Legislature(2021 - 2022)BELTZ 105 (TSBldg)
04/23/2021 01:30 PM LABOR & COMMERCE
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SB 26-REPEAL CERTIFICATE OF NEED PROGRAM 1:31:09 PM CHAIR COSTELLO announced the consideration of SENATE BILL NO. 17, "An Act relating to the retrofitting of certain public facilities and community facilities; relating to the performance of energy audits on schools and community facilities; relating to the duties of the Alaska Energy Authority and the Alaska Housing Finance Corporation; creating a rapid economic recovery office in the Alaska Industrial Development and Export Authority; and relating to the state energy policy and energy source reporting by state agencies." 1:31:52 PM CHAIR COSTELLO opened public testimony on SB 26. 1:32:19 PM JAIMIE CAVANAUGH, Attorney, Institute for Justice, Detroit, Michigan, stated that the Institute is a national nonprofit public interest law firm that for decades has worked to end CON laws through litigation and legislation. She shared the stories of two clients. The first was a man from Nepal who opened a CPA practice in Louisville, Kentucky. He noticed that there were no home healthcare services for Nepali speakers and decided to open an agency himself. When he filed his CON application, a large incumbent intervened and successfully argued that there was no need for an additional home healthcare agency. He was unable to get a CON certificate. The second story is about an ophthalmologist from North Carolina who wanted to perform surgery out of the facility he owned. The cost of surgery at that doctor's office was under $1,800 whereas the local hospital charges a $6,000 facility fee plus the cost of the surgery. Yet the state of North Carolina said there was no need for an additional surgery center so the doctor's patients pay the higher hospital prices. MS. CAVANAUGH said the foregoing examples highlight how CON laws harm patients and empower incumbent CON holders. She suggested that instead of stacking the deck against new business, Alaska should welcome new healthcare providers. She asked the committee to support SB 26. 1:35:07 PM ANGELA ERICKSON, Strategic Research Director, Pacific Legal Foundation, Kentucky, stated that this public interest law firm has a strong history of opposing and helping to strike down CON laws across the country. She referenced testimony during the last hearing from a government official who challenged the notion of Alaska potentially having an additional 12 hospitals [if the state repealed its CON laws]. She argued from a central planning standpoint and wanted all current hospitals to figure out the cost. MS. ERICKSON provided an example of what might happen in the absence of CON laws. In 2017, somebody saw a used ambulance and decided to launch Legacy Medical Transport in Ohio. This non- emergency ambulance transports people to and from doctor appointments and facilities. Within two years, the enterprise grew to seven ambulances. Because the office is just a mile from the Kentucky state line, the business gets many requests to take Ohioans to appointments in Kentucky. However, Kentucky is a CON state and the company cannot operate there without a CON certificate. When the owner applied for a certificate, incumbents protested claiming he would steal business and the application was denied. He is currently suing the state of Kentucky with help from Pacific Legal Foundation. MS. ERICKSON argued that CON laws are in direct violation of the 14th Amendment that guarantees that people will not be deprived of a liberty without due process of law. That essentially means that laws must pursue a legitimate public health and safety goal rather than favoring entrenched businesses. She said the committee heard in testimony on Wednesday how CON laws fail that test. She said everyone appreciates what hospitals and healthcare workers have done during the COVID-19 pandemic and repealing Alaska's CON laws acknowledges the expertise and knowledge each has to respond to new conditions. 1:37:35 PM STEVE FRANK, Member, Fairbanks Memorial Hospital Board, Fairbanks, Alaska, stated that he is a free market Republican who worked on the Medicaid budget years ago when he served as co-chair of the Senate Finance Committee. He related that the Fairbanks Memorial Hospital is a nonprofit community-owned hospital that offers behavioral health and hospice care in addition to running an emergency department and all the usual services a hospital provides 24/7. This is the only hospital in Fairbanks, but the community also has an ambulatory surgery center. The center operates regular business hours and does not worry about staffing for emergencies or uncompensated care. The hospital has lost about 30 percent of its surgery business to the center leaving it with excess surgery capacity. He said the hospital worries about its viability if additional medical businesses come into the community and take more of the hospital's profitable business without having to offer the low profit or uncompensated care that hospitals are required to maintain. The CON process prevents such unnecessary facilities from entering the market. MR. FRANKS suggested the legislature look at two things as it considers SB 26. First, a comparison to anything in the free market like groceries is irrelevant because the healthcare a hospital provides is not free market. Hospitals are totally regulated. Second, a large percentage of the state's budget already goes to pay for Medicaid and that will increase if another unnecessary healthcare facility comes in and the hospital loses more business. The state compensates the hospital on a fee per service basis for Medicaid and if the same population is spread over two facilities, the cost per procedure will go up and so will the Medicaid budget. He urged the legislature to carefully look at what eliminating CON will do to the Medicaid budget and what it will do to sole community hospitals. He offered his understanding that since 2016, six CON applications were approved, none denied, and 22 facilities fell under the $1.5 million threshold. He urged the committee to look at the issue carefully and avoid getting swept up in the rhetoric of the free market. 1:46:32 PM RYAN SMITH, CEO, South Peninsula Hospital and Long Term Care, Homer, Alaska, testified in opposition to SB 26. He stated that healthcare is complex and highly regulated. CON laws are one way it is regulated. After the passage of the National Health Planning and Resources Development Act, CON programs established a review process to promote responsive health facility and service development, rational health planning, healthcare quality, access to healthcare, and healthcare cost containment. He asked the committee to hold SB 26 and refer the matter to the Department of Health and Social Services (DHSS) commissioner or an appropriate individual to convene a negotiated rule making process to find solutions and consensus on CON reforms that would stabilize healthcare access in small communities and critical access hospitals. He related that in 2007 he was the CEO of Central Peninsula Hospital in Soldotna and participated in the CON negotiated rule making committee that did reach consensus on needed CON program reforms without repealing the law altogether. He urged the legislature to allow stakeholders to work as Alaskan partners in healthcare to propose needed reforms to Alaska's CON laws. 1:48:57 PM JESSICA OSWALD, CEO, St. Elias Specialty Hospital, Anchorage, Alaska, stated that she was testifying in opposition to SB 26. She expressed concern about oversimplifying Alaska's continuum of care issues and warned against relying on outside lawyers and think tanks to advocate for Alaskans and develop healthcare policies for the state. She posited that the existing CON process in Alaska allows for careful consideration of the need and impact of proposed changes to the healthcare system to avoid unintended consequences that could increase costs, reduce access, and further destabilize the system. She said St. Elias provides care for acutely, chronically ill patients from ICU through rehabilitation. As federally required, the length of stay is 25 days or longer. One third of their patients generally have no safe discharge in Alaska because a significant portion of their care is unfunded. St. Elias absorbs those unfunded costs of care with limited offset so destabilizing the existing care model would mean that many of their patients would remain in short term ICUs for months or be sent out of state for care. She also pointed out that when Alaska's trauma centers fill with critical care long stay patients, Alaskans wait longer in emergency rooms and the overall availability of care is further reduced across the continuum. Ending the CON program without understanding the unintended consequences could drive up the cost of care and further limit access. 1:51:55 PM RICK DAVIS, CEO, Central Peninsula Hospital, Soldotna, Alaska, related that he has worked in hospital administration in Alaska for 29 years and repealing the CON program has been debated throughout his healthcare career. Proponents always suggest that removing all barriers will allow the free market to work and reduce healthcare costs, but the reality is that healthcare in the U.S. is not a free market. He reported that 70 percent of CPH's patients receive care that is paid for at a fixed rate that is dictated by Medicaid, Medicare, or another government payer. He reminded the committee that hospitals are required by law to see all patients 24X7X365 and accept as full payment what the government chooses to pay. Of the remaining 30 percent of patients, about 10 percent are charity or no pay and 20 percent are workers compensation, other government payers, or insured patients. That 20 percent of patients is what might be called free market and is what hospitals and independent imaging and surgery centers compete for. He pointed out that even then the competition is only for the high margin, elective, 8-5 Monday- Friday care. After hours, weekend, and holiday care is at a hospital and most likely in the emergency room. MR. DAVIS said he understands the financial reasons for independent imaging and surgery centers limiting access to the 80 percent of the population that is no pay or government sponsored. However, he said there is no way a hospital can survive if it depends solely on that segment of the population and is not able to augment care with elective procedures on insured patients. Allowing independent facilities to cherry-pick care will damage small community hospitals and cause some to close. At the least, it would result in reduction of low margin services such as psychiatric, emergency, and obstetrics, all of which community hospitals generally provide in small communities. He said the CON law helps keep community hospitals open but he supports the suggestion to convene a negotiated rule making committee to improve, not repeal, Alaska's CON laws. 1:56:19 PM MONIQUE MARTIN, Director, Government Relations & Regulatory Navigation, Alaska Regional Hospital, Anchorage, Alaska, stated that she was speaking in opposition to SB 26. She refuted the testimony from the last hearing from outside experts who purported to know best about Alaska's healthcare delivery system. She maintained that Alaskans know best about Alaska and its healthcare providers and they are concerned about repealing Alaska's CON program because of what they know about the state's healthcare delivery system. MS. MARTIN highlighted the work that Alaskans and the legislature have done since 2014 to reduce the cost of healthcare in the state. From 2014 to 2018, uncompensated care decreased 48 percent from nearly $113 million to $58.2 million. Additionally, from FY2015 to FY2020 Medicaid covered 54,000 more Alaskans and reforms to the program resulted in the state spending $89.3 million fewer state general funds dollars. She said this came from working together and through Alaskan-grown innovations such as Alaska's innovative 1332 waiver and the tribal claiming program that allows increased federal participation. She said Alaskan healthcare providers and patient advocacy groups have ideas to reduce healthcare costs in the state and the hospital association has a list of improvements to the CON program. She encouraged the committee to look to Alaska- grown ideas because of what Alaskans working together have already accomplished. 1:59:39 PM DR. ROGER STARK, Senior Fellow, Washington Policy Center (WPC), advised that WPC is a free market think tank that has offices in Olympia, Seattle, Spokane, and Tri-Cities Washington. He said he listened to all the testimony on SB 26 and wanted to make four points. The most important point is that the federal government repealed the federal requirement for CON in 1987 because it was not saving money in its Medicaid and Medicare programs. Second, those who testified against SB 26 represent existing facilities that do not want competition. He noted previous testimony that two facilities in a small community operate at 50 percent capacity but his perspective is that it offers patients choices. Third is the argument that healthcare is not a free market. That is somewhat accurate but the trend is for patients to use more of their own dollars through high deductible health plans, health savings accounts, and cash only transactions for things like lasik eye surgery. He said patients need choices in this developing free market. Fourth, the fiscal note for SB 26 indicates that repealing Alaska's certificate of need program would save $250,000 per year. 1:59:52 PM SENATOR MICCICHE joined the committee. 2:02:15 PM LESLIE BECKER, representing self, Ketchikan, Alaska, stated that she is a semi-retired healthcare executive with more than 30 years senior management experience working with large hospitals and diagnostic providers in both CON and non-CON states. She said her experience is that CON is a huge detriment to managing healthcare costs, improving quality of care, and enhancing patient access to services. In her view, the free market is critical for any product or service. Competition raises the bar on the level of service provided, lowers costs, and levels the playing field to allow greater access for everyone. She offered her perspective that logistics ensures that healthcare will always cost more in Alaska. However, the costs do not need to be as high as they are today. She identified CON as one of the key drivers in the exponential growth in healthcare expenses and emphasized that repealing it will not drive up costs. She predicted that if CON is not repealed, medical tourism will continue to flourish throughout the state and a significant number of diagnostic imaging studies and elective surgery cases will continue to be redirected to more efficient and cost-effective centers that happen to be in non- CON states. She advised that the cost of a diagnostic MRI in Ketchikan is $5,000 compared to under $1,000 in the Seattle area. This difference compels patients to fly to Seattle for the 30-minute service. MS. BECKER said that without competition there is no incentive for cost management, efficiency, or patient satisfaction. She pointed out that a high percentage of patients leave Alaska for elective services. She warned that without free market competition, Alaska's level of care will decline and patients will seek lower cost options outside the state for elective care. This will heavily affect the difficult issue of physician recruitment and retention. She said it is time to repeal Alaska's CON laws and let the free market determine success. CHAIR COSTELLO mentioned that written testimony was welcome. 2:06:26 PM PORTIA NOBLE, representing self, Anchorage, Alaska, stated support for SB 26. She said certificate of need laws have limited the supply of facilities and services nationwide. She expressed concern that the CON approval process relies on healthcare planners rather than the needs of Alaskans and those who work in the field. The result is that governments are lobbied by large healthcare monopolies and the free market model is forgotten. She listed what CON laws have done for consumers so far. They have driven up costs to the consumer, lowered the quality of care, eliminated the availability of needed services, and blocked competition in the healthcare market. MS. NOBLE emphasized that healthcare providers should not need the permission of government to expand their size and scope of practice. She noted that during the pandemic, more than 22 states suspended their CON laws related to hospital beds and essential services. She suggested that it should not take a pandemic for a state to realize that CON laws threaten public health. She concluded that it is time to eliminate laws that harm patients and the spirit of competition. 2:08:01 PM CHAIR COSTELLO closed public testimony on SB 26. 2:08:07 PM At ease 2:09:34 PM CHAIR COSTELLO reconvened the meeting and stated she would hold SB 26 in committee. She reiterated that written testimony was welcome.