Legislature(1997 - 1998)
01/30/1997 03:03 PM House HES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 66 APPROVE CENTRALIZED PUBLIC HEALTH LAB Number 0048 CHAIRMAN BUNDE said HB 66 is a reprise of what the committee looked at last year and added that last year's bill did not go through the Senate. He said HB 66 has been introduced on the House side with a companion bill introduced on the Senate side discussing the need for a centralized public health lab in Anchorage. GREGORY V. HAYES, DR. P.H, M.P.H., M.S.,C.L.D., Chief, Laboratories Division of Public Health, Department of Health and Social Services, was first to testify. He said that he has been in the State of Alaska for three years. Formerly, he was the Director of the Public Health Laboratories for the State of Indiana. He received his doctorate in Public Health Laboratory management through a cooperative program with the National Centers for Disease Control and the University of North Carolina at Chapel Hill. Prior to that time, he was a research microbiologist at the Centers for Disease Control. DR. HAYES thanked the committee for this opportunity to address the Department of Health and Social Service's (DHSS) desire to construct a new consolidated Public Health Laboratory facility. This new facility would be located in Anchorage. It would include the functions of the Juneau and Anchorage Public Health Laboratories and the Medical Examiner's Laboratory. Design and construction costs would be paid through debt financing. Through the sale of certificates of participation for a lease-purchase of the facility. DR. HAYES said the services of the State Public Health Laboratory are unique and are directed toward prevention and control of disease in the community and therefore differ from the services of clinical laboratories directed an individual patient care. The laboratories are focused on communicable disease testing and work in partnership with the National Centers for Disease Control and private laboratories in the state. Labs fulfill an assessment, policy development and assurance role. They perform advanced testing for infectious agents not routinely performed in the private sector. Focusing on hard to test for pathogens which are unusual, exotic, rare, and sporadic. DR. HAYES said the laboratories assist private laboratories in the state with difficulties in identification and confirm unusual results they obtain. They are constantly collecting data for targeted disease control efforts. The laboratories set-up to apply state of the art technology for the rapid testing of large numbers of specimens in the event of an epidemic and are specialized in disease surveillance and the recognition of new and re-emerging diseases. DR. HAYES said the following are some examples of how the Public Health Laboratory has benefited Alaskan citizens. In 1991, there was an major epidemic of gastrointestinal illness involving a large seafood processor at Dutch Harbor. Due to their expertise and ability to rapidly process specimens; the state laboratory was essential in establishing the cause of the outbreak; in both ill individuals and the local water supply which was being used to process king crab. This allowed appropriate antibiotics to be quickly administered and water supplies to be treated, ensuring the safety and world-wide reputation of Alaska's seafood products. DR. HAYES said in May of 1992, there was a widespread outbreak of gastrointestinal illness, affecting tourists visiting Alaska during the height of the tourist season. Tourists became ill, on cruise ships, bus tours, the Alaska railroad, and in Anchorage and Fairbanks hotels. The state laboratory was able to tract down the agent causing this outbreak quickly, allowing for rapid treatment of tourists and disinfection. The state avoided a major disruption of the summer tourist season and huge losses of tourist revenue and good will. DR. HAYES said in 1994, there were widespread outbreaks of tuberculosis in rural villages. The investigation required a comprehensive collaborative effort to assess the presence and severity of disease and to arrange for appropriate treatment. Monitoring the status of these outbreaks continues today. DR. HAYES said the ability of the state to control tuberculosis depends on an effective, integrated program that includes a viable State Public Health Laboratory. DR. HAYES said in June of 1995, a rabid dog exposed 26 people to rabies in Pilot Point. Due to the expertise of our virologist, it was determined that the rabies virus had not yet reached the salivary glands of the dog and thereby eliminated much of the fear related to this exposure. The state laboratory is the only laboratory in the state which performs very specialized rabies testing. DR. HAYES said the state laboratory provides essential services for disease surveillance, control and prevention, as well as recognition of new and re-emerging infectious disease agents that threaten the public's health and welfare. Examples include: measles, influenzae, diphtheria, hepatitis B, rubella, pertussis, salmonella/shigella, and sexually transmitted diseases including HIV. DR. HAYES said the State Public Health Laboratory is an essential component of the state and national public health system with a different mission than private laboratories. It provides scientific and technical information for disease prevention and is Alaska's first line of defense in recognizing and controlling the spread of communicable diseases. The labs core functions include; support of disease control and prevention programs. It provides maternal, child, and family health programs. It also provides environmental health programs and epidemiological programs. DR. HAYES said the laboratories also focus on the development, of methods for testing when those methods are not readily available, and transfer this technology to the private sector. They perform diagnostic product evaluations, data collection, testing of high quality at a reasonable cost. The laboratories also provide: training, laboratory expertise and reference services to the private laboratory community in the diagnosis of diseases of public health significance. DR. HAYES said the laboratories provide for a national surveillance link. These functions are very different from the role of a private clinical laboratory. He questioned whether the State's Public Health Laboratory should be privatized and said even the most ardent supporters of government privatization are reluctant to argue for privatizing the public health laboratory function. All 50 states and U.S. territories have public health laboratories and none have been privatized. This is because the services they provide are inherently public. They do not merely perform tests and provide results to health care providers as private labs do, but are an essential component of public health policy determination. DR. HAYES said the following criteria are commonly used by state governments to determine whether privatization is appropriate. He said you do not privatize if the service provided is a core function of government such as policy making. Policy development is a core function of the State Public Laboratory. He said you do not privatize if tasks are uncertain and prone to revision. This is certainly the situation with an outbreak or an epidemic. You do not privatize if the value of output is hard to measure and said the value of emergency preparedness is very hard to measure. DR. HAYES said you do not privatize if the government provider is the most knowledgeable about accomplishing the task, and the transfer of such expertise would be difficult. He said that the Public Health Laboratory staff are specifically trained for participating in public health investigations and have many years of experience. He said you do not privatize if the process is as important as the result. The state laboratory staff works rapidly and closely with the state's epidemiologist during investigations from the initial point of determining what needs to be sampled; how the samples are to be obtained; and how the samples are to be tested; frequently changing protocols and modifying algorithms as the situation requires. Samples are not just dropped off to be tested as is the case in a private laboratory. Public health laboratories go well beyond what one could expect a private contractor to do and staff are specifically trained for public health investigations. DR. HAYES said a further test is to look at criteria in favor of privatization. He said you privatize if specific performance expectations can be set forth. If results are more important than the process. If outputs are easy to measure. If problem providers can be readily replaced. If activity is short-term or intermittent in nature. If the private sector has specialized expertise or skills that give operational efficiency and effectiveness. Or if the activity has been successfully privatized in other states. None of these criteria fit the State Public Health Laboratory. Once we understand that policy making and epidemiological functions are a core responsibility of public health laboratories. DR. HAYES said if testing were privatized multiple contracts would be necessary since no one laboratory performs all types of testing currently performed at the State Public Health Laboratory and for many tests no private laboratory is available. It also needs to be noted that from conversations with private providers, the few tests which they could perform, would simply be added to their current workload that is already being sent out-of-state. Number 0927 DR. HAYES asked why is a new laboratory was necessary. Two of our facilities are in urgent need of repair, having mechanical and structural inadequacies for conducting laboratory testing. The laboratories are in leased space, have poor facility layouts, and space limitations for future growth. Our Juneau and Anchorage laboratories were constructed as office space and currently have major health and safety concerns such as inadequate ventilation systems for working with infectious organisms and inadequate electrical wiring. DR. HAYES said that in 1990, the Anchorage Laboratory almost burned down due to faulty wiring and one staff person contracted tuberculosis thought to be due to the totally inadequate air handling system. The heating system in our Anchorage facility has failed twice since November and because many tests have temperature requirements, no testing could be performed during these heating failures. Also, the pipes in our TB laboratory burst in December flooding the highly infectious contained area where TB testing is performed. DR. HAYES said, additionally, a permanent home must be found for the Medical Examiner. Currently this program is occupying temporary space at the Department of Public Safety's Crime Detection Laboratory. The crime laboratory needs this space to develop a much needed DNA analysis laboratory. DR. HAYES said construction of a new facility would save the state money. An unrecoverable investment would be necessary to repair our current facilities and consultants have told us that even then they could not bring these facilities up to code. A new facility would maintain an essential public service more cheaply and more efficiently. There would no longer be the need for duplication of activities at multiple locations. Number 0880 DR. HAYES said new advances in technology such as DNA testing, newly emergent diseases and federal regulations for conducting infectious disease testing require a safe, well-designed, adaptable, and modern facility. We need a new facility to see us through the 21st century. He asked what problems a new facility would solve. The problem of fragmentation of services and reduced efficiency. The problem of leased and temporary space. The problem that our facilities are not designed for current operations. The problem that significant capital investment would be required to fix and maintain our current facilities, and they still would not meet code. And simply that the state does not need, nor can it afford four separate laboratories. One Lab in Juneau, two Labs in Anchorage and one Lab in Fairbanks. DR. HAYES said existing laboratory conditions in the Anchorage and Juneau Laboratories are inadequate, unsafe and in major need of repair to leased space. The Medical Examiner is occupying borrowed space and Public Safety needs this space. Our Fairbanks laboratory is also in leased space, which is old and inflexible, but it was designed as a laboratory and it is currently safe. DR. HAYES said the Department of Health and Social Services has a long history of analyzing the problems. We know what the problem are and we know how to solve them. We have studied the problems extensively and we gave taken a good government approach by engaging in long range planning, analyzing needs and reviewing all alternatives and have developed a comprehensive workable solution. Number 0978 DR. HAYES said there have been fourteen separate studies since 1985 regarding how to correct problems, and how to position the States Laboratories for the future. The conclusion of these studies strongly supports the construction of a new laboratory facility. Solving the problem of inadequate Public Health Labs in Juneau and Anchorage. Solving the problem of permanent housing for the Medical Examiner, increasing operational efficiency and saving operating costs. We can't afford four separate laboratories. We don't need four separate laboratories and we must find a permanent home for the Medical Examiner. Number 0978 DR. HAYES said last year HB 529 was on the Senate calendar the last night of the legislative session. Unfortunately, the legislature adjourned prior to taking a vote. This bill combined the Anchorage and Juneau Public Health Laboratories with the Medical Examiner's program in a newly constructed facility. The Fairbanks laboratory was to remain operating. DR. HAYES said in the first year a new laboratory is occupied it would save the state approximately $293 thousand dollars. It would save the Department of Health and Social Services close to $218 thousand in personnel and lease costs; and save the Department of Administration $75 thousand in lease costs. Number 1031 DR. HAYES said the cost of the new facility is estimated to be $18,440,000. Annual payments would be approximately $2,420,000 for ten years, with a total estimated Debt of $24,130,000. He said this is somewhat over the proposal last year, but costs from last year's proposal have been adjusted for inflation and the assumption of Coroner responsibilities by the Medical Examiner's program. Number 1055 DR. HAYES said it is critical that the Medical Examiner's laboratory be near Public Safety's Crime Detection Laboratory due to their close interaction and cooperation. Therefore several alternatives for state-owned land are being considered immediately adjacent to the Crime lab. He requested the committee's support for this very important project. Number 1080 REPRESENTATIVE JOE GREEN said last year's bill did not include combining the Fairbanks laboratory with the Anchorage and Juneau. Number 1110 DR. HAYES said the original bill was for a centralized laboratory, that is the version that made it out of the House. The bill was modified in the Senate. Number 1123 CHAIRMAN BUNDE said HB 66 is a compromise bill. Number 1131 REPRESENTATIVE TOM BRICE asked if the site for the State Public Health Laboratory was going to be on the Division of Motor Vehicles or on the Department of Transportation and Public Facilities (DOT/PF) site. Number 1157 DR. HAYES said the site they prefer is the one listed as DOT/PF because it is closer to the crime lab. He said the medical examiner is in daily interaction with the crime lab. He referred to Slide 26 of the handout supplied to the committee members. Number 1175 REPRESENTATIVE BRICE asked how many medical examiners would be brought into the new facility. Number 1199 DR. MICHAEL PROPST, Medical Examiner, Division of Public Health, Department of Health and Social Services, testified via teleconference from Anchorage. He said in the Medical Examiner's office the two forensic pathologist include himself and his deputy, Dr. Norman Thompson. He said an additional staff of eight people are also located in the office. Number 1234 REPRESENTATIVE BRICE asked how many procedures are performed per year. MR. PROPST said his office does approximately 500 hundred to 600 hundred procedures per year where the pathologist is involved in putting hands and eyes on a deceased remain. Number 1284 REPRESENTATIVE AL VEZEY referred to the tables under the Department of Revenue fiscal note. He said on page two there is a current interest rate table and on page three there is a current rate plus 75bp. Number 1299 FORREST BROWN, Debt Manager, Treasury Division, Department of Revenue (DOR), said DOR ran the debt service schedules at current interest rates which translates to a true interest cost over the ten years of a 4.9 percent tax-exempt financing. He said because interest rates are quite volatile, every day they bounce around. This has been increasingly so in the last year or so. He clarified that bp means basis points. He said to test the sensitivity of what would happen if there was an increase in interest rates, three-quarters of a point higher, DOR ran the same number and then came up with the higher debt service. In that instance the debt service would exceed slightly the amount listed in HB 66. If that was the amount authorized, then the financing would have to be cut back by approximately $400,000. He said DOR is calling this information to the laboratory people to tell them that they run some risk of interest rates going against them in this period, in which case they might not have all the funds they need. Number 1382 CHAIRMAN BUNDE asked whether, cumulatively speaking, Dr. Hayes mentioned the amounts that would be saved came to close to half a million dollars per year; $200,000 in one department, $200,000 in another and then $75,000 in another. Number 1403 DR. HAYES said it was $293,000 a year in personnel savings and lease costs. Number 1406 CHAIRMAN BUNDE asked if he had taken the total and had broken it down into three components. Number 1418 DR. HAYES said it was $293,000 total savings in terms of lease cost and personnel; $218,000 from DHSS and $75,000 from Department of Administration which pays one of the leases. Number 1428 REPRESENTATIVE BRIAN PORTER asked Mr. Brown, from his experience, whether this proposal was a little bit risky to add a limitation that wouldn't provide for an interest rate increase. Number 1447 MR. BROWN said that no one can forecast what interest rates are going to be. He said he would feel more comfortable, as their de facto financing partner, if he had a little more flexibility. He said when DOR is going to go out and bid this financing he expects a good reception from Wall Street. If the rates are truly higher than they are now, it could force a difficult decision on the operating people. He said if they go forward with the project and scale it back they might need to go back in a year for a supplement or do they postpone it. MR. BROWN said, if he had a preference, he would have a little more flexibility to meet whatever the market is. In other words by financing this amount and certainly putting a ceiling on the amount that could be spent on the project is appropriate, but it should also recognize that interest rates are very volatile and could go the other way. He said DOR could end up with a 4 percent effective cost to capital in which case you might spend $2.1 million a year instead of $2.4 million. Number 1489 REPRESENTATIVE PORTER said in reading this, it says the anticipated total construction and other costs are not to exceed $18,440,000. "The total anticipated annual amount of rental is and the total anticipated lease payments for the full term total up to be...I guess to give that the best light interpretation, I think it implies that you could adjust the rate, but the total cost of the project would be $18.4 million." Number 1514 MR. BROWN said because a legislative requirement states that when DOR comes in and provides numbers before getting legislative approval on any real estate lease financing. He said DOR indicates these three numbers; the total amount of the financing, the total anticipated amount of the annual payments and the total amount of payment over the term of the loan. The bond counsel is consulted and has to give an opinion on the tax exempt nature of these bonds when DOR floats them. He said the counsel has looked at this legislation in the past as being a maximum, that they would not be comfortable with certifying that DOR followed the law and that the bonds were tax exempt without DOR staying at or under the amount specified here. So, even though it reads anticipated, the legal folks have taken a narrower interpretation of that amount and so DOR has taken that direction and become conservative in their approach. Number 1555 REPRESENTATIVE VEZEY said DOR did a calculation based on current interest rates which were 4.9 percent on tax exempt. Number 1567 MR. BROWN said DOR did this a couple of days ago and went to each year of the maturity. In this type of financing, in a ten year financing you issue serials, ten different maturities. He said DOR looked at a single A credit of comparable deals that were offered that particular day and priced it on that basis. He said on the day DOR did it, the best estimate was that the payments would be what is shown on that schedule and that the overall true interests are, when you discount that back and you meld in the varying maturities and the various interest rates for each of those serial maturities, it would be 4.92 percent. He said DOR did the same thing if interest rates had gone up 75 basis points to 5.67 percent overall and carefully worked that assumption in to each of those ten maturities to determine that it would be somewhat over the anticipated amount. It is not a way of forecasting what is going to happen, but DOR wanted to indicate that there was some risk of interest rates with the current language of HB 66. Number 1625 REPRESENTATIVE VEZEY asked him when they were thinking of doing this. Number 1629 MR. BROWN said DOR, assuming that HB 66 was approved, would go to work on the financing and would issue the certificates of participation, delivering them on February 1, 1998. He clarified that DOR was forecasting a year ahead of time. REPRESENTATIVE VEZEY asked if we have seen three-quarters of a percent fluctuation in interest rates in the past year. Number 1651 MR. BROWN said in December of 1995, the interest rate "would have been around 440 and we have been as high, last summer, as 525, 530 on a ten year. So, that's a fluctuation of 60 to 70 basis points just in the past year. So, it's partially on that basis that we selected 75 basis points as the one to test the sensitivity, figuring that if it happened in the past year it well could happen again. We have no way of knowing, from time to time the fed tightens things up and the overall level of interest rates goes up. And even though the tax exempt rates are about 80 percent of what the taxable rates are they still follow very, very closely." Number 1690 REPRESENTATIVE BRICE asked Dr. Hayes for clarification of the inclusion of the coroner duties with the medical examiner's office. Number 1713 DR. HAYES said the coroner's responsibilities is a new program for the medical examiner program. Number 1720 DR. PROPST said HB 520 which passed in the last session, becoming effective on September 23, 1996, eliminated the Office of Coroner statewide. He said the medical examiner's office took many of the responsibilities for accepting and reporting of sudden and unexpected deaths. Number 1743 REPRESENTATIVE VEZEY asked if HB 66 was included in the Governor's Budget Proposal to the legislature which was given in mid-December. DR. HAYES said he did not believe so. Number 1824 ELMER LINDSTROM, Special Assistant, Office of the Commissioner, Department of Health and Social Services, was next to testify. He said there would be no impact on the fiscal year 1998 budget, the first payment would appear in fiscal year 1999 and would appear in the front section of the operating budget along with similar such debt service items. The project is figured into Office of Management and Budget's (OMB) six year capital plan and, likewise, it has been figured into the Administration's assumptions and plans for fiscal year 1999. Number 1802 REPRESENTATIVE PORTER referred to the language as addressed the three numbers; the cost and the interest, total payments and the total costs and said if there is any concern whether it might not be appropriate and asked if they would entertain something that would make it appropriate. MR. LINDSTROM said they would be prepared to discuss that on Tuesday. CHAIRMAN BUNDE said in the perusal of the information that if questions came up the committee members should contact Mr. Lindstrom so that he could answer them on Tuesday. Number 1843 DR. HAYES said the handout, located in the committee file, follows the slides that his office was going to show. He said his presentation followed each slide.
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