Legislature(2003 - 2004)
03/31/2004 01:47 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 Stoltze MOVED to ADOPT Amendment #1. Co-
Chair Williams OBJECTED.
Representative Stoltze explained that the area he represents
is the most rapidly growing in the State, and he wanted to
ensure that there is a full discussion of the amendment.
Amendment #1 reads:
Page 3, Line 21:
Delete:
"independent diagnostic testing facility"
REPRESENTATIVE RALPH SAMUELS explained that the intent of
the bill is to require all groups to do the Certificate of
Need (CON.) He said that he is opposed to the amendment
because CON is the law, and everyone should follow the same
criteria.
SAM KORSMO, ALASKA OPEN IMAGING CENTER, WASILLA, read from
prepared script as follows:
"The department claims that there is not a level playing
field between the hospitals and the independent facilities
and that 'Providence had to go through the CON process to
get approval for a P.E.T. scanner.' This is in fact
incorrect. Providence never actually completed their CON
application but instead purchased their P.E.T. equipment
through their independent subsidiary Providence Imaging
Center, which is operating today.
In another example, when Providence Imaging Center applied
for an additional MRI unit at a total cost of $2.5 million,
the department reported in their 2003 annual report on CON
activity that 'The MRI will be located adjacent to the
inpatient elevators, operating rooms and Heart Center. It
was determined that a CON is not required because the
facility is not a health care facility as defined by
certificate of need regulations.'(Note: This MRI would be
located within the hospital itself.)"
Mr. Korsmo asked, if the CON has been effective, where is
the evidence of lower costs by the Department. The costs at
Alaska Open Imaging Center are 25-35% lower than at the
major hospitals. Dr. Michael Morrisey of the Lister Hill
Center for Health Policy, University of Alabama at
Birmingham showed that the states with CONs had hospital
costs over 20% higher than those without CONs. Mr. Korsmo
voiced opposition to the bill and urged further work until
the questions are answered.
ROD BETIT, PRESIDENT, ALASKA STATE HOSPITAL & NURSING HOME
ASSOCIATION, spoke from talking points (COPY ON FILE.)
"Mr. Chairman, my name is Rod Betit, and I am President of
the Alaska Hospital & Nursing Home Association representing
10 free standing hospitals, 15 combined hospitals and
nursing homes, and 4 free standing hospitals.
Let me say that this issue potentially impacts all of our
members, not just one or two as has been implied in some
earlier testimony.
All 29 facility CEOs and their Boards stand united behind
CSHB 511 as passed out of House HESS.
As further evidence of the level of concern outside of
Anchorage and Fairbanks, I have copies of letters to
Chairman Williams from Ketchikan General Hospital, Valdez
Regional Health Authority, Sitka Community Hospital,
Wrangell Medical Center, Petersburg Medical Center, and
South Peninsula Hospital expressing their support for HB
511.
As committee members know, a number of these hospitals are
already struggling and any further dilution of a finite
number of medical procedures provided in a community.
We are talking about fairness in HB 511, not whether
we should have CON
CON is in place and is an important tool for the
Department to manage the health care infrastructure in
communities across Alaska. We support CON because of
the finite amount of care a community requires, and
the adverse impact that over investment in facilities
and equipment can have on overall access and cost for
the full range of medical services a community
expects.
Some would have you believe that your consideration of
HB 511 is about free market principles and imaging
centers being squeezed out of the market. That simply
is not the case.
Our member hospitals and nursing homes have had to
submit justification through a CON application each
time they have wanted to add equipment, space or new
services that exceed $1 million, including adding,
expanding or upgrading imaging centers.
In contrast, Alaska Open Imaging has not had to meet
this same requirement As a result they have opened
facilities in Wasilla, Anchorage and Soldotna without
any review by the Department of Health & Social
Services.
You have to wonder why there is such strong
disagreement over requiring imaging centers to submit
to the same review and approval as hospitals must go
through. Could it be there are plans to open centers
in other communities and the project sponsors do not
want the need for these projects reviewed by the
Department?
In our view, it is only fair that all new independent
imaging center projects be required to undergo the
same review as currently required of hospital based
projects. HB 511 makes this small but critically
important change to CON law.
Hospitals must provide imaging services even if an
independent center comes on line.
Providing imaging services is not an either/or decision
for hospitals. Imaging services must be provided to
support their emergency departments and surgery
services, not to mention a whole host of diagnostic
needs for inpatient purposes. Some of this is provided
free of charge due to lack of ability to pay.
Competition for this finite amount of imaging service
seriously impacts a community hospital's ability to
accomplish this portion of their mission.
• Is CON an effective review mechanism?
Yes. Since 1996 there have been 36 CON applications;
61% were approved as
requested, 11% were denied, 11% were partially
approved, 6% were withdrawn, and
14% were given special conditions that had to be met.
(Taken from March 15, 2004 letter from Janet Clark, Assistant
Commissioner to Representative Peggy
Wilson]
• Is the CON process being circumvented?
Yes. "Most ambulatory surgery centers are able to lease
equipment or space in a building and avoid CON. Only 6
CON applications for freestanding ambulatory surgery
centers have been received since the inception of the
CON program 27 years ago. Fifty percent of these were
approved. Independent diagnostic testing facilities are
not required to go through the CON process, so no
applications have even been received from them".
Janet Clark letter dated March 15, 2004]
It is vital these loopholes be fixed in the interest of
health care providers and consumers alike.
• Are hospitals being protected in some way by CON?
Absolutely not. Since 1996 a number of freestanding
facilities in Anchorage, Wasilla and Kenai have been
built without a CON that would have required a CON if
built by a hospital. For example, Alaska Open Imaging
has opened facilities in Wasilla, Anchorage and
Soldotna without a CON and purchased a PET scanner.
Providence had to go through the CON process to get
approval for a PET scanner. Anchorage Fracture Clinic
purchased an MRI, and several Ambulatory Surgical
Clinics in Anchorage were able to develop projects
without a CON that hospitals would have to go through
the CON process to build of buy the equipment. A
private group of physicians built a cardiac cath lab
without a CON. Also, if the Department's goal is to
protect hospitals from competition, why do hospitals
appeal our decisions? [Janet Clark letter dated March
15, 2004].
Clearly it is time to correct these inequities in the CON
law and HB 511 does that. We request the Committee move HB
511 out of the Finance Committee without amendment. Thank
you for the opportunity to comment."
Mr. Betit concluded that the issue is straightforward, and
the answer is clear that everyone should abide by the same
requirements.
Representative Stoltze wondered why staff from Valley
Hospital or other hospitals hadn't contacted him. Co-Chair
Williams pointed out that Mr. George Larson of Valley
Hospital had planned to testify at the last hearing but he
had been overlooked, and Mr. Larson was unable to testify
today. Mr. Betit offered that Mr. Larson's testimony would
have been in support of the bill.
Representative Hawker stated that he chaired the Department
of Health & Social Services budget subcommittee, which held
discussions on the exceptional relief program for endangered
hospitals. He asked if these hospitals are truly in danger
of not remaining economically viable. Mr. Betit replied that
it is no exaggeration, and he noted that one hospital will
not make it beyond four months. Others have serious problems
that the communities can no longer cover with local
contributions, and will form partnerships to stay in
business. He said that it is an ongoing problem meeting
their daily expenses. Exceptional relief was the long-term
mechanism to keep the hospitals going.
Representative Hawker asked if this bill would alleviate
some of the current difficulties. Mr. Betit replied that HB
511 would bring peace of mind but not any immediate relief.
Small facilities that try to provide the expected level of
services that communities demand can easily go under
financially.
Co-Chair Harris asked why Amendment #1 singles out and
deletes the independent diagnostic testing facility from the
definition of healthcare facilities. Representative Stoltze
replied that these facilities in his district are meeting
previously unmet demands, with better and more responsive
service than the larger and more bureaucratic hospitals.
Co-Chair Harris asked if the hospitals don't provide
adequate services and if there is a waiting list.
Representative Stoltze answered that he's not an expert on
healthcare, but he felt that specializing connotes doing a
better job, and these facilities also don't carry the
administrative overhead of hospitals.
In response to a question by Co-Chair Harris, Mr. Korsmo
stated that he represents the independent diagnostic testing
facilities and he supports Amendment #1. He explained that
the testing facilities resulted from a change in Medicare
around 1998, and have never been an issue until now. He
thought that it is a problem of bureaucracy and the cost of
larger medical institutions. He stated that doctors go to
the testing facilities because they provide the service,
technology and innovation to do the job.
Co-Chair Harris questioned if it would drive up the costs
that hospitals must charge for their services if these
independent facilities were not covered under CON procedure.
Mr. Korsmo expressed that Medicare/Medicaid is on a
collision course, and the third party payments are hurting
the system. He pointed out that the testing facilities
haven't heard the cost analysis of CON, when the Medicaid
expenditures have almost tripled in eight years.
Mr. Betit commented that hospitals would have to keep their
revenue at a level to cover costs, and if the hospitals
don't get it from this legislation, charges would have to
increase in another area. Services that aren't profitable
are threatened and might not be offered in the community,
forcing individuals to go elsewhere. The Department has
preliminary information on the substantial cost savings
through CON. There is no data on imaging because these
facilities have not been required to submit a CON. If the
treatment centers submit creditable data as requested, Mr.
Betit said that the Department would approve them.
In response to a question by Representative Croft, Mr.
Korsmo responded that neither the Alaska Open Imaging Center
nor Providence Imaging Center fall under the CON process. He
maintained that the point is how the Department of Health
and Social Services would know the level of need, and asked
the definitions that would be used in order to be fair.
Representative Stoltze pointed out that the treatment
centers pay property taxes and income taxes.
Co-Chair Harris noted that city and state hospitals do not
pay income tax, but other regional and Native hospitals pay
taxes. He questioned the incentive to build a private
hospital that would have to pay taxes and compete with
existing state or local institutions.
Mr. Korsmo recalled a physician who lost all his money
trying to build a private hospital across from Providence
Hospital. He did not think that there was a need to compete
in Anchorage or Fairbanks where there are large existing
institutions.
Co-Chair Harris noted that there has been interest in
building in Valdez. He observed that CONs are not required
if the cost is under $1 million.
A roll call vote was taken on the motion.
IN FAVOR: Moses, Stoltze, Foster
OPPOSED: Meyer, Chenault, Croft, Fate, Hawker, Joule,
Williams, Harris
The MOTION FAILED (3-8). Amendment #1 was not adopted.
Representative Stoltze MOVED to ADOPT Amendment 2:
Amendment #2 reads:
Page 4, following line 16:
Insert a new bill section to read:
"*Sec.7. The uncodified law of the State of Alaska is
amended to read:
APPLICABILITY. To the extent that secs. 3 and 4 of
this Act relate to residential psychiatric treatment
centers, as defined in sec. 5 of this Act, secs. 3 and 4 of
this Act apply to a residential psychiatric treatment center
that has not been substantially initiated before the
effective date of this Act through either an investment
commitment of at least 50 percent of the construction costs
or acquisition of a building permit for that facility.
Renumber the following bill section accordingly.
SARA NIELSEN, STAFF TO REPRESENTATIVE SAMUELS, observed that
the amendment would address residential psychiatric
treatment centers. It would affect the Department's process
in bringing the children back to Alaska.
Representative Stoltze asked that Ms. Clarke address how the
amendment would affect other facilities.
JANET CLARKE, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES,
DEPARTMENT OF HEALTH AND SOCIAL SERVICES, clarified that the
amendment has an immediate effective date. The provision
would not be retroactive, so that new facilities would be
covered while existing facilities would not.
Representative Fate questioned how a solid commitment to
implement could be obtained from Amendment #2. Ms. Clarke
agreed that the language seems vague.
TAPE HFC 04 - 73, Side A
Ms. Clarke stressed that Amendment #2 would be hard to
enforce.
Representative Stoltze WITHDREW Amendment #2.
Co-Chair Harris questioned if there were currently any
residential psychiatric treatment facilities being planned.
Ms. Clarke observed that recently there were two letters of
intent submitted for facilities that were less than $1
million and clearly not covered by the CON. She has not seen
anything in writing regarding the building of a larger
facility.
In response to a question by Co-Chair Harris, Ms. Clarke
observed that the House HESS Committee had discussed
increasing the threshold to $2.5 million, which would
include equipment. She explained that the Department opposed
the proposal because of concerns on the number of Medicaid
beds that could be built at that level. She felt that costs
would increase in those areas.
Ms. Clarke observed that the CON program over 28 years has
avoided construction of 518 nursing home beds, 468 acute
hospital beds, 9 ambulatory surgery suites, 144 substance
abuse beds and 60 psychiatric beds, and 30 rehab beds. It
has also avoided nearly $200 million in construction costs
and millions in annual operating costs. She stated that the
extra 518 nursing home beds would have cost $45.8 million in
2003.
Representative Hawker MOVED to report CSHB 511 (HES) out of
Committee with the accompanying fiscal note. There being NO
OBJECTION, it was so ordered.
CSHB 511 (HES) was REPORTED out of Committee with a "do
pass" recommendation and with previously published fiscal
impact notes #1 and #2.
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