Legislature(2001 - 2002)
03/19/2002 08:10 AM House CRA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE COMMUNITY AND REGIONAL AFFAIRS
STANDING COMMITTEE
March 19, 2002
8:10 a.m.
MEMBERS PRESENT
Representative Kevin Meyer, Co-Chair
Representative Carl Morgan, Co-Chair
Representative Andrew Halcro
Representative Drew Scalzi
Representative Lisa Murkowski
Representative Gretchen Guess
Representative Beth Kerttula
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 474
"An Act relating to public rights-of-way and easements for
surface transportation affecting the Anchorage Coastal Wildlife
Refuge."
- MOVED CSHB 474(CRA) OUT OF COMMITTEE
HOUSE BILL NO. 407
"An Act relating to the certificate of need program."
- HEARD AND HELD
HOUSE BILL NO. 299
"An Act providing for the naming and renaming of Alaska
geographic features."
- SCHEDULED BUT NOT HEARD
PREVIOUS ACTION
BILL: HB 474
SHORT TITLE:ANCHORAGE COASTAL WILDLIFE REFUGE
SPONSOR(S): REPRESENTATIVE(S)GREEN
Jrn-Date Jrn-Page Action
02/19/02 2315 (H) READ THE FIRST TIME -
REFERRALS
02/19/02 2315 (H) CRA, RES
03/05/02 (H) CRA AT 8:00 AM CAPITOL 124
03/05/02 (H) Heard & Held
03/05/02 (H) MINUTE(CRA)
03/19/02 (H) CRA AT 8:00 AM CAPITOL 124
BILL: HB 407
SHORT TITLE:CERTIFICATE OF NEED PROGRAM
SPONSOR(S): REPRESENTATIVE(S)COGHILL
Jrn-Date Jrn-Page Action
02/13/02 2232 (H) READ THE FIRST TIME -
REFERRALS
02/13/02 2232 (H) CRA, HES
03/04/02 2469 (H) COSPONSOR(S): JAMES
03/13/02 2530 (H) COSPONSOR(S): SCALZI
03/14/02 (H) CRA AT 8:00 AM CAPITOL 124
03/14/02 (H) Scheduled But Not Heard
03/18/02 2593 (H) COSPONSOR(S): DYSON
03/19/02 (H) CRA AT 8:00 AM CAPITOL 124
WITNESS REGISTER
LAURA ACHEE, Staff
to Representative Joe Green
Alaska State Legislature
Capitol Building, Room 404
Juneau, Alaska 99801
POSITION STATEMENT: Testified on behalf of the sponsor of HB
474, Representative Green.
JANEL FEIERABEND, Director
Friends of Potter Marsh and the Anchorage Coastal Wildlife
Refuge (ACWR)
3170 Marathon Circle
Anchorage, Alaska 99515
POSITION STATEMENT: Testified that [HB 474] helps protect [the
ACWR].
CHERYL SHOYER, Member
Oceanview Community Council
PO Box 113264
Anchorage, Alaska 99511
POSITION STATEMENT: Testified in support of HB 474.
JIM DOKOOZIAN, President
Bayshore/Klatt Community Council
1700 Shore
Anchorage, Alaska 99515
POSITION STATEMENT: Testified in support of HB 474.
RYNNIEVA MOSS, Staff
to Representative John Coghill
Alaska State Legislature
Capitol Building, Room 102
Juneau, Alaska 99801
POSITION STATEMENT: Testified on behalf of the sponsor of HB
474, Representative Coghill.
ELMER LINDSTROM, Deputy Commissioner
Department of Health & Social Services
PO Box 110601
Juneau, Alaska 99811-0601
POSITION STATEMENT: Testified on HB 407.
CATHY CRONIN
North Star Hospital
(No address provided)
POSITION STATEMENT: Offered to work on the expansion of the
psychiatric beds in the House Health, Education and Social
Services Standing Committee.
DAVID McGUIRE, Independent Practitioner
(No address provided)
POSITION STATEMENT: Urged passage of HB 407.
ELIZABETH RIPLEY, Director
Community Health Planning
Valley Hospital
PO Box 1687
Palmer, Alaska 99645
POSITION STATEMENT: Recommended establishing a working group
comprised of legislators and providers in order to examine the
CON process.
REBECCA PARKER, Employee
Providence Alaska Medical Center
3200 Providence Drive
Anchorage, Alaska 99508
POSITION STATEMENT: Testified in opposition to HB 407.
ALLAN SNIDER
PO Box 16216
Two Rivers, Alaska 99716
POSITION STATEMENT: Testified in support of HB 407.
JOHN LUNDQUIST, Employee
Fairbanks Memorial Hospital
752 Donohue Drive
Fairbanks, Alaska 99709
POSITION STATEMENT: Testified in opposition to HB 407.
MARTY O'LONE, Employee
Fairbanks Memorial Hospital
3825 Ridgeview Drive
Fairbanks, Alaska 99709
POSITION STATEMENT: Testified in opposition to HB 407.
LIZ WOODYARD, Nurse
PO Box 85109
Fairbanks, Alaska 99708
POSITION STATEMENT: Testified in opposition to changes to the
CON program.
CORLIS TAYLOR, Employee
Fairbanks Memorial Hospital
1335 Viewpointe Drive
Fairbanks, Alaska 99709
POSITION STATEMENT: Testified in opposition to HB 407.
ACTION NARRATIVE
TAPE 02-15, SIDE A
Number 0001
CO-CHAIR KEVIN MEYER called the House Community and Regional
Affairs Standing Committee meeting to order at 8:10 a.m.
Representatives Morgan, Meyer, Scalzi, and Murkowski were
present at the call to order. Representatives Scalzi, Guess,
and Kerttula arrived as the meeting was in progress.
HB 474-ANCHORAGE COASTAL WILDLIFE REFUGE
CO-CHAIR MEYER announced that the first order of business would
be HOUSE BILL NO. 474, "An Act relating to public rights-of-way
and easements for surface transportation affecting the Anchorage
Coastal Wildlife Refuge."
LAURA ACHEE, Staff to Representative Joe Green, Alaska State
Legislature, informed the committee that Tim Rogers,
Municipality of Anchorage, shared his concerns with her. She
said that Mr. Rogers felt that the original legislation
encroached on the municipality's authority over their land that
extends into the refuge. Upon review, she agreed with Mr.
Rogers and thus she had an amendment drafted. She explained
that on page 1, lines 13-14, HB 474 says, "a right-of-way or
other easement for surface transportation may not be created",
with which the municipality took issue because the municipality
does have some land that extends into the refuge. Therefore,
the amendment changes the aforementioned language to read, "the
state shall not acquire or create a right-of-way or other
easement for surface transportation". With the amendment, the
municipality would be able to place any surface transportation
on their land that extends into the refuge.
REPRESENTATIVE MURKOWSKI related her understanding then that the
issue is the state acquiring the easement.
MS. ACHEE replied yes. In further response to Representative
Murkowski, Ms. Achee said that this was the only issue she was
aware that the municipality had.
Number 0648
JANEL FEIERABEND, Director, Friends of Potter Marsh and the
Anchorage Coastal Wildlife Refuge (ACWR), testified via
teleconference. She mentioned that the [goal] of the
organization is to protect the integrity of the marsh through
education. Ms. Feierabend discussed the Lesser Sandhill Crane,
which eats, sleeps, and nests in the ACWR because the habitat so
perfectly supports its well being. The 32,000 acres of ACWR was
designated as a state refuge in 1988 by the legislature. The
state was wise to think of the future and establish the refuge.
Ms. Feierabend mentioned the February 19, 1991, Alaska Coastal
Wildlife Refuge Management Plan by ADF&G, which includes a
comprehensive list of those species found in the refuge. She
noted that
the list has grown since that time.
MS. FEIERABEND emphasized that talk of development of any kind
in this state refuge should raise major concern. Any
possibility of encroachment into the refuge should be studied
and analyzed by state decision makers. She suggested that the
state decision makers should read "The Wildlife Study 2001:
South Extension of the Coastal Trail Final Report" as well as
books regarding the human and canine impact to wildlife. This
state refuge is a unique and special place that hosts a wealth
of plant and invertebrate communities, and a range of wild
animals. She expressed the need for wise statesman, who think
beyond municipal borders and concerns, to be part of the check-
and-balance system when it relates to state and even broader
funded projects. "It is up to the state legislators to weigh in
on the protection of the very area it deemed worthy to reserve
as a refuge," she said. Ms. Feierabend said that HB 474 helps
to protect this treasure, [ACWR], that belongs to all of Alaska.
Number 0946
CHERYL SHOYER, Member, Oceanview Community Council, testified
via teleconference in support of HB 474. As a whole, the
Oceanview Community Council values the ACWR. In participating
in the process, the council has become disappointed,
disillusioned, disheartened, and discouraged. The council
attempted to stay neutral, but that turned out to be impossible
after going through the public process at length. Over and over
it seemed as if [the council] had never been there, which was
very discouraging. Ms. Shoyer informed the committee that the
council hired individuals to review the process, but time after
time those individuals would report that the process was biased.
She felt that the worst of it was when the governor announced he
wanted the trail to go through the marsh. Therefore, Ms. Shoyer
felt that it would be great if the legislature had a watchdog
over this obvious bias from the governor. She expressed hope
that HB 474 could balance this obvious imbalance.
Number 1290
JIM DOKOOZIAN, President, Bayshore/Klatt Community Council,
testified via teleconference in support of HB 474. Mr.
Dokoozian announced that he was present on behalf of the
president of the Oceanview Community Council as well as the
president of the Sand Lake Community Council. Mr. Dokoozian
informed the committee that all three of the community councils
voted in separate votes in favor of the inland trail if a trail
was to exist. It was only after a few concerned citizens were
frustrated that they advocated a trail that would connect [the
communities] on an inland route, the gold route. There was a
great amount of support from the community councils for the gold
route. Furthermore, there is a petition with over 2,500
signatures, including the former governor Jay Hammond, in
support of preserving the refuge.
MR. DOKOOZIAN turned to the governor's announcement that the
trail should go through the marsh. That announcement galvanized
the residents of south Anchorage, who thought they were part of
a public process of evaluating various routes. "We are weary of
the lack of responsiveness of the project team," he noted. He
also indicated that there is much disappointment in the process
and thus expressed the need to have [legislative] oversight.
CO-CHAIR MEYER, upon no one else wishing to testify, closed the
public testimony.
Number 1515
REPRESENTATIVE MURKOWSKI moved that the committee adopt
Amendment 1, which reads as follows:
Page 1, line 10, after "and Fire Island.":
Insert, "Except for the public right-of-way and
utility corridor created in this subsection and
identified in the management plan, for a realignment
of the right-of-way for the new Seward Highway, and
for a realignment of the right-of-way for the Alaska
Railroad, the state shall not acquire or create a
right-of-way or other easement for surface
transportation below the crest of the coastal bluff or
below Campbell Lake without the prior approval of the
legislature by law."
REPRESENTATIVE KERTTULA surmised that all the amendment is doing
is stopping DOT&PF from acquiring. She asked whether a legal
opinion had been obtained regarding the right of the department
to proceed without approval.
MR. ACHEE replied that she spoke with the Legislative Legal and
Research Division, who said that it was a gray area.
CO-CHAIR MEYER asked if there was any objection. There being no
objection, Amendment 1 was adopted.
Number 1625
REPRESENTATIVE SCALZI moved to report HB 474 as amended out of
committee with individual recommendations and the accompanying
zero fiscal note. There being no objection, CSHB 474(CRA) was
reported from the House Community and Regional Affairs Standing
Committee.
The committee took a brief at-ease.
HB 407-CERTIFICATE OF NEED PROGRAM
CO-CHAIR MEYER announced that the next order of business before
the committee would be HOUSE BILL NO. 407, "An Act relating to
the certificate of need program."
Number 1685
RYNNIEVA MOSS, Staff to Representative John Coghill, Alaska
State Legislature, testified on behalf of the sponsor,
Representative Coghill. Ms. Moss read the sponsor statement as
follows:
Representative Coghill feels that [in] trying to
preserve the free enterprise system, legislators
should do all they can to protect the open market and
consumer choice. This bill is an attempt to do this
in the world of health care.
Under the current state statutes, if a health care
provider in Fairbanks or Mat-Su Borough wanted to
build a $10 million dollar clinic, they would have to
obtain a Certificate of Need (CON). In applying for
that Certificate [Of Need] they would have to show
that they would not adversely affect any other health
care facilities in the vicinity. Representative
Coghill feels that the question needs to be asked:
"Whatever happened to competition and the open market
place?" He doesn't believe that by eliminating
Certificates Of Need requirements for larger Alaskan
communities, there will be a large influx of new
medical facilities. This may have been true when the
federal government subsidized Certificate of Need
programs, but the federal Certificate of Need law was
repealed in 1996. Since the repeal of the federal
law, 14 states have repealed their Certificate of Need
statutes. Another ten states have eliminated
Certificate of Need requirements for acute care
facilities, and an additional nine states do not
require Certificates of Need for ambulatory surgical
centers.
More ambulatory surgical centers in Fairbanks would
not mean less business for existing facilities. It
would mean that fewer Fairbanksans would have to
travel to Anchorage or the Lower 48 for medical
procedure[s]. The savings in travel alone could have
a positive effect on the medical costs and medical
insurance costs. According to an article from
"Heartland" in 1996 - and I've attached this article
to your background information - the Federal Trade
Commission estimated that Certificate of Need
regulations increased the cost of hospital care
nationwide by more than $1.3 billion annually. Health
care is expensive and the lack of competition could be
a partial reason for that. This legislation would
encourage competition in the larger Alaskan
communities where the population would support the
competition while protecting the fragile balance of
health care services in smaller Alaskan communities.
MS. MOSS turned to the question as to why HB 407 chose the
population figure of 55,000 and provided the committee with [a
document entitled, "What is the Right Population Number?" She
explained that the 2000 U.S. Census considers a significant
community to be one with a population of 25,000. The federal
formula for Alaska provides an additional 25 percent on any
figure. Therefore, the population [of what is considered a
significant community] would be brought up to 31,250. Then the
Medicaid formulas for medical reimbursements were reviewed, and
the middle, 175 percent, was chosen and thus the population
requirement would rise to 54,688. Therefore, the population
figure of 55,000 was chosen. Ms. Moss pointed out that the
aforementioned document lists the populations of the organized
boroughs in order to illustrate which communities will be
impacted by HB 407. Obviously, the Anchorage Borough, Fairbanks
North Star Borough, and the Matanuska-Susitna Borough will be
impacted.
Number 1930
MS. MOSS directed attention to the fiscal implications of
nonprofit medical providers. She pointed out that Providence
Alaska Medical Center will have excess revenues of approximately
$189 million between 1998 and 2004. Although she wasn't sure
where that excess revenue goes, she was fairly sure that it
didn't stay in Alaska. Therefore, Ms. Moss felt that Anchorage
has an atmosphere for competition in medical facilities. She
reiterated that Representative Coghill feels that competition is
good in all free enterprises, including medical facilities. Ms.
Moss provided the committee with a chart that specifies which
states have a CON program. She also provided the committee with
an article entitled, "Certificates of Need: A Bad Idea Whose
Time Has Passed." That article discusses the results of CON
programs, which are the creation and staffing of new taxpayer-
funded bureaucracies with expensive and time-consuming
application processes. Those costs are passed to the consumer.
The CON programs have also resulted in local community
dissatisfaction with health care planners who are often far away
and perceived as insensitive to local needs.
MS. MOSS turned to the fiscal note, and informed the committee
that Representative Coghill will be requesting some amendments
to HB 407 in the House Health, Education and Social Services
Standing Committee. Those amendments would eliminate most of
the fiscal note through the exemption of nursing homes and acute
psychiatric beds. Therefore, the elimination of the
aforementioned beds would eliminate page 2 of the fiscal note
and result in a fiscal note of approximately $150,000. However,
Representative Coghill believes that nursing home and acute
psychiatric beds should be addressed, and that the state should
reimburse hospitals for beds that aren't being used. Perhaps
the Medicaid formula [for hospitals] would be changed such that
Medicaid money is only used for the beds that are used and the
services that are delivered.
Number 2098
REPRESENTATIVE SCALZI inquired as to why there is a fiscal note.
MS. MOSS explained her understanding that the state pays for a
certain number of [psychiatric] beds whether those beds are used
or not, which is also the case with nursing home beds. Ms. Moss
recalled that there is an 80 percent user rate that is paid.
REPRESENTATIVE SCALZI related his understanding then that if the
CON is eliminated, the funding for those beds, whether they are
used or not, would be eliminated as well.
MS. MOSS clarified that if the CON is eliminated the beds would
still be paid for albeit the bed might be in a different
facility that might be full. Therefore, two beds are being paid
for.
REPRESENTATIVE SCALZI surmised then that [the state] may pay for
duplicate services, if the CON is eliminated.
MS. MOSS replied yes.
CO-CHAIR MEYER asked if that is how Ms. Moss arrived at the
$150,000 annual operating cost.
MS. MOSS answered yes.
Number 2196
REPRESENTATIVE GUESS turned to the concept of cherry picking,
which she feels is the controversial conflict. When there are
situations in which there is an oligopoly and one of the
participants is regulated, she asked whether cherry picking
would exist because those facilities that accept all patients
will be at a disadvantage.
MS. MOSS said that she believes that is the reason
Representative Coghill is willing to amend HB 407 because the
cherry picking is going to happen with nursing home care and
psychiatric beds. In regard to the rest [of the beds] there is
a larger share of private pay. The cherry picking will occur
for the beds that are Medicaid paid, which are the nursing home
and psychiatric beds.
REPRESENTATIVE GUESS related her understanding that in Ms. Moss'
analysis of basic medical situations, the market is such that
there won't be any [cherry picking].
MS. MOSS replied, "We don't believe so."
REPRESENTATIVE GUESS asked if there is an analysis from someone
that supports that belief.
MS. MOSS explained that this belief was developed after reading
[various] articles, two of which have been supplied to the
committee. One of the articles is actually testimony before the
Joint House and Senate Health Committees in the State of
Georgia.
Number 2312
REPRESENTATIVE MURKOWSKI pointed out that there is the
possibility of eliminating the CON program entirely for all
communities. Therefore, she inquired as to why the
aforementioned option wasn't chosen.
MS. MOSS said that Representative Coghill was concerned about
the smaller communities where there are private medical
facilities. For instance, in Tok and Delta nonprofit medical
facilities have moved in and made it difficult for private
medical clinics to compete with nonprofit medical facilities.
REPRESENTATIVE MURKOWSKI related her understanding then that
Representative Coghill believes that the smaller communities
aren't going to have access to a larger health care market.
MS. MOSS replied yes.
Number 2389
REPRESENTATIVE SCALZI noted that Representative Coghill is
interested in reducing state spending and the amount of dollars
the state puts into health care and how those dollars could be
used more efficiently. According to the fiscal note, there may
be an impact; however, he questioned how the removal of the
CON would benefit the state in the long term.
MS. MOSS said that the articles she has provided to the
committee will offer some of the thinking that Representative
Coghill has. In the long run, Representative Coghill feels that
[elimination of the CON] will create better services at a better
cost.
REPRESENTATIVE SCALZI said, "If we're somehow going to eliminate
the duplication of services and empty beds in the long run
because those beds will eventually be full and paid for. I
guess the qualification of the -- whether it's a nonprofit or
private enterprise that comes in, the tie theoretically will not
be split and pay for empty beds. ... is that where we're
going?"
MS. MOSS agreed that is a problem and that is why Representative
Coghill is willing to amend that in the House Health, Education
and Social Services Standing Committee. However, Representative
Coghill feels that with a new administration the process of
paying for medical services could change. That change in
process would merely require that the Department of Health &
Social Services change its agreement with the federal
government. Part of that change would be to only pay for those
services that are delivered.
Number 2514
REPRESENTATIVE MURKOWSKI turned to the letter from Valley
Hospital in opposition to HB 407. The final paragraph of that
letter recommends that the legislature create a working group of
legislators and providers to examine the CON process. Also, she
recalled that the Senate is reviewing a measure to establish
such a task force. She requested that Ms. Moss comment.
MS. MOSS clarified that Representative Murkowski was referring
to SB 256, sponsored by Senator Green. Senator Green's
legislation deals with changing the application process in
certain areas that she is exempting, which Ms. Moss recalled
were the psychiatric beds and nursing home beds. Ms. Moss
explained that Representative Coghill chose to narrow HB 407 to
the whole concept of CON because Representative Coghill wants to
push the concept of free enterprise and competition. Ms. Moss
remarked that the working group is one of Representative
Coghill's concerns and the other is the nursing home and
psychiatric beds. In further response to Representative
Murkowski, Ms. Moss specified that Representative Coghill
wouldn't be adverse to establishing a working group on this
issue.
Number 2643
ELMER LINDSTROM, Deputy Commissioner, Department of Health &
Social Services, began by saying that HB 407 impacts the
department's business in many ways. He explained that the
purpose of the CON program is two-fold. The CON program was
designed to provide some assurance that very expensive health
facilities are built only if they are needed and economically
efficient. Over time, the CON program has taken on an aspect of
cost control, which relates to the Medicaid program.
MR. LINDSTROM remarked that it is important for the committee to
understand who pays for health care in Alaska. For instance,
the nursing home and psychiatric beds are paid for by the state
and the State Medicaid program. If one isn't eligible for
Medicaid upon entrance into a nursing home facility, odds are
that person will be shortly thereafter because the cost of a
nursing home bed in Alaska is thousands of dollars a month. In
total, the Medicaid program pays for about 85 percent of the
total budget for nursing home beds. As a cost containment
issue, the department is keenly supportive of the CON process as
it relates to long-term care beds. Therefore, he urged the
committee to consider adjusting HB 407 so that the CON would
still apply to nursing home beds. He related his understanding
that Representative Coghill isn't hostile to that. The area
that [the state] pays is for the acute psychiatric beds, which
he urged the committee to give that some thought as well.
Number 2800
MR. LINDSTROM said, "Intuitively it makes some sense, I think,
the bill trying to differentiate between the health care market
in a large community ... like Anchorage, and maybe Fairbanks,
and maybe the Mat-Su as opposed to other areas in the state."
However, there is no data to paint that picture and thus [the
department] can't say that it can support that approach. The
CON program in Alaska consists of one staff person who reviews
all the CONs. Historically, the CON program was part of a
larger health planning process. Mr. Lindstrom pointed out that
along with the elimination of the federal government's
requirement, all the federal funding that supported the CON
program as well as a broader health plan was eliminated. He
explained that typically the evaluation of a CON would be done
in the context of a community health plan or state health plan.
The last state health plan was written in 1983 and thus the
planning infrastructure that would support the CON program
doesn't exist in Alaska. He reiterated that the department
doesn't have the data to support whether the concept of treating
Anchorage, the Mat-Su, and Fairbanks makes sense or not.
Number 2927
MR. LINDSTROM turned to the fiscal note and directed attention
to page 2, which includes a list of potential projects in
Anchorage, Fairbanks, and the Mat-Su. He didn't believe that
CONs had been submitted for all these projects, although there
has been some indication that these projects could be
constructed. Whether these facilities are constructed or not
would be decisions by the various entities. The fiscal note
merely sums the total of [possible] CON projects and applies the
percentage of what the [state] pays. In the case of nursing
home [beds], in excess of 85 percent of the cost will be paid by
the state. A similar percentage applies to the psychiatric
beds. Mr. Lindstrom acknowledged that the fiscal note isn't
precise.
CO-CHAIR MEYER advised the committee not to get too involved
with the fiscal note but rather leave it to the House Finance
Committee to debate.
TAPE 02-15, SIDE B
REPRESENTATIVE HALCRO asked if all the beds are full every day
of the year.
MR. LINDSTROM said that he didn't know. However, he guessed
that the assumptions do [assume] that all the beds are full
every day.
Number 2995
REPRESENTATIVE HALCRO questioned how the fiscal note was
derived. He related his interpretation that every bed would be
full every day of the year. He asked if the plan is for people
to get sick. He also asked if there is concern with regard to
disbursement of existing patients into these facilities.
MR. LINDSTROM pointed out that over the last decade [the state]
has done a good job of not building nursing home beds. However,
the home and community-based system has been nurtured to try to
put in place less costly alternatives to nursing home care in
communities [with] assisted living home beds. Ten years ago,
there were no assisted living home beds, and furthermore Alaska
didn't even have a licensure for something called assisted
living. That system has grown over the last ten years so that
there are probably more people in assisted living beds than are
in nursing home beds. Using the CON has discouraged the
building of those nursing home beds. In the absence of the CON
process, it's likely that a number of these projects will be
built and people will gravitate to those more expensive nursing
home beds. However, whether those beds are full moves into
another very complicated issue in regard to how the Medicaid
system reimburses nursing home and acute care facilities. [The
Medicaid system] has a formula with its own rate-setting
mechanism that is partly governed by some federal requirements.
However, he pointed out that in the end beds that might not be
filled are paid for in some sense. To the extent that
utilization is less than 100 percent, the unit cost for that bed
will be higher than it would otherwise. He clarified that 85
percent of the cost of those beds will be borne by the state.
Number 2848
REPRESENTATIVE SCALZI related his understanding that although
most states support CONs, those states also strongly support
long-term care. That support of long-term care is consistent
with the sponsor's comments. Representative Scalzi recalled the
struggle the local hospital on the Kenai Peninsula had when
attempting to obtain its long-term CON. Representative Scalzi
remarked, "Long-term care makes sense because you can't tell
when a person's going to check out."
REPRESENTATIVE SCALZI turned to the issue of psychiatric beds
and related his belief that without an incentive for a cure
ratio, then the problem may be exacerbated because of a need to
fill the beds. Therefore, there is a disincentive for the
private sector to develop a cheaper method of service. In the
long term, everyone's objective is to provide care to the
community. Therefore, he inquired as to Mr. Lindstrom's view of
Alaska's health care system in the long term. He asked if
Alaska is providing a disincentive by continuing the CON
program.
MR. LINDSTROM reiterated that [the state pays about 85 percent
of the cost] for long-term care and psychiatric beds. For other
acute care services [in facilities subject to a CON the state
pays] about 20 percent of the cost. Mr. Lindstrom suspected
that others would be able to provide a better answer to
Representative Scalzi.
MR. LINDSTROM turned to the fundamental purpose of the CON
program, which is to ensure that the [health care] system in any
community is efficient and that facilities aren't needlessly
built. He posed an example in which a community has a community
hospital and an ambulatory surgical facility. "If the demand
for the services isn't really there, then "the pie" is simply
being divided between more facilities, and therefore there will
be some inefficiencies in the system. He attributed those
inefficiencies to the rate-setting system. He explained that
because there will be fewer units of surgery performed at the
hospital, the unit cost is going to increase and thus [the
state] will reimburse at a higher rate for a fewer number of
procedures at that hospital. In regard to the ambulatory
surgical center, it won't be reimbursed through the facility
rate-setting system but rather will be treated as an outpatient
[facility], he explained. In short, Mr. Lindstrom believes that
the CON program will provide a more efficient system than
otherwise.
Number 2621
REPRESENTATIVE MURKOWSKI pointed out that one of the arguments
against the CON program is that it just doesn't work.
Representative Murkowski turned to information provided to the
committee that says that in the past five years 100 percent of
all hospital CON applications were approved, while 0 percent of
nonhospital [applications] were approved. She explained the
argument as follows: "The hospitals have what the hospitals
have and ... they are able to maintain that, and anybody who's
looking to come in and through the process, as it is set up,
work within that process and obtain a certificate of need, they
are denied while the hospitals are not denied." She asked if
the argument that hospitals are able to obtain CONs [due to
what] they have, while others [attempting] to obtain a CON are
denied is accurate.
MR. LINDSTROM answered that although he wasn't sure whether that
argument was true, he could provide the committee with
information. He wasn't sure of the number of ambulatory
surgical facility applications that have been received in the
last few years. However, he recalled that there were three
[such facilities trying to obtain CONs] in Fairbanks. All three
of those applications were denied because the CON review
indicated that no new operating facilities were necessary in the
area. He also recalled that there was a desire to replace a
surgical center in Anchorage, which resulted in legislation two
years ago. That legislation passed and thus allowed that
operator to replace the facility without going through the CON
process.
Number 2515
REPRESENTATIVE MURKOWSKI said that if it is true that hospitals
are being approved for CONs while ambulatory facilities aren't,
then she is curious as to why. Representative Murkowski turned
to the notion that hospitals are attempting to get around the
CON requirement by leasing equipment or using a captive
foundation to build a facility. Representative Murkowski
expressed her curiosity as to the administration's response to
these remarks.
MR. LINDSTROM offered to respond to those [arguments] point-by-
point once he has received the document to which Representative
Murkowski is referring.
Number 2451
REPRESENTATIVE GUESS inquired as to the regulations regarding
who has to take Medicaid patients and who can choose not to
accept Medicaid patients or those who can't pay.
MR. LINDSTROM related his belief that no one is compelled to
enroll as a Medicaid provider. He suspected Representative
Guess' question is really in regard to what community hospitals
are required to do. As a licensure requirement, there are some
requirements regarding the hours of operation and who is served.
That licensure requirement isn't related to Medicaid
reimbursement.
REPRESENTATIVE GUESS asked if HB 407 received a Finance referral
because upon introduction, it didn't have a Finance referral.
CO-CHAIR MEYER related his belief that since the bill has a
fiscal note, it would automatically receive a Finance referral.
Number 2330
CATHY CRONIN, North Star Hospital, testified via teleconference.
Ms. Cronin shared Representative Coghill's concern with regard
to an expansion of psychiatric beds and thus she said she was
prepared to work on that matter in the House Health, Education
and Social Services Standing Committee.
DAVID McGUIRE, Independent Practitioner, testified via
teleconference. Mr. McGuire characterized the [CON program] as
one which never worked. It's fundamental theory is upside down.
The notion that to have cheaper gasoline would require having
one gas station in town doesn't work. Similarly, such a
situation wouldn't work in the health care realm. Therefore,
the federal government eliminated [the CON program]. The [CON]
process has become highly political and unfair. For example,
the Fairbanks Memorial Hospital was allowed to construct a $10
million oncology center without a CON. That was done by having
the Board of Trustees own the facility. Since [the Board of
Trustees] wasn't a health care provider, Mr. Pearce (ph) ruled
that no CON was necessary. "We, in turn, asked for the same
treatment by having a nonprofit agency buy the building and we
were told that would not be allowed; principally because he said
so," Mr. McGuire explained.
MR. McGUIRE turned to the issue of cherry picking. He related
his belief that patients want to go where they feel most
comfortable that the care [desired] will be delivered. He
wasn't sure that a patient's primary interest is ensuring that a
nonprofit, perhaps an inefficient nonprofit, stays profitable.
Mr. McGuire urged the committee to pass HB 407 from committee.
He noted that he wasn't sure of the fiscal note, and offered the
information that outpatient facilities are reimbursed less for
the same procedure, than inpatient facilities. Therefore,
outpatient procedures should save the state money. He
questioned whether that is reflected in the fiscal note.
Number 2121
ELIZABETH RIPLEY, Director, Community Health Planning, Valley
Hospital, testifying via teleconference noted that she had faxed
written testimony to the committee. Ms. Ripley clarified that
Valley Hospital is a private nonprofit free-standing hospital
that is opposed to the population delimiter in HB 407. She
pointed out that [the Mat-Su Borough] is one of the three
communities that would fall outside the population delimiter.
In regard to the earlier question of what happened to
competition, Ms. Ripley acknowledged the benefits of competition
and asserted that the proposed delimiter does nothing to support
a level playing field. She expressed concern regarding the
establishment of medical boutiques and cherry picking.
MS. RIPLEY turned to how [Valley Hospital] competes right now.
She explained that Valley Hospital competes with Anchorage.
Although [Valley Hospital] has sole community provider status,
studies show that most of the 16,000 Valley residents commute to
Anchorage and most get their [health care] services there as
well. Those commuters make more than those who don't commute
and a much higher percentage have health insurance or a third
party insurance. Currently, 6 percent of [Valley Hospital's]
patients are on Medicare, which is expected to double in eight
to ten years. Additionally, [Valley Hospital] has one of the
highest rates of Medicaid persons per capita per borough.
Furthermore, those Medicaid persons are the fastest growing
payer segment for [Valley Hospital]. Moreover, [Valley
Hospital] has seen its self-pay double in the last quarter,
which is drastic.
Number 1992
MS. RIPLEY announced support for keeping the CON program at the
$1 million threshold for equipment and raising it to a $2
million threshold for building. Ms. Ripley said:
If you care about preserving competition, then you'll
consider the following. First of all, all providers,
including private physicians, must meet the terms of
the CON. Right now, a private provider doesn't have to
[meet the terms of the CON] -- one single physician
opening up something specific. All providers must
provide for all financial classes and their payer mix
must reflect the payer mix of the locale within which
they operate. And Dave Pearce (ph) and the CON
department could track this.
MS. RIPLEY recalled a prior question regarding whether hospitals
are getting around [the CON program] with leasing. To that, Ms.
Ripley suggested making all expenditures fall under the
aforementioned $2 million threshold. In regard to the fiscal
implications of a nonprofit, Ms. Ripley emphasized that Valley
Hospital takes its nonprofit status seriously. She informed the
committee that Valley Hospital's net revenues for the past five
years have run between $2-$3 million. From that net revenue, 10
percent is returned to the community in a healthy communities
program that is designed to raise health status. For instance,
a dental clinic in Talkeetna was created. That net revenue is
also reinvested into the equipment because [Valley Hospital] has
to compete with the Anchorage providers. Furthermore, the net
revenue is reinvested in the staff. Therefore, Valley Hospital
is barely making it with a net revenue of $2-$3 million.
MS. RIPLEY concluded by relating her belief that there are many
problems with HB 407. She recommended that the legislature
establish a working group comprised of legislators and providers
in order to examine the CON process.
Number 1828
REPRESENTATIVE SCALZI inquired as to whether [Palmer] has a mill
rate that contributes to Valley Hospital.
MS. RIPLEY replied no, and reiterated that Valley Hospital is a
private nonprofit free-standing hospital. She explained that
the Mat-Su Borough has limited health powers, and therefore the
borough does virtually nothing in the health care arena. In her
opinion, she didn't believe that the borough would consider
doing anything in the health care arena.
Number 1780
REPRESENTATIVE HALCRO said that he has heard those supportive of
eliminating the CON process express concern that in the larger
cities the nonprofit hospitals use the CON as a shield to
competition and therefore, are able to amass a great amount of
dollars that fuels their growth and needlessly holds down
competition. In Anchorage, this wealth has been used for
purchases unrelated to providing medical services.
Representative Halcro requested that Ms. Ripley respond to those
charges and explain the federal requirements the nonprofit falls
under.
MS. RIPLEY answered that as a private nonprofit, [Valley
Hospital] is accountable. She related her belief that the
country is at a crossroads in regard to whether to make
[medical] nonprofits accountable. Valley Hospital's Board of
Directors has reviewed that and created the Healthy Communities
Program in an attempt to be accountable. She reiterated that
Valley Hospital invests 10 percent of its net revenues back into
the community. However, typically most hospitals reinvest less
than 1 percent. She said that although she believes Valley
Hospital's board and chief executive officer agree with some of
the statements regarding how nonprofits can be held accountable,
[they] feel that Valley Hospital has more than stepped up to the
plate to be held accountable to the community.
MS. RIPLEY turned to the mention of providers amassing funds,
and explained that is why [Valley Hospital] established the
criteria it did. If one wants to have a level playing field and
competition, she suggested making all hospitals and private
providers meet these terms as well as making sure that they are
providing care to all financial classes. "Because we're not
seeing that," she said. Valley Hospital already experiences
competition in its outpatient sector for radiology. Ethically
and legally, Valley Hospital's ER has to take anyone who comes
in. However, individual providers don't have to do so. For
instance, there are providers in [the Mat-Su] Valley who don't
accept patients with Medicaid or Medicare. She reiterated her
earlier statement that [Valley Hospital's] outpatient sector is
supporting the inpatient sector. Ms. Ripley expressed her
belief that [Valley Hospital] could support legislation that
built in a level playing field and accountability for
nonprofits.
Number 1505
REBECCA PARKER, Employee, Providence Alaska Medical Center,
testified via teleconference. Ms. Parker informed the committee
that the Providence Alaska Medical Center has served hundreds of
thousands of Alaskans regardless of their ability to pay. Ms.
Parker also informed the committee that Providence Alaska
Medical Center spent over $40 million to expand its emergency
room. The prior year Providence Alaska Medical Center purchased
a new helicopter and thus expanded the number of patients that
can be carried in an emergency. In the next five to ten years,
Providence Alaska Medical Center will be investing over $100
million in capital improvements and expansions merely to meet
the emerging needs of various programs in health care in
Anchorage.
MS. PARKER explained that Providence Alaska Medical Center
opposes HB 407 because it places many existing programs in
jeopardy. Furthermore, this legislation will allow surgery
centers to be built without any review or consideration as to
whether the community can financially support such facilities.
Ms. Parker said that nationwide a duplication of medical
services has contributed to the existing costs of health care.
Providence Alaska Medical Center provides services that it knows
won't be reimbursed to cover the real cost. Five years ago,
Providence Alaska Medical Center provided over $11 million in
charity costs, which has risen to more than $25 million. She
acknowledged the expectation to see less dollars available for
primary health care and health care reimbursements from both the
federal and state government. Furthermore, there is also the
expectation that the aforementioned will impact the cost of
charity care during this time when revenues are expected to
decline. Ms. Parker specified that [Providence Alaska Medical
Center's] greatest concern is maintaining the programs already
in place while increasing those that are expected to grow, such
as the cancer therapy center. "Who, if we don't, will offer the
broad spectrum of services to Alaska's patients," she asked.
Eliminating the CON process in urban areas would allow for new
surgery centers that will serve only a small number of patients
who can afford to pay, which will quickly erode the financial
stability of the medical center and its ability to provide the
many unreimbursed costs of operating a true tertiary acute care
center for all Alaskans.
Number 1273
CO-CHAIR MEYER recalled that Anchorage has competition that
seems to be working. Therefore, he didn't understand why
[Alaska Providence Medical Center] would be opposed to HB 407.
MS. PARKER agreed that Anchorage currently has healthy
competition. However, with the passage of HB 407, the building
of new surgical centers are anticipated. Those surgery centers
will be able to serve those who can afford to pay, while Alaska
Providence Medical Center will remain open 24 hours a day and
serve everyone regardless of their ability to pay. Today,
Alaska Providence Medical Center's charity costs amount to over
$25 million and that is expected to continue to grow. She
reiterated, "Who in the community will serve those people if
Providence doesn't?"
REPRESENTATIVE MURKOWSKI turned to the sponsor statement for HB
407, which refers to the repeal of the federal CON program. The
sponsor statement says since the federal repeal of the CON
program, 14 states have repealed the CON. Representative
Murkowski asked if Ms. Parker has any information regarding what
has happened in those states, especially in relation to those
hospitals similar to Alaska Providence Medical Center, where the
CON program has been repealed.
MS. PARKER said that she didn't have any information on that,
but offered to provide statistics to Representative Murkowski.
Number 0984
MS. PARKER, in response to Representative Halcro, confirmed that
charity costs are defined as [the cost for] those patients that
are unable to pay for their services. In further response to
Representative Halcro, Ms. Parker reiterated that charity costs
for Alaska Providence Medical Center has increased from $11
million to $25 million over five years. That charity care
segment is growing rapidly.
CO-CHAIR MEYER asked if Ms. Parker would anticipate the same
numbers [in regard to charity costs] for Alaska Regional
Hospital.
MS. PARKER answered that she didn't know. She related her
impression that Alaska Providence Medical Center is serving more
of the underserved in the community than anyone else.
Number 0836
REPRESENTATIVE MURKOWSKI referred to a document in the packet
that addressed the 1998-2004 projections for revenues and
expenses for Alaska Providence Medical Center. This document
indicates that charity was $11 million for 1998 and $15 million
for 2001. Those figures are under the heading of contractual
allowances. She asked if those figures refer to charity costs
that Ms. Parker has said have risen to $25 million.
MS. PARKER replied yes.
REPRESENTATIVE SCALZI asked if CON programs pay for other
services in the hospital or is it more like a dedicated program.
He asked if the hospital finds that it collects more revenue
than [patients it] takes care of and so that money is disbursed
to other services in the hospital.
MS. PARKER clarified that [Alaska Providence Medical Center]
serves acute care needs and long-term care mental health as well
as many other services. Furthermore, Alaska Providence Medical
Center serves Medicaid and Medicare patients that other
facilities won't accept.
Number 0578
ALLAN SNIDER testified via teleconference in support of HB 407.
He related a personal experience in which he had orthopedic
surgery on his hand at the Tanana Valley Clinic in his doctor's
office for a cost of $400. However, Fairbanks Memorial quoted a
cost of approximately $5,000 for outpatient orthopedic surgery.
Mr. Snider discussed his insurance coverage as a carpenter.
JOHN LUNDQUIST, Employee, Fairbanks Memorial Hospital, testified
via teleconference. As a 50-year resident of Fairbanks, Mr.
Lundquist said that he has seen many changes. One of the good
changes occurred after the flood when the community supported
and funded a debt-free community hospital. He related his
belief that Fairbanks Memorial Hospital has served the community
well and maintained relatively low prices. Therefore, Mr.
Lundquist stated his opposition to HB 407 because removing the
CON restrictions will result in cherry picking as well as an
increase in prices. The CON program protects against
unnecessary facilities.
REPRESENTATIVE MURKOWSKI inquired as to whether the beds at
Fairbanks Memorial Hospital are full or over capacity.
MR. LUNDQUIST answered that although the hospital doesn't run at
capacity, he wasn't sure of the percentage. There are many
empty beds.
Number 0113
MARTY O'LONE, Employee, Fairbanks Memorial Hospital, testified
via teleconference. Mr. O'Lone indicated that he took exception
with the statistics that mix Alaska with the Lower 48 because
Alaska does have a smaller population compared to the average
Lower 48 state. Specifically, Mr. O'Lone questioned the
comparison of Alaska to Georgia because the suburbs of Atlanta,
Georgia, itself have the same population of the entire state of
Alaska. Mr. O'Lone said that he is in favor of a reasonable
level of state oversight of new programs. However, if the
current CON regulations were changed or eliminated, the results
would be negative on the community and the only Interior
hospital that has served the community since 1972. The
population of the Fairbanks North Star Borough isn't large
enough to support the unnecessary facilities that would emerge
if the current CON was changed or eliminated.
TAPE 02-16, SIDE A
MR. O'LONE mentioned that [research has shown] that hospitals in
states without CONs have lower patient levels but higher
treatment costs to patients. Mr. O'Lone announced his
opposition to HB 407, and he requested that the CON regulations
be strengthened rather than weakened in order that the Interior
population would have access to the high quality of care that
already exists locally.
Number 0099
LIZ WOODYARD, Nurse, testified via teleconference. Ms. Woodyard
informed the committee that she supported the current CON
program. Therefore, she opposed any proposed changes to the CON
program because she believes that the CON program protects the
public from any unnecessary services. She echoed earlier
testimony regarding the need to strengthen not weaken the CON
program. Ms. Woodyard said, "As a nurse, too, I'm also
concerned about the nursing shortage and the workforce shortage,
and feel that the CON program does really look at the community
to see if we need any additional services, and also looks at the
workforce that's needed to support any services."
Number 0180
CORLIS TAYLOR, Employee, Fairbanks Memorial Hospital, testified
via teleconference. She noted that she is also a consumer of
health care and has probably received services from almost every
facility in Fairbanks. Ms. Taylor said that she is opposed to
HB 407. She explained that she is concerned with the shortage
of health care workers, specifically there are shortages of RNs.
This shortage is nationwide. Therefore, elimination of the CON
would result in an even thinner spread of health care workers,
which she said would impact the quality of care. Ms. Taylor
explained that the CON process allows review of the services
that are provided in order to determine whether those services
are necessary in a given community, which helps with the cost of
health care. In other words, if there are too many beds, then
[all facilities] suffer because no place has enough patients to
maintain their financial health. Therefore, each facility would
need to increase its costs in order to survive.
MS. TAYLOR turned to the comparison of health care to a grocery
store. She pointed out that if she goes to a grocery store to
purchase a loaf of bread, she knows exactly what to look for.
However, as a consumer of health care, the consumer has to trust
what the health care provider says. Therefore, facilities that
feel the need to increase their finances may result in
affiliated physicians ordering unnecessary tests in order to
meet a financial obligation of the facility.
MS. TAYLOR remarked that community hospitals have an obligation
to treat all who enter, regardless of whether the person has
insurance or the means to pay. Furthermore, hospitals provide
services that most clinics and free-standing facilities don't
want to offer. For example, the Fairbanks [Memorial] Hospital
provides mental health services, nursing home services, and a
cancer treatment facility. In regard to the cancer treatment
facility, Ms. Taylor explained that the facility was primarily
built to keep patients in the community rather than for money.
Number 0647
MS. TAYLOR recalled earlier testimony regarding the notion of
excess revenue that facilities are stockpiling. Any revenue
generated by Fairbanks Memorial Hospital is put back into the
community in many ways such as the aforementioned cancer
treatment center. Therefore, she feels that most facilities put
excess revenue back into the community.
CO-CHAIR MEYER apologized for not being able to complete the
public testimony today. Therefore, he announced that HB 407
would be heard again on Thursday.
ADJOURNMENT
There being no further business before the committee, the House
Community and Regional Affairs Standing Committee meeting was
adjourned at 9:59 a.m.
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