Legislature(1999 - 2000)

03/22/1999 01:35 PM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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                                                             
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                                                              
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.                                                                                 

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