Legislature(2003 - 2004)

03/29/2004 03:19 PM House FIN

Audio Topic
* first hearing in first committee of referral
+ 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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