Legislature(2021 - 2022)SENATE FINANCE 532
03/16/2022 01:00 PM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB130 | |
| SB26 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 130 | TELECONFERENCED | |
| + | SB 26 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
March 16, 2022
1:03 p.m.
1:03:55 PM
CALL TO ORDER
Co-Chair Bishop called the Senate Finance Committee meeting
to order at 1:03 p.m.
MEMBERS PRESENT
Senator Click Bishop, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Lyman Hoffman
Senator Donny Olson
Senator Natasha von Imhof
Senator Bill Wielechowski
Senator David Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Senator Mia Costello, Sponsor; Melodie Wilterdink, Staff to
Senator Costello; Gary Zepp, Staff to Senator Wilson; Jamie
Cavanaugh, Certificate of Need Attorney, Institute for
Justice.
PRESENT VIA TELECONFERENCE
Matthew Mitchell, Mercatus Center at George Mason
University, Arlington, VA.
SUMMARY
SB 26 REPEAL CERTIFICATE OF NEED PROGRAM
SB 26 was HEARD and HELD in committee for further
consideration.
SB 130 ELECTRONIC PULL-TAB GAMES
SB 130 was HEARD and HELD in committee for
further consideration.
SENATE BILL NO. 130
"An Act relating to electronic pull-tabs."
1:04:40 PM
Co-Chair Bishop relayed that it was the first hearing of SB
130 during the current session. The committee had heard a
bill introduction the previous session and had taken public
testimony. The intent of the committee was to hear a bill
reintroduction and to set the bill aside.
1:05:13 PM
SENATOR MIA COSTELLO, SPONSOR, recounted that many years
previously the state had adopted a policy to recognize
certain gaming activities in the state, including raffles,
bingo, and pull tabs. The bill dealt solely with pull tabs.
She noted that a few years previously bingo had gone to an
electronic format. The bill would allow for a new format
for pull tabs and allow for an electronic representation of
a pull-tab. The bill would not change where pull tabs were
offered, nor who was allowed to play, nor how the pull tabs
were paid for. She reminded that pull-tabs supported
charities in the state including entities such as Veterans
of Foreign Wars, sports teams, schools, and Native
villages. The funds were often used for scholarships.
1:07:40 PM
AT EASE
1:07:52 PM
RECONVENED
MELODIE WILTERDINK, STAFF TO SENATOR COSTELLO, thought that
the senator had given a great overview of the bill. She
made note that one of the supporting documents (copy on
file) listed all of the charities in the state that had
pull tab permits.
Co-Chair Bishop asked if Ms. Wilterdink could provide a
number.
Ms. Wilterdink cited that at the bottom of page 6 there was
a total of 249 charities in the state held pull tab
permits.
Co-Chair Bishop stated the committee would set the bill
aside. He thanked the sponsor and staff.
SB 130 was HEARD and HELD in committee for further
consideration.
SENATE BILL NO. 26
"An Act repealing the certificate of need program for
health care facilities; making conforming amendments;
and providing for an effective date."
1:09:01 PM
Co-Chair Bishop asked the sponsor if he would like to
address the bill from the testifier seat.
1:09:24 PM
AT EASE
1:11:37 PM
RECONVENED
Co-Chair Bishop relayed that it was the first hearing for
SB 26. He intended to hear a bill introduction and
sectional analysis and then set the bill aside. He
commented on the size of the bill.
1:12:13 PM
Senator David Wilson, Sponsor, asserted that well-intended
government laws and regulations had unintended consequences
that could be negative for businesses and prevent the
expansion of the economy in the state. He asserted that
some of such laws led to limited consumer choices for
services, and stifled competition and expansion in certain
industries. He mentioned Uber and Lyft in contrast to
taxis, the hospital sector, distilleries and bars, and
healthcare. He asserted that Alaskans deserved a free
market where the law of supply and demand of direct
production of goods and services kept prices low.
Senator Wilson continued his remarks. He commented on the
complexity of the healthcare system. He commented on
individuals in the gallery. He thought many individuals
would not come forward because of pressures. He explained
that the bill would repeal the Certificate of Need (CON)
and would allow a window of repeal before the bill became
effective. He referenced an amendment in the previous
committee, which would adjust the repeal date. He would
examine historical arguments regarding CON laws, which he
thought did not provide economic justification for
depriving consumers with the benefits of a free market. He
asserted that that the state's CON program provided a
substantial threat to performance and expansion of the
healthcare market. He recounted that the mandate of CON
laws happened in 1974 and was developed to cut down on
overinflation of healthcare costs. He discussed the
transition from reimbursement to fee-for-service
structures.
1:16:15 PM
Senator Olson referenced his time spent in medical school
and thought the reason for the CON was due to too many
economic factors causing healthcare providers to be
overextended. He recalled that the federal government had
established the CON so that a provider had to prove it
could survive ups and downs of the nation's economy.
Senator Wilson asserted that several presidential
administrations had supported the repeal of CON. He
referenced letters from the Federal Trade Commission and
the Department of Justice from two administrations (copy on
file). He would also be seeking support from the current
administration.
Senator Olson asked the sponsor why the proposed CON repeal
was necessary in Alaska, where healthcare and providers
were so far apart, and the market was so small.
Senator Wilson cited that Alaska was the most expensive
place in the world for healthcare services. He used the
example of a colonoscopy, which had an average price of
$1,200 to $1,500, yet in Alaska was almost $5,000 $7,000
despite the technology being unchanged. He understood that
eliminating CON would not lower all healthcare costs but
thought that it was one element that would help.
Senator Olson asked about the potential effect on health
corporations in rural Alaska.
Senator Wilson stated that the forthcoming presentation
would address exemptions, one of which was for Native-owned
entities. He noted that currently there was a massive
expansion by a provider in Southeast. He referenced small
private clinics and privately-owned pharmacies that had
closed. He thought there had been abuse in the system that
had created unfair competitors.
1:20:08 PM
GARY ZEPP, STAFF TO SENATOR WILSON, wanted to address
Senator Olson's question. He reminded that the CON had
begun in the 1960's and in the 1970s the federal government
had mandated that states participate and tied it to
funding. He cited high inflation rates of 16 percent. He
thought the early effort was the government's attempt to
control healthcare costs. He cited that 13 states including
over 40 percent of the population had no CON and had
functioning healthcare markets.
Senator von Imhof emphasized that healthcare was a
significant cost driver in the state. She pointed out that
Alaska was different than the continental United States in
being surrounded by water or Canada. She referenced
Washington and mused that the entire population of Alaska
could fit into a suburb of Seattle. She commented on the
dwindling state population and the cost of equipment. She
shared that she had many comments on the matter. She did
not see how eliminating CON would somehow create
competition and lower costs.
Senator Wilson asserted that the change was not about cost
but was also about access and quality. He used the example
of the Matanuska-Susitna (Mat-Su) Borough, where a
competitor had put up an imaging facility near a hospital,
thus disqualifying the hospital from getting a CON for its
new imaging equipment. He mentioned access to quality. He
thought it had taken the hospital 12 years to get a new CON
to update its imaging services.
1:24:22 PM
Senator Wielechowski referenced a letter from Foundation
Health Partners (copy on file) which cited that the margin
was less than three percent for Fairbanks Memorial
Hospital. He contended that the organization was making a
"cherry picking argument," and asserting that the hospital
made money on some things, and lost money on other things.
He thought the organization was worried about other
organizations coming in and picking off the more profitable
areas, and then making the entire hospital unprofitable.
Mr. Zepp relayed that the sponsor had done research on
states that repealed CON. He identified that if there was
an ambulatory surgery center in a repeal state, sometimes
there was an excise tax imposed. He asked if Senator
Wielechowski was linking his comment to the Emergency
Medical Treatment and Labor Act (EMTALA), or uncompensated
care in emergency rooms.
Senator Wielechowski relayed that he was not citing
specific departments but was referencing the letter from
Foundation Health Partners.
Mr. Zepp cited that some repeal states implemented an
excise tax, which was allocated to hospitals that provided
uncompensated care to help level things out.
Co-Chair Bishop wanted to revisit Senator Wilson's earlier
statement regarding the support of previous presidential
administrations. He thought Senator Wilson had cited that
the two Bush Administrations, the Clinton Administration,
and the Obama Administration had supported CON.
Senator Wilson affirmed that those past administrations
were on the record as supporting the repeal of CON.
Co-Chair Bishop asked Senator Wilson to provide his written
testimony of his opening statement.
Senator Wilson agreed.
Senator Wilson wanted to note that the binders provided to
members were just a fraction of the empirical data he had
found on the topic of the bill. He asserted that there was
no other bill, aside perhaps from the appropriation bills,
that had more supporting backup data.
1:28:18 PM
Senator von Imhof asked who in Alaska was required to
accept Medicare and Medicaid, and whether it was optional
or required.
Senator Wilson relayed that acceptance of Medicare and
Medicaid was dependent upon some other requirements of an
agency. He cited that if a provider received grant funds
from the state, it was required to accept patients that
used Medicaid and Medicare. He continued that it could be
optional for some private providers that chose not to
receive additional state or federal funds for its
operations.
Senator von Imhof made note of the annually set rates for
Medicare and Medicaid, and thought the rates were less than
the market rates. She thought other insurance companies
would pay the difference and referenced an 80 percent rule.
She asked about the incentive for a new surgery center to
accept Medicare and Medicaid, which clearly had below
market rates and may or may not cover its costs. She asked
why the new surgery center would not cherry-pick the
highest payers, especially considering the high equipment
cost. She was concerned that places such as Fairbanks
Memorial Hospital and Providence Hospital being used a
county hospital, without higher payers to help cover higher
costs. She questioned the overall value for patients at
Fairbanks Memorial Hospital and patients that did not have
access to the surgery center. She likened the surgery
center to a spa in comparison.
Senator Wilson believed that one would not open a business
if it would not be profitable. He did not think it would
create chaos if the CON was repealed, and asserted that
chaos had not happened in states that had repealed CON. He
mentioned Alaska market rates. He cited that Alaska was one
of four states that had higher Medicaid rates than Medicare
rates. He mentioned issues beyond healthcare costs. He
discussed medical tourism. He cited that Alaska hospitals
were some of the most profitable in the nation. He thought
the Mat-Su hospital was at about 24 percent profitability.
He relayed that Providence Hospital had purchased a
hospital in California. He did not see Senator von Imhof's
argument would be a concern in the state.
1:33:51 PM
Mr. Zepp commented on states that had repealed CON, and
asserted that there was a competitive healthcare system
with better outcomes and typically better pricing. He
referenced support data. He agreed that Alaska was not like
Washington, but thought the bill would be good for the
state.
Senator von Imhof thought it was difficult to compare
Alaska to 13 other states. She was concerned that repealing
CON would widen the gap between "the haves and the have-
nots." She commented on the small number of payers and
thought imposing free market forces would not work. She
shared concerns that people that could afford high payments
would go to private clinics and others would go to
hospitals, which would have a difficult time recouping
costs.
Mr. Zepp mentioned an invited testifier that could speak to
Senator von Imhof's concerns.
Senator von Imhof restated her question. She noted that
currently hospitals in the state handled very expensive
care for pre-term babies in intensive care units (ICU) as
well as geriatric care for people that spent days or weeks
in the hospital. She highlighted the costs, which were
frequently covered by Medicaid or Medicare. She pondered
how hospitals would be able to pay for the neo-natal ICU
and the care for elder population, if hospitals were not
able to conduct other procedures that private insurance
paid for.
1:38:34 PM
MATTHEW MITCHELL, MERCATUS CENTER AT GEORGE MASON
UNIVERSITY, ARLINGTON, VA (via teleconference), emphasized
that the topic of CON was well-studied by academics, and
relayed that he had identified and read 93 peer-reviewed
papers on the subject. He cited that none of the papers had
found that CON laws were associated with decreased spending
in healthcare. He continued to cite that 60 percent of the
studies found that CON laws were associated with higher
spending per patient and capital and 40 percent found mixed
results. He described CON laws as supply restrictions that
undermined competition. He asserted that the best models in
healthcare suggested that when you undermined competition
and created local monopolies, consumers lost.
Mr. Mitchell continued and noted that another well-studied
aspect of CON laws was access. He cited that 73 percent of
studies that assessed the affect of CON on access found
that it limited access. He suggested that the patients in
Alaska had access to fewer neo-natal ICUs and fewer
psychiatric care centers. He referenced Senator von Imhof's
concern about what made a provider accept Medicare and
Medicaid. He pointed to two studies that indicated that
psychiatric care facilities and substance abuse facilities
were less likely to accept Medicaid in CON states than in
non-CON states. He summarized that the data from almost 100
studies assessing outcomes in CON and non-CON states
largely conformed with the theory that limiting supply
resulted in higher cost, less access, and diminished
quality of care.
Co-Chair Bishop asked if any of the 100 studies referenced
by Mr. Mitchell were Alaska-specific.
Mr. Mitchell believed that a majority of the studies
included data from Alaska.
Co-Chair Bishop asked if any of the studies were about
Alaska alone.
Mr. Mitchell argued that to do a proper study, one would
never want to use data only from one state, because
variation was needed to compare outcomes from CON and non-
CON states. He asserted that there needed to be a control
group.
1:41:56 PM
Senator von Imhof asked how many states he knew of where
the Medicare reimbursement rate was less than the Medicaid
reimbursement rate.
Mr. Mitchell did not have the information on hand but
offered to get back to the committee with the information.
Senator von Imhof thought the question was important,
because in Alaska the Medicare reimbursement rate was
significantly less than any other reimbursement rate,
including Medicaid. She mentioned writing an article for
Alaska Business Monthly and interviewing Providence
Hospital. The hospital had indicated that one of its
biggest cost drivers was end-of-life care, which was very
expensive and covered by Medicare with low reimbursement.
She could not imagine any private company wanting to open
an end-of-life care facility if it could not cover its
costs if Medicare paid below market rate. She thought in
other states, Medicare paid higher or comparable to others.
She hoped Dr. Mitchell could look into the matter.
Mr. Zepp addressed a presentation entitled "Alaska's
Certificate of Need Program AS 18.07 - Senate Bill 26
"An Act repealing the certificate of need (CON) program for
health care facilities"" (copy on file). He hoped the
committee members received binders with materials that he
characterized as "the tip of the iceberg" when it came to
studies on the benefits of repealing CON. He noted that
there were experts available to answer questions if
necessary. He referenced a book that had been mailed to all
committee members entitled "Conning the Competition."
Mr. Zepp stated that he would cover why the bill proposed
to repeal CON. He asserted that the legislation challenged
the fortresses of Alaska's restrained healthcare market. He
asserted that the repeal was about improving quality and
access to care, allow for new entrants and healthcare
competition, and to slow down medical tourism. Further, the
repeal would increase healthcare employment opportunities
by allowing a free-market competition and providing
healthcare providers with additional employment options.
1:46:25 PM
Mr. Zepp showed slide 2, "Our healthcare providers are
cherished and valued members of our communities!":
The concept of repealing Alaska's certificate of need
program is not meant in any way, shape, or form to
dishonor, disrespect, or minimize how important our
healthcare providers are to Alaskans!
They are our friends, neighbors, and family members,
our loved ones.
But government policies and regulations have
suppressed competition, allowed a constrained market
to escalate prices, produced lower-quality services,
dis-incentivized innovation, and new entrants.
Research shows, without competition, the incentive to
lower prices and improve quality and innovation
diminishes.
Mr. Zepp turned to slide 3, "Certificate of Need Programs":
Certificate of Need (CON) laws are state-level
statutory laws that require individuals in the
healthcare industry to obtain permission to make
significant expenditures or to construct or expand
facilities and services, based on the theory that
controlling the supply of facilities, equipment, and
services is the best method to restrain rising
healthcare costs and prevent over-expansion of
healthcare facilities.
The basic assumption underlying CON is that excess
needs stemming from the overbuilding of healthcare
facilities results in healthcare price inflation and
services beyond a community's capacity.
The Certificate of Need laws were originally created
to contain healthcare costs, prevent over-supply of
medical services and infrastructure, and improve
access to care, whether indigent or in underserved
areas.
CON laws in Alaska require medical providers to obtain
government permission to compete for over 20 medical
services. Please take note: The approval process is
not done by health care providers like nurses or
doctors; it's a government entity that decides what
health care facilities and/or services should be
available to you, your family, and friends (your loved
ones).
However, the overwhelming empirical evidence shows the
CON has worked like envisioned in Alaska; 40 years of
data/research studies back this up. Certificate of
Need has not worked how it originally was intended and
it's time to repeal!
Mr. Zepp noted that SB 26 did not change healthcare
licensing and accreditation. He noted that licensing
occurred through the Division of Healthcare Services, and
accreditation through the Centers for Medicaid and Medicare
Services. He noted that while not a magic bullet to fix
everything, SB 26 was a step in the right direction for
Alaskans that did not have a voice.
Mr. Zepp showed slide 4, "Current National Status of
Certificate of Need Programs," which showed a graphical
map. He cited that currently 35 states had a CON, 3 states
had a version of a CON, and 13 states had fully repealed
CON. The 13 states that had repealed the CON represented
over 40 percent of the population, or about 131 million
Americans. The 13 states had functioning healthcare
markets, and research and data showed that the states were
enjoying benefits from the repeal.
Mr. Zepp advanced to slide 5, "Alaska's Legislative History
of Certificate of Need":
The following is a past summary of enacted legislation
passed by the Alaska Legislature regarding the
certificate of need program:
1976: HB 665 (Ch. 275, SLA 1976), which repealed and
replaced all of AS 18.07 to establish the certificate
of need program and regulation of healthcare
facilities.
1982: HB 591 (Ch. 59, SLA 1982), covers only a
temporary but not an emergency certificate of need for
a health care facility and added a definition of
certificate of need dealing with the issuance of
certificates.
1982: HB 591 (Ch. 25, SLA 1981), clarified that
Pioneer Homes are not subject to certificate of need.
1983: SB 85 (Ch. 95, SLA 1983), added a $1,000,000
($1.0 million) floor for requiring a certificate of
need.
1990: HB 85 (Ch. 85, SLA 1990), provided authorization
to Dept. of Health & Social Services to charge a fee
for the certificate of need.
1991: SB 86 (Ch. 21, SLA 1991), deleted the federal
statutes and changed the title section.
1996: HB 528 (Ch. 84, SLA 96), Placed a moratorium on
nursing home beds and established a legislative
working group on long-term care.
2004: HB 511 (Ch. 48, SLA 04), Included Residential
Psychiatric Treatment Centers
Mr. Zepp referenced earlier comments by Senator Olson and
noted that in the 1970s when the governor mandated the CON
tied to funding, it was repealed in the 1980s because it
did not work.
1:50:05 PM
Mr. Zepp discussed slide 7, "Why repeal Alaska's
Certificate of Need?":
The Federal Trade Commission, the Dept. of Justice,
the Mercatus Center, and many other researchers have
studied this issue for over 4 decades and some have
even testified here in our legislature supporting the
repeal of the CON.
Here are a few points (data & research derived from
the various studies) as to why we should repeal CON:
? CON programs limit the introduction and expansion of
medical services & equipment, rehabilitation centers,
nursing home beds, and medical imaging technologies;
? Rural hospital closures: The data and research shows
that the closures are related to Low Patient Volume,
Challenging Payer Mix (Medicare & Medicaid patients,
which pay less), Geographic Isolation (located far
away from population centers), and Workforce
shortages. None of this has to do with whether you
have a CON or not;
? High-quality health care: Data and research
indicates that deaths from treatable complications
following surgeries and mortality from heart failure,
pneumonia and heart attacks are significantly higher
in CON states than non-CON states; and,
? Charity care: Studies have shown, there is not
evidence that charity care is higher in CON states
than non-CON states.
? Racial Disparities: According to research, racial
disparities seems to increase in CON states.
Mr. Zepp cited that there were four studies in members'
binders that provided data about rural hospital closure. He
cited a report that identified that hospital margins in
Alaska could range as much as 223 percent higher than the
Lower 48. He cited that emergency care in America was two
percent of all United States' (U.S. medical costs. He
reminded that the CON concept from the 1970s was to charge
private insurers two to three times the amount for services
for uninsured patients so hospitals could cover
uncompensated care. He mentioned the Department of Health
and Social Services payments of federal dollars through the
state to help with uncompensated care. The payments ranged
from $17.6 million to as much as $25 million.
Mr. Zepp referenced the claim that if CON was repealed,
Medicaid costs would rise. He asserted that there was no
evidence that states that repealed a CON had seen an
increase after the repeal.
Mr. Zepp cited that U.S. Presidents George W. Bush, Barack
Obama, and Donald Trump were on the record supporting
repeal of CON. He cited that Governor Bill Walker supported
repealing CON. He asserted that repealing CON benefitted
citizens. He encouraged members to peruse the data
supporting the topic.
1:54:02 PM
Mr. Zepp asserted that CON healthcare facilities, services,
and technology was unfairly exposed to competitors through
the CON process where incumbents were able to review,
comment, and object to the application.
Mr. Zepp showed slide 8, "Alaskans pay the highest
healthcare costs in the world!":
Why would Alaska's health care providers not want to
open Alaska to a free market? Here are some data
examples to think about:
• Alaska ranks the highest in the nation at $11,064
per capita in 2014; (Medicaid & Medicare data was
last released in June 2017, which covers 1991-2014.
The next release is scheduled for 2022);
• The total Anchorage consumer price index was up 77%
from 1991- through 2017, but the medical care part
of the index was up 210% - Nearly three times faster
than the prices in the overall CPI;
? Hospital margin averages in Alaska run at
15.6%, Anchorage margins average 20.6%, that's 5%
higher than San Francisco, which is the next
highest in the country;
? Hospital Margins can be as much as 223% higher
than the lower 48 states; and,
? Medicare Fee Schedule for Diagnostic Radiology
(imaging) in Alaska increased from 491% in 2014
to 533% in 2016 (percentage above the average
reimbursement rate).
ALASKA HAS THE HIGHEST HEALTH CARE COSTS IN THE
WORLD!!!
Mr. Zepp suggested that CON was designed to restrain
healthcare costs, and thought evidence and studies showed
that CON regulations tended to increase the costs of
services. He noted that comparison states for the data on
the slide were Washington, Oregon, Idaho, Wyoming, and
North Dakota. He highlighted his support for choice,
competition, new entrants, and new technologies in
healthcare.
Mr. Zepp reviewed slide 9, "Alaska's economy is losing
dollars because of the high cost of healthcare":
Let's talk briefly about medical tourism: Because
employers are looking at ways to keep healthcare costs
down and increase the quality for their employees,
they have engaged with third party vendors to manage
and coordinate medical services for their members.
They seek healthcare services in the lower 48.
• Summary data from several third-party vendors
related to the medical tourism within Alaska:
? State of Alaska: 2019-2020: 93 completed
procedures
o Total savings = $3.9 million dollars, average
cost savings = $42,407 per procedure;
• Orthopedics for 11 procedures:
? In Alaska = $547,082 Lower 48 = $236,510 Savings
of $337,572 or 58.8% less
• Pacific Health Group: 2019: 220 completed procedures
? Total cost savings = $5.7 million
Mr. Zepp discussed savings through using third-party
vendors and medical tourism.
1:57:05 PM
Senator Wilson discussed slide 10, "What happened to CON
during the COVID pandemic?":
The requirement to submit a certificate of need prior
to temporarily increasing bed capacity was suspended
on March 31, 2020. The suspension ended on February
14, 2021. Approximately 11 months without CON
regulations.
Alaska suspended the certificate of need laws to meet
the demand for increased beds and equipment necessary
during the pandemic.
The industry was able to meet the health care demand
during a crisis, without CON.
Amazon, Walmart, and McDonald's didn't run up here to
open up any health care facilities during the
suspension. The health care industry in Alaska wasn't
turned on its head or destroyed without CON.
What happens when the next pandemic strikes and we
have CON?
The suspension of CON regulations provided flexibility
to the health care industry to meet the market
demands. This is another reason the law should not
exist now!
So why do we need CON?
Alaska already has the highest healthcare prices in
the world!
Senator Wilson cited that 25 jurisdictions had had CON
requirements suspended or loosened during the pandemic. He
noted that during the CON suspension in Alaska, there had
been no ambulatory surgery clinics that applied for a CON,
no exemptions to build capacity, and there had been no
facilities trying to stake a claim to come to the state
when the pandemic was over.
Co-Chair Bishop asked if the lack of new facilities during
the pandemic was due to hospitals being full.
Senator Wilson answered in the negative. He described an
example of starting a dialysis center or ambulatory surgery
center, which took a couple of years to build. He thought
most of the surgery centers currently being built were
under a certain dollar threshold and were unsafe because of
fewer medical professionals on hand. He mentioned large
medical entities that were exempt from applying for a CON.
He referenced a facility that wanted to open a surgery
center in a metropolitan area, that could put a hospital
out of business. He discussed leasing medical equipment in
physician-owned facilities. He questioned why the state
needed a CON when the CON requirements could be suspended
for 11 months during the pandemic.
Senator Wilson showed slide 11, "Thank you for support of
Senate Bill 26 "An Act repealing the certificate of need
program for health care facilities"."
Co-Chair Bishop referenced Senator Wilson's example of a
colonoscopy costing $7,500. He asked where the procedure
was.
Senator Wilson answered "Anchorage."
Co-Chair Bishop relayed that a colonoscopy was cheaper in
Fairbanks.
2:01:19 PM
Senator von Imhof referenced the high cost of healthcare in
Alaska and agreed that there was no silver bullet. She
questioned how much repealing the CON requirement would
change the situation. She asked how many of the states
mentioned earlier had Medicaid expansion or Indian Health
Service funds. She noted that a lot of the Medicaid
expansion population qualified for both, which had helped
funnel money into rural areas to build expensive
facilities. She asked how many of the states had the 80th
percentile rule. She thought the issue was very complicated
in a small population with the other "levers" she had
mentioned. She reiterated that she was worried that
repealing the CON would create an even wider gap between
the "haves and have nots."
Mr. Zepp asked for Dr. Mitchell to address Senator von
Imhof's comments.
Dr. Mitchell thought it was notable that when researchers
were comparing outcomes in different states or across time,
the studies used regression analyses. He continued that all
the estimates were driven by estimates that controlled
other factors. He thought there were three sets of
evidence: how CON affects quality, how CON affects cost,
and how CON affects access. He cited that there were four
times as many studies that found that CON undermined
quality rather than enhanced quality. He emphasized access,
and thought the evidence was overwhelming. He cited that
the typical patient in a CON area had access to 30 percent
fewer hospitals, to 14 percent fewer ambulatory surgery
centers, and 30 percent fewer rural hospitals.
Dr. Mitchell continued his remarks. He cited that there was
quite a bit of research on rural states. In rural states,
patients had to drive longer distances to obtain care in
CON states relative to non-CON states. There were fewer
substance abuse facilities and psychiatric care facilities,
and the facilities were less likely to accept Medicaid in
CON states. He continued that there was also a larger
black-white disparity in the provision of care in CON
states versus non-CON states in certain procedures. He
noted that the black-white disparity disappeared upon
repeal of the CON laws.
2:06:28 PM
Mr. Mitchell referenced Senator von Imhof's concerns about
the "haves and have nots," and thought she was right to be
focusing on the topic. He contended that evidence suggested
that repealing the CON was the way to help the most
vulnerable, since CON did not stand in the way of care for
people with resources to fly outside the state but did
stand in the way of care for those that did not have the
resources.
Senator Wielechowski was curious if there was any research
regarding hospitals shutting down in states that had gotten
rid of the CON.
Dr. Mitchell mentioned that overall, there were 30 percent
more hospitals per capita in states without CON laws than
states with CON laws. There was also more of other types of
providers. He noted there was studies that showed hospital
profitability did fall but recovered after three to four
years.
Senator von Imhof asked how a hospital overcame a fall in
profitability if the population stayed the same.
Dr. Mitchell relayed that some of the evidence suggested
that hospitals recovered by becoming more adaptable. There
was research to suggest that hospitals were less likely to
change missions, adopt new programs and adapt to changing
circumstances of the hospital patients if protected by CON
laws that limited competition.
Senator von Imhof hoped that as the bill progressed there
would be invited testimonies from hospitals that could
describe plans to adapt.
2:09:01 PM
Co-Chair Bishop asked if Dr. Mitchell was a doctor of
economics or a medical doctor.
Dr. Mitchell stated he had a Ph.D. in economics.
Co-Chair Bishop asked what Milton Freedman would say about
CONs.
Dr. Mitchell did not know.
Co-Chair Bishop asked what one swift action Mr. Mitchell
would take to reduce healthcare costs in America if he were
able.
Dr. Mitchell relayed that he had studied CON laws for a
decade, and he was very familiar with the issue. He did not
think it would be responsible to say that he had compared
CON repeal with all other proposed reforms. He thought it
was pretty obvious given the data, that repealing the CON
was a step in the right direction. He pondered whether the
proposed repeal was better than other reforms, including
price transparency. He was unable to comment.
Senator Wilson addressed Senator von Imhof's comments and
cited a study from the National Institute of Healthcare
Reform. The study included a response from a hospital that
indicated that CON laws were a valuable tool in blocking
new facilities from coming into market. He reiterated that
SB 26 was one of the most researched and documented pieces
of legislation that had moved through the body since his
time in the legislature.
Co-Chair Bishop thanked Mr. Zepp for the time he took in
putting the research together for the bill.
2:12:55 PM
Mr. Zepp shared that the sponsor believed that the CON had
distorted the Alaska healthcare market. He asserted that
the path was unsustainable. He emphasized controlling the
state's destiny rather than letting the restrained
healthcare markets guide us. He asked support to repeal
government control of healthcare options, facilities, and
services.
Co-Chair Bishop asked about Mr. Zepp's earlier comment
regarding healthcare workers.
Mr. Zepp relayed that the CON had distorted the Alaska
healthcare market and created more self-interest concerns
for business entities, which did not benefit Alaskans nor
healthcare workers. He explained that he was referring to
New Hampshire repealing the CON law in 2016. He cited
information that showed nursing employment growth after
repeal of the CON.
Co-Chair Bishop thought the state was in a new paradigm. He
observed the people in the gallery. He commented on a
6,500-person healthcare worker shortage. He asked how long
it would take to fill the healthcare worker gap if the bill
were to pass.
Senator Wilson stated ideally there would be more
competition and would bring more profitability to the
state. He mused that the gallery represented about $1.2
million in lobbyist fees to help stop the bill. He
alternatively hoped individuals were there to support the
legislation.
Co-Chair Bishop thought there was a long way to go with
workforce development in the state. He referenced the
pandemic and that it had exacerbated the problem. He
commented on the need to help the healthcare industry
become fully staffed.
2:15:55 PM
Mr. Zepp addressed a sectional snalysis for SB 26, Version
I (copy on file):
Section 1: AS 12.25.030(e) - Title 12, Code of
Criminal Procedure
PAGE 1, LINES 4-6:
This conforming section replaces the statutory
definition of a "health care facility" reference under
the "Arrests & Citations" chapter of statutes and
deletes the previous reference under the "Certificate
of Need" program.
Section 2: AS 12.55.155(c)(36)(A) - Title 12, Code of
Criminal Procedure
PAGE 1, LINE 7 - PAGE 2, LINE 4:
This section provides for a new definition of a
"health care facility" reference under the "Sentencing
and Probation" chapter of statutes.
Section 3: AS 12.55.155(c)(36) - Title 12, Code of
Criminal Procedure
PAGE 2, LINES 5 - 7:
This section adds the definition of a "residential
psychiatric treatment center" reference under the
"Sentencing and Probation" chapter of statutes.
Section 4: AS 18.20.400(c) - Title 18, Health, Safety,
Housing, Human Rights, and Public Defender
PAGE 2, LINE 8 - PAGE 4, LINE 10:
This conforming section adds the definition of a
"residential psychiatric treatment center" reference
under the "Overtime Limitations for Nurses" chapter of
statutes.
Section 5: AS 18.20.400 - Title 18, Health, Safety,
Housing, Human Rights, and Public Defender
PAGE 4, LINE 11 - LINE 23:
A conforming section that adds the definition of a
"residential psychiatric treatment center" reference
under the "Overtime Limitations for Nurses" chapter of
statutes.
Section 6: AS 18.20.499(2) - Title 18, Health, Safety,
Housing, Human Rights, and Public Defender
PAGE 4, LINE 24 PAGE 5, LINE 5:
A conforming section that adds the definition of a
"health care facility" reference under the "Overtime
Limitations for Nurses" section of statutes and
deletes the previous "Certificate of Need" statutory
references
Section 7: AS 18.26.220 - Title 47, Welfare, Social
Services, and Institutions
PAGE 5, LINE 6 LINE 16:
This section is amended to add the state licensing
requirements for facilities and services under a new
statutory reference remove the previous requirements
for facilities and services under a "certificate of
need" program under the "Centralized Licensing and
Related Administrative Procedures" chapter of
statutes. The amended section maintains licensing
requirements for facilities and/or services.
Section 8: AS 18.35.399(9) - Health, Safety, Housing,
Human Rights, and Public Defender
PAGE 5, LINE 17 LINE 29:
A conforming section that removes the reference to the
"certificate of need" statute and replaces it with the
updated statue reference under AS 18.20.400 (d),
"Definitions".
Section 9: AS 18.07.021-18.07.111; AS 21.86.030(c)(1);
AS 44.64.030(a)(18); and AS 47.80.140(b)
PAGE 5, LINE 30 PAGE 6, LINE 1:
This conforming section repeals various statutory
references related to the "certificate of need"
program.
2:19:16 PM
Mr. Zepp continued to address the sectional analysis:
Section 10: Section 4, ch. 275, SLA 1976, is repealed:
PAGE 6, LINE 2:
Repeals a section of uncodified law in sec. 4, ch.
275, SLA 1976, which provided a transition to allow
medical facilities in existence or under construction
before July 1, 1976, to obtain certificates of need.
Section 11: Certificate of Need; Applicability:
PAGE 6, LINE 3 LINE 16:
Amends uncodified law and provides that the Department
of Health & Social Services may not take any action to
revoke, enforce, or modify a certificate of need
issued to a health care facility before the effective
date of the Act. This section includes a sliding scale
that increases the threshold amount, in fiscal years
FY24 through FY 31, of when a "Certificate of Need" is
required by the Department of Health & Social
Services.
Section 12:
PAGE 6, LINE 17 - LINE 22:
Adds a new subsection that directs the Department of
Health and Social Services to create regulations
necessary to implement the changes made by this Act by
July 1, 2023.
Section 13:
PAGE 6, LINE 23:
Section 12 of this Act takes effect immediately under
AS 01.10.070(c).
Section 14:
PAGE 6, LINE 24:
Provides that, except section 13 of the Act, the
effective date of the Act is July 1, 2024.
2:20:50 PM
Mr. Zepp addressed an Explanation of Changes document -
Version B to I document (copy on file):
One change:
Page 6, lines 8 through 16:
o Amendment added in the Senate Labor & Commerce
Committee inserted a sliding scale that increases the
threshold amount, in fiscal years FY24 through FY 31,
of when a "Certificate of Need" is required by the
Department of Health & Social Services.
o If enacted in its current form, the legislation
would fully repeal Alaska's "Certificate of Need" on
July 1, 2031.
Mr. Zepp noted that Section 11 of the bill provided for a
delayed implementation date of three years. He explained
that the intent was to create a glide path for businesses
entities that had invested multiple millions of dollars. As
of July 1, 2024, the threshold to apply for a CON went from
$1.5 million to $5 million. On July 1, 2026, the amount
increased to $7.5 million. On July 1, 2028 the amount
reached $10 million. In 2030 the amount reached $15
million. The current level was $1.5 million. He added that
July 1, 2031 would be the full repeal of CON for Alaska.
Co-Chair Bishop thanked Dr. Mitchell for calling in to the
meeting.
Mr. Zepp informed that Jamie Cavanaugh, a CON attorney from
Michigan, was present to answer questions.
Senator Olson asked to have Ms. Cavanaugh come to the table
to address some questions expressed by Senator von Imhof.
2:24:18 PM
JAMIE CAVANAUGH, CERTIFICATE OF NEED ATTORNEY, INSTITUTE
FOR JUSTICE, introduced herself. She referenced comments by
Dr. Mitchell regarding profitability of hospitals, and
cited that incumbent hospitals were not closing due to CON
repeals. Further, studies showed that the hospitals were
more profitable after the initial drop in profitability
after CON repeal.
Senator Olson understood Ms. Cavanaugh's comments. He asked
if a normal hospital administrator would say the same
thing.
Ms. Cavanaugh heard from hospital administrators and
hospital associations that they shared the same fear, but
had not seen examples of a rural hospital closing.
Senator Olson referenced Senator von Imhof's comments about
the widening spread between the "haves and the have-nots."
He wondered if the concern was valid if the CON was
repealed.
Ms. Cavanaugh thought the widening gap was not something to
worry about. She cited that Alaska was already losing
medical dollars to the Lower 48. She contended that if
there was anything that could be done to increase
competition and drive prices down, it would keep medical
dollars in the state and it would benefit hospitals. She
referenced Dr. Mitchell's citation of studies that showed
racial disparities diminishing when CON laws were repealed.
She summarized that the evidence did not show that any
disparities widened but did show that CON repeal helped the
problem.
2:27:25 PM
Senator Olson considered Alaska Native hospitals and
beneficiaries of the federal government and asked about the
effect of the proposed repeal.
Ms. Cavanaugh thought the hospitals Senator Olson referred
to were exempt from the CON.
Senator Olson noted that there was still competition, and
contended that people with private insurance could go to
Anchorage for medical care rather than a rural hospital.
Senator Wilson believed the co-chair had an example to
share in which an exempt facility wanted to compete with a
hospital in the same district and was opening a new
facility. He thought there were Native-owned hospitals that
wanted to compete with the private sectors and opening a
variety of services including a dialysis center. He made
the point that entities had to go through a multi-million-
dollar CON application process, while exempt entities could
move forward to profitability.
Senator Wielechowski was curious if there were any other
states that had abolished CON and had then gone back to
having a CON.
Ms. Cavanaugh cited that Indiana had abolished its CON
program and then had reenacted a CON in 2019 only for
nursing homes.
Senator Wielechowski asked if there was a rational reason
for the return. He asked what had occurred, and if the
state had made a mistake.
Ms. Cavanaugh thought the state had made a mistake going
back to a CON. She did not know the policy reasons behind
the decision.
Senator Wilson recalled that there was a National
Conference of State Legislatures (NCSL) conference in
Tennessee, and there had been some states that were looking
at repealing CON. There had been a private meeting off the
record, in which someone from Indiana had stated the
reinstatement of CON was due to a nursing home lobbying
group.
Co-Chair Bishop thanked Ms. Cavanaugh for her testimony.
Co-Chair Bishop set the bill aside.
SB 26 was HEARD and HELD in committee for further
consideration.
2:31:40 PM
AT EASE
2:33:02 PM
RECONVENED
Co-Chair Bishop discussed the agenda for the following day.
He noted that he was removing SB 81 from the following
day's agenda.
ADJOURNMENT
2:33:56 PM
The meeting was adjourned at 2:33 p.m.