Legislature(2021 - 2022)BELTZ 105 (TSBldg)
04/23/2021 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| SB26 | |
| SB17 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 17 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 26 | TELECONFERENCED | |
SB 26-REPEAL CERTIFICATE OF NEED PROGRAM
1:31:09 PM
CHAIR COSTELLO announced the consideration of SENATE BILL NO. 17
"An Act relating to the retrofitting of certain public
facilities and community facilities; relating to the performance
of energy audits on schools and community facilities; relating
to the duties of the Alaska Energy Authority and the Alaska
Housing Finance Corporation; creating a rapid economic recovery
office in the Alaska Industrial Development and Export
Authority; and relating to the state energy policy and energy
source reporting by state agencies."
1:31:52 PM
CHAIR COSTELLO opened public testimony on SB 26.
1:32:19 PM
JAIMIE CAVANAUGH, Attorney, Institute for Justice, Detroit,
Michigan, stated that the Institute is a national nonprofit
public interest law firm that for decades has worked to end CON
laws through litigation and legislation. She shared the stories
of two clients. The first was a man from Nepal who opened a CPA
practice in Louisville, Kentucky. He noticed that there were no
home healthcare services for Nepali speakers and decided to open
an agency himself. When he filed his CON application, a large
incumbent intervened and successfully argued that there was no
need for an additional home healthcare agency. He was unable to
get a CON certificate. The second story is about an
ophthalmologist from North Carolina who wanted to perform
surgery out of the facility he owned. The cost of surgery at
that doctor's office was under $1,800 whereas the local hospital
charges a $6,000 facility fee plus the cost of the surgery. Yet
the state of North Carolina said there was no need for an
additional surgery center so the doctor's patients pay the
higher hospital prices.
MS. CAVANAUGH said the foregoing examples highlight how CON laws
harm patients and empower incumbent CON holders. She suggested
that instead of stacking the deck against new business, Alaska
should welcome new healthcare providers. She asked the committee
to support SB 26.
1:35:07 PM
ANGELA ERICKSON, Strategic Research Director, Pacific Legal
Foundation, Lexington, Kentucky, stated that this public
interest law firm has a strong history of opposing and helping
to strike down CON laws across the country. She referenced
testimony during the last hearing from a government official who
challenged the notion of Alaska potentially having an additional
12 hospitals [if the state repealed its CON laws]. She argued
from a central planning standpoint and wanted all current
hospitals to figure out the cost.
MS. ERICKSON provided an example of what might happen in the
absence of CON laws. In 2017, somebody saw a used ambulance and
decided to launch Legacy Medical Transport in Ohio. This non-
emergency ambulance transports people to and from doctor
appointments and facilities. Within two years, the enterprise
grew to seven ambulances. Because the office is just a mile from
the Kentucky state line, the business gets many requests to take
Ohioans to appointments in Kentucky. However, Kentucky is a CON
state and the company cannot operate there without a CON
certificate. When the owner applied for a certificate,
incumbents protested claiming he would steal business and the
application was denied. He is currently suing the state of
Kentucky with help from Pacific Legal Foundation.
MS. ERICKSON argued that CON laws are in direct violation of the
14th Amendment that guarantees that people will not be deprived
of a liberty without due process of law. That essentially means
that laws must pursue a legitimate public health and safety goal
rather than favoring entrenched businesses. She said the
committee heard in testimony on Wednesday how CON laws fail that
test. She said everyone appreciates what hospitals and
healthcare workers have done during the COVID-19 pandemic and
repealing Alaska's CON laws acknowledges the expertise and
knowledge each has to respond to new conditions.
1:37:35 PM
STEVE FRANK, Member, Fairbanks Memorial Hospital Board,
Fairbanks, Alaska, stated that he is a free market Republican
who worked on the Medicaid budget years ago when he served as
co-chair of the Senate Finance Committee. He related that the
Fairbanks Memorial Hospital is a nonprofit community-owned
hospital that offers behavioral health and hospice care in
addition to running an emergency department and all the usual
services a hospital provides 24/7. This is the only hospital in
Fairbanks, but the community also has an ambulatory surgery
center. The center operates regular business hours and does not
worry about staffing for emergencies or uncompensated care. The
hospital has lost about 30 percent of its surgery business to
the center leaving it with excess surgery capacity. He said the
hospital worries about its viability if additional medical
businesses come into the community and take more of the
hospital's profitable business without having to offer the low
profit or uncompensated care that hospitals are required to
maintain. The CON process prevents such unnecessary facilities
from entering the market.
MR. FRANK suggested the legislature look at two things as it
considers SB 26. First, a comparison to anything in the free
market like groceries is irrelevant because the healthcare a
hospital provides is not free market. Hospitals are totally
regulated. Second, a large percentage of the state's budget
already goes to pay for Medicaid and that will increase if
another unnecessary healthcare facility comes in and the
hospital loses more business. The state compensates the hospital
on a fee per service basis for Medicaid and if the same
population is spread over two facilities, the cost per procedure
will go up and so will the Medicaid budget. He urged the
legislature to carefully look at what eliminating CON will do to
the Medicaid budget and what it will do to sole community
hospitals. He offered his understanding that since 2016, six CON
applications were approved, none denied, and 22 facilities fell
under the $1.5 million threshold. He urged the committee to look
at the issue carefully and avoid getting swept up in the
rhetoric of the free market.
1:46:32 PM
RYAN SMITH, CEO, South Peninsula Hospital and Long Term Care,
Homer, Alaska, testified in opposition to SB 26. He stated that
healthcare is complex and highly regulated. CON laws are one way
it is regulated. After the passage of the National Health
Planning and Resources Development Act, CON programs established
a review process to promote responsive health facility and
service development, rational health planning, healthcare
quality, access to healthcare, and healthcare cost containment.
He asked the committee to hold SB 26 and refer the matter to the
Department of Health and Social Services (DHSS) commissioner or
an appropriate individual to convene a negotiated rule making
process to find solutions and consensus on CON reforms that
would stabilize healthcare access in small communities and
critical access hospitals. He related that in 2007 he was the
CEO of Central Peninsula Hospital in Soldotna and participated
in the CON negotiated rule making committee that did reach
consensus on needed CON program reforms without repealing the
law altogether. He urged the legislature to allow stakeholders
to work as Alaskan partners in healthcare to propose needed
reforms to Alaska's CON laws.
1:48:57 PM
JESSICA OSWALD, CEO, St. Elias Specialty Hospital, Anchorage,
Alaska, stated that she was testifying in opposition to SB 26.
She expressed concern about oversimplifying Alaska's continuum
of care issues and warned against relying on outside lawyers and
think tanks to advocate for Alaskans and develop healthcare
policies for the state. She posited that the existing CON
process in Alaska allows for careful consideration of the need
and impact of proposed changes to the healthcare system to avoid
unintended consequences that could increase costs, reduce
access, and further destabilize the system.
MS. OSWALD said St. Elias provides care for acutely, chronically
ill patients from ICU through rehabilitation. As federally
required, the length of stay is 25 days or longer. One third of
their patients generally have no safe discharge in Alaska
because a significant portion of their care is unfunded. St.
Elias absorbs those unfunded costs of care with limited offset
so destabilizing the existing care model would mean that many of
their patients would remain in short term ICUs for months or be
sent out of state for care. She also pointed out that when
Alaska's trauma centers fill with critical care long stay
patients, Alaskans wait longer in emergency rooms and the
overall availability of care is further reduced across the
continuum. Ending the CON program without understanding the
unintended consequences could drive up the cost of care and
further limit access.
1:51:55 PM
RICK DAVIS, CEO, Central Peninsula Hospital, Soldotna, Alaska,
related that he has worked in hospital administration in Alaska
for 29 years and repealing the CON program has been debated
throughout his healthcare career. Proponents always suggest that
removing all barriers will allow the free market to work and
reduce healthcare costs, but the reality is that healthcare in
the U.S. is not a free market. He reported that 70 percent of
CPH's patients receive care that is paid for at a fixed rate
that is dictated by Medicaid, Medicare, or another government
payer. He reminded the committee that hospitals are required by
law to see all patients 24X7X365 and accept as full payment what
the government chooses to pay. Of the remaining 30 percent of
patients, about 10 percent are charity or no pay and 20 percent
are workers compensation, other government payers, or insured
patients. That 20 percent of patients is what might be called
free market and is what hospitals and independent imaging and
surgery centers compete for. He pointed out that even then the
competition is only for the high margin, elective, 8-5 Monday-
Friday care. After hours, weekend, and holiday care is at a
hospital and most likely in the emergency room.
MR. DAVIS said he understands the financial reasons for
independent imaging and surgery centers limiting access to the
80 percent of the population that is no pay or government
sponsored. However, he said there is no way a hospital can
survive if it depends solely on that segment of the population
and is not able to augment care with elective procedures on
insured patients. Allowing independent facilities to cherry-pick
care will damage small community hospitals and cause some to
close. At the least, it would result in reduction of low margin
services such as psychiatric, emergency, and obstetrics, all of
which community hospitals generally provide in small
communities. He said the CON law helps keep community hospitals
open but he supports the suggestion to convene a negotiated rule
making committee to improve, not repeal, Alaska's CON laws.
1:56:19 PM
MONIQUE MARTIN, Director, Government Relations & Regulatory
Navigation, Alaska Regional Hospital, Anchorage, Alaska, stated
that she was speaking in opposition to SB 26. She refuted the
testimony from the last hearing from outside experts who
purported to know best about Alaska's healthcare delivery
system. She maintained that Alaskans know best about Alaska and
its healthcare providers and they are concerned about repealing
Alaska's CON program because of what they know about the state's
healthcare delivery system.
MS. MARTIN highlighted the work that Alaskans and the
legislature have done since 2014 to reduce the cost of
healthcare in the state. From 2014 to 2018, uncompensated care
decreased 48 percent from nearly $113 million to $58.2 million.
Additionally, from FY2015 to FY2020 Medicaid covered 54,000 more
Alaskans and reforms to the program resulted in the state
spending $89.3 million fewer state general funds dollars. She
said this came from working together and through Alaskan-grown
innovations such as Alaska's innovative 1332 waiver and the
tribal claiming program that allows increased federal
participation. She said Alaskan healthcare providers and patient
advocacy groups have ideas to reduce healthcare costs in the
state and the hospital association has a list of improvements to
the CON program. She encouraged the committee to look to Alaska-
grown ideas because of what Alaskans working together have
already accomplished.
1:59:39 PM
ROGER STARK, MD, Retired; Senior Fellow, Washington Policy
Center (WPC), Seattle, WA, advised that WPC is a free market
think tank that has offices in Olympia, Seattle, Spokane, and
Tri-Cities Washington. He said he listened to all the testimony
on SB 26 and wanted to make four points. The most important
point is that the federal government repealed the federal
requirement for CON in 1987 because it was not saving money in
its Medicaid and Medicare programs. Second, those who testified
against SB 26 represent existing facilities that do not want
competition. He noted previous testimony that two facilities in
a small community operate at 50 percent capacity but his
perspective is that it offers patients choices. Third is the
argument that healthcare is not a free market. That is somewhat
accurate but the trend is for patients to use more of their own
dollars through high deductible health plans, health savings
accounts, and cash only transactions for things like lasik eye
surgery. He said patients need choices in this developing free
market. Fourth, the fiscal note for SB 26 indicates that
repealing Alaska's certificate of need program would save
$250,000 per year.
1:59:52 PM
SENATOR MICCICHE joined the committee.
2:02:15 PM
LESLIE BECKER, representing self, Ketchikan, Alaska, stated that
she is a semi-retired healthcare executive with more than 30
years senior management experience working with large hospitals
and diagnostic providers in both CON and non-CON states. She
said her experience is that CON is a huge detriment to managing
healthcare costs, improving quality of care, and enhancing
patient access to services. In her view, the free market is
critical for any product or service. Competition raises the bar
on the level of service provided, lowers costs, and levels the
playing field to allow greater access for everyone.
She offered her perspective that logistics ensures that
healthcare will always cost more in Alaska. However, the costs
do not need to be as high as they are today. She identified CON
as one of the key drivers in the exponential growth in
healthcare expenses and emphasized that repealing it will not
drive up costs. She predicted that if CON is not repealed,
medical tourism will continue to flourish throughout the state
and a significant number of diagnostic imaging studies and
elective surgery cases will continue to be redirected to more
efficient and cost-effective centers that happen to be in non-
CON states. She advised that the cost of a diagnostic MRI in
Ketchikan is $5,000 compared to under $1,000 in the Seattle
area. This difference compels patients to fly to Seattle for the
30-minute service.
MS. BECKER said that without competition there is no incentive
for cost management, efficiency, or patient satisfaction. She
pointed out that a high percentage of patients leave Alaska for
elective services. She warned that without free market
competition, Alaska's level of care will decline and patients
will seek lower cost options outside the state for elective
care. This will heavily affect the difficult issue of physician
recruitment and retention. She said it is time to repeal
Alaska's CON laws and let the free market determine success.
CHAIR COSTELLO mentioned that written testimony was welcome.
2:06:26 PM
PORTIA NOBLE, representing self, Anchorage, Alaska, stated
support for SB 26. She said certificate of need laws have
limited the supply of facilities and services nationwide. She
expressed concern that the CON approval process relies on
healthcare planners rather than the needs of Alaskans and those
who work in the field. The result is that governments are
lobbied by large healthcare monopolies and the free market model
is forgotten. She listed what CON laws have done for consumers
so far. They have driven up costs to the consumer, lowered the
quality of care, eliminated the availability of needed services,
and blocked competition in the healthcare market.
MS. NOBLE emphasized that healthcare providers should not need
the permission of government to expand their size and scope of
practice. She noted that during the pandemic, more than 22
states suspended their CON laws related to hospital beds and
essential services. She suggested that it should not take a
pandemic for a state to realize that CON laws threaten public
health. She concluded that it is time to eliminate laws that
harm patients and the spirit of competition.
2:08:01 PM
CHAIR COSTELLO closed public testimony on SB 26.
2:08:07 PM
At ease
2:09:34 PM
CHAIR COSTELLO reconvened the meeting and stated she would hold
SB 26 in committee. She reiterated that written testimony was
welcome.