Legislature(2019 - 2020)BUTROVICH 205

03/27/2019 01:30 PM HEALTH & SOCIAL SERVICES

Note: the audio and video recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.

Download Mp3. <- Right click and save file as
Download Video part 1. <- Right click and save file as

Audio Topic
01:31:10 PM Start
01:31:22 PM SB1
02:54:34 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ SB 1 REPEAL CERTIFICATE OF NEED PROGRAM TELECONFERENCED
Heard & Held
-- Testimony <Invitation Only> --
+ Bills Previously Heard/Scheduled TELECONFERENCED
           SB   1-REPEAL CERTIFICATE OF NEED PROGRAM                                                                        
                                                                                                                                
                                                                                                                                
1:31:22 PM                                                                                                                    
CHAIR WILSON announced  the consideration of SB 1.  He noted this                                                               
was the committee's  first hearing of the bill  and announced his                                                               
intention  to consider  the adoption  of  a work  draft, hear  an                                                               
overview  of the  bill and  a sectional,  take invited  testimony                                                               
from subject matter experts, and hold the bill in committee.                                                                    
                                                                                                                                
1:31:48 PM                                                                                                                    
CHAIR WILSON solicited a motion to  adopt the work draft for SB 1                                                               
as the working document.                                                                                                        
                                                                                                                                
1:31:55 PM                                                                                                                    
SENATOR COGHILL moved to adopt  the Committee Substitute (CS) for                                                               
SB 1, work order 31-LS0001\M, as the working document.                                                                          
                                                                                                                                
1:32:04 PM                                                                                                                    
SENATOR GIESSEL objected for purposes of hearing the changes.                                                                   
                                                                                                                                
CHAIR WILSON reviewed the changes  made from version A to version                                                               
M:                                                                                                                              
     The changes made in the work draft pertain to the effective                                                                
     date on page 5, line 9:                                                                                                    
                                                                                                                                
        • Section 8 reads: This act takes effect on July 1,                                                                     
          2024.                                                                                                                 
                                                                                                                                
     The change in the effective date from July 1, 2020, to July                                                                
     1, 2024, enables a step-down approach to allow certificate-                                                                
     of-need recipients and newly approved applicants to:                                                                       
                                                                                                                                
        • plan for the change over the course of five years                                                                     
        • re-engineer their business model                                                                                      
        • and re-coup their investment                                                                                          
        • allow the department to revise regulations                                                                            
                                                                                                                                
1:33:01 PM                                                                                                                    
SENATOR BEGICH asked  that if they eliminated  the Certificate of                                                               
Need (CON), would  the regulations necessarily not  follow and go                                                               
as well. He asked  if they are going to spend  four or five years                                                               
working  on  regulations,  what  do   they  need  to  ensure  the                                                               
regulations still  apply and do  not disappear with the  bill. He                                                               
asked if they could get a legal opinion about that.                                                                             
                                                                                                                                
CHAIR WILSON said they are  repealing the statute. His hope would                                                               
be that they  would have new regulations being  developed to help                                                               
strengthen what could  be a better process. Last  year they heard                                                               
from many providers  who agreed the process is  not perfect. Even                                                               
the  department  stated  that  the process  for  applying  for  a                                                               
Certificate of  Need is not a  good one. They would  like to make                                                               
the process  better. This  will allow them  to make  that process                                                               
better without having the Certificate of Need law in effect.                                                                    
                                                                                                                                
SENATOR BEGICH asked  if by eliminating the law  whether they are                                                               
eliminating the  authority for regulation.  He is  asking because                                                               
he doesn't know the technicality of it.                                                                                         
                                                                                                                                
CHAIR WILSON  said they  could ask  for a  legal opinion  on that                                                               
matter.                                                                                                                         
                                                                                                                                
1:34:54 PM                                                                                                                    
SENATOR GIESSEL removed her objection.                                                                                          
                                                                                                                                
1:34:59 PM                                                                                                                    
CHAIR WILSON found no objection  and CSSB 1, Version 31-LS0001\M,                                                               
was adopted.                                                                                                                    
                                                                                                                                
CHAIR WILSON said that SB  1 repeals Alaska's Certificate of Need                                                               
program  and  provides  for a  five-year  delayed  implementation                                                               
date.  The CON  programs were  first mandated  nationally by  the                                                               
federal government  in 1974.  Since the  mandate was  repealed by                                                               
the federal  government in  1987, 12  states have  repealed their                                                               
CON laws;  three states have  a regulatory oversight  method, and                                                               
35 states  still have CON  laws and require approval  for certain                                                               
facilities and services.                                                                                                        
                                                                                                                                
CHAIR WILSON said  that CON programs were  originally intended to                                                               
restrain health  care costs  and improve access  to care  for the                                                               
poor and  the underserved populations.  However, four  decades of                                                               
data  and  studies  show  CON laws  have  not  controlled  costs,                                                               
improved quality and outcomes or  increased access to health care                                                               
for the poor or underserved.                                                                                                    
                                                                                                                                
CHAIR WILSON said that in  fact, CON laws have established health                                                               
care  monopolies.  This  has  resulted  in  barriers  to  new  or                                                               
expanded medical  facilities and  limited health care  choices or                                                               
innovations  for  consumers.  Studies  have shown  that  a  well-                                                               
functioning  health care  market  improves  access, quality,  and                                                               
outcomes; incentivizes innovations from  new entrants; and lowers                                                               
the   costs  of   health   care   services.  Repealing   Alaska's                                                               
Certificate of  Need program would benefit  Alaskans by fostering                                                               
competition in the health care markets.                                                                                         
                                                                                                                                
1:36:53 PM                                                                                                                    
GARY   ZEPP,   Staff,   Senator  David   Wilson,   Alaska   State                                                               
Legislature, Juneau, Alaska,  said that most of  the sections for                                                               
SB 1 are conforming and presented the sectional analysis:                                                                       
                                                                                                                                
     Sections  1-3: makes  conforming amendment  to AS  18.20.400                                                               
     and AS  18.20.499 to eliminate  references to  AS 18.07.111,                                                               
     which is repealed under sec. 5 of the bill.                                                                                
                                                                                                                                
     Section 4:  makes conforming amendments  to AS  18.26.220 by                                                               
     removing references to repealed sections of law.                                                                           
                                                                                                                                
     Section  5: repeals  all of  AS 18.07,  which describes  the                                                               
     certificate of need program for  health care facilities, and                                                               
     AS    21.86.030(c)(1),   AS    44.64.030(a)(18),   and    AS                                                               
     47.80.140(b), which  also relate to the  certificate of need                                                               
     program.                                                                                                                   
                                                                                                                                
     Section 6: repeals a section  of uncodified law, sec. 4, ch.                                                               
     275, SLA 1976, which provided  a transition to allow medical                                                               
     facilities in  existence or  under construction  before July                                                               
     1, 1976 to obtain certificates of need.                                                                                    
                                                                                                                                
     Section  7:  provides  that the  Department  of  Health  and                                                               
     Social Services may not take  any action to revoke, enforce,                                                               
     or  modify a  certificate of  need issued  to a  health care                                                               
     facility before the effective date of the Act.                                                                             
                                                                                                                                
     Section 8: provides that the Act takes effect July 1, 2020.                                                                
                                                                                                                                
MR. ZEPP  began his presentation  about SB  1 by showing  a video                                                               
explaining  what a  Certificate of  Need program  is from  George                                                               
Washington  University-Mercatus   Center.  The  video   made  the                                                               
following points:                                                                                                               
                                                                                                                                
     Before  someone  can open  or  expand  the operations  of  a                                                               
     health care  facility, CON laws  require them to prove  to a                                                               
     regulator that  their community needs the  new services. The                                                               
     original goal was  to control costs by  reducing spending on                                                               
     unnecessary treatments and equipment.  The CON laws have not                                                               
     been a panacea  for controlling costs. Obtaining a  CON is a                                                               
     pain. CON  laws make it  hard for new health  care providers                                                               
     to   compete  with   established   ones.  Congress   stopped                                                               
     encouraging states  to adopt CON  laws in 1987.  Since then,                                                               
     14 states have  repealed them. Repealing CON laws  is one of                                                               
     the first  steps a state  can take  to make its  health care                                                               
     market more competitive.                                                                                                   
                                                                                                                                
MR. ZEPP presented the following information on CON programs:                                                                   
                                                                                                                                
     CON  laws  are  state-level   statutory  laws  that  require                                                               
     healthcare   entities   to   obtain   permission   to   make                                                               
     significant   expenditures  or   to   construct  or   expand                                                               
     facilities  and services,  based on  the an  application fee                                                               
     and the  theory that  controlling the supply  of facilities,                                                               
     equipment,  and  services is  the  best  method to  restrain                                                               
     rising  healthcare  costs   and  prevent  over-expansion  of                                                               
     healthcare facilities.                                                                                                     
                                                                                                                                
     The  Certificate of  Need laws  were  originally created  to                                                               
     contain healthcare costs, prevent  an over-supply of medical                                                               
     services and infrastructure, and  improve access to care for                                                               
     the indigent or to underserved populations.                                                                                
                                                                                                                                
     The  basic  assumption  underlying Certificate  of  Need  is                                                               
     excess   capacity   stemming   from  the   overbuilding   of                                                               
     healthcare  facilities  which  results in  healthcare  price                                                               
     inflation and overcapacity.                                                                                                
                                                                                                                                
MR. ZEPP presented the National History of Certificate of Need:                                                                 
                                                                                                                                
     1974:  National Health  Planning  Resources Development  Act                                                               
     (NHPRDA)  required all  states seeking  federal funding  for                                                               
     health  programs to  establish  oversight  agencies for  the                                                               
     submission of  proposals for any  major capital  spending on                                                               
     health care, i.e. a Certificate of Need program.                                                                           
                                                                                                                                
     1974-1982:  Health care  costs continue  to rise  nationwide                                                               
     despite almost 100% state participation in NHPRDA.                                                                         
                                                                                                                                
     1982:  Congress initiates  a review  of Certificate  of Need                                                               
     programs and  the Congressional Budget Office  study doesn't                                                               
     offer  a  recommendation  but  reports  that  problems  with                                                               
     NHPRDA has  limited the program's success  in achieving cost                                                               
     savings. 1983-1985: Five states  abandon Certificate of Need                                                               
     even though NHPRDA is still in effect.                                                                                     
                                                                                                                                
     1987-Present:  Congress repeals  NHPRDA. Following  the U.S.                                                               
     repeal, 13  states have now terminated  their Certificate of                                                               
     Need programs.                                                                                                             
                                                                                                                                
MR. ZEPP  showed maps  representing the evolution  of CON  in the                                                               
U.S. from 1974 to 1980 to 1990 and  to 2017. He said the 2017 map                                                               
shows fifteen  states that have  repealed their  CON regulations.                                                               
Since  then,  Arizona  has  implemented  a  variation  of  a  CON                                                               
program.   Indiana  reinstated   their  CON   program  in   2018.                                                               
Interestingly, Indiana's  own state medical association  does not                                                               
support reinstating the CON program.                                                                                            
                                                                                                                                
MR. ZEPP presented Alaska's Legislative History of Certificate                                                                  
of Need:                                                                                                                        
                                                                                                                                
The following is a past summary of enacted legislation passed by                                                                
the Alaska Legislature regarding the Certificate of Need                                                                        
program:                                                                                                                        
                                                                                                                                
     1976:  HB  665  (Ch.  275, SLA  1976),  which  repealed  and                                                               
     replaced all  of AS 18.07  to establish the CON  program and                                                               
     regulation of healthcare facilities.                                                                                       
                                                                                                                                
     1982: HB  591 (Ch.  59, SLA 1982),  covered a  temporary but                                                               
     non emergency  CON for  a health care  facility and  added a                                                               
     definition of certificate of need  dealing with the issuance                                                               
     of certificates.                                                                                                           
                                                                                                                                
     1982:  HB 591  (Ch. 25,  SLA 1981),  clarified that  Pioneer                                                               
     Homes are not subject to CON.                                                                                              
                                                                                                                                
     1983: SB 85  (Ch. 95, SLA 1983), added a  $1.0 million floor                                                               
     for requiring a CON.                                                                                                       
                                                                                                                                
     1990: HB  85 (Ch. 85,  SLA 1990), provided  authorization to                                                               
     Dept. of  Health & Social Services  to charge a fee  for the                                                               
     CON.                                                                                                                       
                                                                                                                                
     1991:  SB  86  (Ch.  21,  SLA  1991),  deleted  the  federal                                                               
     statutes and changed the title section.                                                                                    
                                                                                                                                
     1996:  HB 528  (Ch.  84,  SLA 96),  Placed  a moratorium  on                                                               
     nursing  home beds  and  established  a legislative  working                                                               
     group on long-term care.                                                                                                   
                                                                                                                                
     2004:  HB  511  (Ch.   48,  SLA  04),  Included  Residential                                                               
     Psychiatric Treatment Centers.                                                                                             
                                                                                                                                
1:46:43 PM                                                                                                                    
MR. ZEPP said that the CON program is very broad and deep. He                                                                   
presented the following overview of Alaska's Certificate of Need                                                                
program:                                                                                                                        
                                                                                                                                
     Certificate of Need  approval is required in  Alaska for any                                                               
     expenditures totaling more than $1.5 million dollars for:                                                                  
          Construction of a health care facility;                                                                               
          Alteration of the bed capacity of a health care                                                                       
          facility; Addition of a category of health services                                                                   
          provided by the health care facility; and,                                                                            
          Conversion of a  building or a part of a  building to a                                                               
          nursing home.                                                                                                         
                                                                                                                                
     Non-Refundable Applications & Fees:                                                                                        
          Activity valued  at $2.5 million  dollars or  less, the                                                               
          cost would be $2,500.00 to apply; and,                                                                                
          Activity valued  more than $2.5 million  dollars, a fee                                                               
          equal to .1% of the estimated  cost is applied, up to a                                                               
          maximum of $75,000.00.                                                                                                
                                                                                                                                
     Time Standards  for review  of applications  for Certificate                                                               
     of Need:                                                                                                                   
          The department has up to  60 days to review a completed                                                               
          application      and      to      allow      concurrent                                                               
          applications/proposals  for a  similar activity  in the                                                               
          same geographic area.                                                                                                 
                                                                                                                                
     Proceedings for modification, suspension, and revocation:                                                                  
          The  department,   a  member  of  the   public  who  is                                                               
          substantially affected by  activities authorized by the                                                               
          certificate, or another applicant  for a Certificate of                                                               
          Need may initiate a hearing  conducted by the Office of                                                               
          Administrative  Hearings  to   obtain  a  modification,                                                               
          suspension,  or revocation  of an  existing Certificate                                                               
          of Need  by filing an accusation,  THE Commissioner has                                                               
          authority to do this as prescribed under AS 44.62.360.                                                                
                                                                                                                                
     Definition:                                                                                                                
     Health care  facility means a private,  municipal, state, or                                                               
     federal   hospital,    psychiatric   hospital,   independent                                                               
     diagnostic   testing   facility,   residential   psychiatric                                                               
     treatment  center,  tuberculosis hospital,  skilled  nursing                                                               
     home    facility,   kidney    disease   treatment    center,                                                               
     intermediate   care   facility,   and   ambulatory   surgery                                                               
     facility.                                                                                                                  
                                                                                                                                
MR.  ZEPP  said   there  is  an  exemption   for  an  operational                                                               
ambulatory surgical  facility to  expend any  amount of  money to                                                               
relocate the  facility to  a new site  within the  same community                                                               
without seeking  a CON approval, as  long as the neither  the bed                                                               
capacity nor  the number  of categories  of health  care services                                                               
remains  the same.  CON exempt  entities are  the Alaska  Pioneer                                                               
Homes,  the Alaska  Veterans' Home,  offices of  private practice                                                               
physicians or dentists, whether  in individual or group practice;                                                               
U.S. Indian Health Services facilities;  and Alaska tribal health                                                               
care entities.                                                                                                                  
                                                                                                                                
MR.  ZEPP  said  there  are   three  categories  of  health  care                                                               
providers with  CON. There  are some on  the forefront  that have                                                               
exemptions. There are  incumbents in the middle  who are existing                                                               
and operational. Then are there  are new entrants who cannot gain                                                               
entrance to Alaska because of CON laws.                                                                                         
                                                                                                                                
MR.  ZEPP  presented   a  slide  showing  that   health  care  is                                                               
complicated:                                                                                                                    
                                                                                                                                
        • Our current healthcare system is a highly fragmented.                                                                 
        • Data is siloed with no sharing, because "proprietary                                                                  
          patient data can be profitable.                                                                                       
        • Insurance is bought  mostly   by  employers  and  the                                                                 
          patient is removed from the purchasing process.                                                                       
        • Government laws and regulations  require  unnecessary                                                                 
          administrative efforts for healthcare providers.                                                                      
        • The government dictates what health  care facilities,                                                                 
          providers, and services are allowed and not allowed                                                                   
          into your community.                                                                                                  
        • The freedom of selecting your healthcare  services is                                                                 
          dictated and controlled by government.                                                                                
                                                                                                                                
MR. ZEPP said  that repealing CON will not solve  all of Alaska's                                                               
health  care issues,  but it  is  a great  start to  open up  the                                                               
markets for  new entrants and  increased access to  new services,                                                               
technology, and most importantly,  competition. He showed a slide                                                               
stating  that repealing  Alaska's  CON  is only  a  piece of  the                                                               
puzzle:                                                                                                                         
                                                                                                                                
        • Over 100 million Americans in  twelve states  (31% of                                                                 
          the U.S. population) live without CON.                                                                                
        • 40 years of studies  very clearly  show that  non-CON                                                                 
          states have better access, lower costs, higher quality                                                                
          outcomes, and lower mortality rates than CON states.                                                                  
        • Proponents of CON would have you believe that  if CON                                                                 
          was  repealed, there  would chaos  in our  communities:                                                               
          small  hospitals would  close, Medicaid/Medicare  costs                                                               
          would rise,  and hospitals would  be unable  to provide                                                               
          EMTALA for the indigent care                                                                                          
        • CON states and non-CON states have very similar levels                                                                
          of indigent care, whether you have a con or not, this                                                                 
          is based on actual research!                                                                                          
                                                                                                                                
MR. ZEPP  said this legislation  is a policy issue,  not directed                                                               
at  any of  the  state's cherished  health  care providers.  They                                                               
fully respect  and appreciate  the great work  they are  doing in                                                               
the state. This is a policy discussion and not an attack on                                                                     
health care providers.                                                                                                          
                                                                                                                                
MR. ZEPP presented the following on the consequences of CON                                                                     
failures:                                                                                                                       
                                                                                                                                
     We believe Alaska's CON laws have:                                                                                         
        • Stifled competition,    prevented   innovation,   and                                                                 
          prevented new technology;                                                                                             
        • Failed to increase access for indigent care or the                                                                    
          underserved populations;                                                                                              
        • Created barriers for new entrants;                                                                                    
        • Protected incumbent hospitals and created monopolies;                                                                 
        • And increased healthcare costs, especially in a                                                                       
          restrained market like Alaska.                                                                                        
                                                                                                                                
     Result: We have the highest healthcare costs in the world!                                                                 
                                                                                                                                
1:50:37 PM                                                                                                                    
MR. ZEPP presented quotations about why competition is important                                                                
in health care markets:                                                                                                         
                                                                                                                                
     "Competition  is  essential  to ensure  that  providers  and                                                               
     health plans  are subject  to the  market forces  that drive                                                               
     them  to attract  patients and  subscribers by  offering low                                                               
     prices and  high quality. If market  powers are concentrated                                                               
     among  providers or  plans, they  are  insulated from  those                                                               
     forces."                                                                                                                   
                                                                                                                                
     "Material,  lasting  improvement  to our  healthcare  system                                                               
     requires   harnessing   private    sector   innovation   and                                                               
     competition to  benefit of all.  When ingenuity  and capital                                                               
     are  focused  on  what  we most  value,  we  see  incredible                                                               
     innovation  and  productivity  gains.  Enabling  competition                                                               
     requires  alignment of  the incentives  of all  stakeholders                                                               
     with what we value:  sufficient transparency and appropriate                                                               
     regulations that further benefit Alaskans."                                                                                
                                                                                                                                
     "Reform  must address  the underlying  drivers of  costs and                                                               
     cost increases,  including the  current lack  of value-based                                                               
     competition  in   our  healthcare  delivery   system  (e.g.,                                                               
     hospitals, medical service providers, and pharmaceuticals."                                                                
                                                                                                                                
          Why Competition  Law Matters to  Health Care  Quality -                                                               
          William  Sage, David  Hyman,  Warren  Greenburg -  2003                                                               
          (page 32);  Making Healthcare Markets Work  Better: The                                                               
          Role  of Regulation."  Stuart Guterman    January  2017                                                               
          (page 2)                                                                                                              
                                                                                                                                
MR.  ZEPP presented  quotations from  A Bipartisan  Blueprint for                                                               
Improving  Our  Nation's  Health  System  Performance  signed  by                                                               
Governors John Hickenlooper, John  Kasich, Bill Walker, Tom Wolf,                                                               
and  Brian Sandoval,  pointing out  that  Alaska's Governor  Bill                                                               
Walker had been one of the signees of the blueprint:                                                                            
                                                                                                                                
     "Reduced  competition  among   clinicians  leads  to  higher                                                               
     prices   for  healthcare   services,  reduces   choice,  and                                                               
     negatively  impacts  overall   healthcare  quality  and  the                                                               
     efficient allocation of resources."                                                                                        
                                                                                                                                
     "State  polices that  restrict entry  into provider  markets                                                               
     can  stifle  innovation  and  more  cost-effective  ways  to                                                               
     provide care while limiting choice and competition."                                                                       
                                                                                                                                
MR. ZEPP provided quotes "from research, studies and data                                                                       
regarding how CON laws have stifled competition":                                                                               
                                                                                                                                
     "Competition  creates  choices   for  consumers  and  raises                                                               
     quality standards as providers  compete for patient loyalty.                                                               
     A  1993  study  found  that hospitals  in  more  competitive                                                               
     markets had  average costs below  those of  less competitive                                                               
     markets."                                                                                                                  
                                                                                                                                
     "Market   competition   in  healthcare   delivery   provides                                                               
     economic  empowerment to  patients and  payors by  providing                                                               
     access,  encouraging   innovation  and  the   investment  of                                                               
     capital in  overall cost  saving technologies,  and creating                                                               
     choices for  consumers which, in turn,  encourages providers                                                               
     to  raise  quality standards  as  they  compete for  patient                                                               
     loyalty. When patient choice  is diminished, decisions about                                                               
     appropriate pricing/costs,  access, quality,  and beneficial                                                               
     outcomes  become the  sole purview  of the  elite groups  of                                                               
     oligopoly  decisionmakers who,  in  the  absence of  healthy                                                               
     competition, are  free to ignore market  demands and patient                                                               
     needs. This circumstance is what  drives the acceleration of                                                               
     costs."                                                                                                                    
                                                                                                                                
          Written  Testimony  to  the  Senate  Labor  &  Commerce                                                               
          Committee on April  6, 2017   Robert J.  Cimasi (page 7                                                               
          &  8)  +  "California Providers  Adjust  to  Increasing                                                               
          Price Controls,  J Zwanziger,  G. Melnick,  A. Bamezai,                                                               
          Health  Policy Reform    1993  (Pages 241-58);  Written                                                               
          testimony to  the Senate Labor &  Commerce Committee on                                                               
          April 6, 2018  Matthew D. Mitchell, PhD, Mercatus                                                                     
          Center-George Mason University (page 17).                                                                             
                                                                                                                                
1:52:15 PM                                                                                                                    
MR. ZEPP presented two slides stating that CON laws prevent                                                                     
innovation and new technologies:                                                                                                
                                                                                                                                
     Example, this applies  to Alaska as well due to  our CON law                                                               
     restrictions if you're  a new entrant and  costs exceed $1.5                                                               
     million!                                                                                                                   
                                                                                                                                
     Dr.  Singh, of  North Carolina,  cannot purchase  a new  MRI                                                               
     machine because of CON laws  in North Carolina, the law that                                                               
     applies here.                                                                                                              
                                                                                                                                
     On  average,  an MRI  at  a  North Carolina  hospital  costs                                                               
     upwards of $2,000. Dr. Singh's  charges between $500 to $700                                                               
     but he  has to use a  mobile scanner instead of  a fixed MRI                                                               
     scanner because of the CON laws.                                                                                           
                                                                                                                                
     "The  answer  lies  in the  powerful  lessons  business  has                                                               
     learned over the  past two decades about  the imperatives of                                                               
     competition.  In  industry  after industry,  the  underlying                                                               
     dynamic  is  the  same;  competition  compels  companies  to                                                               
     deliver  increasing  value  to  customers.  The  fundamental                                                               
     driver  of  this  continuous quality  improvement  and  cost                                                               
     reduction  is  innovation.  Without  incentives  to  sustain                                                               
     innovation  in health  care,  short-term  cost savings  will                                                               
     soon  be overwhelmed  by  the desire  to  widen access,  the                                                               
     growing  health  needs  of  an  aging  population,  and  the                                                               
     unwillingness of Americans to  settle for anything less that                                                               
     the best  treatments available.  Inevitably, the  failure to                                                               
     promote  innovation  will  lead  to lower  quality  or  more                                                               
     rationing of care  two equally undesirable results."                                                                       
                                                                                                                                
          Institute  of Justice,  North  Carolina  CON (page  1);                                                               
          Making  Competition in  Health  Care  Work    Elizabeth                                                               
          Teisbeth,  Michael Porter,  & Gregory  Brown    Harvard                                                               
          Business Review  1994 (page 1-2)                                                                                      
                                                                                                                                
      The  misguided assumption  underlying  much  of the  debate                                                               
     about health  care reform is  that technology is  the enemy.                                                               
     By  assuming  that  technology drives  up  costs,  reformers                                                               
     neglect the central importance of  innovation or, worse yet,                                                               
     attempt  to slow  its pace.  In fact,  innovation driven  by                                                               
     rigorous  competition  is  the  key  to  successful  reform.                                                               
     Although  health  care  is  unique in  some  ways,  in  this                                                               
     respect, it is no different than any other industry."                                                                      
                                                                                                                                
     "CON   repeal  would   remove  unnecessary   and  irrational                                                               
     constraints  and costly  regulatory barriers  to innovation;                                                               
     to  investment in  new  technologies;  to quality  services;                                                               
     and,   to   cost-effective   improvements,  which   as   the                                                               
     technology advances,  offer the  true and  valid opportunity                                                               
     to  provide cost-effective  quality  healthcare to  Alaska's                                                               
     citizens."                                                                                                                 
                                                                                                                                
     "Systematically  review and  rationalize  federal and  state                                                               
     regulations  that  may  inhibit innovation  and  competition                                                               
     (e.g.,  credentialing,  clinical  trials,  and  prescription                                                               
     drug import regulations)."                                                                                                 
                                                                                                                                
          Institute  of Justice,  North  Carolina  CON (page  1);                                                               
          Making  Competition in  Health  Care  Work    Elizabeth                                                               
          Teisbeth,  Michael Porter,  & Gregory  Brown    Harvard                                                               
          Business Review    1994 (page 2);  Written Testimony to                                                               
          the Senate Labor & Commerce  Committee on April 6, 2017                                                               
            Robert  J. Cimasi (page  8) ; A  Bipartisan Blueprint                                                               
          for Improving  Our Nation's Health  System Performance-                                                               
          Governor's   John  Hickenlooper,   John  Kasich,   Bill                                                               
          Walker, Tom  Wolf, and Brian  Sandoval    February 2018                                                               
          (page 4)                                                                                                              
                                                                                                                                
1:53:39 PM                                                                                                                    
MR. ZEPP presented quotations about how CON laws create barriers                                                                
for new entrants:                                                                                                               
                                                                                                                                
     "Government-erected  barriers to  entry that  can lead  to a                                                               
     highly-concentrated and inefficient market."                                                                               
                                                                                                                                
     "Under  normal market  conditions, high  prices and/or  high                                                               
     profit  margins  attract  new producers  and  sellers.  This                                                               
     increased supply  leads to lower  prices and  higher quality                                                               
     over time. Without the possibility  of new entrants and real                                                               
     competition,  however,  existing  producers can  use  market                                                               
     power to keep prices high and quality low."                                                                                
                                                                                                                                
     "Denial  of  patient choice  in  Alaska  is because  of  the                                                               
     barrier to  entry posed  by CON.  New Medical  providers, no                                                               
     matter how efficiently and  creatively they might contribute                                                               
     to  higher  quality,  more beneficial  outcomes,  and  lower                                                               
     overall healthcare  costs, must  receive permission  and can                                                               
     be challenged by incumbents and  this limits competition for                                                               
     Alaskans and their families.                                                                                               
                                                                                                                                
     "On average,  application fees  are $32,000;  however, total                                                               
     costs  associated  with  the process  to  obtain  regulatory                                                               
     permission  to provide  the medical  services requested  can                                                               
     exceed  $5  million for  a  single  application (Conley  and                                                               
     Valone 2011), which exceeds the  average price of a magnetic                                                               
     resonance   imaging  (MRI)   machine.   The  costs   include                                                               
     consulting fees as  well as review and appeal  fees, and the                                                               
     process can take up to three years."                                                                                       
                                                                                                                                
          Reforming  America's Healthcare  System Through  Choice                                                               
          and  Competition    November  2018  (page 14);  Written                                                               
          Testimony to  the Senate Labor &  Commerce Committee on                                                               
          April 6, 2017   Robert  J. Cimasi (page 9); Barriers to                                                               
          Entry  in  the  Healthcare Markets,  Thomas  Stratmann,                                                               
         Matthew Baker, Mercatus Center  2017 (page 4)                                                                          
                                                                                                                                
MR. ZEPP  said that  he wanted to  address the  Emergency Medical                                                               
Treatment and Labor Act (EMTALA) because  it has come up the last                                                               
several  years when  discussing  CON in  committee.  EMTALA is  a                                                               
federal law  that requires Medicare-participating  hospitals with                                                               
emergency  departments  to  medically screen  every  patient  who                                                               
seeks  emergency care  and to  stabilize or  transfer those  with                                                               
medical  emergencies, regardless  of health  insurance status  or                                                               
ability to  pay--this law has  been an unfunded mandate  since it                                                               
was enacted in 1986. He asked  the committee to keep in mind that                                                               
CON laws have failed to increase  access for indigent care or the                                                               
underserved populations.                                                                                                        
                                                                                                                                
MR. ZEPP  asked if  EMTALA-related care is  the driver  of rising                                                               
health care  costs. He  would say no.  According to  the American                                                               
College  of Emergency  Physicians, emergency  care in  America is                                                               
just two percent of all U.S. medical costs.                                                                                     
                                                                                                                                
MR. ZEPP  said to remember that  CON has been in  effect for over                                                               
four decades and the effectiveness  and burdens of CON regulatory                                                               
policy  have  been  studied  extensively  by  federal  and  state                                                               
governments,  academic institutions,  and  other researchers  and                                                               
organizations.  Although  advocates of  CON  laws  might seek  to                                                               
promote indigent care,  the evidence does not show  that CON laws                                                               
advance  that  goal.  By limiting  competition,  CON  laws  allow                                                               
incumbent  healthcare  providers  to   earn  greater  profits  by                                                               
charging  higher   prices  for   private  health   insurance  and                                                               
financing indigent  care. It is cross-subsidization.  That is the                                                               
concept behind CON.                                                                                                             
                                                                                                                                
MR. ZEPP said to contemplate the following:                                                                                     
                                                                                                                                
     "The huge  enterprises that U.S.  hospitals have  become are                                                               
     largely unaccountable for the  amounts of revenue they raise                                                               
     or the  uses to which they  put that money. Indeed  they are                                                               
     major contributors to ever-rising healthcare costs."                                                                       
                                                                                                                                
     "Competition  is  the  best  way   both  to  limit  dominant                                                               
     hospitals'  claims on  gross domestic  product (GDP)  and to                                                               
     restore  voters  and  their  representatives  the  power  to                                                               
     decide just what extras are worth paying for."                                                                             
                                                                                                                                
     "Early  analysis  of the  Medicare  Care  Report data  shows                                                               
     national  declines  in  uncompensated  care,  especially  in                                                               
     expansion states,  although the data do  not permit reliable                                                               
     estimates of trends in Medicaid payment amounts."                                                                          
                                                                                                                                
      Almost  all  states  make Medicaid  Disproportionate  Share                                                               
     Hospital (DHS)  payment are made  to hospitals  serving high                                                               
     proportions of Medicaid or low-income patients."                                                                           
                                                                                                                                
     What is Disproportional Share Hospital payments?                                                                           
     Federal  law  requires  that state  Medicaid  programs  make                                                               
     Disproportionate   Share   Hospital    (DSH)   payments   to                                                               
     qualifying hospitals  that serve a large  number of Medicaid                                                               
     and  uninsured  individuals. Approximately  3,109  hospitals                                                               
     receive this adjustment.                                                                                                   
                                                                                                                                
          Hospital  Competition  and  Charity  Care,  Christopher                                                               
          Garmon, Bureau of Economics  Federal Trade Commission                                                                 
          October  2006   (page  18);  CON  Laws:   Analysis  and                                                               
          Recommendations  for  the Commission  on  Rationalizing                                                               
          New Jersey's  Health Care Resources, Janelle  Sagness                                                                 
          January   2007  (page   9)  ;   Understanding  Medicaid                                                               
          Hospital  Payments  and  the Impact  of  Recent  Policy                                                               
          Changes,  Peter  Cunningham,  Katherine  Young,  Rachel                                                               
          Garfield, Julia Foutz, Kaiser  Family Foundation - 2019                                                               
          (page  3  &  8);  Medicaid.gov  Disproportionate  Share                                                               
          Hospitals web site.                                                                                                   
                                                                                                                                
1:56:41 PM                                                                                                                    
MR. ZEPP presented information on Medicaid Disproportionate                                                                     
Share Hospital (DSH) payments in 2018 for Alaska:                                                                               
                                                                                                                                
     Who  or   where  was  the   funding  distributed   to?  What                                                               
     healthcare entities/facilities?                                                                                            
          4 Hospitals have had ongoing agreements with the                                                                      
          department to receive DSH for many years.                                                                             
             • Alaska Psychiatric Institute (by regulation API                                                                  
               receives    their   facility    specific   maximum                                                               
               allowable by law)                                                                                                
                  o FY2018-$14.7 million                                                                                        
                  o FY2017-$14.6 million                                                                                        
                  o FY2016-$14.1 million                                                                                        
             • Fairbanks Memorial Hospital- note the decline                                                                    
               resulting from falling uncompensated care                                                                        
                  o FY2018-$258.9 thousand                                                                                      
                  o FY2017-$660.5 thousand                                                                                      
                  o FY2016-$1.3 million                                                                                         
             • Bartlett Regional Hospital  note the decline                                                                     
               resulting from falling uncompensated care                                                                        
                  o FY2018-$302.5 thousand                                                                                      
                  o FY2017-$274.5 thousand                                                                                      
                  o FY2016-$1.8 million                                                                                         
             • Providence Alaska Medical Center - $2,531,019                                                                    
               annually.                                                                                                        
                  o FY2018-$2.5 million                                                                                         
                  o FY2017-$2.5 million                                                                                         
                  o FY2016-$2.5 million                                                                                         
                                                                                                                                
MR. ZEPP  said that  for his final  considerations on  EMTALA, he                                                               
would present  how other states  that do  not have CON  or states                                                               
that  do have  CON but  do  not regulate  hospitals, imagery,  or                                                               
ambulatory surgery centers deal with EMTALA:                                                                                    
                                                                                                                                
     Example: New Jersey requires  Ambulatory Surgery Centers not                                                               
     owned by a hospital  to pay a 3.5% tax of  up to $200,000 on                                                               
     the facility's annual gross revenue.  The tax helps fund the                                                               
    uncompensated care through the Health Care Subsidy Fund.                                                                    
                                                                                                                                
     There are methodologies to help  level the playing field for                                                               
     EMTALA  in Alaska  for those  healthcare  providers who  are                                                               
     mandated  to provide  EMTALA.  It's not  an  all or  nothing                                                               
     proposition and  certainly not a  reason to retain  CON laws                                                               
     in Alaska.                                                                                                                 
                                                                                                                                
1:57:59 PM                                                                                                                    
SENATOR BEGICH  asked about the  slide on DSH payments.  He noted                                                               
the API  numbers are significantly  higher than others  and read,                                                               
"by  regulation  API  receives their  facility  specific  maximum                                                               
allowable  by  law."  Under  EMTALA  they  receive  the  Medicaid                                                               
Disproportionate  Share money.  He  asked if  they did  privatize                                                               
API, would that regulation still apply.                                                                                         
                                                                                                                                
MR. ZEPP answered that he did not know.                                                                                         
                                                                                                                                
SENATOR BEGICH said that he would  like to look into that at some                                                               
point.                                                                                                                          
                                                                                                                                
MR. ZEPP  said, "Let's examine  the data of Alaska's  high health                                                               
care costs" and presented the following:                                                                                        
                                                                                                                                
     Inflation vs. Skyrocketing Healthcare Prices                                                                               
                                                                                                                                
     The average overall rate of inflation in Alaska was 1.22%                                                                  
     between 2013  2017.                                                                                                        
                                                                                                                                
     Healthcare had a rate of inflation of 10.0% over the same                                                                  
     five-year period.                                                                                                          
                                                                                                                                
MR. ZEPP  said to remember that  in 1974, one of  the main points                                                               
was  that  health care  costs  were  rising  rapidly with  an  11                                                               
percent inflation rate that year.  According to the Department of                                                               
Labor's data, Alaska's health care  costs are anywhere from 45 to                                                               
53 percent higher than the U.S. average for health care.                                                                        
                                                                                                                                
MR. ZEPP  said that  the Milliman  reports about  Alaska's health                                                               
care costs  produced in 2011  and 2016 were very  interesting. He                                                               
presented the key conclusions from 2011:                                                                                        
                                                                                                                                
        • Hospital operating margins in Alaska were 13.4% on                                                                    
          average in 2010, compared with  5.7% for the comparison                                                               
          states (or in other  words, average hospital margins in                                                               
          Alaska  are 233%  of those  in  the comparison  states)                                                               
          Margins for  hospitals in rural  areas were  similar to                                                               
          the comparison  states. Margins for hospitals  in urban                                                               
          areas  were 16.2%,  driven largely  by high  margins in                                                               
          two for-profit hospitals.                                                                                             
        • Commercial hospital reimbursement is approximately                                                                    
         137% of the average in the comparison states.                                                                          
        • Average hospital costs are approximately 138% of the                                                                  
          average in comparison states.                                                                                         
        • Overall health care utilization rates for Medicare                                                                    
         patients are similar to the comparison states.                                                                         
                                                                                                                                
               Milliman Client Report, Drivers of Health Care                                                                   
               Costs in Alaska and Comparison States, November                                                                  
               2011  (page 1 & 2)                                                                                               
                                                                                                                                
SENATOR BEGICH  asked Mr. Zepp  to connect  the dots for  him. He                                                               
asked  how would  repeal of  CON laws  impact this  based on  his                                                               
reading of the reports and the data he is describing.                                                                           
                                                                                                                                
MR. ZEPP  answered that he has  22 studies he has  drawn from for                                                               
this presentation.  The committee  packets have  seven additional                                                               
studies. This is  not all the studies he has  researched over the                                                               
last three years. He has  talked to people nationally. Originally                                                               
CON  was  created  to  contain  health  care  costs,  prevent  an                                                               
oversupply of  medical services  and infrastructure,  and improve                                                               
access for indigent care and  underserved populations. If he is a                                                               
new provider of  dialysis, for example, he cannot  come to Alaska                                                               
unless the state of Alaska  gives him permission to enter Alaska.                                                               
An incumbent, which in this  case is Fresenius, the only provider                                                               
in the  state for dialysis,  could get involved and  help prevent                                                               
another  company  from  coming  to   Alaska.  He  is  just  using                                                               
Fresenius  as an  example of  the concept.  It is  fortresses vs.                                                               
frontiers.  In Alaska  they have  fortresses in  the health  care                                                               
industry. A  provider cannot come into  Alaska without permission                                                               
from the government. He asked Senator Begich if that helped.                                                                    
                                                                                                                                
SENATOR BEGICH replied that it does  help. He wanted to know what                                                               
the expectations are  if they eliminate CON  laws. The assumption                                                               
is that a company holds the  price at a certain point and because                                                               
of the barriers to entry,  there aren't other entities that might                                                               
offer that  same product at  a lower price.  He asked if  that is                                                               
the fundamental theory.                                                                                                         
                                                                                                                                
2:02:45 PM                                                                                                                    
CHAIR WILSON  said they  would get  to what  they were  hoping to                                                               
accomplish  later.  They  are  just  stating  that  the  original                                                               
reasons  for CON  were to  help contain  and control  health care                                                               
costs and expenditures, but here  in Alaska they are still paying                                                               
the inflation rates in the 70s.                                                                                                 
                                                                                                                                
SENATOR BEGICH  said he understands  that, but what he  is asking                                                               
is not  oppositional. He is  saying it  is not causation  by just                                                               
putting numbers there. He wants to  see how those are related and                                                               
connected. Mr.  Zepp is doing a  good job of describing  that. He                                                               
just wanted to hear that.                                                                                                       
                                                                                                                                
2:03:43 PM                                                                                                                    
SENATOR GIESSEL said that the  Milliman reports are very helpful.                                                               
They were  done for  the health care  commission. CON  repeal was                                                               
one  of the  recommendations. The  80th percentile  law comes  in                                                               
there,  but that's  another  subject. In  Eagle  River about  two                                                               
years  ago,  one   of  the  hospitals  made  a   request  to  the                                                               
commissioner of Department of Health  and Social Services (DHSS),                                                               
who  is the  person  who  makes the  CON  decision. The  hospital                                                               
wanted to put a stand-alone  emergency room in Eagle River, which                                                               
is  a  30-minute  drive  from Anchorage  and  probably  about  45                                                               
minutes  from Mat-Su,  where the  nearest health  care facilities                                                               
are. A  stand-alone emergency room  in Eagle River would  serve a                                                               
large population.  That CON was  turned down.  Instead, emergency                                                               
room facility increases were allowed  at Providence Hospital that                                                               
year. There is  no rationale. Not only does it  increase costs by                                                               
suppressing  competition, but  it  limits access  to health  are.                                                               
There are more  people living in the Eagle River  area than there                                                               
are  in Bethel  and  yet  they are  denied  having a  stand-alone                                                               
emergency room. After about 7  p.m., there is no available health                                                               
care in Eagle River.                                                                                                            
                                                                                                                                
SENATOR BEGICH  said that description  and the  description about                                                               
dialysis get  right to the  point of connecting numbers.  That is                                                               
all he is looking for.                                                                                                          
                                                                                                                                
MR.  ZEPP  presented a  chart  from  the November  2016  Milliman                                                               
report comparing  hospital margins  in Alaska to  other locations                                                               
and the  nation along with  the statements, "Hospital  margins in                                                               
Alaska  are  generally higher  than  those  in  the rest  of  the                                                               
country.  Within Alaska,  hospital margins  in Anchorage  are the                                                               
highest" and "Figure  10 shows the Alaska average  at 15.6% comes                                                               
in  about five  points higher  than San  Francisco, which  is the                                                               
highest of  the comparison areas  at 10.3%.  Anchorage facilities                                                               
lead  the pack  with 20.3%  margin. Alaska  hospitals outside  of                                                               
Anchorage  are consistent  with the  high end  of the  comparison                                                               
areas."                                                                                                                         
                                                                                                                                
MR. ZEPP  said that  when health care  markets have  a restrained                                                               
market, the incumbents create monopolies and control prices.                                                                    
                                                                                                                                
2:06:33 PM                                                                                                                    
SENATOR STEVENS  asked why the  chart shows the  hospital margins                                                               
in Fairbanks as so low.                                                                                                         
                                                                                                                                
MR. ZEPP answered that his  understanding from reading the report                                                               
is that it  is a smaller hospital.  He would need to  get back to                                                               
him.                                                                                                                            
                                                                                                                                
SENATOR  STEVENS said  it was  remarkable  that it  has the  same                                                               
margins as Vermont.                                                                                                             
                                                                                                                                
SENATOR GIESSEL  said another  factor is  who owns  the hospital.                                                               
These are hospital  margins, these are their  profits. This would                                                               
include  the  Providence Medical  Center  complex,  which is  the                                                               
highest  margin facility  in the  Providence network.  Providence                                                               
covers most  of the West  Coast. Their hospital in  Anchorage has                                                               
an extremely high margin of profitability.                                                                                      
                                                                                                                                
MR. ZEPP  showed a graph  from the November 2016  Milliman report                                                               
on  physician   colonoscopy  with  biopsy,  average   unit  cost.                                                               
Anchorage is  significantly higher than all  other cities listed.                                                               
This is consistent  with the data throughout  the Milliman report                                                               
and  other data.  When  there is  CON, and  Alaska  is even  more                                                               
special  because  it has  a  small  population and  a  restrained                                                               
market, prices are set by the competitors.                                                                                      
                                                                                                                                
MR. ZEPP presented key findings from the 2016 Milliman report:                                                                  
                                                                                                                                
        • Commercial provider payment levels in Alaska are 76%                                                                  
          higher than levels nationwide;                                                                                        
        • Physician payment levels are 148% higher in Alaska;                                                                   
        • Hospital payment levels are 56% higher;                                                                               
        • Commercial provider payment levels have grown faster                                                                  
          in Alaska than  in comparison areas over  the last five                                                               
          years, with the Alaska  physician payment level growing                                                               
          by an excess of 15%  and the hospital payment levels by                                                               
          an  excess  of  6%.   Combined,  this  resulted  in  an                                                               
          additional  10% medical  cost growth  in Alaska  versus                                                               
          the comparison areas over the five-year period;                                                                       
        • Hospital margins in Anchorage, at 20.6% are high                                                                      
          relative to the nationwide average at 6.9%;                                                                           
                                                                                                                                
MR. ZEPP  said that Alaska's  high health care costs  are driving                                                               
citizens out of the state for  medical care. Entities such as the                                                               
state of Alaska, Premera, General  Communication, Inc. (GCI), and                                                               
the Mat-Su  Borough have programs  that send employees  south for                                                               
medical care because  the cost of health care costs  in Alaska is                                                               
too  high.  Employees  can  go through  third  party  vendors  to                                                               
schedule appointments.  The trips  usually include  the patients,                                                               
their  airfare, hotel,  per diem,  their spouses  and they  still                                                               
save tens  of thousands of dollars.  A 2018 report for  the state                                                               
of Alaska shows that the carrier  rate for repairing a hernia was                                                               
$17,434.  The cost  through SurgeryPlus,  the third-party  vendor                                                               
that does  the travel arrangements,  was $9,558. It is  a savings                                                               
of  $7,876  or  45.2  percent, which  includes  travel  costs  of                                                               
$2,000.                                                                                                                         
                                                                                                                                
SENATOR  GIESSEL   said  that  the  Teamsters   also  send  their                                                               
beneficiaries  Outside and  so do  school districts,  who can  no                                                               
longer afford instate care for their beneficiaries.                                                                             
                                                                                                                                
MR.  ZEPP said  that the  point of  the slide  is that  they need                                                               
competition in Alaska. CON prevents competition.                                                                                
                                                                                                                                
MR. ZEPP said  that 12 states have repealed their  CON laws. Over                                                               
100 million  Americans, 31 percent  of the U.S.  population, live                                                               
without CON programs. They still  have licensing, they still have                                                               
regulation, but they have open competition.                                                                                     
                                                                                                                                
2:11:05 PM                                                                                                                    
MR. ZEPP presented the slide  "Why repeal Alaska's Certificate of                                                               
Need?":                                                                                                                         
                                                                                                                                
     Four decades of research show that CON Laws Have:                                                                          
        • Prevented Access;                                                                                                     
        • Not increased the levels of indigent care in CON                                                                      
          states versus Non-CON states;                                                                                         
        • Created barriers to new entrants;                                                                                     
        • Enriched incumbent healthcare providers;                                                                              
      • Contributed to high healthcare costs in Alaska;                                                                         
                                                                                                                                
     Alaskans  are paying  the highest  healthcare prices  in the                                                               
     world and they continue to increase!                                                                                       
                                                                                                                                
     Repealing Alaska's  CON program  will provide  Alaskans with                                                               
     choice and spur competition.                                                                                               
                                                                                                                                
MR. ZEPP presented  the slide "No better time  to repeal Alaska's                                                               
CON program":                                                                                                                   
                                                                                                                                
     The  fundamental premise  of our  systems  is that  consumer                                                               
     welfare  is  maximized  by  open  competition  and  consumer                                                               
     choice!  Healthcare  development  should   be  left  to  the                                                               
     economics  of  a   well-functioning  healthcare  system  for                                                               
     Alaskans.                                                                                                                  
                                                                                                                                
     Alaska's CON  law remains a  major hurdle for  new entrants,                                                               
     existing providers  seeking to expand, modernize  or reshape                                                               
     their service capabilities. Now is the right time!                                                                         
                                                                                                                                
     Alaskans  are paying  the highest  healthcare prices  in the                                                               
     world!                                                                                                                     
                                                                                                                                
MR.  ZEPP  said that  with  a  delayed, five-year  implementation                                                               
date,  the  repeal  provides  Alaska  health  care  providers  an                                                               
opportunity  to  prepare  and  the state  of  Alaska  to  develop                                                               
meaningful regulations.                                                                                                         
                                                                                                                                
MR. ZEPP presented the slide "Healthcare is multifaceted":                                                                      
                                                                                                                                
     Healthcare markets contain many elements that are in need                                                                  
     of review, including:                                                                                                      
        • Escalating costs and care provider shortages;                                                                         
        • Public health and various payer programs;                                                                             
        • Lack of accurate and reliable cost information to                                                                     
          consumers;                                                                                                            
      • Medicaid reforms and implementation challenges;                                                                         
                                                                                                                                
     "When healthcare markets  operate properly, competition will                                                               
     determine the  appropriate prices for medical  services, the                                                               
     appropriate  organizational forms  for healthcare  financing                                                               
     and delivery, and the appropriate  range and availability of                                                               
     cost/quality/service trade-offs."                                                                                          
                                                                                                                                
MR. ZEPP concluded the presentation by  saying that SB 1 is not a                                                               
silver  bullet for  Alaska, but  they believe  that based  on the                                                               
research and data and studies of  over 30 years and the fact that                                                               
31 percent  of Americans live without  a CON law and  thrive that                                                               
competition is  good for consumers  in all  industries, including                                                               
health care.  "We all have  to compete every  day, all of  us. It                                                               
shouldn't be  any different for  the health care  industry. Let's                                                               
open Alaska to competition," he said.                                                                                           
                                                                                                                                
2:13:28 PM                                                                                                                    
SENATOR STEVENS said this is a  complex issue. He is the only one                                                               
on  the committee  from rural  Alaska. He  always felt  fortunate                                                               
that Kodiak  has a wonderful  hospital and emergency room.  He is                                                               
always concerned about what this  this really means. He hears Mr.                                                               
Zepp  say  that repealing  CON  laws  will spur  competition.  It                                                               
concerns him that  his community might lose that  hospital. He is                                                               
very cautious about  this. They have dealt with this  in the past                                                               
and it  has never  passed the  legislature for  whatever reasons,                                                               
good or bad. "Cautious, cautious," he said.                                                                                     
                                                                                                                                
MR. ZEPP replied  that they all share that thought.  No one wants                                                               
to  see a  small, rural  hospital close.  He has  three different                                                               
studies, including  one from the  General Accounting  Office, the                                                               
Chartis  group,   and  from  the  North   Carolina  Rural  Health                                                               
Commission.  All  entities  have  studied  small  rural  hospital                                                               
closures. Of all  the things that they have studied,  it is about                                                               
economics. There  is nothing that  has changed  with competition.                                                               
Mercatus Center studies  have shown that in  states that repealed                                                               
CON, there has  been little to no change. In  2017 and 2018, they                                                               
were presented with  a slide that showed  rural hospital closures                                                               
in 22 states. No one wants  to see that, but the interesting fact                                                               
is that  17 of those  states have CON laws  and five do  not. For                                                               
himself  and the  three  organizations he  named  that have  done                                                               
extensive research on this, it does  not have anything to do with                                                               
Certificate of Need.                                                                                                            
                                                                                                                                
SENATOR  STEVENS said  he  also has  small  hospitals in  Kodiak,                                                               
Cordova, and Homer. The one in  Cordova is always on the verge of                                                               
closing. It would  be interesting to talk to those  folks and see                                                               
what they are facing. Probably a  third of the health care in his                                                               
community  is  covered by  the  Kodiak  Area Native  Association,                                                               
which is already not CON. They  are exempt from those rules. Each                                                               
community is so different and has different concerns.                                                                           
                                                                                                                                
CHAIR WILSON  said that  was an additional  point in  showing the                                                               
profitability  margins because  the  small  hospitals in  Seward,                                                               
Kodiak, and another area are  owned by a large profitable entity,                                                               
which seems to send profits out  of state instead of investing in                                                               
Alaska infrastructure and  needs. The entity just  bought a large                                                               
California  hospital to  add to  its portfolio.  They are  saying                                                               
their CON  laws stifle new  hospital beds. They are  always based                                                               
on cost,  but the department  says that  CON laws do  not account                                                               
for  the specific  acuity of  Alaskan situations.  They have  had                                                               
testimony about  the need  for more nursing  home beds,  but with                                                               
the way  that CON laws operate,  it is not about  the specificity                                                               
of  what those  beds should  entail. They  heard from  the deputy                                                               
commissioner today  that they  need more  ventilator-type systems                                                               
in  those skilled  nursing home  facilities. They  have heard  of                                                               
only one  hospital, St. Elias,  that operates  ventilator systems                                                               
for  that highly  vulnerable population  that needs  that skilled                                                               
nursing  level. There  are waiting  beds at  hospitals to  try to                                                               
fill  these  needs. Their  current  CON  laws  do not  allow  new                                                               
entrants into the  market because of their type  of facility, not                                                               
based on the  needs of Alaskans who are suffering  because of the                                                               
CON  laws. That  is  just  one example  of  how  those laws  have                                                               
stifled treating vulnerable populations in Alaska.                                                                              
                                                                                                                                
SENATOR STEVENS said  that to clarify his  comments, the hospital                                                               
in  Kodiak is  owned by  the  Kodiak Island  Borough. Every  five                                                               
years it  goes out to  contract. He  was on the  borough assembly                                                               
when they awarded  that bid to Providence. It's been  open bid at                                                               
various  times.  The  local  government  owns  the  building  and                                                               
hospital.                                                                                                                       
                                                                                                                                
SENATOR GIESSEL said  that the committee chair  was responding to                                                               
needs. None of them have ever  found a shortage in the morning of                                                               
coffee and  bagels. It  is amazing how  the network,  the system,                                                               
knows  how much  coffee and  how many  bagels they  are going  to                                                               
need. It  is the  same idea  if market  forces are  inserted into                                                               
health care. They will respond  to the demand, like the long-term                                                               
nursing beds  the committee  chair just  referred to.  The market                                                               
will respond  to that demand  if allowed. She was  wondering what                                                               
the health  care costs are like  in states that do  not have CON.                                                               
When she  saw the slide  about the states  that do not  have CON,                                                               
she  reflected on  the Milliman  report. Idaho  and North  Dakota                                                               
were compared  to Alaska  in the Milliman  reports. It  shows how                                                               
much lower the  health care costs are in those  two states. These                                                               
are rural states with small  communities. It could be argued that                                                               
they  have road  systems where  Kodiak  does not.  But they  have                                                               
repealed CON and  have allowed competition to  work. Their health                                                               
care costs  are significantly  lower. CON  suppresses innovation,                                                               
particularly in  stand-alone surgery centers and  in orthopedics.                                                               
She  has  talked   to  many  physicians  who   would  like  these                                                               
facilities.  They have  innovative procedures  that will  provide                                                               
lower-cost  care,  but  they cannot  open  clinics.  They  cannot                                                               
provide these services because of  government restrictions on the                                                               
market.                                                                                                                         
                                                                                                                                
2:21:18 PM                                                                                                                    
CHAIR WILSON moved on to invited testimony.                                                                                     
                                                                                                                                
2:21:40 PM                                                                                                                    
DAVID  GRABOWSKI, Ph.D.,  Professor,  Department  of Health  Care                                                               
Policy, Harvard Medical  School, Boston, Massachusetts, testified                                                               
in  favor of  repealing Certificate  of  Need laws.  He said  his                                                               
research focuses  on nursing  home CON, so  his remarks  would be                                                               
addressed  on that  area.  He began  with  a thought  experiment.                                                               
Imagine if Alaska had a  regulation limiting the number of hotels                                                               
in a  local area. Rather than  let the market dictate  the supply                                                               
of  hotel beds,  the  number of  hotel  beds would  be  set by  a                                                               
regulatory  body in  the state.  One does  not need  a degree  in                                                               
economics to see that this  would quickly distort competition. As                                                               
demand grows  in a local  market, new hotels cannot  easily open,                                                               
resulting in higher hotel occupancy  and fewer beds available for                                                               
consumers.   Because   existing   hotels  could   get   customers                                                               
regardless  of the  quality  they offer,  there  would be  little                                                               
incentive  to  invest  in  good   service  or  make  big  capital                                                               
improvements to the  facility. Hotels in Alaska would  be able to                                                               
charge higher prices, even in  the context of lower quality. This                                                               
type  of rule  for hotels  is unfathomable,  yet Alaska  and many                                                               
other states have such a rule for  nursing homes in the form of a                                                               
Certificate of  Need law. Certificate of  Need constrains nursing                                                               
home bed growth  in Alaska by employing  a needs-based evaluation                                                               
of all applications for new construction.                                                                                       
                                                                                                                                
[Connection with Dr. Grabowski was lost.]                                                                                       
                                                                                                                                
2:23:40 PM                                                                                                                    
DAN GILMAN, Attorney Advisor, Office  of Policy Planning, Federal                                                               
Trade Commission  (FTC), Washington, D.C., testified  in favor of                                                               
repealing Certificate  of Need  laws. He  said that  his prepared                                                               
remarks  review recent  statements  on the  effects  of CON  laws                                                               
issued jointly  by the two  federal competition  authorities, the                                                               
FTC and the Antitrust Division  of the U.S. Department of Justice                                                               
(DOJ), collectively called the agencies.  In particular, in April                                                               
2017, the  agencies commented on  Alaska SB 62, an  earlier bill,                                                               
discussing both  their general views  on CON laws and  the likely                                                               
impact of  SB 62 on  Alaska health care competition.  In February                                                               
2018,  they summarized  those comments  and  the FTC's  continued                                                               
concerns  about CON  in a  statement to  the Alaska  State Senate                                                               
Labor and Commerce  Committee. They have continued  to follow the                                                               
economic and policy literature on  CON laws since then and remain                                                               
concerned  about the  impact  of  CON laws  on  both health  care                                                               
competition and  ultimately, health  care consumers.  These prior                                                               
statements  reflect  the   agencies'  extensive  experience  with                                                               
health  care  competition,  including   several  decades  of  law                                                               
enforcement,  research,  and   policy  experience  regarding  the                                                               
effects  of  provider concentration  generally  and  CON laws  in                                                               
particular.   Any  additional   comments  that   they  may   make                                                               
responding  to questions  are their  own and  do not  necessarily                                                               
reflect the  views of  the FTC,  any individual  commissioner, or                                                               
the Department of Justice.                                                                                                      
                                                                                                                                
MR. GILMAN said that CON laws  at first had the laudable goals of                                                               
reducing  health  care  costs  and   improving  access  to  care.                                                               
However, after  considerable experience,  it has  become apparent                                                               
that  CON  laws  do  not provide  the  benefits  they  originally                                                               
promised. Worse,  in operation,  CON laws  can undermine  some of                                                               
the very policy  goals they were originally  intended to advance.                                                               
Over the  years there have  been many  efforts to study  CON laws                                                               
empirically  to determine  whether  their  claimed benefits  have                                                               
materialized.  The   empirical  literature  does   not  generally                                                               
suggest  that  CON  laws have  succeeded  in  controlling  costs,                                                               
improving quality, or increasing access.                                                                                        
                                                                                                                                
MR.  GILMAN said  they  have identified  at  least three  serious                                                               
problems with CON laws. First,  CON laws create barriers to entry                                                               
and expansion, which can increase  prices, limit consumer choice,                                                               
and stifle innovation.  Second, incumbent firms can  use CON laws                                                               
to  thwart   or  delay  otherwise  beneficial   market  entry  or                                                               
expansion by  new or existing competitors.  Third, as illustrated                                                               
by the FTC's  own experience in the Supreme  Court [Federal Trade                                                               
Commission vs.] Phoebe  Putney case, CON laws  can deny consumers                                                               
the benefit of an effective  remedy following the consummation of                                                               
an  anticompetitive merger.  For  these reasons,  last year  they                                                               
suggested Alaska repeal  its CON laws and they are  here today to                                                               
reiterate that suggestion.                                                                                                      
                                                                                                                                
MR. GILMAN said CON laws  create barriers to entry and expansion,                                                               
potentially depriving  consumers of  the benefits of  health care                                                               
competition. CON laws  such as Alaska's require  new entrants and                                                               
incumbent  providers  to   obtain  state-issued  approval  before                                                               
constructing  new  facilities  or offering  certain  health  care                                                               
services. These  aren't basic health and  safety standards. These                                                               
are entry  requirements. By interfering  with market  forces that                                                               
normally  determine the  supply of  services and  facilities, CON                                                               
law can  suppress increases in supply  and misallocate resources.                                                               
They   also  shield   incumbent   health   care  providers   from                                                               
competition  from new  entrants  and innovations  in health  care                                                               
delivery, which  means consumers  lose these benefits.  They urge                                                               
the  committee to  consider  all  these ways  CON  laws may  harm                                                               
health care consumers.  They also urge the  committee to consider                                                               
how consumers,  including patients,  and both public  and private                                                               
payers, might benefit if new  facilities and services could enter                                                               
the market more easily. Entry  and expansion, often even just the                                                               
credible  threat  of  entry  or  expansion,  typically  restrains                                                               
health  care  prices,  improves  quality  of  care,  incentivizes                                                               
innovation, and improves access to care.                                                                                        
                                                                                                                                
MR. GILMAN said that entry  restrictions, on the other hand, tend                                                               
to  raise costs  and prices.  They also  limit opportunities  for                                                               
providers to  compete, not just  on price, but also  on non-price                                                               
aspects, like  quality and convenience  that may  be particularly                                                               
important  to  patients.  Impeding  new entry  into  health  care                                                               
markets can be  especially harmful in rural  or other underserved                                                               
areas. CON laws may delay  or block the development of facilities                                                               
and  services   where  they  are  needed   most  and  potentially                                                               
reinforce  market power  that incumbent  providers  may enjoy  in                                                               
already concentrated areas.                                                                                                     
                                                                                                                                
MR.  GILMAN  said that  incumbent  providers  may exacerbate  the                                                               
competitive harm  from these entry  barriers by  taking advantage                                                               
of the CON process, and not  merely its outcome, to protect their                                                               
revenues. The  strategic use  of the  CON process  by competitors                                                               
can cause  more than delay.  It can divert scarce  resources away                                                               
from health  care innovation and  delivery as  potential entrants                                                               
incur  legal, consulting,  and  lobbying  expenses responding  to                                                               
competitor challenges as incumbents  incur expenses mounting such                                                               
challenges. Moreover, as  the FTC's experience in  FTC vs. Phoebe                                                               
Putney shows,  CON laws can  entrench anticompetitive  mergers by                                                               
limiting  the   ability  of  antitrust  enforcers   to  implement                                                               
effective structural remedies to consummated transactions.                                                                      
                                                                                                                                
MR. GILMAN  said that empirical  evidence does not show  that CON                                                               
laws  have achieved  their goals.  States originally  adopted CON                                                               
law programs  over 40 years ago  as a way to  control health care                                                               
costs and mitigate  the incentives created by  a cost-plus health                                                               
care reimbursement  system. Although  this type  of reimbursement                                                               
has mostly  gone away, CON  laws remain in  force in a  number of                                                               
states and  CON proponents  continue to raise  cost control  as a                                                               
justification.  Proponents  also  argue  that  CON  laws  improve                                                               
health  care  quality  while   increasing  access.  The  evidence                                                               
suggests otherwise.  Empirical evidence on competition  in health                                                               
care  markets generally  has demonstrated  that more  competition                                                               
leads to lower prices. FTC  scrutiny of hospital mergers has been                                                               
particularly   useful   in  understanding   concentrated-provider                                                               
markets  and retrospective  studies of  provider-consolidation by                                                               
FTC staff and independent  researchers consistently indicate that                                                               
"increases in hospital market concentration  lead to increases in                                                               
the price  of hospital care."  That quote  is from The  Impact of                                                               
Hospital  Consolidation by  economists Martin  Gaynor and  Robert                                                               
Town. All  sources and citations  of his empirical points  can be                                                               
found in the 2017 joint statement by FTC and DOJ.                                                                               
                                                                                                                                
2:31:49 PM                                                                                                                    
MR. GILMAN  said that the  best empirical evidence  also suggests                                                               
that greater  competition incentivizes  providers to  become more                                                               
efficient. Recent  work shows  that hospitals  faced with  a more                                                               
competitive  environment  have  better management  practices  and                                                               
also that narrowing or repealing  CON laws can reduce per patient                                                               
cost of health care.                                                                                                            
                                                                                                                                
MR. GILMAN  said they have  found no empirical evidence  that CON                                                               
laws have  successfully restricted so-called  overinvestment. CON                                                               
laws can,  however, limit investments  that would lower  costs in                                                               
the long  run. Several  studies directly  analyzed the  impact of                                                               
changes in CON  laws on health care outcomes. The  weight of this                                                               
research  has  found that  repealing  or  narrowing CON  laws  is                                                               
unlikely to lower  quality. It may, in fact,  improve the quality                                                               
of certain types of care.                                                                                                       
                                                                                                                                
MR. GILMAS said  that CON proponents concede that  CON laws allow                                                               
incumbent providers to earn greater  profits that they would in a                                                               
competitive  environment.   Proponents  argue  that   in  theory,                                                               
incumbents can  then use those  extra profits  to cross-subsidize                                                               
charity  care.  They  appreciate   the  importance  of  providing                                                               
charity care,  but they  urge the  committee to  consider whether                                                               
there  are less  costly and  more effective  ways to  do it.  The                                                               
charity  care  rationale  is  at   odds  with  the  cost  control                                                               
rationale. If the idea is  that CON-protected incumbents will use                                                               
their market  power and profits to  cross-subsidize charity care,                                                               
that  implies  that providers  will  charge  more for  noncharity                                                               
care.  Such  pricing can  harm  Alaska's  health care  consumers,                                                               
including  hurting low-income  or underinsured  patients who  are                                                               
ineligible for  charity care. Also,  because CON  programs impede                                                               
entry  and  expansion,  they  impede   access  to  care  for  all                                                               
patients, including the indigent and other low-income patients.                                                                 
                                                                                                                                
MR.  GILMAN said  that finally,  although advocates  of CON  laws                                                               
might seek to promote charity  care, the evidence simply does not                                                               
show that  CON laws  advance that  goal. In  fact, there  is some                                                               
research  suggesting that  safety-net hospitals  are no  stronger                                                               
financially  in  CON states  than  in  non-CON states.  Moreover,                                                               
there is  some empirical evidence  contradicting the  notion that                                                               
dominant  providers use  their  market  power to  cross-subsidize                                                               
charity care. A  paper from Professor Christopher  Garmon found a                                                               
"complete   lack   of   support   for   the   cross-subsidization                                                               
hypothesis." The FTC recognizes that  states must weigh a variety                                                               
of policy  objectives when  considering health  care legislation,                                                               
but  CON   laws  raise  considerable  competitive   concerns  and                                                               
generally  have  not appeared  to  have  achieved their  intended                                                               
benefits  for health  care  consumers. CON  laws  have failed  to                                                               
demonstrate success  at delivering on  any of their  policy goals                                                               
over the course of 40 plus  years. They respectfully ask that the                                                               
legislature consider whether Alaskan  citizens are well served by                                                               
CON laws and  if not, whether they would benefit  from the repeal                                                               
of those laws.                                                                                                                  
                                                                                                                                
2:35:30 PM                                                                                                                    
MATTHEW MITCHELL, Ph.D., Senior  Research Fellow, Director of the                                                               
Equity  Initiative,  Mercatus  Center, George  Mason  University,                                                               
Arlington, Virginia, testified in  favor of repealing Certificate                                                               
of Need laws. He said that for  the last several years he and his                                                               
colleagues have been  studying CON laws. A CON law  is an unusual                                                               
idea in a  market economy in that it is  essentially a permission                                                               
slip to  compete. There are  some misconceptions about  CON laws.                                                               
They are not  quality gates. If someone asks to  open or expand a                                                               
health  care facility,  add a  hospital bed  or offer  a neonatal                                                               
intensive  care unit,  someone  has to  get  permission from  the                                                               
authority to do this. In the  process, the authority is not going                                                               
to  ask  about   that  person's  quality  or   safety  record  or                                                               
certifications or any  of that. All of that  is addressed through                                                               
other  regulatory measures.  Instead, the  authority is  going to                                                               
assess  whether the  community needs  the service  the person  is                                                               
trying to  offer. That is  unusual because in almost  every other                                                               
walk of life, that type of  question is answered by the potential                                                               
profitability of  the service. Economists  tend to view  CON laws                                                               
as being  restrictions on supply that  are anticompetitive, which                                                               
is why  they are skeptical  of them.  This is also  why antitrust                                                               
authorities at the FTC and the DOJ are skeptical of them.                                                                       
                                                                                                                                
DR. MITCHELL  said that CON laws  came about because of  the 1974                                                               
National  Health Planning  and Resources  Development Act,  which                                                               
mandated that states  pass CON laws in order  to receive matching                                                               
funds. The act laid out a  number of rationales for CON laws. Now                                                               
they can use  the fact that 15 states have  repealed CON laws and                                                               
38 percent of  the U.S. population lives in one  of those states.                                                               
These are  rich states.  These are poor  states. These  are urban                                                               
states. These  are rural states. They  use econometric techniques                                                               
to compare outcomes in these  states with outcomes in CON states.                                                               
They do not have to speculate  or imagine what would happen in an                                                               
Alaska  that  repeals   its  CON  laws  because   they  have  the                                                               
experience of  38 percent of  the population. Moreover,  they can                                                               
use sophisticated  econometric techniques to look  at differences                                                               
in  outcomes in  CON and  non-CON  states and  control for  other                                                               
factors,  like  demographics  and  underlying  economics  of  the                                                               
community.                                                                                                                      
                                                                                                                                
DR.  MITCHELL said  that a  lot of  the research  focuses on  the                                                               
rationales offered in the National  Health Planning and Resources                                                               
Development  Act in  1974. One  of the  first rationales  was the                                                               
idea  of ensuring  an adequate  supply  of health  care. This  is                                                               
curious because  CON law is  a restriction on supply.  Basic Econ                                                               
101 says that there will be  a leftward shift in the supply curve                                                               
and  sure enough,  that is  exactly what  empirical evidence  has                                                               
found.  Research  finds  that relative  to  non-CON  states,  CON                                                               
states  have  a  more  limited supply  of  dialysis  clinics  and                                                               
hospice care. They  have fewer hospitals per capita  and beds per                                                               
capita; they  have fewer  hospitals offering  MRIs and  fewer CT,                                                               
MRI, PET scans  are provided. And more  out-of-county and out-of-                                                               
state  care is  sought in  those communities  that have  CON laws                                                               
relative  to  those  that don't.  Extrapolating  from  their  own                                                               
research,  they estimate  that  in an  Alaska  without CON  there                                                               
would be about  36 hospitals. Presently Alaska  has 25 hospitals.                                                               
This  is  drawn  from  actual   experience,  comparing  what  has                                                               
happened   in  states   without   CON  laws.   The  evidence   is                                                               
overwhelming that the number would be somewhere around 36.                                                                      
                                                                                                                                
DR. MITCHELL  said that the  second rationale offered by  the act                                                               
was  that  CON  would  ensure  rural access  to  care,  which  is                                                               
surprising  given  that  it  is  a  restriction  on  supply.  The                                                               
empirical evidence is consistent  with economic theory. What they                                                               
find when  they zero  in on  just rural  hospitals is  that those                                                               
states with  CON laws have  30 percent fewer rural  hospitals, as                                                               
well as  fewer hospitals overall.  They also have less  access to                                                               
rural hospice  care, experience longer travel  distances in order                                                               
to obtain care,  and are more likely to  seek out-of-county care.                                                               
They  estimate  that  Alaska  without CON  would  have  25  rural                                                               
hospitals; whereas now, Alaska has 17 rural hospitals.                                                                          
                                                                                                                                
DR. MITCHELL  said the next goal  was to increase the  quality of                                                               
care. Again,  the CON  process itself  doesn't attempt  to assess                                                               
quality. The  basic idea is that  if a state has  CON laws, there                                                               
will  be  fewer  hospitals,  more procedures  will  be  channeled                                                               
through those  fewer hospitals and  maybe the hospitals  will get                                                               
better at  those procedures. This  is an okay argument.  There is                                                               
nothing inconsistent  with it, but  the problem is that  there is                                                               
another  good  argument that  has  a  lot of  empirical  support:                                                               
quality tends  to rise with  competition. The theory  is somewhat                                                               
ambiguous,  but  the  research suggests,  particularly  the  most                                                               
recent research,  that CON  laws do not  achieve these  goals. In                                                               
the states that  have CON laws, there are  higher mortality rates                                                               
following heart failure, pneumonia,  and heart attacks. There are                                                               
higher  rates of  postsurgery complications  and lower  levels of                                                               
patient  satisfaction. They  find that  in states  that have  CON                                                               
laws, like  Alaska, that  regulate four  or more  procedures that                                                               
patient satisfaction  is lower. They  estimate that in  an Alaska                                                               
without CON patient satisfaction would  be 4.8 percent higher and                                                               
that postsurgery complications would be about 5.6 percent lower.                                                                
                                                                                                                                
DR. MITCHELL  said the next  goal of  CON was to  promote charity                                                               
care. In looking at the  levels of uncompensated care or indigent                                                               
care in  CON vs.  non-CON states  they find  no evidence  that it                                                               
increases  charity care.  They do  find  that there  seems to  be                                                               
greater racial disparity  in the provision of care  in CON states                                                               
relative  to  non-CON  states.  The   final  goal  of  CON  laws,                                                               
ironically, was to promote hospital  substitutes. He says this is                                                               
ironic because now 18 states,  including Alaska, limit the supply                                                               
of hospital  substitutes, like  ambulatory surgery  centers. They                                                               
find that  states with this  type of  CON law, like  Alaska, have                                                               
fewer hospitals  and fewer ambulatory  surgery centers,  about 14                                                               
percent fewer.  They have fewer rural  ambulatory surgery centers                                                               
as well. CON  laws limit new hospitals  and nonhospital providers                                                               
while they  don't seem  to limit existing  providers. One  of the                                                               
senators already  brought up an  example of an  existing provider                                                               
who was given a CON whereas  a new entrant was not. That specific                                                               
anecdote is consistent  with the broader evidence.  This helps to                                                               
explain why CON laws persist,  simply because they are protection                                                               
for incumbent  providers. They estimate  that an Alaska  with CON                                                               
would  have more  ambulatory surgery  centers  than it  currently                                                               
does.                                                                                                                           
                                                                                                                                
DR. MITCHELL  said the final  rationale for the advocates  of CON                                                               
was  that it  would restrict  cost.  This is  unusual given  that                                                               
restrictions on  supply tend  to raise prices.  This is  what the                                                               
evidence  has  found.  He   surveyed  20  peer-reviewed  academic                                                               
studies. The  preponderance of evidence  here is  consistent with                                                               
the economic  theory, which is  that there is zero  evidence that                                                               
CON laws  reduce per unit  costs, which is the  important matter.                                                               
There  is evidence  that CON  laws  increase per  unit costs  and                                                               
increase overall  patient spending.  He reviewed  Dr. Grabowski's                                                               
study and highly commends it to the committee.                                                                                  
                                                                                                                                
2:45:52 PM                                                                                                                    
SENATOR BEGICH asked if Idaho  and North Dakota, two rural states                                                               
that got rid of their CON laws, lost any rural hospitals.                                                                       
                                                                                                                                
DR. MITCHELL  said he could  not answer specifically  about those                                                               
states.  He  could   say  that  when  they  look   at  all  rural                                                               
communities that have CON and do  not have CON, they get evidence                                                               
that CON is associated with  fewer rural hospitals. He noted that                                                               
he happened  to be speaking  from his  home state of  New Mexico,                                                               
which is  a low-income, rural state.  It does not have  a CON law                                                               
and it has decent measures of access of care.                                                                                   
                                                                                                                                
SENATOR BEGICH  said that information  would help  alleviate some                                                               
of  Senator Stevens'  concerns. He  asked why  Indiana reinstated                                                               
its CON law last year.                                                                                                          
                                                                                                                                
DR.  MITCHELL   replied  that  he   doesn't  know   the  details.                                                               
Pennsylvania brought  back CON laws  for a  bit and then  took it                                                               
away again. The general story is  that those who benefit from CON                                                               
are  the incumbent  providers  who tend  to  be very  politically                                                               
organized. Patients are  harmed by CON and often  don't even know                                                               
CON  exists. Would-be  providers  hoping to  start up  facilities                                                               
tend not to be very politically  organized. His guess is that the                                                               
benefits  of  CON  are   concentrated  on  politically  organized                                                               
groups, but the  costs are borne by the  unorganized. However, he                                                               
doesn't know the details about Indiana.                                                                                         
                                                                                                                                
2:48:34 PM                                                                                                                    
At ease                                                                                                                         
                                                                                                                                
2:48:38 PM                                                                                                                    
CHAIR  WILSON said  that health  care is  complicated, just  like                                                               
bodies  are  complicated systems.  They  will  look at  the  many                                                               
studies in more depth when the  bill is in front of the committee                                                               
again  to  answer  questions  that will  come  up  during  public                                                               
testimony. The subject has been  through the first President Bush                                                               
administration,  the  Clinton  administration,  the  second  Bush                                                               
administration,  and  the  Obama administration.  They  have  all                                                               
said, both  Republicans and Democrats,  that Certificate  of Need                                                               
laws do  not work at a  federal level and have  been recommending                                                               
that states  seek other methodologies of  regulating their health                                                               
care facilities. He studied this  while getting his MBA in health                                                               
service administration.  A person  could write a  dissertation on                                                               
this subject.                                                                                                                   
                                                                                                                                
CHAIR WILSON encouraged  the committee and the  general public to                                                               
research and  google "do Certificate  of Need laws work."  It was                                                               
hard for  his office to  find studies  by proponents of  CON laws                                                               
not written by hospital associations  or other hospital entities.                                                               
His office looked for empirical  data and research and has banker                                                               
boxes full  of research  and tried to  provide the  most relevant                                                               
research  of different  varieties  and  methodologies. They  have                                                               
archived  research   and  are  trying  to   educate  the  general                                                               
population about this issue of  trying to acquire more innovative                                                               
health care  systems for  the state of  Alaska. His  hospital was                                                               
stifled when  another entity decided  to move its  imaging clinic                                                               
from Anchorage to  the Mat-Su. It stopped them from  getting a CT                                                               
scanner and  another MRI machine for  a period of time.  It's not                                                               
as  though the  hospital  would wheel  him  literally across  the                                                               
street to be imaged if he  were staying at that hospital. He felt                                                               
that CON inhibited that.                                                                                                        
                                                                                                                                
CHAIR WILSON said that if people  look at the public testimony on                                                               
record from  the Department  of Health  and Social  Services, the                                                               
people who  speak against other entities  acquiring a Certificate                                                               
of Need  are their competitors.  His office found  it interesting                                                               
that  the ones  most  likely to  testify  against another  person                                                               
entering the market are that  entity's competition. So much money                                                               
is  spent  fighting  and  policing  CON laws  in  Alaska.  It  is                                                               
amazing. One entity averages about  $2 million a year fighting or                                                               
enforcing  CON laws,  which would  be better  going for  indigent                                                               
care. That is why it is important.                                                                                              
                                                                                                                                
[CHAIR WILSON held CSSB 1(HSS) in committee.]                                                                                   

Document Name Date/Time Subjects
SB 1 - Repealing CON - 31-LS0001 A.PDF SHSS 3/27/2019 1:30:00 PM
SHSS 4/1/2019 1:30:00 PM
SB 1
SB 1 - Work Draft 31-LS0001_M - 3.11.19.pdf SHSS 3/27/2019 1:30:00 PM
SHSS 4/1/2019 1:30:00 PM
SB 1
Senate Bill 1 - Summary of Changes, ver A to M.pdf SHSS 3/27/2019 1:30:00 PM
SB 1
Senate Bill 1 - Sponsor Statement.pdf SHSS 3/27/2019 1:30:00 PM
SHSS 4/1/2019 1:30:00 PM
SB 1
SB 1 Repealing Alaska's CON - Sectional Analysis.pdf SHSS 3/27/2019 1:30:00 PM
SHSS 4/1/2019 1:30:00 PM
SB 1
SB 1 Fiscal Note DHSS Health Care Services.pdf SHSS 3/27/2019 1:30:00 PM
SHSS 4/1/2019 1:30:00 PM
SB 1
SB 1 Fiscal Note DHSS Medicaid.pdf SHSS 3/27/2019 1:30:00 PM
SB 1
SB 1 - Federal Rpt - Reforming Americas Healthcare System Through Choice and Competition - 2018.pdf SHSS 3/27/2019 1:30:00 PM
SHSS 4/1/2019 1:30:00 PM
SB 1
SB 1 - John Locke Foundation - Spotlight-468-The-Case-Against-CON-A-law-that-prevents-health-care-innovation.pdf SHSS 3/27/2019 1:30:00 PM
SHSS 4/1/2019 1:30:00 PM
SB 1
SB 1 - National Institute for Health Care_Research_Brief_No._4.pdf SHSS 3/27/2019 1:30:00 PM
SHSS 4/1/2019 1:30:00 PM
SB 1
SB 1 - Mercatus Center - Do Certificate-of-Need Laws Increase Indigent Care.pdf SHSS 3/27/2019 1:30:00 PM
SHSS 4/1/2019 1:30:00 PM
SB 1
SB 1 - News Story - Florida lawmakers lurch ahead with certificate-of-need repeal.pdf SHSS 3/27/2019 1:30:00 PM
SHSS 4/1/2019 1:30:00 PM
SB 1
SB 1 - Reforming Americas Healthcare System Through Choice and Competition - NOvember 2018.pdf SHSS 3/27/2019 1:30:00 PM
SHSS 4/1/2019 1:30:00 PM
SB 1
SB 1 - News Story - Mark-CON-paper-web.pdf SHSS 3/27/2019 1:30:00 PM
SB 1
SB 1 - US Department of Justice - Competition in Healthcare and Certificates of Need.pdf SHSS 3/27/2019 1:30:00 PM
SHSS 4/1/2019 1:30:00 PM
SB 1
SB 1 - CON Power Point - SHSS 3.27.19.pdf SHSS 3/27/2019 1:30:00 PM
SHSS 4/1/2019 1:30:00 PM
SB 1