Legislature(2003 - 2004)

05/03/2004 01:36 PM Senate HES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
SENATE HEALTH, EDUCATION AND SOCIAL SERVICES STANDING COMMITTEE                                                               
                          May 3, 2004                                                                                           
                           1:36 p.m.                                                                                            
                                                                                                                                
TAPE (S) 04-27&28                                                                                                             
                                                                                                                              
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Fred Dyson, Chair                                                                                                       
Senator Lyda Green, Vice Chair                                                                                                  
Senator Gary Wilken                                                                                                             
Senator Bettye Davis                                                                                                            
Senator Gretchen Guess                                                                                                          
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
CS FOR HOUSE BILL NO. 511(HES) am                                                                                               
"An Act relating to the certificate of need program for health                                                                  
care facilities; and providing for an effective date."                                                                          
     HEARD AND HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 511                                                                                                                  
SHORT TITLE: CERTIFICATE OF NEED PROGRAM                                                                                        
SPONSOR(s): REPRESENTATIVE(s) SAMUELS                                                                                           
                                                                                                                                
02/16/04       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/16/04       (H)       HES, FIN                                                                                               
03/02/04       (H)       HES AT 3:00 PM CAPITOL 106                                                                             
03/02/04       (H)       Heard & Held                                                                                           
03/02/04       (H)       MINUTE(HES)                                                                                            
03/04/04       (H)       HES AT 3:00 PM CAPITOL 106                                                                             
03/04/04       (H)       Heard & Held                                                                                           
03/04/04       (H)       MINUTE(HES)                                                                                            
03/18/04       (H)       HES AT 3:00 PM CAPITOL 106                                                                             
03/18/04       (H)       Moved CSHB 511(HES) Out of Committee                                                                   
03/18/04       (H)       MINUTE(HES)                                                                                            
03/24/04       (H)       HES RPT CS(HES) 3DP 1DNP 2NR                                                                           
03/24/04       (H)       DP: KAPSNER, CISSNA, WILSON; DNP: WOLF;                                                                
03/24/04       (H)       NR: GATTO, COGHILL                                                                                     
03/29/04       (H)       FIN AT 1:30 PM HOUSE FINANCE 519                                                                       
03/29/04       (H)       Heard & Held                                                                                           
03/29/04       (H)       MINUTE(FIN)                                                                                            
03/31/04       (H)       FIN AT 1:30 PM HOUSE FINANCE 519                                                                       
03/31/04       (H)       Moved CSHB 511(HES) Out of Committee                                                                   
03/31/04       (H)       MINUTE(FIN)                                                                                            
04/01/04       (H)       FIN RPT CS(HES) 4DP 2NR 2AM                                                                            
04/01/04       (H)       DP: MEYER, HAWKER, HARRIS, WILLIAMS;                                                                   
04/01/04       (H)       NR: FATE, FOSTER; AM: STOLTZE, CHENAULT                                                                
04/26/04       (H)       MOVED TO BOTTOM OF CALENDAR                                                                            
04/26/04       (H)       NOT TAKEN UP 4/26 - ON 4/27 CALENDAR                                                                   
04/27/04       (H)       NOT TAKEN UP 4/27 - ON 4/28 CALENDAR                                                                   
04/28/04       (H)       TRANSMITTED TO (S)                                                                                     
04/28/04       (H)       VERSION: CSHB 511(HES) AM                                                                              
04/29/04       (S)       READ THE FIRST TIME - REFERRALS                                                                        
04/29/04       (S)       HES, FIN                                                                                               
04/30/04       (S)       HES AT 1:30 PM BUTROVICH 205                                                                           
04/30/04       (S)       Heard & Held                                                                                           
04/30/04       (S)       MINUTE(HES)                                                                                            
05/03/04       (S)       HES AT 1:30 PM BUTROVICH 205                                                                           
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
Mayor John Williams                                                                                                             
City of Kenai Peninsula Borough                                                                                                 
144 North Binkley Street                                                                                                        
Soldotna, AK 99669                                                                                                              
210 Fidalgo Ave., St. 200                                                                                                       
Kenai, AK 99601                                                                                                                 
POSITION STATEMENT:  Testified on CSHB 511(HES) am                                                                            
                                                                                                                                
Blaine Gilman                                                                                                                   
Attorney representing Lord's Ranch                                                                                              
Kenai, AK                                                                                                                       
POSITION STATEMENT:  Testified on CSHB 511(HES) am                                                                            
                                                                                                                                
Jeff Kinion                                                                                                                     
CEO of Alaska Open Imaging Center                                                                                               
6911 DeBarr Road                                                                                                                
Anchorage, AK 99504                                                                                                             
POSITION STATEMENT:  Testified on CSHB 511(HES) am                                                                            
                                                                                                                                
Doctor Val Christensen                                                                                                          
Alaska Open Imaging Center                                                                                                      
6911 DeBarr Road                                                                                                                
Anchorage, AK 99504                                                                                                             
POSITION STATEMENT:  Testified on CSHB 511(HES) am                                                                            
                                                                                                                                
George Larsen                                                                                                                   
Valley Hospital                                                                                                                 
515 Dahlia Avenue                                                                                                               
Palmer, AK99645                                                                                                                 
POSITION STATEMENT:  Supports CSHB 511(HES) am                                                                                
                                                                                                                                
Brian Slocum                                                                                                                    
Tanana Valley Clinic Administrator                                                                                              
1001 Nobel Street                                                                                                               
Fairbanks, AK 99701                                                                                                             
POSITION STATEMENT:  Testified on CSHB 511(HES) am                                                                            
                                                                                                                                
Mike Powers                                                                                                                     
Fairbanks Memorial Hospital                                                                                                     
650 Cowles Street                                                                                                               
Fairbanks, AK 99701                                                                                                             
POSITION STATEMENT:  Testified on CSHB 511(HES) am                                                                            
                                                                                                                                
Robert Gould                                                                                                                    
Fairbanks Memorial Hospital                                                                                                     
650 Cowles Street                                                                                                               
Fairbanks, AK 99701                                                                                                             
POSITION STATEMENT:  Supports CSHB 511(HES) am                                                                                
                                                                                                                                
Rick Solie                                                                                                                      
Volunteer Trustee, Greater Fairbanks Hospital Foundation                                                                        
665 Knightsbridge Road                                                                                                          
Fairbanks, AK 99709                                                                                                             
POSITION STATEMENT:  Testified on CSHB 511(HES) am                                                                            
                                                                                                                                
Doctor Kurt Hediger                                                                                                             
AK Chiropractic Society President                                                                                               
Anchorage, AK                                                                                                                   
POSITION STATEMENT:  Opposes CSHB 511(HES) am                                                                                 
                                                                                                                              
Doctor Robert Bridger                                                                                                           
Alaska Open Imaging Center                                                                                                      
6911 DeBarr Road                                                                                                                
Anchorage, AK 99504                                                                                                             
POSITION STATEMENT:  Opposes CSHB 511(HES) am                                                                                 
                                                                                                                                
Paul Brenner                                                                                                                    
Central Peninsula General Hospital                                                                                              
250 Hospital Place                                                                                                              
Soldotna, AK 99669                                                                                                              
POSITION STATEMENT:  Testified on CSHB 511(HES) am                                                                            
                                                                                                                                
Doctor Helen Bedder                                                                                                             
No address provided                                                                                                             
POSITION STATEMENT:  Opposes CSHB 511(HES) am                                                                                 
                                                                                                                                
Joel Gilbertsen, Commissioner                                                                                                   
Department of Health &                                                                                                          
  Social Services                                                                                                               
PO Box 110601                                                                                                                   
Juneau, AK  99801-0601                                                                                                          
POSITION STATEMENT:  Explained aspects of CSHB 511(HES) am                                                                    
                                                                                                                                
Janet Clarke                                                                                                                    
Department of Health & Social Services                                                                                          
PO Box 110601                                                                                                                   
Juneau, AK  99801-0601                                                                                                          
POSITION STATEMENT:  Testified on CSHB 511(HES) am                                                                            
                                                                                                                                
Doctor Chris Conover                                                                                                            
Assistant Research Professor of Public Policy Studies                                                                           
Box 90253                                                                                                                       
Duke University                                                                                                                 
Durham, NC 27708                                                                                                                
POSITION STATEMENT:  Testified on CSHB 511(HES) am                                                                            
                                                                                                                                
Charlie Franz                                                                                                                   
CEO, South Peninsula Hospital                                                                                                   
Homer, AK                                                                                                                       
POSITION STATEMENT:  Testified on CSHB 511(HES) am                                                                            
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
TAPE 04-27, SIDE A                                                                                                            
                                                                                                                                
CHAIR FRED DYSON  called the Senate Health,  Education and Social                                                             
Services  Standing  Committee  meeting  to  order  at  1:36  p.m.                                                               
Present  were  Senators Green,  Wilken,  Davis  and Chair  Dyson.                                                               
Senator Guess arrived momentarily.                                                                                              
                                                                                                                                
         CSHB 511(HES) am -CERTIFICATE OF NEED PROGRAM                                                                      
                                                                                                                                
CHAIR  FRED  DYSON  announced  CSHB  511(HES) am  to  be  up  for                                                               
consideration. He recognized Kenai  Mayor John Williams and asked                                                               
how far  along the two  adolescent facilities projects  were that                                                               
he spoke about during the previous hearing.                                                                                     
                                                                                                                                
JOHN WILLIAMS, Mayor  of the City of Kenai, replied  the city was                                                               
in a  land purchase  process that began  about three  months ago.                                                               
Architects   had  already   spent  considerable   time  rendering                                                               
drawings for  the projects  and he knew  that both  companies had                                                               
spent considerable time in anticipation of the project.                                                                         
                                                                                                                                
CHAIR  DYSON said  he asked  that because  some of  the committee                                                               
members  believe  that it's  a  bit  unjust  to change  rules  in                                                               
midstream  so  they were  looking  for  some  way to  keep  those                                                               
companies from being  subject to new rules. He  suggested that he                                                               
and others  listening think about  how they might  grandfather in                                                               
those  people  who  had  begun a  process  and  made  commitments                                                               
without opening the door too wide.                                                                                              
                                                                                                                                
MAYOR  WILLIAMS expressed  his appreciation  and said  he thought                                                               
the commissioner  was well aware of  how many beds are  needed as                                                               
well as  how many  beds are  planned and  in progress.  When they                                                               
suggested a  January 1, 2005  effective date during  the previous                                                               
meeting,  he wasn't  aware whether  the date  would or  would not                                                               
accommodate any other projects that  might have been started, but                                                               
there should be some leeway for accommodation.                                                                                  
                                                                                                                                
CHAIR DYSON  asked Mayor Williams to  stand by and called  on Mr.                                                               
Gilman.                                                                                                                         
                                                                                                                                
BLAINE GILMAN from Kenai said  he is an attorney representing the                                                               
Lord's Ranch,  which is a  non-profit based out of  Arkansas that                                                               
runs  a   residential  treatment  facility  and   an  out-patient                                                               
counseling facility. Both are for children.                                                                                     
                                                                                                                                
The  Lord's Ranch  is in  the process  of trying  to develop  and                                                               
build a  30 bed facility  in Kenai.  They started the  process in                                                               
November  2003 when  they applied  to  purchase a  piece of  city                                                               
property. They re concerned that  if this legislation passes then                                                               
they will miss the entire  2004 construction season. He asked the                                                               
committee  to  think about  the  fact  that  they must  still  go                                                               
through  a   licensing  process  so  the   department  does  have                                                               
oversight  over this  type of  facility. To  date they  have gone                                                               
through re-platting,  surveys, and  an appraisal of  the property                                                               
and  they  really want  to  continue  to  move forward  with  the                                                               
project. He  has seen data  indicating there are over  500 Alaska                                                               
children  in facilities  outside  the state  evidencing the  fact                                                               
that  there is  a  terrific need  for this  type  of facility  in                                                               
Alaska.                                                                                                                         
                                                                                                                                
CHAIR DYSON announced  that he would like everyone  to keep their                                                               
remarks to  three minutes  because of the  number of  people that                                                               
wanted to testify.                                                                                                              
                                                                                                                                
JEFF KENYON, CEO of Alaska  Open Imaging Center, reported that he                                                               
has been involved with the delivery  of medical care for about 30                                                               
years.  Four years  ago  he left  hospital  employment to  become                                                               
independent.                                                                                                                    
                                                                                                                                
He  said  he has  seen  hospitals  hold  back on  purchasing  and                                                               
installing new technology until  competition spurred them to make                                                               
the move. Valley Hospital is  such an example. Although they were                                                               
asked  to consider  installing a  bone density  unit to  evaluate                                                               
osteoporosis over several budgetary  request cycles, they took no                                                               
action until the service was  offered by the competition. At that                                                               
time  it took  just months  for  Valley Hospital  to install  the                                                               
equipment.                                                                                                                      
                                                                                                                                
PET scanning is  one of the most expensive  technologies there is                                                               
and  Providence Hospital  was  reluctant to  bring  a scanner  in                                                               
until a  competitor did  so. They  offered Providence  Hospital a                                                               
"cost  competitive,  cooperative  arrangement only  to  have  the                                                               
hospital negatively  react and commit  to a $2.8  million machine                                                               
and  duplicate  the  service,  which  by the  way,  was  not  CON                                                               
[certificate of  need] approved."  Competition has  benefited the                                                               
people of  Alaska and has  increased the level of  technology and                                                               
care and competition works to decrease costs, he stated.                                                                        
                                                                                                                                
He  charged that  the Department  of Health  and Social  Services                                                               
(DHSS)  in  cooperation with  multimillion  dollar  out of  state                                                               
hospitals  are organizing  for a  double  standard monopoly  that                                                               
will ultimately be very expensive  for the citizens of the state.                                                               
HB 511  is an effort  to steamroller this process  without giving                                                               
legislators the time  or information that would  make it possible                                                               
to  analyze the  facts  to make  a  sound decision.  "Competition                                                               
drives  the  level and  the  delivery  of  health care  up  while                                                               
driving the  cost of  health care  down. Competition  works where                                                               
the CON was designed to, but never did," he concluded.                                                                          
                                                                                                                                
1:46 pm                                                                                                                       
                                                                                                                                
SENATOR GRETCHEN  GUESS asked Mr.  Kenyon to explain how  the CON                                                               
might  jeopardize  competition  if  it's supposed  to  result  in                                                               
adequate capacity within a community.                                                                                           
                                                                                                                                
MR.  KENYON replied,  "We don't  feel  that the  delivery of  the                                                               
certificate  of need  in Alaska  is a  fair approach  and equally                                                               
represented  to  all  companies."  He said  he  understands  that                                                               
Providence  Hospital has  tremendous influence  on both  DHSS and                                                               
the advisory  board for CONs  and they have  tremendous influence                                                               
behind HB 511. Because of this,  his company won't be allowed the                                                               
opportunity to fairly expand and grow.                                                                                          
                                                                                                                                
SENATOR GUESS interpreted that to mean  that it's not so much the                                                               
CON  itself rather  it's  the  current process  of  how CONs  are                                                               
applied that is problematic.                                                                                                    
                                                                                                                                
MR. KENYON didn't agree and  advised that their philosophy is for                                                               
free enterprise  and competition to  be the regulating  force for                                                               
which services  are needed and  which are delivered.  Through the                                                               
CON  regulation  process  undue   expense  and  time  and  unfair                                                               
evaluations are the problem.                                                                                                    
                                                                                                                                
SENATOR GUESS  asked how  his business  deals with  the uninsured                                                               
and the underinsured.                                                                                                           
                                                                                                                                
MR.  KENYON replied  their  philosophy  is to  take  care of  the                                                               
patient  first and  work out  the  details later.  They work  out                                                               
individual  payment  plans and  are  also  write off  uncollected                                                               
debts.                                                                                                                          
                                                                                                                                
CHAIR DYSON added  that he understands that they  give a discount                                                               
to those people who pay cash.                                                                                                   
                                                                                                                                
MR.  KENYON said  he  thought  there was  a  slight discount  for                                                               
prompt pay.                                                                                                                     
                                                                                                                                
CHAIR DYSON  noted that  is in contrast  to most  facilities that                                                               
charge 30  to 40  percent more  for patients  that pay  their own                                                               
bills [the uninsured].                                                                                                          
                                                                                                                                
DOCTOR VAL CHRISTIANSON  said he is a  board certified diagnostic                                                               
radiologist  who is  currently  working for  Alaska Open  Imaging                                                               
Center.  When he  was in  the Air  Force he  was the  chairman of                                                               
radiology and  nuclear medicine at  Elmendorf. He left  the state                                                               
briefly  but after  his retirement  he moved  his family  back to                                                               
Alaska   because  he   thought  he   could  make   a  significant                                                               
contribution to  the improvement  of health  care in  Alaska. His                                                               
commitment is  based on the ideal  of a free and  open market for                                                               
business competition and free enterprise. He continued:                                                                         
                                                                                                                                
     HB 511  definitely represents collusion with  intent of                                                                    
     restraint  of  trade  and  is  the  antithesis  of  the                                                                    
     American  free enterprise  that  we all  believe in  as                                                                    
     well as our  Alaska model of 'North to  the Future.' It                                                                    
     does  indeed represent  a giant  leap backwards  to the                                                                    
     era of 'Might Makes Right.'                                                                                                
                                                                                                                                
     HB 511  guarantees monopolistic control in  the medical                                                                    
     imaging market  with the  two-tier price  fixing system                                                                    
     and  essential gouging  of the  Alaska public.  This is                                                                    
     the business  equivalent of telling  John Dow  he can't                                                                    
     open  the automobile  repair  shop  because we  already                                                                    
     have  a  qualified Ford  dealer  or  a qualified  Chevy                                                                    
     dealer in town who is sufficient, thank you very much.                                                                     
                                                                                                                                
     In   recent   House   testimony  on   Thursday   night,                                                                    
     Representative  Samuels  stated  for  fairness  on  the                                                                    
     front  end and  sounded very  good, but  in reality  it                                                                    
     absolutely destroys  fairness on the back  end. What he                                                                    
     didn't mention is from here  on out a small independent                                                                    
     facility would have no  chance, essentially, to acquire                                                                    
     new  equipment  or replace  old  equipment  in a  world                                                                    
     dominated  by   hospital  deep  pockets   and  critical                                                                    
     connections.                                                                                                               
                                                                                                                                
     Previous   to   his   final  speech   that   night,   a                                                                    
     Representative from Fairbanks,  who admitted to sitting                                                                    
     on the  hospital board up  there, stated there is  a 30                                                                    
     percent  increase in  the  chance  of errors  including                                                                    
     services  of hospitals.  He  gave  no documentation  of                                                                    
     that  whatsoever, which  is somewhat  untenable without                                                                    
     citation of a mainstream or  a peer review study. There                                                                    
     are indeed  several big mainstream peer  review studies                                                                    
     published   in   the   Journal  of   American   Medical                                                                    
     Association  which has  filtered  down  to the  popular                                                                    
     press such  as Readers  Digest that document  very high                                                                    
     and unacceptable errors  in hospital services including                                                                    
     radiology departments.                                                                                                     
                                                                                                                                
     That   Representative  also   stated  that   33  states                                                                    
     presently in  the Lower 48  have a certificate  of need                                                                    
     program. What he didn't mention  was that originally 49                                                                    
     of the 50 states had  CON programs and that the federal                                                                    
     administrators dropped the federal  CON programs in the                                                                    
     1980s and  the rest of  the states have  followed suit.                                                                    
     These  programs  have  been proven  not  to  work  down                                                                    
     there.                                                                                                                     
                                                                                                                                
     He also stated that  medical economics work differently                                                                    
     and have been arguing  against free enterprise. That is                                                                    
     true.  Medical economics  have  been  shown to  operate                                                                    
     differently.  What he  didn't state  was why.  The main                                                                    
     reason they  work differently is  because of  a problem                                                                    
     of  self-referral. Self-referral  means  that a  doctor                                                                    
     sees a  patient in his  clinic and refers  that patient                                                                    
     to  his  own  imaging  center  or  his  own  laboratory                                                                    
     testing  center. This  is even  worse  if the  hospital                                                                    
     owns the equipment.                                                                                                        
                                                                                                                                
     Alaska Open Imaging Center does  not do this and cannot                                                                    
     do  this  because  our  radiologists  don't  make  that                                                                    
     initial  patient  visit  and don't  control  referrals.                                                                    
     Independent   outpatient   centers  do   imaging   more                                                                    
     efficiently,  more  economically   and  with  a  higher                                                                    
     standard of care.  They are not subject to  the cost of                                                                    
     the  CON,  which  can  run   up  to  $100,000  for  the                                                                    
     bureaucratic costs,  all of which  are passed  along to                                                                    
     the patients.                                                                                                              
                                                                                                                                
     Independent  outpatient  centers  are not  involved  in                                                                    
     over  utilization and  inflated  costs associated  with                                                                    
     self-referrals. It's  my belief,  and others  also, the                                                                    
     hospitals should stick  to what they do  best, which is                                                                    
     inpatient care  of critically ill people  including any                                                                    
     needed  imaging. They  should not  attempt monopolistic                                                                    
     control of  all business  enterprise especially  in the                                                                    
     outpatient  imaging  arena  for  the  purpose  of  cost                                                                    
     shifting.                                                                                                                  
                                                                                                                                
     HB 511  is being ramrodded  through just as  quickly as                                                                    
     possible  because  the powers  behind  it  do not  want                                                                    
     [indisc] to have time to  read the studies or learn the                                                                    
     facts behind it. It  threatens my livelihood personally                                                                    
     and I feel  it threatens Alaska patients  and payers on                                                                    
     their  behalf and  everybody stands  to  lose big  time                                                                    
     with this.                                                                                                                 
                                                                                                                                
SENATOR GUESS  asked him  to comment further  on how  he believes                                                               
CON  creates  a  two-tiered  system   because,  "no  matter  what                                                               
situation,  you're  not  going to  have  perfect  competition  in                                                               
medical  economics. You're  always  going  to have  oligopolies."                                                               
She assured  him she wasn't  trying to give  him a hard  time she                                                               
was simply  trying to  understand how  a CON  would deny  him his                                                               
livelihood.                                                                                                                     
                                                                                                                                
DOCTOR CHRISTIANSON replied  one of their findings  is that there                                                               
is a two-tier system between  inpatient hospital pay for Medicaid                                                               
and Medicare  as opposed to outpatient.  As far as the  impact on                                                               
his livelihood, he said that if  his company wanted to purchase a                                                               
very expensive  piece of  equipment for  one of  their facilities                                                               
and  they weren't  already in  that market  place but  a hospital                                                               
was, it  would be difficult for  them to justify why  they should                                                               
have  the equipment  instead of  the hospital.  Another point  is                                                               
that  when  it  comes  time  for  them  to  replace  a  piece  of                                                               
equipment, such  as an  MRI, Providence  Hospital is  right there                                                               
and has  the certificate of  need so there  is no way  they could                                                               
compete  for  a new  CON  to  replace  the equipment.  "We  would                                                               
basically go out of business at that point," he said.                                                                           
                                                                                                                                
CHAIR DYSON recognized George Larsen in Mat-Su.                                                                                 
                                                                                                                                
GEORGE LARSEN stated that he supports the bill as presented.                                                                    
                                                                                                                                
He noted  that there  have been references  to Triad  having deep                                                               
pockets, but he  clarified that the community and  Triad have had                                                               
a  joint venture  that was  established  because Valley  Hospital                                                               
wasn't able to generate sufficient money for replacements.                                                                      
                                                                                                                                
Imaging is  one of the  areas in which  a hospital can  make some                                                               
profit and  provide an  offset to areas  such as  emergency rooms                                                               
that draw down the entire  organization. If they couldn't rely on                                                               
imaging to generate profit, they  would have to rely more heavily                                                               
on the state, he said.                                                                                                          
                                                                                                                                
CHAIR DYSON asked him if he works at Valley Hospital.                                                                           
                                                                                                                                
MR. LARSEN  replied he is  the chief executive officer  at Valley                                                               
Hospital.                                                                                                                       
                                                                                                                                
CHAIR  DYSON  asked  him  to  clarify  whether  or  not  he  just                                                               
represented that  Valley Hospital  charges more for  imaging than                                                               
the  service  costs  to  offset   services  that  don't  pay  for                                                               
themselves.                                                                                                                     
                                                                                                                                
MR.  LARSEN  replied,  "That  is  true  and  that's  where  we're                                                               
charging a little  bit more. It's competitive with  the market in                                                               
Anchorage." If they weren't able to  make a profit on imaging and                                                               
offset  losses  in  departments  like  emergency  rooms,  medical                                                               
surgical units, and obstetrics they  wouldn't be able to operate.                                                               
They look at  the full system rather than the  separate parts, he                                                               
said.                                                                                                                           
                                                                                                                                
CHAIR  DYSON asked  how much  discount on  imaging services  they                                                               
give third party payers such  as insurance companies over a self-                                                               
payer.                                                                                                                          
                                                                                                                                
MR. LARSEN said he would have  to go to his billing department to                                                               
get  that  information for  certain,  but  he thought  that  with                                                               
Medicare and Medicaid  they receive in the neighborhood  of 50 to                                                               
55 percent  of the bill.  On the other  hand, he said,  they give                                                               
discounts to self-payers in the form  of write offs. In 1999 they                                                               
wrote off $2.9 million, in 2000  they wrote off $4.6 million, and                                                               
in 2001 they wrote off $4 million.                                                                                              
                                                                                                                                
CHAIR DYSON restated  his question, which was  what discount they                                                               
give insurance companies.                                                                                                       
                                                                                                                                
MR. LARSEN  said Medicare and  Medicaid pay  50 to 55  percent so                                                               
the receive a  45 or 50 percent discount. Blue  Cross Blue Shield                                                               
receives between 3 and 6 percent off charges he said.                                                                           
                                                                                                                                
SENATOR GUESS  asked why they  couldn't price services to  make a                                                               
reasonable  profit in  the departments  that lose  money so  they                                                               
wouldn't have to overcharge in departments that do make money.                                                                  
                                                                                                                                
MR. LARSEN  said some  of it has  to do with  the market.  In the                                                               
medical surgical unit  a room costs over $1,000 per  day and they                                                               
believe they're priced at what the market can bear.                                                                             
                                                                                                                                
BRIAN  SLOCUM,  administrator  of  the Tanana  Valley  Clinic  in                                                               
Fairbanks,  reported that  they are  the largest  multi specialty                                                               
group  in  the state  and  they  too  provide care  for  indigent                                                               
patients. In  2003 this  amounted to about  4.6 percent  of their                                                               
net  revenue  and  he  knew   that  Fairbanks  Memorial  Hospital                                                               
reported  that   about  1.8  percent   of  patient   revenue  was                                                               
uncompensated. Contractual adjustments  for Medicare and Medicaid                                                               
amounted to another $5.6 million for the clinic, he said.                                                                       
                                                                                                                                
He said  his point is  that the  CON application in  Alaska needs                                                               
revision  because  it's  fatally  flawed  and  has  outlived  its                                                               
usefulness. In 1999 his clinic  was turned down when they applied                                                               
for a  CON. During a  subsequent appeal, depositions  uncovered a                                                               
number of precepts. First, the  CON program has no risk standards                                                               
that  are  used  to  evaluate applications.  According  to  sworn                                                               
testimony, DHSS  used to  employ 25 people  for planning  and CON                                                               
review. Now  there is  a single  person and  they aren't  able to                                                               
provide  current  updates  of  CON standards  for  a  review.  He                                                               
pointed  out that  even  multi million  dollar  projects have  no                                                               
written standards to use for evaluation purposes.                                                                               
                                                                                                                                
He  was aware  that the  CON coordinators  assured Senator  Green                                                               
that confidentiality  is provided when competing  applicants file                                                               
multiple  CON  applications  simultaneously.  However,  in  sworn                                                               
testimony the  CON coordinator admitted that  he sent application                                                               
data from  the Tanana Clinic  to Fairbanks Memorial  Hospital and                                                               
other   CON  applicants   for  editing.   Although  his   company                                                               
protested, their objections were ignored.                                                                                       
                                                                                                                                
Finally, he  pointed to a CON  review dated February 10,  2004 in                                                               
which the coordinator decided that a  CON would be required for a                                                               
group of  physicians because the  present value of  the equipment                                                               
they were  applying for exceeded  $1 million. Although  it's been                                                               
stated multiple  times that hospitals  want to level  the playing                                                               
field because  doctors don't need  a CON when  leasing equipment,                                                               
the CON  coordinator apparently  anticipated the  Legislature and                                                               
changed the requirements. "This is  all too characteristic of the                                                               
CON program," he said.                                                                                                          
                                                                                                                                
MIKE  POWERS,  administrator   of  Fairbanks  Memorial  Hospital,                                                               
testified via teleconference  to say that he would  like to speak                                                               
to  the  philosophic  issues  of  CON  and  comments  about  them                                                               
restricting   competition  and   being  a   monopolistic  control                                                               
measure.  "A number  of things  have been  said about  the unique                                                               
rules  of health  care economics.  They essentially  require four                                                               
conditions  to be  met.  Buyers and  sellers  are well  informed,                                                               
buyers  and   sellers  are  numerous,  buyers   and  sellers  are                                                               
independent and  there is easy  entry and exit from  the market."                                                               
Not one of those conditions is  met in health care. Patients make                                                               
infrequent  decisions about  health care  issues and  so are  not                                                               
informed. There  are many sole  community providers and  so there                                                               
aren't many buyers and sellers in  a community. The whole role of                                                               
insurance  puts  a  barrier  between the  buyer  and  seller.  If                                                               
Fairbanks Memorial were  to try to exit from the  ER or neo-natal                                                               
market,  there  would  be public  outrage.  Because  those  basic                                                               
conditions  aren't   met  there's  a   need  for  some   kind  of                                                               
regulation.                                                                                                                     
                                                                                                                                
The  question of  cost  subsidies is  anathema  to business,  but                                                               
departments such  as the ER  are badges  of honor to  a hospital.                                                               
"We're proud of  the ER and we're proud of  taking care of burns,                                                               
neo-natal,  Medicare and  Medicaid and  all comers."  However, he                                                               
said he takes  issue with niche providers that  cherry pick labor                                                               
in an 8  to 5 operation while the hospital  operates all hours to                                                               
take care  of the entire  community. Empirical  evidence suggests                                                               
that niche  providers target less  costly patients,  which raises                                                               
the issue of a few  shareholders benefiting versus access to many                                                               
in the community.                                                                                                               
                                                                                                                                
Questions about  ethics and self-referral  have come up,  but the                                                               
federal government  is calling  for an 18  month moratorium  as a                                                               
result  of  the adverse  impact  of  niche providers.  A  General                                                               
Accounting Office  study in Florida  shows that doctors  that own                                                               
diagnostic imaging equipment charge  54 percent more for Medicare                                                               
scans, 28  percent more  for CT  scans, and  25 percent  more for                                                               
ultrasounds.  The   study  indicates  that  83   percent  of  all                                                               
specialty  hospitals  and 55  percent  of  general hospitals  are                                                               
located in  states without certificate  of need. Some  states are                                                               
moving back  to CON because they  found that managed care  in the                                                               
80s and 90s didn't work.                                                                                                        
                                                                                                                                
In  conclusion  he   said  they  would  like   the  committee  to                                                               
conceptually make the rules fair for all organizations.                                                                         
                                                                                                                                
SENATOR  GUESS  asked him  to  comment  on what  keeps  Fairbanks                                                               
Memorial Hospital from  pricing ER services to  reflect the costs                                                               
plus a reasonable profit.                                                                                                       
                                                                                                                                
MR.  POWERS replied  it's the  heavy reliance  on the  government                                                               
payers such as Medicaid and Medicare  that don't pay for the cost                                                               
of the care.  Those costs have to be recovered  somewhere else so                                                               
you over price in other areas.                                                                                                  
                                                                                                                                
CHAIR DYSON commented that that is a remarkable statement.                                                                      
                                                                                                                                
MR.  POWERS replied,  "It's a  sad, unfortunate  societal dilemma                                                               
that unfortunate  legislators find themselves in  and can't fully                                                               
fund the Medicaid program."                                                                                                     
                                                                                                                                
CHAIR  DYSON asked  if he  just  said that  because Medicare  and                                                               
Medicaid  reimbursements don't  cover  the cost  of services  you                                                               
have to  put those charges  on somebody  else and that  is either                                                               
the self payer or the insurance third party payer.                                                                              
                                                                                                                                
MR. POWERS  replied, "All costs,  all charges are  placed equally                                                               
on all payers it's just that some refuse to pay for those."                                                                     
                                                                                                                                
CHAIR DYSON said that includes Medicare and Medicaid.                                                                           
                                                                                                                                
MR. POWERS agreed.                                                                                                              
                                                                                                                                
SENATOR GUESS  questioned whether  the prices  charged in  the ER                                                               
are reflective of the cost of services plus a reasonable profit.                                                                
                                                                                                                                
MR. POWERS said they are.                                                                                                       
                                                                                                                                
ROBERT GOULD reported  that he is the  associate administrator of                                                               
finance  and operation  [for Fairbanks  Memorial Hospital]  so he                                                               
fills the  CFO role and  also has operational  responsibility for                                                               
imaging, surgery, ER  etc. He said he supports  the bill because,                                                               
in his view, it levels the  playing field, which is not currently                                                               
the case.                                                                                                                       
                                                                                                                                
Using imaging  as an example he  advised that the hospital  is in                                                               
the  process  of   building  an  imaging  center   and  they  are                                                               
restricted to  building up  to the  current community  need. They                                                               
are unable  to build in  extra services or build  for anticipated                                                               
growth,  but a  business without  a CON  could come  in and  draw                                                               
business away  from the  hospital without  going through  the CON                                                               
process.  Although there  have been  charges that  this restricts                                                               
competition, the fact  is that anybody that goes  through the CON                                                               
process that  can show need  can get approval for  their project.                                                               
"The  fact  of  the  matter  is that  if  there  is  capacity  in                                                               
Fairbanks,  even  after  we're  done  with  our  imaging  center,                                                               
someone else could  come in, apply for a certificate  of need and                                                               
as long as they can show  need, they can have the services. Under                                                               
the current legislation, the way it  is now, for imaging it isn't                                                               
required.  They could  just build  on top  of what  we've already                                                               
built and shown a need for."                                                                                                    
                                                                                                                                
He said he  would challenge the statement that a  CON can cost up                                                               
to $100,000 because they've done a  number of them and if they've                                                               
spent more  than $10,000 on any  one he would be  very surprised.                                                               
He also challenged  the idea that Fairbanks  Memorial Hospital is                                                               
a   monopoly  and   that  they   don't  foster   competition.  If                                                               
competition  brings  lower  costs  then the  costs  in  Anchorage                                                               
should  be  the  lowest  in the  state,  but  Fairbanks  Memorial                                                               
Hospital  is  actually the  low  cost  full service  provider  in                                                               
Alaska.                                                                                                                         
                                                                                                                                
He stated  that there  are four  areas in  health care  that pay.                                                               
Whether it's right or wrong,  Medicare, Medicaid and other payers                                                               
have  placed a  premium  on imaging,  surgery,  pharmacy and  lab                                                               
services. Those  are the only  services a hospital  would provide                                                               
if they were  in business solely for the money  because those are                                                               
the only  services in health care  that make the money  needed to                                                               
sustain the facility.                                                                                                           
                                                                                                                                
CHAIR DYSON remarked  that when he said that  the hospital builds                                                               
capacity up to the need he assumed  that it meant the need of the                                                               
people in the area, but he  probably meant the need as defined in                                                               
the CON.                                                                                                                        
                                                                                                                                
MR. GOULD replied when they applied for  a CON it was to fill the                                                               
needs  that they  thought  they could  support  and that  weren't                                                               
being met.                                                                                                                      
                                                                                                                                
CHAIR DYSON  asked if that was  the need that was  defined in the                                                               
CON.                                                                                                                            
                                                                                                                                
MR. GOULD said that when they applied  for the CON it was to fill                                                               
the need  they thought  they could support  related to  the needs                                                               
that were  not offered  in the  community at  that time.  "What I                                                               
meant  is that  we  were  building up  to  what  we believed  the                                                               
customers in Fairbanks  need at this time. What  we could justify                                                               
based on the numbers."                                                                                                          
                                                                                                                                
CHAIR  DYSON acknowledged  that  they were  both  looking at  and                                                               
using  the  numbers  in  the  same way.  He  asked  whether  it's                                                               
legitimate for  someone else to come  along and meet a  need that                                                               
the hospital didn't recognize.                                                                                                  
                                                                                                                                
MR. GOULD asked what that might be.                                                                                             
                                                                                                                                
CHAIR  DYSON said  it would  be  someone else  offering the  same                                                               
service  and  meeting  needs  that  Fairbanks  Memorial  Hospital                                                               
didn't have the capacity to meet.  "You object to them coming and                                                               
taking the new business?" he questioned.                                                                                        
                                                                                                                                
MR.  GOULD replied  he  wouldn't  object to  that,  but he  would                                                               
object if they went through the  CON process to show need for two                                                               
MRIs  only to  have  someone  else enter  the  picture and  began                                                               
taking business away  from the hospital by  offering MRI services                                                               
without going through the CON process.                                                                                          
                                                                                                                                
SENATOR GUESS asked  why he believes the four  areas he mentioned                                                               
are profitable because they heard  that prices are under cost but                                                               
they're all  the market can  bear. Also, they've heard  that it's                                                               
really recovery and not prices that are under cost.                                                                             
                                                                                                                                
MR.  GOULD explained  that Medicare  reimbursement  is higher  in                                                               
those four  areas and  most providers elect  to use  the Medicare                                                               
regulations to  determine reimbursement.  Charges, he  added, are                                                               
becoming  less  relevant  in health  care  because  Medicare  and                                                               
Medicaid give  a flat  fee in each  area. For  instance, Medicaid                                                               
reimburses Fairbanks Memorial Hospital  52 percent of charges and                                                               
Medicare reimburses 50 percent of charges.                                                                                      
                                                                                                                                
RICK SOLIE,  volunteer trustee on the  Greater Fairbanks Hospital                                                               
Foundation,  stated this  is  a very  important  issue for  their                                                               
community  hospital.  He  said he  would  first  clarify  several                                                               
issues he heard during the hearing on Friday.                                                                                   
                                                                                                                                
The foundation  contracts with  Banner Health  System to  run the                                                               
hospital for about 3.5 percent, which  is average to low for this                                                               
service. The notion that Banner Health  is making a great deal of                                                               
money from  this contract is  not accurate or fair.  ".... health                                                               
care  and hospital  economics  is not  a free  market  and so  to                                                               
employ  the  standard of  free  competition  on  it is  not  fair                                                               
because  it  isn't true.  What  is  true  though,  is to  have  a                                                               
rigorous  discussion of  some of  the  benefits that  competition                                                               
gives you and that is cost quality and access."                                                                                 
                                                                                                                                
TAPE 04-27, SIDE B                                                                                                            
2:21 pm                                                                                                                       
                                                                                                                                
Specifically as it relates to Fairbanks:                                                                                        
                                                                                                                                
     We're  trying to  help our  communities  and trying  to                                                                    
     have  imaging systems  and in  Fairbanks we're  working                                                                    
     hard on  a cardiology  program trying  to figure  out a                                                                    
     way to make that work.  We have audited statements from                                                                    
     Medicaid rates  that show our hospital  with the lowest                                                                    
     inpatient rates.  That's across  the board,  that's the                                                                    
     overall picture.                                                                                                           
                                                                                                                                
     On the  outpatient side, our  hospital has  lower rates                                                                    
     than Anchorage  on the outpatient  side. And this  is a                                                                    
     town  that you  would argue  doesn't have  competition,                                                                    
     yet our prices are lower.  Specifically on the MRI, - I                                                                    
     can't speak  to Anchorage I know  [Alaska] Open Imaging                                                                    
     is touting  cheaper prices -  I know our  experience in                                                                    
     Fairbanks is  that the MRI  prices at our  hospital are                                                                    
     between  20 and  40  percent lower  than  those at  the                                                                    
     clinic   across  town.   So   I   would  suggest   that                                                                    
     competition in whatever  form you might call  it is not                                                                    
     bringing lower prices in Fairbanks.  What it does do is                                                                    
     hurt  our ability  to provide  those services  like the                                                                    
     ER,  the  neo-natal  care, the  psychiatric  care,  the                                                                    
     cancer  care -  an awful  lot of  those things  that we                                                                    
     look to. I would encourage  the committee to be careful                                                                    
     as  you look  at this  bill  because we  don't want  to                                                                    
     start  to  take  apart  a   system  that  at  least  in                                                                    
     Fairbanks we've spent some 34 years in building.                                                                           
                                                                                                                                
     We support  this bill. I  think it closes up  the lease                                                                    
     provision and  the diagnostic  provision. It  creates a                                                                    
     level playing field. You can  argue about the wisdom of                                                                    
     the CON. [But] honestly, I  don't think this is the day                                                                    
     to do that.  This is a better day to  at least create a                                                                    
     level  playing field  and  let's  have some  discussion                                                                    
     about  whether  it's  deductibles  or  medical  savings                                                                    
     accounts or ways to move  a free market into the health                                                                    
     care sector.  But it is not  a free market today  so on                                                                    
     cost  - and  I didn't  even get  to quality  and access                                                                    
     because  my time  ran out  - we  have 98  percent board                                                                    
     certified  medical  staff. We  take  all  comers and  I                                                                    
     would be happy to answer questions.                                                                                        
                                                                                                                                
SENATOR  GREEN  asked for  his  interpretation  of what  the  new                                                               
language does  for the lease  issue and  how it differs  from the                                                               
current situation.                                                                                                              
                                                                                                                                
MR. SOLIE said that's in Section  2 and his understanding is that                                                               
under  current  law it  would  allow  for an  ambulatory  surgery                                                               
facility  to be  constructed if  the facility  was leased  or the                                                               
equipment was leased. He wasn't  clear on the monetary total, but                                                               
"it's the  lease provision  that allows  for the  skirting around                                                               
the CON need."                                                                                                                  
                                                                                                                                
SENATOR  GREEN wondered  whether  his reference  to  lease was  a                                                               
specific reference to Fairbanks Memorial Hospital.                                                                              
                                                                                                                                
MR. SOLIE replied it is  specific because under current law there                                                               
are  two  ways  that  it   doesn't  apply  uniformly.  Those  are                                                               
diagnostics and the  lease provision. This bill  would level that                                                               
playing field, he said.                                                                                                         
                                                                                                                                
SENATOR GREEN asked whether Fairbanks  Memorial Hospital had ever                                                               
leased facilities.                                                                                                              
                                                                                                                                
CHAIR DYSON added, "Or equipment."                                                                                              
                                                                                                                                
MR. SOLIE  advised the foundation  leases the hospital  to Banner                                                               
Health System and  they pay the hospital a lease  fee. He said he                                                               
wasn't sure whether that answered the question.                                                                                 
                                                                                                                                
CHAIR DYSON said  that in Section 2 he understands  that there is                                                               
a  $1 million  threshold  and  if you're  under  that amount  you                                                               
wouldn't have  to go  through the CON  process. Some  people have                                                               
figured  out that  you could  lease the  equipment so  that money                                                               
comes from the operating budget and you stay under $1 million.                                                                  
                                                                                                                                
Those   that  believe   that  the   lease  issue   allows  unfair                                                               
competition, say  that loophole  should be closed.  Senator Green                                                               
just asked whether Fairbanks Memorial ever leases equipment.                                                                    
                                                                                                                                
SENATOR GREEN added, "Or anything."                                                                                             
                                                                                                                                
MR. SOLIE said  the foundation isn't leasing any  real estate and                                                               
he  would have  to defer  to  the finance  officer regarding  the                                                               
leasing of  equipment. Their concern  is that whether or  not you                                                               
like  the  CON, it  doesn't  apply  to  the  ability to  build  a                                                               
facility or obtain equipment through a lease mechanism.                                                                         
                                                                                                                                
SENATOR GREEN  asked whether the foundation  ever leased anything                                                               
to the hospital that didn't go through the CON process.                                                                         
                                                                                                                                
MR. SOLIE asked whether she was speaking of the cancer center.                                                                  
                                                                                                                                
SENATOR  GREEN  replied  she  didn't   know  anything  about  his                                                               
foundation.                                                                                                                     
                                                                                                                                
MR. SOLIE explained  the foundation is the owner  of the facility                                                               
and the equipment.  Generally the hospital applied  for the CONS,                                                               
but sometimes the foundation has assumed that role.                                                                             
                                                                                                                                
SENATOR GUESS said  she would like to spend time  on Section 2 at                                                               
some point because 'purchasing  equipment' isn't referenced under                                                               
'expenditure'. It's just leasing that is referenced.                                                                            
                                                                                                                                
CHAIR DYSON agreed with her reading.                                                                                            
                                                                                                                                
SENATOR  GUESS asked  that the  sponsor's staff  explain why  you                                                               
wouldn't need  a CON  if you purchased  $1 million  in equipment,                                                               
but you would if you lease the equipment.                                                                                       
                                                                                                                                
CHAIR  DYSON  said the  department  could  speak  to it,  but  he                                                               
thought  that since  you  wouldn't  have to  go  through the  CON                                                               
process if you  were under $1 million, people  were avoiding that                                                               
threshold by leasing equipment.                                                                                                 
                                                                                                                                
DOCTOR   KURT  HEDIGER,   AK   Chiropractic  Society   President,                                                               
testified via  teleconference to say he  practices throughout the                                                               
state as a vacation chiropractic  physician and is opposed to the                                                               
bill in its current form.                                                                                                       
                                                                                                                                
Although the  CON may have been  necessary at some point,  it's a                                                               
dinosaur in 2004  and the $1 million threshold is  low in today's                                                               
dollars. The  bill would negatively  impact his patients  and his                                                               
business  and  would give  an  edge  to established  health  care                                                               
facilities and stifle  upstart businesses. It appears  to be anti                                                               
competitive  and amounts  to government  support  for the  status                                                               
quo.  "The consumer  will continue  to have  limited choices  and                                                               
health  care  costs could  only  go  up  as quality  and  patient                                                               
satisfaction actually will decline."                                                                                            
                                                                                                                                
To   his  knowledge,   just  Fairbanks   Memorial  Hospital   has                                                               
restrictions  against chiropractic  referrals and  such impedance                                                               
to access  is frustrating because it  delays treatment, increases                                                               
costs  and  puts  the  patient   at  risk.  Alaska  Open  Imaging                                                               
increases capacity  and choice for  Mat Su, Kenai  and Anchorage.                                                               
The focus  should be on the  patient's best interest and  that is                                                               
competitive  health care  through  competition accessibility  and                                                               
the use of innovative technology.  He emphasized he believes that                                                               
including "independent diagnostic facility" is wrong.                                                                           
                                                                                                                                
With only one  provider you can't expect prices to  go down. With                                                               
that in  mind, he questioned  how hospitals made a  profit before                                                               
imaging like  MRIs and CT  scans. All businesses assume  risk but                                                               
if this bill  passes, hospitals in Alaska will  have their profit                                                               
margin protected by statute.                                                                                                    
                                                                                                                                
CHAIR DYSON asked  what he believes a reasonable  threshold to be                                                               
if the $1 million is too low.                                                                                                   
                                                                                                                                
DOCTOR  HEDIGER  suggested it  should  be  adjusted for  cost  of                                                               
living increases  and could be  five times  the amount it  is for                                                               
larger businesses.                                                                                                              
                                                                                                                                
DOCTOR ROBERT  BRIDGES from Alaska Open  Imaging Center testified                                                               
via  teleconference  that  he  started   the  business  in  2001.                                                               
Countering the  claim regarding over charging  on self-referrals,                                                               
he  said can't  self-refer. His  work is  always returned  to the                                                               
referring physicians so if he does  a good job and the patient is                                                               
happy  he may  get the  next  referral. His  work undergoes  peer                                                               
review  every day  for every  procedure  and provides  a form  of                                                               
checks and balances.                                                                                                            
                                                                                                                                
When the business  first opened in Wasilla, they had  an open MRI                                                               
magnet  just like  the  one at  Providence  Hospital. Later  they                                                               
added a  CT scanner that  was similar  to the one  at Providence.                                                               
Seven  months later  Valley Hospital  fired  the radiology  group                                                               
that had  been working  there for 17  years because  the hospital                                                               
could  have been  offering  these services  all  along, but  they                                                               
didn't because they didn't want to or they didn't know how.                                                                     
                                                                                                                                
When his  business moved into  Anchorage they added  another open                                                               
MRI  scanner because  Providence had  abandoned open  imaging and                                                               
their patients had  to go to Wasilla for a  scan. Next they added                                                               
a CT scanner and finally in  March 2003 they installed a Positron                                                               
Emission  Tomography  scanner.  As  board  certified  in  nuclear                                                               
medicine and a nuclear engineer  he said they were very qualified                                                               
to do this.                                                                                                                     
                                                                                                                                
Providence  Hospital talked  about installing  a PET  scanner for                                                               
five  years  and  for  three  years  they  could  have  done  so.                                                               
Referring to their CON application  for renewal in December 2002,                                                               
he said they  admitted they had done nothing on  this project but                                                               
they needed  a renewal  because the price  had ballooned  to $4.5                                                               
million. "Providence  followed in  our footsteps and  using their                                                               
taxed for profit wing, legally  circumvented the CON and leased a                                                               
$2.8 million  PET scanner  that fits in  a mobile  trailer behind                                                               
the hospital.  It could be  done. We did  it because we  took the                                                               
time, we  knew what to do  and we delivered on  this, much needed                                                               
services."                                                                                                                      
                                                                                                                                
He  said  his  business  takes  care  of  Medicare  and  Medicaid                                                               
patients and  patients that are  difficult because of  their size                                                               
and/or  claustrophobic  tendencies  yet the  hospital  says  they                                                               
cherry pick.  The CON won't  work, he said, because  it restricts                                                               
access  to the  equipment he  needs to  practice medicine  and it                                                               
restricts patient access.  The CON does not  help Valley Hospital                                                               
because people can vote  with their feet, get in a  car and go to                                                               
Anchorage.  "Before  we  came  on  the scene,  half  of  all  the                                                               
outpatient and  daily medical services  in the valley  were going                                                               
to Anchorage. ....  People want choice, they  want an opportunity                                                               
for better more diversified medicine in the state."                                                                             
                                                                                                                                
The playing  field is already  equal, he  said. Using the  CON is                                                               
capricious and will bring waste and cronyism.                                                                                   
                                                                                                                                
UNIDENTIFIED  SPEAKER commented  that someone  said that  outside                                                               
corporations were making money in  Alaska and she would point out                                                               
that Providence arrived in Alaska  in 1905. With reference to the                                                               
charge  that hospitals  are monopolistic,  she said  we're really                                                               
talking about  what is  best for  communities. Senator  Guess has                                                               
been asking about competition and  the services that aren't self-                                                               
supporting.  People  can and  do  vote  with  their feet  as  the                                                               
previous speaker  pointed out, but  it's hospitals that  are open                                                               
all hours  of every day  and every  night and the  public expects                                                               
full services  to be available in  the hospital. To do  that, the                                                               
hospital has to have the ability to provide those services.                                                                     
                                                                                                                                
As Mr. Gould  said, there are four areas that  are profitable and                                                               
facility providers don't control  that. Medicare and Medicaid and                                                               
someone  up  in federal  offices  decides  what they  believe  is                                                               
important. Imaging  is an important  area and  therefore provides                                                               
an opportunity to support areas that aren't profitable.                                                                         
                                                                                                                                
In conclusion, she  said she hopes the committee  can support the                                                               
bill.                                                                                                                           
                                                                                                                                
PAUL  BRENNER, vice  president of  quality management  at Central                                                               
Peninsula General  Hospital, said he  supports the bill.  The CON                                                               
has worked for  many years and guarantees a  level playing field.                                                               
It  will   help  eliminate  duplication  of   services  in  small                                                               
communities and help curtail rising medical costs.                                                                              
                                                                                                                                
DOCTOR HELEN  BEDDER testified via  teleconference to say  she is                                                               
strongly  opposed to  CONs  and most  physicians  are opposed  as                                                               
well. She  reminded members that  Alaska has few  restrictions on                                                               
physicians, which is one reason  why doctors are attracted to the                                                               
state. CONs are restrictions on  the ability to practice. All the                                                               
hospitals are talking about CONs  leveling the playing field, but                                                               
she doesn't see why hospitals believe  they play on a level field                                                               
because  most  of  them  are   non-profit.  Hospitals  receive  a                                                               
percentage of what  they charge from Medicare  and Medicaid while                                                               
independent surgery centers  are paid a flat rate that  is set by                                                               
Medicare  and Medicaid.  The result  is that  hospitals are  paid                                                               
higher. Hospitals have a natural  advantage in terms of referrals                                                               
that independent practitioners don't have.                                                                                      
                                                                                                                                
With regard  to the  question Senator Guess  asked about  how CON                                                               
shuts  down  competition,  she   pointed  out  that  a  Fairbanks                                                               
physician  applied for  a  CON only  to  have Fairbanks  Memorial                                                               
Hospital take away his hospital  privileges, which eliminated his                                                               
ability to earn a living.                                                                                                       
                                                                                                                                
SENATOR GUESS  asked if  she believes that  it's the  CON process                                                               
that's the problem rather than the CON itself.                                                                                  
                                                                                                                                
DOCTOR  BEDDER replied  she really  doesn't  believe the  concept                                                               
itself is  fair, but the  process definitely isn't fair.  CON was                                                               
initiated years ago  as a federal program to  determine how costs                                                               
and charges were determined. Most  states have done away with CON                                                               
because  it's no  longer  part  of what  is  needed to  determine                                                               
costs. The  CON in Alaska is  archaic and is being  maintained by                                                               
Providence and Fairbanks Memorial in an effort to control the                                                                   
market and make sure there isn't any competition. Competition                                                                   
works and reduces prices.                                                                                                       
                                                                                                                                
CHAIR DYSON asked the commissioner to come forward.                                                                             
                                                                                                                                
JOEL GILBERTSEN, Commissioner of the Department of Health &                                                                     
Social Services, introduced himself and asked Janet Clarke to                                                                   
sit with him. He said:                                                                                                          
                                                                                                                                
     There have been  a number of things stated  today and I                                                                    
     think it's fair  to say that there  have been different                                                                    
     perspectives  put on  issues by  organizations. As  the                                                                    
     State of  Alaska it's not  really our business  to pick                                                                    
     amongst providers. We want to  make sure we have a fair                                                                    
     process.  I  know there  have  been  criticisms of  the                                                                    
     process  around certificate  of need  and I  think it's                                                                    
     fair to say the department  has to work continuously on                                                                    
     a daily  basis to improve  that process. That  said, as                                                                    
     an  administration, as  a department,  we support  this                                                                    
     legislation.                                                                                                               
                                                                                                                                
     The legislation  touches upon a  number of  issues, one                                                                    
     of which  I wanted  to speak  to, which  is residential                                                                    
     psychiatric  treatment center  care. Right  now we  are                                                                    
     engaged  in an  effort called,  "Bring the  Kids Home."                                                                    
     Bring kids  home from out  of state and these  are kids                                                                    
     with residential  placements out of state  because of a                                                                    
     lack   of   continuum    care   including   residential                                                                    
     placements  in state.  We believe  we  can serve  these                                                                    
     kids better here in Alaska.  We believe it's better for                                                                    
     them therapeutically, but it's also better policy.                                                                         
                                                                                                                                
     What  we also  know is  that while  there might  be 400                                                                    
     plus kids  in residential  placements out of  state, we                                                                    
     do not need  400 beds in state. In fact  we believe our                                                                    
     system  rushes  children  into  residential  placements                                                                    
     because  we  haven't  had the  continuum  of  care.  We                                                                    
     haven't had a  good gate keeping system.  We don't have                                                                    
     good therapeutic foster care  programs and group homes.                                                                    
     We need  to invest  in these  things. They  are cheaper                                                                    
     than residential  care and they're  better for  many of                                                                    
     them.                                                                                                                      
                                                                                                                                
     As we  engage in  this effort  to bring  these children                                                                    
     home we  want to  make sure  we have  a system  that is                                                                    
     geographically   responsive  to   the   needs  of   the                                                                    
     children.  But is  also acknowledges  that  we have  to                                                                    
     have  the   appropriate  amount   of  beds   in  state.                                                                    
     Certificate  of   need  does   have  its   critics  and                                                                    
     supporters. I support CON; I  think it's a good way for                                                                    
     a  state to  have a  public  process and  in turn  give                                                                    
     adequate access to care across the state.                                                                                  
                                                                                                                                
     I  know there  have been  comments around  competition.                                                                    
     Competition brings  a lot to many  different markets. I                                                                    
     think  for health  care, competition  greatly increases                                                                    
     choice   and  choice   for  the   consumers.  Does   it                                                                    
     necessarily  benefit cost?  Not in  all cases.  In some                                                                    
     cases it does  but not in all cases. One  of the things                                                                    
     we have in  health care and are painfully aware  of - I                                                                    
     know the  Chairman is  aware of  this because  I've had                                                                    
     conversations about this with him  - but outside of the                                                                    
     cash  payer,  most  individuals really  do  not  select                                                                    
     their health care or the  location of their health care                                                                    
     based  on cost.  There is  an intermediary  between the                                                                    
     price  and the  consumer. It's  called insurance.  Some                                                                    
     times  it's  provided by  the  State  and sometimes  by                                                                    
     their provider, but they do  normally shop not based on                                                                    
     cost but on access.                                                                                                        
                                                                                                                                
     Quality is  a key  component when making  their choice.                                                                    
     Who  has  the  better facility?  Location,  convenience                                                                    
     other  amenities, but  not necessarily  cost. So  we do                                                                    
     have  some  concerns  about  as  we  move  forward  and                                                                    
     supporting  CON  policy   that  we're  developing  this                                                                    
     residential  system in  state that  is cost  efficient,                                                                    
     that the  state the primary  payer. And for  these kids                                                                    
     we  are  the  payer.  Particularly  after  30  days  of                                                                    
     residency status.                                                                                                          
                                                                                                                                
     The  other provisions  we support  and I  want be  here                                                                    
     with Janet to  answer questions of the  committee or to                                                                    
     comment on things that you may want to hear from us.                                                                       
                                                                                                                                
CHAIR DYSON said he had a couple of questions beginning with                                                                    
page 2, line 3. He questioned why they should care how many                                                                     
times a business or person relocates their capacity in an area.                                                                 
                                                                                                                                
Janet  Clarke with  the Department  of Health  & Social  Services                                                               
said  they brought  an  analysis of  Sections 1  and  2 from  the                                                               
assistant attorney general  who advises them on CON.  She said he                                                               
could join them at the table if the Chair would like.                                                                           
                                                                                                                                
CHAIR DYSON said that's fine,  but it's a philosophical question.                                                               
Who cares whether  they move every day as long  as they're in the                                                               
area and providing the service, he questioned.                                                                                  
                                                                                                                                
COMMISSIONER  GILBERTSON said  it's fair  to ask  as long  as the                                                               
size and  scope of practice  remains the same and  the geographic                                                               
location  is   the  same.  The   state's  primary   concern  with                                                               
certificate of need is whether or not that capacity is needed.                                                                  
                                                                                                                                
MS. CLARKE said current law doesn't allow that.                                                                                 
                                                                                                                                
CHAIR DYSON  said he  knew that,  but the  philosophical question                                                               
remains. Why is just one move allowed?                                                                                          
                                                                                                                                
MS.  CLARKE  suggested the  sponsor  might  want to  answer  that                                                               
question.                                                                                                                       
                                                                                                                                
CHAIR DYSON  then asked  for comments on  whether the  $1 million                                                               
threshold is obsolete.                                                                                                          
                                                                                                                                
COMMISSIONER GILBERTSON  replied it's  a fair question,  but when                                                               
you look at the purpose of  what CON is serving that threshold is                                                               
as proper and relevant today  as when it was originally designed.                                                               
Originally CONs  were for hospitals  and nursing homes.  Costs in                                                               
those facilities  have increased  a great deal  and if  CONs were                                                               
only  addressing those  facilities  then the  threshold isn't  as                                                               
valid,  but  it's  not  completely  invalid.  Hospitals  are  now                                                               
competing  in a  different area.  It's not  about constructing  a                                                               
hospital  it's about  purchasing  equipment so  the threshold  is                                                               
still legitimate.                                                                                                               
                                                                                                                                
Now there are  areas of new services such  as ambulatory surgical                                                               
centers and  residential psychiatric  treatment centers.  He said                                                               
these  are   boutique  services  that  provide   clearly  defined                                                               
services, but  aren't of  the broad scope  that a  hospital would                                                               
provide. For those smaller facilities  the $1 million is a viable                                                               
threshold. As the market has  changed and as hospitals have begun                                                               
to provide other services the threshold is correct.                                                                             
                                                                                                                                
CHAIR DYSON  asked about when  a facility just leases  a building                                                               
as Fairbanks Memorial is doing.                                                                                                 
                                                                                                                                
COMMISSIONER GILBERTSON  explained, the legislation is  an effort                                                               
"to ensure that whether you are  purchasing it or you are leasing                                                               
it,  if  you are  acquiring  for  use  for health  care  service,                                                               
property  with a  value of  over $1  million in  its present  day                                                               
value, or  equipment, that  should be  equally treated  under the                                                               
certificate of need law." This bill clarifies that, he said.                                                                    
                                                                                                                                
CHAIR DYSON  announced that  Doctor Conover  was waiting  to give                                                               
testimony and  since he was  removed from Alaska by  several time                                                               
zones he would like to allow him time to testify.                                                                               
                                                                                                                                
DOCTOR  CHRIS CONOVER,  assistant  research  professor of  public                                                               
policy  from Duke  University, testified  via teleconference  and                                                               
advised  members  that  he  and  Professor  Sloan  conducted  two                                                               
studies of CONs for Delaware and Michigan. He stated:                                                                           
                                                                                                                                
     There are three principle  reasons used to justify CONs                                                                    
     that have  been discussed  - quality, access  and cost.                                                                    
     The  chief one  is  cost, but  then  people often  talk                                                                    
     about quality and access.                                                                                                  
                                                                                                                                
     Our  report from  Michigan  systematically refutes  the                                                                    
     evidence regarding CONs from  every public CON study to                                                                    
     date.  Included  among  these  were  six  studies  that                                                                    
     looked at CON's impact on  the diffusion of CT scanners                                                                    
     and  four  studies  focused on  CON's  affects  on  the                                                                    
     supply of MRIs.                                                                                                            
                                                                                                                                
DOCTOR CONOVER advised  that he would submit  the information for                                                               
the record rather than going  through each study individually. He                                                               
then continued to say:                                                                                                          
                                                                                                                                
     On  the CT  studies,  there was  one  study written  by                                                                    
     proponents of CON who in  their study acknowledged that                                                                    
     there  were   probably  some  very   real  non-economic                                                                    
     patient   costs  of   the  Massachusetts   approach  to                                                                    
     rationing scanners. These may  have included long waits                                                                    
     in  addition to  the  inconvenience  and discomfort  of                                                                    
     having  to be  transported  from a  hospital without  a                                                                    
     scanner to  a hospital with  one. They also  noted that                                                                    
     since   limited   availability   of   scanners   forced                                                                    
     prioritization  of patients,  some  patients who  might                                                                    
     have benefited  from CT were  not scanned. Many  of the                                                                    
     alternatives  to   scanning  involved  more   risk  and                                                                    
     discomfort to the patient such an angiography.                                                                             
                                                                                                                                
     A critical shortcoming of all  of these studies is that                                                                    
     they  count the  number of  units rather  than directly                                                                    
     measuring the impact  of CON on cost.  This is somewhat                                                                    
     equivalent  to  estimating   consumer  expenditures  on                                                                    
     gasoline  based  on  the number  of  available  filling                                                                    
     stations.  The presumption  in  these  studies is  that                                                                    
     more units  mean more  services, which  translates into                                                                    
     higher  costs.   But  the   example  of   gas  stations                                                                    
     illustrates the potential fallacy  of that approach. In                                                                    
     the case  of gas stations,  prices tend to  actually be                                                                    
     lower when there are two  gas stations competing across                                                                    
     the corner from one  other. Even though, logically, one                                                                    
     might think the duplication  of facilities would result                                                                    
     in higher prices.                                                                                                          
                                                                                                                                
     While  medical  care  is  not  the  same  as  gasoline,                                                                    
     various  FTC studies  have shown  that hospital  prices                                                                    
     and  costs  are  higher  in  areas  where  there  is  a                                                                    
     monopoly  provider compared  to  areas  where there  is                                                                    
     head to  head competition,  which is precisely  why the                                                                    
     FTC regulates hospital consolidation  - to prevent anti                                                                    
     competitive affect.                                                                                                        
                                                                                                                                
     Moreover, even  if one could demonstrate  that reducing                                                                    
     the  supply  of  imaging   services  results  in  lower                                                                    
     spending on  these services, this is  not tantamount to                                                                    
     proving  that regulation  has saved  you money.  On the                                                                    
     contrary,  if   imaging  is   a  substitute   for  more                                                                    
     expenses,  more  invasive   procedures  and/or  growing                                                                    
     imaging can reduce [end of tape]                                                                                           
                                                                                                                                
TAPE 04-28, SIDE A                                                                                                            
3:06 pm                                                                                                                       
                                                                                                                                
     It is worth noting that  there are no volume benchmarks                                                                    
     for  CTs  or MRI  services  established  by either  the                                                                    
     Joint  Commission  on   Accreditation  of  Health  Care                                                                    
     Organizations or the American  College of Radiology. So                                                                    
     even if CON  were effective in holding  down the supply                                                                    
     of  CT or  MRI services,  there  is no  good reason  to                                                                    
     suppose this would confer an  improvement in quality of                                                                    
     care.                                                                                                                      
                                                                                                                                
     A  final thought  worth considering  is  this; only  21                                                                    
     states  now  regulate  CT  scanners,  24  regulate  PET                                                                    
     scanners  and  30 regulate  MRIs.  Of  the states  that                                                                    
     opted  not to  regulate these  technologies, [did  they                                                                    
     make]  a foolhardy  choice? Are  their citizens  paying                                                                    
     higher  costs  for  enduring  levels  of  quality  care                                                                    
     because these images do not  now fall under CON review?                                                                    
     I  am aware  of  no such  evidence. Unfortunately,  the                                                                    
     kind  of  definitive study  that  could  nail down  the                                                                    
     answer  to   the  question   that  will   basically  be                                                                    
     considered by  the committee today  has not  been done.                                                                    
     Such  a study  is feasible  and could  be completed  in                                                                    
     roughly a year's time.  Frankly, given the availability                                                                    
     of this  evidence, I myself  would be more  inclined to                                                                    
     drop regulation of  imaging technology in-hospital than                                                                    
     I would  be to expand  this regulation  to non-hospital                                                                    
     entities. The best  approach of all might be  to do the                                                                    
     research  that   could  definitively  nail   down  this                                                                    
     question  of  whether   regulating  these  technologies                                                                    
     saves money  or adds to  cost once all costs  are taken                                                                    
     into account.  It is not  at all clear what  harm would                                                                    
     be done  by deferring a  decision so the answer  to the                                                                    
     right question can be determined.                                                                                          
                                                                                                                                
CHAIR DYSON  asked Doctor Conover to  FAX a copy of  his research                                                               
paper and his written comments  and he would distribute copies to                                                               
the  committee members.  He  questioned whether  he  knew of  any                                                               
states that had  particular success in handling  these issues and                                                               
whether  there were  paradigms available  that Alaska  might find                                                               
useful.                                                                                                                         
                                                                                                                                
DOCTOR CONOVER replied  the states they worked for  looked at CON                                                               
globally  and didn't  specifically focus  on imaging  technology.                                                               
Michigan asked them  to look at MRIs so they  did address them in                                                               
their report.  The evidence on MRIs  is mixed, but they  were all                                                               
focused on  hospital based MRI  units and  half of the  MRIs that                                                               
are in use are outside hospitals.                                                                                               
                                                                                                                                
SENATOR GUESS  asked if  he is  recommending that  they eliminate                                                               
imaging  technology from  the CON  process rather  than expanding                                                               
the CON process to include them.                                                                                                
                                                                                                                                
DOCTOR CONOVER replied  if the committee feels  compelled to take                                                               
action he  believes it would  be preferable to level  the playing                                                               
field by  taking away regulation  in a sector rather  than adding                                                               
it to a different sector.                                                                                                       
                                                                                                                                
SENATOR BETTYE DAVIS asked whom he was representing.                                                                            
                                                                                                                                
DOCTOR CONOVER  said Sam  Corsmell contacted  him, but  he didn't                                                               
know which facility he runs.                                                                                                    
                                                                                                                                
CHAIR DYSON  assured him his  question wasn't pejorative,  but he                                                               
wanted to know whether he was remunerated for his testimony.                                                                    
                                                                                                                                
DOCTOR CONOVER said he was compensated for his time to appear.                                                                  
                                                                                                                                
SENATOR  DAVIS  announced  that  she   had  a  question  for  the                                                               
commissioner.                                                                                                                   
                                                                                                                                
CHAIR DYSON said he  did too and if she didn't  mind, he would go                                                               
first.   He  questioned   whether  the   major  reason   for  the                                                               
legislation  didn't   relate  to  the  expansion   of  adolescent                                                               
facilities and the desire to get them in under the CON process.                                                                 
                                                                                                                                
COMMISSIONER  GILBERTSON said  Representative Samuels  introduced                                                               
the  legislation  and  DHSS  began  working  with  Representative                                                               
Samuels' office  after he had  introduced the bill.  They support                                                               
the entire  bill, but  the department is  most interested  in the                                                               
RPTC language.                                                                                                                  
                                                                                                                                
CHAIR  DYSON asked  whether the  present licensing  process would                                                               
allow DHSS  to issue a  directive saying they would  only license                                                               
so many beds in a certain area.                                                                                                 
                                                                                                                                
COMMISSIONER  GILBERTSON said  no; licensing  is based  on strict                                                               
standards of  meeting the clinical  requirements for  a facility.                                                               
Right now there is a cap  on long-term care beds, but that's done                                                               
through the CON process.                                                                                                        
                                                                                                                                
CHAIR DYSON brought  up his concern about the  people who already                                                               
started the  process in  Kenai and  asked if there  was a  way to                                                               
lend  certainty  to   their  process  so  they   don't  lose  the                                                               
construction season.                                                                                                            
                                                                                                                                
COMMISSIONER GILBERTSON  interjected that  he didn't  know enough                                                               
about  the proposal  to say  with  certainty that  they could  or                                                               
could not make this construction  season. "That said, there are -                                                               
based on  just informal  communications - since  there is  no CON                                                               
process  right now,  providers are  not required  to come  to the                                                               
state  and let  us  know what  you are  planning.  A number  have                                                               
voluntarily to say, 'These are  things we're considering.' If you                                                               
were to add all  of them up, I think we  have easily seen between                                                               
500 and 600  beds that are at some conceptual  stage or closer to                                                               
development in the state right now."                                                                                            
                                                                                                                                
DHSS has developed  a policy for interpreting  the effective date                                                               
for  projects that  are underway  or have  reached some  level of                                                               
decision-making  within  the  organization. The  policy  is  that                                                               
projects are grandfathered in as  long as legitimate construction                                                               
has started, a  full set of architectural  drawings are completed                                                               
and that the entity that is  building the facility has a building                                                               
permit  in hand.  In addition,  they  must complete  construction                                                               
within  two  years  of  breaking ground.  It  doesn't  mean  that                                                               
everyone  will get  in,  but  they are  putting  the CON  process                                                               
forward so that as psychiatric  treatment center beds are brought                                                               
on line in Alaska the kids' needs are met first.                                                                                
                                                                                                                                
SENATOR DAVIS  asked if it was  the sponsor's idea or  his to put                                                               
adolescent psychiatric treatment centers under the CON process.                                                                 
                                                                                                                                
COMMISSIONER GILBERTSON said they had  a process underway to look                                                               
at statutorily expanding, through  a governor's bill, residential                                                               
psychiatric treatment centers.  Representative Samuels introduced                                                               
his  legislation first  so they  began working  with him  using a                                                               
committee substitute on the House side.                                                                                         
                                                                                                                                
SENATOR DAVIS asked  if most of the 500 some  children that would                                                               
return to the state would be located in south central Alaska.                                                                   
                                                                                                                                
COMMISSIONER  GILBERTSON replied  the  children in  out of  state                                                               
placement  are disproportionately  Alaska  Native  and they  come                                                               
from  rural  communities.  Simply  based  on  the  population  of                                                               
Anchorage, the need for residential  facilities would be weighted                                                               
in that  community if the sole  desire were to have  the children                                                               
close to home.  That isn't always the case though,  and there are                                                               
always a  variety of clinical reasons  for why a child  is placed                                                               
in a  certain place. "Our  goal largely is  that we want  to have                                                               
the  care   given  as  close   to  home  as  possible   with  the                                                               
acknowledgement that it's a continuum  of care and that there are                                                               
levels  of  care  below  the  semi-secure  residential  treatment                                                               
center.  And as  the child  is working  their way  back to  their                                                               
community, you  want to make  sure that they have  the after-care                                                               
and the support services in every community for the kids."                                                                      
                                                                                                                                
SENATOR WILKEN  asked if there  was a  letter of intent  with the                                                               
legislation.                                                                                                                    
                                                                                                                                
MS.  CLARKE replied  the House  adopted a  letter of  intent that                                                               
related  to CON.  It  establishes a  task force  to  look at  the                                                               
process  and   the  procedures  and  standards   to  improve  the                                                               
effectiveness  of   the  program.  The  letter   of  intent  also                                                               
indicates  that  the  Legislature  urges  DHSS  to  expeditiously                                                               
update  the CON  regulations,  which is  what  Senator Green  has                                                               
mentioned many times.                                                                                                           
                                                                                                                                
SENATOR WILKEN asked for a copy.                                                                                                
                                                                                                                                
SENATOR GUESS  asked how she  would learn more about  the process                                                               
by  which  they  make  a  decision.  After  reading  through  the                                                               
regulations and the  statute, she was still  uncertain about what                                                               
evaluation methods are used and how a final decision is made.                                                                   
                                                                                                                                
COMMISSIONER  GILBERTSON   acknowledged  the  question   is  very                                                               
appropriate. The State is currently  in the process of finalizing                                                               
an  actual process  for defining  the criteria  for this  type of                                                               
facility, he said.                                                                                                              
                                                                                                                                
MS.  CLARKE added  the statute  requires  them to  look at  need.                                                               
Although no written  standards have been adopted  in Alaska, they                                                               
are in the process of developing them.                                                                                          
                                                                                                                                
CHAIR DYSON asked Mr. Franz from  Homer whether he could give his                                                               
testimony on Wednesday.                                                                                                         
                                                                                                                                
CHARLIE  FRANZ  said  he  wouldn't be  available  then,  but  his                                                               
testimony wouldn't take long.                                                                                                   
                                                                                                                                
CHAIR DYSON told  him to go ahead and apologized  for keeping him                                                               
waiting for so long.                                                                                                            
                                                                                                                                
MR.  FRANZ stated  he is  the  chief executive  officer of  South                                                               
Peninsula  Hospital in  Homer and  the chairman  of the  board of                                                               
directors of  the hospital  and nursing  home association  and he                                                               
serves on  the DHSS  assembled task force  to look  at developing                                                               
standards for  the CON  process. "With  that background,  I would                                                               
like to speak to you in favor of HB 511," he said.                                                                              
                                                                                                                                
It's a  good bill that helps  to preserve access to  a full range                                                               
of  hospital-based  health  care,  he   said.  It  does  this  by                                                               
including  the  independent  diagnostic and  testing  facilities,                                                               
which levels  the playing field  and gives equal  treatment under                                                               
the  law.   Independent  diagnostic  facilities  would   have  to                                                               
demonstrate  a need  instead  of simply  opening  a facility  and                                                               
competing for these lucrative services that hospitals provide.                                                                  
                                                                                                                                
He  took  issue with  the  argument  that independent  diagnostic                                                               
testing facilities  are only an  issue in larger  communities. He                                                               
pointed out that Homer has that problem.                                                                                        
                                                                                                                                
CHAIR  DYSON  thanked all  the  participants  and encouraged  the                                                               
committee members that were interested  in offering amendments to                                                               
get them drafted  quickly and distribute them  to other committee                                                               
members  and  the administration  so  they  could move  the  bill                                                               
forward.                                                                                                                        
                                                                                                                                
MS. CLARKE pointed out that she distributed a letter dated                                                                      
5/3/04 providing the information requested of her at the                                                                        
previous meeting.                                                                                                               
                                                                                                                                
CHAIR DYSON thanked her and adjourned the meeting at 3:28 pm.                                                                   
CSHB 511(HES) am was held in committee.                                                                                         
                                                                                                                                

Document Name Date/Time Subjects