Text of a Congressional hearing held in Tucson, Arizona, to examine health care and the diagnostic related group (DRG) system is presented in this document. Opening statements are delivered by Representatives Kolbe and McCain. Witnesses testifying include: (1) two older Arizona residents who had experienced problems related to diagnostic related group rules; (2) Otto F. Dworsky, president, Arizona Federation of Chapters, National Association of Retired Federal Employees; (3) Frances Smith, member of American Association of Retired Persons; (4) Robert D. O'Connor, regional administrator, Health Care Financing Administration; (5) Theodore H. Koff, director Long-Term Gerontology Center, University of Arizona Medical Center; (6) Donn Duncan, practicing physician, State of Arizona; (7) Lawrence Shapiro, Peer Review Organization, State of Arizona; (8) Gary Henderson, president, Arizona State Medical Association; (9) Tom Plantz, chairman, Board of Directors, Arizona Hospital Association; (10) Robin A. Klaehn, regional administrator for Medical Personnel Pool in Arizona; (11) Stewart Grabel, director, Cochise Aging Services; and (12) Kathleen Heard, director, Area Agency on Aging, Southeastern Arizona Governments Organization. Short remarks by 13 audience participants are also included. (ABL)