Legislature(2001 - 2002)
03/04/2002 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
SB 256-CERTIFICATE OF NEED PROGRAM
MR. JERRY BURNETT, staff to Senator Lyda Green, sponsor of SB
256, informed members that a proposed committee substitute (CS)
is before the committee (Version O). The CS contains significant
changes to the original bill. He explained those changes to
members as follows.
· Section 1 provides that all nursing home and psychiatric
beds are subject to a certificate of need regardless of
their location in Alaska;
· It increases the threshold for a certificate of need to $2
million for facilities and $1 million for equipment but it
exempts communities with a population of more than 55,000
from certificate of need requirements for acute care
facilities;
· Section 2 removes a section in current law that only allows
for replacement of ambulatory-surgical facilities and
applies to smaller communities;
· Section 3 allows an exact replica of a facility to be built
on the same site without a certificate of need and defines
what is included in the $1 and $2 million thresholds. It
says a donation or transfer of equipment is also included
under the threshold for a certificate of need;
· Section 4 establishes a specific timeline for the
certificate of need process;
· Section 5 sets up a time limit for decisions;
· Section 6 puts all acute care, psychiatric and nursing home
beds under the same standards for review, which allows the
budgetary resources of the state to be considered;
· Sections 7, 8, 9, 10, 11 and 12 address technical changes
required by changes made in earlier sections of the bill;
· Section 13 contains moratorium language for certain
psychiatric beds (only those beds designated for children
and adolescents);
· Section 14 creates a working group to look at psychiatric
care services and the certificate of need program. The group
consists of 7 members: two providers of mental health
services, two mental health service consumers or their
parents or guardians; a physician whose primary practice is
not the provision of mental health services; an
administrator of a hospital who is not a provider of mental
health services; and the commissioner of DHSS or his/her
designee. This working group is tasked with looking at the
principles used to develop the state's psychiatric care
system and certificate of need process for psychiatric care
beds and to recommend changes to statutes and regulations
governing the certificate of need program to clarify the
standards applied during the application process.
SENATOR WARD moved to adopt Version O as the working document of
the committee. There being no objection, the motion carried.
CHAIRWOMAN GREEN called Dr. David McGuire to testify.
DR. DAVID MCGUIRE, an orthopedic surgeon practicing in Anchorage,
gave the following testimony.
I appreciate the opportunity to testify on this bill -
or the committee substitute and to discuss very briefly
with you the issue of certificate of need in general.
As most of you probably know, the certificate of need
was originally enacted by the United States government
during the Lyndon Johnson years in an effort to control
the cost of health care. The theory was that if there
were too many providers, all of the providers would be
duplicating services and they would all have to charge
more money for the duplication. Unfortunately, that
theory doesn't work in anything else that we know
about, and neither did it work in medicine.
By 1987 the federal government recognized that this was
not working and they repealed the law in its entirety.
Unfortunately, as is seemingly the habit of the federal
government, they had by then mandated that all states
adopt this legislation in order to be in compliance
with the Medicare-Medicaid regulations. But when the
federal government got rid of the certificate of need,
they left it entirely to the states. Many states have
gotten rid of the CON, others have modified it, and
some, like Alaska, have it pretty much intact from what
it was when it was first adopted.
It doesn't take much of a student of the scene to know
that medicine has changed dramatically in the last few
decades. The way we do medicine, the things that we can
do and the way that it's delivered is radically
different than what it was 20, 30 years ago. And so,
the problem is, that there are many kinds of procedures
that can be done better, quicker, cheaper in a setting
other than a traditional hospital setting.
Well, as of not too long ago, the hospital association
seemed to think the same way and they argued for the
repeal of the certificate of need. Since then they've
changed their opinion and they argue that having
surgery centers will cherry pick the patients. I don't
know how many patients really think of themselves as
being cherries to be picked, most of the time we think
that patients would want to have a choice and be able
to go where they want to go. They argue that having a
surgery center will undercut the revenue base of the
hospital and that it will in turn cause the hospital to
go broke or to rely upon public subsidies or something
of that nature. And even a superficial examination of
the situation in Anchorage, Fairbanks and, to some
extent, the Mat-Su, would lead you to rapidly different
conclusions. The hospitals, in fact, are doing quite
well. They have sufficient resources that they are
able to spend on any project they want. They build any
time they want and so I think the idea that they are
endangered is probably not a good one.
The certificate of need process, even if it were a good
idea to begin with, has now become subject to political
machinations to obfuscation to uncertainties as to who
needs and who doesn't need. The department determined
that a certificate of need was required in Fairbanks
for two ambulatory centers. Unfortunately, the
individual to whom this had been issued was not able to
complete in a timely fashion the building of those two
ambulatory operating rooms. The assumption would be
that since Fairbanks has grown, and since the needs are
greater, not less, that that same certificate of need
issued some six or seven years ago would still be
operant. But, we found upon application that the
commissioner was able to, in short order, request an
RFP for a study and the study was issued within 30 days
of the RFP and the study was required to report within
60 days its conclusions. Well, it came to Fairbanks
and studied the situation and came back with the
following recommendation - that there was only a need
for one ambulatory surgery room and that that being the
case, one was not economically viable and therefore
none were needed.
But, it's interesting to see how they did that study.
How they did it is they said that the operating room
that FMH was granted in the original CON that was given
to Dr. Odom (ph), FMH got one at the same time, that
was to be designated as an ambulatory operating room
where you can only count minutes in an ambulatory
operating room from 7 in the morning until 5 at night
because you don't do elective surgery at 3 in the
morning. So that gives you 5 days a week times from 7
to 5 and that's the number of minutes. But when they
came back to do the study, they lumped that in as an
acute care room and therefore you get to count 24-7 365
which is some 50 - 60 percent increase in the number of
operating room minutes and that's how the study
determined that no certificate of need is needed.
So my point, I guess, is it was a bad idea to begin
with and it never worked and hasn't worked and hasn't
worked anywhere else and it has become a process that
is highly, highly political and subject to
manipulation, is not fair, is not reasonable. To the
extent that the very small communities feel their
hospital care is threatened, this bill would exempt
them from any such threat. Communities like Homer,
Kenai, Juneau, etcetera would continue to live under
the same certificate of need that's been in existence
since it was first put on the books. But in larger
communities where there is a demonstrable need, in my
opinion, for competitive activities, the experiment
could be done without a disaster occurring to any of
the hospitals. For those reasons, I would urge your
consideration and support of this.
CHAIRWOMAN GREEN said at this time she will set aside SB 256 to
give members time to study it. She then took up SB 302.
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