Legislature(2001 - 2002)

04/23/2002 01:39 PM House FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                  HOUSE FINANCE COMMITTEE                                                                                       
                      April 23, 2002                                                                                            
                          1:39 PM                                                                                               
                                                                                                                                
TAPE HFC 02   90, Side A                                                                                                        
TAPE HFC 02 - 90, Side B                                                                                                        
TAPE HFC 02 - 91, Side A                                                                                                        
TAPE HFC 02 - 91, Side B                                                                                                        
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair  Williams   called  the  House   Finance  Committee                                                                    
meeting to order at 1:39 PM.                                                                                                    
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Eldon Mulder, Co-Chair                                                                                           
Representative Bill Williams, Co-Chair                                                                                          
Representative Con Bunde, Vice-Chair                                                                                            
Representative Eric Croft                                                                                                       
Representative John Davies                                                                                                      
Representative Richard Foster                                                                                                   
Representative John Harris                                                                                                      
Representative Bill Hudson                                                                                                      
Representative Ken Lancaster                                                                                                    
Representative Carl Moses                                                                                                       
Representative Jim Whitaker                                                                                                     
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None                                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Representative John  Coghill; Representative  Lesil McGuire;                                                                    
Elmer  Lindstrom, Special  Assistant,  Department of  Health                                                                    
and Social  Services; Mike Powers,  Administrator, Fairbanks                                                                    
Memorial  Hospital;  Brian  Slocum,  Tanana  Valley  Clinic,                                                                    
Fairbanks;  Jerome  Selby,   Regional  Director,  Providence                                                                    
Kodiak Island  Medical Center,  Kodiak; Richard  Cobden, MD,                                                                    
Fairbanks;   Catherine   Reardon,  Director,   Division   of                                                                    
Occupational   Licensing,   Department  of   Community   and                                                                    
Economic Development.                                                                                                           
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Carolyn   Watts,   PH.D.,   Professor,   Health   Economics,                                                                    
University  of  Washington;   Jay  Kaplan,  Vice  President,                                                                    
Emergency  Services,  Banner   Health,  Arizona;  Thomas  R.                                                                    
Piper,  Director,  Certificate  of  Need  Program,  Missouri                                                                    
Department   Health,   Missouri;  Dean   Montgomery,   Staff                                                                    
Director,  Health   Systems  Agency  of   Northern  Virginia                                                                    
(HSANV), Virginia; Kim  Pickarel, Market Coordinator, Health                                                                    
South  Medical   Services  Corporation,   Anchorage;  Dennis                                                                    
Murray,  Heritage  Place,  Kenai;  Harry  Porter,  Fairbanks                                                                    
Memorial  Hospital,   Fairbanks;  Susan   McLane,  Fairbanks                                                                    
Memorial  Hospital,   Fairbanks;  Karl   Sanford,  Fairbanks                                                                    
Memorial Hospital Foundation, Fairbanks.                                                                                        
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 350    "An Act relating to terroristic threatening."                                                                         
                                                                                                                                
          CSHB 350 (FIN) was  REPORTED out of Committee with                                                                    
          a  "do  pass"  recommendation and  with  and  four                                                                    
          previously  published  fiscal  notes: #1  CRT,  #3                                                                    
          LAW, #4 ADM, and #5 COR.                                                                                              
                                                                                                                                
HB 399    "An Act  relating to  the Uniform  Mechanical Code                                                                    
          and   other   safety  codes;   annulling   certain                                                                    
          regulations   adopted   by   the   Department   of                                                                    
          Community  and  Economic Development  relating  to                                                                    
          the  mechanical  code   that  applies  to  certain                                                                    
          construction     contractors    and     mechanical                                                                    
          administrators;  and  providing for  an  effective                                                                    
          date."                                                                                                                
                                                                                                                                
HB 407    "An  Act  relating  to  the  Certificate  of  Need                                                                    
          program."                                                                                                             
                                                                                                                                
HCR 23    Proposing  amendments to  Uniform Rule  20 of  the                                                                    
          Alaska  State Legislature;  and  providing for  an                                                                    
          effective date for the amendments.                                                                                    
                                                                                                                                
          HCR 23  was REPORTED out  of Committee with  a "do                                                                    
          pass" recommendation  and with  a new  zero fiscal                                                                    
          note by the Legislative Affairs Agency.                                                                               
HOUSE CONCURRENT RESOLUTION NO. 23                                                                                            
                                                                                                                                
     Proposing amendments to Uniform Rule 20 of the Alaska                                                                      
     State Legislature; and providing for an effective date                                                                     
     for the amendments.                                                                                                        
                                                                                                                                
Vice-Chair Bunde,  Sponsor, HCR  23 testified in  support of                                                                    
the legislation.  He noted that the  legislation would amend                                                                    
the  Uniform  Rules to  create  a  standing House  Education                                                                    
Committee.   It   would   reconfigure  the   House   Health,                                                                    
Education,  and  Social  Services  Committee  to  the  House                                                                    
Health and Social  Services Committee. He noted  that "it is                                                                    
a full  plate" for  one committee. He  observed that  HCR 23                                                                    
would  not  change the  Senate  HESS  Committee. The  change                                                                    
would be effective for the next legislative session.                                                                            
                                                                                                                                
Vice-Chair Bunde  noted that  it was  felt that  the Special                                                                    
Committee on  Education has proven  to be beneficial  to the                                                                    
legislative process  by facilitating focused  committee work                                                                    
on education  bills and issues.  He noted that while  he was                                                                    
chair,  the House  Health,  Education,  and Social  Services                                                                    
Committee often  had to meet  five days  a week in  order to                                                                    
get through the  bills before them. He observed  that it was                                                                    
sometimes difficult to get a quorum.                                                                                            
                                                                                                                                
Vice-Chair  Bunde  emphasized   that  education  issues  are                                                                    
complex  and   very  important.  The  workload   related  to                                                                    
education has become significant  and would benefit from the                                                                    
full  attention  of  a   permanent  standing  committee.  He                                                                    
observed  that HCR  23 is  supported by  the Association  of                                                                    
Alaska  School  Boards  and the  Alaska  Council  of  School                                                                    
Administrators.                                                                                                                 
                                                                                                                                
                                                           nd                                                                   
Vice-Chair   Bunde  pointed   out   that  during   the   22                                                                     
Legislature: 119 bills were referred  to HESS; 42 bills were                                                                    
referred  to  the Special  Committee  on  Education; and  33                                                                    
bills were referred to both committees.                                                                                         
                                                                                                                                
Representative Harris  observed the difficulty of  getting a                                                                    
quorum  and  questioned  if an  additional  committee  would                                                                    
exacerbate  the situation.  Vice-Chair  Bunde stressed  that                                                                    
the  new  committee would  be  able  to maintain  a  regular                                                                    
three-day a week schedule.                                                                                                      
                                                                                                                                
Vice-Chair Bunde  MOVED to ADOPT  a zero fiscal  note. There                                                                    
being NO OBJECTION, it was so ordered.                                                                                          
                                                                                                                                
Representative  Foster  MOVED  to   report  HCR  23  out  of                                                                    
Committee with the accompanying  fiscal note. There being NO                                                                    
OBJECTION, it was so ordered.                                                                                                   
                                                                                                                                
HCR  23 was  REPORTED  out  of Committee  with  a "do  pass"                                                                    
recommendation  and  with a  new  zero  fiscal note  by  the                                                                    
Legislative Affairs Agency.                                                                                                     
HOUSE BILL NO. 407                                                                                                            
                                                                                                                                
     "An Act relating to the Certificate of Need program."                                                                      
                                                                                                                                
Representative John  Coghill, Sponsor,  spoke in  support of                                                                    
the legislation. He  noted that he was motivated  by an open                                                                    
market system. He  stressed that health care  needs to cross                                                                    
over  between regulation  and the  free  market economy.  He                                                                    
maintained that the consumer (patient)  is often left out of                                                                    
discussions. Under  current statute, a health  care delivery                                                                    
system costing more than $1  million dollars must go through                                                                    
a   Certificate  of   Need  (CON)   discovery  process   and                                                                    
authorization  with  the  Department of  Health  and  Social                                                                    
Services. He questioned why  government permission should be                                                                    
required to give health care  services in certain population                                                                    
and if it is the wisest way to go.                                                                                              
                                                                                                                                
Representative Coghill reviewed  the legislation by section.                                                                    
Section 1 provides that a  facility may not expend more than                                                                    
a million  dollars under specific conditions:  for a skilled                                                                    
nursing facility  or psychiatric  hospital; to  increase the                                                                    
bed capacity of  a skilled nursing facility;  or convert bed                                                                    
care style.                                                                                                                     
                                                                                                                                
Section   2. Provides  that a facility destroyed  on site or                                                                    
demolished  on  site could  be  replaced  without having  to                                                                    
acquire  a  new Certificate  of  Need  and provides  that  a                                                                    
facility could move to a  new site without a new Certificate                                                                    
of Need  as long as  capacity and categories of  services do                                                                    
not change.                                                                                                                     
                                                                                                                                
Section   3.  Requires the  department to  adopt regulations                                                                    
to set a time limit for  the department to determine that an                                                                    
application is complete.                                                                                                        
                                                                                                                                
Section 4. Requires  the department to  set a time  limit by                                                                    
which public  hearings must  be held.  It also  requires the                                                                    
department  to approve  or deny  an  application within  120                                                                    
days of  the date the department  determined the application                                                                    
was complete.                                                                                                                   
                                                                                                                                
Section   5.  Places all  Certificate  of Need  applications                                                                    
under the same standards of  review that currently exist for                                                                    
nursing home beds.                                                                                                              
                                                                                                                                
Sections  6 and  7 addresses  issuance and  the rights  of a                                                                    
temporary Certificate of Need.                                                                                                  
                                                                                                                                
Section  8  addresses the  suspension  of  a Certificate  of                                                                    
Need.                                                                                                                           
                                                                                                                                
Section 11  provides for the development  of a comprehensive                                                                    
health plan.                                                                                                                    
                                                                                                                                
Representative  Coghill  observed  that limitations  to  the                                                                    
health plan were placed in section 13:                                                                                          
                                                                                                                                
     (1) is not intended by the legislature to be updated                                                                     
          periodically;                                                                                                         
                                                                                                                                
     (2) shall be prepared by the Department of Health and                                                                    
          Social Services by January 1,  2003, and a copy of                                                                    
          it  shall  be  given  by  the  department  to  the                                                                    
          legislature by that date; and                                                                                         
                                                                                                                                
     (3) shall be prepared by using staff and other                                                                           
          resources  of the  department  that are  generally                                                                    
          available to perform the  duties of the department                                                                    
          without  an additional  appropriation specifically                                                                    
          designated for preparation of  the plan or without                                                                    
          an additional  appropriation to fund  the indirect                                                                    
        effect on existing personnel or resources.                                                                              
                                                                                                                                
Representative  Coghill   maintained  that   populations  of                                                                    
55,000  or  more  should  be  open to  a  freer  market.  He                                                                    
acknowledged that the size is  arbitrary. He emphasized that                                                                    
the non-profit  organization world  is over-running  the for                                                                    
profit world. He inferred that  non-profits could indulge in                                                                    
price  fixing and  that it  leaves room  for discussions  of                                                                    
impropriety. He stated  that he would not be  opposed to the                                                                    
elimination of section 11.                                                                                                      
                                                                                                                                
Vice-Chair Bunde  clarified that  the high fiscal  costs are                                                                    
associated with section 11.                                                                                                     
                                                                                                                                
CAROLYN   WATTS,   PH.D.,   PROFESSOR,   HEALTH   ECONOMICS,                                                                    
UNIVERSITY  OF WASHINGTON,  testified via  teleconference in                                                                    
opposition  to the  legislation. She  has done  research and                                                                    
taught in  the area  of health  economics and  health policy                                                                    
for  the past  26  years.  She has  also  written widely  on                                                                    
issues involving  the organization  of health  care markets,                                                                    
including  several pieces  on Certificate  of Need,  one for                                                                    
the Washington State Legislature.                                                                                               
                                                                                                                                
Ms.  Watts  urged  the Committee  to  proceed  with  extreme                                                                    
caution. She maintained that the  stakes are very high, both                                                                    
for  Alaska's  Medicaid  budget  and  for  access  to  basic                                                                    
services  such  as  obstetrics and  prenatal  care  for  the                                                                    
populations,   particularly   the  low-income   populations,                                                                    
served by sole community hospitals.                                                                                             
                                                                                                                                
     As  an economist,  I believe  in competition.  However,                                                                    
     competition delivers  good results in markets  that can                                                                    
     support  many buyers  and sellers  where all  consumers                                                                    
     can afford  to pay their  way. Competition at  its best                                                                    
     does a  good job of  catering to the desires  of buyers                                                                    
     with  money. It  does  nothing for  people without  the                                                                    
     ability to  pay. This  is not  the situation  in single                                                                    
     hospital   communities.    Here   patients    have   no                                                                    
     alternative  if   the  only  hospital   cannot  survive                                                                    
     financially  because another  provider has  entered the                                                                    
     market to do only the profitable services.                                                                                 
                                                                                                                                
     Competition can lower prices  in some markets. However,                                                                    
     the  only  prices  that  get   lowered  are  for  those                                                                    
     consumers and services the sellers  want to serve (at a                                                                    
     profit).  Sellers won't  compete to  serve Medicaid  or                                                                    
     charity  patients     but competition  will  erode  the                                                                    
     ability   of  charitable   hospitals  to   serve  these                                                                    
     patients  if they  take away  the  potential for  cross                                                                    
     subsidization.                                                                                                             
                                                                                                                                
     The Alaska  State budget is in  trouble. Medicaid funds                                                                    
     are  in trouble.  Cross subsidization  of Medicaid  and                                                                    
     charity   services  with   insurance  funds   paid  for                                                                    
     profitable  services essentially  allows  the state  to                                                                    
     shift  some of  the  financial burden  of its  Medicaid                                                                    
     obligation  to  the  private sector.  Competition  that                                                                    
     lowers  the prices  of profitable  services to  insured                                                                    
     patients  benefits insurance  companies at  the expense                                                                    
     of the state Medicaid  budget. The hospital's financial                                                                    
     obligations  around basic  services such  as obstetrics                                                                    
     and prenatal  care to low income  Medicaid or uninsured                                                                    
     patients  will not  be  reduced  as outpatient  surgery                                                                    
     centers and other niche providers  enter the market. In                                                                    
     the   absence   of   funds  generated   through   cross                                                                    
     subsidization, the  hospital will either have  to raise                                                                    
     its prices  to Medicaid or fail  financially, resulting                                                                    
     in  major   access  dilemmas  not  just   for  Medicaid                                                                    
   patients but for all the residents of the community.                                                                         
                                                                                                                                
     Finally,   Certificate  of   Need  does   not  prohibit                                                                    
     competition.  It  simply  provides a  structure  and  a                                                                    
     public  process   through  which  competition   can  be                                                                    
     monitored,  guided,  and   shaped  to  be  constructive                                                                    
     rather than  destructive. The  free market,  after all,                                                                    
     brought us Enron.                                                                                                          
                                                                                                                                
Ms.  Watts urged  legislators to  study the  issue carefully                                                                    
before they dismantled the public  process that supports the                                                                    
health  care  infrastructure   of  Alaskan  communities  and                                                                    
maintained  that  Certificate  of  Needs  does  not  inhibit                                                                    
competition.                                                                                                                    
                                                                                                                                
Co-Chair Mulder questioned if the  state of Washington has a                                                                    
Certificate of Need process and  whether it had changed over                                                                    
the  last decade.  Ms.  Watts affirmed  and  noted that  the                                                                    
process has changed,  but the process of  the Certificate of                                                                    
Need  has remained  allowing public  discussion around  what                                                                    
the community's infrastructure would look like.                                                                                 
                                                                                                                                
Co-Chair  Mulder noted  that there  is a  closed opportunity                                                                    
into the  Alaskan market, which  has caused  frustration. He                                                                    
questioned if it  is easier in the state  of Washington. Ms.                                                                    
Watts observed that the idea behind  the process is not as a                                                                    
prohibition, but as a careful  introduction into the market.                                                                    
Proposals that  provide choice and  are good for  the market                                                                    
without harming the basic  infrastructure go through without                                                                    
a  lot  of  discussion.   Certificate  of  Need  allows  for                                                                    
alteration  of  projects. It  provides  a  forum for  public                                                                    
discussion. Without  a Certificate of Need  process there is                                                                    
no way  to monitor or assure  promises are kept. There  is a                                                                    
process by  which the product  can be monitored  and shaped.                                                                    
Co-Chair  Mulder summarized  that  the process  is open  and                                                                    
occurs in the public discussion. Ms. Watts agreed.                                                                              
                                                                                                                                
Vice-Chair Bunde clarified that Ms.  Watts is a paid witness                                                                    
through the Fairbanks Memorial Hospital.                                                                                        
                                                                                                                                
In response  to a  question by Representative  Whitaker, Ms.                                                                    
Watts noted that market forces  cater well to the people who                                                                    
have  resources but  not to  those  that cannot  pay or  are                                                                    
represented  by  agencies  like  Medicaid  that  cannot  pay                                                                    
market  rates.  The  competition is  around  the  profitable                                                                    
patients  and services.  No one  wants patients  that cannot                                                                    
pay  or  that  come  with  less than  market  rates,  as  do                                                                    
Medicaid patients in most states.                                                                                               
                                                                                                                                
JAY  KAPLAN,  VICE  PRESIDENT,  EMERGENCY  SERVICES,  BANNER                                                                    
HEALTH, ARIZONA, testified  via teleconference in opposition                                                                    
to the legislation. Mr.  Kaplan practiced emergency medicine                                                                    
for 21  years [in New  Jersey] and  in the state  of Arizona                                                                    
for the  past year. He  referred to the Certificate  of Need                                                                    
process  in New  Jersey,  which was  implemented to  prevent                                                                    
duplication of  services and  increased costs.  The hospital                                                                    
in  which he  worked was  not allowed  to initiate  an open-                                                                    
heart program  because of the  affect on nearby  urban inner                                                                    
city  hospitals. Another  suburban hospital  was allowed  to                                                                    
open  due  to political  maneuverings.  A  major urban  area                                                                    
hospital in  the vicinity of  the new open-heart  clinic now                                                                    
has   a  $40   million   dollar   shortfall  and   increased                                                                    
uncompensated reimbursements.                                                                                                   
                                                                                                                                
Mr. Kaplan noted that the state  of Arizona is seeing a rise                                                                    
in  specialty hospitals  and boutique  health care  services                                                                    
that  are planned  and  developed by  for  profit groups  to                                                                    
attract   paying,   insured   patients,   especially   those                                                                    
requiring surgical  procedures, which  have a  higher profit                                                                    
margin. He noted that Arizona  has a serious medical problem                                                                    
with  overcrowded  emergency  departments: with  a  lack  of                                                                    
access and 8  - 10 hour weights. It is  difficult to get on-                                                                    
call  physicians   to  care   for  Medicaid   and  uninsured                                                                    
patients.  He argued  that  eliminating  the Certificate  of                                                                    
Need process  would not increase  access and  competition or                                                                    
lead to reductions in cost.  Not for profit hospitals have a                                                                    
mandated social responsibility to  care for all patients. He                                                                    
argued  that  Medicaid  patients  are not  accepted  at  for                                                                    
profit  hospitals. He  maintained  that  elimination of  the                                                                    
Certificate of Need process would  threaten the viability of                                                                    
the safety net [for low  income patients] and begin a health                                                                    
care  arms race  with  the elimination.  Studies have  shown                                                                    
that   the  unbridled   ability   of   services  result   in                                                                    
unnecessary procedures  and surgeries, which  increase cost.                                                                    
He  stressed  that health  care  premiums  would be  raised,                                                                    
leading  to more  people that  cannot  afford insurance  and                                                                    
maintained that the Medicaid  and uninsured population would                                                                    
swell.  More facilities  would also  strain the  shortage of                                                                    
nurses and technicians, which would  lead to increased labor                                                                    
costs. He  concluded that elimination of  the Certificate of                                                                    
Need process would not lower costs or help physicians.                                                                          
                                                                                                                                
THOMAS  R. PIPER,  DIRECTOR,  CERTIFICATE  OF NEED  PROGRAM,                                                                    
MISSOURI   DEPARTMENT   HEALTH,  MISSOURI,   testified   via                                                                    
teleconference in  opposition to the legislation.  He is the                                                                    
director  of the  Missouri Certificate  of Need  program. He                                                                    
reviewed  changes in  the Missouri  system  since 1979.  The                                                                    
Missouri program has evolve and change in many ways:                                                                            
                                                                                                                                
     1979 -  Original Certificate of  Need law  passed. 1983                                                                    
     Establishment   of   the    Nursing   Home   Moratorium                                                                    
     established.                                                                                                               
                                                                                                                                
     1988  -   Expenditure  minimums  raised,   but  Federal                                                                    
     funding discontinued.                                                                                                      
                                                                                                                                
     1991 -  Parking facilities, utility systems  and others                                                                    
     waived from review.                                                                                                        
                                                                                                                                
     1996  -   Acute  care  sunset  passed   by  Legislature                                                                    
     effective 12/31/01.                                                                                                        
                                                                                                                                
     1999  - Long-term  care  replacements  and purchase  of                                                                    
     beds established.                                                                                                          
                                                                                                                                
     2001 -  The sunset  took affect  and acute  care review                                                                    
     ended  except  for  new hospitals.  Ambulatory  centers                                                                    
     have  not been  reviewed; long  term care,  residential                                                                    
     care  and  major  medical  equipment  over  $1  million                                                                    
     dollars in any location have continued to be reviewed.                                                                     
                                                                                                                                
     2002 - Two bills have  been introduced that, HB1717 and                                                                    
     SB 1087, which would  restore and strengthen acute care                                                                    
     review.                                                                                                                    
                                                                                                                                
Mr.  Piper  observed  that hospitals  were  split  for  many                                                                    
years,  but are  now united  with the  intent to  reform the                                                                    
Certificate  of Need  process.  Proposed  bills would  cover                                                                    
both  acute  and long-term  care  with  zero thresholds  for                                                                    
first-time  services, but  broaden  flexibility for  service                                                                    
expansion  and  replacement.  The   basic  rationale  is  to                                                                    
protect  established  community services  while  restraining                                                                    
double-digit inflation in health  care premiums and Medicaid                                                                    
costs. The  impact of deregulation  has been jolting  in the                                                                    
number  of new  ambulatory  surgery  and diagnostic  imaging                                                                    
centers, plus major hospital expansions.  He argued that the                                                                    
fiscal  impact  cannot  yet   be  measured  accurately,  but                                                                    
emphasized  that it  could not  come  at a  worse time  with                                                                    
state budget cuts  of over $500 million  dollars and federal                                                                    
limitations on reimbursement. Mr. Piper observed that:                                                                          
                                                                                                                                
     Such funding problems  are being experienced everywhere                                                                    
     in  our country.  As I  have  monitored CON  activities                                                                    
     nationally  over the  last 13  years,  and watched  the                                                                    
     demise of managed  care, we have seen  CON stabilize in                                                                    
     36 states  and the  District of Columbia.  Missouri has                                                                    
     streamlined  their Certificate  of  Need process;  many                                                                    
     other states  that repealed  their Certificate  of Need                                                                    
     programs subsequently reenacted  them, such as Indiana,                                                                    
     Minnesota, Wisconsin.  Louisiana started  a Certificate                                                                    
     of Need  program in  1991. Pennsylvania  reformed their                                                                    
     program and  continues the activities  under licensure.                                                                    
     There have been efforts in  Texas and Kansas to restore                                                                    
     Certificate of Need programs.                                                                                              
                                                                                                                                
Mr.  Piper emphasized  that state  oversight of  health care                                                                    
persists  because public  funds pay  for over  two-thirds of                                                                    
the health  care services,  and maintained  that competition                                                                    
doesn't  work in  health care;  health care  is part  of the                                                                    
caring  community,   not  a  commodity.  He   stressed  that                                                                    
public/private partnerships  with community  health planning                                                                    
and  oversight  continues  to be  the  best  investment.  He                                                                    
reiterated  that competition  does not  work in  health care                                                                    
and that state oversight is important.                                                                                          
                                                                                                                                
Co-Chair  Mulder  questioned   Mr.  Piper's  statement  that                                                                    
public  funds  pay  for  over   two-thirds  of  health  care                                                                    
services.  Mr.  Piper  clarified that  his  statistics  were                                                                    
based the national number: 68 percent.                                                                                          
                                                                                                                                
Chair Mulder  noted that his  biggest concern is  the impact                                                                    
on  the  state's Medicaid  budget.  Mr.  Piper thought  that                                                                    
there would  be an  impact on the  state of  Alaska Medicaid                                                                    
system. He suggested  that there would be  a rapid expansion                                                                    
of  surgery centers  and nursing  homes.  Medicaid would  be                                                                    
impacted   because  patients   would   be  divided   between                                                                    
providers.                                                                                                                      
                                                                                                                                
Co-Chair   Mulder   noted   that  proponents   justify   the                                                                    
legislation based  on the  anticipated growth  of population                                                                    
in the  state of  Alaska; in  five years  there would  be an                                                                    
additional 55,000  in population; and more  facilities would                                                                    
translate into more opportunity.                                                                                                
                                                                                                                                
Mr.  Piper  pointed out  that  the  planning component  must                                                                    
occur  to look  at  the expanding  population and  determine                                                                    
where  and which  services should  be provided.  Planning is                                                                    
needed along with regulation.                                                                                                   
                                                                                                                                
Co-Chair  Mulder  asked  if   there  were  comparisons  with                                                                    
Montana  or  other  states   with  similar  demographics  to                                                                    
Alaska. Mr.  Piper did not  have information on  states with                                                                    
similar demographics to Alaska.                                                                                                 
                                                                                                                                
Vice-Chair  Bunde asked  who is  the ultimate  arbitrator in                                                                    
Missouri.  Mr.  Piper  explained  that  there  is  a  health                                                                    
facilities  review  committee,  which is  a  9-member  panel                                                                    
appointed  by  the governor  and  legislature.  There are  4                                                                    
legislators  on   the  body.  The  committee   prepares  and                                                                    
analyzes information  consistent with  a set  of regulations                                                                    
that help  to plan for what  is needed and then  compare for                                                                    
feasibility. He observed that acute  care review in Missouri                                                                    
is poised  to pass,  which would strengthen  the Certificate                                                                    
of Need process in Missouri.                                                                                                    
                                                                                                                                
Vice-Chair  Bunde   maintained  that  Certificate   of  Need                                                                    
regulations  in Alaska  have been  handled arbitrarily.  Mr.                                                                    
Piper noted  that a Certificate  of Need  technical advisory                                                                    
committee  with 73  members helped  the state  to streamline                                                                    
and  rewrite their  rules.  They have  been  able to  reduce                                                                    
times and costs by 20  40 percent.                                                                                              
                                                                                                                                
Representative Coghill  noted that the  legislation tightens                                                                    
up  Certificate of  Need requirements  for a  school nursing                                                                    
facility,  psychiatric hospital  or nursing  and psychiatric                                                                    
facility. These  facilities would  be under  the Certificate                                                                    
of Need requirements in communities under 55,000.                                                                               
                                                                                                                                
DEAN MONTGOMERY,  STAFF DIRECTOR,  HEALTH SYSTEMS  AGENCY OF                                                                    
NORTHERN   VIRGINIA   (HSANV),    VIRGINIA,   testified   in                                                                    
opposition  to the  legislation. He  noted that  HSANV is  a                                                                    
private non-profit  corporation, which does  health services                                                                    
research and  planning, under contract, for  both public and                                                                    
private entities.  They have conducted  a number of  CON and                                                                    
related planning studies in Virginia  and elsewhere over the                                                                    
last two  decades. He noted that  he has more than  25 years                                                                    
experience in this field.                                                                                                       
                                                                                                                                
Mr. Montgomery stated that:                                                                                                     
                                                                                                                                
     The merits,  and necessity of CON  and related planning                                                                    
     have been debated in Virginia,  with varying degrees of                                                                    
     intensity,   every  year   since  1986.   The  Virginia                                                                    
     experience  may  be  instructive  and  of  use  as  you                                                                    
     consider changes  to Alaska's  program. After  years of                                                                    
     debate,   most   covered   service  in   Virginia   was                                                                    
     deregulated  in   1989.  Among  acute   care  services,                                                                    
     planning  controls were  kept  on  only hospital  beds,                                                                    
     operating  rooms  and   open-heart  surgery.  Following                                                                    
     deregulation, there  was an immediate  proliferation of                                                                    
     new  services  (notably,  CT, MRI,  radiation  therapy,                                                                    
     cardiac  catheterization).  The resulting  increase  in                                                                    
     capital  expenditures,   and  the  sharp   decrease  in                                                                    
     average program use/volumes  and the associated revenue                                                                    
     loss   at   established   programs.   led   the   state                                                                    
     legislature to  reimpose planning controls  three years                                                                    
     later, in 1992.  Controls were reimposed on  all of the                                                                    
     services  that had  been deregulated  in 1989.  It took                                                                    
     between 7  and 8 years  for average program  volumes to                                                                    
     return  to 1989  levels.  Virginia has  been a  rapidly                                                                    
     growing  state  during the  last  decade:  2 percent  a                                                                    
     year. Were this  not the case, the  negative effects of                                                                    
     deregulation would  have been  even greater  and longer                                                                    
     lasting.                                                                                                                   
                                                                                                                                
     This experience  notwithstanding, CON has  been debated                                                                    
     annually (during each  general assembly Session), since                                                                    
     the re-imposition  of controls  in 1992. To  date there                                                                    
     has  been   no  significant  change  in   the  program.                                                                    
     Although  there  is a  strong  lobby  in favor  of  the                                                                    
     deregulation,   particularly    of   surgery   centers,                                                                    
     diagnostic-imaging   services,    specialized   cardiac                                                                    
     services,   cancer  treatment   Centers,  and   similar                                                                    
     services  that can  be operated  profitably outside  of                                                                    
     community hospitals.                                                                                                       
                                                                                                                                
     The  CON' debate  has centered  on three  broad issues:                                                                    
     (1)   on   the   economic  effects   of   deregulation,                                                                    
     particularly  for  community   hospitals,  (2)  on  the                                                                    
     access  to  care  implications,  especially  l  hr  the                                                                    
     medically indigent  and Medicaid  patients, and  (3) on                                                                    
     the  quality  implications,   notably  for  specialized                                                                    
     surgical and other tertiary care services.                                                                                 
                                                                                                                                
     To  date  (the  2002  general  assembly  session  ended                                                                    
     recently),  the legislature  has not  deregulated again                                                                    
     because the evidence and testimony indicate that:                                                                          
                                                                                                                                
         Community hospitals would lose critical revenue                                                                        
         from  the   loss  of  a  large  percentage  of  the                                                                    
         services  on   which  they  make  a  profit  (e.g.,                                                                    
         ambulatory  surgery,  diagnostic  imaging,  cardiac                                                                    
         catheterization)  and  use to  subsidize losses  in                                                                    
         necessary hut unprofitable services;                                                                                   
                                                                                                                                
TAPE HFC 02 - 90, Side B                                                                                                      
                                                                                                                                
         In some cases, and perhaps in many, the loss of                                                                        
         this revenue would undercut  the economic viability                                                                    
         of  the  hospital upon  which  a  community,  or  a                                                                    
         specific population, is dependent;                                                                                     
                                                                                                                                
         Many community hospitals would he unable, or less                                                                      
         able, to provide  necessary emergency  services and                                                                    
         services to the medically indigent  and to Medicaid                                                                    
         patients,  without   a   substantial  increase   in                                                                    
         Medicaid payments;                                                                                                     
                                                                                                                                
         Cost of deregulation to community hospitals is                                                                         
         estimated, at  minimum, to be  tens of  millions of                                                                    
         dollars  annually,  and  perhaps   several  hundred                                                                    
         million, depending  on the  categories of  services                                                                    
         removed from regulation; and                                                                                           
                                                                                                                              
         Although there have been sustained negotiations                                                                        
         over several  years,  to date  the legislature  has                                                                    
         been unwilling or  unable to appropriate  monies or                                                                    
         to  increase   Medicaid   payments   to  offset   a                                                                    
         significant  part  of  these  losses  to  essential                                                                    
         community  hospitals, or  to  otherwise  level  the                                                                    
         playing field to offset the  inherent advantages in                                                                    
         proprietary ambulatory  surgery  centers and  other                                                                    
         diagnostic  and treatment  centers,  if  they  were                                                                    
         deregulated.                                                                                                           
                                                                                                                                
Mr. Montgomery concluded that:                                                                                                  
                                                                                                                                
     Virginia hospitals  are highly dependent  on ambulatory                                                                    
     surgery  and  diagnostic  imaging  revenues  to  offset                                                                    
     losses  in  a  number 01'  essential  but  unprofitable                                                                    
     services  they are  required to  provide.  The same  is                                                                    
     true of most essential community hospitals elsewhere,                                                                      
                                                                                                                                
     Deregulation should occur, only after careful study of                                                                     
     the economic and service implications, particularly the                                                                    
     cost to community hospitals.                                                                                               
                                                                                                                                
In  response   to  a  question  by   Vice-Chair  Bunde,  Mr.                                                                    
Montgomery  acknowledged  that  some services  performed  by                                                                    
hospitals  are  profitable.  These   services  are  used  to                                                                    
subsidize services that do not make money.                                                                                      
                                                                                                                                
KIM  PICKAREL,  MARKET  COORDINATOR,  HEALTH  SOUTH  MEDICAL                                                                    
SERVICES     CORPORATION,    ANCHORAGE,     testified    via                                                                    
teleconference in  support of the legislation.  She observed                                                                    
that Medicaid patients seen in  an ambulatory surgery center                                                                    
are charged  an average  of $310 dollars  less for  the same                                                                    
surgery done  in an acute  care facility. She  observed that                                                                    
they are  able to  offer 23-hour  service for  patients that                                                                    
need an extended  stay. Very rarely are  these patients sent                                                                    
to  the acute  care facility.  She argued  that out  patient                                                                    
surgery  would  be done  by  teams  that specialize  in  out                                                                    
patient  surgery. She  maintained  that  this would  improve                                                                    
patient outcome,  reduce time under anesthesia,  reduce risk                                                                    
and lessen time  in the operating room.  She emphasized that                                                                    
competition is needed in the state of Alaska.                                                                                   
                                                                                                                                
Co-Chair Mulder  question whether the Medicaid  budget would                                                                    
be affected. Ms. Pickarel acknowledged  that there may be an                                                                    
affect  but  maintained  that  it  would  balance  out.  She                                                                    
pointed out that  non-profits that do not  pay taxes provide                                                                    
indigent care.                                                                                                                  
                                                                                                                                
In response to  a question by Co-Chair  Mulder, Ms. Pickarel                                                                    
explained that  patients could remain  up to 23  hours. They                                                                    
could not care for the  patient beyond 23 hours because they                                                                    
are not an acute care facility.                                                                                                 
                                                                                                                                
Representative  Hudson noted  that it  has been  a community                                                                    
goal to have a broad  base hospital with as many specialties                                                                    
as possible. He questioned the impact on hospital services.                                                                     
                                                                                                                                
Ms.  Pickarel explained  that out  patience care  allows the                                                                    
surgery  to be  completed,  cost and  time efficiently.  She                                                                    
maintained that patients and physicians  would not be bumped                                                                    
by  emergency needs.  There are  many facets  of acute  care                                                                    
facilities that would not be compromised.                                                                                       
                                                                                                                                
Co-Chair Mulder  observed that there  is a  frustration with                                                                    
the process  among those  that are  attempting to  enter the                                                                    
market  through   the  Certificate  of  Need   process.  Ms.                                                                    
Pickarel agreed.  Co-Chair Mulder  questioned why  they have                                                                    
not  advocated for  streamlining the  process. Ms.  Pickarel                                                                    
observed  that  discussions   have  occurred  regarding  the                                                                    
building of a data site to compare data.                                                                                        
                                                                                                                                
Co-Chair  Mulder stressed  that  a more  open process  would                                                                    
resolve some of the issues. Ms. Pickarel agreed.                                                                                
                                                                                                                                
Representative  Foster  observed  that  Valley  Hospital  is                                                                    
legally and ethically bound to  cover any patient that comes                                                                    
to them.  He observed that Valley  Hospital had unreimbursed                                                                    
care of $4  - $5.5 million dollars. Ms.  Pickarel noted that                                                                    
12 percent of their care was to indigents.                                                                                      
                                                                                                                                
ELMER  LINDSTROM, SPECIAL  ASSISTANT,  DEPARTMENT OF  HEALTH                                                                    
AND   SOCIAL   SERVICES,   provided   information   on   the                                                                    
legislation. He observed  that the department is  a payer of                                                                    
health care through  the Medicaid program: 1  of 6 Alaskans.                                                                    
The  state is  the major  payer for  long-term nursing  home                                                                    
care  (85  percent) and  psychiatric  care.  The state  pays                                                                    
about 20  percent for other  types of acute care.  The state                                                                    
is  interested  in assuring  that  Alaskans  have access  to                                                                    
primary care  and in preserving  and expanding  health care.                                                                    
Alaska  has   worked  to  maintain  rural   facilities.  The                                                                    
Certificate  of  Need  program is  in  administered  by  the                                                                    
Department  of Health  and Social  Services and  operated by                                                                    
one person.  He referred to  the state health  plan compiled                                                                    
in 1984 and noted that it  has not been updated. He observed                                                                    
the lack of available information.                                                                                              
                                                                                                                                
Representative Hudson questioned if  the Certificate of Need                                                                    
application covers  the cost of their  review. Mr. Lindstrom                                                                    
did not  know if there  was a charge.  Representative Hudson                                                                    
spoke in support of a fee.                                                                                                      
                                                                                                                                
Co-Chair   Mulder   noted   that  there   are   frustrations                                                                    
surrounding the  openness of the  program. He  questioned if                                                                    
the  department would  consider revamping  the process.  Mr.                                                                    
Lindstrom  indicated that  the department  would be  open to                                                                    
discussion. He observed  that the process is  similar to the                                                                    
regulatory process, which allows  public hearings and public                                                                    
testimony.                                                                                                                      
                                                                                                                                
Vice-Chair   Bunde   suggested   that    it   is   a   large                                                                    
responsibility to  place on  a single  person. He  asked for                                                                    
further information regarding section 11.                                                                                       
                                                                                                                                
Mr. Lindstrom reviewed the  legislation. Section one repeals                                                                    
and  reenacts existing  law to  make  a distinction  between                                                                    
communities  with populations  below  and  above 50,000.  He                                                                    
noted  that  the  department is  not  comfortable  with  the                                                                    
approach and  pointed to the  lack of data.  He acknowledged                                                                    
that the  market in Anchorage  is different than  in smaller                                                                    
communities, but  emphasized that they  do not have  data to                                                                    
indicate the  affect of unbridled competition  in Fairbanks,                                                                    
Mat-Su or  other areas  that make the  cut-off. They  do not                                                                    
endorse the cut-off provision. He  explained that the intent                                                                    
is  to treat  psychiatric beds  similarly to  long-term care                                                                    
beds.  Long-term   beds  cannot   be  built,   remodeled  or                                                                    
converted without  a CON. The  state is the  [primary] payer                                                                    
for   these  facilities.   The   department  supports   this                                                                    
provision.                                                                                                                      
                                                                                                                                
Mr.  Lindstrom  reviewed section  2,  which  relates to  the                                                                    
replacement  of health  care  facilities.  He observed  that                                                                    
many small  facilities in small communities  are hanging on.                                                                    
The CON  process requires  communities to  ask what  sort of                                                                    
health facilities  are needed and  what can be  afforded. He                                                                    
suggested that  the legislature look  at the issue  of long-                                                                    
term  care beds,  nursing home  beds,  and psychiatric  beds                                                                    
where the state is the primary payer.                                                                                           
                                                                                                                                
Mr. Lindstrom  continued his review  of the  legislation. He                                                                    
observed that the department is  comfortable with section 3,                                                                    
time limits.  Section 4 provides technical  cleanup. Section                                                                    
5  provides  new standards  of  review  for Certificates  of                                                                    
Need. The Department supports the  approach contained in the                                                                    
legislation,  which applies  nursing home  standards to  all                                                                    
types. He  stressed that nursing  home standards  are better                                                                    
and more objective.                                                                                                             
                                                                                                                                
Mr.  Lindstrom observed  that section  11  was an  amendment                                                                    
offered in  the House Health and  Social Services Committee,                                                                    
which would direct the department  to prepare a state health                                                                    
plan. The  department is not  capable of doing  the facility                                                                    
piece of the plan. Section  11 was later modified by section                                                                    
13,  which  would  suspended   the  provision  for  periodic                                                                    
updates,  place a  January 2003  deadline,  and require  the                                                                    
work  to  be  done  without  any  additional  resources.  He                                                                    
stressed that  the department would update  the plan without                                                                    
additional  resources if  they could.  The department  needs                                                                    
additional resources to  implement [the legislative intent].                                                                    
The department's  fiscal note for  the plan was  not carried                                                                    
forward. The  remaining $4 -  $5 million dollar  fiscal note                                                                    
reflects  the cost  to the  Medicaid  program if  facilities                                                                    
were built  without going through  the Certificate  of Needs                                                                    
process.   He  observed   that  the   fiscal  note   is  the                                                                    
department's best  estimate, which  is based  on assumptions                                                                    
that  would  be made  by  private  business outside  of  the                                                                    
department.                                                                                                                     
                                                                                                                                
MIKE  POWERS,  ADMINISTRATOR, FAIRBANKS  MEMORIAL  HOSPITAL,                                                                    
testified  in opposition  to  the  legislation. He  observed                                                                    
that patients do not decide  where they will be emitted. The                                                                    
physician makes the  choice. He observed that  93 percent of                                                                    
Alaskans are covered by some  type of insurance.  Government                                                                    
generally pays for 45 percent  of a patient's hospital stay:                                                                    
15%   Medicaid  and   30%  Medicare.   He  maintained   that                                                                    
entrepreneurs  will say  "no"  to  programs like:  homecare,                                                                    
trauma,   chemical   dependency,    neonates   and   chronic                                                                    
inebriates. He  asserted that entrepreneurs would  say "yes"                                                                    
to imaging  and surgery  and entrepreneurs  in the  lower 48                                                                    
would  say   "yes"  to  cardiology,  imaging   and  surgery.                                                                    
Hospitals  are required  by law  and mission  to handle  all                                                                    
comers, at  all times.  If a  patient calls  their physician                                                                    
after hours they are told to  go to the hospital. He pointed                                                                    
out that every Alaskan town  but Anchorage is a one-hospital                                                                    
town.  This  does  not  add  choice.  He  pointed  out  that                                                                    
technicians  that  move to  outpatient  care  would use  the                                                                    
equipment.  He emphasized  that the  healthcare "choice"  is                                                                    
largely the  producer's, not the consumer's.  The physician,                                                                    
not the patient, wrestles with  the question: "Do I admit to                                                                    
hospital where  I am not a  shareholder; or Do I  admit to a                                                                  
surgery center where I am a shareholder?"                                                                                       
                                                                                                                                
Mr. Powers  responded to testimony that  surgery centers are                                                                    
20%  less expensive.  He observed  that  the Alaska  Surgery                                                                    
Center in Anchorage charges $600  dollars more per cataract,                                                                    
$400  dollars more  for carpal  tunnel procedure,  and other                                                                    
surgeries.                                                                                                                      
                                                                                                                              
Representative   Davies  questioned   if   Mr.  Powers   was                                                                    
comparing "apples to apples".  Mr. Powers explained that the                                                                    
comparison was  to the  technical component.  A professional                                                                    
charge  would be  additional. He  assumed that  the surgical                                                                    
charge would be the same.                                                                                                       
                                                                                                                                
Mr. Power  concluded that  "deregulation" sounds  great, but                                                                  
that it does not lead  to healthcare competition because the                                                                    
physician  maintains   their  "state-licensed   monopoly  on                                                                    
admitting privileges."  He emphasized that Alaska  is facing                                                                    
double-digit health  inflation, small businesses  are seeing                                                                    
health  premium increases  of 20%  to 30%;  surgical volumes                                                                    
are  flat in  Fairbanks and  Juneau.  He stated  that it  is                                                                    
ironic that the state would  consider eliminating one of the                                                                    
cost   control  mechanisms   available.  He   suggested  the                                                                    
formation of  an "honest"  study group  to include  the best                                                                    
elements  of "competition"  where appropriate  and the  best                                                                    
protection of regulation.                                                                                                       
                                                                                                                                
Co-Chair  Mulder questioned  if Mr.  Powers would  support a                                                                    
new formula  that is  more open. Mr.  Powers stated  that he                                                                    
would. He emphasized  that there needs to be  a solution. He                                                                    
estimated that  it costs them  $10 thousand dollars to  do a                                                                    
CON. He stated that he would support a study group.                                                                             
                                                                                                                                
Representative  Hudson  stressed  the need  for  an  updated                                                                    
health plan.                                                                                                                    
                                                                                                                                
BRIAN   SLOCUM,   ADMINISTRATOR,   TANANA   VALLEY   CLINIC,                                                                    
FAIRBANKS,   testified   in   Juneau.  He   disagreed   with                                                                    
statements  by  Mr.  Power that  the  prices  in  ambulatory                                                                    
surgery centers  are higher than in  hospitals. He explained                                                                    
that the federal government says  that an ambulatory surgery                                                                    
center  has to  charge the  patient one  of eight  different                                                                    
charges. The dollars that can  be charged for services at an                                                                    
ambulatory surgery center  range from a low  of $242 dollars                                                                    
to a  high of $962  dollars. The doctor's charges  are added                                                                    
to  the base.   The  hospital  bills from  a more  expansive                                                                    
menu, but  cannot charge  for the  doctor. In  an ambulatory                                                                    
surgery center the  whole bill is lumped  together. He noted                                                                    
that the federal government stated  in the November 11, 1999                                                                    
federal register that the use  of ambulatory surgery centers                                                                    
nationwide, since  1982, has saved  hundreds of  millions of                                                                    
dollars in  Medicare and Medicaid charges.  The law prevents                                                                    
charges at  ambulatory surgery centers from  being more than                                                                    
at a hospital.                                                                                                                  
                                                                                                                                
Mr. Slocum  observed that Certificate  of Need comes  from a                                                                    
central planning  area of the  1970's when it was  felt that                                                                    
one  person or  a  team  of people  could  allocate all  the                                                                    
health care  resources over the  entire state of  Alaska. He                                                                    
maintained  that  there  have  not  been  any  studies  that                                                                    
indicate  that the  Certificate of  Need process  works. The                                                                    
Certificate of  Need process was  intended to  control costs                                                                    
by  eliminating new  facilities  and  services. He  asserted                                                                    
that  the CON  process  is associated  with  a 20.6  percent                                                                    
increase  in  hospitals  and 9  percent  increase  in  other                                                                    
healthcare according to a 1998  study. The increases are the                                                                    
result  of  erecting  barriers   to  entry.  Less  expensive                                                                    
methods of delivery cannot occur.                                                                                               
                                                                                                                              
TAPE HFC 02 - 91, Side A                                                                                                      
                                                                                                                                
Mr. Slocum emphasized  that they would not  be testifying if                                                                    
the  Certificate of  Need process  worked. He  stressed that                                                                    
they  have tried  to streamline  the process.  He maintained                                                                    
that  the CON  program is  the  "lap dog  of the  healthcare                                                                    
industry" in  Alaska and it  keeps people who have  a better                                                                    
way of  doing business out  of the community. He  noted that                                                                    
hospitals have never been turned  down (19 applications have                                                                    
been  approved), but  that no  entities in  competition with                                                                    
hospitals have  been granted a Certificate  of Need. Twenty-                                                                    
nine states currently have eliminated  their CON programs or                                                                    
scaled  them back  to  an  extent that  it  would not  cover                                                                    
ambulatory  surgery.  Alaska  is  the  only  state,  of  the                                                                    
smaller  populated  states,  with   a  Certificate  of  Need                                                                    
program. He stressed  that there have been  lots of studies,                                                                    
which show  that nothing bad  happens when CON  programs are                                                                    
discontinued. A  1999 study, Certificate of  Need Revisited,                                                                    
concluded that there was no  evidence of increasing costs in                                                                    
the 12  states that  repealed their  CON programs.  In 1988,                                                                    
the  Duke University  Center of  Health Policy  and Politics                                                                    
performed a study  with 16 years of federal  data. The study                                                                    
concluded that states  that lifted CON did  not experience a                                                                    
rise  in  spending  on  hospital  and  physicians'  services                                                                    
relative to those that retained  it. He emphasized that more                                                                    
facilities  were generated  in others  states that  repealed                                                                    
their  CON programs,  but the  total cost  to the  community                                                                    
stays the  same as people  "vote with their feet".  He noted                                                                    
that hospital profits do not  decrease when CON programs are                                                                    
deleted. He  added that if  hospital profits do not  go down                                                                    
then  there is  no reason  for charity  care to  go down.  A                                                                    
study  showed that  there was  no linkage  between stringent                                                                    
CON laws  and charity care  increases. The states  that have                                                                    
made  the  change  have  found   it  to  be  beneficial.  He                                                                    
challenged   the    hospital   industry   to    bring   data                                                                    
demonstrating  that the  deletion of  the CON  program would                                                                    
make a  difference. He  estimated that there  would be  a 20                                                                    
percent  reduction  if  an ambulatory  surgery  center  were                                                                    
built in Fairbanks.                                                                                                             
                                                                                                                                
Co-Chair  Mulder   observed  that  Mr.   Slocum's  testimony                                                                    
conflicted  with  the  previous five  speakers.  Mr.  Slocum                                                                    
acknowledged  that the  number of  facilities would  rise if                                                                    
the CON program were eliminated,  but emphasized that it did                                                                    
not  mean  that  the  total  amount  spent  by  health  care                                                                    
consumers would  rise. Co-Chair Mulder argued  that the cost                                                                    
to  the state  would increase.  Discussion ensued  regarding                                                                    
the cost  to the state.  Mr. Slocum  stated that a  study by                                                                    
Information  Insights  in  Anchorage (Brian  Rogers)  showed                                                                    
that it  would take 5 years  for the impact to  be felt. The                                                                    
study showed  that a decrease  in prices could occur  in the                                                                    
first and  second years as  people prepare  for competition.                                                                    
There  was  a range  of  possibilities  for the  third  year                                                                    
depending on assumptions: a $20  thousand dollar decrease to                                                                    
the state  to a  $190 thousand  dollar increase.  During the                                                                    
fourth,  fifth and  subsequent  years,  competition and  the                                                                    
opportunity for a new less  expensive service would decrease                                                                    
price. The  total five-year estimate  was a  decreasing cost                                                                    
to the state for all operations.                                                                                                
                                                                                                                                
Vice-Chair  Bunde questioned  if Mr.  Slocum had  experience                                                                    
applying  for  a  Certificate  of   Need.  Mr.  Slocum  gave                                                                    
examples  of problems  within  the  existing Certificate  of                                                                    
Need program.  Applicants are  told to  send four  copies of                                                                    
the  proposal  to a  health  systems  agency that  does  not                                                                    
exist.  Proposals must  be consistent  with the  health care                                                                    
plan,  published in  1984,  which has  pages  out of  order.                                                                    
There are conflicting directions.                                                                                               
                                                                                                                                
Representative  Hudson noted  that  the  Valley Hospital  is                                                                    
legally and ethically  bound to help all  patients that come                                                                    
through their  door and  questioned if  the same  applied to                                                                    
Mr.  Slocum. Mr.  Slocum clarified  that there  is no  legal                                                                    
requirement,  but   they  feel   that  they   are  ethically                                                                    
[required  to  help those  that  come  to them].  They  have                                                                    
provided    approximately   $17.7    million   dollars    in                                                                    
unreimbursed  care  in  the  last  three  years.  Forty-four                                                                    
percent  of one  doctor's practice  is made  up of  Medicare                                                                    
patients, which pays .27 cents on a dollar.                                                                                     
                                                                                                                                
Representative  John  Davies  asked   if  costs  were  being                                                                    
transferred. He  summarized that ambulatory  surgery centers                                                                    
and  hospitals  are dealing  with  the  same basic  economic                                                                    
problems.  He  asked if the Medicaid  reimbursement rate was                                                                    
the same. Mr. Slocum  explained that hospitals operate under                                                                    
a  different  reimbursement   scenario.  Hospitals  are  not                                                                    
capped  in the  same fashion  as an  ambulatory center.  The                                                                    
intent  of   the  federal   government's  decision   to  pay                                                                    
ambulatory  surgery  centers for  Medicare  in  1982 was  to                                                                    
control those costs.  Anything  an ambulatory surgery center                                                                    
can do  must go  into one of  eight different  cost charges;                                                                    
these  are capped  at a  maximum rate.  Hospitals have  more                                                                    
options. He  pointed out that  hospitals could appear  to be                                                                    
cheaper: "you  may go in and  look at a $10  dollar steak in                                                                    
the hospital, but  you don't realize you are  going to spend                                                                    
$5 dollars for the potato and $7 dollars of the salad."                                                                         
                                                                                                                                
RICHARD  COBDEN,  M.D.,  TANANA  VALLEY  CLINIC,  FAIRBANKS,                                                                    
testified that he did not  like what is happening because of                                                                    
the Medicare  practices. Over the  last 30 years,  there has                                                                    
been a  gradual disenfranchisement  of patients  that cannot                                                                    
pay  or are  under government  programs. This  year Medicare                                                                    
will pay  approximately one-third of  what was paid  for the                                                                    
same procedure seven  years ago. He noted  that his Medicare                                                                    
practice  had grown  from  5%  to 36%  because  many of  his                                                                    
colleagues  are giving  up Medicare  and Medicaid  patients.                                                                    
The  Tanana  Clinic has  never  refused  a patient.  As  the                                                                    
population shifts away from private  practice it is going to                                                                    
come to the large clinics  and hospitals. If patients cannot                                                                    
be seen,  by a  doctor and  is told to  go to  the emergency                                                                    
room, they will  pay more. The same treatment  for a urinary                                                                    
infection cost  $900 dollars at  the emergency room  and $36                                                                    
dollars in  a doctor's  office. Cost shifts  when physicians                                                                    
stop seeing  certain type  of patients.   The impact  on the                                                                    
state's  budget,  if  doctors  refuse to  see  Medicare  and                                                                    
Medicaid patients,  would be enormous because  patients will                                                                    
start going to the hospital.                                                                                                    
                                                                                                                                
Dr. Cobden pointed out that  the state of Alaska cannot make                                                                    
Congress  raise Medicare  and  Medicaid  rates. He  stressed                                                                    
that ancillary services help  to support non-paying patients                                                                    
in  hospitals.  He questioned  why  the  same cost  shifting                                                                    
option to pay  their overhead is being  denied in ambulatory                                                                    
surgery  centers.  If  the Tanana  Valley  Clinic  could  no                                                                    
longer cost  shift it would  result in a  discontinuation of                                                                    
services. He maintained that there is a catastrophe coming.                                                                     
                                                                                                                                
Representative Croft questioned if  there would be a problem                                                                    
with applying  an exemption  to the  Certificate of  Need to                                                                    
those that take all patients.                                                                                                   
                                                                                                                                
JEROME  SELBY, REGIONAL  DIRECTOR, PROVIDENCE  KODIAK ISLAND                                                                    
MEDICAL  CENTER, KODIAK,  testified  via teleconference.  He                                                                    
asserted that the 55,000-population  clause is a showstopper                                                                    
in terms of negative impact  on health care for Alaskans. He                                                                    
stressed  that the  population  orientation  would say  that                                                                    
competition is  good in Fairbanks, Mat-Su  and Anchorage but                                                                    
nowhere  else  in the  state.  This  provision would  foster                                                                    
competition in the  three medical markets that  are the most                                                                    
competitive.  Anchorage  is  already  the  most  competitive                                                                    
medical  market  in  Alaska.  He  disagreed  that  the  bill                                                                    
addressed  competition and  maintained that  the legislation                                                                    
would shift economic advantage to  surgery centers that want                                                                    
to   provide   only  profitable   services.   Non-profitable                                                                    
services  would  be  left to  hospitals.  He  stressed  that                                                                    
quality of care  must be a major  consideration. He referred                                                                    
to a study,  which stated that patient risk of  death was 21                                                                    
percent higher  in 18 states  that did not  have Certificate                                                                    
of  Need. He  did  not  think that  the  level  of care  was                                                                    
comparable. He  maintained that a  surgery center,  which is                                                                    
staffed from 8 am to 5  pm, cannot be compared to a hospital                                                                    
with  a  larger  staff   and  emergency  services.  Hospital                                                                    
services require approximately 3.7  staff to each physician.                                                                    
Surgery centers should be able  to provide the same level of                                                                    
care at 30 percent less  than a hospital. He maintained that                                                                    
a limit on  charges by surgery centers of 30  percent of the                                                                    
prevailing  cost  for  hospital  services  would  level  the                                                                    
field.  The   legislation  would   shift  money   away  from                                                                    
hospitals,  which would  "hammer"  Anchorage Providence  and                                                                    
Alaska  Regional  hospitals.  He  asserted  that  Providence                                                                    
Hospital would  lose the ability to  continue development of                                                                    
high  level  health care  for  Alaskans,  such as:  neonatal                                                                    
intensive  care unit,  children's hospital,  advanced cancer                                                                    
care,  and  advanced  heart  care. There  are  a  number  of                                                                    
services that  lose money, such  as Life Guard,  which flies                                                                    
around the  state and  picks up sick  babies and  others. He                                                                    
questioned if the state of  Alaska would pick up the service                                                                    
if Providence  Hospital were  no longer  able to  afford the                                                                    
service.  He  stressed  that the  playing  field  should  be                                                                    
equitable if it is changed.  The current Certificate of Need                                                                    
program as written  is closer to a level  playing field than                                                                    
the proposed legislation.                                                                                                       
                                                                                                                                
Mr. Selby  pointed out  that persons  that use  the facility                                                                    
are going  to have pay for  the facilities and the  state of                                                                    
Alaska  and federal  government are  the biggest  payers. He                                                                    
felt  that the  $4 million  dollar estimated  impact on  the                                                                    
state budget  was low.  He noted  that discussions  on costs                                                                    
centered  on  developed  services,   not  on  the  remaining                                                                    
services  that  are  not  covered  at  surgery  centers.  He                                                                    
emphasized  that  quality is  important  to  make sure  that                                                                    
staff is  competent. The neonatal unit  at Providence, which                                                                    
receives  sick  babies  from around  the  state,  only  sees                                                                    
enough cases to  barely meet the national  standards to keep                                                                    
their staff qualified and certified.  A second neonatal unit                                                                    
would  probably result  in  insufficient  numbers at  either                                                                    
unit to meet national  standards. He summarized that removal                                                                    
of the CON program would be extremely detrimental.                                                                              
                                                                                                                                
HB 407 was heard and HELD in Committee for further                                                                              
consideration.                                                                                                                  
HOUSE BILL NO. 350                                                                                                            
                                                                                                                                
     An Act relating to terroristic threatening.                                                                                
                                                                                                                                
Representative John Davies MOVED to ADOPT Amendment #1:                                                                         
                                                                                                                                
     Sec. 11.56.807.  Terroristic threatening in the first                                                                      
     degree.                                                                                                                    
     (a)    A  person   commits  the  crime  of  terroristic                                                                    
     threatening in the first degree  if the person sends or                                                                    
     delivers  a bacteriological,  biological, chemical,  or                                                                    
     radiological substance, or  radiological substance with                                                                    
     intent to                                                                                                                  
        (1)    place a person in  fear of physical injury to                                                                    
        any person;                                                                                                             
        (2)    cause evacuation of  a building, public place                                                                  
        or  area,  business  premises,  or  mode  of  public                                                                    
        transportation; or                                                                                                      
        (3)  cause serious public inconvenience.                                                                                
     (b)  In this section,                                                                                                      
        (1)    "bacteriological,  biological,  chemical,  or                                                                    
        radiological substance"  means  a  material that  is                                                                    
        capable of causing serious physical injury;                                                                             
        (2)      "imitation   bacteriological,   biological,                                                                    
        chemical,  or   radiological   substance"  means   a                                                                    
        material  that  by  its  appearance   would  lead  a                                                                    
        reasonable person to believe  that it is  capable of                                                                    
        causing serious physical injury.                                                                                        
                                                                                                                                
REPRESENTATIVE LESIL MCGUIRE recommended that "or an                                                                            
imitation bacteriological or chemical" be added.                                                                                
                                                                                                                                
Representative John Davies MOVED to Amend Amendment #1 to:                                                                      
"or an imitation bacteriological, biological, chemical".                                                                        
There being NO OBJECTION, #1 was adopted.                                                                                       
                                                                                                                                
Representative John Davies WITHDREW Amendment #2.                                                                               
                                                                                                                                
Representative John  Davies MOVED to ADOPT  #3: delete lines                                                                    
26 and 27  on page 9. Representative McGuire  did not object                                                                    
to  the  amendment. There  being  NO  OBJECTION, it  was  so                                                                    
ordered.                                                                                                                        
                                                                                                                                
Representative Foster  MOVED to report  CS HB 350  (FIN) out                                                                    
of Committee  with individual  recommendations and  with the                                                                    
accompanying  fiscal notes.   There  being NO  OBJECTION, it                                                                    
was so ordered.                                                                                                                 
                                                                                                                                
CSHB  350 (FIN)  was REPORTED  out of  Committee with  a "do                                                                    
pass" recommendation and with  and four previously published                                                                    
fiscal notes: #1 CRT, #3 LAW, #4 ADM, and #5 COR.                                                                               
HOUSE BILL NO. 399                                                                                                            
                                                                                                                                
     An  Act relating  to the  Uniform  Mechanical Code  and                                                                    
     other  safety  codes;   annulling  certain  regulations                                                                    
     adopted  by the  Department of  Community and  Economic                                                                    
     Development  relating  to   the  mechanical  code  that                                                                    
     applies   to  certain   construction  contractors   and                                                                    
     mechanical   administrators;  and   providing  for   an                                                                    
     effective date.                                                                                                            
                                                                                                                                
REPRESENTATIVE LESIL  MCGUIRE, SPONSOR, spoke in  support of                                                                    
the  legislation.  She  observed that  the  Committee  could                                                                    
adopt a  proposed committee  substitute, which  would return                                                                    
the  legislation to  its original  form or  adopt the  House                                                                    
Labor  and Commerce  version of  the legislation.  The House                                                                    
Labor and Commerce  version is the product  of a compromise.                                                                    
House  Bill  399 was  created  to  correct a  separation  of                                                                    
powers  violation. She  noted that  as the  chairman of  the                                                                    
Administrative Regulation Review  Committee she has reviewed                                                                    
at least  25 issues  questioning if the  regulations comport                                                                    
with the original intent of  the legislation. She noted that                                                                    
HB 399 was  the first bill that she has  introduced to annul                                                                    
regulations.  There are  three statutes  that reference  the                                                                    
Uniform Mechanical  Code, which  is a  trademark proprietary                                                                    
document.                                                                                                                       
                                                                                                                                
Representative McGuire referred  to AS 8.40.270(3) governing                                                                    
the  examination  of   a  mechanical  contractor  applicant.                                                                    
Applicants  must  be  familiar  with  the  following  codes:                                                                    
Uniform Plumbing  Code, Uniform Swimming Pool,  Spa, and Hot                                                                    
Tub Code,  and Uniform  Solar Energy  Code, and  the Uniform                                                                    
Mechanical  Code.  There  is  a  four-year  code  cycle.  In                                                                    
September 2002, the Department of  Public Safety made a move                                                                    
to adopt regulations that  would implement the International                                                                    
Mechanical   Code.   She   noted  that   the   Division   of                                                                    
Occupational Licensing intended to follow suit.                                                                                 
                                                                                                                                
Representative   McGuire   pointed   out   that   when   the                                                                    
legislature chooses a technical term,  as they have with the                                                                    
Uniform Mechanical  Code, that  those terms are  presumed to                                                                    
have   the  technical   meaning.  She   maintained  that   a                                                                    
department has decided  to make a policy issue  based on the                                                                    
actions  of another  department,  which is  in violation  of                                                                    
law.  She  pointed out  that  the  Division of  Occupational                                                                    
Licensing  opted  to  change  their  regulations  in  direct                                                                    
violation  to what  the legislature  placed in  statute. She                                                                    
stressed that  she indicated  to the  division that  she was                                                                    
willing to work with them  and cautioned that there would be                                                                    
an  clear issue  of the  separation of  powers and  that any                                                                    
change  should come  through legislation.  There are  severe                                                                    
arguments regarding the merits  of International Code versus                                                                    
Uniform  Mechanical Code.  She pointed  out that  people are                                                                    
going  to  be  passionate  about  what  they  do  and  their                                                                    
livelihood.                                                                                                                     
                                                                                                                                
TAPE HFC 02 - 91, Side B                                                                                                      
                                                                                                                                
Representative McGuire stressed  that the legislature guides                                                                    
policy and  maintained that the change  is being spearheaded                                                                    
by  one major  urban area.  The  entire state  is under  the                                                                    
Uniform Mechanical Code.   There are people  in the business                                                                    
that  know  the code,  which  has  been changed  "overnight"                                                                    
through a regulation.                                                                                                           
                                                                                                                                
Representative McGuire  noted that  the first  version would                                                                    
repeal   the  regulations.   She   pointed   out  that   the                                                                    
Municipality of Anchorage has postponed  the adoption of the                                                                    
                                             th                                                                                 
International  Mechanical Code  until  May 10.   The  second                                                                    
version recognizes  that there  may be a  move to  adopt the                                                                    
International Mechanical Code and would test under both.                                                                        
                                                                                                                                
Representative   McGuire   discussed   the   Department   of                                                                    
Community  and Economic  Development's fiscal  note for  $40                                                                    
thousand  dollars. The  department noted  in their  proposed                                                                    
fiscal note that  the state Fire Marshal  currently uses the                                                                    
International  Code,  which  would   be  superceded  by  the                                                                    
legislation and require new licensing  tests that would need                                                                    
to  be  rewritten. She  argued  that  the bill  specifically                                                                    
allows the 1997 test to be given.                                                                                               
                                                                                                                                
Representative  McGuire  stressed that  it  would  be a  bad                                                                    
precedent to allow a department  to adopt regulations on the                                                                    
basis  of  regulations  adopted by  another  department,  in                                                                    
direct contrast  to statute adopted by  the legislature. She                                                                    
maintained that  the issue  is black and  white. There  is a                                                                    
law on the books that  specifies mechanical code that should                                                                    
not be changed until the legislature adopts a change.                                                                           
                                                                                                                                
Representative  Harris  questioned   which  version  of  the                                                                    
legislation she  supports. Representative  McGuire responded                                                                    
that although  there is  a move to  go to  the International                                                                    
Mechanical Code, all  the participants have not  been at the                                                                    
table. She  observed that the  "little guys" weren't  at the                                                                    
table. She  supports continuation of the  Uniform Mechanical                                                                    
Code  until the  process  has been  followed (House  Finance                                                                    
Committee  proposed committee  substitute 22-LS1461\O).  She                                                                    
observed that the O version carries no fiscal note.                                                                             
                                                                                                                                
CATHERINE  REARDON,   DIRECTOR,  DIVISION   OF  OCCUPATIONAL                                                                    
LICENSING,    DEPARTMENT   OF    COMMUNITY   AND    ECONOMIC                                                                    
DEVELOPMENT, spoke  to the fiscal  note. She  explained that                                                                    
she  submitted a  zero fiscal  note to  the House  Labor and                                                                    
Commerce  [the fiscal  note  was not  adopted  by the  House                                                                    
Labor and Commerce Committee].                                                                                                  
                                                                                                                                
HB  399  was  heard  and   HELD  in  Committee  for  further                                                                    
consideration.                                                                                                                  
HOUSE BILL NO. 407                                                                                                            
                                                                                                                                
    An Act relating to the Certificate of Need program.                                                                         
                                                                                                                                
DENNIS   MURRAY,  ADMINISTRATOR,   HERITAGE  PLACE   NURSING                                                                    
FACILITY, KENAI, testified  via teleconference in opposition                                                                    
of the legislation. He maintained  that Alaska should retain                                                                    
mechanisms  to   evaluate  the   cost/benefit  relationships                                                                    
between the construction of health  facilities. He felt that                                                                    
the  current threshold  was  appropriate  given the  state's                                                                    
role  in financing  services. He  argued that  there are  no                                                                    
concrete examples  where elimination  of the CON  process in                                                                    
Alaska has  resulted in consumer/community benefit.  He drew                                                                    
an analogy to public  school construction and concluded that                                                                    
more  capacity does  not necessary  generate better  pricing                                                                    
and availability.  He observed,  as a  member of  the Kodiak                                                                    
Borough  Assembly,   that  parties  were   brought  together                                                                    
through  the  Certificate  of Need  process  to  prevent  an                                                                    
adverse impact  on the viability  of the Kodiak  Hospital by                                                                    
another facility.                                                                                                               
                                                                                                                                
HARRY  PORTER,   FAIRBANKS  MEMORIAL   HOSPITAL  FOUNDATION,                                                                    
FAIRBANKS,  testified via  teleconference  in opposition  of                                                                    
the   legislation.   [Teleconference  difficulty   occurred;                                                                    
written testimony is included].                                                                                                 
                                                                                                                                
     The movement in the state  government to change the CON                                                                    
     rules  alarms   me.  We  have  operated   as  they  are                                                                    
     presently  on the  books since  we began  our community                                                                    
     hospital.  Reflect for  a moment  where  we came  from:                                                                    
     1967  flood, departure  of the  Sisters of  Providence,                                                                    
     creation  of the  Greater Fairbanks  Community Hospital                                                                    
     Foundationvarious   fund drives, constant building arid                                                                    
               1                                                                                                                
     changes to deliver the best  hospital care at the least                                                                    
     possible cost.  We have done  and are continuing  to do                                                                    
     the  job for  the Fairbanks  community without  cost to                                                                    
     the  state   government.  We   are  not   receiving  an                                                                    
     appropriation  from the  state in  2002. We  are not  a                                                                    
     part of any Senate or House appropriation bill.                                                                            
                                                                                                                                
     Some legislators  have expressed the feeling  that they                                                                    
     do  not  understand  the  hospital  business.  Give  us                                                                    
     credit for  30+ years of  involvement on a  daily basis                                                                    
     at no cost  to anyone gives us an  understanding of our                                                                    
     local  hospital   and  healthcare  needs.   Kill  those                                                                    
     unwarranted CON bills.                                                                                                     
                                                                                                                              
Mr.  Porter maintained  that  he has  seen  first hand  what                                                                    
competition can do. He noted that  it took 35 years to build                                                                    
the Fairbanks Memorial Hospital.                                                                                                
                                                                                                                                
SUSAN  MCLANE,   FAIRBANKS  MEMORIAL   HOSPITAL  FOUNDATION,                                                                    
FAIRBANKS,  testified via  teleconference  in opposition  to                                                                    
the  legislation.  She suggested  that  a  working group  be                                                                    
appointed  to address  the Certificate  of  Need issue.  She                                                                    
observed  that there  is a  shortage  of nurses;  additional                                                                    
facilities would dilute the workforce.                                                                                          
                                                                                                                                
KARL  SANFORD,  DIRECTOR   OF  NURSING,  FAIRBANKS  MEMORIAL                                                                    
HOSPITAL     FOUNDATION,     FAIRBANKS,    testified     via                                                                    
teleconference in  opposition to  the legislation.  He noted                                                                    
that the  hospital has reinvested, back  into the community,                                                                    
$4  million dollars  into mental  health  services over  the                                                                    
last two years. He stressed  that there is no competition in                                                                    
regards  to  mental  health  services   because  it  is  not                                                                    
profitable. Competition is focused on  the high cost and low                                                                    
cost services.  The impacts of removing  these services from                                                                    
the hospital would tremendous.  Two other homecare providers                                                                    
disappeared from  the Fairbanks community due  to a decrease                                                                    
in revenue and an increase  of federal scrutiny for Medicare                                                                    
fraud. He questioned if for  profit providers were knowingly                                                                    
performing charity care.                                                                                                        
                                                                                                                                
HB  407  was  heard  and   HELD  in  Committee  for  further                                                                    
consideration.                                                                                                                  
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 4:30 PM                                                                                            
                                                                                                                                
                                                                                                                                

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