Legislature(2003 - 2004)
03/31/2004 01:47 PM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
March 31, 2004
1:47 P.M.
TAPE HFC 04 - 72, Side A
TAPE HFC 04 - 72, Side B
TAPE HFC 04 - 73, Side A
CALL TO ORDER
Co-Chair Williams called the House Finance Committee meeting
to order at 1:47 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
Representative Samuels; Sam Korsmo, Alaska Open Imaging
Center, Wasilla; Rod Betit, President, Alaska State Hospital
& Nursing Home Association; Bob Loeffler, Director, Division
of Mining Land and Water, Department of Natural Resources;
Nancy Welch, Special Assistant, Department of Natural
Resources; Mryl Thompson, Matanuska-Susitna Valley
PRESENT VIA TELECONFERENCE
None
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 464 An Act extending the termination date of the Board
of Certified Real Estate Appraisers.
HB 464 was REPORTED out of Committee with a "do
pass" recommendation and with one previously
published fiscal impact note.
HB 511 An Act relating to the certificate of need program
for health care facilities; and providing for an
effective date.
CSHB 511 (HES) was REPORTED out of Committee with
a "do pass" recommendation and with previously
published fiscal impact notes #1 and #2.
HOUSE BILL NO. 464
An Act extending the termination date of the Board of
Certified Real Estate Appraisers.
Co-Chair Harris MOVED to report HB 464 out of Committee with
the accompanying fiscal note and individual recommendations.
There being NO OBJECTION, it was so ordered.
Co-Chair Williams informed the committee that the sponsor
preferred not to amend the bill at this time.
HB 464 was REPORTED out of Committee with a "do pass"
recommendation and with one previously published fiscal
impact 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 pointed out that there was an
amendment to HB 319 regarding the contractual language at
the last hearing. The amendment has been replaced by a new
work draft.
Representative Fate MOVED to ADOPT Work Draft Version V
dated 3-30-04. Co-Chair Harris OBJECTED for purposes of
discussion.
Co-Chair Harris asked if Version V incorporates the
amendment and whether there are other changes.
Representative Fate explained that the language has been
changed to reflect the penalty for a lawsuit outside the
parameters of the statute. The penalties have been changed
from 150% of the appraised value to 100% of appraised value
in the proposed Committee Substitute. He noted that Legal
also changed other language in the bill.
JIM POUND, STAFF TO REPRESENTATIVE FATE, observed that
members should have the blank CS, Work Draft Version V, and
a page explaining the changes between the Resources
Committee Substitute and new CS. He explained that the
sponsor initially intended to drop all the contractual
language in Sections 2 and 3 but had since decided to retain
it. The CS brings the legal language up to current
standards. It also changes the appraised value, giving
latitude to the Department of Natural Resources (DNR) and
the Commissioner to determine a penalty not to exceed 100%
of the appraised value of the property. This language would
go into a purchase agreement between DNR and the buyer, and
the intent of keeping it in the bill is to avoid confusion
by the buyer on the question of obligation.
Co-Chair Harris withdrew his objection. Work Draft Version
V was adopted.
Representative Croft questioned the language at the bottom
of page 2 and the top page 3. He asked if Representative
Fate reads "an immediate assessment against the owner of a
penalty that may equal the current appraised value" as
saying that [the penalty] can't exceed. Mr. Pound answered
that there is supporting statutory language in Section 3 on
page 3, line 9, stating "the amount of the penalty, which
may not exceed the appraised value of the land."
Representative Croft felt it was awkward language in Section
2 and asked if Sections 2 and 3 refer to and supplement each
other. Mr. Pound affirmed.
Representative Croft asked if the language meant that if
there was an effort to develop coal bed methane on cabin
land that he had bought, and he objected and filed for
relief, the Department could assess him the entire value of
his land plus improvements. Mr. Pound replied that is
correct, and the language would be put into the contract so
that the buyer would be aware of it. Representative Croft
asked for clarification that it would result in immediate
assessment, so there is no discretion except for the amount
of the fine. Mr. Pound replied that is correct.
Representative Stoltze expressed that he still had some
concerns about the bill. He asked for clarification of the
filing a claim for relief, and if it would take away the
right to due process. Mr. Pound was unable to answer.
Representative Stoltze yielded to wait for response to his
question.
Co-Chair Harris acknowledged that the State has subsurface
rights that are protected. He questioned how the language in
Section 2 (on page 2, lines 27 through page 3, line 3) would
make private property owners feel comfortable or have any
protection to enjoy their property if a developer [wanted
the subsurface minerals] and the state offered leases to the
developer. Co-Chair Harris said he was concerned about it
because the coal bed methane development in the Mat-Su
Valley is occurring near a fairly populated area and is a
private property issue.
Representative Fate replied that this bill gives the
Commissioner the responsibility of delineating areas for
nomination that are within limits. The areas that are off
limits include lands with high mineral potential, or areas
that have been, or are earmarked to be, withdrawn. He
thought that the prospect of mineral development happening
is limited. The language on page 2, lines 29-30, provides
for redress for any physical damage on the property. He
asked how to address the intangibles of drilling or noise
pollution. He noted that people have sued on those bases,
and the plaintiffs have usually lost the cases but it has
cost the defendants a lot of money. He said that the bill
doesn't curtail, but it does limit, that possibility.
Representative Fate continued, pointing out that if it is a
site on a lake, it doesn't exclude the Commissioner from
deciding to develop it in the buffer area of 660 feet over
which the State has jurisdiction. The bill includes
safeguards on the existing and prospective uses of the land.
Representative Stoltze stated that the property rights issue
has been top priority this session, and he lauded the
efforts of Representative Fate to try to make more land
available.
Representative Croft understood that noise would be
excluded, and he asked if the owner could complain about
groundwater contamination or the subsurface water on his
site without incurring the penalty. Representative Fate was
unable to respond. Representative Croft said he would ask
Legal.
Representative Croft withdrew his objection to the Work
Draft Version V.
BOB LOEFFLER, DIRECTOR, DIVISION OF MINING LAND AND WATER,
DEPARTMENT OF NATURAL RESOURCES, stated he would do an
overview of the current land disposal program and the remote
recreation cabin program. He explained that land disposal
began with the passage of SB 283 in 2000, which passed with
some new funding. The department was given specific
performance measures to put all the inventory of land
disposal parcels on the market until they sell; to start a
new subdivision program of at least 100 lots a year; and
start the remote recreation cabin program in FY 02. In the
first year, there were 2400 re-offered parcels, with an
additional 1900 in the second year.
Representative Croft asked if "subdivision" means platted
lots that are next to each other. Mr. Loeffler affirmed,
and said that the parcels have been surveyed. In response
to a question by Representative Croft, he explained "re-
offered" means a parcel that came back to DNR. In the 1980s
during the huge land sale program, most parcels never sold
and there was a 50-60% default rate on the programs.
Mr. Loeffler continued, explaining that the performance goal
was 250 offerings each year. The Department is drawing down
the inventory of parcels available, and not replenishing
them with new subdivisions as fast as it is selling the
parcels.
Mr. Loeffler referred to a chart, "Economics of Land
Disposal." The first remote subdivision under SB 283 is
completed this year, and the first recreational cabin
program was in FY 02; the parcels were staked but only now
are being purchased. The chart shows 2000 re-offers at $13-
43 dollars an acre, and it makes a lot of money for the
Department. The DNR does a limited title search. A pre-
surveyed parcel in a new subdivision costs $750 an acre
minimum, not including roads, which takes two years with
most of the time and cost in the survey. Remotes cost a lot
less, at $250-350/acre, because the applicant pays for the
survey and appraisal. Mr. Loeffler said that it can be done
in a year but it typically takes longer, with staking during
the first year, surveying during the second year, and
appraisal during the third year. It takes two additional
years before DNR receives real income from it.
Representative Croft asked if the Department does a regional
best interest finding for remote parcels. Mr. Loeffler
replied that DNR does sub-regions of an area, with a batch
of 30-60 parcels in one area. The same is true for
subdivisions.
Mr. Loeffler discussed a chart titled "Re-Offer" that shows
2816 parcels, totaling 21,839 acres available today. He
noted there are program innovations including acceptance of
credit cards, personal checks, cash, and payments by mail,
in person, or over the Internet.
Mr. Loeffler showed charts of re-offered parcels around
Fairbanks, Mat-Su and Southcentral with detail around
Talkeetna.
Mr. Loeffler explained that the supply is land-classified
settlements. On the Mat-Su map, the demand area includes
swamp. In some areas of the state with a lot of demand, DNR
has a lot of potential supply. In general, DNR is the fourth
best place to look for land after the Mental Health Trust,
the University, and Municipal Entitlements have rejected the
land and it becomes classified settlement. In Fairbanks
there is a lot of supply, but not at much in other areas.
Mr. Loeffler referred to the subdivision or "Pre-Survey
Program." In SB 283, the DNR was required to do over 100 per
year. The increment in this year's budget is an increase to
300 lots per year, which would help replenish the supply.
He explained that costs average $3400 for a 3-acre parcel,
but range to an unusual 40-acre parcel costing $201
thousand. The size range is from 3 to 40 acres with the
average at 7 acres. The platting board requirements now
include roads. The Department ensures that the value of the
land with roads will more than pay back the cost of the
roads. This year the DNR expects a 10-12% internal rate of
return, after not selling all the parcels and with some
defaults. The subdivision challenge is to find good quality,
profitable land with roads that meets platting board
requirements. The cost of $750 per acre is for the title
search, platting board approval, and public assistance and
contract administration.
Mr. Loeffler discussed SB 283 and the "Remote Recreational
Cabin Program." The Department offers over 250 parcels a
year. He pointed out that there is a significant reduction
between the authorizations that people take and the actual
parcels leased. He explained that this is due to people
realizing, once they're on the land, that it is more
difficult than they had expected, and not following through.
The average acreage is 13.6, and the average value over the
first two years is estimated at $620 per acre after taking
out survey costs, which the applicant pays.
Mr. Loeffler described the program innovations that include
putting the cost up front with a key parcel appraisal. The
Department does 30-40 parcels in an area to come up with a
hypothetical parcel to show the public the costs, and the
additional costs for lake frontage. The DNR requires a
quarterly deposit for an appraisal survey, and contracts out
in batches, with the result of getting the work done, which
people don't do themselves. He concluded that this works
well, but the challenges are to increase the follow-through
rate and getting untaken parcels to market.
Mr. Loeffler illustrated the staking patterns in the Yentna
Remote, which tend to be in family groups, the access points
of airstrips or trails, and around water frontage. The
Department must reserve easements along public waters and
trails.
Mr. Loeffler concluded that the Department's challenge is to
"ratchet up" the program.
Representative Fate asked Mr. Loeffler to describe the
procedure of staking a remote cabin site. Mr. Loeffler
answered that the Department opens a particular area, and
the public can stake anywhere within it, subject to the
guidelines.
Representative Fate noted a difference in the value per
parcel between his historical data and that of the
Department. He said that the $627 figure, with a multiplier
of 1.14, brought the level up to $750-900 in today's value.
He also asked if the average price today is $1400 per acre.
MS. NANCY WELCH, SPECIAL ASSISTANT, DEPARTMENT OF NATURAL
RESOURCES, replied that the Department projected $900 per
acre in the fiscal note. She clarified that Mr. Loeffler has
been giving historical data and some of the costs do not
necessarily compare to the fiscal note because it is based
on individual processing. The Personal Services cost would
be about $245 thousand to do 150 parcels under the proposed
program in HB 319 [Ms. Welch referred to the fiscal note
dated 3-15-04].
Representative Fate asked if the fee simple program has the
same surface right restrictions and problems that have been
brought up. Ms. Welch said that the buyer would have the
same rights of ownership as in any other DNR land sale
program.
Ms. Welch commented that the Department is working through
the coal bed methane issue in the Mat-Su area and it may be
premature to comment on it. It has held public meetings and
it is working on standards to make coal bed methane
compatible with existing uses.
Representative Foster noted that during the mid-1980s and
early 1990s offerings north of Nome were cancelled, and he
wondered if there would be offerings on the Seward Peninsula
in the next five to ten years. Mr. Loeffler replied that if
it's classified settlement, the Department is anxious to go
there. Ms. Welch advised that a lot of those lands still
have the municipal entitlement provision that the Department
must resolve first before it can sell lands in the Seward
Peninsula area.
Co-Chair Williams asked what bill would do to the existing
land disposal program. Ms. Welch replied that Commissioner
Irwin has two areas of concern with the bill. The first is
fairness to all Alaskans, and the bill implies a first right
of refusal to some who nominate the parcels. It is not
genuinely offering it to every Alaskan. The second concern
is that all the efficiencies gained in the past three or
five years, particularly with the inception of the Land
Disposal Fund, would be lost because of HB 319. A
significant figure in the fiscal note is the cost of
individual processing because the DNR couldn't do batch
processing. The fiscal note also reflects a change in the
type of staff, because technicians cannot do decision-making
for the State on best interest findings. There are also
technical issues, including limitations in the bill on
spacing requirements and size, resulting in a different
staking pattern. She said that the revenue stream for a
disposal like Yentna would be significantly lower, and the
staking pattern would be significantly different.
Ms. Welch concluded that this bill amends the Department's
existing program because it is in the same statute.
Ms. Welch explained that DNR hadn't done an analysis of Work
Draft Version V, Section 2 but she guessed if it went
through the judicial system, the court would make the
decision. If it went through administratively, it could
take the form of an appeal or a complaint. The Department
would have to write regulations.
Representative Croft referred back to Ms. Welch's
interchange with Representative Fate that concluded there
would be the same problems of any other surface owner. He
asked if this penalty language is in the statutes. Ms.
Welch replied negative, this is new generic, reservation to
the State, language. Offering remote recreation land does
not remove the conflict between surface and subsurface uses.
Representative Croft asked if Sections 2 and 3 apply to all
of the State land sales, not just remote cabin sites. Ms.
Welch noted the language on page 2, lines 2-5 and said that
these provisions apply to all of the DNR land sales.
Representative Croft asked what is left out. Ms. Welch
replied that conveyances to municipalities under Title 29
are omitted.
Representative Croft asked how this program used to work and
how it would work under this bill. Ms. Welch said she had
not done an analysis. Co-Chair Williams asked her to do an
analysis for the next hearing on the bill.
TAPE HFC 04 - 72, Side B
Representative Fate commented that the rest of the disposal
program by lottery or subdivision is a completely different
concept than when this bill was formulated four years ago,
to allow people to choose areas which are open. The lottery
is not successful with more than 40% and the rest is turned
over for resale. There are about 2200 parcels available for
people wanting land. The fiscal note is based on the lowest
per acre cost to show that the state, and the people, will
be benefactors.
MRYL THOMPSON, REPRESENTING SELF, MATANUSKA-SUSITNA VALLEY,
stated that he is a land developer, but he hasn't been able
to develop his properties during last 8 months because all
of it has been leased by the coal bed methane (CBM)
industry. He reviewed the remote land bill, which "floored"
him when he saw the huge exemption for the gas extraction
industry. He expressed that Work Draft Version V is even
worse than the previous version. He said that he has not
even considered buying another piece of land, especially
leased land. He thought that because of the CBM issues,
people who just eight months ago would have had no problem
buying remote land or a cabin now wouldn't even consider it.
He noted that studies out of Colorado showed land values
dropped by 20% with extraction taking place. A decrease in
value would make these parcels less attractive. He felt
that it is not right or fair to say that the owner has no
right to complain on land that he bought.
Mr. Thompson expressed that Sections 2 And 3 are "totally
egregious," and he asked, if the system isn't really broken,
why do we need to fix it with this bill.
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 Stoltze MOVED to ADOPT Amendment #1. Co-
Chair Williams OBJECTED.
Representative Stoltze explained that the area he represents
is the most rapidly growing in the State, and he wanted to
ensure that there is a full discussion of the amendment.
Amendment #1 reads:
Page 3, Line 21:
Delete:
"independent diagnostic testing facility"
REPRESENTATIVE RALPH SAMUELS explained that the intent of
the bill is to require all groups to do the Certificate of
Need (CON.) He said that he is opposed to the amendment
because CON is the law, and everyone should follow the same
criteria.
SAM KORSMO, ALASKA OPEN IMAGING CENTER, WASILLA, read from
prepared script as follows:
"The department claims that there is not a level playing
field between the hospitals and the independent facilities
and that 'Providence had to go through the CON process to
get approval for a P.E.T. scanner.' This is in fact
incorrect. Providence never actually completed their CON
application but instead purchased their P.E.T. equipment
through their independent subsidiary Providence Imaging
Center, which is operating today.
In another example, when Providence Imaging Center applied
for an additional MRI unit at a total cost of $2.5 million,
the department reported in their 2003 annual report on CON
activity that 'The MRI will be located adjacent to the
inpatient elevators, operating rooms and Heart Center. It
was determined that a CON is not required because the
facility is not a health care facility as defined by
certificate of need regulations.'(Note: This MRI would be
located within the hospital itself.)"
Mr. Korsmo asked, if the CON has been effective, where is
the evidence of lower costs by the Department. The costs at
Alaska Open Imaging Center are 25-35% lower than at the
major hospitals. Dr. Michael Morrisey of the Lister Hill
Center for Health Policy, University of Alabama at
Birmingham showed that the states with CONs had hospital
costs over 20% higher than those without CONs. Mr. Korsmo
voiced opposition to the bill and urged further work until
the questions are answered.
ROD BETIT, PRESIDENT, ALASKA STATE HOSPITAL & NURSING HOME
ASSOCIATION, spoke from talking points (COPY ON FILE.)
"Mr. Chairman, my name is Rod Betit, and I am President of
the Alaska Hospital & Nursing Home Association representing
10 free standing hospitals, 15 combined hospitals and
nursing homes, and 4 free standing hospitals.
Let me say that this issue potentially impacts all of our
members, not just one or two as has been implied in some
earlier testimony.
All 29 facility CEOs and their Boards stand united behind
CSHB 511 as passed out of House HESS.
As further evidence of the level of concern outside of
Anchorage and Fairbanks, I have copies of letters to
Chairman Williams from Ketchikan General Hospital, Valdez
Regional Health Authority, Sitka Community Hospital,
Wrangell Medical Center, Petersburg Medical Center, and
South Peninsula Hospital expressing their support for HB
511.
As committee members know, a number of these hospitals are
already struggling and any further dilution of a finite
number of medical procedures provided in a community.
We are talking about fairness in HB 511, not whether
we should have CON
CON is in place and is an important tool for the
Department to manage the health care infrastructure in
communities across Alaska. We support CON because of
the finite amount of care a community requires, and
the adverse impact that over investment in facilities
and equipment can have on overall access and cost for
the full range of medical services a community
expects.
Some would have you believe that your consideration of
HB 511 is about free market principles and imaging
centers being squeezed out of the market. That simply
is not the case.
Our member hospitals and nursing homes have had to
submit justification through a CON application each
time they have wanted to add equipment, space or new
services that exceed $1 million, including adding,
expanding or upgrading imaging centers.
In contrast, Alaska Open Imaging has not had to meet
this same requirement As a result they have opened
facilities in Wasilla, Anchorage and Soldotna without
any review by the Department of Health & Social
Services.
You have to wonder why there is such strong
disagreement over requiring imaging centers to submit
to the same review and approval as hospitals must go
through. Could it be there are plans to open centers
in other communities and the project sponsors do not
want the need for these projects reviewed by the
Department?
In our view, it is only fair that all new independent
imaging center projects be required to undergo the
same review as currently required of hospital based
projects. HB 511 makes this small but critically
important change to CON law.
Hospitals must provide imaging services even if an
independent center comes on line.
Providing imaging services is not an either/or decision
for hospitals. Imaging services must be provided to
support their emergency departments and surgery
services, not to mention a whole host of diagnostic
needs for inpatient purposes. Some of this is provided
free of charge due to lack of ability to pay.
Competition for this finite amount of imaging service
seriously impacts a community hospital's ability to
accomplish this portion of their mission.
• Is CON an effective review mechanism?
Yes. Since 1996 there have been 36 CON applications;
61% were approved as
requested, 11% were denied, 11% were partially
approved, 6% were withdrawn, and
14% were given special conditions that had to be met.
(Taken from March 15, 2004 letter from Janet Clark, Assistant
Commissioner to Representative Peggy
Wilson]
• Is the CON process being circumvented?
Yes. "Most ambulatory surgery centers are able to lease
equipment or space in a building and avoid CON. Only 6
CON applications for freestanding ambulatory surgery
centers have been received since the inception of the
CON program 27 years ago. Fifty percent of these were
approved. Independent diagnostic testing facilities are
not required to go through the CON process, so no
applications have even been received from them".
Janet Clark letter dated March 15, 2004]
It is vital these loopholes be fixed in the interest of
health care providers and consumers alike.
• Are hospitals being protected in some way by CON?
Absolutely not. Since 1996 a number of freestanding
facilities in Anchorage, Wasilla and Kenai have been
built without a CON that would have required a CON if
built by a hospital. For example, Alaska Open Imaging
has opened facilities in Wasilla, Anchorage and
Soldotna without a CON and purchased a PET scanner.
Providence had to go through the CON process to get
approval for a PET scanner. Anchorage Fracture Clinic
purchased an MRI, and several Ambulatory Surgical
Clinics in Anchorage were able to develop projects
without a CON that hospitals would have to go through
the CON process to build of buy the equipment. A
private group of physicians built a cardiac cath lab
without a CON. Also, if the Department's goal is to
protect hospitals from competition, why do hospitals
appeal our decisions? [Janet Clark letter dated March
15, 2004].
Clearly it is time to correct these inequities in the CON
law and HB 511 does that. We request the Committee move HB
511 out of the Finance Committee without amendment. Thank
you for the opportunity to comment."
Mr. Betit concluded that the issue is straightforward, and
the answer is clear that everyone should abide by the same
requirements.
Representative Stoltze wondered why staff from Valley
Hospital or other hospitals hadn't contacted him. Co-Chair
Williams pointed out that Mr. George Larson of Valley
Hospital had planned to testify at the last hearing but he
had been overlooked, and Mr. Larson was unable to testify
today. Mr. Betit offered that Mr. Larson's testimony would
have been in support of the bill.
Representative Hawker stated that he chaired the Department
of Health & Social Services budget subcommittee, which held
discussions on the exceptional relief program for endangered
hospitals. He asked if these hospitals are truly in danger
of not remaining economically viable. Mr. Betit replied that
it is no exaggeration, and he noted that one hospital will
not make it beyond four months. Others have serious problems
that the communities can no longer cover with local
contributions, and will form partnerships to stay in
business. He said that it is an ongoing problem meeting
their daily expenses. Exceptional relief was the long-term
mechanism to keep the hospitals going.
Representative Hawker asked if this bill would alleviate
some of the current difficulties. Mr. Betit replied that HB
511 would bring peace of mind but not any immediate relief.
Small facilities that try to provide the expected level of
services that communities demand can easily go under
financially.
Co-Chair Harris asked why Amendment #1 singles out and
deletes the independent diagnostic testing facility from the
definition of healthcare facilities. Representative Stoltze
replied that these facilities in his district are meeting
previously unmet demands, with better and more responsive
service than the larger and more bureaucratic hospitals.
Co-Chair Harris asked if the hospitals don't provide
adequate services and if there is a waiting list.
Representative Stoltze answered that he's not an expert on
healthcare, but he felt that specializing connotes doing a
better job, and these facilities also don't carry the
administrative overhead of hospitals.
In response to a question by Co-Chair Harris, Mr. Korsmo
stated that he represents the independent diagnostic testing
facilities and he supports Amendment #1. He explained that
the testing facilities resulted from a change in Medicare
around 1998, and have never been an issue until now. He
thought that it is a problem of bureaucracy and the cost of
larger medical institutions. He stated that doctors go to
the testing facilities because they provide the service,
technology and innovation to do the job.
Co-Chair Harris questioned if it would drive up the costs
that hospitals must charge for their services if these
independent facilities were not covered under CON procedure.
Mr. Korsmo expressed that Medicare/Medicaid is on a
collision course, and the third party payments are hurting
the system. He pointed out that the testing facilities
haven't heard the cost analysis of CON, when the Medicaid
expenditures have almost tripled in eight years.
Mr. Betit commented that hospitals would have to keep their
revenue at a level to cover costs, and if the hospitals
don't get it from this legislation, charges would have to
increase in another area. Services that aren't profitable
are threatened and might not be offered in the community,
forcing individuals to go elsewhere. The Department has
preliminary information on the substantial cost savings
through CON. There is no data on imaging because these
facilities have not been required to submit a CON. If the
treatment centers submit creditable data as requested, Mr.
Betit said that the Department would approve them.
In response to a question by Representative Croft, Mr.
Korsmo responded that neither the Alaska Open Imaging Center
nor Providence Imaging Center fall under the CON process. He
maintained that the point is how the Department of Health
and Social Services would know the level of need, and asked
the definitions that would be used in order to be fair.
Representative Stoltze pointed out that the treatment
centers pay property taxes and income taxes.
Co-Chair Harris noted that city and state hospitals do not
pay income tax, but other regional and Native hospitals pay
taxes. He questioned the incentive to build a private
hospital that would have to pay taxes and compete with
existing state or local institutions.
Mr. Korsmo recalled a physician who lost all his money
trying to build a private hospital across from Providence
Hospital. He did not think that there was a need to compete
in Anchorage or Fairbanks where there are large existing
institutions.
Co-Chair Harris noted that there has been interest in
building in Valdez. He observed that CONs are not required
if the cost is under $1 million.
A roll call vote was taken on the motion.
IN FAVOR: Moses, Stoltze, Foster
OPPOSED: Meyer, Chenault, Croft, Fate, Hawker, Joule,
Williams, Harris
The MOTION FAILED (3-8). Amendment #1 was not adopted.
Representative Stoltze MOVED to ADOPT Amendment 2:
Amendment #2 reads:
Page 4, following line 16:
Insert a new bill section to read:
"*Sec.7. The uncodified law of the State of Alaska is
amended to read:
APPLICABILITY. To the extent that secs. 3 and 4 of
this Act relate to residential psychiatric treatment
centers, as defined in sec. 5 of this Act, secs. 3 and 4 of
this Act apply to a residential psychiatric treatment center
that has not been substantially initiated before the
effective date of this Act through either an investment
commitment of at least 50 percent of the construction costs
or acquisition of a building permit for that facility.
Renumber the following bill section accordingly.
SARA NIELSEN, STAFF TO REPRESENTATIVE SAMUELS, observed that
the amendment would address residential psychiatric
treatment centers. It would affect the Department's process
in bringing the children back to Alaska.
Representative Stoltze asked that Ms. Clarke address how the
amendment would affect other facilities.
JANET CLARKE, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES,
DEPARTMENT OF HEALTH AND SOCIAL SERVICES, clarified that the
amendment has an immediate effective date. The provision
would not be retroactive, so that new facilities would be
covered while existing facilities would not.
Representative Fate questioned how a solid commitment to
implement could be obtained from Amendment #2. Ms. Clarke
agreed that the language seems vague.
TAPE HFC 04 - 73, Side A
Ms. Clarke stressed that Amendment #2 would be hard to
enforce.
Representative Stoltze WITHDREW Amendment #2.
Co-Chair Harris questioned if there were currently any
residential psychiatric treatment facilities being planned.
Ms. Clarke observed that recently there were two letters of
intent submitted for facilities that were less than $1
million and clearly not covered by the CON. She has not seen
anything in writing regarding the building of a larger
facility.
In response to a question by Co-Chair Harris, Ms. Clarke
observed that the House HESS Committee had discussed
increasing the threshold to $2.5 million, which would
include equipment. She explained that the Department opposed
the proposal because of concerns on the number of Medicaid
beds that could be built at that level. She felt that costs
would increase in those areas.
Ms. Clarke observed that the CON program over 28 years has
avoided construction of 518 nursing home beds, 468 acute
hospital beds, 9 ambulatory surgery suites, 144 substance
abuse beds and 60 psychiatric beds, and 30 rehab beds. It
has also avoided nearly $200 million in construction costs
and millions in annual operating costs. She stated that the
extra 518 nursing home beds would have cost $45.8 million in
2003.
Representative Hawker MOVED to report CSHB 511 (HES) out of
Committee with the accompanying fiscal note. There being NO
OBJECTION, it was so ordered.
CSHB 511 (HES) was REPORTED out of Committee with a "do
pass" recommendation and with previously published fiscal
impact notes #1 and #2.
ADJOURNMENT
The meeting was adjourned at 3:30 P.M.
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