Legislature(2005 - 2006)CAPITOL 106


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03:06:45 PM Start
03:07:09 PM HB287
05:43:37 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
<Bill Hearing Canceled>
Heard & Held
<Bill Hearing Postponed to 03/30/06>
<Bill Hearing Postponed to 03/30/06>
<Bill Hearing Postponed to 03/30/06>
<Bill Hearing Canceled>
<Bill Hearing Postponed to 04/04/06>
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
 HOUSE HEALTH, EDUCATION AND SOCIAL SERVICES STANDING COMMITTEE                                                               
                         March 28, 2006                                                                                         
                           3:06 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Paul Seaton, Vice Chair                                                                                          
Representative Tom Anderson                                                                                                     
Representative Carl Gatto                                                                                                       
Representative Vic Kohring                                                                                                      
Representative Sharon Cissna                                                                                                    
Representative Berta Gardner                                                                                                    
MEMBERS ABSENT                                                                                                                
Representative Peggy Wilson, Chair                                                                                              
COMMITTEE CALENDAR                                                                                                            
HOUSE BILL NO. 287                                                                                                              
"An Act  amending the certificate  of need requirements  to apply                                                               
only to  health care  facilities and nursing  homes located  in a                                                               
borough  with  a population  of  not  more  than 25,000,  in  the                                                               
unorganized borough,  or in  a community  with a  critical access                                                               
     - HEARD AND HELD                                                                                                           
HOUSE BILL NO. 426                                                                                                              
"An Act  relating to medical assistance  eligibility and coverage                                                               
for persons under 21 years of age."                                                                                             
     - BILL HEARING POSTPONED TO 3/30/06                                                                                        
HOUSE BILL NO. 467                                                                                                              
"An  Act relating  to the  administration of  prescribed remedies                                                               
and dietary supplements by a nurse."                                                                                            
     - BILL HEARING POSTPONED TO 3/30/06                                                                                        
HOUSE BILL NO. 468                                                                                                              
"An Act  relating to  disclosure of  employment information  on a                                                               
medical assistance application and  a hospital intake report; and                                                               
requiring  the  Department  of  Health  and  Social  Services  to                                                               
prepare and  publicize a  report pertaining  to employers  who do                                                               
not provide health insurance."                                                                                                  
     - BILL HEARING POSTPONED TO 3/30/06                                                                                        
CS FOR SENATE BILL NO. 177(HES)                                                                                                 
"An  Act  eliminating  the  prohibition on  the  use  by  certain                                                               
licensed  professionals of  titles  or  descriptions of  services                                                               
that  incorporate  the terms  'psychoanalysis,'  'psychoanalyst,'                                                               
'psychotherapy,' 'psychotherapeutic,' or 'psychotherapist.'"                                                                    
     - BILL HEARING POSTPONED TO 4/4/06                                                                                         
HOUSE CONCURRENT RESOLUTION NO. 25                                                                                              
Supporting  consistent  regulation   of  district  and  statewide                                                               
correspondence  programs;  and   encouraging  the  Department  of                                                               
Education  and  Early  Development to  remove  student  allotment                                                               
restrictions on all correspondence students.                                                                                    
     - BILL HEARING CANCELED                                                                                                    
HOUSE CONCURRENT RESOLUTION NO. 35                                                                                              
Relating  to establishing  March 2006  as brain  injury awareness                                                               
     - BILL HEARING CANCELED                                                                                                    
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HB 287                                                                                                                  
SHORT TITLE: MEDICAL FACILITY CERTIFICATE OF NEED                                                                               
SPONSOR(s): REPRESENTATIVE(s) LYNN                                                                                              
04/27/05       (H)       READ THE FIRST TIME - REFERRALS                                                                        
04/27/05       (H)       HES, L&C, FIN                                                                                          
03/28/06       (H)       HES AT 3:00 PM CAPITOL 106                                                                             
WITNESS REGISTER                                                                                                              
REPRESENTATIVE BOB LYNN                                                                                                         
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Spoke as the prime sponsor of HB 287.                                                                      
NANCY MANLY, Staff                                                                                                              
to Representative Bob Lynn                                                                                                      
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  During hearing of HB 287, answered                                                                         
REPRESENTATIVE JOHN COGHILL                                                                                                     
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Spoke as a co-sponsor of HB 287.                                                                           
JIM LYNCH, Director                                                                                                             
Human Resources                                                                                                                 
Fairbanks Memorial Hospital                                                                                                     
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Testified in opposition to HB 287.                                                                         
ROBERT GOULD, Finance Officer                                                                                                   
Fairbanks Memorial Hospital                                                                                                     
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Testified in opposition to HB 287.                                                                         
NORMAN STEPHENS, Chief Executive Officer                                                                                        
Mat-Su Regional Medical Center                                                                                                  
Palmer, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in opposition to HB 287.                                                                         
DEBORAH KILEY, Nurse Practitioner (NP)                                                                                          
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Testified  that the  state would  be better                                                               
served  by   allowing  a  level   playing  field   and  fostering                                                               
competition  by eliminating  the subsidy  of existing  facilities                                                               
when new construction isn't allowed.                                                                                            
STEPHEN SUTLEY, Oral Surgeon                                                                                                    
Alaska Oral & Maxillofacial Center                                                                                              
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  During hearing of HB 287, testified that                                                                   
the CON keeps competition out of Alaska and limits the doctors                                                                  
and services that could come to Alaska.                                                                                         
DON ROBERTS                                                                                                                     
Kodiak, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in opposition to HB 287.                                                                         
GREG POLSTON, Physician                                                                                                         
Advanced Medical Centers of Alaska                                                                                              
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 287.                                                                            
GLENDA SMITH                                                                                                                    
Eagle River, Alaska                                                                                                             
POSITION STATEMENT:  Testified in support of HB 287.                                                                            
JIM TAMAI, Orthopedic Surgeon                                                                                                   
Advanced Medical Centers of Alaska                                                                                              
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 287.                                                                            
THOMAS PIPER, Principal                                                                                                         
MacQuest Consulting                                                                                                             
Jefferson City, Missouri                                                                                                        
POSITION STATEMENT:  Testified in opposition to HB 287.                                                                         
FRED BROWN, Chairman                                                                                                            
ASEA/AFSCME Local 52                                                                                                            
Health Benefits Trust;                                                                                                          
Secretary,  Alaska  Health   Care  Cost  Management  Corporation;                                                               
Secretary, Fairbanks Central Labor Council                                                                                      
Fairbanks, Alaska                                                                                                               
POSITION  STATEMENT:    Testified   that  the  Fairbanks  Central                                                               
Council believes it's  time to change the  current law regulating                                                               
the CON.                                                                                                                        
ALAN GROSS, Orthopedic Surgeon                                                                                                  
Juneau Orthopedics                                                                                                              
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in support of HB 287.                                                                            
SAM KORSMO, Chief Operating Officer                                                                                             
Alaska Open Imaging Center (AOIC)                                                                                               
Wasilla, Alaska                                                                                                                 
POSITION  STATEMENT:   Testified that  AIOC's success  shows that                                                               
doctors  and  their  patients appreciate  having  the  choice  to                                                               
access quality service and the commitment to [lower] costs.                                                                     
JEREMY HAYES, Representative                                                                                                    
Advanced Medical Centers of Alaska                                                                                              
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 287.                                                                            
ACTION NARRATIVE                                                                                                              
VICE-CHAIR  PAUL SEATON  called the  House Health,  Education and                                                             
Social Services  Standing Committee  meeting to order  at 3:06:45                                                             
PM.  Representatives Gatto, Kohring,  Gardner, Cissna, and Seaton                                                             
were  present at  the  call to  order.   Representative  Anderson                                                               
arrived as the meeting was in progress.                                                                                         
HB 287-MEDICAL FACILITY CERTIFICATE OF NEED                                                                                   
3:07:09 PM                                                                                                                    
VICE  CHAIR SEATON  announced  that the  only  order of  business                                                               
would be HOUSE BILL NO. 287,  "An Act amending the certificate of                                                               
need requirements  to apply  only to  health care  facilities and                                                               
nursing homes located in a borough  with a population of not more                                                               
than 25,000, in  the unorganized borough, or in  a community with                                                               
a critical access hospital."                                                                                                    
3:08:16 PM                                                                                                                    
REPRESENTATIVE  BOB  LYNN,  Alaska State  Legislature,  as  prime                                                               
sponsor  introduced  HB  287   paraphrasing  from  the  following                                                               
written statement [original punctuation provided]:                                                                              
     Thank  you for  hearing HB  287 today.   I'm  the prime                                                                    
     sponsor  of  this  bill, and  Representatives  Coghill,                                                                    
     Chenault, and Kohring are co-sponsors.   As a matter of                                                                  
     disclosure, I'm  also a prime sponsor  of an Initiative                                                                  
     on   Certificate    of   Need   issues,    along   with                                                                    
     Representative  Kohring and  Mr. Paul  Fuhs, which  has                                                                    
     been certified.   The principal difference  between the                                                                  
     bill  and  the  initiative,   is  that  the  initiative                                                                    
     pertains  to  every  place  in   Alaska,  and  my  bill                                                                  
     pertains  only to  places with  a population  exceeding                                                                  
     25,000.  But  I want to focus on the  bill because that                                                                  
     initiative is not before us, the bill is.                                                                                
     I would  ask the committee  to consider this  bill from                                                                    
     three different, but complementary, viewpoints.                                                                            
     Protect traditional American free enterprise;                                                                            
     Increase availability of medical care; and                                                                               
     Create   potential  cost   savings  for   patients  and                                                                  
     worker's  compensation costs,  and even  administrative                                                                    
     costs to the state.                                                                                                        
     Personally, I  think protecting  free enterprise  is as                                                                  
     American as  apple pie.  If  we want to go  in business                                                                    
     together, we shouldn't have to  go "hat in hand" to the                                                                    
     government  and beg  for  a Certificate  of  Need.   It                                                                  
     shouldn't matter  whether that  Certificate of  Need is                                                                  
     for  a hot  dog stand,  a  pizza parlor,  or a  medical                                                                    
     facility.   The free market  should decide if  a health                                                                    
     care facility, or  any other business, is  needed - not                                                                  
     some   self-serving   government    bureaucracy.      A                                                                    
     Certificate of Need, in effect,  and for example, gives                                                                
     Anchorage   and   Fairbanks   hospitals  a   de   facto                                                                    
     government  monopoly.   We need  more competition,  not                                                                    
     less.      Free    enterprise   motivates   excellence,                                                                    
     encourages  lower prices  through  competition, and  in                                                                    
     the long run benefits consumers.                                                                                           
     Secondly,  people suffering  health problems  need more                                                                  
     choice  of medical  providers, not  less.   When I  get                                                                  
     sick, I  want to be able  to choose my own  caregiver -                                                                  
     and not have the government  limit my choices with some                                                                  
     Certificate  of  Need.    When  I  go  shopping  for  a                                                                    
     computer,  things usually  turn out  better, if  I have                                                                  
     several   different  dealers   and  models   to  choose                                                                    
     between.  Of course,  finding the medical provider with                                                                    
     the best service, and with  whom we have the most trust                                                              
     is  infinitely more  important, and  perhaps even  aids                                                                  
     one's successful recovery.                                                                                                 
     Third,  medical costs  in  Alaska  are reaching  crisis                                                                  
     levels, and it  hurts everybody.  Passage  of this bill                                                                    
     should  help lower  the  escalating  costs of  Worker's                                                                  
     Compensation,  and the  overall costs  of medical  care                                                                  
     for  the state,  companies, and  families.   Typically,                                                                  
     monopolies increase  costs.  Competition  lowers costs.                                                                
     That's Economics 101.                                                                                                    
     Lastly,  there  has  been  some  major  differences  of                                                                    
     opinion  over  fiscal notes  -  what  is legitimate  to                                                                    
     include, and  what is not.   For example,  the original                                                                    
     fiscal note  for the initiative  - almost  identical to                                                                    
     my bill, except  for no population exemption  - came in                                                                    
     at an  incredible 41 million  bucks.   When questioned,                                                                  
     we were told  that the fiscal note would  be about half                                                                  
     that  figure -  saved  $20 million  with one  question.                                                                    
     Good thing  we questioned  it.  And,  as you  will hear                                                                  
     from witnesses,  that figure  is also  unrealistic, and                                                                  
     way  on  the  high  side.   This  bill  should  not  be                                                                
     compromised  with unsustainable  fiscal notes  - that's                                                                  
     inappropriate and not fair.                                                                                            
     In summary,  please evaluate this  bill on  its merits.                                                                  
     Those  merits  pertain  to  the  medical  availability,                                                                  
     choice of  health provider, legitimate cost  savings to                                                                
     all   concerned,   and  especially   the   time-honored                                                                  
     principles of American  free enterprise.  HB  287 is my                                                                    
     designated  priority legislation,  and your  support of                                                                  
     this bill is respectfully requested.                                                                                       
     I would ask  that you call next upon Mr.  Paul Fuhs for                                                                    
     a more in-depth discussion  of this bill and especially                                                                    
     fiscal  note  questions  which  I  am  sure  you'll  be                                                                    
     wanting to hear about.                                                                                                     
3:13:34 PM                                                                                                                    
REPRESENTATIVE  GATTO  moved  to  adopt  CSHB  287,  Version  24-                                                               
LS0611\Y, Mischel, 2/13/06, as the working document.                                                                            
REPRESENTATIVE KOHRING  objected, and asked whether  the proposed                                                               
committee substitute (CS) is acceptable to the sponsor.                                                                         
REPRESENTATIVE LYNN replied yes.                                                                                                
REPRESENTATIVE KOHRING removed his objection.                                                                                   
VICE  CHAIR SEATON,  upon hearing  no other  objection, announced                                                               
that CSHB 287, Version Y, was before the committee.                                                                             
3:14:12 PM                                                                                                                    
REPRESENTATIVE  KOHRING stated  support for  HB 287,  and related                                                               
that competition is  going to be the key with  regard to the cost                                                               
[and  quality]  of  medical   service.    Representative  Kohring                                                               
expressed  concern with  regard  to the  fiscal note,  especially                                                               
since it  suggests that the  opponents of the legislation  may be                                                               
attempting  to  kill  the legislation  with  a  greatly  inflated                                                               
fiscal note.                                                                                                                    
REPRESENTATIVE  LYNN   said  that   he  didn't  want   to  assign                                                               
motivation to  anyone because  the legislation  proposed changing                                                               
the  current  situation and  change  is  often uncomfortable  for                                                               
some.    He  noted  that  the  committee  packet  should  include                                                               
correspondence regarding how the fiscal note was derived.                                                                       
3:16:35 PM                                                                                                                    
REPRESENTATIVE GARDNER  related her understanding that  the issue                                                               
addressed in HB 287 is a  national issue.  She requested that the                                                               
sponsor provide some history of the certificate of need (CON).                                                                  
REPRESENTATIVE LYNN noted  that his interest began  in April 2004                                                               
when he introduced legislation on the  issue.  With regard to the                                                               
specific  history of  the CON,  Representative  Lynn deferred  to                                                               
others present.   In further response  to Representative Gardner,                                                               
Representative Lynn related his understanding  that the CON was a                                                               
national  mandate some  years ago  and states  followed at  which                                                               
point  the federal  mandate was  removed and  the certificate  of                                                               
need remained in many parts of the country.                                                                                     
3:18:29 PM                                                                                                                    
REPRESENTATIVE CISSNA mentioned that  she has heard comments that                                                               
seem to  indicate that those  in support of this  legislation are                                                               
good people while those who  don't support it aren't.  Therefore,                                                               
she expressed  hope that this  legislation would rise or  fall on                                                               
its own [merits].                                                                                                               
3:19:43 PM                                                                                                                    
REPRESENTATIVE GATTO  pointed out  that HB 287  doesn't eliminate                                                               
CON, but merely amends it.   He then inquired as to whether there                                                               
are significant differences between  the original legislation and                                                               
Version Y.                                                                                                                      
3:20:02 PM                                                                                                                    
NANCY  MANLY,  Staff to  Representative  Bob  Lynn, Alaska  State                                                               
Legislature,  explained that  Version  Y was  brought forward  in                                                               
order  to  keep the  nursing  homes  and residential  psychiatric                                                               
treatment   centers  as   part   of  the   CON   program.     The                                                               
aforementioned is  part of the  initiative.  In  further response                                                               
to  Representative  Gatto, Ms.  Manly  specified  that Version  Y                                                               
includes  a  title  change  to   add  the  language  "residential                                                               
psychiatric treatment centers".   On page 1, line 7,  and on page                                                               
2, line  4, the reference to  subsection (g) was added.   On page                                                               
2,  line 6,  the language  "facility  under AS  47.32 was  added.                                                               
Subsection  (g) on  page 2,  lines 13-15,  was added  as was  the                                                               
language "and residential psychiatric  treatment centers" on page                                                               
2, line  29.  Finally,  on page 3,  line 1, the  language "except                                                               
for nursing homes and  residential psychiatric treatment centers"                                                               
was added.                                                                                                                      
3:22:07 PM                                                                                                                    
VICE CHAIR  SEATON pointed out  that the committee  packet should                                                               
include the fiscal note dated 3/16/06 for Version Y.                                                                            
3:22:24 PM                                                                                                                    
REPRESENTATIVE GARDNER  said if the notion  that providing health                                                               
care is a  business such that marketplace rules  should apply and                                                               
that competition will  lower prices, why would  nursing homes and                                                               
residential psychiatric centers be  exempt from the provisions of                                                               
HB 287.                                                                                                                         
REPRESENTATIVE LYNN  related his  belief that  it's best  to move                                                               
with  what is  possible to  pass the  House and  the Senate.   He                                                               
opined that [Version Y] is a step in the right direction.                                                                       
3:23:28 PM                                                                                                                    
REPRESENTATIVE JOHN  COGHILL, Alaska State  Legislature, speaking                                                               
as  a co-sponsor  of  HB  287, informed  the  committee that  the                                                               
residential  psychiatric   treatment  facilities   are  primarily                                                               
public  pay, which  is why  it's probably  not bad  to leave  the                                                               
government  in  charge  of  the  number  of  beds  it  will  make                                                               
available.   He  indicated  that it's  a  similar situation  with                                                               
nursing homes.                                                                                                                  
3:24:21 PM                                                                                                                    
REPRESENTATIVE  CISSNA surmised  that the  sponsor believes  that                                                               
hospitals  should be  in  the  private sector  and  should be  in                                                               
REPRESENTATIVE LYNN said he believes in competition.                                                                            
REPRESENTATIVE  CISSNA highlighted  the requirement  of hospitals                                                               
to be  open 24  hours a  day and see  anyone who  walks in.   She                                                               
asked if  anyone providing the  same services as  hospitals would                                                               
be required to do the same.                                                                                                     
REPRESENTATIVE LYNN  said it  would depend on  the facility.   He                                                               
did  say that  to compete  in the  marketplace, a  facility would                                                               
have to offer similar services.                                                                                                 
3:26:26 PM                                                                                                                    
REPRESENTATIVE  COGHILL, in  further  response to  Representative                                                               
Cissna, acknowledged  that emergency  rooms are mandated  to take                                                               
all patients  and due to  that hospitals receive an  extra "bump"                                                               
on the Medicaid  rate.  He informed the committee  that there are                                                               
other ways  that [hospitals can  use Medicaid money to  a greater                                                               
advantage  than  most other  businesses.    He acknowledged  that                                                               
hospitals use different  business models, but in  Alaska most are                                                               
3:27:31 PM                                                                                                                    
VICE  CHAIR SEATON  highlighted that  this legislation  addresses                                                               
expenditures over $1 million.                                                                                                   
3:27:36 PM                                                                                                                    
REPRESENTATIVE  CISSNA asked  if there  are supporting  documents                                                               
regarding  whether  the federal  funding  is  cost effective  and                                                               
actually does cover  the expenses such that it's  an even playing                                                               
REPRESENTATIVE COGHILL  said that he could  provide the committee                                                               
information  with  regard to  the  Medicaid  rate issues.    With                                                               
regard  to  the cost  effectiveness,  he  acknowledged that  it's                                                               
3:28:27 PM                                                                                                                    
REPRESENTATIVE KOHRING  related his understanding that  there are                                                               
a  large  number  of  physicians  who  support  this  concept  of                                                               
eliminating or at least reducing the CON.                                                                                       
REPRESENTATIVE LYNN agreed, and added  that the CON is one manner                                                               
in  which  the  medical  challenges  the  state  faces  could  be                                                               
3:29:49 PM                                                                                                                    
REPRESENTATIVE  KOHRING  inquired as  to  what  other states  are                                                               
doing with the CON.                                                                                                             
MS. MANLY related  that approximately 36 states  continue to have                                                               
the  CON,  although  there  seems  to  be  much  movement  toward                                                               
removing CON programs.                                                                                                          
3:31:28 PM                                                                                                                    
JIM   LYNCH,  Director,   Human  Resources,   Fairbanks  Memorial                                                               
Hospital,  began   by  stating   that  he,  too,   believes  that                                                               
capitalism  and  strong  economic competition  are  positive  and                                                               
strong  economic   theories.     However,  he  opined   that  the                                                               
aforementioned theories  don't work perfectly nor  should they be                                                               
applied blindly in  every situation.  Mr. Lynch  then related his                                                               
strong opposition to  HB 287 for several reasons.   First, it's a                                                               
flawed assumption to believe that  competition in the health care                                                               
industry [will decrease  costs].  The health care  industry is an                                                               
environment in  which the economics  aren't normal  because there                                                               
is heavy government  subsidy.  He opined that  in many situations                                                               
these costs [at hospitals] will  increase and wages are likely to                                                               
increase for technically  trained staff that are  in short supply                                                               
within the state,  which would inflate the cost of  a hospital as                                                               
well as  a stand-alone  surgical center.   Moreover,  it's likely                                                               
that  community  hospitals  will  have  to  compensate  for  lost                                                               
surgical  revenue  by increasing  prices  for  other services  it                                                               
offers,  and  thereby resulting  in  higher  overall health  care                                                               
costs for  the community.   Mr. Lynch highlighted  that hospitals                                                               
see all patients regardless of the  patient's ability to pay.  On                                                               
the other hand, surgical centers  are likely to only see patients                                                               
with the  ability to pay  and the  facilities are likely  to only                                                               
provide  procedures  for  which   the  maximum  reimbursement  is                                                               
received from the government or private insurers.                                                                               
MR.  LYNCH then  brought forth  the issue  of self-referral.   He                                                               
informed the committee that historically, hospitals and stand-                                                                  
alone  surgical centers  are the  facilities  that sell  surgical                                                               
services  while physicians  sell  their services  related to  the                                                               
delivery of health  care.  The economic  relationship between the                                                               
two  groups is  complimentary  with the  hospitals providing  the                                                               
facility  services needed  by the  physicians and  the physicians                                                               
providing  the  patient  referral   volume  the  facility  needs.                                                               
However,  the entire  relationship  will shift  when a  referring                                                               
physician  acquires personal  financial  ownership  in the  free-                                                               
standing  health care  facility that  competes with  the hospital                                                               
facility.   The aforementioned is  particularly troublesome  in a                                                               
situation  in which  the referring  physician  investor is  faced                                                               
with referring  a patient  to the  hospital facility  that he/she                                                               
doesn't own  or the stand-alone  surgical center in  which he/she                                                               
has an economic investment.   Lastly, Mr. Lynch expressed concern                                                               
with  regard  to   the  small  size  of   the  community,  25,000                                                               
population base,  proposed in HB  287.  If one  looks nationally,                                                               
it  takes a  minimum  of about  300,000 people  to  have an  open                                                               
economic model that can sustain competition, he opined.                                                                         
3:36:29 PM                                                                                                                    
REPRESENTATIVE GARDNER  related her understanding then  that if a                                                               
physician  has  ownership  in a  stand-alone  facility  and  that                                                               
physician  makes  a  referral  to his/her  own  facility  or  the                                                               
hospital,  the physician  has  a conflict  of  interest that  can                                                               
influence the aforementioned decision.                                                                                          
MR. LYNCH  replied yes,  adding that the  issue is  the potential                                                               
increased gain by referring to  a facility in which the physician                                                               
has an investment.                                                                                                              
3:37:12 PM                                                                                                                    
ROBERT  GOULD, Finance  Officer,  Operations, Fairbanks  Memorial                                                               
Hospital, began  by stating his opposition  to HB 287.   He noted                                                               
that over the  last four or five years he  has testified a number                                                               
of times  regarding the impact  that elimination or  weakening of                                                               
the  CON would  have  on a  community  hospital, particularly  in                                                               
Fairbanks.  Mr. Gould informed  the committee that there are only                                                               
fours  areas in  health  care  that continue  to  make money  for                                                               
facilities, and therefore  as a business model the  only areas of                                                               
the  hospital that  are profitable  and competitive  are surgery,                                                               
radiology, pharmacy,  and labs.   However, the  hospitals provide                                                               
much broader services than just  the aforementioned four services                                                               
and in  fact, those  services actually  pay for  the rest  of the                                                               
services the hospital offers.                                                                                                   
MR. GOULD related his understanding  that the assertion of HB 287                                                               
is  that  by  elimination  of  the  CON  in  communities  with  a                                                               
population   over  25,000,   competition   will  increase   while                                                               
decreasing the cost.  However,  he disagreed and pointed out that                                                               
there  is data  that supports  the hospitals'  position that  the                                                               
elimination of the CON will increase  the cost of care.  He noted                                                               
that as  of February 22, 2006,  he performed a survey  of two top                                                               
magnetic resonance  imaging (MRIs)  [facilities] in  Fairbanks in                                                               
competition with  Fairbanks Memorial  Hospital.  Over  the years,                                                               
each  entity has  testified  that  if they  were  allowed in  the                                                               
market, they would  decrease costs.  However, of  the private MRI                                                               
[providers] one charges  about $1,700 and the  other about $1,900                                                               
for  a MRI  spine without  contrast  while the  same costs  about                                                               
$1,400 at  the hospital.   The aforementioned  is the  number one                                                               
procedure in Fairbanks.  The  second most common procedure is MRI                                                               
of the brain without contrast.   Again, the private providers are                                                               
higher than the local hospital.   Because of the referral pattern                                                               
and  because it's  not a  pure  free market,  patients are  being                                                               
driven  to  facilities with  higher  costs  due  to the  lack  of                                                               
understanding of the  costs and exams.  In  conclusion, Mr. Gould                                                               
suggested that  if there  was a comparison  of charges,  one will                                                               
find that  in the not-for-profit community  hospitals the charges                                                               
are more  than likely  much lower than  those in  the for-profit,                                                               
privately owned  facilities.  If HB  287 is passed or  the CON is                                                               
weakened,   hospitals  and   communities   in   Alaska  will   be                                                               
drastically harmed, he opined.                                                                                                  
3:43:02 PM                                                                                                                    
MR. GOULD, in response to  Representative Gardner, explained that                                                               
under the  current reimbursement  system facilities are  paid the                                                               
most for  surgery, radiology,  pharmacy, and labs.   That  is for                                                               
those services, the reimbursement is  well beyond the cost of the                                                               
service  while  for   other  services  there  is   a  much  lower                                                               
reimbursement.    The  aforementioned   is  why  people  want  to                                                               
eliminate the CON and enter  the market for the four money-making                                                               
services.   He  pointed  out that  someone won't  put  in an  in-                                                               
patient mental  health unit,  an emergency  room, or  home health                                                               
care for chronic inebriants or diabetics.                                                                                       
3:44:05 PM                                                                                                                    
REPRESENTATIVE  GARDNER asked  if  a facility  only provided  the                                                               
four money-making services,  could it reduce the  rates for those                                                               
MR.  GOULD  answered yes,  in  theory.    In fact,  the  [private                                                               
providers of the four money-making  services] ought to be able to                                                               
offer  the  services at  a  lower  cost, especially  since  these                                                               
private facilities,  unlike hospitals, don't  have to be  open 24                                                               
hours a  day, 7 days  a week, 365 days  a year, which  means that                                                               
they  don't  have  to  pay a  shift  differential,  overtime,  or                                                               
additional  staffing  requirements.    However,  because  of  the                                                               
ability to steer  patients [and the profit  motive], the facility                                                               
can charge what it desires.                                                                                                     
3:45:14 PM                                                                                                                    
REPRESENTATIVE  GARDNER posed  a  situation in  which a  self-pay                                                               
patient in Fairbanks chooses to  have his/her radiology procedure                                                               
performed  at Fairbanks  Memorial  Hospital.   She surmised  that                                                               
such  a  patient  is  subsidizing other  parts  of  the  hospital                                                               
because the  patient is  paying a higher  cost than  the hospital                                                               
would  otherwise  have to  charge  because  the charges  for  the                                                               
services  are set  at a  level that  allows the  subsidization of                                                               
other procedures.                                                                                                               
MR. GOULD said  that's an accurate statement,  but clarified that                                                               
Medicare and  Medicaid set rates  for the hospitals.   Regardless                                                               
as to  whether it's insurance,  private pay, et cetera,  the fees                                                               
are based  primarily on what  Medicare and Medicaid pay  or their                                                               
regulations.    He  reiterated that  Medicare  and  Medicaid  pay                                                               
extremely well in the four  areas mentioned earlier and extremely                                                               
poor in  all other areas.   "In effect, we're doing  exactly what                                                               
the government has  asked us to do, which is  charge more because                                                               
you're going to get paid more in these areas," he pointed out.                                                                  
3:46:25 PM                                                                                                                    
MR. GOULD,  in further response  to Representative  Gardner, said                                                               
that  he does  have data  indicating  that removing  the CON  may                                                               
increase costs and  could provide it to the committee.   He noted                                                               
that this same debate is  occurring across the nation in relation                                                               
to specialty hospitals.  Currently,  the federal government has a                                                               
moratorium on specialty hospitals  because studies show that they                                                               
have increased costs and physician-owned  hospitals see a reduced                                                               
number  of  government  patients   and  more  of  the  commercial                                                               
insurance  payers, which  results  in an  increase in  government                                                               
patients in community hospitals.                                                                                                
3:49:55 PM                                                                                                                    
NORMAN  STEPHENS,   Chief  Executive  Officer,   Mat-Su  Regional                                                               
Medical  Center,   recalled  the  sponsor's  comment   that  this                                                               
legislation is  Economics 101 and respectfully  disagreed because                                                               
it's not  Health Care Economics  101.  He informed  the committee                                                               
that he has  a master's degree in health  care administration and                                                               
has studied health care financing,  which is quite different than                                                               
traditional financing.   Mr. Stephens pointed  out that hospitals                                                               
are a people-oriented business and  the product is to hire people                                                               
to take  care of others  in a  very intensive format.   Hospitals                                                               
are  different  than  manufacturing   in  which  mass  production                                                               
techniques  or  outsourcing labor  drives  the  costs down.    In                                                               
hospitals, the  economics are inherently cost-based.   He related                                                               
that what  a hospital charges  doesn't make that  much difference                                                               
because the cost structure is  really what determines whether the                                                               
hospital is effective and sustainable.   Mr. Stephens highlighted                                                               
that there is  a finite number of people who  are being served in                                                               
an  area and  adding a  second facility  to provide  some of  the                                                               
services  of  the  hospital  doesn't   reduce  the  cost  to  the                                                               
community  but  rather  doubles   the  costs  in  some  respects.                                                               
Furthermore,  since there  are  tremendous  staff shortages,  the                                                               
[private  facilities] that  don't have  to  work the  hours of  a                                                               
hospital employee cause the hospital  to increase its salaries in                                                               
order to  remain competitive.   A vicious  cycle is  created that                                                               
threatens the  stability of a  community hospital,  and therefore                                                               
he opposed  HB 287  which he  said is based  on flawed  logic and                                                               
economic  theory  that  hasn't  been examined  thoroughly.    Mr.                                                               
Stephens informed  the committee that he  lived through something                                                               
similar in  Corpus Christi, Texas,  where the CON  was eliminated                                                               
and  the for-profit  corporations came  in, which  resulted in  a                                                               
number of hospitals  closing.  Alaska, a  relatively small state,                                                               
is   more  vulnerable   and   probably   couldn't  tolerate   the                                                               
elimination of the CON.                                                                                                         
3:54:36 PM                                                                                                                    
VICE CHAIR  SEATON inquired as  the size of community  that would                                                               
support a competitive  model or a situation in which  there is no                                                               
MR.  STEPHENS  said  that  Corpus Christi,  Texas,  to  which  he                                                               
referred earlier had  a population of about 379,000.   Once there                                                               
is a population  of 300,000 or over, any one  player becomes less                                                               
vulnerable.   In  the  Mat-Su  Valley, he  pointed  out that  the                                                               
original  Valley Hospital  Association,  a not-for-profit  entity                                                               
that has  taken care of the  Mat-Su Valley's needs for  70 years,                                                               
has stacked  everything on  the new [medical  center].   In fact,                                                               
$101 million has been spent to  build this hospital in the Mat-Su                                                               
where there  is a  lot at risk.   He noted  that there  are niche                                                               
providers hovering to  pick off the profitable  product lines and                                                               
programs that the hospital depends upon  to make its living.  The                                                               
only way  to keep the hospital  breaking even or on  margin would                                                               
be  to review  other areas  of  the hospital  not being  provided                                                               
elsewhere  and try  to  recover the  cost in  those  areas.   Mr.                                                               
Stephens  then  informed  the  committee  that  the  Health  Care                                                               
Advisory  Board is  a nonprofit  think-tank  group that  recently                                                               
gave a presentation entitled  "Overcoming A Ruinous Competition."                                                               
The  presentation highlighted  those who  are profit-seekers  who                                                               
focus  on the  lucrative  niche markets  within  the health  care                                                               
3:57:39 PM                                                                                                                    
REPRESENTATIVE CISSNA  recalled an  economics class  she attended                                                               
in which  externalities was  discussed.   She requested  that Mr.                                                               
Stephens discuss externalities in [the health care industry].                                                                   
MR. STEPHENS said that he didn't know what externalities are.                                                                   
REPRESENTATIVE  CISSNA  explained  that  externalities  are  what                                                               
happen when market systems don't work perfectly.                                                                                
VICE  CHAIR   SEATON  said  that  the   aforementioned  could  be                                                               
addressed during committee discussion.                                                                                          
4:00:31 PM                                                                                                                    
REPRESENTATIVE GATTO  related his  understanding that  the Mat-Su                                                               
Regional  Medical Center,  Fairbanks Memorial  Hospital, and  the                                                               
Alaska Regional Hospital are all  for-profit hospitals as opposed                                                               
to  government/community  hospitals  such as  Providence  Medical                                                               
Center and  Bartlett Regional  Hospital.  He  asked if  whether a                                                               
hospital  is  for-profit  or   not-for-profit  would  change  the                                                               
outlook in relation to CON.                                                                                                     
MR. STEPHENS  replied no.   Although the difference  in ownership                                                               
has to do with what happens  to the reserves over revenue, a for-                                                               
profit  hospital provides  the same  amount of  uncompensated and                                                               
charity care as [nonprofit hospitals].   In fact, Mat-Su Regional                                                               
Medical Center's charity care is  2.5 percent of gross, which has                                                               
increased since  the company  has taken over  the hospital.   Mr.                                                               
Stephens said:                                                                                                                  
     We're dealing with the same  rules and regulations that                                                                    
     pertain to a for-profit  hospital, the market pressures                                                                    
     are the same; we have the  same laws that require us to                                                                    
     not  ask people  whether they  have the  means to  pay.                                                                    
     And ...  because of being  a for-profit  hospital, it's                                                                    
     even  more critically  sensitive in  a community  where                                                                    
     we're trying  to maintain a good  reputation and ensure                                                                    
     that we get business from  our community.  We've got to                                                                    
     be very careful about our  approach toward being a for-                                                                    
     profit and it doesn't change that at all.                                                                                  
MR.  STEPHENS,  in  further  response  to  Representative  Gatto,                                                               
opined  that HB  287 does  the  reverse of  leveling the  playing                                                               
field.   The legislation allows  niche providers who do  not have                                                               
the  same   obligation  to  the  community   to  operate  freely.                                                               
Therefore, the  constraints of a  hospital aren't  removed either                                                               
legally or  morally because a  facility couldn't  maintain itself                                                               
as  a hospital  without  operating an  emergency  room all  night                                                               
long.   Furthermore, to place  hospitals in competition  with the                                                               
8:00 a.m. to  5:00 p.m. niche operators is not  a leveling of the                                                               
playing field.                                                                                                                  
4:03:44 PM                                                                                                                    
REPRESENTATIVE GARDNER inquired  as to how the  health care costs                                                               
in Corpus Christi,  Texas, compare to costs  in other communities                                                               
of comparable size with or without the CON.                                                                                     
MR. STEPHENS  expressed the  need to  research that,  but offered                                                               
that  the costs  continue to  rise, which  he characterized  as a                                                               
national  emergency.   However,  he  pointed  out that  costs  in                                                               
health care are costs that  health care sustains; those costs are                                                               
incurred  as the  hospital  operates and  are  largely labor  and                                                               
technology costs.                                                                                                               
4:05:33 PM                                                                                                                    
REPRESENTATIVE  GARDNER  opined  that it's  generally  understood                                                               
that when  new businesses  come to town,  there's a  shakeup from                                                               
which  some survive  and some  don't.   Therefore, she  expressed                                                               
interest  in any  data about  what actually  happens with  health                                                               
care costs in a community after the removal of CON.                                                                             
4:06:09 PM                                                                                                                    
DEBORAH  KILEY, Nurse  Practitioner (NP),  specified that  she is                                                               
speaking  on her  own  behalf  as a  nurse,  although  she is  an                                                               
employee  for  the  Advanced  Medical Centers  of  Alaska.    She                                                               
informed the  committee that  she has  been a  nurse for  over 30                                                               
years and a NP  for over 20 years during which  quite a number of                                                               
things  have changed.   When  the CON  process was  introduced in                                                               
1972,  it  was   designed  to  control  costs   by  stopping  the                                                               
proliferation  of all  types of  medical facilities  by requiring                                                               
review for projects costing over  $100,000.  However, restricting                                                               
building  didn't control  the  cost  of health  care.   "The  CON                                                               
concept has  no more  application to life  in 2006  than $100,000                                                               
medical facility budget will buy today,"  she said.  In fact, the                                                               
federal   government  and   20  states   have  revoked   the  CON                                                               
requirements, which  she asked  the committee  to take  the first                                                               
step in doing so  as well.  Ms. Kiley refuted  the myth that only                                                               
hospitals   and  community   health  centers   provide  for   the                                                               
underserved because  in the  private sector  physicians, physical                                                               
therapists,  nurse  practitioners,  and other  clinicians  donate                                                               
many  hours  and resources  to  patients  with no  or  inadequate                                                               
resources.   Therefore, rather  than placing  artificial barriers                                                               
before private citizens who have  the vision to build and create,                                                               
the  state would  be better  served by  allowing a  level playing                                                               
field  and fostering  competition by  eliminating the  subsidy of                                                               
existing facilities  when new construction isn't  allowed.  "With                                                               
competition, providers  can attract  patients by  improving their                                                               
quality  of  care,  improving  service  to  the  patient,  and/or                                                               
decreasing  costs to  payers," she  opined.   She further  opined                                                               
that  patients  deserve  a  choice   as  to  where  they  receive                                                               
4:10:49 PM                                                                                                                    
REPRESENTATIVE CISSNA  asked if Ms. Kiley  could provide examples                                                               
of why the  CON would cause costs in the  health care industry to                                                               
MS.  KILEY clarified  that  her testimony  was  that costs  would                                                               
decrease if more facilities were available.                                                                                     
4:12:29 PM                                                                                                                    
STEPHEN  SUTLEY,  Oral  Surgeon,   Alaska  Oral  &  Maxillofacial                                                               
Center,  opined that  the majority  of the  elderly patients  and                                                               
medically compromised  patients that  "we" treat at  the hospital                                                               
could be safely be treated in  a surgery center for a lower cost.                                                               
He pointed out  that many of these patients  receive Medicare and                                                               
Medicaid  and  thus  treatment  in  a  surgery  center  versus  a                                                               
hospital would  decrease the cost to  the patient as well  as the                                                               
state.    Furthermore, a  number  of  the patients  that  require                                                               
facial  reconstruction  surgery  or  orthognathic  surgery  elect                                                               
either to  not have  the surgery at  all or to  go to  Seattle or                                                               
Portland because  of the escalated  costs at the  local hospital.                                                               
Many of  these patients  could be treated  at a  surgical center.                                                               
Moreover, facial trauma with fairly  simple fractures to the face                                                               
requiring treatment at the hospital  operating room could also be                                                               
treated safely in a surgery center.   Many of these patients have                                                               
Medicaid or  no insurance  at all,  and therefore  face extremely                                                               
high  bills when  they  are  discharged from  the  hospital.   In                                                               
summary, the  CON needs  to be  repealed, he said.   The  CON, he                                                               
opined, keeps  competition out of  Alaska and limits  the doctors                                                               
and services that could come  to Alaska.  Congress recognized the                                                               
problem  and   has  repealed  the   CON  as  have   many  states.                                                               
Economically,  it's  costly  to   maintain  the  status  quo  for                                                               
patients in Alaska.  Dr.  Sutley explained that the CON increases                                                               
the cost throughout  the state.  In fact, the  CON, he opined, is                                                               
only important  for those special  interest groups who  desire it                                                               
to remain.                                                                                                                      
4:16:58 PM                                                                                                                    
VICE  CHAIR SEATON  inquired as  to  whether the  [Alaska Oral  &                                                               
Maxillofacial Center] takes Medicaid patients.   He also asked if                                                               
the [center] limits the number of Medicaid patients.                                                                            
DR. SUTLEY  answered that  he does  accept Medicaid  patients and                                                               
has no limits  on the number that [the center]  takes.  He echoed                                                               
earlier  testimony that  hospitals  are not  the only  facilities                                                               
that  give away  free care.   In  fact, Dr.  Sutley informed  the                                                               
committee  that he  [Alaska Oral  &  Maxillofacial Center]  gives                                                               
away several  hundred thousand dollars  worth of care  every year                                                               
whether the  patient is on  Medicaid or merely can't  pay his/her                                                               
4:17:42 PM                                                                                                                    
REPRESENTATIVE GARDNER  asked if Dr.  Sutley works at  a surgical                                                               
center and has privileges at Fairbanks Memorial Hospital.                                                                       
DR.  SUTLEY  explained that  his  business  and practice  is  the                                                               
Alaska  Oral  &  Maxillofacial  Center  with  which  he  has  one                                                               
partner.   He  specified  that the  Alaska  Oral &  Maxillofacial                                                               
Center isn't  a surgical center.   He also specified that  he has                                                               
full privileges at the Fairbanks Memorial Hospital.                                                                             
4:18:38 PM                                                                                                                    
REPRESENTATIVE GARDNER  related her understanding that  there are                                                               
some hospitals  that don't allow  surgeons to perform  surgery at                                                               
the  hospital  if they  perform  surgery  at a  private  surgical                                                               
DR. SUTLEY said that he wasn't familiar with such a scenario.                                                                   
4:19:14 PM                                                                                                                    
DON  ROBERTS began  by  stating his  opposition to  HB  287.   He                                                               
opined  that health  care  services aren't  best  delivered on  a                                                               
competitive  basis because  competition  results  in winners  and                                                               
losers.   In such a situation  what happens with all  the losers,                                                               
he  asked.    "Basically,  I  think  it  ultimately  reduces  the                                                               
availability  of  quality  health care  services  and  sacrifices                                                               
effective services  on the  alter of  administrative efficiency,"                                                               
he opined.   However,  if the  desire is  to control  health care                                                               
costs,  one must  determine where  hospitals  are spending  their                                                               
money.    Therefore, he  suggested  that  the committee  consider                                                               
including  the state's  version of  the  federal form  990 and  a                                                               
socioeconomic report.   He also  expressed the need for  there to                                                               
be some  commitment from the  community as to how  agencies could                                                               
incorporate the  resources of other physicians  and facilities to                                                               
offset  the  costs  of  service  and  include  the  viability  of                                                               
service.  He  expressed concern with regard to  the references to                                                               
"health care service"  because it doesn't explain  whether it's a                                                               
health  care  service  that  keeps   one  healthy  or  a  crisis,                                                               
treatment,  or  recovery  service.    Furthermore,  there  is  no                                                               
knowledge   as  to   how  much   of  "this"   would  be   in  the                                                               
administrative costs.   Even more troubling is  the definition of                                                               
"person"  as per  7 AAC  7.07.900(a)(14) includes  the following:                                                               
health  maintenance  organizations (HMOs),  foundations,  trusts,                                                               
estates,  the  state,  political   subdivisions  or  other  legal                                                               
entities,  as  well  AS  01.10.060(8),  which  specifies  that  a                                                               
"person" includes  corporations, companies,  partnerships, firms,                                                               
associations,  organizations, businesses,  trusts  as  well as  a                                                               
natural  person.   He  opined that  there  are philosophical  and                                                               
moral problems when a government  creates entities and gives them                                                               
the same authority of the entities that created [government].                                                                   
4:23:36 PM                                                                                                                    
GREG  POLSTON, Physician,  Advanced  Medical  Centers of  Alaska,                                                               
stated support for  HB 287.  He opined that  by removing the CON,                                                               
access to  health care will  increase in Alaska for  Alaskans and                                                               
costs will  decrease.  He  informed the committee  that currently                                                               
he  sits  on the  state  Medicaid  committee,  on both  the  drug                                                               
utilization  review  committee  as   well  as  the  pharmacy  and                                                               
therapeutics committee.   In working  with those  two committees,                                                               
Dr. Polston said  that he has reviewed the cost  and attempted to                                                               
maximize  care.    With  regard   to  the  testimony  that  niche                                                               
physicians  are  trying  to push  this  legislation  through,  he                                                               
strongly  disagreed.    In  fact,  in the  21  states  that  have                                                               
eliminated the CON,  health care costs haven't  been impacted and                                                               
competition has  allowed competition  such that  hospitals aren't                                                               
in monopoly situations.  He informed  the committee that he has a                                                               
report from the  commissioner of DHSS that discusses  a number of                                                               
projects [that would  be considered] if the CON  was removed from                                                               
the state.   In reviewing  the list,  Dr. Polston said  he became                                                               
very  excited with  regard  to the  various  new facilities  [and                                                               
services] that would  be provided in the state.   He related that                                                               
it  appears that  over  200  beds could  be  provided, a  cardiac                                                               
hospital,  and  a substance  abuse  hospital.   Furthermore,  the                                                               
economics of building  these centers, in terms  of jobs provided,                                                               
would also make  the state a stronger place in  which to work and                                                               
4:26:56 PM                                                                                                                    
DR. POLSTON,  in response  to Vice  Chair Seaton,  specified that                                                               
Advanced  Medical Centers  has facilities  located in  Anchorage,                                                               
Fairbanks, and  the Mat-Su  Valley.   He noted  that he  has also                                                               
done work in the Kodiak hospital in the past.                                                                                   
4:27:21 PM                                                                                                                    
REPRESENTATIVE   GARDNER   asked   if   Dr.   Polston   has   any                                                               
documentation  to support  his statement  that in  the 21  states                                                               
that  have eliminated  the CON,  health care  costs haven't  been                                                               
DR. POLSTON  related that the  committee packet should  contain a                                                               
report from the  Washington Policy Center, which  was prepared by                                                               
Mr. Barnes  who should be  on-line to testify.   Additionally, he                                                               
said that he has a report  that was prepared by the Florida State                                                               
University Law Review  "stating some of those  questions that you                                                               
4:28:24 PM                                                                                                                    
GLENDA  SMITH, speaking  as a  patient advocate  and mother  of a                                                               
special  needs  child, began  by  relating  that over  the  years                                                               
attempts to lower  the cost of health care have  resulted in cuts                                                               
to  the   much-needed  services  for  those   with  disabilities.                                                               
Furthermore,  she  said  that she  has  seen  much  documentation                                                               
relating  that  the  CON hasn't  been  successful  in  containing                                                               
health  care costs  and thus  she  questioned why  the CON  would                                                               
continue  to exist.   She  highlighted that  Alaskans don't  have                                                               
access in  this state to  the specialists that are  needed, which                                                               
costs the state a lot of money  to send patients out of state for                                                               
treatment.   Ms. Smith opined that  [HB 287] is a  way to improve                                                               
the rising  costs of health  care in the  state and help  many in                                                               
the  process rather  than  filling the  pockets of  a  few.   She                                                               
concluded  by  noting her  appreciation  in  regard to  what  the                                                               
committee can do to move HB 287 forward.                                                                                        
4:31:59 PM                                                                                                                    
JIM  TAMAI,  Orthopedic  Surgeon,  Advanced  Medical  Centers  of                                                               
Alaska,  informed the  committee that  during his  14 years  as a                                                               
practicing physician in  Fairbanks he has had  the opportunity to                                                               
become familiar with  the health care structure  in the Interior.                                                               
One of the  weaknesses in the Interior, he opined,  is that there                                                               
is only  one specific  health care facility  that offers  a broad                                                               
range  of services,  including inpatient  and outpatient  care as                                                               
well  as  surgical services.    The  aforementioned is  Fairbanks                                                               
Memorial  Hospital, which  is a  strong hospital.   However,  the                                                               
community  could   benefit  by   opening  up   opportunities  for                                                               
alternative access to  health care, in particular in  the form of                                                               
outpatient  ambulatory surgical  center  services.   Having  more                                                               
than one facility,  he highlighted, [is of  importance] since the                                                               
terrorist attacks of September 11,  2001.  Dr. Tamai then related                                                               
his firm  belief in a free  market economy and his  support in HB
287.   He then  indicated the  need for  there to  be alternative                                                               
4:35:26 PM                                                                                                                    
VICE CHAIR  SEATON asked  if Dr. Tamai  had any  information with                                                               
regard to  the population  level necessary  to support  a general                                                               
hospital that  provides 24 hour service,  outpatient surgery, and                                                               
imaging services.                                                                                                               
DR.  TAMAI replied  no,  but  related his  belief  that it  would                                                               
depend upon the size of the  hospital and the number of full-time                                                               
employees.  In  further response to Vice Chair  Seaton, Dr. Tamai                                                               
related his belief that if  Fairbanks' population was one-quarter                                                               
the size of  its current population, it could  possibly support a                                                               
hospital, imaging center, and an  ambulatory surgical center.  He                                                               
explained  that   he  believes  it  would   be  possible  because                                                               
Fairbanks,  even  a  smaller  Fairbanks,  would  be  the  closest                                                               
regional  hospital in  the Interior  area  outside the  Fairbanks                                                               
North Star Borough.                                                                                                             
4:37:31 PM                                                                                                                    
REPRESENTATIVE  GATTO posed  a  situation in  which  there is  no                                                               
facility,  and  inquired  as  to  whether  it  would  be  in  the                                                               
community's best interest  to not have the CON or  to protect one                                                               
good facility.                                                                                                                  
DR. TAMAI  maintained his belief  that the community  would still                                                               
be served best with competition and choices for patients.                                                                       
4:39:35 PM                                                                                                                    
REPRESENTATIVE  GATTO  pointed  out   that  the  government  does                                                               
provide for  monopolies, such as  an electric company.   However,                                                               
the  government  regulates  the company.    Representative  Gatto                                                               
opined that the  CON was similar, in that the  regulation for the                                                               
single  service  was the  CON.    Therefore,  he inquired  as  to                                                               
whether  monopolies can  work so  long as  they are  regulated by                                                               
DR.  TAMAI  maintained  that   competition  makes  everyone  work                                                               
harder, better,  and more efficient.   He expressed  concern that                                                               
complacency may breed where monopolies exist.                                                                                   
4:42:01 PM                                                                                                                    
THOMAS  PIPER,  Principal,   MacQuest  Consulting,  informed  the                                                               
committee that  he has been the  director of the CON  in Missouri                                                               
for over  21 years and  is currently working with  the Department                                                               
of Health in Seattle, Washington.   He noted his opposition to HB
287.    He  then  directed   the  committee's  attention  to  the                                                               
PowerPoint  entitled, "National  CON  Perspective and  Experience                                                               
Impact  Report  of  Deregulation",   which  is  included  in  the                                                               
committee packet.   He then referred to the  slide entitled, "The                                                               
CON Matrix  of 2005  Relative Scope and  Review Thresholds:   CON                                                               
Regulated  Services  by  State"  and pointed  out  that  although                                                               
Alaska has one  of the broadest programs, it ranks  near the top.                                                               
However, were HB 287 to pass,  Alaska's rank would fall with only                                                               
long-term care.                                                                                                                 
MR. PIPER then turned to the  situation in Ohio, which is a state                                                               
for  which there  is the  best  information with  regard to  what                                                               
happened immediately after deregulation of  CON.  He informed the                                                               
committee that  the Ohio General Assembly  started the three-year                                                               
repeal of  the CON in  1995 after having a  CON for 20  years for                                                               
most  services.   All facilities,  services,  beds, capital,  and                                                               
equipment save  long-term care  were taken out  of review.   Over                                                               
the three-year phase  out, 17 services, in total,  were taken out                                                               
of the CON process.   He pointed out that Ohio is  one of the few                                                               
states  that  doesn't have  hospital  licensure,  but rather  the                                                               
services  are  all handled  under  joint  commission surveys  and                                                               
national   reviews,  except   the  psychiatric   and  obstetrical                                                               
services.  He  pointed out that there  are free-standing services                                                               
in  Ohio, most  of which  are licensed  and have  quality review.                                                               
However,  licensure nor  quality review  were barriers  to market                                                               
entry  to  establish  new  services  or  the  expansion  of  such                                                               
MR. PIPER then drew the  committee's attention to "Ohio Hospitals                                                               
Closed since Deregulation", which  relates that before 1997 there                                                               
were 214  licensed hospitals.   However, after  deregulation, the                                                               
number  of hospitals  dropped to  206 with  a commensurate  loss,                                                               
almost 7,000, in the number of  beds.  The next slide, "Detail of                                                               
Hospitals  Opened   since  Deregulation"  relates  that   19  new                                                               
hospitals were  established for  a total of  829 beds.   Overall,                                                               
there was a decline as  evidenced in the slide entitled "Hospital                                                               
Bed Decline since Deregulation."   Still, cardiac catheterization                                                               
increased since deregulation, although per  state law it can only                                                               
be performed in  a hospital setting.  An  increase in [facilities                                                               
offering] open  heart surgery  also occurred  after deregulation.                                                               
With regard to imaging services, in  1995 there were 23 mobile or                                                               
free-standing MRIs, which increased to  126 new MRI units in 1999                                                               
while 65  more intended to come  on-line.  In 1995  there were 35                                                               
hospitals with in-house MRIs and  after 1999 almost all hospitals                                                               
had a MRI.  Mr. Piper  then highlighted the increase in radiation                                                               
therapy  facilities  since  deregulation  as was  the  case  with                                                               
ambulatory surgery facilities and outpatient dialysis centers.                                                                  
4:50:51 PM                                                                                                                    
MR. PIPER identified the main  characteristics of deregulation in                                                               
Ohio as follows:   a significant loss of inner  city hospitals; a                                                               
substantial increase  in ambulatory surgery facilities  and other                                                               
freestanding  facilities; and  more  competitive  hospitals.   He                                                               
then pointed  out that  the elimination  of the  CON is  in sharp                                                               
contrast to  those areas where  work is going forward  to improve                                                               
the  CON,  such as  in  Washington,  Maine, and  North  Carolina.                                                               
Turning attention to the slide  entitled, "Balance Regulation and                                                               
Competition:    Protect  Community Interests",  he  informed  the                                                               
committee that  over 50  percent of the  money going  into health                                                               
care comes  from public sources  such as Medicare,  Medicaid, and                                                               
other third-party  sources.  He  opined that  it might be  a much                                                               
better  situation   if  pricing  and  quality   information  were                                                               
available for patients.  However,  the price of individual health                                                               
care services  isn't available.   Furthermore, often  the patient                                                               
isn't the  person purchasing the  services because  the physician                                                               
is making  the decisions and the  employer/government is actually                                                               
purchasing  the   health  insurance  for  the   employee  if  the                                                               
individual is  even covered.   Therefore, it's necessary  to have                                                               
better  community-oriented health  services  and facility  plans,                                                               
pricing and quality information  to consumers, and maintenance of                                                               
a public forum for a broad range  of services.  The goal isn't to                                                               
reduce the  scope of services  to long-term health care  only, he                                                               
stated.   Mr.  Piper concluded  by  relating that  there is  good                                                               
reason  to  maintain  the  current system  in  Alaska,  which  he                                                               
characterized as a system that really works.                                                                                    
4:54:35 PM                                                                                                                    
VICE  CHAIR  SEATON  highlighted  that the  slides  illustrate  a                                                               
decrease in the  number of hospital beds, but  a general increase                                                               
in the number  of hospitals that provide various  treatments.  He                                                               
asked if  Mr. Piper has any  information with regard to  the cost                                                               
of  procedures  when the  CON  was  in  place  and after  it  was                                                               
MR.  PIPER answered  that recent  reports from  Ohio relate  that                                                               
costs  have  escalated  steeply,   although  there  has  been  no                                                               
reporting  of the  real  costs.   In  fact,  it  has been  almost                                                               
impossible to determine the impact  of the elimination of the CON                                                               
versus other changes.                                                                                                           
4:55:47 PM                                                                                                                    
VICE CHAIR SEATON requested that  Mr. Piper provide the committee                                                               
with  any  information  he  receives in  relation  to  the  costs                                                               
associated with the elimination of the CON.                                                                                     
4:56:14 PM                                                                                                                    
REPRESENTATIVE ANDERSON  inquired as to  who is paying  Mr. Piper                                                               
to testify today.                                                                                                               
MR. PIPER  answered that he  has testified  voluntarily, although                                                               
he noted that  last year he was under contract  with DHSS to help                                                               
improve the CON program.                                                                                                        
4:57:05 PM                                                                                                                    
REPRESENTATIVE ANDERSON  asked, "Do  you find that  this balance,                                                               
this swaying of public policy occurs  in all the states where the                                                               
CON arises in legislation?"                                                                                                     
MR. PIPER  replied that it  does in  the vast majority  of states                                                               
because the value of the CON  has been repeatedly questioned.  He                                                               
emphasized the  difficulty with health  care, which  is expensive                                                               
and doesn't  play by the same  rules as other services  and goods                                                               
since it  isn't a  commodity.  Furthermore,  Alaska is  unique in                                                               
many  ways with  several large  population centers  and areas  in                                                               
which a hospital  is barely [remaining open].  At  the same time,                                                               
CONs  or  similar  programs  don't  stop  competition,  he  said.                                                               
Moreover,  Alaska's new  regulations are  based on  excellence in                                                               
performance so that if a  new applicant/entrant to the market can                                                               
meet  the performance  expectations, that  applicant/entrant will                                                               
be  approved.   He said  that Alaska's  system is  based on  very                                                               
competitive  values,  and therefore  he  opined  that Alaska  has                                                               
taken  steps to  make Alaska's  CON more  responsive although  he                                                               
acknowledged that it's not perfect.                                                                                             
5:00:18 PM                                                                                                                    
VICE CHAIR SEATON  inquired as to whether Mr. Piper  had any data                                                               
with  regard  to the  size  of  population  under which  the  CON                                                               
wouldn't fulfill  its purpose  and the  system would  more easily                                                               
lend itself to a more competitive model.                                                                                        
MR. PIPER responded  that he knows of no such  model.  He related                                                               
that in practice he has seen  that the larger the population, the                                                               
greater the  need for an  oversight into  the market in  order to                                                               
ensure quality  entrants and achievement among  the participants.                                                               
In the health care industry it's  well known that the more that's                                                               
done, the  better the quality and  thus there need to  be minimum                                                               
utilization  standards  for  excellence  and  to  hold  down  the                                                               
mortality figures.                                                                                                              
5:02:08 PM                                                                                                                    
REPRESENTATIVE CISSNA returned to  the Ohio example, and inquired                                                               
as  to how  many,  if  any, medical  school  hospitals or  county                                                               
hospitals  there  were  and  the  outcome  of  those  [after  the                                                               
elimination of the  CON].  She then inquired as  to whether there                                                               
is any  transparency in Ohio with  regard to the costs  of health                                                               
care, before and after the elimination of the CON.                                                                              
MR. PIPER, in response to the  first question, said that he would                                                               
contact  folks in  Ohio for  that  information.   With regard  to                                                               
transparency, he  related his belief  that there are  new efforts                                                               
to improve the situation in  Ohio with regard to the transparency                                                               
of costs.   He indicated that  the Ohio Office for  Health Policy                                                               
appears to have published some data on the hospitals.                                                                           
5:04:05 PM                                                                                                                    
REPRESENTATIVE  GARDNER, referring  to  the  number of  hospitals                                                               
that  have  closed in  Ohio  since  deregulation, asked  if  it's                                                               
possible that  the CON  was an  artificial support  for hospitals                                                               
that weren't needed, and therefore  the decrease in hospitals was                                                               
the result was  a natural consequence of  removing the artificial                                                               
MR.  PIPER  opined that  the  CON  has  been  referred to  as  an                                                               
enfranchiser of  services that are currently  in existence, which                                                               
he said he  believed to be the  case in Ohio.   However, one must                                                               
keep  in  mind  that  the CON  doesn't  protect  those  hospitals                                                               
because the hospitals  have to "pass muster" to  ensure that they                                                               
had a certificate  to provide those services.   Mr. Piper related                                                               
that he was told that some of  the hospitals were on the verge of                                                               
closure [before  the elimination of  the CON], and  therefore the                                                               
closures were probably a combination  of factors.  Health care is                                                               
not cleanly dissected  with regard to regulation  and fee changes                                                               
and thus overlaps are difficult to differentiate.                                                                               
5:06:05 PM                                                                                                                    
REPRESENTATIVE  GARDNER  surmised from  the  slides  of the  Ohio                                                               
situation that more facilities opened  up with the elimination of                                                               
the  CON.   However,  the  data presented  doesn't  speak to  the                                                               
reason for competition, which is  its impact on quality and price                                                               
of services.                                                                                                                    
5:07:19 PM                                                                                                                    
FRED  BROWN,  Chairman,  ASEA/AFSCME Local  52,  Health  Benefits                                                               
Trust; Secretary, Alaska Health  Care Cost Management Corporation                                                               
("The  Coalition"); Secretary,  Fairbanks Central  Labor Council,                                                               
provided  testimony on  HB 287,  paraphrasing from  the following                                                               
prepared statement [original punctuation provided]:                                                                             
     I am making  this statement on behalf  of the Fairbanks                                                                    
     Central  Labor Council,  which has  taken the  position                                                                    
     that the  current state law requiring  a Certificate of                                                                    
     Need from  the Alaska  Department of Health  and Social                                                                    
     Services,   before  expending   more  than   $1,000,000                                                                    
     towards improving  or building a health  care facility,                                                                    
     is  counter-productive  to   providing  cost  effective                                                                    
     health  care for  Alaskans.   It  is also  inconsistent                                                                    
     with the  cherished American principles  of competition                                                                    
     and free enterprise.                                                                                                       
     The   Fairbanks  Labor   Council  is   affiliated  with                                                                    
     eighteen unions representing  approximately 5,500 union                                                                    
     members in  Interior Alaska.  These  union members work                                                                    
     in the public and  the private sectors, in construction                                                                    
     and in the service  industries, and on large government                                                                    
     contracts as well as for  small business owners.   Many                                                                    
     of these  members are married  and have families.   All                                                                    
     have an  interest in  maintaining access  to affordable                                                                    
     health care.                                                                                                               
     Alaska's Union Health plans  have struggled to continue                                                                    
     providing   valuable   health  benefits   despite   the                                                                    
     increasing cost  of health care.   In  communities with                                                                    
     only one health care  provider, the lack of competition                                                                    
     has kept  health care  costs significantly  higher than                                                                    
     in  communities where  competition exists.   The  State                                                                    
     has encouraged  monopolistic activities by  sole source                                                                    
     health   care  facilities,   by  creating   significant                                                                    
     barriers to entry to competitive facilities.                                                                               
     In  sum, the  Fairbanks  Central  Council believes  the                                                                    
     current law  regulating Certificates  of Need  does not                                                                    
     well serve  the needs  of our  union members  and their                                                                    
     families, nor  does it  serve the  needs of  many other                                                                    
     Alaskans who seek  affordable health care.   It is time                                                                    
     to change that law.                                                                                                        
5:10:52 PM                                                                                                                    
MR.  BROWN,  in  response  to  Vice  Chair  Seaton,  related  his                                                               
experience  that  generally  the   cost  of  hospitalization  and                                                               
hospital treatment  in Anchorage is substantially  less expensive                                                               
than  in Fairbanks.   He  offered to  provide specific  data with                                                               
regard to specific procedures.                                                                                                  
5:12:18 PM                                                                                                                    
REPRESENTATIVE  GARDNER asked  if Mr.  Brown's references  to the                                                               
cost of the CON program referred to administering the program.                                                                  
MR.  BROWN   clarified  that   he  meant   that  when   there  is                                                               
competition, the  Health Benefits Trust  is able to  contract for                                                               
much less  expensive coverage  because of  the ability  to commit                                                               
the volume of  patients that allows a volume  discount.  However,                                                               
that opportunity doesn't exist in  Fairbanks and thus the [Health                                                               
Benefits Trust] supports competition as occurs in Anchorage.                                                                    
5:13:08 PM                                                                                                                    
ALAN  GROSS,  Orthopedic   Surgeon,  Juneau  Orthopedics,  stated                                                               
support for  HB 287  and relayed  that the  vast majority  of the                                                               
local  medical  providers  support   eliminating  the  CON.    He                                                               
characterized the CON as outdated  and said that it's a protector                                                               
of large hospitals and doesn't  protect or enhance the quality of                                                               
care.  Frequently, physicians in  Juneau lose patients to Seattle                                                               
for quality  of care and  cost reasons.   Dr. Gross  informed the                                                               
committee  that he  and other  physicians attempted  to create  a                                                               
single-room procedure center for  patients with minor procedures.                                                               
The aforementioned would  be cheaper than the  hospital and would                                                               
be convenient  for patients and  physicians alike.   However, the                                                               
existing CON law  caused the facility to  be denied, specifically                                                               
because the  net present value of  the lease was included  in the                                                               
$1 million cap.  With  the current definition and interpretation,                                                               
it's  difficult to  build much  more than  an "out  house."   Dr.                                                               
Gross  then  informed  the  committee that  there  is  a  plastic                                                               
surgeon in town who can't  compete with the facilities in Seattle                                                               
because  of the  hospital's  refusal to  create  a package  deal,                                                               
which is done for aesthetics in  hospitals in the Lower 48.  With                                                               
regard to providing  care to the indigent, Dr.  Gross opined that                                                               
it doesn't make a difference whether  the care is provided at the                                                               
surgical  center  or the  hospital,  it  will  be provided.    He                                                               
related that  time and again,  he has come across  quality issues                                                               
at Bartlett  Regional Hospital that  he believes could  be solved                                                               
if there were a small  procedure center for orthopedics and other                                                               
certain fields.   One of our desires for a  facility of this type                                                               
was to  provide quality,  which the CON  stymies.   Therefore, he                                                               
strongly urged the committee to pass HB 287.                                                                                    
5:18:01 PM                                                                                                                    
REPRESENTATIVE  COGHILL asked  whether  a  small surgical  center                                                               
would be considered a niche provider.   He further inquired as to                                                               
how  a  surgical center  in  Juneau  would  work with  the  local                                                               
DR. GROSS said that even with  a [surgical center], at least half                                                               
of his practice would done  through the hospital in its operating                                                               
room.   He related  that he  would see a  surgical center  as for                                                               
minor  outpatient  procedures.    He  recalled  a  medical  staff                                                               
meeting  last  year  when the  issue  of  economic  credentialing                                                               
arose.    Economic  credentialing  is  a  situation  in  which  a                                                               
hospital can sanction  a physician for being  in competition with                                                               
a hospital.   The medical staff resoundingly  passed a resolution                                                               
against  supporting  the aforementioned  while  a  member of  the                                                               
hospital  board argued  that competition  would be  good for  the                                                               
hospital to keep it honest  and provide quality care, although it                                                               
would hurt Bartlett Regional Hospital economically at first.                                                                    
5:20:26 PM                                                                                                                    
DR.  GROSS,  in response  to  Vice  Chair  Seaton, said  that  he                                                               
absolutely believes  the competitive  model works in  a community                                                               
with a  base population of 30,000.   He noted that  the catchment                                                               
in Juneau  would be  closer to  50,000.   In further  response to                                                               
Vice  Chair Seaton,  he  related  his belief  that  no one  would                                                               
attempt to  form a surgical center  in a town such  as Petersburg                                                               
where  surgery   is  only  performed   once  every   two  months.                                                               
Therefore, he said he supports the capitalistic approach in                                                                     
which the market [determines what it can bear].                                                                                 
5:21:22 PM                                                                                                                    
SAM KORSMO, Chief Operating Officer, Alaska Open Imaging Center                                                                 
(AOIC), paraphrased from the following written statement                                                                        
[original punctuation provided]:                                                                                                
     Thank you for  allowing me to speak  to this committee.                                                                    
     My name is Samuel J. Korsmo.   I am the Chief Operating                                                                    
     Officer of  Alaska Open  Imaging Center  with locations                                                                    
     in Wasilla,  Anchorage, Soldotna and Fairbanks.   Today                                                                    
     we have 4 Doctors, 54 employees in 4 imaging centers.                                                                      
     As a physicians group  in the radiology profession, our                                                                    
     business has  prospered on the  core value  of SERVICE.                                                                    
     We  bring  referring  physicians  alternatives  in  the                                                                    
     outpatient   imaging   needs   that  place   care   and                                                                    
     compassion to  their patients.  We  have introduced new                                                                    
     technologies  that are  saving  Alaskan  lives such  as                                                                    
     open imaging,  web-based imaging services  and positron                                                                    
     emission   tomography  (PET).      Responding  to   our                                                                    
     leadership,  other providers  also  finally made  these                                                                    
     services available.                                                                                                        
     We  have been  in operation  in Anchorage,  Wasilla and                                                                    
     Kenai for  the past few  years and in all  these areas,                                                                    
     the local  hospitals have  embarked on  major expansion                                                                    
     projects,  showing  that we  were  not  a detriment  to                                                                    
     their operations.   Our success shows  that doctors and                                                                    
     their patients  appreciate having the choice  to access                                                                    
     our  quality  service  and   our  commitment  to  costs                                                                    
     We  recently opened  a facility  in Fairbanks  and have                                                                    
     achieved  the same  level of  support and  appreciation                                                                    
     from the  community.  Unfortunately, after  two rulings                                                                    
     by  Commissioner  Jackson   that  Alaska  Open  Imaging                                                                    
     Center is  a physicians' group not  covered by Alaska's                                                                    
     CON laws,  Banner Health Corporation  through Fairbanks                                                                    
     Memorial  Hospital  has  filed a  lawsuit  against  the                                                                    
     department and AOIC seeking to  shut down our operation                                                                    
     and to  restrict Fairbanks consumer access  to quality,                                                                    
     affordable health care services.                                                                                           
     This is just  another example of how  Alaska's CON laws                                                                    
     are being abused  to the detriment of  Alaskans and why                                                                    
     it should  be done  away with.   We  do not  use public                                                                    
     money to build our facilities  and when state funds are                                                                    
     spent  on Medicaid  Services at  AOIC  the charges  are                                                                    
     substantially less  than hospital charges for  the same                                                                    
MR.  KORSMO  added  that  AOIC doesn't  self-refer  and  thus  it                                                               
totally competes with  other entities.  "We have no  way of self-                                                               
referral,"  he  stated.   He  continued  to paraphrase  from  the                                                               
following written testimony [original punctuation provided]:                                                                    
     The hospitals  say they  need monopoly  pricing because                                                                    
     they  take  low income  patients  thru  no pay/low  pay                                                                    
     charity and  such.  I  am here  to tell you  we provide                                                                    
     more than  our fair share  at 18% of gross  revenues in                                                                    
     2005  and preceding  in 2004  at 15%.   I  believe that                                                                    
     this may  be even  higher than those  services provided                                                                    
     by hospitals.                                                                                                              
     Thank you and I will be glad to answer any questions.                                                                      
5:24:53 PM                                                                                                                    
REPRESENTATIVE  COGHILL asked  if there  is a  level of  pay that                                                               
AOIC  receives  that  may  be   better  or  worse  than  that  of                                                               
MR.  KORSMO informed  the committee  that AOIC  will service  any                                                               
patient [from] any  referring physician, even after  hours and on                                                               
weekends.   With regard  to the pay  difference, Mr.  Korsmo said                                                               
that there is  a structure that's completely  different from what                                                               
AOIC receives in  reimbursements from Medicaid and  Medicare.  He                                                               
explained that  hospitals receive  facility charges, which  are a                                                               
contracted amount  to the  state that's  received in  addition to                                                               
the  flat fee  that's set  by the  department or  the Centers  of                                                               
Medicaid  and  Medicare  Services  (CMS).   The  hospitals  would                                                               
receive four charges  in addition to the flat  charge whereas for                                                               
an ambulatory or surgical center only the flat fee applies.                                                                     
5:26:39 PM                                                                                                                    
REPRESENTATIVE  COGHILL surmised  then  that  AOIC wouldn't  have                                                               
physicians  or  technicians  that  work with  AOIC  and  a  local                                                               
hospital at the same time.                                                                                                      
MR. KORSMO said that actually that  has occurred.  He pointed out                                                               
that AOIC's  physicians are credentialed  in two  other hospitals                                                               
in the state.                                                                                                                   
5:27:28 PM                                                                                                                    
MR. KORSMO, in response to Vice  Chair Seaton, said that AOIC has                                                               
no desire to enter small  communities because it makes more sense                                                               
for those  people to travel  for the  services.  Mr.  Korsmo said                                                               
that he, too, believes in  the capitalistic, competitive markets,                                                               
but he indicated that dismantling the  CON will be a process that                                                               
may include protecting the small communities.                                                                                   
5:28:50 PM                                                                                                                    
JEREMY  HAYES,   Representative,  Advanced  Medical   Centers  of                                                               
Alaska,  stated  support for  HB  287  and paraphrased  from  the                                                               
following written statement [original punctuation provided]:                                                                    
     In  1982,  less than  8  years  after the  Federal  CON                                                                    
     mandate,  the   Federal  Government   acknowledged  the                                                                    
     failure  of  its Certificate  of  Need  laws to  reduce                                                                    
     health care costs and  repealed the mandate altogether.                                                                    
     Almost  25   years  later  and   with  a   health  care                                                                    
     environment  completely  different  than  that  of  the                                                                    
     original CON era, Alaska's  Certificate of Need remains                                                                    
     and is  as ineffective  as it was  more than  2 decades                                                                    
     ago.   But  rather than  repeal or  scale back  our CON                                                                    
     regulations  like many  states,  Alaska  has made  them                                                                    
     even more  stringent.  In 2006,  Alaska is the 2   most                                                                    
     regulated  health care  state  in the  country and  has                                                                    
     costs that are 40% higher than the national average.                                                                       
     We support  repealing our CON laws  as Alaska continues                                                                    
     to see  some of the  most expensive health care  in the                                                                    
     country continue to  rise.  The rising  cost of medical                                                                    
     care  in  Alaska  is   hurting  our  families,  raising                                                                    
     workers   compensation  costs,   putting  health   care                                                                    
     insurance  out of  economic range  for individuals  and                                                                    
     companies, and raising Medicaid costs in our state.                                                                        
     While  the Certificate  of Need  process was  initially                                                                    
     implemented  with the  intent  to  control health  care                                                                    
     costs  and  prevent  duplication of  services,  it  has                                                                    
     failed in that regard  while instead driving prices up,                                                                    
     restricting consumer's medical  choices, and protecting                                                                    
     hospitals   from   potential  competitors   who   could                                                                    
     accomplish the very goal the  CON program strives for …                                                                    
     lower health care costs.                                                                                                   
     Alaska's  CON program  no  longer  serves the  public's                                                                    
     interest, if  indeed it ever  did.  The  stated purpose                                                                    
     of the program  is to foster a health  care system that                                                                    
     controls costs  and meets changing conditions.   Yet to                                                                    
     succeed  such a  system requires  the very  flexibility                                                                    
     the  CON   is  designed  to   prevent.    In   a  state                                                                    
     experiencing  growth and  demographic  change, the  CON                                                                    
     law prevents  providers from  adapting to  the changing                                                                    
     needs of the community effectively.                                                                                        
     This Bill, if passed,  would have a tremendous economic                                                                    
     effect on the  residents of Alaska in the  form of huge                                                                    
     health care savings.   We feel its  time that Alaskan's                                                                    
     are  given  an answer  to  their  quest for  affordable                                                                    
     health care?                                                                                                               
     Since  the 1980's  when states  were released  of their                                                                    
     obligation from the federal  government to maintain CON                                                                    
     laws,  numerous studies  have  examined  the change  in                                                                    
     health  care costs  as  states  eliminated those  laws.                                                                    
     *If  Certificate   of  Need  laws  were   "working"  as                                                                    
     advertised,  then one  would expect  to see  a rise  in                                                                    
     costs in  states where CON  laws were eliminated.   But                                                                    
     in fact this  is not the case.  One  of the most widely                                                                    
     referenced  studies  was  written  by  Duke  University                                                                    
     professors Christopher  Conover &  Frank Sloan  and was                                                                    
     published in  the Journal  of Health  Politics, Policy,                                                                    
     and  Law.   They found  that output  restrictions which                                                                    
     resulted from CON  laws led to higher  not lower costs,                                                                    
     and  higher profits  for the  hospitals.   The  authors                                                                    
     point out  that CON laws  resulted in higher  costs per                                                                    
     day and  per admission in states  with CON regulations,                                                                    
     along  with higher  hospital profits.    So, in  states                                                                    
     where  CON  laws  remain,  patients  are  charged  more                                                                    
     money,  more often  than in  states  that repealed  the                                                                    
     law.     Simply  put,  the  result   of  repealing  CON                                                                    
     regulations is  lower health care costs  for the people                                                                    
     of that state.                                                                                                             
     Studies  throughout  the  US have  arrived  at  similar                                                                    
     conclusions:   the  data   indicates  that   a  program                                                                    
     designed to reduce costs,  improve quality, and promote                                                                    
     access  has  not achieved  any  of  these goals.    *In                                                                    
     addition, the  14 states  with no  CON laws  (which are                                                                    
     home to  more than  1/3 of  Americans), show  no higher                                                                    
     rate of  health care costs  or spending due to  lack of                                                                    
     such laws.                                                                                                                 
     In  states with  less restrictive  Certificate of  Need                                                                    
     programs,    hospitals    are    increasingly    facing                                                                    
     competition  from  ambulatory   surgery  centers  which                                                                    
     offer miner surgical procedures  that do not require an                                                                    
     overnight  stay.    These  facilities  offer  the  same                                                                    
     surgery  as a  hospital  but at  a significantly  lower                                                                    
     price.  It  is one of the ways the  market is adjusting                                                                    
     to make  health care  delivery more efficient  and cost                                                                    
     effective.  Established  hospitals in heavily regulated                                                                    
     CON  states like  Alaska however,  use the  CON law  to                                                                    
     prevent  such facilities  from opening  in their  city,                                                                    
     thus blocking  access to health  care choice  and lower                                                                    
     costs to the consumer.                                                                                                     
     The  Certificate of  Need program's  chief  goal is  to                                                                    
     reduce  health care  costs, something  it has  not been                                                                    
     successful  in  accomplishing.     There  has  been  no                                                                    
     evidence that CON regulation lowers  the cost of health                                                                    
     care  in   Alaska;  a  fact   which  alone   should  be                                                                    
     sufficient   reason  to   repeal  a   law  specifically                                                                    
     designed with that aim in mind.                                                                                            
     There is  possibly no proposition in  economics that is                                                                    
     more accepted than the idea  that if you want to reduce                                                                    
     the cost  of something, you foster  an environment that                                                                    
     encourages open competition  and entrepreneurship while                                                                    
     discouraging monopolistic  practices.  It is  as faulty                                                                    
     to  think  that  limiting  the supply  of  health  care                                                                    
     facilities can reduce health care  costs as it would be                                                                    
     to think that oil prices  could be lowered by producing                                                                    
     less oil.                                                                                                                  
     Competition  brings  lower  prices,  more  convenience,                                                                    
     better  quality, and  new  technology and  innovations.                                                                    
     Hospitals   with  CON   protection  have   a  franchise                                                                    
     monopoly  which   provides  no  incentive  for   it  to                                                                    
     exercise cost  control or better services.   The owners                                                                    
     of  these  existing   facilities  can  charge  inflated                                                                    
     prices  for their  services  which  continues to  raise                                                                    
     costs  by  restricting   the  entry  of  cost-effective                                                                    
     providers into the market.                                                                                                 
     Facility duplication  is at  the heart  of competition.                                                                    
     Indeed,  the very  definition of  a monopoly  market is                                                                    
     one where  there is  no duplication.   And this  is why                                                                    
     consumers  in monopoly  markets lose;  they are  denied                                                                    
     the  option  of turning  to  others  who are  providing                                                                    
     "duplicated" services when  monopoly providers act like                                                                    
     Market  forces generally  allocate society's  resources                                                                    
     far   better  than   government  planning.     Everyday                                                                    
     experience  shows  that  when  the market  is  free  to                                                                    
     operate  under minimal  government control,  the result                                                                    
     is abundant, quality service at a low price.                                                                               
     In reality, the continuation  of CON regulations cannot                                                                    
     be justified  either theoretically or empirically.   In                                                                    
     fact,  from the  perspective  of  sound economics,  the                                                                    
     reverse is  true.   If one desired  to devise  a policy                                                                    
     for  any  market  whose  purpose  would  be  to  reduce                                                                    
     efficiency,   raise  costs   and  prices,   and  reduce                                                                    
     quality, Alaska's existing CON  program would be highly                                                                    
     In   researching  countless   journals  and   published                                                                    
     articles, one is hard pressed  to find even one article                                                                    
     that asserts  that CON laws succeed  in lowering health                                                                    
     care  costs.    One  thing CON  studies  have  done  is                                                                    
     elicited a remarkable evaluative  consensus … that they                                                                    
     don't work.                                                                                                                
     Over the  last 2 decades, the  Federal Trade Commission                                                                    
     has  done several  studies on  the impact  of CON  laws                                                                    
     both  nationally and  for specific  states.   The FTC's                                                                    
     consistent  conclusion can  be summarized  in its  most                                                                    
     recent study  released jointly  with the  Department of                                                                    
     Justice in  July 2004.   The agencies believe  that CON                                                                    
     programs can  pose serious competitive concerns.   They                                                                    
     found that  where CON programs are  intended to control                                                                    
     health care costs, there  is considerable evidence that                                                                    
     they  actually  drive  prices  up  by  fostering  anti-                                                                    
     competitive barriers  to entry.   Their report  goes on                                                                    
     to say  that evidence  does not  support the  view that                                                                    
     CON regulations  reduce the  costs of  providing health                                                                    
     care  services and  urges  states  to consider  whether                                                                    
     such  programs best  serve their  citizens health  care                                                                    
     There's   a   reason   Congress  repealed   state   CON                                                                    
     requirements just a few years after mandating them.                                                                        
     There's a  reason 14 states  which make up over  1/3 of                                                                    
     our  countries  population   have  completely  repealed                                                                    
     their CON laws.                                                                                                            
     And  there's  a reason  why  6  additional states  have                                                                    
     repealed every  part of their CON  regulations save for                                                                    
     long-term care facilities…                                                                                                 
     They don't work  at controlling health care  costs!  If                                                                    
     they did we wouldn't have  some of the costliest health                                                                    
     care in the nation.                                                                                                        
5:37:24 PM                                                                                                                    
MR. HAYES,  regarding Mr. Lynch's concerns  about self-referrals,                                                               
said that  worse than  a facility that  does self-referrals  is a                                                               
facility  that  has a  monopoly.    A  facility with  a  monopoly                                                               
doesn't  have  to  self-refer because  it  already  receives  the                                                               
business/referral.   With  regard to  Mr. Gould's  testimony that                                                               
costs would rise with the elimination  of the CON, per a sampling                                                               
he did of various facilities, such  a tactic could be used by the                                                               
supporters  of this  bill in  the same  way and  does not  really                                                               
serve to prove anything, Mr. Hayes  said.  In fact, DHSS's fiscal                                                               
note relates that the cost of  surgical centers is lower than the                                                               
cost  of hospitals.   With  regard to  Mr. Stephens'  notion that                                                               
elimination  of the  CON would  only  work in  states with  large                                                               
populations, he  pointed out  that the  states of  Idaho, Kansas,                                                               
New  Mexico,  North  Dakota, South  Dakota,  Utah,  Wyoming,  and                                                               
others have been  successful at repealing CON laws.   With regard                                                               
to charity  care, Mr.  Hayes agreed  with earlier  testimony that                                                               
it's  provided by  many  providers  in each  service  area.   The                                                               
difference  is  that  besides hospitals,  those  facilities  that                                                               
provide  charity  care aren't  subsidized  "to  the tune  of  $25                                                               
million a year by the  government."  Moreover, if surgery centers                                                               
were  paid  for  charity  care and  received  additional  federal                                                               
funding  from Medicare,  they could  afford to  operate the  same                                                               
hours as hospitals.                                                                                                             
5:40:33 PM                                                                                                                    
MR.  HAYES,  in response  to  Representative  Coghill, agreed  to                                                               
provide  the study  by  Duke  University to  the  committee.   In                                                               
further response  to Representative Coghill, Mr.  Hayes said that                                                               
he  doesn't   work  with   a  hospital.     He  then   turned  to                                                               
Representative Gardner's comment  regarding some physicians being                                                               
denied access  to hospital privileges  because they  attempted to                                                               
open their  own surgical  facilities, but were  denied.   He said                                                               
that in Fairbanks  Dr. Nancy Cross has been  denied privileges in                                                               
such a situation.                                                                                                               
5:42:21 PM                                                                                                                    
VICE CHAIR  SEATON suggested that  he would appreciate  Dr. Cross                                                               
addressing that herself.                                                                                                        
[HB 287 was held over.]                                                                                                         
5:42:42 PM                                                                                                                    
There being no  further business before the  committee, the House                                                               
Health, Education and Social  Services Standing Committee meeting                                                               
was adjourned at 5:43:37 PM.                                                                                                  

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