Legislature(2003 - 2004)

03/29/2004 03:19 PM House FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                  HOUSE FINANCE COMMITTEE                                                                                       
                       March 29, 2004                                                                                           
                         3:19 P.M.                                                                                              
                                                                                                                                
TAPE HFC 04 - 70, Side A                                                                                                        
TAPE HFC 04 - 70, Side B                                                                                                        
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Williams called the House  Finance Committee meeting                                                                   
to order at 3:19 P.M.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative John Harris, Co-Chair                                                                                            
Representative Bill Williams, Co-Chair                                                                                          
Representative Kevin Meyer, Vice-Chair                                                                                          
Representative Mike Chenault                                                                                                    
Representative Eric Croft                                                                                                       
Representative Hugh Fate                                                                                                        
Representative Richard Foster                                                                                                   
Representative Mike Hawker                                                                                                      
Representative Reggie Joule                                                                                                     
Representative Carl Moses                                                                                                       
Representative Bill Stoltze                                                                                                     
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None                                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Jim  Pound,  Staff  to  Representative  Fate;  Representative                                                                   
Ralph   Samuels;   Janet  Clarke,   Director,   Division   of                                                                   
Administrative  Services,  Department  of Health  and  Social                                                                   
Services; Jim  Derringer, Staff to Representative  Fate; Matt                                                                   
Davidson,  Executive  Director, Alaska  Conservation  Voters;                                                                   
Rod Betit,  President, Alaska  State Hospital &  Nursing Home                                                                   
Association; Sam Korsmo, Alaska  Open Imaging Center, Wasilla                                                                   
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Nancy  Welch,   Special  Assistant,  Commissioner's   Office,                                                                   
Department  of   Natural  Resources,  Anchorage;   Harold  C.                                                                   
Heinze, Chief Executive Officer,  Alaska Natural Gas Pipeline                                                                   
Authority,  Anchorage;  Bob Favretto,  Board  Member,  Alaska                                                                   
Natural  Gas  Development  Authority,  Kenai;  Brian  Slocum,                                                                   
Administrator,  Tanana   Valley  Clinic,  Fairbanks;   Laurie                                                                   
Herman, Director of Government  affairs, Providence Hospital,                                                                   
Anchorage;  Rob Gould,  Assistant  Administrator for  Finance                                                                   
and Operations, Fairbanks Memorial Hospital                                                                                     
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 319    An Act  relating to the  disposal of state  land by                                                                   
          lottery; and relating to the disposal, including                                                                      
          sale or lease, of remote recreational cabin sites.                                                                    
                                                                                                                                
          HB 319 was heard and HELD in Committee for further                                                                    
          consideration.                                                                                                        
                                                                                                                                
HB 417    An Act amending the  definition of 'project' in the                                                                   
          Act   establishing    the   Alaska    Natural   Gas                                                                   
          Development Authority; and providing for an                                                                           
          effective date.                                                                                                       
                                                                                                                                
          HB 417 was REPORTED out of Committee with a "do                                                                       
          pass" recommendation and with a previously                                                                            
          published indeterminate fiscal note.                                                                                  
                                                                                                                                
HB 511    An Act relating to the  certificate of need program                                                                   
          for health care facilities; and providing for an                                                                      
          effective date.                                                                                                       
                                                                                                                                
          HB 511 was heard and HELD in Committee for further                                                                    
          consideration.                                                                                                        
                                                                                                                                
HOUSE BILL NO. 417                                                                                                            
                                                                                                                                
     An Act amending the definition of 'project' in the Act                                                                     
     establishing the Alaska Natural Gas Development                                                                            
     Authority; and providing for an effective date.                                                                            
                                                                                                                                
REPRESENTATIVE  MIKE CHENAULT  explained that  HB 417  amends                                                                   
the  definition of  "project" to  include all  options for  a                                                                   
terminus  for  the  Alaska  natural   gas  pipeline,  and  it                                                                   
specifically  identifies Cook  Inlet  as one  terminus.   The                                                                   
voters  gave the  Alaska  Natural Gas  Development  Authority                                                                   
(ANGDA) the power to study the  Prudhoe Bay to Prince William                                                                   
Sound  route  with  a  spur  run   to  the  Southcentral  gas                                                                   
distribution  grid.  This  bill  would allow  ANGDA  to  also                                                                   
consider  Cook  Inlet  as  a   potential  and  possibly  more                                                                   
advantageous terminus.                                                                                                          
                                                                                                                                
Representative  Fate noted  that 3  months ago  ANGDA made  a                                                                   
unanimous  decision to expand  its purview  and do  what this                                                                   
bill  addresses,  and  he  asked  if  HB  417  is  necessary.                                                                   
Representative  Chenault replied  that he  couldn't speak  to                                                                   
the Board's  decision. He  argued for  not limiting  ANGDA to                                                                   
one option but  allowing it to look at all viable  options by                                                                   
June  30.  Representative  Fate  expressed  support  for  the                                                                   
concept.                                                                                                                        
                                                                                                                                
Representative Joule thought that  the title limits the scope                                                                   
to ANGDA  and not  the Stranded Gas  Act. He also  questioned                                                                   
the  impact of  this  language on  proposals  that have  been                                                                   
submitted.  Representative  Chenault clarified  that  ANGDA's                                                                   
only current authority is to study  a Prudhoe Bay/North Slope                                                                   
route  to  Prince William  Sound  with  a  spur line  to  the                                                                   
Southcentral gas distribution  grid.  He reiterated that this                                                                   
bill  amends  their authority  to  include  Cook Inlet  as  a                                                                   
viable option.                                                                                                                  
                                                                                                                                
Co-Chair Harris expressed support  for providing gas where it                                                                   
makes  the  most  economic  sense  for  the  benefit  of  all                                                                   
Alaskans.  The  initiative  authorizing  ANGDA  was  project-                                                                   
specific,  and   this  bill   would  give  ANGDA   additional                                                                   
authority. He pointed out that  major industries on the Kenai                                                                   
Peninsula depend  on natural gas and he spoke  for protection                                                                   
of those jobs.                                                                                                                  
                                                                                                                                
HAROLD  C. HEINZE,  CHIEF EXECUTIVE  OFFICER, ALASKA  NATURAL                                                                   
GAS DEVELOPMENT AUTHORITY, VIA TELECONFERENCE, ANCHORAGE,                                                                       
explained that the Board considered this and other                                                                              
legislation changing the scope of ANGDA.  He clarified that                                                                     
this bill does not relate to the  Stranded Gas Act, and ANGDA                                                                   
itself is outside the limits of the Stranded Gas Act.  He                                                                       
made three points.  The charge for ANGDA in the initiative                                                                      
was to study the route from Prudhoe Bay to Prince William                                                                       
Sound, with a spur line from Glenallen to the Cook Inlet                                                                        
area.  The current feasibility level of study makes it                                                                          
difficult to determine the difference between any of the                                                                        
specific routes to Cook Inlet without a lot more detail                                                                         
and a lot more funding.  He urged the funding of ANGDA.                                                                         
                                                                                                                                
Mr. Heinze continued explaining that ANGDA is working on                                                                        
three projects:  the Liquefied Natural Gas (LNG) project to                                                                     
export gas, use of ANGDA's financing and tax advantage for                                                                      
the highway project, and the Cook Inlet spur line and                                                                           
utility concept to be a gas aggregate  and transporter to the                                                                   
commercial entities in that area.                                                                                               
                                                                                                                                
BOB FAVRETTO, BOARD MEMBER, ALASKA NATURAL GAS DEVELOPMENT                                                                      
AUTHORITY (ANGDA), VIA TELECONFERENCE, KENAI, spoke as a                                                                        
board member and a resident of Kenai Peninsula Borough.  He                                                                     
explained that the industries in the area have a shortfall                                                                      
of natural gas at a sustainable price for operation. He                                                                         
noted that gas projects in Alaska  are changing weekly.  This                                                                   
legislation is a companion bill  to Senator Wagoner's SB 247.                                                                   
It is an issue of timing, and he spoke for funding ANGDA to                                                                     
study alternative gas routes.  He expressed that he                                                                             
wholeheartedly supports the bill.                                                                                               
                                                                                                                                
Co-Chair Williams asked if the title is a little broad.                                                                         
Representative Chenault replied  that he didn't see a problem                                                                   
with the title and he noted that SB 247, which is moving                                                                        
through the Senate, has the same title.  He said that there                                                                     
has not been discussion of tightening the title.                                                                                
                                                                                                                              
At Ease:     3:34 P.M.                                                                                                        
Reconvene:   3:36 P.M.                                                                                                        
                                                                                                                                
Representative Chenault MOVED to report HB 417 out of                                                                           
Committee with the accompanying  fiscal note.  There being NO                                                                   
OBJECTION, it was so ordered.                                                                                                   
                                                                                                                                
HB  417  was REPORTED  out  of  Committee  with a  "do  pass"                                                                   
recommendation and with a previously  published indeterminate                                                                   
fiscal note.                                                                                                                    
                                                                                                                                
HOUSE BILL NO. 319                                                                                                          
                                                                                                                                
     An Act relating to the disposal of state land by                                                                           
     lottery; and relating to the disposal, including sale                                                                      
     or lease, of remote recreational cabin sites.                                                                              
                                                                                                                                
REPRESENTATIVE HUGH  FATE explained that the  legislation was                                                                   
first introduced  four years  ago as HB  232, and  since that                                                                   
time it  has evolved with  assistance from the  environmental                                                                   
community,   the   Alaska  Miners'   Association,   and   the                                                                   
Department of Natural Resources  (DNR). He said that the bill                                                                   
basically would  move some public  sector lands  into private                                                                   
hands.  It also  designates  which  lands are  available.  He                                                                   
noted that  high mineral-value  lands, military  reservations                                                                   
and  selections   by  boroughs   would  be  off   limits.  It                                                                   
designates those  areas of land up for nomination,  giving an                                                                   
individual the  ability to nominate  and choose land  that he                                                                   
prefers.  The  DNR  Commissioner  makes  the  final  decision                                                                   
whether the land  is compatible with the nomination,  and the                                                                   
Department  would   formulate  regulations  to   address  the                                                                   
program.                                                                                                                        
                                                                                                                                
Representative Fate  explained that the fiscal  note includes                                                                   
DNR's low  figure of about $900  per acre, multiplied  by the                                                                   
number of acres  sold, to show a profit in  the second, third                                                                   
and  fourth years.  He advised  that during  the first  year,                                                                   
there would  be expenditures  in formulating regulations  and                                                                   
public notices.  He estimated  that sales  could be  three to                                                                   
four times the conservative figures in the fiscal note.                                                                         
                                                                                                                                
Representative Joule  asked if the bill would  limit how much                                                                   
land an  individual could  obtain in  various regions  of the                                                                   
state. Representative  Fate answered that nothing  limits the                                                                   
number of locations where an individual  could purchase land,                                                                   
but there is a 5-acre limit.                                                                                                    
                                                                                                                                
Representative Joule  asked the type  of title that  would be                                                                   
involved. Representative Fate  replied that it is fee simple,                                                                   
and clarified  that the  minerals are  reserved by  the State                                                                   
and the buyer wouldn't have subsurface  rights. He reiterated                                                                   
that  the high-mineral  potential  areas are  off limits  for                                                                   
staking.   He pointed out  that the bill includes  safeguards                                                                   
against lawsuits by the buyer  if someone comes in to exploit                                                                   
the subsurface minerals.                                                                                                        
                                                                                                                                
Representative  Foster noted  that the  backup is limited  to                                                                   
Southcentral Alaska  and the Copper  Valley, and he  asked if                                                                   
land would be available in Northwest  Alaska.  Representative                                                                   
Fate  stated that  it is  anywhere there  is available  state                                                                   
land that is not encumbered.   The final application would be                                                                   
reviewed by the DNR.                                                                                                            
                                                                                                                                
JIM  POUND,  STAFF TO  REPRESENTATIVE  FATE,  explained  that                                                                   
Amendment  #1 removes  contractual language  that was  in the                                                                   
original  bill.  The  contractual  language is  used  by  the                                                                   
Department  of Natural  Resources for  all their land  sales,                                                                   
and Legal felt  it was unnecessary.  The sponsor  also wanted                                                                   
to delete the 150% lawsuit in Section 3 of the bill.                                                                            
                                                                                                                                
Amendment #1 reads:                                                                                                             
                                                                                                                                
     Page 1, lines 1-2:                                                                                                         
          Delete "relating to the reservation of rights by                                                                    
          the state in land contracts and deeds;"                                                                             
                                                                                                                                
     Page 2, line 1, through page 3, line 15:                                                                                   
          Delete all material.                                                                                                  
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 5, lines 2-5:                                                                                                         
          Delete all material.                                                                                                  
                                                                                                                                
Representative Croft  asked if the deleted  language included                                                                   
provisions that  the mining industry  wanted as a  penalty to                                                                   
any  lawsuits. Representative  Fate replied  that the  mining                                                                   
industry never requested the 150%  and he had included it for                                                                   
a high  threshold but the penalty  would have been  more than                                                                   
the land was worth.                                                                                                             
                                                                                                                                
Representative  Croft asked  what protections  remain in  the                                                                   
bill. Mr. Pound replied that the  language in Section 2, even                                                                   
though  deleted  from the  bill,  would  still apply  to  the                                                                   
contract between the DNR and the purchaser.                                                                                     
                                                                                                                                
Co-Chair  Harris  asked  if  Amendment   #1  deletes  all  of                                                                   
Sections 2 & 3.  Mr. Pound affirmed.                                                                                            
                                                                                                                                
Co-Chair  Harris  expressed  concern  that  this  bill  might                                                                   
create a situation similar to  that in the Mat-Su Valley with                                                                   
coal   bed  methane.      He   reiterated  that   under   the                                                                   
Constitution, the State owns the  subsurface rights. He noted                                                                   
limited  protection  in the  bill  for the  private  property                                                                   
owner who desires  protection from drilling or  mining on his                                                                   
property. He expressed that if  this bill makes the situation                                                                   
worse, his intention  is not to support it.  He  spoke to the                                                                   
need to strike a balance between  mining and people's private                                                                   
property rights.                                                                                                                
                                                                                                                                
Co-Chair  Harris   asked  if   the  deletion  of   Section  2                                                                   
eliminates the problem.  Mr. Pound  replied that the language                                                                   
in Section  2 is in existing  statute, and it would  still be                                                                   
used in  the land  contracts between  the Department  and the                                                                   
purchasers.  He was  unsure  of the  language  in the  Mat-Su                                                                   
Valley  private sector  contracts, but  he thought that  this                                                                   
language  was more  specific.  Co-Chair Harris  said that  he                                                                   
would talk to Representative Fate.                                                                                              
                                                                                                                                
Representative Chenault referred  to the new fiscal note that                                                                   
shows 7 full-time and one half-time employees in 2006.                                                                          
                                                                                                                                
JIM DERRINGER  explained  that pages  7 and  8 of the  fiscal                                                                   
note backup describe the 7-1/2  positions in the fiscal note.                                                                   
The  sponsor increased  the staff  by one  position over  the                                                                   
Department's request. Representative  Chenault noted that the                                                                   
older  fiscal note  backup showed  6-1/2  positions, and  Mr.                                                                   
Derringer clarified that there would be 7-1/2 positions.                                                                        
                                                                                                                                
Representative  Hawker  referred   to  the  analysis  in  the                                                                   
previously  published   Fiscal  Note  #1  prepared   by  Land                                                                   
Sales/Municipal Entitlements in  DNR.  He noted the language,                                                                   
"The  new program  would  have  DNR negotiate  private,  non-                                                                   
competitive  sales. (This  is a significant  change  from the                                                                   
existing  policy of  only public,  competitive land  sales.)"                                                                   
He asked if that is an accurate  statement. Mr. Pound replied                                                                   
that the  bill authorizes  an individual  to select  a parcel                                                                   
and  request  a  first  right  of  refusal,  which  could  be                                                                   
considered a  private sale,  but it is  ultimately up  to the                                                                   
Commissioner   whether   it   would  be   a   private   sale.                                                                   
Representative Hawker  commented that, as written,  it is not                                                                   
quite an accurate statement.  Mr. Pound agreed.                                                                                 
                                                                                                                                
Representative  Joule requested a  sectional analysis  of the                                                                   
bill.  Mr. Pound said that he would provide one.                                                                                
                                                                                                                                
MATT  DAVIDSON,   EXECUTIVE  DIRECTOR,  ALASKA   CONSERVATION                                                                   
VOTERS, commented  that the group  had been involved  in this                                                                   
legislation  during the  previous  legislature. He  explained                                                                   
that the Alaska  Conservation Voters (ACV) could  not support                                                                   
the  bill at  this time.  The  ACV supports  land sales  that                                                                   
safeguard  important lands  for  public access,  recreational                                                                   
opportunities,  and fish and wildlife  habitat. He  said that                                                                   
HB  319  is  unnecessary  and unfair,  and  it  would  invite                                                                   
conflict with other users of these  lands. Mr. Davidson urged                                                                   
the committee not to take quick action on the bill.                                                                             
                                                                                                                                
Mr. Davidson thought the fiscal  note figures were optimistic                                                                   
regarding how  much land would  be sold, and said  that State                                                                   
land disposal programs  don't make money. He  referred to the                                                                   
April  2003  Alaska Conservation  Alliance  report  (copy  on                                                                   
file.) that  shows that  past state  land sales haven't  made                                                                   
money.  The  Department of Natural Resources  has worked hard                                                                   
to make  the state land sale  program more efficient,  and HB
319 is a step  backward. He said that best  interest findings                                                                   
for  every  single  application   would  be  cumbersome.  The                                                                   
Department's  estimate  of  over  $400  thousand  a  year  to                                                                   
process  the applications  would  make it  difficult for  the                                                                   
state to make  any money. The Department would  be prohibited                                                                   
from selling land directly adjacent  to these properties.  If                                                                   
HB 319  isn't fully funded,  and existing land  sale programs                                                                   
stay in  the budget, DNR resources  would be drained  for the                                                                   
existing programs.                                                                                                              
                                                                                                                                
Mr.  Davidson continued,  expressing that  the best  interest                                                                   
findings by DNR  would lead to the expectation  of a decision                                                                   
to rule in the applicant's favor.  He argued that because the                                                                   
bill  language is  noncompetitive and  gives individuals  the                                                                   
right of  first refusal to  the land selected,  only Alaskans                                                                   
with access to the backcountry  would have knowledge of these                                                                   
areas, and only  the most powerful Alaskans  would obtain the                                                                   
land. The bill  has no mechanism to deal with  conflicts that                                                                   
may  arise.  He discussed  potentially  conflicting  adjacent                                                                   
uses that have not been addressed  in the bill.  He concluded                                                                   
that when the  state builds a new subdivision  in wild areas,                                                                   
it results in an over-harvest of fish and game resources.                                                                       
                                                                                                                                
Co-Chair  Harris  asked  if the  Alaska  Conservation  Voters                                                                   
supports  any  more  land  going  into  public  hands.    Mr.                                                                   
Davidson affirmed that it supports  the current DNR land sale                                                                   
program.  Co-Chair  Harris  asked  if the  ACV  supports  any                                                                   
natural   resource   development.   Mr.   Davidson   replied,                                                                   
"absolutely."  Co-Chair Harris  asked when in the past couple                                                                   
years  the ACV  has supported  natural resource  development.                                                                   
Mr.  Davidson  replied  that   natural  resource  development                                                                   
should  pay  its own  way,  provide  jobs for  Alaskans,  not                                                                   
overly harm the  environment, and be supported  by locals. He                                                                   
asserted that in  the coal bed methane development,  three of                                                                   
those four principles were not met by the State.                                                                                
                                                                                                                                
Co-Chair Harris asked if the ACV  supports opening ANWR.  Mr.                                                                   
Davidson replied the ACV does  not have a position on it, but                                                                   
it would be fair to say that it does not support it.                                                                            
                                                                                                                                
Co-Chair  Harris commented  that Mr.  Davidson's critique  of                                                                   
the  bill  was  against  public land  going  to  the  private                                                                   
sector, although he did express  support for the Department's                                                                   
land  lottery.  He  pointed  out that  Alaska  has  the  most                                                                   
federal lands of  any state in the nation,  and Alaskans want                                                                   
to be able to own land.                                                                                                         
                                                                                                                                
Mr. Davidson responded  that the majority of  state lands are                                                                   
neither  high  quality nor  accessible.  He said  that  there                                                                   
would be  a lot of competition  for the parcels  in Southeast                                                                   
if the  bill moves  forward. He thought  that there  would be                                                                   
competition  to use those  parcels for  public uses  as well,                                                                   
and the lands have other values.                                                                                                
                                                                                                                                
HB  319  was   heard  and  HELD  in  Committee   for  further                                                                   
consideration.                                                                                                                  
                                                                                                                                
HOUSE BILL NO. 511                                                                                                            
                                                                                                                                
     An Act relating to the certificate of need program for                                                                     
     health care facilities; and providing for an effective                                                                     
     date.                                                                                                                      
                                                                                                                                
REPRESENTATIVE  RALPH SAMUELS explained  that HB 511  has two                                                                   
goals. The first part of the bill  is the language on page 2,                                                                   
line 4,  "'expenditure' includes the  net present value  of a                                                                   
lease for space  occupied by or the equipment  required for a                                                                   
health care facility."  He explained that the  Certificate of                                                                   
Need  (CON)  applicant would  have  had  to spend  a  million                                                                   
dollars  before entering  the system,  but now  "expenditure"                                                                   
includes  the  leased  space or  the  leased  equipment.  The                                                                   
facility would  form a  holding company  and lease  the space                                                                   
and equipment. The goal of this  bill is to make the CON fair                                                                   
to all players, and he noted that  it doesn't change the CON.                                                                   
                                                                                                                                
TAPE HFC 04 - 70, Side B                                                                                                      
                                                                                                                                
Representative Samuels  continued, explaining that  part 2 of                                                                   
the  bill  requires that  residential  psychiatric  treatment                                                                   
homes, which will increase and  drive the Medicaid budget, be                                                                   
put into  the CON process.   He pointed  out the  zero fiscal                                                                   
note.                                                                                                                           
                                                                                                                                
BRIAN  SLOCUM,  ADMINISTRATOR,   TANANA  VALLEY  CLINIC,  VIA                                                                   
TELECONFERENCE, FAIRBANKS,  stated that he opposes  the bill.                                                                   
He explained that  United Bank documented that  there are not                                                                   
sufficient  healthcare  services  in Fairbanks  to  meet  the                                                                   
needs of  the citizens. The study  revealed over the  past 1-                                                                   
1/2 years a consistent one-to-two  week backlog in scheduling                                                                   
non-emergency cases  for MRIs, CTs, and ultrasounds.   Nearly                                                                   
80% of  the patients  couldn't get  their tests done  because                                                                   
there  weren't enough  services  available.  He thought  that                                                                   
passage of HB 511 would prevent  companies from attempting to                                                                   
fill community health care needs.  The quantity of healthcare                                                                   
services  would  decrease and  lead  a monopoly  provider  to                                                                   
ignore growing community needs.                                                                                                 
                                                                                                                                
JANET CLARKE, DIRECTOR, DIVISION  OF ADMINISTRATIVE SERVICES,                                                                   
DEPARTMENT  OF HEALTH  AND SOCIAL SERVICES,  stated that  the                                                                   
Department supports  HB 511, which strikes the  right balance                                                                   
of technical corrections  as well as making  the program work                                                                   
better. She explained that in  its pure form, the Certificate                                                                   
of Need program  is a health planning function.   It provides                                                                   
a mechanism  for  health facilities  to go  through a  public                                                                   
planning   process   that  requires   hearings   and   public                                                                   
testimony.                                                                                                                      
                                                                                                                                
Ms. Clarke  gave a brief  sectional review.   Section 1  is a                                                                   
technical  correction  that  changes   the  requirements  for                                                                   
ambulatory surgery centers so  that space vacated by a center                                                                   
could  continue  to  operate  without  going  through  a  CON                                                                   
process. Current  law presents a hardship for  these centers,                                                                   
which this bill would correct.                                                                                                  
                                                                                                                                
Ms. Clarke  explained  that Section  2 does  two things:   it                                                                   
limits  the  relocation  of  a  healthcare  facility  without                                                                   
having a CON  to one time, and  it also closes a  loophole in                                                                   
the  CON.  Currently  if  a  healthcare  facility  spends  $1                                                                   
million  for construction  or purchase  of a  large piece  of                                                                   
equipment, it is  required to go through CON,  whereas if the                                                                   
facility leases the same equipment  and pays over time, it is                                                                   
not  required. The  facility  would have  to  do net  present                                                                   
value, and it evens the playing field.                                                                                          
                                                                                                                                
Ms. Clarke explained  that the Department is  most interested                                                                   
in Section  3.  Section  3 would add residential  psychiatric                                                                   
treatment centers  to CON review.  The Legislature  asked the                                                                   
Department to  do cost containment initiatives  in its budget                                                                   
development. Residential  psychiatric treatment  centers have                                                                   
grown from $5 million  in FY 1998 to an expected  $43 million                                                                   
in 2003.   The Department spends  Medicaid money for  most of                                                                   
these  facilities  that  are   out-of-state.    The  DHSS  is                                                                   
beginning  an initiative  to bring  many of  the children  in                                                                   
these facilities  back to Alaska.  Ms. Clarke  explained that                                                                   
the  plan has  three  components: a  gate-keeping  mechanism,                                                                   
planned  growth   (which  the  CON  would   facilitate),  and                                                                   
ensuring  that  the  Alaska treatment  centers  be  built  in                                                                   
various locations rather than  one large facility in an urban                                                                   
center.                                                                                                                         
                                                                                                                                
Ms.  Clarke  noted  that  Section  4  basically  changes  the                                                                   
definition   and  adds   residential  psychiatric   treatment                                                                   
centers and independent diagnostic  testing facilities to the                                                                   
definition of  a healthcare facility.   Section 5 adds  a new                                                                   
paragraph  defining   a  residential  psychiatric   treatment                                                                   
center.  She  concluded that HB  511 adds a tool to  help the                                                                   
Department control the growth  of the Medicaid budget, and it                                                                   
addresses needed  technical changes and current  loopholes in                                                                   
the law.                                                                                                                        
                                                                                                                                
Representative Croft asked why  a gatekeeper would be needed,                                                                   
and questioned  slowing  the process of  bringing kids  home.                                                                   
Ms.  Clarke clarified  that a  gatekeeper is  a mechanism  to                                                                   
decide  the  best  course of  treatment  for  the  individual                                                                   
child.  She said that  treatment might  include placement  in                                                                   
the  community, with  wraparound  intensive services,  rather                                                                   
than a high-cost residential placement.                                                                                         
                                                                                                                                
Representative  Croft wondered if  the Department  also wants                                                                   
the CON  as a gatekeeper  for more  facilities to  open, with                                                                   
input on  locations and timing.  Ms. Clarke affirmed,  saying                                                                   
that  the  Department  would prefer  planning  that  involves                                                                   
local communities,  and Native  health corporations  in order                                                                   
to gain  100% federal Indian  Health Service funding,  rather                                                                   
than   having   the   General   Fund  pick   up   the   cost.                                                                   
Representative  Croft asked  if  there are  enough people  to                                                                   
fill the  beds. Ms.  Clarke replied that  there are  over 700                                                                   
kids,  many out  of state,  with  severe emotional  problems.                                                                   
Parents or  guardians have placed  the children, and  75% are                                                                   
kids  not  in  state custody  but  the  Department  pays  the                                                                   
Medicaid bill for them.                                                                                                         
                                                                                                                                
Representative  Croft had heard  arguments in defense  of CON                                                                   
that  the  state   doesn't  want  facilities   half  full  or                                                                   
expensive medical  equipment half  used. He had  expected Ms.                                                                   
Clarke  to  express  that the  Department  doesn't  want  the                                                                   
increased  cost   to  the   system  of  several   psychiatric                                                                   
treatment  facilities that are  not filled  and he  asked for                                                                   
clarification.  Ms.  Clarke replied  that  the  State is  the                                                                   
primary  payer   for  nursing   homes'  long-term   care  and                                                                   
psychiatric   services.   The   Department  would   pay   for                                                                   
overcapacity of  psychiatric treatment centers,  but it wants                                                                   
to ensure  that it  builds the  service array  for the  least                                                                   
restrictive  and closest  to home  environment  to treat  the                                                                   
children.   The residential  psychiatric treatment  costs are                                                                   
about  $300 per  day in  Alaska,  and in-patient  psychiatric                                                                   
services are about $700 per day.                                                                                                
                                                                                                                                
LAURIE  HERMAN, DIRECTOR  OF GOVERNMENT  AFFAIRS,  PROVIDENCE                                                                   
HOSPITAL,  VIA TELECONFERENCE,  ANCHORAGE, expressed  support                                                                   
for HB 511, and spoke to the part  of the bill that addresses                                                                   
leases. She explained that when  a provider leases equipment,                                                                   
the  $1  million  threshold  requiring  a CON  is  often  not                                                                   
reached.  The  entire  CON process  is  avoided,  creating  a                                                                   
significant loophole  in statute  prohibiting the  state from                                                                   
performing a  vital service. If  the CON process  is avoided,                                                                   
the  State  is  unaware  of  the  additional  services  being                                                                   
provided and it cannot assess  the impact to the community or                                                                   
the state.  Leasing  is now being used to avoid  the CON, and                                                                   
she  stated  that  the  lease   exemption  might  lead  to  a                                                                   
corrosion of  Alaska's healthcare  system by undermining  the                                                                   
Department's  efforts to  control costs  and improve  quality                                                                   
for all communities.  Passage of HB 511 would  serve to level                                                                   
the  playing  field,  and  she   encouraged  the  committee's                                                                   
support.                                                                                                                        
                                                                                                                                
ROB   GOULD,   ASSISTANT  ADMINISTRATOR   FOR   FINANCE   AND                                                                   
OPERATIONS, FAIRBANKS MEMORIAL  HOSPITAL, spoke in support of                                                                   
HB  511.  He  stated that  it  strengthens  the  current  CON                                                                   
statute  and levels  the playing  field. Current  regulations                                                                   
help to  hold down  costs by minimizing  excess capacity  and                                                                   
redundancy.   Mr.  Gould discussed  how the  bill closes  two                                                                   
significant  loopholes   in  the  regulations   by  including                                                                   
imaging centers and rental equipment.                                                                                           
                                                                                                                                
ROD BETIT,  PRESIDENT, ALASKA  STATE HOSPITAL &  NURSING HOME                                                                   
ASSOCIATION,  referred  to his  letter  (copy  on file.)  and                                                                   
stated that  the organization  members are  in support  of HB
511 with  its technical improvements.  He expressed  that the                                                                   
CON is  a good tool and  it does not  keep people out  of the                                                                   
marketplace.  The Department reviews  the CON application  in                                                                   
an unbiased way  and if compelling information  is given, the                                                                   
proposal  moves forward.  The Association  is asking  for the                                                                   
review  standard to  be applied  to  everyone equally,  which                                                                   
this bill would accomplish.                                                                                                     
                                                                                                                                
SAM KORSMO,  ALASKA OPEN IMAGING  CENTER, WASILLA,  read from                                                                   
prepared testimony as follows:                                                                                                  
                                                                                                                                
Good Afternoon Mr. Chairman and members of the Committee.                                                                       
                                                                                                                                
I am Sam Korsmo, a partner in Alaska Open Imaging Center in                                                                     
Wasilla, Alaska. We provide diagnostic imaging and                                                                              
professional reading services to Alaskans. I am here to                                                                         
provide you with information that hopefully cause you to                                                                        
seek additional information of  the effects of this bill on                                                                     
Alaskans and on your long term budget considerations before                                                                     
you move it out of this Committee. I believe that if you                                                                        
consider all the ramifications  of this new and unwarranted                                                                     
intrusion of government into the  private sector provision of                                                                   
critical medical services to Alaskans  you will see why you                                                                     
should not move this bill from  Committee or why you should                                                                     
amend the bill to remove independent diagnostic testing                                                                         
facilities (IDTF's) from the bill.                                                                                              
                                                                                                                                
In the first case, the department has not provided you with                                                                     
any information showing how certificate  of need has resulted                                                                   
in any cost savings for patients or the state in their                                                                          
existing jurisdiction over medical facilities. Accordingly.                                                                     
there is no justification for  expanding their bureaucratic                                                                     
control over other facilities such as IDTF's.                                                                                   
                                                                                                                                
I believe it is a legitimate concern that this bill is a                                                                        
move to restrain trade and competition by the major                                                                             
hospitals in Alaska. The bill's sponsor said as much in a                                                                       
television interview which I have recorded on this CD. This                                                                     
is similar to the legislation  you see each year in which the                                                                   
telecommunications companies try to use government laws and                                                                     
regulations to seek a competitive  advantage over each other.                                                                   
                                                                                                                                
When this happens, it is the consumer  that is always hurt.                                                                     
In our own facilities, our prices are regularly 25 to 30%                                                                       
lower than those provided by the largest hospitals in                                                                           
Alaska, our business model is  predicated on a global billing                                                                   
method which saves money. Our services are also better in                                                                       
that we use an open imaging technology,  we can accommodate                                                                     
larger patients so they do not have to be shipped outside,                                                                      
saving them money. These cost  savings have ramifications for                                                                   
your budgeting process in that the higher costs of medical                                                                      
care for Medicaid patients are paid for by general fund                                                                         
dollars. I am aware of the struggle you have had in meeting                                                                     
these increased Medicaid costs. The department should be                                                                        
required to provide with an estimate  of the impact this bill                                                                   
will have on future Medicaid payment  by the State of Alaska.                                                                   
                                                                                                                                
The Department claims in its fiscal note that vastly                                                                            
expanding the certificate of need program as proposed in                                                                        
this bill will not cost the department  any more money. To do                                                                   
a real analysis of whether new services are required and                                                                        
what impact they will have on quality of outcomes and costs                                                                     
would require substantial analysis.  If it is just to be done                                                                   
on a cursory level, it confirms out worst fears that this                                                                       
could be a politically driven process, which I am sure all                                                                      
of you would agree would lead to bad outcomes. If they have                                                                     
the time to do these analyses, which I seriously doubt, you                                                                     
have to ask yourself what they are supposed to be doing in                                                                      
their current jobs. [End of Mr. Korsmo's testimony]                                                                             
                                                                                                                                
Representative  Croft  asked if  the  bill would  affect  Mr.                                                                   
Korsmo's  current  facility  by  revoking  its  license.  Mr.                                                                   
Korsmo  replied that  the bill  would  require a  CON on  the                                                                   
replacement of equipment. He asserted  that there is no level                                                                   
playing field.                                                                                                                  
                                                                                                                                
HB  511  was   heard  and  HELD  in  Committee   for  further                                                                   
consideration.                                                                                                                  
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 4:45 P.M.                                                                                          

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