The NewsHour with Jim Lehrer

JIM LEHRER: Good evening. I'm Jim Lehrer. On the NewsHour tonight the President's budget as seen differently by Budget Director Franklin Raines and Senate Budget Chairman Pete Domenici; the first of two Jeffrey Kaye reports on community hospitals becoming for profit; a David Gergen dialogue about the 1960's civil rights movement; and an update of the Starr investigation story by Dan Balz of the "Washington Post." It all follows our summary of the news this Monday. NEWS SUMMARY

JIM LEHRER: President Clinton offered his 1999 federal budget today. It's the first with a projected surplus in 30 years. Copies were handed out this morning at the government printing office in Washington and delivered to congressional office buildings. The $1.73 trillion proposal includes a $9.5 billion surplus and an overall spending increase of 3.9 percent over last year. Mr. Clinton presented his plan at a White House ceremony with members of his budget team.

PRESIDENT CLINTON: This budget marks the end of an era, an end to decades of deficits that have shackled our economy, paralyzed our politics, and held our people back. It can mark the beginning of a new era of opportunity for a new American century. This budget meets the test I set out before Congress last week: no new spending initiatives, no new tax cuts, unless they can actually be accomplished without adding a dime to the deficit.

JIM LEHRER: Republicans said the plan called for $100 billion in new spending, $90 billion in new taxes, and that violated last year's balanced budget agreement and was a return to Democratic Party tax and spend policies.

SEN. PETE DOMENICI: If we're in charge of the budget of the United States and the fiscal policy that flows from it, then we have to tell it like it is. And I think we're telling the American people like it is today. It is absolutely preposterous--the contradiction of telling the American people government's getting smaller, we're not breaking the agreement, but we're going to spend $150 billion more than we planned when we made the agreement, and we're going to tax the American people more, whatever the kind of tax and whatever the kind of fees, we're going to tax them to pay for them.

JIM LEHRER: We'll have more on the budget right after this News Summary. Wall Street had a strong day today. The Dow Jones Industrial Average closed above the 8,000 mark for the first time in nearly two months. It gained 201 points, or 2.5 percent, to close at 8107.78. Today's surge followed sharp gains in overseas markets earlier in the day. On the Iraq story today Secretary of State Albright said Saudi Arabia sees eye to eye with the United States. She held talks in a desert retreat with the country's top leaders. It was part of her diplomatic tour to gain support for a possible military strike against Iraq. Earlier today Albright denied the Arab world was not backing the U.S. in the showdown with Iraq. And in Washington, Secretary of Defense Cohen said he believed the U.S. would get the help it needs.

WILLIAM COHEN, Secretary of Defense: I would expect all of the Gulf states to agree and support whatever military action needs to be carried out if the President should decide that is the case. No such decisions have been made at this point. I would expect the full support of all the countries and beyond that, I don't think that I can comment.

JIM LEHRER: In Baghdad, Iraqi officials met with a Russian envoy to discuss diplomatic solutions. They denied Russian reports of an offer from President Saddam Hussein to allow inspectors into eight presidential sites. At the United Nations today Secretary General Kofi Annan recommended Iraq be allowed to double the amount of oil it sells for food and medicine. He said he hoped the deal would prevent a humanitarian disaster. The Security Council must act on the recommendation. In the Middle East today Palestinian police and Israeli soldiers in Bethlehem aimed their guns at each other again but no shots were fired, and the Israelis returned to their positions. The incident began when they fired rubber-coated bullets and teargas at Palestinian demonstrators. Several teargas canisters landed near a girls' school. Twenty students were taken to a hospital. It was the fourth straight day of unrest in the Palestinian-controlled West Bank town. Back in this country Karla Faye Tucker was denied clemency today. The Texas woman remained on schedule to be executed by lethal injection tomorrow. She was convicted in 1983 for the pickax murder of two people. The Texas Board of Pardons and Paroles, in denying clemency, also refused to recommend a sixty- or ninety-day reprieve. She has an appeal pending before the U.S. Supreme Court. Texas Governor George W. Bush could postpone the execution with a one-time 30-day reprieve. He's not expected to announce his decision until tomorrow. Tucker would be the first woman executed in Texas since 1863. Former Arizona Governor Fife Symington was sentenced to two and a half years in prison today. He was convicted of lying to get millions of dollars in loans for his failing real estate empire. He resigned after his conviction last September. Symington will also have to serve five years' probation following his prison term. And that's it for the News Summary tonight. Now it's on to the federal budget, hospitals for profit, a David Gergen dialogue, and a Starr investigation update. SERIES - BEYOND THE SPEECH

JIM LEHRER: Beyond the State of the Union speech today President Clinton put budget numbers with the proposals he offered last week. Kwame Holman begins our coverage.

KWAME HOLMAN: President Clinton made this morning's release of his 1999 budget proposal a major event. Nearly every member of his cabinet, more than 30 Democrats from the House and Senate, and dozens of invited guests packed the East Room of the White House. And, right from the start, the President took a back seat to Al Gore steal, letting the Vice President announce the expected news of the day.

VICE PRESIDENT AL GORE: For those of you who won't pore through all of those numbers and graphs, let me preview the ending for you. I don't want to ruin it for you, but when you get to the end, what you'll find is that President Clinton is submitting to Congress today the first balanced budget in 30 years. [Applause.] That's the ending. [Applause]

KWAME HOLMAN: The President's balanced budget proposal calls for federal spending of $1.7 trillion beginning October 1st. Nearly one quarter of that--$425 billion--by law must go to Social Security recipients. Another 30 percent would be spent on Medicare, Medicaid, and other federal entitlement programs. 15 percent of the budget--$267 billion--would be spent on national defense. And a slightly larger amount would go to non-defense so-called "discretionary" programs such as education, housing, technology, and transportation. Interest payments on the national debt next year-- some $240 billion--will account for the remaining 14 percent of the President's budget. Among the specific spending items in the President's budget are several new initiatives he unveiled over the last several weeks.

PRESIDENT CLINTON: Indeed, the balanced budget I submitted shows we can balance the budget and still hire 100,000 new teachers and modernize 5,000 schools. We can balance the budget and allow hundreds of thousands of middle aged Americans, who have no health insurance through no fault of their own, to buy into Medicare. We can balance the budget and still extend child care to a million more children.

KWAME HOLMAN: Other presidential initiatives include: extra money for after-school programs; tax credits for people who purchase energy-efficient automobiles; increased funding for biomedical research at the National Institutes of Health; and food stamps for 800,000 legal immigrants who lost their benefits after the 1996 welfare overhaul.

PRESIDENT CLINTON: The budget funds these initiatives by continued cuts in government programs, by closing unwarranted tax loopholes, and from the passage of tobacco legislation which, as every passing day shows, is critically important to the future of our children, and therefore of our country. [Applause]

KWAME HOLMAN: Meanwhile, on Capitol Hill, Republicans wasted no time taking apart the President's spending proposals.

SEN. PHIL GRAMM, [R] Texas: The President's budget proposes the largest increase in spending contemplated by government since he proposed having the government take over and run the health care system. The President proposes the largest tax increase--$93 billion--substantially larger than the tax cut from last year. He proposes the largest tax increase contemplated by our government since 1993. The President takes $400 billion that will be paid into the Social Security Trust Fund and spends it on general government under this budget. I believe that should be stopped. And finally, if we have a tobacco settlement, the money ought to go to save Medicare; it ought not to go to fund general government.

REP. JOHN KASICH, Chairman, Budget Committee: You call Alan Greenspan and ask him what he thinks about the President expanding government by the tune of $150 billion in new programs. That does not bode well long-term for our economy and, frankly, I think most of these programs will not come to pass in a Republican Congress that believes in smaller government, lower taxes, more individual freedom, and more choice by people back home.

KWAME HOLMAN: But the President had more than just spending to talk about. He also focused on the money he expects will be left over after all the spending.

PRESIDENT CLINTON: First and foremost, we project that the budget will not only balance; it will actually run a surplus of $9 1/2 billion next year and over $200 billion over the next five years --fully $1 trillion over the next 10 years. This budget reserves that surplus--I want to say it again-- this budget reserves that surplus, saving it until we have taken the steps necessary to strengthen Social Security into the next century.

KWAME HOLMAN: Now the President begins the traditional battle with Congress over a final budget. And while many Republicans agree any budget surplus should be used to strengthen the Social Security system, others suggest using some of it to provide more tax breaks, improve the nation's infrastructure, or simply use the extra money to start paying down the $5 trillion national debt.

JIM LEHRER: More now from President Clinton's budget director, Franklin Raines, and Senate Budget Committee Chairman Pete Domenici, Republican of New Mexico. Senator, in general terms, what do you think of the President's budget?

SEN. PETE DOMENICI, Chairman, Budget Committee: Well, first, I think it's a giant contradiction. It's an enigma. It's a magnificent political document. Now, having said that, let me first say if we did nothing, the President doesn't even send us a budget, we will--under his economics--we will have a balanced budget. So it's not the budget that makes the balance; it's what we did last year in reaching agreement that makes the balance. Now, secondly, it seems quite strange to me that last year we made an agreement that said spending would not go up for all of the appropriated accounts of government. We set caps and said that's the limit. Now, here we've got a president in an election year that says, wait a minute, I want smaller government, lower taxes, more power back to us, to our cities, and this budget says raise taxes, regardless of what kind, for next year, their own budget document says that taxes--the tax take will be the highest since 1945, 20.6 percent of Gross Domestic Product, a giant increase. So it's up, instead of down, the taxes. Then he said smaller government. There's 9,300 more employees in this budget, and believe it or not, there's $150 billion in new programs of one type or another. Now, if that's smaller government, under the rubric of an agreement that got you to balance it, then what is big government? And last but not least, let me suggest if the President can find all this money to spend--and I don't understand how we're going to get it because 106--we're using different numbers--we think the correct one is 106 is taxes and fees--the balance of the 150 comes from some manipulations--some are right-- some are very questionable. But then he spends it all. Now, if he could do that, we could cut taxes for the American people by the amount of his new spending and just think what they would--how they would feel. Instead of programs they'd get money; instead of more home care they'd get a reduction in their taxes. So this is a classic battle between a spending president and a taxing president, and Republicans that say we had a deal, less government, less taxes.

JIM LEHRER: First, Mr. Raines, to that general point, that this violates the deal, the original budget deal in general terms, and to the Senator's general point, and then we'll go back through his list of specifics.

FRANKLIN RAINES, White House Budget Director: Well, this budget is consistent with the deal that we negotiated last year. Specifically, it's consistent because it was the chairman who particularly said we're going to apply the Budget Enforcement Act and its rules to this budget agreement, and we are abiding by those rules in proposing that investments that are offset by cuts and revenue elsewhere. So this is very consistent, except in one respect, and I have to admit, we do deviate from the agreement in one respect. We balance the budget three years earlier than the agreement calls for.

JIM LEHRER: All right, then, let's go through his specifics, Mr. Raines. There--not only are taxes not cut; they are increased. There's more taxes--tax money coming in as a result--in this budget.

FRANKLIN RAINES: We propose about $24 billion of tax cuts that are paid for by a comparable amount of closing of loopholes. These are tax cuts to support child care, to support the building of schools and reconstruction of schools, to support energy efficiency, so we can deal with climate change. We are paying for those tax cuts by closing loopholes. Those are the tax--in our proposal, but we do have a proposal to raise the cost of tobacco, to make cigarettes more expensive so that teenagers will smoke less. And we admit that. We want to raise the cost of tobacco. We don't want that money to go to the tobacco companies. We believe it should go to the federal government and the states to support things such as an increase in research for NIH, to support an expansion of child care, and to reduce class size.

JIM LEHRER: So, do you have a problem with raising the tobacco tax?

SEN. PETE DOMENICI: No, I don't. Look, we'll probably raise the tobacco tax, but let me make a point. They raise the tobacco tax, and then they assume--just get this--that we're going to pick up $65 billion, which they are going to then spend on new programs, from the settlement. And I may favor the settlement, but the truth of the matter is it's a very big concern that we'll ever pass that. And, if we do, we have to take that from the states and say we're going to use it. So chances of ever getting that money are pretty slim.

JIM LEHRER: So you don't think that should be figured into the budget?

SEN. PETE DOMENICI: Absolutely not.

JIM LEHRER: That's $65.5 billion.

SEN. PETE DOMENICI: Which means there hardly any room for the new programs they're talking about.

JIM LEHRER: Mr. Raines, what about that, why should that be counted now?

FRANKLIN RAINES: Well, we are counting it now because the President's required to set forth his entire legislative proposal in the budget. But as the Senator said, and I agree with, the budget's balanced without any of the proposals that we have made. With these proposals we have proposed investments, and we've proposed offsets for those investments. I disagree that we're not going to see tobacco legislation pass. Indeed, every day more and more support is there for tobacco legislation. The "Wall Street Journal" today had an excellent article pointing out that support is growing for tobacco legislation, and it's growing for a simple reason. There's nothing else we can do that will have an impact on the public health more dramatic than increasing the cost of cigarettes.

SEN. PETE DOMENICI: That's not relevant.

JIM LEHRER: What about the Senator's basic point, Mr. Raines, that the President's budget increases the size of the federal government, rather than shrinks it?

FRANKLIN RAINES: Well, by everything that I can measure we are shrinking the size of government, as a percentage of the Gross Domestic Product, we are shrinking government, whether you're looking at total spending or discretionary spending, or just domestic spending. We have shrunk the government in terms of people. The government has been shrinking and while the private sector is growing. And, indeed, ifyou look at the average person, the average--the median income person--you look at their tax rate, their taxes are now lower than they were when Ronald Reagan's tax cuts became fully effective in 1984. They are lower. And if you look at people who are at half the median, we virtually wiped out their taxes.

JIM LEHRER: Senator.

SEN. PETE DOMENICI: Look, let me see if I can, for your readers, give you a description of what we got. We got a budget, and it's got agreed-upon limitations from a five-year agreement. And then we got the President coming along and producing a rump budget. It's kind of a rump budget, because it says, okay, that's all well and good, but we can tax the American people and we can spend $150 billion new money and we figured out a way so it doesn't count in that budget. And it shouldn't have any impact on America.

JIM LEHRER: I don't understand that. In other words, you're saying--Mr. Raines, can you help me on this- -help us understand what--in terms of seeing it differently. You're saying $150 billion--

SEN. PETE DOMENICI: New spending.

JIM LEHRER: New spending. You dispute that, Mr. Raines?

FRANKLIN RAINES: No. Our spending isn't that high. Our spending is approximately $120 billion, but it is all paid for. That is the important point. Now, we can have a dispute. I can understand the other side saying, well, gee, we just don't think the government ought to be doing anything about child care. We don't think they ought to be reducing class size. We think that we're spending enough money on health research. Those are all respectable positions. And we can debate that. But there is no question that we've balanced the budget three years early and we've paid for every dollar of proposal we've made.

JIM LEHRER: So what, Senator, you believe that that--if it's $120 billion or $150 billion, it should not be spent on any program, much less the kinds that the President wants--

SEN. PETE DOMENICI: Let me do it another way by using some exaggerated numbers.

JIM LEHRER: Okay. All right.

SEN. PETE DOMENICI: You have a budget. It's in balance, and nothing the President did brought this balance any earlier. The agreement last year brought the budget earlier, so he made a point--the only thing different is they balanced the budget three years early but they didn't do anything to get that. That's the effect of the economy. But, now, look at this: Here we have a budget, and there are no new programs, and taxes are what they were last year. Along comes the President and he says, oh, oh, I got a way--I'm going to raise taxes $300 billion, and I'm going to spend it. That's neutral--$300 billion in taxes, $300 billion spending. The budget's still balanced. Have you spent more on government? Of course. Have you taxed the people more? Of course. But if it's one for one, you don't change the deficit, but you--

JIM LEHRER: Okay.

SEN. PETE DOMENICI: --you pull down the people with more taxes, and you put more government.

JIM LEHRER: I follow the concept. Mr. Raines, is that what you have done?

FRANKLIN RAINES: Well, actually, government is shrinking, even with this budget, government is shrinking as a percentage of the economy. It's been shrinking since the President came in office. One thing to keep in mind: Every budget presented by this President has had a small--lower percentage of the economy going to government than any budget presented by President Reagan or President Bush. Every budget he's presented--

SEN. PETE DOMENICI: Wait a minute.

FRANKLIN RAINES: --has spent less of the economy than any budget proposed by President Reagan or President Bush.

SEN. PETE DOMENICI: Don't get off the air before I tell you.

JIM LEHRER: All right.

SEN. PETE DOMENICI: Of course it has because defense has been cut. I mean, 95 percent of the personnel reductions that this administration brags about as we cut people out of government, they're all defense reductions.

FRANKLIN RAINES: I'll go even further. Every budget presented by this President has had less domestic spending--

SEN. PETE DOMENICI: Okay.

FRANKLIN RAINES: --than any budget presented by President Reagan.

SEN. PETE DOMENICI: But this budget has 9,300 new federal employees right there, and I think my last description is right. What I just told you is, the President has a new way to say we're not breaking a budget; we're just raising taxes, and we got a whole nice list of new things everybody'd like, and we're going to spend the money on it.

JIM LEHRER: What about the President's point that nothing happens with a surplus until Social Security is reformed, do you buy that? Do you support that?

SEN. PETE DOMENICI: Look, according to the numbers we are going to have to use, we're a little bit different than theirs, there is no surplus for three years. So this is--this is a wonderful concept. There just is no surplus that we have to work with according to our Congressional Budget Office for three years. So in my way of thinking about it, a lot of talk about Social Security and the surplus is wonderful, but we ought to have Social Security fixed.

JIM LEHRER: Whether there's a surplus or not?

SEN. PETE DOMENICI: No. We ought to have it fixed before three years are up. It ought to be fixed in about 18 months.

JIM LEHRER: Mr. Raines, what about that?

FRANKLIN RAINES: We agree with that. That's the President plan, that we agree that there won't be any substantial surpluses for several years, and that--during that time we need to have a national dialogue this year ending in a White House conference in December, and then beginning negotiations to pass comprehensive Social Security reform next year, so we can get it done during 1999, before any surpluses arrive. Our point is there are people out there who are saying, let's have big tax cuts, and we will pay for them out of the surplus, and we're saying, no one should spend the surplus for anything, whether it's something we want or something they want; no one should spend the surplus for anything until we fix Social Security.

JIM LEHRER: Senator Domenici, Mr. Raines mentioned President Reagan, President Bush, now President Clinton. Every time a President offers a budget, there's always somebody in Congress who pronounces it dead on arrival. We have people on this program saying that each time. What do you pronounce on this one?

SEN. PETE DOMENICI: Well, look, I pronounce it, as I have, an enigma, a contradiction in terms, and we're going to present the case to the American people. It is classic this time. It's a spend and tax president, and it's Republicans who want less government and holding the line because we made a deal. Now, frankly, our approach is not easy, but I believe it's right.

JIM LEHRER: Mr. Raines.

FRANKLIN RAINES: Well, a year ago Sen. Domenici and I were on this program and we were discussing the President's budget last year, and people said, well, this can't be, you'll never get this approved, you know, how could you be calling for bipartisan budget negotiations; it'll never happen. Well, about six months later the President signed a balanced budget agreement, balanced budget bill, and a tax cut bill.And I think we're going to go through the same thing here. The reason it happened last year wasn't because we were so smart; it's because the American people said they wanted to balance a budget. And that's why the President and Congress acted. I believe the American people will say they want to keep the budget balanced, and they would like to see these initiatives in child care and in health care, in research, and I think that's going to lead the Congress to adopt the President's program.

JIM LEHRER: Okay, gentlemen, thank you both very much.

FRANKLIN RAINES: Thank you.

SEN. PETE DOMENICI: Thank you.

JIM LEHRER: Now, we'll have beyond-the-speech looks at other proposals over the next several evenings. Tomorrow we'll talk to the head of the Internal Revenue Service about reforming his agency. FOCUS - COMMUNITY CARE

JIM LEHRER: Still to come on the NewsHour tonight the first of two stories on moving from community to profit hospitals, a David Gergen dialogue, and a Starr investigation update. Jeffrey Kaye of KCET-Los Angeles has the hospital report.

JEFFREY KAYE: It used to be that just about every American community was served by one or more non- profit hospitals--institutions created by charity and taxes and often run by religious organizations. But in the 1990's corporate change, led by industry giant Columbia/HCA, found they could make money by taking non- profit hospitals and converting them to for-profit ones. Between 1990 and 1996, for-profit companies bought up some 200 non-profit hospitals. Linda Miller, president of an organization of non-profit hospitals, says a huge amount of money is changing hands.

LINDA MILLER, Volunteer Trustees Foundation: This is potentially and probably by now the largest redeployment of charitable assets in the history of the country.

SPOKESMAN: This hospital is very important to our community. Why are you selling it?

JEFFREY KAYE: Communities across the country have been locked into bitter battles over the sale of those assets. Opponents question how the deals are done and charge that conversions result in higher prices, less charity care, and staffing cutbacks. There's been a flurry of legislative activity because of these concerns. Last year, 16 states passed laws requiring greater oversight of hospital conversion. But in some states like here in Tennessee there are few regulations governing the sale of not-for-profit hospitals. And, as a result, say critics, deals can be made in secret, and funds, once dedicated by communities for health care, can be redirected. Dr. Jeff Pennington has been active in his community for decades. In the early 60's he helped found National Memorial Hospital, located in Madison, Tennessee, a suburb of Nashville.

DR. JEFF PENNINGTON: We were able to build a hospital by raising about $5 million. Most of it came from private solicitation, door-to-door, organizing teams, and raising money--just by asking.

JEFFREY KAYE: Pennington also contributed $28,000 of his own money. When a for-profit chain tried to buy the hospital in 1994, Pennington filed suit to stop the sale.

DR. JEFF PENNINGTON: You had the not-for-profit hospital, which was not built by investors, not paid for by investors, but paid for by donations by people who wanted their money to go to serve not just those who could pay but also those who can't pay. We did not give our money for this type of facility where there is an effort to make the biggest--the largest amount of money for the investment.

JEFFREY KAYE: Pennington lost his suit, and the hospital he founded was bought by a chain that months later merged with Columbia/HCA.

COMMERCIAL ANNOUNCER: Through jobs, taxes, and charitable contributions we're caring for the community everywhere you look.

JEFFREY KAYE: A spokesman for the Tennessee-based company said no one from the change would discuss conversions since the issue was "off our radar screens." Columbia has been the subject of a widespread federal criminal fraud investigation concerning Medicare billing. But the second largest chain of for-profit hospitals--Tenet Healthcare of Santa Barbara, California--was more forthcoming about its conversions. Tenet Vice President says that when her company buys up non-profits, the hospitals benefit by becoming part of a large hospital network.

CHRISTI SULZBACH, Tenet Healthcare Corporation: There's tremendous cost savings available for a hospital to be able to buy on a national basis the way Tenet can buy through its Buy Power program. We recently had a contract with Johnson & Johnson where we're saving tens of millions of dollars because we can purchase band-aids and other types of intravenous equipment on a nationwide basis.

JEFFREY KAYE: But critics say while costs may be decreased, charges to patients generally increase significantly when a for-profit takes over. Brian Lapps, Sr. is a health care consultant in Tennessee.

BRIAN LAPPS, Sr., Health Care Consultant: They will force the hospital to operate more efficiently as a business, but when they do that, the fallacy is that they do it all through low-cost operations and purchasing contracts. The greater part of their margin, if not all their margin, is usually made from the standpoint of increased charges.

JEFFREY KAYE: In fact, public records show average in-patient charges at Nashville Memorial increased by a third after Columbia took over. By contrast, at the nearby non-profit, Tennessee Christian Medical Center, charges went down slightly during the same period. At Columbia Nashville Memorial some charges, such as X-rays, doubled. In 1996, a head X-ray there averaged some $1300, double the price at nearby Tennessee Christian, which was a little more than $600. Tom Scully, president of an association of for-profit hospitals, doesn't dispute the fact that prices usually rise after conversions. He says the reason is for-profits inherit poorly-run hospitals which weren't billing correctly.

TOM SCULLY, Federation of American Health Systems: If you're running a business that's losing money, I guess one of the ways to increase your revenues is to, number one, make sure that you're billing more effectively, and number two, raise your charges to some people. But the companies came in, kept the hospital open, attracted new doctors, billed Medicare and Medicaid and private pay patients more efficiently. I'm sure they probably did raise costs in some cases. Bu basically they saved the hospitals.

JEFFREY KAYE: But John Leifer, a former executive with Columbia/HCA, thinks that by their very nature, for-profits don't operate for the benefit of the community.

JOHN LEIFER, Former Columbia/HCA Executive: I think that any time a not-for-profit community-based facility sells to a for-profit, I think the community suffers. I think that the needs of Main Street are incongruous with the needs of Wall Street.

JEFFREY KAYE: As a regional senior vice president for Columbia/HCA in 1994 and 1995, Leifer helped arrange takeovers. He's now convinced conversions are bad medicine.

JOHN LEIFER: The community-based hospital has as part of its mission meeting the total health care needs of the community, and it doesn't have an obligation to pay a return on investment to its shareholders, whereas, a for-profit has a very different motivation. They have earnings expectations on the part of their investors, and they have earnings expectations on the part of Wall Street analysts.

JEFFREY KAYE: Charity care is one measure how responsive a hospital is to its community, what happens to those who cannot afford to pay their bills, who need uncompensated care. A study commissioned by Tom Scully's organization of some recently converted hospitals says they maintain the same level of uncompensated care.

TOM SCULLY: There's zero difference in charity care between non-profits and shareholder-owned companies.

JEFFREY KAYE: But other research indicates that in states where corporate hospitals are most highly concentrated, such as Florida, Georgia, and Tennessee, for-profits tend to provide less charity care than their non-profit counterparts. Non-profit hospitals are considered by federal law to be charitable institutions. And the law requires that the proceeds of sales continue to be used for charity.

LINDA MILLER: When a not-for-profit hospital--community-owned hospital--is sold to a for-profit company, the fair market value of that asset, not some piece of it, but the fair market value of that asset has to be returned to the community in order to stay in the charitable stream to serve the community in an ongoing fashion.

JEFFREY KAYE: And Tenet Vice President Sulzbach says that's exactly what's happening.

CHRISTI SULZBACH: The community benefits. There's additional resources in that community for perhaps education programs, things that might not have been available beforehand.

JEFFREY KAYE: More than 80 charities that fund AIDS research, medical teaching, and clinics and schools have been formed as a result of hospital conversions. These foundations now control about $9 billion in assets. But the more controversial ones have diverted funds once earmarked for health care away from medical purposes. In Dickson, Tennessee, the Jackson Foundation is building a $15 million arts and science center. The foundation was created with assets from the 1995 sale of the non-profit Goodlark Hospital to Columbia/HCA. The Jackson Foundation also foots the bill for flying lessons to high school students who pledge to remain drug free. Student pilot Shawn Constance thinks it's a great idea.

SHAWN CONSTANCE, Student: I'd just be getting home from school and wouldn't have anything to do but, you know, sit home and watch TV and now I'm sitting in an airplane.

JEFFREY KAYE: But consultant Lapps argues that the $80 million the Jackson Foundation received from Columbia actually adds to health care costs.

BRIAN LAPPS, Sr.: We've taken about 80 plus million dollars out of the health care system and put it into doing other things for the community. Realistically, when we look at health care costs and the escalation, we've added 80 plus million dollars worth of debt to the health care system in Dickson, Tennessee, that has to be paid for then by the users of the hospital.

JEFFREY KAYE: One person who benefitted from the sale is Douglas Jackson. His family founded the hospital in 1958. Jackson, Dickson's state representative, was the hospital's lawyer. He is now the $209,000 a year president of the Jackson Foundation. Jackson had agreed to be interviewed on camera but didn't show up and didn't return subsequent phone calls. The practice of rewarding key decision makers in these sales was not uncommon, according to John Leifer. Leifer helped arrange takeovers for Columbia/HCA.

JOHN LEIFER: Our intent was to clear the roadblocks to acquisition. And at times clearing the roadblocks meant offering enticements to senior management of the organization that would perhaps persuade them that a sale to Columbia was the appropriate strategy.

JEFFREY KAYE: What kinds of enticements are you talking about?

JOHN LEIFER: Well, the scope of the responsibilities might increase, whether it's with a new hospital, or whether they were put into a corporate position, or whether they were put into a foundation.

JEFFREY KAYE: Critics of the deals made in Tennessee complained they were shrouded in secrecy. Linda Miller says that's not unusual.

LINDA MILLER: As we went around the country, trying to ascertain how the hospitals were being bought up by Columbia/HCA and other for-profit companies. It became apparent to us that all of the questions that communities need to know, like what was the price paid for the hospital, where did the money go, who got jobs in the process, all of those questions were unavailable to the community. Basically, all of these sales were being done totally enshrouded in secrecy, with no availability of information to the community before, during, or after the sale.

TOM SCULLY: I think that might have been fair five or six years ago. I wasn't here then. I mean, when these first happened, there might have been a fair amount of secrecy. I think there's very little evidence there's much secrecy now. I mean, there have been a lot of states that have looked into this. There's been an awful lot of attention on it.

JEFFREY KAYE: Indeed, an increasing number of states are requiring public hearings and more disclosure of hospital conversions before allowing them to go through. And there is debate over whether greater oversight is needed to safeguard the level and quality of patient care when corporations take over non-profit hospitals.

JIM LEHRER: And that's precisely what Jeffrey Kaye will explore in part two of his report. DIALOGUE

JIM LEHRER: Now, a Gergen dialogue. David Gergen, editor at large of "U.S. News & World Report," engages Taylor Branch, author of "Pillar of Fire: America in the King Years, 1963-1965," the second volume in his trilogy on the civil rights era.

DAVID GERGEN: Taylor, you've written a sweeping graphic account of the 1960's--1963, 1965--but can you stand back from it for a moment and tell us what those years meant to America.

TAYLOR BRANCH, Author, "Pillar of Fire:" I think those years meant an America that enlarged freedom, when it didn't really think that it could, and discovered all kinds of optimism that had been kind of tamped down after World War II in its human relations and in stepping out in the world. We were a much more provincial, narrow, and spiteful in many respects and divided country then than we are now. And it took a lot of courage and with the race issue and segregation having lived for a century after the Civil War, for people to believe that something good could happen. It's much harder than it is today. And this is a story about ordinary people from all ranks, you know, from presidents down to cripples, who took risks and risked their lives to enlarge freedom. And we have inherited a much better country for it.

DAVID GERGEN: Tell us about a couple of them before we get to Martin Luther King, just what kind of examples.

TAYLOR BRANCH: Well, there was one--one of my favorites in St. Augustine--which is a setting that's not normally appreciated. It was so overshadowed by freedom somewhere in Mississippi, but it was an amazing story in itself, and at one critical point the movement was desperate to find people willing to go to jail, and they couldn't find anybody in this church, in spite of their amazing exhortations, because everybody was either already in jail or they were frightened, because there had been a lot of violence. And they said it was very embarrassing and they couldn't get anybody. And finally they went back in the kitchen, where they--in churches at that time, and still today there's usually somebody back there, cooking the meals. They went back to the cooks, and said, we're desperate, is anybody willing to go to jail, and they found this woman well up in age who had polio and walked on two crutches named Georgia Reed, and she said she would go to jail. And she came forward. And everybody in the church was mesmerized by the fact that this cripple woman came, and then she announced to the church she was ready to go to jail but not until somebody took her home to get a better dress because she'd be darned if she was going to go to jail--she went to jail and later became instrumental in the transformation of the federal judge--the judge down there--Brian Simpson--sturdy conservative Republican judge then--but he was kind of converted by her court testimony about the cruelties going on inside the jail. So it's an amazing collection of people and courage coming from places you don't expect to find it.

DAVID GERGEN: Martin Luther King was central to the story, central to our imaginations; tell us about him.

TAYLOR BRANCH: Well, this is the period when King is no longer reluctant, as he had been for the--from the bus boycott all the way through the freedom rides and the sit-ins, he was trying to preach America out of segregation, and always getting dragged into the stories. In '63, he said, I can't do that anymore; we may be losing the moment in history to try to set something in place. And Birmingham and later in Freedom Summer-- and then in Selma--most definitely in Selma--he did a great risk. He said, I'm going to risk my career. I'm going to do this; people are going to get hurt, that hurts me, and he did. And we got the Civil Rights Bill out of it, and we got the Voting Rights Bill out, which transformed American politics. So this is--unlike the first volume, which is more about King as a moral leader and a spiritual leader--in this volume we have all of that, plus his political skills. I mean, he diddles with Johnson. This time Johnson is trying to invite him--and sometimes King will say, I'm sorry, I can't come to the White House, which in the private memos is a very, very interesting side of what's going on.

DAVID GERGEN: He also mobilized, in moving from talk to action he mobilized young people and children played a huge role in changing America.

TAYLOR BRANCH: It was not just college students. It was junior high students and right down to eight- and nine-year-olds, and there were first graders who went to jail by the hundreds in Birmingham. And they really played a large role, and it was--as I write. It was tremendously controversial inside the movement--to use your children where they could be hurt and scarred for life, as hard as it is for them to have meaningful careers, to send them to jail deliberately--and yet it paid off because it broke through the emotional resistance of the whole country, those pictures of the dogs and fire hoses attacking the children. And I write I don't know of any precedent in history for a country being so moved by the active political witness of children that young.

DAVID GERGEN: That picture of Bull Connor unleashing the dogs--

TAYLOR BRANCH: Yes.

DAVID GERGEN: --it was just a memorable picture. It seared the conscience.

TAYLOR BRANCH: It's a tableau in American history of that whole period.

DAVID GERGEN: Right. In the midst of all these controversies we have today about morality and politics tell us about Martin Luther King squaring his private life and his public life.

TAYLOR BRANCH: Well, he had a hard time doing it. I don't really know much about it in his youth-- there are hints of it--but he certainly by the time he was an adult had a--in this period he had a number of running affairs--very loyal people--often for long periods of time. And he vowed when it became an issue of blackmail--because eventually the FBI by wiretaps learned where he was going to be going, and got advanced notice to be waiting for him with bugs at a hotel--if he was setting up some sort of rendevous, so they began recording his private life and leaking, or trying to get people to write about it. They never did. Nobody would ever write about it because the FBI would always insist that they not be cited as the source. So it put the news person in the position of saying I've stumbled on this material and I have no idea where it comes, but this is what it is. So they wouldn't do it.

DAVID GERGEN: It almost seemed from your book that the struggles he had reconciled in his public and private life actually made him more determined to improve America's public life.

TAYLOR BRANCH: He preached about it a lot. He talked about fighting addictions. He talked about, I'm not as good as you think I am. He gave some memorable sermons about how you don't fight evil, the story of Scylla and Charybdis and Ulysses: you don't stuff wax in your ears to try to repress it. You try to fixate on something that's better, on the better music, on the better music to draw yourself away from that. And he would preach on that in public but I don't think people really knew what he was talking about. I think what he was talking about was that he knew that this was a threat to the movement. He also knew that there were people who idolized him, who would stumble across evidence of this, who would be crushed by it. But he would take his failures and almost punish himself in public. I'm going to take greater risk to try to redeem myself in public for what he knew were his private faults, and what he would talk about. So this is--I think it's--I never have argued that your public life and your private life are completely distinct--because what you really care about and where your heart is, is shown in both. But I think the relationship between them is very complex. And that's why I think that's a different reason to tread so lightly about knowing how they relate to one another because I think you almost have to be a novelist to know about somebody's marriage, about somebody's life, about what they think of sex, and what they think of their--where their idealism is. I mean, it's obvious if say sex consumes them to the point that they can't think of anything else and they become a husk--and you can tell that they don't care about what their private life is. But there's no evidence whatsoever of that in Martin Luther King. I think when you hear him, one of the things that's most distinctive is that fairness of passion and saying things are really bad, but I refuse to give in to this, and I've got to reach for something higher, that's what makes his voice have that, you know, timber. It's the sound of his voice almost as much as the words that really affects people.

DAVID GERGEN: You wrote in your first volume of this trilogy and now in volume 2 you repeated it, that King's life is the best and most important metaphor for American history in the watershed, post-war years. What did you mean by that?

TAYLOR BRANCH: The post war years basically were trying to test--we had fought a world war about lessons of freedom, and the very searing nature of that war made us once again wonder whether we practiced that much freedom here at home. And, as usual, when there's a crisis like that in American history, as before in the Civil War, race is at the center of that: are we really treating people according to our creed, you know, that all people are created equal. And this is a great period of testing about that, and it did change the country in ways that are far more dramatic, I think, than we think. And I personally, looking on this historically now, think that our objective reality of the way we treat each other is far, far--all you have to do is look back at that period--far, far better. Hope is much easier now. Our problem now is that we've lost the memory of how to talk to one another and have the kind of hope and the conversion and the language about race that these people had then. Our objective conditions I think are a lot better off.

DAVID GERGEN: Taylor Branch, thank you very much. We'll look forward to volume III.

TAYLOR BRANCH: Thank you, David. UPDATE - TRACKING THE STORY

JIM LEHRER: And finally tonight before we go an update on the Starr investigation of President Clinton and to Margaret Warner.

MARGARET WARNER: Once again, we return to the "Washington Post" newsroom. Joining us Dan Balz, a correspondent on the Post's national staff. Dan, as we go into this third week now of this investigation, give us a sense of what the legal landscape looks at, starting with independent counsel Ken Starr's investigation, his die of it.

DAN BALZ, Washington Post: Margaret, Ken Starr was interviewed over the weekend very briefly, and he said that his investigation is moving along at pretty much full speed and that his hope is to get to the bottom of this as quickly as he can and to try to get the truth in this resolved. It's moving along in several different places. First of all, there is the continuing effort to accumulate documents. Today he received the deposition that President Clinton has given in the Paula Jones case, as well as the affidavit that Monica Lewinsky also gave in that same case. So two key pieces of information have now arrived at the Starr investigation. In addition to that, as we've said before, he has received White House logs of visits by Monica Lewinsky. We believe he also has received telephone records which would indicate telephone conversations between the President and Monica Lewinsky. He's after a variety of other things, including he's put on a request for videotapes, if they exist. We don't know that any do exist, but they did become important in the campaign finance case. So I think he put out a general request for things. The White House is being generally cooperative, they say. There are some questions about how Ken Starr's office will be able to deal with Secret Service agents. He would like to interview them. There are some negotiations going on on that front. So on the document front there's a full court press on to get as much as he can. There's a second front, as we know, which is the grand jury front. There are a number of people yet to testify who are obviously crucial in this investigation, beginning with, I would say, Vernon Jordan, who was the Washington attorney and friend of the President's who helped Monica Lewinsky get a job at the request of Betty Currie, who is the President's secretary. Others who have yet to be interviewed by the grand jury or to testify before the grand jury include Linda Tripp, who did the tape recordings of Monica Lewinsky, Lewinsky, herself, Frank Carter, who is an attorney who was working for Monica Lewinsky at the time that she prepared the affidavit, and a new name that has surfaced over the last few days, Bruce Lindsey, who is an attorney in the White House but, more importantly, one of President Clinton's closest confidantes and oldest friends. He has always played a kind of behind-the-scenes role. He is intimately trusted by President Clinton, and he has been subpoenaed to testify as well.

MARGARET WARNER: All right now on the Lewinsky front with her attorney, William Ginsburg, where do things stand in their ongoing negotiations with Ken Starr over giving her immunity?

DAN BALZ: Margaret, that's still a great puzzle. There seems to be no progress on the direct negotiations or discussions between Starr's office and her attorney, William Ginsburg. Ginsburg said over the weekend that at some point this week she is likely to return to California to spend a little time with her father, perhaps decompress a little bit. We don't know how long she's likely to stay there, whether and when she will come back. So on that front not a lot of progress has been made.

MARGARET WARNER: Now, there have been a number of stories, including the front page of the "Washington Post" today about William Ginsburg's approach, rather unconventional approach to this case. What does make it unusual?

DAN BALZ: Well, for one thing, he's conducted kind of a non-stop, round-the-clock series of TV performances. We had an article in our paper today written by Ruth Marcus and Bob Woodward in which he was quoted as saying, "I'm the most famous person in the world." Facetiously or not, he said it. The article went on to point out that the amount of time he's spent on TV is almost to turn him into what they called the "Ginsburg News Network." He's been on all--every talk show available. He did all five Sunday talk shows yesterday, and he's carried on this kind of blanket approach to talking to Ken Starr through the media.

MARGARET WARNER: And what does this press strategy suggest to other lawyers involved and other legal experts you've talked to? What does it tell about what his strategy really is?

DAN BALZ: No one is quite sure what his strategy is. Some lawyers are frankly baffled by what he's doing. Some, who are experienced in criminal matters like this, cannot understand the approach he's taken. In a number of his interviews--particularly he did one on ABC's "20/20" with Barbara Walters the other night--and he went through a series of issues and seemed to in one way or another undercut or attempt to downplay some of the more sensational aspects of evidence that would corroborate the idea that there was a relationship between the President and Monica Lewinsky. For example, on the issue of did the President send her gifts, he said, well, whatever gifts that she might have received are pretty routine and they would be something that you could get at the White House souvenir shop. On some other matters he made it sound as if there was nothing of any untoward nature. He talked about telephone calls between the President and Monica Lewinsky. He described them in the most benign context possible and said it was--that the President and Lewinsky were "just colleagues." Now, allof this adds up in other attorneys' mind to one of several possible strategies that he's pursuing. One possible one is that he is trying to muddy the evidence in such a way that it would make it difficult for Ken Starr to carry out any prosecution. The other is that he may be trying to make it such that Ken Starr feels the only way that he can take this case forward is with Monica Lewinsky's help and that he will grant her the full immunity that Mr. Ginsburg has been asking for. Ginsburg, as you recall last week, at one point described the whole matter as a "one witness case," i.e., his client, Monica Lewinsky. So what he's actually trying to do and whether he will be successful I think it's too early to tell.

MARGARET WARNER: What do the people you're talking to, whether it's at the White House or on the Starr team or in any of these various arenas, say to you about the timetable at this point?

DAN BALZ: The timetable at this point obviously is much longer than anybody predicted when this story first broke. At the time it seemed both in the President's interest and in Ken Starr's interest to get this resolved as quickly as possible the stakes were seen as so enormous for both sides. I think what's happened in the last week with the President putting into place a strategy that gives him a clear denial that he's issued a week ago Monday, now a decision not to take any further questions on it, his approval ratings are very high, he seems to be in no hurry at this point to describe in his own word what the relationship might have been between himself and Monica Lewinsky. Ken Starr, obviously, has a difficult and complicated legal case that he now has to put together. That takes time. Subpoenaing witnesses, interviewing witnesses all takes a lot of time. It's clear that on both sides people are somewhat more prepared now for a long, drawn out investigation than they were two weeks ago.

MARGARET WARNER: All right. Well, Dan, thank you very much.

DAN BALZ: Thank you, Margaret.

JIM LEHRER: The "Washington Post's" full coverage is available on their web site after 10:30 Eastern Time and on ours. A reminder that we will be going to the reporters and editors of the "Washington Post" for occasional updates of this story, or when a particular turn of events warrants. RECAP

JIM LEHRER: Again, the major stories of this Monday, President Clinton offered a 1999 budget with the first projected surplus in 30 years; the Dow Jones Industrial Average closed above the 8,000 mark for the first time in nearly two months; and Texas death row inmate Karla Faye Tucker was denied clemency and remained on schedule to be executed tomorrow. We'll see you on-line and again here tomorrow evening. I'm Jim Lehrer. Thank you and good night.