Legislature(2001 - 2002)

03/21/2002 08:08 AM CRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
              HOUSE COMMUNITY AND REGIONAL AFFAIRS                                                                            
                       STANDING COMMITTEE                                                                                     
                         March 21, 2002                                                                                         
                           8:08 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. 407                                                                                                              
"An Act relating to the certificate of need program."                                                                           
                                                                                                                                
- MOVED HB 407 OUT OF COMMITTEE                                                                                                 
                                                                                                                                
PREVIOUS ACTION                                                                                                               
                                                                                                                                
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                                                                   
03/19/02                (H)        Heard & Held                                                                                 
MINUTE(CRA)                                                                                                                     
03/21/02                (H)        CRA AT 8:00 AM CAPITOL 124                                                                   
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
RITA ROACH, Patient Liaison                                                                                                     
Tanana Valley Clinic                                                                                                            
1001 Noble St                                                                                                                   
Fairbanks, Alaska 99701                                                                                                         
POSITION STATEMENT:  Discussed the situation of the Tanana                                                                      
Valley Clinic.                                                                                                                  
                                                                                                                                
TERRY KIRKENDALL                                                                                                                
Pre-Patient Certification                                                                                                       
Tanana Valley Clinic                                                                                                            
2332 Prague Circle                                                                                                              
North Pole, Alaska 99705                                                                                                        
POSITION STATEMENT:  Testified in support of HB 407.                                                                            
                                                                                                                                
ELLEN SMITH                                                                                                                     
Business Office                                                                                                                 
Tanana Valley Clinic                                                                                                            
1001 Noble St                                                                                                                   
Fairbanks, Alaska 99701                                                                                                         
POSITION STATEMENT:  Testified in support of HB 407.                                                                            
                                                                                                                                
SUSAN McLANE, RN                                                                                                                
Fairbanks Memorial Hospital                                                                                                     
PO Box 58054                                                                                                                    
Fairbanks, Alaska 99711                                                                                                         
POSITION STATEMENT:  Testified in opposition to HB 407.                                                                         
                                                                                                                                
SHELBY NELSON, Employee                                                                                                         
Fairbanks Memorial Hospital                                                                                                     
1245 Vixon Way                                                                                                                  
Fairbanks, Alaska 99712                                                                                                         
POSITION STATEMENT:  Expressed the need for a comprehensive                                                                     
health system.                                                                                                                  
                                                                                                                                
BRIAN SLOCUM, Administrator                                                                                                     
Tanana Valley Clinic                                                                                                            
1001 Noble St                                                                                                                   
Fairbanks, Alaska 99701                                                                                                         
POSITION STATEMENT:  Testified in support of HB 407.                                                                            
                                                                                                                                
JENNIFER HOUSE, Employee                                                                                                        
Denali Center                                                                                                                   
1951 Gilmore Trail                                                                                                              
Fairbanks, Alaska 99712                                                                                                         
POSITION STATEMENT:  Urged the committee to reconsider HB 407.                                                                  
                                                                                                                                
ROBERT GOULD, Chief Financial Officer                                                                                           
Fairbanks Memorial Hospital                                                                                                     
4820 Drake St                                                                                                                   
Fairbanks, Alaska 99709                                                                                                         
POSITION STATEMENT:  Testified in opposition to HB 407.                                                                         
                                                                                                                                
KARL SANFORD, Director of Nursing                                                                                               
Fairbanks Memorial Hospital                                                                                                     
384 Snowy Owl Lane                                                                                                              
Fairbanks, Alaska 99712                                                                                                         
POSITION STATEMENT:  Testified in opposition to HB 407.                                                                         
                                                                                                                                
JON LIEBERMAN, General Surgeon                                                                                                  
Fairbanks Memorial Hospital and Tanana Valley Clinic                                                                            
1239 Lois Lane                                                                                                                  
Fairbanks, Alaska 99712                                                                                                         
POSITION STATEMENT:  Testified in support of HB 407.                                                                            
                                                                                                                                
DAN KELLY                                                                                                                       
581 Briar Drive                                                                                                                 
Wasilla, Alaska 99654                                                                                                           
POSITION STATEMENT:  Expressed concerns with HB 407.                                                                            
                                                                                                                                
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.                                                                                       
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
TAPE 02-17, SIDE A                                                                                                              
Number 0001                                                                                                                     
                                                                                                                                
CO-CHAIR  KEVIN MEYER  called the  House  Community and  Regional                                                               
Affairs  Standing  Committee  meeting   to  order  at  8:08  a.m.                                                               
Representatives Morgan, Meyer, Scalzi,  and Guess were present at                                                               
the  call  to  order.   Representatives  Halcro,  Murkowski,  and                                                               
Kerttula arrived as the meeting was in progress.                                                                                
                                                                                                                                
HB 407-CERTIFICATE OF NEED PROGRAM                                                                                            
                                                                                                                                
CO-CHAIR MEYER announced  that the only order  of business before                                                               
the committee  would be HOUSE BILL  NO. 407, "An Act  relating to                                                               
the certificate of need program."                                                                                               
                                                                                                                                
Number 0136                                                                                                                     
                                                                                                                                
RITA ROACH, Patient Liaison, Tanana  Valley Clinic, testified via                                                               
teleconference.   Ms. Roach requested that  the committee support                                                               
and pass HB  407.  She said  that for 43 years  the Tanana Valley                                                               
Clinic  has   offered  quality  health  care   in  the  Fairbanks                                                               
community.   Over  the  past three  or so  years,  more and  more                                                               
private  practice   physicians  in   our  community   have  found                                                               
themselves  in  a position  of  no  longer  being able  to  treat                                                               
Medicare/Medicaid patients  and thus have  closed their  doors to                                                               
those  patients.   This  is primarily  due  to the  reimbursement                                                               
rates from these payers.   Therefore, the Tanana Valley Clinic, a                                                               
multi-specialty clinic, finds that it  is absorbing the impact of                                                               
the  aforementioned.    In  2001  Medicare/Medicaid  patients  at                                                               
Tanana  Valley  Clinic  accounted  for 28  percent  of  its  bill                                                               
charges.   When that  28 percent  is added to  the 11  percent of                                                               
patients served with no insurance,  it should be clear, she said,                                                               
that  the Tanana  Valley Clinic  is committed  to the  community.                                                               
Therefore, there should be no question of cherry picking.                                                                       
                                                                                                                                
MS.  ROACH mentioned  that as  a patient  liaison she  hears many                                                               
stories  of   financial  grief.     The  clinic  works   hard  to                                                               
accommodate its  patients' financial  needs.   [Often,] long-term                                                               
payment plans  that allow them  to continue to meet  their family                                                               
needs  and  other financial  obligations  are  established.   Ms.                                                               
Roach  suggested that  the committee  would find  [this approach]                                                               
unique to  the Tanana Valley Clinic.   "It seems we  could better                                                               
serve and  accommodate our  patients if we  were able  to provide                                                               
more  services  for  them  on  site.    We  have  the  expertise,                                                               
professional staff,  and the  desire to do  this, except  we find                                                               
ourselves  today wrapped  up in  this tangled  mess of  paperwork                                                               
trying to obtain  permission to better serve  our community," she                                                               
explained.                                                                                                                      
                                                                                                                                
Number 0325                                                                                                                     
                                                                                                                                
TERRY  KIRKENDALL,   Patient  Pre-Certification,   Tanana  Valley                                                               
Clinic, testified via  teleconference in support of HB  407.  She                                                               
related  her belief  in  the importance  of  patients having  the                                                               
options of health care whether  through a provider or a facility.                                                               
In  the past  nine months  28 patients  have canceled  procedures                                                               
recommended  by physicians  of  the Tanana  Valley  Clinic.   She                                                               
attributed  those  cancelations to  the  financial  burden.   Ms.                                                               
Kirkendall related her view that  if treatment could occur at the                                                               
clinic, long-term payment plans could  be established in order to                                                               
facilitate the patient's budget problems.                                                                                       
                                                                                                                                
ELLEN  SMITH, Business  Office, Tanana  Valley Clinic,  testified                                                               
via teleconference.   Ms. Smith announced her support  of HB 407.                                                               
The [Business  Office] works one  on one with patients  and their                                                               
accounts.    Many  of  the patients  don't  qualify  for  medical                                                               
assistance and  can't afford medical coverage  through commercial                                                               
insurance.   Often these  patients cancel  procedures due  to the                                                               
high cost  of care.   Although the  clinic offers  these patients                                                               
payment  plans,  the clinic  can  only  offer payment  plans  for                                                               
services provided  by the clinic's  providers.   This cancelation                                                               
of [procedures]  occurs with  commercial insurance  patients when                                                               
their  insurance doesn't  cover a  procedure.   She informed  the                                                               
committee that Medicaid doesn't  allow screening for its clients.                                                               
Ms. Smith concluded  by saying, "In today's  society, health care                                                               
awareness  is at  an  all-time high.   And  all  the health  care                                                               
recommendations and research  are a moot point if we  do not keep                                                               
the cost down and affordable for our patients."                                                                                 
                                                                                                                                
Number 0541                                                                                                                     
                                                                                                                                
SUSAN  McLANE, RN,  Fairbanks  Memorial  Hospital, testified  via                                                               
teleconference in opposition to HB  407.  Ms. McLane informed the                                                               
committee  that she  has  been through  the  Certificate of  Need                                                               
(CON) process  twice.   Although the  CON process  is frustrating                                                               
and obtaining information is difficult,  it serves a purpose.  If                                                               
the process  is broken,  fix it.   In regard to  the cost  to the                                                               
patient,  Ms. McLane  related  an instance  in  which some  local                                                               
physicians  inquired as  to the  cost  of a  procedure that  they                                                               
thought cost $2,600 at the  hospital; however, the procedure only                                                               
cost around $1,000.  These  physicians were being encouraged by a                                                               
colleague to  contact the  legislature in  order to  do something                                                               
about  this  problem.   Ms.  McLane  recalled  that at  the  last                                                               
hearing there  was a  gentleman who told  the committee  that the                                                               
hospital would perform a procedure  for $5,600 that cost him $400                                                               
in his physician's  office.  She questioned why one  would have a                                                               
procedure done  in a hospital  that could  be done in  an office;                                                               
this gentleman  was in  the wrong environment.   She  related her                                                               
belief  that the  CON process  addresses having  patients [obtain                                                               
procedures in  the appropriate  environment].   In regard  to the                                                               
issue  of   cost,  Ms.   McLane  expressed   the  need   to  hold                                                               
[facilities] accountable.                                                                                                       
                                                                                                                                
                                                                                                                                
MS. McLANE  mentioned the difficulty in  attracting and retaining                                                               
qualified staff.   Ms. McLane  suggested that elimination  of the                                                               
CON  process could  place Fairbanks  in a  position in  which the                                                               
area will be  living with the "fall out."   Therefore, Ms. McLane                                                               
urged the committee to fix  the CON process rather than eliminate                                                               
it.                                                                                                                             
                                                                                                                                
Number 0765                                                                                                                     
                                                                                                                                
SHELBY NELSON,  Employee, Fairbanks Memorial  Hospital, testified                                                               
via teleconference.   She pointed out  that she is also  a parent                                                               
and a  patient.  She  informed the  committee that she  takes her                                                               
children to the Tanana Valley  Clinic, and when hospital services                                                               
are needed  she takes them  to Fairbanks Memorial Hospital.   The                                                               
same physicians that  treat her children at  Tanana Valley Clinic                                                               
treat  her children  at  the Fairbanks  Memorial  Hospital.   Ms.                                                               
Nelson informed  the committee  that the  [Fairbanks] community's                                                               
growth  is  stable and  thus  there  is  no need  for  additional                                                               
services for  years to  come.   However, in  such a  rural health                                                               
care community, the  partnerships in the health  care system need                                                               
to be  strengthened in order  that the delivery system  is strong                                                               
rather than  fragmented.  Furthermore,  there is no need  to have                                                               
duplicative  services and  increase  the cost  to the  community.                                                               
Ms. Nelson  turned to  her perspective as  a parent  and patient.                                                               
She expressed her  belief that there needs to  be a comprehensive                                                               
health care  delivery system in  which all health  care providers                                                               
work  together in  the joint  effort to  ensure that  the current                                                               
quality is maintained in the future.                                                                                            
                                                                                                                                
Number 0895                                                                                                                     
                                                                                                                                
BRIAN SLOCUM, Administrator, Tanana  Valley Clinic, testified via                                                               
teleconference  in support  of HB  407.   Mr. Slocum  related his                                                               
belief  that the  Tanana Valley  Clinic is  probably the  largest                                                               
multi-specialty  clinic  in  Alaska.    The  clinic's  physicians                                                               
basically  see anyone  who walks  in regardless  of insurance  or                                                               
not.  In  regard to cherry picking, Mr.  Slocum acknowledged that                                                               
there may  be physicians  in this community  and others  who only                                                               
see patients  with good insurance.   However, he  never [receives                                                               
documentation  as to]  who  those physicians  actually  are.   It                                                               
seems to be a dark rumor.   Mr. Slocum said that he could provide                                                               
the committee  with information on  the other side of  the cherry                                                               
picking issue.   For  example, between 1999  and 2001  doctors at                                                               
the   Tanana  Valley   Clinic  provided   $17,770,000  worth   of                                                               
unreimbursed  charity  care.   Each  of  the clinic's  individual                                                               
shareholder  physicians provided  about  $800,000  worth of  free                                                               
care to members  of the community.  "If that's  cherry picking, I                                                               
think that's the  kind of cherry picking we ought  to see more of                                                               
in our community and throughout the  state," he said.  Mr. Slocum                                                               
pointed out that this free  care isn't supported by tax donations                                                               
or  exemptions.   He also  pointed out  that [the  aforementioned                                                               
figures] don't include the "no  charge" [procedures].  Mr. Slocum                                                               
informed the  committee that  the clinic  is the  largest locally                                                               
owned property  tax payer in the  borough.  He mentioned  that he                                                               
wasn't  aware  that  nonprofit   hospitals  pay  property  taxes.                                                               
Therefore, shifting  business from a nonprofit  organization to a                                                               
regular business  increases the  tax base  and decreases  the tax                                                               
burden on  other people, which  improves the economic  quality of                                                               
people's  lives.    Furthermore,  the  clinic  pays  millions  of                                                               
dollars in income taxes under  doctor's compensation on corporate                                                               
income tax for  any profits made.  Again,  nonprofit entities pay                                                               
nothing.    However, to  the  extent  business  is shifted  to  a                                                               
competitive environment  [there will be]  more of a tax  base for                                                               
the state  and the federal  government.  He highlighted  that all                                                               
the  dollars earned  [by the  Tanana Valley  Clinic] stay  in the                                                               
community.                                                                                                                      
                                                                                                                                
Number 1194                                                                                                                     
                                                                                                                                
MR. SLOCUM  turned to the  concerns from hospitals that  say they                                                               
must  see anyone  who comes  in, which  [they say]  has a  severe                                                               
impact  on their  profits.   However, no  one has  mentioned that                                                               
nonprofit  hospitals receive  exemptions from  state, local,  and                                                               
federal taxes in  order to cover the cost  [of admitting everyone                                                               
regardless  of  insurance  and  ability  to  pay].    Mr.  Slocum                                                               
reiterated that the Tanana Valley Clinic  has to pay taxes and it                                                               
sees people  who can't afford  to pay; however, the  clinic isn't                                                               
requesting special treatment.  Mr.  Slocum turned to testimony in                                                               
the second Senate Health, Education  and Social Services Standing                                                               
Committee regarding  an Anchorage hospital that  made $55 million                                                               
of profits.   Furthermore, in  the [House Community  and Regional                                                               
Affairs  Standing Committee]  it was  noted that  a hospital  had                                                               
budgeted $189 million  in profits between 1998 and 2004.   "And I                                                               
got to wonder how much is enough?   How one can say that ... with                                                               
those kinds of profits that having  to provide charity care is at                                                               
risk.  That's  hard to say with  a straight face," he  said.  Mr.                                                               
Slocum  recalled  testimony  at  the prior  House  Community  and                                                               
Regional Affairs  Standing Committee  meeting in which  there was                                                               
the suggestion  that hospitals  typically invest  approximately 1                                                               
percent  of their  net  profit  back into  the  community.   This                                                               
witness  with  [Valley  Hospital] expressed  pride  that  [Valley                                                               
Hospital] invested 10 percent back  into the community.  However,                                                               
Mr. Slocum questioned what happens to  the other 90 or so percent                                                               
that accrues to the institution.                                                                                                
                                                                                                                                
MR.  SLOCUM turned  to the  impact of  having competition  in the                                                               
community.   He recalled  that about three  years ago  the health                                                               
department reviewed the  multiple CONs and needed help  to do so.                                                               
A  firm,  MSRG,  was  hired  to  provide  a  review  of  the  CON                                                               
applications.   The  draft report  stated, "It  is reasonable  to                                                               
assume a  cost savings of  at least  20 percent" with  respect to                                                               
ambulatory surgery  in Fairbanks.   In  1999 the  department also                                                               
reviewed  58  actual  case  histories  of  surgery  performed  at                                                               
Fairbanks'  local  hospital,  and  it determined  that  if  those                                                               
surgeries  had  been  performed  at  a  free-standing  ambulatory                                                               
surgery center, the  payments that would've been  made would have                                                               
amounted to  about 45  percent of the  payment that  was actually                                                               
made to  the hospital, which  is a savings  of more than  half on                                                               
those cases.  The total  projected savings on those 58 ambulatory                                                               
surgery cases would've been just  under $47,000, which would have                                                               
amounted to a savings of over $2 million at Medicaid rates.                                                                     
                                                                                                                                
MR.  SLOCUM concluded  by saying  that  30 years  of history  and                                                               
research illustrate  that the CON  process doesn't work.   It has                                                               
been  proven  that  the  CON process  raises  costs  by  erecting                                                               
barriers  to more  efficient  providers,  and its  administrative                                                               
costs are  in the millions.   The process is  easily circumvented                                                               
by institutions and  there is no evidence that  CONs increase the                                                               
level of charity care.   Mr. Slocum characterized the CON process                                                               
as a  failed experiment in  centralized planning.   Therefore, he                                                               
urged the committee to eliminate it and allow competition.                                                                      
                                                                                                                                
Number 1482                                                                                                                     
                                                                                                                                
REPRESENTATIVE  SCALZI turned  to  the fiscal  note, which  shows                                                               
general   fund  expenditures   rising,   although  he   indicated                                                               
agreement that  there will  be savings  at the  local level.   He                                                               
asked Mr. Slocum to comment.                                                                                                    
                                                                                                                                
MR.  SLOCUM  informed  the  committee  that  [the  Tanana  Valley                                                               
Clinic]  has  hired  a  consulting  firm to  review  that.    The                                                               
preliminary   report   from   the   consulting   firm   is   that                                                               
approximately $150,000  per annum  at startup [will  increase] to                                                               
some minimum  amount.   However, this is  all dependent  upon the                                                               
assumptions.  Still, the impact  wouldn't occur for several years                                                               
because of the  timing required to plan and build  a facility, as                                                               
well as  the impact on  the state's  budget and the  re-basing of                                                               
Medicare fees.  Therefore, the  consulting firm estimates that it                                                               
would  be  2006   before  there  would  be   any  fiscal  impact.                                                               
Furthermore, [the report seems] to  suggest that there may be the                                                               
need  to review  the  state's reimbursement  formula because  the                                                               
state will be required to pay  for empty beds and rooms using the                                                               
current  formula.   The federal  government changed  that formula                                                               
ten years ago  in order to avoid the problem  of paying for empty                                                               
beds.                                                                                                                           
                                                                                                                                
Number 1612                                                                                                                     
                                                                                                                                
JENNIFER   HOUSE,   Employee,   Denali  Center,   testified   via                                                               
teleconference.  She said that she  didn't believe that HB 407 is                                                               
in  the  best interest  of  her  community, or  Alaska's  general                                                               
public.   She  said  she  imagined that  the  intent behind  this                                                               
legislation is to increase competition  among certain health care                                                               
services  using the  erroneous assumption  that  it will  benefit                                                               
consumers.  However, unlike retail  industries, health care isn't                                                               
a consumer-driven  market but rather is  need-driven.  "Consumers                                                               
don't control  the amount of  health care services  they consume,                                                               
this is controlled by the  physician," she explained.  Therefore,                                                               
this  legislation would  benefit specialty  providers that  would                                                               
carve  out profitable  health care  services providing  redundant                                                               
[services]  in  urban  areas  of   Alaska.    The  cost  of  this                                                               
redundancy  will be  borne by  the consumer.   Under  current CON                                                               
laws, consumers have the ability  to participate in and influence                                                               
the  amount, variety,  and quality  of  services provided  within                                                               
their community.   Alaska's CON  laws have worked well  to ensure                                                               
efficient use of  health care resources.  Ms.  House stressed the                                                               
importance of  this point when  one considers the  acute shortage                                                               
of health  care professionals with  which the  providers contend.                                                               
Diluting  the  CON laws  in  order  to  allow for  the  redundant                                                               
provision  of services  simply  aggravates  this growing  crisis.                                                               
Furthermore,  Ms. House  said that  she didn't  see the  logic of                                                               
eliminating the  CON process for communities  with populations of                                                               
55,000   or  greater.      Actually,  she   found   that  to   be                                                               
discriminatory.  "Long-term health  care planning through the CON                                                               
process  is just  as important  and just  as beneficial  to urban                                                               
communities  as   it  is  to  rural   communities,"  she  stated.                                                               
Therefore, she  urged the committee  to reconsider HB  407, which                                                               
she felt would only weaken the community health care system.                                                                    
                                                                                                                                
ROBERT  GOULD,   Chief  Financial  Officer,   Fairbanks  Memorial                                                               
Hospital, testified  via teleconference  in opposition to  HB 407                                                               
because  he didn't  believe  it's  in the  best  interest of  the                                                               
state.   Mr.  Gould  informed the  committee  that his  testimony                                                               
would be primarily  in regard to the testimony  heard on Tuesday.                                                               
In regard  to the assertion  that mental health beds  and nursing                                                               
home beds are  reimbursed when not in use,  Mr. Gould emphasized,                                                               
"I  can  tell  you  for  a   fact  that  that  is  not  correct."                                                               
"Fairbanks   Memorial  Hospital   and  Denali   Center  are   not                                                               
reimbursed for beds  that are not in use in  inpatient, in mental                                                               
health, or in the nursing home setting," he specified.                                                                          
                                                                                                                                
MR. GOULD turned  to Dr. McGuire's testimony in  which he claimed                                                               
that  reimbursement  under  the  Medicaid  system  is  lower  for                                                               
ambulatory surgery centers and would  reduce the cost to Medicaid                                                               
if  an ambulatory  surgery center  was allowed.   Again,  this is                                                               
incorrect.    Mr.  Gould  explained  that  reimbursement  between                                                               
Fairbanks Memorial  Hospital and  the ambulatory  surgical center                                                               
is almost identical.   Therefore, there would be  no cost savings                                                               
for Medicaid under  such a reimbursement system.   There was also                                                               
testimony that costs  are lower in an  ambulatory surgery center.                                                               
However, Fairbanks  Memorial Hospital  was the low  cost provider                                                               
in the state three years ago  and it continues be while the free-                                                               
standing  ambulatory surgery  center in  Anchorage has  increased                                                               
its costs  22 percent over  the last three  years.  In  regard to                                                               
[testimony] that  patients travel  to Anchorage for  lower costs,                                                               
Mr.  Gould said  patients  travel to  Anchorage because  specific                                                               
services, services  for the head  and heart, aren't  available in                                                               
their  community.   Mr.  Gould  reiterated  that of  all  service                                                               
providers, Fairbanks  Memorial Hospital has the  lowest prices in                                                               
the state.                                                                                                                      
                                                                                                                                
MR. GOULD  related his  understanding that  [HB 407]  proposes to                                                               
eliminate the CON  in communities with a  population over 55,000.                                                               
As one of  the communities that would be impacted,  Mr. Gould was                                                               
concerned.   He reemphasized that  Fairbanks has the  lowest cost                                                               
in  the state,  and it  has  been shown  that there  is no  need.                                                               
Eliminating the  CON will only  increase costs, and for  proof of                                                               
that one merely  has to look at the Anchorage  market where there                                                               
are  three   surgical  providers   and  the  costs   are  higher.                                                               
Therefore, the same  situation will result in  Fairbanks with the                                                               
elimination of the CON.                                                                                                         
                                                                                                                                
Number 1926                                                                                                                     
                                                                                                                                
KARL SANFORD,  Director of Nursing, Fairbanks  Memorial Hospital,                                                               
testified  via  teleconference in  opposition  to  HB 407.    Mr.                                                               
Sanford said that he would  speak to quality from the perspective                                                               
of nursing.   He recalled  the adage  in health care  that volume                                                               
equates to  quality, which  is supported by  a study  released by                                                               
the University of Iowa School of  Medicine in January 2002.  That                                                               
study reviewed all  states.  Several states had  repealed the CON                                                               
laws and others kept  the CON over the course of  the study.  The                                                               
predominant focus of  the study was of  coronary bypass patients.                                                               
Mr. Sanford informed the committee  that the outcome of the study                                                               
was that when  states removed their CON laws, those  states saw a                                                               
proliferation  of hospitals  providing  coronary bypass  surgery.                                                               
"The  point here  is that  when you  open it  up for  all comers,                                                               
essentially the  volume of  patients being cared  for in  any one                                                               
setting is  diluted among  many," he explained.   [Without  a CON                                                               
process]  many smaller  facilities  began  doing these  [coronary                                                               
bypass] procedures.   The study  reported an overall  increase in                                                               
the mortality rate among patients  because of [the absence of the                                                               
CON  process].   Mr. Sanford  related  his belief  that when  the                                                               
volume is diluted so is the  quality, which he didn't believe the                                                               
state was looking to do.                                                                                                        
                                                                                                                                
Number 2037                                                                                                                     
                                                                                                                                
JON LIEBERMAN,  General Surgeon, Fairbanks Memorial  Hospital and                                                               
Tanana Valley Clinic, testified  via teleconference in support of                                                               
HB 407.  Mr. Lieberman remarked  that health care is no exception                                                               
to capitalism in  America because health care is  a business that                                                               
should  be  cost  accountable.   He  indicated  that  competition                                                               
provides a  spark for  perfection.   In the  last ten  years, Mr.                                                               
Lieberman  has noticed  that the  threat of  a surgery  center in                                                               
Fairbanks  has sparked  Fairbanks Memorial  Hospital to  improve.                                                               
Furthermore,  the threat  of a  cancer  radiation therapy  center                                                               
pushed  Fairbanks Memorial  Hospital  to build  a cancer  center.                                                               
Mr. Lieberman  related his  belief that  there is  reluctance, on                                                               
the part  of Fairbanks Memorial Hospital,  to completely disclose                                                               
the exact  cost of health  care to  patients.  He  mentioned that                                                               
patients  complain  to  him  regarding  the  costs  at  Fairbanks                                                               
Memorial Hospital.   Mr. Lieberman turned to the  notion that the                                                               
mortality  rate of  ambulatory centers  is higher.   However,  he                                                               
charged everyone  to review  these studies  in regard  to whether                                                               
they  are  based upon  scientific  [information].   There  is  no                                                               
logical reason  to stand in  the way of capitalism  in Fairbanks.                                                               
Medicine  should be  treated as  any other  business would.   Mr.                                                               
Lieberman concluded  by relating his  belief that the  quality of                                                               
health care can be improved by the passage of HB 407.                                                                           
                                                                                                                                
Number 2275                                                                                                                     
                                                                                                                                
DAN  KELLY  testified via  teleconference  that  he can't  really                                                               
support  HB  407  until  some modifications  occur.    Mr.  Kelly                                                               
informed the  committee that Senator  Lyda Green is  sponsoring a                                                               
bill  that  would  increase  the  $1  million  threshold  to  $10                                                               
million.   He asked if  the sponsor of HB  407 is against  such a                                                               
raise  in the  threshold.   The $1  million was  [established] in                                                               
1983.  Mr.  Kelly expressed the need to  provide clarification in                                                               
regard to  "commencement of  activities".   The Matanuska-Susitna                                                               
(Mat-Su) Borough  has over 60,000 population  currently; however,                                                               
just five  years ago the area  had a population less  than 55,000                                                               
when "we certainly  were commenced at that time."   Therefore, he                                                               
was unclear as  to whether HB 407 applies to  the Mat-Su Borough.                                                               
Moreover, the need  for a CON isn't clear when  one considers the                                                               
size of  the borough.   Mr. Kelly said  that it isn't  clear that                                                               
when an  area exceeds  a population of  55,000 that  Section 1(a)                                                               
would apply to  a borough.  If these issues  could be made clear,                                                               
Mr. Kelly  said that  he could possibly  consider support  for HB
407.   In conclusion,  Mr. Kelly requested  an explanation  as to                                                               
why the CON is necessary at all.                                                                                                
                                                                                                                                
CO-CHAIR MEYER announced that public testimony would be closed.                                                                 
                                                                                                                                
Number 2484                                                                                                                     
                                                                                                                                
RYNNIEVA  MOSS,  Staff  to Representative  John  Coghill,  Alaska                                                               
State Legislature, testified on behalf  of the sponsor of HB 474,                                                               
Representative  Coghill.   Ms. Moss  related that  Representative                                                               
Coghill  would  encourage amendments  to  be  made in  the  House                                                               
Health, Education  and Social Services  Standing Committee.   She                                                               
also  related   that  Representative   Coghill  feels   that  the                                                               
involvement of the House Community  and Regional Affairs Standing                                                               
Committee is related to the population  delimiter in HB 407.  The                                                               
[House Community  and Regional Affairs Standing  Committee] needs                                                               
to  decide  whether  the population  figure  is  appropriate  and                                                               
whether CONs  for ambulatory  facilities and  equipment purchases                                                               
is good for communities.  She  said, "He feels that a bureaucracy                                                               
can't be measured by the  number of bureaucrats that we're paying                                                               
for; it was mentioned that only  one person is employed for CONs.                                                               
It should be measured by the  burden placed on the businesses who                                                               
have  to spend  thousands  of  dollars and  years  to  open up  a                                                               
business in a free enterprise system, or expand that business."                                                                 
                                                                                                                                
MS.  MOSS  informed  the committee  that  Representative  Coghill                                                               
believes that  federal subsidization of the  medical industry has                                                               
created  a  false economy  for  medical  services.   Furthermore,                                                               
Medicaid  has  redefined  poverty   for  those  receiving  public                                                               
assistance  as well  as  for  corporate welfare.    In regard  to                                                               
comments  that Fairbanks  Memorial  Hospital is  the lowest  cost                                                               
provider  in  the state,  Ms.  Moss  remarked that  the  hospital                                                               
shouldn't be  concerned with competition.   "CONs put  the choice                                                               
of medical  services in  the hands of  government and  takes that                                                               
choice away from consumers," she charged.                                                                                       
                                                                                                                                
CO-CHAIR  MEYER  inquired  as to  the  amendments  Representative                                                               
Coghill plans to  make in the House Health,  Education and Social                                                               
Services Standing Committee.                                                                                                    
                                                                                                                                
MS. MOSS  answered that Representative Coghill  has discussed the                                                               
exemption  of  psychiatric  beds  and nursing  home  [beds]  with                                                               
Representative Dyson.                                                                                                           
                                                                                                                                
Number 2574                                                                                                                     
                                                                                                                                
REPRESENTATIVE SCALZI  turned to the  fiscal note and  noted that                                                               
he was  suspect of the numbers  because they seem to  assume that                                                               
some  of these  facilities are  already  on line  and will  begin                                                               
business immediately.                                                                                                           
                                                                                                                                
MS. MOSS stated that the  fiscal note is beyond her capabilities.                                                               
She trusted Tanana Valley Clinic's  testimony that there would be                                                               
no fiscal impact to fiscal year 2006.                                                                                           
                                                                                                                                
REPRESENTATIVE  SCALZI  expressed  the  need to  flesh  that  out                                                               
through the process.                                                                                                            
                                                                                                                                
Number 2626                                                                                                                     
                                                                                                                                
REPRESENTATIVE MURKOWSKI  informed the  committee that  she spoke                                                               
with  the  department  in regard  to  amending  the  legislation.                                                               
Representative Murkowski  inquired as  to what the  sponsor feels                                                               
wouldn't    work    with     the    administration's    proposal.                                                               
Representative  Murkowski mentioned  that she  wouldn't make  the                                                               
amendment if she understood the  problems with it.  The amendment                                                               
reads as follows:                                                                                                               
                                                                                                                                
     Page 1, following line 13:                                                                                                 
     Insert new bill sections to read:                                                                                          
     "*Sec.2. AS 18.07.031(b) is amended to read:                                                                             
     (b) Notwithstanding [THE  EXPENDITURE THRESHOLD IN] (a)                                                                    
     of  this  section, a  person  may  note alter  the  bed                                                                
     capacity by  adding new beds  to, construct  a building                                                                
     for  use  as,  or  convert  a building  or  part  of  a                                                                
     building  to, a  nursing home  or psychiatric  hospital                                                            
     that  requires  licensure  under  AS  18.20.020  unless                                                                    
     authorized  under the  terms of  a certificate  of need                                                                    
     issued by the department.                                                                                                  
     *Sec.3. The  uncodified law of  the State of  Alaska is                                                                  
     amended by adding a new section to read:                                                                                   
     TRANSITION. (a)  For an expenditure that  was less than                                                                    
     $1,000,000  for  alteration  of  the  bed  capacity  by                                                                    
     adding  new  beds to,  or  for  new construction  of  a                                                                    
     building  for use  as, a  nursing  home or  psychiatric                                                                    
     hospital that requires licensure  under AS 18.20.020 or                                                                    
     for conversion of  a building or part of  a building to                                                                    
     a  psychiatric hospital  that requires  licensure under                                                                    
     AS  18.20.020, and  that  was not  required  to have  a                                                                    
     certificate of  need before the effective  date of this                                                                    
     Act,  a person  must  comply with  AS 18.07.031(b),  as                                                                    
     amended  by sec.  2 of  this Act,  if the  person first                                                                    
     seeks  licensure under  AS 18.20.020  on  or after  the                                                                    
     effective  date  of this  Act  for  the new  beds,  new                                                                    
     construction, or conversion.                                                                                               
     (b)Pending  applications to  comply with  AS 18.02.031,                                                                    
     as that  statute appeared before the  effective date of                                                                    
     this  Act, shall  be processed  in  accordance with  AS                                                                    
     18.07.031, as amended by this Act."                                                                                        
                                                                                                                                
MS.  MOSS said  that  there  are three  basic  concerns.   First,                                                               
Representative Coghill has  said that he will  make amendments in                                                               
the  House   Health,  Education  and  Social   Services  Standing                                                               
Committee where  the discussion  should occur.   She  related her                                                               
belief  that  the House  Health,  Education  and Social  Services                                                               
Standing  Committee  will  question  the fiscal  note.    Second,                                                               
Section 2  [of the amendment]  would allow government  to specify                                                               
who  can be  put in  the beds,  which includes  existing and  new                                                               
beds.   [Third], Section 3(a) seems  to be an example  of ex post                                                               
facto; the rules are being changed  mid-stream and a CON would be                                                               
required.                                                                                                                       
                                                                                                                                
Number 2736                                                                                                                     
                                                                                                                                
ELMER  LINDSTROM, Deputy  Commissioner,  Department  of Health  &                                                               
Social  Services,  explained  that   were  the  amendment  to  be                                                               
adopted, the  status quo  would remain  relative to  nursing home                                                               
beds.  Currently, nursing home  beds can't be converted without a                                                               
CON.  The sponsor's position  of including psychiatric beds would                                                               
make  the  situation  for  psychiatric  beds  the  same  as  what                                                               
currently exists for  nursing home beds.   Therefore, there isn't                                                               
a  significant  policy  issue  here.     He  indicated  that  the                                                               
[amendment] seemed  to be on  par with the  sponsor's intentions;                                                               
however, now he  wasn't certain.  In closing,  Mr. Lindstrom left                                                               
the  decision  as  to  whether  to offer  the  amendment  to  the                                                               
committee.                                                                                                                      
                                                                                                                                
CO-CHAIR MEYER  remarked that  this committee  wants to  pass the                                                               
best bill possible from the committee.                                                                                          
                                                                                                                                
Number 2855                                                                                                                     
                                                                                                                                
REPRESENTATIVE HALCRO  commented that this isn't  merely a debate                                                               
over  the economics  of free  competition.   He recalled  the $25                                                               
million  a year  spent  by Providence  on free  care.   "I  would                                                               
suggest that  it's not  just a pure  matter of  competition, it's                                                               
looking at  communities and  trying to  define what  services are                                                               
going to  be effected  if we  allow this  to go  forward.   And I                                                               
would hope  the sponsor would  take that into  consideration," he                                                               
said.                                                                                                                           
                                                                                                                                
REPRESENTATIVE KERTTULA inquired as to who drafted SSHB 316.                                                                    
                                                                                                                                
MR.  LINDSTROM  answered that  the  bill  was drafted  by  Stacie                                                               
Kraly, Assistant Attorney General,  Human Services Section, Civil                                                               
Division  (Juneau),  Department  of  Law,  and  was  reviewed  by                                                               
Deborah   Behr,  Assistant   Attorney   General,  Legislation   &                                                               
Regulations Section, Civil Division  (Juneau), Department of Law.                                                               
In  further response  to Representative  Kerttula, Mr.  Lindstrom                                                               
explained that unamended  HB 407 would exempt  nursing homes from                                                               
a  CON  review  in  communities with  a  population  larger  than                                                               
55,000.   Mr. Lindstrom agreed with  Representative Kerttula that                                                               
the amendment  would return  the situation  for nursing  homes to                                                               
the status quo.                                                                                                                 
                                                                                                                                
REPRESENTATIVE  GUESS remarked  that  it is  appropriate for  the                                                               
discussion of the fixes for HB  407 to occur in the House Health,                                                               
Education and Social Services Standing Committee.                                                                               
                                                                                                                                
Number 2961                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GUESS moved  to report  HB 407  out of  committee                                                               
with  individual  recommendations  and  the  accompanying  fiscal                                                               
note.                                                                                                                           
                                                                                                                                
REPRESENTATIVE KERTTULA related her  understanding that the House                                                               
Health,  Education  and  Social Services  Standing  Committee  is                                                               
going to review the amendment.                                                                                                  
                                                                                                                                
MS. MOSS reiterated Representative  Coghill's commitment to offer                                                               
amendments  in the  House Health,  Education and  Social Services                                                               
Standing Committee.                                                                                                             
                                                                                                                                
TAPE 02-17, SIDE B                                                                                                              
                                                                                                                                
[There being no objection, HB 407 was reported from the House                                                                   
Community and Regional Affairs Standing Committee.]                                                                             
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no further business before the committee, the House                                                                 
Community and Regional Affairs Standing Committee meeting was                                                                   
adjourned at 8:57 a.m.                                                                                                          

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