Legislature(2017 - 2018)BELTZ 105 (TSBldg)

04/07/2017 09:00 AM LABOR & COMMERCE

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Audio Topic
10:12:53 AM Start
10:13:39 AM SB80
10:18:58 AM SB95
10:21:49 AM Confirmation Hearings
10:24:48 AM SB62
10:56:58 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Bills Previously Heard/Scheduled: TELECONFERENCED
+= SB 95 MARICULTURE REVOLVING LOAN FUND TELECONFERENCED
Moved SB 95 Out of Committee
+= SB 80 TELECOMMUNICATIONS: DISABLED SUBSCRIBERS TELECONFERENCED
Moved CSSB 80(L&C) Out of Committee
+= SB 62 REPEAL CERTIFICATE OF NEED PROGRAM TELECONFERENCED
Heard & Held
-- Public Testimony --
                    ALASKA STATE LEGISLATURE                                                                                  
          SENATE LABOR AND COMMERCE STANDING COMMITTEE                                                                        
                         April 7, 2017                                                                                          
                           10:12 a.m.                                                                                           
                                                                                                                                
                                                                                                                              
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Mia Costello, Chair                                                                                                     
Senator Shelley Hughes, Vice Chair                                                                                              
Senator Gary Stevens                                                                                                            
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Kevin Meyer                                                                                                             
Senator Berta Gardner                                                                                                           
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
SENATE BILL NO. 80                                                                                                              
"An Act relating to telecommunications services for certain                                                                     
disabled subscribers; and providing for an effective date."                                                                     
                                                                                                                                
     - MOVED CSSB 80(L&C) OUT OF COMMITTEE                                                                                      
                                                                                                                                
SENATE BILL NO. 95                                                                                                              
"An Act relating to the mariculture revolving loan fund and                                                                     
loans and grants from the fund; and providing for an effective                                                                  
date."                                                                                                                          
                                                                                                                                
     - MOVED SB 95 OUT OF COMMITTEE                                                                                             
                                                                                                                                
SENATE BILL NO. 62                                                                                                              
"An Act repealing the certificate of need program for health                                                                    
care facilities; making conforming amendments; and providing for                                                                
an effective date."                                                                                                             
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
CONFIRMATION HEARINGS                                                                                                           
                                                                                                                                
     - ADVANCED NAMES OF GOVERNOR APPOINTEES TO BOARDS AND                                                                      
        COMMISSIONS                                                                                                             
                                                                                                                                
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
                                                                                                                                
BILL: SB  80                                                                                                                  
SHORT TITLE: TELECOMMUNICATIONS: DISABLED SUBSCRIBERS                                                                           
SPONSOR(s): SENATOR(s) COSTELLO                                                                                                 
                                                                                                                                
03/08/17       (S)       READ THE FIRST TIME - REFERRALS                                                                        
03/08/17       (S)       L&C, FIN                                                                                               
03/23/17       (S)       L&C AT 1:30 PM BELTZ 105 (TSBldg)                                                                      
03/23/17       (S)       -- MEETING CANCELED --                                                                                 
04/04/17       (S)       L&C AT 1:30 PM BELTZ 105 (TSBldg)                                                                      
04/04/17       (S)       Heard & Held                                                                                           
04/04/17       (S)       MINUTE(L&C)                                                                                            
04/07/17       (S)       L&C AT 1:30 PM BELTZ 105 (TSBldg)                                                                      
                                                                                                                                
BILL: SB  95                                                                                                                  
SHORT TITLE: MARICULTURE REVOLVING LOAN FUND                                                                                    
SPONSOR(s): SENATOR(s) STEVENS                                                                                                  
                                                                                                                                
03/16/17       (S)       READ THE FIRST TIME - REFERRALS                                                                        
03/16/17       (S)       L&C, FIN                                                                                               
04/05/17       (S)       L&C AT 9:00 AM BELTZ 105 (TSBldg)                                                                      
04/05/17       (S)       Heard & Held                                                                                           
04/05/17       (S)       MINUTE(L&C)                                                                                            
04/07/17       (S)       L&C AT 1:30 PM BELTZ 105 (TSBldg)                                                                      
                                                                                                                                
BILL: SB  62                                                                                                                  
SHORT TITLE: REPEAL CERTIFICATE OF NEED PROGRAM                                                                                 
SPONSOR(s): SENATOR(s) WILSON                                                                                                   
                                                                                                                                
02/17/17       (S)       READ THE FIRST TIME - REFERRALS                                                                        
02/17/17       (S)       L&C, FIN                                                                                               
04/06/17       (S)       L&C AT 9:00 AM BELTZ 105 (TSBldg)                                                                      
04/06/17       (S)       Heard & Held                                                                                           
04/06/17       (S)       MINUTE(L&C)                                                                                            
04/06/17       (S)       L&C AT 1:30 PM BELTZ 105 (TSBldg)                                                                      
04/06/17       (S)       -- MEETING CANCELED --                                                                                 
04/07/17       (S)       L&C AT 1:30 PM BELTZ 105 (TSBldg)                                                                      
                                                                                                                                
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
SORCHA HAZELTON, Staff                                                                                                          
Senator Mia Costello                                                                                                            
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Described the changes  in the CS for  SB 80,                                                             
version J.                                                                                                                      
                                                                                                                                
DAVID MORGAN, Economic Director                                                                                                 
Alaskan Institute for Economic Growth                                                                                           
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Detailed the  economic impacts of Certificate                                                             
of Need during his testimony on SB 62.                                                                                          
                                                                                                                                
BECKY HULTBERG, President/CEO                                                                                                   
Alaska State Hospital and Nursing Home Association                                                                              
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: During  the hearing on SB  62, testified that                                                             
ASHANHA does not  support the full repeal of  Certificate of Need                                                               
laws but believes that a full review is warranted.                                                                              
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
10:12:53 AM                                                                                                                   
CHAIR MIA COSTELLO called the  Senate Labor and Commerce Standing                                                             
Committee meeting to  order at 10:12 a.m. Present at  the call to                                                               
order were Senators Hughes, Stevens, and Chair Costello.                                                                        
                                                                                                                                
        SB  80-TELECOMMUNICATIONS: DISABLED SUBSCRIBERS                                                                     
                                                                                                                                
10:13:39 AM                                                                                                                   
CHAIR COSTELLO announced  the consideration of SB  80. She stated                                                               
that this  is the  second hearing  and the intent  is to  adopt a                                                               
committee substitute  (CS), take members' questions,  and look to                                                               
the will of the committee.                                                                                                      
                                                                                                                                
10:14:21 AM                                                                                                                   
SENATOR  HUGHES moved  to  adopt the  work draft  CS  for SB  80,                                                               
labeled 30-LS0631\J, as the working document.                                                                                   
                                                                                                                                
CHAIR COSTELLO objected for an explanation of the changes.                                                                      
                                                                                                                                
10:14:33 AM                                                                                                                   
SORCHA  HAZELTON, Staff,  Senator  Mia  Costello, explained  that                                                               
version  J for  SB 80  incorporates changes  discussed in  public                                                               
testimony during  the last bill  hearing. It  incorporates person                                                               
first  language   and  the  suggestion   to  change   the  phrase                                                               
"organizations  representing  the  deaf,  hard  of  hearing,  and                                                               
speech disabled" to "organizations  whose principle purpose is to                                                               
provide these services".                                                                                                        
                                                                                                                                
These changes are found on page 1,  line 8; page 1, line 12; page                                                               
2, line 5; and page 2, lines 8-9.                                                                                               
                                                                                                                                
SENATOR HUGHES asked if the  CS clarifies that new companies that                                                               
have not been charging customers  this surcharge would be brought                                                               
under this  umbrella, and,  if so, are  those companies  aware of                                                               
that.                                                                                                                           
                                                                                                                                
MS. HAZELTON said  yes, and pointed to page 1,  line 6, that says                                                               
the    commission     shall    adopt     regulations    requiring                                                               
telecommunication  utilities   to  provide  services.   She  also                                                               
clarified  that  the  subscriber  pays  the  surcharge,  not  the                                                               
utility. She  said the purpose  of changing the  terminology from                                                               
"telephone"  to  "telecommunications"  is to  allow  the  RCA  to                                                               
change their regulations more frequently than state statute.                                                                    
                                                                                                                                
SENATOR HUGHES asked if new companies  will fit under the bill or                                                               
if it will apply to existing companies, but change their rates.                                                                 
                                                                                                                                
MS. HAZELTON said there shouldn't be any new companies.                                                                         
                                                                                                                                
10:17:20 AM                                                                                                                   
CHAIR COSTELLO  removed her objection  and announced that  the CS                                                               
for SB 80, version J, is adopted.                                                                                               
                                                                                                                                
10:17:29 AM                                                                                                                   
SENATOR HUGHES  moved to report the  CS for SB 80  from committee                                                               
with individual recommendations and attached fiscal note(s).                                                                    
                                                                                                                                
CHAIR COSTELLO announced  that CSSB 80(L&C) is  reported from the                                                               
Senate Labor and Commerce Standing Committee.                                                                                   
                                                                                                                                
10:17:40 AM                                                                                                                   
At ease                                                                                                                         
                                                                                                                                
             SB  95-MARICULTURE REVOLVING LOAN FUND                                                                         
                                                                                                                                
10:18:58 AM                                                                                                                   
CHAIR  COSTELLO   reconvened  the   meeting  and   announced  the                                                               
consideration  of SB  95.  She  stated that  this  is the  second                                                               
hearing and  intent is to  take questions from  committee members                                                               
and look to the will of the committee.                                                                                          
                                                                                                                                
10:19:26 AM                                                                                                                   
SENATOR GARY  STEVENS, sponsor of  SB 95, remarked that  the more                                                               
he learns  about the bill  the more exciting it  becomes, because                                                               
of  the tremendous  potential to  expand mariculture  in Alaska's                                                               
clean ocean water.  The committee heard about  the possibility of                                                               
developing  shellfish  and seaweed  farms  and  algae as  a  fuel                                                               
source.  He  highlighted  that  Julie  Decker  [Alaska  Fisheries                                                               
Development  Foundation] envisions  this  being a  billion-dollar                                                               
industry  in  30 years,  which  will  greatly enhance  the  state                                                               
economy.                                                                                                                        
                                                                                                                                
CHAIR  COSTELLO said  she agrees  and signed  as a  cosponsor. "I                                                               
think  it's   a  great  economic  diversification   and  economic                                                               
development bill."                                                                                                              
                                                                                                                                
SENATOR  HUGHES  said  she,  too, appreciates  the  bill  and  is                                                               
selfishly looking  forward to the  day when it's possible  to get                                                               
local shellfish in grocery stores.                                                                                              
                                                                                                                                
10:20:40 AM                                                                                                                   
SENATOR  HUGHES  moved  to  report  SB  95  from  committee  with                                                               
individual recommendations and attached fiscal note(s).                                                                         
                                                                                                                                
CHAIR  COSTELLO  announced  that  without  objection,  SB  95  is                                                               
reported from the Senate Labor and Commerce Standing Committee.                                                                 
                                                                                                                                
10:20:53 AM                                                                                                                   
At ease                                                                                                                         
                                                                                                                                
^Confirmation Hearings                                                                                                          
                     CONFIRMATION HEARINGS                                                                                  
                                                                                                                                
10:21:49 AM                                                                                                                   
CHAIR  COSTELLO reconvened  the  meeting and  announced the  next                                                               
order  of  business is  to  conclude  the committee's  review  of                                                               
governor  appointees to  boards and  commissions. Finding  no one                                                               
who wanted  to testify on  any of the appointments  the committee                                                               
had reviewed, she  closed public testimony. She  asked members if                                                               
they  had  any questions  before  the  names were  reported  from                                                               
committee. She clarified that reporting  the names from committee                                                               
was merely a step in the process.                                                                                               
                                                                                                                                
SENATOR HUGHES  thanked all the  appointees for being  willing to                                                               
serve.                                                                                                                          
                                                                                                                                
CHAIR  COSTELLO  asked  Senator Hughes  to  read  the  forwarding                                                               
language.                                                                                                                       
                                                                                                                                
10:23:28 AM                                                                                                                   
SENATOR HUGHES read the following:                                                                                              
                                                                                                                                
     In  accordance   with  AS  39.05.080,  the   Labor  and                                                                    
     Commerce Committee  has reviewed the  attached nominees                                                                    
     and  recommends  the  appointments be  forwarded  to  a                                                                    
     joint session for consideration.  This does not reflect                                                                    
     an intent by any of the  members to vote for or against                                                                    
     the confirmation of the individuals.                                                                                       
                                                                                                                                
[The  names were  forwarded from  the Senate  Labor and  Commerce                                                               
Committee.]                                                                                                                     
                                                                                                                                
10:23:51 AM                                                                                                                   
At ease                                                                                                                         
                                                                                                                                
           SB  62-REPEAL CERTIFICATE OF NEED PROGRAM                                                                        
                                                                                                                                
10:24:48 AM                                                                                                                   
CHAIR  COSTELLO   reconvened  the   meeting  and   announced  the                                                               
consideration  of SB  62.  She  stated that  this  is the  second                                                               
hearing and the intention is  to conclude invited testimony, take                                                               
members' questions,  and hold the  bill in committee  for further                                                               
review.                                                                                                                         
                                                                                                                                
10:25:31 AM                                                                                                                   
DAVID MORGAN,  Economic Director, Alaskan Institute  for Economic                                                               
Growth,  stated that  he lives  in  Anchorage, was  chair of  the                                                               
municipal health  care commission  for six  years, and  served on                                                               
the  state  health care  commission  for  4.5 years  representing                                                               
primary care  clinics. He  is completing  his doctoral  thesis on                                                               
cost drivers, was  a contributor to the  Commonwealth North study                                                               
on  the budget  for  2017, and  a principal  on  the health  care                                                               
assessment.                                                                                                                     
                                                                                                                                
MR.  MORGAN  said  that  his testimony  today  would  detail  the                                                               
economic  impacts  of  Certificate  of Need.  He  noted  that  he                                                               
provided  a  document  from the  Federal  Trade  Commission  that                                                               
includes  studies looking  at cost  drivers and  costs. He  noted                                                               
that markets  in several states  equate Certificate of  Need with                                                               
added costs for new construction  and new equipment. It also adds                                                               
time whenever  entities that  hold CONs  try to  stop competition                                                               
from coming into their area.                                                                                                    
                                                                                                                                
He said  the history that  Senator Wilson provided  yesterday did                                                               
not  include  the  Hill-Burton  Act  of  1946.  That  legislation                                                               
provided  money for  hospital  construction and  paid  it off  by                                                               
giving charity care  at cost. This changed in 1974  and it became                                                               
unnecessary for the federal government  to provide money to build                                                               
the hospitals.                                                                                                                  
                                                                                                                                
MR. MORGAN reviewed the number of  states that do and do not have                                                               
a  CON  program  and  said  that Puerto  Rico,  the  U.S.  Virgin                                                               
Islands, and the District of  Columbia should also be included in                                                               
the count. He advised that one  of the addendums to the report he                                                               
submitted from  the National  Governors Association  details each                                                               
CON program  in each state. He  added, "so there's no  need to go                                                               
into 50 programs, we're talking about Alaska."                                                                                  
                                                                                                                                
CHAIR COSTELLO said the committee has the document you provided.                                                                
                                                                                                                                
MR.  MORGAN said  what we've  really found,  especially with  the                                                               
advent of the  Affordable Care Act is that a  lot of what happens                                                               
with  Certificate  of  Need  is  a  duplicate  process  that  has                                                               
increased  costs. With  changes in  the Medicare  payment system,                                                               
outpatient  ancillary services  have made  the issue  of building                                                               
facilities that  sit empty a thing  of the past. "The  sheer cost                                                               
and   process  and   the  market   itself  has   made  redundancy                                                               
uneconomical and financially unviable."                                                                                         
                                                                                                                                
He posited  that decisions on  building new facilities  or buying                                                               
new  equipment   should  be  left   to  the  economics   of  each                                                               
institution rather  than subject to  a state view. The  Bureau of                                                               
Economics  of  the Federal  Trade  Commission  has detailed  that                                                               
restricting  new  construction, adding  to  the  price, and  time                                                               
delays  has  reduced  price competition  between  facilities  and                                                               
helped  keep  prices  high.  It's   a  barrier,  and  that's  why                                                               
organizations like the Alaska  Association of Health Underwriters                                                               
are  sending  non-emergency  cases (especially  surgery)  out  of                                                               
state. Even with the cost  of travel and accommodations, they can                                                               
get services at less than  half the price at quality institutions                                                               
like  the Cleveland  Clinic, major  institutions in  Seattle, and                                                               
the Mayo Clinic.                                                                                                                
                                                                                                                                
MR.  MORGAN  said  that  virtually every  step  in  the  building                                                               
process (especially  in Anchorage)  public hearings  are required                                                               
to  get any  kind of  licensing,  permitting, and  zoning so  the                                                               
public does have input.                                                                                                         
                                                                                                                                
He pointed out that the  interests of the community oftentimes do                                                               
not consider  outside factors like transportation,  marketing, or                                                               
institutional  prestige. He  cited  an anecdotal  example of  the                                                               
speed of  ambulance service in midtown  Anchorage and highlighted                                                               
that  a Certificate  of Need  was  denied for  a small  emergency                                                               
center intended  to stabilize  patients before  transferring them                                                               
to a facility on the other side of town.                                                                                        
                                                                                                                                
MR. MORGAN advised  that included with his  written testimony, he                                                               
provided 84  documents from  the Federal  Trade Commission  and a                                                               
list he compiled of all the other programs                                                                                      
                                                                                                                                
Addressing the question Senator  Stevens posed yesterday, he said                                                               
he found  a study that  compares states that have  Certificate of                                                               
Need or  don't have  it and  whether they  have a  public utility                                                               
review commission  to review hospitals  and ancillary  care rates                                                               
and payer mix. What's interesting, he  said, is that in 2016 just                                                               
Indiana had an individual insurance  premium rate change that was                                                               
negative three percent without the CON.                                                                                         
                                                                                                                                
CHAIR COSTELLO asked  him to send the document to  her office and                                                               
she would share  it with the committee. She asked  the members to                                                               
submit  any questions  in writing  and her  office would  get the                                                               
responses from Mr. Morgan.                                                                                                      
                                                                                                                                
10:38:00 AM                                                                                                                   
At ease                                                                                                                         
                                                                                                                                
10:38:16 AM                                                                                                                   
CHAIR COSTELLO  reconvened the meeting  and invited  Ms. Hultberg                                                               
to testify.                                                                                                                     
                                                                                                                                
10:38:44 AM                                                                                                                   
BECKY HULTBERG, President/CEO, Alaska  State Hospital and Nursing                                                               
Home Association,  stated that  ASHANHA does  not support  a full                                                               
repeal of Certificate  of Need, but does support a  review of the                                                               
CON program  to determine if  it is accomplishing its  intent, if                                                               
it  is adequately  enforced, and  if changes  are warranted.  The                                                               
process should be collaborative and  informed by data. She is not                                                               
aware of any provider group that would oppose such a review.                                                                    
                                                                                                                                
Referring  to testimony  yesterday  that  implied that  hospitals                                                               
would revoke  privileges if  a provider  supported the  repeal of                                                               
the CON  program, she clarified  that hospital  administrators do                                                               
not grant  medical privileges. She explained  that privileges are                                                               
granted or  revoked through a physician-led  process that focuses                                                               
on  qualifications,  work  performance,   and  education  of  the                                                               
applicant.                                                                                                                      
                                                                                                                                
10:40:42 AM                                                                                                                   
MS. HULTBERG  delivered a PowerPoint presentation  on Certificate                                                               
of Need.  She displayed the  following list of six  key questions                                                               
that should be answered through  the CON process: 1) What problem                                                               
are  we trying  to  solve;  2) Will  repealing  CON address  this                                                               
problem;  3)  What  critical  purpose does  CON  serve;  4)  What                                                               
happens to our  health care system and to our  state budget if we                                                               
get CON wrong;  5) Given other factors in the  market, is now the                                                               
time to  repeal CON;  and 6)  What information  would we  need to                                                               
make this  decision? She said  the forgoing questions need  to be                                                               
factored  in as  we  work  our way  through  the complicated  but                                                               
important issue for our health care infrastructure.                                                                             
                                                                                                                                
She displayed  a U.S. map  showing which states  have experienced                                                               
rural hospital closures since 2010.  She said Alaska is fortunate                                                               
that it  has not  had any  small hospital  closures but  there is                                                               
always  that  potential.  She advised  that  comments  about  the                                                               
profitability of hospitals in Alaska  are frequently referring to                                                               
hospitals  in the  Railbelt, whereas  the  majority of  ASHANHA's                                                               
membership are small  rural hospitals, some of  which are tribal.                                                               
Hospitals   in  Kodiak,   Seward,   Valdez,  Homer,   Petersburg,                                                               
Wrangell, Ketchikan, and Cordova  are small non-tribal, critical-                                                               
access hospitals  that have fewer  than 25 beds.  Those hospitals                                                               
are  most  at  risk  for closure  in  the  current  reimbursement                                                               
environment. They have  thin margins and a less  than great payer                                                               
mix. She highlighted  that most hospitals in Alaska  are owned by                                                               
the community they  serve. She reported that  just four hospitals                                                               
in Alaska are owned by an outside  entity, and one of those has a                                                               
significant investor presence by the local foundation.                                                                          
                                                                                                                                
10:42:16 AM                                                                                                                   
MS. HULTBERG  said the challenges  local hospitals  face include:                                                               
lower inpatient  volumes; Medicare  cuts, and Medicaid  cuts. She                                                               
displayed  a  chart showing  $856  million  in cuts  to  Medicare                                                               
reimbursement for  Alaska hospitals  over 15 years.  She reminded                                                               
members  that to  keep  the budget  flat,  the administration  is                                                               
reducing Medicaid rates  by five percent, starting  July 1, 2017.                                                               
Addressing Medicaid  reimbursement, she explained  that ASHANHA's                                                               
hospitals and  nursing homes  are reimbursed  based on  cost. The                                                               
forthcoming  reductions   place  providers   that  have   a  high                                                               
percentage of Medicaid  patients in the position  of operating in                                                               
a cost minus environment, which is not sustainable.                                                                             
                                                                                                                                
She  said the  goal  of the  Certificate of  Need  program is  to                                                               
restrain  the growth  of health  care costs.  The methodology  is                                                               
that competition  reduces prices  which will lower  overall costs                                                               
in  the health  care market.  Increasing competition  through the                                                               
repeal  of CON  will lower  prices and  restrain costs.  But what                                                               
must  also  be analyzed,  she  said,  is  the  impact of  CON  on                                                               
quality, access to care for  underserved populations, and the use                                                               
of CON as a tool  for public accountability and transparency. She                                                               
said the  current CON process  provides a level of  visibility on                                                               
costs and facility growth that would not be available otherwise.                                                                
                                                                                                                                
10:44:35 AM                                                                                                                   
CHAIR COSTELLO  asked if she  is aware of  any of the  methods to                                                               
cover   indigent   populations   that  the   previous   testimony                                                               
mentioned, should CON be scaled back or repealed.                                                                               
                                                                                                                                
MS. HULTBERG  said typically it  would be  a direct subsidy  to a                                                               
hospital or facility that sees  a high percentage of underserved.                                                               
"That   would   be   like   the    Medicare   or   Medicaid   DSH                                                               
[Disproportionate  Share  Hospital]  funds   or  those  types  of                                                               
payments."                                                                                                                      
                                                                                                                                
10:45:20 AM                                                                                                                   
MS. HULTBERG  discussed the existing  competition in  the current                                                               
CON  program. She  said that  in most  markets, small  outpatient                                                               
imaging or  surgery centers already have  significant competition                                                               
due to the  physician office exemption, lax  enforcement, and the                                                               
ability to  move facilities. CON  has limited  high-cost, capital                                                               
intensive  surgery centers,  expensive  hospital expansions,  and                                                               
has limited  the development of  skilled nursing  facilities. "To                                                               
imply that there  is not competition right now,  is a significant                                                               
misunderstanding of the market," she said.                                                                                      
                                                                                                                                
SENATOR HUGHES asked  for an explanation of  the physician office                                                               
exemption.                                                                                                                      
                                                                                                                                
MS. HULTBERG  said a  private physician's  office is  exempt from                                                               
the Certificate  of Need requirements.  For example,  a physician                                                               
could put an MRI machine in their private office.                                                                               
                                                                                                                                
SENATOR HUGHES  asked if the  exemption applies even if  the cost                                                               
of the machine reaches or exceeds the dollar threshold.                                                                         
                                                                                                                                
MS.  HULTBERG  said  she  would follow  up  with  information  to                                                               
clarify that.                                                                                                                   
                                                                                                                                
10:46:59 AM                                                                                                                   
MS. HULTBERG addressed the question  of whether the repeal of CON                                                               
addresses cost  problems. She displayed  a list of  seven primary                                                               
factors  driving health  care costs  from Mack,  M. (2016).  What                                                               
drives rising  health care costs? Government  Finance Review. 26-                                                               
32.   1)  Fee-for-service   system,  which   rewards  volume   of                                                               
procedures, incentivizing  overtreatment; 2)  prescription drugs;                                                               
3)  new   medical  technology,  and   our  use  of   new  medical                                                               
technology;  4) aging  population;  5)  unhealthy lifestyles;  6)                                                               
high administrative costs; and  7) service provider consolidation                                                               
(not much  of a factor in  Alaska). She said Certificate  of Need                                                               
is not on  the list because the things driving  health care costs                                                               
are primarily  related to  the fee for  service structure  of the                                                               
system. What should be on the  list, she said, is the third-party                                                               
payment  system. The  consumer isn't  purchasing the  service and                                                               
thus  is  disconnected   from  the  cost  of   the  service.  She                                                               
highlighted that  lack of competition  in the health  care market                                                               
is not commonly cited as a  driver of health care costs. Findings                                                               
from Elhauge,  E. (2010). "The Fragmentation  of U.S. Healthcare:                                                               
Causes and Solutions" underscores that, she said.                                                                               
                                                                                                                                
MS.   HULTBERG  said   the  Commonwealth   Fund  looked   at  the                                                               
differences between  U.S. health  care costs and  other countries                                                               
and found that  high U.S. health care costs  are directly related                                                               
to the fee-for-service system, the  third-party payer system, and                                                               
the use  of high-priced medical  technology. She agreed  with the                                                               
testimony  from   the  person  from  the   Mercatus  Center  that                                                               
increasing  competition will  result in  more hospitals,  surgery                                                               
centers, and MRI  machines in Alaska. However, we need  to ask if                                                               
more is better  because physical infrastructure must  be paid for                                                               
by someone, she  said. She pointed to a chart  showing the number                                                               
of   sophisticated  diagnostic   imaging  machines   per  million                                                               
population and the  number of exams per 1,000  population for the                                                               
U.S. and other countries. She noted  that the U.S. is only behind                                                               
the  technologically advanced  country of  Japan. She  noted that                                                               
Canada has 8.8  MRI machines per million  population, whereas the                                                               
U.S. has 35.5. Clearly the  U.S. utilizes expensive technology at                                                               
a far greater rate than Canada, she said.                                                                                       
                                                                                                                                
10:49:33 AM                                                                                                                   
MS. HULTBERG displayed  a chart titled "Health care  vs. a normal                                                               
market"  that  demonstrates  from  an  economic  perspective  why                                                               
health  care  does  not  behave  like a  normal  market.  It  has                                                               
different  assumptions  and  yields  different  outcomes  than  a                                                               
normal market.                                                                                                                  
                                                                                                                                
She displayed a supply demand  graph that shows what happens when                                                               
the  supply  (of surgery  centers  for  example) increases  in  a                                                               
market. Price  often falls but  quantity increases  which creates                                                               
the  Starbucks phenomenon.  When there  is a  Starbucks on  every                                                               
corner, you  drink a lot more  coffee and spend more  money, even                                                               
if the per unit price for coffee is a little less.                                                                              
                                                                                                                                
10:50:24 AM                                                                                                                   
MS.  HULTBERG said  that  because  health care  is  not a  normal                                                               
market,  competition  can  sometimes  increase  both  volume  and                                                               
price, leading to higher costs  for the individual and the health                                                               
care  system.  She  displayed  a  graph  that  demonstrates  this                                                               
circumstance. The  supply of surgery  centers increased,  and the                                                               
demand curve  moved too  so the  price went  up and  the quantity                                                               
consumed also  went up.  In this scenario  the total  cost almost                                                               
doubled.  She noted  that  the  source for  this  graph  is in  a                                                               
subsequent  slide. She  reiterated that  it's important  to think                                                               
about  whether traditional  assumptions hold  true in  the health                                                               
care market.                                                                                                                    
                                                                                                                                
10:51:48 AM                                                                                                                   
She  offered to  provide copies  and suggested  members read  the                                                               
study  the   Lewin  Group  conducted  when   Illinois  looked  at                                                               
eliminating  its  Certificate  of  Need  program.  She  read  the                                                               
following from the study:                                                                                                       
                                                                                                                                
     "The  traditional  arguments  for CON  are  empirically                                                                    
     weak…  However,   given  the  potential  for   harm  to                                                                    
     specific critical  elements of the health  care system,                                                                    
     we  would  advise  the  Illinois  legislature  to  move                                                                    
     forward  with an  abundance of  caution. Nontraditional                                                                    
     arguments  for maintaining  CON deserve  consideration,                                                                    
     until  the  evidence  on   the  impact  that  specialty                                                                    
     hospitals and  ambulatory surgery  centers may  have on                                                                    
     safety  net providers  can be  better quantified."  (p.                                                                    
     iii)                                                                                                                       
                                                                                                                                
MS. HULTBERG displayed the following  list of benefits of CON: 1)                                                               
promotes and  ensures access for underserved  populations; 2) may                                                               
prevent oversupply of services,  equipment and facilities; 3) may                                                               
restrain oversupply of  facilities, which can lead  to overuse of                                                               
services  (supply-induced  demand);  4) may  protect  high-volume                                                               
procedures  that  affect  quality  (e.g.  NICU);  5)  provides  a                                                               
vehicle for health  care cost transparency and  public input into                                                               
the  health  planning  process;  and  6)  manages  major  capital                                                               
expenditures, protecting the Medicaid budget                                                                                    
                                                                                                                                
10:52:41 AM                                                                                                                   
She  stated  that there  is  government  interest in  the  public                                                               
involvement through  the CON process  because of the role  of the                                                               
government as a  payer. She highlighted that the  State of Alaska                                                               
has a fiscal interest in this  issue and the fiscal note is large                                                               
because the state  will pay for the capital  and operating costs-                                                               
through  the  Medicaid  program-of   any  new  facility  that  is                                                               
constructed.                                                                                                                    
                                                                                                                                
MS.  HULTBERG said  the Emergency  Medical  Treatment and  Active                                                               
Labor  Act  (EMTALA) mandates  that  hospitals  treat anyone  who                                                               
comes to an  emergency room, regardless of their  ability to pay.                                                               
That  is  why  Alaska  hospitals   have  such  high  figures  for                                                               
uncompensated   care.  [The   slide  shows   the  following   for                                                               
uncompensated care:  2011: $85,047,723; 2012:  $90,025,771; 2013:                                                               
$94,475,540; 2014: $89,001,149; 2015: $72,594,126]                                                                              
                                                                                                                                
She  said  she found  the  McDonald's  Burger King  example  from                                                               
yesterday  somewhat  amusing.  The   testifier  pointed  out  how                                                               
ridiculous it would be if McDonald's  had to get a CON to compete                                                               
with  Burger King.  But, she  asked, what  would the  competitive                                                               
market look like  if the federal government  required Burger King                                                               
to  give away  its hamburgers  for free,  but didn't  require the                                                               
same of  McDonald's? That  is basically the  impact of  EMTALA in                                                               
the health care market, she said.                                                                                               
                                                                                                                                
She pointed  out that hospitals  subsidize many services  that do                                                               
not generate  revenue or  do not  cover costs.  Examples include:                                                               
sexual   assault   response  (forensic   nursing);   subspecialty                                                               
services  for  children;  homeless  services  (medical  respite);                                                               
primary care  (Mountain View,  senior clinics);  community health                                                               
(school programs, etc.)  She said a lot of  the critical services                                                               
that a  community takes  for granted are  paid for  by hospitals.                                                               
Hospitals also must maintain infrastructure  and staffing for 24-                                                               
hour  emergency services.  These  services  are provided  because                                                               
hospitals have  positive margins  on other services.  CON repeal-                                                               
and loopholes  in the CON statute-allows  profitable services and                                                               
payers  to migrate  outside of  the  hospital, leaving  hospitals                                                               
with fewer resources to provide needed community services.                                                                      
                                                                                                                                
10:54:47 AM                                                                                                                   
MS. HULTBERG  said it's really about  what we value. What  is the                                                               
value of  the community services  that are provided? What  is the                                                               
value of having certain specialty  services in the community that                                                               
are subsidized by hospitals? What  services do you want available                                                               
in your  hospital in the  event of  a medical emergency?  What is                                                               
the value of rural hospitals  to their communities? These are the                                                               
things that are  at risk if the CON program  is changed. She said                                                               
it's also  about who gets care.  CON laws protect access  to care                                                               
for: the poor; the very  sick; those without commercial insurance                                                               
(Medicare,   Medicaid,  uninsured);   rural   areas;  and   urban                                                               
neighborhoods with high populations of uninsured.                                                                               
                                                                                                                                
She listed  the following  six key questions  about CON:  1) what                                                               
problem are we  trying to solve; 2) will CON  repeal address this                                                               
problem;  3)  what  critical  purpose does  CON  serve;  4)  what                                                               
happens to our health care system  and our state budget if we get                                                               
CON wrong; 5) given other factors  in the market, is now the time                                                               
to repeal  CON; and  6) what  information would  we need  to make                                                               
this decision?                                                                                                                  
                                                                                                                                
10:56:05 AM                                                                                                                   
MS. HULTBERG  concluded her comments  stating that  loopholes and                                                               
the  lack  of  enforcement  in  the  current  CON  law  are  very                                                               
dissatisfying  for   many  ASHANHA   members.  We  think   it  is                                                               
appropriate  to have  a  conversation about  whether  the law  is                                                               
working as intended and how  it could be strengthened or changed,                                                               
she  said. ASHANHA  does not  support a  full repeal  of the  CON                                                               
program.  Alaska's unique  provider  environment  and its  unique                                                               
rural  communities   must  be  part  of   the  conversation.  The                                                               
conversation should be  informed by data and the  issue should be                                                               
addressed   with  a   stakeholder  group   to  ensure   that  all                                                               
perspectives   are   heard  and   that   there   is  a   thorough                                                               
understanding of any unintended consequences of the decision.                                                                   
                                                                                                                                
CHAIR COSTELLO thanked Ms. Hultberg and held SB 62 in committee.                                                                
                                                                                                                                
10:56:58 AM                                                                                                                   
CHAIR COSTELLO  adjourned the Senate Labor  and Commerce Standing                                                               
Committee meeting at 10:56 a.m.                                                                                                 
                                                                                                                                
                                                                                                                                

Document Name Date/Time Subjects
CS SB 80 (L&C) - Ver. J.pdf SL&C 4/7/2017 9:00:00 AM
SB 80
SB 85 - Background Document - TVEP 2016 Report Cover Letter.pdf SL&C 4/7/2017 9:00:00 AM
SB 85
SB 85 - Background Document - TVEP Distribution FY09-17.pdf SL&C 4/7/2017 9:00:00 AM
SB 85
SB 85 - Background Document - TVEP 2016 Report.pdf SL&C 4/7/2017 9:00:00 AM
SB 85
SB 85 - Background Document - TVEP Program Basics.pdf SL&C 4/7/2017 9:00:00 AM
SB 85
SB 85 - Background Document - UA TVEP Advocacy Package.pdf SL&C 4/7/2017 9:00:00 AM
SB 85
SB 85 - DOL&WD Presentation.pdf SL&C 4/7/2017 9:00:00 AM
SB 85
SB 85 - Fiscal Note - DEED.pdf SL&C 4/7/2017 9:00:00 AM
SB 85
SB 85 - Fiscal Note - DOLWD 2.pdf SL&C 4/7/2017 9:00:00 AM
SB 85
SB 85 - Fiscal Note - DOLWD 3.pdf SL&C 4/7/2017 9:00:00 AM
SB 85
SB 85 - Fiscal Note - DOLWD.pdf SL&C 4/7/2017 9:00:00 AM
SB 85
SB 85 - Fiscal Note - UA.pdf SL&C 4/7/2017 9:00:00 AM
SB 85
SB 85 - Support Letter - NACTEC.pdf SL&C 4/7/2017 9:00:00 AM
SB 85
SB 85 - Support Letter - UA.pdf SL&C 4/7/2017 9:00:00 AM
SB 85
SB 85 - Support Resolution - APICC.pdf SL&C 4/7/2017 9:00:00 AM
SB 85
SB 85 - Support Resolution - Maritime Works.pdf SL&C 4/7/2017 9:00:00 AM
SB 85
SB80 Background Documents.pdf SL&C 4/7/2017 9:00:00 AM
SB 80
SB80 Sponsor Statement.pdf SL&C 4/7/2017 9:00:00 AM
SB 80
SB80 Letters of Support.pdf SL&C 4/7/2017 9:00:00 AM
SB 80
SB80 Summary of Changes.pdf SL&C 4/7/2017 9:00:00 AM
SB 80