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CONSOLIDATION OF HOSPITALS

Taking first the question of the hospital situation, are you familiar with the four hospitals?

Mr. Finnan. Mr. McNamara is prepared to discuss that, Mr. Chairman.

Senator KNOWLAND. Would you care to discuss that at this time, Mr. McNamara ?

Mr. McNAMARA. Senator, I am not familiar with what the question in the mind of the Senator is.

Senator KNOWLAND. There have been both discussions and suggestions on the part of the Armed Services Committee and of this committee through its chairman, Senator Bridges, that there could be savings if the hospitals could be consolidated.

Mr. McNAMARA. The Bureau of the Budget has been trying, sir, since the close of the war to get the Department of Defense to do something to reduce the number of hospitals, both civilian and military, in the Canal Zone. It has not been too successful. The committees of the Congress have been working on the same subject. From our point of view, finally, in connection with the presentation of the 1955 budget, the Department of Defense contemplated the closing of the Fort Clayton Army hospital and the hospitalizing of military patients in the Gorgas Hospital, which, as you know, is the civilian hospital operated by the Canal Government.

The Budget, as presented to the Congress, reflects that decision and the Bureau of the Budget included funds in the appropriation of the Canal Zone to finance the care of 1,205 military patients in the Gorgas Hospital. It was also contemplated, we were told, that the Department of Defense would take some action on the Atlantic side whereby there would only be one hospital. However, we did not get a definite decision on it. We understand that the Navy will in its presentation to the Appropriations Committee affect the care of Canal Zone beneficiaries in the Navy hospital at Coco Solo. It is our view from a planning point of view that there is not a need for the continued operation of four hospitals in the Canal Zone by the Department of Defense.

HOUSE REPORT

Senator KNOWLAND. In the House of Representatives, Report No. 680 of the 83d Congress, last year, June 27, dealing with the Department of Defense appropriation bill, that subcommittee had this to say:

Recent hearings by the subcommittee handling the Canal Zone governmenta! appropriations disclosed duplication of the Federal hospital facilities in the Canal Zone. The Army and the Navy each operated hospitals there in addition to the two operated by the Canal Zone Government. More recent hearings hoy the Subcommittee on Armed Services confirmed this duplication. It is evident that 2 of the 4 hospitals with proper cross servicing will meet current needs. Defense officials at first flatly disagreed that this was feasible or the wise thing to do, but as evidence from the letter from the Department on page 481 of the printed hearings on Navy appropriations, the Department now fulls agt*** that two hospitals will suffice. This matter has been under consideration in the Department since 1947. A further study of the situation is contained in a report by the General Accounting Office dated June 30, 1952. It is a reflection on those involved that this arrangement was not reached long ago.

As you have pointed out, the matter has been under study since the close of World War II. The matter has been under consideration by this committee and its counterpart in the House. It has been under the consideration of the Armed Services Subcommittee in both the House and the Senate. We feel that there comes a time when 7 years of study are sufficient and some action should be taken.

We want to find out precisely what action is going to be taken, and if not, we may have to proceed to make certain that the action is taken.

Mr. McNAMARA. Senator, we feel that the budget for 1955 does make possible the closing of two hospitals there. Unfortunately, from a budgetary point of view it is difficult to force it, because, as I understand it, we have to place in both the Canal Zone appropriation and in the military appropriation the funds that would be needed to effect the hospitalization of the military patients in Gorgas.

We attempted at first not to provide the money in the Canal appropriation but to put it in the military appropriation for reimbursement to the Canal Zone, but as a technical matter we had to include it in both appropriations; that makes it possible that it would not be carried out. But we do not have a mechanism through the budgetary process to enforce it. Our view is that the Department of Defense has acted in good faith and intends to bring about the closure of one on each side. We have accepted that as a statement of good faith.

Senator KNOWLAND. I want to have right at this point so we can keep the matter before us to have the Department of Defense representatives also come forward and let us explore this situation right now.

Mr. McNAMARA. Yes, sir.

STATEMENTS OF FRANK B. BERRY, M. D., ASSISTANT SECRETARY

OF DEFENSE (HEALTH AND MEDICAL); BRIG. GEN. R. S. MOORE, OFFICE OF THE SECRETARY OF DEFENSE; AND COL. E. I. DAVIS, OFFICE OF THE ASSISTANT SECRETARY OF THE ARMY

DUPLICATION OF HOSPITAL FACILITIES

Senator KNOWLAND. You have heard the general discussion here. We would be glad to have your comments.

Mr. BERRY. I agree, and as a matter of fact, I visited Panama and was out to make a similar report 4 or 5 years ago to the Army to get an opinion, and I agree that our opinion is that one of the hospitals should be left operating on the Atlantic side and one on the Pacific side. The Colon Hospital is in very bad repair, and that leaves Coco Solo on the Atlantic side.

At the present moment the recommendations are in Secretary Floete's office studying the overall duplication of facilities in the Canal Zone, and their opinion as forwarded to us is that they should hold up the closing of Clayton, which is the smaller of the two hospitals on the Pacific side, until their overall study is completed, and then from the Army statement they are perfectly willing to go ahead with the closing of Clayton as soon as the enabling legislation is passed and the appropriation of the Military Department will be available for the reimbursement of the Canal Zone Government for the cost of providing the facilities operated by the Canal Zone Government medical care other than subsistence and dependents of military personnel

Senator KNOWLAND. While normally I do not approve of the practice of writing legislation in an appropriation bill, nevertheless there are times when both the Congress and the committees have felt that it was reasonable and perfectly proper to do so. It may be that this committee here, its counterpart in the House, in carrying out what we think has been sufficient study for 7 years would add to whatever funds were allowed the following language:

Hereafter appropriations of the Military Department shall be available for the reimbursement of Canal Zone Government for the cost of providing facilities operated by the Canal Zone Government, medical care, other than subsistence of dependents of military personnel.

Mr. BERRY. That has been the hold-up, apparently.

Senator KNOWLAND. Rather than getting caught in a condition of suspended animation between the several departments and the legislative committees and the Appropriation Committee, this might cut the Gordian knot and permit us to get some action on it.

Mr. Berry. From the hospital medical standpoint the advantage of Gorgas over Clayton is that it is larger, has more bed capacity. Clayton is somewhat newer, very much newer, than the old part of Gorgas, but a separate building was built in Gorgas about 4 or 5 years ago, so they have a new section there which will hold several hundred patients in and of itself.

Senator KNOWLAND. I am not quite clear as to why the Military Establishment feels that it is necessary to delay in closing one of them.

Mr. BERRY. That they went into in Mr. Floete's office, who is in charge of all the duplication of facilities and is trying to work them out. He is brand new at it. His own study of the facilities there in the Canal Zone is going on. I think Mr. McNamara and I have had the same opinion on this, and Dr. Casberg, my predecessor, on the advisability of having only two hospitals in that zone.

Senator KNOWLAND. Well, I hope that the Defense Establishment will complete its study before this committee acts in a reasonably short period of time.

General MOORE. Mr. Chairman, I might state that there is a general feeling in the Office of the Assistant Secretary of Defense, Comptroller, and many other officers in the Army and elsewhere that in the event that authority such as has been made known, read by the Chairman, to continue the treatment of all those now being treated in military hospitals that in less than 45 days this roadblock will be removed and this question definitely solved.

Senator KNOWLAND. That is the most encouraging news that has been presented to this committee in 7 years.

Mr. McNAMARA. Could I ask the chairman if that includes also the Atlantic side?

Senator KNOWLAND. I would hope that this means if we are going to have one on the Atlantic side that we will have one on the Pacific side.

General MOORE. I think the inclusion of the language read by the chairman would definitely make a satisfactory solution possible, because it would permit the continuation of the treatment of all military persons on both sides of the canal.

Senator KNOWLAND. Of course, we are interested, as you are, in being sure that the facilities are there and that there is no legislatire

roadblock to prevent the proper care of the people, but we also, having that in mind, want to cut down on what appears to be unnecessary duplication.

Thank you, gentlemen. The Budget people I would like to have remain.

QUESTIONS FOR BUDGET BUREAU I would like to submit to the Bureau of the Budget several questions which you may or may not be prepared to answer today, but if not it would be perfectly agreeable if you supply the information.

Mr. FINNAN. If I cannot answer them this morning I will be glad to supply the answers for the record.

Senator KxOWLAND. I will read the four questions here, and you may decide which ones you are prepared to answer today.

1. What action has been taken on the principles of evaluation of the assets of the company?

2. The committee reports on the civil functions appropriation bill, 1954, requested submission to the Congress of legislation to provide for the amortization of nondepreciable assets of the canal, and recovery from tolls of interest during construction. Can you comment on the status of that proposed legislation ?

3. Does the Bureau recommend the enactment of any legislation that would have the effect of furthering or expediting the elimination of unnecessary duplication of activities in the Canal Zone?

Mr. FINNAN. Mr. Chairman, as Mr. Dodge reported when we got the call yesterday afternoon that you would like to have us come up this morning, I am forced to confess that it caught the Bureau of the Budget at a particularly difficult point in that the three people in the Bureau who are most familiar with this particular problem all happen to be out of town on this particular day. Consequently I am only in a position at this point to answer question 3, but we can and will supply very promptly the answers to the other questions for the record.

(The information referred to follows:) Question 1

“What action has been taken on the principles of evaluation of the assets of the company?"

Answer: The Comptroller of the Panama Canal Company sent draft statements of evaluation policies to the Bureau of the Budget on December 11 and December 31, 1953. These proposed principles were studied by the Bureau of the Budget and a letter was written to the President of the Panama Canal Company, on January 14, 1954, requesting further information on certain items and discussing others,

On January 30, 1954, the Board of Directors of the Panama Canal Company adopted a statement of policies for the valuation of the Panama Canal and other properties. This set of policies was transmitted to the Bureau of the Budget by the Secretary of the Army on March 5, 1954, and is now under consideration by the Bureau of the Budget. Question 2

*The committee reports on the civil functions appropriation bill, 1954, requested submission to the Congress of legislation to provide for the amortization of nondepreciable assets of the canal, and recovery from tolls of interest during construction. Can you comment on the status of that proposed legislation ?"

Answer: The question is divided into two parts, namely, (a) amortization of nondepreciable assets, and (b) recovery from tolls of interest during construction. The most recent legislation submitted to the Bureau of the Budget in reference to amortization of nondepreciable assets was sent by the Secretary of the Army on March 1, 1954, and is now under consideration. Proposed legislation for the recovery from tolls of interest during construction was received in the Bureau of the Budget on December 24, 1933, and is under consideration.

42592-54-98

Questions

“Does the Bureau recommend the enactment of any legislation that would have the effect of furthering or expediting the elimination of unnecessary duplication of activities in the Canal Zone?"

Answer: The Bureau of the Budget has received no proposed legislation specifically directed toward the issue of eliminating unnecessary duplication of activities in the Canal Zone. It is conceivable, however, that the draft of proposed legislation dated March 1, 1954, submitted to the Bureau by the Secretary of the Army, might contribute to that end. This draft, which would permit the sale of goods and services by the Panama Canal Company at less than their full cost to the Company, is now being reviewed by the Bureau of the Budget, with special attention to the proposed pricing policy. Aside from this draft, the Bureau is not now considering any other legislation on this subject.

Mr. FINNAN. The answer to question 2 is that we have had in the Budget Bureau since the 3d of March draft legislation submitted by the Secretary of the Army dealing with this problem among others of amortization of nondepreciable assets of the canal. It is our expectation that this legislation will be ready for submission to the Congress in the very near future.

Senator KNOWLAND. Fine. Then if you will, supply the committee at the earliest possible time with the answers to the other questions, please.

Mr. FINNAN. Yes, sir, we will do that.

Senator KNOWLAND. You are free to remain because there may be some questions that we will raise with the Army that will be of interest to the Bureau of the Budget, but I believe we will have no additional questions of you at this time.

Mr. FINNAN. With your permission, Mr. Chairman, I will have one of our staff remain.

Senator KNOWLAND. You may be excused.
Mr. FINNAN. Thank you.

STATEMENT OF COL. ELSWORTH I. DAVIS, MILITARY ASSISTANT

TO THE ASSISTANT SECRETARY OF THE ARMY (F. M.)

DUPLICATION OF ACTIVITIES

Senator KNOWLAND. Colonel Davis? The Office of Assistant Secretary of Defense under date of February 26 did submit a memorandum for the Secretary of Defense on the duplication of activities in the Canal Zone which was signed by George H. Roderick, Assistant Secretary of the Army, and I will ask that that be printed in full in the record at this point. (The letter referred to follows:)

OFFICE ASSISTANT SECRETARY OF THE ARJI,

Washington 25, D. C., February 26, 1954. Memorandum for the Secretary of Defense. Subject: Duplication of Activities in the Canal Zone.

Reference is made to your memorandum, June 8, 1953, subject as above, which directed a survey of duplication of activities between the Army, Mary. and Air Force in the Canal Zone, and suggested that the survey include activi. ties of the Canal Zone Government and the Panama Canal Company.

The following is the status of actions that have been taken on this subject since January 1, 1953:

1. Retail food stores.-The Panama Canal Company has closed stores at Madden Dam and Red Tank and will close the Curundu store on March 31. 1954. The Army closed the Fort Sherman sales store September 29, 19.13, upon inacti. vation of the post. The fiscal problems inherent in the Panama Canal Company

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