Legislature(1999 - 2000)
03/22/1999 01:35 PM Senate JUD
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SENATE JUDICIARY COMMITTEE
March 22, 1999
1:35 p.m.
MEMBERS PRESENT
Senator Robin Taylor, Chairman
Senator Dave Donley
Senator John Torgerson
MEMBERS ABSENT
Senator Rick Halford, Vice-Chairman
Senator Johnny Ellis
COMMITTEE CALENDAR
SENATE BILL NO. 106
"An Act relating to decisions by the commissioner of health and
social services to remand certain health facility payment decisions
back to the hearing officers; and amending Rule 602, Alaska Rules
of Appellate Procedure."
-MOVED CSSB 106(JUD) OUT OF COMMITTEE
SENATE BILL NO. 96
"An Act relating to access to criminal history records and to
revocation of or failure to renew certain licenses based on
criminal conduct or alleged criminal conduct; and providing for an
effective date."
-SCHEDULED BUT NOT HEARD
PREVIOUS SENATE COMMITTEE ACTION
SB 96 - See Judiciary Committee minutes dated 3-15-99 and 3-17-99.
SB 106 - No previous action to report.
WITNESS REGISTER
Mr. Robert Valliant
Bartlett Regional Hospital
4409 Cloverdale Street
Juneau, AK 99801
POSITION STATEMENT: Supported CSSB 106(JUD)
Mr. Jay Livey, Deputy Commissioner
Department of Health and Social Services
PO Box 110601
Juneau, AK 99811-0601
POSITION STATEMENT: Commented on CSSB 106(JUD)
Ms. Kristen Bomengen, Assistant Attorney General
Department of Law
PO Box 110300
Juneau, AK 99811-0300
POSITION STATEMENT: Commented on CSSB 106(JUD)
Ms. Sue Mason
1029 West 3rd, 6th Floor
Anchorage, AK 99501
POSITION STATEMENT: Commented on CSSB 106(JUD)
Mr. Dan Houghton, Chief Financial Officer
Alaska Regional Hospital
Debarr Road
Anchorage, AK 99501
POSITION STATEMENT: Supported CSSB 106(JUD)
Mr. Charlie Franz
South Peninsula Hospital
4300 Bartlett Street
Homer, AK 99603
POSITION STATEMENT: Supported CSSB 106(JUD)
Ms. Laraine Derr, President and CEO
Alaska State Hospital and Nursing Home Association
319 Seward Street #11
Juneau, AK 99801
POSITION STATEMENT: Supported CSSB 106(JUD)
ACTION NARRATIVE
TAPE 99-20, SIDE A
Number 001
CHAIRMAN ROBIN TAYLOR called the Judiciary Committee meeting to
order at 1:35 and announced SB 106 would be the first item for
consideration.
SB 106-REMAND OF HEALTH FACILITY PAYMNT DECISION
CHAIRMAN TAYLOR explained the purpose of SB 106 is to provide
finality in the administrative appeals process and to stop the
merry-go-round of departmental hearings and remanded decisions that
is negatively affecting hospitals around the state.
MS. LARAINE DERR, President and Chief Executive Officer of the
Alaska State Hospital and Nursing Home Association, said her
organization had submitted a letter of support for SB 106. She
deferred to the other witnesses.
Number 039
SENATOR TORGERSON moved the adoption of the committee substitute
for SB 106 (version D, dated 3-19-99). Without objection, the
committee substitute was adopted.
MR. BOB VALLIANT, representing Bartlett Regional Hospital, stated
that Bartlett supports the committee substitute. MR. VALLIANT
explained his concerns and frustrations with the administrative
adjudication process. MR. VALLIANT discussed Bartlett Hospital's
experience with the Department of Health and Social Services in
their effort to obtain Medicare reimbursement funds for a Magnetic
Resonance Imager (MRI) machine purchased in 1993.
MR. VALLIANT explained the MRI issue still has not been settled, 38
months after the original denial of reimbursement. There have been
two partial rulings in Bartlett's favor, yet no resolution. He said
the issue has required quite a bit of time and money and the lack
of finality is frustrating. He contended that this type of
expensive, extended case is one example of why medical costs are so
high.
MR. VALLIANT urged the committee to pass CSSB 106(JUD).
Number 176
CHAIRMAN TAYLOR commented that medical technology is rapidly
changing and asked MR. VALLIANT when they will replace the MRI in
question. MR. VALLIANT replied they will purchase a new MRI in 4
to 5 months. CHAIRMAN TAYLOR noted the machine is not only paid
off, but "kind of used up". MR. VALLIANT agreed.
SENATOR TORGERSON asked the outstanding amount of reimbursement in
the Bartlett case. MR. VALLIANT said the amount would be negotiated
by the hospital with the Department, but his financial consultants
estimate the amount at $800,000.
Number 202
MR. JAY LIVEY, representing the Department of Health and Social
Services, handed out information and explained the complex,
individualized Medicare rate setting process. Each facility
receives a particular reimbursement rate assigned to it each year.
To determine the Medicare reimbursement rate, each facility submits
an inventory of its costs. The Department uses these costs and the
actual cost of services provided to Medicare patients in a
calculation that also considers reimbursement rates from previous
years to determine the current year reimbursement rate.
SENATOR DONLEY interrupted, asking MR. LIVEY what he was driving
at. He said he would understand his explanation better if he knew
what the premise of his argument is. MR. LIVEY replied he was
trying to show that the appeals process that would be changed under
SB 106 is all part of the existing rate-setting system, and he
believes SB 106 will violate the Department's ability to regulate
the rate-setting process.
Number 290
SENATOR TORGERSON asked if the Department audits just what they are
given by each facility. MR. LIVEY replied the audit is the review
of the cost report provided to the Department by each facility.
SENATOR TORGERSON said "That's just verification of numbers -
that's a long way from an audit."
SENATOR TORGERSON asked for examples of high and low reimbursement
rates and said he thought they ranged from $187 dollars a day to
close to $600 per day. He asked how the Department justifies the
difference in rates. MR. LIVEY said each facility has an individual
rate and "just because we do an audit of the Medicare cost report,
doesn't mean that it is an efficient facility." SENATOR TORGERSON
said he is trying to find a way to achieve more efficient
facilities. He asked if the Legislature could set a fixed rate and
tie it to area cost differentials or change state statutes in order
to clean up the regulatory process. MR. LIVEY said he supports
changing state statutes in this area.
Number 330
SENATOR DONLEY asked how following the recommendation of a hearing
officer would have prevented the Department from setting rates. MR.
LIVEY said a hearing officer may understand departmental policy but
may not write his or her decision totally in accordance with it.
The Department needs to be able to "imprint" its policy on a
decision through the remand process, and 30 days is not enough time
to do this.
SENATOR DONLEY asked what "imprinting policy" means. CHAIRMAN
TAYLOR commented that the policy the hearing officer interprets is
within the Administrative Code Regulations. He asked what the
policy that needs to be imprinted is. MR. LIVEY used the example of
the policy decisions that had to be made in the Bartlett Hospital
case. SENATOR DONLEY concluded he would like to hear from the
Department of Law.
Number 399
MS. KIRSTEN BOMENGEN, Assistant Attorney General for the Department
of Law, explained that a Commissioner's review of a hearing
officer's decision allows the Commissioner to review the facts in
the case and ensure the decision is consistent with the
Department's historical interpretation of regulations. She stated
it is the Commissioner's job to decide if all agency decisions are
internally consistent.
SENATOR DONLEY asked if the Department of Law approves remands. MS.
BOMENGEN said the Department is not active in agency decisions, but
feels this action is consistent with administrative legal
principles. SENATOR DONLEY countered, "...Administrative legal
principles? What about the Constitution? What about the intent of
the statutes that there be some finality to this process so you are
not denying people access to the courts . . . shouldn't your advice
incorporate all of those principles?" MS. BOMENGEN replied that all
of those factors are considered. She said there are many options to
weigh as solutions to the problem.
SENATOR DONLEY asked if she had suggested the department change the
regulations, rather than continue remanding decisions. MS. BOMENGEN
repeated "I'm certain that all types of recommendations have come
up, in different contexts of reviewing these cases."
MR. LIVEY suggested that one of the benefits of having a hearing
officer who is acting "somewhat independently" is they can suggest
the Department review and/or change regulations. SENATOR DONLEY
asked, "You haven't done that yet?"
Number 465
SENATOR DONLEY asked if cases can be bifurcated in order to proceed
with one issue that is not contested, while the other issue(s) is
still being decided. MS. BOMENGEN agreed this would an option,
provided both parties agreed. SENATOR DONLEY asked her if the
Department had explored that option. MR. LIVEY said if this were
done, the issue would be split by the hearing officer, after he or
she holds evidentiary hearings.
Number 484
SENATOR TORGERSON again verified that MR. LIVEY used the term audit
to mean a verification of cost figures supplied by facilities.
CHAIRMAN TAYLOR commented, "You take their report . . . what they
think their cost reimbursement should be, you then go back into
their facilities . . . to have them prove to you that these amounts
of money were actually expended . . ." MR. LIVEY agreed that was
the procedure.
SENATOR DONLEY asked MS. BOMENGEN if the Commissioner could
recommend that a question be split. MS. BOMENGEN agreed that is
likely possible, but there may be reasons people want the issue
decided "as a package."
SENATOR DONLEY asked if the Bartlett Hospital case was remanded
once or twice. CHAIRMAN TAYLOR added that the original audit was in
1995, and asked what is the status of this case in 1999. MR. LIVEY
believed the issue had been remanded for a second evidentiary
hearing as of last Fall. MR. VALLIANT remarked the case has been
remanded to a hearing officer twice and both times the hearing
officer has decided "pay the hospital". MR. LIVEY argued that the
second remand ended in a summary judgement, not a proposed decision
for the Commissioner to act on.
Number 543
SENATOR DONLEY asked, "A summary judgement is not a final
decision?" MR. LIVEY explained the summary judgement would be
rolled into the proposed decision that will be submitted to the
Commissioner after the evidentiary hearing. MS. BOMENGEN explained
the hearing officer had come to a "partial summary judgement" that
was distributed informationally to the parties involved.
SENATOR TORGERSON brought the discussion back to SB 106 and asked,
"Why doesn't this bill work?" MR. LIVEY replied 30 days is not
enough time for the Department to finalize a decision. SENATOR
TORGERSON interrupted, "45 enough? . . . I'm trying to negotiate a
settlement." Mr. LIVEY replied he would like to think about the
length of time that would be appropriate.
Number 566
SENATOR TORGERSON pointed out there have only been 6 proposed
decisions remanded to a hearing officer in the past 4 years. He
asked how many hearing officers the Department employs and MR.
LIVEY indicated they employ one hearing officer.
MR. LIVEY explained that once a decision is appealed, future rates
are affected. The rates for all subsequent years are rolled into
one appeal, which can be complex. CHAIRMAN TAYLOR said that is the
problem, "Once a decision is not made, it impacts every year's
filing after that and they all have to . . . be amended because
somebody failed to make a decision . . ." He asked how, after
these things are rolled into one another year after year, a
reimbursement rate is decided.
TAPE 99-20, Side B
Number 585
MR. LIVEY explained the rate is set on costs that are approved.
Disputed costs are paid later, if they are eventually approved.
SENATOR TORGERSON asked what the outstanding appeals total
currently. MR. LIVEY replied between $10 million and $12 million,
though once these costs are paid they would be included in the
facilities cost base and would show up annually. CHAIRMAN TAYLOR
remarked, "Somebody is paying those costs anyway, that's what has
me bothered. I think I know who it is - it's me."
SENATOR TORGERSON said this is only "the tip of the iceberg" and
the whole process needs help. SENATOR DONLEY observed the problem
requires clearer regulations, and "a better Executive branch."
Number 568
MR. LIVEY agreed the rate-setting process could be improved. He
reiterated that 30, 45, or even 60 days is not enough time for the
Department to issue a decision. CHAIRMAN TAYLOR maintained that is
exactly the number of days (30) a private attorney has to file an
appeal in a major case.
Number 547
MS. SUE MASON, an Anchorage attorney who represents hospitals in
Medicare rate appeals, testified the committee substitute is better
than the original bill and she supports it.
MS. MASON said the Department now is in compliance with the
Administrative Procedures Act only technically; by issuing a remand
order that specifies remand instructions to follow, the
Commissioner avoids existing statute that requires a decision
within 30 days.
MS. MASON suggested the numbering of the sections within bill be
changed to tighten the bill.
Number 464
MR. DAN HOUGHTON, Chief Financial Officer of Alaska Regional
Hospital, testified in support of SB 106. MR. HOUGHTON said endless
appeals without judicial relief waste both time and money and seem
contrary to finding a fair and equitable solution.
Number 431
SENATOR TORGERSON moved Amendment #1, the structural changes to the
bill suggested by Sue Mason. CHAIRMAN TAYLOR clarified the
amendment would change, on page 1 line 14, "Section (2)" to
"Section (c)" and, on page 2 line 7, change "Section (3)" to
"Section (d)". Without objection, Amendment #1 was adopted.
CHAIRMAN TAYLOR agreed with SENATOR TORGERSON that this is only the
tip of the iceberg in relation to the problems that exist with the
administrative adjudication process. He said there is legislation
moving out of the House that establishes an autonomous cadre of
hearing officers to hear administrative appeals.
CHAIRMAN TAYLOR remarked he appreciated the candor of MR. LIVEY,
who reinforced his idea that there are internal unwritten policies
within departments. He suggested this must be difficult for anyone
trying to deal with the department.
Number 395
MR. CHARLIE FRANZ, representing South Peninsula Hospital,
registered his support for CSSB 106(JUD). He said, "The appeals
process is clearly broken . . . and we need to do something to fix
it."
Number 373
SENATOR TORGERSON moved CSSB 106(JUD) out of committee with
individual recommendations. Without objection, CSSB 106(JUD) moved
from committee with individual recommendations.
CHAIRMAN TAYLOR announced SB 96 would not be heard. With no further
business to come before the committee, CHAIRMAN TAYLOR adjourned
the meeting at 2:43 p.m.
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