Legislature(2001 - 2002)

03/04/2002 01:35 PM HES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
               SB 256-CERTIFICATE OF NEED PROGRAM                                                                           
MR. JERRY  BURNETT,  staff to Senator  Lyda Green,  sponsor  of SB
256, informed  members that a  proposed committee  substitute (CS)                                                              
is before the  committee (Version O). The CS  contains significant                                                              
changes  to the  original bill.    He explained  those changes  to                                                              
members as follows.                                                                                                             
   · Section  1 provides  that all  nursing  home and  psychiatric                                                              
     beds  are subject  to  a certificate  of  need regardless  of                                                              
     their location in Alaska;                                                                                                  
   · It increases  the threshold for  a certificate of need  to $2                                                              
     million for  facilities and $1  million for equipment  but it                                                              
     exempts  communities with  a population  of more than  55,000                                                              
     from  certificate   of  need  requirements  for   acute  care                                                              
   · Section 2 removes  a section in current law  that only allows                                                              
     for   replacement  of   ambulatory-surgical  facilities   and                                                              
     applies to smaller communities;                                                                                            
   · Section 3 allows  an exact replica of a facility  to be built                                                              
     on the  same site without a  certificate of need  and defines                                                              
     what  is included  in the $1  and $2  million thresholds.  It                                                              
     says a  donation or  transfer of  equipment is also  included                                                              
     under the threshold for a certificate of need;                                                                             
   · Section   4  establishes   a   specific   timeline  for   the                                                              
     certificate of need process;                                                                                               
   · Section 5 sets up a time limit for decisions;                                                                              
   · Section 6 puts  all acute care, psychiatric  and nursing home                                                              
     beds under  the same standards  for review, which  allows the                                                              
     budgetary resources of the state to be considered;                                                                         
   · Sections  7, 8, 9,  10, 11 and  12 address technical  changes                                                              
     required by changes made in earlier sections of the bill;                                                                  
   · Section 13 contains moratorium language for certain                                                                        
     psychiatric  beds (only  those beds  designated for  children                                                              
     and adolescents);                                                                                                          
   · Section 14 creates a working group to look at psychiatric                                                                  
     care services and the certificate  of need program. The group                                                              
     consists  of  7  members:  two  providers  of  mental  health                                                              
     services,  two  mental  health  service  consumers  or  their                                                              
     parents or  guardians; a physician whose primary  practice is                                                              
     not   the   provision   of   mental   health   services;   an                                                              
     administrator of  a hospital who is not a  provider of mental                                                              
     health  services; and  the commissioner  of  DHSS or  his/her                                                              
     designee.  This  working group is tasked with  looking at the                                                              
     principles  used  to  develop the  state's  psychiatric  care                                                              
     system and  certificate of need process for  psychiatric care                                                              
     beds  and to recommend  changes to  statutes and  regulations                                                              
     governing  the certificate  of  need program  to clarify  the                                                              
     standards applied during the application process.                                                                          
SENATOR WARD moved to adopt Version O as the working document of                                                                
the committee.  There being no objection, the motion carried.                                                                   
CHAIRWOMAN GREEN called Dr. David McGuire to testify.                                                                           
DR. DAVID MCGUIRE, an orthopedic surgeon practicing in Anchorage,                                                               
gave the following testimony.                                                                                                   
     I appreciate  the opportunity to testify on  this bill -                                                                   
     or the committee substitute  and to discuss very briefly                                                                   
     with you the issue of certificate of need in general.                                                                      
     As most  of you probably  know, the certificate  of need                                                                   
     was originally  enacted by the United  States government                                                                   
     during the Lyndon Johnson years  in an effort to control                                                                   
     the cost  of health care. The  theory was that  if there                                                                   
     were too many  providers, all of the providers  would be                                                                   
     duplicating services  and they would all have  to charge                                                                   
     more  money for  the duplication.   Unfortunately,  that                                                                   
     theory  doesn't  work  in anything  else  that  we  know                                                                   
     about, and neither did it work in medicine.                                                                                
     By 1987 the federal government  recognized that this was                                                                   
     not working and  they repealed the law in  its entirety.                                                                   
     Unfortunately, as is seemingly  the habit of the federal                                                                   
     government,  they had by then  mandated that  all states                                                                   
     adopt  this legislation  in  order to  be in  compliance                                                                   
     with  the Medicare-Medicaid  regulations.  But when  the                                                                   
     federal government  got rid of the certificate  of need,                                                                   
     they left  it entirely to  the states. Many  states have                                                                   
     gotten  rid of  the CON,  others have  modified it,  and                                                                   
     some, like Alaska, have it pretty  much intact from what                                                                   
     it was when it was first adopted.                                                                                          
     It doesn't take  much of a student of the  scene to know                                                                   
     that medicine  has changed dramatically in  the last few                                                                   
     decades. The way we do medicine,  the things that we can                                                                   
     do  and  the  way  that  it's   delivered  is  radically                                                                   
     different  than what it  was 20, 30  years ago.  And so,                                                                   
     the problem is, that there are  many kinds of procedures                                                                   
     that can be  done better, quicker, cheaper  in a setting                                                                   
     other than a traditional hospital setting.                                                                                 
     Well, as of  not too long ago, the  hospital association                                                                   
     seemed to  think the  same way and  they argued  for the                                                                   
     repeal of the  certificate of need.  Since  then they've                                                                   
     changed  their  opinion  and   they  argue  that  having                                                                   
     surgery centers  will cherry pick the patients.  I don't                                                                   
     know  how many patients  really think  of themselves  as                                                                   
     being cherries  to be picked, most of the  time we think                                                                   
     that patients  would want to  have a choice and  be able                                                                   
     to go  where they want to  go. They argue that  having a                                                                   
     surgery  center will  undercut the  revenue base of  the                                                                   
     hospital and that it will in  turn cause the hospital to                                                                   
     go broke or  to rely upon public subsidies  or something                                                                   
     of that nature.   And even a superficial  examination of                                                                   
     the  situation  in  Anchorage, Fairbanks  and,  to  some                                                                   
     extent, the Mat-Su, would lead  you to rapidly different                                                                   
     conclusions.   The hospitals,  in fact, are  doing quite                                                                   
     well.   They  have sufficient  resources  that they  are                                                                   
     able to spend on any project  they want.  They build any                                                                   
     time they  want and  so I think  the idea that  they are                                                                   
     endangered is probably not a good one.                                                                                     
     The certificate of need process,  even if it were a good                                                                   
     idea to begin with, has now  become subject to political                                                                   
     machinations to  obfuscation to uncertainties  as to who                                                                   
     needs and  who doesn't need.  The department  determined                                                                   
     that  a certificate  of need was  required in  Fairbanks                                                                   
     for   two   ambulatory   centers.   Unfortunately,   the                                                                   
     individual to whom this had  been issued was not able to                                                                   
     complete in a  timely fashion the building  of those two                                                                   
     ambulatory  operating  rooms.  The assumption  would  be                                                                   
     that since Fairbanks has grown,  and since the needs are                                                                   
     greater, not  less, that that  same certificate  of need                                                                   
     issued  some  six or  seven  years  ago would  still  be                                                                   
     operant.  But,  we  found  upon   application  that  the                                                                   
     commissioner  was able  to, in short  order, request  an                                                                   
     RFP for a study and the study  was issued within 30 days                                                                   
     of the RFP  and the study was required to  report within                                                                   
     60 days  its conclusions.   Well,  it came to  Fairbanks                                                                   
     and  studied  the  situation  and  came  back  with  the                                                                   
     following recommendation  - that  there was only  a need                                                                   
     for one ambulatory surgery room  and that that being the                                                                   
     case,  one was  not  economically viable  and  therefore                                                                   
     none were needed.                                                                                                          
     But, it's  interesting to see  how they did  that study.                                                                   
     How they  did it  is they said  that the operating  room                                                                   
     that FMH was granted in the  original CON that was given                                                                   
     to Dr.  Odom (ph),  FMH got one  at the same time,  that                                                                   
     was  to be designated  as an  ambulatory operating  room                                                                   
     where  you  can  only count  minutes  in  an  ambulatory                                                                   
     operating room  from 7 in the  morning until 5  at night                                                                   
     because  you  don't do  elective  surgery  at 3  in  the                                                                   
     morning.  So  that gives you 5 days a week  times from 7                                                                   
     to 5  and that's the number  of minutes.  But  when they                                                                   
     came back  to do the  study, they  lumped that in  as an                                                                   
     acute care room and therefore  you get to count 24-7 365                                                                   
     which is some 50 - 60 percent  increase in the number of                                                                   
     operating  room   minutes  and  that's  how   the  study                                                                   
     determined that no certificate of need is needed.                                                                          
     So my  point, I  guess, is it  was a  bad idea to  begin                                                                   
     with and  it never worked  and hasn't worked  and hasn't                                                                   
     worked anywhere  else and it  has become a  process that                                                                   
     is   highly,    highly   political   and    subject   to                                                                   
     manipulation,  is not fair, is  not reasonable.   To the                                                                   
     extent  that  the  very  small  communities  feel  their                                                                   
     hospital  care is  threatened,  this  bill would  exempt                                                                   
     them  from  any such  threat.  Communities  like  Homer,                                                                   
     Kenai,  Juneau, etcetera  would continue  to live  under                                                                   
     the same  certificate of need  that's been in  existence                                                                   
     since  it was first  put on  the books.   But in  larger                                                                   
     communities  where there is  a demonstrable need,  in my                                                                   
     opinion,  for  competitive  activities,  the  experiment                                                                   
     could  be done without  a disaster  occurring to any  of                                                                   
     the hospitals.   For  those reasons,  I would urge  your                                                                   
     consideration and support of this.                                                                                         
CHAIRWOMAN GREEN said at this time she will set aside SB 256 to                                                                 
give members time to study it.  She then took up SB 302.                                                                        

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