Legislature(2019 - 2020)BUTROVICH 205
03/27/2019 01:30 PM Senate HEALTH & SOCIAL SERVICES
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| Audio | Topic |
|---|---|
| Start | |
| SB1 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 1 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 1-REPEAL CERTIFICATE OF NEED PROGRAM
1:31:22 PM
CHAIR WILSON announced the only order of business would be
SENATE BILL NO. 1, "An Act repealing the certificate of need
program for health care facilities; making conforming
amendments; and providing for an effective date."
CHAIR WILSON made opening remarks.
1:31:48 PM
CHAIR WILSON solicited a motion to adopt the proposed committee
substitute (CS) for SB 1.
1:31:55 PM
SENATOR COGHILL moved to adopt the Committee Substitute (CS) for
SB 1, work order 31-LS0001\M, Marx, 3/8/19, as the working
document.
SENATOR GIESSEL objected for purposes of discussion.
1:32:08 PM
CHAIR WILSON reviewed the changes made to SB 1 from Version A to
Version M:
The changes made in the work draft pertain to the effective
date on page 5, line 9:
• Section 8 reads: This act takes effect on July 1,
2024.
The change in the effective date from July 1, 2020, to July
1, 2024, enables a step-down approach to allow certificate-
of-need recipients and newly approved applicants to:
• plan for the change over the course of five years
• re-engineer their business model
• and re-coup their investment
• allow the department to revise regulations
1:33:01 PM
SENATOR BEGICH asked how existing regulations would be affected
if the Certificate of Need (CON) program was eliminated. He said
if the [department] spends four or five years working on
regulations, what would the legislature need to ensure the
regulations still apply and do not disappear with the bill. He
asked if the committee could request a legal opinion for
clarification.
CHAIR WILSON said the bill would repeal the statute. He said he
hoped the department would develop new regulations to help
strengthen what could be a better process. He noted that last
year the committee heard from many providers who were in
agreement that the process was not perfect. Even the department
stated that the process for applying for a certificate of need
(CON) is not a good one. The [department and stakeholders] would
like to make the process better and the bill will allow them to
do so without the CON law in effect.
SENATOR BEGICH asked if eliminating the statute would also
eliminate the authority for regulation.
CHAIR WILSON offered to request a legal opinion from the
Legislature Legal Services on the matter.
1:34:54 PM
SENATOR GIESSEL removed her objection.
There being no further objection, CSSB 1, Version M, was
adopted.
1:35:04 PM
CHAIR WILSON explained that SB 1 repeals Alaska's Certificate of
Need program and provides for a five-year delayed effective
date. The CON programs were first mandated nationally by the
federal government in 1974. Since the mandate was repealed by
the federal government in 1987, 12 states have repealed their
CON laws, three states have a regulatory oversight method, and
35 states still have CON laws and require approval for certain
facilities and services.
CHAIR WILSON said that CON programs were originally intended to
restrain health care costs and improve access to care for the
poor and the underserved populations. However, four decades of
data and studies show CON laws have not controlled costs,
improved quality and outcomes or increased access to health care
for the poor or underserved.
CHAIR WILSON offered his belief that CON laws have established
health care monopolies. This has resulted in barriers to new or
expanded medical facilities and limited health care choices or
innovations for consumers. Studies have shown that a well-
functioning health care market improves access, quality, and
outcomes. Further, a well-functioning health care market will
incentivize innovations from new entrants and lower the cost of
health care services. Repealing Alaska's Certificate of Need
program would benefit Alaskans by fostering competition in the
health care markets.
1:36:53 PM
GARY ZEPP, Staff, Senator David Wilson, Alaska State
Legislature, Juneau, said that most of the sections for CSSB 1
are conforming. He presented the sectional analysis:
Sections 1-3: makes conforming amendment to AS
18.20.400 and AS 18.20.499 to eliminate references to
AS 18.07.111, which is repealed under sec. 5 of the
bill.
MR. ZEPP explained that the conforming amendments were to
limitations on nursing overtime under AS 18.20.400, to
definitions in AS 18.20.499. It would remove references to
definitions in AS 18.07.11, which is repealed under Section 5 of
the bill. He reviewed Section 4.
Section 4: makes conforming amendments to AS 18.26.220
by removing references to repealed sections of law.
MR. ZEPP said these conforming amendments were to facility
compliance with health and safety laws and licensing
requirements. He continued his sectional analysis.
Section 5: repeals all of AS 18.07, which describes
the certificate of need program for health care
facilities, and AS 21.86.030(c)(1), AS
44.64.030(a)(18), and AS 47.80.140(b), which also
relate to the certificate of need program.
Section 6: repeals a section of uncodified law, sec.
4, ch. 275, SLA 1976, which provided a transition to
allow medical facilities in existence or under
construction before July 1, 1976 to obtain
certificates of need.
MR. ZEPP said this statute was the original creation of the CON
program in Alaska in 1976. He reviewed Section 7.
Section 7: provides that the Department of Health and
Social Services may not take any action to revoke,
enforce, or modify a certificate of need issued to a
health care facility before the effective date of the
Act.
Section 8: provides that the Act takes effect July 1,
2020.
1:40:28 PM
MR. ZEPP began his presentation on CSSB 1 by showing a video
from George Washington University-Mercatus Center explaining the
Certificate of Need program. The video made the following
points:
Before someone can open or expand the operations of a
health care facility, CON laws require them to prove
to a regulator that their community needs the new
services. The original goal was to control costs by
reducing spending on unnecessary treatments and
equipment. The CON laws have not been a panacea for
controlling costs. Obtaining a CON is a pain. CON laws
make it hard for new health care providers to compete
with established ones. Congress stopped encouraging
states to adopt CON laws in 1987. Since then, 14
states have repealed them. Repealing CON laws is one
of the first steps a state can take to make its health
care market more competitive.
1:43:53 PM
MR. ZEPP said that the state's CON programs are administered by
statutes and regulations controlling market entry for regulated
facilities, services, and equipment, hospitals, nursing homes,
some free-standing clinics, home health agencies, and ambulatory
care service centers.
He reviewed slide 3 of the PowerPoint on Senate Bill 1 "An Act
repealing the Certificate of Need (CON) program for health care
facilities" dated March 27, 2019.
CON laws are state-level statutory laws that require
healthcare entities to obtain permission to make
significant expenditures or to construct or expand
facilities and services, based on the an application
fee and the theory that controlling the supply of
facilities, equipment, and services is the best method
to restrain rising healthcare costs and prevent over-
expansion of healthcare facilities.
The certificate of need laws originally were created
to contain healthcare costs, prevent an over-supply of
medical services and infrastructure, and improve
access to care for the indigent or to the underserved
population.
The basic assumption underlying Certificate of Need is
excess capacity stemming from the overbuilding of
healthcare facilities which results in healthcare
price inflation and overcapacity.
MR. ZEPP reviewed slide 4, "National History of Certificate of
Need."
1974: National Health Planning Resources Development
Act (NHPRDA) required all states seeking federal
funding for health programs to establish oversight
agencies for the submission of proposals for any major
capital spending on health care, i.e. a Certificate of
Need program.
1974-1982: Health care costs continue to rise
nationwide despite almost 100% state participation in
NHPRDA.
1982: Congress initiates a review of Certificate of
Need programs and the Congressional Budget Office
study doesn't offer a recommendation but reports that
problems with NHPRDA has limited the program's success
in achieving cost savings. 1983-1985: Five states
abandon Certificate of Need even though NHPRDA is
still in effect.
1987-Present: Congress repeals NHPRDA. Following the
U.S. repeal, 13 states have now terminated their
Certificate of Need programs.
MR. ZEPP said that in 1974, if a state did not develop oversight
agencies it would lose federal funding. By 1987, the CON
programs throughout the country were not working. CON laws did
not constrain health-care costs, provide access, or increase
indigent care or underserved populations, he said.
1:45:21 PM
MR. ZEPP referred to maps on slides 5-9 that showed the
evolution of CON in the U.S. in 1974, 1980, 1990, 2000, and
2017. By 1980 every state except Louisiana adopted CON programs.
From 1990-2017, states gradually repealed their CON programs,
and by 2017 a total of 15 states had repealed its CON programs.
Since then, Arizona has introduced a variation of the program,
and Indiana reinstated its program, although its state medical
association does not support the CON laws.
1:46:21 PM
MR. ZEPP reviewed slide 10, "Alaska's Legislative History of
Certificate of Need."
The following is a past summary of enacted legislation
passed by the Alaska Legislature regarding the
Certificate of Need program:
1976: HB 665 (Ch. 275, SLA 1976), which repealed and
replaced all of AS 18.07 to establish the CON program
and regulation of healthcare facilities.
1982: HB 591 (Ch. 59, SLA 1982), covered a temporary
but non-emergency CON for a health care facility and
added a definition of certificate of need dealing with
the issuance of certificates.
1982: HB 591 (Ch. 25, SLA 1981), clarified that
Pioneer Homes are not subject to CON.
1983: SB 85 (Ch. 95, SLA 1983), added a $1.0 million
floor for requiring a CON.
1990: HB 85 (Ch. 85, SLA 1990), provided authorization
to Dept. of Health & Social Services to charge a fee
for the CON.
1991: SB 86 (Ch. 21, SLA 1991), deleted the federal
statutes and changed the title section.
1996: HB 528 (Ch. 84, SLA 96), Placed a moratorium on
nursing home beds and established a legislative
working group on long-term care.
2004: HB 511 (Ch. 48, SLA 04), Included Residential
Psychiatric Treatment Centers.
1:46:43 PM
MR. ZEPP briefly reviewed slide 11, "Alaska's Certificate of
Need Program." He said he would not read the slide but noted
that the program is broad.
Certificate of Need approval is required in Alaska for
any expenditures totaling more than $1.5 million
dollars for:
Construction of a health care facility;
Alteration of the bed capacity of a health care
facility; Addition of a category of health
services provided by the health care facility;
and,
Conversion of a building or a part of a building
to a nursing home.
Non-Refundable Applications & Fees:
Activity valued at $2.5 million dollars or less,
the cost would be $2,500.00 to apply; and,
Activity valued more than $2.5 million dollars, a
fee equal to .1% of the estimated cost is
applied, up to a maximum of $75,000.00.
MR. ZEPP briefly reviewed slide 12, "Alaska's Certificate of
Need Program."
Time Standards for review of applications for
Certificate of Need:
The department has up to 60 days to review a
completed application and to allow concurrent
applications/proposals for a similar activity in
the same geographic area.
Proceedings for modification, suspension, and
revocation:
The department, a member of the public who is
substantially affected by activities authorized
by the certificate, or another applicant for a
Certificate of Need may initiate a hearing
conducted by the Office of Administrative
Hearings to obtain a modification, suspension, or
revocation of an existing Certificate of Need by
filing an accusation, THE Commissioner has
authority to do this as prescribed under AS
44.62.360.
Definition:
Health care facility means a private, municipal,
state, or federal hospital, psychiatric hospital,
independent diagnostic testing facility,
residential psychiatric treatment center,
tuberculosis hospital, skilled nursing home
facility, kidney disease treatment center,
intermediate care facility, and ambulatory
surgery facility.
1:47:31 PM
MR. ZEPP reviewed slide 13, "CON Exemptions."
An operational ambulatory surgical facility may expend
any amount of money, to relocate the facility to a new
site within the same community without seeking a CON
approval. As long as the neither the bed capacity nor
the number of categories of health care services
remains the same.
Exempt Entities:
? The Alaska Pioneers' Homes
? The Alaska Veterans' Home
? Offices of private practice physicians or dentists
whether in individual or group practice
? US Indian Health Services Facilities
? Alaska Tribal Healthcare entities.
MR. ZEPP explained that Alaska has three categories of health
care providers with CON. Some on the forefront with exemptions,
incumbents in the middle were existing and operational, and new
entrants were those who are not able to gain entrance to Alaska
because of CON laws.
1:48:40 PM
MR. reviewed slide 14, "Healthcare is complicated!"
• Our current healthcare system is a highly fragmented.
• Data is siloed with no sharing, because "proprietary"
patient data can be profitable.
• Insurance is bought mostly by employers and the
patient is removed from the purchasing process.
• Government laws and regulations require unnecessary
administrative efforts for healthcare providers.
• The government dictates what health care facilities,
providers, and services are allowed and not allowed
into your community.
• The freedom of selecting your healthcare services is
dictated and controlled by government.
MR. ZEPP pointed out that repealing CON will not solve all of
Alaska's health care issues, but it is a great start to open up
the markets for new entrants and increased access to new
services, technology, and most importantly, competition.
MR. ZEPP reviewed slide 15, "Repealing Alaska's CON is only a
piece of the puzzle."
• Over 100 million Americans in twelve states (31% of
the U.S. population) live without CON.
• 40 years of studies very clearly show that non-CON
states have better access, lower costs, higher quality
outcomes, and lower mortality rates than CON states.
• Proponents of CON would have you believe that if CON
was repealed, there would chaos in our communities:
small hospitals would close, Medicaid/Medicare costs
would rise, and hospitals would be unable to provide
EMTALA for the indigent care
• CON states and non-CON states have very similar levels
of indigent care, whether you have a con or not, this
is based on actual research!
1:49:36 PM
MR. ZEPP reviewed slide 16, "Our healthcare providers are
cherished and valued members of our communities!"
Attempts to repeal Alaska's Certificate of Need
program is not meant in any way, shape, or form to
dishonor, disrespect, or minimize how important our
healthcare providers are to Alaskans! They are our
friends, family members, and neighbors.
He said that [SB 1] is a policy discussion and not an attack on
health care providers.
1:50:02 PM
MR. ZEPP reviewed slide 17, "Consequences of CON failures."
We believe Alaska's CON laws have:
• Stifled competition, prevented innovation, and
prevented new technology;
• Failed to increase access for indigent care or the
underserved populations;
• Created barriers for new entrants;
• Protected incumbent hospitals and created monopolies;
• And increased healthcare costs, especially in a
restrained market like Alaska.
Result: We have the highest healthcare costs in the
world!
1:50:37 PM
MR. ZEPP reviewed slide 18, "Why competition is important in
health care markets."
"Competition is essential to ensure that providers and
health plans are subject to the market forces that
drive them to attract patients and subscribers by
offering low prices and high quality. If market powers
are concentrated among providers or plans, they are
insulated from those forces."
"Material, lasting improvement to our healthcare
system requires harnessing private sector innovation
and competition to benefit of all. When ingenuity and
capital are focused on what we most value, we see
incredible innovation and productivity gains. Enabling
competition requires alignment of the incentives of
all stakeholders with what we value: sufficient
transparency and appropriate regulations that further
benefit Alaskans."
"Reform must address the underlying drivers of costs
and cost increases, including the current lack of
value-based competition in our healthcare delivery
system (e.g., hospitals, medical service providers,
and pharmaceuticals."
1:51:18 PM
MR. ZEPP reviewed slide 19, "Why is competition important?"
"Reduced competition among clinicians leads to higher
prices for healthcare services, reduces choice, and
negatively impacts overall healthcare quality and the
efficient allocation of resources."
"State polices that restrict entry into provider
markets can stifle innovation and more cost-effective
ways to provide care while limiting choice and
competition."
MR. ZEPP said that the quotations were from "A Bipartisan
Blueprint for Improving Our Nation's Health System Performance,"
signed by Governors John Hickenlooper, John Kasich, Bill Walker,
Tom Wolf, and Brian Sandoval, pointing out that Alaska's
Governor Bill Walker had been one of the signees of the
blueprint.
1:51:49 PM
MR. ZEPP reviewed slide 20, "Competition is Important."
The quotes you see are from research, studies and data
regarding how CON laws have stifled competition:
"Competition creates choices for consumers and raises
quality standards as providers compete for patient
loyalty. A 1993 study found that hospitals in more
competitive markets had average costs below those of
less competitive markets."
"Market competition in healthcare delivery provides
economic empowerment to patients and payors by
providing access, encouraging innovation and the
investment of capital in overall cost saving
technologies, and creating choices for consumers
which, in turn, encourages providers to raise quality
standards as they compete for patient loyalty. When
patient choice is diminished, decisions about
appropriate pricing/costs, access, quality, and
beneficial outcomes become the sole purview of the
elite groups of oligopoly decisionmakers who, in the
absence of healthy competition, are free to ignore
market demands and patient needs. This circumstance is
what drives the acceleration of costs."
Written Testimony to the Senate Labor & Commerce
Committee on April 6, 2017 Robert J. Cimasi (page 7
& 8) + "California Providers Adjust to Increasing
Price Controls, J Zwanziger, G. Melnick, A. Bamezai,
Health Policy Reform 1993 (Pages 241-58); Written
testimony to the Senate Labor & Commerce Committee on
April 6, 2018 Matthew D. Mitchell, PhD, Mercatus
Center-George Mason University (page 17).
He said that these studies span over 30 years, but the data
trends have not changed.
1:52:15 PM
MR. ZEPP reviewed slides 21-22, two slides stating that CON laws
prevent innovation and new technologies.
Example, this applies to Alaska as well due to our CON
law restrictions if you're a new entrant and costs
exceed $1.5 million!
Dr. Singh, of North Carolina, cannot purchase a new
MRI machine because of CON laws in North Carolina, the
law that applies here.
On average, an MRI at a North Carolina hospital costs
upwards of $2,000. Dr. Singh's charges run from $500
to $700 but he has to use a mobile scanner instead of
a fixed MRI scanner because of the CON laws.
"The answer lies in the powerful lessons business has
learned over the past two decades about the
imperatives of competition. In industry after
industry, the underlying dynamic is the same;
competition compels companies to deliver increasing
value to customers. The fundamental driver of this
continuous quality improvement and cost reduction is
innovation. Without incentives to sustain innovation
in health care, short-term cost savings will soon be
overwhelmed by the desire to widen access, the growing
health needs of an aging population, and the
unwillingness of Americans to settle for anything less
that the best treatments available. Inevitably, the
failure to promote innovation will lead to lower
quality or more rationing of care two equally
undesirable results."
1:53:00 PM
MR. ZEPP reviewed slide 22, "How CON Laws Prevent Innovation and
New Technologies."
"The misguided assumption underlying much of the
debate about health care reform is that technology is
the enemy. By assuming that technology drives up
costs, reformers neglect the central importance of
innovation or, worse yet, attempt to slow its pace. In
fact, innovation driven by rigorous competition is the
key to successful reform. Although health care is
unique in some ways, in this respect, it is no
different than any other industry."
"CON repeal would remove unnecessary and irrational
constraints and costly regulatory barriers to
innovation; to investment in new technologies; to
quality services; and, to cost-effective improvements,
which as the technology advances, offer the true and
valid opportunity to provide cost-effective quality
healthcare to Alaska's citizens."
"Systematically review and rationalize federal and
state regulations that may inhibit innovation and
competition (e.g., credentialing, clinical trials, and
prescription drug import regulations)."
1:53:39 PM
MR. ZEPP reviewed slide 22, "CON laws create barriers for new
entrants."
"Government-erected barriers to entry that can lead to
a highly-concentrated and inefficient market."
"Under normal market conditions, high prices and/or
high profit margins attract new producers and sellers.
This increased supply leads to lower prices and higher
quality over time. Without the possibility of new
entrants and real competition, however, existing
producers can use market power to keep prices high and
quality low."
"Denial of patient choice in Alaska is because of the
barrier to entry posed by CON. New Medical providers,
no matter how efficiently and creatively they might
contribute to higher quality, more beneficial
outcomes, and lower overall healthcare costs, must
receive permission and can be challenged by incumbents
and this limits competition for Alaskans and their
families."
"On average, application fees are $32,000; however,
total costs associated with the process to obtain
regulatory permission to provide the medical services
requested can exceed $5 million for a single
application (Conley and Valone 2011), which exceeds
the average price of a magnetic resonance imaging
(MRI) machine. The costs include consulting fees as
well as review and appeal fees, and the process can
take up to three years."
1:54:13 PM
MR. ZEPP reviewed slide 23, What About EMTALA?"
EMTALA is a federal law that requires Medicare-
participating hospitals with emergency departments to
medically screen every patient who seeks emergency
care and to stabilize or transfer those with medical
emergencies, regardless of health insurance status or
ability to pay--this law has been an unfunded mandate
since it was enacted in 1986.
CON laws have failed to increase access for indigent
care or the underserved populations.
He said he wanted to bring Emergency Medical Treatment and Labor
Act (EMTALA) because it has come up the last several years when
discussing CON in committee.
1:54:54 PM
MR. ZEPP reviewed slide 24, "Is EMTALA-related care the driver
of Rising Healthcare Costs.
Emergency care in America is just 2 percent of all
U.S. medical costs.
He said he would say no, because according to the American
College of Emergency Physicians, emergency care in America is
just two percent of all U.S. medical costs. He reminded members
that CON has been in effect for over four decades and the
effectiveness and burdens of CON regulatory policy have been
studied extensively by federal and state governments, academic
institutions, and other researchers and organizations.
1:55:32 PM
MR. ZEPP reviewed slide 26, which contained quotes:
"Although advocates of CON laws might seek to promote
indigent care, the evidence does not show that CON
laws advance that goal."
"Most noticeable in all of the results is a lack of
any statistically significant evidence for the cross
subsidization hypothesis. The data provides no
statistically significant evidence that increased
competition leads to reductions in charity care. The
claim that hospitals will use market power to increase
services to the poor is largely unsupported by this
data."
He said that by limiting competition, CON laws allow incumbent
healthcare providers to earn greater profits by charging higher
prices for private health insurance and financing indigent care.
It is cross-subsidization. That is the concept behind CON, he
said.
1:56:08 PM
MR. ZEPP reviewed slide 27, "Contemplate the Following."
"The huge enterprises that U.S. hospitals have become
are largely unaccountable for the amounts of revenue
they raise or the uses to which they put that money.
Indeed, they are major contributors to ever-rising
healthcare costs."
"Competition is the best way both to limit dominant
hospitals' claims on gross domestic product (GDP) and
to restore voters and their representatives the power
to decide just what extras are worth paying for."
"Early analysis of the Medicare Care Report data shows
national declines in uncompensated care, especially in
expansion states, although the data do not permit
reliable estimates of trends in Medicaid payment
amounts."
"Almost all states make Medicaid Disproportionate
Share Hospital (DHS) payment are made to hospitals
serving high proportions of Medicaid or low-income
patients."
What is Disproportional Share Hospital payments?
Federal law requires that state Medicaid programs make
Disproportionate Share Hospital (DSH) payments to
qualifying hospitals that serve a large number of
Medicaid and uninsured individuals. Approximately
3,109 hospitals receive this adjustment.
1:56:41 PM
MR. ZEPP reviewed slide 28, "Medicaid Disproportionate Share
Hospital (DSH) payments in 2018 for Alaska."
Who or where was the funding distributed to? What
healthcare entities/facilities?
4 Hospitals have had ongoing agreements with the
department to receive DSH for many years.
• Alaska Psychiatric Institute (by regulation API
receives their facility specific maximum allowable by
law)
• FY2018-$14.7 million
• FY2017-$14.6 million
• FY2016-$14.1 million
• Fairbanks Memorial Hospital- note the decline
resulting from falling uncompensated care
o FY2018-$258.9 thousand
o FY2017-$660.5 thousand
• FY2016-$1.3 million
• Bartlett Regional Hospital note the decline
resulting from falling uncompensated care
o FY2018-$302.5 thousand
o FY2017-$274.5 thousand
o FY2016-$1.8 million
• Providence Alaska Medical Center - $2,531,019
annually.
o FY2018-$2.5 million
o FY2017-$2.5 million
o FY2016-$2.5 million
1:57:07 PM
MR. ZEPP reviewed slide 29, "Final Considerations on EMTALA."
How do other states deal with EMTALA?
Example: New Jersey requires Ambulatory Surgery
Centers not owned by a hospital to pay a 3.5% tax of
up to $200,000 on the facility's annual gross revenue.
The tax helps fund the uncompensated care through the
Health Care Subsidy Fund.
There are methodologies to help level the playing
field for EMTALA in Alaska for those healthcare
providers who are mandated to provide EMTALA. It's not
an all or nothing proposition and certainly not a
reason to retain CON laws in Alaska.
1:57:59 PM
SENATOR BEGICH referred to [slide 28] on Disproportionate Share
Hospital (DSH) payments. He noted the API numbers are
significantly higher than others and read, "by regulation API
receives their facility specific maximum allowable by law."
Under EMTALA API receives the Medicaid disproportionate share
funds. He asked if the state privatizes API, whether that
regulation would still apply.
MR. ZEPP answered that he did not know.
SENATOR BEGICH said that he would like the committee to look
into that at some point.
1:58:59 PM
MR. ZEPP reviewed the quote on slide 30.
"Let's examine the data of Alaska's high health care
costs."
MR. ZEPP reviewed slide 31, "Inflation vs. Skyrocketing
Healthcare Prices."
The average overall rate of inflation in Alaska was
1.22% from 2013 2017.
Healthcare had a rate of inflation of 10.0% over the
same five-year period.
MR. ZEPP said to remember that in 1974, one of the main points
was that health care costs were rising rapidly with an 11
percent inflation rate that year. According to the Department of
Labor's data, Alaska's health care costs are anywhere from 45 to
53 percent higher than the U.S. average for health care.
1:59:46 PM
MR. ZEPP reviewed slide 33,"Milliman reports." He presented the
key conclusions from 2011:
• Hospital operating margins in Alaska were 13.4% on
average in 2010, compared with 5.7% for the comparison
states (or in other words, average hospital margins in
Alaska are 233% of those in the comparison states)
Margins for hospitals in rural areas were similar to
the comparison states. Margins for hospitals in urban
areas were 16.2%, driven largely by high margins in
two for-profit hospitals.
• Commercial hospital reimbursement is approximately
137% of the average in the comparison states.
• Average hospital costs are approximately 138% of the
average in comparison states.
• Overall health care utilization rates for Medicare
patients are similar to the comparison states.
2:00:36 PM
SENATOR BEGICH asked how the repeal of CON laws would impact
this.
MR. ZEPP explained the process he used to make the conclusions,
including using 22 studies to prepare this presentation, that he
reviewed many other studies in the last three years, and held
numerous discussions with people nationwide.
He reiterated that CON was created to contain health care costs,
prevent an oversupply of medical services and infrastructure,
and improve access for indigent care and underserved
populations. He gave an example to illustrate how a new provider
of dialysis, cannot work in Alaska unless the state of gives
permission, but a sole incumbent provider could get involved and
help prevent another company from working in Alaska.
SENATOR BEGICH expressed an interest in knowing the expectations
if the legislature eliminates the CON laws. Referring to his
example, he said that the assumption is that a company holds the
price at a certain point and because of the barriers to entry,
other entities cannot offer that same product at a lower price.
He asked if that was the fundamental theory.
2:02:45 PM
CHAIR WILSON said that he will discuss the goals later on. The
slide reviewed the original reasons for CON laws, which was to
help contain and control health care costs and expenditures.
However, Alaska is still paying the same inflation rates as it
did the 70s, he said. It has not changed.
SENATOR BEGICH said his point was that identifying the figures
on the slide does not indicate causation. He would like to see
how the two are related and connect.
2:03:43 PM
SENATOR GIESSEL said that the Milliman reports, which were done
for the Health Care Commission are very helpful. She said that
one recommendation by Milliman was to repeal CON laws.
She related a scenario to illustrate how CON works. Two years
ago, one Eagle River hospital requested permission for a stand-
alone emergency room. This community serves a large population
and is about a 30 minute drive from Anchorage and 45 minutes
from the Mat-Su Valley. The commissioner of Department of Health
and Social Services (DHSS), the person who makes the CON
decision, denied the CON even though the stand-alone emergency
room in Eagle River would serve a large population. Instead,
emergency room facility increases were approved at Providence
Hospital in Anchorage.
She offered her belief that the rationale was non-existent in
this decision. Not only did it increase costs by suppressing
competition, it limits access to health care. She expressed
frustration that even though more people reside in the Eagle
River area than in Bethel, this community was denied a stand-
alone emergency room.
2:05:24 PM
SENATOR BEGICH said that the two scenarios get right to the
point of connecting the figures on the slide, which is what he
sought.
MR. ZEPP reviewed slide 33, "Data from the Milliman Report from
November 2016, which included a bar chart that showed hospital
margins by area from FY 2012 to FY 2014, comparing hospital
margins in Alaska to other locations in the nation. It included
these statements:
Hospital margins in Alaska are generally higher than
those in the rest of the country. Within Alaska,
hospital margins in Anchorage are the highest. Figure
10 sows the Alaska average at 15.6% comes in about
five points higher than San Francisco, which is the
highest of the comparison areas at 10.3%. Anchorage
facilities lead the pack with 20.3% margin. Alaska
hospitals outside of Anchorage are consistent with the
high end of the comparison areas.
MR. ZEPP said that when health care markets have a restrained
market, the incumbents create monopolies and control prices.
2:06:33 PM
SENATOR STEVENS asked why the chart shows the hospital margins
in Fairbanks as so low.
MR. ZEPP related his understanding that Fairbanks is a smaller
hospital. He offered to research it and respond back to the
committee.
SENATOR STEVENS commented that it was remarkable that the
Fairbanks hospital has the same margins as Vermont.
2:07:05 PM
SENATOR GIESSEL said another factor is who owns the hospital.
This slide refers to hospital margins or profits and it would
include the Providence Medical Center complex, which is the
highest margin facility in the Providence network. She reminded
members that Providence Medical covers most of the West Coast
and noted that the Anchorage Providence hospital has an
extremely high margin of profitability.
2:07:48 PM
MR. ZEPP reviewed slide 34, "An Example - Milliman Report on
Colonoscopy from November 2016," which consisted of a graph that
showed the average unit cost for physician colonoscopy with
biopsy. He said that Anchorage costs are significantly higher
than the other eight cities listed. This is consistent with the
data throughout the Milliman report. He concluded that with CON
laws, prices are set by the competitors. This is especially true
in Alaska because it has a small population and a restrained
market, he said.
MR. ZEPP reviewed slide 35, "Milliman Reports Key Findings -
2016."
• Commercial provider payment levels in Alaska are 76%
higher than levels nationwide;
• Physician payment levels are 148% higher in Alaska;
• Hospital payment levels are 56% higher;
• Commercial provider payment levels have grown faster
in Alaska than in comparison areas over the last five
years, with the Alaska physician payment level growing
by an excess of 15% and the hospital payment levels by
an excess of 6%. Combined, this resulted in an
additional 10% medical cost growth in Alaska versus
the comparison areas over the five-year period;
• Hospital margins in Anchorage, at 20.6% are high
relative to the nationwide average at 6.9%/
2:08:58 PM
MR. ZEPP reviewed slide 36, "Alaska's high health care costs are
driving citizens out of the state for medical care."
Companies such as the state of Alaska, Premera,
General Communication, Inc. (GCI), and the Mat-Su
Borough have programs that send employees south for
medical care because of the high healthcare costs in
Alaska.
He explained that these entities use third-party vendors to
schedule appointments. The covered costs usually include the
airfare, hotel, per diem, for the patients and their spouses and
the program still save tens of thousands of dollars. A 2018
report for the state of Alaska shows that the carrier rate for
repairing a hernia was $17,434. The cost to have the surgery
performed in Seattle, using SurgeryPlus, a third-party vendor
that provides travel arrangements, was $9,558. This results in a
savings of $7,876 or 45.2 percent, including the travel costs of
$2,000, he said.
SENATOR GIESSEL said that the Teamsters also send its
beneficiaries to the Lower 48 as do many school districts since
the districts can no longer afford to have care provided in
Alaska.
MR. ZEPP said that the point of the slide is that the state
needs competition CON prevents competition.
MR. ZEPP said that 12 states have repealed their CON laws. Over
100 million Americans, or about 31 percent of the U.S.
population, live without CON programs. Theses still have
licensing and regulation, but the states have open competition.
2:11:05 PM
MR. ZEPP presented the slide 37, "Why repeal Alaska's
Certificate of Need?"
Four decades of research show that CON Laws Have:
• Prevented Access;
• Not increased the levels of indigent care in CON
states versus Non-CON states;
• Created barriers to new entrants;
• Enriched incumbent healthcare providers;
• Contributed to high healthcare costs in Alaska;
Alaskans are paying the highest healthcare prices in
the world and they continue to increase!
Repealing Alaska's CON program will provide Alaskans
with choice and spur competition.
2:11:42 PM
MR. ZEPP presented slide 39, "No better time to repeal Alaska's
CON program."
The fundamental premise of our systems is that
consumer welfare is maximized by open competition and
consumer choice! Healthcare development should be left
to the economics of a well-functioning healthcare
system for Alaskans.
Alaska's CON law remains a major hurdle for new
entrants, existing providers seeking to expand,
modernize or reshape their service capabilities. Now
is the right time!
Alaskans are paying the highest healthcare prices in
the world!
MR. ZEPP said that with a delayed, five-year implementation
date, the repeal provides Alaska health care providers an
opportunity to prepare and the state of Alaska to develop
meaningful regulations.
2:12:17 PM
MR. ZEPP presented slide 40, "Healthcare is multifaceted."
Healthcare markets contain many elements that are in need
of review, including:
• Escalating costs and care provider shortages;
• Public health and various payer programs;
• Lack of accurate and reliable cost information to
consumers;
• Medicaid reforms and implementation challenges;
"When healthcare markets operate properly, competition will
determine the appropriate prices for medical services, the
appropriate organizational forms for healthcare financing
and delivery, and the appropriate range and availability of
cost/quality/service trade-offs."
MR. ZEPP concluded saying the sponsor believes that based on the
research and studies spanning over 30 years, that 31 percent of
Americans live without CON laws. These states thrive because
competition is good for consumers in all industries, including
health care. He urged the committee to open Alaska to
competition.
2:13:28 PM
SENATOR STEVENS said that this is a complex issue. He stated
that he is the only committee member from rural Alaska. He said
he feels fortunate that Kodiak has a wonderful hospital and
emergency room. He expressed concern about what this this really
means. He said he understands that the sponsor believes that
repealing CON laws will spur competition. However, he expressed
concern that the Kodiak hospital might not survive. He said he
will cautiously consider this measure. He pointed out that the
legislature has considered repealing the CON statutes, but it
lacked support to do so.
MR. ZEPP responded that no one wants to see small, rural
hospitals close. He referred members to three different studies,
including one from the federal U.S. General Accounting Office,
the Chartis group, and from the North Carolina Rural Health
Commission. All of these entities studied small rural hospital
closures and determined hospitals close due to economics and not
competition. The Mercatus Center studies have shown that in
states that repealed CON statutes, it has had little effect on
hospitals. In 2017 and 2018, rural hospital closures occurred in
17 of 22 states with CON laws and in five without CON laws. He
offered his belief that the extensive research concludes it
these closures did not have anything to do with the certificate
of need requirements.
2:16:02 PM
SENATOR STEVENS said that his district has small hospitals in
Kodiak, Cordova, and Homer. The Cordova hospital is always on
the verge of closing, he said. He expressed an interest in
hearing from the hospital administrators for their perspective.
He estimated that approximately one-third of the health care in
his community is covered by the Kodiak Area Native Association
(KANA). The KANA is a nonprofit corporation exempt from CON
requirements since the KANA has an exemption from the federal
rules.
CHAIR WILSON said, in terms of profitability margins, the small
hospitals in Seward and Kodiak are owned by a large entity,
[Providence Health & Services]. He offered his belief that
Providence Health & Services seems to send its profits out of
state instead of investing in Alaska infrastructure and needs.
For example, it added a large California hospital to its
portfolio. That group suggests that the CON laws stifle new
hospital beds, which are always based on cost. However, the
department {DHSS) says that CON laws do not account for the
specific acuity of Alaskan situations. Prior committee testimony
about the need for more nursing home beds indicates that CON
laws are not the issue. Today, the [DHSS] deputy commissioner
said that skilled nursing home facilities need more ventilator-
type systems. However, only St. Elias [Specialty] Hospital in
Anchorage operates ventilator systems for patients who need
specialized skilled nursing level care. He said that current CON
laws do not allow new entrants into the market because of the
type of facility, not based on the needs of Alaskans who suffer.
This is one example of how CON laws have stifled treatment for
vulnerable populations in Alaska.
SENATOR STEVENS stated that the Kodiak Island Borough owns the
Kodiak Island Medical Center and building and every five years
the borough contracts for services. He noted that he served on
the KIB Assembly when the bid went to Providence Health.
2:19:12 PM
SENATOR GIESSEL offered her belief that the supply and demand
concept has worked for coffee and bagels and it will work for
health care. The health care system will respond to the demand
if it is allowed to do so. She referred to the slide in the
PowerPoint that showed the states without any CON requirements
and to the Milliman report that compared Idaho and North Dakota
to Alaska. The Milliman report showed these two states have
significantly lower health care costs than Alaska. These states
are also rural states with small communities, she said. While it
could be argued that North Dakota and Idaho have road systems
and Kodiak does not, those two states repealed their CON
requirements and allowed competition to work. She offered her
belief that the CON statutes suppress innovation, particularly
in stand-alone surgery centers and in orthopedics. She has held
discussions with many surgeons who would like access to
innovative facilities that can provide lower-cost care. However,
new clinics cannot open due to government restrictions on the
market, she said.
2:21:40 PM
DAVID GRABOWSKI, Ph.D., Professor, Department of Health Care
Policy, Harvard Medical School, Boston, Massachusetts, testified
in favor of repealing certificate of need laws. He said his
research has focused on nursing home CON, so his remarks will
address that area. He asked members to imagine if Alaska limited
the number of hotels in communities. Instead of the market
dictating the number of hotel beds, a regulatory body would set
the number of hotel beds. He explained that this would quickly
distort competition. As demand grew, new hotels could not easily
open, which would result in higher hotel occupancy and fewer
available beds. Hotels would not need to provide good service or
invest in capital improvements since customers would pay higher
prices for limited hotel bed. Yet many other states have similar
rules for nursing homes in the form of certificate of need laws.
These laws constrain nursing home bed growth in Alaska by
employing a needs-based evaluation of all applications for new
construction.
[Connection with Dr. Grabowski was lost.]
2:23:40 PM
DAN GILMAN, Attorney Advisor, Office of Policy Planning, Federal
Trade Commission (FTC), Washington, D.C., testified in favor of
repealing Alaska's certificate of need (CON) laws. He pointed
out that he also submitted prepared remarks that reviewed the
effects of CON laws issued jointly by the two federal
competition authorities, the FTC and the Antitrust Division of
the U.S. Department of Justice (DOJ), referred to as "the
agencies". In April 2017, these agencies commented on Senate
Bill 62, discussing their general views on CON laws and the
likely impact of that bill on Alaska's health care competition.
In February 2018, the agencies summarized those comments and the
FTC's continued concerns about CON to the Senate Labor and
Commerce Committee. The FTC has continued to follow the economic
and policy related to CON laws and remains concerned about the
impact of CON laws on health care competition and health care
consumers. These agencies have extensive experience with health
care competition, including several decades of law enforcement,
research, and policy regarding the effects of provider
concentration and CON laws. However, his comments do not
necessarily reflect the views of the FTC, any individual
commissioner, or the Department of Justice (DOJ), he said.
2:25:39 PM
MR. GILMAN offered his belief that initial goal of certificate
of need laws was to reduce health care costs and improve access
to care. However, it has become apparent that CON laws do not
provide these benefits. In fact, CON laws can undermine some of
the very policy goals the laws originally intended to advance.
The empirical data from numerous studies do not generally find
that CON laws have succeeded in controlling costs, improving
quality, or increasing access to health care, he said.
MR. GILMAN said he has identified at least three serious
problems with CON laws. First, CON laws create barriers to entry
and expansion, which can increase prices, limit consumer choice,
and stifle innovation. Second, incumbent firms can use CON laws
to thwart or delay market entry or expansion by new or existing
competitors. Third, as illustrated by the FTC's own experience
in the Supreme Court [Federal Trade Commission vs.] Phoebe
Putney, CON laws can deny consumers the benefit of an effective
remedy following the consummation of an anticompetitive merger.
For these reasons, last year he suggested Alaska repeal its CON
laws, which he still maintains, he said.
MR. GILMAN said CON laws create barriers to entry and expansion,
potentially depriving consumers of the benefits of health care
competition. CON laws, including Alaska's law, require new
entrants and incumbent providers to obtain state-issued approval
before constructing new facilities or offering certain health
care services. These aren't basic health and safety standards
but are entry requirements. By interfering with market forces
that normally determine the supply of services and facilities,
CON laws can suppress increases in supply and misallocate
resources, he said. These CON laws also shield incumbent health
care providers from competition by new entrants and innovations
in health care delivery, which means consumers lose these
benefits. He urged the committee to consider all the ways that
CON laws may harm health care consumers and to consider how
patients and public and private payers might benefit if new
facilities and services could enter the market more easily. He
suggested that the credible threat of entry or expansion alone
typically restrains health care prices, improves quality of
care, incentivizes innovation, and improves access to care.
MR. GILMAN said that entry restrictions tends to raise costs and
prices and limit opportunities for providers to compete, not
just on price, but also on non-price aspects, like quality and
convenience for patients. Impeding new entry into health care
markets can be especially harmful in rural or other underserved
areas since CON laws may delay or block the development of
facilities and services in areas services are needed most. CON
laws potentially reinforce market power that incumbent providers
may enjoy in already concentrated areas, he said.
MR. GILMAN said that incumbent providers may exacerbate the
competitive harm from these entry barriers by taking advantage
of the CON process to protect their revenues. The strategic use
of the CON process by competitors can divert scarce resources
away from health care innovation and delivery as potential
entrants incur legal, consulting, and lobbying expenses. The
FTC's found in FTC vs. Phoebe Putney that CON laws can entrench
anticompetitive mergers by limiting the ability of antitrust
enforcers to implement effective structural remedies to
consummated transactions.
MR. GILMAN said that empirical evidence does not show that CON
laws have achieved their goals. States originally adopted CON
law programs over 40 years ago as a way to control health care
costs and mitigate the incentives created by a cost-plus health
care reimbursement system. Although this type of reimbursement
has disappeared, CON laws remain in force in a number of states.
The CON proponents continue to raise cost control as a
justification, arguing that CON laws improve health care quality
while increasing access. The evidence suggests otherwise, he
said. Empirical evidence on competition in health care markets
generally has demonstrated that more competition leads to lower
prices. FTC scrutiny of hospital mergers has been particularly
useful in understanding concentrated-provider markets and
retrospective studies of provider-consolidation by FTC's staff
and independent researchers. He quoted from "The Impact of
Hospital Consolidation" by economists Martin Gaynor and Robert
Town that "increases in hospital market concentration lead to
increases in the price of hospital care." All sources and
citations of his empirical points can be found in the 2017 joint
statement by FTC and DOJ, he said.
2:31:49 PM
MR. GILMAN said that the best empirical evidence also suggests
that greater competition incentivizes providers to become more
efficient. Recent work shows that hospitals faced with a more
competitive environment have better management practices and
also that narrowing or repealing CON laws can reduce per patient
cost of health care.
2:32:10 PM
MR. GILMAN said he has found no empirical evidence that CON laws
have successfully restricted so-called overinvestment. CON laws
can, however, limit investments that would lower costs in the
long run. Several studies directly analyzed the impact of
changes in CON laws on health care outcomes. The weight of this
research has found that repealing or narrowing CON laws is
unlikely to lower quality. It may, in fact, improve the quality
of certain types of care.
MR. GILMAN said that CON proponents concede that CON laws allow
incumbent providers to earn greater profits that the providers
would in a competitive environment. Proponents argue that
incumbents could use those extra profits to cross-subsidize
charity care. He acknowledged providing charity care is
important. However, he urged the committee to consider less
costly and more effective ways to provide it. The charity care
rationale is at odds with the cost control rationale, he said.
If the idea is that CON-protected incumbents will use their
market power and profits to cross-subsidize charity care, that
implies that providers will charge more for non-charity care, he
said. Such pricing can harm Alaska's health care consumer and
hurt low-income or underinsured patients who are ineligible for
charity care. Also, because CON programs impede entry and
expansion, these programs impede access to care for all
patients, including the indigent and other low-income patients.
MR. GILMAN said that although advocates of CON laws might seek
to promote charity care, the evidence simply does not show that
CON laws advance that goal. In fact, there is some research
suggesting that safety-net hospitals are not financially
stronger in CON states than in non-CON states. Moreover, some
empirical evidence contradicts the notion that dominant
providers use their market power to cross-subsidize charity
care. A paper from Professor Christopher Garmon found a
"complete lack of support for the cross-subsidization
hypothesis," he said. The FTC recognizes that states must weigh
a variety of policy objectives when considering health care
legislation, but CON laws raise considerable competitive
concerns and do not appear to achieve their intended benefits
for health care consumers. CON laws have failed to demonstrate
success at delivering on any of their policy goals in over 40
years. He respectfully asked that the legislature consider
whether Alaskan citizens are well served by CON laws and if not,
whether Alaskans would benefit from the repeal of those laws.
2:35:30 PM
MATTHEW MITCHELL, Ph.D., Senior Research Fellow, Director of the
Equity Initiative, Mercatus Center, George Mason University,
Arlington, Virginia, testified in favor of repealing the
certificate of need (CON) statutes. He said that for the last
several years he and his colleagues have been studying CON laws.
He highlighted some misconceptions about CON laws, such that CON
laws are not quality gates. CON laws require permission from the
state to open or expand a health care facility, add a hospital
bed or offer a neonatal intensive care unit. The process does
not asses the provider's quality, safety record or
certifications, which is addressed by other regulatory measures.
Instead, the CON process assesses whether the community needs
the services, which is typically decided by the market.
Economists tend to view CON laws as being anticompetitive
restrictions to supply, which is why antitrust authorities at
the FTC and the DOJ are skeptical of them, he said.
DR. MITCHELL said that the 1974 National Health Planning and
Resources Development Act mandated that states pass CON laws in
order to receive matching funds. This federal law laid out a
number of rationales for CON laws. Since then 15 states have
repealed CON laws and 38 percent of the U.S. population lives in
one of those states. Alaska can predict the effect of repealing
its CON laws from the experiences of the other states. Alaska
can also use sophisticated econometric techniques to examine
differences in outcomes in CON and non-CON states and control
for other factors, such as demographics and underlying economics
of the community.
DR. MITCHELL said that substantial research focuses on the
rationales offered in the National Health Planning and Resources
Development Act in 1974, including the goal to ensure an
adequate supply of health care. However, the CON laws place
restrictions on supply. Research finds that relative to non-CON
states, CON states offer a more limited supply of dialysis
clinics, hospice care, fewer hospitals per capita, and beds per
capita. CON states also have fewer hospitals offering MRIs and
fewer CT, MRI, PET scans. Patients in CON states seek more out-
of-county and out-of-state care as compared to ones in states
without CON. Based on his research of other states that
eliminated CON laws, he estimated that Alaska's 25 hospitals
would increase to approximately 36 hospitals.
DR. MITCHELL said the second goal of the federal law is to
ensure rural access to care. However, states with CON laws have
30 percent fewer rural hospitals and fewer hospitals overall.
Rural areas have less access to hospice care, experience longer
travel distances in order to obtain care, and are more likely to
seek out-of-county care. He and his colleagues estimate that if
Alaska repealed the CON statutes, it would have 25 rural
hospitals instead of 17 rural hospitals.
2:41:32 PM
DR. MITCHELL reiterated that the CON process itself does not
attempt to assess quality. Under the CON process, states would
have fewer hospitals and doctors would perform more procedures,
so these doctors should become more skilled. However, quality
tends to rise with competition. Research suggests that CON laws
do not achieve this goal. In fact, states with CON laws have
higher mortality rates following heart failure, pneumonia, and
heart attacks. Hospitals in these states also have higher rates
of postsurgery complications and lower levels of patient
satisfaction, he said. He and his colleague estimated patient
satisfaction in Alaska would be 4.8 percent higher and
postsurgery complications would be about 5.6 percent lower
without CON laws.
2:43:00 PM
DR. MITCHELL said the next goal of the CON process is to promote
charity care. He and his colleagues reviewed the levels of
uncompensated care or indigent care in CON versus non-CON states
and did not find any evidence that charity care increased. He
and his colleagues also found greater racial disparity in the
provision of care in CON states relative to non-CON states.
The final goal of the federal law requiring the CON process was
to promote hospital substitutes. However, under CON laws 18
states, including Alaska, limit any hospital substitutes, such
as ambulatory surgery centers. He and his colleagues found that
these states have fewer hospitals and approximately 14 percent
fewer ambulatory surgery centers. While CON laws limit new
hospitals and nonhospital providers, these laws do not seem to
limit existing providers. He recalled earlier testimony that
indicated an existing provider was awarded a CON whereas a new
entrant was not, which is consistent with the broader evidence.
It also helps explain why CON laws persist because these laws
provide protection to incumbent providers. He and his colleagues
estimated that Alaska would have more ambulatory surgery centers
than it currently does if it repealed its CON laws.
2:43:29 PM
DR. MITCHELL said the final goal for the advocates of CON is to
restrict cost. However, the evidence shows that restrictions on
supply tend to raise prices. He said he surveyed 20 peer-
reviewed academic studies and the preponderance of evidence
supported this. However, he and his colleagues did not find any
evidence to show that CON laws reduce per unit costs. Instead,
CON laws increased per unit costs and increase overall patient
spending, he said. He highly recommended Dr. Grabowski's study
to the committee.
2:45:52 PM
SENATOR BEGICH asked if Idaho and North Dakota lost any rural
hospitals when these rural states repealed their CON laws.
DR. MITCHELL said he was unsure. After reviewing all rural
communities with and without CON laws, he found evidence that
CON laws are associated with fewer rural hospitals. His home
state is New Mexico, which is a low-income, rural state that
does not have a CON law. However, it has decent measures of
access of care, he said.
SENATOR BEGICH said that type of information can help alleviate
some of Senator Steven's concerns. He asked why Indiana
reinstated its CON law last year.
DR. MITCHELL replied that he was unsure. Those who benefit from
CON are the incumbent providers who tend to be very politically
organized. Many patients often are often unaware that CON
exists. He surmised that providers hoping to start up facilities
and apply via the certificate of need process tend not to be
very politically organized.
2:48:34 PM
At ease.
2:48:38 PM
CHAIR WILSON said the committee must examine the many studies to
answer questions that arose during public testimony. He said the
topic of certificate of need laws has been analyzed by federal
administrations under four presidents. These federal
administrations concluded the certificate of need laws are
ineffective and recommended that states seek other methodologies
to regulate their health care facilities. He remarked that he
studied CONs when he worked to obtain his master's degree in
health service administration.
CHAIR WILSON encouraged the committee and the public to research
whether certificate of need laws work. He said that it was
difficult to find studies by proponents of CON laws that were
not written by hospital associations or other hospital entities.
His office has boxes of empirical data and research, but he has
tried to provide the most relevant research to the committee. He
has worked to educate the public on more innovative health care
systems for the state of Alaska. He reiterated the problems his
district faced when an Anchorage clinic applied for a
certificate of need to open an office in the Mat-Su, which
resulted in a lawsuit that has adversely affected his community.
CHAIR WILSON offered his belief that the public testimony in
opposition to certificate of need (CON) applicants are most
likely to come from their competitors. He remarked that
significant funds are spent on opposing changes to CON laws in
Alaska, which would be better spent on indigent care. That is
the reason this bill is so important, he said.
[CHAIR WILSON held SB 1 in committee.]