Legislature(2013 - 2014)SENATE FINANCE 532
04/19/2014 09:00 AM FINANCE
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CS FOR HOUSE BILL NO. 316(FIN) "An Act relating to workers' compensation fees for medical treatment and services; relating to workers' compensation regulations; and providing for an effective date." 11:03:16 AM ANNA LATHAM, STAFF, REPRESENTATIVE KURT OLSON, introduced the legislation and read from the sponsor statement: For the past decade, Alaska has faced the highest workers compensation rates in the nation. The Alaska Workers' Compensation Board, the Legislature, the Alaska Health Care Commission and the Administration agree that effective reform is needed, and is crucial to Alaska's economic future. In 2005, the Alaska Legislature passed HB 13, which established a workers' compensation fee schedule based on usual, customary and reasonable rates, set at the 90th percentile, with a geographic differential. This made incremental changes for the better, but it wasn't the sweeping reform that Alaska truly needs. HB 316 proposes a solution to this challenge by introducing a new fee schedule. HB 316 changes the basis for the fee schedule from what physicians charge in a geographic area, to what it costs physicians to perform medical procedures. Thirty-two states currently use this relative values unit methodology, which incorporates the relative value of a physician's work, practice expense, and professional liability insurance. A conversion factor and geographic differential is applied to the formula. This relative value unit methodology is a system that is owned by the American Medical Association, and is the basis for Medicare and Medicaid's payment schedules. The Medical Services Review Committee will set the conversion factors for the fee schedules, which require the approval of the Commissioner of Labor and Workforce Development before they are adopted into regulation by the Workers' Compensation Board. The Board will also set reimbursement rates for air ambulance services, and the markup rates for prescription drugs and durable medical equipment. HB 316 introduces comprehensive reform of Alaska's workers' compensation fee schedule, in an effort to reduce exorbitant costs in both the public and private sectors. I urge your support of this legislation. Co-Chair Meyer understood that the bill had received support from the majority of affected parties. Ms. Latham agreed that there were 38 letters of support in the bill packet from various medical, union and other related groups. She furthered that the sponsor had worked with all stakeholders involved during the legislative process; 5 hearings were heard in House Labor and Commerce and 2 in the House Finance Committee, prior to the bill moving to the senate. Vice-Chair Fairclough read from an April 17, 2014 letter from the Alaska Chamber of Commerce: While Committee Substitute House Bill 316 (HB 316) is singularly focused on the medical fee schedule, it is an important piece of the overall workers' compensation system. Until now, the Alaska Chamber has withheld support from HB 316. Not because the changes made by HB 316 move workers' comp in the wrong direction, but because additional reforms introduced during the legislative process have yet to be included. Our primary concern is that HB 316 will only have a short-term effect on workers' compensation medical costs over the next several years. Vice-Chair Fairclough noted that Alaska ranked last in the nation when it came to worker's compensation reform. She wondered if the legislation would improve the state's standing, and what the effects would be on employers and employees. Ms. Latham replied that there were many reforms that needed to be addressed when discussing worker's compensation. She believed that the chamber wanted to implement evidence based best practices and utilization as part of the reform. The sponsor holds that the process should consist of 2 parts, lowering fees and implementing utilization and evidence based best practices. 11:08:45 AM Vice-Chair Fairclough understood that the legislation would also benefit employers. Ms. Latham responded yes; employers would pay lower premium rates. Senator Bishop expressed support for the intent of legislation. He noted in member packets the letters of support from labor and contract associations, as well as certain municipalities and boroughs (copy on file). Senator Olson remarked that the letters of support were from industry. He queried whether employees had offered support for the legislation. Ms. Latham replied one individual testified in House Labor and Commerce concerning their experience in the worker's compensation system. She relayed that the previous hearings of the legislation had been publicly noticed and that the process had been very open to the public. She added that the Alaska State Medical Association offered full support of the legislation following the amendment of the bill in the House Finance Committee; the amendment would allow the Commissioner of Labor to approve the conversion factor set by the Medical Services Review Committee (MSRC). She maintained that the process had been open and transparent. Senator Olson expressed concern that the bill could be too ambitious. He worried about a hasty transition from the usual, customary, and reasonable (UCR) fee schedule to a resource based scenario. He wondered if the sponsor had been in discussions with pain management clinics, or patients that dealt with pain management. Ms. Latham stated that a HB370 was up in Senate Judiciary, and spoke to the fee schedule as it pertained to pain management. She asserted that the Resource-Based Relative Value Scale (RBRVS) methodology in the bill was sound and had been developed by Harvard researchers. She relayed that the UCR was inherently inflationary. She shared that 32 states had adopted the RBRVS methodology with a conversion factor, not in phases but in a swift switch from one to the next. 11:13:13 AM Senator Dunleavy asked whether practitioners from remote areas of the state had testified on the legislation. Ms. Latham said that the only practitioners that had testified on the bill were physical therapists in Fairbanks. She added that the sponsor had worked closely with the Alaska State Hospital and Nursing Home Association (ASHNA), adopting a critical access hospital exemption because ASHNA used a different federal Medicaid billing schedule. She furthered that a geographic differential had been applied for smaller, rural hospitals and clinics. Senator Olson understood that there was a letter of support from the Alaska State Medical Association (ASMA) in member packets. Ms. Latham replied in the affirmative. Co-Chair Meyer wondered if chiropractors had expressed an opinion on the bill. Ms. Latham responded that the chiropractic community had not expressed an opinion on the legislation. Senator Dunleavy asked whether cost issues due to Alaska's unique terrain had been considered during the process. Ms. Latham replied yes. She reiterated that the bill contained a critical access hospital exemption and the ability of the board to apply a geographic differential, as well as the initial conversion factor. RACHAEL PETRO, PRESIDENT AND CEO, ALASKA CHAMBER, ANCHORAGE (via teleconference), testified in support of the legislation. She referred to the letter of support in member packets (copy on file). She believed that the legislation was a step in the right direction for systemic, comprehensive change. 11:17:17 AM WARD HURBURT, CHIEF MEDICAL OFFICER, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, ANCHORAGE (via teleconference), spoke in support of the legislation. He shared that the legislation was consistent with the recommendations of the Alaska Healthcare Commission and that the new methodology would encourage a free market. He opined that healthcare and medical costs in the state were the highest in the nation and the bill would open up better negotiations. He said that there would be a conversion factor for the resource based scale to reflect the costs in Alaska. He noted that organized labor groups had testified in support of the legislation. BARBARA HUFF TUCKNESS, DIRECTOR, GOVERNMENT AND LEGISLATIVE AFFAIRS, TEAMSTERS LOCAL 959, testified in support of the legislation. She believed that the medical review board, with the make-up of doctors and lay representatives, would be effective. Co-Chair Meyer CLOSED public testimony. Senator Olson expressed concern that the legislation could prove to alienate those already on the margins of society. Vice-Chair Fairclough spoke to the fiscal notes. She remarked that the FY15 column reflected $62 thousand, while FY16 through FY18 reflected $54 thousand with an estimated supplemental appropriation of $13,700. She felt that the numbers were appropriate. She pointed out that fiscal note 3 reflected several indeterminate costs; however, the analysis on page two of the note provided an appropriate explanation for the indeterminate amount. Vice-Chair Fairclough MOVED to REPORT CSHB 316(FIN) out of committee with individual recommendations and the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. CSHB 316(FIN) was REPORTED out of committee with individual and with previously published fiscal impact note: FN2(LWF); and previously published indeterminate fiscal note: FN3(ADM). 11:23:18 AM AT EASE 11:44:29 AM RECONVENED Co-Chair Meyer handed the gavel to Co-Chair Kelly.