Legislature(2003 - 2004)
03/02/2004 03:07 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 511-CERTIFICATE OF NEED PROGRAM Number 1300 CHAIR WILSON announced that the next order of business would be HOUSE BILL NO. 511, "An Act relating to the certificate of need program for health care facilities; and providing for an effective date." Number 1310 REPRESENTATIVE RALPH SAMUELS, Alaska State Legislature, testified as sponsor of HB 511. He told the members that HB 511 closes some loopholes in the certificate of need (CON) language in the statutes and it allows the state to use CON as a management tool for residential psychiatric facilities. This bill would enable the state to addresses the problem of the large number of youths who are in facilities outside of Alaska, would ensure that there are the right number of beds, and that Medicaid costs are kept under control. Number 1219 LISA WOLF, Director of Planning, Providence Health System, testified in support of HB 511. She told the members that she has been involved in the CON law for over 20 years, has written over 20 CON applications, and has been involved in the review process on far more that. The CON law was established to ensure that the state of Alaska and individual communities are not financially burdened with excess health care equipment and facilities. The premise is that having more than the community needs would increase the cost of care, as providers would need to increase charges to cover the additional expenses that would not be covered by adequate volume [of patients]. The CON law was designed to ensure a high quality of care by ensuring that there would be adequate volume so that the practitioners would be proficient in performing the procedure or exam. Number 1050 MS. WOLF told the members that in recent years there have been studies done in other states to see if the CON law was actually achieving its purpose. For example, one study compared the cost and quality of heart procedures done in a state which had a CON law with the cost and quality of another state which had eliminated the law a few years earlier. It was found that the clinical outcome was better in the state with the CON law, than the non-CON state. The outcome was linked to higher volumes in facilities with CON approval. MS. WOLF explained that leasing has become a common way of getting around the CON process. If a health care facility or provider wants to add a piece of equipment that costs over $1 million, a CON is required. However, if the equipment is leased the $1 million threshold is not reached and the entire CON process is avoided. Often when this happens the local providers and the state are unaware of the overall impact to the community or the state as a whole, she said. Ms. Wolf added that this also makes it difficult for the state to make an adequate review on a CON application. The question is then whether the state rewards those who go around the CON process or potentially adds unneeded services by approving CONs. MS. WOLF Summarized that the CON process levels the paying field for all providers and provides the oversight that is needed. She encouraged the members to support HB 511. Number 0940 ROBERT BRIDGES, M.D., Medical Director, Alaska Open Imaging Center (AOIC), testified in opposition to HB 511. He told the members that it has imaging centers in Wasilla, Soldotna, and Anchorage. Dr. Bridges emphasized that presently Alaska Open Imaging Center is the only independent diagnostic testing facility in Alaska. He told the members that he graduated from the University of Washington School of Medicine in 1980 and has degrees in chemistry and nuclear engineering, and has been awarded medical specialties in diagnostic radiology and nuclear medicine. DR. BRIDGES said that for over two years the Alaska Open Imaging Center has provided quality, affordable health care for Alaskans. He told the members of the advances in medical technology the center has brought to Alaska. While others have talked about advances, the center has brought that vision into reality. The center has given patients a choice and has provided these services efficiently and at a lower cost than other providers. Dr. Bridges emphasized that this is a story of success, not of elitist medical groups or large medical conglomerates, but Alaskans who are technologists and hospital employees who saw the need for a new and better form of health care. The market place determines the center's success. he commented. It is earned by taking personalized care of every patient, one at a time. Since opening its doors the center has taken care of Medicare and Medicaid patients, and patients who have been abandoned by the hospitals because the patient's problems seemed too complicated or too time consuming. DR. BRIDGES summarized his comments that HB 511 is not about health care, but about health control. This bill stifles competition and does not confront the challenges of cost and quality medicine. The bill favors those with offices of lawyers and lobbyists with large bank accounts to ensure they get what they want, he stated. Number 0785 DR. BRIDGES commented that the bill strikes on one of the true major cost challenges in medicine today, and that is the abuse of unfettered and uncontrolled self-referral which has created over-utilization of services nationwide by up to 250 percent in some specialties. He said he believes this over regulation is an abuse of the people's time and resources. Dr. Bridges asked the members to give AOIC the freedom to grow. Number 0720 SAM KORSMO, Chief Operating Officer, Alaska Open Imaging Center, testified in opposition to HB 511. He told the members that several years ago it embarked on a venture to provide the largest independent radiology businesses in Alaska. There are 36 employees, 3 doctors, and an array of technological advances that have set new levels in quality. Mr. Korsmo said that the business has prospered and grown based on core values of service. The physicians there place care and compassion for the patients' benefit first and foremost. He explained that AOIC has brought a large array of new technology to Alaska including the open MRI, virtual colonoscopy and cardiac scoring for the comfort of patients. MR. KORSMO urged the committee to ensure that any changes to the CON laws be warranted. The mission statement on CON was to promote responsive health facilities, service development, rational planning and cost containment; and to ensure that these services would be of good quality, acceptable to the public, promote access, choice, and meet the public's needs while preventing excessive unnecessary duplicative facilities and services. Mr. Korsmo told the members that AOIC has met all of the CON mission statement goals and has done it better and more cost effectively than any other provider could do in the last three years. There has been more duplication of AOIC's model by other providers than any other period before, he said. The mentality of "staying up with the Jones" has created a burden which has been thrown on the backs of patients and families, he added. Number 0555 MR. KORSMO asked the members to reconsider the language which defines a health care facility on page 3, line 21, which says: independent diagnostic testing facility, secure residential psychiatric treatment center, MR. KORSMO told the members that currently AOIC is one of the few if not the only, independent diagnostic testing facilities in Alaska. He suggested that this definition is directed only at AOIC. Mr. Korsmo urged the members to eliminate the CON process and allow free market forces to provide a better health care system. Number 0508 CHAIR WILSON asked if this bill will affect AOIC now. MR. KORSMO said yes. The bill will impact AOIC if it chooses to upgrade equipment or expand services. It would be required to request a CON. CHAIR WILSON asked if the cost of services are lower than that which is provided at a hospital. MR. KORSMO said yes. Number 0449 REPRESENTATIVE GATTO expressed concern for the consumer. While it is clear that a patient could go to AOIC and get services provided for less money, a week later that same patient may require services that are only provided at the hospital, he said. Because the hospital has lost business it will now charge the patient more money to compensate and the consumer ends up paying more. Representative Gatto questioned whether the consumer will get a better deal with the services AOIC is providing or not. MR. KORSMO said yes. REPRESENTATIVE GATTO clarified that what Mr. Korsmo is saying is that the hospital will not have to change its rates even though AOIC is taking some of the business away from it. The hospitals have said that the most important patients are the ones who can pay. He added that he would bet that AOIC is not taking too many patients who do not have the ability to pay. He asked Mr. Korsmo to comment. MR. KORSMO told the members that AOIC takes all patients. It has an equal percentage of those that cannot pay as the hospital. It also takes Medicare and Medicaid patients, he added. Number 0330 REPRESENTATIVE COGHILL asked Mr. Korsmo what is an independent diagnostic testing facility. Number 0306 MR. KORSMO replied that AOIC was formed by a group of individuals who have come together to build an imaging center company. REPRESENTATIVE COGHILL asked for clarification on the term "independent". MR. KORSMO responded that independent was the designation under which it applied [for a license]. Number 0192 DAVID McGUIRE, M.D., testified on HB 511. He told the members that he has testified on more than one occasion that he believes the CON law does not work; and he added that he has not changed his opinion. However, in the current application he said he believes it is worse than it was intended to be. He explained that the reason leasing has become an issue is due to the fact that one large institution was granted the ability to install radiology and oncology treatment facilities that cost as much as $10 million and were not able to circumvent the CON process by the precise language that is before the members. Specifically, what was said is that as health care providers it was leasing the equipment and space, while someone else owned it and therefore it was not necessary to comply with a CON. Dr. McGuire told the members that no matter how one views a CON, the process should be the same for everyone. It should not be a situation where some get special treatment over others which was the end result, he added. DR. McGUIRE commented that it was requested a number of years ago to allow a facility to move to another site without having to go through the CON process again. The department chose to include language that is only clear to itself, that effectively limited the options of the site from which this facility was moved. He said he believes that if there is any limitation on anyone, it should be on the person with the CON. Dr. McGuire told the members the CON allows a facility to move once, but not twice. It does not deal directly with the facility from which the CON moved. Dr. McGuire summarized that there could be many battles about whether or not the CON process works; however, it should be fair to everyone. TAPE 04-17, SIDE A Number 0029 REPRESENTATIVE GATTO told the members that he served on the Valley Hospital board during the time the hospital was trying to get a CON. It took well over a year to do it. He asked if Dr. McGuire would agree that if fairness is to prevail all providers should be subject to the same rules. DR. McGUIRE agreed that all providers should have to go through the same process. He told the members that is the way it use to be before the hospital got an oncology department. Number 0133 MIKE POWERS, Hospital Administrator, Fairbanks Memorial Hospital, testified in support of HB 511. He told the members that he agrees with Dr. McGuire's comments that HB 511 addresses some weakness in the current CON law. Mr. Powers took exception to some comments in that he believes the CON process is very valuable to communities. The weaknesses in the CON statute provides tremendous exposure to community hospitals. MR. POWERS said that there are three areas that need to be clarified. One is the matter of the freestanding diagnostic imaging centers. He pointed out that the bill recognizes that there should be a level playing field for all. Two, the (indisc.)... Three, the issue of the cost of leases for space [needs to be addressed]. MR. POWERS told the members it is his opinion that the department will ensure that the CON law is applied equally. It won't be possible to avoid CON review by leasing space and it does require that everyone plays by the rules. He explained that he believes it is important that the diagnostic imaging centers be subject to CON because without it, it tears at the fabric of those services that do not pay for themselves, such as burns, mental health, neo-natal care, emergency visits, chronic inebriants, Medicare, et cetera. Mr. Powers urged the members to pass HB 511 because it is an important step in leveling the playing field. Number 0255 CHARLIE FRANZ, Administrator, South Peninsula Hospital, and Chairman of the Board, Alaska State Hospital Association, testified in support of HB 511 and answered questions from the members. He told the members that both the South Peninsula Hospital and the hospital association strongly supports HB 511 and the changes that are proposed. The changes will provide a level playing field for community hospitals and entrepreneurs such as the independent testing facilities whose representatives testified earlier. Mr. Franz emphasize that it is important the members think about the community hospitals as a resource for the communities. He suggested that those who are familiar with the fishing industry in Alaska think of the analogy between the CON bill and the limited entry permits. There are resources that need to be used appropriately. Fishing and health care are probably the only two business in the state where there is an effort to provide quality services or products, in a cost effective manner, and then someone else decides how much will be paid for that service or product. He pointed out that it is not like the free market place and he does not believe that is an appropriate way to consider health care. Mr. Franz encourage the members to support HB 511 because it is a good bill. It does not cost the state anything and protects community resources, he added. Number 0414 REPRESENTATIVE GATTO commented that [Valley Hospital Association] merged with Triad and is in the process of building a much larger hospital, up to 70 beds, in another location. He asked Mr. Franz how this bill would affect the hospital that is going to be constructed and in general how it affect the hospital in the valley. MR. FRANZ responded that the new hospital would have to go through the CON process, just as it does now. However, he said, there would be an impact on the competitor across the street, Open Imaging Center would have to go through the CON process before adding services or upgrading its equipment. Number 0481 CHAIR GATTO asked if he understands correctly that Mr. Franz is saying that Open Imaging Center has a grandfather right, but the new hospital does not because it is expanding and moving to a new location. MR. FRANZ replied that if HB 511 is not enacted, Valley Hospital will be at a serious disadvantage when Open Imaging Center decides to add a new service and does not have to go through the CON process. It will allow Open Imaging Center to cherry-pick services away from the hospital. Number 0547 STEVE GONZALES, Owner, Gonzales Marketing, testified on HB 511. He told the members that in addition to representing Alaska Open Imaging Center, he is a supporter of consumer rights. He commented that he does not agree with comments by the non- profit's that this bill levels the playing field. As a consumer, when a non-profit provides a service that is not required by the public or cannot be paid for by the public, then it is leveled on the shoulders of the consumers who pay taxes. Mr. Gonzales pointed out that Alaska Open Imaging Center has based its services on the needs of the community; and therefore, either thrives or does not based on how that service is provided and how it competes with other providers. The stockholders carry the burden, not taxpayers. He asked the members to recognized that this bill is being pushed forward as a competitive impediment by non-profit hospitals who compete with this particular service. Mr. Gonzales said he believes that consumers should not be forced to pay higher and higher medical bills and hundreds of dollars for minimal treatment because this is a grandfathered organization. He urged the members not to buy the smoke screen that is being put forth here because this bill is simply a competitive strategy to eliminate Alaska Open Imaging Center. Number 0670 BRIAN SLOCUM, Administrator, Tanana Valley Clinic, testified on HB 511 and answered questions from the members. He explained that Tanana Valley Clinic was established in 1959 and currently has about 35 providers, employs about 225 people, and one-third of its patients are Medicare or Medicaid recipients, or have no insurance. In 2003 the clinic provided just under $7 million worth of unreimbursed care to community members. He added that while the clinic is a private business, it does serve a community need and offers some community benefit. MR. SLOCUM spoke against the inclusion of diagnostic facilities and a blanket prohibition of using leases for space and equipment. He opposes the carving out of another area of health care delivery as the exclusive realm of hospitals. A couple of years ago there was debate about ambulatory surgical centers and it was determined that ambulatory surgical centers would be subject to CON. He said he understands that is a "dead issue" at this point; however, he is concerned that once again the hospital industry is asking the legislature to take a portion of the services delivered to patients and make it exclusively available to hospitals. If the members do not agree with him on this point, he asked if it would be possible to work on the definition of some of these terms. Number 0825 MR. SLOCUM said for instance, that today was the first time he had heard the definition of "independent diagnostic testing facility." As HB 511 is drafted it does not refer to a Medicare or state definition of independent diagnostic testing facility. He commented that it might be wise to tie it to a very specific definition. Mr. Slocum said his fear is that if it is not clearly articulated, then it would fall to the CON office in the Department of Health and Social Services to make that determination without guidance from the legislature. He said he believes that clinics such has Tanana Valley Clinic, because it is not affiliated with a hospital, could be defined an independent diagnostic testing facility. For example, the clinic has a laboratory and some imaging facilities scattered on four different floors of the five-story building where it is located. It is inconvenient and there will be a time when the clinic will want to try to consolidate all these services in one space. There isn't space in the existing building, so the clinic has purchased a lot across the street, and it has been thought that the clinic would put all these testing facilities in one building. This current lack of clarity in the definition may require the clinic to go through the CON process just to move existing services to a better building, he said. Number 0918 MR. SLOCUM said he is concerned with the leasing portion of this bill. He told the members that he finds it highly ironic that some of the organizations that are supporting this bill are the very organizations who used that loophole to build its $10 million facility. Once an organization has its own facility then it wants to "slam the door in the face of others." He said he doubted that those who are urging the support of this bill have thought through all the implications. For example, currently medical space in Fairbanks rents for $2.50 per square foot per month for fully serviced space. That means that if there were 2,500 square feet of medical space that someone wanted to lease for ten years with two five year options to renew, the total of those payments for 20 years would be $1.5 million. Even using the net present value calculation to bring that back to today's dollars, that would be over $1 million and would required a company to go through the CON process just to rent the space. MR. SLOCUM explained that the old law does not require the addition of adding the value of telephones and computers. The new language suggests strongly that the value of the space and any equipment required to operate the facility be included. He told the members that he believes that language is too broad and urged the elimination of the "lease of space" language. If not, then any minor project for clinics like Tanana Valley will trigger that CON process and it will result in the inability for the clinic to ever go forward. Mr. Slocum summarized that he does not believe this was the intent of the sponsor or other groups who support the bill. Number 1056 REPRESENTATIVE GATTO asked how much it would cost the clinic to obtain a CON on the most minimal of expenditures. MR. SLOCUM responded that he does not know, because it would depend on whether or not the CON request was contested or how much information the department requested. He told the members that a couple of years ago when the clinic was exploring the idea of building an ambulatory surgery center, it was determined that it would require a change to the law, and it cost the clinic over $100,000 in direct costs. In response to Representative Gatto's question, he responded that the CON process took 18 months. Number 1114 CHAIR WILSON announced the HB 511 will be held in committee.
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