Legislature(1999 - 2000)
02/29/2000 08:10 AM House STA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE STATE AFFAIRS STANDING COMMITTEE
February 29, 2000
8:10 a.m.
MEMBERS PRESENT
Representative Jeannette James, Chair
Representative Joe Green
Representative Jim Whitaker
Representative Bill Hudson
Representative Hal Smalley
Representative Scott Ogan
MEMBERS ABSENT
Representative Kerttula
COMMITTEE CALENDAR
HOUSE BILL NO. 297
"An Act relating to the certificate of need program; and
providing for an effective date."
- HEARD AND HELD; ASSIGNED TO SUBCOMMITTEE
HOUSE CONCURRENT RESOLUTION NO. 19
Designating the month of March as Women's History Month and
urging all Alaskans to join in the celebration of International
Women's Day on March 8, 2000.
- MOVED HCR 19 OUT OF COMMITTEE
HOUSE BILL NO. 411
"An Act relating to the market value of the permanent fund and to
distribution of income of the permanent fund; and providing for
an effective date."
- BILL HEARING POSTPONED
HOUSE BILL NO. 367
"An Act providing for the revocation of driving privileges by a
court for a driver convicted of a violation of traffic laws in
connection with a fatal motor vehicle or commercial motor vehicle
accident; and amending Rules 43 and 43.1, Alaska Rules of
Administration."
- SCHEDULED BUT NOT HEARD
HOUSE BILL NO. 292
"An Act adopting the National Crime Prevention and Privacy
Compact; making criminal justice information available to
interested persons and criminal history record information
available to the public; making certain conforming amendments;
and providing for an effective date."
- SCHEDULED BUT NOT HEARD
PREVIOUS ACTION
BILL: HB 297
SHORT TITLE: CERTIFICATE OF NEED PROGRAM
Jrn-Date Jrn-Page Action
1/21/00 1961 (H) READ THE FIRST TIME - REFERRALS
1/21/00 1961 (H) HES
2/02/00 2076 (H) COSPONSOR(S): KOTT
2/10/00 (H) HES AT 3:00 PM CAPITOL 106
2/10/00 (H) Heard & Held
2/10/00 (H) MINUTE(HES)
2/11/00 2186 (H) STA REFERRAL ADDED
2/15/00 (H) HES AT 3:00 PM CAPITOL 106
2/15/00 (H) Moved Out of Committee
2/15/00 (H) MINUTE(HES)
2/18/00 2235 (H) HES RPT CS(HES) 4AM
2/18/00 2235 (H) AM: GREEN, DYSON, COGHILL, BRICE
2/18/00 2236 (H) FISCAL NOTE (DHSS)
2/18/00 2236 (H) REFERRED TO STA
2/23/00 2289 (H) COSPONSOR(S): BUNDE
2/24/00 (H) STA AT 8:00 AM CAPITOL 102
2/24/00 (H) Heard & Held
2/24/00 (H) MINUTE(STA)
2/29/00 (H) STA AT 8:00 AM CAPITOL 102
BILL: HCR 19
SHORT TITLE: WOMEN'S HISTORY MONTH/WOMEN'S DAY
Jrn-Date Jrn-Page Action
2/16/00 2205 (H) READ THE FIRST TIME - REFERRALS
2/16/00 2205 (H) STA
2/18/00 2238 (H) COSPONSOR(S): HALCRO
2/29/00 (H) STA AT 8:00 AM CAPITOL 102
WITNESS REGISTER
SHARON ANDERSON
Alaska State Hospital and
Nursing Home Association
18820 Fish Hatchery
Eagle River, Alaska
POSITION STATEMENT: Commented on HB 297.
LINDA SMITH, Registered Nurse
1293 Rangeview Road
North Pole, Alaska 99705
POSITION STATEMENT: Commented on HB 297.
JANE GRIFFITH
Providence Health Systems
3200 Providence Drive
Anchorage, Alaska 99508
POSITION STATEMENT: Testified in opposition to HB 297.
WALTER MAJOROS, Executive Director
Alaska Mental Health Board
431 N Franklin Street Suite 200
Juneau, Alaska 99801
POSITION STATEMENT: Commented on HB 297.
BARBARA FLEMING, Secretary
Providence Health System of Alaska
PO Box 302
Seward, Alaska 99664
POSITION STATEMENT: Testified in opposition to HB 297.
JOHN VOWELL
Sitka Hospital
209 Moller
Sitka, Alaska 99835
POSITION STATEMENT: Commented on HB 297.
DON ETHERIDGE
AFL-CIO
710 W 9th Street
Juneau, Alaska 99801
POSITION STATEMENT: Testified in opposition to HB 297.
MARY KIESSLING
13640 Jarvi Drive
Anchorage, Alaska 99515
POSITION STATEMENT: Testified in support of HB 297.
SCOTT WHEAT
Homer, Alaska
POSITION STATEMENT: Testified in opposition to HB 297.
LELAND "CORKY" CORKRAN
Fairbanks, Alaska
POSITION STATEMENT: Testified in opposition to HB 297.
CARL WALES
PO Box 82647
Fairbanks, Alaska 99708
POSITION STATEMENT: Testified in support of HB 297.
WILLIAM DOOLITTLE, M.D.
PO Box 71046
Fairbanks, Alaska 99707
POSITION STATEMENT: Testified in opposition to HB 297.
ACTION NARRATIVE
TAPE 00-12, SIDE A
Number 0001
CHAIR JEANNETTE JAMES called the House State Affairs Standing
Committee meeting to order at 8:10 a.m. Members present at the
call to order were Representatives James, Green, Whitaker,
Hudson, Smalley and Ogan. Representative Kerttula was excused.
Representative Ogan arrived as the meeting was in progress.
HB 297-CERTIFICATE OF NEED PROGRAM
Number 0121
CHAIR JAMES announced the first order of business is to continue
public hearing of HOUSE BILL NO. 297, "An Act relating to the
certificate of need program; and providing for an effective
date." She said her intent is to continue public testimony and
appoint a subcommittee of Representatives Green, Smalley, and
herself to further review this issue. She noted that there is a
proposed CS before the committee and the change is on page 2(D).
Number 0229
REPRESENTATIVE HUDSON made a motion to adopt the proposed CS for
HB 297, version 1-LS1301\I, Lauterbach, 2/28/00, as a work draft.
REPRESENTATIVE OGAN objected for discussion purposes. He asked
Chair James to explain the changes.
CHAIR JAMES explained that the changes on page 1(A) and page 2(D)
excludes communities with 15,000 or less population from HB 297.
REPRESENTATIVE OGAN asked what communities above 15,000
population would be left "in the loop."
CHAIR JAMES answered that Fairbanks, Anchorage, and Juneau are
above the 15,000 population limit.
REPRESENTATIVE OGAN removed his objection. [There being no
further objection, the proposed CS for HB 297, version 1-
LS1301\I, Lauterbach, 2/28/00 was before the committee as a work
draft].
Number 0386
REPRESENTATIVE SMALLEY asked if the 15,000 population limit means
the specific community in which the hospital facility is located
or does it mean the general population in the area.
CHAIR JAMES replied that her intention was to include the
location of the hospital.
REPRESENTATIVE SMALLEY asked if the 15,000 figure was an
arbitrary selection.
CHAIR JAMES answered yes.
Number 0455
SHARON ANDERSON, Alaska State Hospital and Nursing Home
Association (ASHNHA), said she represents ASHNHA. She explained
that in reviewing some of the CON literature she had noted that
Hawaii is considering a revamp of their CON process. Also, she
added, a quote in Modern Health Care magazine stated that "the
CON would never win a popularity contest in any hospital
association setting." She commented that she thinks that is a
true statement.
Number 0487
MS. ANDERSON reminded the committee that the CON has been used
for 30 years in the health care system. She mentioned that it
had been originally designed as a way for the federal health care
system to contain health care costs shortly after the Hill-Burton
days when money was given for facilities to be built. She
indicated that some states started as early as 1964 to use the
CON process about the time when diagnostic related groupings
(DRG) were introduced into the health care delivery system. She
explained that DRG refers to global health care reimbursement and
the method by which Medicare pays hospitals. She remarked that
when the DRG system was introduced the federal government saw no
further need for the CON process to help contain health care
costs.
MS. ANDERSON observed that cost shifting began in 1983 with the
establishment of the Medicare reimbursement system; in other
words, the federal government is not paying full cost of health
care so excess costs are shifted to other health care payers.
About that time too, she added, managed care was introduced and
eleven states dropped the CON process because it was no longer
required by the federal government.
Number 0959
MS. ANDERSON said that in 1987 the State Health Planning and
Development Authority was de-funded by the federal government
which left states to decide whether they would retain the CON
process or not. At that time, she added, she had heard testimony
that the state of Alaska had $8 million available for processing
CON applications and its CON threshold was $150,000. About that
time, she reiterated, most states altered the CON dollar
threshold and Alaska did likewise, setting the threshold at $1
million.
MS. ANDERSON noted that 38 states and the District of Columbia
have some form of CON today. She explained that many states have
a CON process for any new service that is introduced into a
community regardless of the dollar amount. She concluded that
the CON process varies state by state and that CON programs are
responding to change thus becoming more flexible tools of public
policy. She commented that the CON deserves to be better
understood because it can be a flexible tool to assist states in
reaching their goal of public accountability as well as cost
control.
Number 1151
MS. ANDERSON mentioned that the average review threshold for CON
is $1.7 million for capital outlays in those states that have a
CON process. However, she indicated, Massachusetts' threshold is
$9 million for acute care hospitals and $965,000 for non-acute
care. She remarked that Hawaii's threshold is $4 million for
capital outlays, $1 million for equipment, and any new service
must be reviewed. She added that Hawaii's regulatory changes in
1997 have pared application-processing time to as little as three
weeks and Hawaii has also rejuvenated strategic planning for
health care by rewriting its Health Services and Facilities Plan.
MS. ANDERSON observed that in 1999, 30 states had a CON process
for ambulatory surgical centers and of those, 23 states have a $2
million threshold or less for the review and 27 states have a CON
process for acute care. She stated that in 1996 Michigan
initiated a new standard that allows a surgical service and/or
one or more operating rooms to be relocated within the
replacement zone (i.e. 10-mile radius in a non-rural county and
20-mile radius within a rural county). She said that the new
standard still had to meet specific requirements of minimum
volumes.
MS. ANDERSON noted that in 1997 Nebraska reduced CON scope to
only include ambulatory surgical centers, long term care, and
rehabilitation. She commented that Maryland also did a major
revision to streamline their CON process (threshold is $1.25
million) in 1997 and included changes for ambulatory surgical
services. She mentioned that in 1985 Wisconsin left only long
term care subject to the CON process but in 1992 they added
capital expenditure review of $500,000 back into the CON because
they had experienced steep increases in costs and capacity.
Number 1384
MS. ANDERSON reminded the committee that Alaska is a large payer
for health care services since 20 percent of patients are
Medicaid participants and 30 percent are Medicare participants.
She added that another large segment of patients (17 percent) are
state employees, active and retired, and federal employees. She
recognized that because Medicaid and Medicare payers are
involved, there is a tie-in between the CON process and the
Medicaid reimbursement system. She reiterated that having CON
approval will assure that costs can be rolled into the Medicaid
cost base when the Medicaid rate is being set. She said that
maintaining the balance between all regulatory aspects of health
care is extremely important and it must be considered in the
entire picture.
CHAIR JAMES asked if ambulatory surgery centers and hospitals had
a different rate structure. She said she understood that
Medicaid rate structures only applied to hospitals and associated
services.
Number 1511
MS. ANDERSON replied that ambulatory surgery centers are paid
through the Medicaid global fee system that is set under the
Medicare system.
REPRESENTATIVE GREEN inquired as to what evidence exists to prove
that the CON has stopped unreasonable projects.
MS. ANDERSON answered that Rhode Island in 1996 commissioned
KPMG-Pete Marwick to do a review of Rhode Island's whole CON
process and that study published a definitive statement that the
CON process had helped Rhode Island reduce health care
expenditures. She informed the committee that in 1997 the
Illinois Health Facilities Planning Board had stated, "Since the
Planning Act was implemented, substantial savings have been
realized in restraining health care costs by preventing
unnecessary construction or modification of health care
facilities." She emphasized that other studies indicated that
CON has served to limit the diffusion of services and technology;
a Lewin-VHI, Inc. study completed in 1995 for Georgia did not
recommend repeal of CON.
Number 1757
CHAIR JAMES said that it is not known if unnecessary construction
referred to by the Illinois Health Facilities Planning Board was
a CON submitted by an existing hospital or whether the CON was
submitted by a private entity.
MS. ANDERSON replied that Chair James' statement was correct.
CHAIR JAMES commented that it is not easy to match "apples to
apples" in this discussion.
MS. ANDERSON informed the committee that to her knowledge there
has been no national study of CON programs since 1993.
Number 1862
REPRESENTATIVE GREEN asked if the Lewin study recommended keeping
CON or did they just not want to recommend anything.
MS. ANDERSON answered that the Lewin study did not actually
recommend keeping CON but they did not recommend repealing it
either.
MS. ANDERSON said she wanted to briefly mention the Federal Trade
Commission (FTC) because it had been mentioned in regard to the
Anchorage situation as it related to the ambulatory surgical
center. She noted that in 1994 Columbia Hospital Corporation of
America (HCA) purchased a national company called Med-Care
America. She explained that Med-Care America owns the Anchorage
Surgery Center (ASC) and the FTC ruled that Columbia had to
divest itself of ASC. She reminded the committee that the FTC
changes its interpretation of different scenarios and has done so
in California and Missouri.
MS. ANDERSON recognized that the CON is a labyrinth of
bureaucracy in Alaska and the average time frame for a completed
CON is 120 days if there are no delays. She observed that other
states had instituted expedited reviews to make the CON process
go faster. She stated that the CON does provide for a level
playing field in that all providers of like services are subject
to review. Also, she added, CON review allows for any price
advantage individual consumers may obtain to be weighed against
increased cost to the entire community. She reiterated that
there is a challenge for all entities to facilitate the
development of a responsible marketplace, one in which the
desired benefits of competition and real value in health care are
realized.
Number 2160
MS. ANDERSON stated that it was her understanding that the $7
million threshold was based on inflation. She said that ASHNHA
had checked with the Department of Labor and had been told that
$1 million in 1983 would be worth $1.5 million in 1999.
CHAIR JAMES said she had heard testimony that inflationary cost
of medical procedure has raised the cost to $6 million in
today's dollars.
Number 2262
MS. ANDERSON replied that her numbers resulted in an inflationary
figure of $2.8 million. She noted that all Alaska facilities
desire a CON process that is stable, rational, and predictable
with as little interference as possible with the day to day
operation of the facility. She encouraged the committee to work
in a collaborative spirit to update the State Health Plan by
developing revised standards, redefining in regulation such
things as "routine replacements," redefining in regulation a list
of services not covered under CON, considering replacement zones
similar to what was done in Michigan, revamping the review
criteria, developing an expedited review process, and ensuring by
data collection that CON approval goes to projects that meet
demonstrated need.
Number 2435
LINDA SMITH, registered nurse, testified via teleconference from
Fairbanks. She said she would like to talk about actual effects
that she sees if the CON process were to be changed. She asked
the committee to consider some of the implications that
additional surgery centers would have in the Fairbanks community.
She acknowledged that the Fairbanks Memorial Hospital (FMH) is
experiencing tremendous shortage of nurses, particularly surgery
nurses, operating room technicians, as well as radiology
technicians. She observed that about five years ago, FMH began
to see a severe shortage of nurses, particularly nurses with
advanced skills and training in the intensive critical care unit
(ICU), the emergency room, and in the operating room. She added
that the shortage continues and believes that the shortage will
continue for the long haul because young people are not choosing
nursing as a career since it involves hard work. She noted that
she did not think this trend would reverse but rather, each year
seems to get worse.
MS. SMITH explained that FMH advertises [for nurses] on eight
Internet recruitment sites, in state and national publications
for operating nurses, and at colleges and high schools, and at
employment fairs. In fact, she commented, FMH has gone to Canada
to recruit nurses. She mentioned that it is very expensive to
advertise in a national journal as it costs $1500 per ad and is
taking FMH six to eighteen months to fill open positions. She
indicated that FMH has had to resort to using agency or traveling
nurses to fill some of the openings and to allow FMH staff to
take vacations. She informed the committee that FMH must pay
traveling nurses twice the hourly salary of regular nurses and
when FMH does find nurses willing to relocate permanently FMH
pays a large sign-on bonus, relocation costs, and an extremely
competitive wage. She acknowledged that this is affecting the
cost of health care.
MS. SMITH remarked that if a surgery center opens in Fairbanks,
her fear is that the surgery center will handpick FMH nurses
because FMH nurses must work weekends, holidays, and be on call
whereas a surgery center only works Monday through Friday.
CHAIR JAMES acknowledged that shortage of nurses and teachers is
a national issue and, though it is not related to the CON
process, she understands Ms. Smith's concern regarding the
shortage.
Number 2739
JANE GRIFFITH said she represents Providence Health Systems in
Alaska and opposed HB 297. She noted she had participated in
many CON applications over the past 20 years which were submitted
to DHSS by Providence Hospital and she thinks the process has
become less cumbersome. She commented that raising the threshold
from $1 million to $7 million eliminates the CON. She explained
that Providence has been helping Seward build their new hospital
at a cost of less than $7 million, consequently, she thinks that
anyone could build whatever they wanted for that price.
MS. GRIFFITH encouraged the committee to review health care and
cost of living indices with Mr. Neilsen of the Medicaid Rate
Commission (MRC). She mentioned that the MRC publishes their
recommendation each year for health care inflation, specifically
regarding the Medicaid program. She remarked that the inflation
figure is significantly less than $7 million.
MS. GRIFFITH reminded the committee that earlier testimony had
indicated that some administrators in 1983 as well as the State
Hospital Association were supportive of eliminating the CON
process. She stated that she was part of that group and can
remember the specifics of why they had wanted to eliminate the
CON. First of all, she explained, back in 1982 and 1983 Medicare
and Medicaid actually paid hospital costs. She added managed
care did not exist and hospitals then were not limited to some
fee schedule or other arbitrary reduction in reimbursement other
than hospital cost and managed care did not exist. She
reiterated that insurance companies were not telling hospitals or
physicians how a patient had to be treated, either on an
inpatient or outpatient basis. She said that at that time
hospitals were very close to being a free market; a true free
market allows a price to be determined by people who pay for it
of their own free choice.
Number 2914
MS. GRIFFITH acknowledged that just as Ms. Anderson had testified
previously, hospitals in Alaska are at least 50 percent dependent
upon government funding. Therefore, she reiterated, hospitals
no longer operate on a free market basis and must submit to CON
to protect the government's investment in the facilities that
they have helped with their support through the Medicare and
Medicaid system. She observed that if Alaskan hospitals want to
return to a free market then she sees that both sides of the
equation must be considered; eliminate the CON but on the other
hand pay for hospital costs. She emphasized that those who
believe that competition truly reduces cost can eliminate the
CON; those who do not believe in competition want to keep the CON
regulation.
TAPE 00-12, SIDE B
Number 2971
MS. GRIFFITH said that no one was disputing that ambulatory
surgery centers can provide services. However, she reminded the
committee that physicians, the State Licensing Board, and the
Joint Commission on Accreditation of Healthcare Organizations are
the ones who set policy regarding how many X-rays are needed,
etc. so she wonders if the question of differences in practices
is applicable to the CON discussion. When dealing with
applications of Medicaid and Medicare cost reimbursement, she
added, hospitals are not allowed to carve out a piece of business
and say "this particular center has only these characteristics or
costs and, therefore, we can price them separately."
MS. GRIFFITH acknowledged that many cost structures in an acute
care setting are driven by those things that a hospital has to
have to operate as an acute care hospital, for example, emergency
room services and surgical services. She explained that if a
patient in an ambulatory surgery center becomes critical that
patient is transferred to an acute care hospital. Therefore, she
added, the hospital must maintain physicians and nurses on
standby to accept those patients whether or not the patient is on
the physician schedule. She reminded the committee that
maintaining staff on call is a tremendous cost factor for the
hospital. She reiterated that hospital laboratory and radiology
units are open 24 hours a day, seven days a week to respond to
physicians' requests. She observed that costs are different
between an acute care hospital and an ambulatory surgery center
because of the expensive 24/7 requirement placed upon hospitals.
Number 2865
CHAIR JAMES said she understood that Ms. Griffith had stated that
ambulatory surgery centers definitely can charge less and yet
Chair James is hearing from testimony that the opposition does
not want ambulatory surgery centers to have an opportunity to be
installed unless they apply for a CON. Chair James commented
that she sees the lesser charge as a point in favor of ambulatory
surgery centers. Also, she mentioned that she does not
understand why a small community like Seward needs to apply for a
CON since there is no competition to provide service in that
community.
MS. GRIFFITH replied that Providence Hospital can charge
similarly for the same services as an ambulatory surgery center.
Nevertheless, she added, ambulatory surgery centers are "cherry
picking" because they do not have to provide the same level of
service as a hospital; therefore, ambulatory surgery centers are
not on the same playing field as hospitals.
Number 2752
CHAIR JAMES agreed with Ms. Griffith because ambulatory surgery
centers can only accept ambulatory cases; they do not accept all
surgeries. Chair James asked again if Seward needed the CON
process as excess baggage in their endeavors to build a new
hospital or does the CON serve a purpose.
MS. GRIFFITH replied that when small communities replace or build
a facility, the CON process defines what kinds of services are
appropriate for that area and is an integral part of the
evaluation. She explained that a structured process is necessary
for reviewing and assessing outside the emotion of the people
involved. She added that she thinks that is what the CON
provides. She commented that it is her understanding that a
physician can build an ambulatory surgery center without a CON if
he/she so desires but then they cannot tap into Medicaid funds by
attending to Medicaid or Medicare patients. She reiterated that
special interest groups want access to Medicare and Medicaid
funding; at present it is only available to entities who apply
for a CON. She added that no health care facility, with or
without CON, can be successful unless they have support of
Medicare and Medicaid funds.
Number 2517
REPRESENTATIVE HUDSON said that after hearing her testimony, it
was the first time that he had associated the CON with a federal
requirement (Medicare and Medicaid). He asked if the CON was a
state regulation because federal Medicaid and Medicare programs
require a CON program before any funds will be released to the
state.
MS. GRIFFITH replied no. She acknowledged that it used to be the
case some years ago but currently if the CON were eliminated the
state would still be in compliance with Medicare because the
federal government repealed the need for a CON in 1982. However,
she added, regulation states that if a CON is active in a state,
then Medicare will accept that as a condition of participation.
Number 2467
REPRESENTATIVE HUDSON asked if the converse were true and the
state did not have a CON law, then the federal government would
not require a CON as a condition of participation.
MS. GRIFFITH answered yes.
Number 2457
CHAIR JAMES said that the committee can find a corroborative
answer when the committee meets with Jack Neilsen from the
Medicaid Rate Commission on March 1, 2000. At this time she
announced the proposed CS will be set aside for a minute while
the committee discusses HCR 19. However, discussion of the
proposed CS continued because Representative Davies was not
present.
REPRESENTATIVE OGAN asked if it was Chair James' intention to put
the proposed CS in subcommittee.
CHAIR JAMES answered yes.
Number 2407
WALTER MAJOROS, Executive Director, Alaska Mental Health Board
(AMHB), said his agency is an advocate for people with serious
mental illness, both children and adults. He explained that his
board has serious concerns about the potential and perhaps
totally unintended negative impact that HB 297 might have on
consumers of mental health services. He added that his board is
particularly concerned about funding for community-based mental
health services. He commented that he wanted to introduce the
concept of least restrictive care and the obligation to provide
services to people in the area of mental health.
MR. MAJOROS mentioned that the board's main concern with HB 297,
particularly in view of the economic and political environment,
is that HB 297 will drive limited Medicaid dollars away from
community-based care for mental health type services toward more
expensive, high-level care. He indicated that there is a current
squeeze on the Medicaid program since the House Finance Committee
is discussing Medicaid right now and there could be cutbacks. He
emphasized that the important thing to recognize is that Medicaid
is a significant source of funds through the Medicaid options
list for community-based mental health services. He acknowledged
that some services under Medicaid are mandatory while those on
the options list are not; mental health rehabilitation services
are on the options list. He remarked that institutional
services, hospital services, and services that are subject to the
CON process are funded first in the Medicaid program; if enough
money is left over then optional services are funded. As a
result, he added, when more emphasis and funding is put toward
institutional-based services (which includes hospitals), the less
money there will be for community-based services. He reminded
the committee that by raising the CON threshold to $7 million
services will be impacted and moved toward institutional care.
Number 2202
MR. MAJOROS stated that an exemption could be made for mental
health care services under HB 297. He reiterated that if the
exemption existed, the CON would require institutional providers
of mental health care to demonstrate that there are not other
more appropriate community-based alternatives such as crisis
respite care. He explained that crisis respite care means acute
care emergency services for someone in a mental health crisis,
which type of care is substantially less expensive than providing
that same care in a hospital environment.
Number 2166
MR. MAJOROS emphasized that even an exemption would not solve the
movement of limited Medicaid funding away from lower-level
community-based services into hospital/institutional-based care.
He reiterated that his board would not be so concerned with
Medicaid money flow if the current economic and political
environment was not seeking to reduce overall Medicaid budget,
which places all services under the Medicaid options list in
jeopardy. He stated that his board believes that HB 297 would
place community-based mental health care services in greater
jeopardy. Therefore, he added, the question is "where do we want
to concentrate our limited resources for mental health, at the
highest, most restricted level or at the lower level, less
restrictive, and less expensive care that can be received in
communities."
Number 2121
CHAIR JAMES stated for the record that she is interested in
reducing the cost of Medicaid. She announced that the committee
will take a break from the proposed CS and discuss HCR 19.
HCR 19-WOMEN'S HISTORY MONTH/WOMEN'S DAY
CHAIR JAMES announced that the order of business under discussion
now is HOUSE CONCURRENT RESOLUTION NO. 19, Designating the month
of March as Women's History Month and urging all Alaskans to join
in the celebration of International Women's Day on March 8, 2000.
Number 2103
REPRESENTATIVE DAVIES said HCR 19 is a resolution that identifies
March 2000 as Women's History Month. He noted that HCR 19 is
straightforward and observes that women have made significant
contributions in history. He acknowledged that people
occasionally have undervalued, under reported, and generally not
been aware of contributions that women have made because of the
way that history is written. He explained that HCR 19 is a small
step in an attempt to recognize women's contributions and asks
the legislature to designate March as Women's History Month.
REPRESENTATIVE DAVIES offered one small personal story as to why
HCR 19 is important. He mentioned that a few days ago Alaska
celebrated Elizabeth Peratrovich Day. He explained that he had
called his wife, who is a teacher, and asked if there had been
any recognition of Elizabeth Peratrovich Day in Fairbanks
schools. He found that there were none because most of the
teachers were not even aware that it was Elizabeth Peratrovich
Day.
REPRESENTATIVE DAVIES recognized that Alaska has played a leading
role in many areas of social justice and yet many Alaskan
children grow up unaware of that role. He observed that HCR 19
would be one small step in raising the issue to people's
consciousness so that appropriate school curriculum materials
might be added to school districts, for example. He requested
the committee's support for HCR 19.
Number 1954
REPRESENTATIVE HUDSON wondered if there should be some mention of
the role that women have played in the defense of our nation.
Representative Hudson made a motion to move HCR 19 out of
committee with individual recommendations and asked for unanimous
consent. There being no objection, HCR 19 moved from the House
Sate Affairs Standing Committee.
HB 297-CERTIFICATE OF NEED PROGRAM
Number 1832
CHAIR JAMES announced the committee will return to discussion of
the proposed CS for HB 297.
BARBARA FLEMING, Secretary, Providence Health System of Alaska
Board of Directors, testified via teleconference from Seward in
opposition to HB 297. She read the following testimony:
Superficially, it [HB 297] seems simple; however, it
has far-reaching impacts across the state. I do wear
many hats here in Seward. I am a member of the Healthy
Communities Task Force, a member of the Providence
Seward Health Council, and Secretary of the Providence
Health System of Alaska Board of Directors. For the
record, I do oppose HB 297.
Many administrators and health care professionals have
been giving you all the history and dates regarding the
CON. Where I am concerned is the impact on communities
across this state. There is really a very delicate
balance in health care. The changes in the CON
legislation to only affect communities greater than
15,000 is really a mistake because in truth, it will
affect communities with less than 15,000 populace.
Through my association with Providence Health System, I
have been able to witness first hand their benevolence
around the state. Not just through charitable care,
but through their operation here in Seward and in other
communities across the state. Seward's hospital,
emergency room and clinic would, quite literally, not
be here without Providence. No other entity in the
state would ever take on this endeavor, as it [Seward
hospital] operates quite heavily in red ink, and is
never expected to make a profit or even break even. By
changing the CON legislation, it will affect the larger
hospitals in the state. By cutting into their
profitability, you short change all facilities across
the state and especially in Seward.
The current CON legislation adequately serves all our
needs. The balance, though delicate, is serving all
Alaskans and I urge you to reject the proposed changes
in HB 297.
Number 1525
JOHN VOWELL, Sitka Hospital, testified via teleconference from
Sitka. He said that the public has a right to and a vested
interest in health care. He noted that there has to be a process
so that the public can be involved in the decisions that are
being made relative to the health care that is being provided and
planned for them. He explained that is why he feels a CON exists
and why he personally feels that Alaska needs a CON process in
which the public is involved.
MR. VOWELL commented that hospitals exist to provide inpatient
care. However, the economics of health care create a situation
where those beds are supported by outpatient services. He
mentioned that revenues from outpatient services allow the
hospital to invest in personnel, equipment, supplies, and
structures to provide those services but not because of those
services on an inpatient basis. He indicated that the Sitka
hospital functions on 25 percent revenue from inpatient and 75
percent from outpatient services.
MR. VOWELL informed the committee that recently a major physician
group in Sitka chose to build a complete service outpatient
laboratory in their physicians' office. He emphasized that the
impact on the Sitka community is that the new laboratory will
take more than half of the outpatient revenue from the Sitka
hospital laboratory. He remarked that the new laboratory will
not decrease any costs of operating the Sitka hospital laboratory
and the new laboratory is not required to operate 24/7, as does
the Sitka hospital. Therefore, he concluded, when a decision is
made without a review process it results in detriment to the
community and to the ability of the Sitka hospital to meet
community health care needs.
Number 1341
CHAIR JAMES asked if the physicians were required to apply for a
CON in order to build an outpatient laboratory.
MR. VOWELL answered no. He added that the physicians were not
required to go through any type of review process or
consideration. He reminded the committee that the Sitka hospital
already had those services available for people in the community.
He observed that there is no mechanism in Alaska to attract
highly technical people necessary to support services. He stated
that he recruits outside Alaska in a very competitive, expensive
environment and Sitka hospital will lose some expensive personnel
to an outside service, which means that Sitka hospital will have
to go outside and repeat the recruitment process. He reiterated
the issue is not just the dollar amount but the health issue and
ability of the Sitka hospital to continue to provide community
services. Again, he said the public has a vested interest in
decisions that are being made.
Number 1204
DON ETHERIDGE, American Federation of Labor and Congress of
Industrial Organizations (AFL-CIO), testified on behalf of his
organization in opposition to HB 297. He said many AFL-CIO
trustees are concerned about cost increase to their memberships
if hospitals must increase their prices. He noted any increase
in hospital costs will be passed on to members of AFL-CIO in
their health care cost.
Number 1126
MARY KIESSLING, testified via teleconference from Anchorage in
support of HB 297. She read her testimony as follows:
My husband is a physician who has practiced family
medicine and occupational medicine in Anchorage for
over 25 years. His professional corporation has an
independent contract to provide the physician services
for two HealthSouth medical clinics, one in Anchorage
and one in Eagle River.
I'll give a brief, thumbnail sketch of my background.
In the early 70s I worked in public accounting for
Ernst & Ernst where I performed on audits of health
care facilities--both public and private.
For 14 years, I worked in health care administration.
I've been a hospital controller, chief financial
officer, assistant administrator, associate
administrator, executive director, and Chief Executive
Officer (CEO).
I was the executive director of Humana Hospital Alaska
here in Anchorage until June 1987, when I stepped down
to become my kids' Mom.
Since then I've done private consulting for doctors'
offices and a couple of hospitals outside of Anchorage,
but still in Alaska. Currently, I handle the financial
aspects of my husband's professional corporation, which
is a part-time job.
I've been involved in several private, diverse business
ventures, including publishing. I've been active in
many community organizations over the years, and am
currently on the board of the Alaska Center for the
Performing Arts, and am a board member and treasurer
for Breast Cancer Focus, Inc.
My real business is being the owner and instructor of a
private mathematics center in Anchorage. This is my
7th year of owning the Kuman Math Center which helps
students from age 4 to 74 learn and master a high skill
level in mathematics.
I'm here today to support any legislation that reduces
the politics in health care. House Bill 297 seems to
be a step in the right direction, but my preference
would be for the state to eliminate the Certificate of
Need requirement.
The CON process restricts access of providers into the
market and, from that point on, compromises the
benefits of the free market model for the private
sector of health care delivery.
At the point of service level, health care is a unique
and complex industry because the lines between the
public sector and the private sector are fading.
Nowhere is that more apparent than in Alaska, where
public sector facilities built by government funds
provided by our nations's taxpayers are opening their
door to private patients. No CON process is required
here.
The private sector comprises tax-exempt and tax-paying
providers, and the distinction between these two are
also fading. Tax-paying organizations, with their
private capital base, are expected to meet social
standards of free access, provide the compassionate and
caring delivery of health care services, and
participate in the community as good, tax-paying
corporate neighbors.
The tax-exempt preference was created to be a
significant financial incentive for organizations to
provide services that government might otherwise have
to provide.
Number 0936
Tax-exempt organizations have come to function with
financial goals of income exceeding expenses, with
sophisticated competitive strategies for increasing
their market share and political influence. They can
raise funds directly from the community on a tax-free
basis to help meet their stated missions and goals.
They can also obtain funds directly from the government
for major projects that enhance their market share and
influence.
Every facility provider's dream is to be an exclusive,
sole source provider in their self-defined market, with
no government interference.
The issue at hand is the role the state should play in
determining who can enter the private market at the
facility level, and how a provider will be allowed to
grow by expanding and enhancing their services.
I'm just here today to say that the CON process
prevents free market benefits. Do we really want
health care to be another utility?
Number 0681
SCOTT WHEAT said he is a mental health consumer advocate in
agreement with Walter Majoros' testimony. He reiterated that the
main concern of a mental health consumer is the impact on the
overall Medicaid general fund budget if there is competition or
expansion of cost to the Medicaid program. He noted that things
like prescribed drugs, mental health clinic services, and
rehabilitative services are all very important to keep people
like himself out of the hospital. He explained that de-
institutionalizing people by recognizing community-based services
is important and if institutions are able to access the Medicaid
fixed budget then community supports for consumers could be lost.
Number 0537
LELAND "CORKY" CORKRAN testified via teleconference from
Fairbanks in opposition to HB 297. He said he has been a ten-
year user of outpatient surgery at Fairbanks Memorial Hospital
(FMH). He noted that probably FMH has provided the best that he
can get and best return for the money. He reiterated that FMH
has done a very good job.
Number 0444
CARL WALES testified via teleconference from Fairbanks in support
of HB 297. He read his testimony as follows:
I am speaking for myself, work in satellite data
systems and have nothing to do with health care
industry beyond being a patient. Between my wife, my
daughter, and myself we have had five outpatient
surgeries in the last two years.
In my view, health care is not just the medical care
you receive but it starts when you sign in and ends
when your account is settled.
I remind you that "not for profit" does not assure
lower or lowest cost and/or high efficiency.
In my view, if someone is afraid of competition, then I
immediately wonder why. What are they afraid of?
Out-of-state management must return enough in economies
of scale to compensate for the drain of funds
(profits?) out of the state.
In the Interior (in over six years that I have lived
here) we have seen population growth, economic growth,
and tourism and visitor growth. The only health care
facility growth that I know of is at the Banner Health
Systems facility. In my opinion the rest of the growth
has been stalled by the CON process as we saw this last
year [in Fairbanks].
I think the system should let investors take their own
risk. I believe that Fairbanks needs more choices and
competition. I believe that we should have Alaska
ownership and management or, even better, local
ownership and management. We need to keep profits in
the state.
Number 0053
WILLIAM DOOLITTLE, M.D., testified via teleconference from
Fairbanks in opposition to HB 297. He read his testimony as
follows:
I have been in this community practicing medicine for
thirty-five years.
TAPE 00-13, SIDE A
Number 0040
During that time I have served on multiple hospital and
community boards and have seen the Interior of Alaska
escape much of the turmoil in health care that has
engulfed our neighbors in the Lower 48. For 20 years
or more I was able to serve the North Pole Fire
Department as Medical Director for their ambulance
service. There was little concern there for
competition since it was an unpaid position the rewards
of which were limited to watching a group of town folk
develop into highly skilled emergency medical
technicians (EMT) providing a much needed state-of-the-
art service. That's stuff I know something about.
I confess to a consuming ignorance about politics and
much of the legislative process. Regarding HB 297, I
appreciate the time spent by the committee in taking
this cogent testimony. As a novice to the process, it
is difficult for me to escape the concept that the
energy being put into this unfortunate piece of
legislation is directly related to the three rejected
certificates of need in the city of Fairbanks for a
free-standing outpatient surgery center. The
Department of Health and Social Services (DHSS) had
extensive public input, hired an outside consultant and
came to the conclusion that there was no definable need
for expansion of outpatient surgery services in
Fairbanks. Two of the three CON applicants were for-
profit providers and one was the single hospital in the
city--a not-for-profit, publicly owned hospital
established just after the flood--the '67 flood in
Fairbanks, not Noah's--through donation and hard work.
In as much as the hospital had previously developed
outpatient surgery to the extent deemed necessary,
pursuit of this legislation to raise the economic
threshold for CON appeared to be designed to enable
these two for-profit entrepreneurial efforts to build
without restriction.
Number 0202
CHAIR JAMES said that she did not file HB 297 to make sure that
two ambulatory surgery centers were built in Fairbanks. She
explained that HB 297 is a statewide effort to solve the real
problems of the CON.
Number 0231
DR. DOOLITTLE replied that the issue he addresses now is that CON
is designed to protect small communities. He continued to read
his testimony as follows:
... Whereas there is general acceptance of competition
as a market force to favor consumers, competition for a
small, relatively stable health care niche has the
single purpose of driving competitors out, since the
market here does not expand or change materially, and
there has been no demonstrated need for expansion. At
that point, when the competition for a particular
health care niche--in this case outpatient surgery--has
closed out the other competitors, we will have gone the
full circle where competition is gone, only now with
for-profit providers driving the system for--guess
what--profit.
With a single, community owned not-for-profit center of
health care, certain services are essential, but do not
generate sufficient revenue to be attractive to
competition. The community hospital is proscribed from
eliminating some services even though they may not be
profitable.
When for-profit operations sequester off the services
that appear to be profitable, they may well accomplish
the purpose of eliminating the competition, and then
find that some technologic or therapeutic nuance makes
the service they offer no longer profitable. They have
no constraint against leaving, and they have no
requirement to restore the prior status quo to
accommodate the needs of the community.
In sum, all the spurious arguments of advantage in
competition that would be enabled by this legislation
notwithstanding, only one result would emanate--loss of
the ability of small communities of Alaska to protect
themselves from invasion of for-profit entrepreneurs
who have no commitment to the long-term health of these
small communities. I don't always believe in the
rectitude of DHSS decisions--in this case they were
right. This legislation appears to be an attempt to
circumvent their decision. Please don't let it pass.
Number 0452
CHAIR JAMES closed public testimony and announced that she has
appointed a subcommittee made up of Representatives Green,
Smalley and herself.
ADJOURNMENT
There being no further business before the committee, the House
State Affairs Standing Committee meeting was adjourned at 9:50
a.m.
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