Legislature(2017 - 2018)BELTZ 105 (TSBldg)
02/06/2018 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
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| Start | |
| SB62 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 62 | TELECONFERENCED | |
| *+ | SB 105 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
SENATE LABOR AND COMMERCE STANDING COMMITTEE
February 6, 2018
1:31 p.m.
DRAFT
MEMBERS PRESENT
Senator Mia Costello, Chair
Senator Kevin Meyer
Senator Gary Stevens
Senator Berta Gardner
Senator Peter Micciche
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
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
SENATE BILL NO. 105
"An Act relating to the licensure of marital and family
therapists; relating to professional liability insurance for
marital and family therapists; relating to medical assistance
for marital and family therapy services; and providing for an
effective date."
- SCHEDULED BUT NOT HEARD
PREVIOUS COMMITTEE ACTION
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 9:00 AM BELTZ 105 (TSBldg)
04/07/17 (S) Heard & Held
04/07/17 (S) MINUTE(L&C)
02/06/18 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
WITNESS REGISTER
SENATOR DAVID WILSON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of SB 62.
NAOMI LOPEZ-BAUMAN, Director
Healthcare Policy
Goldwater Institute
Phoenix, Arizona
POSITION STATEMENT: Provided supporting testimony for SB 62.
DR. HAL SCHERZ, Founder and Secretary
DOCS 4 Patient Care Foundation
Atlanta, Georgia
POSITION STATEMENT: Testified in support of SB 62.
DANIEL GILMAN, Attorney Advisor
Office of Policy Planning
Federal Trade Commission (FTC)
Washington, DC
POSITION STATEMENT: Testified in support of SB 62.
MATTHEW D. MITCHELL, Economist
Mercatus Center
George Mason University
Arlington, Virginia
POSITION STATEMENT: Testified in support of SB 62.
BECKY HULTBERG, President and CEO
Alaska State Hospital and Nursing Home Association (ASHNHA)
Juneau, Alaska
POSITION STATEMENT: Testified in opposition to SB 62.
MARY KASPARI, President
Interior Alaska Hospital Foundation
Delta Junction, Alaska
POSITION STATEMENT: Testified in support of SB 62.
RANDY BEALER, representing self
Delta Junction, Alaska
POSITION STATEMENT: Testified in support of SB 62.
BILL WARD, representing self
Delta Junction, Alaska
POSITION STATEMENT: Testified in support of SB 62.
MICHAEL JESPERSON, representing self
Anchorage, Alaska
POSITION STATEMENT: Testified in support of SB 62.
JOE FONG, Administrator
Providence Seward Medical and Care Center
Seward, Alaska
POSITION STATEMENT: Testified in opposition to SB 62.
DR. RICHARD MANDSAGER
Administrator
Providence Alaska Medical Center
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to SB 62.
DR. TIMOTHY SILBAUGH, MD FACEP, Business Manager
Alaska Emergency Medicine Associates
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to SB 62.
DR. ANNE ZINK, Emergency Physician
MatSu Regional Medical Center
Palmer, Alaska
POSITION STATEMENT: Testified in opposition to SB 62.
DAVID MORGAN, representing self
Anchorage, Alaska
POSITION STATEMENT: Provided supporting testimony for SB 62.
DAWN WARREN FRASIER, Member
Interior Alaska Hospital Foundation
Delta Junction, Alaska
POSITION STATEMENT: Testified in support of SB 62.
JOHN LEWIS, Vice President
Interior Alaska Hospital Foundation
Delta Junction, Alaska
POSITION STATEMENT: Testified in support of SB 62.
JOSHUA RUSSEL, representing self
Delta Junction, Alaska
POSITION STATEMENT: Testified in support of SB 62.
DAVID WALLACE, CEO
Mat-Su Regional Medical Center
Palmer, Alaska
POSITION STATEMENT: Testified in opposition to SB 62.
MIKE POWERS, COO
Tanana Valley Clinic
and former CFO/CEO Fairbanks Memorial Hospital
Fairbanks, Alaska,
POSITION STATEMENT: Testified in opposition to SB 62.
KARL GARBER, President
AgeNet
Juneau, Alaska
POSITION STATEMENT: Testified in opposition to SB 62.
ACTION NARRATIVE
1:31:20 PM
CHAIR MIA COSTELLO called the Senate Labor and Commerce Standing
Committee meeting to order at 1:31 p.m. Present at the call to
order were Senators Stevens, Meyer, Micciche, and Chair
Costello. Senator Gardner arrived shortly.
SB 62-REPEAL CERTIFICATE OF NEED PROGRAM
1:31:55 PM
CHAIR COSTELLO announced the consideration of SB 62. She asked
the sponsor to remind the members what they heard when they
considered the bill last year.
1:32:26 PM
SENATOR DAVID WILSON, Alaska State Legislature, Juneau, Alaska,
introduced SB 62 speaking to the following sponsor statement:
Senate Bill 62 repeals Alaska's certificate of need
(CON) program and provides for a two year window
before the repeal becomes effective.
The certificate of need programs were first mandated
nationally by the federal government in 1974, then
subsequently repealed in 1987 by the federal
government. Thirteen states have since repealed their
certificate of need programs across the nation, thirty
four have CON laws, and three don't have a CON
program, but require approval for certain facilities
and services.
Certificate of need programs were originally intended
to reduce healthcare costs, improve access to card,
and regulate and limit the entry and supply of medical
services and facilities. CON programs create internal
subsidies and encourage the use of the economic
profits to cross-subsidize indigent care.
However, the healthcare system has evolved from a fee-
for-service system, which lacked incentives to lower
prices, to a prospective payment system. CON laws over
the last forty years have stifled competition, created
a barrier to new medical facilities and services for
healthcare consumers, and prevented the free market
forces which improve the quality and lower the costs
of healthcare services.
Alaska's certificate of need program poses a
substantial threat to the proper performance of
healthcare markets and services.
CHAIR COSTELLO opened public testimony on SB 62.
1:36:50 PM
NAOMI LOPEZ-BAUMAN, Director, Healthcare Policy, Goldwater
Institute, Phoenix, Arizona, stated that SB 62 is important for
Alaskans because the certificate of need (CON) laws put process
before patient health care needs and preferences. CON laws were
adopted in the 1970s and allow competitors to veto new health
care providers or a new hospital. These laws persist today and
stifle competition. She drew a parallel to the smart phone
industry. "Imagine what our smart phones might look like if the
manufacturer first had to get permission from its competitor."
She emphasized that just as there shouldn't be laws against
smart phone innovations, the State of Alaska should not make it
illegal or onerous to offer more health care options and
services, particularly in rural areas.
MS. LOPEZ-BAUMAN referred to research by the Mercatus Center at
George Mason University that found that CON laws reduce health
care quality, access to care, and the availability of medical
equipment. She opined that Alaskans may be more profoundly
affected because traveling to other states for treatment can be
prohibitively expensive and logistically difficult
She pointed out that CON laws were originally established to
counter the cost-plus reimbursement system that no longer
exists. Instead, hospitals today generally receive a fixed
amount from insurers for patient care, which makes the CON laws
obsolete.
MS. LOPEZ-BAUMAN read the following joint statement from the
U.S. Department of Justice and the Federal Trade Commission to
show that the federal government has abandoned the CON system:
Certificate of need laws impede the efficient performance
of health care markets. By their very nature, CON laws
create barriers to entry and expansion to the detriment of
health care competition and consumers. They undercut
consumer choice, stifle innovation, and weaken markets'
ability to contain health care costs. Together we support
the repeal of such laws as well as steps that would reduce
their scope.
She noted that she submitted written testimony.
1:37:31 PM
SENATOR GARDNER joined the committee.
CHAIR COSTELLO asked Ms. Lopez-Bauman to describe the Goldwater
Institute's work.
MS. LOPEZ-BAUMAN explained that the Goldwater Institute as a
nonpartisan 501 (c)(3) libertarian research institution that
works on public policy issues and is involved in litigation.
SENATOR MICCICHE commented that for someone like himself who
believes in a free market, this seems like an easy decision.
He asked if she was aware that huge swaths of Alaska had
essentially no medical services and thus counted on a
certificate of need to develop initial services "Have you worked
much in Alaska?"
MS. LOPEZ-BAUMAN replied she did some research on Juneau and
found that health care consumers lives are better in that part
of the state than they were 15-18 years ago because cancer
patients now have the option of treatment closer to home.
SENATOR MICCICHE observed that he and Ms. Lopez-Bauman seem to
be talking about two different things. He thanked her for the
answer.
CHAIR COSTELLO encouraged people to submit written testimony.
1:43:14 PM
DR. HAL SCHERZ, Founder and Secretary, DOCS 4 Patient Care
Foundation, Atlanta, Georgia, testified in support of SB 62. He
related that this physician-run health care think tank has been
involved nationwide in efforts to repeal certificate of need
laws. He highlighted a conference in Washington, D.C. in 2017
that brought together experts from academia, medicine, public
policy, patient advocacy, the legal profession, and state
government. The consensus was that CON laws harm patients both
medically and financially, stifle competition and innovation,
and harm physician practices. He opined that these laws may also
be unconstitutional and monopolistic.
He directed attention to the article he coauthored and submitted
for the record titled, "Eliminating CON Law is a Meaningful Step
in Lowering Alaska's Health Care Costs."
DR. SCHERZ shared his opinion of CON laws speaking as a policy
expert and a practicing physician:
CON laws are a remnant of health care policy from the
1960s and 1970s that clearly no longer apply in this
new era of health care. They came into existence to
protect hospitals and nursing homes from competition
at a time when medical services were predominantly
paid for by fee-for-service. The federal government
incentivized states to adopt these laws with funding
that they terminated a decade later because the
promises of savings and improved patient access which
were promised, were never realized. Nonetheless,
states retained these laws because of the powerful
lobbying efforts of hospitals which benefited by
eliminating competition.
Fast forward to 2018. Most of the laws and regulations
that are on the books in health care protect hospitals
and they give them carte blanche when it comes to
controlling the health care market. Most hospitals
call themselves not-for-profit entities, which simply
means that they do not distribute the earnings to
shareholders. These enterprises are in fact some of
the most profitable entities in the community.
Since 1970, the number of physicians across the
country has gone up 100 percent while the number of
hospital administrators during this same period of
time has risen 3,400 percent. Salaries for CEOs at the
largest hospitals are typically in excess of $1
million annually and those of other medical executives
are not far behind. If you travel to any large city,
the most ambitious building projects are those of
hospitals. And the trend toward consolidation and
mergers and acquisition have positioned the hospitals
as the power brokers of health care. This trend, which
also includes the hospital acquisition of physician
practices, has left patients with very little patient
choice regarding where to get their health care.
Simultaneously, hospitals charge fees that are 5-10
times that of the services received at outside
facilities.
There is no transparency or consistency regarding
hospital fees. Patients have no idea what they are
being charged and two patients can have identical
services and pay vastly different amounts for them. As
an anecdote to illustrate the insanity of this
situation, understand that hospitals are purchasing
physician practices because it is good business for
them. This is because they get paid often ten times as
much for the identical service delivered at the
hospital as it would be at a doctor's practice.
For example, if Dr. Smith who is a GI specialist as he
does colonoscopies in his office-based GI lab, charges
$200 for the colonoscopy and the patient has a 20
percent copay, then they're responsible for $40.
However, if Dr. Smith sells his practice to Anchorage
general hospital, he keeps the same office but simply
changes the signage and then does a colonoscopy the
very next day. That charge for the colonoscopy is no
longer $200, but $2,000 and the patient is now
responsible for $400 out of pocket. CON laws allow
this practice to continue because competition is
prevented. The losers are the patients. They no longer
have any choice.
Please give Alaskans a choice.
1:48:56 PM
SENATOR GARDNER asked if he submitted the publication he
referenced.
DR. SCHERZ replied he submitted the article to Mr. Zepp.
CHAIR COSTELLO advised that the sponsor's staff indicated he
would provide the article.
1:49:51 PM
DANIEL GILMAN, Attorney Advisor, Office of Policy Planning,
Federal Trade Commission (FTC), Washington, DC, thanked the
committee for the opportunity to present the views of the FTC on
certificate of need (CON) laws. He stated that the prepared
remarks review recent statements on the effects of CON laws
issued jointly by the Federal Trade Commission and the Antitrust
Division of the US Department of Justice. He called the
committee's attention to the Agencies' joint 2017 statement on
Alaska Senate Bill 62 and CON laws. He requested the committee
include that statement in the record. He said these prior
statements reflect the Agencies' extensive experience with
health care competition and the effects of CON laws.
MR. GILMAN clarified that any additional comments or responses
to questions do not necessarily reflect the views of the FTC or
any individual commissioner or the Department of Justice.
He read the following:
CON laws,when first enacted, had the laudable goals
of reducing health care costs and improving access to
care.However, after considerable experience, it has
become apparent that CON laws do not provide the
benefits they originally promised. Worse, in operation
CON laws can undermine some of the very policy goals
that they are supposed to advance.
As detailed in our written statement, we have
identified at least three types of serious problems
with CON laws. First, CON laws create costly
regulatory barriers to entry and expansion. Those
barriers can increase prices, limit consumer choice,
and stifle innovation. Second, incumbent firms can
use CON laws to thwart otherwise beneficial market
entry or expansion by new or existing competitors.
Third, as illustrated by the FTC's experience in the
Phoebe Putney case, CON laws can deny consumers the
benefit of an effective remedy following the
consummation of an anticompetitive merger or
acquisition. For these reasons, last April we
respectfully suggested that Alaska repeal its CON laws
and we're here today to reiterate that suggestion. We
urge you to consider all the ways that CON laws may
harm health care consumers. Namely, individual patient
as well as both public and private third-party payers.
And those ways include these.
I. Entry restrictions tend to raise costs and
prices. They also limit opportunities for
providers to compete, not just on price but also
on nonprice aspects of health care like quality
and convenience that may be particularly
important to patients.
II. Impeding new entry to health care markets can be
especially harmful in rural and other underserved
areas. CON laws may delay or block the
development of facilities and services where they
are needed most. And they can reinforce market
power that incumbent providers may enjoy in
already concentrated areas. (By concentrated we
mean concentrations of the number of providers,
not that there are many providers.)
III. Empirical evidence on competition in health care
markets generally has demonstrated that more
competition leads to lower prices. In particular,
studies of provider consolidation by FTC staff
and independent scholars consistently indicate
that, "Increases in market hospital concentration
lead to increases in the price of hospital care."
In particular, the best empirical evidence also
suggests that greater competition incentivizes
providers to become more efficient and that
repealing or narrowing CON laws can reduce the
per-patient cost of health care. Empirical
evidence has not shown that CON laws control
spending, improve quality of care, cross-
subsidize charity care, or improve access to
care. We have found no empirical evidence that
CON laws have restricted so called over-
investment.
We urge you to consider the detailed discussion of the
available empirical evidence that is contained in the
2017 statement. We would be happy to entertain
questions about that as follow up. We urge you also to
consider that more targeted policies may be more
effective at ensuring more access to care without
inflicting the same harm on competition and,
ultimately, health care consumers.
1:55:13 PM
SENATOR GARDNER said an argument she's heard in favor of
maintaining CON is that it helps hospitals that are required to
provide care to everybody regardless of their ability to pay.
Competing facilities draw away business that hospitals need to
help subsidize the services that competing facilities don't want
to offer.
MR. GILLMAN said the CON laws do help hospitals, but it's
important to look at whether they improve charity care or
provide more services to the indigent community. He noted that
the 2017 joint statement discusses several empirical studies
that found that CON laws neither foster charity care nor deliver
on the cost-shifting promise. The evidence is lacking to support
the notion that hospitals will exploit their market power to
generate extra profits and then spend those profits in a
socially useful way. He suggested there are other approaches
such as the Medicare Critical Access Hospital Program that
provides extra reimbursement for rural critical access
hospitals.
CHAIR COSTELLO asked how repealing CON laws will affect
emergency rooms.
MR. GILLMAN replied there is no evidence that CON laws have
helped sustain emergency room services.
SENATOR MICCICHE asked if he was speaking for the Federal Trade
Commission in opposition to CON laws.
MR. GILLMAN clarified that the statement that he read was
screened and approved by the Federal Trade Commission. The
subsequent questions he fielded do not necessarily represent the
views of the FTC. The 2017 statement was jointly issued by the
Federal Trade Commission and the Antitrust Division of the US
Department of Justice. It's an official statement.
SENATOR MICCICHE pointed out that Alaska is geographically
diverse, is more than twice the size of Texas, has a population
of 734,000, and very limited availability of medical care.
MR. GILLMAN responded that Alaska is unique in some respects,
but other states also have substantial rural regions and
concerns about delivery of care and critical access hospitals.
They have not done a special study in Alaska, but nationally CON
laws, including in rural states, do not improve the
availability, quantity, or quality of charity care.
He added:
We do understand that there is a concern about what
will happen to critical access hospitals. We simply
have not found evidence that these rural hospitals,
that remote hospitals do a better job and thrive
better under CON laws than they do without them. We
just haven't found that.
2:04:48 PM
MATTHEW D. MITCHELL, Economist, Mercatus Center, George Mason
University, Arlington, Virginia, testified in support of SB 62.
He referenced the February 6, 2018 letter he submitted to the
committee and stated the following:
CON laws require health care providers wishing to open
or expand a health care facility to first prove to a
regulatory body that the community needs the service
they plan to offer. Policy makers hoped that these
programs would restrain health care costs, increase
quality, and improve access to care for poor and
underserved communities. However, by limiting supply
and undermining competition, CON laws may undercut
each of these laudable aims.
Because 15 states have repealed their certificate of
need programs, we have quite a bit of information to
help predict what would happen if other states, such
as Alaska, were to repeal their CON laws. Economists
have been able to use modern statistical methods to
compare outcomes in CON and non-CON states to estimate
the effects of the regulation. These methods control
for factors such as socioeconomic conditions that
might confound the estimates.
TABLE 1 in my written testimony summarizes some of
this research. It is organized around the stated goals
of CON laws. Briefly, it is hoped that CON laws will
ensure an adequate supply of health care resources.
The evidence suggests they do not. States with CON
laws have fewer hospitals, they have fewer ambulatory
surgery centers, they have fewer dialysis clinics, and
they have fewer hospice care facilities. Patients in
these states have access to fewer beds and fewer
medical imaging devices. They are more likely to leave
their counties in search of care and they are more
likely to leave their states in search of care.
The data suggests that Alaska without CON would have
42 percent more hospitals than it currently does. Of
particular interest to Alaskans, it is hoped that CON
laws will ensure access to health care for rural
communities. They do not. States with CON laws have
fewer rural hospitals, they have fewer rural hospital
substitutes, and they have fewer rural hospice
facilities. Residents of CON states must drive further
to obtain care, and the data suggests that an Alaska
without CON would have 45 percent more rural hospitals
than it currently does.
It's hoped that CON laws will promote high quality.
They do not. Research suggests that deaths from
treatable complications following surgery and
mortality rates from heart failure, pneumonia, and
heart attacks are all statistically higher in CON
states relative to non-CON states. In states like
Alaska with especially comprehensive CON programs
that is they require CON for many different
procedures, patient satisfaction is lower. Patients
are much less likely to rate their experience as a 9
or a 10 on a scale of 1 to 10.
It's hoped that CON laws will encourage charity care.
They do not. It is hoped that CON laws promote the use
of hospital substitutes. They do not. Finally, it is
hoped that CON laws will restrain the cost of care.
They do not.
All of this research is cited in my written testimony.
I have also attached two working papers addressing the
effect of CON on rural care and on spending, as I
believe these papers should be of particular interest
to your state.
Given the substantial evidence that CON laws do not
achieve their stated goals, one may wonder why these
laws continue to exist in so much of the country. The
explanation seems to lie in the special interest
theory of regulation. Mainly, CON laws perform a
valuable function for incumbent providers of health
care services by limiting their exposure to new
competition. Research finds that existing hospitals,
for example, are not affected by CON laws, whereas new
hospitals and hospital substitutes like ambulatory
surgery centers are. This helps explain why antitrust
authorities at the federal Department of Justice and
at the Federal Trade Commission have long argued (as
we've heard today) that these regulations are
anticompetitive and harmful to consumers.
2:09:05 PM
At ease
2:10:03 PM
CHAIR COSTELLO reconvened the meeting and welcomed Ms. Hultberg.
2:10:26 PM
BECKY HULTBERG, President and CEO, Alaska State Hospital and
Nursing Home Association (ASHNHA), Juneau, Alaska, testified in
opposition to SB 62. She said she enjoyed hearing the
perspectives of the previous testifiers, all of whom are from
the Lower 48. She questioned their relevance in Alaska and
provided several fact-checks before starting the presentation.
• In Alaska, CON is a rigorous state process; it does not
require a competitor's stamp of approval.
• The cost-plus system exists in Alaska. All hospitals are
paid by Medicaid based on cost and rural hospitals are
cost-plus under the Medicare methodology.
• Alaska is primarily fee for service and most states that
have repealed CON laws have replaced them with something
else.
She said that whether to repeal CON can be distilled to two
questions. 1) Will CON repeal increase competition and reduce
costs, and 2) What will the consequences be to the health care
system if we take that action?
MS. HULTBERG highlighted that the State of Alaska has a vested
interest in CON in protecting its budget. She explained that
skilled nursing in Alaska is paid 85-90 percent by the Medicaid
program. That includes cost-based reimbursement and construction
assistance to cover the capital costs. Should CON be repealed,
the cost of developing new skilled nursing beds would be shared
equally between the state and federal government.
She disputed the assumption that repealing CON will increase
competition and lead to lower health care prices. She pointed
out that the largest market in the state already has many
ambulatory surgery centers and imaging centers and this
competition has not resulted in any reduction of prices.
2:13:20 PM
MS. HULTBERG displayed a chart showing the impact of increased
supply with no change in demand. She said the assumption is
health care behaves like a normal market, but that is not the
reality for a number of reasons.
• Third-parties pay the bill, so consumers are less price
sensitive.
• Information is asymmetric information between the people
providing the service and those consuming the service.
• Quality is sometimes more important that price.
She said the reality is that in certain cases competition in
health care can result in increased prices. She drew an analogy
to a Starbucks on every corner. To the question of whether CON
addresses the cost problem, she maintained that lack of
competition in the health care market is not commonly identified
as a cost driver in health care. She clarified that the factors
that many studies identify as health care cost drivers are not
necessarily directly related to certificate of need.
2:15:20 PM
MS. HULTBERG presented the hospital perspective of certificate
of need and why it is important. She explained that the
Emergency Medical Treatment and Active Labor Act (EMTALA)
requires hospitals to see patients 24 hours a day regardless of
their ability to pay. Hospitals lose money on some services and
make it up on others. When services migrate outside the
hospital, there is less volume over which to spread cost. Some
of the facilities that have migrated out do not see patients who
cannot pay and sometimes do not see Medicaid or Medicare. To
demonstrate this point, she drew an analogy between two fast-
food restaurants. One is required by law to be open 24 hours per
day and to give food away for free to those who cannot pay. The
other doesn't have those restrictions.
She listed the ways hospitals subsidize community services.
• Primary care senior clinics (The Medicare clinics in
Anchorage are run by the two hospitals)
• Forensic nursing sexual assault response
• Subspecialty services for children
• Homeless services (medical respite)
• Community health programs
She compared a hospital to a public utility pointing out the
significant cost of maintaining a functioning infrastructure.
She emphasized that undercutting the ability of a hospital to
pay for its infrastructure, could jeopardize that service. She
highlighted that during the tsunami warning people went to the
hospital because it was open and safe.
2:18:15 PM
MS. HULTBERG displayed 2016 data on rural hospital closures and
warned against assuming that hospitals will be able to maintain
services indefinitely given the current market. The facilities
most at risk are Homer, Kodiak, Ketchikan, Soldotna, and
Fairbanks. It is these mid-size community hospitals that do not
have a significant market. To demonstrate this point, she quoted
a health care futurist who said, "Are community hospitals
obsolete? It's a serious question. Just about every trend of
late seems to suggest the days are numbered for many, if not
most." Given these trends, it seems that the first step in
maintaining viable community hospitals is don't make it worse.
She pointed out that government plays a significant role in the
financing and regulation of health care through the dollars
spent on Medicaid and the potential increase in that spending.
She said part of this conversation is about what we value. It's
the value of the services that hospitals provide. It's the value
of having facilities in the community that are willing and able
to serve the poor and vulnerable. It's the value of having a
well-equipped and staffed emergency room available anytime it's
needed.
2:20:26 PM
MS. HULTBERG addressed the question of whether we have the
information to make a decision about CON by quoting the Lewin
Group that evaluated Illinois' CON program in 2007. They said,
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.
She advised the committee to also move forward with caution and
understand the implication of CON repeal on the critical
elements of the health care system. She welcomed future
conversations about CON regulations and the health care
infrastructure.
2:21:15 PM
SENATOR MICCICHE commented on the $2.7 billion Medicaid
expenditure and asked if conversations are taking place to
develop a hybrid model that protects critical services while
expanding private innovation to help keep costs down.
MS. HULTBERG opined that the state's regulatory CON framework
provides many vehicles for competition, and it that was the
answer, prices would already be lower. She suggested that the
goal everyone should be aiming for is how to lower the total
cost of care over a person's life. She directed attention to
slide 11 that lists the primary factors driving health care
costs:
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
7. Service provider consolidation (not much of a factor in
Alaska)
She acknowledged that her answer wasn't entirely satisfactory.
"Nobody has figured this out in our country and we are all
continuing to struggle with it." She noted that health care
stakeholders in Alaska are holding conversations on this topic.
SENATOR STEVENS asked her to comment on the statement that
without CON Alaska would have 45 percent more hospitals. He said
he couldn't imagine that.
MS. HULTBERG replied it doesn't apply to the Alaska market, but
if it did it would also mean 45 percent more spending on
hospitals in Alaska.
2:25:23 PM
MARY KASPARI, President, Interior Alaska Hospital Foundation,
Delta Junction, Alaska, testified in support of SB 62. She said
she is a 20-year resident of Delta Junction and has been an RN
for 35 years. In 2011, she started working to get a critical
access hospital in Delta Junction. The feasibility study showed
the community could sustain a 10-bed long-term care facility
along with a 10-bed critical access hospital with swing-bed
capabilities. In 2013 the foundation applied for and received a
new access point grant to open the first community health center
in the Interior. The Interior Alaska Medical Clinic opened in
2014 and the Interior Alaska Pharmacy opened in 2017. The last
phase of the project is to construct the critical access
hospital with 24/7 emergency room coverage. The roadblock is the
certificate of need even though there is no competition in a
200-mile radius. She urged the committee to dissolve CON or at
least make a rural exemption that is immediately effective.
2:29:43 PM
RANDY BEALER, representing self, Delta Junction, Alaska,
testified in support of SB 62. He reported that medical air
transport became unavailable in Delta Junction when the 24-hour
medical facility reduced hours to the work day. Emergencies
after hours, weekends, or holidays require an ambulance ride to
Fairbanks. He shared personal medical emergencies and stressed
that the certificate of need requirement is a roadblock to basic
health care. Denying 24-hour emergency care and a small hospital
for rural communities is not beyond comprehension.
2:32:37 PM
BILL WARD, representing self, Delta Junction, Alaska, testified
in support of SB 62. He stated that the statutory requirement
for certificate of need is a tool that municipal hospitals and
large health care organizations use to strengthen their power
base and thwart the legitimate needs of small Alaskan
communities. The community of Delta Junction has demonstrated
the need for a critical access hospital but is being stymied by
the CON requirement. The lack of primary and emergency health
care jeopardizes the desire of older residents to continue to
live in the community. The clinic and EMTs are obligated to send
anyone who has an undetermined illness or trauma to Fairbanks
for diagnostic testing. This is expensive, time-consuming, and
sometimes an overreaction. It is also a burden on the Fairbanks
emergency room. He urged the committee to do away with the
outmoded and restrictive requirement to obtain a CON.
2:36:10 PM
MICHAEL JESPERSON, representing self, Anchorage, Alaska,
testified in support of SB 62. He opined that the best way to
reduce prices in any industry is more competition. He lives in
midtown Anchorage and can get care if he needs it, but it's more
difficult in rural areas. Small communities need emergency
services and access to medivacs. Removing the certificate of
need requirement increases competition and reduces the
substantial cost of opening a medical facility. He acknowledged
that opening new medical facilities takes time but removing this
one hurdle will save a step for everyone, make it less expensive
to open a new facility, and save a few more lives. He urged the
committee to pass SB 62 to remove certificate of need and bring
competition back to the market.
2:39:21 PM
JOE FONG, Administrator, Providence Seward Medical and Care
Center, Seward, Alaska, said he supports the conversation about
whether the current CON is appropriate, but doesn't believe a
full repeal is the answer. He clarified that the center is part
of the Providence system, but it is city owned so its success
directly impacts the state, not the larger Providence
organization. He explained that rural hospitals generally have
small margins and they rely heavily on outpatient services like
imaging, therapies, labs, and surgical services to be able to
offer 24-hour ER coverage. The Seward center doesn't see a lot
of people in a 24-hour period but there is no argument that the
community needs access to these services. However, removing a
barrier or incentivizing competition may have a long-term
negative impact on the ability to provide urgent care and
emergency services. He provided an example of the way the
community addressed competition through collaboration and opined
that may not always be feasible. He reiterated support for
continued conversation about the current law, but not a full
repeal.
2:43:04 PM
DR. RICHARD MANDSAGER, Administrator, Providence Alaska Medical
Center, Anchorage, Alaska, urged the committee to hold SB 62 and
continue the dialog about how to improve the CON regulations. He
said hospitals are a public utility in the sense that they need
to be open all the time, but in many communities supporting
these services is marginal. He acknowledged that the current CON
statute isn't perfect and opined that it provides a way to talk
through and rationalize services. He advised that Providence
didn't oppose awarding CONs for Alaska Regional and MatSu to
build more behavioral health services. More of these services
are needed and it's a useful dialog to talk this through with
the community, he said. Hospitals have become a place for the
very sick, and the challenge is to make sure these services are
available into the future. He reiterated his support for
continuing the dialog about how to improve CON regulations.
2:46:30 PM
DR. TIMOTHY SILBAUGH, MD FACEP, Business Manager, Alaska
Emergency Medicine Associates (AEMA), Anchorage, Alaska, said he
is affiliated with Providence Alaska Medical Center and is
speaking in opposition to SB 62. He opined that the CON process
provides thoughtful use of state medical resources, has been
effective in developing a strong health care system, and has
prevented the introduction of expensive medical entities that
would drive up costs.
He related that in 2015 to 2017 the Providence Alaska Medical
Center successfully applied for a CON to develop a pediatric
specialty emergency care center. There was a thorough discussion
of the proposal and competitors were free to oppose it. He
opined that lifting the CON process would result in a
proliferation of expensive facilities that would drive up costs
but provide no coordinated benefit to the Alaska health care
system.
Referring to Senator Costello's question about what would happen
to emergency rooms should CON be appealed, he said they would
become freestanding emergency centers. These unique facilities
are allowed by federal regulations to charge the same hospital
facility fee as a traditional hospital-based emergency
department. They do not currently exist in Alaska, and
essentially provide service where it isn't needed at a much
higher cost. They also directly translate into allowable
increases in Medicaid fees to offset the infrastructure
investment.
2:49:39 PM
DR. ANNE ZINK, Emergency Physician, MatSu Regional Medical
Center, Palmer, Alaska, testified in opposition to SB 62. She
mentioned the $1.5 million exemption that people in MatSu and
Anchorage have taken advantage of, which has added facilities
and increased competition, and she agreed with testimony from
Delta Junction that access to emergency care is critical. She
expressed concern that repealing CON would threaten emergency
departments. Surgery centers would come in and wouldn't be
required to cover costs at the hospital, which would jeopardize
emergency services for Medicare, Medicaid and the uninsured.
These centers would also attract itinerant surgeons from the
Lower 48 who may not be available in emergencies.
DR. ZINK said she has seen the certificate of need process work
well in Alaska. First, it doesn't accommodate the freestanding
emergency departments that Dr. Silbaugh talked about that
significantly increase costs without helping patient care. Also,
Mat-Su Regional went through the arduous process to apply for a
certificate of need for behavioral health. It ultimately brought
the community to resolution and the state approved the beds. She
concluded saying that Alaska has unique challenges and it's
necessary to look at what makes sense in each community. That is
why she is opposed to SB 62.
2:52:22 PM
DAVID MORGAN, representing self, Anchorage, Alaska, stated he
has worked in health care finance and management for 31 years.
He noted that he submitted written testimony and the Alaska
profile that George Mason University prepared about what would
happen without the certificate of need. It shows significant
reductions on spending, improved access, and positive trending
quality measures.
He said the experience in Illinois in getting rid of certificate
of need was that rural hospitals responded to the threat of
competition by changing the services they delivered, adding
swing beds and long-term beds. He said he is currently working
with the Kaiser Foundation on market place average bench mark
premiums from 2014 to 2018. That identifies what was really paid
in insurance and health care. Economists found that those states
without certificate of need had a lower rate of increase than
those states that did. California was an exception, but it has
embedded regulations more severe than CON and major health care
taxes that helped raise costs.
MR. MORGAN warned that examples that are given of the effect of
the repeal of CON don't necessarily look at the total cost of
health care in the state or community. He noted that Senator
Giessel said there is a three-year wait for behavioral health
and suggested looking at the economic issues to see who has a
material interest. That will lead you to look more closely at
the certificate of need issue, he said.
He advised that he sent most of the information from George
Mason about what would happen in Alaska without certificate of
need. He would follow up shortly with the market place bench
mark costs. This shows which states do and don't have CON and
ranks them according to the percentage those costs have grown
over four years. It's very surprising, he said.
SENATOR GARDNER asked him to share the information.
MR. MORGAN said he sent everything to Mr. Zepp except the study
that uses Kaiser Foundation information and that should be ready
to send shortly.
CHAIR COSTELLO asked Margaret Brody to provide information on
the cost for an application for a certificate of need, and the
timeframe for the department to process the application and get
back to the applicant.
MARGARET BRODIE Department of Health and Social Services (DHSS)
deferred the question to Donna Stewart, the executive director
of the Office of Rate Review. It falls under her purview.
CHAIR COSTELLO said she would follow up with her.
3:02:20 PM
DAWN WARREN FRASIER, Member, Interior Alaska Hospital
Foundation, Delta Junction, Alaska, testified in support of SB
62. She said this small community has no hospital or emergency
services for a hundred miles in any direction. People from
surrounding communities pass through Delta Junction heading to
Fairbanks for emergency medical services. She described the
members of the Interior Alaska Hospital Foundation as regular
folks looking to improve health care options for their families,
friends, and neighbors. They have been able to open a pharmacy
and a community health clinic. The next phase is a critical
access hospital that could have up to 10 beds and a 24/7
emergency room. The foundation has raised some funds to proceed
but has discovered it needs a certificate of need to proceed.
This will cost close to $200 thousand. This requirement seems
silly given the circumstances in Delta Junction, she said.
3:04:45 PM
SENATOR GARDNER asked Ms. Brodie if the Department of Health and
Social Services (DHSS) will take a position on the bill.
MS. BRODIE said she didn't believe so.
3:05:24 PM
JOHN LEWIS, Vice President, Interior Alaska Hospital Foundation,
Delta Junction, Alaska, testified in support of SB 62. He
advised that he is a 14-year resident of Delta Junction and an
82-year-old senior. He opined that the community should not be
required to apply for a certificate of need because the closest
hospital is 100 miles. An immediate exemption from the
requirement is in order. The application is very costly, and
that money should instead be used for the project. He requested
the committee eliminate the bill.
3:07:11 PM
JOSHUA RUSSEL, representing self, Delta Junction, Alaska,
testified in support of SB 62. He recounted previous testimony
and observed that no one seems to want to get rid of the
roadblock to access emergency medical services for half of the
state. He related that he is a father of four, a disabled
veteran with health problems, and a certified emergency medical
technician (EMT). He pointed out that anyone who experiences a
medical emergency has a much better chance of survival if they
receive medical care within the first "golden" hour. Under ideal
conditions, the closest hospital for Delta residents is 90
minutes away. He listed the emergencies he has experienced as an
EMT in Delta and suggested that their chances of survival and
better quality of life would have increased if the proposed 10-
bed critical access hospital had been available. He said $200
thousand is a lot to spend on a certificate of need application,
particularly when there is no competition in the community. He
asked the committee to do the right thing and pass SB 62 from
committee. At the very least, exempt rural communities from the
certificate of need process.
3:11:28 PM
DAVID WALLACE, CEO, Mat-Su Regional Medical Center, Palmer,
Alaska, testified in opposition to the wholesale repeal of the
certificate of need. He said his opposition to SB 62 is for the
same reasons that his colleagues articulated. He highlighted Dr.
Zink's testimony for laying out the challenges the Palmer
hospital faces. He acknowledged the challenges that Delta
Junction residents face trying to get basic health care,
confirmed that the certificate of need could be improved, and
agreed with Ms. Hultberg that hospitals should be part of the
discussions to improve the CON statute and allow health care to
evolve in Alaska.
He referenced testimony from people living out-of-state and
offered his perspective that Alaska is different than any other
state, but that it could learn things about what has worked well
in other jurisdictions. He suggested that full repeal of the
certificate could have negative consequences. He cited a drill
for responding to mass casualties as an example of how the
hospital partners with the state to provide services. He listed
competing imaging and surgery centers in town that have either
worked around the CON law or used the $1.5 million
expansion/development provision, and reiterated support for
collaboration to improve the current law.
3:15:44 PM
MIKE POWERS, COO, Tanana Valley Clinic, and former CFO/CEO
Fairbanks Memorial Hospital, Fairbanks, Alaska, testified in
opposition to SB 62. He cited experience with a variety of
certificate of need approvals over the past 30 years. Most
important, he said, is the build out of responsive and effective
ER services. He related his experience with three mass
casualties that flooded the ER after hours. He also noted that a
number of CONs were not approved over the same timeframe. In
each instance the CON process was followed, and the community
was engaged. "There was rational, thoughtful health planning
deployed; there was high-quality, right-sized health capacity
created." He said he appreciates Delta Junction's desire for a
critical access facility and believes that Fairbanks would like
to see additional capacity in that location. However, it needs
to be done constructively or it won't provide the service that
can stand the 24/7 test of quality and consistency. Appropriate
planning [through the CON process] is imperative to ensure
"judicious, efficacious, quality service.He stated support for
amending CON regulations to improve health planning abilities
and encouraged the committee to seek Alaskan data on charity
care and who is providing the services.
3:19:21 PM
KARL GARBER, President, AgeNet, Juneau, Alaska, testified in
opposition to SB 62. He related that he is also the Executive
Director of Alzheimer's Resource of Alaska and was an
administrator of an Alaskan nursing home for 10 years. He
explained that AgeNet is a statewide association that provides
home and community-based services for seniors that typically
have nursing-home-level-of-care needs. It serves over 10,000
seniors annually, so they can remain at home as long as
possible. Preventing adverse events like falls, missed
medications, and missed meals from happening helps to prevent
high-cost hospitalizations and long-term nursing home stays.
He stated support for the continuation of certificate of need
for nursing homes because adding more isn't affordable right
now. He opined that the best use of scarce resources is to focus
on developing more home and community-based services. He
reported that AARP recently released a study showing that Alaska
ranks fifth in the U.S. for long-term services and support. In
part this is due to the certificate of need law that requires
identification of the need and the best use of state resources.
3:21:57 PM
CHAIR COSTELLO closed public testimony on SB 62.
SENATOR GARDNER said she would like to hear about the regulatory
changes the state might agree are appropriate.
CHAIR COSTELLO said she would reach out and request DHSS engage
in the process.
[SB 62 was held in committee.]
3:23:24 PM
There being no further business to come before the committee,
Chair Costello adjourned the meeting at 3:23 pm.