Legislature(2021 - 2022)BELTZ 105 (TSBldg)

04/23/2021 01:30 PM LABOR & COMMERCE

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Heard & Held
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**Streamed live on AKL.tv**
           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                                                               

Document Name Date/Time Subjects
SB 26 CON Laws and Healthcare Utilization During COVID Report.pdf SL&C 4/23/2021 1:30:00 PM
SB 26
SB 26 Brief Synopsis of COVID and CON Report.pdf SL&C 4/23/2021 1:30:00 PM
SB 26
SB 26 - Federalist Society - CON Working Paper 4.23.21.pdf SL&C 4/23/2021 1:30:00 PM
SB 26
SB 26 Written Testimony - David Balat.pdf SL&C 4/23/2021 1:30:00 PM
SB 26
SB 26 Written Testimony - Bethany Marcum, Alaska Policy Forum.pdf SL&C 4/23/2021 1:30:00 PM
SB 26
SB 26 Written Testimony - Leslie Becker.pdf SL&C 4/23/2021 1:30:00 PM
SB 26
SB 26 - Written Testimony - Alicia Plemmons.pdf SL&C 4/23/2021 1:30:00 PM
SB 26
SB 26 Written Testimony - Francine Attrill, U.S. Renal Care.pdf SL&C 4/23/2021 1:30:00 PM
SB 26
SB 26 Written Testimony - CEO ASHNHA.pdf SL&C 4/23/2021 1:30:00 PM
SB 26
SB 26 Written Testimony - Wendy Schrag.pdf SL&C 4/23/2021 1:30:00 PM
SB 26
SB 26 Written Testimony - Naomi Lopez-Bauman.pdf SL&C 4/23/2021 1:30:00 PM
SB 26
SB 17 v. B Presentation 4.23.21.pdf SL&C 4/23/2021 1:30:00 PM
SB 17
SB 17 v. B Sectional Analysis 4.9.2021.pdf SL&C 4/23/2021 1:30:00 PM
SB 17
SB 17 Written Testimony - Sydney Lienemann, ESCO.pdf SL&C 4/23/2021 1:30:00 PM
SB 17