HB 316-WORKERS' COMPENSATION MEDICAL FEES  3:29:11 PM CHAIR OLSON announced that the first order of business would be HOUSE BILL NO. 316, "An Act relating to workers' compensation fees for medical treatment and services; relating to workers' compensation regulations; and providing for an effective date." 3:29:51 PM REPRESENTATIVE CHENAULT moved to adopt the proposed committee substitute (CS) for HB 316, labeled 28-LS1362\O, Wallace, 3/10/14, as the working document. CHAIR OLSON objected for the purpose of discussion. 3:30:17 PM ANNA LATHAM, Staff, Representative Kurt Olson, Alaska State Legislature, explained the changes in proposed committee substitute (CS) for HB 316, Version O. She related that the CS contains two new subsections pertaining to the duties of the Medical Services Review Committee (MSRC). She referred to page 2, lines 24-26, Section 2, which explicitly requires the Workers' Compensation Board (WCB) to request and consider recommendations from the MSRC on setting conversion factors and rates. Additionally, language on page 2, lines 27-29, requires the WCB to consult with the MSRC before evaluating or revising conversation factors for the fee schedules. 3:30:40 PM MS. LATHAM explained that there was some opposition to the [Workers' Compensation Board] setting conversion factors, including raising questions about the WCB's expertise in setting the medical schedules. The MSRC is already defined under AS 23.30.095 in the original bill. However, the MSRC has not met since 2009. The intent of this change is to make it extremely clear in statute that the MSRC will advise the Workers' Compensation Board (WCB) on setting the rates. MS. LATHAM referred to page 3, line 17, subsection (n), which provides an exemption for critical access hospitals. There are 13 federally designated critical access hospitals in Alaska certified under Medicare conditions of participation. Typically, these small hospitals are under 25 beds, are located in rural areas, and patients have a 96-hour average stay or less. For examples, critical access hospitals are in Cordova, Valdez, and Kodiak, and these facilities represent a separate provider type with their own Medicare conditions of payment as well as a separate payment method. The critical access hospital certification allows these hospitals to receive cost-based reimbursements for Medicare instead of the standard fixed-based rates. Page 3, line 21, subsection (o) adds language for geographical area differential, which was inadvertently omitted in the original bill. The sponsor felt it was imperative in Alaska for the board to have the option of using the geographical adjustment factor. She noted that the language is "may" rather than "shall," so the board will have flexibility to determine whether to use this option. She referred to page 3, line 24, Section 3, relating references AS 44.62.245, under which future amended document or reference material, as listed can be incorporated by reference in future regulations. 3:33:24 PM MS. LATHAM pointed out that the sunset provision in the original bill [Section 5] was removed. The language was originally envisioned as a safety net to give the board four years to set rates, conduct an audit, and require legislative action to extend the new fee schedules; however, substantial public opposition occurred, such that providers and insurers testified against it, noting it would be difficult for future planning. CHAIR OLSON interjected that the sunset provision is the only provision that brought all the stakeholders together. No one liked the sunset provision except for the sponsor, so it's gone. 3:34:19 PM MS. LATHAM concluded her testimony by outlining the effective dates. She referred to page 4, lines 15-17, to the effective date language. With the sunset provision removed, new fee schedules and conversation factors will be effective on January 2015; and proposed Section 5, would make subsections (h) and (i) effective on July 1, 2014. Thus, the board has an opportunity to begin its review to set fee schedules on July 1, 2014, and the fee schedules and conversion factors would be effective on January 1, 2015. 3:36:33 PM MICHAEL MONAGLE, Director, Central Office, Division of Workers' Compensation, Department of Labor & Workforce Development (DLWD), introduced himself. 3:37:07 PM REPRESENTATIVE JOSEPHSON asked whether the [WCB] with advice from the MSRC would set this conversion rate. MR. MONAGLE answered yes. 3:37:29 PM REPRESENTATIVE JOSEPHSON asked for more information on the WCB. MR. MONAGLE answered that the board is actually the Workers' Compensation Board. He acknowledged it has an advisory role, but most importantly under the statutes it provides that the department may not adopt a regulation unless the regulations are approved by the WCB. Thus, the WCB has authority under the statutes to be the final voice for any regulations that the department proposes. The WCB is comprised of 18 members; 9 representing labor, 9 representing industry, and all 18 members are appointed by the governor. 3:38:23 PM REPRESENTATIVE JOSEPHSON asked whether the nine labor members are required to have any specific background before they can be nominated for confirmation by the governor. He further asked what identifies these appointees as being associated with labor. MR. MONAGLE answered that the Office of the Governor, Boards and Commissions makes the selection process. He commented that the division rarely is consulted, unless it relates to the knowledge or activity of potential board members. He offered his belief that the people who serve on the WCB are typically involved in a labor union with representation from most of the larger labor organizations in the state. CHAIR OLSON remarked that the committee has been responsible for the language in HB 316, and it was a unanimous decision by all members to put forth the resolution which led to a good portion of the bill, including labor, medical insurance, and lay people. 3:40:00 PM REPRESENTATIVE JOSEPHSON recalled earlier testimony from a previous committee hearing that indicated that there needs to be an effort to control treatment. He asked how the committee will know that this reform doesn't go too far and that rates will not be set in a way that undermines the capacity of an injured worker to obtain the treatment he/she needs. MR. MONAGLE agreed it is a balancing act that the MSRC and the WCB are challenged to achieve, which is to set the conversion factors at a level that appropriately awards doctors but not so low as to cause providers to elect not to treat injured workers. He offered his belief that a broad range of data exists that suggests some specialties - as provided in members' packets as price comparisons - that some allowable reimbursement rates are 400-500 percent higher than in regional states such as Washington, Oregon, and Idaho. He said he can't speak for either the MSRC or the WCB, but those would be areas these entities would be focused on when determining the appropriate conversion factors. Additionally, rates for other treatment such as evaluation and management, office physician, physical medicine, physical therapist, and chiropractor are more reasonable, although they are higher than regional costs, but don't represent 400 percent higher costs. He further said that one of the values of the conversion factors is the MCRC and WCB can customize them for each specialty and "it's not going to be one size fits all." 3:42:30 PM REPRESENTATIVE JOSEPHSON asked whether the bill should spell out and define the goal of a conversion factor so those involved in setting the factor know the policy they are trying to implement. MR. MONAGLE answered that he certainly would leave that policy decision to the committee. He said he thought there was some public testimony - both written and in person last week to that effect. 3:43:18 PM LUKE HOPKINS, Mayor, Fairbanks North Star Borough (FNSB), testified in support of HB 316. He said the FNSB and the FNSB school district workers' compensation plans are self-funded programs. The FNSB spends approximately $1.1 million per year on workers' compensation benefits. The FNSB continues to see medical costs increasing. The regulation of fees and charges for medical treatment, equipment, and drugs could reduce the overall workers' compensation costs. The FNSB doesn't have any ability to steer the workers' compensation related injuries to the PPOs network, where certain services are provided. In most circumstances the FNSB is paying the additional costs for these claims more than if they were non-work related injuries covered under the self-funded plan. He said that allowing the board to adopt a fee schedule based on quantified data, based upon federal Centers for Medicare and Medicaid service scales, is a positive change and would provide the needed reform to address the highest workers' compensation costs in Alaska. The FNSB and the FNSB assembly fully support HB 316. The FNSB assembly adopted a resolution on February 13, 2014. He thanked members for the opportunity to express the FNSB's concerns. 3:45:05 PM MARIANNE E. BURKE said she is representing herself. She stated there are some problems with the workers' compensation system with respect to the value for the single person. CHAIR OLSON informed Ms. Burke that the bill she is referring to is not currently the bill before the committee [so he would not take her testimony at this time.] [HB 316 was held over.]