj­ect, with a target date of July 1979 for the ­actual bond issue. In May, the Mary­land Health Ser­vices Cost Review Commission issued a crucial “comfort order” approving patient rates that would allow the hospital to meet debt ser­v ice requirements for the bonds.44 Just a­ fter the Fourth of July, Hopkins hosted, with the assistance of the Baltimore investment firm Alex Brown and Sons, informational meetings on the bond issue for the Moody’s and Standard and Poor’s bond rating ser­v ices. At the meetings, hospital administrators and trustees took pains to emphasize that the commission’s rate system represented a positive for the hospital b ­ ecause it had helped to stabilize revenue and required Blue Cross–­Blue Shield to pay a share of the hospital’s bad debts. Standard and Poor’s had a negative view of the commission from previous transactions and as a result needed particularly extensive assurances on this point. Staff members from the state’s Health and Higher Educational Facilities Authority helped with this, as did HSCRC director Harold Cohen, who made a personal visit to the rating agencies in support of the Hopkins bond issue. Such efforts demonstrated that the state’s extension of public powers to private institutions like Hopkins transcended the ­simple granting of tax exemptions on debt issues and instead served to legitimate the entire system of public-­private finance that undergirded the hospital city. ­These initiatives proved successful. Both ser­vices gave the Hopkins bond issue high-­grade, investment-­quality ratings—­t he highest to date for an authority-­backed hospital bond issue in Maryland—­t hat lowered the hospital’s interest rates from 7.16 ­percent to 6.58 ­percent, saving as much as $11 million over the course of the repayment period.45 A second series of meetings took place two weeks ­later, first in Baltimore and then at New York’s World Trade Center (including a luncheon at the Win­dows on the World restaurant), for investment banks and financial professionals who might purchase the bonds. Like the rating agency meetings, the investment sessions emphasized Hopkins’s prestige and medical accomplishments, along with its recent financial turnaround. Robert Heyssel spoke to the latter point, noting specifically that cash flow was now projected to be positive throughout the forecast period and commenting that the hospital was “run as a business,” with “profit and expense goals set annually and on a 5 year basis.” Internal decentralization, he explained, meant that Hopkins was now “6 or more specialty hospitals operating ­under one corporate name, each with its own staff, controlled from the top.” The distinction between

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Hopkins as a not-­for-­profit academic medical center and a profit-­maximizing corporation had evaporated.46 Wall Streeters loved it: a vice president at Smith Barney, Upham and Com­ pany, which would serve as a man­ag­er for the bond sale, wrote to Hopkins president Steven Muller following the pre­sen­ta­tion and noted how proud his firm was to be associated with the Hopkins proj­ect, which he described as a “prestigious financing.” 47 The Hopkins name, in other words, brought credit to top firms on the Street. With that cachet came access to capital: the bond issue itself, which followed on July 24, proved a g­ reat success, as the Mary­ land Health and Higher Educational Facilities Authority sold all $100.5 million of the bonds. The sale was one of the largest hospital bond issues to date in the United States.48 Construction on phase II began shortly afterward, and by September 1981, Heyssel could report to the Hopkins board that the proj­ ect “is on schedule and $1.2 million ­under bud­get” and that the funds raised from the bond sale “have earned much more income than was projected.” 49 By that point, the new radiation therapy center, infant special care unit, and

Figure 16. ​Robert Heyssel, Johns Hopkins Hospital executive vice president and director, and Steven Muller, Johns Hopkins Hospital and University president, at a construction site during the hospital’s phase II redevelopment proj­ect, circa 1980. Johns Hopkins Hospital Annual Report 1980, The Chesney Archives of Johns Hopkins Medicine, Nursing, and Public Health, Baltimore.



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emergency rooms had all opened. The overall proj­ect was completed in September 1982, achieving the modernization of Hopkins both physically and financially.50 Not all hospitals had access to the tax-­exempt debt financing that Johns Hopkins used to implement its phase I and II rebuilding proj­ects. Provident Hospital, Baltimore’s only Black-­run hospital, never employed the ser­v ices of the Mary­land Health and Higher Educational Facilities Authority. In part, this was b ­ ecause Provident had opened a new hospital building in 1970, which it funded on the “old” financing model of Hill-­Burton and state grants, private philanthropy, and community fund­-­rais­ing. Most notably, Provident raised more than $1 million from the city’s African American community alone, far above a $60,000 target.51 While the new fa­cil­i­t y meant that Provident initially did not require additional financing, the situation did not last. By the 1980s, the building needed renovation. Even more than that, Provident strug­gled to maintain its occupancy rate as other hospitals modernized and renovated in ways that made them more attractive to insured patients. This meant that Provident’s revenues deteriorated, and the hospital slid ­toward financial crisis. In 1984–1985, a ­bitter clash between a faction of Provident physicians and the hospital’s board led to an admissions boycott by the doctors that worsened the situation. But Provident’s disadvantages in the increasingly competitive landscape of the hospital city created the under­lying prob­lem. Other hospitals with stronger finances could use the authority’s tax exemption to secure the low-­ cost bond financing that funded improvement proj­ects. Hospitals like Provident found themselves in a downward spiral. Without access to debt financing, they could not modernize, which made them less attractive to paying patients, which further worsened their revenue position, which made the bond markets even less accessible—­and so on. In 1985, a U.S. Bankruptcy Court judge placed Provident ­under the control of court-­appointed attorney George Russell (an African American, for what it mattered), with the goal of stabilizing its finances. During the fall, Russell reached out to Heyssel and Hopkins board chair Andre Brewster about “a pos­si­ble linkage between [Hopkins] and the Provident.” Such an affiliation would require financial support by Hopkins. With Hopkins in the midst of finalizing the acquisition of three other Baltimore hospitals, the board concluded that they did not have the resources necessary to support such an arrangement and rejected Russell’s request. Two trustees dissented, calling on Hopkins to play “a more supportive role” in relationship to the African American hospital, but the issue was

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never reconsidered. Despite emergency loans from the state to keep it afloat, Provident was absorbed in a merger with Lutheran Hospital in 1986. Although the hospital building remained open, Lutheran’s board and physicians effectively controlled the resulting Liberty Medical Center, and the city’s historically Black hospital dis­appeared. Liberty itself would be taken over by Bon Secours Hospital in 1996 and closed completely three years ­later.52

“A Drop in the Bucket”: Hopkins and Housing Though Johns Hopkins had relatively l­ ittle trou­ble raising capital for its own expansion during the 1970s, few such funds w ­ ere available for large-­scale community redevelopment. As a result, Hopkins had never ­really resolved the questions that had been raised more than a de­cade before about its role in solving the nonmedical prob­lems of the surrounding neighborhoods. The consequences of this inaction became brutally clear on the eve­ning of January 15, 1979, when fourth-­year medical student Alan Trimakas encountered three local teen­agers while walking to his car ­after a clinical rotation. The three youths attempted to rob Trimakas, who tried to flee. According to prosecutors, one of the teen­agers, James Featherstone, shot him in the back. Featherstone, a star wrestler at nearby Dunbar High School, denied the charge, claiming that one of the other teen­agers had shot Trimakas. A passing driver s­ topped to assist the wounded student, as did a classmate who passed by while jogging and a Hopkins intern who had just arrived for a shift. A police car soon ferried Trimakas to the emergency room, where he was operated on by Dr. Levi Watkins, Hopkins’s first African American chief resident in cardiac surgery. Just an hour before, Watkins and Trimakas had discussed collaborating on a new research proj­ect. Watkins did not know the identity of his patient ­until he raised the surgical sheet to declare the young man’s death. Despite inconsistent witness testimony and rumors of witness intimidation by both police and associates of the teen­agers, jurors convicted Featherstone of murder in November. Prosecutors placed Trimakas’s white lab coat, which he had been wearing on the night of the murder, over an empty chair in the courtroom. Regardless of what actually happened that night on an East Baltimore street, the trial (like ­t hose of so many other young Black ­people) appears to have been unfair b ­ ecause the judge gave the jury incorrect instructions. This error led, thirty-­five years ­later, to Featherstone’s early release.53



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At Hopkins, Trimakas’s murder touched off a wave of grief, along with demands for improved security and more parking close to the hospital. But it also generated something ­else. Anger and grief aside, many at Hopkins recognized that crime also threatened community residents. As one medical student put it during a schoolwide meeting ­after the murder, residents “are scared to death, too. It’s not the Hopkins against East Baltimore.” Steven Muller noted in a letter to the trustees that “it is simply not pos­si­ble for us to achieve real security in isolation from the community” and emphasized “the common fear shared by the institutions and the community.” As a result, the murder led to a renewed discussion of Hopkins’s role in the neighborhood.54 This issue had never r­ eally gone away, as a series of studies and reports throughout the 1970s had called on the institutions to take responsibility for community development. But none of the calls had been acted upon. In the aftermath of the murder, Muller asked the trustees for their support in pushing the city to improve conditions in East Baltimore and to consider using Hopkins-­owned housing both as a replacement for the aging and increasingly dilapidated apartment compound and as a potential opportunity for “community rehabilitation and occupancy.”55 Movement also began in city government. By this point, however, the context of federal urban policy had changed significantly since the days of the Broadway urban renewal proj­ect. In 1974, Congress had folded urban renewal, Model Cities, historic preservation, and other categorical urban programs into a new Community Development Block Grant (CDBG) Program. Part of the Nixon administration’s “New Federalism” initiative, the block grants gave cities discretion over how they used federal funds. While this could improve responsiveness to local conditions, it also facilitated pet proj­ects favored by local leaders or influential constituencies. A wider range of communities could also receive the block grants, which meant that comparatively wealthy areas received funding for the first time, while distressed urban areas received a correspondingly lower share despite greater need.56 In 1977, the Car­ter administration, although failing to achieve an intended reor­ga­ni­za­tion of federal urban policy, gained congressional support for the Urban Development Action Grant (UDAG) Program. Designed to avoid the speculative plans that had led urban renewal proj­ects to sit vacant for years, UDAGs required the commitment of private capital before grants could be made. Reflective of Car­ter’s personal philosophy, the new tool sought to use government primarily as a way to stimulate private-­sector involvement, and

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by 1979, $487 million in federal UDAG grants had produced $2.86 billion in private investment. Most of the UDAG funding, though, went to commercial or industrial proj­ects; less than 10 ­percent went to low-­income housing. Yet in contrast to CDBGs, the funding formula for UDAGs did allow the Department of Housing and Urban Development to concentrate resources in urban areas.57 In practice, the new programs (along with the Section 8 rental voucher subsidy) transformed the funding environment in which city governments, activists, and institutions operated. Reflecting this changed framework, Baltimore’s Department of Housing and Community Development proposed a $10.4 million renewal plan for the area between Hopkins and Prospect Park to the east, funded through a combination of UDAGs, city or state bonds, and private capital. The plan included rehabilitated row ­houses that would be sold to low-­and moderate-­income buyers using a targeted loan fund and apartments that would be eligible for Section 8 rental subsidies. Hopkins agreed to provide rental guarantees to support the overall effort but received an exemption for two blocks adjoining the hospital where it had gradually acquired most properties.58 This activity presented an opportunity for neighborhood activist Lucille Gorham. As the president of Citizens for Fair Housing, Gorham had by this time become a self-­taught expert in planning and community development by reading on her own at Baltimore’s Pratt Library (she also took courses at the University of Mary­land and at a local business college).59 By the mid1970s, she had built a reputation as a tough but pragmatic community leader. A developer’s proposal described her as “a good team player—­she’s an articulate advocate for the needs of her community, but at the same time is reasonable and cooperative.” She began to be selected for high-­profile public roles, including an advisory board for James Rouse’s Inner Harbor Marketplace and a Baltimore del­e­ga­tion to an international urban revitalization conference in Hamburg, Germany.60 During ­these years, Gorham moved from the Gay Street area to the neighborhood east of the hospital. ­There, she formed the ­Middle East Community Organ­ization (MECO) in 1978 to lobby the city for CDBG funds. In d ­ oing so, Gorham coined a new name for the previously anonymous neighborhood: “­Middle East” distinguished it from Southeast and Northeast Baltimore. In its first years of operation, with a staff of two and a nine-­member community board, MECO assisted residents with housing prob­lems, developed an urban gardening proj­ect, and worked with city agencies on planning issues.61



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Figure 17. ​East Baltimore community activist Lucille Gorham, 1970. During her long ­career, Gorham served as the leader of Citizens for Fair Housing, “Our House,” and the M ­ iddle East Community Organ­ization. Permission from Baltimore Sun Media. All rights reserved.

The reemergence of interest in redevelopment at Hopkins offered the prospect of extending such efforts on a far larger scale. In October 1979, Robert Heyssel reached out to Gorham and MECO. He sought and received the group’s support for adding one additional block on the east side of the medical center to the long-­term institutional bound­aries as set by Russell Nelson in 1969. Heyssel copied Clarence Burns on the letter but other­wise did not consult the East Baltimore Community Corporation

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about the boundary extension, implicitly suggesting that MECO had become the neighborhood’s true representative. Gorham responded by thanking Heyssel for preempting the rumors about Hopkins’s expansion that had begun to circulate, for showing re­spect, and for building trust. In November, the City Council and Mayor William Donald Schaefer approved the urban renewal ordinance.62 With many demands on Baltimore’s federal grants, pro­gress proved slow. In late 1981, Heyssel and Muller endorsed the recommendation of a four-­ member trustee committee (which included James Rouse, since 1978 a trustee of the university) that the two blocks immediately across Wolfe Street to the east of the hospital (most of which Hopkins already owned) should be the immediate priority for ­either rehabilitation or reconstruction. ­After extended discussions with both MECO and Neighborhood Rental Ser­v ices, a recently formed nonprofit housing development group that had just received a $230,000 federal UDAG to renovate twenty-­five empty buildings in a large area immediately to the east, they expanded the redevelopment effort north to include the Monument Street business corridor and the Northeast Market, an enclosed building with a variety of stalls for food vendors where “community residents shop on the weekends for groceries and JHMI [Johns Hopkins Medical Institutions] students and employees provide a brisk lunch trade on weekdays.” From that core, redevelopment could eventually be extended throughout the ­Middle East area. The effort would be “a partnership combining the resources of the Hospital, the City, and local community groups.” Hopkins’s contributions would consist of the land the hospital owned, along with financing, which it would seek to earn back.63 In a February meeting with city officials and community leaders, Heyssel indicated that housing built on the Hopkins-­owned blocks would be open to the community. “­There is no intention on our part,” he explained, “to restrict anything to Hopkins employees. W ­ e’re not interested in a Hopkins housing proj­ect. ­We’re interested in the neighborhood.” One East Baltimore minister, previously a critic of the hospital, told the Baltimore Sun, “I think ­we’re in a new day. We had some false starts, but once we started dealing with Heyssel, he has been straight with us. It’s only as the neighborhood has become or­ga­nized that Hopkins has been held accountable for the property they own.” 64 In May, the Hopkins board agreed to commit up to $3 million for the institutional share of the proj­ect.65 Through the second half of 1982 and into 1983, the proj­ect moved ­toward implementation. The city reserved its remaining Section 8 funds for the proj­



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ect, providing a critical source of rental subsidy, while Hopkins hired Elinor Bacon, a specialist in housing rehabilitation with extensive experience in both city and federal government (and the ­daughter of famed Philadelphia city planner Edmund Bacon), as its director of community development. It also brought in a community development firm (where James Rouse’s son Ted would soon become a partner) to prepare site plans and contracted with Neighborhood Rental Ser­v ices to manage the homes it owned in East Baltimore and oversee the relocation of residents. In September 1982, the hospital agreed to guarantee between $3 million and $4 million in financing to support the proj­ect. In December, HUD awarded Baltimore a $614,000 UDAG for the proj­ect, to be known as Jefferson Court. Work would begin in March 1983.66 During this period, opposition to the proj­ect emerged in the community. With help from S­ ister Sarah Fahy of the Julie Community Center, a Catholic antipoverty organ­ization, residents formed the “­People’s Choice” group to resist removal. Members of ­People’s Choice wrote to Muller and noted that the proj­ect had caused ­great distress, particularly among el­derly residents. “We are a community of p ­ eople who have known each other for years and who work together and watch out for one another,” the residents explained. “We are absolutely against our neighborhood being broken up. We wish to continue to live in the h ­ ouses that we live in now. Many of our h ­ ouses need repair. We wish them to be repaired and for us to continue to live in them, at rents we can afford.” 67 The ­People’s Choice letter revealed something new since the urban renewal era: the residents articulated a claim to their homes and neighborhoods, regardless of their status as renters or property ­owners and, further, asserted that the hospital had an obligation not only to allow them to stay but to make improvements to the homes. This was a vision of stakeholding in the community rather than property owner­ship and of Hopkins’s responsibilities as extending far beyond the traditional hospital mission of medical care, teaching, and research. Although ­People’s Choice also reached out to Congressman Parren Mitchell, the objections did ­little to slow the proj­ect.68 Heyssel and Elinor Bacon reassured Mitchell of their intent to protect the residents, and the hospital director composed a letter to “Dear Neighbors” in the area, assuring them “that Dr. Muller and I are sensitive to your concerns about potential displacement . . . ​and w ­ ill also work with the community and the City in promoting homeownership, employment opportunities and commercial revitalization.” For homeowners, he emphasized that Hopkins “has no intention of acquiring

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their properties” and offered assistance “in renovating the exteriors of their homes.” Meanwhile, Bacon and Lucille Gorham went door to door in the area delivering the same message.69 Despite its ­limited effect, the opposition to the proj­ect demonstrated the complexity of the questions facing Hopkins and other urban hospitals: about how to act in the community, how to ensure participation, and how to balance institutional interests with social equity. For community members and organizers such as Lucille Gorham, it suggested similar questions about what it meant to or­ga­nize and represent a community living in the shadow of a major health care institution: had Gorham and MECO secured the best pos­ si­ble outcome for the ­Middle East neighborhood, or had they become complicit in Hopkins’s aims for the neighborhood in exchange for the provision of a l­ imited mea­sure of influence over proj­ect details and goals? Groundbreaking for the Jefferson Court proj­ect took place in July 1983, with an event that honored the “­Middle East Revitalization Partnership” and doubled as a fund-­raiser for a community green­house being built by MECO on a Hopkins-­owned property on Monument Street. Afterward, Gorham wrote an appreciative note to Elinor Bacon: “On behalf of my community I THANK YOU AGAIN, AGAIN AND AGAIN.” 70 Developers completed the Jefferson Court proj­ect during the summer of 1984. The final proj­ect included the renovation of seven existing homes, the de­mo­li­tion of the remainder of the block, and the construction of forty-­t hree new two-­and three-­bedroom town­houses. Final costs totaled just over $3.6 million, ­under bud­get and in line with similar housing proj­ects elsewhere in the city. Johns Hopkins contributed $280,965 in ground rent and $319,670 in cash.71 Meanwhile, work began on a second component of the proj­ect. Known as McElderry Court, this effort involved two noncontiguous areas: a row of ­houses and small commercial spaces along the north side of Orleans Street south of Jefferson Court and a second group of seventeen row ­houses on McElderry Street just to the west, which would be rehabilitated. Costs totaled $1,971,090, funded as before through a federal UDAG, Mary­land Community Development Administration mortgage funds, a federal CDBG, and small buyer down payments; Hopkins contributed $99,900 in ground rents and wrote off $45,000 in de­mo­li­tion costs as a contribution to the proj­ect.72 Together, Jefferson Court and McElderry Court produced seventy-­seven housing units, fifty-­three of them new and twenty-­four renovated. The ­houses all sold for approximately $20,000 below cost.73 In both cases, Hopkins retained owner­ship of the land as a way to lower costs to the initial purchasers.



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­ fter five years, land rights would convey to the purchaser in any ­future sales. A All of the available units found buyers. The overall financing package sought to make homeownership more affordable, on the premise that d ­ oing so would stabilize the neighborhood. In almost all cases, this benefited moderate-­ income purchasers rather than low-­income residents.74 Other proj­ect components included the rehabilitation of Northeast Market and improvements along the Monument Street business corridor, planned in conjunction with a local merchants’ association.75 Housing improvements aside, all was not well in M ­ iddle East: in January 1984, a tenant in a Hopkins-­owned h ­ ouse on North Chapel Street died, effectively of exposure, b ­ ecause of a nonworking furnace.76 By spring, the broader limitations of the redevelopment proj­ect had become clear. Neither Jefferson Court nor McElderry Court offered housing for lower-­income residents, and despite the housing work near Hopkins, numerous vacant ­houses remained throughout the neighborhood. In May 1984, Muller and Heyssel reported to the trustees’ policy committee that Hopkins’s “relations with the community are healthy and positive, and it would be rewarding if the current momentum ­were somehow sustained.” Yet this would be difficult, they warned, ­because of deeply rooted divergent interests: the community wanted low-­cost housing, but Hopkins could not afford extensive subsidies. Instead, the institutions would seek to recover any housing investments at market rates. Hopkins’s interest in the neighborhood, the report bluntly acknowledged, “smacks of gentrification, an alternative at odds with the community’s wishes.”77 The acknowl­edgment that Hopkins’s core interests lay in gentrification represented a remarkable admission: with federal support for low-­income housing in decline, Hopkins would not step into the breach. It would not try to save the community. Perhaps it could not. Regardless, Hopkins would focus again on its traditional priorities and mission. Alan Trimakas’s death had spurred Hopkins action in the neighborhood but not true commitment. Through this period, community frustration with Hopkins increased. By 1987, even Lucille Gorham had become critical of Hopkins. Although she acknowledged that ­limited pro­gress had been made, Gorham charged that “they have not kept their promises.” Hopkins also faced harsh criticism from its own students. In early 1987, the Johns Hopkins Co­a li­tion for a ­Free South Africa ­adopted a new, locally focused strategy by drawing comparisons between the practices of the South African government and Hopkins’s residential real estate holdings in East Baltimore. An enraged Robert Heyssel

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engaged in a public argument in the pages of the Baltimore Sun with the gradu­ate student leader of the co­a li­tion. More coolly, Hopkins vice president for facilities Sally MacConnell articulated the rationale for the hospital to limit its commitment to the community, especially in a time of increasing competitive pressure in health care: “Our first purpose is to provide care for sick p ­ eople. To the extent that we can, we try to be good neighbors. But we are basically ­here to provide medical care. . . . ​­There is not an endless amount of money to put into the neighborhood.”78 The statement marked the limits of Hopkins’s willingness to take on a fully developed quasi-­governmental role and, on a broader scale, of the under­lying limitations of a form of urban policy that relied heavi­ly on private institutions. It also returned the hospital yet again to a purely medical approach to core social prob­lems. For a brief period in the late 1980s, it appeared that large-­scale community redevelopment might begin anew at Hopkins with the backing of James Rouse’s Enterprise Foundation, which sought to address social prob­lems as well as physical reconstruction in low-­income urban neighborhoods around the country. Enterprise joined MECO and Hopkins in a new “­Middle East Partnership” and even secured initial funding from the Ford and Rocke­fel­ ler Foundations and the U.S. Department of ­Labor. This support allowed the renovation of nearly two hundred East Baltimore homes by 1990, most of which remained rentals ­under the owner­ship of a nonprofit organ­ization. A few low-­income families ­were able to purchase homes through the proj­ect.79 Po­liti­cal changes in Baltimore soon undermined this proj­ect. When ­William Donald Schaefer fi­nally left the mayor’s office to become governor in  1987, City Council chair Clarence Burns succeeded him and became the city’s first Black mayor. In a b ­ itter Demo­cratic primary election, however, Burns, despite having Schaefer’s backing, lost to State’s Attorney Kurt Schmoke. Schmoke hailed from West Baltimore and had done relatively poorly in Burns’s East Baltimore stronghold. He had l­ittle interest in seeing large-­scale funding flow to his rival’s neighborhood. As a result, Rouse and the Enterprise Foundation shifted their primary efforts to West Baltimore’s Sandtown-­Winchester neighborhood, soon receiving a federal Nehemiah grant. Although it engaged in extensive housing construction and rehabilitation, Sandtown-­Winchester’s lack of an economic base like Hopkins ­limited the proj­ect’s transformative impact, even though it eventually received over $130 million in public and private funds. Meanwhile, East Baltimore, where Hopkins stood as an anchor economic institution, received only a few relatively small side proj­ects. The possibility of resident-­led



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redevelopment that Enterprise-­Nehemiah might have offered in East Baltimore faded away.80 Mixing a mea­sure of community concern with institutional self-­interest, the housing proj­ects of the 1980s amounted to, as Lucille Gorham put it, “a drop in the bucket” amid a sea of need.81 In combination with the redevelopment of the hospital lot, this was the outcome of the debate during the early 1970s over ­whether Hopkins should remain in East Baltimore and, if it did, ­whether it should invest in the surrounding community. Capital flowed freely for rebuilding Hopkins’s medical facilities, but it remained scarce (­whether from public sources or from Hopkins) for low-­income housing or for smaller and weaker hospitals like the Black-­run Provident. The scale of East Baltimore reinvestment remained minuscule compared to the funds poured into phases I and II of the hospital proj­ect. This echoed the old dichotomy between the Columbia and East Baltimore Medical Plan, with the former financed generously by private insurance plans and the latter scrambling to tack together grants and small public funding streams. More generally, it highlighted the broader choices made in the U.S. health system to emphasize massive medical institutions like Hopkins while neglecting social d ­ rivers of health, such as housing, food access, green spaces, safe working conditions—­and a strong public health system. The de­cades that followed would make such disparities even more severe.

PA R T III Costs of the Hospital City

CHAPTER 9

“The Dream ­Shall Never Die” . . . ​ but It May Be Compromised

W

ith its reliance on debt markets and national streams of capital, the Johns Hopkins Hospital construction proj­ect exemplified the growing size and economic significance of the hospital city. No other institution in a city like Baltimore enjoyed Hopkins’s access to capital. This was one side of the hospital city’s growing importance, but such economic power had another dimension as well. It drove health care costs higher, helping to block national-­level cost-­control efforts. In turn, this made national health insurance all but impossible to achieve during the presidency of Jimmy Car­ter. This pattern had emerged u ­ nder Johnson and Nixon, but u ­ nder Car­ ter it firmly fixed the bound­aries of health care reform in the United States for de­cades to come. The rise of the hospital city and the failure to achieve national health care are thus inextricably intertwined. In the year following the demise of President Nixon’s price-­wage controls, overall health expenditures soared by more than $16.3 billion, the largest annual increase on rec­ord. Hospitals accounted for over $7 billion of the increase.1 Together with rising energy costs, the surge in health care prices pushed inflation back to the center of national po­liti­cal and economic debate for the remainder of the 1970s. As a result, supporters of national health insurance had to integrate cost control with their main goal of covering more ­people.2 Car­ter’s presidency highlighted the tension, as he initially eschewed an all-­out pursuit of national health insurance in f­ avor of systematic hospital cost containment. Congressional relations adviser William Cable ­later explained, “You could not in any way afford to even begin talking about affording a national health insurance program if hospital costs had an unlimited straw into the Federal Trea­sury.”3 Advocates of national health insurance such as

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Ted Kennedy agreed about the need to limit hospital costs, but they believed that the two efforts could proceed in tandem. The difference would contribute to a crucial fracture within the Demo­cratic Party. Most commentators have dismissed Car­ter’s efforts in health care reform as well intentioned but po­liti­cally unsophisticated.4 Yet his eventual failure to accomplish ­either universal coverage or cost containment signified something more consequential: it demonstrated that the cost issue, and all that it increasingly represented in the U.S economy and American communities, now drove the wider debate over health care reform. No longer just a constraint, the health care cost prob­lem and b ­ ehind it, the hospital city, had closed off po­liti­cal and policy options by the end of the 1970s that only a few years before had seemed not just pos­si­ble but inevitable.

Car ­ter’s Promises As a presidential candidate in 1976, Car­ter had only reluctantly embraced the health care issue. All three of his chief rivals for the nomination—­Senator Hubert Humphrey of Minnesota, Senator Henry “Scoop” Jackson of Washington, and Representative Morris “Mo” Udall of Arizona—­supported the Health Security bill developed by the Committee for National Health Insurance. Car­ter, in contrast, endorsed national health insurance cautiously and only u ­ nder the pressure of securing the endorsement of the United Automobile Workers. The UAW had backed Car­ter in an early primary in Florida but only to prevent a victory t­ here by Alabama segregationist George Wallace. This provided an opening for conversations between Car­ter’s team and the ­union about a potential national endorsement. That possibility, however, remained contingent on agreement about health care. ­After extensive negotiations over the exact words the candidate would use, the former Georgia governor delivered a speech in April to the National Student Medical Association—­the student arm of the main African American physician organ­ization—in which he endorsed the general princi­ple of national health insurance and called for the phased introduction of a plan financed by payroll and general revenue taxes, incorporating private as well as public insurance, controlling both hospital and physician fees, and tied in unspecified ways to welfare reform. Although this was not the sweeping transformation preferred by the UAW, it was enough. Car­ter received the ­labor movement’s backing and won the 1976 presidential election.5



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As Car­ter prepared to take office, the constraint of bud­get deficits and the scourge of inflation reinforced his inclination to move cautiously. They also drew him t­ oward cost control. Stuart Eizenstat, Car­ter’s domestic policy adviser, included an outline of a hospital cost-­containment mea­sure in an early January draft legislative package, and a week before inauguration day, Car­ter and his team de­cided to delay a national health insurance proposal for at least a year in order to focus on cost. The UAW, meanwhile, continued to push for the Health Security bill, which Kennedy had returned to ­after the failure of his efforts at compromise with Nixon and Wilbur Mills.6 The choice to sever hospital cost containment from national health insurance made sense from a fiscal standpoint, but it drained the issue of emotional appeal and ­limited the administration’s ability to construct a compromise among dif­fer­ent factions within the Demo­cratic co­a li­tion.7 Through the winter and early spring, Eizenstat worked with HEW secretary Joseph Califano to draft a hospital cost-­containment proposal. Califano, who as Lyndon Johnson’s special assistant for domestic affairs had worked on the implementation of Medicare and Medicaid, brought extensive Washington experience to Car­ter’s team of self-­styled outsiders. He soon joined Eizenstat and the president himself in reaching out to legislative leaders about the initiative. Along with Kennedy, ­these included Senator Herman Talmadge of Georgia, who chaired the Senate Finance Subcommittee on Health, and Representative Dan Rostenkowski of Illinois, who chaired a new Ways and Means Subcommittee on Health. The latter position allowed Rostenkowski to play a determinative role, much like Wilbur Mills a de­cade before, in shaping the fate of any health care legislation in the House. A fiscal conservative and national health insurance skeptic, Rostenkowski welcomed the turn to cost control but remained dubious of its po­liti­cal viability. In the Senate, the conservative Talmadge had already been working on a cost-­control mea­sure, although it applied only to a subset of routine hospital costs paid by Medicare and Medicaid. Talmadge indicated to Eizenstat that he would work with the White House, but his ­actual position remained far from certain.8 Looking in part to convince the senator, Vice President Walter Mondale delivered one of the first extended discussions of the administration’s plans at the Georgia Demo­cratic Party’s Jefferson-­Jackson Dinner in March—­with Talmadge in attendance. Highlighting the rapid rise of hospital costs, Mondale directly equated time in the hospital with the recovery of good health: “It’s getting to the point that millions of our citizens c­ an’t afford to get sick—­and they ­can’t afford to get well.” Mondale emphasized that existing

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cost-­reimbursement systems provided no incentives for hospitals to operate efficiently. He also lauded Senator Talmadge’s work to develop “a comprehensive system for containing medical costs” and framed the administration’s effort as a short-­run step t­ oward that goal—­rather than as a competitor.9 Califano and Eizenstat also reached out to l­ abor leaders, business groups, health insurers, and health care providers. For the first three groups, rising health care costs posed serious prob­lems. With assurances that their interests would be protected, they could be expected at least to remain neutral. Some, such as automakers and other manufacturers, might actively support the legislation. The final group, providers, consisted primarily of hospitals and physicians; both vigorously opposed the mea­sure, although Eizenstat suggested that hospitals might be won over by the possibility of using the program to resist the demands of physicians for additional equipment and other expenditures.10 Completed in late April, the administration’s proposal offered an approach to hospital cost containment far simpler than ­either Nixon’s controls or the state-­level systems being implemented in Mary­land and other states. Car­ter proposed a limit on hospital revenue growth of about 9 ­percent annually, based on a formula that combined general inflation levels with an allowance for hospital expenditures linked to quality of care. This would be implemented by capping “average reimbursement per admission” for cost payers such as Medicare, Medicaid, and Blue Cross, as well as “average charges per admission” for charge payers such as commercial insurers and self-­paying patients. Outpatient care would not be covered by the limits, as the administration hoped to encourage it as a cost-­effective alternative to hospital admission. The legislation allowed hospitals to “pass-­through” for reimbursement any wage increases granted to nonsupervisory, nonprofessional employees (including nurses and medical technicians). The wage pass-­t hrough would potentially exempt as much as $2.5 billion in fiscal year 1980 from the revenue limit. Yet without this concession, Eizenstat explained to the president, ­labor might oppose the entire cost-­containment initiative. Title II of the bill took up the more complex prob­lem of hospital financing: it imposed an overall, national limit of $2.5 billion on annual hospital capital investment from all sources, to be allocated by regional health systems agencies on the basis of population. This would effectively transform the HSAs from weak regional planning bodies into what National Journal described as “federal regulatory outposts.” As such, the potential significance of Title II was ­great. If implemented, it would have significantly strengthened



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the ineffectual existing federal health care planning program and altered the incentives that pushed hospitals to focus on capital accumulation through revenue-­seeking be­hav­ior. The Congressional Bud­get Office estimated that the mea­sure would cut hospital capital spending from $12.2 billion nationally to $4.3 billion in 1981. In addition, it would have authorized regional agencies to ban new beds in areas where planners identified excess supply. Compliance with ­t hese mea­sures would be achieved through the federal health care purse: proj­ects not approved by regional planning bodies would lose eligibility for Medicare and Medicaid reimbursement. In addition, the federal government would deny loan guarantees, grants, and tax subsidies for added beds in any health ser­v ice areas with a bed-­to-­population ratio higher than 4 to 1,000 or with existing occupancy rates lower than 80 ­percent. ­These rules would exclude all but 17 of the 205 health ser­v ice areas in the country. Title II would apply for up to three years, at which point it would be integrated into a more sophisticated permanent cost-­control program, presumably based on prospective payment.11 If Title II had been implemented, the United States would have developed a far less expensive health care system. In an April 25 message to Congress, President Car­ter made his position clear: he emphasized the centrality of hospitals in the rapid rise of health care costs and argued that cost containment represented a necessary preliminary step before the phased introduction of “a workable program of national health insurance.” Without it, Car­ter warned, the cost of national health insurance would double within just five years, a pattern that “jeopardizes our health goals and our other impor­tant social objectives.” In contrast, Car­ter claimed that the cost-­containment bill would deliver $2 billion in overall national savings during fiscal year 1978, with $650 million of that accruing to the federal government alone. Savings would rise to $5.5 billion in 1980. He also took pains to note that the legislation did not reintroduce Nixon’s controversial wage-­price controls but instead merely capped overall payment levels.12 “I think it is revenue control,” Secretary Califano told the White House press corps. “Hospitals have become, over the years, many of them, quite obese, if you w ­ ill. They are not trim, and t­ here are many t­ hings on which they can save money.”13 Soon ­after delivery of the message to Congress, Rostenkowski and Representative Paul Rogers, who chaired the Health and Environment Subcommittee of the Interstate and Foreign Commerce Committee, introduced the bill in the House. Ted Kennedy cosponsored it in the Senate. All of them had

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doubts about the viability of the legislation. Kennedy emerged as the bill’s staunchest supporter, describing it as “absolutely essential” during a subcommittee markup session in July. His split with Car­ter remained far in the ­f uture.14 Privately, Califano warned the president that passage of hospital cost containment would be a difficult fight, requiring full commitment from the administration. The prob­lem lay in the po­liti­cal nuances of health care inflation: “The precipitous rise in hospital costs is not a gut issue for most Americans ­because consumer resentment is primarily directed ­towards the mechanisms which pay for hospital cost increases—­taxes and insurance premiums—­rather than t­ owards the cost increases themselves.”15 Califano’s emphasis on the mechanisms of payment is critical for understanding the role of cost within the larger American health care debate. Most Americans saw their taxes and health insurance premiums rise and blamed the government or their insurance com­pany. The relationship between t­ hose financing mechanisms and the practices of their own hospitals and doctors in creating the health care cost spiral remained abstract. Five years ­earlier, Senator Russell Long had made this exact point in regard to the Kennedy Health Security bill.16 Califano had correctly assessed the challenge ahead. In May, joint hearings by the Rostenkowski and Rogers subcommittees revealed a range of concerns. Th ­ ese included the lack of controls on the price of supplies and ser­v ices that hospitals purchased, the absence of incentives for hospitals to close unnecessary ser­vices or shift patients to cheaper outpatient ser­vices, and the possibility that care would be rationed or quality reduced. AHA president J. Alexander McMahon acknowledged that soaring hospital costs required a solution, but he also argued, in a classic statement of the hospital-­ centric understanding of health care, that the prob­lem “reflects the values of our civilization, which support the application of resources to improve and maintain health, to ease suffering and to extend life.” More prosaically, he warned that complying with the per admission revenue limit would impose administrative burdens that raised rather than lowered costs. Michael Bromberg, director of the Federation of American Hospitals (FAH), complained that the legislation did nothing about physician fees or about how insurance insulated patients from the true cost of care. Reflecting strug­gles in Mary­land and other states with rate review agencies, the AFL-­CIO’s Andrew Biemiller expressed concern that the bill’s exemptions for states with such programs would weaken the collective-­bargaining rights of hospital ­unions.17



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In testimony before the Rostenkowski committee, Secretary Califano cited Johns Hopkins Hospital’s success in cutting costs through its decentralization program as evidence that the bill’s 9 ­percent revenue cap was realistic. In his own testimony, however, Hopkins director Robert Heyssel noted that Hopkins had required more than three years to reach the 9 ­percent level rather than the single year that the Car­ter bill provided. Further, Heyssel argued that variations among hospitals in size, location, bad-­debt burden, and mission, for which the bill made no allowance, would make it “difficult to impossible . . . ​for most of the industry” to meet the goal. He urged the committees instead to follow the example of Mary­land’s hospital rate-­setting commission, which had recognized such differences in establishing its rate review formulas.18 Notably, Title II’s capital controls evoked a broad range of support, from business groups such as the conservative National Association of Manufacturers, to insurers such as the Blue Cross Association and the Health Insurance Association, to state and local government associations, to the AFL-­CIO. Despite their other differences, all of ­t hese interests saw rising health care costs as a threat and concluded that limiting hospitals’ access to capital would slow not just current spending but also ­f uture growth. Even the AHA’s McMahon recognized the po­liti­cal salience of the issue and simply requested that a capital limit not be imposed on an “arbitrary, across-­t he-­board basis.” In contrast, the Association of American Medical Colleges, the FAH, and the AMA adamantly opposed capital controls, arguing that they w ­ ere too low, would prevent federally required safety improvements, and would lead to the rationing of care.19 Surprisingly, the Hospital Financing Study Group, which represented the tax-­exempt bond industry, took a softer position. Testifying for the group at the hearing, investment banker David Fearheller objected not to the capital limit itself (although he maintained it was too low) but to its allocation of capital on the basis of state population. Instead, Fearheller argued that capital shares should be assigned to states according to their ­actual need for hospital modernization and then distributed to specific proj­ects through rigorous certificate-­of-­need reviews by the still new health systems agencies. His industry, Fearheller explained, believed that “the better the planning, the sounder the investment. . . . ​Our experience tells us that good hospital planning lowers the cost of capital from private sources and results in savings to the reimbursement system.” Such a step “would put more teeth in the planning pro­cess.” Fearheller focused his most intense criticism on Title I’s

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reimbursement limits, which he argued would significantly raise the risk and hence the cost of hospital bond issues. This would, of course, also undermine business for the investment banks.20 Mary­land’s HSCRC chair Alvin Powers, in contrast, strongly supported the reimbursement cap but struck a similar note about linking capital expenditure limitations to toughened planning standards: “Our experience in Mary­land with planning agencies indicates that ­unless they are forced to recognize that ­there is [a] ­limited amount of dollars, they ­w ill continue to approve proj­ects which should not be approved.”21 Taken together, the similarity of Fearheller’s and Powers’s positions suggested that strong regulation and planning would not automatically lead to the collapse of the health care system’s financial under­pinnings. Dan Rostenkowski, though, had his own doubts. The administration’s recent change of position on a tax rebate proposal had led Rostenkowski to question ­whether the White House could be counted on to fight for hospital cost containment. As a result, he demanded assurances of Car­ter’s continued commitment. Above all, Rostenkowski simply lacked the votes in his subcommittee to advance the legislation, with opposition split evenly among Demo­crats and Republicans. Still, his interest in deficit reduction kept him from breaking completely with Car­ter, even to the point of challenging opponents of the administration bill to come up with something better. Meanwhile, Rostenkowski worked to defuse opposition with amendments amenable to the hospital industry.22 In late June, Califano reported to the president that Rostenkowski was ready to move the bill on to the full Ways and Means Committee.23 The Senate presented a dif­fer­ent challenge. As the year proceeded, Ted Kennedy had become increasingly frustrated with Car­ter’s unwillingness to move forward on national health insurance, even charging, in a May speech at the UAW convention, that “health reform is in danger of becoming the missing promise” of the Car­ter administration. Car­ter spoke to the UAW delegates the next day and promised to introduce national health legislation— in phases, beginning in early 1978.24 At a tense White House meeting with Kennedy and UAW president and Committee for National Health Insurance chair Douglas Fraser on June 16, Car­ter offered reassurance of his commitment to national health insurance but also emphasized the need to control hospital costs. This allowed a temporary and unsteady truce between the sides but no real agreement on how or when to move a national health insurance bill forward.25



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Despite this mounting tension, Kennedy still agreed with the administration about the importance of hospital cost containment. He quickly moved the cost-­containment bill through his health subcommittee and on to the full ­Human Resources Committee. Amendments along the way placed additional limits on hospital construction and equipment purchases and exempted small hospitals, federal hospitals, and hospitals that provided the only ser­v ices in their area. In a concession to ­labor, an amendment also made the bill’s wage pass-­t hrough mandatory rather than optional. The H ­ uman Resources Committee reported the amended bill on August 2.26 Kennedy nonetheless expressed frustration with what he saw as the administration’s lackluster effort to promote it. Car­ter responded with a letter to congressional leaders restating his commitment and urging prompt action on the legislation.27 Senator Talmadge’s existing cost-­control bill ultimately represented the greatest prob­lem for the Car­ter proposal. Ironically, it could have provided the administration with an opportunity. By the late spring of 1977, Talmadge’s proposal included a relatively sophisticated, bud­get review–­based, prospective payment system that grouped hospitals by type. This allowed relevant comparisons of cost levels. More broadly, it incorporated learning from state-­ level experiments. Talmadge’s revised bill also included hospital per­for­ mance incentives that both Kennedy and Rogers desired, and it toughened controls on hospital capital expenditures through potential cutoffs of Medicare and Medicaid payments. Significantly, Talmadge had also done far more than the administration to build support both inside and outside of Congress. He had secured at least the provisional buy-in of the FAH and AHA, both of which saw benefits for hospitals in the bill’s prospective payment approach, as well as the cosponsorship of nineteen senators. Th ­ ese included such influential figures as conservative Demo­crat Russell Long, liberal Abraham Ribicoff of Connecticut, and Republican Robert Dole of Kansas.28 Talmadge objected to the short-­term nature of the Car­ter approach and as a result proceeded with hearings on his own bill. Appearing as a witness, Califano promoted the administration proposal as a more ­v iable immediate option. Talmadge quickly countered by offering to extend his bill to cover all third-­party payers rather than just Medicare and Medicaid and to control not only patient reimbursements but also hospital costs for capital, energy, training, and equipment. He also noted that ­because his bill would now use fiscal year 1979 (instead of 1980) as a base year for f­ uture rate calculations, hospitals would have an incentive to look for efficiencies and cost savings immediately. By the end of the hearings, the Talmadge bill had broader

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support than the administration’s proposal and increasingly covered much of the same policy ground.29 As such, President Car­ter and Secretary Califano could have pushed for a version of Talmadge’s bill that incorporated the changes the senator had agreed to in the hearing. Such a system would have been broader in scope than the prospective payment system that Congress eventually a­ dopted in 1983, which covered only Medicare. Car­ter could have claimed a significant domestic policy victory early in his presidency, built functional alliances on Capitol Hill, implemented a foundational level of hospital cost control, and moved on to national health insurance. This was not the path the administration chose. Meanwhile, pro­gress in the House had broken down. Paul Rogers’s Health Subcommittee reported the bill, but it stalled before the full Commerce Committee. In Rostenkowski’s subcommittee, seven consecutive attempts to schedule a markup session for the bill failed to produce a quorum, and relations between Rostenkowski and the White House grew increasingly tense.30 In early November, Rostenkowski ended the cost-­containment effort for the 1977 session and called on the hospital industry to develop a voluntary cost-­ control program before the next session of Congress.31 This challenge and the industry’s ensuing response would shape the cost-­containment debate for the remainder of the Car­ter administration.

The Near Miss On January 30, 1978, the AHA, FAH, and AMA responded to Rostenkowski’s November request by jointly announcing a new “Voluntary Effort” that promised to reduce the rate of increase in hospital spending by 4 ­percent between 1978 and 1979 (from 16 ­percent to 12 ­percent), along with caps on new hospital beds and “restraint” on capital spending. The Voluntary Effort would be overseen by the three associations, plus Blue Cross–­Blue Shield, the Health Insurance Association of Amer­i­ca, the Health Industry Manufacturers Association, the U.S. Chamber of Commerce, and a “consumer con­sul­tant.” Implementation would be handled by state hospital associations and medical socie­ties. Ultimately, the Voluntary Effort relied on detailed, hospital-­level bud­get reviews to identify efficiencies and exercise spending restraint. It also asked suppliers to constrain the prices they charged hospitals and likely would have required antitrust exemptions to go into full effect.32 The Voluntary Effort thus represented a classic associational solution to a public prob­lem:



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groups of private actors proposing to work together through their industry organ­izations t­ oward a goal that government had identified but that would be pursued by the private entities, using grants of public authority as necessary. Rostenkowski immediately embraced the voluntary proposal, indicating in a February 1 speech to the AHA convention that he would amend the administration bill so that mandatory federal revenue limits would be triggered only if the Voluntary Effort failed to yield results. In his State of the Union speech, President Car­ter called for voluntary private-­sector efforts to control inflation in the economy generally, arguing that “a sincere commitment to voluntary constraint provides a way—­perhaps the only way—to fight inflation without Government interference.” Califano, however, publicly rejected the hospitals’ Voluntary Effort, pointing to the failure of such initiatives in the aftermath of Nixon’s cost controls. Privately, he told Car­ter that “the Rostenkowski proposal obviously is very attractive po­liti­cally,” but argued that the administration would do better to delay a compromise u ­ ntil ­after the Ways and Means Committee reported the bill, at which point it could work with the House leadership, as well as Kennedy in the Senate, to toughen it.33 As a result, Califano did not vigorously oppose Rostenkowski’s approach during subcommittee markup sessions. Instead, he and other administration officials recast the bill as an inflation control mea­sure rather than a prelude to national health insurance.34 His efforts proved unsuccessful. A ­ fter months of negotiations over ­whether the wage pass-­through adequately protected low-­wage hospital workers and w ­ hether similar exemptions should be added for energy, food, malpractice insurance, and other costs, the House Commerce Committee voted twenty-­two to twenty-­one on July 18, 1978, to replace the bill with a weak Republican substitute that lacked mandatory triggers. At the last minute an Illinois Demo­crat, Marty Russo, changed his position “for some yet to be explained reason” and cast the decisive vote for the Republican mea­sure. The action appeared to kill the compromise Rostenkowski bill.35 Car­ter himself ­later recalled the events as “a financial payoff deal” in which the AMA and the hospital lobby “­were able to buy enough votes to prevail.”36 In the Senate, however, action had quietly begun in the Finance Committee. In contrast to the previous year, the administration de­cided to use Talmadge’s more l­ imited bill, covering only Medicare and Medicaid payments for routine hospital costs (“­hotel costs”), as the basis for a renewed cost-­ containment push. A ­ fter the committee voted down the original Car­ter bill

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that Ted Kennedy had pushed through the H ­ uman Resources Committee in 1977, it turned to the Talmadge bill, approved it, appended it to a minor tariff bill, and on August 11 reported it to the full Senate, where any member could offer amendments. This created an opportunity to pursue Califano’s idea of melding the Voluntary Effort with mandatory triggers.37 Wisconsin senator Gaylord Nelson, with Kennedy’s support, offered such an amendment in September, effectively turning the Talmadge bill into a version of the Rostenkowski compromise: a two-­year voluntary period, with mandatory controls triggered if the industry failed to reduce the annual hospital revenue increase rate by 2 ­percent in 1979 and 4 ­percent in 1980. Nelson’s amendment included the mandatory wage pass-­t hroughs needed to retain l­ abor support, and it offered hospitals a sophisticated payment structure with fixed payments in the mandatory phase based on the a­ ctual operating expenses of each institution. Unlike the Talmadge bill, all payers would be covered, and any mandatory controls would cover all revenues rather than just h ­ otel costs.38 The hospital industry countered that the Voluntary Effort was working and that a single industry should not be targeted for inflation control. The Nelson amendment nonetheless gained the support of ­labor, the American Association of Retired Persons, the National Governors’ Association, small business organ­izations, vari­ous public health groups, and even the Health Insurance Industry of Amer­i­ca. This broader and more unified co­a li­tion reflected the efforts of Anne Wexler, Car­ter’s new special assistant for public liaison, to build constituency support for the president’s priorities.39 Gradually, the administration and its supporters won over key senators with arguments about the insufficiency of the Voluntary Effort and the importance of hospital costs in the inflation prob­lem. On October 12, with the support of both Talmadge and Kennedy, the Senate approved the Nelson amendment forty-­seven to forty-­two. Further amendments added controls on payments to hospital-­based physicians, and in a sudden and unexpected victory for the administration, the Senate approved the bill sixty-­four to twenty-­ two. Although Talmadge voted in ­favor, Car­ter congressional liaison Frank Moore reported the next day that the segregationist Georgia senator felt “forsaken.” 40 Herman Talmadge’s feelings aside, the Senate vote represented a significant win for Jimmy Car­ter, whose efforts in support of the Nelson amendment had been crucial. Still, multiple forces had combined to produce the victory. Kennedy had successfully lulled opponents into complacency by publicly indicating that he lacked the votes to pass the Nelson amendment, and



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as a result industry allies in the Senate did not deploy procedural delays and other stalling tactics. An exemption for hospitals with fewer than four thousand annual admissions further undermined re­sis­tance. The administration rallied private insurers, HMOs, local governments, community health organ­ izations, nurses, and other groups with warnings that a failure to control Medicare and Medicaid spending on hospitals would lead to cuts to other health programs. This co­ali­tion in turn pressured wavering senators. Fi­nally, Kennedy called in a promise from Majority Leader Robert Byrd to hold a floor vote on the issue—­a dramatic action that effectively forced a confrontation on the Senate floor. Timing represented a final, critical f­ actor in the passage of the Nelson amendment: few Senators believed that the House would act on the bill before the close of the legislative session.41 This expectation proved correct. When the Senate bill arrived in the House Ways and Means Committee, opponents regrouped and launched an intense lobbying effort against it. Most importantly, Anne Wexler’s coalition-­ building efforts proved less fruitful in the House, where the more local nature of members’ concerns made them easy marks for the hospitals. As Wexler ­later explained, “At the grassroots level the opposition was so well or­ga­nized and so influential that we could never do anything to dent it, and that’s ­because on ­every local hospital board was the president of the bank, the president of what­ever local community organ­izations t­here w ­ ere, the leading lights in all the religious organ­izations in town and so forth and so on. We ­were defeated outside the beltway before we ever got g­ oing.” Such voices had direct influence with their representatives, and with l­ imited time and a schedule already jammed with other bills, supporters had few tools to ­counter such attacks.42 More generally, the cost issue never generated a personal, emotional connection that had the power to shift the issue away from interest-­group politics. “We could never make ­people feel affected by the increase in hospital costs ­because ­there was always an intervener, the insurance com­pany,” Wexler observed. “Somebody ­else was paying the bills and they never felt the pain enough to get excited and exercised about it.” Speaker of the House Tip O’Neill tried to overcome this prob­lem by sharing a hospital bill given to him by a constituent whose son had fallen and smashed his front teeth, an injury that required an overnight hospital stay and generated a bill of more than $2,300—­t hreatening the f­ amily with financial ruin. President Car­ter shared the story in at least one speech. The issue, though, could not be personalized. “It was one of ­t hose ­t hings where you just ­couldn’t get the engine ­going,”

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recalled congressional liaison staffer William Cable. “­There was just no way to get any fire in anybody’s gut for it.” 43 Despite the efforts of the president, the White House staff, and administration supporters on the committee, Ways and Means repeatedly failed to get a quorum on the bill. Vote counts consistently fell four or five short of the number needed to move out of committee, and late on October 13, Moore glumly informed Car­ter that he needed to decide ­whether to push forward with the lobbying effort knowing that the “dead cat”—as he called it—­had ­little chance of being reported.44 By October 14, Califano, Moore, and Rostenkowski agreed that it would be better to use the pyrrhic Senate victory to build momentum for a new push in 1979 than to suffer a loss in Ways and Means. Hospital cost containment had died again.45 Nonetheless, the Senate’s passage of the Nelson amendment left the administration with a sense of optimism about the prospects for passing a bill in 1979. “The general point is that we have a r­ unning start on this issue,”46 Wexler wrote to Car­ter adviser Hamilton Jordan in December.

Health Security Returns By this point, however, the wider context of health care policy had grown increasingly complicated. Although Ted Kennedy continued to support the hospital cost-­containment bill, during 1978 he broke with President Car­ter on the timing and content of national health insurance legislation. This divide would shape the remainder of Car­ter’s presidency, the 1980 campaign, and the trajectory of health care policy—­and the hospital city—in the United States. Along with the Watergate moment of 1974, the failure of Car­ter and Kennedy to find an accommodation in 1978 marked one of two crucial lost opportunities during the 1970s to shift the debate over health care away from the path it had followed since World War II. Th ­ ese episodes represented twin tragedies that left the nation with incomplete health coverage and excessive health care costs: the contextual ­factors that defined the hospital city and the health care nation. The fault lines that presaged this fissure had long been evident. A committee led by HEW deputy secretary Hale Champion had been working on the outlines of a national health insurance plan since April 1977, but serious disagreements had emerged within the administration over how, when, and



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even ­whether to proceed. Council of Economic Advisers chair Charles Schultze, Trea­sury secretary Mike Blumenthal, and Bud­get director James McIntyre hoped to delay the bill ­until ­after the midterm elections or possibly to abandon it completely. Their view reflected the priority that they, along with the president and conservative Demo­crats in Congress, placed on fiscal restraint and fighting inflation. They also did not believe national health insurance could pass and a­ fter a difficult first year wanted to avoid another legislative loss. At least some members of Stuart Eizenstat’s White House domestic policy staff shared ­t hese po­liti­cal concerns. Car­ter himself preferred to wait u ­ ntil 1979 but feared that this would break his commitment to pursue legislation sooner. As a result, he accepted a suggestion from Califano and Eizenstat that he release a statement of princi­ples in early 1978, with development of a fully formed plan to follow.47 Kennedy, the u ­ nions, and other liberals saw the issue differently: not as a vast new burden but as the fulfillment of a promise made during the New Deal, advanced by President Johnson, and reinvigorated by Walter Reuther.48 In 1977, Kennedy and his supporters had grudgingly accepted that hospital cost containment could be a helpful precursor to national health insurance, but now they demanded that the two efforts proceed together. For them, forcing members of Congress to start the legislative pro­cess and take a position on national health insurance before the midterm elections was exactly the point, as polls showed strong support for the idea among voters. Meeting with Califano on December 2, Kennedy made clear that he saw the president’s plan to announce princi­ples for what it was: a delaying tactic. In Kennedy’s view, Car­ter had already outlined basic princi­ples in his National Student Medical Association speech during the 1976 campaign.49 Car­ter health policy adviser Peter Bourne agreed, arguing that the UAW had made the issue their top priority and that delay would be perceived as Car­ter reneging on his campaign promise. “The potential po­liti­cal loss for failing” to move ahead, Bourne closed, “would be substantial.” 50 A few days before Christmas 1977, New York Times columnist Tom Wicker confirmed Bourne’s warning: the u ­ nions believed that delay would doom national health insurance “for years to come,” and they stood ready to back Kennedy in a 1980 primary campaign against the president.51 But Kennedy had prob­lems of his own. Although he enjoyed the backing of ­labor, he had ­little support in Congress. When Califano raised the national health insurance issue with key Demo­crats such as Rostenkowski and Ways

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and Means chair Al Ullman of Oregon, he found complete re­sis­tance. Ullman commented that “the President is in the world of enchantment” for even suggesting the possibility.52 Senators Ribicoff, Talmadge, and Long had already introduced an alternative that would expand Medicaid eligibility while adding coverage of catastrophic medical expenses. Although unlikely to pass, the Long-­Talmadge-­R ibicoff bill provided po­liti­cal cover for Demo­ crats unwilling to support Kennedy.53 President Car­ter saw his task as mediating between the two sides: Kennedy, speaking broadly for l­abor and the liberal wing of the party; Long, as the representative of the business community and specifically the health care industry. James Mongan, who had moved from the Senate Finance Committee staff to HEW during this period, ­later observed that “Car­ter was trying to find, I guess you’d call it a sweet spot. Turned out to be a sour spot, I guess, in the ­middle.”54 Seeking to deescalate the situation, Eizenstat initiated discussions aimed at finding compromise. By early March, Kennedy and the u ­ nions tentatively accepted cost-­sharing and a role for private insurers as long as the program remained universal in coverage and comprehensive in its benefits.55 This represented a significant concession on Kennedy’s part, so much so that Representative Jim Corman, his cosponsor in the House, refused to support it.56 In late May, Califano highlighted two options for Car­ter: e­ ither a narrow, targeted initiative that would federalize Medicaid and provide catastrophic coverage for c­ hildren and the poor, or a broad, universal program that relied on an employer mandate, federalization and expansion of Medicaid, and catastrophic cost protection for anyone not other­wise covered. The broad option would include provider reimbursement reforms and cost controls, and it would be phased in over as long as a de­cade. “Triggers” built into the legislation could delay each new stage should economic conditions prove unfavorable. Califano strongly favored the broad approach, arguing that it honored the public commitments Car­ter had made during the campaign and private promises made to Kennedy and the l­abor leaders. He also made the impor­tant point that “only with a broad approach ­will ­t here be enough governmental leverage over basic reimbursement mechanisms to implement cost containment mea­sures that have real bite.” This argument reflected the real­ity that cost and coverage issues w ­ ere deeply intertwined: the more ­people the government covered and the more bills it paid, the greater its leverage with providers. National health insurance, in this view, represented not a further driver of inflation in the health care sector but the best tool for containing it.57



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Schultze and McIntyre, along with Blumenthal, adamantly opposed this view. They maintained that ­either strategy would undermine the administration’s credibility on inflation and fiscal restraint. Gains in cost control, they pointed out, remained hy­po­t het­i­cal, but spending increases would be very real. Their worries about inflation involved not only domestic considerations but also international economic concerns. The anti-­inflation fight required coordinated action across countries. Adopting a potentially inflationary program like national health insurance, the economic advisers warned, “would call our commitments into question and could unravel the international economic alliance.” The global interconnectedness of the inflation prob­lem thus weighed on Car­ter’s economic team during the debate over domestic health care policy. More generally, Schultze and McIntyre dismissed Califano’s claim that the broad approach would provide a basis for cost control: “Since effective control of costs requires control of incomes in the health sectors, ­t here ­will be ­great po­liti­cal re­sis­tance to enacting any cost controls from doctors and from hospital employees and their u ­ nions.” To this list of opponents, of course, they could have added the hospital industry itself. Just as it had during the Nixon years, the hospital city and the health care costs it was built on represented a constraining ­factor in the national health insurance debate.58 On ­t hese grounds, Schultze and McIntyre recommended a third option: the indefinite deferral of national health insurance u ­ ntil economic and po­liti­cal 59 conditions allowed. The president himself felt increasingly trapped in the “sour spot” between the factions. He believed that he had to keep his campaign promises, but he also sought to maintain credibility as an inflation fighter. Car­ter further recognized the emerging antitax sentiment evident in California’s recently passed Proposition 13 ballot initiative limiting local property tax increases. Congressional conservatives, meanwhile, reinforced ­these instincts. Seeking to balance conflicting impulses, Car­ter de­cided in early June to adopt a broad program that would be “phased in as we could afford it in terms of inflation, cost control, and administrative feasibility.” He also accepted Califano’s timetable of princi­ples and a tentative plan in 1978, with legislation to follow in 1979.60 Initially, Kennedy seemed ready to accept a phased approach as long as the program had a definite timetable and comprehensive, universal benefits, but differences soon emerged over the triggers that could delay implementation of ­later phases. Over the summer, Kennedy and the ­unions concluded

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Figure 18. ​Senator Ted Kennedy and President Jimmy Car­ter meet in the Oval Office to discuss the timing of the Car­ter administration’s national health insurance proposal, June 26, 1978. In a briefing memo for this meeting, Car­ter’s advisers had recommended that he “not give Senator Kennedy any definitive answers nor encouragement. Your purpose in this meeting should be to prevent a rupture between yourself and Senator Kennedy at this time.” Photo­graph courtesy of Jimmy Car­ter Presidential Library. Quotation: Stu Eizenstat and Joe Onek, “Meeting with Senator Edward Kennedy; Monday, June 26, 1978, 5:00 p.m.,” 25 June 1978, Container 82, Folder “6/26/78,” JC-SSO.

that triggers for delay, instead of kicking in automatically based on economic conditions, should require a presidential request followed by congressional approval. Eizenstat argued that “this would make any trigger meaningless.” Kennedy’s terms soon hardened further ­until he rejected the trigger concept entirely and called on the administration to move a plan forward before the midterms.61 Key congressional Demo­crats, however, remained opposed. Califano and Eizenstat reported on July 22 “that even liberal Demo­crats have requested that we delay the proposal. Although the UAW may believe other­ wise, the time is not right to make national health insurance a major campaign issue.” 62 When Eizenstat and Califano reached out in search of another



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compromise, Kennedy cited the congressional setbacks on hospital cost containment as a justification for accepting only a single bill with specified implementation dates for any phases. To break the phases into separate bills, he argued, would create multiple opportunities for Congress to prevent the system from ever becoming comprehensive.63 Kennedy fi­nally agreed to a White House meeting in late July. Car­ter acknowledged that he had not fully met his promise on timing but indicated that he would announce the princi­ples of his bill the following day. The core difference between the two, however, remained unresolvable: Car­ter wanted national health insurance eventually but believed that the imperative of fiscal responsibility meant that he had to maintain flexibility based on economic conditions. Kennedy, in contrast, saw the creation of a new entitlement to health coverage as imperative regardless of conditions. Compromising that princi­ple would undermine the interest-­group support necessary to succeed. Kennedy did agree to delay the bill u ­ ntil ­after the midterms and to review the administration’s plan in detail before taking a public position. Car­ter recalled in his memoirs that “we shook hands and parted in fairly good spirits.” 64 Kennedy immediately began receiving inquiries from the press and from supporters about the meeting. He called Califano and asked if the secretary could speed the release of the administration’s princi­ples to that after­noon. Califano responded that his team could not possibly be ready before the next day. Kennedy then called an immediate news conference. Surrounded by ­labor, se­nior citizen, and liberal religious leaders, he denounced the president’s “piecemeal” approach and announced that he would introduce his own comprehensive bill. Furious, Car­ter and his advisers viewed Kennedy’s move as an act of overt betrayal. As Car­ter ­later put it, “Any hope of cooperation was gone.” 65 In his weekly report to the president, Eizenstat wrote, “I think we are clearly on the right side of this issue—­wanting NHI [national health insurance] but in a cautious, fiscally responsible way. It is impor­tant that we maintain that posture and not be tempted to show how ‘­really close’ to 66 Kennedy’s extremely expensive proposal we can come.”  The episode marked a key step t­oward Kennedy’s 1980 effort to wrest the Demo­cratic nomination from the president. This split took dramatic form in December at a disastrous Demo­cratic Party midterm convention in Memphis where Kennedy debated Califano and Eizenstat on a health care panel moderated by Arkansas governor Bill Clinton. With a withering attack on the admin-

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istration’s failure to move forward on national health insurance, Kennedy broke with the president and rallied the party’s liberal wing to his cause.67

Car­ter’s Final Attempt In 1979, the administration tried again to pass both cost containment and national health insurance legislation. It found no more success than it had during the previous two years. Throughout the winter and spring, administration officials negotiated with leading congressional Demo­crats about the shape of a pos­si­ble national health insurance bill. They gained the support of Russell Long on the right, along with key liberals such as Tip O’Neill, Charlie Rangel, and Jim Corman, who had previously introduced Kennedy’s Health Security bill in the House. By May, they had crafted a compromise “phase I” bill that combined Long’s catastrophic cost-­coverage proposal with a mandate for employers to provide a basic plan covering hospital, outpatient, preventive care, and ­mental health costs, with subsidies for low-­income workers. A new “Healthcare” program would federalize Medicaid and combine it with Medicare to provide coverage for the el­derly and poor. Cost control would include not only the separate hospital cost-­containment bill but also a $3 billion annual limit on hospital capital expenditures and a prospective fee schedule for physicians. In retrospect, the Car­ter plan would have marked a significant reshaping of the U.S. health care system and would have anticipated aspects of the Affordable Care Act that passed three de­cades l­ater. It would have moved health care ­toward greater equity, while significantly increasing the federal government’s capacity to control costs. Kennedy, though, refused to accept the concept of multiple bills. His own single-­stage bill, incidentally, now relied on an employer mandate and administration by private insurers and, significantly, a national health bud­get to limit costs. The latter would become a key part of the Physicians for a National Health Program proposal thirty years l­ater. At the time, though, neither approach made any pro­ gress in Congress. On November 7, Kennedy officially announced his candidacy for president, delivering a blistering attack on Car­ter’s approach to health care. Russell Long made a final attempt to pass a bill in 1980 before abandoning the effort as the economy worsened and the presidential campaign intensified.68 The hospital cost-­containment effort met a similar fate. When Car­ter announced his national health bill on May 12, he noted that he had tried for two years to pass hospital cost containment and argued that “Congress must



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enact a strong hospital cost containment bill if the new National Health Plan is to become a real­ity.” 69 Reflecting the continuing centrality of the cost prob­ lem, the administration in March had introduced a new cost-­containment bill similar to the mea­sure that had passed the Senate the previous fall. It offered extensive exemptions for hospitals and pass-­throughs for wages and other key costs, and required mandatory controls only if voluntary efforts failed. A White House task force on health policy developed a carefully coordinated outreach strategy that presented the bill “as an integral and crucial part of the President’s anti-­inflation program” and as a “ ‘test vote’ to judge the Members of Congress on their support of the President’s anti-­inflation program.” 70 Even with ­t hese efforts, the bill could not overcome an equally sophisticated industry counter-­campaign. The hospital lobby claimed that the Voluntary Effort had begun to succeed and raised fears that hospital cost containment would curtail the availability of ser­v ices while creating “a regulatory nightmare.” The administration countered that cost increases had slowed only in states with mandatory control programs, while rising everywhere ­else. ­Actual cost data supported this position, and in mid-­June the Senate L ­ abor and H ­ uman Resources Committee reported the bill. A month l­ ater, however, the Senate Finance Committee rejected it outright and instead reported a version of the Talmadge bill that placed limits only on Medicare and Medicaid payments for routine costs. Pro­gress in the Senate soon stalled.71 On the House side, both the Ways and Means and Commerce Committees reported weakened versions of the administration bill, adding a sunset provision, a “one-­house veto” that allowed e­ ither the House or Senate to block the mandatory phase, and exemptions that intentionally covered specific hospitals in key members’ districts. Car­ter chose to portray the modifications as a reasonable accommodation of industry concerns and launched an all-­ out push to pass the bill in any form.72 As part of this effort, a co­a li­tion that included a range of groups, from the United Steelworkers and Group Health Association of Amer­i­ca to the American Association of Retired Persons and National Farmers Union, ran a full-­page advertisement in the Washington Post that emphasized the damaging effects of hospital cost inflation as well as the under­lying “non-­competitive environment” of the U.S. health care system.73 Car­ter personally ­shaped the effort to appeal to centrist Demo­crats and moderate Republicans. Shortly before the final House vote, he rejected as “very poor” a draft presidential letter to House members attacking the Voluntary Effort. Car­ter instead preferred to pre­sent the bill as a test of members’ anti-­inflation commitment and ordered Eizenstat to “redraft using

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conservative arguments which I’ve been using in meetings with Congressmen.” ­These included the bill’s funding for state programs, its voluntary stage, and its correction of prob­lems in ­earlier versions.74 Meanwhile HEW, now ­under the leadership of Patricia Harris a­ fter the president’s controversial August firing of Joseph Califano and other cabinet members, did not take an active role in the administration’s initiative—to the growing frustration of White House staff members.75 Car­ter’s all-­out effort proved to be of no avail. Although a number of key Demo­crats backed the bill, the House Rules Committee first delayed a rule for floor debate and then issued a rule that allowed a vote both on the bill and on a weak substitute sponsored by Missouri representative Richard Gephardt (a rising Demo­crat star and usually a Car­ter ally). On November 15, 1979, ninety-­nine Demo­crats broke with the president in a 234-­to-166 vote against the bill. Gephardt’s substitute, which offered ­limited funds for state cost-­control agencies and for a commission to study the prob­lem, passed instead on a 321-­to-75 vote.76 Car­ter himself saw the repeated failure to pass cost containment as a critical loss, “one that keeps sticking in my mind” as indicative of his troubled relationship with Congress and of the problematic power of industry lobbying groups.77 Ultimately, both politics and ideology divided Car­ter and Kennedy. As po­liti­cal rivals, neither felt they could accept the other’s bill. Even more, though, a basic ideological rift separated the two. Economist Rashi Fein, who served as technical director for the Committee for National Health Insurance (and who a de­cade before had discussed the hospital industry’s power with Kermit Gordon in a Brookings elevator), observed that “in his heart of hearts, Kennedy does not need a role for the insurance companies,” although he might accept them out of po­liti­cal necessity to advance a bill. In contrast, Fein observed, “When Car­ter was saying, ‘I want a role for the insurance companies,’ he was not making a po­liti­cal statement, I think he was making the statement about what he envisioned was this wonderful public/private mix and so on.” 78 The “so on” reflected Car­ter’s entire experience in Georgia, where he had built his po­liti­cal c­ areer advancing a series of public-­private economic development efforts in rural parts of the state.79 Although Kennedy gave on that ideological divide, he proved unwilling to go the additional step of giving a conservative Congress, which increasingly shared Car­ter’s view of government as an agent for private-­sector development, a series of potential vetoes over the ­later stages of a comprehensive plan that he already saw as compromised in its basic policy content.



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This dynamic led Kennedy’s supporters to feel they had been betrayed by the president. “The t­ hing that killed it was Jimmy Car­ter,” recalled Max Fine. ‘When he made the commitment to [the UAW], I think he meant it, but he ­didn’t carry through. Maybe he c­ ouldn’t. But he was the President that we ­were all banking on to lead the country to national health, ­because, since Harry Truman, he was the first one who r­ eally meant it—or seemed to mean it.” Yet even Fine acknowledged that Car­ter was trapped “in the quicksand of inflation.”80 In the health care sector, hospitals generated much of that inflation. Although perhaps po­liti­cally unrealistic, even naïve, Car­ter’s attempt to begin with hospital cost containment had been an acknowl­edgment of the impossible dilemma at the core of the health care debate: the system cost so much and t­ hose costs had become so intertwined with the economy and the livelihood of so many Americans that achieving the dream of national health insurance remained tremendously difficult. At its core, the debate was about costs and all that they meant in the hospital city. Kennedy’s dream, as he famously put it at the 1980 Demo­cratic National Convention, might never die—­but it had been compromised.

Federal Cost Control, at Last, Sort of . . . When Jimmy Car­ter left office in January 1981, it seemed that the pursuit of federal hospital cost regulation, much less national health insurance, had come to an end. Car­ter’s successor in the White House, Ronald Reagan, had campaigned on a promise to “get government off the backs” of the American p ­ eople. The regulation of a major economic sector like health care did not figure anywhere in such a promise. Cost regulation, however, did arrive u ­ nder Reagan. And it did so in part ­because of economic forces and po­liti­cal dynamics rooted in the failed Car­ ter effort. First, the aftermath of Car­ter’s hospital cost-­containment failure proved that the industry’s Voluntary Effort had been ­little more than a po­ liti­cal tactic to block legislation. With the threat of federal action removed, the Voluntary Effort faded, and hospital costs soared again, rising 18 ­percent in 1981 alone. This cost increase undercut the industry’s clout in Congress, particularly when combined with the growing pressure placed on federal health spending.81 Second, the technical capacity to standardize, monitor, and then regulate hospital payment practices reached a new stage of maturity—­a nd

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practicality. This development had its roots in the state-­based rate-­setting and rate-­review initiatives of the 1970s and, in par­tic­u­lar, in a payment experiment in New Jersey. In that case, the state government had set the rates that hospitals could charge to the New Jersey Blue Cross plan, while rates charged to commercial insurers remained un­regu­la­ted. As a result, hospitals soon engaged in a practice that would become known as cost-­shifting: allocating costs previously charged to Blue Cross over to patients covered by commercial insurers, and then charging them higher prices. Forced to increase premiums, t­ hose insurers lost business to Blue Cross. The commercial insurers in turn called on the state to set hospital rates for all payers (as in Mary­land), not just Blue Cross.82 Conservatives in the state legislature rejected this option on the grounds that it constituted an unacceptable intervention in the market. Instead, the state legislature ­adopted a model that had been developed by a team of health policy researchers at Yale during the early 1970s. Based on their analy­sis of 500,000 patient rec­ords, the Yale team categorized each patient diagnosis into hundreds of categories known as diagnosis-­related groups (DRGs). Each resulting DRG could be assigned a code and a corresponding payment. DRGs, which relied extensively on the emerging power of computer-­based data analy­sis, had the effect of removing mystery and art from medical payment and hospital administration. Using data about DRGs, hospitals could be directly compared and mea­sured, and the claims of administrators about having sicker patients or other cost justifications could be empirically assessed. This development also meant that New Jersey could use DRGs to implement a full prospective payment system (PPS) for hospitals. ­Under PPS, reimbursement would no longer consist of after-­t he-­fact, cost-­based payments to hospitals but instead would be set according to a predetermined schedule for the most appropriate treatment of a given diagnosis. More-­efficient hospitals would prosper, as their costs could drop below the set payment; t­ hose with higher costs would suffer, as they would receive only the fixed amount. New Jersey ­adopted such a system in 1980 as a solution to its regulatory crisis. Mary­land’s HSCRC also deployed a version of the DRG system, and Georgia began using one in a 1981 Medicaid pi­lot. Preliminary results showed a slowing in the rate of hospital cost growth.83 Through the 1970s, prospective payment had been viewed as an impor­ tant potential tool for cost control at the federal level. ­Until the latter part of the de­cade, however, the technical capacity to implement it had remained uncertain. Herman Talmadge’s Medicare cost-­control bill had proposed such



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an approach, and part of the Georgia senator’s opposition to the Car­ter bill had been based in the legislation’s lack of a prospective payment component. As a result, HEW’s Office of Planning and Evaluation began working intensively on the development of a DRG-­based payment system with the intention of replacing Car­ter’s proposed limit on the growth rate of per-­admission cost with a “diagnostic-­specific case-­based payment system.” Califano repeatedly testified about that objective, and Karen Davis, who served as assistant secretary for planning and evaluation, recalled that DRGs represented a “a dif­fer­ent—­a nd I think better—­methodology, but one that just ­d idn’t exist back in ’78 when we ­were working on it.” Davis, however, maintained that the Car­ter effort represented a critical federal precursor to the prospective payment systems of the early 1980s.84 In contrast to the Car­ter administration’s direct assault on hospitals, cost control in the Reagan years crept stealthily into the system, through the back door of federal Medicare payment policy. The pro­cess began in August 1982 when Congress and the Reagan administration agreed on the Tax Equity and Fiscal Responsibility Act (TEFRA). Although primarily intended to correct flaws in the tax code, TEFRA implemented unpre­ce­dented changes in federal health care policy. Along with removing constraints on HMOs and strengthening professional standard review organ­izations, TEFRA capped Medicare reimbursements to hospitals, placing limits on what Medicare would pay u ­ nless costs w ­ ere controlled through another mechanism. The proposed Medicare limits formed a sort of “doomsday device” built into the legislation. TEFRA also required HEW to develop a proposal for a new PPS for Medicare, to be submitted to Congress within five months. Focusing on Medicare alone rather than on all payers as Car­ter had done helped to blunt the hospital industry’s ability to fight the new caps, as did the cost spiral that had followed the end of the Voluntary Effort.85 If implemented, prospective payment would turn off the TEFRA doomsday device. But its ­actual creation depended on the intersection of TEFRA with an emerging crisis in both Medicare and Social Security. With federal revenues declining due to a recession and Reagan’s 1981 tax cuts, official estimates judged both the Medicare and Social Security trust funds to be less than a de­cade away from depletion. The situation raised difficult questions about the government’s ability to meet even short-­term benefit promises, let alone f­ uture commitments. In May 1981, following drastic cuts in domestic spending (including to health programs), the Reagan administration unveiled a plan to cut Social Security benefits, particularly for early retirement. The

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plan produced a bipartisan firestorm. Speaker of the House Tip O’Neill, for example, accused Reagan of trying “to balance the bud­get on the backs of the el­derly,” and Reagan’s plan died on arrival in Congress. Although the administration cuts had been largely ideological in motivation, the under­lying prob­lem of Social Security’s looming shortfalls nonetheless remained. At this point, Reagan retreated to the fallback position of a high-­level bipartisan commission, establishing the National Commission on Social Security Reform. Chaired by Alan Greenspan, the former chair of the Ford administration’s Council of Economic Advisers, and operating ­under the pressure of the 1982 midterm elections and heavy lobbying from interest groups, the commission made ­little pro­gress. By November 1982, Social Security had to draw from the Medicare and Disability Insurance funds to pay monthly benefits.86 With the crisis suddenly real, secret negotiations began between top-­level administration officials, Speaker O’Neill, and five commission members including Greenspan and former Social Security commissioner Robert Ball. Where the formal commission itself had failed in the glare of open politics, the backroom pro­cess succeeded, in a triumph of old-­school Washington deal-­making. The wider commission gave its approval to the resulting agreement, which included delays in cost-­of-­living increases, a phased increase in the retirement age from sixty-­five to sixty-­seven, and new taxes on the benefits of high-­income retirees. Together, ­t hese mea­sures resolved the immediate Social Security funding crisis.87 For all its wider importance for social policy in the United States, none of this directly affected the health care system. To Ways and Means Committee chair Dan Rostenkowski, however, it offered a po­liti­cally foolproof mechanism for implementing the most significant modification to the Medicare reimbursement system since the program’s establishment: in December 1982, Rostenkowski quietly attached an amendment creating a Medicare PPS (thus meeting TEFRA’s requirement that Congress do so). Secretary of Health and H ­ uman Ser­v ices Richard Schweiker had been won over to the prospective payment idea during his tenure as a Pennsylvania senator, during which he served on the Finance Committee’s Health Subcommittee. With his advocacy, the Reagan White House embraced Rostenkowski’s amendment in late February 1983, giving it bipartisan cover. Normally, such a major change in Medicare would have required a po­liti­cally charged, high-­profile fight. The critical nature of the Social Security fix, though, along with TEFRA’s impending Medicare payment caps, meant that the amendment passed without controversy. Congress, facing imminent emergencies and having no bet-



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ter options available, approved the bill as the 1983 Amendments to the Social Security Act.88 As enacted, the prospective payment amendment applied to Medicare’s hospital coverage section, Part B. It replaced the existing formula of cost plus 2 ­percent reimbursement with a new mechanism that relied on 467 DRGs, each of which had a unique code for billing purposes. Each code generated a specified fixed payment. If the hospital had an ­actual cost lower than the fee, the savings stayed with the hospital; if it had costs above the fee, it had to absorb them. The system was “prospective” in the sense that all parties knew in advance what the payment would be for a given diagnosis and associated therapeutic practice. In theory, hospitals would be encouraged to find the most efficient way to provide necessary care. With its emphasis on using incentives and the price system to change be­hav­ior, prospective payment marked a significant shift t­ oward market-­oriented approaches in health care policy. The symbolism of this feature, along with Schweiker’s support and the potential to cut spending, explained the Reagan administration’s embrace of what other­wise might be seen as a regulatory expansion of government.89 Significantly, the system did not extend to the reimbursement of hospitals’ capital costs. Th ­ ese continued to be factored into payments according to the old, cost-­based formula ­until 1992, followed by a ten-­year phase-in to the Medicare PPS. This represented a huge subsidy for hospital capital expenditures and pushed institutions further in the direction of competitive expansion and revenue-­seeking be­hav­ior. Tom Scully, president of the FAH and ­later administrator of the Centers for Medicare and Medicaid Ser­vices, noted that it produced “a massive building spree up into the early 1990s. . . . ​You’d have to be an idiot not to put up a new building ­every c­ ouple of years, b ­ ecause Medicare paid for such a big part of it.” With regional hospital planning weakened or eliminated, such construction often occurred without consideration of the under­lying need for the facilities and directly increased overall health costs.90 Other benefits for hospitals emerged as the new program came into operation. The Consolidated Omnibus Bud­get Reconciliation Act of 1985, for example, added Medicare disproportionate share hospital (DSH) payments for urban and rural hospitals that served high percentages of low-­income patients, who w ­ ere presumed to produce a higher cost structure for ­t hose institutions. Regular PPS, with its purposefully standardized payments, threatened to put such hospitals at a deep disadvantage, which the addition of DSH payments sought to reduce. In Medicaid, DSH payments had already been

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created through the 1981 Boren amendment to the Social Security Act. ­A fter growing slowly though the 1980s, DSH payments surged between 1990 and 1993 as states developed creative and sometimes exploitative ways to expand their federal Medicare and, especially, Medicaid revenues. For a time, they became a critically impor­tant source of revenue for qualifying hospitals, as well as an ongoing source of controversy. Although well intentioned, DSH payments in practice marked a new level of politicization of Medicare, as well as another step in its evolution t­ oward a form of broad subsidization for the health care system generally—­and for hospitals specifically.91 Such features meant that in contrast to their e­ arlier intransigent opposition to federal cost containment u ­ nder Car­ter, the hospital associations went along with prospective payment. The industry preferred prospective payment to the severe limitations that TEFRA would other­wise have imposed by direct regulation and recognized that ­t here was ­little chance of disentangling PPS from the larger and po­liti­cally unassailable Social Security fix. Creation of the Medicare prospective payment system thus depended on a delicate set of po­liti­cal arrangements, in which one piece of legislation (TEFRA) set up another (the prospective payment amendment), which in turn depended on the wider po­liti­cal and policy context of the Social Security crisis to produce the most significant reform of Medicare’s reimbursement system since its creation.92 In theory, at least, the new PPS provided a serious incentive for hospitals to control costs by dispensing only necessary care and ser­vices. Implemented in 1985, the new system initially seemed to work: length of hospital stays declined, and costs fell. But prob­lems quickly emerged. In par­tic­u­lar, hospitals engaged in a practice known as “DRG creep.” This occurred ­because patients often pre­sent with multiple diagnosable conditions. In the detailed coding of their reimbursement claims (itself a significant new source of hospital employment), hospitals frequently found some defensible latitude for choosing diagnoses with higher reimbursement rates, in effect allowing them to game the system. Other techniques emerged as well that created largely legitimate, if not always popu­lar, efficiencies and savings: shifting inpatient ser­v ices to lower-­cost outpatient facilities, or discharging patients ­earlier, or moving long-­term care ser­v ices into lower-­cost nursing home settings. Such strategies allowed hospitals to maintain a sicker patient population while encouraging faster turnover, as reimbursement levels remained the same for shorter stays ­under prospective payment. Overall, hospitals’ Medicare margins increased significantly in the early years of prospective payment.93



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Many of t­ hese efficiencies could be gained without diminishing quality of care and represented exactly the kind of cost-­saving innovation that prospective payment had been designed to encourage. But they also led to charges that some Medicare patients ­were being discharged prematurely or that hospitals ­were not accepting certain conditions at all ­because of DRG fee limits that they found inadequate. Congress responded by setting up a Prospective Payment Assessment Committee to adjudicate t­ hese and other questions, protect patients, and recommend ­future improvements in the program. Meanwhile, as hospital administrators put pressure on physicians to prioritize efficiency, tensions that echoed the divisions within hospitals a c­ entury ­earlier over who should control the practice of medicine reemerged: should administrators or doctors have such power? Now, however, they played out in the context of a large-­scale health care industry that represented a significant share of the national economy and that as a result formed the backbone of many local economies in the hospital city.94 The most serious prob­lem with the new PPS, however, was that it applied only to Medicare. Hospitals, of course, interacted not just with Medicare, as they would have had the federal program been a single-­payer system covering all Americans, but with all components of the mixed public-­private system that had evolved over the previous half ­century. This meant that over time hospitals could find ways to move costs around to other parts of the system, thus undermining the cost savings generated by Medicare prospective payment. The complexity of medical billing systems created the opportunity for such practices, as hospitals received reimbursement for depreciation on equipment and buildings, for physician and hospital ser­v ices (frequently for the same procedure), for lab ser­v ices, and for numerous other cost sectors. This meant that costs could be broken out in vari­ous ways, and hospitals soon figured out how to shift some of the costs that they could no longer bill to Medicare onto private insurers and self-­insured employers. This practice intensified a­ fter Congress reduced hospital payment increases in the second half of the de­cade (in response to high hospital profit margins). Such cost-­shifting led to higher insurance premiums and increasingly brought hospitals into conflict with business. Large companies responded by moving their employee coverage to HMOs and other forms of managed care that reviewed care decisions and often ­limited patient options to providers who agreed to lower payment levels.95 For all t­ hese limitations, prospective payment did partially control costs within Medicare: in 1981, Medicare covered 96 ­percent of hospital costs, but

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by 1990, that had fallen to 89 ­percent. Although not dramatic, the drop was significant in bud­getary terms. More impor­tant, it showed that cost control could be implemented without a collapse in quality of care and without Congress caving in to pressure from interest groups. Further changes followed prospective payment: in 1989, Congress imposed a Medicare fee schedule on physician payments, following essentially the same model as prospective payment. The resulting Physician Payment Review Commission proved even more assertive than its hospital counterpart. It adjusted physician fees according to a “resource-­based relative value scale” that created a uniform “standard for paying doctors based on objective mea­sures of the complexity, time, and resources involved in physician ser­v ices.” The scale also sought to eliminate unjustified disparities between specialists and primary care physicians, attempting to push medical care away from specialists and t­ oward primary care, which was cheaper and in many cases equally effective. From 1984 to 1989, Medicare physician fees had risen by 10.3 ­percent; in the five years ­after enactment of the fee schedule, they r­ ose just 5.6 ­percent.96 Prospective payment and the resource-­based relative value scale thus represented something significant: for the first time, Congress had successfully imposed a check on Medicare spending and stuck with it. In ­doing so, however, Congress had not found a way to address the larger cost prob­lems across the system, prob­lems rooted in the insurance com­pany model of health care finance, in provider payment practices, and in the capital-­focused be­hav­ior of hospitals. More broadly still, the PPS introduced some market forces, but in its application to just one part of the system and in the ­limited range of be­hav­iors that it could affect amid health care’s vast asymmetries of information and power, it could not create even a simulation of a true market. Yet the idea that such a market could be achieved—­and that it would solve the system’s prob­lems—­would continue to shape the health care debate for de­ cades to come.

CHAPTER 10

“A New Emphasis on Market Strategies”

A

lthough Carter-­era efforts to implement national health insurance or hospital cost containment had failed, the combination of continuing health care inflation and the looming real­ity of prospective payment meant that the U.S. health care system had begun to change. This placed significant pressure on hospitals such as Johns Hopkins. In par­tic­u­lar, policy makers and employers both sought out new orga­nizational and financing structures that would restrain hospital cost growth. By 1980, their efforts increasingly focused on health maintenance organ­izations (HMOs). When first authorized by Congress in the Health Maintenance Organ­izations Act of 1973, HMOs had been publicly subsidized but so highly regulated in terms of coverage and access requirements that they ­were unable to compete with traditional insurers. Beginning in 1976, however, Congress withdrew the mandates that had l­imited HMOs’ initial growth. In 1978, with the Car­ter administration’s support, Congress increased federal subsidies to HMOs. Employers in turn responded to evidence that large HMO networks such as Kaiser Permanente had lower rates of hospitalization, better preventive care, and lower administrative costs. They began offering incentives for employees to join HMOs. Meanwhile, the typical character of HMOs changed, from locally controlled nonprofits to for-­profit entities run by national firms.1 ­These developments had profound implications for hospitals in general and for large academic medical centers such as Hopkins in par­tic­u­lar. They would also lead to dramatic shifts in Hopkins’s relationship with the surrounding community and with the American state. The connection between HMOs and academic medical centers lay in hospital costs, which accelerated at a faster rate than costs for other health care ser­vices during the 1970s. By mid-­decade, they accounted for nearly 40 ­percent

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of health care spending.2 As a direct result, the new, cost-­focused HMOs aggressively sought to reduce hospitalization rates, limit unnecessary ser­v ices, and utilize low-­cost hospitals.3 ­These changes threatened the core revenue streams of not-­for-­profit hospitals generally but posed a par­tic­u ­lar challenge for high-­cost academic medical centers that cross-­subsidized their teaching, research, and charity care through extra charges to patients covered by third-­party payers. Any decline in such revenues undermined the institutions’ capacity to develop the capital needed to support expansion and modernization. Previously, the pursuit of capital had been motivated by a race for patients and insurance payments with suburban voluntary hospitals. Now, a new competitor emerged in the form of investor-­owned hospital management companies that began purchasing voluntary hospitals and melding them into for-­profit networks that could achieve economies of scale through increased regional market share and cost savings through administrative and operational cuts. Such efficiencies made the hospital chains attractive to the increasingly cost-­conscious health insurance market and particularly to the growing HMO sector.4 As a result, even prestigious medical centers such as Johns Hopkins faced serious questions about their ability to compete in an environment in which federal policy had shifted away from support for hospital expansion and in which employers had grown sensitive to hospital-­driven insurance premium increases. With its teaching and research commitments, its high proportion of low-­income and uninsured patients, and its capital-­intensive physical plant, Hopkins was the Baltimore area’s most expensive hospital. It thus faced a particularly severe threat from new competitors. As one Hopkins administrator explained to the trustees, “The new HMOs w ­ ill be using the lower cost hospitals when hospitalization of their members is necessary.”5 Such pressures forced Hopkins to make adjustments to its basic operational model, pushing it to behave even less like a charitable institution and more like a competitive market actor. This pro­cess had already begun in response to suburban hospitals, but in the 1980s, it would transform Hopkins, Baltimore, and, ultimately, the entire U.S. health care system. Ironically, the very embrace of competition ultimately added new responsibilities for Hopkins in community care, including for low-­income patients, that the city government could no longer afford and that the state and federal governments only partially funded. This represented a new extension of the associational state in Baltimore specifically and in the United States more



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generally: a nominally private institution—­Hopkins—­adopted responsibilities and core functions of the state, even as it embraced a new orientation ­toward the market. This was not a contradiction but a logical outcome of the interaction of the fiscal crisis of local government with the U.S. health care system and its under­lying financing. The embrace of an explicit market orientation alongside an expansion of the associational del­e­ga­t ion of governmental powers to the private sector would play out in issues of health care provision in East Baltimore and the metropolitan region as a w ­ hole.

Planning for Market Competition The competitive pressures on Johns Hopkins intensified in late 1981 when Hospital Corporation of Amer­i­ca, a Tennessee-­based for-­profit hospital chain owned by the f­amily of ­f uture Senate Majority Leader William Frist, expressed interest in managing and possibly acquiring the municipally owned Baltimore City Hospitals (BCH). Hopkins had extensive teaching and research affiliations with City Hospitals, and in early 1984, Hospital Corporation of Amer­i­ca instead took over Baltimore C ­ hildren’s Hospital.6 The same year, another Tennessee com­pany, HealthAmerica Corporation (founded by yet another Tennessee politician-­to-be, f­uture governor Phil Bredesen), launched a new HMO with four locations in the Baltimore region. Health­ America issued an indirect challenge to Hopkins when it described the Baltimore area as “a truly under-­served market.”7 For a region that was home to one of the world’s leading medical centers, this was a remarkable and telling statement. Hopkins had rarely, if ever, directly referred to the area from which it drew patients as its “market.” The distinction is significant and reflected the deep changes ­under way not just in the economics but in the perceptual organ­ization of health care in the United States. From this point forward, no provider—no ­matter how large, no ­matter how prestigious, and no ­matter ­whether they operated on a not-­ for-­profit or for-­profit basis—­would be able to avoid such a framework for thinking about their institutions. Soon, few in the field would even think to consider that alternatives might be pos­si­ble. Hopkins had not been caught entirely unaware of the threat posed by HMOs and for-­profit hospitals. Long-­range planning, in the form of a committee headed by Robert Heyssel that would consider “trends, projections and expected actions by both government and the private sector,” had begun in

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the spring of 1979.8 This effort intensified during a six-­month period in late 1981 and early 1982 in a way that reshaped the basic orientation of the medical institutions. In November 1981, with the Frists’ Hospital Corporation of Amer­i­ca seeking entry to the Baltimore area, Robert Heyssel and Steven Muller informed the hospital trustees that new economic pressures required Hopkins to act rapidly. Along with discussions about how Hopkins might assist with the management of the increasingly troubled East Baltimore Medical Plan, Heyssel had begun negotiations with Blue Cross of Mary­land regarding a pos­si­ble joint purchase of the Columbia Medical Plan (which Hopkins had or­ga­nized a de­cade e­ arlier before withdrawing in 1974). Heyssel also indicated that CareFirst, another Mary­land HMO, might be available for acquisition. ­Either action would provide Hopkins with a foothold in the HMO field. As Muller carefully explained, “It was impor­tant for the Hospital to become involved with health maintenance organ­izations, ­because such affiliations would assure continued referrals and continued associations with referral bases. . . . ​The health care environment is becoming more and more competitive.” The trustees endorsed Heyssel’s negotiations.9 A report on the effort by the trustees’ Bud­get and Operations Committee precisely illustrated the extent to which emerging competitive pressures had—­and had not—­reshaped thinking among the Hopkins leadership: “It is the position of this hospital that its f­ uture . . . ​depends on participation in or acquisition of HMOs, not necessarily for profit but as necessary for long term survival. The purpose of such involvement is to provide teaching and research opportunities for the Medical School and to maintain the best pos­si­ble patient mix and occupancy.”10 This was the stark position that Hopkins’s leaders perceived themselves to be in during the early 1980s—­a period of change during which nothing less than the institutions’ ­f uture existence might be at stake. Yet with its qualified eschewal of a profit motive—­“not necessarily for profit”—it also suggested that leadership did not yet conceive of the institutions, or possibly even the larger health care field, as being fully engaged as market actors. Muller emphasized this point to the trustees, noting that “financial gain would not be a consideration in entering into such ventures.”11 Yet the reference to “patient mix and occupancy” unknowingly suggested the core weakness in such a conceptual position. Maintaining the desired mixture and volume of patients in a competitive environment, in which the hospital leadership had already stated that the hospital’s survival could be at stake, would eventually be impossible to separate from revenue maximization and even profit seeking itself. In practice, of course, the hospital already



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had been engaged in such practices ever since it had turned to the bond markets for capital to finance the construction proj­ect. Fear represented a new motivation, but the pressures and incentives of health care capitalism had already impinged on the traditional conception of a nonprofit academic medical center. During the first few months of 1982, the development of a new Hopkins strategic plan made such tensions clear. Completed in early May 1982, the resulting plan provided a detailed overview of the hospital’s current operations, a careful analy­sis of the changing health care landscape, and a broad strategy for adapting to t­ hose shifts. Writing in the document’s introduction, Heyssel argued that the focus of the previous de­cade on the provision of advanced medical ser­vices would no longer generate a patient base large enough to sustain the hospital and medical school. Instead, Hopkins would have to develop “a complementary approach which broadens the marketing effort and reaches a wider range of patients with new ser­v ices.” To accomplish this, he urged the adoption of “a new emphasis on market strategies” at the medical institutions.12 Heyssel made no mention of the previous fall’s assurances that Hopkins would never act on the basis of the profit motive. His references to “market strategies” and “marketing efforts” suggested instead that Hopkins would not only acknowledge the competitive marketplace it faced but would attempt to use that market to enhance its traditional mission. The strategic plan carefully outlined the specific threats that pushed the medical institutions in this direction. Along with HMOs and hospital chains, Heyssel and his team identified a series of additional challenges to Hopkins’s traditional operations—­and financial base. One of t­ hese was the presence of voluntary hospitals in the suburbs that could compete with Hopkins for referrals. Located in growing, prosperous suburban communities, ­t hese hospitals had access to advanced medical technology that in previous de­cades would only have been available at large academic medical centers. Such purchases ­were made pos­si­ble by the industry-­wide emphasis on the use of debt to finance new facilities and equipment and in some cases by capital from private investors. “The result,” Heyssel emphasized, “is a much shorter period of time during which an institution like Hopkins can enjoy the benefits of being the only provider of such ser­vices in the community or region.” Suburban physicians in private practice increasingly referred patients to such community hospitals rather than to academic medical centers. The result was that “one of the biggest prob­lems which continues to plague [Hopkins] and its clinical faculty is how to retain appropriate share of the paying market.”

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This “paying market” referred to patients with Blue Cross–­Blue Shield, commercial insurance, or Medicare. It lay largely outside of East Baltimore, where over 42 ­percent of patients relied on Medicaid, which offered providers lower payments, particularly ­after the state of Mary­land imposed a twenty-­day annual coverage limit as a cost-­saving mea­sure in January  1980. Many East Baltimore patients had no coverage at all. According to this analy­sis, Hopkins had to win and keep patient referrals from suburban physicians if it was to sustain an adequate flow of patient revenue. Other­wise, Heyssel warned, “the prospect of the isolation of the Hospital in the inner-­city is real.”13 Implicitly, this reflected an intersection of race, metropolitan space, and hospital finance. The challenges that Hopkins faced played out across the region, reflecting deeply grounded racial and economic inequalities between city and suburb that in turn s­ haped competitive be­hav­ior among health providers and purchasers (particularly HMOs and large employers). Th ­ ese w ­ ere, of course, the same broad regional forces that the Price report had identified more than a de­cade before—­but they had greatly intensified. In some areas, such tensions extended not just regionally but globally. ­Because of Hopkins’s status as a center of advanced care, it drew referral patients from around the United States and in some cases the world. Acting si­mul­ta­neously as both a local and an international institution, the hospital strug­gled to meet the medical needs of often divergent patient groups. With more and more patients “with high technology, high cost diseases” in its patient mix, Hopkins staff wrestled over “increasing competition for beds and other resources between t­ hose patients which are largely referral patients and ­those which are from the community.” ­Those from the immediate surrounding community ­were quite simply less likely to be paying patients.14 Complex referral cases brought payment prob­lems of their own. The Mary­land Health Ser­v ices Cost Review Commission’s rate-­setting structure accounted for some of Hopkins’s costs and provided an overall check on rate competition between Mary­land hospitals. But in other ways, the HSCRC intensified the pressures of Hopkins’s case mix, as its rate-­setting model did not fully account for differences in the severity of patient illnesses. Hopkins’s disproportionate share of such patients also meant that it had to recruit high-­ priced specialists, which further increased the hospital’s costs. Fi­nally, Hopkins’s outpatient, subspecialty clinics continued to be extremely expensive to run, even as the hospital strug­g led to provide the medical school with enough ­simple patient illnesses to provide training opportunities in pediatrics and primary care. Together, t­ hese f­ actors meant that the f­ uture capacity



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to provide “a full range of medical care ser­v ices” at the hospital remained, a dozen years ­after the Price report, an open question.15 Heyssel’s answer, as presented in the “Strategic Plan for the Eighties,” was that t­ here ­really was no choice. ­Unless the Hopkins trustees wanted to step backward to what the institutions had been de­cades before, Hopkins had to embrace competition and maximize its still considerable advantages relative to other providers. This would require “entry into new markets for patient ser­vices through health maintenance organ­izations, special finance arrangements, and cooperative arrangements with other providers,” as well as the aggressive expansion and marketing of new and existing programs to generate revenue and attract patients. In par­tic­u­lar, Hopkins should seek “owner­ ship of a community hospital or hospitals.”16 This was a reference to negotiations already ­under way with the city about the f­ uture of BCH.17 The plan’s most far-­reaching recommendation, however, consisted of a step that would fundamentally change the operating structure of the medical institutions: the creation of a new corporate subsidiary. This entity would be jointly owned by the university and hospital and would “allow owner­ship and control of for-­profit and not-­for-­profit subsidiaries so that joint ventures with other providers and industrial firms can be pursued.” With such potentially revenue-­generating partnerships in place, the institutions’ critical teaching and research functions might be funded through “increased endowments, profits and subsidiary operations.”18 This went beyond the focus on capital development that had been growing since the mid-1960s and pushed Hopkins ­toward a fundamentally dif­fer­ent institutional identity: one that involved direct for-­profit operations.19 Heyssel soon offered a further rationale for the new subsidiary when he explained to the trustees that it would provide “legitimate sources of revenue for the Institutions which are not totally government controlled.”20 ­Here, of course, he referred to state Medicaid limits, the HSCRC’s fee structure, and the soon-­to-­be-­realized possibility that the federal government would impose limits on Medicare payments. With this embrace of market-­oriented strategies, Muller’s disavowal of the profit motive, offered just five months e­ arlier, had been abandoned u ­ nder pressure from investor-­owned hospital chains, HMOs, lower-­cost community hospitals, and state and federal cost-­control efforts. Most of the hospital and university trustees quickly embraced the new approach. Robert Levi, an active and influential trustee, argued that u ­ nless the institutions ­adopted the strategic plan, he “surmised that the institutions have prob­ably crested and are headed downhill.” Only a few raised objections.

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­ ese focused on the vague quality of the proposals to increase the patient Th base, as well as the hospital’s ­limited ability to control cost growth or to acknowledge that government action through the HSCRC had stabilized the hospital’s finances. Two trustees expressed concern about the hospital’s growing emphasis on advanced care rather than primary medical ser­v ices. As one suggested, Hopkins could instead “emphasize setting an example of making medical care available to more ­people at lower cost.” None of ­t hese objections received support from the other trustees.21 In April, meanwhile, Blue Cross had completed the purchase of the Columbia HMO Plan without Hopkins involvement. This provided the trustees with a clear and specific reminder of the challenges facing the institutions. In June, both the university and hospital trustees a­ dopted the strategic plan.22 Over the remainder of the 1980s, the resulting effort to compete for market share would complete the transformation of Hopkins—­like other large hospitals—­into a fundamentally market-­oriented actor. The hospital would consciously respond to competitive forces in the local, regional, and national health care marketplace in a way it had never done before. When it could, Hopkins would also act to shape t­ hose forces.

Takeover at EBMP This embrace of the market took place at the same time that mounting financial and po­liti­cal prob­lems plagued both the city-­owned Baltimore City Hospitals and the East Baltimore Medical Plan (the community-­controlled, nonprofit HMO that Hopkins had helped to establish in the early 1970s). ­These developments, which themselves reflected the irrationality of how the United States provides health care for the urban poor, ­shaped the specific manner in which Johns Hopkins ­adopted a market focus. The ensuing orga­nizational shifts would bring the hospital city to maturity as the po­liti­cal, social, and economic core of a new postindustrial city in which key public functions would be distributed to private, associational actors like Johns Hopkins, even as the latter took on characteristics of for-­profit businesses. Ultimately, this combination of market orientation and the assumption of delegated governmental authority would prove complementary rather than contradictory: the ability to deploy public power could support and sustain market power. EBMP’s strug­gles flowed from multiple sources: financial, po­liti­cal, and administrative. The program had hoped to break ground on a permanent fa­



“A New Emphasis on Market Strategies” 231

cil­i­ty by the spring of 1973, but site issues, cost increases, and tepid fund­-­ rais­ing delayed the opening u ­ ntil 1979. Lack of an attractive, modern fa­cil­i­t y constrained membership growth, which in turn ­limited revenues. Even more problematically, the capitation payments that EBMP received from Medicaid and the other funding agencies never fully covered the program’s ­actual costs.23 The state of Mary­land’s Medicaid rules further destabilized the program, as patient enrollments would automatically lapse ­a fter six months ­unless the patient actively recertified their membership; ­after an additional two months, the patient would be purged from the HMO system completely. Many patients would enroll with EBMP during an illness and then allow their enrollment to drop once they returned to health.24 This undermined the core, prepayment princi­ple that made HMOs financially ­v iable. The combined result was that EBMP fell b ­ ehind on payments to vendors and particularly to Johns Hopkins, its primary provider of hospital ser­v ices for program members. Hopkins extended $890,000 in credit, and other hospitals made similar arrangements. ­These loans allowed EBMP to operate but placed it deeply in debt. In an attempt to support the program, Hopkins froze repayments on its share of the debt as long as EBMP remained current on new charges. By the spring of 1981, however, EBMP again fell ­behind on payments.25 Po­liti­cally, EBMP was inextricably linked to its parent community organ­ ization, the East Baltimore Community Corporation (EBCC); its chair, State Senator Robert Douglass; and its president, City Councilman Clarence “Du” Burns. EBCC’s larger strategy had always been to leverage ­these po­liti­cal connections into community ser­v ices and economic development. Through the late 1970s, this approach appeared promising, as Douglass ascended to the state Senate and Burns emerged as a chief ally of Mayor William Donald Schaefer and in 1982 claimed the City Council chairmanship; in 1987, ­after Schaefer became governor, Burns briefly became Baltimore’s first Black mayor before losing the 1988 election to Kurt Schmoke.26 Such po­liti­cal power meant that EBCC, and by extension EBMP, could call on Mary­land’s Demo­cratic po­liti­cal establishment for aid when needed. In 1981, for example, Mary­ land U.S. senators Charles Mathias and Paul Sarbanes intervened repeatedly to block the U.S. Department of Health and ­Human Ser­v ices from requiring administrative changes at EBMP.27 But ­t hese po­liti­cal connections could also be a liability. Burns and Douglass had numerous enemies, particularly among the Westside Demo­crats, headed by Congressman Parren Mitchell and his influential f­ amily, who had long dominated African American politics in Baltimore.28 In such strug­gles,

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EBMP became a target. This became apparent during the summer of 1980, when EBMP’s medical group went on strike over salary and working conditions. In response, EBCC removed the entire physician team and replaced them with the Patuxent/Chesapeake Physicians Association, a physician group based at Columbia General Hospital and BCH. Most members of the new group had part-­t ime Hopkins affiliations.29 The following year, l­abor conflict intensified at EBMP, this time intersecting directly with the hospital city’s racial politics. In early 1981, Local 1199E followed up a December 1980 strike at Hopkins by organ­izing EBMP’s nonphysician staff. In August 1981, contract negotiations broke down over 1199E’s demand for a ­union shop and a 25 ­percent wage increase. Twenty-­t hree EBMP staffers, “composed mainly of ­women” and all earning the minimum wage, went on strike. EBCC responded by hiring replacement workers. Pickets continued, and strikers clashed in the street with patients and other EBMP employees. In a few cases, the tension led to physical confrontations and even sabotage of EBMP facilities.30 Douglass’s and Burns’s po­liti­cal ties now became a direct liability for the program. Opponents of the two politicians supported the workers and cited the strike and firings as evidence that Burns and Douglass had lost their connection to the community. The Watch Dog, a newspaper that described itself as “the Defender of the Black Community,” argued that Douglass and Burns “must face charges that they are betraying the entire community.” Johns Hopkins came u ­ nder fire as well for allowing a hospital official to serve as a negotiator for EBMP. Soon, protesters marched outside the EBMP building and Burns’s and Douglass’s offices. In one incident, strikers occupied Douglass’s office, and in another, police officers had to escort Burns from City Hall to his car. The Baltimore Afro-­American (which had close ties to Parren Mitchell) chided Burns and Douglass for engaging “in the kinds of hard posturing better suited to the arch-­capitalists who run General Motors or DuPont.” Similarly, the Watch Dog reported that the strikers “have labeled Douglass and ‘Du’ Burns the ‘Reagan’s,’ the ‘enemies’ of the East Baltimore community.” In contrast, it noted that “the striking workers are closely tied to the community—­they are residents.” In the aftermath of the strike, as well as the collapse of his efforts to redevelop East Baltimore’s American Brewery Com­ pany as a “light manufacturing, commercial and housing complex,” Douglass lost his 1982 bid for reelection to the state legislature.31 Administratively, EBCC’s management proved in­effec­tive at best and corrupt at worst. In late 1980, the federal Office of Health Maintenance Organ­



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izations rejected an EBMP grant renewal application on the grounds of “poor management and accounting procedures.” In the aftermath, EBCC granted Patuxent/Chesapeake full medical authority over EBMP but maintained a dominant administrative role.32 In June 1981, a Department of Health and ­Human Ser­v ices (HHS) investigation revealed serious prob­lems within EBCC, most notably that the corporation had been shifting its own administrative costs to EBMP, thereby “grossly inflating the health care costs.” Reviewing the findings for Mayor Schaefer, Baltimore h ­ uman development coordinator Quentin Lawson placed the blame squarely on Burns and Douglass and concluded that elected officials should not be ­r unning the program.33 ­Others shared t­hese concerns: the FreeState Health Plan, a new HMO with close ties to Blue Cross, indicated that it would not offer EBMP a contract ­unless it became “separate and distinct” from EBCC.34 At Hopkins, Robert Heyssel watched ­t hese developments with concern and even intervened on EBCC’s behalf. Following a series of critical program reviews that found “basic deficiencies” in EBCC’s management, the U.S. Public Health Ser­v ice (PHS) in late February solicited outside bids for a large grant previously held by EBMP.35 Heyssel protested the action, noting the prospect of improved per­for­mance ­under Patuxent/Chesapeake and informing the HHS regional health administrator that “Hopkins has a stake at least as substantial as the Federal Government” in EBMP. Privately, though, he warned Robert Douglass that, as the plan’s largest creditor, Hopkins would soon be forced to take over EBMP through Chapter 11 bankruptcy proceedings ­unless the prob­lems w ­ ere corrected.36 Although an emergency $1 million loan from the city staved off such a step, Hopkins administrators soon looked to draw EBMP into the hospital’s emerging competitive strategy.37 Closer ties and improved management would allow EBMP to help Hopkins maintain an adequate patient base as the latter confronted the emerging HMO market. ­After lengthy negotiations between EBCC and Hopkins leaders, the two sides reached an agreement in mid-­April 1982 u ­ nder which Hopkins’s newly or­ga­nized Broadway Medical Management Corporation (a for-­profit prototype of the larger subsidiary corporation envisioned in the strategic plan) would take over the day-­to-­day management of EBMP.38 As part of the deal, Hopkins forgave $1 million of EBMP’s debt while converting another $1.3 million into subordinated long-­ term debt with a low interest payment and no repayment of principal.39 The new arrangement, however, did not satisfy the federal government. In July, HHS denied the renewal of a $613,000 grant from the Community

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Health Center Program. Loss of the funds would leave EBMP almost entirely dependent on Medicaid. Mayor Schaefer, Robert Heyssel, and the state secretary of health jointly appealed to the secretary of HHS, Richard Schweiker. The secretary, though, backed out of a meeting with the del­e­ga­tion, sending instead a deputy secretary to deliver a message that no changes would be forthcoming.40 Insulted, Mayor Schaefer appealed directly to President Reagan during a presidential visit to Baltimore on July 13. In September, he pointed out that the proposed solutions devised by Hopkins and the city government “exhibit the cooperation efforts of the private sector and local government so often requested by you, Mr. President. . . . ​Yet when we give this approach our best effort, the missing component seems to be the federal government.” Reagan sympathized but deferred to HHS. Ultimately, the lobbying efforts produced a partial restoration of funding for the city of Baltimore as a ­whole, on the condition that the money had to be dispersed through health care centers other than EBMP.41 ­These developments pushed EBMP further ­under Hopkins’s control. In October, the city Board of Estimates approved a $1.5 million loan that would be used for cash flow and the retirement of EBMP’s existing first mortgage. This reduced annual financing and rent costs by more than $55,000. The loan agreement required the sale of the EBMP building to the city, which in turn would lease it to Hopkins’s Broadway Medical Management Corporation.42 EBMP would also be reincorporated as a 501(c)(3) nonprofit corporation fully separate from EBCC, although the latter would maintain repre­sen­ta­tion on EBMP’s board.43 Hopkins lobbied for the loan, as Heyssel explained to the city loan trustees, b ­ ecause “we honestly believe this is an activity worth salvaging and we think over time it can be in a position to prosper.” 44 Heyssel had been involved with the program since the late 1960s and understood the community’s need for basic medical ser­v ices as well as anyone ­else at Hopkins or in city government. At this point, however, what he ­really sought was to align ­t hose needs with Hopkins’s strategic goals. All this required extending the associational state in Baltimore. The loan funds came from a city bond issue that authorized their use to develop buildings “for industrial purposes.” This might have posed a prob­lem for a distinctly nonindustrial health clinic, except that in 1980 the Mary­land General Assembly had helpfully redefined the meaning of “industrial purposes” such that the term encompassed “­every type or branch of business, conducted for a livelihood or for profit, or conducted on a non-­profit basis.” 45 With health care rapidly replacing manufacturing as Baltimore’s leading economic sec-



“A New Emphasis on Market Strategies” 235

tor and source of livelihood, EBMP could legally qualify to use the bond funds. Hopkins would thus provide the public ser­v ice of low-­income health care through EBMP, and it would do so using the tax-­exempt financing capacity of city government. The significance of this step should not be understated: ­under conditions of local fiscal austerity, nongovernmental entities such as Hopkins increasingly acted as de facto state agents in urban areas where they w ­ ere the primary remaining institution. This transfer of governmental power would soon assist Hopkins in strengthening its position in a regional health care market by securing the patient referrals that EBMP generated without having to provide direct primary care in its own clinics and emergency rooms. At the same time, the relabeling of the bonds’ industrial purpose showed how new forms of health care capitalism had moved into the economic voids created by deindustrialization. Structural economic change had altered economic development policies that w ­ ere originally intended to support manufacturing in ways that supported Hopkins’s new market-­oriented strategy. The meaning of “industrial purposes” changed to fit such goals, broadening and shifting to encompass the hospital city. In turn, the city’s reliance on the economic power of health care grew—as did the dependence of residents on hospital jobs for basic survival in cities where few other opportunities existed and where the welfare state had been allowed to wither, if it had been built at all. With this, the power of Johns Hopkins and the hospital city only deepened. Yet making this model work presented substantial difficulties. EBMP faced three core challenges: high medical ser­v ice costs, high rates of disenrollment, and a lack of trust among members of the surrounding East Baltimore community.46 ­Under the leadership of Hopkins director of special proj­ects Barbara Hill, Broadway Medical Management first addressed the cost issue by laying off forty-­four of EBMP’s existing one hundred nonphysician staff members, renegotiating contracts for every­t hing from trash disposal to benefit plans, and replacing the Patuxent/Chesapeake Physicians Group—­whose work at EBMP had been plagued by charges of “patient neglect. . . . ​uncaring physicians and inefficient service”—­with in­de­pen­dent or Hopkins-­affiliated physicians working u ­ nder individual contracts.47 By reducing local employment and eliminating the group physician contract, ­these steps pushed EBMP further away from its origins as a community-­based experiment in prepaid group practice. But the actions also reduced the program’s costs.

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The disenrollment prob­lem proved more challenging, largely due to Mary­ land’s aggressive Medicaid eligibility procedures. During fiscal year 1983, EBMP lost an average of 211 members a month due to automatic Medicaid disenrollment.48 ­Little could be done immediately to change the state rules, but the combined effects of the new medical staff, refurbishment of the clinic fa­cil­i­ty, expanded marketing efforts, and enrollment from two outside HMO plans led to improvement. Implementation of an income-­based, sliding-­scale fee structure for non-­Medicaid patients and an incentive program for local small businesses helped as well. Enrollment increased slightly from a low of 7,037 members in December  1983 to 7,223 members in March  1984.49 In February  1984, a monthly report stated that “the Hopkins management team at EBMP believes that the last few months have shown that a Medicaid HMO can be run without financial loss.” Nonetheless, during this period Broadway Medical Management also began the pro­cess of qualifying EBMP as a full-­service rather than Medicaid-­only HMO. This would allow it to enroll patients in prepaid Medicare contracts, greatly expanding the potential patient base for the program.50 More generally, the enrollment stabilization also reflected improvement in EBMP’s third key prob­lem area: its relationship with the surrounding East Baltimore community. H ­ ere, delinking the program from Burns and Douglass proved critical. As Douglass’s failed 1982 reelection bid demonstrated, the two politicians and their organ­izations had become as much a source of resentment as empowerment in East Baltimore. Barbara Hill explained in a November  1983 “Action Plan” for EBMP that “the old po­liti­cal machine ­behind EBCC may have once reflected community feeling, [but] it no longer does. East Baltimore housing and neighborhood organ­ization leaders as well as area ministers feel strongly that the EBCC Medical Plan leaders took advantage of them, showed ­little concern for patient care, and badly mismanaged assets which should have been used to satisfy community needs.”51 While this perspective of course came from a Hopkins administrator, Hill at the time had extensive day-­to-­day involvement at EBMP as well as frequent interactions with community members. Few defenders of EBCC came forward during this period. Activist energy had instead shifted to younger leaders such as Lucille Gorham. Hill and Broadway Medical Management placed extensive emphasis on outreach to residents and community organ­izations with the goal of rebuilding trust and increasing enrollment. Coordinated with the broader drive to improve the quality of medical ser­v ices at EBMP, t­ hese efforts ranged from creating internships for students in the Dunbar High School health ­careers



“A New Emphasis on Market Strategies” 237

program (which Hopkins had helped to or­ga­nize in the mid-1970s) to holding health and nutrition seminars for community groups. In some cases, ­t hese events produced immediate results, such as increased participation in the health center’s teenage f­amily planning classes ­after EBMP held a “Vo-­ Tech Day for Teens.”52 In all t­ hese efforts, Hill emphasized rather than hid EBMP’s Hopkins connections, believing that for most patients the tie to Hopkins suggested that professionalism had replaced patronage at EBMP. Hopkins had been considering a formal takeover of EBMP since at least the late fall of 1983.53 In March 1984, Hill suggested to Heyssel that such a change would make the rebuilding of community relationships easier ­because it would remove “the suspicion which is aroused due to the EBCC connection.”54 The final impetus for folding EBMP into a new Hopkins health plan came from changes in state HMO regulations. In April, the General Assembly passed legislation that required HMOs to hold a minimum of $100,000 in equity u ­ nless guaranteed by another organ­ization “with sufficient net worth and an adequate history of generating net income.” Despite its improved per­ for­mance, EBMP remained more than $1.8 million in debt. Although Hopkins had no interest in acting as guarantor for a free-­standing EBMP, a takeover would eliminate the prob­lem.55 A second bill, meanwhile, increased the incentives for hospitals to own community health centers. It authorized the HSCRC to decrease the rates that hospitals received for outpatient hospital ser­v ices while si­mul­ta­neously raising them for care provided in nonhospital settings. The legislation sought to shift basic care from high-­cost hospitals to lower-­cost health centers. Hopkins thus stood to lose revenue if it provided outpatient ser­v ices in its emergency rooms and clinics. Yet if it formally controlled EBMP as part of a health care network, it could gain the higher revenues now permitted at nonhospital facilities, while still securing referrals for cases requiring more complex care and hospitalization. Baltimore delegate Clarence Mitchell III served as chief sponsor of the bill.56 The EBCC members of EBMP’s board briefly attempted to fight the takeover but soon found themselves blocked by the state insurance commissioner’s threat to revoke EBMP’s HMO license. The EBCC representatives backed down, and nine new members joined the board. The new members included “three representatives of the community” and six from Hopkins, including both Hill and Heyssel. Only Robert Douglass and former board chair Paula Johnson remained from the EBCC contingent. With the board turnover complete, Hopkins provided the equity guarantee needed to keep EBMP’s license. It also subordinated EBMP’s $1.3 million debt to the hospital.57

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On a sunny Saturday in late September 1984, EBMP staged a well-­attended community health fair that featured “a variety of foods, crafts and amusements coupled with advice and information about ­every facet of health care.” Barbara Hill told Baltimore Sun reporter (and ­future tele­vi­sion producer) David Simon that “this is a chance for us to show the community that ­we’re ­here for a long time, and any changes are ­going to be for the better.”58 As this comment obliquely suggested, basic decisions about the plan’s f­ uture had already been made. The following day, EBMP’s Hopkins-­dominated board approved the absorption of EBMP by the Hopkins plan. In early October, the takeover became official, and the Johns Hopkins Health Plan (JHHP) began operations as a full-­service HMO. EBMP ceased to exist.59 With new or restructured HMOs rapidly entering the Baltimore market, Hopkins had begun the pro­cess of developing a full-­fledged hospital and HMO network of its own. The assumption of EBMP into the health plan marked the creation of an initial node in that network, the first step in a fast-­ moving pro­cess that would transform EBMP into an institution very dif­fer­ ent from its original, community-­based incarnation. The change in name removed the last vestige of community control, but in most re­spects Hopkins had effectively dominated EBMP since the 1982 crisis with the HHS grant. U ­ nder Hopkins’s management, the plan’s operating losses dropped from $685,708 in fiscal year 1983 to $284,386 in fiscal year 1984.60 In addition, the plan’s patient ser­vices improved, and enrollment, which had already stabilized, began to increase. In April 1985, Barbara Hill reported to the Hopkins trustees that “patients ­were happy about both the decreased waiting time and the decreased cost. As a result, the Health Plan now has more patients than it can comfortably ­handle.” By June, total enrollment in the plan had reached ten thousand, up from a low of just over seven thousand only eigh­teen months before. Attention now turned to expansion.61

Decline of the Public Hospital The next step—or, more accurately, a simultaneous step—in Johns Hopkins’s creation of an HMO and hospital network consisted of the acquisition of Baltimore City Hospitals. Like many public hospitals in the late twentieth-­ century United States, BCH by the 1970s had a storied past and a troubled pre­sent.62 ­After originating in the eigh­teenth c­ entury as part of the county alms­house, BCH moved to East Baltimore’s Bayview neighborhood in 1866



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and gradually acquired adjoining properties ­until it occupied a campus of more than 240 acres, of which 134 acres remained in the early 1980s. During the early twentieth c­ entury, BCH became a major teaching hospital for both the Johns Hopkins and University of Mary­land Medical Schools. BCH benefited from this association, both by reputation and in medical practice, as prominent Hopkins faculty members served as chiefs of ser­v ice t­ here, while other Hopkins faculty and residents formed much of the h ­ ouse staff. BCH, meanwhile, continued to offer f­ ree ser­v ices for p ­ eople who could not other­ wise afford or obtain medical care.63 During the de­cades following World War II, however, escalating costs and the pressure to increase hospital capital investment began to strain BCH’s capacity to provide first-­rate care. Meanwhile, decentralization of population and economic activity undermined the fiscal capacity of the city government to sustain a public hospital. This was a common prob­lem around the United States, and public hospitals in multiple cities closed, formed affiliations, or ­were absorbed by academic medical centers between 1970 and 1990.64 Heavi­ly subsidized by state and city government and faced with the need to upgrade its aging infrastructure, BCH soon faced difficult questions about its ­f uture. By the early 1980s, ­these prob­lems had become acute. Administrative difficulties and an in­effec­tive bill collection system produced large deficits and required additional subsidies from the city.65 Meanwhile, the city’s deteriorating finances forced it to defer badly needed improvements and even basic maintenance. In the late 1970s, Mayor Schaefer brought in a new management team that initially improved administrative procedures at BCH.66 Still, operating losses continued, and in March 1980, a mayoral study committee recommended that BCH be transferred to a new public benefit corporation. This move would ­free the hospital from city administrative rules while still permitting it to issue tax-­exempt revenue bonds through the Mary­land Health and Higher Educational Facilities Authority.67 In theory, this combination of physical improvements and administrative restructuring “would allow the hospital to function more competitively in the marketplace with other hospitals.” Providing “a specific governance model lying between the Public and Voluntary,” the proposed corporation paralleled Hopkins’s strategic planning in its focus on responding to market pressures.68 Although Baltimore voters approved a ballot initiative authorizing the change, plans for implementing it lagged. When efforts to improve BCH’s occupancy rate and bill collection system also failed, a disgruntled Mayor Schaefer fired the hospital’s director and replaced the existing City Hospitals Commission with a new board of trustees.69

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At this point, Johns Hopkins emerged as a major force in the debate over BCH’s f­ uture. Increasingly frustrated by the hospital’s continuing level of uncollected bills, Mayor Schaefer approached Robert Heyssel about the possibility of simply selling BCH to Hopkins. Heyssel viewed the situation with wary interest. As with the EBMP, Johns Hopkins had no interest in seeing BCH close. Along with the teaching opportunities it provided, the municipal hospital offered vital ser­vices, such as the region’s only burn unit. In addition, its campus hosted the research arm of the National Institute of Aging and would soon add the National Institute on Drug Abuse.70 Other aspects of BCH had appeal as well. In 1972, BCH physicians (many with appointments at Hopkins) had established the Chesapeake Physicians Professional Association (CPPA). This group formed one half of the Chesapeake/Patuxent partnership that provided medical ser­v ices at EBMP in 1982 and part of 1983. Despite the prob­lems that the group encountered, or created, at EBMP, CPPA had built a ­v iable prepaid group practice plan with a strong patient base. As a result, BCH attracted not only the medically indigent but also a base of privately insured and Medicare patients from nearby working-­class neighborhoods. Not insignificantly, CPPA members also brought in $2.9 million annually in research grants.71 Unlike municipal hospitals in many cities, most of BCH’s prob­lems stemmed from poor management and inadequate city funding rather than lack of patients and revenue flow. All this suggested that with improved administration, BCH’s losses might be eliminated—as Hopkins itself had accomplished over the previous de­cade. Fi­nally, Heyssel told the joint university and hospital trustees that “the tract of land is large and potentially of interest” for development as a modern medical and research complex.72 BCH, in short, had the potential to be a source of growth and capital development for Hopkins. Heyssel’s calculations included another, more threatening f­ actor: if Hopkins did not take over BCH, the mayor might turn to an investor-­owned hospital chain. This concern factored directly into Hopkins’s strategic planning pro­cess. By the spring of 1982, Heyssel knew that the rapidly expanding Hospital Corporation of Amer­i­ca had expressed interest in managing or even acquiring BCH. Faced with the potential entry of such a rival, Hopkins had l­ ittle choice but to engage in discussions about BCH’s ­f uture.73 A final, more altruistic dimension also entered Hopkins’s considerations. During an early discussion of a pos­si­ble takeover, an unnamed Hopkins trustee pointed out that “­there had been no comment about the needs of BCH and the community. City Hospitals is in trou­ble, and someone o ­ ught to do



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something about it. . . . ​An institution as superbly equipped as Johns Hopkins o ­ ught to address the issue.” It is difficult to know where such sentiments weighed in the calculations of Heyssel and his team compared to their need to fight off the Health Corporation of Amer­i­ca, or secure training opportunities for Hopkins students, or ensure an adequate flow of paying patients. Yet the real­ity remained that BCH served an impor­tant function in Baltimore, and Hopkins had the capacity to preserve that ser­v ice.74 Still, BCH’s deficiencies meant that an outright purchase would expose Hopkins to serious risk.75 As a result, Heyssel reached an agreement with Mayor Schaefer and the City Council to establish temporary Hopkins management on a contract basis beginning in September 1982. This arrangement temporarily prevented a competitor from acquiring BCH, while giving Heyssel and his team time to evaluate the hospital.76 Heyssel named Ronald Peterson, who had headed Hopkins’s successful cost-­improvement program, as BCH executive director. Or­gan­i­za­tion­a lly, the BCH contract fell ­under the purview of the Broadway Medical Management Corporation, which by then had taken over management of EBMP.77 In early 1983, Mayor Schaefer determined that the city had to sell BCH. In March, Peterson’s Broadway Medical Management team completed its assessments and recommended that Hopkins should proceed with purchase negotiations.78 Schaefer initially pushed Hopkins to pay what Ronald Peterson described as “major dollars” for the fa­cil­i­t y.79 Heyssel, though, held that Hopkins’s commitment to maintain BCH’s charity care function represented a generous payment to the city, especially given the need for capital investments of as much as $50 million. He requested that the city contribute $3 million annually to cover operating losses, as well as $10 million for short-­term capital improvements and necessary equipment. Schaefer responded that the city could not afford such costs, especially since it would bear continuing liabilities for pensions, accrued employee benefits, debt ser­v ice on past bond issues, and long-­term leases related to the fa­cil­i­t y.80 In April, Heyssel reported to the Hopkins board that “negotiations w ­ ere at a standstill,” and President Muller suggested that l­ ittle pro­gress would occur u ­ ntil ­after the November municipal elections.81 Mayor Schaefer in turn pushed city finance director Charles Benton to reach out to other potential purchasers, arguing that “if we have only one purchaser (Hopkins) we are in a non-­competitive situation. . . . ​We should look at other opportunities NOW.” 82 Benton circulated a request for proposals from potential purchasers, including both for-­profit and not-­for-­profit hospital operators. At least

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eight expressed interest.83 The city, though, still preferred that Hopkins purchase the hospital. As Benton reminded the mayor in April, “I have repeatedly stated that it would be to the City’s best interest if Hopkins w ­ ere to take over City Hospitals.” Such a transaction “would be a bargain for the City”— if Hopkins agreed to assume the city’s termination costs and responsibility for f­ uture operational deficits.84 Mayor Schaefer thus faced a dilemma. Although Hopkins wanted BCH, it would not pay any price to get it. At the same May 1982 meeting during which the joint university and hospital trustees had approved the strategic plan, the Hopkins trustees outlined a set of “deal breaker conditions” that would guide the negotiators: that the hospital and university be protected against all prior BCH debts, that the city provide initial operating capital and assist in financing renovations, that no restrictions be placed on f­ uture land use on the BCH campus, that Hopkins would retain the right to return BCH to the city, and that the city would subsidize any “BCH operating deficits which are associated with its historic mission in Baltimore City,” referring to the provision of care for the city’s poor.85 But Hopkins’s new market imperatives pushed in the other direction: ­toward a deal with the city. As Heyssel ­later put it, “We ­were unwilling to see a base of 11,000 inpatients and a burn unit go the way of an investor-­owned hospital—to lose that market share, if you ­will.” 86 Both sides thus wanted to find a way for Hopkins to take over BCH. Seeking a resolution, Schaefer and Benton turned to an interested third party, the Greater Baltimore Committee (GBC), for mediation. With its long track rec­ord as Baltimore’s dominant pro-­growth business co­a li­tion, the committee had the trust of both sides. Working through the summer of 1983, committee chair Richard ­Sullivan returned an “unreserved conclusion that such a transfer is in the best interest of the City Administration, Johns Hopkins and the community. From ­every vantage point we approach this issue—­social, fiscal and economic development—­a transfer to the Hopkins makes good sense.” To achieve such an outcome, both sides would have to bear some costs: a solution that put all costs on one party “simply does not exist.” 87 GBC thus suggested that Hopkins should take over accounts receivable at BCH, b ­ ecause of its presumed capacity “to collect receivables more expeditiously than the City,” but that it should use the resulting funds to compensate the city for the full termination costs of roughly $7.5 million. The city, though, would pay $10 million for emergency repairs over five years, as t­ hese costs reflected primarily the city’s past deferral of maintenance.88



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The GBC report noted one other f­ actor that made a deal more v­ iable than it had been in the spring: financial conditions at BCH had begun to improve. With Ronald Peterson’s Hopkins-­based management team in place, operating losses had been reduced from nearly $7 million to $1 million within a year. Peterson’s management experiment had demonstrated that the fa­cil­i­t y could be operated on a v­ iable financial basis. Its other assets, both medical and educational, seemed clear as well, and the reduced threat of ongoing operating losses opened up new negotiating possibilities for Hopkins. ­Under the final deal, the city funded $5.4 million in capital improvements over a four-­year period and accepted what ultimately turned out to be a $3 million loan from Hopkins to fund the remainder. Schaefer did negotiate past many of Hopkins’s “deal breakers,” as the hospital agreed to provide $1.5 million in start-up capital and assumed $4.3 million in existing liabilities. The agreement also specified that “the city and Hopkins would split any

Figure 19. ​Aerial view of the Francis Scott Key Medical Center, formerly Baltimore City Hospitals and ­later Johns Hopkins Bayview Medical Center, circa 1989. The Johns Hopkins Health System, which had acquired the city’s municipal hospital in 1984, had undertaken the large-­scale redevelopment of the medical center. New construction can be seen at center right. The Chesney Archives of Johns Hopkins Medicine, Nursing, and Public Health, Baltimore.

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profits from developing land on the hospital grounds over the next 20 years” and gave Hopkins an option to return BCH to the city a­ fter five years. Overall, the transfer cost the city $8.75 million and Hopkins $8.85 million.89 Hopkins took control of BCH on July  1, renaming it the Francis Scott Key Medical Center (it would ­later be renamed Johns Hopkins Bayview Medical Center).90 With BCH—­now Francis Scott Key—­under Hopkins’s control, Heyssel and Peterson moved quickly to make the hospital profitable. Mayor Schaefer ­later recalled, “In the first year, they broke even. And I brought our p ­ eople in, and my exact words w ­ ere, ‘How the hell can they break even the first year when it cost us a million dollars ­every year?’ And they told me, ‘Well, ­you’re not too smart.’ The second year, they made a profit. And the third year, I knew we’d made a bad deal!” 91 ­W hether the city had actually made a bad deal is a complex question. In an era of rapidly increasing health care costs and strained municipal bud­gets, a full commitment to an expensive municipal hospital had become redundant and unsustainable. In addition, the tight controls on hospital rate increases imposed by the HSCRC placed a premium on skilled hospital management—­a task for which Hopkins had far more capacity and experience than the city. The transfer of BCH to Hopkins also meant that employment at the hospital would continue, but as Hopkins’s frequent strug­gles with its ­unionized workers demonstrate, ­t hose workers moved into a dif­fer­ent ­labor environment. While the city might not have been able to maintain t­ hese workers at all as municipal employees, the transfer to Hopkins removed them from civil ser­v ice protections and the often higher wages and better benefits that public employees still received. As such, the transfer of BCH formed part of the wider weakening of l­ abor and the undermining of public employee wages and benefits that marked the late twentieth c­ entury. Fi­nally, not-­for-­profit hospitals such as Hopkins are exempt from local property taxes. This meant that the city gained revenue only indirectly from the land, through sales or wage taxes generated by hospital employees or spin-­off businesses. Still, Hopkins’s takeover of BCH ensured that the hospital would not only remain in operation but that it would be transformed into a modern medical complex. Immediately, it provided a community hospital for what would soon become a multihospital Hopkins system. Over the longer term, it provided a full second medical campus for Hopkins. Johns Hopkins Bayview ­today is a thriving hub of Baltimore’s health care economy, with a modern, seven-­hundred-­bed hospital, clinics, and research facilities. While the trans-



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fer involved the assumption of a previously public health care ser­v ice by a private entity, Heyssel’s and Peterson’s efforts, and Schaefer’s ac­cep­tance of their plans, created a significant part of the industry that now forms the core of Baltimore’s economy. Yet together, Johns Hopkins’s acquisition of the East Baltimore Medical Plan and Baltimore City Hospitals also meant that its function as a quasi-­ state actor had expanded alongside its new market focus. Unlike typical private firms making an acquisition, the purchases meant that Hopkins took on additional public purposes within the associational system of public-­private health care in the United States. This happened at the same time that Hopkins, through its new housing programs, assumed basic functions of urban redevelopment that the city government could no longer fully finance in an era of fiscal austerity. Such governmental roles would expand during the 1980s and beyond, even as academic medical centers like Hopkins ­adopted the characteristics of market actors. Yet this was not, of course, the w ­ hole story: the public charitable function of the municipal hospital, prob­ably the purest form of the hospital as social institution, would be folded into the insurance com­ pany model of public-­private financing used at Hopkins and the rest of the U.S. hospital system. That older municipal charity vision might not have been sustainable, but something was still lost. Just as significantly, the acquisition of BCH formed a second node in Johns Hopkins’s emerging network. Even more than EBMP, the purchase helped it gain market share and hence power in the regional health care market. This effect would deepen over time and would be reflected across the country as hospitals merged and made acquisitions, growing into ever-­larger health systems. Along with the financing system’s rewards for hospital capital investment, such market power would eventually be reflected in hospitals’ capacity to drive prices upward—­except, to a degree, in Mary­land, where the presence of the HSCRC rate-­control system ­limited such pricing power. The Mary­land system thus offers a glimmer of possibility in a national health care system that is increasingly driven by the very market forces to which Johns Hopkins responded during the early 1980s.

“We W ­ ill Find Our Market Has Dis­appeared” In the years that followed Hopkins’s 1984 acquisition of BCH and EBMP, the forces that had prompted the hospital’s new market orientation only intensified.

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Along with the general pressure that the growth of HMOs exerted on costly hospital stays, Congress’s creation of the Medicare prospective payment system encouraged private insurers and self-­insured employers to develop similar systems. By design, ­t hese new payment systems created an incentive to hospitalize fewer patients and shorten inpatient stays.92 Johns Hopkins saw increases in outpatient surgery numbers, along with declines in total patient days and average length of stay, leading to a fall in revenue.93 The pending implementation of Medicare PPS posed an additional threat, albeit one that remained hy­po­t het­i­cal for Hopkins. B ­ ecause of the federal waiver that allowed Mary­land’s HSCRC to set hospital rates for Medicare and Medicaid, the state would be exempt from Medicare PPS itself, as long as it kept hospital cost increases lower than the three-­year national Medicare average. But if PPS nationally outperformed the HSCRC, Mary­land would lose its waiver and become subject to the federal system. Not only would this bring lower payment rates, but PPS reimbursements would prob­ably not match the cost commission’s coverage of uncompensated care.94 Fi­nally, the emerging AIDS epidemic presented both a humanitarian catastrophe and a financial threat to the health system. Even though an integrated AIDS care program cut the hospital’s cost per patient far below national averages, Hopkins still lost roughly $1 million on AIDS care during fiscal year 1988, mostly ­because neither federal nor state reimbursements covered all of the care that AIDS cases required.95 In all of ­t hese areas, Hopkins’s solution was to gain market share. In a March 1985 pre­sen­ta­tion to the hospital’s medical board, Heyssel warned that “the arrival of HMOs in Mary­land has dictated that we or­ga­nize to capture our share of the market or we ­w ill find our market has dis­appeared.” 96 In June 1985, the trustee planning committee recommended that Hopkins create “a vertically integrated multi-­institutional system of medical ser­vices delivery” ranging from primary care to specialty care and across both inpatient and outpatient ser­vices. The goal would be to protect the admissions and clinical activity on which patient care programs, medical education, and research all depended. That base could only be sustained or, better, expanded by extending Hopkins’s reach—to other hospitals, to HMOs, to home health care, and to patients and physicians across the Baltimore-­Washington region.97 A new for-­profit entity known as the Dome Corporation would support this strategy by managing revenue-­generating activities that ranged from parking and security ser­v ices to the commercialization of biomedical research.98



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Hopkins also continued the acquisition strategy that had begun with Baltimore City Hospitals. In early 1986, Hopkins acquired both the North Charles and Wyman Park Hospitals, two small Baltimore community hospitals located near the main Johns Hopkins University campus and reor­ga­ nized them as an integrated unit known as the Homewood Hospital Center. In March, as the purchase of the hospitals moved to completion, the Hopkins trustees approved the creation of the Johns Hopkins Health System as a new corporate entity. The new system would consist of Johns Hopkins Hospital (and its endowment), Francis Scott Key Medical Center, North Charles, and Wyman Park, along with the Johns Hopkins Health Plan and the Broadway Medical Management Corporation. This created a vertically integrated, four-­hospital system offering a full range of ser­v ices, along with insurance offerings and physician groups. Within this system, the main Johns Hopkins hospital would provide advanced inpatient care and specialized ser­v ices for both inpatients and outpatients. The Key Medical Center would continue to function as a lower-­cost, acute care, community hospital that also offered specialized referral ser­v ices such as geriatric care and the burn center. North Charles would serve as a small community hospital providing basic inpatient care at a lower cost than Hopkins. Wyman Park would offer contracted ser­ vices for military veterans, alcohol and drug rehabilitation, inpatient psychiatric ser­v ices, and primary care for university students, staff, and faculty. The JHHP, in addition to providing primary care at sites across the city, would expand around the Baltimore region by opening clinics in wealthier suburban areas with high insurance coverage rates. The health plan thus achieved two goals: it took primary care out of the main hospital building and into the surrounding community, “serving non-­paying patients in a lower cost setting” while still capturing referrals of patients who required advanced services—­particularly t­ hose with insurance. Most impor­tant, it positioned the Hopkins system in Mary­land’s HMO market.99 With t­ hese changes came another wave of new facilities. At the old Broadway urban renewal site, Hopkins demolished the apartment compound, the Sheraton Inn, and the shopping center—­a ll of them once showpieces of hospital urban renewal and all of them in declining or even derelict condition by the mid-1980s.100 In stages over a multiyear period, Hopkins replaced them with a 1,350-­car parking garage, the ambulatory care center, and a new oncology building. Th ­ ese would be funded through a $43 million university contribution, $50 million in hospital fund­-­rais­ing, $17 million in cash reserves (or refinancing of existing debt), and $58 million in new debt funded through

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a bond issue by the state’s Health and Higher Educational Facilities Authority. The new construction would generate an anticipated $3 million annually in new revenues.101 The Key Medical Center had plans for a new psychiatric building and an ambulatory center of its own.102 Also on the former BCH grounds, the Dome Corporation constructed a series of buildings to serve as incubators for new biotech firms. That proj­ect strug­gled but eventually stabilized and by late 1993 was completely leased.103 Gradually, integration of the newly acquired hospitals began to reduce the financial pressure on Hopkins. In May 1987, Heyssel reported that the expanded system had produced $3 million in savings, with up to $6.9 million projected by the end of fiscal year 1989.104 By 1987, the system had total assets of $405 million and gross revenues of $475 million. The following year, revenues climbed to $550 million. Employment in the system passed eight thousand ­people, exclusive of physicians. Perhaps most notably, the new network countered some of the main hospital’s emerging weaknesses: between 1982 and 1987, total patient days at Johns Hopkins Hospital itself fell from 323,707 to 288,716, but for the Johns Hopkins health system as a ­whole, patient days ­rose to 525,695.105 In effect, Johns Hopkins had moved beyond the relatively straightforward concern of the 1970s with developing the financial reserves necessary to finance its capital proj­ects to acting as a diversified, vertically integrated health care business in a competitive market environment in which survival itself was at stake. As it did so, it both reflected and advanced changes in the wider system that would only intensify in the coming de­cades.

CHAPTER 11

Markets, Medicaid, and Mergers

O

n a spring day in June  1993, First Lady Hillary Clinton came to East Baltimore. In a pair of speeches at events celebrating the Johns Hopkins Medical School’s centennial, Clinton discussed the core princi­ples of the sweeping health care reform plan that her husband’s administration would soon propose—­and that she was helping to develop. The plan relied not on the kind of single-­payer, national health insurance approach favored by many on the left, but on a concept known as “managed competition” developed by business groups and market-­oriented policy experts. Attuned to the concerns of her audience, Clinton assured the assembled medical students, physicians, researchers, nurses, administrators, and city and state officials that the teaching and research functions of academic medical centers would be protected and that the high costs their institutions bore from caring for the uninsured would be eliminated through universal coverage. They would, however, be expected to train more primary care physicians rather than specialists, a move she acknowledged Hopkins had already begun, and they would need to contribute to new systems of coordinated care across the health system—­what she deftly referred to in another speech that day as “managed cooperation.” Clinton also noted the reason for the administration’s difficult quest for reform: “Our nation is facing a frightening truth: skyrocketing costs are undermining the foundation of our health care system. M ­ iddle class Americans can no longer take for granted that they ­will be cared for in times of need.” Perhaps not surprisingly, Clinton steered around the role that Hopkins, other academic medical centers, and hospitals of all types and sizes played in driving the costs that motivated the reform effort even as their resulting economic power made reform so difficult to achieve. She offered few direct

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solutions for the cost prob­lem other than the comprehensive nature of the proposed reforms. Instead, she disavowed “controlling the rising costs by regulations,” ignoring the fact that the state in which she spoke had done exactly that over the previous twenty years. Clinton was pursuing a vision of a rebuilt system that would channel market forces as it sought universal coverage and lower costs.1 The Clinton proposal would famously fail, brought down by determined opposition from the insurance industry and business groups as well as lackluster advocacy by supporters—­including the hospital industry.2 Out of its wreckage, though, would emerge a model for the flawed hybrid health care system that the United States would develop in the first quarter of the twenty-­ first ­century. That new system would remain intertwined with the hospital city. It took form not only in national policy but also in local-­level changes in cities like Baltimore, in their suburbs, and in health systems like Johns Hopkins.

The Clinton Reform Plan President Bill Clinton’s attempt to reform the U.S. health care system took place in a context of destabilizing change. In conjunction with the rise of both HMOs and for-­profit hospital chains during the 1980s, large corporations began to pursue a private form of cost control through the strategy of managed care. Relying on networks of physicians and hospitals who agreed to accept reduced rates, as well as gatekeepers (primary care doctors or medical reviewers within insurance companies) who controlled access to expensive specialist ser­v ices, managed care sought to limit cost growth by changing the incentives and choices available to patients, doctors, and hospitals. For a time in the mid-1990s, managed care succeeded in cutting cost growth, u ­ ntil a backlash set in against its limitations on ser­v ices and its inherently adversarial approach.3 Yet the emergence of such market-­oriented private strategies was not the only impor­tant health care development during the 1980s. ­After blocking an effort during the early years of the Reagan administration to make Medicaid a block grant to the states, congressional Demo­crats gradually expanded the program’s coverage to include all ­children ­under the poverty threshold, c­ hildren younger than age 5 in families with income up to 133 ­percent of poverty level, and qualifying groups of adults with incomes above the limits prescribed by the Aid to Families with Dependent ­Children



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(AFDC) program. In addition, Congress required state Medicaid programs to cover Medicare costs for “dual eligibles”—­adults who qualified for both programs. Enrollment grew from 21.6 million ­people in 1980 to 25.3 million in 1990 and 35.1 million in 1994. Spending increased as well.4 Comprehensive health care reform reemerged as a Demo­cratic Party priority in 1991 ­after Harris Wofford emphasized the issue in a successful upstart campaign for a U.S. Senate seat in Pennsylvania. Wofford’s victory suggested that voter concern about rising costs and rapid increases in the number of uninsured Americans made the issue a winning one for Demo­crats. ­A fter securing the presidential nomination, Arkansas governor Bill Clinton settled on an approach known as “managed competition ­u nder a budget”—­a strategy that combined state and federal insurance regulation and cooperative purchasing with competition among private health insurance plans.5 Shortly ­after his inauguration in January  1993, Clinton created the President’s Task Force on National Health Care Reform and charged it with developing a detailed reform plan around the “managed competition” framework. The president named First Lady Hillary Clinton as the task force’s chair and management con­sul­tant (and Clinton friend) Ira Magaziner as its director. Although its more than forty teams and working groups ­were unwieldy, and although its operations created conflict with the executive branch departments, on Capitol Hill, and in the private sector, the task force did not determine the Clinton plan’s exact substance or seal its fate. The president himself had already chosen the under­lying framework and remained deeply involved in developing the a­ ctual legislation. During the summer, work continued primarily through a smaller group of advisers directed by Magaziner, which met frequently with the president and first lady.6 Following delays caused by bruising congressional ­battles over the North American F ­ ree Trade Agreement and the administration’s deficit-­reducing bud­get bill, congressional leaders fi­nally introduced Clinton’s Health Security Act (reviving, incidentally, the name of the Committee for National Health Insurance proposal from the late 1960s) just before Thanksgiving. Using the “managed competition” framework, the administration proposed to provide universal health insurance through competing private health plans, including both traditional insurers and HMOs. Care would be delivered through networks of physicians and hospitals whose clinical decisions, and hence costs, the insurer closely monitored. At a structural level, the plan consisted of two tiers: new regional health alliances and an expanded Medicare program. The alliances would operate as nonprofit purchasing cooperatives

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or­ga­nized by the states, through which individuals would purchase health insurance plans that offered standardized benefits with community rating in premiums and no exclusion of preexisting conditions. Insurers would receive risk-­adjusted payments based on the health status of the individuals they actually covered. Where pos­si­ble, providers would be or­ga­nized into “Accountable Health Partnerships” analogous to managed-­care networks that received capitated payments rather than billing on a fee-­for-­service basis. The scale of the health alliances would give them bargaining power with providers over prices and with insurers over premiums. The alliances would provide purchasers with detailed plan information, as well as information about the cost and quality of care, all of which in theory would produce informed consumers capable of acting as effective market participants. Employers would be mandated to pay 80 ­percent of average premium costs, up to a percentage of payroll capped according to firm size. Employees would be responsible for the rest, with the exact premium determined by ­whether the plan they chose was more or less expensive than the average. This employee cost-­ sharing furthered the ideal of informed consumer choice. The employer mandate also meant that the alliances would still link health coverage to employment. The second tier, an expanded Medicare program, would cover not just the el­derly but also Americans who ­weren’t covered through employment, including the nonworking poor and unemployed. Medicare benefits would also be expanded to cover long-­term care and prescription drugs. Medicaid, meanwhile, would be replaced by subsidies for the working poor that would cover part of their premiums within the alliances.7 In general, the Clinton plan relied on focusing market forces to control costs through both the purchasing power of the alliances and more informed consumer decisions. The Health Security Act also had one more direct regulatory feature, as it would have imposed regional and national spending limits through a National Health Board—­t he bud­get component of “managed competition u ­ nder a bud­get.” Potentially, this structure would have exerted regulatory control over hospitals and other providers by limiting their capacity to set prices (and of insurers to set premiums). If rigorously implemented, this might have placed a limit on the hospital city’s growth.8 In general, though, cost control would occur through attempts at structuring consumer, provider, and employer incentives—an attempt to restructure market forces so that the crushing cost pressures of American health care might ease. At its core, the Clinton proposal relied on a highly technical attempt to engineer a functional market in an economic sector where price signals, as



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conventionally understood, did not work. The alliances’ new structures sought to provide consumers with the knowledge to make informed insurance choices as well as competitive venues in which to purchase coverage. Much of the proffered insurance would operate through the gatekeeper functions, procedure reviews, and payment incentives of managed care. When combined with the Medicare expansion and the regulatory dimensions of the alliances and National Health Board, the combined result was a blend of public and private features designed to generate new market forces that would drive consumers, providers, employers, insurers, and the government t­ oward a comprehensive, cost-­effective system. What­ever the specific merits and inventiveness of the Clinton design, it marked yet another step away from the single-­payer, national health insurance approach. Instead, it celebrated ideals of informed consumer choice and competition, while assuming that the state could stimulate market forces in an arena where markets had previously failed. As such, it occupied a point on the same policy continuum as the broader managed-­care revolution. Initially, the hospital industry responded to the Health Security Act with cautious support. In early March, American Hospital Association president Dick Davidson (who previously headed the Mary­land Hospital Association) outlined his organ­ization’s goals for reform in a letter to Magaziner: the hospitals wanted the legislation to move even further away from volume-­based, fee-­for-­service payment and achieve universal coverage in a way that was irreversible, that was clearly linked to funding mechanisms, and that would build an integrated, community-­based delivery system. Such a system, according to Davidson, should also provide clear public data to facilitate competition between provider networks.9 Testifying before a task force hearing l­ater that same month, Davidson indicated that the AHA wanted “radical change in the status quo in health care in this country” in the form of new “community care networks” roughly analogous to the task force’s Accountable Health Partnerships. ­These organ­ izations would consist of “consortia of hospitals, physicians, other providers and community groups, and ­others locally or­ga­nized and managed” and would offer “a seamless system of care” that avoided unnecessary or duplicative ser­v ices. From a single-­entry point, patients would access all levels of care within the network, from preventive to advanced ser­vices. The networks, in turn, would receive capitated payments on an annual, per-­person basis, making them accountable for their results in both patient outcomes and costs. In this model, capitated payment would encourage collaboration among

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providers by aligning their incentives around keeping the cost of care below the payment level. Excess administrative costs and paperwork arising from meeting the needs of multiple payers would be eliminated. Ideally, all of this would generate cost reductions while raising “the entire community’s health status.” ­Here, the AHA pushed for more rather than less reform, as its emphasis on community health at least raised the possibility of narrowing health disparities through reform. But the AHA’s position remained vague on details such as appropriate profit margins, how to deal with hospital capital costs, and other aspects of hospital systems that had already moved t­ oward a business-­oriented operational structure. In a classic statement of the goals of business-­directed planning, Davidson noted that the networks would further reduce costs by minimizing “unnecessary competition.”10 Left unstated was that this idea, if unchecked, could result in providers having power over prices. Subtle differences emerged between the AHA and the administration on a range of issues. The AHA especially objected to the possibility that the health alliances would be so large and power­f ul that they could take on a de facto regulatory function. Instead, the AHA preferred to focus, in ways not precisely defined, on building out “community-­scale” insurance purchasing cooperatives.11 It also argued that participation in the health alliances should be ­limited to small businesses. The inclusion of large employers, the AHA feared, might lead the alliances to develop into the equivalent of single-­payer entities. In response, Ira Magaziner emphasized the administration’s commitment to a competitive system and maintained that the alliances would not be financially ­v iable if they encompassed only small business. The AHA also wanted a quick launch of a universal coverage system, including Medicare, from which both hospitals and their patients would clearly benefit.12 ­These concerns w ­ ere not, as Davidson put it in March, deal breakers, as the AHA wanted reform to succeed. The hospitals saw the Clinton plan, what­ ever its imperfections, as a ­middle point between single-­payer—­which they did not want—­and more conservative proposals that would not lead to the systematic reforms the AHA did want.13 Other, smaller hospital organ­izations like the Catholic Hospital Association held similar views. Yet the industry still did not give its full, public support to the reform effort.14 Instead, it remained “very-­nervous, wait and see,” as an early task force profile of the AHA put it. The administration badly wanted hospitals’ strong public support, noting that “individual hospitals are major employers and therefore have substantial influence in districts.”15 As it had during the Nixon and Car­ter years,



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the economic power of the hospital city remained central to the fight over the Clinton plan. The hospitals’ hesitation stemmed largely from the plan’s financing. As proposed, the Clinton plan relied on multiple financing sources. Th ­ ese included insurance premiums, taxes on cigarettes and corporations, mandated employer contributions, limits on health insurance tax exemptions, and caps on overall federal spending. But reductions in the rate of increase in Medicare and Medicaid spending provided the plan’s largest single source of funds. Over five years, ­t hese would total $124 billion for Medicare, of which hospitals would absorb $73 billion, and $65 billion for Medicaid.16 ­These caps came on top of a $56 billion Medicare cut included in Clinton’s deficit-­reducing bud­get bill, which passed on a party line vote in August 1993.17 Urban and rural hospitals ­were particularly threatened, as they would lose the disproportionate share hospital payments that they received to compensate them for the costs of serving high percentages of low-­income patients.18 Public hospitals would be especially hard hit, as they received a quarter of the $2.7 ­billion in Medicare DSH payments and over half of the $18 billion in Medicaid DSH payments.19 The resulting loss of revenue would create hardship, in Dick Davidson’s words, for hospitals “already in financial peril.” Their only options would be to reduce services—or eliminate jobs. The prospect of Medicare and Medicaid cuts, combined with uncertainty about when universal coverage would be accomplished ­under the Clinton plan and about how much revenue it would generate, thus threatened the very basis of the hospital city.20 ­These ­factors significantly dampened hospitals’ enthusiasm for the plan. In July 1993, staff members preparing a speech that Hillary Clinton would deliver at the AHA convention noted that the group’s “Washington leadership . . . ​is evidently way out ahead of its members” in support for reform.21 By early September, the AHA told task force staff that they ­were “being pressured by the press to colorfully and roundly denounce” the Medicare and Medicaid caps.22 Seeking to solidify his support among medical professionals, President Clinton spoke at the Johns Hopkins Medical School the day ­after he submitted the administration’s reform bill to Congress on October 27. Clinton talked in broad terms about the goals for reform, telling the assembled doctors, medical students, nurses, and administrators that “you know as well as anyone the h ­ uman and economic costs of d ­ oing nothing.” He noted the precarity of the uninsured and underinsured and emphasized that his bill would provide “true health care security” for all Americans through universal coverage. Yet the speech also took pains to celebrate Clinton’s moderation,

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describing his bill as “a uniquely American solution” and highlighting that “of all the plans that have been offered, ours requires the least dramatic change in how most Americans get their care.” The comment clearly sought to assuage doctors and hospital executives, but it reflected the growing conservative backlash that already swirled about reform. Clinton completely avoided the contentious issues of Medicare and Medicaid cuts and offered only vague assurances that the plan would fully fund medical education. ­These w ­ ere the questions that troubled hospitals like Hopkins.23 And as Clinton made concessions to gain congressional support, he was beginning to lose the hospitals. Davidson, testifying before the House Ways and Means Committee just three weeks ­later, raised concerns about how the Clinton plan “stretches out expanding access over a long period of time.” Such a delay would deprive hospitals of the revenue they would other­w ise gain from treating previously uninsured patients. In addition, he warned that hospital leaders had begun to question ­whether Congress and the administration would fully fund universal coverage, whenever it was achieved. Requiring universal access without full financial support, he warned, would put vulnerable urban hospitals—­“­those with the greatest commitment to care for the poor”—at risk, especially if the proposed caps on insurance premiums effectively barred hospitals from shifting the costs of such care onto the bills of covered patients. Davidson noted that “the Administration’s addition of a subsidy cap; deep Medicare and Medicaid cuts; the failure to move Medicare ­toward capitation; the retreat from integrated delivery networks—­all are disturbing steps in this direction in the eyes of our members.”24 Lawrence Gage, president of the National Association of Public Hospitals, noted that any lag between the a­ ctual enrollment of the uninsured and the cut-­off of DSH payments would put his member hospitals at risk. “It’s ­going to be a significant prob­lem,” Gage noted. “Given our experience with Medicaid and other plans that involve inner-­city residents and the uninsured, it could take months or years for ­people to become enrolled in (health) plans.”25 As the year ended, the support of the hospitals seemed increasingly soft. The prob­lem worsened in early 1994 ­after the health care consulting firm Lewin-­VHI completed a study of the Medicare caps for the AHA. Lewin-­VHI found that hospitals would absorb most of the Medicare reductions. By 2000, Medicare would pay only 71 ­percent of hospitals’ inpatient care costs, a rate lower than what hospitals currently received for Medicaid (which itself would also see new caps). Teaching hospitals and hospitals in low-­income urban areas would take the hardest hit, and some would see their survival threatened



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­ nless they cut e­ ither ser­v ices or hospital jobs. In testimony before the Senu ate Finance Committee in April  1994, the AHA’s Davidson questioned ­whether hospitals could make up the losses through more efficient operations and argued that the loss of revenue would actually make it impossible to pay for the kind of systemic restructuring that the Clinton plan both required and depended on.26 As they had in the 1970s, the costs of the hospital city itself once again hindered reform: cutting even some of the costs associated with the existing system undermined the possibility—or, more accurately, the financing—of change itself. The administration tried to ­counter the Lewin-­VHI study, arguing that its under­lying assumptions about hospital cost growth ­were too high and that its estimates of hospital revenue increases too low, but the damage had been done.27 The hospitals would not mount an all-­out campaign for the Clinton plan. This reflected a broader pattern, as other interest groups responded similarly (for their own reasons), even as opponents of reform intensified their efforts to block the plan. In real­ity, t­ here w ­ ere many nuances to the l­ ater stages of the reform debate. In the run-up to their sweeping victories in the November  1994 midterm elections, Republicans (and some conservative Demo­ crats) pushed for savings from Medicare cuts to be used not for universal health coverage but for deficit reduction. A proposed constitutional amendment requiring a balanced federal bud­get represented the most extreme form of this approach, but it reflected the po­liti­cal atmosphere of the period. For the AHA and its allies, such an outcome would be even worse, as it would deny hospitals the revenues that would be gained if all patients had coverage. By late summer, the Clinton plan (and the numerous other reform proposals before Congress) seemed all but dead. In June, pro­gress in the House Ways and Means Committee stalled when prosecutors indicted committee chair Dan Rostenkowski on fraud charges in a scandal involving misuse of his congressional payroll.28 Congressional debate over the administration’s anticrime bill caused further delays as the summer moved forward, and at the end of August, Congress adjourned without passing a health care bill. Senate Majority Leader George Mitchell sought to reach a compromise agreement, but on September  26, he acknowledged that he lacked the votes to pass any bill. On November 8, Republicans won an overwhelming midterm election victory, defeating House Speaker Tom Foley and capturing control of both the House and Senate for the first time in more than forty years. Not only did comprehensive health care reform appear dead, but major social programs, including Medicare and Medicaid, once again faced the possibility

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of deep cuts b ­ ecause of Republican promises to balance the federal bud­get by ending entitlements to social programs.29

The Market and Its Limits Events did not play out this way. Republican congressional leaders initially tried to downplay changes to Medicare—­because public opinion consistently supported the program—­but their October 1995 bud­get plan included significant increases in Medicare Part B premiums and hard caps on ­f uture Medicare spending. It also moved beneficiaries into private managed-­care programs. The combined effect was a proposed cut of $270 billion from ­future Medicare spending and the transformation of Medicare into a “defined contribution” rather than “defined benefit” program. For Medicaid, the Republican bud­get bill ended most of the program’s entitlement benefits (except ­t hose for low-­income ­children younger than age thirteen, pregnant w ­ omen, and the disabled) and made it a block grant to the states, which would have autonomy to decide benefits and coverage rules. In response, President Clinton refused to sign the bud­get bill and then successfully faced down the Republicans in a dramatic series of federal government shutdowns late in 1995.30 During this period, the hospital industry uniformly opposed the Republican proposals. Davidson wrote Senate Majority Leader Robert Dole in October, warning him that the bill would result in a direct reduction of $86 billion in hospital ser­vices, a cut that would “seriously jeopardize the ability of the hospital community to continue to provide high quality care, not only to se­ niors, but to all our citizens.”31 The AHA also warned that as many as seven hundred hospitals might close, with accompanying job losses.32 During the election year of 1996, Clinton again staved off Republican proposals for cuts in Medicare that would have hit hospitals especially hard. Much of the debate, however, focused on welfare reform. Congressional Republicans hoped to force Clinton to fulfill his 1992 campaign promise to end the Aid to Families with Dependent ­Children program, thus accomplishing one of their key goals while also alienating core Demo­cratic constituencies prior to the November presidential election. Twice, they passed legislation that not only ended welfare cash assistance (that is, AFDC) but also eliminated Medicaid and Food Stamp entitlements. Once again, the hospital industry argued for the preservation of Medicaid as an entitlement, forming a



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co­a li­tion of as many as ten provider organ­izations that repeatedly appealed to Congress to preserve “a set of nationally-­defined benefits” for Medicaid, as well as federal and state fiscal responsibility and adequate payments to providers.33 Both times, Clinton called the Republicans’ bluff, vetoing the two bills before fi­nally signing legislation in July that dealt only with AFDC.34 While Clinton’s readiness to replace AFDC with a temporary assistance program remains controversial, the importance of his separation of Medicaid from welfare reform has not been fully recognized. That fight preserved Medicaid as a federal entitlement, but it also decoupled Medicaid from the stigma too often associated with welfare and transformed it into a free-­ standing health care program for lower-­income Americans. Without the link to AFDC eligibility (which had already been loosened), Medicaid could also be expanded to incorporate a higher percentage of low-­income individuals and two-­parent families. As such, it could become a vehicle for expanded, if not yet universal, public coverage. Reform brought costs—­one-­third of ­women who left AFDC became uninsured, while one-­t hird remained on Medicaid and one-­t hird gained private insurance—­but it greatly accelerated the transformation of Medicaid into a v­ iable instrument for public coverage expansion.35 Further developments followed Clinton’s 1996 reelection. In 1997, Congress passed the State ­Children’s Health Insurance Program (S-­CHIP, l­ater shortened to CHIP), which covered uninsured ­children whose ­family income was too high to qualify for Medicaid. Although S-­CHIP did increase coverage, many potential recipients remained unaware that they ­were even eligible.36 Expansion of public programs aside, the intrusion of market forces continued as well. The Balanced Bud­get Act of 1997 added a private insurance option—­“Medicare + Choice” (­later Medicare Advantage)—to Medicare. The program proved popu­lar, although rather than bringing gains from efficiencies, its cost to the government exceeded that of traditional Medicare. The same legislation had negative consequences for hospitals, as it repealed an existing requirement that state Medicaid rates be adequate to cover providers’ costs and also extended the Medicare Prospective Payment System to hospital outpatient ser­vices.37 This added to the effect of payment policy changes that significantly slowed the growth rate of Medicaid DSH payments.38 All ­these actions fell hardest on the most vulnerable institutions: public hospitals, hospitals serving large numbers of low-­income patients, and urban academic medical centers.39

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Other, equally significant changes came from outside the legislative pro­ cess. With comprehensive reform stifled, the Clinton administration and its successors turned to the discretionary powers of the executive agencies to pursue preferred policies through rulemaking and state waivers. This “executive federalism” was part of a broader pattern in American po­liti­cal development during the late twentieth and early twenty-­first centuries.40 In health care, its most consequential result came in the granting of waivers, ­under Section 1115 of the Social Security Act, that allowed states to experiment with managed care in their Medicaid programs. Managed care had continued to grow rapidly even as the national-­level health care ­battles of the mid-1990s raged. For a time, it seemed that its system of restraints might impose a new level of cost efficiency on hospitals, doctors, and even patients. The rate of overall health care cost growth slowed for a few years (temporarily, as it turned out), a promising early result that aligned with the dominant, market-­focused ideological orientation of the period. With state Medicaid costs continuing to increase as the program expanded, it seemed natu­ral from this perspective to apply the princi­ples of managed care and of market forces more generally to Medicaid. By 1995, more than half the states had implemented some form of managed care in their Medicaid program, and the percentage of beneficiaries enrolled in a managed-­care program increased from 9.5 ­percent in 1991 to 40.1 ­percent in 1996.41 Unlike most managed-­care participants, at least some Medicaid recipients benefited from the experience. The nature of managed care, with its networks, its gatekeepers, and its monitored referral systems, meant that often for the first time ­t hese beneficiaries had a primary care physician, some access to specialists and hospitalization, and a degree of continuity of care. Traditional Medicaid had often made it difficult to establish such relationships. ­Those features that the more privileged found most irritating about managed care thus had value for t­ hose who had previously been outside the circles of Medicare or private insurance. Reflecting this, recipients of Medicaid managed care saw some health improvements, while the general managed-­care population did not.42 In Baltimore, an early Mary­land program allowed one twenty-­nine-­year-­old East Baltimore ­woman to establish a primary care relationship for herself and her six ­children with a doctor at a nearby health center. This led to a diagnosis of lead poisoning and asthma in her two-­year-­ old child—­along with continuing care. The w ­ oman herself suffered from kidney disease and depression, conditions for which the program gave her access to an internist at Johns Hopkins: “I can call him anytime, and he ­will



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tell me to come up t­ here [Hopkins],” she told the Sun. “If it’s an emergency, he w ­ ill see me within an hour.” 43 This was the program at its best, and Mary­land was among the states that fully committed to Medicaid managed care. In 1988, the state health department began offering all Medicaid recipients the option of enrolling in an HMO and in 1991 established an “Access to Care” program that assigned a primary care physician to ­every beneficiary not already in an HMO. This created both a medical home for each individual and a “gatekeeper” who oversaw access to the expensive specialist and hospital ser­v ices that cost the state money. Faced with the possibility of drastic federal cuts in 1996, Mary­land transitioned its entire program, with a few exceptions for special patient groups, to managed care. Known as HealthChoice, the new system encouraged the coordination and monitoring of care and, most notably, allowed physicians to refer patients for nonmedical social ser­v ices.44 To an extent, this nonmedical approach addressed what physicians at the East Baltimore Medical Program had observed twenty years e­ arlier: that not all health prob­lems required medical solutions. Not all the effects of managed care ­were positive. African American physicians often found themselves excluded from HMO-­approved provider panels, largely b ­ ecause they served a sicker and hence more expensive population that managed-­care organ­izations preferred to exclude. Dr.  Willarda Edwards, who served as president of two Baltimore medical socie­ties, expressed her frustration: “It’s about making a profit, so they want well patients. . . . ​Then they want to see doctors who have the low-­cost patients. I see it as discrimination.” Despite her prominence, Edwards herself had been rejected by two Mary­land HMOs, despite both having invited her to apply.45 The 1996 state legislation created a “historic provider” carve-­out that included African American physicians who had experienced exclusion and discrimination by existing private HMOs, as well as for community clinics and hospitals like Hopkins and the University of Mary­land that had a rec­ord of serving Medicaid patients. This meant that the academic medical centers would be protected against the loss of Medicaid patients to lower-­ cost hospitals.46 Around the United States, public hospitals saw their admissions decline as Medicaid patients became more attractive to private hospitals. This exacerbated the financial turmoil with which the public institutions already strug­ gled. Medicaid managed-­care programs also absorbed DSH payments into general program bud­gets, meaning that some of the funds went to hospitals

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that would not have qualified as disproportionate-­share institutions. Such structural f­ actors, rooted in economic incentives, only deepened racial health disparities.47 Ironically, given its long involvement in EBMP, the Johns Hopkins Health System found itself poorly positioned as Mary­land launched its transition to Medicaid managed care. Following the takeover of EBMP and its transition to become the Johns Hopkins Health Plan, Hopkins undertook an intensive effort to improve ser­v ices and quality and compete with other Mary­land HMOs for market share. The health plan fi­nally became profitable in the late 1980s, but by that point Robert Heyssel had become concerned that it might expose the wider health system to large f­ uture losses. “God created hospitals and insurance companies,” he explained to the state health secretary. “Docs ­shouldn’t run HMOs, and insurance companies ­shouldn’t run hospitals.” Given that many HMOs had been created and successfully run by doctors, this statement did not make sense. Heyssel, though, concluded that the health plan had become “a distraction from our core business.” In 1991, Hopkins reached an agreement to sell the plan to Prudential Insurance, although it kept key provider components of the plan such as the group practice organ­ ization and eigh­teen medical clinics, including four in East Baltimore.48 Heyssel retired the following year. His successor, James Block, soon concluded that the sale had been a m ­ istake and that Hopkins did need a presence in the HMO market. Prudential, however, had included a ten-­year, noncompete agreement in its purchase terms, which blocked Hopkins from forming a new HMO. Convinced that Prudential had conspired with former Hopkins Health Plan president Barbara Hill (hired by Prudential to run its HMO operations), Block launched an ill-­advised lawsuit seeking to have the contract declared invalid but then had to withdraw the filing and release a letter of apology a­ fter pretrial document discovery undermined all aspects of Hopkins’s case. The embarrassing incident reflected the increasing stakes involved in controlling, or at least holding, space in the managed-­care regime that in ­little more than a de­cade had come to dominate American health care.49 Mary­land’s launch of HealthChoice provided Hopkins with some relief, as it gave hospitals the authority to form their own managed-­care organ­ izations. Prudential also agreed to waive the noncompete clause in cases in which a Medicaid beneficiary selected a Hopkins physician as their primary care provider. With that issue resolved, Hopkins in late 1996 joined Bethesda’s Suburban Hospital and thirteen federally recognized community health



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centers to form a new Medicaid managed-­care organ­ization known as Priority Partners. Another Hopkins venture, Employee Health Plan, went into the non-­Medicaid market by contracting with self-­insured employers to provide Hopkins-­based care on a capitated basis.50

Markets and Reform in the Hospital City The faith in markets as the most effective approach to health policy had other consequences. Around the country, states eliminated all-­payer rate-­setting systems in f­ avor of relying on managed care—­and the market forces it supposedly channeled—to control hospital costs. Even states with relatively successful rate-­setting systems, such as New York, New Jersey, Mas­sa­chu­setts, Connecticut, and Washington, ended their programs during the period. ­These programs had not failed in a technical sense. Although they had prob­ lems with excessive complexity, with regulatory capture by the industry, or with inflexible authorizing legislation that made it difficult for them to adjust their rate-­setting mechanisms to meet changing conditions, all of the major state systems had significant success in constraining hospital costs—­usually to a greater degree than the managed-­care systems that replaced them. Their failure, instead, had been po­liti­cal: they had not built co­a li­tions of providers and payers who saw their own interests, as well as the good of the larger health system, reflected in the regulatory structure. When the ideological wave of markets swept over them in the form of managed care, they ­were lost.51 This trend threatened Mary­land’s Health Ser­vices Cost Review Commission as well. Although the HSCRC did have the under­lying support that the other state bodies lacked, it still faced difficulties when the state’s rate of hospital cost increase crept above the national average a­ fter 1992. Both insurers and hospitals expressed dissatisfaction with the commission’s per­for­mance, although their diagnosis of the prob­lems reflected their own interests in e­ ither greater discounts (for the insurers) or relief from tight rate-­setting formulas and flexibility in negotiating with HMOs (for the hospitals).52 Belief in the market, however, ran through the critiques. In 1998, the CEO of United Healthcare of the Mid-­Atlantic commented, “I ­don’t think any government agency can inject as much efficiency into the marketplace as the marketplace could on its own.”53 For a time, it even seemed that such sentiments might lead to phasing out the HSCRC entirely.54

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Mary­land ultimately chose to make changes to the rate-­setting system rather than eliminate it. In a compromise in early 2000, the commission, along with hospitals, insurers, business groups, and ­unions, agreed to eliminate the mechanism for controlling the volume of hospital admissions in exchange for hospitals and insurers accepting three years of rate increases based on a “market basket” index of hospital costs. ­These rate increases would be guaranteed as long as costs per hospital admission in Mary­land remained below national averages.55 The HSCRC thus survived when all similar programs did not. This unique outcome occurred ­because of specific features of the Mary­land situation. In part, the HSCRC had become a point of pride for the state and its health care system. As Greater Baltimore Medical Center CEO Robert Kowal told an interviewer in 1995, “The attitude in Annapolis is that motherhood, apple pie, and rate setting all go in the same boat.”56 Despite its strug­gles in the 1990s, the system had a track rec­ord of success that extended for nearly a quarter ­century, and few in the General Assembly or even the health care and insurance industries actually wanted it removed. In addition, unlike the states that eliminated rate setting, the authorizing legislation for the HSCRC granted it the power to change its own regulatory structure and mechanisms as its staff and commissioners believed necessary. Such flexibility helped the HSCRC make adjustments, sometimes annually, throughout the period of the managed-­care revolution. Although this sometimes yielded counterproductive results in terms of actually containing hospital costs, it absorbed po­liti­cal pressure from all sides. Other states could make changes in their regulatory procedures only with the direct approval of state legislatures. More cumbersome and less po­liti­cally responsive, this lack of statutory authority put the regulatory structures at risk. Fi­nally, Mary­land’s federal Medicare waiver meant that Medicare and Medicaid would pay commission rather than Medicare rates. Th ­ ese w ­ ere higher than Medicare prospective payment system rates and also covered as much as $200 million of other­wise uncompensated care. No other state received such a federal bounty, which would be lost if the HSCRC ­were eliminated. Together, ­these ­factors served to preserve Mary­land’s all-­payer rate-­setting system at a moment when all other states eliminated such structures.57 Nonetheless, the 2000–2001 redesign still reflected the prevailing premise that had led to the elimination of rate control elsewhere: that managed care would effectively control hospital costs and that strict regulatory mea­sures like volume control w ­ ere no longer necessary.



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This would prove to be inaccurate. Hospital costs had begun to creep up again nationally in the late 1990s, as did health care costs generally. Managed care had wrung the easy savings out of the system, and fewer excesses remained to produce additional gains. In addition, managed care had proved wildly unpop­u­lar: neither patients nor physicians appreciated having care decisions monitored by third parties, and a po­liti­cal backlash set in. Although legislative mea­sures such as “Patient-­Bills-­of-­R ights” found only ­limited success, managed-­care organ­izations responded to the po­liti­cal climate by softening the very mea­sures that had allowed them to control costs in the mid-1990s. In this context, the HSCRC’s survival, alone among state rate-­setting systems, left Mary­land as a unique experiment in American health care policy. Further, beginning in 2008, the HSCRC would reverse the trend t­ oward weakening its control and undertake a series of impor­tant steps ­toward expanding and strengthening its regulatory model.58

The Merger Wave Along with destroying many state-­level regulatory structures, managed care changed the be­hav­ior of hospitals in ways that have had ongoing consequences for the U.S. health care system. As managed-­care organ­izations aggressively sought to discount payments during the 1990s, hospitals around the country responded by creating large, integrated delivery systems through mergers, acquisitions, and affiliations. According to one estimate, more than nine hundred such deals took place from 1994 to 2000 alone.59 The resulting networks included not only multiple hospitals but also physician practices, clinics, and home health care companies and could offer care at all stages of illness. By increasing their size and reach, and hence their share of health ser­ vices provided in a region, such systems sought leverage against managed-­ care organ­izations. With control over large numbers of patients, they could push back on prices and other concessions or at the very least maintain their share of HMO contracts. As early as 1993, bond raters and insurers began to expect “a sufficient degree of geographic dispersion and vertical integration” from hospital systems seeking to issue new bonds, along with a share of managed-­care contracts proportionate to levels in their ser­vice regions.60 The threat that managed care posed to hospitals would prove to be temporary, but the increase in market power produced by the hospital merger wave of the 1990s and l­ ater waves that followed would be permanent.

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Johns Hopkins could not ignore this trend, although the outcome of Robert Heyssel’s hospital acquisitions in the mid-1980s did produce some hesitation and internal conflict regarding the prospect of additional mergers. While the Hopkins Bayview Medical Center (formerly Baltimore City Hospitals) prospered, the acquisition of North Charles General and Wyman Park Hospitals proved less successful. Integrating the generally less-­academic physicians from the two community hospitals into the Hopkins medical staff proved difficult, and North Charles in par­tic­u­lar lost money. In 1992, Hopkins sold the fa­cil­i­t y to a nursing home chain. Wyman Park remained as an outpatient fa­cil­i­t y and office building for the health system, with its physician group merged into the Hopkins group practice that was retained following the sale of the Johns Hopkins Health Plan.61 ­These setbacks left many at Hopkins wary of ­f uture acquisitions. James Block, Heyssel’s successor, disagreed with this view (as he did about hospital-­owned HMOs). He believed that Hopkins had to increase its presence throughout the region in order to compete for patient referrals and managed-­care contracts. This meant forming relationships with both community hospitals and local doctors. Over the re­sis­tance of many Hopkins physicians, Block spearheaded the construction of a $12 million outpatient fa­cil­i­t y at Green Spring Station, a wealthy suburb slightly north of the Interstate-495 beltway. Opening in 1994 and staffed with fully credentialed Hopkins doctors, Green Spring effectively served as a Hopkins primary care branch in Baltimore’s northern suburbs. It proved im­mensely successful, both in capturing patients and in blocking other hospitals from building large physician practices in the area. By the early 2000s, Green Spring had expanded to five buildings, including an ambulatory surgery center, and generated $100 million annually for the wider Hopkins system. Between 1996 and 2000, Hopkins developed a second suburban site at White Marsh, and then a third at Odenton in 2004. All three sites provided not only easy access for insured patients but also lower-­cost treatment settings than the hospital.62 Block’s efforts to acquire or affiliate with additional hospitals met with less success. Although the medical school had a long-­standing teaching relationship with Sinai Hospital that had continued a­ fter the Jewish-­sponsored hospital moved in 1960 from a location across East Monument Street to a new fa­cil­i­t y in northwest Baltimore, negotiators on both sides concluded that the differing cultures of the two hospitals made a merger impossible. Block proposed another alternative: an “Atlantic Alliance” through which Hopkins, Sinai, and five other community hospitals would negotiate on a joint basis



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with managed-­care organ­izations. In that case, the medical school objected to the proposed relationship, part of an escalating clash between Block and Michael Johns, the medical school dean. In 1998, Sinai merged with Northwest Hospital to form LifeBridge Health. Block’s discussions with Good Samaritan Hospital, another Hopkins teaching partner, similarly failed. Instead, Helix Health System, itself a recent merger of five Baltimore-­area hospitals, acquired Good Samaritan.63 Shortly before his July 1996 resignation, Block fi­nally succeeded in forming an affiliation with Suburban Hospital in the Washington suburb of Bethesda. This strengthened Hopkins’s position in the Washington market, while also taking advantage of Suburban’s significant research and teaching strengths, which ­were heavi­ly based on its location adjoining the National Institutes of Health.64 Block’s departure from the hospital, along with that of Michael Johns from the medical school, represented the resolution of an extended period of internal conflict that led to the reor­ga­ni­za­tion of the medical institutions into a new entity, Johns Hopkins Medicine, that would be led by a single dean-­ CEO. The first occupant of that position, Edward Miller, possessed sufficient authority to move forward with new strategic relationships. Working closely with the new hospital and health system president Ronald Peterson (who had overseen the successful development of Johns Hopkins Bayview), Miller implemented a version of the regional expansions that Block had championed. In late 1997, Hopkins reached an “intense” stage of negotiations with Helix Health System, which by then had grown to be the state’s second-­largest hospital system. A merger between the two would have controlled approximately one quarter of the hospital beds in the entire state. The pos­si­ble deal, however, collapsed when the Helix board opposed the combination, and the CEO who had pushed the merger resigned.65 The following year, Helix merged instead with the Medlantic Healthcare Group, a two-­hospital Washington, D.C., system with over nine hundred beds. Renamed MedStar Health, this massive system would add Georgetown University Hospital in 2000. With ten hospitals and roughly three hundred locations, it remains one of Johns Hopkins’s key regional competitors ­today.66 By the time the Helix conversations ended, a new opportunity had emerged that represented a better match for Hopkins’s needs. Although at that time Helix had four hospitals in Baltimore and one just over the city’s eastern boundary, to the west Howard County General was the only hospital in that rapidly growing suburban county. Although not nearly as large as the Helix system, Howard County General had a historic connection to

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Hopkins, having been founded in conjunction with the Columbia Medical Plan effort of the early 1970s. By 1997, the hospital had strong profit margins but carried a heavy debt load from a series of expansions in the 1980s. As a result, its board and leadership team feared that it would not be able to fund its $46 million strategic plan, which included an emergency room expansion, renovation of the maternity unit, a w ­ omen’s health center, and—as always—­ more parking. Failure to accomplish the plan would leave the hospital in an uncompetitive long-­term position.67 ­After announcing its intentions to sell Howard County General, the hospital’s board received sixteen proposals, which it narrowed to three finalists by early 1998: Hopkins, Helix, and St. Agnes Hospital (a nearby Catholic institution). The potential sale provoked fear among Howard County residents and physicians. While the doctors worried about losing patients and medical control to larger entities like Hopkins or Helix, community members dreaded the loss of the community character and identity of Howard County General. Many remembered its origins in the early days of Columbia, and even more had participated in the community-­organized bond sales that had funded its growth from 59 beds in the original hospital to 233 beds during the 1980s. As one longtime Columbia resident explained at a community meeting, “The bonds w ­ eren’t that g­ reat of an investment, but you bought them ­because it was our community hospital. We took pride in it. We made it what it is, and we deserve to know what’s ­going to happen to it.” The area’s delegate to the General Assembly, Elizabeth Bobo, cut to the core of the ­matter: “It is not the bricks and mortar that are the valuable part of any deal. We, the consumers who are almost all insured, are the attraction.” The possibility of acquisition by St. Agnes, a Catholic institution, provoked another fear: that abortion and reproductive health ser­vices might be curtailed or eliminated.68 This time, Hopkins won. In a $142 million agreement announced in March 1998, Johns Hopkins agreed to assume Howard County’s $56 million debt, fund its $46 million strategic plan, including six new “outreach centers” around the county. It also contributed $40 million for the establishment of an in­de­pen­dent foundation to address community health care needs ranging from dental care to teenage pregnancy prevention. The suburban hospital would also keep its name, merely adding the Hopkins logo to its signage and letterhead. The community would also hold ten of fifteen seats on the board, with repre­sen­ta­tion on both the Johns Hopkins Medicine executive committee and the health system board. Although Hopkins held ultimate fi-



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nancial control, it won over most of Howard County General’s physicians by offering them affiliations while giving them broad autonomy over the hospital’s operations.69 For many in the community, the sale to Hopkins was a relief, even if they might have preferred that Howard County remain in­de­pen­dent. Columbia resident and community activist Helen Ruther summarized this view: “I’m pleased that if the hospital realized it had to merge with anyone, it went with a well-­k nown name like Hopkins. We started out with Hopkins and now ­we’re ­going back to them. It’s reassuring.” Hopkins dean-­CEO Edward Miller spoke forthrightly about the appeal of a suburban hospital for Hopkins: “Our concern was that Hopkins would be totally isolated [in East Baltimore] and become [only] a high-­cost hospital. Our strategy is to partner with Howard County General so that does not happen.”70 This had, of course, been the exact rationale for Hopkins’s involvement in the original Columbia Medical Plan a quarter c­ entury before. Now Hopkins also faced the threat that if it did not acquire Howard County General, then Helix or St. Agnes might. Ironically, the deal was concluded on the twenty-­fifth anniversary of the plan’s founding. Dr. Harry Seidel, who had served as the hospital’s first medical director, attended the announcement of the new sale to Hopkins. “When we started out, we ­were serving a much smaller, much less developed area,” said Seidel. “We went out ­t here with the wonderful idea to provide all the needed ser­v ices for the residents,” Seidel told the Sun. “Now we are coming back together, just like then.”71 But it was not “just like then.” The economic forces driving the arrangements of the hospital city had greatly intensified, placing the survival of the smaller hospital and the preeminence of its academic partner at stake. Meanwhile, the larger possibilities of the health care system had been transformed, from one in which national health insurance seemed a pos­si­ble or even likely development to one in which markets (or at least a simulation thereof) had become dominant in policy thinking and hospitals made decisions based on capital needs and the demands of market actors ranging from bond traders to managed-­care organ­izations. We are still living in the world created during that period. Much of the care that Americans receive through that system is provided by large, integrated health networks, both for-­profit and not-­for-­profit, that encompass hospitals and physicians and, in some cases, insurance products. Yet at the same time, many low-­income Americans now largely rely on an expanded and somewhat stabilized system of public coverage provided by Medicaid and the ­Children’s Health Insurance Program (CHIP). Since the Clinton period,

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the core identity of ­t hese programs has continued to shift. Although still means-­tested and tied to the choices of state governments, they have become much more than the despised lower tier of a two-­tier health system. Although impor­tant gaps remain, they now provide the basis for expanded coverage of millions of Americans. Enacted in legislative form in the 2010 Patient Protection and Affordable Care Act, popularly known as Obamacare, this system’s basic framework of subsidized private health insurance and Medicaid expansion operating alongside increasingly power­f ul and largely unchecked hospital systems emerged in the aftermath of the failed Clinton reform effort. As was the case through the second half of the twentieth ­century, this system still generates costs that are exceptionally high in global terms. Much of this spending flows to hospitals as a result of the pricing power that large health systems have been able to amass in many markets. The hospital city not only survives but has come to define the health care system as well as the economic life of American cities.

CONCLUSION

 Reform in the Hospital City— ­and the Health Care Nation

I

n March  2010, comprehensive health care reform fi­nally arrived in the United States. A ­ fter more than a year of intense negotiations, frequent frustration, personal tragedy (including the death from brain cancer, at a crucial moment in the legislative pro­cess, of Senator Ted Kennedy), and the near collapse of the legislative pro­cess on multiple occasions, the House of Representatives passed a Senate version of the Patient Protection and Affordable Care Act (ACA). On March 23, President Barack Obama signed the bill into law.1 For all its complexity, the ACA—or Obamacare, as it is popularly known—at its heart consisted of three central components, along with complex financing provisions: first, public subsidy, reor­ga­ni­za­tion, and regulation of private health insurance markets; second, the expansion of Medicaid; and third, mea­sures to slow the growth of health care costs while improving quality. The first two dealt with the insurance coverage prob­lem. More than a de­cade ­after passage of the legislation, both have succeeded. The third dealt with the health care cost prob­lem and hence indirectly with the dilemma of the hospital city. This part of the act has at best a mixed rec­ord, which means that the under­lying cost prob­lem of American health care threatens the long-­ term viability of the ACA’s other successes. More aggressive cost reforms ­will be needed. On the insurance coverage side, the ACA created a series of new state and federal insurance market exchanges in which individuals could purchase regulated policies offered by private insurers. Subsidies of premiums and cost-­ sharing are available to individuals and families earning up to 400 ­percent of the federal poverty level. In addition, an employer mandate required companies with more than fifty full-­time workers to provide coverage for their

272 Conclusion

employees, while the controversial individual mandate required all Americans to acquire coverage from ­either private or public sources.2 Despite significant early strug­g les such as the disastrous initial rollout of the federal insurance exchange website, the ACA has survived repeated attempts to overturn it and has gradually evolved ­toward stability and broad public ac­cep­ tance.3 Enrollment in the health insurance exchanges has grown from just over eight million p ­ eople in 2014, the first year of operation, to more than twelve million in 2021.4 Distraught claims of socialism and “government takeovers” of health care aside, the exchanges and subsidies in real­ity served to bring private health insurance to more Americans. The expansion of Medicaid to cover ­people earning up to 133 ­percent of the federal poverty line has been even more successful. ­Under Title II of the ACA, the federal government agreed to pay 100 ­percent of the costs of adding additional recipients to Medicaid u ­ ntil 2017 and 90 ­percent thereafter. Although the Supreme Court ruled in 2012 that states could not be forced to expand Medicaid, legislatures have accepted expansion and voters have supported ballot initiatives providing for it. By 2021, thirty-­eight states and the District of Columbia had expanded Medicaid.5 Expansion led directly to the enrollment of nearly 18.2 million new Medicaid participants by the end of 2020—­more than the total on the exchanges. This growth builds on the stabilization and destigmatization of Medicaid that took place during the 1990s and 2000s, and it marks the program’s maturation as a central, public pillar of the nation’s health care system.6 Still, despite the coverage expansions accomplished through the ACA, more than 28.9 million Americans remain uninsured in 2019, down from a peak of 46.5 million in 2010. This prob­lem is particularly acute in states that have not expanded Medicaid.7 The ACA’s cost-­control components, particularly ­t hose related to hospitals, have been less successful, in part ­because they ­were not central to Obamacare’s design. Early in the legislative pro­cess, the Obama administration and congressional leaders (who led the development of much of the ­actual legislation) de­cided not to pursue aggressive efforts to control provider costs.8 This choice reflected the lessons of the Car­ter and Clinton presidencies. The industry’s outright opposition could kill legislation, as it had during the Car­ ter years. Even when it offered tepid support, as it had ­under Clinton, it could severely hamper prospects for reform. Seeking to win the industry’s support, administration and congressional negotiators cut a deal with the major hospital associations: the hospitals agreed to accept a reduction of $155 billion in federal payments over ten years if the bill achieved coverage of



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95 ­percent of the population. The cuts contributed to financing the overall bill—­a po­liti­cal priority throughout the entire legislative process—­while the coverage expansion meant that hospitals would receive more in new payments for previously uncompensated care than they gave up in the cutbacks. The hospitals also feared that if health reform failed, they would face a repeat of their experience a­ fter the Clinton effort, when the Balanced Bud­get Act of 1997 extracted Medicare and Medicaid cuts but offered no increase in coverage. Negotiations over specific hospital cuts continued almost ­until the bill’s final passage the next year and ultimately included $112 billion in direct Medicare and Medicaid rate reductions and $36 billion from Medicare and Medicaid disproportionate share hospital payments, with the remainder raised from new fines for hospital-­acquired infections and penalties for hospital readmissions.9 ­Those fines and penalties w ­ ere part of a broader set of experimental mea­ sures to increase hospital quality and efficiency and, more generally, to shift the incentives of both physicians and hospitals. This approach was based on the view that the United States had excessively high health care costs b ­ ecause fee-­for-­service payment led doctors and hospitals to order unnecessary tests and procedures, leading to expensive “overtreatment” along with larger profits for providers. To explore ways to ­counter this, the ACA established pi­lot programs that encouraged hospitals and physicians to form new comprehensive care structures known as accountable care organ­izations that would provide integrated care, from routine preventive care to serious illness, for a defined group of patients. This, it was hoped, would increase teamwork among all providers, reducing duplication and waste in the care of each patient. Other sections of the bill encouraged “bundled” payments for an entire episode of patient care, often allowing the provider to retain a portion of any savings. The provisions to limit hospital infection and readmission, along with other new mea­sures of the quality of care, represented an attempt to shift payment away from volume and reward “value-­based care.” Members of Obama’s economic team had wanted to make structures such as accountable care organ­ izations a core part of the bill, but b ­ ecause of the decision to defer cost containment into the ­future, they had to ­settle for a ­limited set of experimental proj­ects. More aggressive mea­sures, such as rate regulation, antitrust actions, and the bud­get caps of the Clinton plan, remained off the ­table entirely.10 This emphasis on the incentives that fee-­for-­service payment created for providers had guided many of the e­ arlier delivery reform efforts discussed

274 Conclusion

in this book, such as prepaid group practices and, ­later, nonprofit HMOs and even managed care. For de­cades, such ideas had at least some validity, and the United States almost certainly would have been better off had it a­ dopted alternative forms of payment and provider organ­ization. Yet by the early 2000s, evidence had mounted that this view of health care costs was at best incomplete and at worst wrong. New research showed instead that provider pricing power represented the primary force driving the country’s excess health care costs.11 While integrated care networks might improve efficiency and even quality, critics on both left and right warned that structures such as accountable care organ­izations would further encourage consolidation among providers, as integrated care and bundled payment would be easiest to provide and manage u ­ nder a single orga­nizational structure.12 This meant ­t here was a strong incentive for hospitals to pursue not only mergers with other hospitals but also acquisitions of physician practices (and for private practices to combine into larger physician groups). The cutbacks in Medicare rate growth and uncertainty about the ACA’s f­ uture exacerbated such incentives. Key members of the administration’s health policy and economic teams actually welcomed consolidation, writing in the fall of 2010 that “­these reforms ­will unleash forces that ­favor integration across the continuum of care. . . . ​The health care system ­will evolve into 1 of 2 forms: or­ga­nized around hospitals or or­ga­nized around physician groups.” In this view, consolidation would improve the patient experience; facilitate the development of efficient, high-­quality, coordinated care; and reverse the wasteful incentives of fee-­for-­ service medicine.13 This perspective has proved overly optimistic. Although the exact, causative role of the ACA is not clear, in the de­cade following the legislation’s passage, hospital mergers r­ ose from an average of sixty per year between 2000 and 2009 to ninety-­one per year between 2010 and 2019.14 The hospitals involved have also been larger.15 In addition, hospital systems increased their purchases of physician practices, a key part of building an integrated care network but also a means of controlling the referral of patients. Together, ­t hese forms of horizontal (acquisition of other hospitals) and vertical (acquisition of physician practices) consolidation allowed the enlarged health systems to build market power, which in turn increased their ability to demand higher prices from insurers. Although some of this increased merger activity would have occurred even without the ACA, the legislation itself prob­ably exacerbated the prob­lem. Medicare savings from accountable care organ­izations



Reform in the Hospital City 275

have been ­limited and far lower than advocates once projected and may have raised systemwide costs once overhead costs are accounted for.16 On the coverage side of health reform, the ACA represented a compromise between pure public and private solutions and between regulation and markets. On the cost-­control side, in contrast, the ACA relied almost entirely on the rearrangement of provider incentives. This approach not only left the hospital city largely untouched but intensified the tensions surrounding it by increasing its revenue flows and facilitating, perhaps even encouraging, further consolidation of the system.

The Trajectory of Capital, Within and Beyond the Hospital City Amid the tumult over Obamacare, hospitals and especially academic medical centers emerged even more clearly as the last institutions standing in inner-­city neighborhoods. Subsidized directly and indirectly by public funds, the hospital city’s jobs provided a crucial buffer against the dislocations that a global economy has brought. They have, in effect, provided a kind of de facto jobs program for the United States, albeit one that is inefficient and not necessarily focused on the greatest areas of need. Still, the quasi-­public quality of ­these institutions led to uncertainty over the nature and extent of their responsibilities t­ oward surrounding poverty communities. At the same time, they exerted extensive, if not unchecked, influence over the use of urban space, creating deep inequities of power, many of them linked to race. Such complex relationships and the tensions they produced fed back into broader health care policy debates, although largely in ways unrecognized at the time. All of this played out at Johns Hopkins Hospital. Following the 1998 acquisition of Howard County General Hospital, Hopkins has continued to expand its health network, adding Washington’s Sibley Memorial Hospital in 2010. Moving beyond the region, it acquired All-­Children’s Hospital in St. Petersburg, Florida, in 2011. Unlike Mary­land, neither Florida nor the District of Columbia controls hospital rates. Meanwhile, the Hopkins Community Physicians group operated from thirty-­nine locations, all of them providing crucial patient referrals to the rest of the system. Such system development activities have been typical of the hospital industry and have accelerated since the passage of the Affordable Care Act. Such integrated health systems have

276 Conclusion

increasingly pursued not only higher revenues but also market dominance and, with it, the pricing power that drives health care costs higher. Beginning in the late 1990s, Hopkins transcended national bound­aries when it formed Johns Hopkins Medicine International, which t­ oday has affiliations with hospitals across Asia, the ­Middle East, and South Amer­i­ca. Hopkins’s global presence is part of a much wider shift in the nature and function of the hospital city. Like Hopkins, major U.S. academic medical centers such as the Cleveland Clinic, Stanford University Medical Center, the Mayo Clinic, and the University of Pittsburgh Medical Center have all established extensive affiliations with hospitals and medical schools around the globe. In some cases, t­ hese American institutions have established official branches of their own systems. Regardless of the form, most of the affiliated institutions are located in eco­nom­ically significant emerging markets, from Dubai to Singapore to Brazil. In January 2014, the Johns Hopkins Health System even established a partnership with the Saudi Arabian national oil com­ pany, Aramco, creating an entity known as “Johns Hopkins Aramco” that completed the integration of American not-­for-­profit medicine into core structures of global capitalism.17 Such connections provide Hopkins with access to wealthy patients who participate in the growing international “health care tourism” marketplace, as well as to international sources of capital. This poorly understood phenomenon represents a fascinating global endpoint to the story of the inner city–­based academic medical center recounted in Hospital City, Health Care Nation. From physical locations of deep disinvestment in U.S. inner cities, such as East Baltimore, American academic medical centers have extended their spatial reach globally. As such, they have transitioned from being anchor institutions to being anchor networks. It is unclear what, if any, benefits such global connections provide for the home neighborhoods of Hopkins or other such institutions. Over the last two de­cades, Johns Hopkins has also pursued a form of comprehensive neighborhood transformation that echoes aspects of the old urban renewal program: the East Baltimore Development Initiative (EBDI), a $1.8 billion, eighty-­eight-­acre redevelopment proj­ect that over a fifteen-­year period has cleared and rebuilt large portions of the low-­income, predominantly minority ­Middle East neighborhood that adjoins the hospital. Hopkins partnered with city government, developers, and the Annie E. Casey Foundation on the proj­ect, which relied on almost total clearance of the neighborhood. EBDI includes mixed-­use commercial development, mixed-­ income housing targeted at workers in the health care system, a charter



Reform in the Hospital City 277

school, a central public green, connections to mass transit, and a biotechnology park.18 The initiative creates, in short, a much easier urban environment in which to run a world-­class medical center. Although the proj­ect included some community planning engagement and produced some rehousing and construction jobs for residents, it has also generated a new wave of anger in the East Baltimore community. Discontent has focused on issues of residential displacement and inadequate rehousing and employment opportunities. Above all, critics charge that the proj­ect has prioritized the needs of Hopkins over ­those of the community. The most recent round of Hopkins-­led efforts to rebuild an urban community demonstrates that the role of the “eds and meds” is about far more than just employment: at stake is the form of the city, who ­will live and work ­t here, and above all who w ­ ill make decisions. EBDI also created the same ­human costs as the older form of urban renewal. Longtime East Baltimore activist Lucille Gorham, who had both worked with and fought the hospital since the 1960s, lost her home to the EBDI clearance proj­ect. Gorham had previously lost homes to the Douglass housing proj­ect in the 1940s and to Hopkins’s Broadway urban renewal proj­ ect in the early 1960s. Describing the modern urban renewal experience in 2007, she recalled that “they kind of swooped down on the neighborhood and bought property and moved ­people out without thinking about it. They got involved b ­ ecause they just looked around and they saw this neighborhood is falling apart. Crime is a real prob­lem for Hopkins employees and for their visitors and patients. . . . ​W hen I got my letter to move, it hurt. It was like sticking a knife in my chest.” Gorham found new housing but in a dif­fer­ent neighborhood from the one in which she had lived and worked for de­cades. “You would think it’s a step up. But I’m ­here and nobody knows I’m ­here. On Chase Street, I could open my front door and see every­body on my block. ­Here I can open my front door and not see anybody for months.” The new ­house also had major structural issues and, a­ fter Gorham’s 2012 death, created significant financial prob­lems for her ­family.19

The Pandemic and the Hospital City The relationship between the hospital city and racial in­equality became tragically vis­i­ble when the Covid-19 pandemic swept the world beginning in the winter of 2020. Forced to cancel most discretionary health ser­vices, hospitals

278 Conclusion

furloughed workers and in at least twenty cases closed completely, even as the nation faced the terror of an inadequate supply of hospital beds and overwhelmed health care workers.20 Meanwhile, a combination of incompetent and malicious leadership and underresourced public health infrastructure resulted in a chaotic response to the crisis in the United States. Despite the world’s most expensive, most technically advanced health care system, hundreds of thousands of Americans died unnecessarily, millions more lost their jobs, minorities and low-­income ­people generally suffered disproportionately, and young p ­ eople experienced profound disruptions in their educations. The Covid-19 catastrophe in part reflected the consequences of the hospital city. For nearly a c­ entury before 2020, the United States emphasized the hospital as the core of its health care system. In ­doing so, it underinvested in other ele­ments of the system, such as public health, including clinics, primary care interventions, and disease surveillance capacity. In addition, it financed the hospital system through payment structures—­“the insurance com­pany model”—­that stressed returns to capital through expensive advanced ser­vices rather than primary and preventive care. This led to overinvestment in hospital facilities and capital-­intensive technology, producing an extraordinarily expensive system. That cost more than any other single ­factor made the system difficult to reform in ways that would have extended coverage of ­either basic or advanced ser­v ices to all Americans. The pandemic highlighted a related but even more fundamental prob­lem: deep disparities in health along divides of race, as African Americans and other ­people of color became sick more often and died more frequently from Covid-19. ­These disparities arose from a history of unequal and discriminatory treatment, beginning in slavery and extending through the rise of scientific medicine, by medical professionals and—­especially—­hospitals. Lack of insurance coverage and high costs exacerbated the prob­lem. Over de­cades, such patterns yielded high rates of under­lying health conditions that, along with unsafe workplace conditions, crowded housing, and distrust of historically racist medical institutions, increased vulnerability to Covid-19. Such outcomes also reflected profound inequalities within the hospital system itself: ­people with the highest vulnerability to Covid-19 frequently received treatment in underfunded hospitals that experienced dramatically worse patient outcomes. Specifically, African Americans died from Covid-19 more frequently not ­because they experienced higher death rates than other patients at the hospitals where they ­were treated but ­because they ­were more



Reform in the Hospital City 279

likely to be treated at hospitals that produced worse outcomes for all patients.21 As a result of the historical inequities of the hospital financing system, hospitals in lower-­income neighborhoods have fewer resources and often provide lower-­quality care—­especially in a crisis such as the pandemic. ­Because hospitalization most often occurs near where a patient lives, this inequitable aspect of the hospital city collided with long-­standing patterns of neighborhood segregation to produce a tragic result. “Under­lying health conditions” are the results of specific features of society and the health system, features deeply embedded in the hospital city itself.

What Should Be Done in the Hospital City and the Health Care Nation? The problematic outcomes of the East Baltimore Development Initiative and the pandemic raise again the questions first posed in the introduction: what should we ask of urban hospitals and how extensive should their responsibilities be? Such questions, though, must go even further, to the hospital city’s role in the larger economy and, with that, to its place in the health care system and the po­liti­cal pro­cesses that surround it. Answering ­t hese questions requires an assessment of the proper extent of the associational state itself—­t hat is, the del­e­ga­tion of governmental powers to private associations charged with fulfilling public purposes. Traditionally, academic medical centers have a narrow societal mission: providing patient care, conducting advanced research, and training the next generation of physicians and medical researchers. In recent de­cades, as they have become a massive, even dominating presence in communities around the United States, ­t hese institutions have taken on activities far beyond that traditional mission. As with Hopkins’s EBDI proj­ect, they have accepted responsibility for functions as varied as building housing, managing redevelopment efforts, creating schools, policing nearby neighborhoods, and providing jobs for the disadvantaged.22 In ­doing so, they have in effect ­adopted a quasi-­governmental role, as each of t­ hese functions could justifiably be considered a responsibility of the state. ­There are positives to this approach. Institutions like Hopkins have significant (although not unlimited) resources, while city governments remain ­limited in their fiscal capacity, particularly given the lack of federal support for major urban policy initiatives. Hospitals thus take on t­ hese roles b ­ ecause

280 Conclusion

if they do not, no other entity w ­ ill or can. In addition, as the East Baltimore Medical Program showed long before the Covid-19 pandemic, many of the “health” prob­lems that patients pre­sent are rooted more in social f­ actors than in medical ones. The proper prescription for a hungry child is food; for the un­housed, it is shelter. Such interventions and many ­others that health care institutions have undertaken have similar implications. This is particularly true in relation to racial disparities in health, where social determinants frequently drive medical outcomes. And yet t­ here are prob­lems with this model. When the activities of the institutions extend beyond such clear health determinants and into reshaping neighborhoods and redefining who ­will live ­t here, the prob­lem of institutional self-­interest inevitably intervenes. While this was the dominant, overwhelming characteristic of urban renewal, it also occurred in more socially conscious efforts like Hopkins’s housing proj­ects in the early 1980s, and it has come back in more intense form in the EBDI proj­ect. The inevitable difficulty is that even with the best intentions, an equilibrium of community and institution is ferociously hard to attain. The traditional mission of the institution remains and must be fulfilled. As such, the resources available to large hospitals are massive, but the demands are many. Teaching, research, and patient care often win out over community responsibilities. More generally still, the adoption of such an associational model means that academic institutions are being asked to undertake huge governing tasks that in many re­spects go far beyond historical pre­ce­dents. Th ­ ese responsibilities are often outside their traditional mission and expertise, and it may simply be unrealistic to expect that they w ­ ill act for interests beyond their own. East Baltimore community members critical of the EBDI proj­ect claim that Hopkins’s interests have predominated, if not completely prevailed. Medical and higher-­ education institutions ­will always to some degree be acting with their own needs in mind and with their traditional missions in mind. As such, it remains an open question w ­ hether this model is a good t­ hing for the affected communities or even the institutions themselves. Hospitals thus may act as agents of government, but they are not the government. This yields an even more pressing concern. By relying on private institutions to extend the associational state so far, the hospital city encourages the limitation of the state’s role, the diminution of its capacities, and the reduction of its societal status and reputation. Although this book has avoided framing the hospital city as “neoliberal,” in this feature it is clearly representative of the most precise, meaningful aspects of that term. H ­ ere, it means



Reform in the Hospital City 281

that an already diminished state finds it easier, or cheaper, to delegate responsibilities that it can no longer fund, even if society would be better off if it did. Yet in the very act of delegating, the state is further reduced and has even less capacity, or standing, to act in the ­f uture. In this context, the associational qualities of the hospital city have distinctly negative implications. They also become part of a far larger po­liti­cal strug­gle. Still, t­ here may be an answer to this prob­lem. Where social action by hospitals serves a clear and direct health purpose and the hospital has the expertise and capacity to act, it should do so. Examples of this would clearly include environmental ­hazards, food needs, and racial disparities in health outcomes. Housing, though it has a readily identifiable health consequence, is complex and would be better undertaken by hospitals in support of government agencies or nonprofit groups with expertise in the field. Given the tax-­exemption on most of the property that they own, hospitals might best contribute by making “payments in lieu of taxes” (commonly known as PILOTs), to local governments to help support affordable housing. On employment, jobs programs might be tempting for hospitals, but health care spending on hospitals is already vastly high, and spending more to create additional hospital jobs may not be the wisest societal course. If we want a jobs policy, we should pursue it directly rather than through the backdoor of an inefficient hospital system.23 This raises the second question, the one concerning the politics of the U.S. health care system. The United States spends far more on health care as a share of GDP than other developed nations, and much of that excess is spent on hospitals. As noted throughout this book, this is the product of a long history in which the insurance com­pany payment model, as extended into Medicare and Medicaid, rewarded hospitals’ capital expenditures, encouraged them to undertake more, and built a system in which hospitals first competed through growth and then consolidated into power­f ul health systems that gained the capacity to drive prices higher. As the classic economic assessment of this characteristic explained, “It’s the Prices, Stupid.”24 This pricing power is exercised in direct relation to private health insurers, many of whom lack the market power to challenge the hospitals for better prices. Medicare, which is much larger, is more successful and pays hospitals on average half of what private insurers pay (with wide variation between hospitals and across ser­v ices).25 The po­liti­cal prob­lem this produces is significant. The most obvious solution to the hospital pricing dilemma is to eliminate private insurers and

282 Conclusion

adopt a Medicare for All system. The latter would ­either set prices or have the negotiating power to drive hospital prices lower. The world, alas, is not such an easy place. The hospital industry knows this and w ­ ill or­ga­nize to fight any Medicare for All system. As a Car­ter administration policy adviser noted, ­every member of Congress has a hospital in their district. Further, at least some smaller hospitals, possibly many, would close if paid only current Medicare rates. Many more would reduce ser­v ices and lay off workers. The early months of the Covid-19 pandemic, when hospital revenue fell dramatically, provide a preview. Several other solutions have been suggested. On the left, the Physicians for a National Health Plan group offer one path out of this dilemma. They suggest that Medicare for All should be accompanied by a complete removal of hospitals from the price system. Hospitals would receive an annual operating bud­get that, cumulatively, would provide the United States’ total hospital spending for the year (something Ted Kennedy proposed in the 1970s). Capital needs would be met through public grants, allocated through a planning system that rigorously assessed regional needs.26 This would be a modern Hill-­Burton program but extended across the entire spectrum of capital funding and implemented within a “hard planning” regime. It would be utterly unlike anything the United States has seen before. It would effectively make health ser­v ices ­free to all Americans while controlling costs through bud­geted planning. ­There would quite simply be no consumer prices for hospital ser­v ices. In ­doing so, this model would transform hospitals completely, turning them from businesses into true social institutions. Such an approach would provide a glide path for Medicare for All to bring U.S. costs more into alignment with the rest of the world without the immediate shock of drastic revenue reductions and layoffs. While this might lessen the po­liti­cal challenge, the strategy would vastly increase it in another way. Where Medicare for All alone disrupts the hospital industry, the global bud­geting and capital planning approach ends the industry as it exists t­oday. While in many re­ spects ideal for the long-­run operation and financing of a national health insurance system, the po­liti­cal path to this outcome is likely to be brutally challenging. On both the center-­left and the center-­right, a more market-­oriented approach has been suggested. Noting the emergence of multi-­institution health systems that now form regional oligopolies or even monopolies, this strategy picks up the old Progressive era–­New Deal tool of antitrust action and seeks to expand it in the hospital industry. Beyond the inevitable interest-­



Reform in the Hospital City 283

group opposition that it generates, antitrust action against hospital concentration is hobbled by existing law. The Federal Trade Commission (FTC), for example, is barred from acting against anticompetitive practices by not-­for-­ profit hospitals (it is also prohibited from studying concentration in the health insurance industry). Similarly, small mergers are exempted from antitrust reporting requirements, regardless of the cumulative anticompetitive effects generated by large numbers of such transactions. Above all, the antitrust divisions of both the FTC and the Department of Justice lack the dedicated staff and resources necessary to challenge mergers in the hospital industry. Reversing each of ­t hese ­factors, as well as strengthening antitrust law generally, could provide the basis for more effective challenges to hospital consolidation and the market power it generates. Changes to state regulations that have l­ imited hospital competition, such as certificate-­of-­need laws, could support such efforts.27 Although advocates of this position often envision it being applied within a more market-­oriented version of the Affordable Care Act, it could just as easily be applied in a Medicare for All framework. While it would generate hospital industry opposition, in an ACA-­based environment it would likely gain the backing of the health insurance lobby ­because it would limit hospital power.28 Antitrust action, however, would likely be applied only to ­future hospital mergers. Unwinding the massive consolidation that has already taken place in the industry would be unlikely. High levels of hospital pricing power would remain.29 ­There is another, less dramatic, but perhaps more po­liti­cally tenable possibility based on the Mary­land experience. Typical as it is in many re­spects, the Johns Hopkins Health System represents an exception in one key feature. This is the regulatory environment in which it operates, namely, that of the Health Ser­v ices Cost Review Commission’s “all-­payer” rate-­setting system. While Hopkins’s growth in recent de­cades has given it significant market share in the Baltimore-­Washington region, the presence of the HSCRC has meant that it does not have the pricing power that many of its peer institutions in other states now enjoy. The system’s hospitals in both the District of Columbia and Florida, as well as t­ hose overseas, are the exception that proves the point: t­ hese hospitals can generate revenue beyond the HSCRC’s reach. The HSCRC’s presence has meant that Mary­land has seen a lower growth rate for per-­case hospital costs than other states. It has also supported the financial stability of hospitals that treat large numbers of low-­income patients, both in Baltimore and in the state’s rural areas. In 2014, the Center for Medicare and Medicaid Ser­v ices issued a new waiver that allowed the HSCRC to not

284 Conclusion

only regulate hospital rates but also implement a total cap on hospital spending in the state. This gave the agency the power to control the price of hospital ser­v ices and the volume of ser­v ices provided by the state’s hospitals. John Colmers, the HSCRC’s executive director, noted that “it’s essentially moving away from a system that is focused on volume to one that is focused on value.”30 More generally, the experiment marked a growing emphasis on the role of states in health care reform generally and cost control specifically.31 It also gave Mary­land a payment system similar to that of nations such as Germany and Switzerland that combine high-­quality health care with low costs. Over the first five years of the pi­lot program, Mary­land achieved a 4.1 ­percent reduction in hospital expenditures among Medicare recipients and 6.1 ­percent among commercial plan members.32 ­These are significant savings. If applied nationally and maintained, they would vastly reduce the burden of health care costs on the country and its economy. This would make any solution to the coverage crisis, ­whether Medicare for All or modifications to the Affordable Care Act, more fiscally ­v iable and more attainable po­liti­cally. Further, ­these savings ­were achieved in Mary­land without bankrupting hospitals or cutting hospital jobs. Nor is Mary­land’s model the only such option. In recent years, eight states have implemented a range of regulatory experiments based on the establishment of health expenditure growth targets both for health-­care spending as a ­whole and for individual sectors such as hospitals. Most notably, Mas­sa­ chu­setts has used such a cost growth benchmarking program to challenge a proposed suburban expansion by Mass General Brigham, the state’s largest hospital system. When combined with the implementation of Mary­land’s all-­ payer global bud­get model, such developments suggests that the abandonment of regulation by many states during the 1980s has begun to reverse u ­ nder the pressure of hospital consolidation and pricing power.33 Such a return to state-­based regulation could provide a way out of the dilemmas of the hospital city: how to restrain health care cost growth so that meaningful coverage expansion can be achieved without immediately devastating the hospital workforce that has provided a crucial buffer of jobs in the twenty-­first-­century United States. The approach could also be a­ dopted at the national level, but this would raise opposition while sacrificing the capacity of state-­level regulators to develop, as the HSCRC has done, nuanced understandings of the hospital industry in their states. A wiser approach would be for the federal government to incentivize the creation of such systems by states, likely through e­ ither sharing the cost of program development



Reform in the Hospital City 285

or federalizing a greater portion (potentially all) of states’ Medicaid costs. The federal government could also impose national per­for­mance standards on state systems as a safeguard against po­liti­cal pressure and industry capture. Such an approach could be combined with forward-­looking antitrust action and would provide a supportive cost-­control framework for ­either Medicare for All or a revised ACA.34 This solution is not as pure as the full elimination of prices through federal funding of hospital operating and capital bud­gets. Yet it would have similar effects in terms of pushing hospitals away from operating as market entities. By separating hospitals from the pursuit of pricing power, it would take a significant step ­toward making them social institutions focused on equity and societal need rather than institutional profit. A price-­controlled payment system would also allow HSCRC-­style agencies to incentivize societally desirable hospital practices, such as increased primary care, efforts to reduce racial health inequities, and programs to provide ­career training and promotion opportunities for low-­skilled health care workers by paying the full marginal costs (or more) of t­ hose activities. If the United States can pay for hospital capital for seventy years, then we can pay for skill upgrading, living wages, and other desirable hospital actions. The hospital city is our real­ity and likely ­will remain so for the indefinite ­f uture. This need not be a bad ­t hing, as it provides jobs, c­ areer opportunities, medical research, and basic, emergency, and advanced health care. We should not casually give t­ hose up, especially in a world with so much economic and public health uncertainty. Yet the system should not be allowed to grow unchecked, in ways that constrain needed expenditures in critical areas ranging from public health to education to infrastructure to racial reparations. The challenge of the coming de­cades is to find ways in which the hospital city can become a means for achieving justice, equity, and rationality in the health care nation.

ABBREVIATIONS USED IN NOTES

1199R Local 1199 Rec­ords, 1929–2004, Kheel Center for Labor-­Management Documentation and Archives, Catherwood Library, Cornell University, Ithaca, NY ACLUMDR American Civil Liberties Union of Mary­land Rec­ords, University of Baltimore, Robert L. Bogomolny Library Special Collections, Baltimore AHA-­HAOHC American Hospital Association, Hospital Administration Oral History Collection, Center for Hospital and Healthcare Administration History, American ­Hospital Association Resource Center, Chicago BAA Baltimore Afro-­American BES Baltimore Eve­ning Sun BNA Baltimore News American BRC Baltimore Redevelopment Commission BS Baltimore Sun BURHAR Baltimore Urban Renewal and Housing Agency Rec­ords, University of Baltimore, Robert L. Bogomolny Library Special Collections, Baltimore CMP-­CHCFP Columbia Medical Plan/Columbia Hospitals and Clinics Foundation Papers, RG XXIII, Columbia Association Archives, Columbia, MD CMSNHED Center for Medicare and Medicaid Ser­v ices, National Health Expenditure Data CMSOHP Center for Medicare and Medicaid Ser­v ices, Oral History Proj­ect, Social Security Administration Historian’s Office CPHAR Citizens Planning and Housing Association Rec­ords, University of Baltimore, Robert L. Bogomolny Library Special Collections, Baltimore

288

Abbreviations Used in Notes

CPR-­DPC Clinton Presidential Rec­ords, White House Staff and Office Files, Domestic Policy Council, ARC 612954, Clinton Digital Library CPR-­FLO Clinton Presidential Rec­ords, White House Staff and Office Files, Office of the First Lady, ARC 1766805, Clinton Digital Library CPR-­HCTF Clinton Presidential Rec­ords, White House Staff and Office Files, White House Health Care Task Force, ARC 7410105, Clinton Digital Library CQA Congressional Quarterly Almanac CUA Center for Urban Affairs DERP David E. Rogers Papers, Medical Center Archives, Samuel J. Wood Library, New York–­Presbyterian/ Weill Cornell Medical Center, New York DOL U.S. Department of L ­ abor EBCC East Baltimore Community Corporation EBMP East Baltimore Medical Plan EBOHP East Baltimore Oral History Proj­ect, University of Baltimore, Robert L. Bogomolny Library Special Collections, Baltimore EMKOHP Edward M. Kennedy Oral History Proj­ect, Miller Center Presidential Oral History Proj­ect, University of ­Virginia, Charlottesville GBCR Greater Baltimore Committee Rec­ords, University of Baltimore, Robert L. Bogomolny Library Special Collections, Baltimore GPO U.S. Government Printing Office HEW U.S. Department of Health, Education, and Welfare HHFA Housing and Home Finance Agency HHS U.S. Department of Health and H ­ uman Ser­v ices HSCRC Health Ser­v ices Cost Review Commission (Mary­land) HUD U.S. Department of Housing and Urban Development JAMA Journal of the American Medical Association JAMP John Alexander McMahon Papers, Center for Hospital and Healthcare Administration History, American Hospital Association Resource Center, Chicago



Abbreviations Used in Notes 289

JC-1005 Office of the Chief of Staff Files, 1977–1981, Landon Butler’s Subject Files, ARC142819, Jimmy Car­ter Presidential Library, Atlanta JC-­BOURNE Rec­ords of Peter Bourne, Special Assistant to the President for Health Issues, 1976–1979, Peter Bourne’s Subject Files, 1977–78, ARC 146029, Jimmy Car­ter Presidential Library, Atlanta JC-­CABSEC Rec­ords of the Office of the Cabinet Secretary, 1977–1981, Jack Watson’s Subject Files, ARC 571257, Jimmy Car­ter Presidential Library, Atlanta JC-­CONGLIAS Rec­ords of the Office of Congressional Liaison, 1976–1981, Lisa Bourdeaux’s Subject Files, 1977–1981, ARC 568554, Jimmy Car­ter Presidential Library, Atlanta JC-­DPS Rec­ords of the Domestic Policy Staff, 1976–1981, ARC 1113, Jimmy Car­ter Presidential Library, Atlanta JC-­SSO Rec­ords of the Office of the Staff Secretary, 1976–1981, Presidential Files, 1977–1981, ARC 148878, Jimmy Car­ter Presidential Library, Atlanta JC-­STRAUSS Rec­ords of the Office of the Special Counselor on Inflation, 1978–1979, Robert Strauss’ Government Files, ARC 591199, Jimmy Car­ter Presidential Library, Atlanta JC-­WEXLER Rec­ords of Anne Wexler as Special Assistant to the President, 1977–1981, Anne Wexler’s Subject Files 1977–1981, ARC 586391, Jimmy Car­ter Presidential Library, Atlanta JCPOHP Jimmy Car­ter Presidential Oral History Proj­ect, Miller Center Presidential Oral History Proj­ect, University of ­Virginia, Charlottesville JHH-­AR Johns Hopkins Hospital, Annual Reports, Pictorial, Subject Files, Alan Mason Chesney Medical ­Archives of the Johns Hopkins Medical Institutions, Baltimore JHH-­MPDCR Medical Planning and Development Committee Rec­ords, Alan Mason Chesney Medical Archives of the Johns Hopkins Medical Institutions, Baltimore

290

Abbreviations Used in Notes

JHH-­UAR Johns Hopkins Hospital Union Activity Rec­ords, Alan Mason Chesney Medical Archives of the Johns Hopkins Medical Institutions, Baltimore JHHS Johns Hopkins Health System JHHT-­MB The Johns Hopkins Hospital Board of Trustees, Board of Trustees Minute Books, Alan Mason Chesney Medical Archives of the Johns Hopkins Medical Institutions, Baltimore JHHT-­SD Johns Hopkins Hospital Board of Trustees Supporting Documents, Alan Mason Chesney Medical Archives of the Johns Hopkins Medical Institutions, Baltimore JHJCT-­MB Joint Committee of Trustees of the Johns Hopkins University and Hospital, Board of Trustees Minute Books, Alan Mason Chesney Medical Archives of the Johns Hopkins Medical Institutions, Baltimore JHMI-­Segregation Johns Hopkins Medical Institutions, History of Segregation, Subject Files, Alan Mason Chesney Medical Archives of the Johns Hopkins Medical Institutions, Baltimore JHU-­OHC Johns Hopkins University Oral History Collection, Ferdinand Hamburger University Archives, Johns Hopkins University, Baltimore JHU-­Pres Office of the President Rec­ords, Rec­ord Group 2.001, Ferdinand Hamburger University Archives, Johns Hopkins University, Baltimore JHU-­VP Vice President for Institutional Relations Rec­ords, Ferdinand Hamburger University Archives, Johns Hopkins University, Baltimore MDR Mary­land Daily Rec­ord MOP Mancur Olson Papers, Special Collections and University Archives, University of Mary­land, College Park MPD Medical Planning and Development Committee of the Johns Hopkins Medical Institutions MUNDR Model Urban Neighborhood Demonstration Rec­ords, University of Baltimore, Robert L. Bogomolny Library Special Collections, Baltimore NEJM New E ­ ngland Journal of Medicine NYT New York Times



Abbreviations Used in Notes 291

PHS U.S. Public Health Ser­v ice RMHP Robert M. Heyssel Papers, Alan Mason Chesney Medical Archives of the Johns Hopkins Medical Institutions, Baltimore RP James Rouse Papers, Columbia Association Archives, Columbia, MD URA Urban Renewal Administration URAGSF49–60 General Rec­ords of the Department of Housing and Urban Development, Rec­ord Group 207, Urban Renewal Administration, General Subject Files, 1949–1960, National Archives II, College Park, MD URASF61–65 General Rec­ords of the Department of Housing and Urban Development, Rec­ord Group 207, Urban Renewal Administration, Subject Files 1961–65, National Archives II, College Park, MD URF Urban Renewal Files, University of Baltimore, Robert L. Bogomolny Library Special Collections, Baltimore WDSMP William Donald Schaefer Mayoral Papers 1962–1992, MSA Citation BRG9-42, Baltimore City Archives, Baltimore WHP Wallace Hamilton Papers, Columbia Association Archives, Columbia, MD WP Washington Post

NOTES

Introduction 1. Kenneth J. Arrow, “Uncertainty and the Welfare Economics of Medical Care,” American Economic Review 53:5 (December 1963): 941–973. For Arrow’s intellectual legacy, see Peter Hammer, Deborah Hass-­Wilson, Mark Peterson, and William Sage, eds., Uncertain Times: Kenneth Arrow and the Changing Economics of Health Care (Durham, NC: Duke University Press, 2003). 2. Gerard Anderson, Uwe Reinhardt, Peter Hussey, and Varduhi Petrosyan, “It’s the Prices, Stupid: Why the United States Is So Dif­fer­ent from Other Countries,” Health Affairs 22:3 (2003): 89–105; and Anderson, Hussey, and Petrosyan, “It’s Still the Prices, Stupid: Why the US Spends So Much on Health Care, and a Tribute to Uwe Reinhardt,” Health Affairs 38:1 (2019): 87–95. 3. Mary­land Department of Commerce, “Brief Economic Facts; Baltimore City, Mary­ land,” 2021, https://­commerce​.­maryland​.­gov​/­Documents​/­ResearchDocument​/­BaltCityBef​ .­pdf; Pew Charitable Trusts, Philadelphia 2021: The State of the City (Philadelphia: Pew Charitable Trusts, 2021), https://­w ww​.­pewtrusts​.­org​/­​-­​/­media​/a­ ssets​/­2021​/0­ 4​/p ­ hiladelphia​-2­ 021​-­state​ -­of​-t­ he​-c­ ity​.­pdf; Boston Redevelopment Authority, The Largest Employers in the City of Boston, 2013, http://­w ww​.­bostonredevelopmentauthority​.­org​/­getattachment​/7­ ced9a9e​-­cb5c​-­4d6b​-a­ 840​ -­2a0042f68ce5​/­; Scott Suttell, “List of Cuyahoga County’s Largest Employers Proves Cleveland Is a Health Care Town,” Crain’s Cleveland Business, 26 August 2014, http://­w ww​.­crainscleve​ land​.­c om​/­a rticle​/­20140825​/­F REE​/­140829853​/­l ist​-­of​-­c uyahoga​-­c ountys​-­largest​-­employers​ -­proves​-­cleveland​-i­ s​-­a; Greater Houston Partnership, “Largest Houston Area Private Employers,” ­ Here Is Houston, http://­trendmag2​.­trendoffset​.­com​/­publication​/­​?­i​=­276961&p​=­12&search​ _­str​=­Largest%20Employers, 202; and Crain’s Detroit, “Crain’s List: Detroit’s Largest Employers,” July 2013, http://­w ww​.c­ rainsdetroit​.c­ om​/­assets​/P ­ DF​/­CD90222816​.­PDF. 4. Andrew Simpson, The Medical Metropolis: Health Care and Economic Transformation in Pittsburgh and Houston (Philadelphia: University of Pennsylvania Press, 2019); and Gabriel Winant, The Next Shift: The Fall of Industry and the Rise of Health Care in Rust ­Belt Amer­i­ca (Cambridge, MA: Harvard University Press, 2021). 5. U.S. Census Bureau, “All Sectors: Geographic Area Series: Economy-­Wide Key Statistics: 2012,” 2012 Economic Census of the United States, https://­w ww2​.­census​.­gov​/­econ2012​ /­EC​/­sector00​/­EC1200A1​.­zip; and Jon C. Teaford, The Rough Road to Re­nais­sance: Urban Revitalization in Amer­i­ca, 1940–1985 (Baltimore: Johns Hopkins University Press, 1990), 213. 6. Centers for Medicare and Medicaid Ser­v ices, National Health Expenditures 2019 Highlights, https://­w ww​.­cms​.­gov​/­fi les​/­document​/h ­ ighlights​.­pdf. 7. American Hospital Association, “The Cost of Caring,” September 2019, https://­w ww​ .­a ha​.­org​/­system​/­fi les​/­media​/­fi le​/­2019​/­09​/­report​-­cost​-­caring​-­0919​.­pdf.

294

Notes to Pages 6–16

8. U.S. Census Bureau, “Health Care and Social Assistance: Summary Statistics for the U.S., States, and Selected Geographies: 2017” (­Table EC1762BASIC) and “Manufacturing: Summary Statistics for the U.S., States, and Selected Geographies: 2017” (­Table EC1731BASIC), 2017 Economic Census of the United States, https://­data​.­census​.­gov​/­cedsci​/­table​?­q​ =­E C1762BASIC&lastDisplayedRow​ =­2 5& ­t able​ =­E C1762BASIC& tid​ =­E CNBASIC2017​ .­EC1762BASIC&hidePreview​=­t rue&g​=­0100000US and https://­data​.­census​.­gov​/­cedsci​/­table​?­q​ =­2017%20economic%20census&tid​=E ­ CNBASIC2017​.E ­ C1700BASIC. 9. Christy Ford Chapin, Ensuring Amer­i­ca’s Health: The Public Creation of the Corporate Health Care System (Cambridge: Cambridge University Press, 2015); Paul Starr, The Social Transformation of American Medicine: The Rise of a Sovereign Profession and the Making of a Vast Industry (New York: Basic Books, 1982), 345–351; and Beatrix Hoffman, Health Care for Some: Rights and Rationing in the United States Since 1930 (Chicago: University of Chicago Press, 2012), 63–89. 10. Along with traditional, nonprofit voluntary hospitals, the industry also included a for-­profit sector that grew during the second half of the twentieth c­ entury. 11. W. Edward Orser, Blockbusting in Baltimore: The Edmondson Village Story, repr. ed. (Lexington: University Press of Kentucky, 1997); Kenneth Durr, ­Behind the Backlash: White Working-­Class Politics in Baltimore, 1940–1980 (Chapel Hill: University of North Carolina Press, 2003); Rhonda Williams, The Politics of Public Housing: Black W ­ omen’s Strug­ gles Against Urban In­equality (New York: Oxford University Press, 2005); Antero Pietila, Not in My Neighborhood: How Bigotry S­ haped a G ­ reat American City (Chicago: Ivan  R. Dee, 2010); Howell Baum, Brown in Baltimore: School Desegregation and the Limits of Liberalism (Ithaca, NY: Cornell University Press, 2010); Jessica Elfenbein, Elizabeth Nix, and Thomas Hollowak, eds., Baltimore ’68: Riots and Rebirth in an American City Paperback (Philadelphia: ­Temple University Press, 2011); Marisela Gomez, Race, Class, Power, and Organ­izing in East Baltimore: Rebuilding Abandoned Communities in Amer­i­ca (Lanham, MD: Lexington Books, 2013); and Paige Glotzer, How the Suburbs ­Were Segregated: Developers and the Business of Exclusionary Housing, 1890–1960 (New York: Columbia University Press, 2020). 12. Brian Balogh, A Government out of Sight: The Mystery of National Authority in Nineteenth-­Century Amer­i­ca (Cambridge: Cambridge University Press, 2009); Balogh, The Associational State: American Governance in the Twentieth ­Century (Philadelphia: University of Pennsylvania Press, 2015); William J. Novak, “The Myth of the ‘Weak’ American State,” American Historical Review 113:3 (June 2008): 752–772; and James Sparrow, William Novak, and Stephen Sawyer, eds., Bound­aries of the State in US History (Chicago: University of Chicago Press, 2015). 13. Novak, “Myth of the ‘Weak’ American State,” 763. 14. Balogh, Associational State, 5–6; and Novak, “Myth of the ‘Weak’ American State,” 770. 15. Davarian Baldwin, In the Shadow of the Ivory Tower: How Universities Are Plundering Our Cities (New York: Bold Type, 2021). 16. Lars Thorup Larsen and Deborah Stone, “Governing Health Care Through ­Free Choice: Neoliberal Reforms in Denmark and the United States,” Journal of Health Politics, Policy and Law 40:5 (October 2015): 937–966.

Chapter 1 1. Susan B. Car­ter et al., Historical Statistics of the United States Millennial Edition Online, ­Tables Dh59–69, Ca9-19, Dh48–58, Bd257–266, and Dd661–683 (New York: Cambridge University Press, 2006), http://­hsus​.­cambridge​.­org ​/­.



Notes to Pages 16–21

295

2. Rosemary Stevens, In Sickness and in Wealth: American Hospitals in the Twentieth ­Century, rev. ed. (Baltimore: Johns Hopkins University Press, 1999), 168–169; and Jonathan Betz Brown, Health Capital Financing: Structuring Politics and Markets to Produce Community Health (Ann Arbor, MI: Health Administration Press Perspectives, 1988), 3–6. 3. Car­ter et al., Historical Statistics of the United States, ­Tables Bf887–892 and Ba470–477, http://­hsus​.c­ ambridge​.­org​/­; Jacob Hacker, The Divided Welfare State: The B ­ attle over Public and Private Social Benefits in the United States (New York: Cambridge University Press, 2002), 215; Christy Ford Chapin, Ensuring Amer­i­ca’s Health: The Public Creation of the Corporate Health Care System (New York: Cambridge University Press, 2015), 16–36; and Jennifer Klein, For All ­These Rights: Business, L ­ abor, and the Shaping of Amer­i­ca’s Public-­Private Welfare State (Prince­ton, NJ: Prince­ton University Press, 2003), 128–131, 148–164. 4. Hacker, Divided Welfare State, 199–220; Paul Starr, The Social Transformation of American Medicine (New York: Basic Books, 1982), 294–300, 306–310; and Beatrix Hoffman, Health Care for Some: Rights and Rationing in the United States Since 1950 (Chicago: University of Chicago Press, 2012), 58–69. 5. Herman Miles Somers and Anne Ramsay Somers, Medicare and the Hospitals: Issues and Prospects (Washington, D.C.: Brookings Institution, 1967), 154. 6. Chapin, Ensuring Amer­i­ca’s Health, 10–36, 156–160; Brown, Health Capital Financing, 6–8, 25–26; and Stevens, In Sickness and in Wealth, 267, 271–272. 7. Stevens, In Sickness and in Wealth, 162–170. 8. Stevens, In Sickness and in Wealth, 208–211, 214; and Starr, Social Transformation, 261–266. 9. Klein, For All ­These Rights, 135, 162–172; Colin Gordon, Dead on Arrival: The Politics of Health Care in Twentieth ­Century Amer­i­ca (Prince­ton, NJ: Prince­ton University Press, 2003), 139; Stevens, In Sickness and in Wealth, 210–212, 271; and Brown, Health Capital Financing, 6–7. 10. Commission on Hospital Care, Hospital Care in the United States (New York: Commonwealth Fund, 1947); “Hill-­Burton ­A fter 20  Years: The Men, the Money, the 360,000 Beds,” Modern Hospital 107:2 (August 1966): 96; Lewis Weeks and Howard Berman, Shapers of Health Care Policy: An Oral History (Ann Arbor, MI: Health Administration Press, 1985), 29–35; Stevens, In Sickness and in Wealth, 212–215; and Starr, Social Transformation, 348–349. 11. Harry Truman, “Special Message to the Congress Recommending a Comprehensive Health Program, November 19, 1945,” Public Papers of the President: Harry Truman, 1945, Volume 1, April 12—­December 31, 1945 (Washington, D.C.: GPO, 1961), 1:475–491. 12. Hoffman, Health Care for Some, 69–70; and Starr, Social Transformation, 283, 347–51. 13. Stevens, In Sickness and in Wealth, 216–217; Starr, Social Transformation, 283; and Hoffman, Health Care for Some, 68–69. 14. Brown, Health Capital Financing, 76; Starr, Social Transformation, 348; Stevens, In Sickness and in Wealth, 217–218; and Judith R. Lave and Lester B. Lave, The Hospital Construction Act: An Evaluation of the Hill-­Burton Program, 1948–1973 (Washington, D.C.: American Enterprise Institute for Public Policy Research, 1974), 7–9. 15. David Blumenthal and James Morone, The Heart of Power: Health and Politics in the Oval Office (Berkeley: University of California Press, 2010), 67–79; and Jill Quadagno, One Nation Uninsured: Why the U.S. Has No National Health Insurance (New York: Oxford University Press, 2005), 25–31.

296

Notes to Pages 22–25

16. Congressional Quarterly, Inc., Congress and the Nation, 1945–64, Vol. I: The 80th thru 88th Congresses (Washington: CQ Press, 1965), 1130–1131; “First of the Hill-­Burton Hospitals,” Architectural Rec­ord 107:1 (January 1950): 146–153; and “Medical News: Open First Hill-­ Burton Hospital,” Journal of the JAMA 141:17 (December 1949): 1251–1253. 17. Lave and Lave, Hospital Construction Act, 8–9; Stevens, In Sickness and in Wealth, 220; and Starr, Social Transformation, 349. 18. Starr, Social Transformation, 349–350. 19. Stevens, In Sickness and in Wealth, 220–221. 20. Starr, Social Transformation, 376; and Evan Melhado, “Health Planning in the United States and the Decline of Public-­Interest Policymaking,” Milbank Quarterly 84:2 (2006): 366–373. 21. Brown, Health Capital Financing, 10–13, 167–194; and Melhado, “Health Planning in the United States,” 369–371, 376–377. 22. Brown, Health Capital Financing, 3–8. 23. “Hoffberger Gift,” BS, 20 July 1960; and U.S. Department of Health, Education, and Welfare [HEW], Public Health Ser­v ice [PHS], Hill-­Burton Proj­ect Register: July  1, 1947–­ June 30, 1968 (Silver Spring, MD: HEW, 1968), 96. 24. HEW-­Health Ser­v ices and M ­ ental Health Administration, Hill-­Burton Program: Pro­ gress Report July 1, 1947–­June 30, 1971 (Washington, D.C.: GPO, 1972), 3, 9; and Lave and Lave, Hospital Construction Act, 7–8, 16. 25. Kenneth May, Hill-­Burton Charitable Care and Community Ser­vice Requirements (Towson, MD: National Law Publishing Corporation, 1979), introduction; and Hoffman, Health Care for Some, 77. 26. Stevens, In Sickness and in Wealth, 220, 230, 256–257; and Car­ter et  al., Historical Statistics of the United States, ­Table Bd257–266. 27. Stevens, In Sickness and in Wealth, 219–220, 224–228; and Hoffman, Health Care for Some, 65, 67. 28. Stevens, In Sickness and in Wealth, 220. 29. Hoffman, Health Care for Some, 64–65 30. U.S. Commission on Civil Rights, Equal Opportunity in Hospitals and Health Facilities, March 1965 (Washington, D.C.: U.S. Commission on Civil Rights, 1965); Karen Kruse Thomas, Deluxe Jim Crow: Civil Rights and American Health Policy, 1935–1954 (Athens: University of Georgia Press, 2011), 157–207; Gordon, Dead on Arrival, 143–144, 155–156, 193–196; Hoffman, Health Care for Some, 64, 71–76; Stevens, In Sickness and in Wealth, 219, 254; and Quadagno, One Nation Uninsured, 25–43. 31. Congress, House, Committee on Energy and Commerce, Subcommittee on Health and the Environment, Report on Hill-­Burton Hospitals and Their Obligations, 97th Cong., 2d sess. (Washington, D.C.: GPO, 1982), 83, 93. 32. Hoffman, Health Care for Some, 72. 33. Stevens, In Sickness and in Wealth, 314–315; and Hoffman, Health Care for Some, 64. 34. Johns Hopkins Hospital, The Johns Hopkins Hospital 1958, 1959, JHH-­AR, and other reports in this box. 35. Stevens writes that “Hill-­Burton had a minimal impact on hospitals in the inner cities, which w ­ ere not a program priority.” Stevens, In Sickness and in Wealth, 294; and Lave and Lave, Hospital Construction Act, 9.



Notes to Pages 25–32

297

36. Lave and Lave, Hospital Construction Act, 19–21; PHS, Hill-­Burton Program: Pro­gress Report July 1, 1947–­June 30, 1961 (Washington, D.C.: PHS, 1961), 32–33; Starr, Social Transformation, 350; and Joseph Mantone, “The Big Bang,” Modern Healthcare 15 August 2005, 6–16. 37. “Lyndon Johnson and Kermit Gordon on 4 August 1964,” Conversation WH6408-054670, Presidential Recordings Digital Edition [Lyndon B. Johnson: Civil Rights, Vietnam, and the War on Poverty, ed. David Coleman, Kent Germany, Guian McKee, and Marc Selverstone] (Charlottesville: University of V ­ irginia Press, 2014–), http://­prde​.­upress​.­v irginia​.­edu. 38. HEW, Health Ser­v ices and ­Mental Health Administration, Hill-­Burton Program: Pro­ gress Report July 1, 1947–­June 30, 1971, 10; and Lave and Lave, Hospital Construction Act, 20. 39. HEW, Health Ser­v ices and M ­ ental Health Administration, Hill-­Burton Program: Pro­ gress Report July 1, 1947–­June 30, 1971, 23. 40. Alan Chesney, “Our Voluntary Hospitals—­I,” BS, 12 July 1956. 41. This analy­sis is based on detailed Hill-­Burton proj­ect data compiled in 1971. Suburban counties are defined as being part of e­ ither the Baltimore, Washington, or Wilmington (DE) standard metropolitan statistical areas but not in a central city. They include Anne Arundel, Baltimore (non-­city), Carroll, Cecil, Harford, Howard, Montgomery, and Prince George’s Counties. Rural counties are ­t hose outside the statistical areas and include Allegany, Calvert, Caroline, Charles, Dorchester, Frederick, Garrett, Kent, Queen Anne’s, Somerset, St.  Mary’s, Talbot, Washington, Wicomico, and Worcester. HEW, Health Ser­vices and ­Mental Health Administration, Hill-­Burton Proj­ect Register; July 1, 1947–­June 30, 1971 (Washington, D.C.: HEW, 1971), 134–139. 42. HEW, Health Ser­v ices and M ­ ental Health Administration, Hill-­Burton Proj­ect Register; July 1, 1947–­June 30, 1971, 134–139. 43. Richard Ross, interview by Mame Warren, 13 April 2000, JHU-­OHC. 44. HEW, PHS, Hill-­Burton Proj­ect Register: July  1, 1947–­June  30, 1968; Johns Hopkins Hospital, Annual Reports for 1957–1961, all in JHH-­A R; “Minutes,” 5 June 1962, and 27 September 1962, Book 11, 5 June 1962, to 3 Dec. 1963, 18, 25–26, JHHT-­MB; Milton Eisenhower, interview by William Potts, 4 October 1963, and Russell Nelson, interview by William Potts, 21 August 1963, both in Series 13, Group 6, Folder “6-13–7 Hospitals Study,” GBCR; E. Maxwell Sauerwein, “Meeting with Baltimore Urban Renewal and Housing Agency Officials,” 17 April  1964, Box R119R2, Folder “BURHA 1958–67,” 4, JHH-­M PDCR; Carroll Williams, “Hospital Expansions Top $165 Million,” BS, 8 February 1959; and A. McGehee Harvey, Gert Brieger, Susan Abrams, and Victor McKusick, A Model of Its Kind—­Volume 1: A Centennial History of Medicine at Johns Hopkins (Baltimore: Johns Hopkins University Press, 1989), 106–107. 45. Ross interview, 18–19, JHU-­OHC. 46. McGehee et al., Model of Its Kind, 105, 107.

Chapter 2 1. J. Anthony Lukas, “Chinese Laundry Falls Prey to City Renewal Revolution,” BS, 13 October 1959. 2. Recent examples include Samuel Zipp, Manhattan Proj­ects: The Rise and Fall of Urban Renewal in Cold War New York (New York: Oxford University Press, 2012); Christopher Klemek, The Transatlantic Collapse of Urban Renewal: Postwar Urbanism from New York to Berlin (Chicago: University of Chicago Press, 2012); N. D. B. Connolly, A World More Concrete:

298

Notes to Pages 32–34

Real Estate and the Remaking of Jim Crow South Florida (Chicago: University of Chicago Press, 2014); and Ladale Winling, Building the Ivory Tower: Universities and Metropolitan Development in the Twentieth C ­ entury (Philadelphia: University of Pennsylvania Press, 2017). 3. The legislation defined “predominantly residential” to mean that half of the structures demolished or built in a project should be residential. Roger Biles, “Public Housing and the Postwar Urban Re­nais­sance, 1949–1973,” in From Tenements to the Taylor Homes: In Search of an Urban Housing Policy in Twentieth-­Century Amer­i­ca, ed. John F. Bauman, Roger Biles, and Kristin M. Szylvian (University Park: Pennsylvania State University Press, 2000), 144–146. 4. David M. Walker to Malcolm D. Rivkin, 12 April 1960, Box 340, Folder “Reporting and Statistics 1960 (January through May),” URAGSF49–60. 5. Sarah Gordon, ed., All Our Lives: A Centennial History of Michael ­Reese Hospital and Medical Center (Chicago: Michael ­Reese Hospital and Medical Center, 1981), 127–128, 137–139; “Hospitals’ Study,” 4 September 1963, Series 13, Group 5, Box 12, Folder “Hospitals Study Chicago,” 1–3, GBCR; Arnold Hirsch, Making the Second Ghetto: Race and Housing in Chicago, 1940– 1960 (New York: Cambridge University Press, 1983), 115–117; and Michael Carriere, “Chicago, the South Side Planning Board, and the Search for (Further) Order: ­Toward an Intellectual Lineage of Urban Renewal in Postwar Amer­i­ca,” Journal of Urban History 39:3 (May 2013): 411–432. 6. Housing and Home Finance Agency (HHFA), Urban Renewal Administration (URA), Urban Renewal Proj­ect Characteristics, June 30, 1962 (Washington, D.C.: HHFA, 1962), 26. See also Lee Pravatiner to Harry Cooper, 14 March 1963, Series 13, Group 5, Box 12, Folder “Hospitals Study Chicago,” GBCR; HEW, Health Ser­v ices and ­Mental Health Administration, Hill-­Burton Proj­ect Register; July 1, 1947—­June 30, 1971, 95; “Hospitals’ Study,” 3–4, GBCR; GBC Planning Council, “A Preliminary Planning Report Prepared for: The Church Home and Hospital and the Johns Hopkins Medical Institutions,” December  1963, Series 13, Box 56, Folder 24, 20–22, GBCR; Gordon, All Our Lives, 139–144; and Hirsch, Making the Second Ghetto, 117–122, 259–262. 7. Ultimately, urban renewal did not save Michael R ­ eese Hospital. The for-­profit Humana hospital chain acquired the hospital in 1991; a succession of mergers and corporate acquisition followed before Michael ­Reese closed in 2008. De­mo­l i­t ion of all but one building took place in 2009. 8. Walter Gropius and Walter Blucher, “A Hospital Plans: Seven Square Miles of Chicago Slums Are Scheduled for Redevelopment ­Under a Unique Planning Program Sponsored by Michael R ­ eese Hospital,” Architectural Forum 85 (September  1946): 87–103; Ada Louis Huxtable, “Two Cities: Planning in North and South Amer­i­ca,” Museum of Modern Art Bulletin 14:3 (June 1947); Walter Blucher, “A Hospital Plans: The Michael R ­ eese Hospital Planning Proj­ect—­t he Implications of the Proj­ect,” and Reginald Isaacs, “A Retrospective Report on the Activities of the Michael R ­ eese Hospital Planning Staff, August 1945–­July 1950,” both in Town Planning Review 21:4 (January 1951): 319–356; and Raymond Spaeth, “Campus Planning,” Planning 1958 (Chicago: American Society of Planning Officials, 1958), 148–152. 9. “Testimony of Julian Levi,” Congress, House, Subcommittee on Housing of the Committee on Banking and Currency, Housing Act of 1959, 86th Cong., 1st sess., 29 January 1959, 241; Winling, Building the Ivory Tower; and Hirsch, Making the Second Ghetto, 136–170. 10. “Testimony of Karl Klicka,” Congress, Senate, Subcommittee on Housing of the Committee on Banking and Currency, Housing Legislation of 1961, 87th Cong., 1st sess., 11 April 1961, 724–29.



Notes to Pages 34–36

299

11. Lyman Brownfield to Teachers Insurance and Annuity Association of Amer­i­ca, 23 January 1961, Box 720, Folder “College & University Proj­ects 1961 (Section 112),” URASF61-65; Roger Montgomery to Dean Joseph R. Passonneau, 3 January 1963 and William L. Slayton to J. O. Lindstrom, 15 October 1963, both in Box 755, Folder “College & University Proj­ects 1963 (Section 112),” URASF61-65; and “Testimony of Julian Levi,” pp. 242, 255. 12. Frederick O’R. Hayes to William L. Slayton, 11 December 1961, Box 720, Folder “College & University Proj­ects 1961 (Section 112),” URASF61-65. 13. “Transcript of Proceedings,” Congress, Senate, Committee on Banking and Currency, Executive Session: Housing Legislation of 1961, 87th Cong., 1st sess., 27 April 1961, 99– 101. Connecticut Senator Prescott Bush did attempt to remove the amendment in 1959. Julian  H. Levi, Municipal and Institutional Relations Within Boston: The Benefits of Section 112 of the Federal Housing Act of 1961 (Chicago: University of Chicago Press, 1964), Appendix L, 131–136. 14. Housing and Home Finance Agency, 18th  Annual Report 1964 (Washington, D.C.: GPO, 1965), 326. 15. “Testimony of Julian Levi,” Congress, House, Subcommittee of Housing of the Committee on Banking and Currency, Housing Act of 1959, 88th  Cong., 1st  sess., 19 November 1963, 258–59. 16. Levi, Municipal and Institutional Relations Within Boston, 3. For background on Levi’s study, see Sylvan Kamm to Frederick O’R. Hayes, 7 September 1961, and Frederick O’R. Hayes to William L. Slayton, 23 October 1961, both in Box 720, Folder “College & University Proj­ects 1961 (Section 112),” URASF61-65. 17. U.S. Department of Housing and Urban Development (HUD), Urban Renewal Proj­ect Characteristics, June 30, 1966 (Washington, D.C.: HUD, 1967), 18. 18. Levi, Municipal and Institutional Relations Within Boston; Tracie Rozhan, “ ’60s Dream of Renewal Fades with Time,” NYT, 11 January 1981; and Legislative Research Council (LRC), Commonwealth of Mas­sa­chu­setts, Report Relative to Involvement of Hospitals and Education Institutions in Urban Renewal Programs, 18 February  1963 (Boston: Commonwealth of Mas­sa­chu­setts, 1963). 19. Weldon Wallace, “University Hospital Buys Betatron to Treat Cancer, BS, 17 November 1961; James Waesche, “U. of M.’s Growing Downtown Campus,” BS, 24 May 1964; “A-­Plus Expansion at UM City Campus,” BS, 18 February 1962; and J. Anthony Lukas, “U.M. Plans to Double City Campus,” BS, 31 July 1960. 20. Dessoff, “Mary­land U. Sprucing Up Baltimore “ ‘Slum’ Campus,” BS, 7 October 1960; URA, Urban Renewal Directory, June 30, 1974 (Washington, D.C.: HUD, 1975), 38; HHFA, URA, Urban Renewal Proj­ect Characteristics, June  30, 1962 (Washington, D.C.: HHFA, 1962), 28; Baltimore Urban Renewal and Housing Agency (BURHA), Community Renewal Program, “Displacement and Relocation, Past and ­Future; Baltimore, Mary­land,” March 1965, Research Reports, Box 4, Folder 6, T ­ able  2, BURHAR; and BURHA, “Business Relocation Proj­ect Report,” 30 June 1967, Research Reports, Box 3, Folder 42, BURHAR. 21. HUD, Urban Renewal Proj­ect Characteristics, June 30, 1966, 34. 22. Waesche, “U. of M.’s Growing Downtown Campus”; Isaac Rehert, “The Direction of U.M. ‘Campus’ Downtown Is One Way Only—­Up,” BS, 26 January 1978; and Charles Flowers, “UMAB Is on the Rise,” BS, 15 March 1981. 23. “The Redevelopment Dream Has Become a Real­ity,” BS, 11 June 1950; and Center for Urban Affairs (CUA), “Report on East Baltimore to the Medical Planning and Development

300

Notes to Pages 36–40

Committee,” 2 February 1970, rev. 18 March 1970, Box 431996187, Folder “JHU Report on East Baltimore to the MPD, 1970,” 3–20, JHH-­MPDCR. 24. “The Redevelopment Commission,” no date [c. 1950], Series X, Subseries F, Box 19, Folder 34, 5, CPHAR; David Price, “Memorandum to Lincoln Gordon, Russell Nelson—­ Subject: Redevelopment West of Broadway,” 22 September  1969, Series 14, Box 9, Folder “Broadway Management 1969–1982,” JHU-­Pres; “Council Gets 12 Plan Bills,” BS, 29 October 1946; “Council Calls for Old Bills,” BS, 6 May 1947; and “Council Advances Parking Meters,” BS, 9 May 1947. 25. Price, “Memorandum to Lincoln Gordon, Russell Nelson,” 2, JHU-­Pres; “Redevelopment Commission,” 5–6, CPHAR; “The Election,” BS, 7 May  1947; Thomas O’Neill, “D’Alesandro Final Margin Set at 24,220,” BS, 16 May 1947; and “Stadium Loan Defeated; 12 ­Others O.K.’d,” BS, 3 November 1948. 26. “Hopkins Hospital Seeks $3,000,000,” BS, 18 November 1945; Price, “Memorandum to Lincoln Gordon, Russell Nelson,” 2–3, JHU-­Pres; “Exploratory Meeting on Redevelopment,” 28 June 1950, and Committee on the Redevelopment Proj­ects, “Hearing on the Redevelopment Proj­ects, City Council Chamber,” 29 June 1950, both in Series X, Subseries F, Box 19, Folder 5, CPHAR. 27. Nicholas Dagen Bloom, Merchant of Illusion: James Rouse, Amer­i­ca’s Salesman of the Businessman’s Utopia (Columbus: Ohio State University Press, 2004). 28. Paige Glotzer, How the Suburbs ­Were Segregated: Developers and the Business of Exclusionary Housing, 1890–1960 (New York: Columbia University Press, 2020), 190–197; and Howard Gillette, Civitas by Design: Building Better Communities, from the Garden City to the New Urbanism (Philadelphia: University of Pennsylvania Press, 2012), 96–101. 29. Price, “Memorandum to Lincoln Gordon, Russell Nelson,” 2–3, JHU-­Pres. 30. Baltimore Redevelopment Commission (BRC), “Redevelopment Proj­ect No.  3-­A,” May 1950, Series X, Subseries F, Box 20, Folder 6, 4–6, CPHAR; CUA, “Report on East Baltimore,” 13–14, JHH-­M PDCR; and Broadway Slum Redevelopment, no date, Series VIII, Box 1, Folder 21, CPHAR. 31. “Area Studied for Rebuilding; 6-­Block Site Is on Broadway, West of Hopkins Hospital,” BS, 6 January 1950. 32. Price, “Memorandum to Lincoln Gordon, Russell Nelson,” 3, JHU-­Pres. 33. BRC, “Redevelopment Proj­ect No. 3-­A,” 4, 7, CPHAR. 34. David Erickson, The Housing Policy Revolution: Networks and Neighborhoods (Washington, D.C.: Urban Institute Press, 2009); Alexander von Hoffman, “Calling upon the Genius of Private Enterprise: The Housing and Urban Development Act of 1968 and the Liberal Turn to Public-­Private Partnerships,” Studies in American Po­liti­cal Development 27 (October 2013): 165–194. 35. BRC, “Redevelopment Proj­ect No. 3-­A,” CPHAR. 36. Louise Cavagnaro, “A History of Segregation and Desegregation at the Johns Hopkins Medical Institutions,” 18 February 1992 (updated 26 April 2002), JHMI-­Segregation, 6–12; and “Memorandum re Relation of Negro Physicians to the Johns Hopkins Hospital,” 18 May 1948, JHMI-­Segregation (Black Physicians). 37. Metropolitan Research, “Community Needs in a Residential Campus for the Johns Hopkins Medical Center,” September 1951, RG 2.001, Series 1, Box 7, Folder 28 (1951) Sept.–­ Dec., 2–7, JHU-­Pres.



Notes to Pages 40–46

301

38. “Redevelopment of 2 Areas O.K.’d by Board of Estimates,” BS, 25 May 1950; BRC, “Redevelopment Proj­ect No. 3-­A,” 4–5, 9, CPHAR; Price, “Memorandum to Lincoln Gordon, Russell Nelson,” 4, JHU-­Pres; and Henry Knott, President, Broadway Development Corporation, to Baltimore Redevelopment Commission, 19 May 1950, reproduced in BRC, “Redevelopment Proj­ect No. 3-­A,” CPHAR. 39. Clark  S. Hobbs, Chairman, Baltimore Redevelopment Commission, to Honorable Thomas D’Alesandro, Jr., 23 May 1950, reproduced in BRC, “Redevelopment Proj­ect No. 3-­A,” CPHAR. 40. “The Acid Test of Slum-­Clearance Planning,” BS, 19 May 1950; “Contracts for First 2 Big Slum Proj­ects Are Approved,” BES, 24 May 1950; and “1197 Families Must Be Relocated to Make Way for City’s 2 Proj­ects,” BAA, 27 May 1950. 41. M. W. Wilkerson et al., “Petition,” undated, Series X, Subseries F, Box 19, Folder 34, CPHAR; “Memorandum re Relation of Negro Physicians to the Johns Hopkins Hospital,” 2, JHMI-­Segregation; and “Slum Clearance Proj­ect Brings Confusion, Alarm,” BAA, 6 June 1950. 42. “Slum Clearance Proj­ect Brings Confusion, Alarm,” BAA, 6 June 1950. 43. “Slum Proj­ect Is Protested,’ BS, 8 June 1950. 44. “Bready Backs Redevelopment Commission,” BS, 13 June 1950. 45. “Bready Backs Redevelopment Commission.” 46. “Citizens Hit Proj­ect Plans,” BAA, 1 July 1950. Showell was not among the ministers who had signed the petition. 47. “City Warned on 2 Housing Programs,” BS, 29 June 1950. 48. “Slum Proj­ect Victims Backed,” BAA, 1 July 1950. 49. “Memorandum from Edgar Ewing and Cecil Scott, Baltimore Urban League, to the Mayor and City Council—­Subject: Redevelopment Proj­ects 1-­A and 3-­A,” 6 June 1950, Series 3A, Box 4, Folder 41, ACLUMDR. 50. “The Urban League Is Off on the Wrong Foot,” BS, 9 July 1950; Hans Froelicher, President, for the Citizens Planning and Housing Association to Mayor Thomas D’Alesandro and the Board of Estimates, 14 June  1950, and G. Cheston Carey, “Impor­tant Hearing—­ Redevelopment Ordinances,” 26 June 1950, both in Series X, Subseries F, Box 19, Folder 34, CPHAR. 51. Clark S. Hobbs to K. W. Wilkerson, 23 June 1950, Series X, Subseries F, Box 19, Folder 34, CPHAR. 52. “Bready Backs Redevelopment Commission”; and “City Warned on 2 Housing Programs,” BS, 29 June 1950. 53. He would be fired in April 1954, in part ­because of scandals in the Section 608 mortgage insurance program. “Senate Confirms Guy T. O. Hollyday,” BS, 16 April 1953; and “Housing: The Loan Scandals,” Time, 26 April 1954. 54. “Housing Plan Is Supported,” BS, 13 June 1950. 55. “City’s Housing Responsibility,” BAA, 15 July 1950. 56. “­Going: 47 Acres of Slum,” BS, 13 June 1950. See also “Our City Councilmen Took Their Job Seriously,” BS, 13 June 1950. 57. “City Compiles Property List,” BS, 29 August 1950; “Pro­g ress in Public Housing and Private Redevelopment,” BS, 21 December  1950; and “Advisory Unit for Housing to Be Named,” BS, 7 February 1951. 58. “Houses Begin to Come Down for Waverly Redevelopment,” BS, 6 July 1951.

302

Notes to Pages 46–51

59. Clarence Mitchell to Nathaniel Keith, 17 December 1951, Series 3A, Box 5, Folder 2, ACLUMDR; “D.C. Hearing on Housing,” BAA, 18 December 1951; and Rhonda Williams, The Politics of Public Housing: Black W ­ omen’s Strug­gles Against Urban In­equality (New York: Oxford University Press, 2005), 101–102. 60. Thomas D’Alesandro Jr. to Harry Truman, 7 November 1951, and D’Alesandro to Franklin Richards, 7 December  1951, both in Series X, Subseries F, Box 19, Folder 34, CPHAR; Price, “Memorandum to Lincoln Gordon, Russell Nelson,” 3, JHU-­Pres; BURHA, “Outline of Urban Renewal—­Baltimore 1961,” Series I, Box 1, Folder 16, 13, URF; “Plan to Clear 2 Slum Areas Is in Jeopardy,” BS, 8 November 1951; “Mayor Seeks Aid for Slums,” BS, 14 November 1951; “Grants Extension on Housing Plan,” BS, 9 November 1951; “Mayor Fears Crippling of Housing Work,” BS, 6 December  1951; and “­Those Empty Acres Facing Hopkins Hospital,” BS, 19 January 1955. 61. James W. Rouse to Lowell Reed, 5 May 1952, reprinted in “Minutes,” 3 November 1955, Book 9, 168, JHJCT-­MB. 62. BURHA, “Data Sheets: Urban Renewal and Public Housing Proj­ects—­Baltimore, Mary­land,” May 1961, Series X, Box 4, Folder 21, 2, BURHAR; Price, “Memorandum to Lincoln Gordon, Russell Nelson,” 4, JHU-­Pres; “No Place for Displaced Rats,” BS, 11 March 1952; “Real Estate News,” BS, 14 September 1952; and “26 Families Moving to New Housing Area,” BS, 10 November 1952. 63. “$3,373,861 Slated for Housing Plan,” BS, 21 January 1953. 64. “Minutes,” 28 April 1955 and 6 June 1955, Book 9, 123, 145; and “Minutes,” 29 September 1955, Book 9, 155, all in JHJCT-­MB. 65. “The Broadway Pig in a Poke,” BS, 20 January 1955. 66. Housing Authority of Baltimore City, “Information on Negro Housing Conditions in Baltimore,” 30 January 1953, and BURHA, “Some Background Information for Participants in the December 1, 1960, Meeting on Nondiscrimination Clauses in BURHA Land Disposition Contracts,” November 1960, both in Series X, Subseries F, Box 19, Folder 3, CPHAR; and Price, “Memorandum to Lincoln Gordon, Russell Nelson,” 5, JHU-­Pres. 67. “Broadway Area Proj­ect May Get Start in Summer,” BS, 3 March  1955. See also “Broadway Pig in a Poke.” 68. “Group Complains Bitterly of Redevelopment Proj­ect,” BS, 18 January  1955; and “Blast New Plans on Redevelopment,” BAA, 18 January 1955. 69. “­Those Empty Acres Facing Hopkins Hospital”; and “Broadway Pig in a Poke.” 70. James  W. Rouse, “Letters to the Editor: Broadway Redevelopment,” BS, 26 January 1955; and Gillette, Civitas by Design, 102–104. 71. Jesse Glasgow, “Broadway Area Proj­ect May Get Start in Summer,” BS, 3 March 1955; and Jesse Walker, “Broadway Redevelopment Plan Unsatisfactory,” BAA, 3 March 1955. 72. Oliver Winston, “Desegregation Policy: An Address to All Employees of the Housing Authority of Baltimore City,” 30 June  1954, Series X, Subseries F, Box 19, Folder 3, 1–2, CPHAR; and Price, “Memorandum to Lincoln Gordon, Russell Nelson,” 5, JHU-­Pres. 73. Christopher Bonastia, Knocking on the Door: The Federal Government’s Attempt to Desegregate the Suburbs (Prince­ton, NJ: Prince­ton University Press, 2006), 69; Philip Warden, “Supreme Court Expands Its Application of Segregation Decision,” Chicago Tribune, 25 May 1954; “Public Housing: President’s Program Prob­ably Is Doomed as Maybank Now ­Will Oppose It Due to Supreme Court Ruling,” Wall Street Journal, 26 May 1954; and “U.S. Studies Racial Issue in Housing,” WP, 28 May 1954.



Notes to Pages 52–56

303

74. “Broadway Housing Plan Unsettled,” BES, 18 January 1955. 75. “Minutes,” 3 November 1955, 1 December 1955, 167–168, 181–182, JHJCT-­MB; Russell Nelson to W. Barry Wood, 7 December 1955; J. D. Colman and J. Crossan Cooper to Broadway Development Corporation, 24 August 1956; “Summary of Redevelopment Housing Proj­ ect,” 27 February  1957; and “Draft—­ Report to Trustees re Broadway Management,” 5 April 1965, all in RG 2.001, Series 6, Box 5, Folder Broadway Management—­Church Home, JHU-­Pres. 76. “Mayor Takes Job of Finding Circus Area,” 9 March 1955; “Not-­So-­Bare Acres,” 1 October 1955; and “One Year ­Later,” 26 October 1955, all in BES. 77. BURHA, “Data Sheets,” 2, BURHAR; and “Hopkins Area Ceremony Set,” BS, 22 July 1956. The city received $3,510,833 in federal urban renewal funds for the proj­ect. Jesse Glasgow, “U.S. Approves of Broadway Proj­ect Fund,” BS, 16 March 1956. 78. Colin Churchill, “Summary of Redevelopment Housing Proj­ect,” 27 February  1957, and Broadway Management Corporation, untitled list of officers and directors, 2 October 1959, RG 2.001, Series 6, Box 5, Folder “Broadway Management—­Church Home,” JHU-­Pres; “Minutes,” 5 February 1957, JHHT-­MB; and “Minutes,” 28 February 1957, JHJCT-­MB, both in Book 9. 79. J. D. Colman to Henry Baker and W. Barry Wood, 28 August 1956, RG 2.001, Series 6, Box 5, Folder “Broadway Management—­Church Home,” JHU-­Pres; and “Minutes,” 27 September 1956, Book 9, 241, JHJCT-­MB. 80. Sherwood  D. Kohn, Experiment in Planning an Urban High School: The Baltimore Charette, (New York: Educational Facilities Laboratory, 1969), 17–18. 81. Kohn, Experiment in Planning an Urban High School, 16–19; and Weldon Wallace, “Hopkins Hospital, Nearby Community, Working Th ­ ings Out,” BS, 1 October 1973. 82. Colin W. Churchill to Charles Behre, 26 July 1957, RG 2.001, Series 6, 1964–1967, Box 5, Folder “Broadway Management—­Church Home,” JHU-­Pres; and Johns Hopkins Hospital (JHH), “The Johns Hopkins Hospital Pictorial Review 1957,” 1958, JHH-­A R. 83. Churchill to Behre, JHU-­Pres; “Food Fair Stores to Open Outlet,” BS, 10 April 1958; JHH, “The Johns Hopkins Hospital 1958,” 1959, JHH-­A R, and Allan Wetzler, interview by William Potts, 23 September  1963, Series 13, Group 6, Folder “6-13–7 Hospitals Study,” GBCR. 84. Odell Smith, “New ­Hotel in Broadway Area Slated,” BS, 15 July  1958; “Plans for Highway H ­ otel Outlined,” BS, 27 July  1958; and JHH, “Johns Hopkins Hospital 1958,” JHH-­A R. 85. “Memorandum from the Medical Planning and Development Committee to the JHJCT-­ MB Concerning Redevelopment Area 3-­ C ,” 21 September  1959, and “Release: Apartment-­Office Building to Rise Across from Johns Hopkins Hospital,” 9 September 1959, both in RG 2.001, Series 6, 1964–1967, Box 5, Folder “Broadway Management—­Church Home,” JHU-­Pres; Price, “Memorandum to Lincoln Gordon, Russell Nelson,” 6, JHU-­Pres; and JHH, “The Johns Hopkins Hospital [Annual Report 1961],” 1962, JHH-­A R. 86. Sara Lamport Azrael, “Baltimore Inn Plays Multiple Role,” NYT, 25 September 1960; “Medical Office—­Apartment Building” and “Sheraton-­Baltimore Inn,” 29 September  1960, both in RG 2.001, Series 6, 1964–1967, Box 5, Folder “Broadway Management—­Church Home,” JHU-­Pres. 87. “Release: Apartment-­Office Building to Rise Across from Johns Hopkins Hospital,” 9 September 1959, JHU-­Pres.

304

Notes to Pages 56–61

88. “Minutes,” 5 December 1967, Book 15, 67, JHHT-­MB; “Minutes,” 2 September 1969, Book 16, 221, JHHT-­MB; and E. Maxwell Sauerwein, “Meeting with Baltimore Urban Renewal and Housing Agency Officials,” 17 April 1964, Box R119R2, Folder “BURHA 1958–67,” 2, JHH-­MPDCR. 89. “Draft—­Report to Trustees re Broadway Management,” 2, JHU-­Pres. 90. Sauerwein, “Meeting with Baltimore Urban Renewal and Housing Agency Officials,” 2, JHH-­MPDCR; “Minutes,” 2 March 1976, Book 20, 368, JHHT-­MB; and “Minutes,” 2 April 1978, Book 21, 189–190, JHJCT-­MB. 91. BURHA, “Outline of Urban Renewal—­Baltimore 1961,” 12, URF; Jesse Glasgow, “Council Supports Falls Road Rink,” BS, 19 June  1956; “Urban Renewal Heads Are Sure Broadway Delays Are Over,” BS, 27 January 1958; and BURHA, “Data Sheets,” 1, BURHAR. 92. “Memorandum from the Medical Planning and Development Committee to the JHJCT-­MB Concerning Redevelopment Area 3-­C,” 21 September  1959, RG 2.001, Series 6, 1964–1967, Box 5, Folder “Broadway Management—­Church Home,” JHU-­Pres; and “Redevelopment Plans,” BS, 1 May 1956. 93. Walter Perkins, interview by William Potts, 16 September 1963, Series 13, Group 6, Folder “6-13–7 Hospitals Study,” GBCR. 94. “Redevelopment Plans,” BS, 1 May 1956. The larger Broadway 3-­A area included approximately six hundred permanent parking spaces. JHH, “Johns Hopkins Hospital 1958,” JHH-­A R; and Churchill to Behre, 2, JHU-­Pres. 95. Russell A. Nelson to Robert A. Larrabee, 13 September 1956, RG 2.001, Series 6, 1964– 1967, Box 5, Folder “Broadway Management—­Church Home,” JHU-­Pres. 96. “Memorandum from the Medical Planning and Development Committee to the JHJCT-­MB Concerning Redevelopment Area 3-­C ,” JHU-­Pres; BURHA, “Outline of Urban Renewal—­Baltimore 1961,” 12, URF; JHH, “Johns Hopkins Hospital [Annual Report 1961],” JHH-­A R; BURHA, “Data Sheets,” December 1962, Series X, Box 4, Folder 21, 2–4, BURHAR. 97. Price, “Memorandum to Lincoln Gordon, Russell Nelson,” 6, JHU-­Pres. Tax revenue figures w ­ ere calculated at the 1961 tax rate. BURHA, “Data Sheets,” December 1962, 3–5, BURHAR. 98. This statistic was not provided for Broadway 3-­A or for any purchased homes. In addition, the two proj­ects displaced a total of 198 single persons; no rehousing data was included for ­t hose individuals. City of Baltimore Community Renewal Program, “Displacement and Relocation, Past and F ­ uture—­Baltimore, Mary­land,” March 1965, Series X, Box 4, Folder 6, T ­ ables  1A & 1B, BURHAR; and “Broadway Area F ­amily Moves Defended,” BES, 6 April 1955. 99. “Housing Redevelopment—­t he Good Often Hurts,” BAA, 30 August 1952. 100. “Man, 88, Gives Up His House,” BS, 1 April 1954. 101. J. Anthony Lukas, “Baltimore’s Displaced Persons: Some Improved Housing in Move from Area 3C,” BS, 2 January 1961. 102. Lucille Gorham, interview by Roslyn Dorsey, 12 December 1997, 8, EBOHP. 103. “Old Deal is Out,” BAA, 11 July 1959.

Chapter 3 1. Rashi Fein, “The Early Days of Medicare and Medicaid: A Personal Reflection,” in Medicare and Medicaid at 50: Amer­i­ca’s Entitlement Programs in the Age of Affordable Care, ed. Alan Cohen, David Colby, Keith Wailoo, and Julian Zelizer (New York: Oxford University Press, 2015), 41; Rashi Fein interview, 21 March 2007, 15–16, EMKOHP.



Notes to Pages 62–65

305

2. Christy Ford Chapin, Ensuring Amer­i­ca’s Health: The Public Creation of the Corporate Health Care System (New York: Cambridge University Press, 2015), 37–65, 156–160; Jennifer Klein, For All Th ­ ese Rights: Business, L ­ abor, and the Shaping of Amer­i­ca’s Public-­P rivate Welfare State (Prince­ton, NJ: Prince­ton University Press, 2003), 162–257; Beatrix Hoffman, Health Care for Some: Rights and Rationing in the United States Since 1950 (Chicago: University of Chicago Press, 2012), 39–113; and Paul Starr, The Social Transformation of American Medicine (New York: Basic Books, 1982), 310–334. 3. Evan Melhado, “Health Planning in the United States and the Decline of Public-­ Interest Policymaking,” Milbank Quarterly 84:2 (2006): 386–387; and Jonathan Betz Brown, Health Capital Financing: Structuring Politics and Markets to Produce Community Health (Ann Arbor, MI: Health Administration Press Perspectives, 1988), 25–26. 4. Julian Zelizer, Taxing Amer­i­ca: Wilbur  D. Mills, Congress, and the State, 1945–1976 (New York: Cambridge University Press, 2000), 212–232; David Blumenthal and James Morone, The Heart of Power: Health and Politics in the Oval Office, rev. ed. (Berkeley: University of California Press, 2010), 99–130; Chapin, Ensuring Amer­i­ca’s Health, 55–59, 104–105, 196– 197, 207–208; Jill Quadagno, One Nation Uninsured: Why the U.S. Has No National Health Insurance (New York: Oxford University Press, 2005), 55–61; and Colin Gordon, Dead on Arrival: The Politics of Health Care in Twentieth C ­ entury Amer­i­ca (Prince­ton, NJ: Prince­ton University Press, 2003), 24–26, 116–117, 233–234. 5. Congress, Senate, “Health Care Task Force,” 87th Cong., 2nd sess., Congressional Rec­ ord (13 September 1962), vol. 108, pt. 14, 19374–75; Congress, Senate, “Medical Care for the Aged,” 88th Cong., 1st sess., Congressional Rec­ord (13 November 1963), vol. 109, pt. 16, 21737– 39; Marjorie Hunter, “National Committee Proposes a New Plan for Medical Care of the Aged,” NYT, 14 November 1963; “The President’s News Conference of November 14, 1963” and “Statement by the President in Response to Report of the National Committee on Health Care of the Aged,” Public Papers of the President: John F. Kennedy, 1963, January 1 to November 22, 1963 (Washington, D.C.: GPO, 1964), 849, 853; and Lewis Weeks and Howard Berman, Shapers of Health Care Policy: An Oral History (Ann Arbor, MI: Health Administration Press, 1985), 83–88, 130. 6. Russell Nelson, interview by Lewis Weeks, 11 June  1985, transcript, 68–69, AHA-­HAOHC. 7. Gordon, Dead on Arrival, 239; and Quadagno, One Nation Uninsured, 72. 8. The Medicare legislation consisted of amendments to the Social Security Act, over which the Ways and Means Committee had jurisdiction ­because it held the power to raise revenue—­and the act relied on a payroll tax. Zelizer, Taxing Amer­ic­ a, 38–43, 212–218. 9. “Lyndon Johnson, Larry O’Brien, and Wilbur Mills on 11 June  1964,” Tape WH6406.06, Citations #3686 and #3687, Presidential Recordings Digital Edition [Mississippi Burning and the Passage of the Civil Rights Act, vol. 7, ed. Guian A. McKee] (Charlottesville: University of ­Virginia Press, 2014–), http://­prde​.u ­ press​.­v irginia​.­edu​/­conversations​ /­9070067; Blumenthal and Morone, Heart of Power, 187–195; and Zelizer, Taxing Amer­i­ca, 240–252. 10. Howard Berman and Lewis Weeks, The Financial Management of Hospitals (Ann Arbor: University of Michigan Bureau of Hospital Administration, 1971), 122–147. 11. Gordon, Dead on Arrival, 97–98, 124; and Hoffman, Health Care for Some, 134–142. 12. Quadagno, One Nation Uninsured, 76; Gordon, Dead on Arrival, 28–29; Starr, Social Transformation, 375; and Chapin, Ensuring Amer­i­ca’s Health, 226–232.

306

Notes to Pages 66–72

13. Herman Miles Somers and Anne Ramsay Somers, Medicare and the Hospitals: Issues and Prospects (Washington, D.C.: Brookings Institution, 1967), 154–160, 177–185. 14. Weeks and Berman, Shapers of American Health Care Policy, 92; Rosemary Stevens, In Sickness and in Wealth: American Hospitals in the Twentieth ­Century, rev. ed. (Baltimore: Johns Hopkins University Press, 1999), 271–275, 281–282; Somers and Somers, Medicare and the Hospitals, 158–161 (quotation); and Jonathan Oberlander, The Po­liti­cal Life of Medicare (Chicago: University of Chicago Press, 2003), 108–110. 15. “Statement by the President on Approving the Appointment of Members of the Health Insurance Benefits Advisory Council,” 11 November 1965, Weekly Compilation of Presidential Documents 1:16 (1965): 490–491; and Nelson, interview by Weeks, 71, AHA-­H AOHC. 16. Fein, “Early Days of Medicare and Medicaid,” 41; and Somers and Somers, Medicare and the Hospitals, 31–32, 189. 17. Kenneth Williamson to Russell Long, 24 May 1966, in Congress, Senate, Committee on Finance, Reimbursement Guidelines for Medicare, 89th Cong., 2nd sess., 25 May 1966, 185; Stevens, In Sickness and in Wealth, 284; and Somers and Somers, Medicare and the Hospitals, 154–161, 177–185. 18. Oberlander, Po­liti­cal Life of Medicare, 108–116. 19. Starr, Social Transformation, 384–385. For awareness at the time that the reimbursement structures would be inflationary, see Weeks and Berman, Shapers of American Health Policy, 97–98; and Gordon, Dead on Arrival, 28–31, 240–242. 20. Stevens, In Sickness and in Wealth, 299; Starr, Social Transformation, 376; and Melhado, “Health Planning in the United States,” 373–376. 21. Brian Kinkead, “Medicare Payment and Hospital Capital: The Evolution of Policy,” Health Affairs 3:3 (Fall 1984): 57. 22. David Freund, Colored Property: State Policy and White Racial Politics in Suburban Amer­i­ca (Chicago: University of Chicago Press, 2007), 118–39, 176–96. 23. Department of Housing and Urban Development, Federal Housing Administration, Office of Hospital Facilities, “Section  242 Complete Transactions 1969-2010.xls,” accessed 1 January 2010, data file in author’s possession. 24. U.S. Census Bureau, Current Construction Reports, Annual Value of Private Nonresidential Construction Put in Place by Region, http://­w ww​.­census​.­gov​/­const​/­w ww​/­privpage​ .­html & http://­w ww​.­census​.­gov​/­const​/­C30​/­oldtc​.­html. 25. Donald Cohodes and Brian Kinkead, Hospital Capital Formation in the 1980s (Baltimore: Johns Hopkins University Press, 1984), 19–25. 26. Brown, Health Capital Financing, 16–17; Stevens, In Sickness and in Wealth, 299– 300; and Beth Mintz and Michael Schwartz, “Capital Formation and the U.S Health System,” in Health, Illness, and Use of Care: The Impact of Social ­Factors, ed. Jennie Jacobs Kronenfeld (New York: Elsevier Science, 2000), 236–237. 27. Kinkead, “Medicare Payment and Hospital Capital,” 64–66. 28. “Statement of David Fearheller,” Congress, House, Subcommittee on Health of the Committee on Ways and Means, and Subcommittee on Health and the Environment of the Committee on Interstate and Foreign Commerce, President’s Hospital Cost Containment Proposal, Part 2, 95th Cong., 1st sess., 13 May 1977, 827–828. 29. Stevens, In Sickness and in Wealth, 285, 299–301, 304. 30. AHA, “Summary of Highlights of S. 2694, the Health Planning and Development Bill As Agreed to by the Senate (12/19) and House (12/20),” December  27, 1974, Box 30, File 1,



Notes to Pages 72–75

307

JAMP; Steven Sieverts, “Office Communication to: Alex McMahon,” 1 December 1975, Box 30, File 3, JAMP, 2 (quotation); Stuart Altman interview, 14 March 2007, 15, EMKOHP; Judith Feder, Medicare: The Politics of Federal Hospital Insurance (Lexington, MA: D.C. Heath, 1977), 33–45; Melhado, “Health Planning in the United States,” 369–370, 380–385, 392–394; Starr, Social Transformation, 376–377, 399–401; and Stevens, In Sickness and in Wealth, 292, 299, 306–309. 31. Melhado, “Health Planning in the United States,” 371, 391–392. 32. William Casady, “To: Executive Directors, Allied Hospital Associations; Directors, State Comprehensive Health Planning Agencies; Members, Society of Hospital Attorneys; Subject: Survey—­Status of State Legislation for Certification of Need and Rate Review,” 24 August 1973, and Sheldon Bergman, “To: Allied Hospital Association Executives; Comprehensive Health Planning Agency Directors; Subject: Status of Certificate-­of-­Need Legislation and Contracts Implementing Section 1122 of the Social Security Act,” 5 April 1974, both in Box 29, File 2, JAMP. Stevens, In Sickness and in Wealth, 307. 33. L. R. Jordan, “Statement of Behalf of National Protestant-­Catholic Hospital Action Committee to the Subcommittee on Production and Stabilization of the Senate Committee on Banking, Housing and Urban Affairs,” 15 February 1974, Box 35, File 2, JAMP; David Abernethy and David Pearson, Regulating Hospital Costs: The Development of Public Policy (Ann Arbor, MI: AUPHA Press, 1979), 62–63; and Starr, Social Transformation, 399. 34. Stevens, In Sickness and in Wealth, 307. 35. David Barton Smith, “Civil Rights and Medicare: Historical Convergence and Continuing Legacy,” in Medicare and Medicaid at 50, ed. Cohen et al., 24–25; and Quadagno, One Nation Uninsured, 85–86. 36. Smith, “Civil Rights and Medicare,” 25; “The Medical Committee for H ­ uman Rights” (pamphlet), 1965, Civil Rights Movement Veterans, Documents Collection, http://­ www​.c­ rmvet​.­org​/­docs​/­64​_ m ­ chr​.­pdf; and John Dittmer, The Good Doctors: The Medical Committee for ­Human Rights and the Strug­gle for Social Justice in Health Care (New York: Bloomsbury, 2009). 37. Gordon, Dead on Arrival, 196–199; and Smith, “Civil Rights and Medicare,” 21. 38. Smith, “Civil Rights and Medicare,” 25–30. 39. Ibid., 31; and Hoffman, Health Care for Some, 126–127. 40. Quoted in Somers and Somers, Medicare and the Hospitals, 66. See also Smith, “Civil Rights and Medicare,” 31–33. 41. Somers and Somers, Medicare and the Hospitals, 88; and Quadagno, One Nation Uninsured, 89–92. 42. Hoffman, Health Care for Some, 126–127; and Gordon, Dead on Arrival, 200–202. 43. Thomas Fenton, “Hospital Bias Talks Held,” BS, 24 January 1964; “Hospital Council of Mary­land Moves Quietly for Integration,” Journal of the National Medical Association 56:3 (May 1964): 287; and Mary­land Commission Report Cites Negro Health Needs,” Journal of the National Medical Association 54:2 (March 1962): 261. 44. Charles Flowers, “62 State Hospitals Agree to Medicare Requirements,” BS, 28 June 1966; and “Medical Center Renews Pledge,” BS, 28 June 1966. 45. Louise Cavagnaro, “A History of Segregation and Desegregation at the Johns Hopkins Medical Institutions,” 18 February  1992, updated 26 April  2002, 2–6, ­ JHMI-­Segregation. 46. “Minutes,” 6 September 1966, Book 14, 39, JHHT-­MB.

308

Notes to Pages 75–80

47. Cavagnaro, “History of Segregation and Desegregation,” 6–12; and “Johns Hopkins Medical School Open to Negro Students,” Journal of the National Medical Association 54:2 (March 1962): 262–263. 48. Torrey Brown, “Memorandum to Robert Heyssel; Meeting with East Baltimore Physicians, October 26, 1969,” 3 November 1969, Box 4RH (431977703), Local Physicians, RMHP; Stanley Madison to Troy [sic] Brown, 25 November 1969, Box 4RH (431977703), Local Physicians, RMHP; Robert Heyssel, “Memorandum for File; Subject: Staff Appointments for Black Physicians in the Immediate Vicinity of Hopkins,” 18 February 1970, Box 4RH (431977703), Local Physicians, RMHP; and Cavagnaro, “History of Segregation and Desegregation,” 8–15. 49. Hoffman, Health Care for Some, 126–127; and Quadagno, One Nation Uninsured, 86–92. 50. Emily Friedman, “Medicaid: The Primrose Path,” Hospitals 51 (16 August 1977); and Emily Friedman and Carl Wendorf, “Medicaid: A Garden Sown with Dragon’s Teeth,” Hospitals 51 (1 September 1977). 51. The 1950 Social Security amendments provided federal cost-­sharing for such programs. Robert Stevens and Rosemary Stevens, Welfare Medicine in Amer­i­ca: A Case Study of Medicaid (New York: F ­ ree Press, 1974), 21–24. 52. “How One State Lived to Regret Medicaid Fever,” National Observer, 2 June 1969; and “Medicaid” (editorial), BS, 23 October 1967. 53. “Minutes,” 2 January  1968, Book 15, 77–79, JHHT-­MB; Lowell Sunderland, “State Drops Medicaid for 27,000 Poor,” BS, 30 December 1967; “Agnew Assailed on Aid Cutback,” BS, 3 January 1968; M. K. Milliken, “Hospitals Rap Agnew’s Cut in Medicaid,” BES, 3 January 1968; “Mayor Joins in Query of Medical Cut,” BS, 4 January 1968; and Gene Oishi, “Agnew Stays Medicaid Cut Order,” BS, 6 January 1968. 54. Sunderland, “State Drops Medicaid for 27,000 Poor”; “Call for Action” (editorial), BS, 23 January 1968; Gene Oishi, “Agnew Asks $1.15 Billion for Bud­get,” BS, 18 January 1968; and “Too Much Cut, Agnew Says,” BS, 22 March 1968. 55. James Rouse also served on the committee. John Carroll, “State Urged to Form One Health Panel,” BS, 28 April 1967; Gene Oishi, “Agency May Set Hospital Rates,” BS, 17 November  1967; Rosalie Silber Abrams, “Hospital Agency” (letter to editor), BS, 27 November 1967; Charles Whiteford, “Agnew Names Health Cost Study Group,” BS, 23 January 1968; “Grasping the Nettle” (editorial), BES, 23 January  1968; “Call for Action” (editorial); and “Minutes,” 5 December 1967 and 6 February 1968, Book 15, 65–67, 113, JHHT-­MB. 56. Michael Weiss, “Health Group Is Critical of State on Medicaid,” BES, 19 March 1968; and “Too Much Cut, Agnew Says.” 57. Lowell Sunderland, “Medicaid Cut Is Proposed to Governor,” BS, 19 March 1968; Weiss, “Health Group Is Critical of State”; “Too Much Cut, Agnew Says”; Sunderland, “22,000 Poor to Lose Medicaid Benefits, Governor Announces,” BS, 13 June 1968; and “Minutes,” 7 May 1968, Book 15, 237, 243, JHHT-­MB. 58. “Doctor Council to Study Asking Medicaid Boycott,” BES, 24 January 1968; “Plan to Slash Medicaid Is Assailed,” BES, 13 June 1968; and Frank Megargee, “Medical Society Rejects Bid to Probe Medicaid,” BS, 6 September 1968. 59. “Activists Demand Role in Health,” BAA, 6 April  1968; “Agnew, TJD Chided on Medical Care,” BAA, 1 June 1968; Lowell Sunderland, “Rights Group Scores Agnew for Lacking Health Interest,” BS, 19 May 1968; Stephen Lynton, “­Legal Aid Considers Suit to Bar Cuts in Medicaid,” BS, 1 July 1968; Lynton, “Welfare Cut Fight Urged,” BS, 22 July 1968; “Medicaid



Notes to Pages 80–86

309

Cut Brings Suit,” BS, 16 August  1968; and “Medicaid Cuts Protest Rally Set,” BES, 18 October 1968. 60. “Minutes,” 1 October 1968, Book 15, 331, JHHT-­MB. 61. Frederick McGehan, “State Drops ‘Co-­Pay’ Part of Medicaid,” BS, 6 November 1968; and “How One State Lived to Regret Medicaid Fever.” 62. Richard Homan, “Gov. Mandel to Resume Medicaid for 22,000,” WP, 9 January 1969; “22,000 in Mary­land Go Back on Medicaid,” NYT, 27 January 1969; and “Minutes,” 4 February 1969, Book 16, 29, JHHT-­MB.

Chapter 4 1. GBC Planning Council, “A Preliminary Planning Report Prepared for: The Church Home and Hospital and the Johns Hopkins Medical Institutions,” December 1963, Series 13, Box 56, Folder 24, GBCR; and Medical Planning and Development Committee (MPD), “Minutes, 3-12–64,” excerpted in “Information on Baltimore Urban Renewal and Housing Agency,” 3 November 1967, Box 431996187, Folder “BURHA 1958–67,” JHH-­MPDCR. 2. Nicholas Dagen Bloom, Merchant of Illusion: James Rouse, Amer­i­ca’s Salesman of the Businessman’s Utopia (Columbus: Ohio State University Press, 2004); and Paul Lemkau, “The Planning Proj­ect for ‘Columbia,’ ” August 1967, vol. 1, 1–2, WHP. 3. Paul Lemkau, “Memorandum to: Martin Hoppenfeld; Subject: The Development of a Comprehensive Community Health and Medical Program for Columbia,” 7 November 1963, and Lemkau and Guido Crocetti, “Memorandum to: James Rouse and Donald Michael; Subject: Columbia Proj­ect,” 21 May 1964, both in vol. 1, WHP. 4. Christy Ford Chapin, Ensuring Amer­i­ca’s Health: The Public Creation of the Corporate Health Care System (New York: Cambridge University Press, 2015), 1–4, 17–20; Paul Starr, The Social Transformation of American Medicine (New York: Basic Books, 1982), 290–294, 320– 327; and Jennifer Klein, For All ­These Rights: Business, ­Labor, and the Shaping of Amer­i­ca’s Public-­P rivate Welfare State (Prince­ton, NJ: Prince­ton University Press, 2003), 190–197, 207–208, 213–216, 233. 5. Sam Shapiro to Paul Lemkau, 3 March 1964, vol. 1, 1–3, WHP. 6. Lemkau and Crocetti, “Memorandum to: James Rouse and Donald Michael,” WHP. 7. James Rouse, handwritten note on William Finley, “Memorandum to: Nancy Allinson,” 28 September  1964, Series III, Box 39, Folder 7, RP; and Lynne Salisbury, “How Healthy Is the Columbia Medical Plan?” Columbia Flier, 3 March  1983, clipping in Box 1, Folder “Clippings 1967–2004,” CMP-­CHCFP. 8. “School Due $500,000 Sum,” BS, 28 February 1966; Wallace Hamilton to Frank Watters, 1 March 1966, and “Wallace Hamilton annotation,” p. 0139, all in vol. 2, WHP; JHU-­J HH, “Release: Dr. Joseph Sadusk Appointed to Johns Hopkins Medical Faculty, ­Will Study Columbia Satellite Hospital,” 27 May 1966, Series III, Box 39, Folder 7, RP; and Joseph Sadusk and William Towle, “Comprehensive Health Care at the City of Columbia—­a Preliminary Report,” 20 February 1967, vol. 2, iv, 5–7, 19–39, WHP. 9. Hospital Trustees, “Minutes,” 2 May 1967, Book 14, JHHT-­M B; Edwin Daniels, Jr., “Memorandum To: James Rouse; William Finley; Wallace Hamilton; Re: Columbia Medical Plan -­Hopkins,” 8 March 1967, vol. 2, WHP. 10. “Wallace Hamilton annotation,” vol. 2, p. 0229, WHP; John Carroll, “Health Planner Leaving Hopkins,” BS, 15 March 1967, vol. 2, WHP; “Minutes,” 7 March 1967, Book 14, 165, JHHT-­MB; and Carroll, “Columbia’s Plan Passed,” BS, 5 May 1967.

310

Notes to Pages 86–90

11. “Hospital School Appears Doomed,” BS, 16 June  1968; and David Price to Lincoln Gordon, 24 June 1968, Series 9, Box 46, Folder “Medicine-­Town School 1968,” JHU-­Pres. 12. “Note for Dr.  Walker from E.  M. Sauerwein, Re: Gay Street Renewal Area,” 31 May  1965, and “Report on Baltimore Urban Renewal and Housing Agency Meeting with Community Leaders in the Gay Street Urban Renewal Area,” 28 May  1965, both in Box 431996187, Folder “Baltimore Urban Renewal and Housing Agency 1958–67,” JHH-­MPDCR; and “Residents in Renewal Area Voice Fears About Proj­ect,” BS, 22 March 1967. 13. MPD, “Minutes, 4-12–65,” 6, and “Minutes, 9-12–66,” 10, both excerpted in “Information on Baltimore Urban Renewal and Housing Agency,” 3 November 1967, Box 431996187, Folder “BURHA 1958–67,” JHH-­MPDCR. 14. “Minutes,” 4 April 1967, Book 14, 193, JHHT-­MB. 15. Ad Hoc Committee on Community Medicine, “Facilities for Teaching and Research in Community Medicine: A Report to the Advisory Board of the Medical Faculty and the Medical Board of the Hospital,” 30 March 1967, Series 9, Box 16, Folder “CHCF, Columbia, MD, 1967,” JHU-­Pres; Johns Hopkins University and Hospital, “Report of the Health Ser­v ices Committee to the Medical Planning and Development Committee, Lincoln Gordon, Chairman,” 23 February 1968, Series 9, Box 16, Folder 2: “CHCF, Columbia, MD, 1968 (1),” JHU-­Pres; and MPD, “Recommendations on Health Care Ser­v ices for East Baltimore and Columbia,” 27 March 1968, Series 9, Box 16, Folder 2: “CHCF, Columbia, MD, 1968 (2),” JHU-­Pres. 16. Max Frankel, “Lincoln Gordon Is Named President of Johns Hopkins,” NYT, 20 January  1967; M.  K. Milliken  Jr., “New Hopkins Dean Sees Difficult Prob­lems,” BS, 13 December  1967; and Wallace Hamilton, “Memorandum to: James Rouse; William Finley,” 12 December 1967, volume 2, WHP. 17. David Rogers, “Memorandum to Mr.  Garland, Mr.  Cooper, Members of the Joint Board,” 28 March  1968, 1, Series 9, Box 16, Folder 2: “CHCF, Columbia, MD, 1968 (2),” 3, JHU-­Pres. 18. “Minutes,” 28 March  1968, Book 15, 1117–119, JHJCT-­MB; “Minutes,” 2 April  1968, Book 15, JHHT-­MB; and Lincoln Gordon and Russell Nelson, “Untitled Draft of Statement to Faculty,” 2 April  1968, Series 9, Box 16, Folder 2: “CHCF, Columbia, MD, 1968 (2),” JHU-­Pres. 19. Stephanie Kiehl, “When Baltimore Burned,” BS, 30 March 2008; and Jessica Elfenbein, Thomas Hollowak, and Elizabeth Nix, eds., Baltimore ’68: Riots and Rebirth in an American City (Philadelphia: ­Temple University Press, 2011), 3–25. 20. “Minutes,” 7 May 1968 and 3 September 1968, Book 15, 243–245, 301–303, JHHT-­MB; “Thousands Back at Work in City,” BS, 10 April 1968; and John O’Donnell, “600 Treated, 19 Admitted, with Wounds from Rioting,” BS, 10 April 1968. 21. Sherwood Kohn, Experiment in Planning an Urban High School: The Baltimore Charette, (New York: Educational Facilities Laboratory, 1969), 19–33; “Minutes,” 4 March 1969, Book 16, 61–63, JHHT-­MB; Jane Keidel, “An Extraordinary Way to Plan a School,” BS, 9 March 1969; and Baltimore City Economic Development Commission, “Report on Visitation to the Johns Hopkins Hospital,” 18 December  1972, Box 431996187, Folder “Balto. City-­ Economic Development Commission-­Visit to JHH,” 2, JHH-­MPDCR. 22. Rafael Alvarez, “Eugene Feinblatt, 78, Key City Figure Dies,” BS, 17 July 1998. 23. Center for Urban Affairs, “Report on East Baltimore to the Medical Planning and Development Committee,” 2 February 1970, rev. 18 March 1970, Box 431996187, Folder “JHU Report on East Baltimore to the MPD, 1970,” 1, 22–23, 52, JHH-­MPDCR; and Eugene Feinblatt to



Notes to Pages 90–94

311

Medical Planning and Development Committee, 19 March  1970, Book 17, 157–159, JHHT-­MB. 24. “Minutes”, 2 June 1970, Book 17, 135–137, JHHT-­MB. 25. Robert Heyssel, “Curriculum Vitae; Robert M. Heyssel, M.D.,” 19 January 1968; David Rogers to A. McGeeHee Harvey, 27 February 1968; Rogers to Lincoln Gordon, 28 February 1968; and Rogers, “Memorandum to: Advisory Committee, MPD, et al.,” 13 May 1968, all in Series 9, Box 31, Folder “Robert Heyssel, 1968,” JHU-­Pres; and Mary Knudson, “Heyssel Keeps Hopkins Moving Ahead,” BS, 6 January 1980. 26. Robert Heyssel and Malcolm Peterson, “Office of Health Care Programs—­a Three-­ Year Summary: 1969–1971,” Box 431977630, Folder “Office of Health Care Programs,” RMHP; Liz Kramer, “HSDRC—­Draft on Columbia,” May 1974, Box 1, Folder “Report-­Planning and First Five Years of Columbia Medical Plan,” 6–9, CMP-­CHCFP; “Minutes,” 16 December 1969, and Heyssel, “Pro­gress Report—­January  1969–­December  1969,” 4 December  1969, both in Book 16, JHHT-­MB; Robert Heyssel and Henry Seidel, “The Johns Hopkins Experience in Columbia, Mary­land,” New E ­ngland Journal of Medicine 295:22 (25 November  1976): 1225–1231. 27. Victor Cohn, “Cradle to Grave Medical Plan Starts at New City,” WP, 5 October 1969. 28. Richard Lyons, “New Town Hails Prepaid Group Practice as Prescription for Health,” NYT, 8 April  1970; and Joyce Fraiser, “Kennedy Cites Col. Medical Plan in Congressional Rec­ord,” 8 June  1970, Ellicott City Times, clipping in Box 1, Folder “Clippings 1967–2004,” CMP-­CHCFP. 29. Kramer, “HSDRC—­Draft on Columbia,” 10, CMP-­CHCFP; William Towle to Herbert Fritz, 27 July  1970, Series 9, Box 16, Folder 6: “CHCF, 1970,” JHU-­Pres; “Ground-­ Breaking for Columbia Hospital Set,” [newspaper unknown], 16 November 1970, and Sylvia Voss, “Medical Center Opens in May,” 19 May 1973, Central Mary­land News, clippings in Box 1, Folder “Clippings 1967–2004,” CMP-­CHCFP; and JHH, Annual Report 1976 (Baltimore: Johns Hopkins Hospital, 1977), 27. 30. Heyssel and Seidel, “Johns Hopkins Experience in Columbia, Mary­land,” 1226–1228; Kramer, “HSDRC—­Draft on Columbia,” 3, 6, 10–12, 15–16, CMP-­CHCFP; John Wyper to Robert Heyssel, 15 June 1973; Heyssel to Steven Muller and Sidney Lansburgh, 21 June 1973; Heyssel to Wyper, 2 July 1973; Wyper to Heyssel, 20 July 1973; and Ed Stafford, “Columbia Medical Plan—1973,” November 1973, all in Series 14, Box 13, Folder “Columbia Medical Plan, 1972–1975,” JHU-­Pres; “Theodore Hussey Appointed Plan Administrator; Neil McGinn New Plan Man­ag­er,” COMP Newsletter, December  1973, Box 1, Folder “COMP Newsletters 1971–1974,” CMP-­CHCFP; William Towle to Robert Heyssel, 25 February 1974, Box 1, Folder “Correspondence 1970–1974,” CMP-­CHCFP; Salisbury, “How Healthy Is the Columbia Medical Plan?” 31, CMP-­CHCFP; and JHH, Annual Report 1976, 22. 31. Max Bennett, “Minutes of the Last Session, Model Cities Manressa Retreat,” 10 December  1968, Box 431977703, Folder “12/5 Retreat—­Manresa,” RMHP; Robert Heyssel to William Sykes, 28 August 1968; Heyssel to Russell Nelson and David Rogers, 28 August 1968; Max Bennett, “Memorandum for the Rec­ord; Subject: Meeting with Mr. Sykes, Representative for Model Cities,” 25 September 1968; and R, “Memorandum to: Dr. Heyssel,” 29 January 1969, all in Box 431977675, Folder “Model Cities Agency,” RMHP. 32. Elizabeth M. Oliver, “East Baltimore Community Corporation Makes ­Th ings Happen on the Eastside,” BAA, 15 May 1982; and Lucille Gorham and Herbert Darling, “Dunbar

312

Notes to Pages 95–97

Charrette: Community Ser­v ices: Some Basic Proposals for the New Dunbar High School Community Complex,” 24 February 1969, Series II, Box 4: “Education,” 5, MUNDR. 33. “East Baltimore Community Corporation Members,” 19 September  1969, Box 431977703, Folder “EBCC Members,” RMHP. On the emergence of community development corporations, Alice O’Connor, “Swimming Against the Tide: A Brief History of Federal Policy in Poor Communities,” in Urban Prob­lems and Community Development, ed. Ronald F. Ferguson and William T. Dickens, 99–108 (Washington, D.C.: Brookings Institution Press, 1999). 34. The Mitchells also had a close alliance with the Baltimore Afro-­American newspaper. Paul Hutchins, “Thirteen Black Leaders,” BS, 20 September 1970; Antero Pietila, “The Afro-­ Baltimoreans-­I: Black Communities’ Power Is on the Rise, but Some Traditions Are Being Challenged,” 18 March 1979; Pietila, “The Afro-­Baltimoreans-­III: East Side Blacks Flex Their Muscles,” 20 March 1979; and Sandy Banisky, “Burns Points to Role in City’s Re­nais­sance,” 16 August 1987, all in BS; and U.S. House of Representatives, Office of the Historian, History, Art and Archives, “Mitchell, Parren James,” http://­h istory​.­house​.­gov​/­People​/­Detail​/­18367; Pietila, Ghosts of Johns Hopkins: The Life and Legacy That S­ haped an American City (New York: Rowman & Littlefield, 2018), 162–165, 209–214. 35. “East Baltimore Community Corporation Members; Honorable Robert Douglass, Advisor,” 19 September 1969, and EBCC, “Committee List—­Revised,” no date, both in Box 431977703, Folder “EBCC Members,” RMHP. 36. Lucille Gorham, interview by Lawrence Brown, 29 November  2012, https://­w ww​ .­youtube​.­com​/­watch​?­v​=­hPJLCMav2u8; Janelee Keidel, “ ‘Our House’ Is a Home for Many,” BS, 13 June 1969; John Strausbaugh, “She Gave the ­M iddle East Neighborhood a Name and a Dream,” BS, 15 August  1982; “Welfare M ­ other Took Reins of Power to Rebuild Slum,” BS,  5 April  1988; and Jacques Kelly, “Lucille Gorham, Neighborhood Activist,” BS, 7 November 2012. 37. Black Panther Party and Baltimore Defense Committee, “­People’s F ­ ree Medical Clinic Newsletter,” 15 January 1970, Box 431977703, Folder “­People’s F ­ ree Medical Clinic,” RMHP; Rhonda Williams, The Politics of Public Housing: Black ­Women’s Strug­gles Against Urban In­equality (New York: Oxford University Press, 2005), 157–161, 192–196; Amy Zanoni, “Welfare ­Isn’t a Single Issue,” and Elizabeth Morrow Nix, April Kalogeropoulos House­ holder, and Jodi Kelber-­Kaye, “Baltimore’s Socialist Feminists—­Lessons from Then, Lessons for Now,” in P. Nicole King, Kate Darbinski, and Joshua Clark Davis, Baltimore Revisited: Stories of In­equality and Re­sis­tance in a U.S. City, 128–136, 216–221 (New Brunswick, NJ: Rutgers University Press, 2019). 38. Elinor Bacon to Robert Heyssel, 31 October  1983, and Heyssel to Bacon, 1 November 1983, both in Box 431996450, Folder “Community Redevelopment,” RMHP. 39. Robert Heyssel, “Memorandum to: Lincoln Gordon, John Hume, Russell Nelson, David Rogers” and handwritten reply from Nelson, 8 January 1970, and Robert Heyssel to Dollie Thaniel, 14 January  1970, all in Box 431977703, Folder “EBCC—­Letter to Dollie Thaniel ($15,000),” RMHP. 40. Torrey Brown to the Honorable Marvin Mandel, 7 March 1969, Box 431977703, Folder “East Baltimore—­Misc. 1969,” 4, RMHP; Heyssel, “Pro­gress Report—­January 1969–­D ecember 1969”; “Minutes,” 16 December  1969, JHJCT-­MB; and Frederick McGehan, “3 Foundations Give Hopkins $800,000 for Health Plans,” BS, 22 December 1969. 41. James Dilts, “New Patient for Johns Hopkins,” Baltimore Sun Magazine, 29 November 1970.



Notes to Pages 97–100

313

42. Heyssel, “Pro­g ress Report—­January 1969–­December 1969,” 305. 43. Robert Heyssel, “Memorandum for Rec­ord; Subject: Meeting with East Baltimore Community Group—­Thursday October 16, 1969, Princi­ples of Agreement Between Hopkins and East Baltimore,” 17 October  1969, Box 431977703, Folder “East Baltimore-­Misc. 1969,” 2–3, RMHP; and Torrey Brown, “Memorandum to: Robert Heyssel; Subject: Meeting with East Baltimore Physicians, October 26, 1969,” 3 November 1969, Box 431977703, Folder “Local Physicians,” RMHP. 44. Robert Heyssel, “Memorandum to Russell Nelson and David Rogers,” 17 October 1969, Box 431977703, Folder “East Baltimore-­Misc. 1969,” RMHP. 45. Robert Heyssel, “Memorandum for File; Subject: Staff Appointments for Black Physicians in the Immediate Vicinity of Hopkins,” 18 February  1970; Brown and A. McGeeHee Harvey, “Memorandum to: Albert LaForest, M.D., et al.; Subject: Welcoming Luncheon,” 13 February  1970; Russell Nelson to Stanley Madison, 4 March  1970, all in Box 431977703, Folder “Local Physicians,” RMHP. 46. Heyssel, “Pro­gress Report—­January 1969–­December 1969,” 303–305; and F. M. Gloth to Robert Heyssel, 1 October 1969, Box 431977703, Folder “Blue Cross—­East Balt. Program,” RMHP. 47. Robert Blendon and Clifton Gaus, “Memorandum to: Henry Seidel; Subject: Report to the Dean,” 7 January 1970, Box 431977592, Folder “Dr. Blendon’s Report,” 1–2, RMHP. 48. David Rogers and Robert Heyssel, “One Medical School’s Involvement in New Health Care Delivery Models,” Archives of Internal Medicine 127 (January 1971): 57–64. 49. Heyssel, “Pro­g ress Report—­January 1969–­December 1969,” 303–305; Russell Nelson and Clarence Burns to the Honorable William Donald Schaefer, 9 November 1970, Box 431977703, Folder “EBCC Board of Directors Meeting,” 2, RMHP; Office of Health Care Programs (OHCP), “Annual Report 1972,” December 1972, Box 431977630, Folder “OHCP Annual Report 1972,” 4–5, RMHP; and Robert Heyssel, “The Columbia Medical Plan and the East Baltimore Medical Plan,” Hospitals 45 (16 March 1971): 70–71. 50. Heyssel, “Memorandum for Rec­ord; Subject: Meeting with East Baltimore Community Group,” RMHP. 51. Robert Heyssel, “Memorandum to: Russell Nelson; David Rogers; David Everhart,” 10 June  1969, and Heyssel to Robert Blendon, 11 June  1969, both in Box 431977592, Folder “Dr. Blendon’s Report,” RMHP. 52. Russell Nelson, “Memorandum to: Robert Heyssel, et al.,” 13 June 1969, Box 431977592, Folder “Dr. Blendon’s Report,” RMHP. 53. Heyssel, “Memorandum for Rec­ord; Subject: Meeting with East Baltimore Community Group,” 1–2, RMHP. 54. Heyssel, “Memorandum for Rec­ord; Subject: Conversation with Dr. Nelson on Saturday, 9/20/69—­Re: East Baltimore Program,” 22 September 1969, Box 431977703, Folder “East Baltimore—­Misc. 1969,” RMHP. 55. Heyssel, “Memorandum to: Members of the Board of Trustees,” 25 June 1970, Box 431977703, Folder “EBCC JHJCT-­MB Mtg & Letter 6/10/70,” RMHP; and “Minutes,” 28 May and 10 June 1970, Book 17, JHJCT-­MB. 56. Heyssel, “Memorandum to: Members of the Board of Trustees,” RMHP; and Heyssel, “Memorandum for Rec­ord; Subject: Discussion of East Baltimore Community Corporation Agreement—­ April  6, 1970; Trustees Cooper, Levi, President Nelson, Dr.  Heyssel,” 7 April 1970, Box 431977703, Folder “EBCC Agreement—12/15/70,” RMHP.

314

Notes to Pages 101–107

57. Heyssel, “Memorandum to: Members of the Board of Trustees,” RMHP. 58. “Minutes,” 10 June 1970, JHJCT-­MB. 59. “Report on Development—­E ast Baltimore Medical Plan,” 27 November 1970, Book 17, 293, JHHT-­MB; Wayman Henry, James Shepperd, and Sidney Burrnett, “Dear Member,” 11 November  1971, Box 431977703, Folder “EBCC Neighborhood Health Fa­cil­it­y,” RMHP; Heyssel and Peterson, “Office of Health Care Programs—­a Three-­Year Summary: 1969–1971,” 7, RMHP; and “Annual Report 1972,” 4–5, RMHP. 60. JHMI and EBCC, “Proposal for an East Baltimore Medical Program,” October 1969, Box 431977703, Folder “East Baltimore Medical Plan,” 5–6, 43–51, RMHP; and Robert Blendon, “The Age of Discontinuity: The Financing of Innovative Health Care Programs in Poverty Areas,” Johns Hopkins Medical Journal 128:1 (January 1971): 24–29. 61. JHMI and EBCC, “Proposal for an East Baltimore Medical Program,” 18–19, 30–32, RMHP; and EBMP, “Staff Meeting Minutes,” 30 April 1971, Box 431977703, Folder “EBMP Staff Meetings,” RMHP. 62. David Rogers to Dan Smith, 23 December  1970, Box 431977592, Folder “Blendon, Robert Sc.D.,” 2, RMHP; OHCP, “Annual Report 1972,” 4–9, RMHP; Reginald Washington to Lois Chatham, 1 September, 1972, Box 431977703, Folder “EBCC-­Grant 5-­H19 NH 17830–03 Drug Abuse Center 1972–73,” RMHP; and EBCC, “Annual Report 1974,” Box 431996440, Folder “East Balto. Community Corp.,” 5–11, RMHP. 63. Reginald Washington, “Memorandum to J. Wayman Henry, Jr.; Subject: Disenrollment,” 23 March 1972, Box 431977630, Folder “East Baltimore Medical Plan—­Miscellaneous (R.  J. Washington),” RMHP; and EBCC, “Executive Board Meeting Minutes,” 18 October 1972, Box 431977457, Folder “EBCC 1972–73,” 1–2, RMHP. 64. Blendon, “Age of Discontinuity,” 24–29; and Reginald Washington, “Memorandum to: Gerald Lewis; Subject: Recertification of Medicaid Enrollees,” 28 April 1972, Box 431977630, Folder “East Baltimore Medical Plan—­M iscellaneous (R. J. Washington),” RMHP. 65. Jacob Hacker, The Divided Welfare State: The ­Battle over Public and Private Social Benefits in the United States (New York: Cambridge University Press, 2002). 66. EBCC, “Annual Report 1974,” 6–7, RMHP; “Eastside Health Center ­Will Serve 30,000,” BAA, 25 August 1979; and EBMP, “The New East Baltimore Health Fa­cil­i­t y (advertisement),” BAA, 22 September 1979. 67. Martha Jablow, “Dr.  Heyssel: ­ He’ll Run the Hopkins Hospital,” BS, 1 October 1972. 68. Mary Knudson, “Baltimoreans Are Not the Healthiest Americans,” BS, 3 July 1977; and OHCP, “Annual Report 1972,” 6, RMHP. 69. David Rogers and Robert Blendon, “The Academic Medical Center: A Stressed American Institution,” NEJM 298:17 (27 April 1978): 940–950. 70. Rogers and Blendon, “Academic Medical Center,” 941, 947–948. 71. “Minutes,” 7 September 1971, Book 18, 173–175, JHHT-­MB. 72. Bradford  H. Gray, “The Rise and Decline of the HMO: A Chapter in U.S. Health-­ Policy History,” in History and Health Policy in the United States: Putting the Past Back In, ed. Rosemary A. Stevens, Charles E. Rosenberg, and Lawton R. Burns, 315–328 (New Brunswick, NJ: Rutgers University Press, 2006). 73. Robert Heyssel, “Dept. of Pediatrics—­Evergreen House,” no date [prob­ably 26 February  1972], Box 431977576, Folder “Evergreen House-­Dept. of Pediatrics-­Feb.  26, 1972,” 3, RMHP.



Notes to Pages 111–118

315

Chapter 5 1. Stanley Jones interview, 9 March 2007, 4–5, EMKOHP. 2. Jill Quadagno, One Nation Uninsured: Why the U.S. Has No National Health Insurance (New York: Oxford University Press, 2005), 97, 102. 3. Department of Health, Education, and Welfare, A Report to the President on Medical Care Prices (Washington, D.C.: GPO, 1967); Lyndon Johnson, “Special Message to the Congress: Education and Health in Amer­i­ca,” Public Papers of the President, 1967 (Washington, D.C.: GPO, 1968), 256–257; John Gardner, “Controlling Costs: Whose Responsibility?” in Report of the National Conference on Medical Costs; Washington, D.C. June 27–28, 1967 (Washington, D.C.: HEW, 1967), 79–82; and Stuart Auerbach, “Change in System Is Urged to Reduce Cost of Health Care,” WP, 28 June 1967. 4. Max Fine interview, 25 May 2007, 6, 8–10, 16, 22; Philip Caper interview, 20 March 2007, 15–16; and Leroy Goldman interview, 5 May 2007, 10–12, all in EMKOHP. 5. Fine interview, 5–6, 17–18; Jones interview, 15–16; and Goldman interview, 12–13, all in EMKOHP. For overviews, see Quadagno, One Nation Uninsured, 110–112; and Paul Starr, The Social Transformation of American Medicine (New York: Basic Books, 1982), 382–383, 393–397. 6. Edward M. Kennedy interview, 28 March 2008, 2–9, 17, EMKOHP. 7. Jones interview, 3–7, 17, EMKOHP; and Rosemary Stevens, In Sickness and in Wealth: American Hospitals in the Twentieth ­Century, rev. ed. (Baltimore: Johns Hopkins University Press, 1999), 305. 8. Fine interview, 14, 16–17, EMKOHP. 9. Edward Kennedy, In Critical Condition: The Crisis in Amer­i­ca’s Health Care (New York: Simon and Schuster, 1972); Jones interview, 6; Caper interview, 21–24; Goldman interview, 37–40; and Fine interview, 10–16, all in EMKOHP. 10. Richard Nixon, “Special Message to the Congress Proposing a National Health Strategy,” 18 February 1971, Public Papers of the Presidents of the United States, Richard Nixon, 1971 (Washington, D.C.: GPO, 1972), 170–186; and David Blumenthal and James Morone, The Heart of Power: Health and Politics in the Oval Office (Berkeley: University of California Press, 2010), 224–234. 11. Altman interview, 14 March  2007, 3; and Goldman interview, 13–14, both in EMKOHP. 12. Caper interview, 5–12; Altman interview, 11–13; and Goldman interview, 41–43, all in EMKOHP; and Starr, Social Transformation, 395–397. 13. Goldman interview, 7–8, 13, 20, 25; James Mongan interview, 9 May 2007, 4; Fine interview, 12–13; and Jones interview, 21–22, all in EMKOHP. 14. Kennedy interview, 10; Goldman interview, 20–24; and Jones interview, 10–13, 19–22, all in EMKOHP; Richard Lyons, “Kennedy, Mills Unite on Total Health Plan,” WP, 18 June 1972; Lyons, “Platform Most Liberal Ever, Promises Something for All,” WP, 9 July 1972; and Victor Cohn, “Kennedy, Mills Eye Joint Health Bill,” WP, 30 September 1972. 15. Mongan interview, 4–7, EMKOHP. 16. Mongan interview, 4, 7–8, EMKOHP; Robert M. Ball, “Social Security Amendments of 1972: Summary and Legislative History,” Social Security Bulletin 36:3 (March 1973): 3–25; Starr, Social Transformation, 399–400; and Quadagno, One Nation Uninsured, 106–107. 17. Rick Mayes and Robert Berenson, Medicare Prospective Payment and the Shaping of U.S. Health Care (Baltimore: Johns Hopkins University Press, 2008), 19–20. 18. Caper interview, 8–11, EMKOHP; and Starr, Social Transformation, 407.

316

Notes to Pages 118–121

19. Caper interview, 5–12; Altman interview, 11–13; and Goldman interview, 41–43, all in EMKOHP; CQA, 93rd  Cong., 1st  sess., 1973, vol. XXIX (Washington, D.C.: Congressional Quarterly Inc., 1974), 499–507; Quadagno, One Nation Uninsured, 117–118; and Starr, Social Transformation, 407–408. 20. Altman interview, 12; and Caper interview, 9, both in EMKOHP. 21. Paul Ginsburg, “Inflation and the Economic Stabilization Program,” in Health: A Victim or Cause of Inflation, ed. Michael Zubkoff (New York: Published for the Milbank Memorial Fund by Prodist, 1976), 31–33; Allen Matusow, Nixon’s Economy: Booms, Busts, Dollars, and Votes (Lawrence: University Press of Kansas, 1998), 15–18, 84–116, 154–178. 22. The White House, “Executive Order: Providing for the Stabilization of the Economy,” 15 October 1971, and the White House, “Fact Sheet,” 15 October 1971, both in Economic Stabilization Program Briefing Book, Box 1, File 6, JAMP; and Rita Campbell, “ ‘NPS, IPS & UPS,’ Hospital Financial Management Association, Luncheon Speech—­Phase II Update Institute,” 19 October 1972, Box 1, File 3, JAMP. 23. AHA, “Economic Stabilization Summaries,” January  1974, Box 35, File 3, JAMP; AHA Bureau of Research Ser­v ices, “Hospital Compliance with Price Commission Regulations: Report on a Special Survey for the Cost of Living Council,” 14 July 1972, Box 1, File 2, JAMP; Warren Whitted, “Memorandum to Lou Neeb; Subject: Health Ser­v ices Industry,” 9 June 1972, and Samuel Tibbitts, “Wage Price Controls—­Phase III? (Speech at California Hospital Association Convention, San Diego, CA),” 17 October 1972, both in Box 1, File 3, JAMP; Ginsburg, “Inflation and the Economic Stabilization Program,” 36–44; and David Abernethy and David Pearson, Regulating Hospital Costs: The Development of Public Policy (Ann Arbor, MI: Health Administration Press, 1979), 54–55. 24. “Hospitals Cut Rate of Inflation in Half—­Achieve Price Control Goals,” 15 May 1972, and “Rumsfeld Claims Success in Steps to Curtail Health Costs Inflation,” Group Health and Welfare News, July 1972, both in Box 1, File 2; Elliott Richardson, “Health Care and Phase 2,” Washington Star Daily News, 25 September 1972, and Barbara Dunn, “Memo: Health Ser­v ices Industry Committee Members; Re: Meeting with President Nixon on October 27, 1972,” 1 November  1972, Box 1, File 3; AHA, “Hospital Activity U ­ nder the Economic Stabilization Program,” January 1974, Box 35, File 3; Campbell, “NPS, IPS &UPS,” 2–3; and Tibbitts, “Wage Price Controls—­Phase III?” 2–3, all in JAMP. 25. Stuart Altman and Joseph Eichenholz, “Inflation in the Health Industry—­Causes and Cures,” in Zubkoff, ed., Health, 22. 26. Ginsburg, “Inflation and the Economic Stabilization Program,” 32, 49–50. 27. Richard Nixon to J. Alexander McMahon, 1 February 1973, and AHA, “ ‘Background Material on Economic Stabilization Program,’ in Economic Stabilization Program Public Relations Kit,” July 1973, 2, Box 36, File 2; and AHA, “Economic Stabilization Summaries,” January 1974, Box 35, File 3, all in JAMP. 28. Neal Borden to Cost of Living Council; Attention, Mr.  Roy Parker; Re the Johns Hopkins Hospital Case No. 73-­EA 7317RH, 8 June 1973, and “Complaint: The Johns Hopkins Hospital v. Cost of Living Council,” 28 August 1973, 3–4, both in Series 14, Box 15, Folder “Cost of Living Council 1973–1974,” JHU-­Pres; and Abernethy and Pearson, Regulating Hospital Costs, 57. 29. Srinivasan Umapathy, “Harvard School of Public Health: The Johns Hopkins Hospital (parts A and B) Case Study 4-378–088” (President and Fellows of Harvard College, 1977), Box 431996416, Folder “Management Organ­ization of the JHH,” 1–2, RMHP.



Notes to Pages 121–124

317

30. “Status Report on Decentralized Management,” 15 May 1973, and Charles Buck, “A Review of the Management of the Johns Hopkins Hospital October 1972–­October 1976 and F ­ uture Directions,” 11 November  1976, both in Box 431996416, Folder “JHH Organ­ization,” RMHP; Neal Borden to Cost of Living Council; Attention, Mr. Roy Parker; Re the Johns Hopkins Hospital Case No. 73-­EA 7317RH, 8 June 1973, and “Complaint: The Johns Hopkins Hospital v. Cost of Living Council,” 28 August 1973, 3–4, both in Series 14, Box 15, Folder “Cost of Living Council 1973–1974,” JHU-­Pres. 31. Steven Muller to John Dunlop, 12 April 1973, Series 14, Box 15, Folder “Cost of Living Council 1973–1974,” JHU-­Pres. 32. “Complaint: The Johns Hopkins Hospital v. Cost of Living Council,” 3–5, 7–10, JHU-­Pres. 33. Don Wortman to W. Thomas Barnes, re Request for Reconsideration dated June 8, 1973, Case No. 73 EA 7317 RH, 23 July 1973; Economic Stabilization Program, Cost of Living Council, “Decision and Order; Case Number 73 EA 7317 RH,” 23 July 1973; “Complaint: The Johns Hopkins Hospital v. Cost of Living Council,” 28 August 1973, 1–11; Fred Furst, “Memorandums,” 1 August and 6 August  1973; and Robert Heyssel, “Memorandum to: Board of Trustees,” 20 August 1973, all in Series 14, Box 15, Folder “Cost of Living Council 1973–1974,” JHU-­Pres. 34. Abernethy and Pearson, Regulating Hospital Costs, 56–57. 35. Robert Heyssel to Executive Secretariat, Cost of Living Council, 29 November 1973, and John Cooper to Executive Secretariat, Cost of Living Council (Discussion Draft), November 1973, both in Series 14, Box 15, Folder “Cost of Living Council 1973–1974,” JHU-­Pres. 36. Jay Hedgepath, “Office Communication to: John Alexander McMahon; Subject: Report on Filing of Association’s ESP Suit,” 28 January 1974; AHA, “News: AHA Files Law Suit Against Phase IV Controls,” 28 January  1974; AHA, “Press Conference-­Phase IV; Part I—­ Q&A,” 28 January  1974; John Alexander McMahon, “Statement on Phase IV Controls for Hospital Field,” 28 January 1974; and AHA, “Economic Stabilization Program Bulletin #15,” 31 January 1974, all in Box 35, File 3, JAMP. 37. “The Johns Hopkins Hospital v. Cost of Living Council; George P. Schultz, as Chairman; John T. Dunlop, as Director, Civil No. 73-871-­T (United States District Court for the District of Mary­land, 30 May 1974),” and Jay Hedgepath, “Memorandum to: John Alexander McMahon; Subject: New Status Report on ESP Litigation,” 14 June 1974, both in Box 35, File 1, JAMP. 38. John Horty, “Memorandum to: Charles Phillips; S­ ister Mary Maurita; H. Allan Barth; L.R. Jordan,” 7 October 1974, Box 35, File 1, JAMP. 39. Altman interview, 5–6, 15, EMKOHP; and Richard Nixon, “Address on the State of the Union Delivered Before a Joint Session of the Congress,” 30 January 1974, Public Papers of the Presidents of the United States, Richard Nixon, 1974 (Washington, D.C.: GPO, 1975), 47–55. 40. ­Under the Comprehensive Health Insurance Plan, employees would be responsible for a $150 deductible, 25 ­percent of premium costs, and copayments, up to a total of $1,500 annually (compared to the Long-­R ibicoff bill’s $2,000 limit). Richard Nixon, “Special Message to the Congress Proposing a Comprehensive Health Insurance Plan,” 6 February 1974, Public Papers of the Presidents of the United States, Richard Nixon, 1974 (Washington, D.C.: GPO, 1975), 132–140; Fine interview, 19–20, EMKOHP; Quadagno, One Nation Uninsured, 119– 121; and Starr, Social Transformation, 404–405.

318

Notes to Pages 124–131

41. Mongan interview, 10, EMKOHP. 42. Richard Lyons, “Mills, Kennedy Back Health Plan Similar to Nixon’s,” NYT, 3 April 1974; Stuart Auerbach, “Kennedy, Mills Set New Health Plan,” WP, 2 April 1974; Quadagno, One Nation Uninsured, 121; and Altman interview, 11, EMKOHP. 43. Fine interview, 21, 24 (quotation); Kennedy interview, 10; Goldman interview, 10; Altman interview, 6; and Jones interview, 18–19, 21–23, all in EMKOHP. 44. Kennedy interview, 10–12; Altman interview, 4–8, 11; Goldman interview, 28–29; Jones interview, 24–26; and Caper interview, 13, all in EMKOHP. 45. Mongan interview, 10; and Altman interview, 6, both in EMKOHP. 46. Jones interview, 25–26, 30–31; Kennedy interview, 11–12; Caper interview, 15–16; Goldman interview, 26–30; Fine interview, 21, 24; and Altman interview, 10–11, all in EMKOHP. 47. Goldman interview, 29, EMKOHP. 48. Altman interview, 7–8; Caper interview, 13–15; Fine interview, 20–21, 24; and Goldman interview, 24, all in EMKOHP. 49. Altman interview, 8, EMKOHP; Quadagno, One Nation Uninsured, 122–123; and Starr, Social Transformation, 404–406. 50. “Text of Ford’s State of the Union Message,” 19 January  1976, CQA, 94th  Cong., 2nd sess., 1976, vol. XXXII (Washington, D.C.: Congressional Quarterly Inc., 1976), 4-­A; and “Hospital Cost Control: Background,” CQA, 95th Cong., 1st sess., 1977, vol. XXXIII (Washington, D.C.: Congressional Quarterly Inc., 1977), 500. 51. Jones interview, 31, EMKOHP.

Chapter 6 1. Local 1199E, “News Release: Mrs. Coretta Scott King to Visit Baltimore Tuesday (August 26th),” 24 August 1969, and Local 1199E, “Meet Coretta King T ­ oday,” 26 August 1969, both in Sub-­Series III-­C-5, Container 5525 87, Folder 0009, 1199R; Frederick McGehan, “Mrs. King Urges Pro-­Union Vote,” BS, 27 August 1969; Barbara Blum, “Union Sees Hopkins Win as Mrs.  King Spurs Drive,” BNA, 27 August  1969; Whitney Smyth, “Mrs.  King Lends Support for Union Before Hopkins Hospital Vote,” BES, 27 August 1969; and “Mrs. King Boosts Hospital Union; Expect Hopkins Win,” BAA, 30 August 1969. 2. Department of ­Labor, Bureau of ­Labor Statistics, Hospitals, August  1972: Industry Wage Survey Bulletin 1829 (Washington, D.C.: GPO, 1974), 6; and “Hospital Union Movement Gathers Strength,” American Medical News, 29 September 1969. 3. Edwin Crosby to All Employees of the Johns Hopkins Hospital, 12 December  1946; Johns Hopkins Hospital Organ­izing Committee, United Public Workers of American (UPWA), CIO, “The Union Is ­Here,” no date; UPWA #742, “Johns Hopkins Reputation W ­ on’t Pay the Grocery Bills,” no date; JHH Local #742, “It Is Getting Late,” no date; and JHH Local #742, “Union Pre­ sents Minimum Wage Demand,” no date, all in Box 507777, Folder “Unions—­Organ­izing Attempts, 1946–47,” JHH-­UAR. 4. Edwin Crosby to All Employees of the Johns Hopkins Hospital, 10 January 1947; Crosby, “Holidays,” no date; and United Public Workers of Amer­i­ca, CIO, Local 742, “A Public Challenge,” no date, all in Box 507777, Folder “Unions—­Organ­izing Attempts, 1946–47,” JHH-­UAR. 5. W. Wallace Lanahan to John Hayes, 6 March 1947; W. Wallace Lanahan, “Statement of the Board of Trustees of the Johns Hopkins Hospital to the Committee on ­Labor and Public Welfare United States Senate in Support of Testimony of John  H. Hayes, President of the American Hospital Association, Submitted March 8, 1947,” 12 March 1947; Edwin Crosby to All



Notes to Pages 131–133

319

Members of the Board of Trustees, 14 March 1947, all in Box 507777, Folder “Unions—­Organ­ izing Attempts 1946–47,” JHH-­UAR. 6. Russell Nelson, “To All Employees,” 20 September 1959, Box 507777, Folder “Union Activities 1959,” JHH-­UAR. 7. Oliver Singleton to Russell Nelson, 11 September 1959, and Nelson to Singleton, 18 September 1959, both in Box 507777, Folder “Union Activities 1959,” JHH-­UAR; AFL-­CIO, “You Do Need a Union,” July  1959, and AFL-­CIO, “Employees of Johns Hopkins Hospital,” 28 July 1959, both in Box 5003088, Folder “The JHH and the AFL-­CIO July-­Aug 1959,” JHH-­ UAR; and Russell Nelson, “Memorandum for the Rec­ord,” 30 September 1959, and Hospital Employees Union, “Two-­Faced Hy­poc­r isy,” 20 October  1959, both in Box 503088, Folder “JHH and the AFL-­CIO September, 1959,” JHH-­UAR. 8. Untitled note announcing end of u ­ nion campaign, October 28, 1959, Box 503088, Folder “JHH and the AFL-­CIO September, 1959,” JHH-­UAR; and Frank Somerville, “Union Is Abandoning Fight for Workers at Three Hospitals,” BS, 29 October 1959. 9. United Public Workers of Amer­i­ca, “A Public Challenge,” no date [1946–47]; “Lunchtime Rally,” 14 January 1947; Johns Hopkins Hospital Local No. 742 United Public Workers of Amer­i­ca, CIO, “To the ­People of Baltimore,” no date [1946–47], all in Box 507777, Folder “Unions—­Organ­izing Attempts 1946–47,” JHH-­UAR; Oliver W. Singleton to All Trustees and Members of the Medical Board Johns Hopkins Hospital, 15 October 1959, Box 507777, Folder “Union Activities 1959,” JHH-­UAR; AFL-­CIO, “You Do Need a Union,” 16 July 1959; AFL-­ CIO, “Employees of Johns Hopkins Hospital,” no date [1959]; Hospital Employees Local 491, “Stick to Your Bunch or You ­Will Get Skinned,” 7 October 1959, all in Box 503088, Folder “JHH & the AFL-­CIO July-­Aug 1959,” JHH-­UAR. 10. “From Orderly to Or­ga­n izer,” BAA, 8 November 1969; and Whitney Smyth, “Union Leader Warns Hospitals, Nursing Homes: ‘­We’ll Get You,’ ” BES, 25 September 1969. 11. Fred Punch, “A Fair Warning,” undated [1969], and “National Hospital Drive ­Really Rolling! Baltimore, Phila. Only a Start,” 1199 Drug & Hospital News, October 1969, both in Box 18RH, Folder “Union (JHH) 4/69-­,” 1–2, RMHP. See also Johns Hopkins Employees, “Bosses Letter,” no date [1969], and “History of Union Campaign,” no date [1970], both in Box 507777, Folder “Unions—­Organ­izing 1969,” JHH-­UAR. 12. “You C ­ an’t Buy Us” [handbill], no date [1969], Box 507777, Folder “Unions—­Organ­ izing 1969,” JHH-­UAR; Stephen Lynton, “Bargaining at Hopkins Broken Off,” BS, 6 December 1969; and Mary Knudson, “When the Hospital Workers’ Union First Came to Baltimore,” BS, 8 December 1974. 13. Tim Wheeler, “Hospital Union Sets Baltimore Drive,” Daily World, 15 August 1969, Box 507777, Folder “Unions—­Organ­izing 1969,” JHH-­UAR. 14. “Minutes,” 2 December 1969, Book 16, 271–275, JHHT-­MB. 15. “Minutes,” 2 December 1969, 273, 277; Bud­get and Operations Committee, “Minutes,” 30 June 1969; Executive Committee, “Minutes,” 3 July 1969; “Minutes of Special Meeting,” 7 July 1969; “Minutes of Special Meeting,” 10 July 1969; and “Minutes,” 2 September 1969, all in Book 16, 197–211, JHHT-­MB. 16. “History of Union Campaign,” 3, JHH-­UAR. 17. Robert Muehlenkamp, interview by David Greenberg, 10 December 1976, Series X-­A1-­g, Container 5680OH 1, Folder 0047, 14, 1199R. 18. Everhart to Mr. Punch, 11 July 1969, Box 507777, Folder “Unions—­Organ­izing 1969,” JHH-­UAR; Russell Nelson, “Think—­Then Vote,” ­Under the Dome 19:8 (August  1969), Box

320

Notes to Pages 134–139

431977581, Folder “Union (JHH) 4/69-­,” RMHP; and Local 1199E, “Now Is the Time!!! Join 1199E’s Victory Train!” 1969, Sub-­Series III-­C-5, Container 5525 87, Folder 0009, 1199R. 19. “Minutes,” 2 December 1969, 271–277, JHHT-­M B; David Everhart, “Memorandum to: All Employees of the Johns Hospital,” 1 December 1969, and Russell Nelson, “Memorandum to: All Staff and Employees, the Johns Hospital,” 3 December  1969, both in Box 431977581, Folder “Union (JHH) 4/69-­,” RMHP; and “Strike Threat at Hopkins,” Johns Hopkins Medical Student Newsletter, 3 December 1969, Box 507777, Folder “Unions—­Strike Planning 1969,” JHH-­UAR. 20. Frederick McGehan, “Doctors Back Union’s Drive at Hospitals,” BS, 26 August 1969. 21. Nelson, “Memorandum to: All Staff and Employees,” RMHP; and Russell Nelson, “Memorandum for Rec­ord; Subject: Meeting with Community Groups December 8, 1969,” 10 December 1969, Box 431977581, Folder “Union (JHH) 4/69-­,” 2, RMHP. 22. Irvin Conway et al., “Tele­gram to Russell Nelson,” 6 December 1969; Nelson, “Memorandum for Rec­ord; Subject: Meeting with Community Groups December 8, 1969,” 10 December 1969; and Russell Nelson, “Representatives from Community Groups at Meeting on December  8th, 1969,” 10 December  1969, all in Box 431977581, Folder “Union (JHH) 4/69-­,” RMHP. 23. Nelson, “Memorandum for Rec­ord; Subject: Meeting with Community Groups December 8, 1969,” 2–3, RMHP; “Minutes of Special Meeting,” 12 December 1969, Book 16, 285, JHHT-­MB; Samuel A. Cook, esq., “Confidential Memorandum to: The Board, Administration, and Professional Staff; Subject: Hospital Management’s Rights and Responsibilities in Opposing a Union Orga­nizational Campaign,” 15 May 1969, Box 507777, Folder “Unions—1969 Management Rights (Strike),” JHH-­UAR. 24. “Minutes,” 2 December 1969, 271–277, JHHT-­M B; “Minutes—­Special Meeting,” and “Appendix A: Summary of Contract Agreement Between the Johns Hopkins Hospital and Local 1199E,” 12 December 1969, 282–293, JHHT-­MB; “History of Union Campaign,” no date [1970], 2–3; 1199 Duke Organ­izing Committee, “Johns Hopkins Workers Win 7 Million Dollar Contract,” 12 January 1970, Sub-­Series III-­C-5, Container 5525 87, Folder 0009, 1199R. 25. Russell  A. Nelson to All Employees, 2 September  1969, Box 18RH, Folder “Union (JHH) 4/69-­,” RMHP; Michael Davis, “Hopkins, Union Reach Accord; Vote Set Thursday on Pact,” BES, 9 December 1969; Frederick McGehan, “Patient Cost, Union Vote Linked,” BS, 28 August 1969; Barbara Blum, “Hopkins Strike Off; Costs to Spiral,” BNA, 9 December 1969; and Smyth, “Union Leader Warns Hospitals, Nursing Homes.” 26. Paul Jablow, “Hospital Workers Union Sets Rally Against Wage Freeze,” BS, 28 September 1971. 27. Communist Workers League of Baltimore, “Our Fight for Survival,” Upsurge, 9 November 1972, Number 1, Box 50778, Folder “Unions—­General 1972–1983,” JHH-­UAR. 28. Paul Jablow, “Union Seeks to Consolidate Gains,” BS, 22 October 1972. 29. Michael Weiss, “Health Group Is Critical of State on Medicaid,” BES, 19 March 1968; and “Too Much Cut, Agnew Says,” BS, 22 March 1968. 30. Nancy Worthington, Karen Tyson, and Martin Chin, Health Care Financing Grants and Contracts Report: Case Study of Prospective Reimbursement in Mary­land, vol. 3, National Hospital Rate-­Setting Study (Washington, D.C.: HEW, Health Care Financing Administration, Office of Research, Demonstrations, and Statistics, 1980), 5–6. 31. Worthington et al., Case Study of Prospective Reimbursement in Mary­land, 6–9, 13, 63–64, 68–69; James Doherty and Thomas Willett, “To: Members of the Council on Rate



Notes to Pages 139–142

321

Regulations; From: Subcommittee—­ Discounts; Subject: Statement of Position,” no date [1974], Box 431977457, Folder “HSCRC 1973–74,” RMHP; Doherty, “To: John Alexander McMahon, William Robinson,” 10 June 1974, Box 29, File 2, 2, JAMP; Bently Orrick, “Health-­ Cost Bill Enacted,” BS, 6 April  1971; and “Accord Set on Curbing Care Costs,” BS, 23 March 1971. 32. Robert Murray and Robert Berenson, Hospital Rate Setting Revisited (Washington, D.C.: Urban Institute, November 2015), 42–43, 66–75. 33. Doherty and Willett, “To: Members of the Council on Rate Regulations; From: Subcommittee—­Discounts; Subject: Statement of Position,” RMHP. 34. Local 1199E also won a closed u ­ nion shop (the issue that had been the sticking point in 1969), concessions on shift scheduling, and changes to the pension plan. Horace Ayres, “Hopkins Hospital Wage Rise Poses $800,000 Yearly Cost Increase,” BES, 1 December 1972; “Negotiations Break Between Union, Management at Hospital,” BAA, 28 November  1972; Frederick McGehan, “Analy­sis: Hopkins-­Union Contract Portends Higher Costs Elsewhere,” BS, 3 December  1972; and Norman Wilson, “Union Chief Hits Delay in Wage Hike Action,” BS, 10 November 1973. 35. “Hopkins Wage Settlement Hit,” BES, 9 December  1972; and Frederic McGehan, “Health Cost-­Controls Endorsed,” BS, 13 January 1973. 36. Paul Jablow, “2 Hospital Pacts May Copy Hopkins,” BS, 30 December  1972; and Jablow, “Pacts at 5 Hospitals Expire at Same Time,” BS, 2 February 1973. 37. Norman Wilson, “Union Chief Hits Delay in Wage Hike Action,” BES, 10 November  1973; Wilson, “Raise Okayed for Hospital Workers,” BES, 9 January  1974; “$800,000 Back Okay for 3,600 City Hospital Workers,” BAA, 12 January 1974; and Frederic McGehan, “Health-­Cost Group Doubts Provident Figures Are Valid,” BS, 17 May 1973. 38. Fred Punch to Alvin Powers, 12 July 1974, and John Alexander McMahon, “To: Institutional Members; Subject: National ­L abor Relations Act (Taft-­Hartley),” 24 July 1974, both in Box 431977590, Folder “Union—­Strike Info 1974,” RMHP. 39. Srinivasan Umapathy, “Harvard School of Public Health: The Johns Hopkins Hospital (A) Case Study 4-378-088” (President and Fellows of Harvard College, 1977), Box 431996416, Folder “Management Organ­i zation of the JHH,” 10, 12, RMHP; “Personnel Changes,” BS, 7 February 1971; Charles Buck, “A Review of the Management of the Johns Hopkins Hospital October  1972–­October  1976 and F ­ uture Directions,” 11 November  1976, Box 431996416, Folder “JHH Organ­ization,” RMHP. On General Electric’s wider significance, see Kim Phillips-­Fein, Invisible Hands: The Businessman’s Crusade Against the New Deal (New York: W. W. Norton, 2009). 40. Robert Heyssel, “Memorandum for the Rec­ord,” 11 October 1974, Box 23RH, Folder “Correspondence, Union 1973–75,” 2–3, RMHP; and Horace Ayres, “­Can’t Afford Boost in Cost of Living, Bon Secours Says,” BS, 31 January 1975. 41. L. R. Phillips, “Employee Relations Newsletter, Volume I, No. 3,” 14 November 1974, Box 431996199, Folder “Employee Relations—­JHMI 1974,” RMHP; David Michael Ettlin, “Sinai-­Union Pact, Area’s 1st, Reached,” BS, 14 November 1974; and Mary Knudson, “Union Foresees Uphill Fight as 3 Hospitals Balk at Pact,” BS, 15 November 1974. 42. Mary Knudson, “Provident Planning Cuts to Meet Pact,” BES, 26 November  1974; and Horace Ayres, “Sinai Pact Ratification Put Off in Dispute,” BES, 26 November 1974. 43. “Lutheran Hospital, Union Reach Pact,” BS, 27 November 1974; and David Lightman, “Workers Vote Strike at Three Hospitals,” BES, 28 November 1974.

322

Notes to Pages 143–147

44. Robert Heyssel, “Dear Friend of Johns Hopkins,” 15 November  1974, Box 507779, Folder “Strike—­Labor Negotiations, Press Releases, Corresp.—1974,” JHH-­UAR. 45. District 1199E, “1974 & 1975 Hospital and Nursing Home Contract Proposals,” 17 October 1974, Box 431996199, Folder “Personnel—­Hospital,” RMHP; L. R. Phillips, “Employee Relations Newsletter, Volume I, No. 4,” 19 November 1974, and “Employee Relations Newsletter, Volume I, No. 5,” 26 November 1974, both in Box 431996199, Folder “Employee Relations—­ JHMI 1974,” RMHP; and Steven Muller to Robert Heyssel, 27 November  1974, Box 50779, Folder “Strike—­Labor Negotiations, Press Releases, Corresp.—1974,” JHH-­UAR. 46. Horace Ayers, “Union Strikes 3 Area Hospitals; 13 Pickets Arrested at Hopkins,” BES, 2 December 1974; District 1199E, National Union of Hospital and Health Care Employees, R.W.D.S.U., AFL/CIO, “An Appeal to All Hospital Employees,” no date [1974], Box 50779, Folder “Strike—­Labor Negotiations, Press Releases, Corresp.—1974,” RMHP. 47. “1199E Members March on Despite Adverse Conditions,” BAA, 7 December 1974. 48. Antero Pietila, “Strikers Solid If Not Ardent, as Hopkins Hands Out Last Checks,” BS, 7 December 1974. 49. “Hospital Workers’ Guardian: Cong. Mitchell Watches Strike ‘Beyond the End,’ ” BAA, 14 December 1974. 50. Deborah Brumback, “Hopkins Copes with Crisis in Strike,” BES, 2 December 1974; James Rousmaniere, “To the Pickets Outside and the Volunteers Inside, the Question Is the Same: How Long?” BS, 11 December 1974; and Pietila, “Strikers Solid If Not Ardent.” 51. “­Woman Crosses Picket Line, Gives Strikers $100 Check,” BAA, 10 December 1974. 52. Ayers, “Union Strikes 3 Area Hospitals”; Memorandum From: John Eddinger to Robert Heyssel and Douglas Kinsey; Subject: Key Points to be made during Azrael and Sunpapers Interviews,” 24 October 1974; and Muller to Robert Heyssel, 27 November 1974, and attached draft statement, all in Box 50779, Folder “Strike—­Labor Negotiations, Press Releases, Corresp.—1974,” JHH-­UAR. 53. Rousmaniere, “The Question Is the Same: How Long?”; Antero Pietila, “Union Votes to End Strike at 3 Hospitals,” BS, 12 December 1974; and Steven Muller and Robert Heyssel, “Draft of Letter,” November 27, 1974, Box 507779, Folder “Strike—­Letters of Appreciation to Volunteers, Police and Non-­Striking Staff, ‘Open House’ 1974,” RMHP. 54. Mary Knudson, “Hopkins to Raise Salaries,” BS, 19 December 1974; Pietila, “Union Votes to End Strike”; and “Temporary Rate Filing” [packet], 3 December 1974; JHH, “Temporary Rate Application,” 16 December 1974; JHH, “Rate Application,” 16 December 1974; JHH, “Rate Application,” 16 December 1974; HSCRC, “In re the Temporary Application of Johns Hopkins Hospital for a Temporary Change in Rates: Order,” 27 December 1974; HSCRC, “In re: The Regular Rate Application of Johns Hopkins Hospital: Order,” 27 December 1974, all in Box 14RH, Folder “HSCRC ­Orders and Correspondence, 1974,” RMHP. 55. Mary Knudson, “Hopkins Hospital Denied Rate Increase,” BS, 4 October 1975; and Lloyd Brinson, “Hopkins Hospital to Cut 60 Workers,” BS, 5 October 1975. 56. District 1199E, “It’s Your Fight Too!” no date [1975], Box 507778, Folder “Unions-­ General 1972–83,” JHH-­UAR. 57. District 1199E, “Save Lutheran Hospital,” 13 February 1975, Series 1, Box 10, Folder 18, MOP. 58. Mary Knudson, “Hospitals Get Bud­get Warning,” BS, 14 February 1976; and Joseph Challmes, “Union Leader Wants Powers off Health Unit,” BS, 16 February 1976.



Notes to Pages 149–152

323

Chapter 7 1. Nancy Worthington, Karen Tyson, and Martin Chin, Health Care Financing Grants and Contracts Report: Case Study of Prospective Reimbursement in Mary­land, vol. 3, National Hospital Rate-­Setting Study (Washington, D.C.: HEW, Health Care Financing Administration, Office of Research, Demonstrations, and Statistics, 1980), 80. 2. John Dorsey, “Hospital Costs: Sky-­H igh and Still Climbing,” BS, 28 March  1976; “Hospitals in the Red and Black,” BS, 13 February 1973; and [JHH], “The Prob­lem of Medical Indigence for Hospitals in Mary­land,” 10 December  1974, Box 431977628, Folder “HSCRC 1975,” RMHP. 3. James Doherty and Thomas Willett, “To: Members of the [American Hospital Association] Council on Rate Regulation; From: Subcommittee—­Discounts; Subject: Statement of Position,” no date [1974], Box 431977457, Folder “HSCRC 1973–74,” RMHP. 4. Mary Knudson, “Debt Plan to Affect Insurer,” BS, 15 March 1974; Knudson, “Cost Unit Seeks Cut in Hospital Discounts for Public Insurers,” BS, 2 May 1974; and Attorney for Blue Cross of Mary­land, Inc., “Memorandum of Law Submitted by Blue Cross of Mary­land, Inc. in the ­Matter of Setting of Hospital Rates Equitably Among All Classes of Purchasers Without Undue Discrimination or Preference,” 29 May 1974, Box 29, File 2, JAMP. 5. W. T. Robinson, “To: J. A. McMahon; Subject: Mary­land Health Ser­v ices Review Commission,” 21 May 1974, Box 29, File 2, JAMP. 6. Mary Knudson, “Regulatory Commission Plans to Freeze Hospital Rates on July 1,” BS, 20 June  1974; and Richard Davidson to Robert Heyssel, “Mailgram,” 24 June  1974, Box 431977628, Folder “HSCRC 1974,” RMHP. 7. HSCRC, “In re: The Commission Review of the Rates of Sinai Hospital of Baltimore, Inc.: Opinion,” 20 January 1975; Mancur Olson, HSCRC, “In re: The Commission Review of the Rates of Sinai Hospital of Baltimore, Inc.: Order,” 20 January 1975; and “Ruling on Sinai Hospital Rates Blasted by Blue Cross Chief,” Northwest Star, 6 February 1975, all in Series 1, Box 10, Folder 18, MOP; Richard Davidson, “To: MHA Board of Presidents and Chief Executive Officers; Re: M ­ atters Relating to HSCRC,” 31 January 1975, Box 14RH, HSCRC Correspondence 1975 (2), RMHP; Mary Knudson, “First Steps ­Toward Regulating Hospital Costs,” BS, 15 December 1974; and Knudson, “Sinai Rates for Blue Cross to Rise,” BS, 23 January 1975. 8. Victor Cohn, “Hospital Rate Authority Cut in Mary­land,” WP, 8 February 1975; and “Mary­land: System Criticized—­but Supported,” Investor-­Owned Hospital Review 8:4 (August–­ September 1975): 30–33. 9. Kenneth Proctor, “Franklin Square Hospital, Plaintiffs, vs. Health Ser­v ices Cost Review Commission, Defendants: Order of Final Judgment,” 20 March 1975, Series 14, Box 26, Folder “Health Ser­v ices Cost Review Commission, 1973–1976,” JHU-­Pres; Dick Davidson, “To: State Hospital Associations; Re: Results of the Suit Filed by Mary­land Hospital Association Against the Mary­land Health Ser­v ices Cost Review Commission,” 1 April 1975, Box 29, File 2, JAMP. 10. Michael Weisskopf, “Federal Help Considered for Hospital Debts,” BS, 19 March 1976; “Way out of Hospital Insolvency,” BS, 20 March  1976; Weisskopf, “Medicare to Share Bad Debts,” BS, 22 April 1976; and Worthington et al., Case Study of Prospective Reimbursement in Mary­land, 66–67, 83. 11. Worthington et al., Case Study of Prospective Reimbursement in Mary­l and, 81–83; and “Blue Cross Offers $50,000 to Aid Hospital Rate Review,” BS, 31 December 1976.

324

Notes to Pages 153–156

12. Mary Knudson, “Union Memorial Said to Overcharge Patients,” BS, 5 September 1974; and HSCRC, “Staff Findings in the Review of Union Memorial’s Established Rates,” 4 September 1974, Box 431977628, Folder “HSCRC 1974,” RMHP. 13. HSCRC, “In re: The Regular Rate Application of Johns Hopkins Hospital: Order,” 27 December 1974, Box 431977626, Folder: HSCRC ­Orders and Correspondence, 1974, RMHP; and Mary Knudson, “Hopkins Is Denied Increase,” BS, 1 January 1975. 14. Knudson, “Hopkins Is Denied Increase”; David Lightman, “Hopkins May Get Part of Rate Hike,” BES, 3 January 1975; HSCRC, “In re: The Regular Rate Application of Johns Hopkins Hospital: Order.” 15. Richard  W. Emory to William  E. McGuirk,  Jr., 17 January  1975, Series 14, Box 26, Folder “HSCRC, 1973–1976,” JHU-­Pres. 16. “Meeting with Cohen,” 10 March  1975; I.  W. Kues, “Memorandum to Thomas Barnes, Re: Upcoming H.S.C.R.C. Filing,” 19 March 1975; and Kues, “Memorandum to Jack Murphy, Subject: H.S.C.R.C. Filing,” 14 May 1975, all in Box 14RH, Folder “HSCRC Correspondence 1975 (2),” RMHP. 17. “Robert Shelton to Thomas Barnes, Re: Need for HSCRC Prior Approval to Change Schedule of Rates,” 12 June  1975, Box 14RH, Folder “HSCRC Correspondence 1975 (1),” RMHP. 18. W. Thomas Barnes to Health Ser­v ices Cost Review Commission, 19 June 1975, Box 14RH, Folder “HSCRC Correspondence 1975 (2),” RMHP; and Mary Knudson, “Hopkins Boosts Rates 7 ­Percent,” BS, 20 June 1975. 19. Sanford Kotzen to Robert Heyssel, 20 June 1975, and Heyssel to Kotzen, 20 June 1975, both in Box 431977457, Folder “HSCRC II,” RMHP. 20. “Stuart Rome to John Brooks, Re: The Johns Hopkins Hospital Rate Increases,” 24 June 1975, Box 431977457, Folder “HSCRC II,” RMHP. 21. Alvin Powers, “In re: Commission Review of the Rates of Johns Hopkins Hospital,” 27 June 1975, Box 431977457, Folder “HSCRC II,” RMHP; and Robert Heyssel to Alvin Powers, 30 June 1975, Series 14, Box 26, Folder “HSCRC, 1973–1976,” JHU-­Pres. 22. “Powers Renamed; Test Looms,” BS, 2 July 1975. 23. B. J. Norris, “Draft Statement Responding to Alvin Powers Comments,” 2 July 1975, and “Personal and Confidential; Memorandum to: B. J. Norris, Robert Heyssel,” 8 July 1975, both in Series 14, Box 26, Folder “HSCRC, 1973–1976,” JHU-­Pres. 24. “Ganging Up on Hospital Agency,” BS, 11 July 1975. 25. Mary Knudson, “Hopkins Agrees to Roll Back Rate Increase,” BS, 29 July  1975; HSCRC, “In re: Inflation Rate Increase: Order,” 21 July 1975, and HSCRC, “In re: The ­Matter of Johns Hopkins Hospital Application for a Temporary Change in Rates: Order,” 28 July 1975, both in Box 14RH, Folder “HSCRC Correspondence 1975 (2),” RMHP. 26. Mary Knudson, “Hopkins Economy Advised,” BS, 24 November 1975; Robert Heyssel, “Memorandum for the Rec­ord: Conversation with Dr. Jack Cook of the HSCRC,” 4 September 1975, Box 14RH, Folder “HSCRC Correspondence 1975 (2),” RMHP; and Steven Muller to Alvin Powers, 24 November  1975, Series 14, Box 26, Folder “HSCRC, 1973–1976,” JHU-­Pres. 27. JHMI Office of Public Affairs, “Summary of Issues: Health Ser­v ices Cost Review Commission Hearings on the Rates of Johns Hopkins Hospital,” 23 January 1976, Box 14RH, Folder “HSCRC Correspondence 1976 (2),” RMHP; H. Robert Erwin  Jr. and Lawrence Coshnear, “Post-­Hearing Brief of the ­Legal Aid Bureau, Inc.,” 18 June 1976; Robert Shelton and



Notes to Pages 157–161

325

Venable, Baetjer, & Howard, “Brief of the Johns Hopkins Hospital,” 18 June 1976; HSCRC, “Brief of the Commission Staff,” 22 June 1976; “Opinion of the Commission,” 16 September 1976, and “Addendum: Proposal for a Charity Care Policy,” all in Box 431977457, Loose ­Binder, RMHP. 28. Shelton and Venable, Baetjer, & Howard, “Brief of the Johns Hopkins Hospital,” RMHP; HSCRC, “Brief of the Commission Staff,” RMHP; Robert A. Shelton, “Reply Brief, re: The Experience Rate of Inflation,” 28 June 1976; and HSCRC, “Supplement to Commission’s Staff’s Brief,” 1 July 1976, both in Box 431977628, Folder “HSCRC 1976,” RMHP. 29. Shelton, “Reply Brief, Re: The Experience Rate of Inflation,” 10, RMHP. 30. Shelton and Venable, Baetjer, & Howard, “Brief of the Johns Hopkins Hospital,” 10, RMHP. 31. Shelton, “Reply Brief, Re: The Experience Rate of Inflation,” 12, RMHP. 32. HSCRC, “Supplement to Commission’s Staff’s Brief,” 1, 8, RMHP. 33. “Opinion of the Commission,” RMHP; and “Rate Cuts Ordered at Hopkins,” BS, 29 September 1976. 34. “Hopkins Says Cuts May Force Proj­ect Delays,” BS, 1 October 1976. 35. HSCRC, “In re: The Commission Review of the Rates of the Johns Hopkins Hospital, Baltimore, Mary­land: Final Order,” 21 October 1976, Box 431977626, Folder “HSCRC Correspondence 1976,” RMHP. 36. Robert Heyssel, “Memorandum for the Rec­ord; Subject: HSCRC Rate Review Proceedings and Finding,” 15 December 1976, 2–3; Heyssel to Constance Baker, 16 November 1976; and Baker to Heyssel, 22 November 1976, all in Box 431977628, Folder “HSCRC 1977,” RMHP. 37. Robert Heyssel to Alvin Powers, 22 December 1976, Box 431977628, Folder “HSCRC 1977,” RMHP. 38. HSCRC, “Amended Order,” 21 June 1977; “Memorandum from: Harold Cohen to: All Hospital Financial Man­ag­ers, and Chief Executive Officers; Subject: Inflation Adjustments to Hospital Rates,” 19 July  1977; and Carl Humphreys to John Cook, 20 July  1977, all in Box 14RH, Folder “HSCRC Correspondence 1977 (2),” RMHP. 39. Robert Heyssel to John Cook, 22 July 1977, and Cook, “Untitled Paper Draft,” no date, both in Box 431977457, Folder “HSCRC II,” RMHP. 40. Worthington et al., Case Study of Prospective Reimbursement in Mary­land, 1–2, 15–19, 33–46; “Memorandum from: Harold Cohen to: All Hospital Financial Man­ag­ers, and Chief Executive Officers; Subject: Inflation Adjustments to Hospital Rates,” 6 July 1977, Box 14RH, Folder “HSCRC Correspondence 1977 (2),” RMHP. 41. Mary Knudson, “Trying to Control CAT Fever in the Hospitals,” BS, 8 May 1977; Jay Spry, “Health Agency Scored on CAT’s,” BS, 17 June 1977; and Knudson, “City to Get Four More Scanners,” BS, 22 July 1977. 42. Douglas Watson, “Some Hospital Aid F ­ aces Health Ser­v ices Cost Review Commission Cut,” BS, 7 July 1977; Watson, “Hospitals Emergency Tax Decried,” BS, 19 August 1977; and “The Emergency Room Dilemma,” BS, 21 August 1977. 43. Robert Bomboy, “Agencies Clash on Need for Hospital Beds,” BNA, 11 January 1978; Richard Davidson to Alvin Powers, 25 January 1978; and Robert Heyssel to Powers, 1 February 1978, all in Box 431977457, Folder “HSCRC II,” RMHP. 44. “Statement of Harold A. Cohen at the Hearing of the Baltimore City Del­e­ga­t ion Sub-­ Committee on Health; Subject: Hospital Closing Recommendation and Who ­Will Do the Planning?” May 19, 1978, Box 431977457, Folder “HSCRC II,” RMHP; “Statement of Alvin M. Powers, Chairman, Health Ser­v ices Cost Review Commission,” April 5, 1978, Box 431977626,

326

Notes to Pages 161–167

Folder “HSCRC Correspondence 1977 (2),” RMHP; and Sue Miller, “Ultimatum Issued to Six Hospitals in City,” BS, 6 April 1978. 45. HSCRC, “For Immediate Release,” December  13, 1978, Box 431977626, Folder “HSCRC Correspondence 1978,” RMHP; and Mary Knudson, “Hospital Merger Idea Draws Fire,” BS, 7 April 1978. 46. Worthington et al., Case Study of Prospective Reimbursement in Mary­land, 75–76, 90–91. 47. Heyssel to Cook, 22 July 1977, and Cook, “Untitled Paper Draft” 1977, both in Box 431977457, Folder “HSCRC II,” RMHP. 48. Carl Schramm to Karen Davis, 26 January 1978, Box 431977457, Folder “HSCRC II,” RMHP. 49. HSCRC, “Disclosure of Hospital Financial and Statistical Data: Hospital Regulator in Mary­land Reports Three Year Savings of $106 Million by Hospitals,” 6 February 1979, Box 431977628, Folder “HSCRC 1979,” RMHP. 50. HSCRC, “HSCRC Report to the Governor, Fiscal Year 1977,” 1977, Box 431977457, Folder “HSCRC Report to Govern. 1977,” RMHP; HSCRC, “Disclosure of Hospital Financial and Statistical Data; Hospital Regulator in Mary­land Reports Two Year Savings of $70 Million by Hospitals,” 1 February 1978, Box 431977457, Folder “HSCRC II,” RMHP; and HSCRC, “Disclosure of Hospital Financial and Statistical Data,” RMHP. 51. Carl Schramm, “How Mary­land Held Down the Cost of Hospitalization,” BS, 23 April 1978.

Chapter 8 1. David Price, “Major Questions for Planning,” 12 January 1970, Series 9, Box 46, Folder “Medicine—­Medical Planning and Development Committee, 1969–70,” JHU-­Pres. 2. David Price, “Agenda for Evergreen House,” 11 March 1970, and Price, “Scope of Johns Hopkins Clinical Ser­v ices in the 1980s: Tentative Proposals for Discussion,” 10 March 1970, Series 9, Box 46, Folder “Medicine—­Medical Planning and Development Committee, 1969– 70,” JHU-­Pres; Price, “Hospital Ser­v ices in the 1970s,” drafts of 2 April 1970 and 22 May 1970, Series 9, Box 32, Folder “JHH-­Clinical and Hospital Ser­v ices, 1968–1971,” JHU-­Pres. 3. Price, “Hospital Ser­v ices in the 1970s,” 2 April 1970, 4–6, JHU-­Pres. 4. Louis Faillace to David Rogers, 23 June 1970, and William Greenough to Rogers, 16 June 1970, both in Series 9, Box 32, Folder “Hospital, Johns Hopkins, 1969–1971,” JHU-­Pres; untitled report, October 1970, attached to Robert Mason, “Memorandum to: The Active Staff of the Johns Hopkins Hospital; Subject: The ‘Price Report,’ ” 21 January 1971, Box 431977634, Folder “Jan. 29–30, 1971 Retreat—­Evergreen House,” 1–2, 5, RMHP. 5. Frederick McGehan, “Hopkins Hospital Plans Diversification,” BS, 3 September 1970. 6. Joseph Hall, “Memorandum to: Dr.  David  E. Price; Subject: ‘Hospital Ser­v ices in the 1970’s—­Reaction Responses,” 17 September  1970, Series 9, Box 32, Folder “Hospital, Johns Hopkins, 1969–1971,” 3, JHU-­Pres. 7. Emerson C. Walden to Russell A. Nelson, 3 July 1970, Series 9, Box 32, Folder “Hospital, Johns Hopkins, 1969–1971,” JHU-­Pres; and “The President-­Elect,” Journal of the National Medical Association 62:6 (November 1970): 457–458. 8. “Minutes,” 1 December 1970, Book 17, JHHT-­M B; “Minutes,” 5 February 1971, Book 17, JHJCT-­MB; Medical Planning and Development Committee, “Planning Conference Evergreen House, January 1971,” 1 March 1970, and David Rogers, “Draft Proposal of the Medical



Notes to Pages 167–173

327

Planning and Development Committee: Long-­Range Projections for the Johns Hopkins School of Medicine and Hospital,” 12 March  1971, both in Series 9, Box 38, Folder “LRP—­ School of Medicine—­Evergreen Conference, 1971,” JHU-­Pres. 9. The Johns Hopkins Hospital Annual Report 1972–73, 18, JHH-­A R. 10. Quotation from JHH, Annual Report 1982 (Baltimore: Johns Hopkins Hospital, 1983), 2. This reference mentions “suburban north” as the alternative site rather than Columbia. 11. “Minutes,” 29 April 1971 and 30 September 1971, Book 18, JHJCT-­M B; “Minutes,” 5 October 1971, Book 18, JHHT-­MB. 12. JHH, Annual Report 1972–73 (Baltimore: Johns Hopkins Hospital, 1974), 18–19; JHH, Annual Report 1974 (Baltimore: Johns Hopkins Hospital, 1975), 6–6, 22–25; “Minutes,” 12 September  1973, Book 18, JHHT-­MB; “Minutes” (and attachments), 4 October  1973, Book 18, JHJCT-­MB; Sandor Csobaji, “Johns Hopkins Redevelopment Enlists All Disciplines for Planning and Design,” Architectural Rec­ord 157:2 (February  1975): 124–127; and Mary Knudson, “Hopkins Hospital Marks $41 Million for Suburbs-­ in-­ City Looks and Ser­ v ice,” BS, 17 March 1974. 13. Csobaji, “Johns Hopkins Redevelopment Enlists All Disciplines,” 124–125. 14. Knudson, “Hopkins Hospital Marks $41 Million for Suburbs-in-City.” 15. JHH, Annual Report 1974, 23–24. 16. “Johns Hopkins Hospital Summary of Operations,” 19 February 1974, Series 14, Box 29, Folder “Hospital Fiscal Position 1972–1974,” JHU-­Pres. 17. Robert Heyssel, “To: Members of the Medical Board; Subject: Fiscal Position of the Johns Hopkins Hospital,” 14 December 1972, Series 14, Box 29, Folder “Hospital Fiscal Position 1972–1974,” JHU-­Pres; JHH Medical Board, “Minutes,” 20 December 1972, quoted in Srinivasan Umapathy, “Harvard School of Public Health: The Johns Hopkins Hospital (Part B) Case Study 4-378–088” (President and Fellows of Harvard College, 1977), Box 431996416, Folder “Management Organ­ization of the JHH,” 2, RMHP. 18. Heyssel, “Fiscal Position of the Johns Hopkins Hospital,” JHU-­Pres; JHH Medical Board, “Minutes,” 20 December 1972, RMHP; Charles Buck, “A Review of the Management of the Johns Hopkins Hospital October 1972–­October 1976 and F ­ uture Directions,” 11 November 1976, and Robert Heyssel, “Memorandum to: The Board of Trustees, the Johns Hopkins Hospital; Subject: Management of the Johns Hopkins Hospital,” 1 March 1977, both in Box 431996416, Folder “JHH Organ­ization,” RMHP. 19. Stephen Solomon, “How One Hospital Broke Its Inflation Fever,” Fortune, 18 June 1979; Heyssel, “Management of the Johns Hopkins Hospital,” RMHP; Buck, “Review of the Management of the Johns Hopkins Hospital,” 2–6, RMHP; and Umapathy, “Johns Hopkins Hospital (Part A) Case Study 4-378–088,” 6–11, RMHP. 20. Solomon, “How One Hospital Broke Its Inflation Fever.” 21. JHH, Annual Report 1975 (Baltimore: Johns Hopkins Hospital, 1976), 15–16; JHH, Annual Report 1978 (Baltimore: Johns Hopkins Hospital, 1979), 15–17; and JHH, Annual Report 1983 (Baltimore: Johns Hopkins Hospital, 1984), 11. 22. Solomon, “How One Hospital Broke Its Inflation Fever”; Buck, “Review of the Management of the Johns Hopkins Hospital,” RMHP; and Umapathy, “Johns Hopkins Hospital (Part A) Case Study 4-378–088,” RMHP. 23. “Minutes,” 2 April 1974, 4 June 1974, and 4 February 1975, all in Book 18, JHHT-­MB; and Mary­land Health and Higher Educational Facilities Authority, 1996 Annual Report (Baltimore: The Authority, 1996), 6–7.

328

Notes to Pages 173–176

24. “Minutes,” 6 January 1976 and 6 April 1976, Book 20, JHHT-­M B; and “Minutes,” 12 December 1977, Book 21, JHJCT-­MB. 25. JHH, Annual Report 1976 (Baltimore: Johns Hopkins Hospital, 1977), 3. 26. “Minutes,” 14 February and 3 October 1977, Book 21, JHJCT-­MB. 27. JHH, New Dimensions of Discovery [1979 Annual Report] (Baltimore: Johns Hopkins Hospital, 1980), 3; and “Minutes,” 3 January 1978, Book 21, JHHT-­MB. 28. JHH, Annual Report 1982, 2. 29. “Minutes,” 3 October 1977 and 12 December 1977, Book 21, JHJCT-­MB. 30. “Minutes,” 24 April 1978, Book 21, JHJCT-­M B; and Mary Knudson, “Hopkins Hospital Plan Stalled,” BS, 22 May 1978. 31. Community Health Council of Mary­land, “Position Paper,” no date, Series II, Box 28, Folder 17, MUNDR. 32. “Dr. Saunder Speaks for Community Health Council,” BAA, 23 February 1974; Sharon Dickman, “UF Has Goal for ­Women, Minorities,” BES, 10 April 1974; and “CICHA ­Will Obey,” BAA, 29 October 1974. 33. “Health Care Council Charges Johns Hopkins Hospital with Discrimination,” BAA, 8 June 1976; and “I, Too, Cry Genocide!” BAA, 12 June 1976. 34. “Bias Suit Filed in Hopkins Subpoena Bid,” BS, 11 March 1977; and “Can We Get a Witness? Hopkins Foes Ask,” BAA, 25 February 1978. 35. Lawrence Egbert and Irene Rothman, “Relations Between the Race and Economic Status of Patients and Who Performs Their Surgery,” New E ­ ngland Journal of Medicine 297:2 (14 July 1977): 90–91. 36. Constance Baker, “Memorandum to File; Re: Meeting with Mary­land Commission on ­Human Relations on July 19, 1977,” 21 July 1977; Baker, “To: William Blalock and Robert Heyssel; Re: Mary­land Commission on H ­ uman Relations Patient Care Investigation,” 21 July 1977; and Heyssel, “Handwritten Letter to Bill Blalock,” 23 July 1977, all in Series 14, Box 28, Folder “Commission on ­Human Rights 1977,” JHU-­Pres; and William Blalock, “Memorandum to: Robert Heyssel; Subject: Press Release by Mary­land H ­ uman Relations Commission,” 7 March 1978, Series 14, Box 29, Folder “Hospital—­General 1977–1982,” JHU-­Pres. 37. “Health Group Asks HEW to Cut Hopkins Hospital’s Federal Aid,” BAA, 25 March 1978. 38. Mary Knudson, “Hopkins Hospital Plan Stalled,” BS, 22 May 1978; and “Minutes,” 6 June 1978, Book 21, JHHT-­MB. A recent proposal for redress of past racial inequities at academic medical centers includes the concept of preferential admissions: Bram Wispelwey and Michelle Morse, “An Antiracist Agenda for Medicine,” Boston Review, 17 March 2021. 39. Sue Miller, “$53 Million Plan for Hopkins Hospital Given Tentative Approval,” BES, 7 July  1978; and Charles Flowers, “Hopkins Expansion Plan Backed by Health Panel,” BS, 8 July 1978. 40. “Hopkins Foes Put in Trick,” BAA, 22 July  1978; and Kenneth Berents, “Planning Group Approves Hopkins Hospital Plan,” BS, 20 July 1978. 41. Mary­land Health Planning and Development Agency, “Memorandum to: William Blalock; Re: Johns Hopkins Hospital Redevelopment Program Phase II,” 6 September 1978, and Blalock, “Memorandum to: W. Wallace Lanahan, Steven Muller, and Richard Ross; Subject: Health Planning Agency Approval for Phase II Construction,” 12 September 1978, both in Series 14, Box 28, Folder “Hospital-­Certification of Need 1978,” JHU-­Pres; Mary Knudson, “Hopkins Renovation Approved,” BS, 1 October 1978; and “Health Group Tries to Block Hopkins $,” BAA, 14 October 1978.



Notes to Pages 176–182

329

42. Fred Hines, “Hopkins Wants Names of Black Activists,” BAA, 9 December 1978. 43. “Minutes,” 4 September 1979, Book 22, JHHT-­MB. 44. “Minutes,” 13 November 1978, Book 21, and 7 May 1979, Book 22, JHJCT-­MB. 45. Alex Brown & Sons, “Rating Agency Meetings; the Johns Hopkins Hospital June 5 and 6 [SIC],” 15 June  1979; Robert Heyssel to Harold Cohen, 25 July  1979; and W. Thomas Barnes, “Memorandum to: Robert Heyssel; Subject: Final Debt Ser­vice Schedule—1979 Bonds,” 26 July 1979, all in Series 14, Box 28, Folder “Hospital Bond Issue 1979,” JHU-­Pres; “Minutes,” 13 November 1978, Book 21, JHJCT-­MB; and JHH, New Dimensions of Discovery, 3. 46. Alex Brown & Sons, “The Johns Hopkins Hospital; Information Meetings; July  17, 1979 Baltimore; July 18, 1979 New York,” 13 July 1979, Series 14, Box 28, Folder “Hospital-­Bond Issue 1979,” JHU-­Pres. 47. Louis Hauptfleish to Steven Muller, 20 July 1979, Series 14, Box 28, Folder “Hospital-­ Bond Issue 1979,” JHU-­Pres. 48. JHH, New Dimensions of Discovery, 3. 49. “Minutes,” 27 April 1981, Book 22, JHJCT-­MB. 50. JHH, Expressions of Commitment [1980 Annual Report] (Baltimore: Johns Hopkins Hospital, 1981), 3; and “Minutes,” 8 June 1982, Book 23, JHHT-­MB. 51. Robert Jackson and Emerson Walden, “A History of Provident Hospital, Baltimore, Mary­land,” Journal of the National Medical Association 59:3 (May 1967): 157–165; and J. Kimball Payne, “Provident ­Won’t Be Forgotten,” BS, 25 July 2000. 52. “Minutes of the Executive Session,” 5 November  1985, Book 25, JHHT-­MB; Frank Roylance, “Provident Hospital’s Prob­lem Run Deep,” BES, 27 November  1984; Roylance, “Provident Seeking Allegiance of Blacks,” BES, 24 September 1985; and Roylance, “Provident Would Lose Its Identity in Merger,” BES, 4 June 1986. 53. “Hopkins Student Murdered,” BS, 16 January  1979; Monte Trammer, “3 Witnesses’ Memories Fail at Murder Trial,” BS, 11 October 1979; Theodore Hendricks, “Youth Gets Life Term for Murder,” BS, 16 November 1979; Dan Rodricks, “Echoes of a Senseless Loss Heard Again,” BS, 6 July 2014; Rodricks, “Teenage Killer, at 51, Is Back in Court,” BS, 20 July 2014; and Rodricks, “Man Goes ­Free ­A fter 35 Years for Killing,” BS, 23 July 2014. 54. “Hopkins Murder Stirs Demands for Security,” BS, 17 January 1979; Steven Muller, “Memorandum to Boards of Trustees of the Johns Hopkins University and Hospital,” 26 January 1979, in Book 21, JHJCT-­M B; “Minutes,” 6 February 1979, Book 21, JHHT-­MB. 55. “Minutes,” 29 January 1979, Book 21, 353–354, JHJCT-­MB. 56. Roger Biles, The Fate of Cities: Urban Amer­i­ca and the Federal Government, 1945– 2000 (Lawrence: University Press of Kansas, 2011), 190–191, 198, 203–204, 220–221. 57. Biles, Fate of Cities, 232–233, 243–249. 58. “Minutes,” 20 September 1979 and 26 November 1979, Book 22, 48–50, 68–69, JHJCT-­MB. 59. JHU Center for Metropolitan Planning and Research, “Selected Development Alternatives for East Baltimore,” December 1974, Series 14, Box 16, Folder “East Baltimore Development 1975,” 40–41, JHU-­Pres. 60. Struever Bros. & Eccles, Inc., “Development Coordination Proposal: Northeast Market Area Renovation,” July 1982, Series 15, Box 14, Folder “East Baltimore Redevelopment, 1982–1989,” [2], JHU-­Pres; Tracie Rozhon, “City to Send 9 to German Meeting,” BS, 11 July 1978; and “Design Panel Accepts New Harbor Plan,” BS, 24 August 1978. 61. City of Baltimore, Department of Housing and Community Development [HCD], “Opportunity Areas Within Southern M ­ iddle East,” April  1982, Box 431996450, Folder

330

Notes to Pages 184–186

“Community Redevelopment,” 10, RMHP; and Strausbaugh, “She Gave the ­Middle East Neighborhood a Name,” BS, 15 August 1982. 62. Robert Heyssel to Lucille Gorham, 18 October 1979; Gorham to Heyssel, 27 November 1979; City of Baltimore, “Bill No. 2538, Ordinance No. 1202,” 30 November 1979; and M. J. Brodie to Robert Heyssel, 9 January 1980, all in Series 14, Box 42, Folder “­Middle East Community Organ­ization 1979,” JHU-­Pres. 63. “Minutes,” 19 January  1981, Book 22, 196–197, JHJCT-­MB; Robert Heyssel, “Johns Hopkins Medical Institutions Housing Needs and Community Redevelopment in East Baltimore,” 9 December 1981, Series 14, Box 28, Folder “Hospital—­Community Development 1981– 1982,” JHU-­P res; “Minutes,” 23 November 1981, Book 23, 37, JHJCT-­M B; Joint Trustee Committee on Community Development, “Summary of January  6, 1982 Meeting,” 6 January 1982, Series 14, Box 28, Folder “Hospital—­Community Development 1981–1982,” JHU-­Pres; and City of Baltimore HCD, “Opportunity Areas Within Southern M ­ iddle East,” 6, 10–12, RMHP. 64. Joan Jacobson, “Hopkins’ Properties Strain Neighborhood Ties,” BES, 31 March 1982; and “Minutes,” 5 April 1982, Book 23, 93, JHJCT-­MB. 65. “Minutes,” 3 May 1982, Book 23, 105, JHJCT-­MB. 66. “Community Development Status as of November 30, 1982,” 30 November 1982, Box 431996450, Folder “Community Redevelopment,” RMHP; Edward Gunts, “Elinor Bacon: A Developing Love for Job,” BS, 3 November 1986; Ann Jones, “Memorandum for the Rec­ord; Re: Community Development,” 27 July 1982, Series 15, Box 14, Folder “East Baltimore Redevelopment, 1982–1989,” JHU-­Pres; and Marcelle Sussman, “He Tries to Renovate the Neighborhoods, Not Just the Buildings,” Baltimore Sun Magazine, 18 May 1980. 67. ­People’s Choice to Stephen Mueller [sic], 18 November 1982, Box 431996450, Folder “Community Redevelopment,” RMHP; and Eileen Canzian, “Resident Groups Tiff; Housing Is Issue in Hopkins Area,” BS, 22 December 1982. 68. Tyrone Johnson, Hazlene Reeves, and William Reeves for ­People’s Choice Organ­ ization to Steven Bollinger, 21 December  1982, Series 15, Box 24, Folder “Hospital-­ Community Development, 1982,” JHU-­Pres; and Canzian, “Resident Groups Tiff.” 69. Parren Mitchell to Angelita Poole, 30 December 1982; Robert Heyssel to Mitchell, 17 January 1983; Mitchell to Heyssel, 7 February 1983; and Robert Heyssel to Dear Neighbors, 17 January 1983, all in Box 431996450, Folder “Community Redevelopment,” RMHP. 70. Lucille Gorham to Elinor Bacon, 26 July 1983, Box 431996450, Folder “Community Redevelopment,” RMHP; and “Johns Hopkins Community Development Program Status,” 16 September 1983, Book 24, 5, JHHT-­MB. 71. “Revised UDAG Cost Projections,” 17 November 1982, Box 431996450, Folder “Community Redevelopment,” RMHP; “Minutes,” 10 January 1984, Book 24, 82, JHHT-­MB; JHH, “Jefferson Court UDAG; Per Unit Cost; 50 Houses,” and “JHH, “Current Development Proj­ ects—­Middle East South,” both 24 April 1984, Series 15, Box 14, Folder “East Baltimore Redevelopment, 1982–1989,” JHU-­ Pres; and Robert Heyssel to William Donald Schaefer, 16 May 1984, Box 431969402, Folder “Community Redevelopment,” RMHP. 72. “McElderry Court,” no date [1984], and Marion Pines to Robert Heyssel, 3 July  1984, both in Box 431969402, Folder “Community Redevelopment,” RMHP; JHH, “Current Development Proj­e cts—­M iddle East South,” 3, JHU-­P res; “Minutes,” 5 June 1984, Book 24, 227, JHHT-­MB; and Jesse Glasgow, “HUD to AID 3 Proj­ects with Grants,” BS, 29 June 1984.



Notes to Pages 186–194

331

73. Sally McConnell to JHU Black Student Union and JHU Co­a li­tion for a ­Free South Africa, co/ Gail Evans, 2 February 1987, Box 2, Folder “Co­a li­t ion for a F ­ ree South Africa 1986– 1987,” JHU-­VP. 74. Robert Heyssel to Neil Williams, 16 April 1987, Series 15, Box 14, Folder “East Baltimore Redevelopment, 1982–1989,” JHU-­Pres. 75. “Southern M ­ iddle East Area Revitalization Plan Fact Sheet,” no date [1983], and John Hargrave to Robert Heyssel, 25 March 1983, both in Box 431996450, Folder “Community Redevelopment,” RMHP. 76. “Fact Sheet Re. the Death of Mrs. Mattie Whitaker at 511 N. Chapel St.,” 15 February 1984, and Sarah Fahy to Robert Heyssel, 15 February 1984, both in Box 431969402, Folder “Community Redevelopment,” RMHP. 77. Trustee Policy Committee, “Minutes,” 18 May 1984, Book 24, 226, JHHT-­MB. 78. Eileen Canzian, “Hopkins Real Estate Raises Ire,” BS, 11 May 1987; JHU Co­a li­tion for aF ­ ree South Africa and Black Student Union to Sally McConnell, 15 January 1987, and McConnell to Black Student Union and F ­ ree South Africa Co­a li­tion, 2 February 1987, both in Box 2, Folder “Co­a li­tion for a F ­ ree South Africa 1986–1987,” JHU-­VP; Rafael Alvarez, “Protest Shanty Goes Up at Hopkins,” BS, 23 February 1987; Heyssel, “Letter to the Editor: Hopkins and the Community” BS, 1 March 1987; and Patrick Bond, “Letter to the Editor: Hopkins in East Baltimore,” BS, 20 March 1987. 79. Eileen Canzian, “Hopkins Aid in Fix-­Up of Houses Set,” BS, 18 November 1988; M. K. Guzda, “Baltimore’s ‘­Middle East’ Works to Improve Housing,” BS, 4 December 1988; “Baltimore Housing Strategies Praised,” BS, 23 July 1989; “N.Y. Group Supplies Funds for Baltimore Homebuyers,” BS, 15 October 1989; and Nancy Pick, “Agencies Ask City Funding for Fix-­Up,” BES, 22 January 1990. 80. Edward Gunts, “Nehemiah Proj­ect Getting Underway,” BS, 3 June 1990; Neal Pierce and Curtis Johnson, “New Hope Glimmers for the ­Future,” BS, 5 May 1991; Gunts, “Home Sweet First Home: How the Enterprise Foundation Is Helping the Working Poor Buy Homes and Save Their Neighborhoods in the Pro­cess,” BS Magazine, 21 July 1991; and Antero Pietila, Ghosts of Johns Hopkins: The Life and Legacy That ­Shaped an American City (New York: Rowman & Littlefield, 2018), 210–212. 81. Guzda, “Baltimore’s ‘­Middle East’ Works to Improve Housing.”

Chapter 9 1. CMSNHED, “National Health Expenditures by Type of Ser­v ice and Source of Funds, CY 1960–2019,” https://­w ww​.­cms​.­gov​/­Research​-­Statistics​-­Data​-­and​-­Systems​/­Statistics​ -­Trends​-­a nd​-­Reports​/­NationalHealthExpendData​/­NationalHealthAccountsHistorical; and “Hospital Cost Control: Background,” CQA, 1977, 500. 2. Beatrix Hoffman, Health Care for Some: Rights and Rationing in the United States Since 1950 (Chicago: University of Chicago Press, 2012), 166. 3. William Cable, quoted in Frank Moore interview, 18–19 September  1981, 99–100, JCPOHP. 4. David Blumenthal and James Morone, The Heart of Power: Health and Politics in the Oval Office (Berkeley: University of California Press, 2010), 253, 277; and James Mongan interview, 9 May 2007, 15, EMKOHP. 5. Stuart Eizenstat interview, 29–30 January 1982, 10, JCPOHP; Max Fine interview, 25 May 2007, 23, EMKOHP; Joe Califano, “Memorandum for the President; Subject: National

332

Notes to Pages 195–198

Health Program,” 3 November 1977, Container 50, Folder “11/9/77 [2],” JC-­SSO; Stuart Auerbach, “Cost Unknown: Car­ ter Gives Broad Outline for National Health Plan,” WP, 17 April 1976; and Blumenthal and Morone, Heart of Power, 261–264. 6. Stu Eizenstat, “Memorandum for: The President; Subject: Hospital Cost Containment Program,” 11 February 1977, Container 9, Folder “2/25/77 [2],” JC-­SSO; Moore interview, 99, JCPOHP; Stu Eizenstat, Joe Onek, and Peter Bourne, “Meeting with Senator Kennedy and Or­ ga­nized L ­ abor on NHI,” 6 April 1978, Container 70, Folder “4/6/78 [1],” 2, JC-­SSO; and Richard Lyons, “Car­ter to Delay National Health Plan,” WP, 14 January 1977. 7. Mongan interview, 13–14, EMKOHP. 8. Eizenstat, “Memorandum for: The President; Subject: Hospital Cost Containment Program,” JC-­SSO; “Hospital Cost Containment System: HEW Proposal,” 10 February  1977, Container 9, Folder “2/25/77 [2],” JC-­SSO; and Congress, Senate, Senator Herman Talmadge of Georgia Speaking for the Medicare and Medicaid Administrative and Reimbursement Reform Act, S. 3205, 94th  Cong., 2nd  sess., Congressional Rec­ord (25 March  1976), vol. 122, no. 43, 8030–8032. 9. Walter Mondale, “Prepared Remarks, Jefferson-­Jackson Day Dinner,” 11 March 1977; Office of the Vice President’s Press Secretary, “For Release, Fri., March 11 at 9:00 p.m. EST,” March 1977; and Bernie Aronson, “To: Joe Onek; Re: VP’s Remarks on Hospital Costs,” 18 March 1977, all in James Mongan’s and Joseph Onek’s Subject Files, 1977 -­1981, ARC 578473, Container 32, Folder “Hospital Costs,” JC-­DPS. 10. Eizenstat, “Memorandum for: The President; Subject: Hospital Cost Containment Program,” 2–3, JC-­SSO; and Joseph Califano Jr., “Memorandum for the President; Subject: Hospital Cost Containment Legislation,” 20 April 1977, Container 17, Folder “4/22/77 [2],” 3–4, JC-­SSO. 11. HEW, “Hospital Cost Containment Act of 1977  H.R 6575; S. 1391; Section-­by-­Section Analy­sis and Justification,” 9 May 1977, James Mongan’s and Joseph Onek’s Subject Files, 1977 -­1981, ARC 578473, Container 12, Folder “Cost Containment Bills,” JC-­DPS; Stu Eizenstat, Joe Onek, and Bob Havely, “Memorandum for: The President; Subject: Hospital Message,” no date (April 1977), Container 17, Folder “4/22/77 [2],” JC-­SSO; John Iglehart, “The Hill Turns to Hospital Costs,” National Journal, 30 April 1977, 685; and Iglehart, “Stemming Hospital Growth—­ the Flip Side of Car­ter’s Cost Control Plan,” National Journal, 4 June 1977, 848–851. 12. Jimmy Car­ter, “To the Congress of the United States,” April 25, 1977, Container 17, Folder “4/22/77 [2],” JC-­SSO. 13. Office of the White House Press Secretary, “The White House: Press Conference of Joseph A. Califano, Secretary of the Department of Health, Education and Welfare; the Briefing Room,” 25 April 1977, and “The White House: Statement by the President; the Briefing Room,” 25 April 1977, both in Container 102, Folder “Health Cost Containment, 4/25/77 to 5/3/77,” JC-­CONGLIAS. 14. Jimmy Car­ter, “Untitled Draft of Letter to Members of the House of Representatives,” 22 April 1977, Container 17, Folder “4/22/77 [2],” JC-­SSO; John Iglehart, “Congress Is Sharpening Its Knife for Car­ter’s Hospital Cost Plan,” National Journal, 13 August 1977, 1270; and “Hospital Cost Control,” CQA, 1977, 503. 15. Califano, “Memorandum for the President,” 4, JC-­SSO. 16. Mongan interview, 4–7, EMKOHP. 17. “Hospital Cost Control,” CQA, 1977, 502–505; and Iglehart, “Like It or Not, Congress Must Grapple with Hospital Cost Controls,” National Journal, 21 May 1977, 792–794.



Notes to Pages 199–202

333

18. “Statement of Joseph Califano” and “Statement of Robert Heyssel,” Congress, House, Subcommittee on Health of the Committee on Ways and Means, and Subcommittee on Health and the Environment of the Committee on Interstate and Foreign Commerce, President’s Hospital Cost Containment Proposal, Part 1, 95th Cong., 1st sess., 11–12 May 1977, 95–98, 102, 132, 579–586. 19. Iglehart, “Stemming Hospital Growth,” 848–852. 20. “Statement of David Fearheller,” Congress, House, Subcommittee on Health of the Committee on Ways and Means, and Subcommittee on Health and the Environment of the Committee on Interstate and Foreign Commerce, President’s Hospital Cost Containment Proposal, Part 2, 95th Cong., 1st sess., 13 May 1977, 827–828. 21. “Statement of Alvin Powers,” President’s Hospital Cost Containment Proposal, Part 1, 281. 22. Iglehart, “Like It or Not,” 790, 792, 794; and Iglehart, “Congress Is Sharpening Its Knife,” 1272. 23. Joe Califano, “For the President,” 27 June 1977, Container 28, Folder “6/27/77 [1],” JC-­SSO. 24. Joseph Califano, Governing Amer­i­ca: An Insider’s Report from the White House and the Cabinet (New York: Simon and Schuster, 1981), 98. 25. Stuart Eizenstat, President Car­ter: The White House Years (New York: Thomas Dunne Books/St.  Martin’s Press, 2018), 821; and Blumenthal and Morone, Heart of Power, 265. 26. Iglehart, “Congress Is Sharpening Its Knife,” 1270–1271; and “Hospital Cost Control,” CQA, 1977, 506–507. 27. John Iglehart, “Hospital Cost Containment—­Lost in the Legislative Shuffle?” National Journal, 15 October 1977, 1603; Stu Eizenstat and Frank Moore, “Memorandum for: The President; Subject: Hospital Cost Containment,” 10 October 1977, and accompanying undated letters to Talmadge, Rogers, Rostenkowski, and Kennedy, all in Container 46, Folder “10/11/77 [2],” JC-­SSO. 28. “Hospital Cost Control,” CQA, 1977, 505–506; Iglehart, “Like It or Not,” 793–794; and Iglehart, “Congress Is Sharpening Its Knife,” 1273. 29. “Hospital Cost Control,” CQA, 1977, 505–506; Iglehart, “Like It or Not,” 794; and Iglehart, “Stemming Hospital Growth,” 852. 30. Joe Califano, “Memorandum for the President,” 26 July 1977, Container 355, Folder “HEW Hospital Cost Containment,” JC-­CABSEC; Stu Eizenstat and Joe Onek, “Meeting with Congressman Rostenkowski, Wednesday, February  15, 1978,” 14 February  1978, Container 63, Folder “2/15/78,” JC-­SSO; Iglehart, “Congress Is Sharpening Its Knife,” 1272–1273; and Iglehart, “Hospital Cost Containment?” 1602. 31. Steven Roberts, “Hospital Costs Bill Dead for This Year,” NYT, 6 November 1977. 32. “Actions Approved by the National Steering Committee on Voluntary Cost Containment; December 20, 1977,” 21 December 1977; Voluntary Cost Containment Program, “News Release,” 16 January 1978 and 30 January 1978; John Alexander McMahon, James Sammons, and Michael Bromberg to the President, 2 February 1978; McMahon, Sammons, and Bromberg, “Memorandum to: Chairman of the Governing Board, Chief Executive Officer, and Chief of the Medical Staff,” 2 February 1978; and Michael Bromberg to Peter Bourne, 2 February 1978, all in Container 33, Folder “Hospital Cost Containment, 10/1/77-2/2/78 [O/A6047]” JC-­BOURNE.

334

Notes to Pages 203–204

33. Eizenstat and Onek, “Meeting with Congressman Rostenkowski,” JC-­SSO; Joe Califano, “For the President,” 14 February 1978, Container 63, Folder “2/15/78,” JC-­SSO; Jimmy Car­ter, “The State of the Union Address Delivered Before a Joint Session of the Congress,” 19 January 1978, Public Papers of the Presidents of the United States, Jimmy Car­ter, 1978, Vol. 1 (Washington, D.C.: GPO, 1979), 93; and “Hospital Cost Control Legislation Dies,” CQA, 1978, 620. 34. “Hospital Cost Containment Briefing for Amalgamated Clothing & Textile Workers; Talking Points for Anne Wexler,” 4 April 1978, and Richie Reiman and Phil Spector, “Memorandum for Anne Wexler; Subject: Talking Points—­Meeting with Corporate Reps & Benefits Directors on Hospital Cost Containment,” 5 April 1978, both in Container 24, Folder “Hospital Cost Containment [2],” JC-­W EXLER; Joe Califano, “Memorandum for the President,” 2 June 1978, Container 80, Folder “6/8/78 [1],” JC-­SSO; and Council of Economic Advisers, “Remarks of Charles  L. Schultze, Chairman,” 18 August  1978, Stuart Eizenstat’s Subject File, 1976–1981, ARC 157255, Folder “Hospital Cost Containment,” JC-­DPS. 35. OASPE, “Hospital Cost Containment Legislation,” 8 May  1978, and Ken Levine, “Note to Ralph Gerson,” 26 May 1978, both in Container 5, Folder “Hospital Cost Containment Bill Government Legislation,” JC-­STRAUSS; Joe Onek, “Memorandum for: Anne Wexler; Subject: Hospital Cost Containment,” 29 May 1978, Wexler Subject Files, Folder “Hospital Cost Containment [2],” JC-­W EXLER; Frank Moore, “Memorandum for: The President,” 7 June 1978; Jimmy Car­ter to Paul Rogers, 7 June 1978; and “Presidential Statement on Hospital Cost Containment,” 7 June 1978, all in Container 79, Folder “6/7/78,” JC-­SSO; Frank Moore, “Memorandum for: The President; Subject: Weekly Legislative Report,” 24 June 1978, and Joe Califano, “Memorandum for the President; Subject: Weekly Report on HEW Activities,” 23 June 1978, both in Container 82, Folder “6/26/78,” JC-­SSO; Bill Cable and Les Francis, “Memorandum to Frank Moore,” 18 July 1978, Container 85, Folder “7/19/78,” JC-­SSO; and “Hospital Cost Control Legislation Dies,” CQA, 1978, 622. 36. Jimmy Car­ter interview, 29 November 1982, JCPOHP, 28–30. 37. Stu Eizenstat, “Memorandum for: The President; Subject: Domestic Policy Staff Weekly Status Report,” 23 June 1978, Container 82, Folder “6/26/78,” JC-­SSO; Frank Moore, “Meeting with Senator Herman Talmadge; Wednesday, June  28, 1978,” 27 June  1978, Container 83, Folder “6/28/78 [1],” JC-­S SO; and “Summary of Nelson Amendment to H.R. 5285,” 8 September  1978, Wexler Subject Files, Folder “Hospital Cost Containment [2],” JC-­W EXLER. 38. “Summary of Nelson Amendment to H.R. 5285,” JC-­W EXLER. The administration nominally supported an amendment from Kennedy that would have moved immediately to mandatory controls, which served as a “stalking h ­ orse for the Nelson amendment.” Anne Wexler, Stu Eizenstat, and Frank Moore, “Meeting on Hospital Cost Containment Legislation; Tuesday, September  26, 1978; 3:00 p.m. (15 Minutes; East Room),” 25 September  1978, and “White House Briefing on Hospital Cost Containment: Talking Points,” 25 September  1978, both in Container 92, Folder “9/26/78 [1],” JC-­SSO. 39. Dick Warden, “Note to: Stu Eizenstat, Ann Wexler & Landon Butler,” 12 September  1978; “Supporters of Hospital Cost Containment Legislation,” 12 September  1978; “Talking Points and Background Information: Compromise Hospital Cost Containment Legislation,” 19 September 1978; and Dennis Irish to Honorable Edward W. Brooke, 29 September  1978, all in Wexler Subject Files, Folder “Hospital Cost Containment [2],” JC-­ WEXLER; Cindy Williams, “To: Ralph Gerson; Re: Strauss Appearance at National Steering Committee on Voluntary Cost Containment; Monday, October 16,” 12 October 1978, and Tom Nesbitt, “Inaugural—­Our Federation: Stronger Than Ever,” 21 June 1978, both in Strauss



Notes to Pages 204–208

335

Government Files, Folder “Hospital Cost Containment Bill Government Legislation,” JC-­ CINFL; and Anne Wexler interview, 12–13 February 1981, 14, 23, JCPOHP. 40. Frank Moore, “Memorandum for the President; Subject: Calls on Hospital Cost Containment,” 13 October 1978, Container 95, Folder “10/13/78,” JC-­SSO; and “Hospital Cost Control Legislation Dies,” CQA, 1978, 623–624. 41. “Hospital Cost Control Legislation Dies,” CQA, 1978, 624–625; Jimmy Car­ter, “To Rafshoon,” 3 September 1978, Container 90, Folder “9/3/78,” JC-­SSO; Frank Moore, “Memorandum for the President,” 20 September  1978, and Stu Eizenstat, “Memorandum for: The President; Subject: Hospital Cost Containment,” 22 September  1978, both in Container 91, Folder “9/22/78 [1],” JC-­SSO; and Wexler, Eizenstat, and Moore, “Meeting on Hospital Cost Containment Legislation,” JC-­SSO. 42. Wexler interview, 48, JCPOHP. See also Moore interview, 100–101, JCPOHP. 43. Wexler interview, 48, JCPOHP; Jimmy Car­ter, “Columbia, South Carolina; Remarks at a Fund­rais­ing Reception and Dinner for Charles Ravenel,” 22 September 1978, Public Papers of the Presidents of the United States, Jimmy Car­ter, 1978, Vol. 2 (Washington, D.C.: GPO, 1979), 1588. Cable quoted in Moore interview, 103, JCPOHP. 44. Frank Moore, “Mr.  President; Re: Attached Memorandum on Hospital Cost Containment,” 13 October 1978 (quotation), and Frank Moore and Terry Straub, “Memorandum for the President; Subject: Telephone Calls on Hospital Cost Containment,” 13 October 1978, both in Container 95, Folder “10/16/78,” JC-­SSO; and Patti DeSouza to Phil [Wise], 13 October 1978, and Frank Moore, “Memorandum for the President; 1:00 p.m.,” 13 October 1978, Container 95, Folder “10/13/78,” JC-­SSO. 45. Frank Moore, “Memorandum for the President; Subject: Telephone Calls on Hospital Cost Containment,” October 14, 1978, Container 95, Folder “10/16/78,” JC-­SSO; and “Hospital Cost Control Legislation Dies,” CQA, 1978, 624–625. 46. Anne Wexler, “Administratively Confidential Memorandum for Hamilton Jordan,” 19 December 1978, Wexler Subject Files, Folder “Hospital Cost Containment [2],” JC-Wexler. 47. Califano, Governing Amer­i­ca, 99–102; and Califano, “Memorandum for the President; Subject: National Health Program,” 3, JC-­SSO. 48. Stu Eizenstat, Joe Onek, and Bob Havely, “Memorandum for: The President; Subject: Meeting with Senator Kennedy on National Health Insurance,” 20 December  1977, Container 56, Folder “12/20/77 [2],” JC-­SSO; and Eizenstat, President Car­ter, 822. For HEW’s briefing memorandum on the national health insurance options, see Califano, “Memorandum for The President; Subject: National Health Program,” JC-­SSO. 49. Califano, Governing Amer­i­ca, 101–102; and Califano, “Memorandum for the President; Subject: National Health Program,” 4–5, JC-­SSO. 50. Peter Bourne, “Memorandum for the President; Subject: National Health Insurance,” December 12, 1977, Container 55, Folder “12/14/77 [1],” JC-­SSO. 51. Tom Wicker, “The Health Insurance Minefield,” NYT, 20 December 1977. 52. Califano, Governing Amer­i­ca, 106–107; Eizenstat et al., “Memorandum for: The President; Subject: Meeting with Senator Kennedy on National Health Insurance,” 2–3, JC-­S SO; Joe Califano, “Personal for the President,” 15 May 1978, Container 75, Folder “5/15/78 [1],” JC-­SSO; and Joseph Califano Jr., “Memorandum for the President; Subject: Weekly Report on HEW Activities,” 7 July 1978, Container 84, Folder “7/10/78 [1],” JC-­SSO. 53. Eizenstat and Onek, “Memorandum for: The President; Subject: Meeting with Senators Long, Ribicoff and Talmadge, Friday, May 19, 1978,” 18 May 1978, Container 76, Folder: “5/19/78,” JC-­SSO.

336

Notes to Pages 208–212

54. Mongan interview, 20, EMKOHP. 55. Eizenstat, President Car­ter, 822–823; Stu Eizenstat, “Memorandum for: The President; Subject: Jan. 27 Meeting with Doug Fraser, UAW (10 Mins.),” 24 January 1978, Container 60, Folder “1/27/78,” JC-­SSO; Stu Eizenstat, “Memorandum for: The President; Subject: Meeting with Doug Fraser; Thursday, February 9,” 8 February 1978, Container 62, Folder “2/9/78,” JC-­SSO; and Eizenstat et al., “Meeting with Senator Kennedy and Or­ga­nized ­Labor on NHI,” 2–4, JC-­SSO. 56. Eizenstat et al., “Meeting with Senator Kennedy and Or­ga­nized ­Labor on NHI,” 3–6, JC-­SSO; “Untitled National Health Insurance Proposal,” 13 April  1978, attached to Edward Kennedy to the President, 14 April 1978, Container 71, Folder “4/17/78,” JC-­SSO; and Califano, Governing Amer­i­ca, 108. 57. Joe Califano, “Personal Memorandum for the President; Subject: The Threshold Decision on National Health Insurance,” 30 May 1978, Container 78, Folder “6/1/78,” quotations on 4, 6, JC-­SSO; Califano, Governing Amer­i­ca, 108–109; and Eizenstat, President Car­ter, 825. 58. Charles Schultze and Jim McIntyre, “Memorandum for the President; Subject: CEA and OMB Recommendations on NHI,” 31 May 1978; James McIntyre, “Memorandum for the President; Subject: Health Bud­get,” 1 June 1978; and Schultze and McIntyre, “Developments That Affect the Impact of NHI,” 31 May 1978, all in Container 78, Folder “6/1/78,” JC-­SSO; and Mongan interview, 16–17, EMKOHP. 59. Schultze and McIntyre, “Memorandum for the President; Subject: CEA and OMB Recommendations on NHI,” JC-­SSO. 60. McIntyre, “Memorandum for the President; Subject: Health Bud­get,” JC-­SSO; Mongan interview, 23–24, EMKOHP; Califano, Governing Amer­i­ca, 102–103, 109–112; and Eizenstat, President Car­ter, 823–825. 61. Stu Eizenstat and Joe Onek, “Meeting with Senator Edward Kennedy; Monday, June  26, 1978, 5:00 p.m.,” 25 June  1978, Container 82, Folder “6/26/78,” JC-­SSO; Eizenstat, President Car­ter, 825–827; Califano, Governing Amer­i­ca, 112–113; and Charles Schultze and Jim McIntyre, “Memorandum for the President; Subject: Draft NHI Directive,” 30 June 1978, Container 84, Folder “7/10/78 [1],” 4–5, JC-­SSO. 62. Califano Jr., “Memorandum for the President; Subject: Weekly Report on HEW Activities,” JC-­SSO; Joe Califano and Stu Eizenstat, “Memorandum for the President; Subject: National Health Plan Directive and Principals,” 22 July 1978, Container 86, Folder “7/24/78 [2],” JC-­SSO; and Mongan interview, 15–16, EMKOHP. 63. Stu Eizenstat to Mr. President, 27 July 1978, and Stu Eizenstat and Joe Onek, “Memorandum for: The President; Subject: Meeting with Kennedy on NHI,” 27 July  1978, both in Container 86, Folder “7/27/78,” JC-­SSO; Mongan interview, 17, EMKOHP; Eizenstat, President Car­ter, 827–828; and Califano, Governing Amer­i­ca, 113. 64. Jimmy Car­ter, Keeping Faith: Memoirs of a President (New York: Bantam, 1982), 87. 65. Car­ter, Keeping Faith, 87; Califano, Governing Amer­i­ca, 113–119; Eizenstat, President Car­ter, 828–829; and Jimmy Car­ter, “Presidential Directive/DPS-3; Subject: National Health Plan,” 29 July 1978, Container 86, Folder “7/28/78,” JC-­SSO. 66. Stu Eizenstat, “Memorandum for: The President; Subject: Domestic Policy Staff Weekly Status Report,” 31 July 1978, Container 86, Folder “8/1/78 [2],” 1, JC-­SSO. 67. Eizenstat, President Car­ter, 830–831. 68. Stu Eizenstat, “Memorandum for the President; Subject: NHP,” 17 May 1979, Container 117, Folder “5/17/79,” JC-­SSO; Jody Powell, “Memorandum for the President; Subject: Questions on How Our Approach to National Health Insurance Differs from the Kennedy Approach,” 18 May 1979, Container 118, Folder “5/23/79 [2],” JC-­SSO; Stu Eizenstat and Dick



Notes to Pages 213–216

337

Moe, “Memorandum for the President; Subject: National Health Plan Strategy,” 23 May 1979, Container 119, Folder “5/25/79 [2],” JC-­SSO; Jimmy Car­ter, “National Health Plan: Remarks Announcing Proposed Legislation,” 12 June 1979, Public Papers of the Presidents of the United States, Jimmy Car­ter, 1979, Vol. 1 (Washington, D.C.: GPO, 1979), 1024–1031; and “National Health Insurance,” CQ Almanac, 96th Cong., 1st sess., 1979, Volume 35 (Washington, D.C.: Congressional Quarterly Inc., 1980), 536–540. 69. Car­ter, “National Health Plan: Remarks Announcing Proposed Legislation.” 70. Richard Moe, “Memorandum for Hamilton Jordan, Frank Moore; Subject: Health Cost Containment Task Force—­Proposed Strategy,” 1 March  1979, Container 136, Folder “Task Force Reports—­HCC & MTN (1),” JC-1005; Anne Wexler and Stu Eizenstat, “Talking Points for the President for Meeting with Community Leaders,” 4 April 1979, Container 112, Folder “4/4/79 [2],” JC-­SSO; and “The Hospital Cost Containment of 1979,” 5 March 1979, Container 109, Folder “3/6/79 [1],” JC-­SSO. 71. Anne Wexler and Stu Eizenstat, “Briefing on Hospital Cost Containment for Community Leaders,” 4 September 1979, Container 128, Folder “9/4/79 [2],” JC-­SSO; and “House Kills Car­ter Hospital Cost Control Plan,” CQ Almanac, 96th Cong., 1st sess., 1979, Volume 35 (Washington, D.C.: Congressional Quarterly Inc., 1980), 512–515. 72. Anne Wexler, “Administratively Confidential; Memorandum for the President; Subject: Activities Report—­Week Ending October 19, 1979,” 20 October 1979, Container 136, Folder “10/22/79 [1],” JC-­SSO; Frank Moore and Stu Eizenstat, “Meeting with Selected Members on Hospital Cost Containment Bill,” 8 November 1979, Container 138, Folder “11/8/79 [2],” JC-­SSO; and Frank Moore and Bob Maher, “Congressional Telephone Request on HCC,” 13 November 1979, Container 139, Folder “11/15/79,” JC-­SSO. 73. “Hospital Cost Inflation Is Reaching Epidemic Proportions; We Think Congress Can Help,” WP, 8 November 1979. 74. “ ‘Dear Congressman’; Draft Letter from President Car­ter to Members of the House of Representatives,” 10 November 1979, and Jimmy Car­ter, handwritten note on Stu Eizenstat to Mr. President, 10 November 1979, both in Container 139, Folder “11/12/79,” JC-­SSO. 75. Frank Moore, Stu Eizenstat, and Dick Moe, “Memorandum for the President; Subject: Hospital Cost Containment,” 9 November 1979, and Jimmy Car­ter to Speaker O’Neill, 9 November 1979, both in Container 139, Folder “11/9/79 [1],” JC-­SSO. 76. Frank Moore to Mr. President, 15 November 1979, and Frank Moore, “Memorandum for the President; Subject: Hospital Cost Containment Calls,” 15 November 1979, both in Container 139, Folder “11/15/79,” JC-­SSO. 77. Car­ter interview, 50, JCPOHP; and Car­ter, Keeping Faith, 87. 78. Rashi Fein interview, 21 March 2007, 14–15, EMKOHP. 79. Randall Brentson Cebul, “Developmental State: The Politics of Business, Poverty, and Economic Empowerment from the New Deal to the New Demo­crats” (Ph.D. diss., University of ­Virginia, 2014), 246–248, 411–416, 443–465. 80. Fine interview, 25 May 2007, 23, 25–26, EMKOHP. 81. Paul Starr, Remedy and Reaction: The Peculiar American Strug­gle over Health Care Reform, rev. ed. (New Haven, CT: Yale University Press, 2013), 64; and Jonathan Oberlander, The Po­liti­cal Life of Medicare (Chicago: University of Chicago Press, 2003), 121–122. 82. Rick Mayes and Robert Berenson, Medicare Prospective Payment and the Shaping of U.S. Health Care (Baltimore: Johns Hopkins University Press, 2006), 24–27; and James Morone and Andrew Dunham, “Slouching T ­ owards National Health Insurance: The New Health Care,” Yale Journal on Regulation 2:2 (1985): 263–291.

338

Notes to Pages 216–224

83. Mayes and Berenson, Medicare Prospective Payment, 21–27, 34–37; and Rosemary Stevens, In Sickness and in Wealth: American Hospitals in the Twentieth ­Century, rev. ed. (Baltimore: Johns Hopkins University Press, 1999), 323, 412. 84. Karen Davis, interview by Edmund Berkowitz, 7 September  1985, 281, 285, CMSOHP. 85. Oberlander, Po­liti­cal Life of Medicare, 124; Mayes and Berenson, Medicare Prospective Payment, 37–40; and Jill Quadagno, One Nation Uninsured: Why the U.S. Has No National Health Insurance (New York: Oxford University Press, 2005), 133–134. 86. Sylvester Schieber, The Predictable Surprise: The Unraveling of the U.S. Retirement System (New York: Oxford University Press, 2012), 81; Quadagno, One Nation Uninsured, 133–134; and Mayes and Berenson, Medicare Prospective Payment, 37. 87. Schieber, Predictable Surprise, 82–85; and Quadagno, One Nation Uninsured, 134–135. 88. Morone and Blumenthal, Heart of Power, 302–303; Quadagno, One Nation Uninsured, 135; and Oberlander, Po­liti­cal Life of Medicare, 123. 89. Oberlander, Po­liti­cal Life of Medicare, 123–124; and Mayes and Berenson, Medicare Prospective Payment, 41. 90. Tom Scully, interview by Rick Mayes, 25 October 2002, quoted in Mayes and Berenson, Medicare Prospective Payment, 60–61, 69. 91. Mayes and Berenson, Medicare Prospective Payment, 60–63. On Medicaid DSH, see David Smith and Judith Moore, Medicaid Politics and Policy 1965–2007 (New Brunswick, NJ: Transaction Publishers, 2008), 129–131,168–169, 207–211; and Michael Gusmano and Frank Thompson, “Safety-­Net Hospitals at the Crossroads: Whither Medicaid DSH?” in The Health Care Safety Net in a Post-­Reform World, ed. Mark Hall and Sara Rosenbaum, 153–182 (New Brunswick, NJ: Rutgers University Press, 2012). 92. Stevens, In Sickness and in Wealth, 323; Quadagno, One Nation Uninsured, 135–136; and Blumenthal and Morone, Heart of Power, 303. 93. Mayes and Berenson, Medicare Prospective Payment, 49–56; Quadagno, One Nation Uninsured, 136–137; and Stevens, In Sickness and in Wealth, 325–326. 94. Mayes and Berenson, Medicare Prospective Payment, 52, 57–59; and Stevens, In Sickness and in Wealth, 326. 95. Quadagno, One Nation Uninsured, 137; and Starr, Remedy and Reaction, 65–67. 96. Oberlander, Po­liti­cal Life of Medicare, 124–129.

Chapter 10 1. Bradford H. Gray, “The Rise and Decline of the HMO: A Chapter in U.S. Health Policy History,” in History and Health Policy in the United States,” ed. Rosemary Stevens, Charles Rosenberg, and Lawton Burns (New Brunswick, NJ: Rutgers University Press, 2006), 310. 2. Executive Office of the President, Council on Wage and Price Stability, The Prob­lem of Rising Health Care Costs (Washington, D.C.: GPO, 1976), 3–12. 3. Paul Starr, The Social Transformation of American Medicine (New York: Basic Books, 1982), 395–408, 415, 428–449; Lawrence Brown, Politics and Health Care Organ­izations: HMOs as Federal Policy (Washington, D.C.: Brookings Institution Press, 1983); Beatrix Hoffman, Health Care for Some: Rights and Rationing in the United States Since 1930 (Chicago: University of Chicago Press, 2012), 190–210; and Christy Ford Chapin, Ensuring Amer­i­ca’s Health: The Public Creation of the Corporate Health Care System (Cambridge, MA: Cambridge University Press, 2015), 240–242.



Notes to Pages 224–231

339

4. Rosemary Stevens, In Sickness and in Wealth: American Hospitals in the Twentieth ­Century, rev. ed. (Baltimore: Johns Hopkins University Press, 1999), 297–304, 337–338; Starr, Social Transformation, 394–408, 415, 428–436; and Donald Robinson, “Investor-­Owned Hospitals: Rx for Success,” Readers’ Digest, April 1981, 82–86. 5. “Minutes,” 2 April 1985, Book 25, 80, JHHT-­MB. 6. “Hopkins Hospital May Bid to Manage City Hospitals,” BS, 10 September 1981; “Minutes,” 5 April 1982 and 3 May 1982, Book 23, JHJCT-­MB; and Mary Knudson, “Large National Chain Is Hired to Manage ­Children’s Hospital,” BS, 29 January 1984. 7. HealthAmerica was the largest investor-­owned HMO in the United States. Michael K. Burns, “For-­Profit HMO Plans Move H ­ ere,” BS, 17 September 1984. 8. “Minutes,” 7 May 1979, Book 22, 4–6, JHJCT-­MB. 9. JHH Bud­get and Operations Committee, “Minutes,” 2 November 1981, Box 56/506717, Folder “3 November  1981,” 2, JHHT-­ SD; and “Minutes,” 3 November  1981, Book 23, JHHT-­MB. 10. Bud­get and Operations Committee, “Minutes,” 2 November 1981, 2, JHHT-­SD. 11. “Minutes,” 3 November 1981, 28, JHHT-­MB. 12. Office of the Director, Johns Hopkins Hospital, “The Johns Hopkins Hospital Strategic Plan for the Eighties,” May 1982, Box 57/506718, Folder “4 May 1982,” I, JHHT-­SD; JHHT-­M B, “Minutes, Executive Session (draft),” 8 June  1982, Box 57/506718, Folder “8 June  1982,” JHHT-­SD; and “Minutes,” 8 June 1982, Book 23, 132, JHHT-­MB. 13. JHH, “Strategic Plan for the Eighties,” 25, 27–29, 37. 14. JHH, “Strategic Plan for the Eighties,” 8–9, 11, 22. 15. JHH, “Strategic Plan for the Eighties,” 21–23. 16. JHH, “Strategic Plan for the Eighties,” 37–39. 17. JHHT-­MB, “Minutes,” 8 June 1982, 133–134. 18. JHH, “Strategic Plan for the Eighties,” 39–41. 19. “Minutes,” 3 May 1982, Book 23, JHJCT-­MB. 20. JHHT-­M B, “Minutes, Executive Session,” 4 May  1982, Box 57/506718, Folder “4 May 1982,” 2, JHHT-­SD. 21. “Minutes,” 8 June 1982, 133–134, JHHT-­MB; and JHHT-­MB, “Minutes, Executive Session (draft),” 8 June 1982, 4, 7–8, JHHT-­SD. 22. “Minutes,” 5 April 1982, Book 23, 93, JHJCT-­MB; “Minutes,” 3 May 1982, 104, JHJCT­MB; and “Minutes,” 8 June 1982, 134–135, JHHT-­MB. 23. EBCC, “Minutes of Board of Directors,” 27 September 1972, Box 431977457, Folder “EBCC 1972–73,” RMHP; EBCC, “Board of Directors Meeting Minutes,” 25 July  1979, Box 950, Folder “East Baltimore Community Corporation (2),” WDSMP; and EBMP, “The New East Baltimore Health Fa­cil­it­ y (advertisement),” BAA, 22 September 1979. 24. “East Baltimore Medical Plan: Business Plan,” April 1983, Box 431996450, Folder “East Baltimore Medical Plan,” 7–8, RMHP; and BMMC Board of Directors, “Minutes,” 6 April 1983, Box 431996566, Folder “Broadway Medical Management Inc.,” RMHP. 25. EBCC, “Board of Directors Meeting Minutes,” 12 March 1980, Box 950, Folder “East Baltimore Community Corporation (2),” 4, WDSMP; Clarence Burns to William Donald Schaefer, 1 April 1981, Box 384, Folder “East Baltimore Community Corporation,” WDSMP; Michael Rashid, “Memo to: Robert Douglass; Subject: Outstanding Debts,” 2 June  1981; Robert Heyssel to Senator Robert Douglass, 27 February 1980; and Heyssel to Douglass, 24 April 1981, all in Box 431996440, Folder “East Balto. Community Corp.,” RMHP.

340

Notes to Pages 231–233

26. “Du Burns’s Long Road,” BS, 26 October 1982; Jacques Kelly, “Robert Douglas, 76, Served on City Council, in State Senate,” BS, 29 July 2005; and “Clarence H. Du Burns, 1918– 2003,” BS, 21 February 2007. 27. Senator Paul Sarbanes to H. McDonald Rimple, 20 March 1981, and Sarbanes to Clarence Burns, 23 March  1981, both in Box 950, Folder “East Baltimore Medical Program (1),” WDSMP. 28. Antero Pietila, “The Afro-­Baltimoreans-­III: East Side Blacks Flex Their Muscles,” BS, 20 March 1979. 29. EBMP, “Annual Report to the Board of Directors,” September  1981, RMHP, Box 431996440, F: East Balto. Community Corp., 1; and “Eastside Medical Center Medics Walk-­out, but Ser­v ices Now Back to Normal,” BAA, 7 October 1980. 30. Clyde Woods, “Work Stoppage [in] East Baltimore,” Baltimore Watch Dog: Defender of the Black Community, August 13, 1981, Box 384, Folder “East Baltimore Community Corporation,” WDSMP; EBMP, “Annual Report to the Board of Directors,” September 1981, 7–8; and Lorraine Branham, “2 Politicians Targeted in Health Center Strike,” BS, 26 August 1981. 31. Antero Pietila, “7 Local Firms’ Data Subpoenaed in SBA Probe,” BS, 30 May  1980; Woods, “Work Stoppage [in] East Baltimore”; “ ‘Du’ and the Strikers,” BAA, 19 September  1981; EBMP, “Annual Report to the Board of Directors,” September  1981, 7–8; “Burns, Douglas Give Their Side of Eastside Medical Strike,” BAA, 21 November 1981; “Excess Baggage Cause Douglass Defeat,” BAA, 18 December 1982; and Roberta Gill, “Memorandum to: Clarence Burns and Robert Douglass; Subject: The Attached Article,” 17 August 1981, Box 950, Folder “East Baltimore Community Corporation (4),” WDSMP. 32. “Medical Ser­v ice Agreement Between the East Baltimore Community Corporation and the Patuxent/Chesapeake, P.A.,” December  24, 1980, Box 950, Folder “East Baltimore Community Corporation (4),” WDSMP; and “East Baltimore Medical Plan Gets New Management Team,” BAA, 31 January 1981. 33. Quentin Lawson to William Donald Schaefer, “Memorandum Re: East Baltimore Medical Corporation,” 24 June 1981, BRG9-42, Box 384, Folder “East Baltimore Community Corporation,” WDSMP; and PHS Division of Health Ser­v ice Delivery, “Primary Care Effectiveness Review of the East Baltimore Community Health Center,” 25–26 March 1980, Box 950, Folder “East Baltimore Community Corporation (3),” WDSMP. 34. C. Carroll Miller to Torrey Brown, 26 June 1981, Box 431996440, Folder “East Balto. Community Corp.,” RMHP. 35. PHS Division of Health Ser­v ice Delivery, “Primary Care Effectiveness Review”; H. McDonald Rimple to Clarence Burns, 4 September  1980, Box 950, Folder “East Baltimore Community Corporation (4)”; Dittman to Rashid, 4 February 1981, Box 950, Folder “East Baltimore Medical Program (1)”; and “­Legal Notice (265),” BS, 27 February 1981, clipping in Box 950, Folder “East Baltimore Medical Program (1),” all in WDSMP. 36. Robert Heyssel to H. McDonald Rimple, 3 March 1981, Box 950, Folder “East Baltimore Medical Program (1),” WDSMP; Robert Douglass to Heyssel, 2 June 1981, and Heyssel to Douglass, 5 June 1981, both in Box 431996440, Folder “East Balto. Community Corp.,” RMHP. 37. Charles Benton and Frank Baker to Board of Estimates, City of Baltimore, 19 June 1981, and Charles Pugh to Clarence Burns, 23 September 1981, both in Box 384, Folder “East Baltimore Community Corporation,” WDSMP. 38. East Baltimore Community Corporation, “Minutes, Special Board of Directors Meeting,” 16 April 1982, and “East Baltimore Medical Plan: Business Plan,” April 1983, both in Box



Notes to Pages 233–236

341

431996450, Folder “East Baltimore Medical Plan,” RMHP; and “Minutes,” 7 September 1982, Book 23, 138, JHHT-­MB. 39. Robert Heyssel to Frank Baker and Charles Benton, 6 July 1982, Box 737, Folder “East Baltimore Community Corporation,” WDSMP. 40. Heyssel to Baker and Benton, 6 July 1982; Charles Buck to H. McDonald Rimple, 8 July 1982; and William Donald Schaefer to Secretary Richard Schweiker, 8 July 1982, all in Box 737, Folder “East Baltimore Community Corporation,” WDSMP; “Background Information; 30 August 1982 Meeting with Secretary Schweiker,” n.d., 8 July 1982, and Susan Guarnieri to William Donald Schaefer, 26 August 1982, both in Box 737, Folder “East Baltimore Community Corporation,” WDSMP; and Gwen Ifill, “Mayor ‘Struck Out’ in Washington,” BS, 2 September 1982. 41. William Donald Schaefer to Ronald Reagan, 23 September 1982; Reagan to Schaefer, 15 October  1982; Schaefer to Richard Williamson, 21 July  1982; and Thomas Dean to Michael Steinberg, 4 January 1983, all in Box 737, Folder “East Baltimore Community Corporation,” WDSMP; and Clarence Brown, “City Hall Mum on Health Plan Aid,” BNA, 1 September 1982. 42. Benton, “Memo to Clarence H. ‘Du’ Burns,” 1 September 1982; and Benton and Baker to Board of Estimates, 8 September 1982, both in Box 737, Folder “East Baltimore Community Corporation,” WDSMP. 43. Charles Benton, “Memo to William Donald Schaefer; Subject: East Baltimore Medical Plan,” 29 September  1982, Box 737, Folder “East Baltimore Community Corporation,” WDSMP; Gwen Ifill, “City Loan to Keep Medical Plan Alive,” BES, 13 October 1982; “EBMP Gets $1.5 Million City Loan,” BAA, 16 October 1982; and “East Baltimore Medical Plan: Business Plan,” 2–3, RMHP. 44. Heyssel to Baker and Benton, 6 July 1982, WDSMP. 45. Benton, “Memo to Clarence H. ‘Du’ Burns,” 1, WDSMP. 46. Barbara B. Hill, “Memorandum to: Ann Jones; Re: EBMP Board Meeting,” 24 October 1983, Box 431996450, Folder “East Baltimore Medical Plan,” RMHP. 47. “East Baltimore Medical Plan: Business Plan”; Office of Special Proj­ects, “Monthly Report on the East Baltimore Medical Plan,” October 1983, and Office of Special Proj­ects, “Action Plan for the East Baltimore Medical Plan,” November  1983 (quotation), both in Box 431996450, Folder “East Baltimore Medical Plan,” RMHP; “EBMP Monthly Report, Executive Summary,” February  1984, and Barbara Hill, “Memorandum to Robert Heyssel; Re: EBMP Update,” 21 March 1984, both in Box 431969402, Folder “East Baltimore Medical Plan 1984,” RMHP; and “Broadway Medical Management Corp.,” December 1983, Box 431996566, Folder “Broadway Medical Management Inc.,” RMHP. 48. “East Baltimore Medical Plan: Business Plan,” 7–8, RMHP; and BMMC Board of Directors, “Minutes,” 6 April  1983, Box 431996566, Folder “Broadway Medical Management Inc.,” RMHP. 49. EBMP, “Market Plan Status Report,” 1983, and Vallen Emery, “Memorandum to: Barry Goldberg; Subject: A Brief Outline of Marketing Activity,” 18 January 1983, both in Box 431996566, Folder “Broadway Medical Management Inc.,” RMHP; East Baltimore Medical Plan, “New Sliding Scale Fees,” February 1984; EBMP, “Report of Operations and Financial Statements,” January  1984; and EBMP, “Report of Operations and Financial Statements,” April 1984, all in Box 431969402, Folder “East Baltimore Medical Plan 1984,” RMHP. 50. “EBMP Monthly Report, Executive Summary,” 2–3, RMHP; and Hill, “Memorandum to Heyssel; Re: EBMP Update,” 1, RMHP.

342

Notes to Pages 236–239

51. Office of Special Proj­ects, “Action Plan for the East Baltimore Medical Plan,” 6, RMHP. 52. JHH Patient Care Committee, “Minutes,” 12 March  1985, Box 60/506722, Folder: 2 April 1985, 1–2, JHHT-­SD. 53. Office of Special Proj­ects, “Action Plan for the East Baltimore Medical Plan,” 6, 8, RMHP; and Barbara Hill, “Memorandum to: Raymond Turner; Re: Pos­si­ble JHH Assumption of EBMP,” 1 December 1983, Box 431996450, Folder “East Baltimore Medical Plan,” RMHP. 54. Hill, “Memorandum to Heyssel; Re: EBMP Update,” RMHP. 55. Barbara Hill, “Memorandum to Robert Heyssel; Re: Your Meeting with ‘Du’ Burns,” 17 April 1984, Box 431969402, Folder “East Baltimore Medical Plan 1984,” RMHP. 56. Barbara Hill, “Memorandum to Robert Heyssel; Re: House Bill No. 1251,” 11 April 1984, and Mary­land House of Delegates, Bill No. 1251: Health Ser­v ices Cost Review Commission—­ Rates for Outpatient Ser­vices, 3 February 1984, both in Box 431969402, Folder “East Baltimore Medical Plan 1984,” RMHP. 57. Thomas Paul Raimondi to Paula Johnson, 13 June 1984; EBMP, “Annual Meeting,” 14 June 1984; Barbara Hill, “Memorandum to Robert Heyssel; Re: EBMP Board,” 21 June 1984; Heyssel to Johnson, 10 July 1984; Heyssel and Andre Brewster to Raimondi, 26 July 1984; and Hill, “Memorandum to Robert Heyssel and Edward Halle; Re: EBMP’s License,” 3 August  1984, all in Box 431969402, Folder “East Baltimore Medical Plan 1984,” RMHP; and “Minutes,” 4 September 1984, 9, JHHT-­MB. 58. David Simon, “East Baltimore Medical Plan Has Healthy Turnout for Fair,” BS, 24 September 1984. 59. EBMP, “Minutes of the Meeting of the Board of Directors,” 25 September 1984, Box 431969402, Folder “East Baltimore Medical Plan 1984,” RMHP; and “Minutes,” 2 April 1985, Book 25, 79, JHHT-­MB. 60. Barbara B. Hill, “EBMP Audit FY ’83, Executive Summary,” 20 December 1983, Box 431996450, Folder “East Baltimore Medical Plan,” RMHP. 61. “Minutes,” 2 April 1985, Book 25, 79–80, JHHT-­MB; JHH Planning Committee, “The Johns Hopkins Hospital: Report of the Planning Committee to the Board of Trustees,” 4 June 1985, 11, Book 24, JHHT-­MB. 62. Congress, House Subcommittee on Health of the Committee on Ways and Means, Prob­lems Facing Financially Troubled Hospitals, 96th Cong., 2nd sess., 14 March, 18 April, 27 May, 1980; and Harry Dowling, City Hospitals: The Undercare of the Underprivileged (Cambridge, MA: Harvard University Press, 1992). 63. John G. Steinle and Associates, A Long-­Range Master Plan for Baltimore City Hospitals; Volume I—­Role and Function: A Community Study (September 1960), II-2. 64. Eli Ginzberg, Michael L. Millman, and Charles Brecher, “The Problematic F ­ uture of Public General Hospitals: A Review of the Lit­er­a­ture,” Health and Medical Care Ser­vices Review 2:2 (Summer 1979); and Mareasa R. Isaacs, Karen G. Lichter, and Claire M. Lipschultz, The Urban Public Hospital: Options for the 1980s (Bethesda, MD: Alpha Center, 1982). 65. HSCRC, “Staff Recommendation in re: Rate Application of the Baltimore City Hospitals,” 24 September 1980, Box 320, Folder “Baltimore City Hospitals,” WDSMP; and Charles L. Benton, “City Hospitals: Status Memorandum,” 30 March 1983, Box 415, Folder “WDS 403 Sale/Lease—­City Hospital,” WDSMP. 66. “Rx for City Hospitals,” BS, 25 May 1980. 67. Mayor’s Special Advisory Committee for Long Range Planning for Baltimore City Hospitals, “Report to Mayor William Donald Schaefer,” 5 March 1980, and “Draft Proposal



Notes to Pages 239–242

343

for Change of Governance for the Baltimore City Hospitals,” 12 May 1980, both in Box 504, Folder “BCH Long Range Planning,” WDSMP. 68. Albert Antlitz, “Draft,” 17 June 1980, Box 504, Folder “BCH Long Range Planning,” WDSMP. 69. George Havercheck, “Memo to William Donald Schaefer, Dr.  Antlitz, et  al., and Members of the Hospital Commission; Subject: Charter Amendment—­Baltimore City Hospitals,” 2 September 1980, and Charles Benton, “Memo to George Havercheck; Subject: Negotiations for Transfer of Governance at City Hospital,” 7 April 1981, both in Box 320, Folder “Baltimore City Hospitals,” WDSMP; and W ­ ill Englund, “Placated Council Oks Hospital Board,” BS, 11 December 1981. 70. Charles Benton, “City Hospitals—­Status Memorandum,” 30 March  1983, Box 415, Folder “WDS 403 Sale/Lease-­City Hospital,” 1, WDSMP; Sandy Banisky, “Hopkins Urged to Fill Void at City,” BS, July 9, 1982; and Robert Heyssel, “Changing Environment and the Academic Medical Center: The Johns Hopkins Hospital,” Academic Medicine (January 1989). 71. Trustee Policy Committee, “CPPA/BCH Relationship,” 28 November 1983, Book 24, 64, JHHT-­MB; and Neil Grauer with Janet Worthington, “When Heyssel Played Hardball,” Hopkins Medical News (Winter 2004). 72. “Minutes,” 5 April  1982, Book 23, JHJCT-­M B; “Minutes,” 8 June  1982, Book 23, JHHT-­MB; and “Handing over City Hospitals,” BS, March 14, 1984. 73. “Minutes,” 5 April  1982, Book 23, JHJCT-­M B; “Minutes,” 3 May  1982, Book 23, JHJCT-­MB; and Heyssel, “Changing Environment and the Academic Medical Center,” 8–11. 74. “Minutes,” 8 June 1982, 134, JHHT-­MB. 75. Trustee Policy Committee, “BCH Acquisition Business Risks,” 28 November  1983, Book 24, 52, JHHT-­MB. 76. JHH Bud­get and Operations Committee, “Minutes,” 3 August 1982, Box 57/506718, Folder “7 September 1982,” JHHT-­SD. 77. “Minutes,” 7 September 1982, JHHT-­MB. 78. “Minutes,” 1 March 1983, Book 23, 291, JHHT-­M B; and Trustee Policy Committee, “Baltimore City Hospitals Acquisition Chronology,” 28 November  1983, Book 24, 48, JHHT-­MB. 79. Grauer and Worthington, “When Heyssel Played Hardball.” 80. JHJCT-­M B, “Minutes,” 7 February  1983, Box 58/506719, Folder “1 March  1983,” JHHT-­SD; Charles Benton, “City Hospitals—­Status Memorandum,” 30 March 1983; Benton, “Memo to William Donald Schaefer; Subject City Hospitals Negotiations,” 21 April 1983; and “Mtg with City Hospitals Board,” 4 May 1983, all in Box 415, Folder “WDS 403 Sale/Lease—­ City Hospital,” WDSMP. 81. “Minutes,” 5 April 1983, Book 23, 300, JHHT-­MB. 82. William Donald Schaefer, “Memo to Benton; Subject: City Hospitals,” 28 March 1983, Box 415, Folder “WDS 403 Sale/Lease—­City Hospital,” WDSMP. 83. Charles Benton to Multiple Recipients, 30 March 1983; Benton, “Memo to William Donald Schaefer; Subject: City Hospitals,” April 15, 1983; and City of Baltimore, “Specifications and Proposal; Sale of the Baltimore City Hospitals,” 18 April 1983, all in Box 415, Folder “WDS 403 Sale/Lease—­City Hospital,” WDSMP. 84. Benton, “Memo to Schaefer,” 21 April 1983, WDSMP. 85. “Minutes,” 3 May 1982, 104, JHJCT-­MB; and Trustee Policy Committee, “Minutes,” 28 November 1983, Book 24, JHHT-­MB. 86. Grauer and Worthington, “When Heyssel Played Hardball.”

344

Notes to Pages 242–248

87. Richard ­Sullivan to William Donald Schaefer, 12 September  1983, Box 415, Folder “WDS 403 Sale/Lease-­City Hospital,” WDSMP. 88. Greater Baltimore Committee, “An Evaluation of the Proposed Transfer of Baltimore City Hospitals to Johns Hopkins Hospital,” September 1983, Box 415, Folder “WDS 403 Sale/ Lease—­City Hospital,” 2–6, WDSMP. 89. Trustee Policy Committee, “Minutes,” “Baltimore City Hospitals Acquisition Chronology,” “BCH Acquisition Requirements,” and “BCH Capital Financing Scenario,” 28 November  1983, JHHT-­MB; “Minutes,” 6 December  1983, Book 24, JHHT-­MB; Sandy Banisky, “Pact Is Reached on City Hospitals,” BS, 13 March 1984; and Grauer and Worthington, “When Heyssel Played Hardball.” 90. Ron Davis, “Council Grills Hopkins, City on Shift of Hospital,” BS, 13 April  1984; Davis, “Council Approves Hopkins-­City Hospitals Plan,” BS, April 17, 1984; Davis, “Workers for City, Hospital Reach Pacts,” BS, July 1, 1984; and Trustee Policy Committee, “Minutes,” 8 March 1984, Book 24, 146, JHHT-­MB. 91. Grauer and Worthington, “When Heyssel Played Hardball.” 92. Rick Mayes and Robert Berenson, Medicare Prospective Payment and the Shaping of U.S. Health Care (Baltimore: Johns Hopkins University Press, 2008). 93. Robert Heyssel to Board of Trustees, 21 August 1984, Box 60/506721, Folder “4 Sept 1984,” JHHT-­ SD; and JHH Board Planning Committee, “Minutes,” 5 March  1985, Box 61/506722, Folder “2 April 1985,” JHHT-­SD. 94. “Baltimore City Hospitals—­Th ree Year Plan,” March  1984, Book 24, 2, JHHT-­MB; and JHH, “Annual Operating Plan 1984–1985,” n.d. [1984], Box 60/506721, Folder “1 May 1984,” JHHT-­SD. 95. JHMI Joint Administrative Committee, “Minutes,” 25 September  1987, Box 432179747, Folder “JHMI Joint Administrative Committee ’87,” RMHP; Janet Farrar Worthington, “AIDS: Plague of the ’80s,” Hopkins Medical News, 11:2 (Fall–­Winter 1988); and “Minutes,” 7 February 1989, Book 27, 161, JHHT-­MB. 96. JHH Medical Board, “Minutes,” 26 March 1985, Box 60/506722, Folder “2 April 1985,” JHHT-­SD. 97. JHH, “Report of the Planning Committee to the Board of Trustees,” 4 June 1985, Book 24, ii–­iii, JHHT-­MB. 98. Known as technology transfer, the latter pro­cess proved im­mensely challenging. James McComas, “Dome Corporation Activity Report,” 1 April 1985, Box 431969331, Folder “Dome Corporation,” RMHP; and Dome, “Venture Management Proj­ects ­Under Consideration,” April 1986, Box 129H6 (432179747), Folder “Dome Corporation ’87,” RMHP. 99. JHH, “Report of the Planning Committee to the Board of Trustees,” 4 June  1985, JHHT-MB; Board Planning Committee, “Minutes,” 7 May  1985, Box 61/506722, Folder “4 June 1985,” JHHT-­SD; Johns Hopkins Hospital, “Summary of Proposed Reor­ga­ni­za­t ion,” 18 March 1986, and “Minutes,” 1 April 1986, both in Book 26, JHHT-­MB. 100. Dome Corporation Board of Directors, “Minutes,” 12 June 1985 and 9 October 1985, and Dome, “Proj­ect: West of Broadway Master Site Plan,” 13 November  1985, all in Box 431969331, Folder “Dome Corporation,” RMHP. 101. “The Developmental Sequence of Facilities West of Broadway,” 9 May 1988; “Building Program West of Broadway,” 7 June 1988; Harvey Meyerhoff, “Memorandum to: Johns Hopkins Health System Board of Trustees; Re: Costs and Financing—­West of Broadway,” 8 July 1988; Harvey Meyerhoff, “Memorandum to: Members of the Board of Trustees; Re: Fi-



Notes to Pages 248–254

345

nancing for Proj­ects West of Broadway,” 3 October  1988; and “Building Program West of Broadway—­E stimates of Proj­ect Costs and Funding,” 1 October 1988, all in Box 432211967, Folder 88.63, RMHP. 102. “Completeness Issues: Johns Hopkins Health System—­Merger/Consolidation,” no date [1986], Box 432179320, Folder 89.17, 3–7, RMHP; and Ronald Peterson to Chuck Fargas, 17 March 1987, Box 432179749, Folder: “JHHS/FSKH,” 2, RMHP. 103. Liz Bowie, “Dome Corp.: Hopkins Humbled,” BS, 10 January 1993; Ellen James Martin, “Triad Technology Center to Get New Research Tenant,” BS, 13 August 1993; and Charles Belfoure, “$1 Billion in Proj­ects for Johns Hopkins in Baltimore,” NYT, 6 February 2000. 104. JHHS Bud­get and Finance Committee, “Minutes,” 20 May  1987, Box 432179749, Folder “Johns Hopkins Health Plan—3,” 2, RMHP; and JHHS, “JHHS Annual Operating Plan 1990,” 1989, Box 432179320, Folder “JHHS Planning & Organ­ization,” 8–9, 20, RMHP. 105. JHHS Bud­get and Finance Committee, “Five Year Review of Program Objectives, Program Plans and Fa­cil­i­t y Requirements,” 1 February 1988, Box 432211967, Folder 88.63, 7, 11, RMHP; and Heyssel, “Changing Environment and the Academic Medical Center,” 9–10.

Chapter 11 1. White House Office of the Press Secretary, “Remarks by the First Lady at the Symposium on Health Care Reform, Johns Hopkins University,” and “The First Lady—­Johns Hopkins University School of Medicine Centennial,” 10 June 1993, both in Laura Schiller-­Speechwriting, Folder “HRC Speeches 11/92–8/93: [Health Care Reform Symposium, John Hopkins University 6/10/93],” CPR-­FLO. 2. Russell Riley, Inside the Clinton White House: An Oral History (New York: Oxford University Press, 2016), 134–158. 3. Jill Quadagno, One Nation Uninsured: Why the U.S. Has No National Health Insurance (New York: Oxford University Press, 2005), 159–163; and Paul Starr, Remedy and Reaction: The Peculiar American Strug­gle over Health Care Reform, rev. ed. (New Haven, CT: Yale University Press, 2013), 65–67. 4. David Smith and Judith Moore, Medicaid Politics and Policy 1965–2007 (New Brunswick, NJ: Transaction Publishers, 2008), 145–170; Frank Thompson, “Medicaid Rising: The Perils and Potential of Federalism,” in Medicare and Medicaid at 50: Amer­i­ca’s Entitlement Programs in the Age of Affordable Care ed. Alan Cohen, David Colby, Keith Wailoo, and Julian Zelizer (New York: Oxford University Press, 2015), 194–195; and Thompson, “The ­Faces of Devolution,” in Medicaid and Devolution: A View from the States, ed. Thompson and John DiIulio Jr. (Washington, D.C.: Brookings Institution Press, 1998), 23. 5. Starr, Remedy and Reaction, 79–82. 6. Starr, Remedy and Reaction, 81–83. 7. Starr, Remedy and Reaction, 85–102; and Eric Weissenstein, “Proposed Medicare Reductions Would Fall Hardest on Hospitals,” Modern Healthcare, 22 November 1993. 8. Beatrix Hoffman, Health Care for Some: Rights and Rationing in the United States Since 1930 (Chicago: University of Chicago Press, 2012), 184. 9. Dick Davidson to Ira Magaziner, 3 March 1993, Meeghan Prunty Files, OA/Box 3924, Folder “AHA Correspondence,” CPR-­HCTF. 10. AHA, “Statement of the American Hospital Association Before the President’s Task Force on National Health Care Reform,” 29 March  1993, Meeghan Prunty Files, OA/Box 3924, Folder “AHA Correspondence,” CPR-­HCTF; and Molly [Brostrom], “To: Ira [Maga-

346

Notes to Pages 254–257

ziner]; Re: Meeting with American Hospital Association—1:00 p.m.,” 14 March  1993, Meeghan Prunty Files, OA/Box 3924, Folder “AHA—­General Info [3],” CPR-­HCTF. 11. Christine Heenan and Molly Brostrom to: Carol Rasco; Re: Meeting with American Hospital Association, 19 April  1993; and Molly Brostrom, “To: Lori Davis; Re: AHA’s Concerns,” 13 May 1993, both in Meeghan Prunty Files, OA/Box 3924, Folder “AHA Correspondence,” CPR-­HCTF. 12. “Summary of Clinton/AHA Comparison—­Likely Major Components,” 3 May 1993, and “American Hospital Association,” 4 June 1993, both in Meeghan Prunty Files, OA/Box 3924, Folder “AHA—­General Info [2],” CPR-­HCTF. 13. “American Hospital Association,” 4 June 1993, CPR-­HCTF. 14. AHA, “Statement from the American Hospital Association,” 1 July  1993, Meeghan Prunty Files, OA/Box 3924, Folder “AHA—­Notes,” CPR-­HCTF. 15. “American Hospital Association,” no date [1993], Meeghan Prunty Files, OA/Box 3924, Folder “AHA—­General Info [2],” CPR-­HCTF. 16. Kaiser Commission on the ­Future of Medicaid, “Summary of Major Health Care Reform Legislation,” 22 December 1993, Meeghan Prunty Files, OA/Box 3620, Folder “Summary of Major Health Care Reform Legislation,” CPR-­HCTF; and Weissenstein, “Proposed Medicare Reductions Would Fall Hardest on Hospitals.” 17. “Statement of the American Hospital Association Before the Senate Finance Committee on Medicare Spending Reductions and the Integration of Medicare into a Reformed Health Care System,” 12 April  1994, General Files, OA/Box 3590, Folder “Medicare 1 of 2 [AHA],” CPR-­HCTF. 18. Lynn Wagner, “Reform Plan Said to Limit Program Growth,” Modern Healthcare, 6 September 1993. 19. Karen Pallarito, “Public Hospitals Fear Erosion of Funding, Patient Base,” Modern Healthcare, 18 October 1993. 20. Dick Davidson, “American Hospital Association Statement—­President Clinton Economic Plan,” 18 February  1993, Meeghan Prunty Files, OA/Box 3924, Folder “AHA—­ General Info [3],” CPR-­HCTF; and Weissenstein, “Proposed Medicare Reductions Would Fall Hardest on Hospitals.” 21. “Memorandum (AHA),” 27 July 1993, Meeghan Prunty Files, OA/Box 3924, Folder “AHA—­General Info [3],” CPR-­HCTF. 22. “American Hospital Association Meeting Outline,” 2 September  1993, Meeghan Prunty Files, OA/Box 3924, Folder “AHA Correspondence,” CPR-­HCTF. 23. “The President of the United States—­Johns Hopkins University—­Baltimore, MD,” 28 October 1993, Christine Heenan Files, OA/Box 4622, Folder “President’s Remarks to Johns Hopkins—­loose,” CPR-­HCTF; and John Fairhall, “Many Would Pay More U ­ nder Health Plan,” BS, 29 October 1993. 24. Dick Davidson, “Statement of the American Hospital Association,” Congress, House, Committee on Ways and Means, Financing Provisions of Health Security Act, 103rd  Cong., 1st sess., 19 November 1993; AHA, “News Release: Inadequate Financing Hinders Reform, AHA Says,” 19 November 1993, Maggie Williams Subject Files, OA/Box 10037, Folder 3, CPR-­FLO. 25. Lynn Wagner, “Public Hospitals Fear Funding Gap ­After Disproportionate Payments End,” Modern Healthcare, 22 November 1993. 26. “Statement of the American Hospital Association Before the Senate Finance Committee on Medicare Spending Reductions and the Integration of Medicare into a Reformed



Notes to Pages 257–262

347

Health Care System,” 12 April  1994, General Files, OA/Box 3590, Folder “Medicare 1 of 2 [AHA],” CPR-­HCTF. 27. “Response to the AHA Lewin Report and the Testimony of Dick Davidson,” April  1994, and HHS, “Draft,” 12 April  1994, both in General Files, OA/Box 3590, Folder “Medicare 1 of 2 [AHA],” CPR-­HCTF. 28. Bennett Roth, “Clinton Lieutenants Optimistic About Health Care Legislation,” Houston Chronicle, 3 June 1994; and Keith Schneider, “Dan Rostenkowski, Lawmaker, Is Dead at 82,” NYT, 11 August 2010. 29. Julian Zelizer, Burning Down the House: Newt Gingrich, the Fall of a Speaker, and the Rise of the New Republican Party (New York: Penguin, 2020). 30. Starr, Remedy and Reaction, 129–136. 31. Dick Davidson to Bob Dole, 16 October  1995, and AHA [Federal Relations Office], “Advocacy Action Plan: Opposition to Bud­get Reconciliation Conference Report/Post Veto Strategy,” 16 November  1995, both in Chris Jennings (Subject File), OA/Box 23756, Folder “Clinton-­Gore Campaign Materials [6],” CPR-­DPC. 32. “Claim vs. Real­ity” [Clinton Campaign Document], no date [1996], Chris Jennings (Subject File), OA/Box 23756, Folder “Clinton-­G ore Campaign Materials [6],” CPR-­DPC. 33. American Association of Homes and Ser­v ices for the Aging et al., to “Dear Representative,” 1 February 1996, Chris Jennings (Subject File), Folder “Protecting Medicaid (1996) [1],” CPR-­DPC; and American Association of Eye and Ear Hospitals et al., to William Roth Jr., 10 May 1996, Chris Jennings (Subject File), OA/Box 23756, Folder “Clinton-­Gore Campaign Materials [6],” CPR-­DPC. 34. Starr, Remedy and Reaction, 136–137. 35. Lawrence Brown and Michael Sparer, “Poor Program’s Pro­gress: The Unanticipated Politics of Medicaid Policy,” Health Affairs, 22:1 (January 2003): 31–44; and Quadagno, One Nation Uninsured, 195. 36. Hoffman, Health Care for Some, 188–190. 37. Starr, Remedy and Reaction, 143. 38. Michael Gusmano and Frank Thompson, “Safety-­Net Hospitals at the Crossroads: Whither Medicaid DSH?” in The Health Care Safety Net in a Post-­Reform World, ed. Mark Hall and Sara Rosenbaum, 153–182 (New Brunswick, NJ: Rutgers University Press, 2012). 39. Jonathan Engel, Poor P ­ eople’s Medicine: Medicaid and American Charity Care Since 1965, (Durham, NC: Duke University Press, 2006), 238–240. 40. Thompson, “Medicaid Rising,” 197. 41. James Fossett, “Managed Care and Devolution,” in Thompson and DiIulio, eds., Medicaid and Devolution, 110. 42. Engel, Poor P ­ eople’s Medicine, 224–225. 43. Jonathan Bor, Norris West, and Consella Lee, “Health Care: A Neighborhood’s Ills,” BS, 18 April 1994. 44. Thomas Oliver and Karen Anderson Oliver, “Managed Care or Managed Politics? Medicaid Reforms in Mary­land,” in Medicaid Reform and the American States: Case Studies on the Politics of Managed Care, ed. Mark Daniels, 135–168 (Westport, CT: Auburn House, 1998). 45. Dianna Sugg, “Black Doctors Feel Chill at HMOs,” BS, 8 November 1995. 46. Oliver and Oliver, “Managed Care or Managed Politics?” 151. 47. Engel, Poor P ­ eople’s Medicine, 236–240.

348

Notes to Pages 262–267

48. John Kastor, Governance of Teaching Hospitals: Turmoil at Penn and Hopkins (Baltimore: Johns Hopkins University Press, 2004), 207. 49. Kastor, Governance of Teaching Hospitals, 207–209; William Richardson, interview by Mame Warren, 12 January 2004, 49–50, JHU-­OHC; Peter Frank and David Conn, “Hopkins, Prudential War: High Stakes in Managed Care,” BS, 10 April 1994; Conn, “Hopkins Apologizes, Drops Suit,” BS, 7 February  1995; and Conn and Michael Ollove, “Hopkins Lawsuit Steeped in Mistrust,” BS, 12 February 1995. 50. William Salganik, “Hopkins Plan Omits Traditional Pieces,” BS, 26 April 1996; and Salganik, “Hopkins to Create Plan for Poorer Enrollees,” BS, 7 November 1996. 51. Robert Murray and Robert Berenson, Hospital Rate Setting Revisited (Washington, D.C.: Urban Institute, November 2015), xv–­x vi, 21–29, 60–68, 76. 52. Hospitals also objected to the exemption from rate setting of outpatient surgery and ambulatory centers, which had become common in Mary­land. William Salganik, “Hospital Cost Reign Sought,” BS, 19 September 1997. 53. William Salganik, “Regulatory System Headed for Reform,” BS, 8 November 1998. 54. Philip Dunn, “Mary­land’s Rate Commission Ripe for Overhaul, Critics and Backers Agree,” AHA News 33:6 (15 September 1997): 6; and John Morrissey, “Time for Rate Regulation to Go?” Modern Healthcare, 27:45 (10 November 1997): 98. 55. Robert Murray and Robert Berenson, Hospital Rate Setting Revisited (Washington, D.C.: Urban Institute, November 2015), xiv, 48–49; William Salganik, “Panel Oks Rate Reform,” BS, 3 February 2000; and Mary­land Hospital Association, Achievement, Access, and Accountability: Mary­land’s All-­Payor Hospital Payment System (Elkridge, MD: MHA, 2007), 2–5, 9–14. 56. John McDonough, Interests, Ideas, and Deregulation: The Fate of Hospital Rate Setting (Ann Arbor: University of Michigan Press, 1997), 103–104. 57. Murray and Berenson, Hospital Rate Setting Revisited, xii, xvi, 42–43, 66–67; McDonough, Interests, Ideas, and Deregulation, 104–108; and John McDonough, “Tracking the Demise of State Hospital Rate Setting,” Health Affairs 16:1 (1997): 142–149. 58. Murray and Berenson, Hospital Rate Setting Revisited, xiv–xv, 49–59. 59. Cory Capps et al., “Antitrust Policy and Hospital Mergers: Recommendations for a New Approach,” Antitrust Bulletin 47:4 (Winter 2002): 677–714; and Brent Fulton, “Health Care Market Concentration Trends in the United States: Evidence and Policy Responses,” Health Affairs 36:9 (September 2017): 1530–38. 60. “Analyzing Health-­C are Reform and Its Impact on Hospital Bonds,” Bond Buyer, 9 August 1993. 61. Kastor, Governance of Teaching Hospitals, 185; and Edward Gunts, “North Charles General Hospital Buyer Selected,” BS, 10 March 1992. 62. Kastor, Governance of Teaching Hospitals, 199–201; and Neil Grauer, Leading the Way: A History of Johns Hopkins Medicine (Baltimore: Johns Hopkins Medicine and Johns Hopkins University Press, 2021), 154–155. 63. Kastor, Governance of Teaching Hospitals, 201–204; and Sinai Hospital of Baltimore, “LifeBridge Formation Letter,” 1 October 1998, History of Sinai Hospital of Baltimore, http://­ www​.­historyofsinaihospitalbaltimore​.­org​/­items​/­show​/3­ 7. 64. Grauer, Leading the Way, 156. 65. William Salganik and Diana Sugg, “Hospital Merger Talks ‘Intense,’ ” BS, 30 October  1997; Salganik, “Helix Health’s CEO Resigns,” BS, 12 November  1997; Salganik, “New



Notes to Pages 267–273

349

Helix Chief Puts Hopkins Talks on Hold,” BS, 18 December 1997; and Kastor, Governance of Teaching Hospitals, 253. 66. William Salganik, “Merger of Helix, Medlantic Is Approved by Both Boards,” BS, 5 May 1998; and MedStar Health, “MedStar Health History,” https://­w ww​.­medstarhealth​.o ­ rg​ /­about​/m ­ edstar​-­health​-­history. 67. Dana Hedgpath, “Hospital Nearing Merger Decision,” BS, 4 February 1998; “Hospital W ­ on’t Get For-­Profit Partner; 3 Contenders Remain,” BS, 17 February 1998; and Kastor, Governance of Teaching Hospitals, 254–255. 68. Dana Hedgpath, “Hospital to Shed Some Light on Talks,” BS, 3 February 1998; “Some Fear Changes from Hospital Deal,” BS, 22 February 1998; and “Deal Brings Hopkins Back to Howard,” BS, 22 March 1998. 69. Dana Hedgpath, “Hopkins Buys Howard Hospital,” BS, 19 March 1998; Hedgpath, “Deal Brings Hopkins Back to Howard”; and Kastor, Governance of Teaching Hospitals, 256–257. 70. Hedgpath, “Deal Brings Hopkins Back to Howard.” 71. Hedgpath, “Deal Brings Hopkins Back to Howard.”

Conclusion 1. Paul Starr, Remedy and Reaction: The Peculiar American Strug­gle over Health Care Reform rev. ed. (New Haven, CT: Yale University Press, 2013), 194–238. 2. John McDonough, Inside National Health Reform (Berkeley: University of California Press, 2011), 124–133; and Ezekiel Emanuel, Reinventing American Health Care (New York: PublicAffairs, 2014), 201–258. 3. Jonathan Cohn, The Ten Year War: Obamacare and the Unfinished Crusade for Universal Coverage (New York: St. Martin’s, 2021); and Marcia Frellick, “Healthcare Professionals Almost Equally Divided on Medicare for All, Poll Shows,” Medscape, 29 May 2019, https://­w ww​ .­medscape​.­com​/­v iewarticle​/­913411. 4. KFF, “State Health Facts: Marketplace Enrollment, 2014–2021,” 2021, https://­w ww​.­k ff​ .­org ​/­health​-­reform​/­s tate​-­i ndicator​/­m arketplace​-­e nrollment​/­​?­a ctiveTab​=­g raph¤t​ Timeframe​=­0&startTimeframe​=­7&selectedRows​=­%7B%22wrap​ups%22:%7B%22​u nited​-­stat es%22:%7B%7D%7D%7D&sortModel​=­%7B%22colId%22:%22Location%22,%22sort%22:%2 2asc%22%7D. 5. Starr, Remedy and Reaction, 278–286; Erin Brantley and Sara Rosenbaum, “Ballot Initiatives Have Brought Medicaid Eligibility to Many but Cannot Solve the Coverage Gap,” Health Affairs blog, 23 June 2021; and KFF, “Status of State Action on the Medicaid Expansion Decision,” https://­w ww​.­k ff​.­org​/­health​-­reform​/­state​-i­ ndicator​/s­ tate​-­activity​-­around​-e­ xpanding​ -­medicaid​-­u nder​-­t he​-­a ffordable​-­care​-­act​/­​?­currentTimeframe​=­0&sortModel​=­%7B%22colId %22:%22Location%22,%22sort%22:%22asc%22%7D#notes. 6. KFF, “Medicaid Expansion Enrollment,” December 2020, https://­w ww​.­k ff​.­org​/­health​ -­reform​/­state​-­indicator​/­medicaid​-­expansion​-­enrollment​/­​?­currentTimeframe​=­0&sortModel​ =­%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D. 7. KFF, “Key Facts About the Uninsured Population,” 6 November 2020, https://­w ww​.­k ff​ .­org​/­uninsured​/­issue​-­brief​/­key​-­facts​-­about​-­t he​-­uninsured​-­population​/­. 8. Steven Brill, Amer­i­ca’s B ­ itter Pill: Money, Politics, Backroom Deals, and the Fight to Fix Our Broken Healthcare System (New York: Random House, 2015), 80. 9. McDonough, Inside National Health Reform, 165–166; and Brill, Amer­i­ca’s ­Bitter Pill, 129–130.

350

Notes to Pages 273–277

10. Starr, Remedy and Reaction, 262–265; and Brill, Amer­i­ca’s ­Bitter Pill, 111–114, 130, 138– 141. The legislation also authorized an In­de­pen­dent Payment Advisory Board that would have provided recommendations for cuts in Medicare if spending exceeded specified levels. It was never created, and Congress repealed that provision of the ACA in 2017. Juliette Cubanski and Tricia Neuman, “FAQs: What’s the Latest on IPAB?” KFF, 3 November  2017, https://­ www​.­k ff​.­org​/­medicare​/­issue​-­brief​/­faqs​-­whats​-­t he​-­latest​-­on​-­ipab​/­#:~:text​=­W hat%20is%20 the%20Independent%20Payment,and%20confirmed%20by%20the%20Senate. 11. M.V. Pauly, “U.S. Health Care Costs: The Untold True Story,” Health Affairs (Fall 1993): 152–159; Gerard F. Anderson, Uwe E. Reinhardt, Peter S. Hussey, and Varduhi Petrosyan, “It’s the Prices, Stupid: Why the United States Is So Dif­fer­ent from Other Countries,” Health Affairs 22:3 (May–­June 2003): 89–105. 12. James Robinson, “Hospital Consolidation and the Affordable Care Act,” Physicians for a National Health Program, November 2011, https://­pnhp​.­org ​/­news​/­hospital​-­consoli​dation​-­and​-­t he​-­affordable​-­care​-­act​/­; Christopher Pope, “How the Affordable Care Act Fuels Health Care Market Consolidation,” Heritage Foundation’s Backgrounder, no.  2928, 1 August  2014, https://­w ww​.­heritage​.­org​/­health​-­care​-­reform​/­report​/­how​-t­ he​-­affordable​-­care​-­act​ -­f uels​-­health​-­care​-­market​-­consolidation#​_­ft nref124; and Brill, Amer­i­ca’s ­Bitter Pill, 106–107, 260–264. 13. Robert Kocher, Ezekiel Emanuel, and Nancy-­A nn M. DeParle, “The Affordable Care Act and the F ­ uture of Clinical Medicine: The Opportunities and Challenges,” Annals of Internal Medicine 153:8 (19 October 2010): 538. 14. Martin Gaynor, “Antitrust Applied: Hospital Consolidation Concerns and Solutions” (Figure 3), Statement Before the Committee on the Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights, U.S. Senate, 19 May  2021, https://­w ww​ .­judiciary​.­s enate​.­gov​/­m eetings​/­a ntitrust​-­a pplied​-­hospital​-­c onsolidation​-­c oncerns​-­a nd​ -­solutions; and Kaufman, Hall & Associates, 2020 M&A in Review: Covid-19 as Catalyst for Transformation, 7 January  2021, https://­w ww​.­k aufmanhall​.­com​/­ideas​-­resources​/­research​ -­report​/­2020​-­mergers​-­acquisitions​-­review​-­covid​-­19​-­catalyst​-­t ransformation. 15. Brent Fulton, “Health Care Market Concentration Trends in the United States: Evidence and Policy Responses,” Health Affairs 36:9 (September 2017): 1530–1538. 16. Bob Kocher, “How I Was Wrong About Obamacare,” Wall Street Journal, 31 July 2016; Hannah Neprash, Michael Chernew, and J. Michael McWilliams, “­Little Evidence Exists to Support the Expectation That Providers Would Consolidate to Enter New Payment Models,” Health Affairs 36:2 (2017): 346–354; Lawrence Singer, “Considering the ACA’s Impact on Hospital and Physician Consolidation,” Journal of Law, Medicine & Ethics 46 (2018): 913– 917; and James Kahn and Kip S­ ullivan, “Promise vs. Practice: The A ­ ctual Financial Per­for­ mance of Accountable Care Organ­izations,” Journal of General Internal Medicine 37 (2022): 680–681, https://­doi​.­org​/­10​.­1007​/­s11606​-­021​-­07089​-­6. 17. Sarah Gantz, “Johns Hopkins Medicine, Saudi Oil ­Giant Set to Launch Joint Venture,” Baltimore Business Journal, 28 January 2014; Johns Hopkins Medicine International, Year in Review: Fiscal Year 2014 (Baltimore: Johns Hopkins Medicine, 2014); Johns Hopkins Medicine International, Realizing the Mission: Impact Report FY17-­FY18 (Baltimore: Johns Hopkins Medicine, 2018); Bob Kehoe, H&HN: Hospitals & Health Networks 90:9 (September 2016): 38–41. 18. Marisela Gomez, Race, Class, Power, and Organ­izing in East Baltimore: Rebuilding Abandoned Communities in Amer­i­ca (Lanham, MD: Lexington Books, 2013). For an institu-



Notes to Pages 277–284

351

tional perspective, see Greg Rienzi, “The Changing Face of East Baltimore,” Johns Hopkins Gazette, January 2013. 19. Jacques Kelly, “Lucille Gorham, Neighborhood Activist,” BS, 7 November 2012; and Melody Simmons, “Activist’s C ­ hildren Fear Foreclosure of Her Home,” MDR, 29 April 2013. 20. Ayla Ellison, “21 Hospital Closures in 2020,” Becker’s Hospital CFO Report, 9 December 2020. 21. David Asch et al., “Patient and Hospital F ­ actors Associated with Differences in Mortality Rates Among Black and White US Medicare Beneficiaries Hospitalized with COVID-19 Infection,” JAMA Network Open 4:6 (2021), doi:10.1001/jamanetworkopen.2021.12842. 22. Davarian Baldwin, In the Shadow of the Ivory Tower: How Universities Are Plundering Our Cities (New York: Bold Type Books, 2021). 23. Katherine Baicker and Amitabh Chandra, “The Health Care Jobs Fallacy,” NEJM 366:26 (28 June 2012): 2433–2435. 24. Anderson, et al., “It’s the Prices, Stupid.” 25. Eric Lopez, Tricia Neuman, Gretchen Jacobson, and Larry Levitt, “How Much More Than Medicare Do Private Insurers Pay? A Review of the Lit­er­a­ture,” Kaiser ­Family Foundation, 15 April 2020, https://­w ww​.­k ff​.­org​/­medicare​/­issue​-­brief​/­how​-­much​-­more​-­t han​-­medicare​ -­do​-­private​-­insurers​-­pay​-­a​-­review​-­of​-­t he​-­literature/. 26. Physicians for a National Health Program, Working Group on Single-­Payer Program Design, “Beyond the Affordable Care Act: A Physicians’ Proposal for Single-­Payer Health Care Reform,” https://­pnhp​.­org​/­what​-­is​-­single​-p ­ ayer​/p ­ hysicians​-p ­ roposal/ (first published 2016). 27. Martin Gaynor, “Antitrust Applied: Hospital Consolidation Concerns and Solutions,” Statement Before the Committee on the Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights, U.S. Senate, 19 May 2021. 28. Avik Roy, “Affordable Hospital Care Through Competition and Price Transparency,” Foundation for Research on Equal Opportunity, 31 January 2020. 29. Robert Murray and Robert Berenson, Hospital Rate Setting Revisited (Washington, D.C.: Urban Institute, November 2015), 4, 69. 30. The HSCRC had weakened its previously successful volume control system during the 1990s before removing it altogether in 2001. This had the effect of letting hospitals increase their revenue, regardless of rate setting, by increasing their volume of ser­v ices. Sarah Kliff, “Mary­land’s Plan to Upend Health Care Spending,” WP Wonkblog, 10 January 2014; John Kastor and Eli Adashi, “Mary­land’s Hospital Cost Review Commission at 40: A Model for the Country,” JAMA, 306:10 (14 September 2011): 1137–1138; Mark Pauly and Robert Town, “Mary­ land Exceptionalism? All-­Payers Regulation and Health Care System Efficiency,” Journal of Health Politics, Policy and Law 37:4 (August 2012): 697–707; and Murray and Berenson, Hospital Rate Setting Revisited, 48–50. 31. State Health Care Cost Commission, Cracking the Code on Health Care Costs (Charlottesville, VA: Miller Center, University of V ­ irginia, January 2014). 32. RTI International, Evaluation of the Mary­land All-­Payer Model—­Volume I: Final Report (Waltham, MA: RTI International, November 2019), 63–71; and HSCRC, “Mary­land’s All-­ Payer Model Results,” https://­hscrc​.­maryland​.­gov​/­Documents​/­Maternal%20Task%20Force​ /­HSCRC%20All%20Payer%20Model%20PY5%20Results​.­pdf; and HSCRC, “All-­Payer Model Results, CY 2014–2018,” 2019, https://­hscrc​.­maryland​.­gov​/­Documents​/­Updated%20APM%20 results%20through%20PY5​.­pdf.

352

Notes to Pages 284–285

33. Glenn Melnick and Susan Maerki, Commissioning Change: How Four States Use Advisory Boards to Contain Health Spending (Oakland and Sacramento: California Health Care Foundation, January 2020), https://­w ww​.­chcf​.­org ​/­publication​/­commissioning​-­change​ -­four​-­states​-­advisory​-­boards​-­contain​-­health​-­spending​/­#related​-­links​-­a nd​-­downloads; Melnick, “Health Care Cost Commissions: How Eight States Address Cost Growth,” California Health Care Foundation Issue Brief, April  2022, https://­w ww​.­chcf​.­org ​/­publication​/­cost​ -­commissions​-­eight​-­states​-­address​-­cost​-­growth​/­#related​-­links​-­a nd​-­downloads; and Harris Meyer, “States Watching as Mas­sa­chu­setts Takes Aim at Hospital Building Boom and Costs,” Kaiser Health News, 3 May 2022. 34. Murray and Berenson, Hospital Rate Setting Revisited, 74–75.

INDE X

Abernathy, Ralph, 132 Abrams, Rosalie Silber, 79, 137–38 academic medical centers, 223–24, 275, 276, 279–80 “Access to Care” program, 261 accountable care organ­izations, 273, 274–75 Accountable Health Partnerships, 252, 253 acquisitions by Johns Hopkins Hospital, 247, 265–70, 275 “Action Plan” for EBMP, 236 Activists, Inc., 80 Adams, William, 95 admission control mechanisms, quality of care and, 123 advanced-­care facilities, 160 Aetna Insurance, 64 affiliations, hospital, 225, 265, 266–69, 276 affirmative action plans, Johns Hopkins Hospital and, 175–76 Affordable Care Act. See Patient Protection and Affordable Care Act (ACA, 2010) AFL-­CIO. See American Federation of Labor-­Congress of Industrial Organ­ izations (AFL-­CIO) African American communities: Black owned business within, 43; and Broadway 3-­A, 36, 42–46, 50–60; displacement of, 33, 42–44, 49; establishment of Provident Hospital, 27; funding of Provident Hospital, 179; leaders within, 42, 95–96 African American employees, discrimination of by Johns Hopkins Hospital, 40, 75–76, 174–76 African American housing, urban renewal and, 39–40, 47–54 African American physicians, 75–76, 97–98, 261

African Americans: apartments for, 39–41, 45, 49; and Baltimore Plan, 37; and Broadway proj­ect, 39, 42–48, 50–54, 58–60; and Covid-19, 278–79; displacement of, 33, 39, 42–46, 49, 57, 58; patient care of, 174–75; segregation through Hill-­Burton program, 24–25 Agnew, Spiro, 78, 79, 80 AIDS, 246 Aid to Families with Dependent C ­ hildren (AFDC), 64, 65, 76, 251, 258, 259 Alexander Brown and Sons, 168, 177 All-­Children’s Hospital, 275 all-­payer rate-­setting systems, 150, 163, 216, 263, 264, 283–84 Altman, Stuart, 115, 124 ambulatory care centers, federal matching grants for, 23 American Association of Retired Persons (AARP), 204, 213 American Federation of County, State, and Municipal Employees (AFSCME), 114f American Federation of Labor-­Congress of Industrial Organ­izations (AFL-­CIO), 113, 125, 131, 198–99. See also Local 1199E; National Union of Hospital and Health Care Employees American Hospital Association (AHA): and certificate-­of-­need laws, 72; and collective bargaining rights, 130–31; creation of Commission on Hospital Care, 19; and Economic Stabilization Program, 126; and health alliances, 254; and Medicaid caps, 255; and Medicare, 65, 257–58; national health insurance proposals by, 115; and phase IV regulations, 122; position on Medicare, 63; and Princi­ples of Payment for Hospital Care, 66; position on Clinton

354 Index American Hospital Association (AHA) (continued) reform plan, 253–57; push for hospital construction, 21; reimbursement of capital costs, 67; shaping the emerging hospital regulatory regime, 151; suit against Cost of Living Council, 122–23; support for community care networks, 253; support for universal coverage system, 254; support of Talmadge’s cost-­control bill, 201; and voluntary cost-­control, 172, 202–3; voluntary hospital construction, 71 American Medical Association (AMA): and alternative financing structures, 18; and capital controls, 199; and fee-­for-­service payments, 17, 85, 117; and Hill-­Burton Act, 21; and in­de­pen­dent practice associations, 118; and insurance com­pany payment model, 17; and Medicare/ Medicaid, 63, 64, 65; national health insurance proposals by, 115; opposition to Mills Bill, 125; and prepaid group practice, 85; and voluntary cost-­control, 202, 203; and Wagner-­Murray-­Dingell bill, 21 ancillary costs vs. “­hotel costs,” 117 Anderson, Clinton, 111 Anderson, Gerard, 4 Annie E. Casey Foundation, 276 anti-­inflation program, hospital cost containment as, 203–4, 213 antitrust actions, 282–83, 285 apartments, Johns Hopkins Hospital (“the compound”), 53, 54, 55f, 56, 57, 89, 181, 247 Aramco, 276 Architectural Rec­ord, 22 Arrow, Kenneth, 3 Assisted Health Insurance Plan (Nixon), 124 associational system of public-­private health care, 10–11, 18, 29, 105–6, 134, 224–25, 279–81; EBMP and Johns Hopkins Hospital, 234; and hospital cities, 230; and institutional self-­interest, 280; limitation of state’s role in, 280; and urban redevelopment, 245; and voluntary cost-­controls, 202–3 Association of American Medical Colleges, 122, 199 “Atlantic Alliance,” 266–67 Atomic Bomb Casualty Commission, 90

Bacon, Elinor, 185, 186 bad debts: and Blue Cross, 138, 149–50, 151, 156, 177; charged to all payers, 152; and Johns Hopkins Hospital, 156; and outpatient ser­v ices, 169; and reasonable cost standard, 66; use of endowment funds for, 154 Balanced Bud­get Act (1997), 259, 273 Ball, Robert, 218 Baltimore, Mary­land: 2015 uprising in, 9; assassination of MLK, 88–89; continuity of care in, 260–61; desegregation of hospitals in, 75, 76; economic footprint of Johns Hopkins Hospital in, 168; health care ser­v ices in economy of, 4–5, 10, 133, 235; Hill-­Burton grants in, 26–29; ­human impact of urban renewal in, 58–60; long-­term grievance against Johns Hopkins Hospital, 49–50; as manufacturing city, 8; racial segregation in, 8; redevelopment grants for, 38f, 48; unemployment in, 157 Baltimore Afro-­American, 44, 45–46, 58, 60, 232 Baltimore C ­ hildren’s Hospital, 225 Baltimore City Hospitals (BCH): acquisition by Johns Hopkins Hospital, 225, 229, 238, 242–45; charity care function of, 240, 241, 242; financial conditions at, 230, 243; Hill-­Burton grants for, 26; as teaching hospital, 239 Baltimore City School Board, 89 Baltimore Housing Authority, 51–52, 55, 58 Baltimore L ­ egal Aid Bureau, 80, 156, 158 Baltimore News American, 136 “Baltimore Plan,” 37–38, 43 Baltimore Redevelopment Commission, 36–37, 39–40, 41f, 43–46, 49–51 Baltimore Sun: on Broadway Area 3-­A, 36, 44, 46, 50; on Hammer’s testimony, 43; on hospitals moving to suburbs, 169; on ­hotels near hospitals, 56; on ­human impact of displacements, 59; on need for parking, 57; on Price report, 166; on resignation of Powers, 139; on ­u nionization of Johns Hopkins Hospital, 145 Baltimore Urban League, 44, 50 Baltimore Urban Renewal and Housing Agency (BURHA), 30–31, 55, 56, 57–58, 59



Index 355

Banks v. San Francisco Housing Authority, 51 bargaining power of regional health alliances, 252 Barnes, W. Thomas, 154 Basic Sciences Building, 173 beds, hospital: approval from Health Systems Agency for, 161; certificate-­of-­need laws for, 72; and Hill-­Burton Act, 22; and hospital cost crisis, 162; need for, 20, 26; and outpatient care, 173–74; and regional planning agencies, 197; and “Voluntary Effort,” 202 benefit concessions, 139–40, 142 Benton, Charles, 241–42 “Bettercare” bill, 64 Biemiller, Andrew, 198 Billings building, 28f Black Panther Party, 96–97 Blalock Clinical Science Building, 27 Blendon, Robert, 98, 99, 104 Block, James, 262, 266, 267 Blue Cross-­Blue Shield, 177, 202 Blue Cross network: administering of claims, 65; and advanced-­care facilities, 160; and bad debts, 138, 150, 151, 156; capital allowances through, 18; and charity care, 25; as development of hospital insurance, 17; opposition to Medicare, 63; and “reasonable costs,” 66; support of capital controls, 199 Blue Cross of Mary­land: discount disparity, 150–52; and HSCRC hospital rate regulations, 152; and Mary­land Hospital Association, 138; purchase of Columbia HMO Plan, 226, 230 Blue Cross of New Jersey, 216 Blue Shield network, 17, 65 Blumenthal, Mike, 207, 209 Board of Estimates (Baltimore), 42, 43, 234 Bobo, Elizabeth, 268 bond issues, hospital, 70–71, 172, 174, 177, 178, 247–48; and Baltimore City Hospitals, 239; community-­organized, 268; for Hopkins’s phase I, 173; and reimbursement limits, 199–200 bonds, for industrial purposes, 234–35 Bon Secours Hospital, 27, 93, 142, 147, 180 Boston, Mas­sa­chu­setts, 4, 35 Bouquet, Natalie, 140 Bourne, Peter, 207

Bradley, Thomas, 147 Bready, Robert, 45 Bredesen, Phil, 225 Brewster, Andre, 179 Broadway Development Corporation (BDC), 40, 53, 54, 57 Broadway Management Corporation (BMC), 53–54, 56, 57 Broadway Medical Management Corporation, 233, 234, 235, 236, 241, 247 Broadway Shopping Center, 101 Broadway urban renewal proj­ect: alternative financing arrangements for, 47; approval of revised plans, 53; Area 3-­A, 36, 37–42, 41f, 45, 48f, 52f, 57–59; Area 3-­C , 30–31, 56–59; community distrust from, 86; completion of, 57; displacement of African American families, 42–46, 57, 58, 59–60; expansion of, 38–39; and housing units for African Americans, 42, 47–54; ­human impact of, 58, 59–60; new version of, 49–54; survey of relocatees, 59 Bromberg, Michael, 198 Bronk, Detlev, 45 Brown, Torrey, 97, 98, 99 Brown v. Topeka Board of Education (1954), 51, 60 Bud­get and Operations Committee (Johns Hopkins Hospital), 226 Bugbee, George, 21 bundled payments, 273, 274 Burns, Clarence H. “Du,” 95, 102f; negotiations on EBMP, 97; organ­ization of EBCC, 94, 96; po­liti­cal ties as liability, 231, 232, 233, 236; as politician, 95, 188 Burton, Harold, 21 businesses, African American-­owned, 43 Byrd, Robert, 205 Byrnes, John, 64 Cable, William, 193, 206 Califano, Joseph: on Car­ter’s options, 208; and cost-­containment proposal, 195, 196, 206; on delay of Car­ter’s proposal, 210; on DRG-­based system, 217; firing of, 214; on Johns Hopkins Hospital’s cost-­cutting success, 199; on need for revenue control, 197; promotion of Car­ter’s proposal, 201–2; on role of payment mechanisms, 198; on Voluntary Effort, 203

356 Index capital development, hospital: competitive cycle of, 77; by governments, 23; for hospital construction, 27; in Mary­land, 162; pursuit of, 11, 224; use of endowment funds for, 153–54 capital expenditures, hospital, 18, 66, 219; controls on, 196–97, 199–200, 201; and hospital planning, 199; limits on, 202, 212; and Medicare, 70; and Nixon cost-­ controls, 121; proposed moratorium on, HSCRC, 161; reimbursement of, 19, 67 capital grants: to Johns Hopkins Hospital, 23, 48, 57 “capital improvement allowance.” See “plus ­factor” in hospital cost calculations capitalism, shaping of U.S. health care system by, 8, 11, 72–73, 227, 276 capitated payments: and “Accountable Health Partnerships,” 252; and Columbia Medical Plan, 91; and community care networks, 253–54; and EBMP, 101, 104, 231; and Employee Health Plan, 263; and Medicaid, 99 care, quality of: and admission control mechanisms, 123; and cost control, 222; and efficiencies, 220–21; and hospital-­ acquired infections, 273; and integrated care networks, 274; by Johns Hopkins Hospital, 147; and low-­income neighborhoods, 279; by Patuxent/Chesapeake Physicians Group, 235; and racial health disparities, 8 CareFirst, 226 Car­ne­g ie Corporation, 97 Carney, J. Calvin, 43 Car­ter, Jimmy: cost-­containment proposal by, 172, 195–206, 212–14; lost opportunity for national health insurance, 206; and national health insurance, 193–97, 207–12; phasing in of national health insurance, 208, 209; public commitments by, 208; and T. Kennedy, 200, 210f, 211, 214–15; and UAW, 194, 215; and UDAG program, 181 Car­ter’s national health insurance bill, 208–12 catastrophic cost-­coverage bill (Long-­R ibicoff proposal), 115–16, 125, 126, 208, 212 Catholic Hospital Association, 254 Center for Medicare and Medicaid Ser­v ices, 283–84

Center for Research in Health Care Ser­v ices, 100 certificates of need (CON), 72, 93, 161, 176, 199 Certification and Review Committee (part of HSA), 176 Champion, Hale, 206 charity care: and Baltimore hospitals, 138; and BCH, 241; decline ­a fter World War II, 25; endowment funds for, 153–54; expenditures for, 16; and Hill-­Burton, 25; and Johns Hopkins Hospital, 156; and Medicare, 15, 65; by municipal hospitals, 245; public subsidies for, 10; and state bud­gets, 77 Charles Center urban renewal proj­ect, 56 Charleston, South Carolina, hospital strike in, 132 Cherry Hill Homes public housing proj­ect, 48 Chesapeake Physicians Professional Association (CPPA), 240 Chicago, Illinois, urban renewal proj­ects in, 33 Chick Webb Recreation Center, 40 chiefs of ser­v ice, 170 ­Children’s Bureau, 101 ­Children’s Medical Center, 23, 27 CHIP. See State C ­ hildren’s Health Insurance Program (S-­CHIP) churches, urban renewal proj­ects and, 56 Citizens for Fair Housing, 96, 183f Citizens Planning and Housing Association (Baltimore), 38, 38f, 39, 44–45 City Hospitals Commission, 239 City Planning Commission (Baltimore), 42, 51 Civil Rights Act (1964), passage of Medicare and, 73–76 civil rights activists, 73–74, 80 Cleveland, Ohio, 4–5 Cleveland Clinic, 276 Clinical Science Building, 28f clinic-­based health care ser­v ices, 19 Clinton, Bill, 251, 255–56, 258, 259 Clinton, Hillary, 249–50, 251 Clinton plan. See Health Security Act (B. Clinton) closed-­shop ­labor contracts, 133, 135 code enforcement, “Baltimore Plan” and, 37, 43 Cohen, Harold, 142, 153, 154, 161, 177 Cohen, Wilber, 80 collective-­bargaining, 130–31, 141, 144, 198 Colmers, John, 284



Index 357

Columbia, Mary­land, 84, 85–88, 165 Columbia HMO Plan, Blue Cross and purchase of, 230 Columbia Hospital and Clinics Foundation, 91, 92, 92f, 93 Columbia Medical Center, 92 Columbia Medical Group, 91 Columbia Medical Plan, 90–94, 92f; and Columbia Medical Center, 92; Edward Kennedy, endorsement of by, 91; funded by private insurance, 91, 93, 107, 189; and health care reform, 85, 87, 106–7; and Howard County General Hospital, 268; implementation of, 90–91; Johns Hopkins Hospital dissatisfaction with, 92–94; as link to suburbs, 87, 107, 269; patient satisfaction and, 91; purchase of, 226, 230; reor­ga­ni­za­t ion, 1974, 93–94 Columbia Town Center, 91 “comfort order,” 177 Commission on Hospital Care (of AHA), 19–20, 21 Committee for National Health Insurance, 112, 125, 126, 194 Commonwealth Fund, 85, 97 Communist Workers League of Baltimore, 137 Community Action Center, 144 Community Action Program, 132 community activists, 89, 96–97 community care networks, capitated payments and, 253–54 community development, health care spending and, 105 Community Development Block Grant (CDBG) Program, 181, 182, 186 community development corporations, 94–95. See also East Baltimore Community Corporation (EBCC) community health care, 104, 254, 268 Community Health Center Program, 113, 233–34 community health centers, 97, 113, 237 Community Health Council of Mary­land, 174, 175, 176 community ratings, HMOs and, 118 community responsibilities: and Johns Hopkins Hospital, 98, 164, 185, 187–88; and urban hospitals, 186 competition: and expansion, 168; and HMOs, 115, 262; and hospital city, 179; and

regional expansion of Johns Hopkins Hospital, 94, 219 competitive business practices, 70 competitive cycle of hospital capital development, 69, 77 competitive strategy of Johns Hopkins Hospital, 224–30, 233 “the compound” (Johns Hopkins apartment complex), 53, 54, 55f, 56, 57, 89, 181, 247 comprehensive health care, 118, 271 Comprehensive Health Insurance Plan (Nixon), 124, 317n40 Comprehensive Health Planning Agency, 71–72, 92 comprehensive neighborhood transformation, 276. See also urban renewal proj­ects compulsory participation in Kennedy-­Mills proposal, 124 computed axial tomographic (CAT) scanners, 160 computing systems, 171 Congressional Bud­get Office, 197 Congress of Industrial Organ­izations (CIO), 130. See also American Federation of Labor-­Congress of Industrial Organ­ izations (AFL-­CIO) Congress of Racial Equality, 96 Connally, John, 119 Connecticut General Life Insurance, 91, 92–93 Consolidated Omnibus Bud­get Reconciliation Act (1985), 219 construction, hospital: borrowing for, 68–72; and certificate-­of-­need laws, 72; and Commission on Hospital Care, 21; debt financing of, 164; debt through the bond market, 121–22; encouraging overbuilding through Hill-­Burton, 22; federal aid for, 20–21, 23; and Hill-­Burton hospital loan and grant program, 15, 22; by Johns Hopkins Hospital, 27–29, 247–48; loans from HHFA for, 49; and Medicare payments, 219; and regional hospital planning, 219; use of endowment funds for, 153–54; use of tax-­exempt bonds for, 172; and World War II, 19 consumer cost-­sharing, Kennedy-­Mills proposal and, 124 consumer price index and decline in health care costs, 120

358 Index continuity of care, 260–61 Cook, Jack, 147, 156, 159, 161 Cooper, John, Jr., 134, 135 copayment system for Medicaid recipients in Mary­land, 79, 80 Corman, Jim, 208, 212 corruption of EBCC management, 232–33 cost-­based reimbursement, 66 cost-­control bills: and Car­ter administration, 162, 163, 172, 193–94, 195–206, 212–14; capital controls through Title I; and national health insurance, 126, 195, 197, 201–2; reimbursement limit through Title I, 199–200 cost-­control programs: and hospital capital finance, 121; voluntary, 202–3 cost controls, hospital, 79, 206, 208, 212–13, 222; by ACA, 272–73; broad approaches to, 209; and Car­ter, 172, 195–206, 214; and HMOs, 118, 119; and managed care, 250, 263–65, 264; and market forces, 252–53; and national health insurance, 126, 193–94, 195–202, 207, 215; and Nelson committee report, 137; Nixon price control, 119–23; and prospective payment systems, 220; and Social Security Act, 117; and Talmadge bill, 203; through regional health planning systems, 160; and T. Kennedy, 211; and u ­ nions, 142; wage concessions as threat to, 142; without federal regulation, 172 “Cost Improvement Program,” 171–72 cost-­of-­living concerns: and hospital strikes, 144 Cost of Living Council, 119, 120, 121–22, 140 cost per patient, average daily, 122 “cost-­push inflation,” 119 cost-­reduction incentives: and prepayment basis, 118 cost regulation, hospital, 215 costs, hospital: and bed capacity, 162; benchmarking programs for, 284; and difficulty of health care reform, 278; elimination of private insurers to solve, 281–82; and HMOs, 223; increases in, 119; and inflation prob­lem, 204; lower growth rate for, 283–84; in Mary­land, 137, 162–63; Medicaid spending and rising, 77; and Medicare for All system, 282; and payment mechanisms, 198; p ­ eople not

feeling affected by, 205; and prospective payment system, 216; reduction in among Medicare recipients, 284; and voluntary cost-­controls, 202, 215; and wage levels, 162 cost-­savings, prospective payments and, 221 cost-­sharing, employee, 208, 252 Council for Hospital Affairs, 137 Council of Teaching Hospitals, phase IV regulations and, 122 Council on Price Stability, 162 COVID-19 pandemic, 9, 277–79 crime, urban renewal proj­ects and, 34 Crosby, Edwin, 130 “cross-­f unctional teams,” 171 cross-­subsidizing high-­cost ser­v ices, 160–61 D’Alesandro, Thomas, Jr., 43, 53, 95 D’Alesandro, Thomas “Young Tommy,” III, 95 David Rubenstein Child Health Building, 31 Davidson, Richard: on AHA support for universal coverage, 253; on HSCRC trou­bles, 151; on loss of revenue for hospitals, 255, 256, 257, 258; on minimizing competition, 254 Davis, Karen, 162, 217 Dea Bing-­Horn, 30 Dea Mae-­Hor, 30–31 debt financing: as emerging strategy, 169; and expansion of Johns Hopkins Hospital, 164, 177; in Mary­land, 162; of Provident Hospital, 179; renovations of Johns Hopkins Hospital through, 106, 170 debt ser­v ice, as research cost, 28 decentralization, 165–66, 170–72, 177, 199 deductibles, National Health Insurance Partnership and, 115 deed covenants, racially restrictive, 46 “defined benefit” vs. “defined contribution” programs, 258 deindustrialization, health care and, 8, 235 Demo­cratic Party, health care reform and, 194 de­mo­li­t ion of housing, Broadway proj­ect and, 46, 47–48, 52f, 56, 57–58 dental clinics, 101 Department of Health (Mary­land), 176 Department of Health and Welfare (Baltimore), 101 Department of Housing and Community Development (Baltimore), 182



Index 359

the Depression, hospitals during, 16 desegregation of hospitals, 73–76 Detroit, Ohio, 5 Detroit Medical Center, urban renewal proj­ects and, 35 diagnosis-­related groups (DRGs), 216–17, 219, 220, 221 Dingell, John, Sr., 19 disability insurance, 117, 218 discrimination: in employment, 76; in medical schools, 75, 76; in patient care, 76 disenrollment prob­lems: and EBMP, 104, 236 disparities, discount: and Blue Cross, 150–51 disparities, health, 25–26, 254; and race, 7–9, 278–79 displacement, residential: of African Americans, 33, 39, 42–46, 49, 57, 58; and EBDI, 277; and Jefferson Court, 185–86; and rehousing, 60; surveys of relocatees, 59 disproportionate share hospital (DSH) payments, 219–20, 255, 256, 261–62 Dole, Robert, 201 Dome Corporation, 246, 248 Dominick, Peter, 118 dormitory, medical. See Reed Hall medical dormitory Douglas neighborhood (Chicago), 33 Douglass, Robert: on commitment to black physicians, 98; on EBMP board, 237; negotiations on EBMP, 97; and organ­ ization of EBCC, 94, 96; po­liti­cal ties as liability, 231, 232, 233, 236; as politician, 95 Douglass Homes public housing proj­ect, 48f, 58, 59, 277 “DRG creep,” 220 Druid City Hospital (Alabama), 35 “dual ‘public’ hospital system,” 19 Duke University Hospital, 135 Dunbar High School, 40, 48f, 55f, 89, 94, 96, 236–37 Dunlop, John, 121–22 East Baltimore, Mary­land: comprehensive medical care for, 94–107; relationship with EBMP, 236–37; reliance of patients on Medicaid, 99, 228 East Baltimore Community Corporation (EBCC): administrative authority over EBMP, 99–101; management prob­lems of, 232–33; fighting takeover, 237; founding

of, 94–96; HHS investigation of, 232–34; on inclusion of affirmative action condition, 176; po­liti­cal connections of, 95, 231–32; separation from EBMP, 233, 234, 236–37 East Baltimore Development Initiative (EBDI), 276–77, 280 East Baltimore Medical Center, 9f, 102f, 103f East Baltimore Medical Plan (EBMP): administrative authority over, 99–101; absorption into Johns Hopkins Health Plan, 237; “Action Plan” for, 236; and associational state, 234; and community health fairs, 238; core challenges for, 235–37; displacement of physicians, 97; enrollment in, 103–4, 236; financing structure of, 98, 101, 189, 234–35; and health care reform, 106–7; as HMO, 236; and Johns Hopkins Hospital’s competitive strategy, 233; and l­ abor conflicts, 232; medicine to solve social prob­lems, 105, 261; po­liti­cal connections of, 231–32; poor management of, 232–34; and racial disparities, 175; relationship with East Baltimore community, 128–29, 236–37; separation from EBCC, 233, 234, 236–37; takeover of, 230–38; use of allied health professionals, 102–3 Eastern District Health Center, 40 Eastside Demo­cratic Organ­ization, 95, 134–35 economic development efforts, public-­ private, 214 economic inequalities between city and suburb, 228 Economic Stabilization Program, 119–23, 126, 136–37, 140; rise in health expenditures following removal, 193 Edwards, Willarda, 261 efficiencies in patient care, 122, 201, 202, 220–21, 224, 273, 274 Eisenhower, Dwight D., 45 Eisenhower, Milton, 87 Eizenstat, Stuart, 195, 196, 207, 208, 210, 211, 213 “Eldercare,” 64 el­derly, Medicare and Medicaid coverage for, 64–65 Ellwood, Paul, 115 Emergency Maternity and Infant Care (EMIC) (U.S. Public Health Ser­v ice), 19

360 Index eminent domain for hospital expansion, 31–32 employee cost-­sharing, 208, 252 employee coverage, shift to HMOs, 221 Employee Health Plan, 263 employer-­provided health care, 114; and competitiveness of American manufacturers, 112; and HMO option, 118; mandates for, 124, 212, 252, 271; shift of costs from Medicare to, 221 employment, hospital: affirmative action plans for, 175–76; of African Americans in Johns Hopkins Hospital, 40; by BCH, 244; discrimination in, 76; increase in, 24; and insurance plans, 17; in Johns Hopkins Health System, 248 endowment funds, 153–54, 156, 170 enrollment: in JHHP, 238; in Medicaid, 251 Enterprise Foundation, 188–89 entitlement benefits, 80, 194, 258–59 environmental ­hazards, 281 Episcopal churches, 56 ethnic associations, support of separate hospitals by, 23, 69 Ewing, Edgar, 44 “executive federalism,” 260 expansion, hospital: eminent domain for, 31–32; Johns Hopkins Hospital, pledge to limit, 89; for parking, 34 expansions, regional: of Johns Hopkins Hospital, 94, 267, 268–69 experience ratings, 119 Fahy, Sarah, 185 Falk, I. S., 112 “­Family Health Insurance Plan,” 114 Farm Security Administration (FSA), 19 Fearheller, David, 199, 200 Featherstone, James, 180 federal funding: for hospital construction, 20–21; for medical research, 24 Federal Housing Administration (FHA), 37, 45, 47, 69 Federal Trade Commission (FTC), 283 Federation of American Hospitals (FAH), 199, 201, 202 fee-­for-­service payment structure: and AMA, 85, 117, 118; and EBMP, 97; and hospital cost crisis, 162; and insurance com­pany payment model, 6, 84; and Medicare

reimbursement formula, 67; and “overtreatment,” 273 Fein, Rashi, 61 Feinblatt, Eugene, 90, 166, 167 Feinblatt report, 89–90, 105, 165–66, 167 Feldstein, Martin, 115, 162 “festival marketplaces,” 84 financing structures. See capital development; debt financing; insurance com­pany payment model; prepaid group medical practices; subscriber prepayment Fine, Max, 112, 215 First Boston financial con­sul­tants, 168 501(c)(3) nonprofit corporations, 234 550 Broadway Building, 56, 57 Foley, Tom, 257 Folk, James, 59 Food Fair (grocery store), 55 food needs, 281 food stamp entitlements, 144, 258 Ford, Gerald, 125, 126, 141 Ford Foundation, 90, 188 for-­profit operations: creation of Johns Hopkins Hospital subsidiary, 229; reflected in hospital city, 141–42 Fortune, 172 Francis Scott Key Medical Center, 243, 244, 247, 248 Franklin Square Hospital, 150, 154 Fraser, Douglas, 200 FreeState Health Plan, 233 Frist, William, 225 funding: for Columbia Medical Program, 91; for EBMP, 99–101, 189, 234–35; for Health Security Act (B. Clinton), 255; Hill-­Burton as capital funding program, 23, 27; for medical research facilities, 24, 27–28; Medicare and Medicaid as source of capital funding, 68, 70 fund-­raising campaigns, 173, 179 Gage, Lawrence, 256 Gallagher, Francis X., 79 Gardner, John, 67, 74, 111–12 gatekeepers, 250, 253, 261 Gay Street urban renewal proj­ect, 86, 96 General Electric, 141 gentrification, 187 Georgetown University Hospital, 267 Georgia, use of DRG system in, 216



Index 361

Gephardt, Richard, 214 Goldman, Lee, 116 Good Samaritan Hospital, 267 Gordon, Kermit, 26, 61, 62, 66 Gordon, Lincoln, 87, 90 Gorham, Lucille: on Burns, 95; as community leader, 182, 183f; displacement of, 59–60, 277; on EBCC committees, 96; on Jefferson and McElderry Court proj­ects, 186; on JHH boundary extension, 183–84; on JHH community relations, 187, 189 “gradualism” (Nixon), 119 grants, federal matching, 23, 25, 34–35, 64 grants, state, 179 “grants-­in-­a id,” 34–35 Greater Baltimore Committee (GBC), 82, 86, 167, 242–43 Greater Baltimore Medical Center, 75, 140, 144 Green, Sampson, 80 Greenspan, Alan, 218 Green Spring Station suburb, 266 Gropius, Walter, 33 Group Health Association of Amer­i­ca, 85, 213 Group Health Cooperative of Puget Sound, 85 Group Health Plan of New York, 18 guaranteed inpatient revenue (GIR), 160 Hackerman-­Patz Patient and F ­ amily Pavilion, 31 Hall, Joseph, 166, 167 Halsted Surgical building, 168 Hammer, Emma Bush, 43 Harriet Lane Home for Invalid C ­ hildren, 27 Harris, Patricia, 214 Hayes, John, 130 HealthAmerica Corporation, 225 Health and Higher Educational Facilities Authority. See Mary­land Health and Higher Educational Facilities Authority “health associates,” 103 health care: and “associational state,” 10–11; as dominant local economic sector, 4–6, 10, 147–48, 235; HMOs as market-­based solutions in, 118; lost opportunity for major shift in, 206; market-­oriented approach to, 124, 219; and nonmedical technological change, 171; and World War II, 16

“health care advocates,” 101–2 health care capitalism, 72, 227; and deindustrialization, 235 health care costs, 5; above the rate of inflation, 67; and community development, 105; and competitive expansion, 168; decline in, 120; higher prices in U.S. for, 4, 281; and hospital-­labor relations, 136–37, 141–46; hospitals as cause of rise in, 197; and insurance com­pany payment model, 72, 222; Johns Hopkins Hospital and rising, 136; and l­ abor u ­ nions, 147; and national health bud­get, 117; and Nixon’s price-­wage controls, 193; and per admission revenue limits, 198; and provider pricing power, 274; slowing of, 260; as threat to ACA, 271 health care delivery reform, community control of, 99–101 health c­ areers programs, 236–37 Health Care Financing Administration, 149 “health care nation,” 2 health care policy, TEFRA and, 217 health care reform: and Demo­cratic Party, 194; hospital costs and difficulty of, 2, 3, 7, 16, 123, 194, 249–50, 257, 278; po­liti­cal maneuvers of, 116–17; profitability in, 7 health care sector: expansion of AFL-­CIO into, 131; regulations for, 120 health care-­sector institutions: as jobs program, 157 health care ser­v ices: in Baltimore’s economy, 4–5, 8–10, 245 “health care specialists,” 102f health care systems: and capitalism, 11; hospitals as core of, 278; racial disparities in practice, 175 “health care tourism,” 276 health centers, community, 97, 113, 237 HealthChoice, 261, 262 health cooperatives, rural, 85 Health Corporation of Amer­i­ca, 241 health disparities, 254, 278–79 health economics, 3–4 health equity, discount disparity and, 150 health fairs, EBMP and, 238 Health Industry Manufacturers Association, 202 health insurance, corporate, 17

362 Index health insurance, national, 112–19, 123–26, 207, 210f; bud­get for, 113, 117; as containing inflation, 208–9; failure to move forward on, 212; fiscally responsible approach to, 211; and hospital cost containment, 126, 193–202, 215; push for, 129; and rise of hospital city, 193; and Rostenkowski bill, 203; and UAW, 200, 210; and u ­ nions, 126 health insurance, private, 11, 17, 118–19, 124, 208, 221, 281–82 Health Insurance Association of Amer­i­ca, 199, 202 Health Insurance Benefits Advisory Council (HIBAC), 61, 66, 67 health insurance industry: in hospital cost increases, 205; national health insurance proposals by, 115; opposition to Nixon plan, 125; role for, 214; and voluntary effort, 202–3, 204 Health Insurance Industry of Amer­i­ca, 204 health insurance market exchanges, 271–72 Health Insurance Plan of Greater New York (HIP), 84, 85 Health Maintenance Organ­ization Act (1973), 117–19, 223 health maintenance organ­izations (HMOs): absorption of EBMP into Johns Hopkins health plan, 237; and academic medical centers, 223–24; and competition, 115, 262; EBMP as, 236; and extension of Medicare coverage, 117; federal subsidies for, 223; and hospitalization rates, 224; Johns Hopkins Health Plan as, 238; Johns Hopkins Health System as, 247–48; Johns Hopkins Hospital acquisition of, 226, 229; Johns Hopkins Hospital and threats from, 224; and market-­based solutions in health care, 118; and Medicaid, 261; and negotiations between HSCRC, 263; origins of, 215; prepayment princi­ples of, 231; private insurers vs., 118–19; shift to for employee coverage, 221; and TEFRA, 217 health policy research, 216 health prob­lems, social ­factors of, 280 Health Sciences Library, 36 Health Security Act (B. Clinton), 250, 251–57 Health Security Act (T. Kennedy), 112–15, 125, 194, 195, 196–97 Health Ser­v ices Industry Committee, 120

Health Systems Agency. See Mary­land Health Systems Agency (HSA) Helix Health System, 267, 268 Herzinger, Henry, 59 HEW. See U.S. Department of Health, Education, and Welfare (HEW) Heyssel, Robert, 178f; acquisition of BCH, 240, 241, 242; and advanced-­care facilities, 160; and authority of HSCRC, 154, 155, 156, 158–59; background of, 90–91; and Car­ter bill, 199; on challenges to Johns Hopkins Hospital, 225–29, 246, 262; construction program for Johns Hopkins Hospital, 121, 178; on EBMP board, 237; on funding for EBMP, 98, 233, 234; on funding of non-­Medicaid coverage, 99; and health care reform, 106–7; hiring of Phillips, 141; and HMOs, 225–26; impact of phase IV on teaching hospitals, 122; and internal decentralization, 170, 171, 177; on medicine for social prob­lems, 104–5; and M ­ iddle East redevelopment, 183–84, 185, 187–88; partnership with EBCC, 94, 97, 100–101; profitability of Johns Hopkins Hospital, 244, 248; soured on suburb experiment, 92; and u ­ nion demands, 142–43, 145 HHFA. See Housing and Home Finance Agency (HHFA) Hill, Barbara, 235, 236, 237, 238, 262 Hill, Lister, 21, 24 Hill-­Burton Act (1946), 20–25; 1964 amendments and modernization, 25–26; creation of regional hospital systems through, 22; encouraging overbuilding through, 22; and hospital construction, 15; and hospital desegregation, 73; hospital surveys, 26; and Physicians for a National Health Program framework, 282; and Michael ­Reese Hospital, 33; and planning councils, 22–23; and Provident Hospital, 179; rural-­urban disparity in, 25–26; segregated health care through, 24–25 “historic provider” carve-­out, 261 HMOs. See health maintenance organ­ izations (HMOs) Hobbs, Clark, 45 Hoffberger ­family, 23 Hollyday, Guy, 32, 37, 45 Homewood Hospital Center, 247 Hopkins, Johns, 82



Index 363

horizontal consolidation, market power and, 274 hospital associations: prospective payment system, support for, 220; and voluntary cost-­controls, 202 hospital care: increase in, 24; as more expensive than other health care delivery, 24; spending on, 5 hospital city: and associational actors, 230; Baltimore’s transition to, 133; building of by Hill-­Burton program, 29; competitive landscape of, 122, 179; defined, 1; economic power of health care in, 129, 235, 254–55; emergence of, 61–62; employment of minority w ­ omen in, 129; global presence of, 276; growth of, 15; jobs in, 129; jobs programs in, 275; and neighborhood segregation, 279; as neoliberal, 280–81; racial in­equality, 2; reflecting for-­profit businesses, 141–42; rise of and failure to achieve national health care, 193 Hospital Corporation of Amer­i­ca, 225, 226, 240 Hospital Council of Greater New York, 22 Hospital Council of Mary­land, 136 hospital finance. See insurance com­pany payment model. See also debt financing. Hospital Financing Study Group, 71, 199 hospital industry: and ACA’s cost-­control components, 272–73; antitrust actions against, 282–83; economic and po­liti­cal power of, 61; and Health Security Act (B. Clinton), 254–56; and national health insurance debate, 209; and phase IV regulations, 122; proposed consolidation of, in Mary­land, 161; preservation of Medicaid as entitlement, 258–59 hospital insurance, employment-­based, 24 hospital insurance coverage, 16–18 hospitalization rates: decline in at public hospitals, 261; and HMOs, 223; and hospital beds, 161; increase in, 24 hospital ­labor costs: in Mary­land, 136 hospital-­labor relations: and health care costs, 136–37 hospital lobby: and failure to pass cost containment, 214; and Rostenkowski bill, 203; and Voluntary Effort, 213; wanting universal coverage, 253 hospital management companies, 224

hospital payments, “reasonable cost” standard and, 77 hospital planning, 22–23, 199, 200 hospital rate regulations, 121; and HSCRC, 141; public utility model for, 137 hospital rates: blanket freeze on, 151; Blue Cross, 152; cut by HSCRC, 151; HSCRC’s authority over, 151, 153; request from Johns Hopkins Hospital to HSCRC for, 145–47, 153 hospital reimbursement formula, 61, 62 hospitals: acquisitions of physician practices, 274; collective-­bargaining rights in, 130–31, 141; competition between, 228; concessions from, 139–40, 141; as core of health care system, 278; cost control for, 79; and deindustrialization, 5; and the Depression, 16; desegregation of, 75, 76; as dominant economic sector, 5–6, 68, 254–55; DSH payments as source of revenue, 220; evaluation of rates by HSCRC, 139; financial stability of, 283; as generating inflation, 215; health purpose of social action by, 281; incentives to own health centers, 237; increased private control of, 70–71; in inner-­city neighborhoods, 275; and insurance com­pany payment model, 17; and l­ abor relations, 139, 141–46; length of stay, 161; loss of revenue for, 256–57; managed care as threat to, 265; mergers among, 274; modernization of, 25–26; mortgage insurance for, 69; new capital resources, 68–69; as “not-­for-­profit,” 71; “payments in lieu of taxes” by, 281; price increases, 169; and pricing power, 285; as profit-­oriented businesses, 6–7, 172–73; and prospective payments, 219, 222; and regulatory commissions, 79; reimbursement formula ­u nder Medicare, 62; reimbursing for capital expenses, 19; removal from pricing system, 282; and rise of health care costs, 197; suburban locations of, 7, 83, 150; transformed into social institutions, 282, 285; u ­ nion organ­izing of, 127; as unquestioned good, 20; and urban renewal, 32–33; voluntary ideal, 68 hospitals, Baltimore: and bad debts, 138 hospitals, municipal: charitable function of, 245

364 Index hospitals, private: and Medicaid, 261 hospitals, private nonprofit: and hospital construction, 19 hospitals, public: closing of, 239; decline in admissions to, 261; and New Deal, 16 hospitals, suburban: access to advanced medical technology, 227; appeal to Johns Hopkins Hospital, 269; competition with, 169 hospitals, urban: and community responsibilities, 186; and Medicare reductions, 256–57; and universal coverage, 256 hospitals, voluntary, 16, 18–19, 71, 227 hospital spending: caps on, 282, 283–84 Hospital Survey and Construction Act. See Hill-­Burton Act (1946) hospital systems: inequalities within, 278–79; planning of, 71–72 hospital systems, regional: and Hill-­Burton, 22 hospital workers: wage levels for, 129; ­women as, 127 “­hotel costs,” 117, 203, 204 ­hotel proj­ects, 55, 56, 57 house­keeping workers, 170 housing: and African American residents, 39, 42, 47–54; and Broadway proj­ect, 39; as too complex for hospitals, 281; and urban renewal, 50–53 housing, affordable, 187; “payments in lieu of taxes” for, 281; and UDAG grants, 182 housing, de­mo­li­t ion of, 46, 47–48, 52f, 56, 57–58 housing, public. See also housing proj­ects: and Baltimore Plan, 38, 44, 50; and displacement, 33, 39; inadequacy of, 46; open occupancy of, 51–52 Housing Act (1949), 32, 33, 34–36, 47 Housing Act (1950), 49 Housing Act (1954), 50 Housing Act (Section 112), 34–36 Housing Act (Section 608), 47 Housing and Home Finance Agency (HHFA), 35, 47. See also Federal Housing Administration (FHA); construction loans from, 49; to end support of redevelopment, 46; grant for Broadway proj­ect, 48 Housing and Urban Development Act (1968), 69–70 Housing Bureau of the Baltimore Health Department, 37

housing proj­ects. See also housing, public; Jefferson Court housing proj­ect: and institutional self-­interest, 280; and Johns Hopkins Hospital, 186, 245; segregation of, 39–40, 51–52, 60 housing reformers, Baltimore Plan and, 38 Houston, Texas, 5 Howard County General Hospital, 93–94, 93f, 267–69 HSA. See Mary­land Health Systems Agency (HSA) HSCRC. See Mary­land Health Ser­v ices Cost Review Commission (HSCRC) HUD. See U.S. Department of Housing and Urban Development (HUD) ­human impact of urban renewal, 58–60, 277 Humphrey, Hubert, 194 Hunterian II building, 28 Hussey, Peter, 4 Illinois Institute of Technology, 33 In Critical Condition (T. Kennedy), 113 in­de­pen­dent practice associations: and HMOs, 118 indigent care, 78, 240, 241, 242. See also charity care industrial facilities as highly segregated, 133 industrial purposes, city bonds for, 234–35 infections, hospital-­acquired, 273 inflation, 156; contained by national health insurance, 208–9; generated by hospitals, 215; and hospital costs, 204; and l­ abor pass-­t hroughs, 162; and Medicare, 66; Rostenkowski bill as control mea­sure for, 203; and voluntary restraint, 203 “inflation adjustment system,” 159, 160 informed insurance choices, 253 inner-­city neighborhoods: academic medical centers in, 275; addressing of prob­lems by institutions, 167 Inner Harbor Marketplace, 37, 84, 182 institutional bound­a ries, long-­term, 183–84 institutional owner­ship, 49 institutional self-­interest, 280 institutions, inner city prob­lems addressed by, 167 insurance com­pany payment model: and competitive profit-­seeking, 2–3, 70, 77; and emphasis on hospital sector, 6; overinvestment in hospitals, 278; and prepaid group



Index 365

medical practices, 19; and pricing power, 281; and public-­private financing, 245; and rising health care costs, 72 integrated care networks, 274, 275–76 investment, private: in urban renewal programs, 55–56 Irby, Nathan, 86, 96 Isaac, Reginald, 33 “It’s the Prices, Stupid” (Anderson, et al.), 4 Jackson, Henry “Scoop,” 194 Javits, Jacob, 63 Jefferson Court housing proj­ect, 185–87 jobs programs, 143, 145, 157, 275, 281 Johns, Michael, 267 “Johns Hopkins Aramco,” 276 Johns Hopkins Bayview Medical Center, 243f, 244, 266 Johns Hopkins Center for Urban Affairs, 90 Johns Hopkins Co­a li­t ion for a ­Free South Africa, 187–88 Johns Hopkins Community Physicians, 275 Johns Hopkins Health Plan (JHHP), 238, 247, 262, 266 Johns Hopkins Health System, 9, 10, 243f, 247, 262, 276 Johns Hopkins Hospital, 28f, 52f. See also Broadway Medical Management Corporation; ­Children’s Medical Center; and ACA, 275–76; acquisition of BCH, 238–45; acquisition of EBMP, 231, 237, 245; acquisitions by, 247, 266, 275; acquisition strategy of, 247; admitting privileges to, 97; affiliation with additional hospitals, 266–67; and assassination of MLK, 88–89; and associational state, 234; bond market for construction by, 172, 177–78; and Broadway 3-­C renewal proj­ect, 30–31, 56; and Broadway proj­ect, 30–31, 39, 43, 45, 47, 53–54, 56; bud­getary and administrative structure of, 86, 170–72; capital grants for, 48, 57; collective-­bargaining at, 133–135, 137, 140, 141, 142–45; commitment to local black physicians, 97–98; community engagement by, 54, 86–88, 98, 167–68, 181, 187–88; and community redevelopment, 180–89; community responsibilities of, 82–83, 86–88, 131, 164, 185, 224; competition with suburban hospitals, 169; competitive pressures on, 225–30;

competitive strategy of, 233; comprehensive medical care for East Baltimore, 94–107; and comprehensive neighborhood transformation, 90, 105–106, 276–77; construction of new facilities by, 247–48; and continuity of care, 260–61; contribution to community’s economic stress, 105; and cost-­control structures, 121–22; creation of Johns Hopkins Health System, 247; creation of managed-­care organ­ ization, 262–63; cross subsidy use by, 160–61; debt financing of, 106, 164, 177; decentralization program of, 165–66, 177, 199; declines in total patient days, 246; and discount disparity, 150; economic footprint of, 168; elimination of African American housing by, 52–53, 54; and endowment funds, 153–54, 156; expansion and modernization of, 36, 89, 173–79; gaining of market share, 246–47; global presence of, 276; and HMOs, 224, 226, 229; and HSCRC, 140, 156; layoff of workers, 146–47; linkage with Provident Hospital, 179–80; location of, 8; long-­range planning of, 225–26; and low-­income health care, 82–83, 235, 241; market orientation of, 177–78, 225; and McElderry Court, 186–87; and Medicaid cuts, 80; medical approach to social prob­lems by, 105–6, 188; mergers with, 267; “most-­ favored nation” clause at, 143–44; move into the suburbs, 165–67; and national ­labor policy, 130–31; and neighborhood planning, 90; operating losses, 169–70; and “pass-­t hroughs,” 121; patient referrals, 226, 228, 235; Phase I of building proj­ect, 168–72, 173; Phase II of building proj­ect, 173–76, 178, 178f; public status of, 136; purchase of Howard County General, 268–69; quality of care by, 147; racial practices at, 60, 75–76, 132–35, 174–76; rate cuts, 158; rate increase application to HSCRC, 145–47, 153, 154–59; rate of cost growth, 156, 172; recipient of Hill-­Burton funds, 27–29; regional expansion of, 94, 219, 267; relationship with Columbia, 85–88; renovations to, 106, 167, 168, 173–79; rising costs of health care, 136; social function of, 134, 155, 157–58; staff appointments to, 97; strategic plan of, 227,

366 Index Johns Hopkins Hospital (continued) 229–30; strikes at, 143f, 153, 232; and training programs, 143; and transfer of medical dormitory site, 49; and u ­ nions, 127–29, 128f, 130–35, 139, 140, 145; wage increases at, 131 Johns Hopkins Medical Partnership, 91, 93–94, 100, 101 Johns Hopkins Medicine, 267, 268 Johns Hopkins Medicine International, 276 Johns Hopkins Office of Health Care Programs, 106 Johns Hopkins Oncology Center, 159, 168, 169, 173 Johns Hopkins University, response to MLK assassination at, 90 Johnson, Lyndon B., 26, 63, 64, 65, 111, 207 Johnson, Paula, 237 joint ventures, 229 Jones, Stanley, 111 Kaiser Foundation Health Plan, 18, 19 Kaiser Permanente, 85 Kapiloff, Bernard, 140 Keith, Nathaniel, 46 Kennedy, John F., 51, 65 Kennedy, Ted, 114f; and ACA, 271; and challenges of health care debate, 117; concessions on health bill, 208; division with Car­ter, 200, 206, 210f, 214–15; failure to move forward on national health insurance, 212; and HMOs, 118, 119; and hospital cost containment, 201, 211; and Kennedy-­Mills proposal, 124–25; and limiting hospital costs, 193–94; and national health insurance, 207; and Nelson amendment, 204–5; praise of Columbia Medical Group, 91–92; recruited to lead fight for Health Security Act, 113; return to Health Security Act, 195; shaping of Demo­cratic platform, 116; support of Car­ter’s bill, 197–98; and u ­ nions, 209–10 Kennedy-­Mills proposal, 124–25 Kerr-­Mills program, 64 King, Coretta Scott, 127–28, 128f, 132 King, Martin Luther, Jr., 88–89, 90 Klicka, Karl, 34 Knott, Henry, 37, 38, 40, 49, 53, 54 Kopechne, Mary Jo, 113 Kowal, Robert, 264

l­ abor, hospital: and hospital cost crisis, 162 ­labor costs, 155; and wage settlements, 169–70 ­labor issues, 158 ­labor management: professionalization of, 141 ­labor movements, 125; and Health Security Act, 113 ­labor policy, shaping of by Johns Hopkins Hospital, 130–31 ­labor relations, hospital: and health care costs, 136–37; and hospitals, 139, 141–46; and HSCRC, 145–47 ­labor ­u nions, 208. See also American Federation of Labor-­Congress of Industrial Organ­izations (AFL-­CIO); Congress of Industrial Organ­izations (CIO); Local 1199E; United Automobile Workers (UAW); and cost-­containment bill, 201; and EBMP, 232; and health care inflation, 147; and national health insurance, 125, 126, 207; position on cost-­containment initiative, 196; support of Nelson’s amendment, 204 La Guardia, Fiorello, 84 Lanahan, W. Wallace, 130–31 Langdale, Alabama, 21–22 Lanham Act (1941), 19 Lawson, Quentin, 233 ­Legal Aid Bureau (Baltimore), 156, 158 ­Legal Defense Fund (of the NAACP), 73, 74 Levi, Julian, 33–34, 35, 135 Levi, Robert, 134, 229 Lewin-­V HI consulting firm, 256, 257 Liberty Medical Center, 180 LifeBridge Health, 267 life insurance companies, 70 Local 1199E, 128f; civil rights emphasis of, 132–35; and concessions from hospitals, 139–40; on discrimination of African American employees, 174; and EBMP, 232; and hospital strikes, 142, 143f, 145, 146f; and l­ abor costs, 169–70; layoff of workers at Johns Hopkins Hospital, 146–47; legitimacy of, 135; and “most-­favored nation” clause, 143–44; negotiations with Johns Hopkins Hospital, 140; ­u nionization of Johns Hopkins Hospital, 127–29 Local 1199 Organ­izing Committee, 135 Long, Russell, 67, 115–17, 125, 198, 201, 208, 212 Long-­R ibicoff bill (catastrophic care bill), 115–16, 125, 126, 212



Index 367

Long-­Talmadge-­R ibicoff bill, 208 low-­i ncome health care. See also charity care; indigent care: and DSH payments, 219, 255; and financial stability of hospitals, 283; and Johns Hopkins Hospital, 82–83, 224; quality of, 7, 279; through EBMP, 235 Lutheran Hospital, 93, 140, 142, 180 MacConnell, Sally, 188 Madison, Stan, 97 Magaziner, Ira, 251, 254 managed care: and competition for contracts, 266; to control hospital costs, 264; corporations use of, 118, 250; and hospital cost control, 250, 263–65; and HSCRC, 263–65; and Johns Hopkins Hospital, 262–63; and Medicaid, 260–63; and regional health alliances, 253 “managed competition,” 249, 251 “managed cooperation,” 249 man­ag­ers, nonphysician, 172 mandates: for employer-­provided insurance, 124; hospital cost containment bill, 213; and “National Health Insurance Standards Act,” 114 Mandel, Marvin, 80, 99, 137, 138, 139, 142, 152 manufacturing, American: as less competitive, 112; long decline in, 129 manufacturing centers: Baltimore as, 8; hospital employment in, 5 Marburg medical building, 173 market forces: and cost control, 252–53; and health care, 3, 124; and Johns Hopkins Hospital, 225; and Medicaid, 260 market shares: competition between HMOs for, 262; and hospital mergers, 265; Johns Hopkins Hospital and emphasis on, 227; Johns Hopkins Hospital and gaining of, 246–47 Mary­land: “all-­payer” cost-­control model, 150; certificate-­of-­need laws in, 72; competition between hospital in, 228; containment of u ­ nions to control hospital costs, 142; Hill-­Burton hospital survey of, 26; hospital capital development in, 162; hospital costs in, 137, 162–63, 263; as leader in hospital cost control, 10, 283–84; Medicaid in, 77–81, 231; urban redevelopment legislation in, 36

Mary­land Community Development Administration, 186 Mary­land General Hospital, 27, 75, 140, 144 Mary­land Health and Higher Educational Facilities Authority: and BCH, 239; issuance of tax-­exempt bonds, 168, 173, 177, 178, 248; and Provident Hospital, 179 Mary­land Health Planning and Development Agency, 176 Mary­land Health Ser­v ices Cost Review Commission (HSCRC): and advanced-­ care facilities, 160; “all-­payer” cost-­control model, 150, 264, 283–84; authority to approve hospital rates, 145–47, 151, 153, 154–59; and Blue Cross, 150–52; change to regulatory structure, 264; and collective-­ bargaining rights, AFL-­CIO’s view of, 198; competition between hospitals, 228; and concessions, 142; and cross subsidies, 160–61; and DRG system, 216; exemption from federal Prospective Payment System, 246; hospital rate regulation system, 152, 153–59; hospitals prospering ­u nder, 163; “inflation adjustment system,” 159; and ­labor relations in hospitals, 139, 140, 147; leader in hospital cost control, 10, 149, 162–63, 283; and managed care, 263–65; moratorium on new hospital capacity proj­ects, 161; and outpatient ser­v ices, 237; patient rate approval of Johns Hopkins Hospital, 177; and race neutrality, 157–58; rate-­control methodology of, 159–60, 264–65; rate review formulas of, 140, 141, 149–50, 159–60, 199; rate-­setting by, 140; rate-­setting waiver for Medicare/ Medicaid, 152, 246, 264, 283–84; regulation of hospital rates, start of, 141; regulatory approach to cost control, 149–50; and wage rates, 139, 140, 142–43, 145–46, 157 Mary­land Health Systems Agency (HSA), 160, 161, 174, 175, 176, 196 Mary­land Hospital Association (MHA), 138, 139 Mary­land Hospital Council, 138 Mary­land H ­ uman Relations Commission, 174, 175 Mas­sa­chu­setts, 284 Mass General Brigham, 284 Mathias, Charles, 231

368 Index Mayo Clinic, 276 McElderry Court, 186–87 McGovern, George, 116 McGuirk, Harry, 137, 138 McGuirk, William, 134, 135 McIntyre, James, 207, 209 McKhann, Guy, 169 McMahon, J. Alexander, 198, 199 McMillan, Benjamin “Olugbala,” 134 Meany, George, 113 Medicaid: and “associational state,” 10; automatic disenrollment in, 236; and bad debts, 152; bud­get shortfalls, 86; and charity care, 15; and Civil Rights Act, 73–76; and East Baltimore Medical Plan, 98, 99; and continuity of care, 260–61; copayment system for, 79, 80; coverage for el­derly, 64–65; creation of, 62–65; cuts to, 256, 257–58; destigmatization of, 272; discount disparity, 150, 151, 152; and DSH payments, 219, 255, 259, 273; and EBMP, 101, 104; and entitlement benefits, 258–59; expansion of, 208, 250–51, 269–70, 272; federalization of, 208, 212; financing sources for, 68–69, 255; as freestanding health care program, 259; as a “hand-­out,” 76; and health care costs, 76–78, 111; HMO option with, 261; and HSCRC, 246, 264; implementation of, 61; limits on payments, 213; and managed care, 260–63; Mary­ land’s rules for, 231; opposition from AMA, 63; payment structure of, 62; and private hospitals, 261; qualification for, 77, 78–80; racial impact of cuts to, 78; and reasonable costs standard, 66; reliance of East Baltimore on, 228; separation from welfare reform, 259; and subsidies, 252, 256; and Talmadge bill, 203; and vendor payment programs, 77 Medical Committee for H ­ uman Rights, 73, 134 Medical Planning and Development Committee, 88, 167 medical research, funding for, 24, 27 medical schools, 75, 76, 228 medical ser­v ices, vertical integration of, 246–48 medical technology: access to by suburban hospitals, 227; and health care, 171; investment in, 22, 69, 160; by Johns Hopkins Hospital, 168

Medicare: and accountable care organ­ izations, 274–75; AHA and expansion of, 115; and “associational state,” 10; and certificate-­of-­need laws, 72; and charity care, 15; and Civil Rights Act, 73–76; and construction sprees, 219; creation of, 61, 62–65; cuts to, 255, 256, 257–58; as “defined contribution” program, 258; depletion of trust funds, 217; and development of East Baltimore Medical Plan, 98; and discount disparity, 150, 151, 152; and DSH payments, 219–20, 255, 273; and EBMP funding, 101; expansion of, 117, 251, 252; fee schedule on physician payments, 222; funding new capital resources for hospitals, 68–69; funds drawn by Social Security, 1982 crisis, 218; and hospitals as dominant economic sector, 68; and HSCRC, 264; and increased private control of hospitals, 70–71; increase in health care costs, 111; inflationary cost structure of, 66; and “insurance com­pany payment model,” 70; limits on payments, 126, 213, 218, 256, 258; opposition from AMA, 63; Part A, 64, 65; Part B, 64, 65, 219, 258; pricing power of, 281; proposal to combine with Medicaid, 212; and prospective payment system, 202, 217, 218, 246, 259; provider reimbursement formulas, 111; rate-­setting by HSCRC, 246; and reasonable costs standard, 66; reduction in hospital expenditures among recipients of, 284; reimbursement structure ­under, 62, 65–67, 66, 72, 218, 220; shift of costs from, 221; and Talmadge bill, 203 “Medicare + Choice” (Medicare Advantage), 259 Medicare for All framework, 282, 283, 285 “Medigap” policies, 64 Medlantic Healthcare Group, 267 MedStar Health, 267 Mercy Hospital, 35 mergers, 265, 266–67, 274 Michael ­Reese Hospital, 33, 298n7 ­Middle East Community Organ­ization (MECO), 182–84, 183f, 186, 188 ­Middle East neighborhood, 182, 186, 187, 276–77 ­Middle East Revitalization Partnership, 184, 186, 187, 188



Index 369

Mies van der Rohe, Ludwig, 33 Miller, Edward, 267, 269 Mills, Wilbur, 63, 65, 116, 124–25 minority population neighborhoods, urban renewal and, 32, 36 minority w ­ omen, employment of in hospital city, 129 Mitchell, Clarence, III, 46, 95, 134, 135, 237 Mitchell, George, 257 Mitchell, Parren, 95, 134, 144, 185, 231 Model Cities agency, 94, 100, 101, 181 model communities, 84, 85 Mondale, Walter, 195–96 Mongan, James, 116, 124, 208 Montefiore Hospital, 85 Monumental City Medical Society, 75 Moore, Frank, 204, 206 Morris, Ira, 105 mortgage insurance guarantees, 47, 69 Morton, Frances, 38 “most-­favored nation” clause, 143–44 Mowbray, John, 37, 53 Muehlenkamp, Robert, 133 Muller, Steven, 178f; on community relations, 187; on competition from HMOs, 226; on crime in community, 181; disavowal of profit motive, 226, 229; on efficiency of Johns Hopkins Hospital, 121; expansion of redevelopment, 184; and purchase of BCH, 241; on ­u nion negotiations, 145 Murray, James, 19 National Association for the Advancement of Colored P ­ eople (NAACP), 46, 73, 74 National Association of Manufacturers, 199 National Association of Real Estate Brokers, 37 National Cancer Act (1971), 169 National Cancer Institute, 27–28, 28f National Commission on Social Security Reform, 218 National Committee on Health Care for the Aged, 63 National Conference on Medical Costs, 111–12 National Farmers Union, 213 National Governors’ Association, 204 National Health Board, 252 national health insurance. See health insurance, national

national health insurance debate, hospital industry and, 209 “National Health Insurance Partnership,” 114–15 National Health Planning and Resources Development Act (1974), 71, 72 National Heart Institute, 27, 28f National Institute of Aging, 240 National Institute on Drug Abuse, 240 National Institutes of Health, 27, 28, 267 National Institutes of M ­ ental Health, 101 National Journal, 196 National L ­ abor Relations Act (1935), 130 National Medical Association, 73 National Student Medical Association, 194 National Union of Hospital and Health Care Employees, 127, 132, 136–37, 141. See also Local 1199E Nehemiah grants, 188–89 Neighborhood Rental Ser­v ices, 184, 185 Nelson, Gaylord, 204 Nelson, Russell: ac­cep­tance of African American physicians, 75; on committee to explore regulation, 78–79, 137; on compromise with u ­ nion, 135, 136; on control of EBMP, 99–100; on decentralization of Johns Hopkins Hospital, 166; on expansion into Columbia, 85, 86–87; on HIBAC board, 66; on importance of parking areas, 57; on limit of f­ uture expansion, 89, 94, 168, 183; on public responsibilities of Johns Hopkins Hospital, 131, 134; on Sheraton H ­ otel, 56; support of Medicare, 63 Nelson amendment, 204–6 neoliberalism, hospital city and, 280–81 New Deal programs, 16, 18, 207 “New Economic Policy,” 119 “New Federalism” initiative, 181 New York: certificate-­of-­need laws in, 72; hospital concessions in, 141 New York Times on Columbia Medical Plan, 91 Nixon, Richard, 80, 114–15, 116, 117, 119, 120, 124, 125 Nixon cost controls: and hospital price increases, 119–23; 169 Nixon plan: opposition to health insurance industry, 125 nonprofit group practice, 18 North Charles General Hospital, 247, 266

370 Index Northeast Market, 184, 187 Northwest Hospital, 267 not-­for-­profit hospitals, 11; antitrust actions against, 283; voluntary hospitals as, 71 nurses, 89, 97, 104, 129, 170, 172 nursing homes, 23, 26, 72, 127 Obama, Barack, 271 Obamacare. See Patient Protection and Affordable Care Act (ACA, 2010) occupancy rates, hospital, 169, 170, 173, 179, 197 Odenton suburb, 266 Office of Economic Opportunity, 100, 104 Office of Equal Health Opportunity (OEHO), 74 Office of Health Care Programs (Johns Hopkins Hospital), 91, 97, 98, 103 Office of Planning and Development (Johns Hopkins Hospital), 165 Office of Planning and Evaluation (­u nder HEW), 124, 217 Olson, Mancur, 139, 153 O’Neill, Tip, 205, 212, 218 open-­shop ­labor contract, 133–34 operating losses, 169–70, 172 “Operation ­Dixie” organ­izing campaign, 130 Osler Medical building, 168 “Our House” community center, 96 outpatient ser­v ices, 169, 196, 237 overtreatment, fee-­for-­service payments and, 273 parking areas, 34, 36, 40, 57, 181, 247, 268 participant premiums, 64, 84, 113, 119, 136, 198 pass-­t hroughs, wage, 120, 121, 162, 196, 201, 203, 204, 213 “Patient-­Bills-­of-­R ights,” 265 patient care, affirmative action plans for, 76, 174–76 patient days, 66, 246, 248 Patient Protection and Affordable Care Act (ACA, 2010), 270–75; and antitrust actions, 283, 285; Car­ter plan as anticipating, 212; and Johns Hopkins Hospital, 275–76; Title II of, 272 patient referrals, 226, 228, 235, 266, 275 patients as “market,” 225 Patuxent/Chesapeake Physicians Association, 232, 233, 235, 240

“paying markets,” 227–28 “payments in lieu of taxes” (PILOTS), 281 payment structures. See also fee-­for-­service payment structure; insurance com­pany payment model: “capitated,” 91; fee-­for-­ service, 67; fixed payments, 204; and hospital cost increases, 198; to Medicare/ Medicaid, 62; prospective payments, 160; vendor, 77 payroll taxes, 64, 113, 124, 194 pensions, 143, 145 “­People’s Choice” group, 185 ­People’s ­Free Medical Clinic, 97 per­for­mance incentives, hospital, 201 per­for­mance standards, national, 285 Peterson, Ronald, 171, 241, 243, 244, 245, 267 Petrosyan, Varduhi, 4 phase III controls, 140 Philadelphia, Pennsylvania, 4 philanthropy, private, 16, 23, 27, 179 Phillips, Lawrence, 141 Phipps Psychiatric Clinic, 173, 176 Physician Payment Review Commission, 222 physician payments: and “Bettercare” bill, 64; and insurance com­pany payment model, 17; Medicare fee schedule on, 222; and “prevailing local standard,” 67; and prospective fee schedule, 212 physician practices, 79, 274 physicians, African American, 97, 98, 261 Physicians for a National Health Program, 212, 282 planned cities, 84, 85 planning agencies, 22–23, 71–72, 92, 160, 161, 174, 176, 196–97, 200 playgrounds, 40, 49 “plus ­factor” in hospital cost calculations, 18, 66, 67 Poor ­People’s Campaign, 96, 127 Powers, Alvin, 139, 140, 141, 142, 155, 161, 200 preexisting health conditions, HMOs and, 118 premiums, subsidies of, 271, 272 prepaid group medical practices: as alternative, 84–85, 106; and cost-­reduction incentives, 118; and EBMP, 101; for-­profit version of, 115; and Health Security Act, 113; of HMOs, 231; and local physicians, 97; and Medicaid, 99; reversal of fee-­for-­service incentives, 18; success of, 19



Index 371

President’s Task Force on National Health Care Reform, 251 “prevailing local standard,” 67 preventive care, 18, 84, 115, 223 Price, David, 165 price considerations, patients and, 3 price-­controlled payment systems, 285 “Price report,” 165–67, 228, 229 price-­wage controls (Nixon’s New Economic Policy): rise in health expenditures, 193 pricing power: and hospitals, 7, 245, 270, 276, 281, 283, 285; and providers, 4, 147, 274 Princi­ples of Payment for Hospital Care (AHA), 66 Priority Partners, 263 private sector, reliance on for low-­income housing, 39–40 Proctor, Kenneth, 151–52 professional standards review organ­izations, 117, 217 profit-­oriented businesses, hospitals as, 70, 172–73, 219, 226–27, 244 Proposition 13 ballot initiative, 209 Prospective Payment Assessment Committee, 221 prospective payment system (PPS): and capital-­focused be­hav­ior of hospitals, 222; and cost-­savings, 221; and DRGs, 216–17; and hospital associations, 220; and HSCRC, 160; lack of in Car­ter bill, 217; and Medicare, 202, 218–19, 246; passage of, 217–20; for physicians, 212; and Talmadge cost-­control bill, 201, 216–17 Provident Hospital, 26–27, 140, 142, 150, 174, 179–80 provider pricing power, 4, 147, 274 provider reimbursement formulas, 17, 111, 126 Prudential Insurance, selling of JHHP to, 262 public housing. See housing, public public-­private finance, 177, 245 public utility model for hospital regulations, 79, 137 Punch, Fred, 127, 132–33, 136, 137, 141, 143f, 145 race: and HSCRC, 157–58; in the “Price report,” 165–66; and u ­ nionization of Johns Hopkins Hospital, 131–35; and urban renewal, 32, 60 racial disparities, 175, 262, 278–79, 281

racial in­equality: between city and suburb, 87, 228; and health, 7–9; in health care financing, 107; in hospital city, 2; within hospital system, 278–79; at Johns Hopkins Hospital, 132–35, 174–76; of Medicaid cuts, 78; of urban renewal proj­ects, 58, 60 racial segregation: in hospitals, 24–25, 73–75, 76, 279; housing 8, 32, 33, 37, 39, 51, 60, 83; in industrial facilities, 133; in subsidized housing, 39–40 Rangel, Charlie, 212 rate-­control methodology of the HSCRC, 150–51, 154–157, 159–60, 264, 283–84 rate regulation, legitimacy of, 155–56, 264 rate review agencies. See Mary­land Health Ser­v ices Cost Review Commission (HSCRC) rate-­review initiatives, 1970s, 216 rate-­setting, hospital, 137; at Bon Secours, 147; for cancer center, 159; and HSCRC, 139, 140, 228, 244; at Johns Hopkins, 153–59; in Mary­land, 139 rate-­setting commission, hospital. See Mary­land Health Ser­v ices Cost Review Commission (HSCRC) Rawlings, Howard “Pete,” 175 readmissions, efficiencies and, 273 Reagan, Ronald, 215, 217, 218, 234 “reasonable cost” standards, 65–66, 67, 77, 78 redevelopment, community, 167, 180–89, 184, 276–77. See also urban renewal proj­ects; Jefferson Court housing proj­ect; Gotham, Lucille Redevelopment Commission (Baltimore), 41f; approval of Broadway proj­ect, 42; and Broadway Development Corporation, 40; Broadway proj­ect as priority, 37; and displacement, 43, 44–45, 46, 50, 59; establishment of, 36; on Johns Hopkins Hospital as redeveloper of Area 3-­C, 57; support of Broadway proj­ect, 39; transfer of dormitory to Johns Hopkins Hospital, 49 Redevelopment Division (of HHFA), 48 Reed Hall medical dormitory, 49, 53, 54, 56, 89, 173 referral patients, 228, 235, 237, 274 regional health alliances, 251–52, 253, 254 regional health planning system, 160, 219 regulatory commissions, 138; and health care cost growth, 283–84; for hospitals, 79

372 Index regulatory cost control: for health care sector, 120; and HSCRC, 149–50; workability of, 163 reimbursement system, 65–67, 199–200, 208, 220 Reinhardt, Uwe, 4 religious associations with hospitals, 23, 69 Relocation Ser­v ice (from the Housing Authority), 58 renovations by Johns Hopkins Hospital, 106, 167, 173–79 rental housing for African American residents, 44–45; 49 rental subsidies, 182, 184–85 reproductive health ser­v ices, 268 research costs, debt ser­v ice as, 27, 28 research funds, 27–28 “resource-­based relative value scale,” 222 Reuther, Walter, 112–13, 129, 207 revenue, hospitals and loss of from Medicare cuts, 256–57 revenue limits, 198, 203 Ribicoff, Abraham, 115–16, 201, 208 Richardson, Elliot, 118 Rocke­fel­ler Foundation, 97, 188 Rogers, David, 87, 88, 90, 91, 98, 99 Rogers, Paul, 197, 201 Rostenkowski, Dan: and cost-­containment bill, 195, 197, 200, 206; indicted for fraud, 257; and Medicare PPS, 218; as skeptical of cost-­containment bill, 195; and voluntary cost-­control program, 202, 203 Rouse, James: and “Baltimore Plan,” 37–38; on Broadway proj­ect financed by Johns Hopkins Hospital, 47; elimination of African American housing from Broadway proj­ect, 49, 50–51; formation of Broadway Development Corporation, 40; inclusion of health care in Columbia, 85; as Johns Hopkins University trustee, 184; and nonresidential urban renewal, 32; planning of Columbia, 83–84; private sector in urban redevelopment, 38; and racial integration in Columbia 84; and racial segregation, 37; and Sandtown-­ Winchester proj­ect, 188; transfer of BDC to Johns Hopkins Hospital, 53 Rouse Com­pany, 40, 91 Russell, George, 179 Russo, Marty, 203 Ruther, Helen, 269

Sam Wing Laundry, 30–31, 56 Sandtown-­Winchester neighborhood, 188 San Francisco Housing Authority, 51 Sarbanes, Paul, 231 Schaefer, William Donald: approval of urban renewal ordinance, 184; and EBCC, 95; as governor, 188, 231; on loss of funds for EBMP, 234; po­l iti­c al alliance with Clarence Burns and Robert Douglass, 95, 231; selling of BCH, 239–45 S-­CHIP. See State C ­ hildren’s Health Insurance Program (S-­CHIP) Schmoke, Kurt, 188 School of Allied Health Ser­v ices, 103 Schramm, Carl, 162, 163 Schultze, Charles, 207, 209 Schweiker, Richard, 218, 234 Scott, Cecil, 44 Scott, Ray, 127 Scully, Tom, 219 Section 8 rental subsidies, 182, 184–85 segregation: See racial segregation Seidel, Harry, 269 Shapiro, Sam, 84, 85 Shelley v. Kraemer (1948), 46 Shelton, Robert, 154 Sheraton Inn, 55, 56, 247 Sherlock, Thomas, 151 shopping centers, 49, 50, 54–55, 56, 57, 247 Showell, W. A., 44 Sibley Memorial Hospital, 275 Simkins v. Cone, 24–25 Sinai Hospital, 140, 142, 143, 145, 150, 151, 266–67 single-­payer system. See Medicare for All framework Singleton, Oliver, 131 sliding-­scale fee structures, 236 slum clearance, 36 social function of Johns Hopkins Hospital, 134, 155, 157–58 social institutions, transformation of hospitals into, 282, 285 social prob­lems, medical approach to, 24, 104–6, 188, 280, 281 social responsibilities of Johns Hopkins Hospital, 82–83, 86–88, 131, 164, 185, 224 Social Security Act: 1983 Amendments, 218–19; Boren amendment (1981), 219–20;



Index 373

extension of Medicare coverage, 117; Section 1115, 260; Section 1122, 72 Social Security, 18; vs. AFDC “welfare” program, 65; depletion of trust funds, 217; and development of Columbia Medical Plan, 98; drawing from Medicare funds, 218; financing of health care, 125; funding crisis, 218; and hospital desegregation, 73–74; and Kennedy-­Mills proposal, 124; payroll tax, 64; reimbursement formulas for, 67; setting rules for Medicare/ Medicaid, 61 Social Security Board, Hill-­Burton Act and, 21 social ser­v ices, nonmedical, 261 socio-­economic c­ auses of disease, 167 “soft planning,” Hill-­Burton and, 22 Somers, Anne Ramsay, 17 Somers, Herman, 17 Somerset Homes public housing, 55f, 58 Southern Christian Leadership Council, 132 Southern Demo­crats, 51, 63 specialization of medicine, 27 spending limits, Health Security Act (B. Clinton) and, 252 Spriggs, Isaiah, 144 staff appointments, 97 staff privileges, 73, 75–76 St. Agnes Hospital, 268 Stanford University Medical Center, 276 State C ­ hildren’s Health Insurance Program (S-­CHIP), 259, 269–70 Steiner, Richard, 43, 60 Stevens, Rosemary, 18–19 St. Joseph Hospital, 150 “Strategic Plan for the Eighties” (Johns Hopkins Hospital), 227–30, 233, 240 strikes, hospital, 130, 132, 139, 143f, 144–45, 146f, 153, 155, 158, 232 subscriber prepayment, 18, 84 subsidies, premium, 256, 271, 272 subsidies, reliance of hospitals on, 10 subsidies, rental, 182, 184–85 subspecialty clinics, 228 Suburban Hospital, 262, 267 suburbs, 83, 87, 122, 165–67, 266. See also hospitals, suburban ­Sullivan, Richard, 242 surveys of hospital facilities, 22 swimming pools, 56

Taft, Robert, 21 Taft-­Hartley Act (1947), 130–31, 141, 145 Talmadge, Herman, 195, 196, 201, 204–5, 208 Talmadge Medicare cost-­control bill, 201–2, 203–4, 213, 216–17 Tax Equity and Fiscal Responsibility Act (TEFRA, 1982), 217, 220 tax increases for Medicaid shortfalls, 79 tax revenues, Broadway proj­ect and, 57, 58 teaching hospitals, 122, 239 technology, medical: access to by suburban hospitals, 227; and health care, 171; investment in, 22, 69, 160; by Johns Hopkins Hospital, 168 Town School proposal, 86, 96 training programs, 143, 145, 157, 275, 281 Trimakas, Alan, 180–81, 187 Truman, Harry, 20, 21 Turman, Willa, 133 Turner, Thomas, 86–87 Udall, Morris “Mo,” 194 Ullman, Al, 208 unemployment in Baltimore, 157 Union for Jobs and Income Now, 96 Union Hospital, 147 ­u nionization of Johns Hopkins Hospital, 127–29, 128f, 130–35, 139, 140, 145. See also Local 1199E Union Memorial Hospital, 153 ­u nions, ­labor, 208. See also American Federation of Labor-­Congress of Industrial Organ­izations (AFL-­CIO); Congress of Industrial Organ­izations (CIO); Local 1199E; United Automobile Workers (UAW); and cost-­containment bill, 196, 199, 201; and EBMP, 232; and health care inflation, 147; and national health insurance, 126, 207; support of Nelson’s amendment, 204 United Automobile Workers (UAW), 125, 195; Car­ter’s commitment to, 215; endorsement of Car­ter, 194; and national health insurance, 195, 200, 207, 210; opposition to Mills bill, 125, 196 United Fund, 174 United Healthcare of the Mid-­Atlantic, 263 United Public Workers of Amer­i­ca, 130 United Steelworkers, 213

374 Index universal coverage proposals, 63, 250, 253, 254, 255, 256. See also health insurance, national; Medicare for All framework universities, urban renewal and, 32, 33–34 University Hospital (Baltimore), 27, 35–36 University of Mary­land, Baltimore, urban renewal proj­ects by, 35–36 University of Pittsburgh Medical Center, 276 Urban Development Action Grant (UDAG) Program, 181–82, 186 Urban League, 44, 50 urban redevelopment. See urban renewal proj­ects Urban Renewal Administration (URA), 33, 35 urban renewal proj­ects, 31, 181. See also Broadway urban renewal proj­ect; Charles Center urban renewal proj­ect; Community Development Block Grant (CDBG) Program; displacement, residential; Waverly urban renewal proj­ect; acceptability of casualties of, 45; and African American housing, 47–54; and associational system of public-­private health care, 245; in Baltimore, 38f; and hospital construction, 15; and hospitals, 32–33, 247; and housing, 50–53; h ­ uman impact of, 58–60, 277; and institutional self-­interest, 280; for institutions, 32–36; legislation in Mary­land, 36; and minority population neighborhoods, 32; no housing requirement for, 34; as “predominantly residential,” 32, 33, 298n3; private investment in, 55–56; and private-­sector provision of low-­income housing, 39–40; public benefit of, 50–51; public vs. private in, 35; racial in­equality of, 60 U.S. Chamber of Commerce, voluntary cost-­controls and, 202 U.S. Department of Health, Education, and Welfare (HEW): certificate-­of-­need laws, 72; grants for EBMP, 97, 100, 101; and hospital desegregation, 73; inactive role in Car­ter’s cost-­containment bill, 214; and Medicare payment rules, 66; phase IV regulations, 122; and segregated health care, 24–25; study on hospital costs, 111; transfer of staff to OEHO, 74 U.S. Department of Health and ­Human Ser­v ices (HHS), 231, 233

U.S. Department of Housing and Urban Development (HUD), 182, 185 U.S. Department of Justice, 283 U.S. Department of L ­ abor, 101, 188 U.S. Department of Social Ser­v ices, 144 U.S. Equal Employment Opportunity Commission, 174 Usery, W. J., 145 U.S. Office of Education, 89 U.S. Public Health Ser­v ice (PHS): 314-­e program, 101; certification of hospitals for Medicare, 75; community health ser­v ices program, 98, 104; EMIC program, 19; grants, 101, 233; and hospital bed needs, 22; Hospital Survey and Construction Act, 21; research funds for Wood Basic Science Building, 27; and segregated health care, 24; transfer of staff to OEHO, 74 U.S. Steel, segregation at, 133 U.S. Supreme Court, 24, 51, 272 Utilization Review Boards, 71 “value-­based care,” 273 vendor payment program, 77 vertical consolidation, market power and, 274 vertical integration of medical ser­v ices, 246–48, 265 “Voluntary Effort” cost control, 202–3, 204, 213, 215, 217 voluntary hospitals, 16, 18–19, 71, 227 wage concessions: and HSCRC, 142; at Johns Hopkins Hospital, 145, 153; and l­ abor costs, 169–70; and Local 1199E, 139–40; at Sinai Hospital, 145 wage increases, hospital: and AFL-­CIO, 131; and hospital costs, 162; and HSCRC, 140, 157 wage-­price freezes. See Economic Stabilization Program Wagner, Robert, 19 Wagner-­Murray-­Dingell bill, 21 Walden, Emerson, 166–67 Wallace, George, 194 War on Poverty, 94, 99, 113, 132 Watch Dog, 232 Watergate crisis, 123, 124 Watkins, Levi, 180 Waverly urban renewal proj­ect, 44, 45, 46

Weinberger, Caspar, 118, 123–26, 125 Welfare Administration, 76 welfare reform, 80, 194, 258–59 welfare rights organizers, 96 Wexler, Anne, 204, 205, 206 “Whip Inflation Now,” 141 White Marsh suburb, 266 Whittaker, Thomas, 59 Wicker, Tom, 207 Widgeon, Emma, 59 Wilmer Eye Institute, 28

Index 375 Winston, Oliver, 55 Wofford, Harris, 251 ­women as hospital workers, 127, 129, 133, 157 Wood Basic Science Building, 27 Woodcock, Leonard, 113 World War II: and health care, 16; and hospital construction, 19 Wyman Park Hospital, 247, 266 Young, Ralph, 42, 43, 75 Young Men’s Bohemian Club, 95

ACKNOWL­E DGMENTS

Writing this book has been a long journey, and the debts that I have accumulated are many. I have been fortunate to undertake this proj­ect from a home base at the University of V ­ irginia’s Miller Center of Public Affairs, where I have benefited from the input and friendship of the center’s faculty and staff, including especially Stefanie Georgakis Abbott, Melody Barnes, Sheila Blackford, Andrew Chancey, Cristina Lopez-­Gottardi Chao, Bryan Craig, Sean Gallagher, Kent Germany, Mike Greco, Nicole Hemmer, Ken Hughes, Keri Matthews, Sidney Milkis, Meghan Murray, Barbara Perry, ­A lfred Reaves, Mimi Riley, Russell Riley, Natalie Russell, Marc Selverstone, Jen Starkey, Thomas van der Voort, Gail Hyder Wiley, Howard Witt, and many ­others. My work on the center’s Workplace Culture Committee prob­ ably delayed the completion of this book, but it was one of the most impor­ tant proj­ects of my c­ areer, and I thank every­one at the center who contributed to that effort. The Miller Center’s director, William Antholis, supported this proj­ect and understood how it fit into the center’s mission. At a crucial moment in the writing pro­cess, Bill encouraged me “to take the time you need to get it right.” I certainly took the time, and I hope that I got it right, but I deeply appreciate his support for scholarly work. More broadly, I have benefited greatly from the intellectual community at the University of ­Virginia. In vari­ous seminars, workshops, and conversations, many faculty and students helped me refine my arguments and shape the eventual book. Of par­tic­u­lar note are Brian Balogh, Brent Cebul, Christy Ford Chapin, DeAnza Cook, Andrew Kahrl, Andrew ­Meade McGee, Sarah Milov, Louis Nelson, and Dominique Tobell. Early on, Tara Clark provided able research assistance, particularly in combing through old Baltimore newspapers to identify useful sources. Following a visit to UVA, Stuart Eizenstat went out of his way to speak with me regarding the Car­ter administration’s health care reform efforts.

378

Acknowl­edgments

I am also grateful for the financial support for the research that has been provided by the Miller Center’s Holton Scholars Fund, the Batten Endowment, the Harrison Undergraduate Research Advisor Award Endowment, and the Bankard Fund for Po­liti­cal Economy. In the wider academic community, I have been fortunate to engage with a dynamic group of scholars both of cities and of health care policy, including especially Merlin Chowkwanyun, Catherine Conner, Michael Katz, Scott Knowles, Rick Mayes, Margaret Pugh O’Mara, Mark Rose, Andrew Simpson, Thomas Sugrue, Gabriel Winant, and Amy Zanoni, among many ­others. This book could not have been written without the help of the archivists whose work makes historical research pos­si­ble. Andrew Harrison and Phoebe Evans Letocha provided expert guidance to the expansive collections at the Alan Mason Chesney Medical Archives of Johns Hopkins University and Johns Hopkins Medicine—­and tolerated my lengthy and seemingly endless photocopy requests. I could not have completed this proj­ect without them. Similarly, James Stimpert and Jordon Steele of the Johns Hopkins University Sheridan Libraries Special Collections Department provided assistance with university rec­ords. Jordon generously opened the archive for me when the university was on lock-­down during the uprising following the murder of Freddie Gray in 2015. Aidan Faust of the University of Baltimore’s Special Collections and Archives digitized additional materials beyond t­ hose already contained in the university’s extensive online collections. Archivists at Cornell University’s Kheel Center for Labor-­Management Documentation & Archives, the University of Mary­land’s Special Collections and University Archives, the American Hospital Association Resource Center, and the Columbia Association Archives all offered impor­tant assistance. I am especially grateful for the support provided by Robert Lockhart of the University of Pennsylvania Press. Bob has been an ideal editor for the proj­ect, offering careful readings of chapters and conversations that pushed me to make the book better, while all the while remaining patient as I dis­ appeared for long stretches of time to complete the research and writing. Thomas Sugrue offered valuable advice along the way and a crucial suggestion on a late version of the manuscript. Fi­nally, the two anonymous readers for the press offered careful close readings of the manuscript that helped me refine the book’s arguments—­a long with confirmation that the book ­really did have something valuable to say. This proj­ect would not have been pos­si­ble without the support of my ­family near and far. First, my parents and stepparents—­Linda Jones McKee



Acknowl­edgments 379

and Richard Carey and Michael and Carmen McKee—as always offered their encouragement and their belief that someday I ­really would finish this proj­ ect. My b ­ rother and sister-­in-­law, Colin McKee and Danielle Naftulin, w ­ ere always interested and provided the occasional excuse to escape to California to see them and my nephews and niece, Mason and Bennett McKee and Dana Reed. Ultimately, though, my greatest debt is to my wife, Joanna, and our ­children, ­Reece and Nathaniel, and for that, this book is dedicated to them. ­Reece and Nat have grown up with this book and tolerated the demands that it at times imposed on me. They have offered at least polite interest but, more importantly, have helped me keep a sense of perspective on what is most impor­tant. The hours and days spent on trips and hikes and at soccer games and cross-­country and track meets or simply around the dinner ­table have been the happiest of my life, and so much more impor­tant than this book. The idea for this book took root years ago as a result of Joanna’s first job out of college, when she worked in a research lab at ­Children’s Hospital of Philadelphia. At the time, I was researching deindustrialization in that city for my dissertation, and her job among the massive health care institutions in West Philadelphia first impressed on me the economic importance of the health care sector. Far more impor­tant, though, is the life that we have built together over nearly three de­cades. Joanna is the only person happier than I am to see this book completed, and I cannot begin to express my gratitude for her support, patience, and love.