Legislature(2005 - 2006)CAPITOL 106


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* first hearing in first committee of referral
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Moved CSHJR 36(HES) Out of Committee
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Scheduled But Not Heard
+ Bills Previously Heard/Scheduled TELECONFERENCED
HB 287-MEDICAL FACILITY CERTIFICATE OF NEED                                                                                   
3:14:22 PM                                                                                                                    
CHAIR WILSON announced that the  final order of business would be                                                               
HOUSE  BILL NO.  287, "An  Act amending  the certificate  of need                                                               
requirements to apply only to  health care facilities and nursing                                                               
homes located  in a borough  with a  population of not  more than                                                               
25,000,  in the  unorganized borough,  or in  a community  with a                                                               
critical access hospital."                                                                                                      
3:15:01 PM                                                                                                                    
REPRESENTATIVE BOB  LYNN, Alaska  State Legislature,  speaking as                                                               
the prime  sponsor of  CSHB 287,  paraphrased from  the following                                                               
statement [original punctuation provided]:                                                                                      
     During the last hearing,  opponents testified at length                                                                    
     against the  bill to almost the  entire HESS committee.                                                                    
     However, due  to other legitimate commitments,  when it                                                                    
     came time for  people to speak before  the committee in                                                                    
     favor of the bill, there  was only one committee member                                                                    
     present!   Therefore, for all practical  purposes, this                                                                    
     will be really  the first time the  committee will have                                                                    
     an opportunity to  hear both sides of the issue  - so I                                                                    
     want to thank you for hearing the bill today.                                                                              
     I know that  some of you have concerns that  need to be                                                                    
     addressed,  and that's  what the  committee process  is                                                                    
     for.  So let  me try to put myself in  your shoes, if I                                                                    
     can, and ask, "What possible  reasons are there for not                                                                    
     moving  this  bill  out of  this  committee  and  along                                                                    
     through the Judiciary and Finance Committees?"                                                                             
     1.  Let  me ask.  Would it harm  patients to repeal the                                                                    
     Certificate of Need law?  No!   Like you, I would never                                                                    
     want to harm  patients.  Patients would  not be harmed.                                                                    
     In  fact, patients  would likely  benefit from  greater                                                                    
     availability  of facilities  - and  that usually  means                                                                    
     lower costs.                                                                                                               
     2.   Let me ask.  How  can hospitals afford to care for                                                                    
     the indigent at  no cost, if they are  unable to recoup                                                                    
     those  costs  by  charging  extra  at  hospital  profit                                                                    
     centers?   Well, first  of all,  anyone who  makes that                                                                    
     argument  is admitting  that  some  patients are  being                                                                    
     overcharged.   It reminds me  of the logic of  the sign                                                                    
     on a  well-known bar in  Anchorage that  proclaims, "We                                                                    
     cheat  the other  fellow  and pass  the  savings on  to                                                                    
     you!"   Secondly, as at least  one of you heard  at the                                                                    
     previous  hearing, a  lot of  medical providers  in all                                                                    
     categories do - in fact  - provide charity care for the                                                                    
     indigent.    Charity is  a  virtue.   Overcharging  the                                                                    
     fortunate is - well -  "overcharging," and you can call                                                                    
     that what you will.                                                                                                        
     3.   Let me  ask.  Have  you considered the  fact that,                                                                    
     if  the bill  before  us today  doesn't  pass, that  it                                                                    
     opens the door  to an Initiative that  has already been                                                                    
     certified by  the Lieutenant Governor?   The difference                                                                    
     between the  bill and the  Initiative is that  the bill                                                                    
     applies only to communities of  25,000 or more, and the                                                                    
     Initiative  affects every  place in  Alaska, regardless                                                                    
     of population.   As a co-sponsor of  that Initiative, I                                                                    
     can tell  you that  we wanted  the Initiative  to apply                                                                    
     only  to places  with a  population of  25,000 or  more                                                                    
     like the bill before you today  - but that was not, I'm                                                                    
     sorry to  say permitted by  law, as interpreted  by the                                                                    
     administration.   The bottom  line is, the  bill before                                                                    
     you  today may  address  some of  your concerns  better                                                                    
     than  the   Initiative.    If  the   bill  passes,  the                                                                    
     initiative will be dropped.                                                                                                
     4.   Let  me ask.   What  about the  big dollar  fiscal                                                                    
     note  attached   by  the  administration?     Well,  as                                                                    
     expected,  health  care  monopolies,  and  others  with                                                                    
     vested interests, have responded  the only way they can                                                                    
     - by attaching  humongous fiscal notes to  both my bill                                                                    
     and  the  initiative.   To  paraphrase  Ronald  Reagan,                                                                    
     "There they  go again!"  I  can also tell you,  we have                                                                    
     yet to  obtain any verifiable  - or even  commonsense -                                                                    
     data  for the  fiscal  note.   There  are experts  here                                                                    
     today  ready to  testify  on  what is,  and  is not,  a                                                                    
     reasonable  fiscal  note  - and  you  would  be  better                                                                    
     served to hear from them rather than me.                                                                                   
     5.   Let  me  ask.    Is  it a  good  thing  for  large                                                                    
     hospitals  to have  a monopoly  provided by  the state?                                                                    
     There's a  Principle involved here -  and the Principle                                                                    
     is  not and  should not  be socialism  or Marxism,  the                                                                    
     Principle is  free enterprise.   It's  informative that                                                                    
     someone who  wrote an editorial  in today's  Daily News                                                                    
     opposing my  bill has written  a book that's part  of a                                                                    
     series of "studies in Marxism!"   Good Principles - and                                                                    
     I believe free enterprise is  a good Principle have, by                                                                    
     definition,  a  wide  application.    We  don't  choose                                                                    
     worthy  Principles  in  a some  kind  of  philosophical                                                                    
     cafeteria line  - "We'll take  this Principle,  but not                                                                    
     that Principle."   That said,  the least we can  do, if                                                                    
     we decide  to keep  the current  discriminatory system,                                                                    
     is to call  the Certificate of Need exactly  what it is                                                                    
     - a "Certificate of Monopoly."                                                                                             
     In  conclusion,   Madame  Chair  and  Members   of  the                                                                    
     Committee, I  urge you to consider  carefully all sides                                                                    
     of  this  debate.    But  please  don't  be  afraid  to                                                                    
     challenge the status  quo.  I urge you to  let the bill                                                                    
     run the entire  committee process to which  it has been                                                                    
     referred:   the 7  legislators of your  HESS committee,                                                                    
     the 7  members of the  Judiciary Committee, and  the 11                                                                    
     members of the  Finance Committee, so that  at least 22                                                                    
     legislators  will have  enjoyed a  fair opportunity  to                                                                    
     evaluate, make  any changes  to the  bill, and  vote as                                                                    
     they may.                                                                                                                  
     I  think  HB  258  [287]  is  a  good  a  timely  bill,                                                                    
     otherwise I  would not have  sponsored it - and  it is,                                                                    
     in  fact  my  priority legislation  for  this  session.                                                                    
     Thank you.                                                                                                                 
3:20:05 PM                                                                                                                    
BOB URATA, MD, President, Board of Directors, Bartlett Regional                                                                 
Hospital, testified in opposition of HB 287, paraphrasing from                                                                  
the following written statement [original punctuation provided]:                                                                
     I'm Bob Urata  MD, a family physician,  born and raised                                                                    
     in  Wrangell, Alaska  and have  lived  in Juneau  since                                                                    
     1984.    I  am  here  as  President  of  the  Board  of                                                                    
     Directors  of  Bartlett   Regional  Hospital  to  speak                                                                    
     against  HB  287  which would  be  detrimental  to  the                                                                    
     The  certificate of  need (CON)  program in  Alaska was                                                                    
     started  in 1976  to protect  the public's  interest in                                                                    
     health care  by controlling health care  costs, promote                                                                    
     quality of care and access to  care.  It has become one                                                                    
     of the  most comprehensive programs in  the US covering                                                                    
     up to 26 out of possible 30 services.                                                                                      
     One of  the most important  aspects of the  CON program                                                                    
     is that  it is  an open  public process.   In  order to                                                                    
     assure  order  and  fairness  in  health  facility  and                                                                    
     health  service  planning,  public  input  is  a  must.                                                                    
     Everyone  is affected,  everyone should  have a  say in                                                                    
     how things develop.                                                                                                        
     HB  287  targets  communities  in  Alaska  over  25,000                                                                    
     people which mean only 6  communities will be affected,                                                                    
     one of  them is Juneau.   Our  57 bed hospital  will be                                                                    
     adversely affected financially with  the removal of the                                                                    
     CON  process.   With  removal of  the  CON process,  an                                                                    
     ambulatory  surgery center  or  a diagnostic  imagining                                                                    
     center  would  be  built by  an  entrepreneur,  "cherry                                                                    
     picking"   the   highest  paying   patients   seriously                                                                    
     reducing revenue  and crippling  the operations  of the                                                                    
     hospital which needs  to stay open 24 hours  and 7 days                                                                    
     a  week.   This  would lead  to  shortages of  critical                                                                    
     staff which in turn lowers  quality.  Fees will need to                                                                    
     increase to cover  loss of revenues.  It  is well known                                                                    
     that in  health care economics "supply  drives demand",                                                                    
     that  is the  more supply,  the higher  the demand  and                                                                    
     thus  spending.   Competition in  health care  does not                                                                    
     lead to lower  fees or costs but  increases it, because                                                                    
     consumers do  not shop  for health  care and  they lack                                                                    
     information   to   make   the  economic   health   care                                                                    
     decisions.  Providers control  supply and can determine                                                                    
     demand.   Finally a third party  like private insurance                                                                    
     or Medicaid/Medicare pays the  charges.  Providers have                                                                    
     no incentive  to lower fees.   So with  higher capacity                                                                    
     come  higher health  care costs.   The  CON process  is                                                                    
     needed to  guide this because health  care and services                                                                    
     as a  marketplace do not  follow the usual rules  of an                                                                    
     ordinary economic commodity.                                                                                               
     The CON process maintains  or improves quality of care.                                                                    
     An example  is limiting cardiac surgery  in communities                                                                    
     so that there is no  excess capacity.  Cardiac surgeons                                                                    
     need  to  do a  certain  number  of cases  to  maintain                                                                    
     proficiency.   If  there are  too many  cardiac surgery                                                                    
     centers in a community, then quality gets worse.                                                                           
     Studies that  support my position  may be found  in the                                                                    
     American  Health  Planning   Association  web  page  at                                                                    
     www.ahpanet.org.   There studies by the  3 American car                                                                    
     companies  show that  in states  with CON,  health care                                                                    
     costs  per person  were 33%  to 164%  lower than  those                                                                    
     without.  Ford Motor  found that inpatient, outpatient,                                                                    
     MRI  [magnetic resonance  imaging], and  CABG [coronary                                                                    
     artery  bypass graph]  charges were  10-39% cheaper  in                                                                    
     states with CON  compared to those with  none.  Charges                                                                    
     in  Freestanding  Ambulatory  Surgery Centers  in  1999                                                                    
     were  about 20%  lower in  states with  CON than  those                                                                    
     without CON.                                                                                                               
     Looking at quality, CABG Mortality  was about 20% lower                                                                    
     in  CON states  than  in those  states  without CON  in                                                                    
     Medicare beneficiaries in 1994-1999.                                                                                       
     It is  my opinion the  CON process should  continue for                                                                    
     all Alaskans because it  protects the public's interest                                                                    
     by providing  a public forum for  important health care                                                                    
     service and facility  planning, maintains accessibility                                                                    
       to health care services, maintains quality health                                                                        
     care, and helps with cost containment.                                                                                     
3:27:19 PM                                                                                                                    
REPRESENTATIVE GATTO  encouraged Dr. Urata [leaving  to attend to                                                               
a  patient]  to provide  a  means,  probably via  telephone,  for                                                               
questions during the meeting.                                                                                                   
3:27:53 PM                                                                                                                    
RICHARD COBDEN,  Orthopedic Surgeon,  stated support for  HB 287,                                                               
adding that  he has done quite  a bit of research  on the subject                                                               
of  the legislation.   He  related  that he  had quite  a bit  of                                                               
experience with the  CON when he worked in California.   In fact,                                                               
he was part  of a task force that eventually  lead the California                                                               
legislature to drop the CON almost  25 years ago.  In California,                                                               
the  costs averaged  10-50 percent  higher  when the  CON was  in                                                               
place than when it was absent.                                                                                                  
DR. COBDEN then turned to  Fairbanks, which he characterized as a                                                               
monopolistic  system,  with  only  one hospital  and  thus  if  a                                                               
patient  can't  get  into the  Fairbanks  hospital,  he/she  must                                                               
travel to  Anchorage.   Also, in  Fairbanks there  is a  group of                                                               
physicians  who  are  denied  privileges  at  Fairbanks  Memorial                                                               
Hospital  because  it holds  an  exclusive  contract for  certain                                                               
procedures  to be  supplied  to the  hospital  by one  physician.                                                               
Furthermore, the cost of services  at Fairbanks Memorial Hospital                                                               
is  very high.    For example,  the cost  of  a knee  replacement                                                               
device from the company and to  the hospital was $3,000 while the                                                               
hospital  patient was  charged $16,000.   The  patient protested,                                                               
but was told  that the aforementioned was the  average markup for                                                               
devices at Fairbanks Memorial Hospital.                                                                                         
DR.  COBDEN related  that  his primary  concern  with having  one                                                               
hospital   is   that   in   the    event   of   a   large   scale                                                               
catastrophe/disaster,  there  is  no  alternative  locally.    To                                                               
continue this monopoly at Fairbanks  Memorial Hospital is leading                                                               
to a possible catastrophe in itself.   From the last hearing, Dr.                                                               
Cobden  recalled testimony  likening  health care  to a  national                                                               
monopoly much like utilities of  electricity, gas, and water that                                                               
the  testifier   indicated  should  be  preserved   as  such  for                                                               
efficiency.  In response, Dr.  Cobden emphasized that health care                                                               
is an essential  service and it doesn't make sense  to have it so                                                               
centralized  without alternatives.   For  example, he  questioned                                                               
whether food should be required  to be distributed by one grocery                                                               
store.  Dr. Cobden opined that  the CON is obsolete and should be                                                               
3:33:47 PM                                                                                                                    
DR.  COBDEN, in  response  to  Representative Gardner,  specified                                                               
that currently  he is a  practicing orthopedic surgeon  who works                                                               
in the Advanced Medical Centers of Alaska.                                                                                      
3:34:28 PM                                                                                                                    
REPRESENTATIVE  GATTO  addressed  Dr.  Cobden's  comment  that  a                                                               
utility  is a  service  and monopolies  are  established for  the                                                               
benefit  of  citizens.    The  aforementioned  appears  to  work.                                                               
However, if  Bartlett Regional Hospital was  subjected to intense                                                               
competition and/or  cherry picking  and it were  to close  due to                                                               
its inability  to function, [the community/state]  would be worse                                                               
off than if  the hospital was protected.  He  asked if that would                                                               
be the case.                                                                                                                    
DR. COBDEN agreed  that it would be a disaster  to close Bartlett                                                               
Regional Hospital.   However, with regard to  the suggestion that                                                               
there would be  cherry picking, he questioned  whether such would                                                               
really happen.  He then  reminded the committee that Medicaid and                                                               
the state  pays a premium of  around 24 percent above  and beyond                                                               
the care  guarantee of any  other institution to the  hospital in                                                               
order to  pay for the  additional unpaid patients.   Furthermore,                                                               
the  charity provided  by hospitals  is actually  less than  that                                                               
provided by  private practitioners  and other groups.   Moreover,                                                               
the charge that  cardiac surgery, a very  lucrative procedure for                                                               
hospitals,  would  be  performed  outside of  a  hospital  at  an                                                               
inferior  quality is  a fallacious  argument.   No surgeon  would                                                               
perform  cardiac surgery  outside  of a  hospital  setting.   Dr.                                                               
Cobden  clarified, "Nobody  is  arguing about  setting  up a  new                                                               
hospital; what we're talking about  is surgery centers, which can                                                               
do  outpatient,  minor  procedures  at   a  low  cost  in  direct                                                               
competition  with hospitals."    The  aforementioned, he  opined,                                                               
won't  seriously impact  the bottom  line of  existing hospitals,                                                               
including  Bartlett Regional  Hospital.   In  fact, most  studies                                                               
have shown that the maximum that  a hospital seeks to lose in the                                                               
event of a competitive outpatient  surgery center is 5 percent of                                                               
the facility's bottom line.                                                                                                     
3:39:00 PM                                                                                                                    
CHAIR WILSON inquired  as to the hours of the  surgery center [in                                                               
the area].                                                                                                                      
DR.  COBDEN answered  that if  a  surgery center  were built,  it                                                               
would be open on  a 12 to 24-hour basis depending  on demand.  It                                                               
would  not  be  possible  to  establish  a  surgery  center  that                                                               
provided  24-hour care  because that  requires licensure  through                                                               
the  state and  the joint  commission.   When acute  patients are                                                               
kept more than 24 hours, different criteria must be met.                                                                        
CHAIR  WILSON surmised  then that  a surgery  center wouldn't  be                                                               
open for patients  to come at any  hour.  "There might  not be as                                                               
much pro bono  work as at a  hospital or there might  be more for                                                               
you guys  that go to  some clinic and  give free care.   However,                                                               
there  is  a difference  for  the  hospitals  that have  to  take                                                               
everyone that come  into that emergency room  whether they'll pay                                                               
a penny or not," she pointed out.                                                                                               
DR. COBDEN acknowledged the difference.                                                                                         
3:40:28 PM                                                                                                                    
REPRESENTATIVE  GATTO returned  to the  matter of  cherry picking                                                               
and highlighted  the cherry  picking that  occurred when  UPS and                                                               
FedEx entered the postal services.   Therefore, he suggested that                                                               
he would be surprised if a  company entered the market and didn't                                                               
cherry pick.                                                                                                                    
MR.  COBDEN opined  that it  would be  unethical if  it happened.                                                               
With  regard  to  FedEx  offering  postal  services,  Dr.  Cobden                                                               
reminded  the  committee  that the  postal  service  didn't  have                                                               
overnight  mail.   Furthermore,  when  the  postal service  faced                                                               
competition, it increased its services and improved delivery.                                                                   
3:42:03 PM                                                                                                                    
BRIAN   SLOCUM,  Administrator,   Tanana  Clinic,   provided  the                                                               
following testimony:                                                                                                            
     It seems to me that  all this fighting over certificate                                                                    
     of need issues  ignores a basic business  truth for all                                                                    
     health care organizations in 2006,  that is that no one                                                                    
     ...  gets  paid  enough  by  Medicare  or  Medicaid  or                                                                    
     patients who have no insurance  to stay in business for                                                                    
     very long.  And no  one can remain solvent by providing                                                                    
     only the  basic bread  and butter health  care services                                                                    
     to patients.   Frankly, both hospitals  and doctors can                                                                    
     only remain in business over  the long haul by treating                                                                    
     some patients who have private  insurance that pay more                                                                    
     than the federal government pays  and pay more than the                                                                    
     folks without insurance and  by offering other services                                                                    
     which pay a  little bit better, such  as laboratory and                                                                    
     X-ray  services.    So, by  doing  everything  that  is                                                                    
     possible to  maximize hospital profits you  really risk                                                                    
     marginalizing  the   non-hospital  components   of  our                                                                    
     entire health  care system.  That's  especially true, I                                                                    
     think, of physicians  and clinics.  And not  only is it                                                                    
     true of physicians and clinics,  but is especially true                                                                    
     of those physicians and clinics in Fairbanks.                                                                              
     Our situation here, with respect  to doctors, is pretty                                                                    
     grim these days.  The  number of physicians per 100,000                                                                    
     population  in  Fairbanks  is  about  179  per  100,000                                                                    
     population.   That  means that  Fairbanks has  about 20                                                                    
     percent  fewer  physicians  per capita  than  Anchorage                                                                    
     does and  about 40  percent fewer positions  per capita                                                                    
     than the national  average.  When you look  at how many                                                                    
     patients a doctor sees, that  translates to about 2,000                                                                    
     patients every week  who have no access to  care.  That                                                                    
     is going  to get  worse as  time goes on.   One  of the                                                                    
     things  that  happens  when  you have  a  lack  of  ...                                                                    
     primary  care physicians  in a  community  is that  the                                                                    
     mortality and morbidity rates ...  goes up.  And that's                                                                    
     proven  by the  state's  health department's  mortality                                                                    
     figures.   Frankly,  in Fairbanks  our  mortality is  5                                                                    
     percent higher  than the Alaska state  average and it's                                                                    
     8 percent  higher than the national  average across the                                                                    
     country.  That  means that every year  about 148 people                                                                    
     die  needlessly in  Fairbanks than  would have  to have                                                                    
     died  if we'd  had  sufficient physicians  to have  the                                                                    
     same death rate  as we have throughout the  state.  And                                                                    
     even  worse is  that  about 245  extra needless  deaths                                                                    
     take  place in  our  community every  year compared  to                                                                    
     what would've happened had we  had the national average                                                                    
     number of  physicians.   And as I  said, it's  going to                                                                    
     get  worse.    More  than half  of  the  physicians  in                                                                    
     Fairbanks  these days  are  over 50  years  of age  and                                                                    
     recruiting  new  physicians  to Fairbanks  is  becoming                                                                    
     increasingly difficult.  Part  of the reason it's tough                                                                    
     to  get   folks  to  Fairbanks   is,  of   course,  the                                                                    
     reputation  of Alaska  in general  and of  Fairbanks as                                                                    
     being  remote  and having  some  tough  weather in  the                                                                    
     winter time.  But an  increasing part of the difficulty                                                                    
     of getting  doctors to come  to town is that  we simply                                                                    
     can't compete as  an economic place to come  and set up                                                                    
     practice.   The reason that's happened  is because much                                                                    
     of   the  restrictions   put  on   physicians  by   the                                                                    
     certificate of  need law and frankly,  the ... somewhat                                                                    
     hostile approach  of our local hospital  to new doctors                                                                    
     and  to new  services being  provided by  doctors.   It                                                                    
     makes it  a difficult  place to financially  maintain a                                                                    
     practice.   As a result,  we just don't  get candidates                                                                    
     into  town  any  more.     So,  frankly,  I  think  the                                                                    
     situation  in 5  or  10 years  is going  to  be a  real                                                                    
     We've been  focusing so much  on hospital  profits that                                                                    
     we  forget that  no  one delivers  health care,  except                                                                    
     doctors,  and   nurses,  and  technicians  ....     And                                                                    
     frankly, I don't understand how  the hospitals can keep                                                                    
     saying  that  they make  no  money.    I have  had  the                                                                    
     opportunity to  check the  form 990,  which is  the tax                                                                    
     returns for  our local hospital.   It demonstrates that                                                                    
     in the  period between  1997 and  2004, they  made $119                                                                    
     million in profit.   I don't know how  much more profit                                                                    
     an organization  like that needs  before they  can feel                                                                    
     safe  and  let  up  a  little bit  on  the  demand  for                                                                    
     increasing  restrictions   on  physicians.     At  last                                                                    
     report, at  the end of  2004, which is the  most recent                                                                    
     report  available, the  local  hospital  here had  $105                                                                    
     million  in cash  and  negotiable  securities in  their                                                                    
     bank account.   They're engaged in  a $175-$200 million                                                                    
     billing campaign.   And I'm all in favor  of them doing                                                                    
     that and  I think the  whole community is, but  one has                                                                    
     to ask if  it's the best use of funding  given the fact                                                                    
     that we  have too  few physicians  and too  many people                                                                    
     dying  and  we  have  15,000 people  in  our  community                                                                    
     without  any  access to  care  due  to lack  of  health                                                                    
     insurance.   So, I  wish we could  focus on  the really                                                                    
     important things  here and that really  important thing                                                                    
     is  taking  care  of  sick   people  and  spending  our                                                                    
     community's  health  care  dollars  where  it's  really                                                                    
     critical  and try  to get  away from  this business  of                                                                    
     maximizing hospital profits at  the expense of the rest                                                                    
     of the health care system.                                                                                                 
3:48:29 PM                                                                                                                    
MIKE POWERS, Fairbanks Memorial  Hospital, informed the committee                                                               
that the  Medicare Payment Advisory Commission  recently issued a                                                               
new  study demonstrating  the importance  of  public policy  when                                                               
there are  physician-owned entities.   Referring to  Dr. Cobden's                                                               
comments, Mr. Powers  informed the committee that  Dr. Cobden has                                                               
about  half  of his  schedule  open  for  the  next month.    The                                                               
exclusive contract  to which Dr.  Cobden referred is  probably in                                                               
place for a  pain procedure because there is a  need for only one                                                               
interventional pain  specialist in  the community.   Furthermore,                                                               
the top procedures of Fairbanks  Memorial Hospital are 50 percent                                                               
less  expensive  than the  surgery  center  in Anchorage.    With                                                               
regard  to a  disaster, Mr.  Powers reminded  the committee  that                                                               
there  have been  three mass  casualties  in the  late 1980s  and                                                               
[Fairbanks Memorial Hospital] has never  had an issue with regard                                                               
to  handling those  casualties  through  surgery and  partnership                                                               
with the  military community.   Speaking to Dr.  Cobden's comment                                                               
that   hospitals  perform   less   charity   care  than   private                                                               
practitioners, Mr.  Powers indicated  that he  must misunderstand                                                               
and thus will have to  talk with the [Fairbanks Memorial Hospital                                                               
administration] about  that.  He related  that Fairbanks Memorial                                                               
Hospital [performs] roughly  8 percent in bad debt,  3 percent in                                                               
charity, and extensive  policies such that the  hospital sees all                                                               
MR.  POWERS  then  turned  to  Mr.  Slocum's  comments  regarding                                                               
Fairbanks  Memorial   Hospital's  approach  to   physicians,  and                                                               
highlighted that  the hospital,  over the  last three  years, has                                                               
invested  $250,000 [in  recruiting  staff].   Fairbanks  Memorial                                                               
Hospital  has   an  internal   medicine  physician   coming,  has                                                               
recruited an emergency medical technician  (EMT), and has brought                                                               
four physicians into the community.                                                                                             
3:52:19 PM                                                                                                                    
DAVID GILBREATH,  CEO, Central Peninsula General  Hospital, began                                                               
by noting his agreement with  Mr. Powers' testimony.  He informed                                                               
the committee  that the Central  Peninsula General Hospital  is a                                                               
62-bed  acute  care  hospital  with about  450  employees.    The                                                               
hospital  serves  an  area with  a  population  of  approximately                                                               
35,000.  The Central Peninsula  General Hospital has net revenues                                                               
of  about  $50  million  of   which  about  $5  million  goes  to                                                               
uncompensated  care,  charity,  and  bad debts.    Mr.  Gilbreath                                                               
opined  that HB  287 could  have a  huge negative  impact on  the                                                               
Central  Peninsula General  Hospital  as well  as  others in  the                                                               
MR.  GILBREATH related  that he  fully  supports competition  and                                                               
free enterprise,  but he  highlighted that health  care is  a bit                                                               
different.   He  opined  that there  has to  be  a level  playing                                                               
field, which  this legislation doesn't  create because  it allows                                                               
surgery centers,  imaging centers,  and other niche  providers to                                                               
enter a community  with a hospital.  The  legislation would allow                                                               
cherry picking  and uninsured and underinsured  patients wouldn't                                                               
receive  the care  needed  from the  [niche  providers] and  thus                                                               
would fall to  the responsibility of the community  hospital.  As                                                               
is  the  case  in  many   hospitals,  Central  Peninsula  General                                                               
Hospital loses  money in  the emergency  room, obstetrics,  and a                                                               
residential treatment center.   The services at  the hospital are                                                               
provided on a  24-hour basis every day and all  patients are seen                                                               
regardless of the  ability to pay.   If HB 287 were  to pass, the                                                               
margins the hospital  requires to stay open could  erode and make                                                               
it difficult  to remain open.   Mr. Gilbreath opined that  if the                                                               
aforementioned  niche providers  enter the  community, they  will                                                               
skim  off the  paying patients  the  hospital needs  to keep  its                                                               
doors  open.   In conclusion,  Mr. Gilbreath  related his  strong                                                               
opposition to HB 287.                                                                                                           
3:55:35 PM                                                                                                                    
CHAIR WILSON  acknowledged the  presence of  a group  of students                                                               
observing the proceedings.                                                                                                      
3:56:29 PM                                                                                                                    
DENNIS  MURRAY, Chair,  Alaska State  Hospital  and Nursing  Home                                                               
Association  Legislative Committee,  began by  noting that  he is                                                               
the  administrator  of  the   Heritage  Place  Nursing  Facility,                                                               
although he  isn't speaking in  that capacity.   He then  said he                                                               
would  like to  echo  the  remarks of  Mr.  Gilbreath.   He  then                                                               
highlighted  that community  hospitals are  available 24  hours a                                                               
day,  7 days  a week,  365 days  a year.   The  aforementioned is                                                               
jeopardized when  health care is  segmented.  With regard  to the                                                               
comments about monopolies,  Mr. Murray said that  the CON doesn't                                                               
create such  but rather  creates a process  by which  a community                                                               
has input, through DHSS, upon  which the department can determine                                                               
whether there  is sufficient need  for a  competitive environment                                                               
or whether it would jeopardize  the overall health care available                                                               
in a particular community.                                                                                                      
3:59:02 PM                                                                                                                    
JEREMY  HAYES,   Representative,  Advanced  Medical   Centers  of                                                               
Alaska,  testified  in  support  of   HB  287  and  provided  the                                                               
following testimony:                                                                                                            
     I  support repealing  our certificate  of need  laws as                                                                    
     Alaska  continues to  see some  of  the most  expensive                                                                    
     health care in the country  ....  In 2006, depending on                                                                    
     which study  you cite,  Alaska is  either the  first or                                                                    
     second most regulated health care  state in the country                                                                    
     and  has costs  that  are 40  percent  higher than  the                                                                    
     national   average.     The  stated   purpose  of   the                                                                    
     certificate of need program is  to foster a health care                                                                    
     system   that  controls   costs   and  meets   changing                                                                    
     conditions.    Alaska's   alarming  health  care  costs                                                                    
     proves CON has  failed in controlling costs.   And in a                                                                    
     state experiencing  growth and demographic  change, the                                                                    
     CON  law  prevents  providers   from  adapting  to  the                                                                    
     changing needs of the community effectively.                                                                               
     In  states with  no or  less restrictive  CON programs,                                                                    
     hospitals  are  increasingly  facing  competition  from                                                                    
     ambulatory surgery centers,  which offer minor surgical                                                                    
     procedures  that  do  not require  an  overnight  stay.                                                                    
     Hence, the  24/7 issue before.   These facilities offer                                                                    
     the   same  surgery   as  the   hospital,   but  at   a                                                                    
     significantly lower price.   It is one of  the ways the                                                                    
     market is  adjusting to make health  care delivery more                                                                    
     efficient   and   cost   effective  for   the   public.                                                                    
     Established hospitals in  heavily regulated states like                                                                    
     Alaska,  however,  use  the CON  law  to  prevent  such                                                                    
     facilities from opening in their  city.  Thus, blocking                                                                    
     access to  health care  choice and  lower costs  to the                                                                    
     consumer.  To  give you an idea of  the cost difference                                                                    
     between  ambulatory surgery  centers  and hospitals,  a                                                                    
     2005  Medicare study  found that  hospitals' outpatient                                                                    
     claims  totaled $4.4  billion where  the total  for the                                                                    
     same claims in  a surgery center would  cost about $2.8                                                                    
     billion,  a  difference of  nearly  $1.6  billion.   In                                                                    
     other  words, taking  only  outpatient procedures  into                                                                    
     account:   if  procedures  in a  hospital setting  were                                                                    
     instead performed  in a surgery center,  Medicare would                                                                    
     have  saved $1.6  billion in  2005.   Of the  nearly $5                                                                    
     million  [in] claims  studied  in  2005, they  averaged                                                                    
     $891 in the hospital versus  $571 in a surgery center -                                                                    
     a difference  of $320 less  per claim.  A  separate but                                                                    
     similar study  published by the Journal  of Health Care                                                                    
     Compliance in  2005 found that payments  for procedures                                                                    
     in  hospital   outpatient  department   and  ambulatory                                                                    
     surgery  centers indicate  that for  the same  surgical                                                                    
     services,  the  hospital  is  reimbursed  significantly                                                                    
     more  resulting   in  an  estimated  $1.1   billion  in                                                                    
     additional  Medicare  payments.    After  payment  rate                                                                    
     comparisons of  424 different  procedure codes  in '05,                                                                    
     it  was  found  that  66   percent  for  279  of  those                                                                    
     procedures reimbursed more in  the hospital compared to                                                                    
     a surgery center.   For these 279  procedure codes, the                                                                    
     median difference was $282.                                                                                                
MR. HAYES continued:                                                                                                            
     Competition  brings  lower  prices,  more  convenience,                                                                    
     better  quality, and  new  technology and  innovations.                                                                    
     Hospitals   with  CON   protection  have   a  franchise                                                                    
     monopoly,  which  provides  no   incentive  for  it  to                                                                    
     exercise cost  control or better services.   The owners                                                                    
     of  these  existing   facilities  can  charge  inflated                                                                    
     prices  for their  services,  which  continue to  raise                                                                    
     costs by  restricting the entry of  more cost effective                                                                    
     providers  into the  market.   Multi-state  econometric                                                                    
     studies  demonstrated no  significant  lower cost  with                                                                    
     CON  and   the  repeal   of  CON  had   no  significant                                                                    
     subsequent  effect   on  hospital  costs.     In  fact,                                                                    
     hospitals  in states  with  CON  regulation have  costs                                                                    
     that are  approximately 20.6  percent higher  than non-                                                                    
     CON  states.   Hospitals  in  more competitive  markets                                                                    
     have  demonstrated to  have average  costs below  those                                                                    
     who  have  competitive  markets.   Healthy  competition                                                                    
     appears  to  work  in  giving  economic  power  to  the                                                                    
     patients and  payers by creating choices  for consumers                                                                    
     and raising quality standards  as providers compete for                                                                    
     patient loyalty.                                                                                                           
     Alaska's certificate  of need department  regulates the                                                                    
     most services equipment and facilities  of any state in                                                                    
     the  country.   Interestingly, state  health care  data                                                                    
     from the  Kaiser [Family] Foundation also  shows Alaska                                                                    
     to be the most expensive  in the country for outpatient                                                                    
     care.  So,  I don't think it's  coincidence that Alaska                                                                    
     is  the most  regulated CON  state in  the country  and                                                                    
     just  happens to  also  be the  most  expensive in  the                                                                    
     country.   Additionally, our number one  ranking cannot                                                                    
     simply  be attributed  to the  high cost  of living  as                                                                    
     Hawaii ranks 28 in hospital  care expense but is number                                                                    
     four in cost  of living.  Alaska's not even  in the top                                                                    
     10 for cost  of living, but remains  the most expensive                                                                    
     health  care services  in the  country.   In  contrast,                                                                    
     Alaska spent only 8.3 of  its general fund on Medicaid,                                                                    
     with  only  five states  in  the  Union spending  less.                                                                    
     Therefore, high health  care costs are not  a result of                                                                    
     high indigent or charity care  spending by the state as                                                                    
     the  hospitals  have  argued.   Although  the  cost  of                                                                    
     services remains high  in the state of  Alaska, the CON                                                                    
     department  has  created  a substantial  impediment  to                                                                    
     healthy  competition.   And,  in  effect, represents  a                                                                    
     state  government  supported department  of  anti-trade                                                                    
     and hospital  monopolies that keeps health  care prices                                                                    
     high.  These high health  care costs support the thesis                                                                    
     that Alaska's  CON department contributes  to increased                                                                    
     patient expenses.                                                                                                          
MR. HAYES continued:                                                                                                            
     The CON's  chief goal is  to reduce health  care costs,                                                                    
     something the numbers  tell us it has  been horrific in                                                                    
     accomplishing.   There  has been  no evidence  that CON                                                                    
     regulations lower  the cost of  health care  in Alaska,                                                                    
     but  significant data  from respected  agencies showing                                                                    
     we're  the most  expensive  in the  country.   A  fact,                                                                    
     which  alone should  be sufficient  reason to  repeal a                                                                    
     law  specifically  designed  to control  costs.    This                                                                    
     bill, if passed, would  have tremendous economic effect                                                                    
     on the residents  of Alaska in the form  of huge health                                                                    
     care savings.  We feel  with time Alaskans are given an                                                                    
     answer to their quest for affordable medical care.                                                                         
     In  conclusion, I  just would  like to  leave you  guys                                                                    
     with some additional statistics  from the 2005 Henry J.                                                                    
     Kaiser  [Family] Foundation  study on  Alaska's current                                                                    
     health care  environment.  Number  one, in  2003 Alaska                                                                    
     ranks number  one in the  U.S. in average  expenses per                                                                    
     inpatient day  at $1,952.  In  comparison, Hawaii ranks                                                                    
     28.    In 2004  Alaska  ranks  45th in  total  Medicaid                                                                    
     spending, confirming  that the  majority of  the states                                                                    
     in this  country spend more indigent  and charity care.                                                                    
     In 2003 Alaska  spent 8.3 percent of  the state general                                                                    
     fund  expenditures on  Medicaid.   Only five  states in                                                                    
     the  U.S. spent  less.    Currently, Alaska's  hospital                                                                    
     care is the  highest as compared with  any other state,                                                                    
     with the exception of the District of Columbia.                                                                            
4:06:09 PM                                                                                                                    
MR. HAYES,  in response  to comments  that service  centers would                                                               
not be  open 24 hours 7  days a week, pointed  out that emergency                                                               
rooms  care  for  patients requiring  acute  care  and  emergency                                                               
services.   However, surgery centers perform  outpatient services                                                               
and perform procedures that aren't  life and death procedures and                                                               
thus there wouldn't be a need for  a surgery center to be open 24                                                               
hours a day.   There is a difference between  emergency rooms and                                                               
ambulatory surgery centers, he said.   With regard to Mr. Powers'                                                               
testimony that  only one pain  management physician  is necessary                                                               
in the Fairbanks  area, Mr. Hayes pointed out  that the Fairbanks                                                               
area  already  supports five  pain  management  physicians.   The                                                               
hospital doesn't  support more than  one.  Furthermore,  the four                                                               
pain management  physicians not  allowed to  see patients  at the                                                               
hospital  in Fairbanks  are fellowship  trained and  double board                                                               
certified, which is the case for the hospital pain staff.                                                                       
4:07:43 PM                                                                                                                    
REPRESENTATIVE  GATTO  agreed  that  eliminating  the  CON  would                                                               
reduce prices, but he questioned  whether the state wants to have                                                               
a few  years of cheaper costs  and lose the hospital.   He opined                                                               
that  of most  concern are  hospitals such  as Bartlett  Regional                                                               
Hospital, which  is located in  an area  where there is  no other                                                               
alternative for that kind of care.                                                                                              
MR. HAYES  pointed out  that the physicians  who want  to compete                                                               
with  hospitals  for some  services  have  a vested  interest  in                                                               
keeping  the hospital  running because  most physicians  who work                                                               
outside of  the hospital also  work for the hospital  and provide                                                               
inpatient  care  at  the  hospital.   He  opined  that  Fairbanks                                                               
Memorial Hospital, with its $100  million in the bank, can afford                                                               
to have  some healthy competition.   Perhaps such  would increase                                                               
the efficiency of  services and increase the  level of technology                                                               
and innovation.                                                                                                                 
4:10:55 PM                                                                                                                    
CHARLIE  FRANZ,  CEO,  South  Peninsula  Hospital,  recalled  the                                                               
sponsor saying that free market  forces should be allowed to work                                                               
in health care  and repeal the CON law.   Mr. Franz disagreed and                                                               
pointed out  that health  care is  not in a  free market  as it's                                                               
highly regulated  and very different  than other businesses.   He                                                               
asked the  committee to think  of another business  or profession                                                               
in which someone  else decides how much one will  be paid for the                                                               
service provided.   With regard  to the testimony  that specialty                                                               
facilities can provide  services at a lower  cost than hospitals,                                                               
Mr.  Franz  agreed.    However, he  pointed  out  that  specialty                                                               
facilities  target  the  most   lucrative  services  provided  by                                                               
hospitals, such  as imaging or  surgery.  The  aforementioned are                                                               
major profit  centers, which  help hospitals  offset the  cost of                                                               
providing unprofitable  services 24 hours  a day 365 days  a year                                                               
to anyone.   "Community hospitals serve  the community, specialty                                                               
facilities are businesses,"  he said.  Last year the  CON law was                                                               
changed  by  adding clarity  and  new  requirements in  order  to                                                               
qualify to  add a service,  build a  new facility, or  make major                                                               
changes.   Those new  rules should  be allowed  to operate  for a                                                               
period of time in order to  determine whether it creates a better                                                               
situation.   Nothing  in the  current CON  statute or  regulation                                                               
prevents   anyone  from   submitting   a   CON  application   and                                                               
demonstrating the  need for  services or  the ability  to provide                                                               
those services in  a more cost-effective manner.   Therefore, Mr.                                                               
Franz asked  the committee to do  what is right and  maintain the                                                               
current CON law.                                                                                                                
4:14:58 PM                                                                                                                    
JOHN  BRINGHURST,  CEO,  Petersburg   Medical  Center,  began  by                                                               
relating his opposition  to HB 287.  He noted  that his testimony                                                               
is based  primarily on  his experience in  joint ventures  with a                                                               
physician  center in  another area.   He  expressed concern  that                                                               
specialty facilities hurt existing  providers who provide 24-hour                                                               
service in a community.   Furthermore, Mr. Bringhurst related his                                                               
belief  that the  specialty facilities  may increase  the overall                                                               
cost of health care.  Also,  there is a disproportionate share of                                                               
uninsured   and  underinsured   patients  who   are  treated   by                                                               
[specialty]  facilities.     The  aforementioned   increases  the                                                               
average  cost   of  care  for  existing   providers,  he  opined.                                                               
Moreover,   [specialty]  facilities   take  patients   with  less                                                               
critical  needs,   and  thus  leave  fewer   cases  for  existing                                                               
providers  as well  as cases  with a  higher average  cost.   Mr.                                                               
Bringhurst then related his experience  that surgery centers have                                                               
increased  the number  of procedures  performed  in a  community.                                                               
Although  there  is  evidence  that  rates can  be  lower  in  an                                                               
outpatient surgery center, there's  also evidence that the number                                                               
of  cases treated  increases.   He recalled  that within  a short                                                               
period  of time  the surgery  center with  which he  was involved                                                               
began to  see 40  patients a  week.   However, the  hospital only                                                               
suffered 15-20  cases per week of  a loss and thus  he questioned                                                               
from where  the other  20-25 cases came.   Mr.  Bringhurst opined                                                               
that when a  physician has a larger financial  interest at stake,                                                               
sometimes the  physician's objectivity in referring  patients can                                                               
be  challenged.     In  such   situations,  the   patients  lose.                                                               
Therefore, Mr. Bringhurst urged defeat of HB 287.                                                                               
4:18:03 PM                                                                                                                    
ELIZABETH RIPLEY, Director, Marketing  and Public Relations, Mat-                                                               
Su Regional  Medical Center,  stated opposition to  HB 287.   Ms.                                                               
Ripley opined  that the  current CON  isn't preventing  growth in                                                               
Alaska's health  care infrastructure  as Mat-Su  Regional Medical                                                               
Center  is the  newest and  most modern  medical facility  in the                                                               
state.     Ms.   Ripley   acknowledged  the   benefits  of   fair                                                               
competition,  but highlighted  that [hospitals]  are legally  and                                                               
ethically  bound  to  serve  all   patients,  regardless  of  the                                                               
patient's  ability  to pay.    Ms.  Ripley  said that  there  are                                                               
documented decreases related to  free-standing imaging centers in                                                               
the  Mat-Su area.   She  clarified that  Mat-Su Regional  Medical                                                               
Center  is a  private  business that  doesn't receive  assistance                                                               
from  the Mat-Su  Borough government,  which  has limited  health                                                               
care powers as  a second class borough.  She  noted that the Mat-                                                               
Su Regional  Medical Center directly competes  with the Anchorage                                                               
providers.   Ms.  Ripley  concluded by  reiterating  the need  to                                                               
allow the  CON modifications  passed last year  a chance  to work                                                               
for evaluation.                                                                                                                 
4:21:47 PM                                                                                                                    
REPRESENTATIVE  GATTO,  recalling that  the  cost  of the  Mat-Su                                                               
Regional Medical  Center was $101  million, asked if it  was more                                                               
expensive to  build the hospital  with the  CON in place  than it                                                               
would've been had the CON been repealed.                                                                                        
MS.  RIPLEY  said  that  she  didn't believe  there  would  be  a                                                               
difference, although  she acknowledged that  there was a  cost to                                                               
move through the CON process.                                                                                                   
4:22:44 PM                                                                                                                    
REPRESENTATIVE GATTO noted that an  imaging center is being built                                                               
close to  Mat-Su Regional Medical  Center.  He surmised  that the                                                               
imaging center  will cause  the hospital to  lower its  rates for                                                               
MS. RIPLEY began  by commenting that this new  hospital will help                                                               
all  the hospitals  in the  area perform  at a  higher level  and                                                               
provide better care.  She related  her belief that there are loop                                                               
holes in  the current CON  law, and  thus there is  still concern                                                               
that there isn't  a level playing field.  In  further response to                                                               
Representative  Gatto, the  imaging center,  to the  Ms. Ripley's                                                               
understanding,  didn't go  through the  CON process.   Therefore,                                                               
Mat-Su  Regional  Medical  Center  has petitioned  the  state  to                                                               
investigate the matter and determine  whether a CON is necessary.                                                               
This determination should be forthcoming.   This is an example of                                                               
how hospitals that are very familiar  with the CON laws find ways                                                               
in which to capitalize on the lucrative areas of health care.                                                                   
REPRESENTATIVE GATTO inquired  as to what happens  if the imaging                                                               
facility, currently being constructed, doesn't obtain a CON.                                                                    
MS. RIPLEY  answered that  construction would  have to  cease and                                                               
4:25:40 PM                                                                                                                    
PAUL   FUHS,   Lobbyist,   Alaskans  for   Medical   Choice   and                                                               
Competition,  stated  support  for  HB  287.    He  informed  the                                                               
committee  that he  is also  the  sponsor of  an initiative  that                                                               
would  [eliminate  the  CON].    He  noted  that  originally  the                                                               
initiative  was  filed  as  HB 287  because  hospitals  in  large                                                               
communities  can afford  competition.   He acknowledged  that the                                                               
smaller hospitals  [in smaller  areas] can't  afford competition,                                                               
which is why HB 287  only applies to communities with populations                                                               
over 25,000 and  facilities that aren't designated  as a critical                                                               
access hospital.   Mr. Fuhs  surmised from much of  the testimony                                                               
that  the hospitals  believe that  they  are the  only ones  that                                                               
should be  able to supply  services and  that the CON  is holding                                                               
costs down.  However, if that's  the case, why does Alaska have a                                                               
crisis in every aspect of health care, he asked.                                                                                
MR. FUHS then referred the committee  to what he considered to be                                                               
the best source of data:   the U.S. Department of Justice and the                                                               
Anti-Trust Division of  the Federal Trade Commission  (FTC).  The                                                               
FTC published  a study  of CON  last July  that showed  in states                                                               
without CON  health costs are 20  percent lower.  With  regard to                                                               
the General  Motors Daimler  Benz (ph)  Study that  was mentioned                                                               
earlier,  the  Michigan  Department   of  Health  has  completely                                                               
debunked  that study.    Mr.  Fuhs then  related  that  he was  a                                                               
consumer representative  on the first state  health board meeting                                                               
[on CON]  back in the 1970s.   In those days,  a statewide system                                                               
of  reporting financial  and other  operating data  as well  as a                                                               
current health plan  for the state was required.   At this point,                                                               
the  department is  deficient in  the aforementioned  areas.   He                                                               
indicated that  the aforementioned is  partially due to  the fact                                                               
that there is only one employee  who deals with CONs, which is in                                                               
stark contrast  to the 25  employees who performed the  work when                                                               
it was  "a real  program."   The data is  not being  collected to                                                               
provide  the  information.   He  then  drew attention  to  charts                                                               
provided  to  the  committee that  relate  nationwide  data  that                                                               
specify health care price increases  across the country and which                                                               
sectors are responsible.  Hospitals,  the most protected by CONS,                                                               
are  53 percent  of  the  cost increases  in  the  country.   The                                                               
aforementioned  data isn't  available for  Alaska.   Moreover, he                                                               
related  that   when  he  contacted  the   Division  of  Workers'                                                               
Compensation  within   the  Department   of  Labor   &  Workforce                                                               
Development (DLWD)  to obtain  some of the  data it  collects, he                                                               
was  told   that  it  was   proprietary  information   since  the                                                               
department  contracts   with  a  company  to   gather  the  data.                                                               
Therefore, he questioned what's  going on with the aforementioned                                                               
since workers'  compensation is  a public  program.   Without any                                                               
data  or  oversight, decisions  are  being  made on  a  political                                                               
basis, he  opined.  The aforementioned  isn't a good way  to make                                                               
decisions for health care.                                                                                                      
MR.  FUHS  agreed that  the  state  does  allow the  creation  of                                                               
monopolies such as  with phone service.  However,  he pointed out                                                               
that with such monopolies there  are regulated rates, which isn't                                                               
the case with  hospitals.  Mr. Fuhs recalled hearings  on the CON                                                               
regulations last year  when he discovered that cost  isn't one of                                                               
the criteria  for granting a  CON.  Furthermore, quality  isn't a                                                               
criteria  for   judging  a  CON   application.     Therefore,  he                                                               
questioned  upon what  the  CON  bases its  decisions.   He  then                                                               
suggested  that hospitals  should be  able to  illustrate through                                                               
financial data that they are losing  money [without the CON].  He                                                               
said  that  he  has  a financial  report  on  Fairbanks  Memorial                                                               
Hospital and  Providence Hospital, which presents  that Fairbanks                                                               
Memorial  Hospital  made $11  million  in  profits and  has  $214                                                               
million in  the bank while  Providence Hospital, as  a nonprofit,                                                               
made $23 million in profit last year.                                                                                           
MR.  FUHS  then  turned  the committee's  attention  to  the  $28                                                               
million fiscal note  on HB 287, which the  sponsor has challenged                                                               
the department  to justify.   However, the department has  yet to                                                               
do  so.   He  drew  attention to  information  that related  that                                                               
independent  ambulatory surgical  centers cost  the patient  less                                                               
than a  hospital.  If the  committee does take action  on HB 287,                                                               
Mr. Fuhs  urged the committee  to address the fiscal  note, which                                                               
he said is too high.                                                                                                            
4:35:45 PM                                                                                                                    
REPRESENTATIVE GATTO pointed  out that the $214  million that Mr.                                                               
Fuhs said Fairbanks  Memorial Hospital has in the  bank refers to                                                               
the hospital's  net assets  or fund  balances at  the end  of the                                                               
year.   Therefore, the $214 million  seems to refer to  the total                                                               
sum of Fairbanks Memorial Hospital's assets.                                                                                    
MR. FUHS replied no, and  related his understanding that the $214                                                               
million is  the money,  stocks, and  bonds of  Fairbanks Memorial                                                               
Hospital not the hospital's physical assets.                                                                                    
CHAIR  WILSON  related  her  understanding  that  the  [Fairbanks                                                               
Memorial Hospital]  foundation is separate from  the hospital and                                                               
it  raises funds.    Therefore, she  opined  that the  foundation                                                               
funds couldn't be included in the hospital's profits.                                                                           
MR.  FUHS  specified  that  he   has  seen  tax  years  in  which                                                               
[Fairbanks  Memorial  Hospital  has   earned  a  profit]  of  $20                                                               
million, which is then placed  into the foundation.  He disagreed                                                               
with  the notion  that the  foundation is  raising funds  for the                                                               
hospital  because   when  the  hospital  added   a  $120  million                                                               
addition,  the  hospital  obtained   financing  from  the  Alaska                                                               
Industrial  Development   and  Export  Authority  (AIDEA).     In                                                               
response to Representative Gatto,  he suggested that the hospital                                                               
probably owes  most of that  recent funding  from AIDEA.   If the                                                               
hospital is  taking funds  from what it  charges patients  to pay                                                               
the  loan  and  maintains  $11 million  in  the  foundation,  the                                                               
foundation isn't being used rather it's building the foundation.                                                                
4:39:45 PM                                                                                                                    
REPRESENTATIVE GATTO asked  if the amount the  hospital is paying                                                               
back would  be a deduction and  the hospital would still  have an                                                               
$11 million profit.                                                                                                             
MR. FUHS  answered that it's  after all payments have  been made.                                                               
He offered  to provide the  committee with the  financial records                                                               
for a representative year.                                                                                                      
4:41:23 PM                                                                                                                    
MR.  FUHS,  in  response   to  Representative  Gardner  regarding                                                               
whether  there are  other  stakeholders  than medical  personnel,                                                               
specified that  Alaskans For Medical  Choice and  Competition are                                                               
behind this  effort and the  organization consists  of consumers,                                                               
small businesses, individuals, nurses, and physicians.                                                                          
4:41:54 PM                                                                                                                    
REPRESENTATIVE GATTO  asked if  there is  an organization  on the                                                               
other side of  this issue as he expressed interest  in the belief                                                               
of consumers.                                                                                                                   
MR. FUHS said  that's why he tried to provide  the committee with                                                               
data regarding the impact to the consumer.                                                                                      
4:43:03 PM                                                                                                                    
LAURIE HERMAN, Regional Director, Government Affairs, Providence                                                                
Health & Services - Alaska, provided the following testimony                                                                    
[original punctuation provided]:                                                                                                
     Providence  does   not  believe  that  this   piece  of                                                                    
     legislation should  be enacted into  law.  In  2004 the                                                                    
     legislature  made  significant  changes  to  state  law                                                                    
     governing  this program.   And  during the  legislative                                                                    
     debate there  was a message  heard loud and  clear that                                                                    
     the legislature  felt that the  regulations surrounding                                                                    
     CON needed  review and revision where  appropriate.  As                                                                    
     a  result,  the  department  embarked  upon  a  lengthy                                                                    
     public process  and in fact, updated  those regulations                                                                    
     and they  were completed in  December of last  year and                                                                    
     they've  been in  effect since  January  of this  year.                                                                    
     And  we  believe  that  we   need  to  give  these  new                                                                    
     regulations a chance to work.   Let's see if things are                                                                    
     better as  a result of  this latest effort.   As you've                                                                    
     heard  today several  times, health  care does  not fit                                                                    
     the  free  market  enterprise mold.    Gratefully,  our                                                                    
     society stipulates  that no one will  be denied medical                                                                    
     care  due to  the lack  of financial  resources.   Only                                                                    
     certain  facilities, primarily  hospitals, are  subject                                                                    
     to a  federal mandate  that all  patients will  be seen                                                                    
     regardless  of  the  ability  to pay.    As  a  result,                                                                    
     hospitals  have essentially  become  insurance for  the                                                                    
     uninsured.  Care  to the poor and vulnerable  is a very                                                                    
     important  piece  of  the  Providence  mission  and  we                                                                    
     provide these services willingly  every day.  Last year                                                                    
     alone,  we provided  over $30  million in  charity care                                                                    
     and an  additional $40 million  was written off  in bad                                                                    
     debt.    Important revenue  streams  that  are used  to                                                                    
     underwrite  unprofitable  services like  our  emergency                                                                    
     departments -- the place where  the poor and vulnerable                                                                    
     go for  care --  are provided  by high  margin services                                                                    
     that  are  attractive for  those  who  do not  use  the                                                                    
     profits  to ensure  the survival  for critical  care in                                                                    
     our  communities.   They  can  easily  under price  and                                                                    
     still  collect windfall  profits, given  that they  are                                                                    
     not mandated to see all  patients nor do they provide a                                                                    
     full spectrum of care 24 hours  a day, 365 days a year.                                                                    
     What  does their  delivery model  do for  the uninsured                                                                    
     mother who needs care?                                                                                                     
     In  Alaska  we  have   a  strong  system  of  nonprofit                                                                    
     hospitals that  offset their losses in  charitable care                                                                    
     and   bad  debt   through   profitable  services   like                                                                    
     ambulatory  surgery   and  imaging.    Without   a  CON                                                                    
     program, more niche providers  will likely open service                                                                    
     boutiques  to  provide  only these  specific  services.                                                                    
     When niche providers skim  the profitable business from                                                                    
     local community  hospitals, hospitals can't  offset the                                                                    
     expense  of charitable  care,  bad  debt, or  emergency                                                                    
     room  cases.   Remember,  this is  mandated care  we're                                                                    
     talking about  -- care for  those who lack  the ability                                                                    
     to pay.   If hospitals fail and  emergency rooms close,                                                                    
     this is the  population that will have  nowhere to turn                                                                    
     for medical  care.   Certificate of  need is  not about                                                                    
     government  control   of  health  care,  it   is  about                                                                    
     providing a  process for communities  to have a  say in                                                                    
     the evolution  of the health care  systems that they've                                                                    
     financed  and that  are an  essential component  of the                                                                    
     infrastructure in their community.   Whether in a large                                                                    
     community  or  small,  hospitals must  have  profitable                                                                    
     service  lines in  order  to offer  the  full range  of                                                                    
     services  a community  needs.   If niche  providers are                                                                    
     allowed  to come  into  an  area without  demonstrating                                                                    
     that there's a  need and primarily serve  the high pay,                                                                    
     low  risk population,  community-based hospitals  could                                                                    
     be at risk  of failing.  Those who cannot  pay for care                                                                    
     are  then  left  without  treatment options.    I  urge                                                                    
     committee members not to move this bill forward.                                                                           
4:48:13 PM                                                                                                                    
MS. HERMAN then  acknowledged that in 2005 Providence  did have a                                                               
significant amount  of net  income and every  penny stays  in the                                                               
state.    In fact,  over  2005-2007  Providence is  putting  $100                                                               
million  into medical  facilities  in  Anchorage.   Additionally,                                                               
Providence spends about $30 million  a year on infrastructure and                                                               
information technology upgrades.                                                                                                
REPRESENTATIVE  GATTO  turned  to   the  facility  Providence  is                                                               
building in Palmer that doesn't have a CON.                                                                                     
MS.  HERMAN specified  that a  medical office  building is  being                                                               
built in  Palmer, which will  be leased to a  physician practice.                                                               
She said that medical office buildings don't require a CON.                                                                     
REPRESENTATIVE GATTO asked  if the Palmer facility  is an imaging                                                               
MS.  HERMAN  reiterated that  it's  a  physician practice.    She                                                               
related her understanding that one  of the physicians involved is                                                               
a  radiologist.   She  offered  to have  the  physicians in  that                                                               
practice  talk with  the committee  regarding the  nature of  the                                                               
4:51:10 PM                                                                                                                    
ROD  BETIT, President,  Alaska State  Hospital  and Nursing  Home                                                               
Association  (ASHNHA), began  by clarifying  that testimony  that                                                               
all physicians in  Juneau oppose [eliminating] the  CON isn't the                                                               
case.   Regarding transparency  of medical  data, Mr.  Betit said                                                               
that ASHNHA would like to have  better medical data analysis.  In                                                               
fact, Mr.  Betit noted that  he sits on  a task force  created by                                                               
the legislature to review the  following:  workers' compensation,                                                               
why costs  are higher, and how  much of the costs  are related to                                                               
medical  care versus  the kinds  of  injuries and  rehabilitation                                                               
utilized.   For a year,  such information has been  requested and                                                               
it's  still not  available.   The aforementioned  is part  of the                                                               
reason Senator Seekins requested an  extension of the task force.                                                               
Therefore, it's  premature, he opined,  to draw  conclusions with                                                               
regard  to why  costs are  increasing in  areas such  as workers'                                                               
MR. BETIT  then recalled  testimony that  Medicaid only  makes up                                                               
8.3  percent of  the general  fund  and the  state doesn't  spend                                                               
enough.  Drawing on his  prior experience as Medicaid director in                                                               
Alaska, all  states spend far too  much on Medicaid.   Alaska has                                                               
had an almost 60 percent  federal match rate whereas other states                                                               
have  had 50  percent.    Furthermore, a  large  number of  those                                                               
eligible  for Medicaid  are Alaska  Natives and  those who  use a                                                               
Indian health  service facility or tribal  program are reimbursed                                                               
100  percent by  the federal  government.   Therefore, he  opined                                                               
that it's  not a good indicator  as to whether too  little or too                                                               
much is being spent on the Medicaid population.                                                                                 
MR. BETIT,  speaking to the  document he provided  the committee,                                                               
said there  are seven key themes  regarding whether the CON  is a                                                               
good or  bad program.  He  specified the following:   health care                                                               
isn't a  conventional market; CON  is an important  health policy                                                               
tool  that balances  community need  with growth;  the lack  of a                                                               
federal mandate for  CON doesn't mean such  laws are unnecessary.                                                               
In fact,  when the federal government  left the CON in  the hands                                                               
of the  state government,  it was a  political decision  based on                                                               
the   belief  that   states  should   marshal  the   health  care                                                               
environment in  the state.   Therefore,  he didn't  interpret the                                                               
absence  of  the federal  government  as  an indication  that  it                                                               
doesn't support CON.                                                                                                            
MR. BETIT,  regarding whether CON  is preventing  growth, related                                                               
that  since  the  CON  regulations were  finalized  and  the  CON                                                               
application  process  reopened,  there   has  been  a  flurry  of                                                               
activity.   Although ASHNHA  members aren't  particularly excited                                                               
about  some  of  the  decisions, it's  an  environment  in  which                                                               
rational  and fair  decisions are  being  applied.   Furthermore,                                                               
there is  an appeal process  for those  who don't believe  a fair                                                               
process  occurred.    He  then  provided  the  committee  with  a                                                               
sampling of  applications that have  come before  the department.                                                               
The process attempts  to balance the needs in  the community with                                                               
the projects that  come forward, he said.   Regarding whether CON                                                               
is a  good health tool or  not, Mr. Betit opined  that the health                                                               
care system in a geographic area  can be built up and not provide                                                               
what  is truly  needed,  create  over supply,  and  lead to  some                                                               
critical damage  to a health care  system.  He recalled  his time                                                               
in Utah as  a state health director when Utah  had lifted the CON                                                               
in  some   areas.    Immediately  following,   eight  psychiatric                                                               
facilities were built,  all of which disappeared  over the course                                                               
of the  next three years.   During this time, the  long-term care                                                               
system in  Utah had  25 percent  vacancy rate and  20 out  of 100                                                               
facilities  were  in  some  kind  of  financial  distress.    The                                                               
aforementioned  led  to an  emergency  rule  forbidding any  more                                                               
building  of Medicaid  beds  in Utah  without  approval from  the                                                               
department.   The aforementioned  moratorium remains today.   Mr.                                                               
Betit opined that  there is ample evidence that  if health policy                                                               
and  planning isn't  approached  in a  very deliberative  manner,                                                               
very significant unintended consequences  can result.  Therefore,                                                               
if HB  287 moves forward he  suggested that it will  have results                                                               
similar to those in Utah.                                                                                                       
5:02:36 PM                                                                                                                    
REPRESENTATIVE  KOHRING  interpreted   empty  facilities  as  the                                                               
result of  a market  process caused  by facilities  not providing                                                               
services the  public wants.   Deciding whether  facilities should                                                               
be built or not isn't the government's role, he opined.                                                                         
MR. BETIT noted  his strong disagreement.  He  explained that the                                                               
reason for the  vacancies didn't have to do  with whether someone                                                               
wanted to be  in a nursing home.  He  reminded the committee that                                                               
most  of the  nursing home  business is  funded by  Medicaid with                                                               
only  about  25 percent  of  the  nursing home  population  being                                                               
privately funded  because people can't  afford it and  don't have                                                               
insurance  for it.   Ultimately,  people lose  enough assets  and                                                               
income to qualify for Medicaid.   He explained the differences in                                                               
this market.   He recalled that when Utah [eliminated  its CON in                                                               
certain  areas] there  was a  300 percent  increase in  confirmed                                                               
patient harm  and complaints during  the period of  escalation of                                                               
vacant beds,  the state was  paying the  same amount per  day for                                                               
nursing home  beds that it paid  before the new beds  were built,                                                               
and operators  were forced  to fund  overhead and  basic expenses                                                               
and  thus didn't  meet  the  need of  patients.   Therefore,  the                                                               
moratorium in Utah  changed that.  However,  that change occurred                                                               
because the state  stepped in since the market  doesn't have such                                                               
a correcting ability.                                                                                                           
5:06:10 PM                                                                                                                    
CHAIR WILSON  pointed out  that the testimony  on this  issue has                                                               
brought  forth  much   contradictory  information  that  requires                                                               
further inquiry.   Therefore, she announced that HB  287 would be                                                               
5:09:53 PM                                                                                                                    
REPRESENTATIVE  CISSNA  noted  that  she   made  a  copy  of  the                                                               
Institute  of   Social  and   Economic  Research   (ISER)  report                                                               
regarding the  cost of  health care  for the  committee's review.                                                               
The report  essentially says, "But  for now we want  to emphasize                                                               
that  the answer  to what  is driving  health care  costs is  not                                                               
simple   and  finding   solutions   won't   be  simple   either."                                                               
Additionally, Common  Wealth North's  study provided a  number of                                                               
recommendations,  of  which  none touched  CON.    Representative                                                               
Cissna stressed  her belief that this  is a matter for  which the                                                               
state is responsible.                                                                                                           
5:11:32 PM                                                                                                                    
CHAIR WILSON  announced that although the  [House] isn't [placing                                                               
any  House  Bills on  the  floor  calendar], the  committee  will                                                               
continue to  hear legislation that  address health care  costs in                                                               
the state.                                                                                                                      

Document Name Date/Time Subjects