Legislature(2001 - 2002)

03/28/2002 03:01 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."                                                              
[Before  the committee  was  Version F,  22-LS1389\F,  Lauterbach,                                                              
3/21/02, adopted as a work draft on 3/26/02.]                                                                                   
                                                                                                                                
Number 1133                                                                                                                     
                                                                                                                                
ELIZABETH  RIPLEY,  Director, Community  Health  Planning,  Valley                                                              
Hospital,  testified   via  teleconference,  noting   that  Valley                                                              
Hospital  opposes the  proposed  population delimiter  in HB  407.                                                              
Valley  Hospital   serves  one  of  the  only   large  communities                                                              
affected by  the proposed  delimiter for  the certificate  of need                                                              
(CON) process,  she reported;  a private  business and  a not-for-                                                              
profit  enterprise, it  receives  no assistance  from the  borough                                                              
government, which has "limited health powers."                                                                                  
                                                                                                                                
MS.  RIPLEY said  the hospital  competes  directly with  Anchorage                                                              
providers.    She  offered  that   16,000  Matanuska-Susitna  area                                                              
residents travel  daily to Anchorage for work;  studies have shown                                                              
that  most  of  those  commuters  receive  their  health  care  in                                                              
Anchorage.   She reported  that over the  last five  years, Valley                                                              
Hospital has  made $1.5  million to $2.5  million in  net revenue,                                                              
which  is invested  into  the  hospital's infrastructure  for  new                                                              
equipment  in  order   to  stay  competitive,  and   also  in  the                                                              
workforce.     She  predicted  that   the  nation's   health  care                                                              
workforce   shortage   won't   improve   in   the   near   future;                                                              
consequently, a great deal must be invested in the workforce.                                                                   
                                                                                                                                
Number 1223                                                                                                                     
                                                                                                                                
MS.  RIPLEY  told   members  that  despite  these   costs,  Valley                                                              
Hospital  takes  its  not-for-profit  status  very  seriously;  it                                                              
invests  10 percent  of net  revenues -  in excess  of expenses  -                                                              
into  its Healthy  Communities program.   This  is a  way for  the                                                              
hospital  to give  back to  the community  out of  its revenue  to                                                              
raise health  status.   Suggesting the  hospital is very  fiscally                                                              
responsive  to  the  community by  providing  such  programs,  she                                                              
said, "Acknowledging  the benefits of fair competition,  we assert                                                              
that  this proposed  delimiter  does nothing  to  support a  level                                                              
playing  field.   And  we  are particularly  concerned  about  the                                                              
establishment of  medical 'boutiques'  that ... limit  services to                                                              
those  without  third-party  insurance,  thereby  'cherry-picking'                                                              
most of the paying customers."                                                                                                  
                                                                                                                                
MS.  RIPLEY pointed  out that  the  Matanuska-Susitna Borough  has                                                              
the highest  per-capita rate  of Medicaid  [eligible] patients  of                                                              
any  borough  in the  state;  that  is the  fastest-growing  payer                                                              
segment  in   [the  borough's]   population.    Furthermore,   the                                                              
Medicare population  is expected  to double in  the next  eight to                                                              
ten  years, from  6 percent  to  12 percent.   In  the last  three                                                              
months, self-pay clients  at Valley Hospital doubled  from 8 to 16                                                              
percent; this has  a huge fiscal impact.  The  hospital writes off                                                              
about  80  percent  of  these bills  from  patients  who  have  no                                                              
insurance.    She  noted  that  Valley  Hospital  is  legally  and                                                              
ethically  bound  to  serve  all patients  who  walk  through  its                                                              
doors,  regardless  of ability  to  pay.   Conversely,  a  medical                                                              
"boutique" such as  a freestanding imaging or surgery  center does                                                              
not operate  under the  same regulations and  may, in  fact, limit                                                              
customers of a  particular payer status.  She  reported that there                                                              
are  physicians in  the  [Matanuska-Susitna  area] and  throughout                                                              
the state  who don't  accept Medicaid  and Medicare  or who  limit                                                              
the number of clients who fall into those payer categories.                                                                     
                                                                                                                                
MS. RIPLEY  told members that  Valley Hospital supports  retention                                                              
of the  CON at a  $1-million threshold  for equipment  and raising                                                              
the CON  to a $2-million threshold  for buildings.   She explained                                                              
that [Valley  Hospital] can  support altering  the CON so  long as                                                              
the  following   provisions  are  included  in   the  legislation:                                                              
first,  all providers,  including  private  physicians, must  meet                                                              
the  terms of  the CON;  and second,  all  providers must  provide                                                              
care for  all financial  classes.   She noted  that if  this level                                                              
playing field  could be created  to generate competition,  [Valley                                                              
Hospital] would  be "all for it."   She indicated the  payers must                                                              
reflect  the locale  within which  the [provider]  operates.   She                                                              
suggested  that  the current  CON  bureaucracy could  track  this.                                                              
All expenditures,  whether for capital, equipment,  operations, or                                                              
bricks and mortar,  must fall under the $2-million  threshold, she                                                              
said.  She noted that she would provide written comments.                                                                       
                                                                                                                                
Number 1384                                                                                                                     
                                                                                                                                
CHAIR  DYSON asked  how,  were the  committee  to aim  at a  level                                                              
playing field, she  suggested the committee deal  with differences                                                              
in the taxes  paid by [for-profit] and nonprofit  [providers].  He                                                              
said it appears  it would be an advantage for  the nonprofits that                                                              
don't pay taxes.                                                                                                                
                                                                                                                                
MS. RIPLEY  replied that  the question  of accountability  of not-                                                              
for-profit  [providers]  has  been  raised  in  earlier  committee                                                              
hearings.   She said  the spirit  of the  501(c)(3) code  requires                                                              
nonprofits to give  back and invest in their  communities, whereas                                                              
shareholder profits  can go anywhere, even outside of  Alaska.  As                                                              
a not-for-profit,  [Valley  Hospital] is  being responsive  to its                                                              
community   in   ways   that   are   different   from   for-profit                                                              
[providers].   By  example,  95  percent of  hospitals  nationwide                                                              
invest  less than 1  percent into  their communities  in terms  of                                                              
health care,  whereas [Valley Hospital]  is investing  10 percent.                                                              
So  although it  doesn't  pay taxes,  chances  are  that it  would                                                              
demonstrate a greater  investment in its community,  compared with                                                              
most for-profit  [providers],  which must  make profits for  their                                                              
shareholders.     She  reported   that  the   hospital  has   been                                                              
recognized nationally for its program.                                                                                          
                                                                                                                                
Number 1486                                                                                                                     
                                                                                                                                
CHAIR DYSON  offered his understanding,  then, that her  answer is                                                              
that the  10 percent given for  community health is  equivalent to                                                              
the  taxes  paid by  for-profit  [providers].   He  asked  whether                                                              
[Valley  Hospital] charges  the same  rate for  the same  service,                                                              
regardless of the [payer].                                                                                                      
                                                                                                                                
MS.  RIPLEY  replied  that  the  way  the  Medicaid  and  Medicare                                                              
regulations  work is  that these  programs  must be  able to  take                                                              
advantage  of the  lowest price  the  hospital would  charge.   In                                                              
other words, that  discount must be available to  everyone, should                                                              
any  discount  or  incentive  be offered.    She  reiterated  that                                                              
[Valley  Hospital]  competes  with  providers  in  Anchorage,  and                                                              
charges the same rate for services.                                                                                             
                                                                                                                                
CHAIR DYSON  queried, "So there's  only one price and  ... someone                                                              
who's  indigent or  the one  that pays  their own  bills or  has a                                                              
third-party payer, all pay exactly the same rate?"                                                                              
                                                                                                                                
MS. RIPLEY replied,  "That's correct."  She said  the hospital has                                                              
an active charity  care program and writes off up  to 2 percent of                                                              
its bills  through this program.   She  added that bad  debt costs                                                              
the hospital about  $25 million.  Combining both  charity care and                                                              
bad  debt,  that represents  another  $25  million back  into  the                                                              
community each year, she said.                                                                                                  
                                                                                                                                
CHAIR DYSON  expressed his  understanding  that large groups  with                                                              
insurance   would  receive   a  significant   discount  over   the                                                              
individual  payer who  has only  the buying power  of one  person.                                                              
He noted that  he understood this  to be true in all  hospitals in                                                              
the state.  He asked if this is the case.                                                                                       
                                                                                                                                
MS.  RIPLEY replied,  "We do  have  preferred provider  agreements                                                              
where we offer that  discount, but we have to  match that discount                                                              
for Medicaid  [and] Medicare."   She added, "We're writing  off 80                                                              
percent of every self-pay bill."                                                                                                
                                                                                                                                
Number 1580                                                                                                                     
                                                                                                                                
CHAIR DYSON asked  whether it is correct that those  who pay their                                                              
own bills must pay the top rate, without a discount.                                                                            
                                                                                                                                
MS.   RIPLEY  responded   that   the  hospital   negotiates   with                                                              
individuals  to   put  them  on  a  payment   plan  to  facilitate                                                              
recouping  some  revenue.    She  explained  that  their  customer                                                              
service program  negotiates with  people to  get those  bills paid                                                              
in whatever  way possible.   She offered  to look more  closely at                                                              
those numbers.                                                                                                                  
                                                                                                                                
CHAIR DYSON  said he'd like that  information, but that  his point                                                              
is that  the rare people  who pay their  own bills are  paying the                                                              
very highest rate.  He requested confirmation.                                                                                  
                                                                                                                                
MS.  RIPLEY   replied,  "Well,   they  don't  get   an  advertised                                                              
discount, but I'm  wondering if once they go  through our customer                                                              
service process  ... that,  in effect, they  get that  discount or                                                              
better."    She added  that  when  people  come into  the  [Valley                                                              
Hospital] system,  they receive  care and are  then billed.   This                                                              
is very different  from an electric company where  the power would                                                              
be  shut  off for  lack  of  payment, because  the  operation  [or                                                              
service]  has been  completed,  and the  hospital  must work  very                                                              
hard to secure the revenue to pay its staff and bills.                                                                          
                                                                                                                                
CHAIR DYSON  remarked that he appreciates  that and the  fact that                                                              
they never turn anyone away.                                                                                                    
                                                                                                                                
Number 1678                                                                                                                     
                                                                                                                                
JAN  OWEN-DENTON,  Nurse  Manager,  Fairbanks  Memorial  Hospital,                                                              
testified  via teleconference  in  opposition  to  HB 407,  noting                                                              
that she  has been  a nurse  since 1977,  practicing in  Fairbanks                                                              
since 1981  and raising her family  there.  She indicated  she has                                                              
worked  for  many  of  the  clinics   and  medical  facilities  in                                                              
Fairbanks.   She told  members that  her main  concern centers  on                                                              
providing  experienced,  qualified  staff  to care  for  patients.                                                              
She  said although  most people  realize  the nation  is facing  a                                                              
shortage  of nurses,  similar  shortages  exist in  radiology  and                                                              
pharmacy positions.                                                                                                             
                                                                                                                                
MS. OWEN-DENTON  expressed her fear  that having  multiple medical                                                              
[facilities] in  a community the  size of Fairbanks will  only add                                                              
to the  shortage problem.  Facilities  that can entice  staff with                                                              
the highest  wages and best benefits  will do so.   The facilities                                                              
that  might  serve   only  the  best  payers,   primarily  private                                                              
insurance  companies, will  [have no] obligation  to provide  care                                                              
to the poor,  she suggested.  She indicated that  these facilities                                                              
would recruit  staff from  facilities such  as Fairbanks  Memorial                                                              
Hospital that truly serve the community.                                                                                        
                                                                                                                                
Number 1776                                                                                                                     
                                                                                                                                
JEROME  SELBY,  Regional  Director;   Planning,  Development,  and                                                              
Advocacy;  Providence  Health  System  in  Alaska  ("Providence"),                                                              
testified  on HB  407 via  teleconference.   Drawing attention  to                                                              
page 2,  line 13,  he suggested  deleting "without obtaining"  and                                                              
inserting "by submitting  a written request to  the department for                                                              
a certificate",  and later indicating  this certificate  should be                                                              
issued within  a reasonable amount of  time.  He offered  that the                                                              
department  might   be  better  able  to  [suggest   a  reasonable                                                              
timeframe],  but he  suggested 60  days.   This  is pertaining  to                                                              
replacement   facilities,   he  noted,   and   provides  for   the                                                              
requesting  and  receipt  of  the  certificate,  "pretty  much  no                                                              
questions asked."                                                                                                               
                                                                                                                                
MR.  SELBY pointed  out that  the significance  of this  [proposed                                                              
change] is  related to  eligibility under  the federal  guidelines                                                              
for reimbursement.   He remarked, "So, what we're  concerned about                                                              
here is, for example,  we know the Wrangell folks  want to replace                                                              
their hospital;  we're suggesting they  should be able to  do that                                                              
without  a  certificate  of  need, since  there  isn't  any  other                                                              
hospital around."   He noted, however,  that if "it stays  the way                                                              
it is" and Wrangell  doesn't get a CON, the $8  million slated for                                                              
the  hospital's  replacement  wouldn't be  recoverable  under  the                                                              
federal  system.   On  the other  hand, if  Wrangell  is issued  a                                                              
certificate,  that community  investment could  be recovered  over                                                              
time,  he said.   This is  a significant  issue, particularly  for                                                              
the smaller communities.                                                                                                        
                                                                                                                                
MR. SELBY  stated, in addition  to the  items he'd covered  at the                                                              
last hearing,  that quality  is a huge  concern with  the proposed                                                              
[legislation].   He urged members to delete  the 55,000-population                                                              
[threshold]  and leave  the  CON  for everyone  in  the state,  to                                                              
ensure  a  level  playing field  and  avoid  such  quality-of-care                                                              
issues.  He referenced  his recent testimony wherein  he'd cited a                                                              
study  indicating a  21-percent  increase in  mortality in  states                                                              
without  a CON.   He  reemphasized  the damage  this  would do  to                                                              
Alaska:    it  would  prohibit   the  ability  of  [providers]  in                                                              
Fairbanks  and the  Anchorage area  to generate  funds that  allow                                                              
them to deliver  "high-level, ... heavy-duty medical  care here in                                                              
Alaska for Alaskans."                                                                                                           
                                                                                                                                
MR.  SELBY  observed  that  providers in  these  areas  have  been                                                              
striving for this  high level of care over the course  of the last                                                              
20 years  that the CON  has been in  place; this positive  outcome                                                              
is  a result  of having  a  CON in  place.   He  urged members  to                                                              
"really think  about not  destroying that  by leaving  this 55,000                                                              
population  thing in here,  basically having  a feeding  frenzy, a                                                              
free-for-all, in the three larger areas of the state."                                                                          
                                                                                                                                
Number 1906                                                                                                                     
                                                                                                                                
MR. SELBY suggested  that Providence should back  away from things                                                              
it has  planned, such  as the PET  [positron emission  tomography]                                                              
scanner,  which  has a  highly  advanced  ability to  detect  pre-                                                              
cancerous  cells in  the body,  preventing the  patient from  ever                                                              
getting  cancer.  He  noted that  Providence  would like to  bring                                                              
this  equipment   to  Alaska,  but   that  it  is   a  significant                                                              
investment.  He said,  "But we should set that on  the side and go                                                              
build  about ten surgery  centers  around the  state and get  real                                                              
competitive.   If folks really  want competition, we  can compete;                                                              
we're not afraid  of competition."  He suggested  that members did                                                              
not want  Providence to do  so; it does  not advance  medical care                                                              
in  the state.   However,  this  is the  one  way that  Providence                                                              
could continue  its revenue  stream to allow  it, in four  or five                                                              
years,  "after  the  dust  settles,"  to return  to  the  task  of                                                              
developing high-level medical care.                                                                                             
                                                                                                                                
MR. SELBY  said this will  be a great cost  to the state,  as well                                                              
as a great cost  to some of the physician groups  around the state                                                              
with  whom  Providence would  be  competing.   He  concluded,  "We                                                              
don't  want to  go there.   We  would ask  you to not  make  us go                                                              
there.   And  we think  that this  thing [has]  a really  negative                                                              
effect  on  the  state  of  Alaska's  health  care  system."    He                                                              
mentioned  that other  provisions in  the bill  are positive,  but                                                              
said the  55,000-population threshold for  the removal of  the CON                                                              
is "a showstopper" for this bill.                                                                                               
                                                                                                                                
Number 1980                                                                                                                     
                                                                                                                                
REPRESENTATIVE  COGHILL  requested that  Mr.  Selby fax  suggested                                                              
language for  Section 2 of  the bill.  He  added that he  would be                                                              
willing  to entertain  some sort  of a review  process to  discuss                                                              
this matter.   He mentioned  discussion with department  personnel                                                              
and said these suggestions might be a "good fix."                                                                               
                                                                                                                                
MR.  SELBY  reported  that  the   Kodiak  Legislative  Information                                                              
Office (LIO) would be faxing that momentarily.                                                                                  
                                                                                                                                
Number 2063                                                                                                                     
                                                                                                                                
MR. SELBY, in response  to a question from Chair  Dyson, said that                                                              
surgery centers,  if allowed to  proliferate, would  eliminate the                                                              
revenue stream  that enables  Providence to  raise the  capital to                                                              
invest in that  equipment.  He said,  "We can't go buy  it because                                                              
we don't  have the  money to  do it."   This is  the focus  of his                                                              
concern;  the state's  surgical  capacity  becomes overbuilt,  and                                                              
this  eliminates the  revenue stream  generated by  a fairly  high                                                              
utilization  of  the  surgery [resources]  at  Providence.    This                                                              
would  be  true of  other  providers  doing  surgery.   When  this                                                              
capacity  is overbuilt,  these  facilities  would  be treating  50                                                              
percent  or  less   of  the  patients  they  could   be  treating;                                                              
therefore,  the revenue  stream  wouldn't be  available to  pursue                                                              
the "heavy-duty medical treatment options."                                                                                     
                                                                                                                                
CHAIR DYSON requested confirmation of his understanding, saying:                                                                
                                                                                                                                
     The implication  is that  you make  enough money  off of                                                                   
     surgery,  or  enough  extra  revenue  off  the  services                                                                   
     beyond  what  it costs  you  to  provide them,  that  it                                                                   
     makes extra  revenue available  for you to ...  transfer                                                                   
     over  into other  areas  of  medical service,  and  make                                                                   
     investments  in equipment  or subsidize  other areas  of                                                                   
     medical-service    providing    that    are    not    as                                                                   
     remunerative.                                                                                                              
                                                                                                                                
MR. SELBY said that is true; it is the nature of health care.                                                                   
                                                                                                                                
Number 2140                                                                                                                     
                                                                                                                                
CHAIR  DYSON  observed  that  most   consumers  believe  they  are                                                              
charged  whatever it  costs to  provide  the service.   He  asked,                                                              
"But  you ...  do, indeed,  add  some other  factors  when you  go                                                              
about deciding what to bill us?  Is that correct?"                                                                              
                                                                                                                                
MR. SELBY  responded that the health  care delivery [system]  is a                                                              
"fairly complicated  financial mess, as you know."   He noted that                                                              
simply put,  there is a lot  of care, such as  intensive, advanced                                                              
cancer  care,  for  which  the  full  charge  cannot  possibly  be                                                              
charged to  [the payer].   Nor can anyone  afford to  reimburse to                                                              
providers  the cost  of that  treatment.   He  explained that  for                                                              
anyone to  be in  that business,  there must  be a revenue  stream                                                              
from another source in order to deliver that kind of care.                                                                      
                                                                                                                                
Number 2175                                                                                                                     
                                                                                                                                
CHAIR DYSON  offered his  understanding, then,  that "you  kind of                                                              
overcharge  in some  other areas."   As  a consumer,  he asked  in                                                              
which  areas of  service he  is charged  beyond the  cost, by  the                                                              
greatest margin.                                                                                                                
                                                                                                                                
MR. SELBY  replied, "It's  so complicated ...  that we  don't have                                                              
time here today  to even try to  sort through that."   However, he                                                              
explained that  he is not  telling any  secrets when he  tells the                                                              
committee  that  a well-organized  surgical  center  operation  is                                                              
profitable when  it is efficient.   That  is the premise  on which                                                              
these  surgery centers  and other,  targeted operations  establish                                                              
themselves  in  the absence  of  a  CON.   He  said it  is  common                                                              
knowledge that money  can be made with such centers,  which is why                                                              
they exist.  He elaborated:                                                                                                     
                                                                                                                                
     In most  people's view, they're a guaranteed  moneymaker                                                                   
     for  you, so  it's a  great business  to go  into.   So,                                                                   
     we're  not making any  bones about  the fact that,  yes,                                                                   
     we  at the  hospitals also  make money  on surgery,  and                                                                   
     that's  one of  the places  we count  on to  be able  to                                                                   
     keep our doors  open on a 24-hour basis, 7  days a week,                                                                   
     and subsidize  things like emergency medicine.  ... Very                                                                   
     few emergency  rooms pay their own way, just  because of                                                                   
     the huge  staffing overhead  that you  have to keep  the                                                                   
      place open 24 hours a day, 365 days a year.  That's                                                                       
     extremely expensive.                                                                                                       
                                                                                                                                
MR. SELBY  reiterated  that there  must be a  revenue stream  from                                                              
somewhere to keep the emergency room open.                                                                                      
                                                                                                                                
Number 2283                                                                                                                     
                                                                                                                                
KAREN  LOSINSKI,  R.N.,  Manager,   Home  Health  Care,  Fairbanks                                                              
Memorial   Hospital  (FMH),   testified   via  teleconference   in                                                              
opposition  to   HB  407,  saying   it  will  allow   unnecessary,                                                              
physician-owned-and-operated,   for-profit,   ambulatory   service                                                              
centers  into   the  Fairbanks   area.    She  continued,   "These                                                              
physicians  will   then  direct  their  patients   [with]  private                                                              
insurance coverage  to their own facilities, leaving  the patients                                                              
with no  insurance, Medicare,  or Medicaid to  be served  by FMH."                                                              
This will cause  a considerable financial impact  to the hospital,                                                              
jeopardizing  the  ability  to  support  the  vital,  non-revenue-                                                              
generating services such as home health care.                                                                                   
                                                                                                                                
MS.  LOSINSKI reported  that  FMH  is the  only  home health  care                                                              
agency  in  the  Fairbanks  area  providing  skilled  nursing  and                                                              
therapeutic  services  to  homebound   patients.    Without  these                                                              
services,  patients  will  need  to  stay  in  the  hospital  much                                                              
longer,  thus increasing  the  need for  frequent  hospitalization                                                              
and emergency room  visits, and it will not allow  patients to die                                                              
with  dignity  and  comfort  in   their  homes.    Many  Fairbanks                                                              
residents will be  forced to look for nursing  and assisted-living                                                              
homes and,  in turn,  will have to  leave the Fairbanks  community                                                              
because these facilities  are not available.  She  concluded, "The                                                              
CON process is vital to protecting our community."                                                                              
                                                                                                                                
TAPE 02-26, SIDE B                                                                                                              
Number 2368                                                                                                                     
                                                                                                                                
SHEILA  SIEGLER,   Patient  Service  Finance   Manager,  Fairbanks                                                              
Memorial Hospital,  testified via teleconference in  opposition to                                                              
HB  407.    She  reported  that  she  is  a  17-year  resident  of                                                              
Fairbanks.   She said  competition  in most industries  is  a good                                                              
thing,  but  that  changing  the existing  CON  policy  would  not                                                              
create  a positive,  competitive  market.   Patients  don't  "shop                                                              
around" for  health care services  as they do for  other products,                                                              
she  explained;   physicians  make   the  purchase   decision  for                                                              
patients and provide the service.                                                                                               
                                                                                                                                
MS. SIEGLER  said a owner's  income for a freestanding  ambulatory                                                              
surgery  center   is  tied   directly  to   the  amount   of  care                                                              
[provided];  unlike other business  owners, physician-owners  have                                                              
the power  to order their  own services.   She noted that  in this                                                              
setting, physicians  might be inclined to choose  an inappropriate                                                              
setting for  a surgical  procedure because  of personal  financial                                                              
gain;  physicians would  have the  power  to choose  the place  of                                                              
service  based  on  the reimbursement  rather  than  on  the  most                                                              
appropriate setting  for the patient.  She explained  that studies                                                              
conducted  by  the  office  of the  inspector  general  and  other                                                              
government  agencies have  shown that referrals  to entities  with                                                              
which   physicians  have   a  financial   relationship   encourage                                                              
excessive use of  those services, often resulting  in higher costs                                                              
to the health care program.                                                                                                     
                                                                                                                                
Number 2309                                                                                                                     
                                                                                                                                
CHAIR  DYSON said that  if doctors  are indeed  doing things  that                                                              
are not medically  indicated just for profit, he  believes that to                                                              
be a breach  of professional ethics.   He added  his understanding                                                              
that  a mechanism  is in place  to address  that.   He asked,  "Is                                                              
that not working as well as it should?"                                                                                         
                                                                                                                                
MS.  SIEGLER replied  that studies  indicate physician-owned  labs                                                              
have  more  diagnostic  tests  ordered  than  labs  in  which  the                                                              
physician [doesn't  have a financial interest]; this  indicates to                                                              
her that more  diagnostic services are ordered  when the physician                                                              
financially benefits from the services.                                                                                         
                                                                                                                                
Number 2271                                                                                                                     
                                                                                                                                
CHAIR DYSON  inquired about  her comment  regarding surgery  being                                                              
performed  in  inappropriate  places,   and  the  danger  of  that                                                              
happening in a for-profit setting.                                                                                              
                                                                                                                                
MS. SIEGLER replied,  "You could have a physician  that would make                                                              
a decision to do  a surgery in an out-patient  surgery center that                                                              
might  be more  ...  appropriately  done  in a  hospital  setting,                                                              
based  on   the  condition  of   the  patient  or   other  medical                                                              
decisions."                                                                                                                     
                                                                                                                                
CHAIR   DYSON  queried   whether   the  medical   board's   ethics                                                              
enforcement might be unlikely to catch that.                                                                                    
                                                                                                                                
MS. SIEGLER agreed.                                                                                                             
                                                                                                                                
CHAIR  DYSON   expressed  his   understanding  that   FMH's  gross                                                              
revenues  are about  $160  million and  asked  if that  is in  the                                                              
ballpark.                                                                                                                       
                                                                                                                                
MS.  SIEGLER replied,  "Between  the two  facilities,  yes."   She                                                              
said  this  represents  combined  revenues from  FMH  and  [Denali                                                              
Center].                                                                                                                        
                                                                                                                                
CHAIR  DYSON asked  what the  [combined]  budget is  and what  the                                                              
hospital's excess revenues were for the last accounting period.                                                                 
                                                                                                                                
MS.  SIEGLER  said  she'd  have   to  refer  him  to  FMH's  chief                                                              
financial officer for those answers.                                                                                            
                                                                                                                                
Number 2195                                                                                                                     
                                                                                                                                
CHARLES    HOLYFIELD,   Respiratory    Therapist   and    Manager,                                                              
Respiratory  Care   and  Cardiology  Departments   and  the  Sleep                                                              
Disorders   Lab,  Fairbanks  Memorial   Hospital,  testified   via                                                              
teleconference  in opposition  to HB  407.   He expressed  concern                                                              
that  if the  CON  is eliminated,  unnecessary  facilities can  be                                                              
built by  any organization or person  with enough money  to do so.                                                              
However, most  health care  programs are  not profitable  and must                                                              
be subsidized  to exist.   Anyone  who wishes  to build  a program                                                              
will select  only the few  profitable ones:  radiology,  pharmacy,                                                              
laboratory,  and outpatient  surgery.   He remarked,  "As a  total                                                              
health care  community, we must be  able to provide even  the non-                                                              
profitable  programs  to  the  public;  this  could  be  seriously                                                              
jeopardized if House  Bill 407 is passed."  Conveying  support for                                                              
a strong CON law  in Alaska to provide a measure  of discipline to                                                              
the market, he said  weakening the CON statute will  open the door                                                              
to a multitude of problems.                                                                                                     
                                                                                                                                
Number 2125                                                                                                                     
                                                                                                                                
PATRICIA CONNELLY,  R.N., Fairbanks  Memorial Hospital,  testified                                                              
via  teleconference  in opposition  to  HB  407, noting  that  her                                                              
testimony  was  quite  similar  to  that of  her  colleagues.    A                                                              
longtime  Fairbanks resident  and employee  of FMH,  she said  the                                                              
current  CON  process works  for  Fairbanks;  100 percent  of  the                                                              
hospital's [net] revenue is reinvested in the community.                                                                        
                                                                                                                                
Number 2090                                                                                                                     
                                                                                                                                
CAROL  BARNETT,   Registered  Health  Information   Administrator,                                                              
Medical   Record   Department,    Fairbanks   Memorial   Hospital,                                                              
testified  via teleconference  in opposition  to the bill,  noting                                                              
that she has been  a health care manager for 15  years, the last 4                                                              
in Fairbanks.   She said  the bill would  reduce or  eliminate the                                                              
requirement for  the CON.  She  related that her  greatest concern                                                              
is the potential  for additional, freestanding  ambulatory service                                                              
centers  to  be built  in  Fairbanks.    She argued  against  this                                                              
because the Fairbanks  region has a stable population  of patients                                                              
requiring  surgical  services;  this  volume is  not  expected  to                                                              
grow, thus limiting the patient base for any facilities.                                                                        
                                                                                                                                
MS.  BARNETT  explained  that  whether   one  or  five  facilities                                                              
provide  the   service,  the  volume   remains  the  same.     The                                                              
distribution  of services  would  be unequal,  and the  ambulatory                                                              
surgery  center  would  treat only  profitable  and  less  complex                                                              
cases, reimbursed  by private insurance  on a fee  schedule rather                                                              
than reduced  Medicaid/Medicare  rates.   The hospital would  bear                                                              
the burden  of these  [less profitable]  cases, a high  percentage                                                              
of which are  [covered by] Medicaid or Medicare,  or which involve                                                              
sicker  patients or  more complex  cases.   She indicated  neither                                                              
type  of facility  would  benefit;  even the  [ambulatory  surgery                                                              
center] eventually  would feel the  strain of flat  patient volume                                                              
and would need to raise rates.                                                                                                  
                                                                                                                                
MS.  BARNETT  offered  that  her   other  argument  was  from  the                                                              
patient's  perspective, whose  primary concern  is not the  choice                                                              
of facility but the surgeon who will perform the surgery.                                                                       
                                                                                                                                
Number 1940                                                                                                                     
                                                                                                                                
REPRESENTATIVE COGHILL,  sponsor of HB  407, in reply  to comments                                                              
by Representative  Kohring  and Chair  Dyson, indicated  witnesses                                                              
next week  would offer  another perspective.   He noted  that some                                                              
amendments  would be entertained,  if necessary;  if convinced  it                                                              
was  necessary,  he also  would  work  with  the department  on  a                                                              
proposed  committee  substitute   (CS)  dealing  with  Section  2,                                                              
regarding moving facilities and the associated review process.                                                                  
                                                                                                                                
Number 1880                                                                                                                     
                                                                                                                                
MR. SELBY, in response  to Chair Dyson, said he  doesn't know what                                                              
"magic" there  is about a  population base of  55,000.  If  one is                                                              
addressing competition,  the most competitive market  in Alaska is                                                              
in  Anchorage,   where  the  most   physicians  and   health  care                                                              
providers are  competing.   He said he  fails to follow  the logic                                                              
of removing the CON from them but not the rest of the state.                                                                    
                                                                                                                                
Number 1814                                                                                                                     
                                                                                                                                
MR. SELBY,  in response to Chair  Dyson, clarified that  his point                                                              
with regard to a  CON program is that the state  is keeping an eye                                                              
on  what  is being  developed  and  how  much  is being  spent  on                                                              
facilities  for health  care.   It  doesn't matter  if a  proposed                                                              
facility  is for Anchorage  or the  smallest  village - the  state                                                              
should be  aware of that  and have an  opportunity to look  at the                                                              
need is, he  said.  That is  the premise of the CON,  matching the                                                              
need for facilities with the demand for services.                                                                               
                                                                                                                                
MR. SELBY said,  "There's nothing magic that happens  at 55,000 in                                                              
terms  of needed services  and the  ability to  meet those  needs.                                                              
You either have  a program statewide that looks at  that and makes                                                              
a determination that,  yes, that's a needed facility  and a needed                                                              
thing  in the  state  of Alaska,  or no,  it's  not needed  'cause                                                              
we've already  got 50 of those."   He added that the  CON seeks to                                                              
"keep  a lid  on"  the facilities,  because  that cost  translates                                                              
into  money from  the state's  budget for  Medicare and  Medicaid.                                                              
He emphasized  that the  state is  somehow going  to help  pay for                                                              
each  of these  facilities.    Capping  the number  of  facilities                                                              
built will cap the cost to the state, he suggested.                                                                             
                                                                                                                                
Number 1736                                                                                                                     
                                                                                                                                
CHAIR DYSON  thanked Mr.  Selby for the  clarification.   He asked                                                              
if  Mr. Selby's  responsibilities  at  Providence  are related  to                                                              
facilities.                                                                                                                     
                                                                                                                                
MR.  SELBY   said  no;  he  is   the  director  of   planning  and                                                              
development for Providence.                                                                                                     
                                                                                                                                
CHAIR  DYSON asked,  "The Sisters  [of  Providence] own  hospitals                                                              
outside of Alaska, do they not?"                                                                                                
                                                                                                                                
MR. SELBY answered in the affirmative.                                                                                          
                                                                                                                                
CHAIR   DYSON  inquired   whether  those   were  all   financially                                                              
independent  from  one another,  such  that one  facility  doesn't                                                              
subsidize another across state lines.                                                                                           
                                                                                                                                
MR. SELBY  said he believed  that was correct,  but was  "a little                                                              
fuzzy  about  California"  because   of  unfamiliarity  with  some                                                              
recent  acquisitions  there.   He  offered  that  Alaska  operates                                                              
"pretty  independently,"  and  said  he  knows  this  be  true  of                                                              
Washington and Oregon.                                                                                                          
                                                                                                                                
CHAIR DYSON  asked Mr. Selby  if he was  involved in  the purchase                                                              
of the mall on Tudor Road in Anchorage.                                                                                         
                                                                                                                                
MR.  SELBY answered  that he  was aware  of the  purchase but  not                                                              
directly involved.                                                                                                              
                                                                                                                                
CHAIR DYSON asked what the intention of that purchase was.                                                                      
                                                                                                                                
MR. SELBY said  the land ownership around Providence  is such that                                                              
it  is  landlocked  to  the  point  that  nothing  else  could  be                                                              
developed  on those Providence  properties  because of the  zoning                                                              
regulations  and parking  requirements.    Providence was  seeking                                                              
adjacent  property  where  future development  could  take  place.                                                              
Over  the  course of  the  next  50  years,  he suggested,  it  is                                                              
obvious  that adjustments  and  additions will  need  to be  made.                                                              
[The mall  on Tudor] was the  closest available property  and thus                                                              
provided an option for future considerations.                                                                                   
                                                                                                                                
Number 1630                                                                                                                     
                                                                                                                                
CHAIR DYSON  said he  could see  the wisdom of  that.   He offered                                                              
his  impression  that  the  existing  retail  businesses  will  be                                                              
allowed to operate there.                                                                                                       
                                                                                                                                
MR. SELBY  replied that  [Providence] has  no immediate  plans; it                                                              
is a long-term, strategic holding.                                                                                              
                                                                                                                                
CHAIR DYSON  asked whether [Providence]  would be paying  taxes on                                                              
that property before it is converted to hospital use.                                                                           
                                                                                                                                
MR.  SELBY  answered  yes;  those  properties,  because  of  their                                                              
leasehold nature,  aren't part of [Providence's]  normal operation                                                              
and do pay income  tax.  As to whether property  taxes would still                                                              
be paid,  he said  he didn't know.   He said  each business  has a                                                              
leasehold agreement.                                                                                                            
                                                                                                                                
CHAIR  DYSON  asked  Mr.  Selby   to  find  that  answer  for  the                                                              
committee.  [HB 407 was held over.]                                                                                             
                                                                                                                                

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