HOUSE BILL NO. 528 "An Act relating to applications for certificates of need and licensing of nursing homes; amending the standard of review for certificates of need for health care facilities in the state; establishing a moratorium with respect to new applications by prohibiting the issuance of a certificate of need or a license for additional nursing home capacity in the state until July 1, 1998; and providing for an effective date." JAY LIVEY, DEPUTY COMMISSIONER, DEPARTMENT OF HEALTH AND SOCIAL SERVICES discussed section 2. He observed that if 147 nursing home beds are built over the next five years it will cost the State approximately $57.0 million dollars. He stated that it is unclear where cost effectiveness review will occur if it is not part of the legislation. He stressed that cost effectiveness can be part of the certificate of need process. He maintained that section 2 is critical to the legislation. CONNIE SIPES, DIVISION OF SENIOR SERVICES, DEPARTMENT OF ADMINISTRATION stressed that certificates of need are appealed to the judicial branch. The judicial branch makes a binding finding on whether or not a certificate of need should be granted by the Department. Once a certificate of need is granted, nursing home beds are a mandatory service 2 under Medicaid that must be funded. She pointed out that the courts ultimately rule. Mr. Knudson provided members with the criteria for certificates of need (Attachment 1). He maintained that the primary purpose of the certificate of need is to assure that none are issued if there is a less costly alternative. He stated that if section 2 is adopted the certificate of need would not be needed. Co-Chair Hanley summarized that the Department determines if there is a need. The Legislature does not have the option of rejecting the construction of new beds. Mr. Knudson agreed that if the need is identified the Department is instructed to approve the beds and request funding from the Legislature. Mr. Knudson suggested that the Legislature identify how many nursing home beds will be in each region of the State. He noted that there is a proposal in the Mat-Su Valley to build 60 new beds which will create 40 new jobs and cost $6.0 million dollars a year to operate. The nursing home spent $200.0 thousand dollars to meet the requirements of the certificate of need. He pointed out that 30 of the nursing home beds in Anchorage are occupied by individuals from Mat- Su. LARRY STRIVER, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF HEALTH AND SOCIAL SERVICES noted that 18 states have moratoriums on nursing home beds. DAVID PIERCE, CERTIFICATE OF NEED COORDINATOR, DEPARTMENT OF HEALTH AND SOCIAL SERVICES noted that 10 states had moratoriums in 1985. Representative Martin asked how much money has been spent on beds that are empty. The Department could not answer. Mr. Livey explained that the Department pays on a per day, per patient basis. This cost is calculated based on the total Medicaid cost to operate each facility. The fixed cost is spread across the beds. Representative Brown asked why the Department does not find against the certificate of need if there is a surplus of beds. Ms. Sipes explained that criteria for the certificate of need is based on rescinded federal regulation. She stressed that it is difficult to argue against the need for long term care due to the growing population of elderly. She emphasized that if the service being offered is nursing home beds that the argument can be made to support their construction. She observed that there are states that have 75 nursing home beds for every 1,000 people over the age of 3 65 years of age. Florida has limited nursing home beds to 29 per 1,000 people over 65 years of age. She pointed out that there is great disagreement as to what is the need of nursing home beds. She stressed that there will be a 30 - 60 year commitment for each bed that is built. She emphasized the importance of cost effective review. Co-Chair Hanley asked what percentage of the cost of a nursing home bed is paid for by the State. Mr. Knudson explained that each bed costs approximately $250 dollars. Mr. Livey stated that between 85 - 90 percent of all nursing home expenditures are paid through public funds. Co-Chair Hanley pointed out that the Legislature would be critical of adding new beds which will result in an increased Medicaid budget when the State is having difficulty funding existing beds. He acknowledged that there is a need. He expressed frustration with the lack of legislative input. He expressed a preference for a two year moratorium. He noted that section 2 would provide a statutory change but is not part of an overall strategy. He suggested that section 2 would not be necessary if the moratorium is longer than one year. He suggested that section 2 be deleted, the moratorium be extended, section 1 be deleted, and an additional member be added to the working group. Representative Martin noted that Medicaid is the fastest growing program in the State. Mr. Knudson suggested that the study group identify the total number of nursing home beds to be authorized by the State. He noted that in New York community based care is the fastest growing Medicaid cost. He stressed that assisted living and other alternatives should be addressed. Co-Chair Hanley pointed out that if community based care is added and nursing home beds remain the same there would be an expansion of service. He noted that community based care is generally cheaper than institutional care. He stated that the legislature should determine the number of nursing home beds or the number of eligible nursing home and community based slots. He emphasized that nursing home beds are the most expensive way to expand care. He pointed out that the monetary aspect is a limiting factor. He emphasized that the legislature needs to have oversight. Representative Mulder MOVED to conceptually adopt an amendment to: Delete section 1; delete section 2; after "services" add "one of whom is a licensed nursing home 4 administrator, who operates a community nursing home in Alaska on page 3, line 24; delete July 1, "1997" and insert July 1, "1998" in section 6; and amend the title to reflect the changes. Co-Chair Hanley reviewed the amendment. Representative Mulder questioned if the report of the working group should be delivered to the second regular session. Representative Brown pointed out that the legislature would have more time to act if the report is presented to the first session. Ms. Sipes referred to page 3, lines 6 - 10. She noted that this section refers back to section 1. Mr. Livey explained that any applications on file when the bill becomes effective would be reviewed. He noted that (b) would allow these applications to be reviewed based on the findings. He stressed that the findings would allow a more balanced look at applications in terms of whether services could be provided in the community. Ms. Sipes suggested that section 1, subsections (1) and (2) be deleted and the remaining subsections of section 1 be retained. Representative Mulder WITHDREW his motion to amend HB 528. There being NO OBJECTION, it was so ordered. In response to a question by Representative Grussendorf, Mr. Knudson asserted that a one year moratorium would be sufficient. Mr Livey stated that the Department would prefer to retain section 2. He added that a two year moratorium would be better than a one year moratorium. Representative Mulder MOVED to conceptually adopt an amendment to: Delete section 1, subsections (1) and (2); delete section 2; on page 3, line 24 after "services" add "one of whom is a licensed nursing home administrator, who operates a community nursing home in Alaska; delete July 1, "1997" and insert July 1, "1998" in section 6; and amend the title to reflect the changes. Representative Martin expressed concern with the deletion of section 2. Ms. Sipes clarified that a standard of review will remain in statute. The added requirement for cost effectiveness review will not exist. Co-Chair Hanley spoke in support of the two year moratorium. (Tape Change, HFC 96-116, Side 2) Representative Mulder pointed out that a repealer of May would be better than July in regards to the construction season. 5 Representative Mulder MOVED to AMEND his conceptional amendment to delete "July 1, 1988" and insert "May 1, 1998". Representative Kelly suggested that April would be better. Co-Chair Hanley noted that May would allow time for legislative changes. There being NO OBJECTION, it was so ordered. Representative Brown spoke in support of section 2. There being NO OBJECTION, a conceptional amendment was adopted to: Delete section 1, subsections (1) and (2); delete section 2; on page 3, line 24 after "services" add "one of whom is a licensed nursing home administrator, who operates a community nursing home in Alaska; delete July 1, "1997" and insert July 1, "1998" in section 6; delete "July 1, 1988" and insert "May 1, 1998"; and amend the title to reflect the changes. Representative Martin MOVED to reinstate section 2. Representative Kohring OBJECTED. A roll call vote was taken on the MOTION to reinstate section 2. IN FAVOR: Brown, Navarre, Martin OPPOSED: Grussendorf, Kelly, Kohring, Mulder, Parnell, Therriault, Foster, Hanley The MOTION FAILED (3-8). Representative Mulder MOVED to report CSHB 528 (FIN) out of Committee with individual recommendations and with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CSHB 528 (FIN) was reported out of Committee with a "do pass" recommendation and with a zero fiscal note by the Department of Health & Social Services.