02/19/2008 03:00 PM House HEALTH, EDUCATION & SOCIAL SERVICES
| Audio | Topic |
|---|---|
| Start | |
| HB337|| HB345 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 337 | TELECONFERENCED | |
| += | HB 345 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE HEALTH, EDUCATION AND SOCIAL SERVICES STANDING COMMITTEE
February 19, 2008
3:04 p.m.
MEMBERS PRESENT
Representative Peggy Wilson, Chair
Representative Bob Roses, Vice Chair
Representative Anna Fairclough
Representative Wes Keller
Representative Paul Seaton
Representative Sharon Cissna
Representative Berta Gardner
MEMBERS ABSENT
All members present
OTHER LEGISLATORS PRESENT
Representative Kurt Olson
COMMITTEE CALENDAR
HOUSE BILL NO. 337
"An Act establishing the Alaska Health Care Commission and the
Alaska health care information office; relating to health care
planning and information; repealing the certificate of need
program for certain health care facilities and relating to the
repeal; annulling certain regulations required for
implementation of the certificate of need program for certain
health care facilities; and providing for an effective date."
- HEARD AND HELD
HOUSE BILL NO. 345
"An Act amending the certificate of need requirements to exclude
expenditures for diagnostic imaging equipment in certain
circumstances."
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 337
SHORT TITLE: HEALTH CARE: PLAN/COMMISSION/FACILITIES
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/22/08 (H) READ THE FIRST TIME - REFERRALS
01/22/08 (H) HES, FIN
01/24/08 (H) HES AT 3:00 PM CAPITOL 106
01/24/08 (H) Heard & Held
01/24/08 (H) MINUTE(HES)
01/31/08 (H) HES AT 3:00 PM CAPITOL 106
01/31/08 (H) Heard & Held -- Assigned to
Subcommittee
01/31/08 (H) MINUTE(HES)
02/09/08 (H) HES AT 9:00 AM CAPITOL 106
02/09/08 (H) Heard & Held
02/09/08 (H) MINUTE(HES)
02/19/08 (H) HES AT 3:00 PM CAPITOL 106
BILL: HB 345
SHORT TITLE: MEDICAL FACILITY CERTIFICATE OF NEED
SPONSOR(s): REPRESENTATIVE(s) KELLY
01/30/08 (H) READ THE FIRST TIME - REFERRALS
01/30/08 (H) HES, FIN
02/09/08 (H) HES AT 9:00 AM CAPITOL 106
02/09/08 (H) Heard & Held
02/09/08 (H) MINUTE(HES)
02/19/08 (H) HES AT 3:00 PM CAPITOL 106
WITNESS REGISTER
KAY BIAS, Alaska Representative
Radiology Business Manager's Medicare Advisory Committee
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 345.
JEFF COOK, Board President
Greater Fairbanks Community Hospital Foundation, Incorporated
Fairbanks, Alaska
POSITION STATEMENT: Testified in opposition to HB 337 and in
support of HB 345.
CHRISTINE SCOTT, Patient
Advanced Medical Centers of Alaska
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 337.
ANN MATTHEWS
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 337.
ROD PERDUE, Employee
Fairbanks Memorial Hospital
Fairbanks, Alaska
POSITION STATEMENT: Testified during the hearing on HB 337 and
HB 345.
MARK ACKLEY, Chief Executive Officer
Imaging Associates of Providence
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 345.
MIKE MCNAMARA, M. D.
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 345.
ROBERT BRIDGES, M. D.; Owner
Aurora Diagnostic Imaging
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 337.
MIKE PRAX
North Pole, Alaska
POSITION STATEMENT: Testified in support of the repeal of the
Certificate of Need Program.
JIM LYNCH, Employee
Fairbanks Memorial Hospital
Fairbanks, Alaska
POSITION STATEMENT: Testified during the hearing on HB 337 and
HB 345.
MARTY O'LONE, Employee
Fairbanks Memorial Hospital
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 345 and in
opposition to HB 337.
MAREE BARNEY-SUTLEY
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 337.
ROBERT GOULD, Chief Financial Officer; Head of Operations
Fairbanks Memorial Hospital
Fairbanks, Alaska
POSITION STATEMENT: Testified in opposition to HB 337 and in
support of HB 345.
SCOTT BELL, Volunteer
Greater Fairbanks Community Hospital Foundation
Fairbanks, Alaska
POSITION STATEMENT: Testified in opposition to HB 337.
KEVIN DORSEY
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 337.
JAMESON SMYTH
Fairbanks, Alaska
POSITION STATEMENT: Testified during the hearing on HB 337.
CHRISTINE PALMER
Fairbanks, Alaska
POSITION STATEMENT: Testified during the hearing on HB 337 and
HB 345.
PAUL FUHS, Lobbyist
Alaska Open Imaging Center, LLC (AOIC)
Anchorage, Alaska
POSITION STATEMENT: Testified during the hearing on HB 337 and
HB 345.
JEANNINE HINMAN, Director
Regulatory and Government Affairs
Advanced Medical Centers of Alaska
Anchorage, Alaska
POSITION STATEMENT: Testified during the hearing of HB 377 and
HB 345.
LEONARD SISK, Physician; Medical Director and Owner
Imaging Associates of Providence (IAP)
Anchorage, Alaska
POSITION STATEMENT: Testified during the hearing on HB 337 and
HB 345.
BOB URATA, Physician; Member
Board of Directors
Bartlett Regional Hospital
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 345.
RYAN SMITH, Chief Executive Officer
Central Peninsula General Hospital
Soldotna, Alaska
POSITION STATEMENT: Testified in opposition to HB 337 and in
support of HB 345.
JOEL GILBERTSON, Representative
Providence Health and Services
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 345.
ROD BETIT, President
Alaska State Hospital and Nursing Home Association (ASHNHA)
Juneau, Alaska
POSITION STATEMENT: Testified during the hearing on HB 337 and
HB 345.
NORMAN STEPHENS, Chief Executive Officer
Mat-Su Regional Medical Center (MSRMC)
Palmer, Alaska
POSITION STATEMENT: Testified during the hearing on HB 345 and
HB 337.
RICHARD COBDEN, M. D.; Chief of Medical Staff
Fairbanks Memorial Hospital (FMH)
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 337.
JOHN BRINGHURST, Chief Executive Officer
Petersburg Medical Center
Petersburg, Alaska
POSITION STATEMENT: Testified in favor of HB 345.
MIKE POWERS, Administrator
Fairbanks Memorial Hospital
Fairbanks, Alaska
POSITION STATEMENT: Testified during the hearing on HB 345 and
HB 337.
ACTION NARRATIVE
CHAIR PEGGY WILSON called the House Health, Education and Social
Services Standing Committee meeting to order at 3:04:12 PM.
Representatives Fairclough, Keller, Seaton, Gardner, and Wilson
were present at the call to order. Representatives Cissna and
Roses arrived as the meeting was in progress. Representative
Kurt Olson was also in attendance.
HB 337-HEALTH CARE: PLAN/COMMISSION/FACILITIES
HB 345-MEDICAL FACILITY CERTIFICATE OF NEED
3:04:36 PM
CHAIR WILSON announced that the order of business would be a
hearing on two bills: HOUSE BILL NO. 337, "An Act establishing
the Alaska Health Care Commission and the Alaska health care
information office; relating to health care planning and
information; repealing the certificate of need program for
certain health care facilities and relating to the repeal;
annulling certain regulations required for implementation of the
certificate of need program for certain health care facilities;
and providing for an effective date" and, HOUSE BILL NO. 345,
"An Act amending the certificate of need requirements to exclude
expenditures for diagnostic imaging equipment in certain
circumstances."
3:06:06 PM
CHAIR WILSON informed participants that the committee will only
hear testimony today and that each speaker will be limited to
three minutes.
3:07:49 PM
KAY BIAS, Alaska Representative, Radiology Business Manager's
Medicare Advisory Committee, expressed her support for
Representative Kelly's bill as a fair and equitable alternative
to the present Certificate of Need (CON) program. The present
system does not define a physician's office and physicians, in
partnership with hospitals, have been able to purchase imaging
equipment without a CON, unless they are radiologists. Ms. Bias
explained that a ruling by Superior Court Judge Niesje
Steinkruger led to the decision that radiologists should not be
given the status of a physician's office. She opined that the
imaging facility in question was not a physician's office due to
the ownership structure: 10 percent radiologists and 90 percent
private investors, and other factors. Ms. Bias stated that the
commissioner [of the Department of Health & Social Services] has
not looked at the Medicare guidelines to compare a radiologist
physician's office and other imaging centers. She continued to
say that HB 345 clearly offers a solution to the restraint of
trade on radiologists and also protects the smaller communities
from for-profit conglomerates. Ms. Bias urged the committee to
support HB 345.
3:10:00 PM
JEFF COOK, Board President, Greater Fairbanks Community Hospital
Foundation, Incorporated, stated his opposition to HB 337 and
his support of HB 345. He informed the committee that the
Greater Fairbanks Community Hospital Foundation was formed in
1968. Previous to that, city and borough of Fairbanks voters
had turned down the purchase of St. Joseph's Hospital after its
closure. The foundation raised money and opened a new hospital
in 1972; it now has 500,000 square feet of acute care, long-
term care, and special care facilities. Mr. Cook explained that
the hospital is owned by the foundation and is operated by
Banner Health. He stressed that the 25 member volunteer board
is in opposition to any proposal that will eliminate, or
drastically alter, the CON program. Fairbanks Memorial Hospital
is open 24 hours per day and provides acute and long-term care,
emergency services, psychiatric care, care for chronic
inebriates, and treatment for heart, cancer, and diabetic
patients; all patients are seen regardless of their ability to
pay or their insurance coverage. Mr. Cook opined that it is
only fair to eliminate CON if those who offer ambulatory care
will also offer 24 hour services to all patients in need.
Fairbanks is an isolated community and it is important to have a
wide range of medical services, such as the new cancer center,
heart center, and cath lab. However, to continue to offer the
best care possible, the hospital needs to retain all services,
not just the unprofitable and inconvenient services. Mr. Cook
re-stated the board's opposition to the elimination of CONs and
its support of HB 345.
3:13:21 PM
CHRISTINE SCOTT, Patient, Advanced Medical Centers of Alaska,
stated that she is a patient of Advanced Medical Centers of
Alaska in Fairbanks. She explained that Fairbanks Memorial
Hospital (FMH) does not allow all of the doctors in the
Fairbanks area to work in the hospital; therefore, she has to go
to Anchorage for medical procedures. Ms. Scott expressed her
belief that an out-patient surgery center in Fairbanks would
benefit patients and would not take business away from FMH
because patients from the medical center are already being
treated in Anchorage. She spoke in favor of the elimination of
the CON program in order to encourage capitalization.
3:15:51 PM
ANN MATTHEWS, Fairbanks, Alaska, expressed her support for the
governor's plan. She related her experience of getting
emergency room care at the hospital for the cost of $5,000 for
one visit. She opined that the hospital is a for-profit
hospital and nets $25 million to $35 million each year. Ms.
Matthews said that the CON program limits choices and variety,
and access to medical care, while increasing cost. She urged
the committee to support SB 245 and HB 337.
3:17:57 PM
ROD PERDUE, Employee, Fairbanks Memorial Hospital, informed the
committee that he works at Fairbanks Memorial Hospital and
wanted to speak from a different perspective. He said that he
has lived in many communities and places around the world. From
the community standpoint, the strength of the hospital benefits
the community in two areas. He spoke of the Golden Heart
Project; a collaborative effort between the hospital and a
number of agencies that will build a behavioral health detox
center this year. Mr. Perdue opined that the center benefitted
from the support of the hospital, as did the project to build an
out-patient diabetes center three years ago. He pointed out
that he and his family live in the Interior due to the strength
of the community and the hospital is the cornerstone for many
activities. Mr. Perdue expressed his belief that it is
essential for the well-being of the community to keep the
hospital a strong and viable entity.
3:20:32 PM
MARK ACKLEY, Chief Executive Officer, Imaging Associates of
Providence, expressed his full support of HB 345. He stated
that the bill will protect the smaller, vulnerable, communities
that can not withstand the pressure of new competition resulting
from uncontrolled growth. In addition, the bill will encourage
a competitive consumer-driven environment that gives choices and
improves access to medical services. Mr. Ackley opined that HB
345 will benefit both business and patients who are entitled to
a choice in health care decisions; furthermore, it provides
clear guidelines for new medical businesses to develop with
confidence and sustainability. For example, Imaging Associates
of Providence has twice received permission from the state to
provide imaging services to Wasilla and Anchorage. However, the
decisions were reversed and now both parties are involved in
expensive legal proceedings. Mr. Ackley urged the committee to
support HB 345.
3:23:25 PM
MIKE MCNAMARA, M. D., Anchorage, Alaska, informed the committee
that he is an orthopedic hand surgeon and is also president of a
four member advisory group representing twenty-six limited
partner surgeons of the Alaska Surgical Center in Anchorage.
The center completes about 5,500 cases per year and has 55
surgeons representing 16 specialties. Dr. McNamara said that
about 20 percent of the center's cases are Medicaid, Medicare,
VA, Tri-Care and Project Access; the latter is free care for the
underserved. He stated his opposition to the repeal of CON and
his support of HB 345. Dr. McNamara reminded the committee that
the original purpose of the CON in Alaska was to prevent the
unnecessary duplication of development. He pointed out that, in
Anchorage, there are four primary surgical centers that operate
at around fifty-five percent to sixty percent capacity.
Fortunately, the community is currently well served by the best
surgeons, nurses, and support staff. However, allowing more
centers to open will reduce peer oversight and change the
existing standard of care. Dr. McNamara pointed out that there
is a nationwide shortage of operating room nurses and the
centers are already understaffed. He opined that undue
competition for staff will not lower nursing costs but will
raise costs and overhead. He further explained that larger
centers have the power to negotiate with insurance companies and
unions to manage costs. He urged the committee not to repeal
CON and risk the loss of the centers of excellence in Anchorage.
Dr. McNamara opined that there is no need to send patients
outside anymore.
3:28:08 PM
ROBERT BRIDGES, M. D.; owner, Aurora Diagnostic Imaging,
informed the committee that his private practice is Aurora
Diagnostic Imaging. He stated his support for HB 337;
however, he urged consideration of some of the components of HB
345. His experience in private practice and his position with
an open imaging center warrants his support of the repeal of
CON. The present system hinders care and the influx of new
medical practices to the state. In addition, it does not
address quality of care and quality assurance for the people of
the state. The major problem is the lack of explicit
definitions and he opined that HB 345 addresses the need to
define what a practice really is. Dr. Bridges indicated that he
provides services to Medicare and Medicaid patients and is
uniquely qualified for certain procedures; however, he is having
difficulty getting the equipment he needs due to the CON
restrictions. Dr. Bridges pointed out the value of diversity to
bring in different ideas and progress. At the very least, new
definitions and better guidance are needed for the selection of
new medical facilities.
3:30:28 PM
MIKE PRAX, North Pole, Alaska, stated that he wished to advocate
for the repeal of the Certificate of Need program and the
elimination of the health care commission. He explained that
CON is based on three false premises: that anyone should
override an individual's right to partake of or to provide
medical services; that anyone can override an individual's right
to partake of or provide specific medical services; and that one
can make a potential life or death decision for another. He
opined that CON is a con on the public and a protectionist
measure for certain facilities and providers, who then exclude
others who wish to provide a service. Mr. Prax said that
Fairbanks Memorial Hospital was able to build a cancer center
without a proven economical need for one; thus, the term "con."
He pointed out that his personal decision is to obtain medical
care in the Lower 48 where services are better and costs are
lower. Mr. Prax stated that one can not override individual
decisions on health care and that the provision of services is
up to the market. He urged the committee to repeal the law.
3:34:03 PM
JIM LYNCH, Employee, Fairbanks Memorial Hospital, informed the
committee that he has been a resident of Fairbanks since 1969
and expressed his agreement with the testimony given by Dr.
McNamara. He then referred to Representative Kelly's comments
made at the reading of the bill. Mr. Lynch disagreed with
Representative Kelly's characterization of the issue as
"hospitals versus docs" and reminded the committee that
physicians are on both sides of the issue. Also, he stated his
belief that a CON does not limit or eliminate competition; with
key government oversight, the CON program is the necessary
foundation that provides the ground rules for competition that
creates a sustainable and lasting infrastructure for health care
in Alaska.
3:36:10 PM
MARTY O'LONE, Employee, Fairbanks Memorial Hospital, expressed
his belief that the loss of the CON program would inflict
tremendous hardship on the rural community of Fairbanks. He
related his experiences as a patient in the intensive care unit
and the emergency room after a severe allergic reaction. Mr.
O'Lone stated that his care was expensive, but the 24 hour per
day care and emergency room care provided by the hospital is
valuable and is needed. He stated his opposition to HB 337 and
his support of HB 345.
3:37:52 PM
REPRESENTATIVE SEATON observed that there is support for HB 345
and its exemption of the diagnostic imaging centers under
certain conditions. He asked whether the same concept should be
applied to ambulatory surgery centers, in addition to diagnostic
imaging centers.
3:38:43 PM
MR. O'LONE expressed his belief that the classifications and
parameters of the radiological aspect are set in HB 345. The
parameters of surgical centers, that can perform arthroscopies
and day surgeries, have not been determined.
3:39:00 PM
REPRESENTATIVE SEATON asked for a further explanation from other
speakers who are supporting HB 345 but not HB 337. He re-stated
his question as to why there is support for the elimination, or
drawing back, of the CON for the diagnostic centers, but not for
surgery centers in those same markets.
3:39:34 PM
MAREE BARNEY-SUTLEY, Fairbanks, Alaska, stated that she is a
patient and a citizen of Fairbanks. She expressed her affection
for the hospital, but said that she feels that the pain doctors
in the community should be credentialed by the hospital. Ms.
Barney-sutley stated her support for HB 337.
3:41:07 PM
ROBERT GOULD, Chief Financial Officer; Head of Operations,
Fairbanks Memorial Hospital, told the committee that he was
speaking in opposition to HB 337 and in favor of HB 345.
Firstly, he addressed the question of physicians' lack of access
to Fairbanks Memorial Hospital and said that there was a period
of time when pain services were under an exclusive agreement;
however, that is no longer the case. As of approximately six
months ago, the exclusive contract was modified, and the pain
physicians in Fairbanks have been invited to apply for
privileges to perform surgeries at the hospital. Mr. Gould
opined that there are no physicians who have applied for
privileges at this time. Secondly, he spoke of the value of the
CON program and reminded the committee of the claims, by
supporters of imaging centers, that the centers would lower the
prices of imaging services in Fairbanks. He compared the prices
for three services and concluded that the imaging center prices
are actually higher than those of the hospital. Mr. Gould also
compared costs for surgeries in Anchorage. He urged the
committee to look at the Medicaid data that is available to the
state and indicated that this information will allow the
committee to analyze the cost of services by the health care
providers in the state. He pointed out that competition does
not lower the cost of health care and re-stated his support for
HB 345.
3:46:01 PM
REPRESENTATIVE FAIRCLOUGH asked Mr. Gould to speak to the anti-
trust issue, the possibility that CONs violate anti-trust laws,
that was brought up by the U.S. Department of Justice during a
previous hearing of the bill.
3:46:54 PM
MR. GOULD said that he did not have a response.
3:47:06 PM
REPRESENTATIVE SEATON asked Mr. Gould to supply the cost
comparisons to the committee in writing.
3:47:13 PM
REPRESENTATIVE KELLER expressed his belief that competition
ultimately leads to lower prices. He asked whether Mr. Gould
could explain the reason for competition raising health care
prices.
3:47:50 PM
MR. GOULD opined that a not-for-profit hospital and emergency
room must take all patients, regardless of their ability to pay.
Individual facilities take the "eight to five" business and pull
profitable services away from the hospitals. Therefore, in
order to provide the non-profitable services of in-patient,
emergency room, home health, and diabetes care, hospitals must
increase prices, resulting in the never-ending escalation of
costs. In addition, overbuilding and capital expenditures also
lead to higher prices.
3:49:44 PM
SCOTT BELL, Volunteer, Greater Fairbanks Community Hospital
Foundation, expressed his opposition to HB 337 and opined that
HB 345 is a reasonable compromise. Mr. Bell referred to the
testimonies of Dr. McNamara and Mr. Gould and affirmed that the
CON does a great job of building a strong health care
infrastructure in a rural community such as Fairbanks. He noted
that the hospital uses profits from its profitable areas to
build and provide services to other areas that are not self-
supporting. Mr. Bell stressed his support for the continuation
of CON rules.
3:50:34 PM
KEVIN DORSEY, Fairbanks, Alaska, explained that the reason
health care prices rise with new competition, in the short term,
is that the CON system has been in place for a long time and has
created a dearth of competition that will initially increase
prices. However, the elimination of CON will begin the long
process of reconstruction that will allow the economy to catch
up. He informed the committee that he is a student of economics
and that CON policies are anti-competitive. Mr. Dorsey opined
that Fairbanks Memorial Hospital is a rich and profitable
hospital. He further stated that CON impairs and prevents
physician recruitment; doctors of specialty fields are leaving
Alaska at a net rate of five to six per year. Mr. Dorsey
expressed his disagreement with the idea that Fairbanks is a
rural community; in fact, North Fairbanks is growing and, with
the gas pipeline coming, Fairbanks Memorial Hospital will not be
able to cope with the massive growth as Fairbanks becomes a
major industrial city. He added that CON is a source of
corruption that will lead to a dearth of care, and urged the
committee's support of HB 337.
3:53:30 PM
REPRESENTATIVE GARDNER asked Mr. Dorsey to elaborate on the
reason why CON policies are responsible for a net loss of
doctors and prevent physician recruitment.
3:53:53 PM
MR. DORSEY explained that doctors have two choices: perform non-
surgical, non-intensive work or work for the hospital. He
opined that many doctors do not want to work under the
hospital's coercive terms and with no basis of comparison to
contracts.
3:54:47 PM
JAMESON SMYTH, Fairbanks, Alaska, related his experience as a
patient of the Advanced Medical Clinic in Fairbanks. Mr. Smyth
said that he has gone to Anchorage three times for treatments
that he expected to receive in Fairbanks. These trips are
expensive, painful, and difficult. Mr. Smyth encouraged the
committee to reduce cost and difficulty for patients. He
further stated that going to the imaging centers is a positive
experience as they do not have scheduling problems and do a
great job.
3:56:41 PM
CHAIR WILSON asked whether the situation was that Mr. Smyth's
doctor was not affiliated with the hospital, or that the
procedure could not be done in Fairbanks.
3:57:07 PM
MR. SMYTH answered that one procedure could not be performed in
Fairbanks, but the other two could possibly have been done at
the hospital. In answer to a further question, he said that he
was not certain of the possibilities for surgery in Fairbanks.
3:57:44 PM
CHRISTINE PALMER, Fairbanks, Alaska, informed the committee that
she flew to Anchorage for surgery. In addition to the
discomfort, as a single parent, the additional time needed to
travel is difficult for her family. The ability to have
surgical procedures in Fairbanks would help save stress and
expense.
3:59:45 PM
CHAIR WILSON closed online testimony.
4:00:00 PM
PAUL FUHS, Lobbyist, Alaska Open Imaging Center, LLC (AOIC),
addressed the issue of HB 345 and why his client participated in
the negotiations sponsored by the governor in an attempt to
solve these problems. He opined that, although HB 511 was
enacted, there was a lack of a definition of terms in that
legislation; this is corrected by HB 345. Mr. Fuhs explained
that by HB 511, physicians are exempt from CON, but individual
independent diagnostic testing facilities (IDTF) are not. As a
result, a radiologist went to Fairbanks and opened an imaging
office as a physician's office, thereby exempt from CON. Its
status was affirmed by the commissioner of DHSS. Subsequently,
another facility was opened in Mat-Su that was also deemed a
physician's office. Meanwhile, in Fairbanks, the Alaska Open
Imaging Center (AOIC) was later determined to be an IDTF and was
closed. The lack of a sufficient definition in HB 511 led the
commissioner to base her decision on the presence of certain
equipment. Subsequent to that, the commissioner approved
another physician owned facility. In some cases, there has been
a transfer of ownership of a facility in an attempt to garner an
exemption. Because of these rulings, lawsuits and appeals have
been filed in Fairbanks and in Mat-Su. He stated that AOIC has
always supported the elimination of CON in the major medical
markets of Alaska; that action would solve the problem. In lieu
of that action, Mr. Fuhs pointed out that it is the
responsibility of the legislature that passed a law without
proper definitions, and put the commissioner in a no-win
situation, to remedy the situation. He urged the committee to
define the terms and pass the negotiated agreement as a
reasonable compromise.
4:03:29 PM
REPRESENTATIVE GARDNER expressed her appreciation of Mr. Fuhs
explanation; however, she asked for further discussion on the
larger issue of whether the CON policy should be dismantled.
4:04:19 PM
MR. FUHS agreed with the need for further study of the CON
issue, but re-stated his belief that it is untenable to have a
law on the books that nobody can interpret.
4:04:35 PM
REPRESENTATIVE ROSES asked whether Mr. Fuhs participated in the
CON Negotiated Regulations Committee.
4:04:44 PM
MR. FUHS stated that lobbyists were not allowed to participate,
but he did attend and was involved.
4:04:52 PM
REPRESENTATIVE ROSES asked whether Mr. Fuhs felt, as a biased
observer, that the process was one that allowed for equal
representation for all parties.
4:05:23 PM
MR. FUHS answered no. He explained that nine hospitals, several
physician's offices, and one imaging center were represented.
Furthermore, negotiated rulemaking requires 100 percent
agreement from all parties, but the administrator proceeded with
about 70 percent agreement. Facility ownership is the most
difficult position for AOIC and HB 345 is in the spirit of a
painful compromise on its part.
4:06:47 PM
REPRESENTATIVE GARDNER observed that the rule making group did
not include consumers and, as lawmakers, the legislature must
also safeguard the best interests of Alaskan consumers.
4:07:14 PM
MR. FUHS agreed with Representative Garner's statement when it
applies to a health care commission; however, a negotiated
rulemaking [committee] includes the providers and participants
only, and is not a public task force.
4:07:32 PM
REPRESENTATIVE ROSES opined that, when a group is given a job to
do, its work should not be ignored. He asked whether the AOIC
is comfortable with the conclusions of the CON Negotiated
Regulations Committee.
4:08:02 PM
MR. FUHS answered yes. The only difference his client, AOIC,
has is that they are a home grown, Alaskan company, and the
requirement of 100 percent physician ownership is devastating.
4:08:45 PM
REPRESENTATIVE ROSES recalled that the CON discussion has been
going on for years, but this is the first agreement. Since the
CON Negotiated Regulations Committee has met, there has been a
compromise, he opined.
4:09:52 PM
CHAIR WILSON asked whether, under normal situations, 100 percent
agreement is needed for negotiated rulemaking.
4:10:22 PM
MR. FUHS agreed. He added that a task force will often release
a general recommendation.
4:10:26 PM
CHAIR WILSON further asked whether the fact that the agreement
was issued, with only 70 percent participation, is the reason it
was not looked at.
4:10:59 PM
MR. FUHS remarked:
Chairman Wilson, it does, and that's why I believe,
although the commissioner hasn't told me this, why she
didn't go through with it and you know, everything was
agreed to except for the 50 and the 100 percent. I
think that's what I could say was the one sticking
point and there were a couple side agendas there and
that's why that didn't go through.
4:11:24 PM
JEANNINE HINMAN, Director, Regulatory and Government Affairs,
Advanced Medical Centers of Alaska, expressed her company's
belief that it has demonstrated that repeal of the CON laws
will: increase the access to medical care in the state; increase
the quality of medical care; lead to better physician
recruitment; and not raise, but lower, the cost. She asked the
committee to carefully review all of the data submitted from the
interested parties and to consider the sources of the data, such
as the Department of Justice and the Federal Trade Commission,
that are the agencies that are tasked with monitoring anti-trust
violations. Ms. Hinman supported previous testimony about
future gas line employees moving into the Fairbanks area and
added that the anticipated increase in injured army veterans
will also add patients to Alaska that require comprehensive
medical treatment and complex pain management. She described
the experience of a veteran whose injuries could be treated in
Fairbanks with cooperation from the local hospital. She opined
that Fairbanks Memorial Hospital refused to credential Advanced
Medical Centers of Alaska pain providers during litigation, and
after the restriction was withdrawn, subsequent applications
have not been credentialed. Ms. Hinman stated her company's
support of the governor's bill. She concluded by pointing out
that according, to the CON application of 2007, Fairbanks
Memorial Hospital reported a medical loss ratio of 1.38 that
translates to profit margin of 38 percent; in addition, branches
in Alaska are the most profitable of Banner Health Care systems.
4:15:16 PM
REPRESENTATIVE GARDNER asked whether Advanced Medical Centers of
Alaska provided to the committee the document from the Federal
Trade Commission.
4:15:33 PM
MS. HINMAN said no.
4:15:39 PM
LEONARD SISK, Physician; Medical Director and Owner, Imaging
Associates of Providence (IAP), informed the committee that IAP
is a physician's office and the physician owner is a
radiologist. The practice meets the federal government Centers
for Medicare and Medicaid Services (CMS) guidelines for
physician's offices in which 50 percent hospital ownership of a
physician's practice is allowed. He noted that IAP physicians
also provide radiology professional services to Providence
Alaska Medical Center. The hospital was chosen to invest in IAP
and IAP supports HB 345, a provision of which requires a minimum
50 percent physician ownership before exempting the office from
the state CON process. The bill also requires physician-owners
to interpret images in the facility. Dr. Sisk said that
radiology requires access to expensive machinery, and it is
reasonable that not all of the expense should be paid by the
physicians; partnerships between physicians and hospitals for
radiologist's offices are allowed by the federal government. He
opined that radiologists and hospitals are natural partners to
provide communication between facilities and thereby, benefit
patients. The most vocal opponent of this exemption is the
country's largest publicly traded hospital corporation, whose
shareholders will benefit from the monopoly provided by the
state. Dr. Sisk pointed out that the bill protects from
competition critical facilities in smaller communities with
populations of less than 60,000. He stated his support of HB
345 and concluded by pointing out that the state's cost of
imaging charges are set by Medicaid, and quoting charges from
private insurance is an inaccurate method to compare costs
between providers.
4:19:47 PM
CHAIR WILSON advised that insurance providers have limits for
some procedures. She expressed her concern that the committee
must consider what the fight between the hospitals, the imaging
centers, and the surgery centers, means to patients.
4:21:03 PM
BOB URATA, Physician; Member, Board of Directors, Bartlett
Regional Hospital, informed the committee that he is
representing Bartlett Regional Hospital's position in favor of
HB 345. Dr. Urata opined that eliminating the CON will be
detrimental to areas with small markets, such as Juneau. The
increase in competition will only be in profitable, specialized,
services; these specialized centers will take high paying
private insurance patients only and cripple the hospital's role
as the safety net for the community. Strong community hospitals
are a major part of rescue response in the event of a natural
disaster. Furthermore, the CON process ensures community
planning that prevents excess capacity in small markets that is
an unwise use of health care dollars and ultimately will reduce
quality of care. Dr. Urata referred to a cardiac care study,
published in 2002 by the University Of Iowa College Of Medicine.
In addition, studies by American auto manufacturers, published
by the American Health Planning Association in 2003, found that
surgery was cheaper in states with CON policies. He concluded
that CON policies protect the consumer by assuring public input,
maintaining accessibility to health care and high quality, and
helping to contain costs.
4:24:45 PM
REPRESENTATIVE SEATON asked whether Dr. Urata would give his
perspective on the idea that the CON program slows the
recruitment, and limits retention, of doctors.
4:25:08 PM
DR. URATA said that he has not seen any data that supports that.
4:25:30 PM
RYAN SMITH, Chief Executive Officer, Central Peninsula General
Hospital, stated that he was a member of the CON Negotiated
Regulation Committee and that HB 345 supports its
recommendations. He opined that the bill will act to reduce the
amount of litigation, which was one of the goals of the
[committee]. Mr. Smith expressed his belief that the surgery
centers are not represented by the bill because surgery centers
have not attempted to use the physician's office exemption in
order to operate. He spoke of physician recruitment and said
that recruitment in Soldotna has been successful in the last two
years. His experience, in both CON and non CON states, leads
him to believe that health care and community benefits will
change under the repeal of the CON process. Mr. Smith pointed
out that the third vote during the negotiation process was the
agreement to accept a consensus of 67 percent to 70 percent of
the group; in fact, there was an 85 percent consensus at the end
of the process.
4:27:57 PM
JOEL GILBERTSON, Representative, Providence Health and Services,
stated that there are many big issues in health care, and opined
that the health care system is broken at the national and
statewide level. Mr. Gilbertson said that, unless health care
reform in the state is addressed, health care costs will
continue to escalate and the ability to deliver quality care
will be threatened over time. His organization supported the
[CON Negotiated Regulations Committee]; however, trying to solve
all of the health care problems through the CON process is too
great of a task. The simpler question at the moment, to resolve
the conflict over the lack of definitions in HB 511, is improved
by the compromises in HB 345. Mr. Gilbertson re-stated the
effects of HB 511 and stressed that HB 345 is a reasonable
compromise that will, at least, resolve the question that is
causing confusion in the community and conflict in the courts
and the administrative hearing process. The bill will also
allow the commissioner to focus on the bigger question of how to
address health care reform in the state.
4:31:00 PM
REPRESENTATIVE SEATON observed that the compromise will settle
the majority of the lawsuits brought by the imaging centers. He
asked whether the solution for out-patient or ambulatory surgery
centers should be offered in HB 345, in order to avoid a similar
process in the future.
4:31:51 PM
MR. GILBERTSON explained that an ambulatory surgery center
[(ASC)] can not be a physician's office; therefore, there is no
need to create a clear standard to separate between a
physician's office and an ASC because an ASC is a clearly
defined licensed facility at the state and federal level. The
question that is not settled is whether, for the purpose of a
physician and a physician's office that purchases imaging
equipment, they are a physician's office or an independent
diagnostic testing facility. He further explained that
physician's offices are not licensed and thus, there is no
definition. Moreover, the definition under ambulatory surgery
center has already been established.
4:32:54 PM
REPRESENTATIVE SEATON further asked whether Mr. Gilbertson
experiences recruitment difficulties with doctors who decide not
to come to Alaska because they do not choose to be affiliated
with a hospital.
4:33:32 PM
MR. GILBERTSON said no. He acknowledged that physician
recruitment is tough, there is no medical school or residency
program, outside of primary care, and physicians graduating now
prefer to be employed by a health care system with regular
schedules and without call responsibilities. He opined that
there are always changes to the market and that CON laws are not
a legitimate excuse for the problem of recruiting physicians to
Alaska.
4:34:54 PM
REPRESENTATIVE KELLER asked if there is data on whether doctors
are not coming to Alaska because they are not able to open their
own ambulatory center.
4:35:27 PM
MR. GILBERTSON pointed out that the majority of physicians are
recruited to be community physicians. Federal law allows
hospitals to financially support the recruitment of physicians
and they work with local practices and providers, even though
few physicians come to work for the hospital. In fact,
Providence Medical Center attempts to recruit approximately 30
to 40 doctors per year into the Anchorage area. Mr. Gilbertson
said that he has never heard that CON laws are a barrier to a
physician coming into the community.
4:36:56 PM
REPRESENTATIVE ROSES referred to the report issued by the CON
Negotiated Regulations Committee and read: "Should CON
processes and definitions be in alignment with Medicare?" He
then asked for an explanation of how Medicare and the state CON
policies are out of "sync."
4:37:23 PM
MR. GILBERTSON responded that, at the federal level, the Centers
for Medicare and Medicaid Services have defined what is, and
what is not, a IDTF or a physician's office. In fact, at the
federal level, there is no requirement that there is 100 percent
physician ownership to be a physician's office; a physician's
office can be owned by a physician, a physician in a hospital,
or by a hospital. He opined that the CON Negotiated Regulations
Committee was acknowledging that physicians, at the federal
level, can have partners in running private medical practices.
4:38:34 PM
ROD BETIT, President, Alaska State Hospital and Nursing Home
Association (ASHNHA), expressed his organization's opposition to
the repeal of the CON. Mr. Betit called the committee's
attention to supporting documents in the committee packet
identified as the community benefit report and the analysis of
the Department of Justice report. He explained that the
community benefit report illustrates the size of the financial
burden that hospitals have in covering the uncompensated portion
of Medicaid, Medicare, and care for the uninsured, in order to
keep the health care system in Alaska afloat. Mr. Betit
suggested that the commission will be helpful in figuring out
how to close the gap prior to the elimination of CON in order to
level the playing field. He pointed out that there is $150
million in the report and the regional information comes from
across the state. Furthermore, the commission can use the price
reporting information to see whether increased choice leads to
lower cost. Mr. Betit noted that ASHNHA reports its prices and
the comparisons will show that lower cost is not the result.
Having this accurate and unchallenged information from all of
the parties will lead to a clearer understanding of the
situation. He opined that HB 345 will close the gap on the
problem for imaging areas and re-stated that the ASHNHA Board of
Directors supports the bill at this point in time.
4:42:25 PM
NORMAN STEPHENS, Chief Executive Officer, Mat-Su Regional
Medical Center (MSRMC), informed the committee that he was part
of the CON Negotiated Regulations Committee and expressed his
disappointment that its work went out the window. He disagreed
with previous testimony and said that there were six hospitals
represented and that the balance of the participants were
representing many of the parties in the legal disputes. He
opined that, even though there was tension, the committee was
effective; however, a 66 percent consensus is insufficient for a
permanent solution to the problem. Mr. Stephens referred to his
earlier testimony and expressed his belief that the CON will
reduce costs. Furthermore, he said that a lot of what has
happened will lead to a slippery slope of future conflict. One
of the problems is that competing centers, that are exempt, know
about the conflicts and have taken advantage of the situation.
Mr. Stephens emphasized that MSRMC has built a $101 million
hospital for the Mat-Su valley, followed the rules, and is now
being damaged by an imaging center that did not follow the
rules.
4:46:27 PM
RICHARD COBDEN, M. D.; Chief of Medical Staff, Fairbanks
Memorial Hospital (FMH), informed the committee that he is a
practicing orthopedic surgeon, in addition to being the Chief of
Medical Staff at FMH. He stated that he works with
Representatives Kelly and Kawasaki and was surprised that HB 345
was represented as being agreed to by everyone. He opined that
the rest of the surgeons, included 90 percent of the surgeons
who are not in favor of the CON, did not join in the consensus.
Dr. Cobden said that HB 345 will simply exempt the diagnostic
imaging centers, and several already exist. He stated that HB
345 is not a compromise bill. Furthermore, physicians can not
be recruited to come to Fairbanks, partly due to CON
restrictions, and partly due to the location. In the last
eighteen months, Fairbanks has lost six physicians, who
relocated to areas where they could practice in an ambulatory
surgical center. The situation is very difficult and has
resulted in specialty care by visiting physicians. Dr. Cobden
explained that the original reason for the CON law was to
control capital costs, which it no longer does. The second
reason, cost-shifting, to cover the cost of charity and indigent
care, is a hidden number. Dr. Cobden referred to the book,
"Mired in the Health Care Morass", by Neil Davis, and cited
that, according to the author, 1.3 percent of FMH revenue goes
to charity and indigent care; total revenue is $187 million per
year; FMH profit is 12 percent per year. The hospital charges
profitable services to pay for the areas that are not
reimbursed; however, these charges have no oversight, or rules,
and are not subject to regulation. He opined that this is a
taxing authority that should be held by the legislature, not by
hospitals. Finally, the idea of bringing new physicians to the
state, when the state does not allow them to make capital
investments in their businesses, is discouraging. Dr. Cobden
warned that the state will end up with the best hospitals in the
nation, but with no physicians. He urged the committee to pass
HB 337 and deal with problems separately.
4:52:01 PM
REPRESENTATIVE FAIRCLOUGH asked whether Dr. Cobden was speaking
on behalf of the hospital.
4:52:27 PM
DR. COBDEN said no. He clarified that he is the Chief of Staff
and oversees the credentialing and recruitment of new
physicians. Dr. Cobden disagreed with previous testimony that
there have been no applications for credentialing from the pain
physicians.
4:52:51 PM
REPRESENTATIVE FAIRCLOUGH observed that Dr. Cobden said "we do
not support HB 345" but that previous testimony from three FMH
employees does support HB 345.
4:53:21 PM
DR. COBDEN explained that he is the Chief of Medical Staff and
is not speaking for the hospital.
4:53:56 PM
REPRESENTATIVE SEATON asked whether the previous testimony, that
stated that HB 345 does not need to deal with ambulatory surgery
centers, is valid.
4:54:32 PM
DR. COBDEN opined that ambulatory surgery centers should not be
excluded from legislation; in fact, ambulatory surgery centers
could be substituted for imaging centers in the bill. There is
separate licensing after ambulatory surgery centers are
established; however, the bill does not address those issues.
Dr. Cobden stressed that the overlying issue of CON policies,
and resolution of the expensive lawsuits, remains.
4:55:20 PM
REPRESENTATIVE SEATON asked whether ambulatory surgery centers
can be added into the language of HB 345 to take care of some of
those problems.
4:55:29 PM
DR. COBDEN concurred, and then suggested that this addition may
lead to consensus.
4:55:43 PM
JOHN BRINGHURST, Chief Executive Officer, Petersburg Medical
Center, spoke in favor of HB 345 as a reasonable compromise to
doing away with CON legislation. He said that his 35 years of
experience as a hospital administrator have convinced him that a
CON law instills benefits that outweigh its costs. Intuitively,
it would seem that open competition would lead to lower costs;
however, the health care industry does not always follow logic.
Mr. Bringhurst gave the example of two hospitals in a community
of 28,000 people in Oregon. Although the hospitals were below
capacity, there was a joint venture partnership to open a
surgery center. This action led to a loss of surgical volume at
the hospitals that was less than the increase of surgical volume
at the surgery center. Mr. Bringhurst expressed his belief that
physician ownership and self-referrals lead to a conflict of
interest and over-utilization. Furthermore, when doctors self-
refer there may be no cost competition. He explained that the
hospital was left with a lower volume of service and more
complex cases. He then pointed out that the small hospital in
Petersburg is not rich and will have a $900,000 loss this year.
Finally, Mr. Bringhurst opined that CON does not exclude, but
allows the community to have a choice in whether services are
needful and will lower cost.
5:00:14 PM
CHAIR WILSON asked for the number of surgeries that resulted
after opening the ambulatory surgery center.
5:00:33 PM
MR. BRINGHURST stated that the surgical volume at the ambulatory
surgery center was higher than the losses to the previous levels
at both hospitals, with no increase in population. He said, "It
does create a situation where somehow, surgeries were just ...
created."
5:01:08 PM
REPRESENTATIVE CISSNA compared this to a personal situation
whereby she received more referrals for further services after
obtaining insurance coverage.
5:01:39 PM
MIKE POWERS, Administrator, Fairbanks Memorial Hospital,
informed the committee that he is extremely proud of the
progress the hospital has made due to the planning that is
possible under CON. He stated that FMH has a long record of
success that includes: a long-term skilled nursing facility; a
cancer center; an out-patient surgery center; an imaging center;
cardiac cath care; electronic medical records; nurses training;
and a comprehensive recruiting program. This progress is
related to the logical planning provided by CON law. Mr. Powers
then explained that the DHSS recently authorized the addition of
eight operating rooms in the Fairbanks area. The hospital's
appeal of this crippling action resulted in the final approval
of two additional operating rooms; although this is still too
many, Mr. Powers opined that the system worked. He urged the
committee for more support of the planning function at DHSS.
5:04:46 PM
CHAIR WILSON closed testimony on both bills.
5:06:22 PM
[Although not formally stated, HB 345 and HB 337 were held
over.]
ADJOURNMENT
There being no further business before the committee, the House
Health, Education and Social Services Standing Committee*
meeting was adjourned at 5:06 p. m.
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