Legislature(2003 - 2004)
04/30/2004 01:35 PM Senate HES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
CSHB 511 (HES)am-CERTIFICATE OF NEED PROGRAM
CHAIR DYSON announced the next order of business to be CSHB
511(HES)am.
SARA NIELSON, staff to Representative Ralph Samuels, explained
that the bill modifies certain aspects of the Certificate of
Need statute to level the playing field.
She said the following would provide an overview of the changes:
The bill modifies the section of statute that allows
the relocation of an ambulatory surgical facility to
only one time as long as they still would otherwise
meet all the requirements of the original Certificate
of Need.
It also clarifies that a Certificate of Need would not
be needed in an emergency or a temporary case such an
earthquake or some kind of a disaster.
It also adds independent diagnostic testing facility
and residential psychiatric treatment center - would
make them go through the CON process if they fall
within the $1 million expenditure limit.
The bill also reduces the amount of time the
department has to review the application from 90 to 60
days.
On the House floor a letter of intent was adopted to
address the Certificate of Need process by asking that
a task force be assembled to go over the entire
process.
JANET CLARKE, Department of Health & Social Services
representative, identified herself and stated:
I am here to testify in support of HB 511 - Relating
to certificates of need (CON). Certificate of need is
a health planning process that reviews health facility
construction projects that cost over $1 million
dollars to determine whether there is a need for the
project.
This particular bill does not do away with CON; it
keeps the underpinnings of the statute in place. There
are nine sections in the bill and I'll quickly go over
a sectional review.
As Sara stated, Section 1 corrects an inequity for
ambulatory surgery centers related to relocation and
whether a CON is needed for relocation.
Section 2 has two parts. It basically limits the
relocation outlined in the first Section to one time.
It also amends the statute to include equipment that
is purchased through a lease provision that for CON
purposed, the net present value of the lease space or
equipment is used to calculate the cost. Currently, if
you purchase equipment that costs over $1 million, you
go through the CON program. If you lease it, you do
not. This would put those two purchase processes on
the same level playing field.
Section 3 amends the provision for emergency or
temporary CON that's currently in the bill.
Section 4 would add "residential psychiatric treatment
centers" to fall within CON review. The department is
particularly interested in this provision. As you
know, Medicaid is a primary payer for residential
psychiatric treatment centers (RPTC). We have several
we're paying for. We're paying for children in out-of-
state placement. At any one time there's over 500
children who are in these out-of-state residential
psychiatric treatment centers. We have a program to
bring these kids home to Alaska. We want to make sure
that as we built these RPTCs in Alaska that it's done
in a very thoughtful, planned process and that we do
them close to hub communities in Alaska because these
kids do better when they're closer to home. So we
believe that the CON program is the best mechanism to
look at this planning process for RPTCs.
Section 5 adds a new section in law relating to time
standards for review by the department. It shortens
the time period that the department has to review CONs
from 90 to 60 days internally.
Section 6 amends the definition of health care
facilities to include independent diagnostic testing
facilities as well as residential psychiatric
treatment centers.
Section 7 goes along with Section 6. It adds the
definition for what a residential psychiatric
treatment center is.
Section 8 deals with the applicability issues of when
this law is applicable to what.
Section 9 is the effective date clause of the
legislation.
CHAIR DYSON said he appreciates the problem they're trying to
solve in Fairbanks, but he didn't understand why an empty
building should have a CON grandfathered in.
MS CLARKE pointed to Section 1 and said a few years ago the
Legislature added language that was confusing and that is the
language that would be deleted. She reminded members that CON
covers capital construction and services. HB 511 gets rid of the
provision where someone could construct a new ambulatory
surgical center and take their certificate of need with them.
That provision is counter to CON because it's actually a capital
construction review that looks at whether you're spending $1
million on construction or adding a new service.
CHAIR DYSON asked Ms. Nielson to further clarify.
MS. NIELSON reported that according to Legislative Legal
Services, the language in Section 2 makes the last sentence in
Section 1 (c) unnecessary, which is why it would be deleted.
"Basically, you can't have a building - you can't have one
person - have their services in one building and have the
certificate of need and then move over to another one. And then
that building that was left, they still have to go through the
certificate of need process if somebody else wants to move in
there - assuming that those people didn't already have a
certificate of need and are exercising their one time
relocation."
CHAIR DYSON admitted that his blood pressure rises when he
thinks about the issue. Furthermore, he said he's more confused
because Ms. Clarke says this is just for construction and then
the bill says it's okay to relocate. In addition to that, he
heard it's also for the present worth value of leased equipment,
which isn't construction either. Section 1 simply gets rid of
the restrictive and stupid language, but then in Section 2 "you
only eliminate stupid once and if we'd ever done anything else
stupid like this, in law, that we can only [make a] fix once."
MS. NIELSON agreed that the final sentence in Section 1 (c)
wasn't needed. The first part of Section 1, subsection (c) says
a business may relocate an ambulatory surgical facility once
without obtaining a certificate of need as long as bed capacity
and the number of categories of health services remain
unchanged. Any subsequent business or person moving into the
site is no longer addressed, which is what the sponsor intended.
CHAIR DYSON opined it all has to do with capacity and a person
should be able to move from site to site without jumping through
hoops as long as capacity isn't changed.
SENATOR GUESS questioned why the language they propose removing
is problematic except that it is redundant. "You can't use that
site unless you get a certificate of need because they want to
see, 'Is there the capacity for that site to go back up how it
used to be?' so if you take this out, and someone moves from one
site to the other and someone wants to use that previous site,
they should have to go through the certificate of need to ensure
that we're not overcapacity."
MS. NIELSON agreed that the language is redundant and that's why
they propose removing it.
MS. CLARKE said it is a confusing section of law, but she needed
to clarify her previous statement. Although she was focusing on
the construction aspect, certificate of need applies to the
expenditure of $1 million or more for construction, renovation
or the purchase of new equipment.
2:55 pm
CHAIR DYSON asked her to show the committee how, "with the help
of government intervention, we've gotten into this bizarre
situation where having more than adequate capacity drives prices
up and how choices by consumers can drive prices up and then
specifically this section here about mental health and how after
31 days or 30 days, government has to pay and how having choices
there can drive costs up."
MS. CLARKE replied health care isn't as clean cut as other
market forces that we're used to because the decision to go to
one place or another for a particular procedure is divorced from
the economics of that decision. "We might make that decision
related to where our doctor refers us based on the proximity to
a hospital," she said. Furthermore:
As government, and government plays a big part in the
economics of the health care industry in Alaska
whether it's Medicaid or Medicare - we're a big player
in that so we, particularly for certain parts of the
health care system, as the primary payer - you are -
the Legislature appropriates - particularly for long
term care, nursing homes, for mental health services -
we are the primary payers so we have an interest in
looking at this regulation to make sure that it's done
in such a way that the primary payer is not stiffed
with the bill in the end because the individual
decision is not based on economics of the decision.
CHAIR DYSON said that after his discussion with the
commissioner, he understands that if there are several
providers, there's nothing keeping a patient whose costs are
paid by Medicare from selecting the very highest cost treatment
as long as the provider hasn't been disqualified for some
reason.
MS. CLARKE replied there is a mandatory freedom of choice in
both the Medicare and Medicaid programs.
CHAIR DYSON continued to say that he also understands that when
someone is in a mental health residential program for more than
30 or 31 days then Medicaid picks up the entire cost for the
rest of the time the person is in the program. He wasn't clear
whether both adults and children were included or just children.
MS. CLARKE replied she'd have to check on that then clarified
that this is about children and adolescents and just as with any
insurance program, there are certain standards for when
insurance coverage would apply. For an acute care setting, which
is psychiatric hospital treatment, she thought 30 days was the
industry standard. After that, if no placement is available for
the child then the general fund would likely have to cover 100
percent of the cost because Medicaid might decertify them.
CHAIR DYSON asked what decertify means.
MS. CLARKE explained that being decertified means that the 30
days is up and the child typically no longer needs the
psychiatric hospital treatment, but they do need a continuum of
care from mental health facilities. Through careful planning
they are trying to ensure that there is in-home care, outpatient
care, group homes, and residential psychiatric treatment centers
so that the psychiatric hospital isn't the only alternative.
CHAIR DYSON asked if she said that decertify means going from
acute hospital care to a lesser level of care.
MS. CLARKE said decertification means the insurance program
won't pay any more.
SENATOR GUESS referred to Section 1 and asked whether she could
continue operating an original facility without going through a
new CON process if she had also constructed a new facility and
was running it using the original certificate of need.
MS. CLARKE said she thought the answer was yes, one time, but
she would need to verify that. She then asked whether the
language didn't refer to a sale.
SENATOR GUESS said the language doesn't refer to a sale; it
refers to moving. Furthermore, she said it seems that there
could be over capacity if that were allowed.
MS. CLARKE read the existing law that says, "as long as neither
the bed capacity nor the number of categories of health services
provided at the new site is greater."
SENATOR GUESS agreed the new site couldn't have greater
capacity, but she wondered whether she couldn't run both sites
using just the one CON.
CHAIR DYSON opined that you couldn't do that because that would
increase the capacity set in the original CON process.
SENATOR GUESS asked whether the CON controls the capacity.
CHAIR DYSON explained it's like a government license to provide
X amount of service.
CHAIR DYSON announced that he wanted to use the balance of the
time to take public testimony from anyone that wouldn't be
available on Monday.
JOHN WILLIAMS, Mayor of the City of Kenai, testified via
teleconference to say that they are interested because there are
several groups that would like to build a psychiatric facility
for children in Kenai. They applaud Senator Green's work to
bring children home and place them in care units in the state.
Most recently the city has been involved with two capable
companies each of which would like to build a 30-bed unit in
Kenai. Both companies have expended considerable time and money
to get started this year, but he sees many issues in the bill
that would prolong and delay the process.
Pointing to the DHSS fiscal note dated 3/24/04 and prepared by
Sherry Hill he noted it says that 728 children between the ages
of 7 and 19 were served in FY 02 and that it's conceivable that
up to 150 new RPTC beds could be built in Alaska. The 60 beds
that might be built in Kenai would just scratch the surface of
need for these types of facilities and he said he could see no
reason to delay by tying the companies down with a great deal
more paperwork.
In conclusion he said the City of Kenai recommends placing the
effective date of the bill as of January 1, 2005 rather than
making it effective immediately. Doing so would allow the two
companies working in Kenai to begin building the facilities
immediately. He added that he understands there might be 30 to
60 other beds that are in the planning stage that might also be
expedited if the effective date were to be changed. This too is
beneficial to the state since DHSS recognizes an immediate need
for 150 beds.
PAUL FUHS, Alaska Open Imaging representative, said he'd like to
frame some of the issues the first of which is why the bill is
so confusing. The reason, he said, is because it's a bill that's
designed to address a specific lawsuit.
Another point is that this is an effort to restrict what people
can do. For the government to tell you whether or not you can go
into business is the most extreme action that a government can
take, he said, so there'd better be solid justification for
doing that.
He continued to say:
Mr. Chairman, you hit the nail on the head when you
asked, 'Show us where the cost savings are going to
be.' Because what's actually happened is when these
independent testing facilities have resulted in lower
prices - up to 30 percent lower. So then you get into
the argument - well it's not really cost control. Now
it's over to we want a level playing field. And the
hospitals - we need to overcharge on imaging because
we're making up for something else. And in all the
hearings that were held, no one came forward and
showed their economics to show why they needed this.
They didn't come and show why when we went through
this - one hospital, Providence, they made $13.4
million in revenues over expenses last year. So why do
they need that protection and what happened to that
money? And then you get into the smaller hospitals and
they say well it's to protect the smaller hospitals,
but the smaller hospitals themselves said that new
imaging would not develop in small communities where
there are low patient volumes, but only in the largest
markets of Anchorage, Fairbanks, Wasilla, Kenai and
Juneau. So it's not the small hospital. That is a
completely empty argument that the department itself
dismisses. It's really the big hospitals trying to
limit competition. That's what it comes down to.
Although some of these are listed as non-profits, I
pulled off of Moody's or Dun and Bradstreet, some of
the financials on some of these corporations.
Providence - $3.5 billion in revenues last year. This
isn't some mom and pop non-profit. They're also
showing profits of $58 million a year - 38 percent
increase over the previous year. Triad hospitals in
the valley - a $3.8 billion corporation - they're in
the Fortune 500. That's who's managing that. Banner
Corporation for Fairbanks Memorial - $2.1 billion
corporation - a private non-profit corporation. So
before you believe the idea that these are poverty-
stricken operations that need government protection, I
hope that you'll take a look at some of these
financials and maybe some other information will be
brought out.
The other thing I want to mention - you can level the
playing field two ways. You can either increase
government regulation or you could decrease it and
that's what we offered on the House side. We said well
let's relieve the hospitals of this too especially for
imaging. This technology driven sector - it's not a
bed - you want the best technology available. But when
that was offered, it was not even allowed to go to
second reading on the House floor to even have the
amendment considered. So that's how strong it's been
to even try to restrict the discussion on this.
I hope your committee will look into all these issues.
I think you'll hear a lot of testimony and hopefully
we'll have a much clearer discussion on the issues
than occurred in the other body.
TAPE 04-26, SIDE A
3:05 pm
SENATOR GUESS said she looked forward to a discussion with his
client about policies for the uninsured and the underinsured and
whether anyone from those populations gets served in these
facilities. She then remarked that government does get involved
with natural monopolies in situations such as this so it's an
overstatement to say that there isn't a government role in this
type of market. Whether it's appropriate or not is a separate
question.
MR. FUHS reiterated if you restrict people's private activities
then you must have strong justification.
CHAIR DYSON referenced the goal of bringing children with
psychiatric needs home to Alaska and asked Ms. Clarke how long
it would take the two companies already working on the peninsula
to go through the CON process.
MS. CLARKE explained that they would first submit a letter of
intent so that DHSS would send them an application.
CHAIR DYSON asked whether there was a review and culling process
when the letter of intent is filed.
MS. CLARKE said that when the letter of intent is received then
DHSS sends a letter back affirming or denying eligibility.
CHAIR DYSON asked how long that would take.
MS. CLARKE pointed to an example that took one day. The next
step is for the company to submit a CON application for which
DHSS provides some technical assistance. In the example
referenced above, it took two months for the company to complete
the application. At that point, DHSS goes through a process of
declaring the application complete. That took several days in
the example, but could take longer if the application was more
extensive. Once the application is complete there is a noticed
public hearing and in the example used that took about four
weeks. After the public meeting the information is reviewed,
which took four to five weeks in the example. Finally, the
information is submitted to the commissioner's office for a
decision.
According to current statute, 90 days is allowed for the entire
process once an applicant submits a CON. This legislation would
shorten the process to 60 days.
CHAIR DYSON asked if that was from the time the letter of intent
is received to when a decision is issued.
MS. CLARKE clarified it's from when the completed CON
application is received to the decision. She then added that
there is a 30 day comment period included within that time
period.
SENATOR GREEN asked whether the commissioner would issue a
decision within that time.
MS. CLARKE said no, the 90 day period is the time up until the
commissioner receives the information. The commissioner does not
have a time period within which to make a decision and that time
period varies from a day or two up to several months.
CHAIR DYSON asked how to avoid changing the rules in the middle
of the game for the two companies already working in Kenai.
MS. CLARKE said that discussions related to the effective date
came up in the House and she had information in her office to
further that discussion and would bring it to the hearing on
Monday. With regard to Mayor William's testimony she said the
department is interested in having the residential psychiatric
treatment centers covered by CONs so they can be located in many
communities so the residents are able to be close to their
support groups.
CHAIR DYSON asked if is true that the companies would still have
to go through a licensing process before they could receive
children that are either in state custody or in state supported
treatment programs in other states.
MS. CLARKE told him that is correct.
CHAIR DYSON questioned how long the licensing process takes.
MS. CLARKE said she would have to get back with that
information.
CHAIR DYSON pressed for an estimate.
MS. CLARKE said she didn't have an answer.
CHAIR DYSON posited it was months, but he would enjoy receiving
that information at the next hearing. He then asked if DHSS
could combine the licensing and CON processes and announce that
they would only license so many beds within a single region.
MS. CLARKE responded she would have to speak with the licensing
staff.
CHAIR DYSON observed that even someone that was successful in
the CON process would still have to go through the licensing
process.
MS. CLARKE agreed then clarified that the licensing process
looks at different things such as health and safety and the
facility.
CHAIR DYSON continued to say, "In your efforts to provide
facilities where they're needed, in the government's opinion,
you can only restrict people you can't make anything happen in a
new place."
MS. CLARKE told him they are working very hard to encourage
private providers and others to look at a number of facilities
across the state. "The government is doing what it can."
CHAIR DYSON remarked that the answer is still yes.
SENATOR GREEN asked how much longer the meeting would last.
CHAIR DYSON said he'd like to wrap up in five minutes, but he
wanted the committee to make it clear what additional
information they want and what they're struggling with. If any
members were thinking about offering amendments then he would
like them to let people know so they could be prepared on
Monday.
SENATOR GREEN said she would like to review when the $1 million
cap was set.
MS. CLARKE advised that the original CON threshold was $150,000
and that was changed to $1 million in the mid 1980s
SENATOR GREEN said she though the equivalency today was $2.5 or
$2.75 million so if the intent is the same then it's probably
still reliable for most construction. Some new equipment costs
have gone down though so that might be an issue worth talking
about. She then asked about the timeline and asked at what point
the department releases the information publicly.
MS. CLARKE said she thought it was when the review is complete,
but she would get back with the information. There is an
opportunity to publicly notice that someone has applied and this
has been important in the past because there have been
situations in which there were competing applications.
SENATOR GREEN said, "I think it's very inappropriate that there
is any disclosure of information about a CON application until
the application is deemed complete. And I do not think that
information should be posted, that information should not come
from the department that should be a confidential arrangement."
CHAIR DYSON asked whether she wanted to add language to the
bill.
SENATOR GREEN replied that with regard to amending she had a
question because when they last reviewed the CON there were
regulations that were at odds with current statutes. She
questioned whether the regulations had been cleaned up.
MS. CLARKE replied there were attempts to clean them up, but it
wasn't done.
SENATOR GREEN suggested that the committee draft a letter of
intent saying the regulations must comport to current statute
because they are woefully out of date and very misleading. She
announced that she would like the certificate of need director
to attend the next meeting. She then asked what the difference
is between an approved adolescent treatment bed and a
residential psychiatric treatment bed subject to the CON.
MS. CLARKE replied she was referring to the acute care bed,
which is a hospital psychiatric bed. Hospitals and psychiatric
hospitals are covered by CONs. Residential treatment centers are
not acute hospital care and they are not currently covered by
CONs.
SENATOR GREEN said she misunderstood and thought there was a
current process for approving psychiatric treatment beds, but
now she understands that she was talking about acute beds in a
hospital setting.
MS. CLARKE said yes.
SENATOR GREEN asked what other acute psychiatric beds for
adolescents are provided in Alaska.
MS. CLARKE replied she could get that information.
CHAIR DYSON asked Ms. Clarke to provide some discussion as to
why the department can't say they would only license X number of
beds in a community that they would pay for through Medicaid,
Medicare, or general fund.
He announced he would hold the bill in committee for further
discussion on Monday.
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