Legislature(1999 - 2000)
04/22/1999 03:05 PM House HES
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HB 187 - CERTIFICATES OF NEED FOR HEALTH FACILITY Number 2266 CO-CHAIRMAN COGHILL announced the next order of business as House Bill No. 187, "An Act relating to the certificate of need program for nursing care facilities and other facilities; and providing for an effective date." Number 2300 SENATOR WILKEN presented HB 187 which is the companion bill to SB 59 which has to do with the Certificate of Need (CON). The DHSS reviews all nursing home expansions over $1 million because when they add those facilities to the inventory of caregiving facilities, there is a Medicaid impact, of which the state pays 40 percent. Under current law, there are two tests that the DHSS applies to new facilities: factors of accessibility and quality. If they pass those two tests, the CON is granted, and the state assumes the obligation of the 40 percent toward Medicaid. The two bills, HB 187 and SB 59, add a new standard to this test which has to do with cost effectiveness of the new facility, and that becomes and test upon which new facilities are graded. TAPE 99-41, SIDE B Number 2357 REPRESENTATIVE BRICE asked Senator Wilken to discuss the amendment on day surgery. The amendment has not been offered, but it is in the packets. SENATOR WILKEN deferred to the department. Number 2292 RICK SOLIE, Fairbanks Memorial Hospital and Denali Center, testified via teleconference from Fairbanks in support of HB 187 as it is currently written. This legislation will allow the state to meet the need of an aging population, as well as to try to contain the cost to the state in Medicaid dollars. He is concerned with the amendment relating to imaging services and day surgeries as an exemption from the CON laws. He spoke against that amendment. The amendment goes contrary to the bill before them. In this sense, it would exempt these areas from the CON requirements. Currently, if someone wanted to build a service which includes a health care facility, like radiation therapy, mental health or ambulatory surgery, he believes, if they were to exempt that, it would not hit the mark on what the CON law is intended to do. People can argue about whether the government should be in the business of regulating this, but he believes that to piecemeal exempt is not a prudent approach. There is still some benefit to the idea of a CON whether or not it controls costs; it also has an ability to impact quality and access of the services that are offered as well. CO-CHAIRMAN DYSON asked if Mr. Solie thought that the state isn't currently doing a good enough job of making sure that medical providers are fit and able. MR. SOLIE believes that the state is doing an adequate job in inspecting facilities for fitness and ability. This amendment would take away the oversight that the state currently has in this area. Day surgery and imaging centers would no longer be required to present a CON application to the DHSS as they currently are. To pull out pieces of the CON law doesn't make good policy without some substantial study. CO-CHAIRMAN DYSON said it seemed that Mr. Solie's objection to the amendment would be his objection to competition and maybe diversified options for the patients. Number 2005 MR. SOLIE remarked that he hit on the crux of the issue. It relates to whether or not the state should be involved in determining a need and allowing for new capacity being constructed in this particular area, and that is the debate nationally whether competitive forces should be allowed to prevail. It is an interesting issue and some of it has been involved in the debate over competition in other sectors of the economy. Health care is not the same kind of commodity that toothpaste, widgets, telephones or even electricity are. There are issues of cross subsidies when certain components of hospital business are able to support other components of it, particularly when they are dealing with sole providers. The issue of whether or not they want to allow a community hospital to have "profit pockets," to support areas of that facility that may not be a profit pocket, is a philosophical and community debate. CO-CHAIRMAN DYSON asked if he was inferring that if they allow too much competition, the quality of service will go down. MR. SOLIE was hesitant to say that. Quality is related to the provider and their ability to provide the necessary aspects of health care which includes the facility, but more importantly includes the physician. He wonders if it makes sense to exempt out these services from the current system of state oversight that is there to, not only determine quality, but also access and determine that they don't end up with excess capacity which ultimately the consumers pay for. Number 1865 CO-CHAIRMAN DYSON asked if he means that government needs to protect the private sector from getting over committed. He asked Mr. Solie why should a local physician who wants to open a "Doc in a Box" day surgery center have to jump through an extra set of hoops to get a CON to provide those kinds of services. Number 1829 MR. SOLIE answered that in respect to Fairbanks. Anchorage has two hospitals; Fairbanks has one supported by the community. Day surgery and imaging centers tend to be more profitable services. They are the ones being heavily competed for. In Anchorage, there are a number of ambulatory surgeries. When they get competition in those areas, they would like to see prices fall; he suspects what occurred in Anchorage is that the gross charges for the two hospitals have gone up to cross subsidize their outpatient costs. There is Medicaid data available that shows the history in Anchorage over the last five years, that there was a 20 percent increase in the gross charges of the two hospitals there; in Fairbanks, the gross charges have gone up 3 to 4 percent. He argues that what happens is cross subsidies from the inpatient costs protect outpatient services that aren't profitable. MR. SOLIE indicated that no one is going to come to Fairbanks now and try to take away the monopoly that the hospital has on mental health because that has never been a profitable service to the hospital. They have been concerned for a long time about their ability to continue it. Their ability to pay for services like mental health, drug and alcohol treatment and some others that are not profitable, relate sometimes to the other services that may be able to support some kind of a profit. To a degree, it is a community decision about whether they want to have a hospital with some of these profit pockets, and the extent to which those profits are appropriate is also a community decision. He suggested that in this case, a for-profit, stand-alone center would not be doing anything but taking the profits to wherever, which is fine, but that is part of what a community hospital will often use to support its non profitable operations. It is an issue that is significant, and he would be concerned if, at this late date, the legislature chose to get into it, particularly while there are CONs pending. Number 1668 JAY LIVEY, Deputy Commissioner, Department of Health and Social Services, came forward to testify in support of HB 187. They believe HB 187 will help them to in the future cost manage the Medicaid expenditures for long-term care. Given the long-term care population in Alaska (above 85 years old) over the next 10 or 20 years, they are going to have to figure out how to serve them that is different than the way they do it now. They believe that this bill helps the department to have some tools to cost manage the Medicaid program in the future. CO-CHAIRMAN DYSON asked if the local inference here is that if they can keep down the competition, they can allow the people who have the monopoly to get more of a market share and therefore, be able to do the cross subsidization for the people who can't pay their way or aren't covered by insurance out of the programs. There is kind of a restriction of trade and some kind of soft monopoly in order to help out the cross subsidization they need to do in order to accomplish a public purpose. MR. LIVEY said the issues are a bit different on the long-term care side than on the acute-care side. The amendment that is being considered pushes the issues together. The DHSS believes that right now there is not much competition in long-term care. They are a payer of long-term care through Medicaid. For institutional care in Alaska, they probably pay 80 to 85 percent on average in a year for all the long-term care that is provided in facilities because Medicaid is the only thing that pays for long-term care; it is too expensive in this state for those who privately pay to go into a nursing home. From their perspective, this legislation offers the DHSS criteria that they can use in the future to allow them to develop alternatives and to allow some competition for long-term care to develop, because all the resources won't be going in to one type of care; they can develop some home- and community-based alternatives that are less expensive and use their money more efficiently. Number 1515 CO-CHAIRMAN DYSON asked what does a "Doc in a Box" exemption do that is negative for long-term care. MR. LIVEY answered that that is really unrelated to the long-term care legislation that came out of the LTCTF. The Committee took an at-ease from 4:17 to 4:18 p.m. Number 1428 MR. LIVEY said within the CON statute, they offer CONs to two different kinds of facilities: long-term care and acute care. The state has a different level of interest in long-term care than in acute care. Primarily because Medicaid is paying a much higher percentage of the long-term care bill than they are paying on the acute-care bill. As it currently stands, he doesn't believe that the "Doc in a Box" does not need a CON. The two kinds of services that are raised in this amendment do require a CON, but they are not necessarily an urgent care center. Number 1337 MR. LIVEY indicated that if the bill as proposed were to pass, they believe it would create more alternatives to long-term care: assisted living, home and community based kinds of care where an individual is served in their home or community without having to go into a nursing home. They believe the bill will create alternatives for care. CO-CHAIRMAN COGHILL asked if the amendment opened more alternatives. Number 1303 MR. LIVEY said the amendment is very specific to imaging centers and day surgery and really has nothing to do with the long-term care aspect of the original bill. It all deals with the CON program, but it is different kinds of services. REPRESENTATIVE BRICE observed that the amendment is like "putting a fish tail on a duck." It doesn't quite fit into the argument. He suggested that if they keep their focus on HB 187, a lot of the confusion will dissipate. Number 1205 LARAINE DERR, Director, Alaska State Hospital and Nursing Home Association, came forward to testify. She liked the analogy of "putting the fish tail on a duck." They support HB 187 as originally drafted. They do not support the amendment for reasons they have already heard. It is mixing something different into what the original legislation intended. Number 1167 CO-CHAIRMAN DYSON asked Ms. Derr why they would suggest this bill when it would keep them from making more money. MS. DERR answered they think there should be legislation that addresses the hospitals outside of the nursing homes. CO-CHAIRMAN DYSON asked her why they want to get a CON before they install new equipment in their facility that will allow them to charge more money. Number 1129 MS. DERR said the hospitals do not want that. They would rather not have a CON to install new equipment. This CON addresses nursing home beds so it is a different issue. She doesn't believe that a CON allows the nursing homes to charge more money. CO-CHAIRMAN DYSON believes the opposite. If they have to get a CON before they can enhance their facility, which will allow them to build more at a higher rate, this bill works against their interest. Number 1065 LINDA FINK said she doesn't believe it works against them. It does put more controls on when beds can be built, but a large portion of their funding comes from Medicaid, and they support controlling those costs as much as possible. MS. DERR said nursing homes don't usually have a lot of equipment. They don't usually have the imaging equipment; that is usually in the hospitals. The majority of the nursing homes in the state are co-located with a hospital, so if nursing home patients need that service, they go to the hospital. Nursing homes don't usually have more than $1 million pieces of equipment. CO-CHAIRMAN DYSON asked how they can enhance the rate they charge the state. Number 1010 MS. DERR said the way the rates are set are a cost-reimbursable basis. If they wanted to enhance their rates, they give their patients more services. But that is all reviewed by the DHSS in an auditing process, and they would see that and would not pay. CO-CHAIRMAN DYSON said hospitals can enhance their rate by adding more services and fancier machines. They can do that to be a better service to their clients. They can also bill at a higher rate. He asked if there was nothing the long-term care facilities can do to enhance the rate they charge, like adding more beds, more cable TV. Number 0954 MS. DERR agreed they could make more money by adding more beds. But that is when they have to go to the CON process for long-term care. They agree that there should be more control. REPRESENTATIVE BRICE asked Mr. Livey what the state's financial responsibility is per bed when it comes on-line after construction. MR. LIVEY answered that when a new nursing home bed is built and certified, if a Medicaid-eligible patient moves into that bed, then Medicaid is required to pay the bill. Number 0926 REPRESENTATIVE BRICE asked if there are requirements for the state to pay for empty beds. MR. LIVEY answered that the way the rate setting system works is that they pay what it costs a nursing home to provide the care. To the extent that there are fixed costs included in paying for an empty bed, they do. For example, they have to have a nurse whether the beds are full or not. REPRESENTATIVE BRICE asked how successful the DHSS has been in regulating the cost of ensuring appropriate levels of long-term care through use of the CON process. Number 0771 MR. LIVEY answered that over the past 10 years, there have been a number of nursing home beds that have expanded recently. He believes the DHSS should have been more successful in controlling the number of beds. Their concern in controlling the number of nursing home beds is not to control access to long-term care; it is to be able to provide a less expensive kind of long-term care and more alternatives. With the number of people coming through the system in the future, they simply cannot afford to provide care to those people in nursing homes. There is not enough money. Number 0698 DAVID PIERCE, Certificate of Need Coordinator, Facilities and Planning, Division of Administrative Services, Department of Health and Social Services, came forward to answer questions. Since the inception of the CON program in 1979, there have been over 200 nursing home beds that were not built as a result of that program. Within the last two years, there were 60 beds that were not built; some were denied, and some just didn't go through the process. In some cases, there were concurrent reviews where several entities were trying to build in the same place, and one was chosen over the others. Ten beds will cost approximately $1 million dollars a year to operate and for depreciation expense. A 60-bed facility will cost Medicaid about $3 million. For every ten beds, it is about $1 million dollars in Medicaid, and about 50 percent of that will be state funds. CO-CHAIRMAN COGHILL asked Mr. Pierce if this legislation does not make it, how would that affect the availability and the vision of long-term health care. Number 0559 MR. PIERCE said the trend now is moving away from institutionalizing people to letting them stay in their homes as long as possible. There is going to be an increase in the number of people who are going to need some kind of care; however, they don't have to be in expensive long-term care institutions. They can stay at home. This legislation will help the DHSS make determinations regarding whether new institutional beds are needed or not, or whether more people could stay at home who are going to be served. Number 0501 CO-CHAIRMAN DYSON made a motion to move the amendment which read: Page 3, line 3: Delete "A" Insert "Except as provided in (c) of this section, a [A] Page 3, following line 14: Insert a new bill section to read: * Sec. 4. AS 18.07.031 is amended by adding a new subsection to read: (c) A certificate of need is not required for the (1) construction of a day surgery center or imaging center; (2) alteration of the bed capacity of a health care facility if the alteration is necessary solely to accommodate the addition of day surgery or imaging services to the facility; or (3) addition of day surgery or imaging services to a health care facility." Renumber the following bill sections accordingly. Page 7, line 3: Delete "a new paragraph" Insert "new paragraphs" page 7, following line 3: Insert new paragraphs to read: (13) "day surgery" means surgery performed on a patient who arrives at the surgery facility on the day of surgery and is not expected to remain overnight at the facility after the surgery is performed; (14) "imaging" means diagnostic testing, such as fluoroscopy or an x-ray, computerized axial tomography (CAT scan), bone scan, ultrasonography, scintigraphy, or magnetic resonance imaging (MRI), that produces a picture or conception with a likeness to an objective reality by providing clarity, contrast, and detail through the use of colored fluids, radionucleides, or other materials introduced to the human body; ionizing or nonionizing radiation; or an external magnetic field;" Page 7, line 4: Delete "(13)' Insert "(15)" REPRESENTATIVE BRICE objected. A roll call vote was taken. Co-Chairman Dyson voted for the amendment. Representatives Whitaker, Brice and Coghill voted against it. Therefore, the amendment failed by a vote of 3-1. Number 0390 CO-CHAIRMAN DYSON made a motion to move HB 187 from the committee with individual recommendations and attached fiscal note. There being no objection, HB 187 moved from the House Health, Education and Social Services Standing Committee. The Committee took an at-ease from 4:39 to 4:40 p.m.
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