Legislature(1999 - 2000)
03/22/1999 01:35 PM JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SB 106-REMAND OF HEALTH FACILITY PAYMNT DECISION CHAIRMAN TAYLOR explained the purpose of SB 106 is to provide finality in the administrative appeals process and to stop the merry-go-round of departmental hearings and remanded decisions that is negatively affecting hospitals around the state. MS. LARAINE DERR, President and Chief Executive Officer of the Alaska State Hospital and Nursing Home Association, said her organization had submitted a letter of support for SB 106. She deferred to the other witnesses. Number 039 SENATOR TORGERSON moved the adoption of the committee substitute for SB 106 (version D, dated 3-19-99). Without objection, the committee substitute was adopted. MR. BOB VALLIANT, representing Bartlett Regional Hospital, stated that Bartlett supports the committee substitute. MR. VALLIANT explained his concerns and frustrations with the administrative adjudication process. MR. VALLIANT discussed Bartlett Hospital's experience with the Department of Health and Social Services in their effort to obtain Medicare reimbursement funds for a Magnetic Resonance Imager (MRI) machine purchased in 1993. MR. VALLIANT explained the MRI issue still has not been settled, 38 months after the original denial of reimbursement. There have been two partial rulings in Bartlett's favor, yet no resolution. He said the issue has required quite a bit of time and money and the lack of finality is frustrating. He contended that this type of expensive, extended case is one example of why medical costs are so high. MR. VALLIANT urged the committee to pass CSSB 106(JUD). Number 176 CHAIRMAN TAYLOR commented that medical technology is rapidly changing and asked MR. VALLIANT when they will replace the MRI in question. MR. VALLIANT replied they will purchase a new MRI in 4 to 5 months. CHAIRMAN TAYLOR noted the machine is not only paid off, but "kind of used up". MR. VALLIANT agreed. SENATOR TORGERSON asked the outstanding amount of reimbursement in the Bartlett case. MR. VALLIANT said the amount would be negotiated by the hospital with the Department, but his financial consultants estimate the amount at $800,000. Number 202 MR. JAY LIVEY, representing the Department of Health and Social Services, handed out information and explained the complex, individualized Medicare rate setting process. Each facility receives a particular reimbursement rate assigned to it each year. To determine the Medicare reimbursement rate, each facility submits an inventory of its costs. The Department uses these costs and the actual cost of services provided to Medicare patients in a calculation that also considers reimbursement rates from previous years to determine the current year reimbursement rate. SENATOR DONLEY interrupted, asking MR. LIVEY what he was driving at. He said he would understand his explanation better if he knew what the premise of his argument is. MR. LIVEY replied he was trying to show that the appeals process that would be changed under SB 106 is all part of the existing rate-setting system, and he believes SB 106 will violate the Department's ability to regulate the rate-setting process. Number 290 SENATOR TORGERSON asked if the Department audits just what they are given by each facility. MR. LIVEY replied the audit is the review of the cost report provided to the Department by each facility. SENATOR TORGERSON said "That's just verification of numbers - that's a long way from an audit." SENATOR TORGERSON asked for examples of high and low reimbursement rates and said he thought they ranged from $187 dollars a day to close to $600 per day. He asked how the Department justifies the difference in rates. MR. LIVEY said each facility has an individual rate and "just because we do an audit of the Medicare cost report, doesn't mean that it is an efficient facility." SENATOR TORGERSON said he is trying to find a way to achieve more efficient facilities. He asked if the Legislature could set a fixed rate and tie it to area cost differentials or change state statutes in order to clean up the regulatory process. MR. LIVEY said he supports changing state statutes in this area. Number 330 SENATOR DONLEY asked how following the recommendation of a hearing officer would have prevented the Department from setting rates. MR. LIVEY said a hearing officer may understand departmental policy but may not write his or her decision totally in accordance with it. The Department needs to be able to "imprint" its policy on a decision through the remand process, and 30 days is not enough time to do this. SENATOR DONLEY asked what "imprinting policy" means. CHAIRMAN TAYLOR commented that the policy the hearing officer interprets is within the Administrative Code Regulations. He asked what the policy that needs to be imprinted is. MR. LIVEY used the example of the policy decisions that had to be made in the Bartlett Hospital case. SENATOR DONLEY concluded he would like to hear from the Department of Law. Number 399 MS. KIRSTEN BOMENGEN, Assistant Attorney General for the Department of Law, explained that a Commissioner's review of a hearing officer's decision allows the Commissioner to review the facts in the case and ensure the decision is consistent with the Department's historical interpretation of regulations. She stated it is the Commissioner's job to decide if all agency decisions are internally consistent. SENATOR DONLEY asked if the Department of Law approves remands. MS. BOMENGEN said the Department is not active in agency decisions, but feels this action is consistent with administrative legal principles. SENATOR DONLEY countered, "...Administrative legal principles? What about the Constitution? What about the intent of the statutes that there be some finality to this process so you are not denying people access to the courts . . . shouldn't your advice incorporate all of those principles?" MS. BOMENGEN replied that all of those factors are considered. She said there are many options to weigh as solutions to the problem. SENATOR DONLEY asked if she had suggested the department change the regulations, rather than continue remanding decisions. MS. BOMENGEN repeated "I'm certain that all types of recommendations have come up, in different contexts of reviewing these cases." MR. LIVEY suggested that one of the benefits of having a hearing officer who is acting "somewhat independently" is they can suggest the Department review and/or change regulations. SENATOR DONLEY asked, "You haven't done that yet?" Number 465 SENATOR DONLEY asked if cases can be bifurcated in order to proceed with one issue that is not contested, while the other issue(s) is still being decided. MS. BOMENGEN agreed this would an option, provided both parties agreed. SENATOR DONLEY asked her if the Department had explored that option. MR. LIVEY said if this were done, the issue would be split by the hearing officer, after he or she holds evidentiary hearings. Number 484 SENATOR TORGERSON again verified that MR. LIVEY used the term audit to mean a verification of cost figures supplied by facilities. CHAIRMAN TAYLOR commented, "You take their report . . . what they think their cost reimbursement should be, you then go back into their facilities . . . to have them prove to you that these amounts of money were actually expended . . ." MR. LIVEY agreed that was the procedure. SENATOR DONLEY asked MS. BOMENGEN if the Commissioner could recommend that a question be split. MS. BOMENGEN agreed that is likely possible, but there may be reasons people want the issue decided "as a package." SENATOR DONLEY asked if the Bartlett Hospital case was remanded once or twice. CHAIRMAN TAYLOR added that the original audit was in 1995, and asked what is the status of this case in 1999. MR. LIVEY believed the issue had been remanded for a second evidentiary hearing as of last Fall. MR. VALLIANT remarked the case has been remanded to a hearing officer twice and both times the hearing officer has decided "pay the hospital". MR. LIVEY argued that the second remand ended in a summary judgement, not a proposed decision for the Commissioner to act on. Number 543 SENATOR DONLEY asked, "A summary judgement is not a final decision?" MR. LIVEY explained the summary judgement would be rolled into the proposed decision that will be submitted to the Commissioner after the evidentiary hearing. MS. BOMENGEN explained the hearing officer had come to a "partial summary judgement" that was distributed informationally to the parties involved. SENATOR TORGERSON brought the discussion back to SB 106 and asked, "Why doesn't this bill work?" MR. LIVEY replied 30 days is not enough time for the Department to finalize a decision. SENATOR TORGERSON interrupted, "45 enough? . . . I'm trying to negotiate a settlement." Mr. LIVEY replied he would like to think about the length of time that would be appropriate. Number 566 SENATOR TORGERSON pointed out there have only been 6 proposed decisions remanded to a hearing officer in the past 4 years. He asked how many hearing officers the Department employs and MR. LIVEY indicated they employ one hearing officer. MR. LIVEY explained that once a decision is appealed, future rates are affected. The rates for all subsequent years are rolled into one appeal, which can be complex. CHAIRMAN TAYLOR said that is the problem, "Once a decision is not made, it impacts every year's filing after that and they all have to . . . be amended because somebody failed to make a decision . . ." He asked how, after these things are rolled into one another year after year, a reimbursement rate is decided. TAPE 99-20, Side B Number 585 MR. LIVEY explained the rate is set on costs that are approved. Disputed costs are paid later, if they are eventually approved. SENATOR TORGERSON asked what the outstanding appeals total currently. MR. LIVEY replied between $10 million and $12 million, though once these costs are paid they would be included in the facilities cost base and would show up annually. CHAIRMAN TAYLOR remarked, "Somebody is paying those costs anyway, that's what has me bothered. I think I know who it is - it's me." SENATOR TORGERSON said this is only "the tip of the iceberg" and the whole process needs help. SENATOR DONLEY observed the problem requires clearer regulations, and "a better Executive branch." Number 568 MR. LIVEY agreed the rate-setting process could be improved. He reiterated that 30, 45, or even 60 days is not enough time for the Department to issue a decision. CHAIRMAN TAYLOR maintained that is exactly the number of days (30) a private attorney has to file an appeal in a major case. Number 547 MS. SUE MASON, an Anchorage attorney who represents hospitals in Medicare rate appeals, testified the committee substitute is better than the original bill and she supports it. MS. MASON said the Department now is in compliance with the Administrative Procedures Act only technically; by issuing a remand order that specifies remand instructions to follow, the Commissioner avoids existing statute that requires a decision within 30 days. MS. MASON suggested the numbering of the sections within bill be changed to tighten the bill. Number 464 MR. DAN HOUGHTON, Chief Financial Officer of Alaska Regional Hospital, testified in support of SB 106. MR. HOUGHTON said endless appeals without judicial relief waste both time and money and seem contrary to finding a fair and equitable solution. Number 431 SENATOR TORGERSON moved Amendment #1, the structural changes to the bill suggested by Sue Mason. CHAIRMAN TAYLOR clarified the amendment would change, on page 1 line 14, "Section (2)" to "Section (c)" and, on page 2 line 7, change "Section (3)" to "Section (d)". Without objection, Amendment #1 was adopted. CHAIRMAN TAYLOR agreed with SENATOR TORGERSON that this is only the tip of the iceberg in relation to the problems that exist with the administrative adjudication process. He said there is legislation moving out of the House that establishes an autonomous cadre of hearing officers to hear administrative appeals. CHAIRMAN TAYLOR remarked he appreciated the candor of MR. LIVEY, who reinforced his idea that there are internal unwritten policies within departments. He suggested this must be difficult for anyone trying to deal with the department. Number 395 MR. CHARLIE FRANZ, representing South Peninsula Hospital, registered his support for CSSB 106(JUD). He said, "The appeals process is clearly broken . . . and we need to do something to fix it." Number 373 SENATOR TORGERSON moved CSSB 106(JUD) out of committee with individual recommendations. Without objection, CSSB 106(JUD) moved from committee with individual recommendations.