Legislature(2003 - 2004)
03/04/2004 03:08 PM House HES
| Audio | Topic |
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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 0050
CHAIR WILSON announced that the first 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." Chair Wilson told the members that the
Department of Health and Social Services has an amendment it
would like proposed to the bill.
Number 0090
REPRESENTATIVE GATTO moved Amendment 1 which reads as follows
[original punctuation provided, however some formatting changes
were made]:
Page 2, line[s] 8, 12, 16, 19, 21, 27, 29, and 31,
delete [SECURE]
Page 3, line[s] 3,7, and 15, delete [SECURE]
Page 3, line 26, after "of" delete [ADMINISTRATION]
and insert Health and Social Services
Page 3, line[s] 30 and 31, delete all material and
insert
(1) Residential psychiatric treatment center
(RPTC) means therapeutically appropriate and medically
necessary diagnostic, evaluation and treatment
services provided by a secure or semi-secure
psychiatric facility, or inpatient program in a
psychiatric facility, which are
1. under the direction of a physician;
2. include active treatment of a professionally
developed and supervised individual plan of care
designed to achieve the recipient's discharge from
inpatient status at the earliest possible time that
must be intensively and collaboratively delivered by
an interdisciplinary team involving medical, mental
health, educational, and social service component.
3. are provided 24 hour days for children with
severe emotional or behavioral disorders; and,
4. licensed by the Department of Health and Social
Services.
Number 0106
REPRESENTATIVE COGHILL objected to the amendment for purposes of
discussion.
Number 0132
JANET CLARKE, Director, Division of Administrative Services,
Department of Health and Social Services, testified in support
of HB 511 and answered questions from the committee members.
She told the members that the department has proposed Amendment
1 because Section 3 which deals with residential psychiatric
treatment centers (RPTC) is a subject that is a high cost area
where Medicaid is a primary payer. Ms. Clarke noted that some
of the members who sit on this committee are also on the House
Finance Budget Subcommittee and are aware of this. She
explained that the department wishes for the CON process to
apply to RPTCs; however, in the bill that was introduced there
is a limitation to only include secure residential psychiatric
treatment centers. This amendment would allow semi-secure RPTCs
to also be included. Ms. Clarke summarized that the amendment
is a technical one and allows the CON process to extend to all
types of RPTCs.
Number 0203
REPRESENTATIVE COGHILL asked Ms. Clarke to provide the committee
with the difference in bed capacities in the secure and non-
secure facilities. He commented that he understands that
because of the need there could be several bidders coming
forward.
MS. CLARKE responded that she does not have the information
about the secure and non-secure bed capacities. However, she
said she does know that within Alaska there are 101 RPTC beds.
Currently there are up to 600 children who are out of state.
Ms. Clarke told the members the department's goal is to bring
the kids home from out of state RPTCs in such a way that it does
not disadvantage the state Medicaid budget. She added that she
will provide Representative Coghill with the information on the
secure and non-secure beds in Alaska.
REPRESENTATIVE COGHILL explained that he is asking for this
information so that it is clear what Alaska is dealing with.
CHAIR WILSON agreed that it would be good to have that
information and to ensure that it is included with the bill
packet information.
Number 0335
REPRESENTATIVE SEATON asked what the department sees as the
effect of including the RPTCs in the CON process.
MS. CLARKE responded that the CON is a health-planning tool.
The state is a primary payer in RPTCs for children who have
mental illness. By regulating the RPTC bed size it would ensure
that increases are done in a planned manner which does not
disadvantage the state's Medicaid program in terms of state
general fund growth, Ms. Clarke reiterated. She explained that
by increasing the RPTC beds with Native tribal partners it will
be possible to generate a 100 percent federal match in funds.
The department will match the need with the state Medicaid
program. Ms. Clarke added that the department's primary
interest is in terms of cost containment.
REPRESENTATIVE SEATON asked if he understands correctly that the
effect of requiring CON on these beds is to eliminate private
development in bringing the kids home unless it is done through
a mechanism such as Native health corporations which would
generate 100 percent federal funding. He asked if that is the
purpose of this amendment.
Number 0481
MS. CLARKE agreed that is one portion of it. However, there are
600 Alaskan kids in RPTCs out of state right now and there are
only 101 beds in Alaska. She stated that there clearly is a
need for in-state RPTCs. There will be some beds developed
privately whether it is done with Native health corporations or
not. The department wants to ensure that it is done in the
right place, that the need is justified, and that all the
partnering possible has been done, before tapping into the
state's general fund as part of the Medicaid program, Ms. Clarke
explained. She emphasized that CON does not stop development,
but it requires a business or entity go through a planning
process.
REPRESENTATIVE SEATON commented that with 600 Alaska children in
out of state facilities it is clear that there is a need. He
said he believes this would be a bill that would stop beds from
being provided in Alaska. For example, he does not know if this
bill would prevent beds from being built in Wrangell, Homer, or
Anchorage, or if the bill would promote beds being built in more
remote areas. Representative Seaton restated his concern that
he does not understand the context of this bill.
MS. CLARKE responded that the state is not trying to stop
anything. She explained that as the department looks at the
kids that are going out of state, it has been determined that
some of them could be served in a less intensive environment.
There may be therapeutic foster homes that could be developed.
It may not be necessary to provide the high-cost $300 per day
bed, she said. Ms. Clarke went on to say that when discussing
planning in a cohesive manner, what is being looked at is the
need for development of less intensive services that will meet
the needs of the children who are returning from out of state,
as well as, the needs of high-intensive RPTCs. She said that
this is really an effort to reengineer the internal system
within Alaska as it is being regulated. She summarized that
this process is more than just preventing beds from being
provided, but how the rest of the alternatives are developed.
Number 0643
REPRESENTATIVE SEATON asked if there were beds developed that
were not favorable to the state Medicaid budget, would the state
be obligated to send kids to those beds.
Number 0664
MS. CLARKE explained that of the children out of state, 25
percent of them are children in state custody, the other 75
percent are being sent out of state by another entity. It could
be the parents or physician, without the review in place or
prior approval by the Medicaid program, but these kids are still
Medicaid eligible, she added. If a child is eligible, he/she
receives services. The plan that has been discussed is the
development of the continuum of care, preauthorization reviews
before children are placed in these high-intensive beds, and an
emphasis to do it in a thoughtful manner. Ms. Clarke summarized
that this is a very complex issue.
REPRESENTATIVE SEATON asked if for example, expensive beds were
developed because they were not matched in the right way for
Medicaid, would the department then be obligated to fill those
beds before using other facilities that are cheaper.
MS. CLARKE replied that with Medicaid there is a freedom of
choice issue. If it is not regulated or the state's practices
are not changed or there are not other less intensive services
available, and a child needs that service, then Medicaid would
be obligated to pay.
Number 0743
REPRESENTATIVE COGHILL explained that the CON would ensure that
there is not an over capacity situation which then drives the
cost beyond the state's ability to pay.
CHAIR WILSON asked Ms. Clarke to clarify that permission would
have to be obtained through the CON process before a building
project could occur.
MS. CLARKE replied that if a capital expenditure were to be made
of over $1 million a CON would be required; however, a project
for less than $1 million would not. She noted that typically a
RPTC would cost over $1 million.
CHAIR WILSON commented that she sees the importance of the CON
process with respect to RPTCs. Currently without CON oversight
there could be more facilities built than are needed. For
example, 15 different companies could see the need and each
build 100 bed facilities. Far more than is needed, she added.
Number 0882
REPRESENTATIVE SEATON pointed out that if more beds were
available the law of supply and demand may provide the state
with more affordable beds. Instead of paying $300 per night, it
may be possible for the state to get those beds for $200 per
night. He asked Ms. Clarke if the state could negotiate the
price or if there is a price set by Medicaid.
MS. CLARKE responded that Medicaid rates are highly regulated.
The rate paid is $300 per night.
REPRESENTATIVE SEATON asked for clarification and some examples
of secure versus non-secure residential treatment centers.
MS. CLARKE replied that a secure residential treatment facility
is a locked facility. A semi-secure facility would be one that
has 24-hour staffing for monitoring of beds, but not necessarily
a locked facility. She commented that there are not many secure
facilities. For example, Alaska Psychiatric Institute (API) is
a secure inpatient treatment hospital. There are various levels
of security including day-treatment facilities or 24-hour
treatment facilities. Much of this is determined by staffing,
she explained.
REPRESENTATIVE SEATON asked if these are long-term facilities.
He commented that the committee had a presentation from a group
from Wrangell [See overview dated January 29, 2004, Crossing
Wilderness Expeditions for Youth] where kids who were covered by
Medicaid went through a six-week wilderness program.
Representative Seaton asked if it would be necessary to go
through a CON process before this kind of facility could
operate.
MS. CLARKE responded that a CON would be necessary for that kind
of program to operate. She commented that the average length of
stay for children who are in out of state facilities is about
180 days. In Alaska the average length of stay for children is
90 days. Ms. Clarke told the members that out-of-state beds
cost an average of $250 per day, while in-state beds cost an
average $300 per day. She pointed out that children who remain
in Alaska are closer to family and the length of stay is
considerably less.
Number 1154
REPRESENTATIVE COGHILL told the members that he does not object
to the amendment because he believes it provides a mechanism to
control costs. The anecdotal testimony has reflected that the
vast majority of funding for the children's treatment has been
paid with public funds. He asked for clarification on the
percentage of funding for children admitted to RPTCs.
Number 1184
MS. CLARKE replied that she does not have that particular
information in front of her. She said that she does know that
the Medicaid budget for RPTCs has grown from $4 million in FY 98
TO $42 million in FY 03. This is a fast-growing area in the
Medicaid budget that the department has identified as one which
needs careful control, she commented.
CHAIR WILSON said she understands that it is very difficult to
track the number of children who are sent out of state by
families who pay themselves or who have insurance which covers
these costs.
MS. CLARKE agreed with Chair Wilson. Out-of-state facilities
are not regulated by Alaska and information is not readily
available for those who pay privately.
CHAIR WILSON commented that she recently heard of a family who
was considering sending their son out-of-state and reconsidered
when hearing of the option offered in Wrangell. She said she
believes Alaskan kids will benefit as more options are available
within Alaska.
Number 1281
REPRESENTATIVE COGHILL told the members he believes this
legislation is necessary and removed his objection to Amendment
1. There being no objection, Amendment 1 was adopted.
REPRESENTATIVE GATTO commented that "secure residential
psychiatric treatment center" has the meaning given in AS
47.35.900. The word secure was not given in that definition;
however, Amendment 1 deleted the word secure without deleting
[residential psychiatric treatment center]. He said he does not
know where to find the definition of the word secure.
MS. CLARKE responded that AS 47.35.900 does define the word
secure.
Number 1342
REPRESENTATIVE GATTO asked what it means. He questioned that by
removing the word secure the state is opting for insecure.
MS. CLARKE replied that by removing the word secure it provides
the state with more options. She clarified that it just means
that there will be some locked or secure beds and some that have
close supervision or semi-secure. She explained that there are
varying degrees of supervision depending on the program that is
being provided. She commented that if the word secure were to
remain, it would limit the state by allowing it to only look at
locked facilities.
Number 1402
DENNIS MURRAY, Administrator, Heritage Place, testified in
support of HB 511. He told the members that he supports the CON
process and Amendment 1 which was adopted. Mr. Murray said the
threshold of $1 million makes sense to ensure that community
projects are considered in a thoughtful planned way. He urged
the committee to support HB 511 as amended.
Number 1461
AARON KOTZIN, Support Services Director, Central Peninsula
General Hospital, testified in support of HB 511. He told the
members that he believes HB 511 will insure that CON will be
applied more equally. This will also help to close loopholes
that some companies use to circumvent the CON process.
Specifically, freestanding diagnostic centers should be
considered health care facilities. Inclusion of the cost of
lease space as part of a project is also an important loophole
to be addressed. He reiterated his support of HB 511.
Number 1529
JANET OWEN-DENTON, Director, Outpatient Surgery and Special
Procedures, Fairbanks Memorial Hospital, testified in support of
HB 511. She told the members that the CON process ensures that
only new services that are needed by the community that have not
been met by existing health care facilities are filled.
Community hospitals carefully plan for the needs of the
residents of its community. She explained that if some of the
procedures and surgeries are carved out, it reduces the
available funding to provide needy patients with care. It is
important that the loopholes in the CON process are closed. HB
511 would ensure that the CON rules are applied more equally,
she added. This is a fair bill and one that is fair to the
community, the consumer, and the provider, Ms. Owen-Denton said.
Number 1589
GRETCHEN O'MAHONEY testified in support of HB 511. She told the
members that she has seen the dramatic effect on communities of
redundancy in medical specialty services. One effect is that it
divides the community and the medical professionals, she said.
It is a no win situation, Ms. O'Mahoney added.
Number 1619
ROBERT GOULD testified in support of HB 511. He told the
members that this legislation closes some rather large loopholes
in current law. He pointed out that imaging services are not
included in the CON process, nor is the cost of leasing space.
Mr. Gould said he believes the CON process is in place to ensure
that there is a public process to determine community needs. He
said that by limiting excess capacity and redundancy, costs will
remain low. There is some thought that larger capacity would
allow for the price to go down, however, once the capital is
spent, it must be paid for. Mr. Gould commented that the $1
million threshold is an appropriate level for a CON application.
He urged the committee's support of HB 511.
Number 1718
REPRESENTATIVE GATTO asked Mr. Gould if he believes a $750,000
threshold might be more appropriate for the CON.
MR. GOULD replied that right now a refurbished MRI could be
purchased for under $1 million. He said he believes the $1
million threshold seems reasonable.
REPRESENTATIVE SEATON commented that Mr. Gould is talking about
the cost of a single machine; however, the bill will include the
cost of leased space for the length of the lease, which could be
up to 10 or 20 years, he said. He pointed out that the machine
is just a piece of the puzzle.
MR. GOULD agreed that individual pieces of equipment are just a
part of the cost.
Number 1885
BRIAN SLOCUM, Administrator, Tanana Valley Clinic, testified in
support of HB 511. He told the members that he supports an
amendment to HB 511 to change the CON threshold to $2.5 million
because he believes it is a far more realistic figure. Mr.
Slocum pointed out that the $1 million threshold was established
more than 20 years ago. It took quite a lot of expenditures to
spend $1 million then. However, today that $1 million threshold
could be reached in purchasing a single piece of equipment.
This adjustment could be applicable out over the next 20 years,
he said.
MR. SLOCUM shared a bit of irony that has occurred where the
United Way of the North Star Borough area put out a report of
the big issues facing the community over the next few years.
The study gathered input from non-profits and business
organizations. He explained that some of the recommendations
that were included were how to approach the problems relating to
substance and drug abuse, violence and spousal abuse, crime, and
things of that nature. Mr. Slocum told the members that two of
the top items identified as critical community issues were
access to affordable health care services and physician
services. He said he finds it strange that another community
non-profit organization that is supplying some of those services
is here asking the members to reduce access to the number of
providers who offer those kinds of community services. Mr.
Slocum urged the members to look for a balance and address
increasing the threshold limits on CON.
Number 1943
CHAIR WILSON announced that Representative Cissna has joined the
meeting.
Number 2003
ROBERT BAKER, President-Elect, Executive Committee Member,
Wasilla Chamber of Commerce, testified on HB 511. He read the
following letter on behalf of the Wasilla Chamber of Commerce
[original punctuation provided, although some formatting changes
have been made]:
The Greater Wasilla Chamber of Commerce is opposed to
HB 511. Our opposition is predicated on first-hand
knowledge of and interaction with one of our member
businesses, Alaska Open Imaging Center (AOIC). AOIC
is an independent diagnostic testing facility that is
providing radiology health care services to the
residents of the State of Alaska. It is providing
critical early detection of serious ailments for many
Alaskans.
HB 511 would amend the present Certificate of Need
(CON) process by adding independent diagnostic testing
facilities, like AOIC, into the definition of health
care facilities that would require a CON.
We believe HB 511 would inadvertently create a
monopoly on services for CON holders by adding these
new and costly layer of additional regulation for
private or independent facilities. By requiring them
to provide justification of their services and methods
of operation, with the probable benchmark being that
services which hospitals are providing. This bill
discourages competition, which is always to the
benefit of the consumer. It also would discourage
quality improvements, similar to those in which AOIC
introduced to Alaska residents several years ago.
Alaskans wishing to avail themselves to state-of-the-
art diagnostic testing would find their options
severely limited.
We also believe that stifling existing or new business
ventures is the exact opposite of what should be
occurring in Alaska. Alaska is faced with a
significant fiscal challenge, and possibly the most
positive approach is to create a climate that is
conducive to the expansion of existing and
introduction of new businesses in our State. It
appears that HB 511 would have the complete opposite
effect. Thank you for the opportunity to present our
views.
Number 2054
GEORGE LARSON, Chief Executive Officer, Valley Hospital,
testified in support of HB 511 and answered questions from the
committee. He told the members that this change in the CON law
is important not only for Valley Hospital but for other
organizations such as independent diagnostic centers where
leases can be used to by-pass the $1 million threshold. Mr.
Larson said when the hospital tried to obtain better computed
tomography (CT) scanner the independent diagnostic center sent a
letter to Madeline Pierce (ph?) indicating that the hospital was
duplicating services and under the CON process should not be
allowed to do it. He said he believes there should be a level
playing field. In summary, Mr. Larson told the committee that
he supports HB 511 and the changes that would close the
loopholes in the law.
CHAIR WILSON asked if she understands correctly that when the
hospital wanted to acquire imaging equipment a CON was required,
but when an independent testing facility wanted to obtain this
equipment no CON was necessary.
MR. LARSON agreed with Chair Wilson's statement.
Number 2139
REPRESENTATIVE GATTO asked Mr. Larson if this bill actually
levels the playing field or provides an advantage to hospitals
over independent testing facilities.
MR. LARSON responded that by passing HB 511 it would level the
playing field by removing the loopholes.
Number 2160
SAM KORSMO, Chief Operating Officer, Alaska Open Imaging Center,
testified in opposition to HB 511 and answered questions from
the members. He reiterated his statement from an earlier
hearing in opposition to this bill.
MR. KORSMO commented that George Larson's statement concerning
the Valley Hospital's effort to replace its existing CT scanner,
met with concern by AOIC. He clarified that at that time AOIC
had introduced a CT scanner in Wasilla. He pointed out that
Valley Hospital is in Palmer and it wanted to provide a
duplicative service in Wasilla to compete against AOIC's CT
scanner. The issue here is that Valley Hospital was introducing
a new service which costs over $1 million and was required to go
through the CON process. As to Fairbanks Memorial Hospital's
proposal to open an imaging center in its facility it should
also be subject to the CON process. Providence Hospital has
just completed a $5 million addition for an outpatient imaging
facility that was purchased as Providence Imaging Center. Why
would Providence Hospital buy that imaging center, he
questioned.
Number 2225
MR. KORSMO told the members that AOIC is instituting new
technology and advances. He explained that outpatient-imaging
services are increasing nationwide and in some instances the
need has increased six to ten percent every year. Most
hospitals cannot even keep up with the demand, he said.
Number 2248
REPRESENTATIVE GATTO commented that while Valley Hospital is in
Palmer, it also serves West Valley Medical Center which is part
of Valley Hospital.
MR.KORSMO responded that is correct. He pointed out that within
six months Valley Hospital installed a brand new scanner in
Wasilla.
REPRESENTATIVE GATTO commented that West Valley Medical Center,
which is part of Valley Hospital was already in existence.
MR. KORSMO clarified that Valley Hospital replaced its old
scanner at the hospital in Palmer. However, when AOIC
introduced the CT scanner in Wasilla, West Valley then went out
and purchased a second scanner to put in the West Valley Medical
facility in Wasilla.
Number 2294
CHAIR WILSON asked Mr. Larson how long it takes a hospital to
plan and make a purchase such as the CT scanner.
MR. LARSON responded that it often takes as long as one year.
CHAIR WILSON asked if Valley Hospital had planned to put in the
new CT scanner long before AOIC installed its new scanner.
MR. LARSON commented that what he believes Mr. Korsmo is saying
is that Valley Hospital put in two units. There was an archaic
unit over in Palmer that needed to be replaced, which was done.
A CT scanner was also needed in the outpatient clinic in Wasilla
which was leased through an operating lease. This is one of the
loopholes being discussed. He pointed out that it is
interesting that the diagnostic imaging center was saying that
even though it does not go through the CON process, West Valley
Medical facility should have to go through it. Mr. Larson said
he believes there should be a level playing field.
CHAIR WILSON asked if having two CT scanners in the same area
has created a financial hardship.
MR. LARSON responded that it has not seen any negative effect.
TAPE 04-18, SIDE B
Number 2351
MR. KORSMO told the members that Valley Hospital's installation
of a CT scanner after AOIC had install one, was out of the
strategic plan. He told the members that he has evidence which
he can provide to the committee to prove it.
Number 2299
LISA WOLF, Director of Planning, Providence Hospital Health
System, testified on HB 511 and answered questions from the
members. She commented that the $1 million threshold for the
CON has not been in effect for 20 years. Originally it was
$150,000 and then it became burdensome for the Department of
Health and Social services because of the high number of
applications. This was due to the low threshold on the CON.
Ms. Wolf explained that in one year Providence Hospital Health
System did seven CON applications which was what triggered the
effort to increase the threshold to $1 million. She told the
members that she understands there is discussion about raising
or lowering the threshold, but her experience is that the $1
million threshold is still okay. Providence Hospital Health
System is doing a CON every other year. She said she would want
to ask the department of it believes there is a burden. In
summary Ms. Wolf warned that by increasing the threshold there
will be many new facilities that will open without any public
review.
Number 2213
MS. WOLF corrected a comment that was made by AOIC that it is
the only independent diagnostic testing facility (IDTF) in the
state. She said that is not true. Providence Imaging Center is
an IDTF and has been exempt from the CON process. As a point of
clarification, she said that Providence Imaging Center is a
completely separate entity from Providence Medical Center. It
is a joint venture organization that has three owners. She
pointed out that the $5 million project that was mentioned was
done by the Providence Imaging Center and was not required to do
a CON. A lease arrangement was included in part of that center.
MS. WOLF responded to an earlier question she heard concerning
the length of time required to complete the CON process. She
told the members that it typically takes six months to complete
that process. It could be a shorter time period for the CON
process if what is being reviewed is a lease option.
MS. WOLF told the members there have been great advances in the
technology offered today. At one time only eight to ten CT were
done per day, but with the new CT scanner the volume is
significantly higher.
Number 2093
MS. WOLF commented that someone mentioned that hospitals would
have an advantage over other facilities with respect to the CON
process. She reminded the members that when a letter of intent
is sent in it must be done two months in advance of the
application, so all the health care providers in the area are
notified. Another facility can also apply which would mean that
the department would then have to review all the applications
together. There have been two or three times when Providence
has competed in this kind of situation.
Number 2028
REPRESENTATIVE SEATON posed a hypothetical question where a
facility submits a letter of intent. A hospital is notified of
that intent and then also decides to apply. Has the department
ever decided against a hospital's application and for the
independent facility or doctor, he asked.
Number 1997
MS. WOLF responded that the only instance she can recall is when
Providence Hospital put in an application to add beds. At that
that time, Humana Hospital, now Alaska Regional Hospital,
submitted a competing application to add beds. The commissioner
decided to divide the beds between the two hospitals, so both
hospitals only go to open a portion of the beds requested. She
said that she could not comment on the circumstances
Representative Seaton posed. Ms. Wolf told the members she
believes there was a similar circumstance in Fairbanks and
perhaps someone from there could respond.
Number 1923
RICK DAVIS, Assistant Administrator, Alaska Regional Hospital,
testified in support of HB 511. He explained that he is
testifying on behalf of Ed Lamb, President and Chief Executive
Officer of Alaska Regional Hospital. It is important to address
the loopholes which are being used to circumvent the CON
process, he said. Clarification of the law to ensure that
ambulatory surgery centers, and outpatient-imaging centers are
included in this bill.
MR. DAVIS commented that these independent centers have said its
presence will increase access and keep costs down; however, its
hours will likely be from 8 a.m. to 5 p.m. The community
hospital are providing access 24 hours per day, 7 days per week
to indigent patients. Mr. Davis told the members that these
independent centers will cherry pick the paying patients and
leave the community hospitals struggling to keep its costs equal
with incoming revenue.
CHAIR WILSON asked Mr. Davis to comment on maintaining the
threshold of CON at $1 million.
MR. DAVIS replied that raising the threshold to $2.5 million
will mean that most projects will fall below the threshold.
Number 1780
JEFF KINION, Chief Executive Officer, Alaska Open Imaging
Center, testified in opposition to HB 511. He told the member
that he has over 25 years experience in the hospital and health
care field. That experience ranges from staff positions into
management and administration. He said that there have been
claims that AOIC cherry picks or skims the cream off the top and
does not provide care to Medicare or Medicaid patients. In 2003
Medicare and Medicaid patients accounted for 22 percent of
AOIC's gross receipts and hopes to increase that base in 2004.
From this false statement a case has been built that AOIC as an
IDTF has taken advantage of a gaping hole, operates from an
unlevel playing field, and that a change in the law is needed.
This claim is not only wrong, but is unwarranted. Mr. Kinion
told the members that AOIC is no different than the local
hospitals regarding its imaging acquisition methods. None of
Providence Imaging Center's installed equipment have been CON
applied for and permitted capital expenditures. He pointed out
that it has worked within the law and has navigated around the
CON process on a routine basis, thus using the same loophole
that has been described.
Number 1693
MR. KINION pointed out that Valley Hospital also used the same
legal method to navigate around the state CON process in the
acquisition of two CT scanners. He said that one of the
scanners was placed only a few blocks from an existing CT
service in the community. This was a competitive move, he
commented.
MR. KINION explained that the CON law has many components
including the cost threshold and the leasing versus capital
expenditure, for example. He pointed out that when Valley
Hospital provided a CT scanner in Wasilla it was initiating a
new service which is a separate component in the CON process.
Mr. Kinion told the members that Valley Hospital is the
community hospital and AOIC supports it. As the community
hospital it makes us responsible for it, he added.
Number 1673
CHAIR WILSON asked why AOIC cared how Valley Hospital proceeded.
MR. KINION responded that the only difference it made to AOIC is
that Valley Hospital comply with the law if necessary.
CHAIR WILSON asked if Valley Hospital's expansion of services
impacted AOIC's business.
MR. KINION said no. He commented that AOIC's success if based
on the high performance and cost saving capabilities. The
playing field is already level and does not require a change,
Mr. Kinion added. The CON program was established in the 1970s
to control health care costs and it has not worked. Mr. Kinion
told the members that Representative Samuels is proposing that
the process of the state of Alaska managing growth and capital
expenditures will ensure high quality services in a cost
effective manner. Alaska Open Imaging Center is already
providing high quality services in a cost of effective manner
without the state of Alaska managing its capital expenditures,
he said. Mr. Kinion stated that he believes no change is
needed. He said he believes cooperation and competition work to
control health care costs, not increased legislation.
MR. KINION told the members that AOIC is a for-profit
organization, and that makes us different. He told the members
that AOIC is a facility with specialist and experts in medical
imaging. Patients and doctors choose AOIC because of the
services that are received. Mr. Kinion summarized that Alaska
does not want a socialized medical system. He said this bill is
based on hospital protection and it should be on hospital
correction. He said this should be addressed by an independent
and extensive balanced evaluation, not slipped into the end of a
bill that largely addresses psychiatric treatment facilities.
He requested that the bill be amended by removing the request to
change the definition of medical facilities to include IDTFs.
Number 1545
ROD BETIT, President, Alaska State Hospital and Nursing Home
Association, testified in support of HB 511. He told the
members that prior to returning to Alaska, he was the
commissioner of health for the state of Utah for the last 12
years, and the deputy commissioner for the prior five years.
Mr. Betit told the members that from his personal experience he
has found that CON programs do work. It helps to stabilize the
market, keep costs from escalating, and prevent unintended
consequences from occurring. He said he believes the issues to
be addressed in HB 511 are not what has happened in the past,
but what is needed for the future.
MR. BETIT shared that when he arrived in Utah in 1987, the CON
law had been repealed in 1984. In the three years that CON had
been repealed there had been an explosion of psychiatric and
nursing home beds. Eight psychiatric hospitals had come and
gone, he said, and none are left today. The nursing home
industry saw a doubling of the nursing home beds, far more than
could be supported, he added. The state pays for most of those
beds and indirectly the price is effected by the number of
vacant beds in the system. He told the members that it got so
bad by 1989 that one out of every four beds in the system were
vacant. Mr. Betit explained that there had been a 300 percent
increase in the number of documented patient care programs in
nursing homes around Utah.
Number 1450
MR. BETIT told the members that in January of 1989 he issued a
moratorium, which is one step beyond a CON. What this meant is
that there was no construction permitted for any beds where
there was any expectation of Medicaid funding without the
approval of the department. He added that that approval would
not be given because the door was slammed shut. He told the
members that he opened that door one time in the last 12 years.
MR. BETIT explained that yesterday the Utah State Legislature
adopted [the CON law] in statute, because it has been proven to
be necessary in order to stop that kind of growth in the state.
He said he does not see CON as a barrier to competition. All
CON does is provide a public process for review. It places that
public trust with the head of the department who then looks at
all the information relative to the particular service someone
wants to expand and gets to the question of whether someone is
already providing that or not. A judgment call is then made as
to whether that area can support additional infrastructure, he
said.
Number 1393
MR. BETIT pointed out that an infrastructure in health care is
expensive and the consequences if over capitalization occurs is
serious. He explained that CON is a data driven process, not
one where the commissioner hears the arguments of two parties
and then arbitrarily decide on one or the other based on how
well the parties are known or how well they presented arguments.
He reiterated that there is a lot of data that is provided that
has to prove that CON is documented adequately. If multiple
proposals are presented in a CON process, the commissioner can
pick the best proposal, shape the proposal, and compete against
different proposals until one comes forward that best suits the
needs of the state, he said. In summary, Mr. Betit stated that
the Alaska State Hospital and Nursing Home Association supports
HB 511 as amended.
Number 1327
REPRESENTATIVE CISSNA commented that only one person works on
CON in the state and there is no large database that reflects
what is happening in communities around Alaska. She asked Mr.
Betit to compare the workforce and market between Utah and
Alaska. She asked if he would also comment on the tools Utah
had [to accomplish the CON process when he was commissioner].
Number 1241
MR. BETIT replied that Utah had a population of 2.4 million
people over a much area smaller area than Alaska. However,
there were a lot of remote or frontier parts of the state with
very large distances between different kinds of health care. He
said when the CON process was going strong there were four to
five full-time positions. He explained that included people
looking at the data collected by people proposing any kind of
expansion, and it was then validated by the data the department
had. The state of Utah had a geographic information system that
was immature in those days, but could get at some of the
population and distance issues, he said. Mr. Betit commented
that he believes Alaska has this information too. There is also
national data available as well, he added.
Number 1208
MR. BETIT told the members that in his experience, more often
than not a CON application is approved. It is not a process
that is trying to disprove a need, but to assure that the
information put on the table is accurate. If there are holes in
the application, then it is important to talk about those holes,
and figure out what that data means, he said. Mr. Betit told
the members that while he does not know what the department's
data is, he believes that they are still doing a credible job of
looking at that information. He commented that if someone
presents a CON that is denied, that does not have to be the end
of it. There is the right to appeal an administrative decision
by the commissioner.
Number 1167
REPRESENTATIVE SEATON commented that he believes there are three
competitive interests that are being looked at; medical costs,
quality, and supporting public facilities. In an effort to
balance all of these interests the one point that keeps coming
forward is that excess capacity and redundancy is bad. For
example, if imaging equipment is only limited to hospitals it
would seem that the costs will stay higher because there is no
competition and there is the opportunity for the hospitals to do
cost-shifting. He asked Mr. Betit if Utah tried to balance the
same three competing interests.
Number 1100
MR. BETIT replied that he would phrase it differently. He would
look at it as not supporting the community hospitals by not
putting them at a disadvantage to other providers who might come
in and take away business when there was not enough for both
entities to exist. He underscored that statement by saying that
there will be no more exceptional relief in the state, so a
hospital has to stand on its own merits. When a hospital can't
keep enough volume to fund the capacity that it already has,
that creates the economic problem that exceptional relief has
been trying to solve in Alaska.
MR. BETIT went on to say that in Utah everyone of those
interests were looked at and the department tried to make a fair
case in terms of how that would best represent the needs of that
community. He emphasized that does not mean that an imaging
center not be approved, there very well could be a need for an
imaging center, but it may not be in the location the applicant
wishes. Mr. Betit told the members that any applicant that
takes the time to put together a CON, assembles a business plan,
and documents data to show there is enough business in that area
to support another provider, in most cases prevails. In summary
he said CON has not blocked expansion, it has controlled it.
Number 1012
REPRESENTATIVE SEATON stated that he would like to focus on the
question of imaging equipment since it is being addressed in the
bill. He posed a hypothetical example where a hospital has had
a CT scan for six years. It is the only one approved for a
particular community. Since the hospital has its capital
investment and there is no competition, what would be the
impetus to upgrade its equipment, he asked.
MR. BETIT commented that he has not experienced an instance
where a community was falling being technology to meet the needs
of a community. If that kind of circumstance were to exist, it
would clearly be a place where CON should come in and make a
case that there needs to be some imaging capacity beyond what
the hospital provides. He added that it would be his belief
that in this instance a CON applicant would prevail because
there is a benefit to the community for improved equipment.
Number 0900
REPRESENTATIVE SEATON said that what he has heard of the process
is that, for example, a party puts in a CON application to bring
in new equipment, it is then noticed for 60 days, and then the
current center or hospital who is providing imaging also applies
to bring in the same equipment. He asked Mr. Betit if in these
circumstances there will ever be an independent diagnostic
treatment facility or will this process continually force
existing facilities to upgrade its equipment.
Number 0859
MR. BETIT replied that [in the state of Utah] CON did not give
current providers the opportunity to present an alternative plan
when someone else came forward with a proposal. He explained
that the community was looked at when the proposal came in to
determine if there was a hole that needed to be filled and
whether there was enough capacity to provide the revenue to
support the new service that was being requested. If there was,
then the CON was approved, he said.
REPRESENTATIVE SEATON agreed that kind of scenario makes sense.
However, the testimony that has been heard in committee reflects
that in Alaska when a CON application comes in it is noticed to
all the other providers in a community, who then also put in
their own CON on the same kind of facility. At that point the
CONs are reviewed, he said.
MR. BETIT commented that he does not know that much detail on
what is done on CON in the Alaska Department of Health and
Social Services so he cannot speak to that point. He told the
member that just the fact that a CON comes forward encourages
discussion in a community. In one case he handled the
department wanted to add 60 nursing home beds to a community.
There were three proposals for 100 beds. One facility had
existing physical plant problems and which had received
complaint after complaint. It was not an adequate building for
fragile medical patients, he said. The facility came back to
the department with a proposal to tear down the facility and
build a 100-bed facility to replace it. He commented that is
the kind of discussion that happens when a CON process occurs.
Number 0730
CHAIR WILSON asked Mr. Betit to comment on the ramifications
across the community that can occur if there is no CON.
Number 0701
MR. BETIT responded that his experience has been that when there
is an over supply of beds, an under supply of nurses or nurses
aides to care for those patients, and inadequate revenue to
provide the funding for the health care that is suppose to be
provided, then operators start covering the leaking roof, paying
the mortgage, and covering the administrative expenses, over the
patient care expenses. That is what led to the 300 percent
increase in patient care issues in Utah. He explained that this
example could be correlated to any part of the health care
system. People will do what is necessary to keep businesses
running. In the process of doing that there can be some very
serious patient care consequences, he stated.
CHAIR WILSON said the disagreement in the committee has to do
with imaging centers. She asked Mr. Betit to comment.
MR. BETIT replied that each of these issues needs to be looked
at differently. He said on imaging he could not speak to the
patient care issue. One point he would look at is the profit
line and the impact to a hospital in the community that is
already in that business. Mr. Betit told the members that he
understands the arguments that there should be an ability to
compete, but does not agree that should come automatically
without showing that the competition doesn't cause the community
hospital, which has a lot of other burdens to carry, to not be
able to meet its expenses.
Number 0582
CHAIR WILSON told the members that she would like to have
someone from the Department of Health and Social Services to
address the CON process and answer questions from the members.
The committee took an at-ease from 4:35 p.m. to 4:40 p.m.
Number 0544
CHAIR WILSON announced that HB 511 would be held in committee.
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