Legislature(2003 - 2004)
03/29/2004 03:19 PM House FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 511
An Act relating to the certificate of need program for
health care facilities; and providing for an effective
date.
REPRESENTATIVE RALPH SAMUELS explained that HB 511 has two
goals. The first part of the bill is the language on page 2,
line 4, "'expenditure' includes the net present value of a
lease for space occupied by or the equipment required for a
health care facility." He explained that the Certificate of
Need (CON) applicant would have had to spend a million
dollars before entering the system, but now "expenditure"
includes the leased space or the leased equipment. The
facility would form a holding company and lease the space
and equipment. The goal of this bill is to make the CON fair
to all players, and he noted that it doesn't change the CON.
TAPE HFC 04 - 70, Side B
Representative Samuels continued, explaining that part 2 of
the bill requires that residential psychiatric treatment
homes, which will increase and drive the Medicaid budget, be
put into the CON process. He pointed out the zero fiscal
note.
BRIAN SLOCUM, ADMINISTRATOR, TANANA VALLEY CLINIC, VIA
TELECONFERENCE, FAIRBANKS, stated that he opposes the bill.
He explained that United Bank documented that there are not
sufficient healthcare services in Fairbanks to meet the
needs of the citizens. The study revealed over the past 1-
1/2 years a consistent one-to-two week backlog in scheduling
non-emergency cases for MRIs, CTs, and ultrasounds. Nearly
80% of the patients couldn't get their tests done because
there weren't enough services available. He thought that
passage of HB 511 would prevent companies from attempting to
fill community health care needs. The quantity of healthcare
services would decrease and lead a monopoly provider to
ignore growing community needs.
JANET CLARKE, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES,
DEPARTMENT OF HEALTH AND SOCIAL SERVICES, stated that the
Department supports HB 511, which strikes the right balance
of technical corrections as well as making the program work
better. She explained that in its pure form, the Certificate
of Need program is a health planning function. It provides
a mechanism for health facilities to go through a public
planning process that requires hearings and public
testimony.
Ms. Clarke gave a brief sectional review. Section 1 is a
technical correction that changes the requirements for
ambulatory surgery centers so that space vacated by a center
could continue to operate without going through a CON
process. Current law presents a hardship for these centers,
which this bill would correct.
Ms. Clarke explained that Section 2 does two things: it
limits the relocation of a healthcare facility without
having a CON to one time, and it also closes a loophole in
the CON. Currently if a healthcare facility spends $1
million for construction or purchase of a large piece of
equipment, it is required to go through CON, whereas if the
facility leases the same equipment and pays over time, it is
not required. The facility would have to do net present
value, and it evens the playing field.
Ms. Clarke explained that the Department is most interested
in Section 3. Section 3 would add residential psychiatric
treatment centers to CON review. The Legislature asked the
Department to do cost containment initiatives in its budget
development. Residential psychiatric treatment centers have
grown from $5 million in FY 1998 to an expected $43 million
in 2003. The Department spends Medicaid money for most of
these facilities that are out-of-state. The DHSS is
beginning an initiative to bring many of the children in
these facilities back to Alaska. Ms. Clarke explained that
the plan has three components: a gate-keeping mechanism,
planned growth (which the CON would facilitate), and
ensuring that the Alaska treatment centers be built in
various locations rather than one large facility in an urban
center.
Ms. Clarke noted that Section 4 basically changes the
definition and adds residential psychiatric treatment
centers and independent diagnostic testing facilities to the
definition of a healthcare facility. Section 5 adds a new
paragraph defining a residential psychiatric treatment
center. She concluded that HB 511 adds a tool to help the
Department control the growth of the Medicaid budget, and it
addresses needed technical changes and current loopholes in
the law.
Representative Croft asked why a gatekeeper would be needed,
and questioned slowing the process of bringing kids home.
Ms. Clarke clarified that a gatekeeper is a mechanism to
decide the best course of treatment for the individual
child. She said that treatment might include placement in
the community, with wraparound intensive services, rather
than a high-cost residential placement.
Representative Croft wondered if the Department also wants
the CON as a gatekeeper for more facilities to open, with
input on locations and timing. Ms. Clarke affirmed, saying
that the Department would prefer planning that involves
local communities, and Native health corporations in order
to gain 100% federal Indian Health Service funding, rather
than having the General Fund pick up the cost.
Representative Croft asked if there are enough people to
fill the beds. Ms. Clarke replied that there are over 700
kids, many out of state, with severe emotional problems.
Parents or guardians have placed the children, and 75% are
kids not in state custody but the Department pays the
Medicaid bill for them.
Representative Croft had heard arguments in defense of CON
that the state doesn't want facilities half full or
expensive medical equipment half used. He had expected Ms.
Clarke to express that the Department doesn't want the
increased cost to the system of several psychiatric
treatment facilities that are not filled and he asked for
clarification. Ms. Clarke replied that the State is the
primary payer for nursing homes' long-term care and
psychiatric services. The Department would pay for
overcapacity of psychiatric treatment centers, but it wants
to ensure that it builds the service array for the least
restrictive and closest to home environment to treat the
children. The residential psychiatric treatment costs are
about $300 per day in Alaska, and in-patient psychiatric
services are about $700 per day.
LAURIE HERMAN, DIRECTOR OF GOVERNMENT AFFAIRS, PROVIDENCE
HOSPITAL, VIA TELECONFERENCE, ANCHORAGE, expressed support
for HB 511, and spoke to the part of the bill that addresses
leases. She explained that when a provider leases equipment,
the $1 million threshold requiring a CON is often not
reached. The entire CON process is avoided, creating a
significant loophole in statute prohibiting the state from
performing a vital service. If the CON process is avoided,
the State is unaware of the additional services being
provided and it cannot assess the impact to the community or
the state. Leasing is now being used to avoid the CON, and
she stated that the lease exemption might lead to a
corrosion of Alaska's healthcare system by undermining the
Department's efforts to control costs and improve quality
for all communities. Passage of HB 511 would serve to level
the playing field, and she encouraged the committee's
support.
ROB GOULD, ASSISTANT ADMINISTRATOR FOR FINANCE AND
OPERATIONS, FAIRBANKS MEMORIAL HOSPITAL, spoke in support of
HB 511. He stated that it strengthens the current CON
statute and levels the playing field. Current regulations
help to hold down costs by minimizing excess capacity and
redundancy. Mr. Gould discussed how the bill closes two
significant loopholes in the regulations by including
imaging centers and rental equipment.
ROD BETIT, PRESIDENT, ALASKA STATE HOSPITAL & NURSING HOME
ASSOCIATION, referred to his letter (copy on file.) and
stated that the organization members are in support of HB
511 with its technical improvements. He expressed that the
CON is a good tool and it does not keep people out of the
marketplace. The Department reviews the CON application in
an unbiased way and if compelling information is given, the
proposal moves forward. The Association is asking for the
review standard to be applied to everyone equally, which
this bill would accomplish.
SAM KORSMO, ALASKA OPEN IMAGING CENTER, WASILLA, read from
prepared testimony as follows:
Good Afternoon Mr. Chairman and members of the Committee.
I am Sam Korsmo, a partner in Alaska Open Imaging Center in
Wasilla, Alaska. We provide diagnostic imaging and
professional reading services to Alaskans. I am here to
provide you with information that hopefully cause you to
seek additional information of the effects of this bill on
Alaskans and on your long term budget considerations before
you move it out of this Committee. I believe that if you
consider all the ramifications of this new and unwarranted
intrusion of government into the private sector provision of
critical medical services to Alaskans you will see why you
should not move this bill from Committee or why you should
amend the bill to remove independent diagnostic testing
facilities (IDTF's) from the bill.
In the first case, the department has not provided you with
any information showing how certificate of need has resulted
in any cost savings for patients or the state in their
existing jurisdiction over medical facilities. Accordingly.
there is no justification for expanding their bureaucratic
control over other facilities such as IDTF's.
I believe it is a legitimate concern that this bill is a
move to restrain trade and competition by the major
hospitals in Alaska. The bill's sponsor said as much in a
television interview which I have recorded on this CD. This
is similar to the legislation you see each year in which the
telecommunications companies try to use government laws and
regulations to seek a competitive advantage over each other.
When this happens, it is the consumer that is always hurt.
In our own facilities, our prices are regularly 25 to 30%
lower than those provided by the largest hospitals in
Alaska, our business model is predicated on a global billing
method which saves money. Our services are also better in
that we use an open imaging technology, we can accommodate
larger patients so they do not have to be shipped outside,
saving them money. These cost savings have ramifications for
your budgeting process in that the higher costs of medical
care for Medicaid patients are paid for by general fund
dollars. I am aware of the struggle you have had in meeting
these increased Medicaid costs. The department should be
required to provide with an estimate of the impact this bill
will have on future Medicaid payment by the State of Alaska.
The Department claims in its fiscal note that vastly
expanding the certificate of need program as proposed in
this bill will not cost the department any more money. To do
a real analysis of whether new services are required and
what impact they will have on quality of outcomes and costs
would require substantial analysis. If it is just to be done
on a cursory level, it confirms out worst fears that this
could be a politically driven process, which I am sure all
of you would agree would lead to bad outcomes. If they have
the time to do these analyses, which I seriously doubt, you
have to ask yourself what they are supposed to be doing in
their current jobs. [End of Mr. Korsmo's testimony]
Representative Croft asked if the bill would affect Mr.
Korsmo's current facility by revoking its license. Mr.
Korsmo replied that the bill would require a CON on the
replacement of equipment. He asserted that there is no level
playing field.
HB 511 was heard and HELD in Committee for further
consideration.
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