Legislature(2001 - 2002)

03/26/2002 03:03 PM HES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 407-CERTIFICATE OF NEED PROGRAM                                                                                            
                                                                                                                                
CHAIR DYSON announced the next  order of business, HOUSE BILL NO.                                                               
407, "An Act relating to the certificate of need program."                                                                      
                                                                                                                                
Number 1010                                                                                                                     
                                                                                                                                
REPRESENTATIVE  COGHILL,  sponsor  of  HB  407,  noted  that  the                                                               
proposed committee  substitute (CS), Version F,  is significantly                                                               
different from the  first draft; it is a  continuation of efforts                                                               
to  which he'd  committed  himself in  the  [House Community  and                                                               
Regional  Affairs Standing  Committee]; he  said he  has given  a                                                               
copy [of Version F] to some members of that committee.                                                                          
                                                                                                                                
REPRESENTATIVE  COGHILL moved  to adopt  Version F  [22-LS1389\F,                                                               
Lauterbach,  3/21/02],  as  the  work  draft.    There  being  no                                                               
objection, Version F was before the committee.                                                                                  
                                                                                                                                
REPRESENTATIVE COGHILL remarked:                                                                                                
                                                                                                                                
     This  has been  likened to  a youngster  coming out  of                                                                    
     college [with]  a counseling degree and  getting hooked                                                                    
     up with  a ... 40-year  dysfunctional marriage  ... and                                                                    
     wading in with  that kind of trepidation.   There still                                                                    
     are  some basic  principles  of operation  that even  a                                                                    
     young counselor can bring to a situation.                                                                                  
                                                                                                                                
Number 1121                                                                                                                     
                                                                                                                                
REPRESENTATIVE COGHILL  told members that  one reason he  came to                                                               
the  legislature  was  to  preserve  and  protect  a  free-market                                                               
economy.   He objects  to having  health care  nationalized, more                                                               
socialized, and driven by the  government, he said; based on that                                                               
objection, he  became involved in  the certificate of  need (CON)                                                               
debate.   The CON in  Alaska requires  that if someone  wishes to                                                               
increase  services  or facilities  that  cost  in excess  of  one                                                               
million dollars,  permission must be sought  from the government.                                                               
He  explained that  the  [state] has  rules,  based primarily  on                                                               
[federal  law],  that  determine  whether this  new  facility  or                                                               
service will be allowed.                                                                                                        
                                                                                                                                
REPRESENTATIVE  COGHILL  said  although  the  federal  government                                                               
abandoned  this system  some years  ago because  it wasn't  cost-                                                               
effective and was creating problems,  Alaska continues to use it.                                                               
He  acknowledged   that  the  [CON   is  warranted]   in  certain                                                               
circumstances,  but   expressed  his   intention  to   repeal  it                                                               
completely  from [state  law],  which  [Version F]  accomplishes,                                                               
with some  safeguards:  a  time limit and  greater accountability                                                               
for a government-controlled  process.  He said it  allows for the                                                               
best free-market circumstances when  possible.  Speaking strongly                                                               
against government-protected monopolies, he  said Alaska has many                                                               
examples, especially with  regard to the CON.  Although  a lot of                                                               
public money goes  into health care, he suggested  this [bill] is                                                               
a good solution.                                                                                                                
                                                                                                                                
Number 1270                                                                                                                     
                                                                                                                                
RYNNIEVA  MOSS,  Staff  to Representative  John  Coghill,  Alaska                                                               
State  Legislature,  explained that  Section  1  is the  crux  of                                                               
Representative Coghill's initial intent.   It would require, with                                                               
the  exception  of  skilled nursing  facilities  and  psychiatric                                                               
hospitals, a CON for expenditures  of one million dollars or more                                                               
in   communities  with   a  population   of  less   than  55,000.                                                               
Therefore, a [proposed facility] in  a community larger than this                                                               
wouldn't  require  a  CON  unless  it  was  a  [skilled]  nursing                                                               
facility or a psychiatric hospital.                                                                                             
                                                                                                                                
MS. MOSS turned  attention to Section 2 and  reported that during                                                               
discussion  with the  department  and Senator  Green, some  flaws                                                               
[were observed]  in the system, one  of which Section 2  seeks to                                                               
address.   Currently, if  a facility is  destroyed, it  cannot be                                                               
replaced without  a new CON;  Section 2 therefore  eliminates the                                                               
need for a  new CON.  It also eliminates  an existing requirement                                                               
for a new  CON if a facility moves services  from one building to                                                               
another,  provided the  capacity and  categories of  service have                                                               
not changed.                                                                                                                    
                                                                                                                                
Number 1358                                                                                                                     
                                                                                                                                
MS. MOSS  noted that Section  3 requires the department  to adopt                                                               
regulations to set  a time limit for the  department to determine                                                               
whether  an application  is  complete.   Section  4 requires  the                                                               
department to set  a time limit by which public  hearings must be                                                               
held; it also requires the  department to make a determination on                                                               
an application  within 120 days following  the determination that                                                               
an application is complete.                                                                                                     
                                                                                                                                
MS. MOSS  turned to Section 5  and said CONs were  originally put                                                               
in statute  to apply  only to nursing  facilities.   A seven-step                                                               
review  process is  in place  for  the review  of nursing  homes'                                                               
CONs.    As additional  [facilities]  were  added under  the  CON                                                               
requirement, a new, broad statute was  added.  She noted that the                                                               
sectional [analysis] provides the  repealed language; she pointed                                                               
out  that  the  only  standard   for  review  was  "that  if  the                                                               
availability and  quality of existing  health care  resources, or                                                               
the accessibility  to those resources,  is less than  the current                                                               
or  projected   requirement  for  health  services   required  to                                                               
maintain good  health of the citizens  in this state."   Based on                                                               
this  standard, a  CON could  be  issued.   This is  found in  AS                                                               
18.07.041.                                                                                                                      
                                                                                                                                
MS. MOSS indicated Version F  rolls all other types of facilities                                                               
into the more  defined standard of review found  in AS 18.07.043.                                                               
She said Sections 6 through  10 are simply technical changes that                                                               
remove AS 18.07.041  from existing statutes.   Section 11 repeals                                                               
AS 18.07.041; Section  12 gives applicability of  the new statute                                                               
only to  those CON applications  filed on or after  the effective                                                               
date; and Section 13 is an immediate-effective-date clause.                                                                     
                                                                                                                                
Number 1477                                                                                                                     
                                                                                                                                
REPRESENTATIVE  COGHILL requested  that  testimony on  HB 407  be                                                               
permitted for  the next  two committee meetings.   He  noted that                                                               
some witnesses were unable to attend the March 28 meeting.                                                                      
                                                                                                                                
Number 1515                                                                                                                     
                                                                                                                                
CHAIR DYSON asked which communities HB 407 would apply to.                                                                      
                                                                                                                                
MS. MOSS  responded that criteria  were created to arrive  at the                                                               
[55,000]  number;   according  to  the  U.S.   Census  Bureau,  a                                                               
community must  have a  population of 25,000  for data  from that                                                               
community to  supply [reliable] demographic  data.   The national                                                               
poverty rate was applied to  this number; Alaska is automatically                                                               
25  percent above  that federal  poverty rate.   This  adjustment                                                               
resulted  in [a  figure of  31,250].   She  explained that  three                                                               
different  levels of  poverty are  applied  to medical  services:                                                               
150, 175, and 200 percent.   The middle percent, 175, was applied                                                               
to  the 31,250  to  result in  54,688; this  was  rounded off  to                                                               
[55,000].                                                                                                                       
                                                                                                                                
CHAIR DYSON asked what poverty has to do with this.                                                                             
                                                                                                                                
MS. MOSS replied:                                                                                                               
                                                                                                                                
     Just the  level of  need for  medical assistance  - how                                                                    
     the federal  government has defined  it.   You've heard                                                                    
     in  debates about  Denali KidCare,  for instance,  that                                                                    
     money  may  go  further  if  we  reduce  those  poverty                                                                    
     levels.   But the truth  of the fact is,  that's what's                                                                    
     the feds use.  We're  dealing with Medicaid money here,                                                                    
     so  we're  applying  those percentage  because  of  the                                                                    
     Medicaid involvement.                                                                                                      
                                                                                                                                
Number 1600                                                                                                                     
                                                                                                                                
CHAIR DYSON offered:                                                                                                            
                                                                                                                                
     I'm very sure I don't  understand the logic trail.  But                                                                    
     it  may be  that  the government  doesn't  have a  firm                                                                    
     logic trail.  I  thought the argument about certificate                                                                    
     of  [need]  had  to  do with  the  significant  capital                                                                    
     investment it  takes to  build a  major facility.   And                                                                    
     the  argument  is  that   in  smaller  communities,  if                                                                    
     indeed, there's too much  competition, then there won't                                                                    
     be the economic incentive  and the return on investment                                                                    
     for folks  to invest  in building one.   So,  I thought                                                                    
     that  ...   the  rationale   was  to   protect  smaller                                                                    
     communities  from having  ... fractured  providers, all                                                                    
     of  whom were  below some  economic threshold.   What's                                                                    
     that got to do with Medicare or poverty?                                                                                   
                                                                                                                                
MS.  MOSS  reiterated  that this  issue  involves  Medicaid;  the                                                               
decision  was that  this  should involve  the  "federal logic"  -                                                               
which  was  all that  was  available  - rather  than  arbitrarily                                                               
selecting  a   [population]  figure.    She   said  three  [local                                                               
governments]   in  Alaska   would  qualify   under  [the   55,000                                                               
population]  number:     Anchorage,  the  Fairbanks   North  Star                                                               
Borough, and the Matanuska-Susitna Borough.                                                                                     
                                                                                                                                
Number 1663                                                                                                                     
                                                                                                                                
REPRESENTATIVE COGHILL acknowledged  getting creative in arriving                                                               
at the  figure, but indicated  the basic question remains  of the                                                               
significant investment in  the smaller communities.   He asked at                                                               
what point  there should  be some scrutiny  in a  limited market,                                                               
and at  what point it  would be  considered a growing  market and                                                               
therefore not require  proof of [market] limitation.   He offered                                                               
his belief that  a handful of communities fall  into [this latter                                                               
description].                                                                                                                   
                                                                                                                                
REPRESENTATIVE  COGHILL  said  he  was  willing  to  discuss  the                                                               
[population] number,  since it  is a bit  arbitrary; part  of the                                                               
discussion pertains  to the  size of a  community resulting  in a                                                               
finite market wherein  competition could not happen.   He offered                                                               
his perspective that the market  could handle this, and indicated                                                               
astonishment that someone [might  build an unnecessary facility];                                                               
he allowed,  however, that this does  happen as a result  of poor                                                               
judgment calls.  "I'm not always  sure that the government is the                                                               
best  answer," he  said.    He reiterated  that  he  was open  to                                                               
discussion.   He concluded  by saying  the Medicaid  and Medicare                                                               
expenditures were significant throughout the state.                                                                             
                                                                                                                                
Number 1733                                                                                                                     
                                                                                                                                
CHAIR DYSON, in response to  Representative Cissna, expressed his                                                               
wish  to  hear from  the  administration  and some  witnesses  in                                                               
opposition to  HB 407,  to allow  members to get  a sense  of the                                                               
arguments and to evaluate relevant correspondence.                                                                              
                                                                                                                                
REPRESENTATIVE COGHILL concurred.                                                                                               
                                                                                                                                
Number 1799                                                                                                                     
                                                                                                                                
ELMER LINDSTROM,  Deputy Commissioner,  Department of  Health and                                                               
Social Services (DHSS),  came forward and told  members, "I'll be                                                               
more than  happy to muddy  the waters for you  on this one."   He                                                               
explained that the CON program  impacts the department in several                                                               
ways  on different  levels, which  is  confusing.   He said  DHSS                                                               
operates the CON  program, which consists of one  employee in the                                                               
facility section of the Division of Administrative Services.                                                                    
                                                                                                                                
MR. LINDSTROM  referred to the  sponsor's mention of  the federal                                                               
government's creation  of, and subsequent backing  away from, the                                                               
CON program.  This is not  all the federal government backed away                                                               
from,  Mr. Lindstrom  pointed  out.   When  the  CON program  was                                                               
created in  Alaska and many other  states as a result  of federal                                                               
law, a  range of health-planning  activities went along  with it.                                                               
States  were expected  to have  a state  health program;  funding                                                               
went  into regional  health  planning.   He  said,  "All of  that                                                               
superstructure has disappeared  over time.  In fact,  we have not                                                               
had a state  health plan written ... since, I  think, 1983."  The                                                               
resulting  lack  of  current health  data  precludes  a  thorough                                                               
evaluation and  well-reasoned findings with regard  to the review                                                               
of CONs,  he indicated  - a  job that  is difficult  without this                                                               
information.                                                                                                                    
                                                                                                                                
Number 1902                                                                                                                     
                                                                                                                                
MR.  LINDSTROM  offered  another  department  perspective:    the                                                               
department pays substantial health  care costs, primarily through                                                               
the  Medicaid  program, which  insures  about  one of  every  six                                                               
Alaskans.     For  certain   types  of   facility-based  services                                                               
including long-term care  or nursing home beds, DHSS  is, for all                                                               
practical purposes,  the payor.   A  non-Medicaid-eligible person                                                               
upon  entering a  nursing facility  will likely  become Medicaid-                                                               
eligible  within  several months  because  assets  will be  spent                                                               
down; in all likelihood, this person will end up on Medicaid.                                                                   
                                                                                                                                
MR. LINDSTROM  reported that  DHSS pays 85  percent of  the costs                                                               
for nursing home beds in Alaska.   It is also a primary payor for                                                               
acute-care  psychiatric  beds;  generally,   more  is  spent  for                                                               
children's  services than  for adults,  but  for all  psychiatric                                                               
care the state  is the major payor.   On the other  hand, DHSS is                                                               
not  the major  payor for  other  kinds of  acute-care costs;  it                                                               
covers  20  percent  of  the   market.    Consequently,  DHSS  is                                                               
concerned  about  the  CON programs'  maintaining  integrity  for                                                               
cost-containment  purposes   proportionate  to  the   amount  the                                                               
department pays.  He said,  "We're very concerned about long-term                                                               
care costs  and controlling ...  the number of nursing  home beds                                                               
and the  number of psychiatric  beds.  We  are, as a  payor, less                                                               
concerned about certain other types of care."                                                                                   
                                                                                                                                
Number 1980                                                                                                                     
                                                                                                                                
CHAIR  DYSON asked,  "Your  worry is  that  with competition  ...                                                               
those providers  might not ... have  a large enough share  of the                                                               
market that they can make a  living, so they jack their rates up,                                                               
and your costs will go up?"                                                                                                     
                                                                                                                                
MR. LINDSTROM replied,  "That's true."  He  indicated Chair Dyson                                                               
had  broached another  complex issue,  the Medicaid  rate-setting                                                               
system for  facilities; he acknowledged  he was not an  expert in                                                               
that field.   Capital costs become part of a  facility's rate, he                                                               
explained; to the extent a  community overcapitalizes the system,                                                               
inefficiencies are brought  into the system and  are reflected in                                                               
the rate paid to the facilities through Medicaid.                                                                               
                                                                                                                                
MR.  LINDSTROM  returned to  the  subject  of  the CON  from  the                                                               
department's  perspective  -   specifically,  the  public  health                                                               
perspective.   He said DHSS  is concerned about access  to health                                                               
care  throughout the  state.    The CON  provides  a process  for                                                               
communities  to  rationally  plan  and understand  what  type  of                                                               
health care  is needed in  that community; the  department thinks                                                               
this is a good process.                                                                                                         
                                                                                                                                
Number 2053                                                                                                                     
                                                                                                                                
CHAIR DYSON asked whether Alaska  has examples where the presence                                                               
of too many providers is driving up costs.                                                                                      
                                                                                                                                
MR. LINDSTROM offered to find out.                                                                                              
                                                                                                                                
Number 2075                                                                                                                     
                                                                                                                                
MR. LINDSTROM  noted that  Section 1  of the  bill differentiates                                                               
between larger  and smaller communities in  determining whether a                                                               
CON is  required.  He  offered the department's  concurrence that                                                               
Anchorage, Fairbanks,  and the Matanuska-Susitna  ("Mat-Su") area                                                               
would  be  exempt  from  the requirement  for  CONs,  except  for                                                               
nursing  home facilities  and  some  construction of  psychiatric                                                               
beds;  he  noted  the  department's   support  for  that  change.                                                               
Intuitively, he  offered, one would  acknowledge that  the market                                                               
in Anchorage is very different from  the market in a small, rural                                                               
community.  He  said, however, that the  department also believes                                                               
the  Anchorage market  significantly differs  from the  Fairbanks                                                               
market;  likewise, both  differ  from the  market  in the  Mat-Su                                                               
area.                                                                                                                           
                                                                                                                                
Number 2128                                                                                                                     
                                                                                                                                
MR.  LINDSTROM  said  the  department   doesn't  have  the  data,                                                               
understanding,   or   capacity   to   finely   understand   those                                                               
distinctions.  "We  can't tell you whether or not  it makes sense                                                               
to make this  distinction," he said.  He  reiterated that lumping                                                               
the larger  markets together makes  sense intuitively.   Would it                                                               
hurt the  local hospital in Fairbanks  or Mat-Su if there  were a                                                               
[large]  freestanding ambulatory  surgical  center?   He said  he                                                               
couldn't answer  that question; as  a result, the  department has                                                               
some reservations.                                                                                                              
                                                                                                                                
Number 2162                                                                                                                     
                                                                                                                                
REPRESENTATIVE  CISSNA offered  her belief  that the  health care                                                               
industry is the fastest-growing sector of the private economy.                                                                  
                                                                                                                                
MR.  LINDSTROM replied,  "I  believe that's  true."   In  further                                                               
response, he  said this lack of  data is, sadly, not  unique; the                                                               
capacity  DHSS  once   had  for  planning  and   the  ability  to                                                               
understand  these issues  no longer  exists.   The department  no                                                               
longer  has the  ability  to gather,  sort,  and understand  that                                                               
information.   He  reiterated that  the state  has not  written a                                                               
health plan since 1983.                                                                                                         
                                                                                                                                
CHAIR DYSON noted that he wished  to hear from other witnesses as                                                               
well.  He asked  Mr. Lindstrom, following Representative Wilson's                                                               
next question,  to summarize the  department's concerns;  he said                                                               
Mr. Lindstrom would have other opportunities to present input.                                                                  
                                                                                                                                
Number 2230                                                                                                                     
                                                                                                                                
REPRESENTATIVE  WILSON  said  14  states have  repealed  the  CON                                                               
program.   She asked if  Mr. Lindstrom  had been in  contact with                                                               
any of these states to find out the consequences of the change.                                                                 
                                                                                                                                
MR. LINDSTROM  replied that on  a number of occasions  this issue                                                               
has been raised;  the department has looked into  it to summarize                                                               
what other states are doing.   He expressed uncertainty about the                                                               
number  of  states  that  have  repealed  the  CON  program,  but                                                               
reported  that the  data indicate  "the significant  majority" of                                                               
states have retained the CON  program.  The [CON] criteria widely                                                               
vary  in   different  states  for   facility  types   and  [need]                                                               
thresholds,  among   others,  but   most  states  still   have  a                                                               
certificate of need program.                                                                                                    
                                                                                                                                
Number 2274                                                                                                                     
                                                                                                                                
REPRESENTATIVE  WILSON surmised  that  one reason  is that  these                                                               
states haven't gotten around to  repealing the CON programs.  She                                                               
expressed  interest in  discovering  the results  in states  that                                                               
[have  repealed  the CON];  have  Medicaid  costs increased,  for                                                               
example?                                                                                                                        
                                                                                                                                
MR. LINDSTROM replied  that the department would  give it another                                                               
look.     He   referenced   several   studies  with   conflicting                                                               
conclusions on effects [of discontinuing the CON program].                                                                      
                                                                                                                                
MR. LINDSTROM  returned to  his analysis  of the  bill.   He said                                                               
Section 1  is missing  an amendment  to [AS]  18.07.031(b), which                                                               
speaks only to nursing home  beds; it prohibits the conversion of                                                               
any type of  bed - assisted living,  acute care, or other  - to a                                                               
nursing home bed without a CON,  regardless of the cost.  Perhaps                                                               
this  could be  a new  Section  2, he  suggested.   He said  this                                                               
concern was based  on the department's role as  the primary payor                                                               
for  nursing  home beds.    He  suggested that  similar  language                                                               
related to acute psychiatric care  might also be appropriate.  He                                                               
referenced a  suggestion from an unspecified  Senate staff person                                                               
that this might need to be  more finely tuned than that; it might                                                               
need  to  preclude conversions  from  adult  psychiatric care  to                                                               
psychiatric care for minors.   He noted that the department would                                                               
be glad to address this with the committee.                                                                                     
                                                                                                                                
Number 2340                                                                                                                     
                                                                                                                                
MR.  LINDSTROM   noted  that  Section   2  relates   to  facility                                                               
replacement;  this would  most  likely come  into  play should  a                                                               
facility  be destroyed.    He said  the  department's reading  of                                                               
[Section  2] includes  facilities that  have reached  the end  of                                                               
their useful  life; this would  be a more common  occurrence than                                                               
destruction by fire or earthquake, for example.  He said:                                                                       
                                                                                                                                
     Intuitively,  it makes  sense, I  guess, that  if we've                                                                    
     been going along with a  facility in a community at "X"                                                                    
     number  of beds  and offering  this array  of services,                                                                    
     that  if they  want to  continue  to do  that, ...  why                                                                    
     should they go through a  certificate of need?  But, on                                                                    
     the other  hand -  wearing the  public health  hat, and                                                                    
     the  notion of  having  some sense  of  what is  really                                                                    
     appropriate  for a  community -  saying that  it should                                                                    
     just be  replaced assumes that  what's there  now makes                                                                    
     some sense.                                                                                                                
                                                                                                                                
TAPE 02-24, SIDE B                                                                                                              
                                                                                                                                
MR.  LINDSTROM noted  that  Alaska  has a  number  of very  small                                                               
hospitals; unlike  in most  states, these  have not  been closed,                                                               
but  many are  "hanging on  by a  thread."   He asked  whether it                                                               
makes sense  for the state  to tell  these hospitals to  go ahead                                                               
and replicate  the current model  that is not working  very well.                                                               
He  suggested it  might make  more sense  for a  community to  go                                                               
through  some sort  of intelligent  process to  ask what  sort of                                                               
facility the  community really  needs, and can  afford.   He said                                                               
Section 2 would allow communities  to beg that question, and that                                                               
DHSS isn't certain it is a good idea.                                                                                           
                                                                                                                                
MR.  LINDSTROM  told  members  that  DHSS  needs  to  review  the                                                               
timeframes in  Section 3.  He  said he was uncertain  whether the                                                               
department  would  have  objection  to  Sections 3  and  4.    He                                                               
expressed  his  opinion that  Section  5  is  "quite good."    He                                                               
referenced  the proposed  repealed  language  [in AS  18.07.041];                                                               
that  standard existed  for everything  until several  years ago,                                                               
when the  legislature created new,  more rigorous,  standards for                                                               
nursing homes; the  department wanted to see  this happen because                                                               
it is  the [primary payor]  for nursing  homes.  He  offered that                                                               
the department  believes these standards are  applicable to other                                                               
types of  facilities, and that  it would support having  these be                                                               
put into statute.  He added  that the standards may need "a tweak                                                               
or two" from the department's perspective.                                                                                      
                                                                                                                                
Number 2305                                                                                                                     
                                                                                                                                
CHAIR DYSON asked whether the  department would have brought this                                                               
forward if the sponsor hadn't done so.                                                                                          
                                                                                                                                
MR.  LINDSTROM said  he didn't  believe so.   The  department has                                                               
many other  priorities, and this  wouldn't have risen to  a level                                                               
requiring pursuit.                                                                                                              
                                                                                                                                
CHAIR  DYSON   asked  Representative   Coghill  whether   he  had                                                               
discussed the aforementioned items with the department.                                                                         
                                                                                                                                
REPRESENTATIVE  COGHILL  said  no;  he  expressed  reluctance  to                                                               
include some  of the items  in [Version  F], but agreed  that the                                                               
discussion would take  place now that the  department is present.                                                               
He  expressed   his  appreciation  for  Mr.   Lindstrom's  stated                                                               
concerns, which  give him a  better understanding of  [the issues                                                               
from the department's perspective].                                                                                             
                                                                                                                                
Number 2240                                                                                                                     
                                                                                                                                
JEROME  SELBY,  Regional  Director;  Planning,  Development,  and                                                               
Advocacy;  Providence  Health  System in  Alaska  ("Providence"),                                                               
explained that he  was currently working in Kodiak.   In response                                                               
to Chair  Dyson, he affirmed  that he had reservations  about the                                                               
bill,  but said  there are  some good  provisions.   He indicated                                                               
that  the Hospital  Association  provided some  of the  suggested                                                               
[language  in  Version  F]; he  expressed  appreciation  for  the                                                               
sponsor's incorporating these suggestions.   He said he wished to                                                               
offer  a technical  change to  Section 2  and then  focus on  the                                                               
major concern that [Providence] has with the bill.                                                                              
                                                                                                                                
CHAIR  DYSON  suggested  that Mr.  Selby  address  the  technical                                                               
change with Representative Coghill  [later] because the committee                                                               
would  not  [move] the  bill  at  this  hearing.   He  noted  his                                                               
interest in hearing Mr. Selby's  major concerns about the concept                                                               
of modifying the certificate of need.                                                                                           
                                                                                                                                
Number 2200                                                                                                                     
                                                                                                                                
MR. SELBY  reported that the  major concern he referenced  is the                                                               
issue   of   the   55,000-population   criterion.      He   noted                                                               
[Providence's] inability to find how  that figure relates to "the                                                               
real world."   He suggested  that allowing a "feeding  frenzy" of                                                               
spending  money for  unnecessary medical  facilities in  Alaska's                                                               
three largest communities will reap a  cost to the state that far                                                               
exceeds  any  fiscal  note  the  committee  has  yet  seen.    He                                                               
expressed concern that  [HB 407] is not about  competition in the                                                               
medical industry; there is currently  a great deal of competition                                                               
in  the  Anchorage  medical  community, for  example.    The  CON                                                               
maintains the competition  on a level playing  field and controls                                                               
costs to the  state, he explained.  A CON  means that health care                                                               
will be developed  in the state based on  needed services, rather                                                               
than a  "whatever the market  will bear" basis; he  suggested the                                                               
latter  would happen  if  the CON  were removed.    He added  his                                                               
belief that  the state will  bearing [the  costs] of most  of the                                                               
market in this situation.                                                                                                       
                                                                                                                                
MR. SELBY noted that competition is  perceived as a good thing in                                                               
the U.S.   Although  it is  great when it  relates to  used cars,                                                               
however, he  said it isn't  "the main thing  that you want  to be                                                               
looking at  in a health  care delivery  system."  For  example, a                                                               
person scheduled for heart surgery  won't be seeking the cheapest                                                               
price.   He  told members,  "That's  the problem  when you  start                                                               
trying  to move  a  pure  competition model  into  a health  care                                                               
delivery system where one of the big issues is quality of care."                                                                
                                                                                                                                
MR. SELBY  noted that  a report released  in January  indicates a                                                               
21-percent  increase in  mortality in  states that  have no  CON;                                                               
this is  a nationwide  study; the  second sobering  conclusion of                                                               
the study is  that states with a CON have  84 percent greater use                                                               
of existing facilities.   He explained that [high  use] means the                                                               
volume is large enough that  health care personnel stay competent                                                               
and maintain  high skills.   When too  many facilities  are built                                                               
and each  facility has  little volume,  quality "goes  right down                                                               
the  drain" because  staff aren't  practicing enough  of any  one                                                               
[procedure]  to maintain  a high  level of  skill.   He cautioned                                                               
that quality is a huge concern.                                                                                                 
                                                                                                                                
MR.   SELBY   noted   the  fourth   concern   from   Providence's                                                               
perspective:  if  the 55,000-population limit is  used to include                                                               
Anchorage  and Fairbanks,  "tertiary care"  will be  destroyed in                                                               
the state.   He said,  "The only way that  we can pay  for taking                                                               
care of tertiary-care  patients in Alaska is to  take the profits                                                               
that we do  make from things like surgery and  ... plow them back                                                               
into the system in order to develop tertiary care."                                                                             
                                                                                                                                
Number 2032                                                                                                                     
                                                                                                                                
CHAIR DYSON asked for a definition of "tertiary care."                                                                          
                                                                                                                                
MR.  SELBY said  it  is  care such  as  advanced  cancer care  or                                                               
advanced  heart  care;  it  requires  specialists  and  technical                                                               
medical equipment for delivery, and  has huge overhead costs.  He                                                               
remarked, "You'll  end up sending  tertiary care back  to Seattle                                                               
and points south."  He noted  that Providence has, in the past 20                                                               
years of  the CON law, been  returning any net gains  to tertiary                                                               
care  systems in  Alaska.   This  allows residents  to remain  in                                                               
Alaska  for  high-level  cancer  and  heart  treatments,  whereas                                                               
previously residents  were required to  go to Seattle.   [Removal                                                               
of the  CON] would preclude  further development of this  type of                                                               
care.    He offered  to  provide  further details  to  interested                                                               
members.                                                                                                                        
                                                                                                                                
Number 1978                                                                                                                     
                                                                                                                                
CHAIR  DYSON  informed  Mr.  Selby that  he  would  have  another                                                               
opportunity to  testify and answer  questions.  [HB 407  was held                                                               
over.]                                                                                                                          

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