Legislature(1999 - 2000)

03/16/2000 08:25 AM House STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
HB 297-CERTIFICATE OF NEED PROGRAM                                                                                            
                                                                                                                                
Number 0771                                                                                                                     
                                                                                                                                
CHAIR JAMES  announced the next  order of business is  HOUSE BILL                                                               
NO. 297,  "An Act  relating to the  certificate of  need program;                                                               
and providing for an effective date."                                                                                           
                                                                                                                                
CHAIR JAMES read the new sponsor statement as follows:                                                                          
                                                                                                                                
     The current version  of HB 297 is  quite different from                                                                    
     the original, because after a  great deal of discussion                                                                    
     we  have  found a  solution  to  the immediate  problem                                                                    
     without raising the $1,000,000 floor.                                                                                      
                                                                                                                                
     This  version  allows  relocation   of  a  health  care                                                                    
     facility to a new site  in the same community without a                                                                    
     certificate  of  need (CON)  as  long  as there  is  no                                                                    
     increase in the services offered.                                                                                          
                                                                                                                                
     It  disallows  use  of the  vacated  site  for  another                                                                    
     health care facility without a CON.                                                                                        
                                                                                                                                
     All  parties  still  admit that  Alaska's  CON  process                                                                    
     needs a thorough examination  and possible changes, and                                                                    
     I am  committed to  spending the  next two  years doing                                                                    
     that.                                                                                                                      
                                                                                                                                
Number 0904                                                                                                                     
                                                                                                                                
REPRESENTATIVE  HUDSON  made  a  motion  to  adopt  the  proposed                                                               
committee  substitute  (CS)  for   HB  297,  version  1-LS1303\M,                                                               
Lauterbach, 3/15/00, as a work  draft.  There being no objection,                                                               
proposed CSHB 297, Version M, was before the committee.                                                                         
                                                                                                                                
Number 0929                                                                                                                     
                                                                                                                                
CHAIR JAMES  noted that  the difference in  the proposed  CS from                                                               
existing language is new subsection  (c); it allows a facility to                                                               
move to a new site in  the same community without obtaining a CON                                                               
as  long as  services  are not  expanded.   No  one  can use  the                                                               
vacated  site again  for a  health  care facility  without a  CON                                                               
because that would  be increasing services.   She understood that                                                               
the CON  determines whether or not  there is a need  for services                                                               
so someone  should be able to  move their facility without  a CON                                                               
because  they  are not  increasing  services.   The  proposed  CS                                                               
precludes setting up another health  care facility in the vacated                                                               
building.                                                                                                                       
                                                                                                                                
REPRESENTATIVE WHITAKER quoted from  the new sponsor statement as                                                               
follows:  "The current version of  HB 297 is quite different from                                                               
the original because,  after a great deal of  discussion, we have                                                               
found a  solution to the  immediate problem..." and  commented he                                                               
is puzzled.  He said he  does not know what the immediate problem                                                               
is.                                                                                                                             
Number 1114                                                                                                                     
                                                                                                                                
CHAIR JAMES explained that in  Anchorage a [health care facility]                                                               
wants  to  move  because  it needs  parking  space  and  doctors'                                                               
offices, neither  of which  requires a CON.   She  commented that                                                               
she has reviewed CON timeframes for  the last five years from the                                                               
beginning and  end of a CON  application; she has found  that CON                                                               
time frames  are extensive.   She mentioned that when  a facility                                                               
plan a  move there are  timelines and commitments; based  on past                                                               
experience, the  CON could not  be finished in the  proper length                                                               
of  time.   The idea  that  the proposed  CS was  drafted to  fix                                                               
someone's problem is  not the issue with her;  rather, she thinks                                                               
it  is good  legislation.   There may  well be  someone else  who                                                               
might want to move  tomorrow, and it can be argued  that a CON is                                                               
needed, but she says a CON is  not needed as long as services are                                                               
not  expanded.   She  acknowledged that  the Anchorage  situation                                                               
would benefit from passage of the proposed CS.                                                                                  
                                                                                                                                
Number 1247                                                                                                                     
                                                                                                                                
REPRESENTATIVE  SMALLEY  asked  how  doctors'  offices  could  be                                                               
increased  at the  new  facility in  Anchorage  and not  increase                                                               
services, as precluded by the proposed CS.                                                                                      
                                                                                                                                
CHAIR  JAMES  replied  that  expansion  of  doctors'  offices  or                                                               
parking  lots  is  not  included in  health  care  services  that                                                               
require a  CON.  She  acknowledged that  a question arises  as to                                                               
greater size of the new facility  to which the health care agency                                                               
moved coming from a smaller facility.   She said that if a health                                                               
care agency had only one of  something, they can only have one of                                                               
something  in  their new  facility.    She  stated that  the  new                                                               
facility could  be bigger, but  it cannot add more  services than                                                               
it had before.                                                                                                                  
                                                                                                                                
ELMER  LINDSTROM,  Special   Assistant  to  Commissioner  Perdue,                                                               
Department of Health and Social  Services, confirmed Chair James'                                                               
belief  that  the  proposed  CS   is  quite  different  from  the                                                               
original.  He  said in one sense it is  more restrictive than the                                                               
previous bill; in another sense, it  is more expansive.  He noted                                                               
that under previous  legislation, HB 297 spoke to  a threshold of                                                               
$7  million under  which either  a new  entrant into  the medical                                                               
market  could  be exempt  from  a  CON,  or  someone who  had  an                                                               
existing facility could relocate or  expand without a CON if they                                                               
were  under the  $7 million  threshold.   He  explained that  the                                                               
proposed CS  no longer  speaks to  a changed  financial threshold                                                               
but  rather is  limited in  its application  to entities  who are                                                               
currently lawfully  operating a  health facility as  described in                                                               
statute.  He commented that the  proposed CS is limited to people                                                               
who are  already in business and  would have no impact  on people                                                               
who wanted to enter a new market.                                                                                               
                                                                                                                                
MR. LINDSTROM  mentioned that the  proposed CS is  more expansive                                                               
in the sense that without  the financial threshold, it applies to                                                               
all acute  care facilities under  the CON  law, large as  well as                                                               
small, free-standing outpatient facilities  as well as hospitals.                                                               
He indicated that  the department has no  objection in attempting                                                               
to  solve  the  problem  as  described  by  the  sponsor  in  the                                                               
situation of a  facility wanting to relocate but  not to increase                                                               
capacity.                                                                                                                       
                                                                                                                                
MR.  LINDSTROM informed  the committee  that  to the  department,                                                               
capacity  means   things  like  additional  surgery   suites  and                                                               
magnetic resonance imaging (MRI) units.   Capacity does not speak                                                               
to  a relocated  facility  that happens  to  have greater  square                                                               
footage,   and   he  believes   that   everyone   has  a   common                                                               
understanding.  He acknowledged that  over time all terms used in                                                               
the  proposed   CS  would  be   subject  to   interpretation  and                                                               
discussion, for  example, words  like "community,"  "capacity" or                                                               
"greater."   He is  comforted in that  Chair James  indicated she                                                               
will continue to review the [CON] statute.                                                                                      
                                                                                                                                
MR.  LINDSTROM  said  the  first   thing  that  occurred  to  him                                                               
regarding expansion of the proposed  CS is that his department is                                                               
considering  relocating the  Alaska Psychiatric  Institute (API),                                                               
and API is now in negotiations  with Charter North.  He cited API                                                               
as  an example  where the  proposed CS  language would  come into                                                               
play.   He  does not  know what  the ramifications  would be  but                                                               
doubts that the proposed CS will affect negotiations.                                                                           
                                                                                                                                
Number 1695                                                                                                                     
                                                                                                                                
CHAIR JAMES  said it seems the  proposed CS rules would  apply if                                                               
the department  wants to relocate API.   If API is  making a deal                                                               
with Charter North, which results  in expanded services, then API                                                               
must obtain a  CON.  However, if  API will not be  bigger, no CON                                                               
is required.                                                                                                                    
                                                                                                                                
MR. LINDSTROM said  he understood that API would  be downsized by                                                               
relocating into the  Charter North facility so  perhaps API would                                                               
not  be required  to obtain  a CON.   He  noted that  there is  a                                                               
letter  of intent  on  file from  Charter North  to  build a  new                                                               
facility but  maybe they would  not be  required to obtain  a CON                                                               
because  API would  be backfilling  the existing  facility.    He                                                               
cited  this situation  as an  opportunity where  the proposed  CS                                                               
would come  into play, but  it clearly  would not have  under the                                                               
previous version of HB 297.                                                                                                     
                                                                                                                                
CHAIR JAMES  explained that  she does not  think the  proposed CS                                                               
will change the  [CON] situation much but will  only limit change                                                               
to expansion of  services.  She suspected that if  API had wanted                                                               
to move before  the proposed CS was presented, it  would have had                                                               
to obtain  a CON even  if it is  downsizing.  Charter  North also                                                               
would have had to  obtain a CON because it wants  to move, and no                                                               
health facility can  move without a CON.  She  envisioned that if                                                               
API  downsized and  moved into  the Charter  North facility,  API                                                               
would not have to obtain a CON under the proposed CS.                                                                           
                                                                                                                                
Number 1859                                                                                                                     
                                                                                                                                
MR. LINDSTROM agreed  that if Charter North chose to  build a new                                                               
facility, it  would have to obtain  a CON, whereas API  would not                                                               
if  it  moved into  Charter  North's  facility unless  renovation                                                               
exceeded $1 million.                                                                                                            
                                                                                                                                
CHAIR JAMES  said she felt the  proposed CS is a  benefit in that                                                               
situation because it means one less CON.                                                                                        
                                                                                                                                
MR. LINDSTROM reiterated  that he was not saying  the proposed CS                                                               
is a  barrier to the department,  just that the proposed  CS will                                                               
probably impact  the department's plans  for API.  He  noted that                                                               
another issue that has been raised  because of the proposed CS is                                                               
the impact to those facilities subject to the Medicaid rate-                                                                    
setting  system, in  that  the  proposed CS  may  change the  way                                                               
facilities'  capital expenditures  flow through  the rate-setting                                                               
system as it exists today.   He explained that he understood that                                                               
a facility expanding  or relocating a function obtains  a CON and                                                               
can  then capitalize  the  costs immediately  in  the next  rate-                                                               
setting  cycle whereas  if the  proposed CS  were to  become law,                                                               
recapture of capitalized costs would be delayed.                                                                                
                                                                                                                                
Number 1963                                                                                                                     
                                                                                                                                
CHAIR JAMES  stated that the Medicaid  rate-setting argument does                                                               
not sell  with her.  She  reiterated that her belief  is that the                                                               
CON  exists  to ensure  that  health  care services  are  needed.                                                               
Therefore,  she added,  if services  are  needed and  there is  a                                                               
problem  with  the  way  Medicaid   rate  setting  is  done,  the                                                               
legislature needs to  fix that problem too, which is  part of her                                                               
two-year commitment  to review the  CON.   She said she  does not                                                               
share the fear that Mr. Lindstrom has expressed.                                                                                
                                                                                                                                
MR.  LINDSTROM  reiterated that  he  does  not suggest  that  the                                                               
proposed CS  is a barrier,  it is simply an  imponderable because                                                               
he does  not understand all  the possible implications.   He said                                                               
the indeterminate  fiscal note will  likely remain as  is because                                                               
of  the   imponderables  and  lack   of  knowledge   about  which                                                               
facilities in which communities may or  may not choose to use the                                                               
proposed CS.                                                                                                                    
                                                                                                                                
Number 2065                                                                                                                     
                                                                                                                                
REPRESENTATIVE KERTTULA noted  that right now the  proposed CS is                                                               
written not  requiring a  CON for relocation  or if  bed capacity                                                               
and health care  categories do not increase.   She explained that                                                               
the language  is a  little bit  different by  definitely limiting                                                               
bed capacity and health care  categories.  She commented that the                                                               
[CON] statute now says "as long  as there is no alteration of bed                                                               
capacity" which means  no addition or elimination  of a category.                                                               
She  said that  the  proposed CS  might be  able  to eliminate  a                                                               
category, and she does not know whether that is a real concern.                                                                 
                                                                                                                                
MR.  LINDSTROM replied  that it  was the  department's suggestion                                                               
that the  proposed CS limit  its application to  situations where                                                               
there  would  be increased  capacity  as  the department  is  not                                                               
concerned about less capacity.                                                                                                  
                                                                                                                                
REPRESENTATIVE  HUDSON  recognized  that  a CON  is  a  community                                                               
assessment of  services legitimately  needed.  He  mentioned that                                                               
the department may  not want to diminish services in  view of the                                                               
assumption of  why a CON  exists.   Maybe the current  statute is                                                               
correct in not allowing neither increase nor decrease.                                                                          
                                                                                                                                
Number 2201                                                                                                                     
                                                                                                                                
MR. LINDSTROM  indicated that it  is the  department's preference                                                               
to  keep the  language  as  is in  the  proposed  CS because  the                                                               
department  is not  concerned  about decrease  in  services.   He                                                               
reiterated that the  imponderables are going to be  driven by the                                                               
situation  in each  individual community.   Recently  the federal                                                               
government  passed a  new law  creating  a new  type of  hospital                                                               
called a critical access hospital.   He said that the new law was                                                               
driven by  circumstances in the  Lower 48 where many  small rural                                                               
community  hospitals  were  having  a  tough  go  and  many  were                                                               
disappearing.                                                                                                                   
                                                                                                                                
MR.  LINDSTROM  noted  that  the  federal  government  wanted  to                                                               
support  those small  rural facilities  but also  give them  some                                                               
flexibility  where the  facility did  not  have to  have all  the                                                               
"bells  and whistles"  that a  regular hospital  would have.   He                                                               
commented that  his department  is pursuing  that option  here in                                                               
Alaska through regulation  to allow facilities to  be licensed as                                                               
critical access  hospitals, and he believes  some communities may                                                               
be interested.  When those  communities do replace their existing                                                               
facilities, they  may very well  downsize the number of  beds and                                                               
become  critical access  hospitals,  thus removing  the need  for                                                               
obtaining a CON.    While community hospitals may downsize number                                                               
of beds,  they may want to  expand into other services  that they                                                               
previously  did not  have, such  as greater  outpatient capacity,                                                               
which  would  require  a  CON.     He  emphasized  that  the  CON                                                               
discussion is  driven by the  fact that the practice  of medicine                                                               
has  changed  dramatically  since  the  CON  law  was  originally                                                               
drafted.   He acknowledged that  hospitals are moving to  do more                                                               
outpatient   services,   and    many   free-standing   outpatient                                                               
facilities  are doing  things that  historically would  have only                                                               
been done  in a hospital.   He reiterated that  changing dynamics                                                               
of  the  industry and  technology  is  really driving  the  [CON]                                                               
discussion.                                                                                                                     
                                                                                                                                
Number 2342                                                                                                                     
                                                                                                                                
CHAIR JAMES agreed that health  care services are delivered today                                                               
differently  than  20  years  ago.     She  emphasized  that  the                                                               
committee must  not forget  who the  patients are  because giving                                                               
the best service, and treating  patients when they need treatment                                                               
is the issue.  She reiterated that  it is not easy to think about                                                               
patients without  thinking about  money, but public  health needs                                                               
must  be   met;  that   should  be   the  driving   force  behind                                                               
legislation.                                                                                                                    
                                                                                                                                
REPRESENTATIVE WHITAKER  inquired as  to where Mr.  Lindstrom was                                                               
in thought process regarding Medicaid  capitalization and what is                                                               
happening [in that area].                                                                                                       
                                                                                                                                
MR.  LINDSTROM advised  that the  department has  been discussing                                                               
theories  with   the  Alaska  State   Hospital  &   Nursing  Home                                                               
Association (ASHNHA) and both share  a desire to review the rate-                                                               
setting system with a goal of  simplification.  He said that part                                                               
of the  concern he feels  about the proposed CS  language relates                                                               
to  the rate-setting  system  because he  fears  it might  create                                                               
another issue that must be solved.                                                                                              
                                                                                                                                
Number 2448                                                                                                                     
                                                                                                                                
CHAIR JAMES  asked Mr. Lindstrom if  it was true that  all issues                                                               
of the  Medicaid rate setting  ought to  be addressed and  if the                                                               
proposed CS  brings this issue  to light, that  is not bad.   She                                                               
said she understood that the  department wanted to make the [CON]                                                               
issue simpler,  but she also suspects  that it wanted to  make it                                                               
less, and  her personal  opinion is  that less  is not  where the                                                               
state needs  to go.  She  explained that she wants  [Medicaid] to                                                               
be right and balanced with what  other folks pay so that the cost                                                               
of Medicaid  is not balanced on  the backs of people  who have no                                                               
insurance or who have private insurance.                                                                                        
                                                                                                                                
Number 2490                                                                                                                     
                                                                                                                                
MR.  LINDSTROM commented  that it  is the  rule of  the road,  at                                                               
least from the  department's perspective, that a  new system must                                                               
be  cost neutral.    It is  not the  department's  desire to  use                                                               
discussion  results  as  a  means   to  reduce  reimbursement  to                                                               
hospitals.   It is also the  department's belief, in view  of the                                                               
financial environment,  that rate-setting discussions  should not                                                               
be a tool to greatly increase  expenses.  He acknowledged that it                                                               
is  difficult  to maintain  a  cost-neutral  discussion when  any                                                               
system is reconfigured in the  context of cost neutrality because                                                               
there will inevitably be winners and losers.                                                                                    
                                                                                                                                
CHAIR JAMES  reiterated that cost is  not an issue with  her, and                                                               
she is not  willing to say that discussions will  be cost neutral                                                               
or a reduction or an increase.                                                                                                  
                                                                                                                                
MR. LINDSTROM  replied that all  discussions until now  have been                                                               
in the context of what can  be done in a regulatory framework and                                                               
by  the time  the committee  finishes discussion  today regarding                                                               
the  proposed CS,  the  committee will  be  looking at  statutory                                                               
changes.   He stated that  he hoped that everyone  cooperates and                                                               
comes back with  something that makes the most sense  but he does                                                               
not underestimate  the difficulty  of reviewing  the rate-setting                                                               
system.                                                                                                                         
                                                                                                                                
Number 2595                                                                                                                     
                                                                                                                                
LARAINE DERR,  President/CEO, Alaska  State Hospital  and Nursing                                                               
Home Association,  testified in opposition  to HB 297.   She said                                                               
she had received  the proposed CS draft and  spoken several times                                                               
with  Chair James,  but she  continues to  oppose HB  297 and  so                                                               
states   by  a   letter   dated  March   15,   2000  written   to                                                               
Representative James  because ASHNHA  feels that the  whole [CON]                                                               
process should be  reviewed.  She agreed with  Mr. Lindstrom that                                                               
doing anything  in health care  without the CON  creates problems                                                               
with the Medicaid rate-setting system.                                                                                          
                                                                                                                                
Number 2663                                                                                                                     
                                                                                                                                
SHARON  ANDERSON,   Alaska  State   Hospital  and   Nursing  Home                                                               
Association,  said  she  is  pleased  that  the  subcommittee  is                                                               
studying all  the issues  concerning the [CON]  because it  is an                                                               
interrelated issue  and complicated.   She noted that one  of the                                                               
factors to  be considered in the  whole domino effect is  the new                                                               
proposed regulations  that will impact the  Medicaid rate-setting                                                               
system.  She explained that one  of the proposals is that non-CON                                                               
replacement  items  or capital  issues  will  not be  recoverable                                                               
through  the  rate-setting  process.    She  mentioned  that  the                                                               
proposal  is  an indication  that  the  state  does use  the  CON                                                               
process to contain costs, albeit not a perfect one.                                                                             
                                                                                                                                
REPRESENTATIVE HUDSON asked  Ms. Anderson to cite  a few examples                                                               
of replacement items that would not be recoverable.                                                                             
                                                                                                                                
MS. ANDERSON  replied that  an example might  be that  a facility                                                               
replacing an  operating room  which historically  capitalized out                                                               
at $200,000  for depreciation schedule  purposes.  She  said that                                                               
if the  operating room was  replaced without a  CON at a  cost of                                                               
$700,000,  the facility  would  be held  at  its historical  cost                                                               
[$200,000]  rather  than  the  new  cost.   She  noted  that  the                                                               
facility  would not  be able  to  depreciate at  the higher  rate                                                               
without a CON and maybe some  other costs would not be allowed at                                                               
all because of perceived potential increased volume.                                                                            
                                                                                                                                
Number 2806                                                                                                                     
                                                                                                                                
REPRESENTATIVE HUDSON asked who would make that decision.                                                                       
                                                                                                                                
MS.  ANDERSON  answered   that  the  decision  is   part  of  the                                                               
negotiation that  goes on between  the facility and  the Medicaid                                                               
rate-setting process made up of  the Medicaid Advisory Commission                                                               
and  the Department  of Health  and Social  Services wherein  the                                                               
department actually sets the rate.                                                                                              
                                                                                                                                
Number 2825                                                                                                                     
                                                                                                                                
REPRESENTATIVE HUDSON inquired as to  any federal law on Medicaid                                                               
that would be instructive to the committee.                                                                                     
                                                                                                                                
MS. ANDERSON replied that is part  of the negotiation that is on-                                                               
going  in   the  process  that   came  about  from   last  year's                                                               
discussions  through  the legislature  when  the  task force  was                                                               
formed, having  all parties at  the table.   She said  that there                                                               
are  federal  guidelines  for Medicaid  but  because  each  state                                                               
handles their Medicaid system a  little bit differently, there is                                                               
leeway at the state level.                                                                                                      
                                                                                                                                
REPRESENTATIVE   HUDSON   asked   if  state   negotiations   were                                                               
subjective  to the federal agencies.                                                                                            
                                                                                                                                
MS. ANDERSON answered in the affirmative.                                                                                       
                                                                                                                                
CHAIR  JAMES said  that the  case Ms.  Anderson is  talking about                                                               
does not  apply to this  bill, and if  it does, Ms.  Anderson can                                                               
indicate why.   Chair  James noted that  Ms. Anderson  is talking                                                               
about  replacing things  in a  hospital, but  the proposed  CS is                                                               
talking about  relocating to  some other  facility.   Chair James                                                               
explained that hospitals are treated  differently on the Medicaid                                                               
rate  than are  free-standing  ambulatory surgery  centers.   The                                                               
hospital is paid  a percentage of capital costs as  well as other                                                               
fixed and  variable costs of  Medicaid treatments  are reimbursed                                                               
to  the hospital  whereas  free-standing  ambulatory centers  are                                                               
reimbursed  a percentage  of  fee for  service.   Therefore,  she                                                               
added,  free-standing centers  are  not  reimbursed directly  for                                                               
capital costs.                                                                                                                  
                                                                                                                                
CHAIR JAMES mentioned  that under the proposed CS  there might be                                                               
some hospitals that  would like to relocate.   She indicated that                                                               
Charter  North might  not  have  to obtain  a  CON,  but she  had                                                               
forgotten to ask them if it did  want a CON because it might want                                                               
to apply  for one  in order  to be  in compliance  with Medicaid.                                                               
She  informed the  committee that  she  does not  think there  is                                                               
anything in the proposed CS  that precludes someone from applying                                                               
for a CON since approval of  a CON means approval of depreciating                                                               
capital costs.   She reiterated  that the particular  language in                                                               
the proposed  CS does not apply  to things that a  hospital would                                                               
be doing  because she does  not see them physically  moving their                                                               
facility.   She asked Ms. Anderson  to give her an  example where                                                               
that did happen.                                                                                                                
                                                                                                                                
TAPE 00-21, SIDE B                                                                                                              
Number 2906                                                                                                                     
                                                                                                                                
MS.  ANDERSON answered  that HealthSouth  is trying  to interpret                                                               
how the proposed  CS will impact member facilities  in the future                                                               
when faces  change and interpretations are  different.  Referring                                                               
to the example  of relocation of Charter North,  the current plan                                                               
is to  relocate to another  area in Anchorage servicing  the same                                                               
population and maintaining the same  number of beds but designing                                                               
the facility  to care  for the  adolescent and  child population.                                                               
In going by  the proposed CS, it  is not clear to  her whether or                                                               
not the  new facility will  be in the Medicaid  rate calculation.                                                               
She explained  that she does  not know  if Charter North  will be                                                               
considered a  replacement facility or  a relocation and  how that                                                               
might impact  the whole reimbursement  schedule.   While Medicaid                                                               
is a small  portion of reimbursement (20 percent)  for the state,                                                               
the question  might come  to mind  that if  Charter North  is not                                                               
going to  be able to recoup  capital costs for relocation,  or if                                                               
the state determines that it is  a replacement, what would be the                                                               
reason for Charter North to want to do a deal with the state.                                                                   
                                                                                                                                
MS. ANDERSON posed  another question:  "What would  be the impact                                                               
to insurers  such as Aetna, Blue  Cross, and the State  of Alaska                                                               
who  self insures  patients?"   Under  the Medicaid  rate-setting                                                               
system, sometimes costs are calculated  in a three-year cycle and                                                               
added to  the base  year.   In those  cases where  the three-year                                                               
cycle applies to recoup costs to  Medicaid, it is a sure bet that                                                               
in most instances  the facilities will not be able  to wait three                                                               
years  and as  a  consequence  rates that  go  up  in a  hospital                                                               
setting will be  passed on to insurers and patients.   She stated                                                               
that she is  not saying that is  what is going to  happen, she is                                                               
just saying that it may be part of the domino effect.                                                                           
                                                                                                                                
Number 2756                                                                                                                     
                                                                                                                                
MS.  ANDERSON asked  if Bartlett  [Regional] Hospital  planned to                                                               
relocate within  its facility, would  the proposed  CS relocation                                                               
definition work.   She noted that  the intent of the  proposed CS                                                               
may not  be the above, but  people in positions of  authority may                                                               
change so future intent has to be considered.                                                                                   
                                                                                                                                
CHAIR  JAMES  quoted from  the  proposed  CS  as follows:    "...                                                               
services of  that facility to  a new  site in the  same community                                                               
...."   She  suggested it  is  clear.   Therefore, moving  things                                                               
around  from one  side  of the  hospital to  the  other does  not                                                               
qualify because the proposed CS is  talking about moving to a new                                                               
site.                                                                                                                           
                                                                                                                                
Number 2700                                                                                                                     
                                                                                                                                
MS.  ANDERSON   indicated  one  of  ASHNHA's   concerns  was  the                                                               
definition  of "community."    She  asked if  that  meant that  a                                                               
facility in  Anchorage could move  from one community  council to                                                               
another community council.                                                                                                      
                                                                                                                                
CHAIR JAMES  replied that "community"  means service area  of the                                                               
hospital.   She  remarked that  the legislature  would not  allow                                                               
someone to  move from Anchorage  to the  Matanuska-Susitna Valley                                                               
or vice  versa.  However,  a facility already in  Anchorage could                                                               
move  anywhere  in  the  Anchorage   area  because  it  is  still                                                               
addressing  the   same  community   need,  and  she   thinks  the                                                               
department could identify the area of need by the CON.                                                                          
                                                                                                                                
MS. ANDERSON  said she wanted the  intent to be clear  on each of                                                               
these issues.                                                                                                                   
                                                                                                                                
REPRESENTATIVE  HUDSON  asked  if  everybody  out  there  at  the                                                               
present time would have filed a CON and be operating under one.                                                                 
                                                                                                                                
Number 2613                                                                                                                     
                                                                                                                                
MS.  ANDERSON answered  that an  issued CON  allows a  project to                                                               
commence and once it is completed, the CON cannot be modified.                                                                  
                                                                                                                                
REPRESENTATIVE  HUDSON  asked  whether,  if  Bartlett  [Regional]                                                               
Hospital (BRH) decided to move out  to the valley, it could do so                                                               
under the  proposed CS, assuming  that BRH's CON had  a specified                                                               
client  base.   He explained  that  the original  CON would  have                                                               
identified  the area  of  need.   If  BRH  decided  to move  into                                                               
someone  else's  territory, he  suggested  it  would affect  that                                                               
other  CON; he  said he  understood that  cannot be  done without                                                               
applying for a CON.                                                                                                             
                                                                                                                                
MR.  ANDERSON replied  that under  current law  if BRH  moved and                                                               
expended more than  $1 million, BRH would go through  a CON to do                                                               
that.  Under the proposed  CS, she interprets that the relocation                                                               
would not require  a CON regardless of the dollar  amount as long                                                               
as  BRH was  relocating  and not  using the  vacated  space as  a                                                               
licensed  health  care facility.    She  noted that  ASHNHA  does                                                               
support the  concept of studying  the CON and is  concerned about                                                               
access for all Alaskans.                                                                                                        
                                                                                                                                
Number 2458                                                                                                                     
                                                                                                                                
CHAIR JAMES recognized that people  do not accept change readily;                                                               
in fact,  people usually resist change  as much as possible.   It                                                               
takes  a broad  perspective to  see the  benefits of  change, and                                                               
there will always  be negatives to change; therefore,  it is good                                                               
to  discuss  the  negatives,  but  the  positives  are  extremely                                                               
important as well.  There is a  big change in the way health care                                                               
services are  delivered today.   Thus  fixing the  Medicaid rate-                                                               
setting system  becomes very  important now  because a  system is                                                               
needed  that  will  move  into  the future  to  meet  demand  for                                                               
services.   Ultimately health  care systems  are here  to provide                                                               
the  best  services  for  the  patient in  the  best  way.    She                                                               
explained it  takes an open mind  and resistance to fear  to make                                                               
the necessary changes.                                                                                                          
                                                                                                                                
MS. ANDERSON commented  that change is a part of  daily life of a                                                               
hospital administrator because one  regulation is implemented and                                                               
another regulation is  published right on the heels  of the first                                                               
one.  She emphasized that ASHNHA's  preference is that the fix be                                                               
applicable  and  work  for  the  entire  system  to  benefit  all                                                               
Alaskans.                                                                                                                       
                                                                                                                                
Number 2284                                                                                                                     
                                                                                                                                
BARBARA HUFF-TUCKNESS,  Director of Legislative  and Governmental                                                               
Affairs, Teamsters  Local 959, testified via  teleconference from                                                               
Anchorage.   She  said  she  had originally  been  on record  not                                                               
supporting HB 297  and now she wants to go  on record as removing                                                               
that objection  after reviewing the  current proposed CS.   Since                                                               
there is latitude  to refrain from applying for a  CON, she asked                                                               
if  there was  also latitude  to apply  for CON  if an  entity so                                                               
desired.                                                                                                                        
                                                                                                                                
CHAIR JAMES replied  in the affirmative.  She, in  turn, asked if                                                               
Ms. Huff-Tuckness was withdrawing her opposition to HB 297.                                                                     
                                                                                                                                
MS. HUFF-TUCKNESS answered yes.                                                                                                 
                                                                                                                                
CHAIR  JAMES asked  Mr. Lindstrom  to answer  Ms. Huff-Tuckness's                                                               
question.  Chair James had made  the comment that if the CON does                                                               
affect the  Medicaid rate-setting, even  though CON is  no longer                                                               
required for  some things  under the proposed  CS, an  entity can                                                               
apply for a CON if they want to.   She asked Mr. Lindstrom if the                                                               
proposed CS would allow that.                                                                                                   
                                                                                                                                
Number 2153                                                                                                                     
                                                                                                                                
MR. LINDSTROM  replied that he  guesses the dynamic will  be that                                                               
the department  will choose  not to  require a CON  if it  is not                                                               
required under  HB 297.  He  acknowledged that first he  needs to                                                               
check with  the Department  of Law.   He further  speculated that                                                               
the Medicaid Advisory  Rate Commission staff, who  do depend upon                                                               
[CON] information  for some aspects  of the  rate-setting system,                                                               
would  think  it a  good  idea  if  the department  continued  to                                                               
require a  CON.  He  said he needed  to get more  information and                                                               
sort those things out.                                                                                                          
                                                                                                                                
REPRESENTATIVE KERTTULA  stated that she  would like to  hear the                                                               
answer  to  Ms.  Huff-Tuckness's question  before  the  committee                                                               
moves the proposed CS.  The  answer is important and she wants to                                                               
hear from the  Department of Law.  She explained  that the answer                                                               
would  go  a  long  way  to  resolving  her  community's  concern                                                               
[regarding the CON].                                                                                                            
                                                                                                                                
CHAIR  JAMES  said she  had  promised  the  members of  the  HESS                                                               
Committee  that  she would  discuss  the  proposed CS  with  them                                                               
before submitting the final product  to the Chief Clerk's Office.                                                               
She  noted  that  if  the  House  Health,  Education  and  Social                                                               
Services  Standing  Committee  does  answer the  review  and  the                                                               
proposed CS  needs to be  modified, this committee  could rescind                                                               
its action.                                                                                                                     
                                                                                                                                
Number 1998                                                                                                                     
                                                                                                                                
REPRESENTATIVE  HUDSON  asked  if Representative  Kerttula  could                                                               
speak more specifically to the concern about the proposed CS.                                                                   
                                                                                                                                
REPRESENTATIVE KERTTULA  commented that what she  has heard today                                                               
is that there is latitude to come  back and obtain a CON if it is                                                               
needed for the Medicaid rate.   It seems to her that the proposed                                                               
CS goes  further toward  meeting community  concern but  she does                                                               
not see  it in the language.   She agreed with  the Department of                                                               
Health  and Social  Services (DHSS)  that someone  really is  not                                                               
going to want to do this [a CON]  if it is not in the proposed CS                                                               
language.  She suggested that  the committee go to the Department                                                               
of Law immediately and ask them  whether there has to be language                                                               
for the proposed  CS to resolve that issue and  bring it back for                                                               
the committee to discuss.  She  remarked that it is cleaner to do                                                               
it up front in this committee.                                                                                                  
                                                                                                                                
Number 1932                                                                                                                     
                                                                                                                                
REPRESENTATIVE  HUDSON  asked  if   Mr.  Lindstrom  was  bringing                                                               
information to  the prime sponsor of  the proposed CS.   If there                                                               
is  a need  to  add  language, the  Chair  has  indicated she  is                                                               
willing  to   entertain  added  language.     He  said   he  felt                                                               
comfortable enough to offer a motion to move the proposed CS.                                                                   
                                                                                                                                
REPRESENTATIVE KERTTULA  stated she  was going  to sign  that the                                                               
proposed CS  needs an amendment  and then  she was not  sure what                                                               
she would do when it is heard by the entire House.                                                                              
                                                                                                                                
RICK  SOLEY,  Director  of   Community  Relations  and  Planning,                                                               
Fairbanks Memorial  Hospital and Denali Center,  said that ASHNHA                                                               
spoke clearly to  what his view is  as far as how to  fix the CON                                                               
since it needs additional study.   He reminded the committee that                                                               
when it  started with HB  297 it suggested  that it would  find a                                                               
fix that would  be satisfactory for all Alaskans.   He noted that                                                               
the  proposed  CS is  not  satisfactory  to  all Alaskans  or  to                                                               
Fairbanks  Memorial  Hospital (FMH)  because  it  is a  piecemeal                                                               
approach to the CON program.   He is concerned that the committee                                                               
wants to move a bill that clearly has a myriad of problems.                                                                     
                                                                                                                                
MR.  SOLEY commented  that under  the definition  of "community,"                                                               
FMH    could move  hospital beds to  Delta because FMH  calls its                                                               
service area  the entire northern  half of Alaska.   He suspected                                                               
that DHSS would  have very great concerns about  FMH's ability to                                                               
do that  as far  as the  implications on  Medicaid reimbursements                                                               
but  FMH has  the bed  capacity.   He added  that if  the nuclear                                                               
missile  defense  system  went  through that  is  not  an  absurd                                                               
reading of  the language  of relocation  and has  great financial                                                               
consequences to the state.                                                                                                      
                                                                                                                                
MR. SOLEY  mentioned FMH  has an  outpatient surgery  center that                                                               
operates  in   Fairbanks,  meeting   what  he  believes   is  the                                                               
community's needs for  outpatient surgery.  He  indicated that if                                                               
FMH  chose  to relocate  a  portion  of that  outpatient  surgery                                                               
center across town,  FMH could do so without a  CON.  He informed                                                               
the committee  that when the  committee had started  the proposed                                                               
legislation, he had heard much  about the need for competition in                                                               
the marketplace and had heard  much debate about what competition                                                               
is and  whether it truly  exists in the health  care environment.                                                               
He  emphasized  that the  committee  should  know that  there  is                                                               
potential for this  proposed CS to allow FMH to  move across town                                                               
to set  up a surgery  center without  a CON, whereas  the current                                                               
law would  require another individual  who might want to  build a                                                               
surgery center to  obtain a CON.   It is a huge issue,  and it is                                                               
another reason  why this committee  should not pass  the proposed                                                               
CS out of  committee.  There are still many  questions, and he is                                                               
concerned  that the  other legislative  committees will  not have                                                               
the time or interest to really  look at serious issues to fix the                                                               
proposed CS.                                                                                                                    
                                                                                                                                
Number 1684                                                                                                                     
                                                                                                                                
MR.  SOLEY said  he thinks  the committee  needs to  look at  the                                                               
proposed CS,  as did the legislature  when they set up  the Long-                                                               
Term Care Task  Force.  At that time, the  legislature reviewed a                                                               
host of issues  with a broad array of public  providers:  [people                                                               
from] medical care, the state and  DHSS.  He said the proposed CS                                                               
does  not address  outstanding issues  now but  people have  been                                                               
told that  the issues will  be addressed in  the future.   Now is                                                               
the opportunity  to work on  the issues  and he prefers  that the                                                               
committee  continue  the  diligent  work  it  has  started.    He                                                               
emphasized  that  HB 297  started  out  as  a  bad bill  for  his                                                               
community, and  he has a stack  of letters that suggests  it is a                                                               
bad  bill.    The  committee  should not  move  the  proposed  CS                                                               
forward; rather the committee should continue  to work on it.  He                                                               
said that  the Fairbanks Chamber  of Commerce has  been reviewing                                                               
the CON  issue because of  the significance and has  a resolution                                                               
in  the  works to  ask  the  committee  to continue  a  rigorous,                                                               
thorough study of  HB 297 and present a  recommendation within 18                                                               
months.   He noted that there  is much concern that  if something                                                               
is done with the CON, unintended consequences will result.                                                                      
                                                                                                                                
Number 1515                                                                                                                     
                                                                                                                                
CHAIR JAMES  said she would  have to ask  DHSS if Delta  would be                                                               
considered  the same  community  as Fairbanks.    She noted  that                                                               
under  Medicaid  rate-setting she thinks FMH  would rather obtain                                                               
a CON for any move to  Delta it might contemplate.  She explained                                                               
that as far  as the surgery center is concerned,  FMH can move it                                                               
across  town if  it wants  to, but  she cannot  believe that  FMH                                                               
would want to do that.   She mentioned that there is an advantage                                                               
concerning the  way hospitals obtain payment  for surgery centers                                                               
as opposed  to free-standing centers.   Free-standing centers are                                                               
paid fee for service, and she  is still trying to figure which is                                                               
the  best way  of obtaining  payment.   The  Tanana Clinic  folks                                                               
would  probably like  to have  an  FMH surgery  center closer  to                                                               
them.   She  emphasized that  HB 297  is a  good bill  because it                                                               
solves many  problems for DHSS  and for the  public.  The  CON is                                                               
here to  make sure that new  services are not added  in excess of                                                               
what is needed,  and she is committed over the  next two years to                                                               
review all of the issues.                                                                                                       
                                                                                                                                
REPRESENTATIVE HUDSON asked Mr.  Soley to provide recommendations                                                               
for  the proposed  CS  to  the chair;  for  example, perhaps  the                                                               
committee  needs   a  definition  of  "community"   or  "area  of                                                               
responsibility."                                                                                                                
                                                                                                                                
CHAIR JAMES announced that the meeting was recessed until 3 p.m.                                                                
this afternoon, March 16, 2000.                                                                                                 

Document Name Date/Time Subjects