Legislature(1999 - 2000)
02/10/2000 03:00 PM House HES
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE HEALTH, EDUCATION AND SOCIAL
SERVICES STANDING COMMITTEE
February 10, 2000
3:00 p.m.
MEMBERS PRESENT
Representative Fred Dyson, Chairman
Representative Jim Whitaker
Representative Joe Green
Representative Carl Morgan
Representative Tom Brice
Representative Allen Kemplen
Representative John Coghill
MEMBERS ABSENT
All members present
OTHER HOUSE MEMBERS PRESENT
Representative Andrew Halcro
COMMITTEE CALENDAR
HOUSE BILL NO. 277
"An Act relating to payment of retirement benefits for subsequently
reemployed retired members of the teachers' retirement system."
- MOVED HB 277 OUT OF COMMITTEE
HOUSE BILL NO. 297
"An Act relating to the certificate of need program; and providing
for an effective date."
- HEARD AND HELD
HOUSE BILL NO. 302
"An Act relating to disclosure of public assistance information to
report suspected abuse or neglect of children or vulnerable
adults."
- SCHEDULED BUT NOT HEARD
PREVIOUS ACTION
BILL: HB 277
SHORT TITLE: RETIREMENT BENEFITS FOR REHIRED TEACHERS
Jrn-Date Jrn-Page Action
1/10/00 1892 (H) PREFILE RELEASED 1/7/00
1/10/00 1892 (H) READ THE FIRST TIME - REFERRALS
1/10/00 1892 (H) HES, FIN
1/10/00 1892 (H) REFERRED TO HES
2/10/00 (H) MINUTE(HES)
BILL: HB 297
SHORT TITLE: CERTIFICATE OF NEED PROGRAM
Jrn-Date Jrn-Page Action
1/21/00 1961 (H) READ THE FIRST TIME - REFERRALS
1/21/00 1961 (H) HES
1/21/00 1961 (H) REFERRED TO HES
2/02/00 2076 (H) COSPONSOR(S): KOTT
2/10/00 (H) MINUTE(HES)
WITNESS REGISTER
JONATHON LACK, Legislative Assistant
to Representative Halcro
Alaska State Legislature
Capitol Building, Room 418
Juneau, Alaska 99801
POSITION STATEMENT: Presented sponsor statement for HB 277.
LARRY WIGET, Executive Director
Public Affairs
Anchorage School District
4600 DeBarr Road
Anchorage, Alaska 99519
POSITION STATEMENT: Testified in support of HB 277.
GUY BELL, Director
Division of Retirement & Benefits
Department of Administration
PO Box 110203
Juneau, Alaska 99811-0203
POSITION STATEMENT: Provided information and answered questions on
HB 277.
JOHN CYR, President
NEA (National Education Association) Alaska
114 Second Street
Juneau, Alaska 99801
POSITION STATEMENT: Testified in support of HB 277.
BILL CHURCH, Retirement Supervisor
Division of Retirement & Benefits
Department of Administration
PO Box 110203
Juneau, Alaska 99811-0203
POSITION STATEMENT: Answered questions regarding HB 277.
DARROLL HARGRAVES, Executive Director
Alaska Council of School Administrators
326 Fourth Street, Suite 404
Juneau, Alaska 99801
POSITION STATEMENT: Testified in support of HB 277.
CARL ROSE, Executive Director
Association of Alaska School Boards
316 West 11th Street
Juneau, Alaska 99801
POSITION STATEMENT: Commented on HB 277.
REPRESENTATIVE JEANNETTE JAMES
Alaska State Legislature
Capitol Building, Room 102
Juneau, Alaska 99801
POSITION STATEMENT: Testified as sponsor of HB 297.
MARK BUCKLEY, Chairman
Kodiak Island Hospital and Care Center Advisory Board
PO Box 649
Kodiak, Alaska 99615
POSITION STATEMENT: Testified in opposition to HB 297.
PHIL CLINE, Administrator
Providence Kodiak Island Medical Center
PO Box 9990
Kodiak, Alaska 99615
POSITION STATEMENT: Testified in opposition to HB 297.
ANN HOOK-BAKER, Nurse
Matanuska-Susitna Valley Hospital
PO Box 4466
Palmer, Alaska 99645
POSITION STATEMENT: Testified in opposition to HB 297.
ELIZABETH RIPLEY, Director of Community Health Planning
Matanuska-Susitna Valley Hospital
450 Scheelite Drive
Wasilla, Alaska 99654
POSITION STATEMENT: Testified in opposition to HB 297.
CHARLES FRANZ
South Peninsula Hospital
4300 Bartlett Street
Homer, Alaska 99603
POSITION STATEMENT: Testified in opposition to HB 297.
BARBARA FLEMING, Board Member
Providence Hospital Statewide Board
PO Box 302
Seward, Alaska 99664
POSITION STATEMENT: Testified in opposition to HB 297.
MARTY RICHMAN, Chief Executive Officer
Central Peninsula General Hospital
PO Box 1636
Soldotna, Alaska 99669
POSITION STATEMENT: Testified in opposition to HB 297.
JANE FAULKNER, Nurse
Central Peninsula General Hospital
36040 Kobuk Street
Soldotna, Alaska 99669
POSITION STATEMENT: Testified in opposition to HB 297.
DIANA ZIRUL, Board of Directors President
Central Peninsula General Hospital
215 Fidaldo Avenue, Suite 104
Kenai, Alaska 99611
POSITION STATEMENT: Testified on HB 297.
ELMER LINDSTROM, Special Assistant to Commissioner Perdue
Department of Health and Social Services
PO Box 110601
Juneau, Alaska 99811-0601
POSITION STATEMENT: Testified on HB 297.
DR. PAUL WORRELL, MD.
3650 Lake Otis Parkway
Anchorage, Alaska 99508
POSITION STATEMENT: Testified in support of HB 297.
DR. WILLIAM DOOLITTLE, MD., Board Member
Fairbanks Memorial Hospital Foundation Board
PO Box 71046
Fairbanks, Alaska 99707
POSITION STATEMENT: Testified in opposition to HB 297.
REBECCA DEAN
493 Valley View Drive
Fairbanks, Alaska 99712
POSITION STATEMENT: Testified in support of HB 297.
LOUISE BJORNSTAD, Market Manager
Healthsouth Diagnostic Center of Anchorage
4001 Laurel
Anchorage, Alaska 99508
POSITION STATEMENT: Testified in support of HB 297.
HARRY PORTER, Member
Fairbanks Memorial Hospital Foundation Board
3206 Riverview Drive
Fairbanks, Alaska 99709
POSITION STATEMENT: Testified in opposition to HB 297.
LARAINE DERR, Executive Director
Alaska State Hospital and Nursing Home Association
426 Main Street
Juneau, Alaska 99801
POSITION STATEMENT: Testified in opposition to HB 297.
CHERYL KILGORE, Executive Director
Interior Neighborhood Health Corporation
311 Hawk
Fairbanks, Alaska 99709
POSITION STATEMENT: Testified in opposition to HB 297.
MIKE POWERS
Fairbanks Memorial Hospital
1283 View Pointe
Fairbanks, Alaska 99709
POSITION STATEMENT: Testified in opposition to HB 297.
DAVID RASLEY, District Representative
Operating Engineers Union
2286 Steven Avenue
Fairbanks, Alaska 99709
POSITION STATEMENT: Testified in opposition to HB 297.
JEROME SELBY
Providence Health Systems
PO Box 1962
Kodiak, Alaska
POSITION STATEMENT: Testified in opposition to HB 297.
RICK SOLIE, Director
Community Relations and Planning
Fairbanks Memorial Hospital/Denali Center
4437 Stanford Drive
Fairbanks, Alaska 99709
POSITION STATEMENT: Testified in opposition to HB 297.
BRIAN GILBERT, Chief Executive Officer
Wrangell Medical Center
PO Box 288
Wrangell, Alaska
POSITION STATEMENT: Testified on HB 297.
DAVID CALDWELL, Senior Financial Analyst
Fairbanks Memorial Hospital
1650 Cowles Street
Fairbanks, Alaska 99701
POSITION STATEMENT: Testified in opposition to HB 297.
BARBARA HUFF TUCKNESS, Director
Governmental and Legislative Affairs
General Teamsters Local 959 State of Alaska
520 East 34th Avenue
Anchorage, Alaska 99503
POSITION STATEMENT: Testified in opposition to HB 297.
JENNIFER HOUSE, Comptroller
Fairbanks Memorial Hospital/Denali Center
1650 Cowles Street
Fairbanks, Alaska 99701
POSITION STATEMENT: Testified in opposition to HB 297.
ED LAMB, President/Chief Executive Officer
Alaska Regional Hospital
2801 DeBarr Road
Anchorage, Alaska 99508
POSITION STATEMENT: Testified in opposition to HB 297.
SHARON ANDERSON
18820 Fish Hatchery Row
Eagle River, Alaska 99577
POSITION STATEMENT: Testified on HB 297.
DR. DAVID MCGUIRE
4048 Laurel Street
Anchorage, Alaska 99508
POSITION STATEMENT: Testified on HB 297.
ACTION NARRATIVE
TAPE 00-11, SIDE A
Number 0001
CHAIRMAN FRED DYSON called the House Health, Education and Social
Services Standing Committee meeting to order at 3:00 p.m. Members
present at the call to order were Representatives Dyson, Whitaker,
Brice and Coghill. Representatives Green, Morgan and Kemplen
arrived as the meeting was in progress.
HB 277-RETIREMENT BENEFITS FOR REHIRED TEACHERS
CHAIRMAN DYSON announced the first order of business is House Bill
No. 277, "An Act relating to payment of retirement benefits for
subsequently reemployed retired members of the teachers' retirement
system." Also, he said that the Alaska Native Health Board (ANHB)
had asked him to distribute a booklet to committee members which is
in the information packet before them.
Number 0206
JONATHON LACK, Legislative Assistant to Representative Halcro,
Alaska State Legislature, came forward to present HB 277. He
stated that HB 277 would allow retired teachers in Alaska to be
re-employed in Alaska schools without jeopardizing the collection
of their retirement benefits. Schools throughout the state of
Alaska are experiencing a dire shortage of teachers. Today there
are almost 8,000 retired Alaskan teachers living outside Alaska.
It is unknown how many of these have taken jobs with outside school
districts, but they represent a lost opportunity for the people of
Alaska. These are experienced teachers who could be filling a need
here in Alaska. They understand the Alaskan way of life but have
moved on to teach outside so they can collect their Alaskan
retirement and a paycheck from the outside school.
MR. LACK went on to say the bill is a very broad concept.
Representative Halcro drafted it not to restrict the ability of
school districts and teachers to negotiate the terms of how to
implement the language of this bill. Each school district would go
to their respective bargaining units and establish a system for
rehire. Presumably teachers would be able to come back at a lower
salary; they might even come back without health benefits because
rehired teachers would be eligible for health insurance through the
Teachers' Retirement System (TRS). Each school district and
bargaining unit would be able to work out a system for rehire that
would best benefit that individual school district. Members of the
Anchorage School District brought this bill to Representative
Halcro's attention, and they support the bill.
MR. LACK indicated that Representative Halcro asks the committee to
support it.
Number 0231
CHAIRMAN DYSON asked how present law precludes a retired teacher
from working full time.
MR. LACK replied that actual language in AS 14.25.043 prohibits a
retired teacher from returning to service in more than a 40 percent
capacity. A retired teacher can work for a school district on a
part-time basis but if they return full time, they lose their
retirement benefits. He said HB 277 allows retired teachers to
return to a school district to teach and continue to receive their
retirement benefits.
Number 0272
CHAIRMAN DYSON clarified if a retired teacher returned to teach
full time, he/she would actually receive two paychecks, one for
retirement and one for teaching.
Number 0282
MR. LACK answered yes. He further stated that HB 277 does not
address at what step or range a retired teacher would be rehired.
He presumed that the school district and the teacher's union
bargaining unit would negotiate the pay range of the rehired
retired teacher. He believes that school districts will not want
to rehire retired teachers at the high twenty-year salary level, so
the school districts will probably negotiate less than the high
retirement figure. Initially Representative Halcro had wanted to
designate that retired teachers return at year one salary level to
the school district. In answer to Representative Halcro's idea,
school districts indicated they would like to offer more, maybe
year four or five. Subsequently, it was Representative Halcro's
decision to leave the pay rate issue up to school districts and the
teacher's union bargaining unit.
Number 0422
LARRY WIGET, Executive Director, Public Affairs, Anchorage School
District, testified via teleconference from Anchorage. He said
that the Anchorage School District supports the concept of HB 277
very strongly. He explained that the Anchorage School District
sees HB 277 as a tool to attract school psychologists, special
education teachers and physical therapists, of which there is a
nationwide shortage. Nevertheless, he commented that the Anchorage
School District does not see HB 277 as a panacea for all teachers
who may think they can retire and then be rehired. He noted that
in Anchorage there were up to potentially 300 teachers who would be
eligible for rehire but that the Anchorage School District would
probably not want to rehire the majority of those eligible. The
Anchorage School District is interested in rehiring teachers who
serve the critical needs areas previously mentioned.
Number 0537
GUY BELL, Director, Division of Retirement & Benefits, Department
of Administration, testified for the Teachers' Retirement System
(TRS) and discussed the implications HB 277 could have on the
teachers retirement fund. He said the Teachers' Retirement System
is funded from three sources: 1) school district employer
contributions, 2) employee contributions and 3) interest earnings
on investments.
MR. BELL explained that the TRS fund is used to pay for current
benefits of retired members and to provide health benefits for
retirees. The number of state employees affected by HB 277 is only
about 100 out of about 930 active TRS members now employed in the
Department of Education, the Alaska Vocational Technical Institute
and Mt. Edgecumbe High School. Therefore, he explained, when the
Division of Retirement & Benefits produces a fiscal note on
legislation which affects the TRS, very often minimal fiscal impact
to the state is cited on the fiscal note even if a piece of
legislation could have a financial impact. He reminded the
committee that actual impact on employer rates is hard to measure
because the employer rate is variable. He noted that the teacher
contribution rate is set in statute at 8.65 percent. The school
district employer rate has been variable but Teachers' Retirement
board policy has set it at 12 percent for the past seven years in
an effort to keep the rate level stable for all employers. He
indicated that if teachers' behavior did not change as a result of
HB 277 and everything stayed the same, there would be no impact on
employer rates.
MR. BELL informed the committee that the Division of Retirement &
Benefits had asked their actuarial firm to assess the impact of HB
277 on contribution rates if teacher behavior changed. The fiscal
note analysis in the last paragraph indicates that if half of the
people who had twenty years of service stayed an additional two
years, then the impact on employer rates would be .75 percent. He
said that figure does not exert a huge impact on rates but .75
percent does add up to about $3 million on a yearly basis.
However, he cautioned the committee to remember that the scenario
he has presented is a big "what if."
Number 0755
MR. BELL admitted that there is no way to know how many teachers
will take advantage of HB 277 or how many teachers the school
districts will allow to return, assuming that the school districts
can have the option to rehire retired teachers. He wanted the
committee to understand that HB 277 could have a fiscal impact,
depending on what happened in response to HB 277 if the legislation
is adopted as it is drafted now.
CHAIRMAN DYSON commented that the committee is working with an
undetermined fiscal note. He inquired as to what it would cost the
state if 100 retired teachers came back to work.
Number 0790
MR. BELL answered by posing a hypothetical scenario of a total
teacher salary base of $1 million. Of that $1 million, .75 percent
would result in $75,000 of additional cost. However, he believes
that due to the size of the TRS system, the first scenario he
presented would cost the state about $3.6 million annually.
REPRESENTATIVE COGHILL said he understands that if a retired
teacher is rehired, employer and employee contributions would be
deposited in the TRS for that employee.
MR. BELL agreed and said that whenever a retired teacher is
rehired, the requirement still exists of employer and employee
contribution to TRS.
Number 0867
REPRESENTATIVE WHITAKER asked Mr. Bell to repeat the $1 million
example of percentage because Mr. Whitaker had not heard it clearly
and did not think the $75,000 figure was correct.
MR. BELL explained again that supposing a .75 percent rate increase
were imposed on a $1 million salary cost for state employees, the
fiscal impact annually would be $7,500, not $75,000 [he had made a
mistake in figuring].
Number 0962
JOHN CYR, President, NEA-Alaska [National Education Association],
came forward to testify in favor of HB 277. He stated that
NEA-Alaska is especially pleased that HB 277 will be bargained at
a local level. He believes there is enough variance of need from
one school district to another that it is appropriate for union
bargaining units to negotiate with school districts about how to
use HB 277. He does not believe districts will hire hundreds of
retired teachers; he believes districts will recruit new teachers.
In his opinion, districts will only use HB 277 when they have no
other choice. Therefore, he does not believe there will be any
impact on the TRS system. Even if some teachers are rehired, they
will continue to contribute to the TRS system at the same rate as
they would have originally.
Number 1048
REPRESENTATIVE COGHILL asked if Mr. Cyr knew, from a bargaining
perspective, what the original 40 percent number in AS 14.25.043
was based upon.
MR. CYR answered he did not know; that number has been on the books
for years.
BILL CHURCH, Retirement Supervisor, Division of Retirement &
Benefits, Department of Administration, came forward to answer
questions regarding HB 277. He explained that an employee became
a member of the TRS if he/she worked a minimum of 50 percent of a
contract for a school district or another employer that qualified
for TRS. Individuals who work less than 50 percent of a contract
are not covered by TRS.
DARROLL HARGRAVES, Executive Director, Alaska Council of School
Administrators, came forward to testify and said he supported HB
277 if certain things are true. He understood from testimony heard
that HB 277 is actuarially sound. If HB 277 is actuarially sound
in TRS, HB 277 allows teachers to form a hiring pool for school
district critical need shortages. Statistics that he has read
indicate that there are many certified teachers in Alaska. He
reminded committee members that these numerous certificate holders
are people in the retired category and that under HB 277, they
could be rehired to meet school district needs. It is important
that school districts retain jurisdiction over who is rehired.
That way school districts can fill a critical need. For this
reason, not all retired teachers will be rehired. He indicated
that if a teacher were rehired, that teacher would be rehired under
policies, terms and conditions of a negotiated agreement at the
local level.
MR. HARGRAVES noted that HB 277 is a winning proposition for both
school districts and retired teachers. He said that HB 277 seems
to maintain an actuarially sound TRS, saves money for school
districts and provides quality instruction performed by certified
teachers.
Number 1343
CARL ROSE, Executive Director, Alaska Association of School Boards
(AASB), came forward to testify. He said that the AASB is trying
to address the teacher shortage issue. His membership has not had
an opportunity to address HB 277. He will review HB 277 with his
membership within the next two weeks and bring an answer back to
the committee.
CHAIRMAN DYSON commented that if HB 277 passes, it is his intention
to include a note to the Finance Committee asking them to explore
actuarial soundness and advise if anything needs to be added to the
fiscal note.
Number 1400
REPRESENTATIVE WHITAKER made a motion to move HB 277 out of
committee with individual recommendations, attached note to the
Finance Committee and attached fiscal note. There being no
objection, HB 277 moved from the House Health, Education and Social
Services Standing Committee.
The committee took an at-ease from 3:24 p.m. to 3:25 p.m.
HB 297-CERTIFICATE OF NEED PROGRAM
CHAIRMAN DYSON announced the next order of business as House Bill
No. 297, "An Act relating to the certificate of need program; and
providing for an effective date."
REPRESENTATIVE JEANNETTE JAMES, Alaska State Legislature, presented
HB 297 as sponsor. She said HB 297 modifies the existing
certificate of need program but does not eliminate it. She
commented that what used to be medical services is now medical
industry. Therefore, she emphasized that competition would be good
for the medical industry to ensure needed services. She indicated
there is a proposed CS for HB 297.
Number 1541
REPRESENTATIVE BRICE made a motion to adopt the proposed CS for HB
297, version 1-LS1301\G, Chenoweth/Lauterbach, 2/8/00, as a work
draft. There being no objection, proposed CSHB 297 was before the
committee.
REPRESENTATIVE JAMES informed the committee that she has a
suggested amendment from the Department of Health and Social
Services but does not want to discuss it at this time.
Number 1638
MARK BUCKLEY, Chairman, Providence Kodiak Island Medical Center and
Care Center Advisory Board, testified via teleconference from
Kodiak. He testified in opposition to HB 297. He stated that
Providence Kodiak Island Medical Center did not receive any state
money to build the hospital; the community passed a bond to finance
building of the hospital. He further stated that the hospital
earned only a minimal profit last year. He emphasized that some
services the hospital provides earn money and some do not.
However, whether the services earn or lose money for the hospital,
the hospital is still under obligation to provide certain basic
services. He explained that if some other group focused only on
those services that turn a profit, taking away business from the
hospital, then the hospital would lose money. At that point, he
said, the hospital would be forced to go to the borough and ask for
money to fill the gap between lost revenue on high-end services.
Another possible result of HB 297, he noted, might be that the
hospital would have to stop providing low-end services.
Number 1731
REPRESENTATIVE BRICE asked Mr. Buckley to cite some essential,
low-end services that the hospital provides.
MR. BUCKLEY replied that the hospital provides a home health
service done by visiting nurses which does not earn a profit.
PHIL CLINE, Administrator, Providence Kodiak Island Medical Center,
testified via teleconference from Kodiak. He testified against HB
297. He reminded the committee that expenditures for "bricks and
mortar", technology and equipment actually creates demand. He
urged that the $1 million limit of the hospital certificate of need
be retained to ensure that the opportunity of creating unnecessary
demands be kept under control.
Number 1816
REPRESENTATIVE KEMPLEN asked if Mr. Buckley believes it would be
appropriate to increase the $1 million limit to reflect inflation
adjustment.
MR. CLINE replied that the idea has some merit but said that the
quantum leap from $1 million to $7 million as stated in HB 297 is
impossible to support.
ANN HOOK-BAKER, Nurse, Valley Hospital in Palmer, testified via
teleconference from the Matanuska-Susitna (Mat-Su) Legislative
Information Office (LIO). She testified in opposition to HB 297.
She said that the hospital provides long-term care and
psychological care facilities to patients who cannot be moved.
Those services cost the hospital money, but those services do not
earn money for the hospital, thus forcing the hospital to absorb
the cost. Further the hospital provides, with absolutely no
reimbursement, diabetes dietary counseling, prenatal classes and
other health educational classes. She reiterated previous
testimony that what competition will do is skim off high
money-making services and leave the hospitals with low-end,
non-profitable, but necessary services.
MS. HOOK-BAKER said this kind of thing has already happened in
California and Arizona. She noted that the result to those states
was massive closure of health facilities, including emergency rooms
because the counties could no longer support the facilities after
profit-making services had been skimmed. She recommended that the
legislature keep the certificate of need process intact at $1
million to minimize cost to health facilities and minimize
fragmentation of services.
Number 1971
ELIZABETH RIPLEY, Director, Community Health Planning, Valley
Hospital, testified via teleconference from the Mat-Su LIO. She
said she is unequivocally against HB 297. She explained that the
Valley Hospital provides many mission-oriented programs to meet
specific needs for the Matanuska-Susitna Valley population. She
indicated that if HB 297 passed it would eliminate a level playing
field for hospitals in the state because hospitals are required to
accept any patient, whereas private health centers can accept or
reject patients as they please. She noted that private health
centers can limit their patients to those who have third-party
insurance payers. She strongly urged the committee to vote against
HB 297.
Number 2064
REPRESENTATIVE KEMPLEN asked if Valley Hospital provides all
services needed by health consumers or does the hospital refer some
clients to other providers.
MS. RIPLEY replied that Valley Hospital is a primary care
institution so people who need tertiary care, for example, heart
surgery or brain surgery, are referred to hospitals in Anchorage.
She said that Valley Hospital does provide home health care, family
health, hospice, infusion therapy and outpatient surgery.
CHARLES FRANZ, South Peninsula Hospital, testified via
teleconference from Homer. He testified strongly against HB 297.
He said there is no justification for increasing the certificate of
need (CON) threshold to $7 million. He reminded the committee that
$1 million was set as the threshold in order to require detailed
planning before embarking on a construction project. He suggested
that there is already a great deal of competition in the health
care field due to the mobility of the population. One example of
competition that he cited is that of South Peninsula Hospital
competing with Smith-Kline Laboratories, Seattle, Washington, for
laboratory services. He expressed his concern that HB 297 just
aids one small special interest group. If HB 297 is passed, it
will result in higher costs to the community or it will drive small
hospitals out of business. He urged the committee not to pass HB
297.
Number 2212
BARBARA FLEMING, Board Member, Providence Hospital Statewide Board,
testified via teleconference from Seward. She said that HB 297
threatens both local Seward health care facilities and other health
care facilities in the state. She explained that private
enterprise would be allowed to take pieces of high-paying health
care services from rural hospitals. It is her opinion that someday
emergency rooms in some areas or even the hospital in Seward would
have to close for lack of financial support. Already the Seward
facility is in dire straits. She suggested that the committee
assess HB 297 very carefully before coming to a vote. She reminded
the committee that the Seward health care facility is a major
employer in the community. She does not agree that a private
enterprise should be allowed to come into a town and "pick and
choose" who it will serve, with no commitment to the community
itself. She envisioned private enterprise leaving the community if
it was not making a profit and leaving a hole where the local
Seward health care facility used to be. She strongly recommended
opposition to HB 297.
Number 2282
REPRESENTATIVE KEMPLEN asked Ms. Fleming if she thought raising the
CON threshold to accommodate inflation had merit.
MS. FLEMING replied no. She said that the Seward hospital facility
can be impacted even now at the $1 million CON threshold.
REPRESENTATIVE KEMPLEN asked if Ms. Fleming could accept an
increase in the CON threshold if it was limited to population
communities of over 100,000 people.
MS. FLEMING answered that the basic problem of private health
center skimming high-paying health care services would still exist.
She noted that hospitals are rethinking how best they can serve
their communities as a result of the balanced budget amendment and
other numerous pieces of federal legislation. Nonprofit hospitals
already feel the new constraints and anything else added on becomes
a burden. She reiterated that hospitals are legally bound to
provide services to anyone, whereas private health care centers can
choose not to serve people. She believes that this kind of
situation erodes Seward hospital's ability to keep providing
services.
TAPE 00-11, SIDE B
Number 2361
MARTY RICHMAN, Chief Executive Officer, Central Peninsula General
Hospital, testified via teleconference from Kenai. He testified in
opposition to HB 297 because he believes it will start a "medical
arms race." He said there is a scarcity of capital for hospitals
right now, yet under HB 297 new buildings and equipment, reimbursed
by the Medicaid system, will be brought into communities in
addition to already existing hospitals. He believes that existing
hospitals and new buildings will only be used at half capacity as
a result of doubling of service provision. He cannot figure out
who benefits from HB 297 except for a very few isolated people. He
explained that hospital functions do not operate in isolation to
each other. For example, hospital emergency rooms must function
for the benefit of the community, but emergency rooms lose money
because many times patients cannot afford to pay. Therefore the
local hospital picks up the tab for emergency room service, hoping
to make up the difference by providing high-earning services. He
said that last year the Central Peninsula General Hospital provided
$2.5 million in uncompensated care. This type of fee statement
will eventually erode the hospital's ability to serve the
community. He is adamantly opposed to HB 297.
Number 2306
JANE FAULKNER, Intensive Care Unit Nurse, Central Peninsula General
Hospital, testified via teleconference from Kenai. She testified
in opposition to HB 297. She said that because Soldotna is a small
community, it is difficult to keep staff at the prescribed level in
the hospital. She envisioned that if services are shared with
private groups according to HB 297, it will become more difficult
for the hospital to retain staff and provide services to the
community. She wondered if she would still have a job if there are
less patients to be seen. She is opposed to HB 297.
Number 2270
DIANA ZIRUL, President, Board of Directors, Central Peninsula
General Hospital (CPGH), testified via teleconference from Kenai.
She said that the hospital has suffered a decrease in revenue
sharing from the state, as have other hospitals statewide. Thus,
Central Peninsula General Hospital finds itself heavily dependent
on the diversity of third-party insurance payers to ensure that the
cost to all of its clients, both inpatient and outpatient, is
maintained at minimum level. She informed the committee that
third-party revenue is used by the hospital to purchase new
technology and equipment in the ever-changing health care arena.
She believes that HB 297 would undercut CPGH's ability to keep up
with technology, while at the same time serving all clients, if
private enterprise which can choose clients, is allowed to use
third-party dollars too. She reminded the committee that CPGH's
doors are open to everyone whether they have money or not.
Number 2185
REPRESENTATIVE KEMPLEN asked Ms. Zirul what kind of services are
sent outside of the hospital.
MS ZIRUL replied that tertiary care patients are sent to Anchorage.
She said that CPGH cooperates with other agencies in the Kenai area
to provide services that are not provided at CPGH itself.
Currently CPGH cannot provide chemical dependency and substance
abuse services due to cost considerations; but CPGH is actively
considering a program to encompass those services.
Number 2159
REPRESENTATIVE KEMPLEN asked Ms. Zirul if CPGH sends patients to
other hospitals or for-profit surgery centers, depending on patient
need.
MS. ZIRUL answered that patients are sent to major hospitals in
Anchorage but also CPGH cooperates with several non-profit agencies
in the Kenai area. She said she does not know of any for-profit
agencies in the Kenai area that treat hospital patients.
Number 2119
ELMER LINDSTROM, Special Assistant, Office of the Commissioner,
Department of Health and Social Services (DHSS), came forward to
testify about the CON program. He said that last year the
Long-Term Care Task Force (LTCTF) had presented a bill to the
legislature which strengthened the CON process as it related to
long term care and nursing home beds. He explained that Medicaid
pays approximately 85 percent of long-term nursing home care and
acute care costs. He affirmed that HB 297 appears to weaken the
state's ability to control costs on the long-term care side of the
equation, but the proposed CS relates only to acute care costs.
MR. LINDSTROM informed the committee that DHSS had provided an
indeterminate fiscal note dated February 10, 2000. He noted that
the proposed CS will increase the CON financial threshold for acute
health care facilities and medical equipment from $1 million to $7
million. He said the $7 million threshold will assure that major
health care projects will continue to be subject to the CON
requirement. However, smaller projects like purchase of medical
equipment or construction of a small outpatient facility would no
longer require a CON.
Number 2044
MR. LINDSTROM said that over the short term DHSS believes that the
higher threshold of $7 million will result in construction of
health care facilities which may create excess health care capacity
in any given community. He recognized that the Medicaid program
would likely incur some additional costs which would not otherwise
be incurred. He stated that impact on the Medicaid budget would
depend on the location, cost and the date new projects are brought
on line. The Department of Health and Social Services does not
have sufficient detailed information about potential projects to
provide a credible and concrete estimate of potential costs.
Number 1995
MR. LINDSTROM explained that over the long term DHSS cannot
determine the fiscal impact of increased health care competition in
a community. He reasoned that excess capacity may be absorbed by
population increases over time. He emphasized that increased
competition may result in other efficiencies within the community
health care system. He believes that increased competition will
likely result in different outcomes in different communities over
time.
MR. LINDSTROM said that DHSS had provided an amendment to the
proposed CS for Representative James which she had mentioned
earlier, and he wished to describe that amendment at this time. He
read the following amendment:
Section 1, Page 2 line 6 through line 7 delete:
(C) addition of a category of services
provided by a health care facility that is a
nursing home.
Section, 2, Page 2, lines 8-16, delete all material and
renumber remaining sections accordingly.
MR. LINDSTROM explained that HB 297 was drafted to establish a $7
million threshold for acute care facilities and a separate section
was created with a $1 million threshold for nursing home
facilities. The legislation drafters simply replicated the
conditions from acute care to the nursing care facilities;
consequently, page 2, lines 6-7, (C), does not have any relevance
to nursing home beds, and the DHSS believes that item ought to be
deleted.
MR. LINDSTROM noted the DHSS does not understand the purpose of
Section 2, page 2. He referred to the last two sentences of that
section at the bottom of the page to the language beginning "not
consider the estimated cost of associated facilities such as the
offices of health care professionals maintaining a private practice
that are incorporated into or made part of the health care
facility." The department is not certain what that means,
particularly when read in conjunction with existing law, at which
point he referred to two pages of CON existing law on the back of
the amendment. He referred to the second page of the CON law where
under the definition section for the CON program it already states
"the term health facility excludes the offices of private
physicians or dentists whether an individual or group practice."
He believes that this last alluded language simply is not
necessary; it is already covered by the definition. However, he
leaves it open to sponsor discretion that if there are other types
of associated facilities which need to be excluded they should be
identified and listed because ambiguity might be a source of
litigation in the future.
Number 1886
REPRESENTATIVE KEMPLEN asked Mr. Lindstrom what a magnetic
resonance imaging (MRI) machine costs.
MR. LINDSTROM answered that an MRI costs about $1 million.
REPRESENTATIVE KEMPLEN asked if there are other pieces of medical
equipment that cost that much or more.
MR. LINDSTROM answered that he is not that familiar with medical
equipment to know.
REPRESENTATIVE KEMPLEN asked if the DHSS had ever received comments
from providers complaining that the CON process was a factor that
prevented them from providing services to Alaskans.
Number 1799
MR. LINDSTROM replied that the CON has been an on-going area of
dispute and discussion for a long time. He recounted that at times
the Commissioner of DHSS has rejected CON requests.
REPRESENTATIVE BRICE inquired as to how successful the CON program
has been in terms of managing Medicaid and Medicare costs.
MR. LINDSTROM answered that DHSS believes that the CON program is
absolutely critical in managing the long-term care issue. The
Department of Health and Social Services would like to see more
community-based services of one type or another. At the same time,
keeping control of growth of nursing home beds is absolutely
critical to producing other aspects of long-term care. Regarding
acute care, he mentioned that it is not perceived as being
critical.
Number 1707
REPRESENTATIVE BRICE asked to what breadth of scope the DHSS
considers when authorizing a CON for acute care.
MR. LINDSTROM replied that generally DHSS assesses need for an
additional facility or piece of equipment. He explained that a CON
is required to substantiate the need for a facility or equipment
purchase.
REPRESENTATIVE BRICE asked how DHSS defines need.
MR. LINDSTROM replied he would supply the full CON statute which
defines need.
REPRESENTATIVE WHITAKER remarked that Mr. Lindstrom had stated that
the effect on long-term care would be substantial. Representative
Whitaker asked for an explanation of what those effects would be.
Number 1644
MR. LINDSTROM answered that HB 297 had raised the CON threshold for
all aspects of the CON; for long-term care, for nursing beds, for
acute care beds, equipment and facilities. He said that the
proposed CS has little, if any, impact on the long-term care
program because the proposed CS is limited to raising the financial
threshold for acute care facilities and equipment.
REPRESENTATIVE BRICE asked when a CON is required.
MR. LINDSTROM replied that a CON is required when a proposed health
care facility costs $1 million or more. A health care facility is
defined as "a private, municipal, state or federal hospital,
psychiatric hospital, tuberculosis hospital, skilled nursing
facility, kidney disease treatment center, including free-standing
hemio-dialysis units, intermediate care facility, and ambulatory
surgical facility." Those are the types of services and facilities
that must obtain a CON.
Number 1530
REPRESENTATIVE DYSON asked whether the question of equipment
purchase had been foreseen when the CON process was put in place.
MR. LINDSTROM answered that he believed the CON originally had
envisioned equipment purchase. He stated that prior to 1983 the
threshold was less than $1 million, but since 1983 a CON always
included equipment.
Number 1481
REPRESENTATIVE DYSON commented that the inference is that
"marketplace" [competition] will not function effectively in
determining if a community should have an MRI or not.
MR. LINDSTROM replied that the purpose of the CON is to determine
whether or not the demand really exists in a given community for a
piece of equipment or a facility to make it a viable program. The
assumption is that if excess capacity is created, inefficiency and
extra costs would result to the health care system.
Number 1391
DR. PAUL WORRELL, testified via teleconference from Anchorage to
the contrary of much of previous testimony. He believes that the
CON has outlived its usefulness. He commented that he has
practiced as a doctor since 1971 in Anchorage and has observed
health care before the CON process and after. He indicated that
previous testifiers seem to be saying that monopoly is good for
them, and he can see why. He believes the CON process was
instituted in Alaska due to politics. At one time, inflation was
blamed for overbuilding of hospitals and health care costs.
DR. WORRELL remarked that in his opinion, the CON process promotes
a two-part semi-monopoly. Again, it is his opinion that both
regional hospitals and Providence Hospital do a good job, but he
does not see the need to perpetuate their semi-monopoly on health
care. He empathizes with hospitals' financial problems but does
not believe increasing the CON threshold is the way to solve those
problems.
DR. WORRELL commented that the CON process has quashed any real
health care expansion in the last 15 years. He cited as an example
of repression the lack of privately-owned medical buildings for
doctors. He reminded the committee that regional hospital budgets
and Providence Hospital's budget have more than doubled since the
CON process was instituted. He does not believe that the hospitals
are suffering greatly in a financial way. He does believe that the
CON process gives regional hospitals and Providence Hospital de
facto veto power over a competitor wishing to create a new entity.
Number 1159
DR. WORRELL noted that the excess number of hospital beds or
nursing beds cannot be blamed for health care costs. In his
opinion, innovation arises from doctors in the communities. He
said sometimes hospitals listen to innovators, but oftentimes they
do not. He reminded the committee that before the CON process was
instituted, innovative doctors could push ahead with reform whether
hospitals agreed or not. However, he believes the current CON
process serves only the status quo and slows innovation. In the
long run the health care community would be better served without
the CON process; perpetuating the status quo is not going to work.
The current CON system creates a barrier to innovation and is not
healthy for the health care system.
Number 1107
REPRESENTATIVE KEMPLEN referred to innovations that Dr. Worrell had
mentioned for the Anchorage area. He asked if Dr. Worrell believed
that Anchorage was the only area where innovation was being
suppressed.
DR. WORRELL answered that he had heard that there were similar
problems in Fairbanks too. However, he does not have detailed
knowledge of what is happening in Fairbanks. Nevertheless, in his
experience as a doctor for 30 years, he has observed that the best
innovation usually originates with doctors, not with big hospital
systems. He still maintains that the CON process is a barrier that
impedes innovation.
Number 1039
REPRESENTATIVE COGHILL noted that the proposed CS keeps the CON
process intact but raises the threshold to $7 million. He asked
Dr. Worrell if $7 million is an arbitrary number, or is it a number
that would allow a degree of competition.
DR. WORRELL replied that the proposed CS $7 million figure is a
tremendous change in the right direction. He is in favor of the
proposed CS but also is in favor of eliminating the entire CON
process.
Number 0955
DR. WILLIAM DOOLITTLE, Member, Fairbanks Memorial Hospital
Foundation Board and retired doctor, testified via teleconference
from Fairbanks. He spoke in opposition to the modification of HB
297 and to the threshold of value for the CON. He explained that
he has participated in many community health planning efforts
beginning with health system agencies when the CON threshold was
under $500,000. He commented that the purpose of community-wide
planning is uniquely suitable for small communities, such as
Fairbanks, where health care responsibilities of a medical facility
transcends some of the economic considerations. He recommended the
CON as a requirement to consider need, access, availability,
financial feasibility, quality, the relationship to existing
services and their relationships to ancillary services. He
believes the CON process helps diminish the likelihood of
opportunists sequestering a specific lucrative part of health care
services to the detriment of existing services which might have a
broader obligation in terms of ancillary and co-existent services.
DR. DOOLITTLE reminded the committee that in larger communities
many, if not all, of the services necessary to support consumers of
health care are already duplicated. However, in Alaska many
communities, outside of the one large community [Anchorage], have
only one multi-service hospital. Consequently, control of medical
entrepreneurism is a necessity to avoid development of provider
groups who suck off an economically sustainable service but have no
other responsibility for providing other less lucrative services.
He reiterated that the economics of medicine is different from the
usual market influences. Therefore, the margins under which health
care providers operate are relatively fixed by an endless
assemblage of controls long before a service reaches the
marketplace; all related to third-party payers. He affirmed that
one does not see similar controls in a grocery store or lumber
companies where tight competition to put a competitor out of
business is a rule. The only issue that remains for health care
providers is how the minimal profit margin is to be distributed.
He asked the committee not to tinker with the system because the
product of such tinkering might well be an unfixable catastrophe.
Number 0760
REBECCA DEAN testified via teleconference from Fairbanks. She said
she is a professional health care worker in the Fairbanks
community. She urged the committee to ratify and support HB 297.
She commented that the CON process in the state of Alaska has not
kept pace with the evolution of health care service history or with
fellow states nationwide. She urged passage of HB 297 in order to
provide appropriate economic direction and measurement as well as
maintenance to remain current when control requirements are
mandated. She reminded the committee that the CON program was
initiated in 1976 under a federal mandate with the focus on
controlling undue costs and preserving our budgeted dollars to
support the health care needs. Nevertheless, the circumstances
which drove the initiative have changed drastically over the past
20 plus years since that implementation.
MS. DEAN reiterated that federal regulations have been repealed
along with federal subsidies for state program maintenance. Since
the repeal of the federally mandated programs, many states have
responded proactively and repealed, or at the very least, modified
their state CON process. She believes that Alaska's CON process
needs to be re-evaluated to reflect appropriateness in its
application for the year 2000 and the future of the new millennium.
She encouraged the passage of HB 297 in order to foster
independence in the state of Alaska to allow entrepreneurship and
provide for health care services that are unique to the community
needs.
Number 0547
MR. LINDSTROM stated that the Department of Health & Social
Services takes a neutral stand regarding HB 297. However, he
reminded the committee that DHSS is concerned with long term care
needs.
LOUISE BJORNSTAD, Market Manager, Healthsouth Diagnostic Center of
Anchorage, came forward to testify. She referred to previous
comments about a common playing field. She said Healthsouth is a
for-profit corporation that pays corporate, business and property
taxes. She explained that Healthsouth purchased the surgery center
almost by default. In 1994 the Federal Trade Commission (FTC)
mandated that Columbia Hospital divest themselves of the Alaska
Surgery Center. This mandate came as a result of a merger between
Columbia Hospital and Medical Care International, who is owner of
95 different surgery centers throughout the country. She commented
that the Alaska Surgery Center in Anchorage was the only surgery
center that had to be divested because the FTC felt that the Alaska
Surgery Center was vital to the competition to keep health care
costs down in the state of Alaska. She noted that the FTC required
the Alaska Surgery Center remain viable for ten years.
MS. BJORNSTAD indicated she favors HB 297. The Alaska Surgery
Center would like to replace its present facility, and the Alaska
Surgery Center does not believe a new facility to replace the old
would disrupt the market. However, when the Alaska Surgery Center
submitted its CON letter to the DHSS, the department replied that
the Alaska Surgery Center had to submit a completely new CON
instead of just a CON letter to replace the existing building. She
informed the committee that a full CON can take up to two years to
complete.
Number 0316
REPRESENTATIVE COGHILL referred back to Mr. Lindstrom's proposed
amendment, Section 2, and whether it was needed or not. He asked
if Ms. Bjornstad, after hearing testimony, still felt that Section
2 was unnecessary as it seemed to be site specific.
MS. BJORNSTAD answered in the affirmative. She explained that the
CON process requires that an interested party submit a letter of
intent to start the process. Subsequently, she said, the
interested party has to wait 60 days before he/she can submit the
rest of the CON paperwork and if, in that time period, the
interested party finds another piece of land that is suitable and
less expensive, he/she has to start the whole CON process all over
again.
Number 0202
CHAIRMAN DYSON asked if $7.5 million is the right threshold number.
MS. BJORNSTAD cannot advise a number. She said that the CON
threshold was raised to $1 million in 1982, and she remembered that
the CON process did apply to equipment purchases.
Number 0063
REPRESENTATIVE KEMPLEN asked Ms. Bjornstad how long it had taken to
obtain the CON.
MS. BJORNSTAD answered two years. She said that when the Alaska
Surgery Center submitted their CON, they had to submit the design,
go through public hearings and present the paperwork, all at the
same time. However, she commented that some CON requirements have
been eliminated since then.
TAPE 00-12, SIDE A
Number 0057
HARRY PORTER, Member, Fairbanks Memorial Hospital Foundation Board,
testified via teleconference from Fairbanks. As a member of
foundation board, he is concerned that proper medical care be
provided for the community. As a businessman, he believes in
competition on the open market, but he feels health care is a
different issue. Nobody has a choice about where he is going to be
sick or where he will be taken for treatment. He said Fairbanks is
fortunate to have a non-profit, well-equipped and well-operated
hospital. He does not want to see it "cherry-picked" so that there
are no funds to take care of the needs that no one else wants to
provide. As far as he is concerned, it is a waste of time to
consider or hear HB 297, and it should never have been on the
program. He reminded the committee that Mayo Clinic is a hospital
and has produced many world-famous innovations; this was to answer
a previous testifier who felt that hospitals do not encourage
innovation.
Number 0266
LARAINE DERR, Executive Director, Alaska State Hospital and Nursing
Home Association (ASHNHA), came forward to testify in opposition to
HB 297. She said opposition was a unanimous decision by the board
when they met two weeks ago. She noted that ASHNHA had cooperated
with DHSS last year regarding the long-term care issue.
Number 0424
CHAIRMAN DYSON announced that it was his intention to take all
testimony today, though he does not plan taking any action on the
proposed CS today.
CHERYL KILGORE, Executive Director, Interior Neighborhood Health
Corporation (INHC), testified via teleconference from Fairbanks.
She stated that the INHC is the major health care clinic in the
Fairbanks North Star Borough. She explained that its mission is to
provide universal access to excellent health care. At any given
time more than half of the patients are either low income and/or
uninsured. She urged the committee to oppose HB 297. She reminded
the committee that Alaska's health care market is small and that
makes it different. She represents an agency whose mission is to
address the primary health care needs of the medically underserved,
and she is concerned about any action that potentially would make
the situation worse. She believes that HB 297 in its present form
and its current threshold could very well make the health care
situation worse in many small communities of Alaska.
Number 0581
MIKE POWERS, Administrator, Fairbanks Memorial Hospital, came
forward and testified in opposition to the proposed CS. He
discussed the value of competition. He had heard testimony that
seemed to indicate that hospitals are against competition. If that
is the perception, then hospitals have not communicated
effectively, or others have not listened carefully. He believes
there is considerable competition in health care and in the
appropriate setting, it is probably the best way to allocate
resources effectively. He said he has never experienced a CON that
took two years to finish. In his experience as a hospital
administrator, it has taken between three and six months to
complete the CON process.
MR. POWERS mentioned the health care market issue. He explained
that there are four basic elements to a free, fair market: 1)
consumers must be well informed, 2) buyers and sellers must be
numerous, 3) they must be independent and 4) there must be easy
exit and entry from the market. It is his opinion that none of
these elements are present in health care.
MR. POWERS noted that the CON process has been in place for 25
years and is a proven control of Medicaid expenditures. He stated
that the CON process is in place in 75 percent of all other states.
Most communities in Alaska have one hospital which serves a
far-flung population, excess in standby capacity, difficulty in
recruiting very hard to fill positions, particularly operating room
nurses, and an inability and unwillingness to drop services because
of a broader good, of which psychiatric services is a wonderful
example.
MR. POWERS stated he desired the committee to observe the 1993 task
force report on the CON issue in terms of strengthening the CON to
control Medicaid expenditures. He summarized by saying that ASHNHA
represents 33 licensed hospitals and nursing homes in Alaska and
all 33 entities have opposed HB 297. Given the unique population
distribution of Alaska and the incentive to "cherry pick" only
profitable services in the absence of any regulatory oversight, he
urged the committee to oppose the proposed CS or at the very least
intensively study the broader implications on communities.
Number 0774
DAVID RASLEY, District Representative, Operating Engineers Union,
testified via teleconference from Fairbanks. He is also a member
of the Fairbanks Memorial Hospital Foundation Board. The reason he
became a member of the board was because many members of the
Operating Engineers Union were using hospital services and Mr.
Rasley wanted to see how the [union] medical dollars were being
used. He opposes HB 297 and the proposed CS because he does not
believe there are competitors who want take on mental health
services and unprofitable areas. He informed the committee that
the Fairbanks Memorial Hospital just recently completed a new
mental health unit, yet Mr. Rasley had not seen anyone breaking
down the door to compete with the project. He agreed with Mr.
Porter's testimony that the services which are more lucrative help
support those services which are not. He stated he cannot
understand how the legislature can pass legislation to allow
competition in to a small community like Fairbanks for the purpose
of "cherry picking" lucrative services. He informed the committee
that in summary he has a short statement: "If it ain't broke,
don't fix it."
Number 0907
JEROME SELBY, Providence Health Systems, came forward to testify in
opposition to HB 297. He explained that Providence Health Systems
has been in Alaska almost 100 years; they came here in 1902. He
said that Providence Health Systems built their first hospital in
Nome, later built one in Fairbanks and more recently in Anchorage,
and they also manage the Seward and Kodiak facilities as well. He
requested that the committee oppose HB 297 for a number of reasons.
Realistically, a cap at $7 million is virtually the same as
throwing HB 297 out, and for all practical purposes eliminating the
CON process. He believes that a $7 million cap defeats the careful
control on capital costs; the CON is about capital costs, not
competition. He said doctors compete, hospitals just provide a
place where doctors can work.
MR. SELBY explained that he believes doctors control and drive the
system and the competition between providers for health care
systems. He suggested that the committee try to keep the
competition aspect separate from the CON issue. He reiterated that
the CON is not about competition, it is about not overcapitalizing
the industry. If overcapitalization occurs, all citizens in the
state will pay the increased health care cost. It still costs the
same if a health care facility is half-utilized or fully utilized.
Number 975
MR. SELBY stated that working with a $7 million cap, he could build
a surgical center, and then for another $7 million he could build
an imaging center, he could build a laboratory for another $7
million; he could spend $21 million in facilities. He built the
whole replacement hospital in Kodiak for $20 million. He could go
in and "cherry pick" all three of those services which drive the
whole hospital in Kodiak and spend less than $20 million. He urged
the committee to understand what they are doing to the rural
communities. If there is no surgery in the hospital in Kodiak, the
hospital will lose money. When Kodiak went one year without a
surgeon, the hospital lost money. In Providence Hospital's case in
Anchorage, please understand that having surgery and these other
revenues is how $25 million worth of charity care is covered and
how they bring new services to Alaska. The Children's Hospital is
one of those examples. There are more pediatric services in Alaska
than ever before and the only way to finance that is with that
revenue stream coming from the places where they "make a profit";
it all goes back into health service because they are a nonprofit.
Nobody is making money off of this. It is going in to increasing
health care for Alaskans.
REPRESENTATIVE KEMPLEN asked Mr. Selby what he would think if the
cap were to be $2 million instead of $7 million for Kodiak.
MR. SELBY agreed it would come a long way toward answering the
concern he identified, but still $2 million is pretty high. It
doesn't eliminate his concern for the small communities. Because
of the technological advances, the costs of medical equipment is
actually coming down.
RICK SOLIE, Director, Community Relations and Planning, Fairbanks
Memorial Hospital/Denali Center, testified via teleconference from
Fairbanks. He is also the presiding officer of the Fairbanks North
Star Borough Assembly, and although he is not representing their
position, it does influence what he believes about HB 297. He
stated this bill is bad for Fairbanks and for Alaska's hospitals.
This is nothing other than an effort to "cherry pick" the
profitable services and take away from the hospitals that are
trying to provide the necessary medical services. Fairbanks has a
30 year private, not government, nonprofit partnership that has
provided for cost-effective quality care. Their outpatient surgery
prices are competitive with those in Anchorage which does have free
standing surgery centers.
MR. SOLIE submits that the law here has worked well. It has
resulted in a partnership from the community, hospital and
legislature. The hospital has clearly benefitted from the
government, but it does not receive ongoing operating subsidies
from the government. From his assembly perspective on the fiscal
picture, he does not relish the idea of the hospital all of a
sudden having a difficult time providing services and looking to
the borough government for a tax. Fairbanks has a wonderful
facility, but he advised not rushing to make changes to the law to
benefit those who are simply trying to "cherry pick" the profitable
services because there are many services that are needed greatly
that are truly not supported financially. Fairbanks has expanded
their mental health center, and those services are greatly needed
by their community. He urged the committee to spend some time with
this bill because it will impact Fairbanks and the rest of Alaska
very much.
Number 1328
BRIAN GILBERT, Chief Executive Officer, Wrangell Medical Center,
came forward to testify. He has been there for 30 years so he was
around when the certificate of need began. This bill won't affect
Wrangell because his facility is too small, but the problem would
be seen in Juneau, Ketchikan and other large centers that he does
send patients to. There are four family practice doctors in
Wrangell, and they don't do much surgery. He believes the amount
of money should be $500,000 instead of $1 million; he definitely
disagrees with $7 million. The CON does control the amount of
money spent. There is still competition if someone can prove there
is a need in a community.
REPRESENTATIVE KEMPLEN asked Mr. Gilbert how long it takes an
applicant to get a certificate of need.
MR. GILBERT replied he never has submitted a CON because Wrangell
never wanted to do anything that cost $1 million.
Number 1452
DAVID CALDWELL, Senior Financial Analyst, Fairbanks Memorial
Hospital, testified via teleconference from Fairbanks. He also
opposes this bill for many of the same reasons already expressed.
The hospital in Fairbanks has to provide all kinds of services,
many of which are not profitable. Those services are supported by
the ones that are profitable. The hospital offers home health
care, cardiac rehabilitation and mental health which are not
profitable, however, the community needs those services. If
someone came in and opened a surgery center, that could take away
the hospital's ability to provide those services. The choice is to
either cut out the nonprofitable services, even though the
community needs them, or cut the charity care for those who can't
pay.
Number 1539
BARBARA HUFF TUCKNESS, Director, Legislative and Governmental
Affairs, General Teamsters Local 959 State of Alaska, came forward
to testify. She informed the committee that she is not associated
with any of the hospitals nor any doctor groups. She presented
some labor and commerce issues. Her organization wears two hats.
They represent 500-600 members around the state that work within
the health care industry that includes very technical, high skilled
positions throughout the hospital. The union doesn't just
represent one particular industry or classification within the
hospitals. The employees are well paid, have good benefit packages
and the union has fought hard over the years in maintaining some
sort of balance within the hospitals it represents, specifically
South Peninsula Hospital and Providence Kodiak Island Medical
Center. She expressed opposition to HB 297.
MS. HUFF TUCKNESS continued that in addition to representing
employees, the Teamsters provide health benefit coverage for
employees. The union has not had an opportunity to sit down with
the health care benefit consultants and really look at the
potential affect or take a look at what other states have gone
through in these particular cases. In her brief research, she
found that 11 states have actually eliminated the certificate of
need, and those states are offering heavily managed care or
capitated plans, or there are the HMOs [health maintenance
organization] or PPOs [Preferred Provider Organizations]. The only
thing in Alaska that comes close to that are PPOs.
MS. HUFF TUCKNESS is concerned about the impact on the work force.
The operating nurses are a highly skilled and highly trained
classification where the positions are hard to fill, and that will
be another drain in the health care industry. She maintains that
the most expensive piece of equipment is the pen used by the
doctors. She assured the committee that it is the doctors in
Alaska who decide what facility the patient is going to, what
surgeries are going to be performed, and what services the
community will be utilizing. She urged the committee to consider
the issues addressed today and again expressed opposition to HB
297.
Number 1699
JENNIFER HOUSE, Comptroller, Fairbanks Memorial Hospital/Denali
Center, testified via teleconference from Fairbanks. She expressed
her opposition to HB 297. She is not anti-competition, but health
care services cannot be put in the same category as other retail
businesses, particularly hospital services provided in rural
settings. The Fairbanks hospital is obligated to provide a wide
spectrum of health care services to meet the needs of the
community. Some are profitable and some are not. If the hospital
was run like a retail business, some of those services would be cut
out, and there would be less attention to the needs of the
community. The completion of a $9.5 million cancer treatment
center is evidence of that. The decision to go forward with that
was not made because it would be a great money maker. On the
contrary, it was done in response to the community needs.
MS. HOUSE commented that unlike the emergency room, she can't think
of another business in town that has to provide services or
products for the consumers regardless of their ability to pay. The
Fairbanks hospital provides well over $1 million for charity care
each year. By diluting the current certificate of need regulation,
it is inviting wasteful duplication in health care services in her
community and allowing other providers to come to town and "cherry
pick" profitable services that the hospital is already providing;
the long-term stability of the hospital will be jeopardized. This
law doesn't protect hospitals, it protects communities. It works
both ways. If there is a need not being met in the community, the
CON application process will validate that.
Number 1827
ED LAMB, President/Chief Executive Officer, Alaska Regional
Hospital, testified via teleconference from Anchorage. He
clarified that whether an organization is tax-exempt or not, profit
does not dictate whether a patient is able to receive care at a
hospital. His hospital and other facilities that have testified
today do not discriminate whether a person receives health care
based on their ability to pay. The true issue is that the
assessment of need with the proposed change is greatly compromised.
It is believed that both excess capacity and the inability to staff
appropriately those critical care areas that a hospital maintains
on a 24-hour basis will be greatly challenged. Given the current
nursing shortages, it would be difficult for the community in
Alaska to support all those extra staff. He expressed his group's
opposition to these changes.
Number 1880
SHARON ANDERSON, former Chief Executive Officer, Alaska Regional
Hospital, came forward to testify. She has been in Alaska since
1973 and was involved with the certificate of need process when it
first started in Alaska. She has authored CON applications and
volunteered on the Anchorage Municipal Health Commission and the
Southcentral Health Planning Development, Inc., which was the
regional health systems agency charged with making recommendations
to the state regarding all CON applications that went through the
regional health planning board. She has sat on both sides of the
table as it related to certificate of need applications.
MS. ANDERSON expressed support for competition. Coming out of the
for-profit sector, she values competition. Knowing that, her
colleagues called her when this issue came up to see if she could
help provide them with some additional oversight as they went
through the certificate of need process. In the sponsor statement
there was one area that referenced the Federal Trade Commission
(FTC). She was the CEO at the hospital at that time the FTC made
that particular ruling. As such, she participated in Washington
D.C. to respond to questions from the FTC staff in that area. It
was the hospital's [Alaska Regional, formerly Columbia Hospital]
position at that time that the hospital felt that the acquisition
of the Anchorage Surgery Center would enhance the competition in
the Anchorage market. There were rumors in the provider community
that the competitor was doing something to prevent that from
happening. She said that because the hospital did disagree with
the FTC's findings and it probably would have enhanced competition.
Healthsouth is a dynamic company that has done a lot to keep
competition in the area too.
MS. ANDERSON informed the committee that a number of states have
strengthened their certificate of need process. Thirty eight
states still have it, 22 still have certificate of need for
ambulatory surgery centers at a threshold less than $2 million.
The thresholds vary, but most are below the $2 million figure; one
state goes as high as $5-9 million. She believes the department
offered that list to the committee and she also has those
resources. It is the position of Alaska State Hospital and Nursing
Home Association (ASHNHA) that this is an important issue. There
could be improvements to the system; some have been made along the
way. Other states have done some creative things, and ASHNHA
believes those kinds of things could be discussed. There is dialog
that should occur, and ASHNHA would like to be at the table to have
that continue, and the members are willing and anxious to do that.
Number 2038
DR. DAVID MCGUIRE came forward to testify. He has had a private
practice in Anchorage for 24 years. He has never turned away a
patient for care he could provide regardless of the ability to pay
or regardless of Medicaid or Medicare. The doctor does make the
decision, but the doctor can't make the decision to take the
patient to a facility if it doesn't exist. The federal government
tried to control health care by the CON in 1974 because Medicare
was a cost plus service. In the early 1980s, the government
realized it didn't work so it was repealed. A lot of states have
repealed the CON, but Alaska hasn't. In 1983 there were two bills,
SB 85 and HB 19, which voted to repeal the CON in its entirety. He
shared various bits of testimony on SB 85 and HB 19 which basically
suggested repealing the certificate of need.
DR. MCGUIRE referred to "cherry picking" and said "you've got to be
very certain that you are not the cherry that is being picked." It
isn't the way it is said to be. The Surgery Center in Anchorage
has worked for a long time. The Surgery Center takes care of
Medicaid, Medicare and anybody that comes there. "If you would be
kind enough to grant me nonprofit status, I will be very happy to
continue taking care of even more indigent patients."
REPRESENTATIVE COGHILL asked if the $7 million threshold in HB 297
gives Dr. McGuire the possibility of putting together a facility
that could just pick off the best and most profitable services or
is it acute care that could be more broad in this spectrum.
DR. MCGUIRE answered "We sometimes forget the patient. But suppose
that we are the patient. We are being told that a certain patient
is more valuable than another; that a hospital needs this revenue
stream in order to do the good that it's supposed to do. Mostly we
hear this from the nonprofits. You certainly heard from Ed Lamb
that they do take care of indigent patients. My point in 'cherry
picking' is, let's remember that we as individuals are the people
who receive these services, as so, if we're paying to cross
subsidize, we should at least know that in advance. We should know
where the money goes. And so this concept of 'cherry picking,'
it's each of us as the patient that are being 'cherry picked.' The
Federal Trade Commission, in every single time that they have
addressed this issue, have said, uniformly, that the CON doesn't
work. The Commission has discovered that existing hospitals have
sometimes opposed these CON applications, not in good faith, but
merely to delay the entry of a new competitor and burden it with
heavy costs." Again he read from testimony supporting this.
REPRESENTATIVE KEMPLEN asked Dr. McGuire what he would think of a
two-tiered approach to certificate of need where the smaller and
moderate-sized communities have a smaller threshold and the larger
communities have a larger threshold to address many of the concerns
raised in public testimony.
TAPE 00-12, SIDE B
Number 2267
DR. MCGUIRE answered he didn't know what he thinks about that. The
problem is the consumer isn't given the choice when there is a
monopoly of health care. "I've heard a number of statements about
people not clamoring to provide these services. One of the reasons
they don't clamor is because they know it is never going to be
allowed. Mental health care in lots of places in the world is done
privately and quite well as a matter of fact. There was someone
who wanted to provide cancer treatment in Fairbanks privately but
that was not permitted. So I suppose there is a concern based on
population, I don't know how you'd decide what the number is. ...
What defines a community that should have a different application
to it."
CHAIRMAN DYSON asked Dr. McGuire to comment on someone getting
three separate certificates of need to build three separate free
standing facilities to provide three separate services.
DR. MCGUIRE answered, "As it stands right now, if you spend over $1
million basically to do anything except a private office ... you
have to have a certificate of need. You can't be licensed if you
don't have it, and if you aren't licensed well then you can't
participate in any of the programs. So someone could go out and
apply for a surgery center, they could go out and apply for an
imaging center, as far as I know it could be the same entity, they
would have to go through the process no matter what it was."
DR. MCGUIRE continued, "If I could, a clarification on the
language, the current department has lumped together all elements
of a given building. If you have office space in a building, they
say that that's part of the surgery center. And the contention is
that if they're to limit the surgery center, it ought to be those
costs that are allocated to the surgery center, not those that are
associated with the building but may be related simply to office
space."
REPRESENTATIVE KEMPLEN asked Dr. McGuire how long it has taken him
to have a certificate of need approved.
DR. MCGUIRE replied it is a very long process. "That as someone
else earlier testified, it's got to be site specific. So you've
got to own, lease, rent, something the property that you're going
to do it on. Then you put in a letter of intent, that's 60 days;
then you got to put in your application and the problem is the
certificate process may take forever because they may say there is
no need, in which event, everything that you've done is presumably
forever. We've spent over two years on it and are nowhere with the
first one we've spent eighteen months. I would be interested to
hear from the department if there has ever been a certificate of
need approved in less than a year. Maybe there has been; I don't
know about it."
REPRESENTATIVE COGHILL noted that hospitals are 24-hour, seven day
a week care units and that other entities can pick and choose their
hours and customers. He wondered if that is taken into account as
far as the need goes. He asked if the operating hours are part of
the needs criteria.
DR. MCGUIRE answered "The current process uses a thing called the
'Washington State Methodology' and so the number of available
operating room minutes per population is said to be what determines
whether or not there's a need. Now exactly how Washington State
ever figured that out is a little unclear. But so if you have, for
example in the case in Fairbanks, if you have two ambulatory
surgery suites that were built under the label of 'ambulatory' then
you only get to count those minutes from 7 to 5 or what the
presumed normal operating hours of ambulatory suites would be. If
you change the designation of those, then you get to count them 24
hours a day and so to that extent yeah I guess it does. It says
there are more available operating room minutes, whether anybody
would use them or not is another question."
REPRESENTATIVE COGHILL said he likes the idea of having a free
market as much as possible. It isn't a totally free market
situation in medical care, but he prefers that direction. He asked
Dr. McGuire if this was a fair assessment: "You have no other
responsibility to the market than that particular chunk and that
would siphon off from the community based hospitals and then you
could take that nice chunk of market but you have no other
responsibility to the market."
DR. MCGUIRE answered "I don't think it's fair. As I said, we take
care of all patients for what we do whether they are "cherry
picked" or the high profit margins or whatever we take care of
them. Second is has been repeated many times here, if you're a not
for profit and don't pay taxes presumably that money is meant to go
to help with those uncompensated care. Yes, it's true that we're
not open 24-hours a day, that's true, but it's also true that we
provide a service that people want and need, and if given the
choice, choose. In the end, there's a lot to be said about that."
REPRESENTATIVE COGHILL reminded the committee members that they
need to ask themselves the question on the criteria the certificate
of need whether they are comparing apples and apples or apples and
oranges. He wants to know if they are just gauging what is
actually being done in town and if people are going out-of-state.
It seems like they are talking about a finite market that may not
be so easily defined as a finite market. [HB 297 was heard and
held.]
ADJOURNMENT
Number 1966
There being no further business before the committee, the House
Health, Education and Social Services Committee meeting was
adjourned at 5:30 p.m.
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