SENATE CS FOR CS FOR HOUSE BILL NO. 511(HES) "An Act relating to the certificate of need program for health care facilities; and providing for an effective date." This was the first hearing for this bill in the Senate Finance Committee. Co-Chair Wilken noted that the Senate Health, Education, & Social Services Committee (HES) committee substitute, Version 23-LS1755\X, is before the Committee. He noted that two Letters of Intent accompany the legislation. SARA NIELSEN, Staff to Representative Ralph Samuels, the bill's sponsor, stated that this bill would attempt to "level the playing field," by altering current Certificate of Need (CON) requirements such as those that pertain to a relocation of an ambulatory surgical facility to a new site. In addition, she explained that the bill would further define the term "expenditure" to aid in correcting a current "loophole" in the CON process in which "facilities are leasing space and equipment to themselves" to circumvent "the one million dollar threshold," which is the point at which a CON would be required. Ms. Nielsen noted that the bill would also: eliminate the requirement that an additional CON be required for expenses associated with routine maintenance and replacement; would not require a CON to be issued in the case of an emergency or temporary situation such as an earthquake; and would add independent diagnostic facility and residential psychiatric treatment centers to the definition of a health care facility. She pointed out that the inclusion of these two entities in the definition would require them to adhere to CON requirements. Ms. Nielsen stated that the bill would also require the Department of Health and Social Services to process CON applications more expeditiously by specifying a 60-day rather than a 90-day review process. She noted that the bill also specifies that were a residential psychiatric treatment center under construction at the time this legislation enacted, it would not be required to adhere to CON guidelines. Ms. Nielsen explained that the Senate HES committee substitute addressed concerns regarding the CON process that was provided for in the House of Representatives Letter of Intent. Amendment #1: This amendment inserts new language into Section 2 of the bill on page two, line one, as follows. (d) Beginning July 1, 2005, the $1,000,000 threshold in (a) of this section shall be increased by $50,000 annually until July 1, 2014. Co-Chair Green moved to adopt Amendment #1. Co-Chair Wilken objected for explanation. Co-Chair Green explained that while she had originally sought a larger annual CON limit increase, the $50,000 annual increase is acceptable to most concerned parties. She informed the Committee that Alaska is one of only six states with a CON ceiling of one million dollars or less as others have no ceiling or incorporate a significantly higher ceiling pertinent to such things as long-term care facilities or renovations. She stated that Alaska's current ceiling was established in the 1980s and has never been inflation proofed. She stated that, while this issue would continue to be re- addressed every few years, this amendment would serve as a step in adjusting the "woefully" low CON rate in that, by the year 2014, it would be to "at least half of the level" it should be. This gradual rise, she noted, would not be implemented until January 1, 2005. Co-Chair Green noted that the Department of Health and Social Services' Commissioner voiced concern that too rapid an increase might negatively affect programs such as Medicaid. Co-Chair Wilken asked for further clarification regarding what would be affected in Sec. 2(a) were this amendment adopted. Co-Chair Green clarified that Sec. 2(a) pertains to the CON threshold. Co-Chair Wilken removed this objection to Amendment #1. There being no further objection, Amendment #1 was ADOPTED. BLAINE GILMAN, Attorney, testified via teleconference from Kenai and noted that his clients: The Lord's Ranch, Arkansas Counseling, and Alaska Counseling among others; currently provide residential psychiatric treatment for approximately 110 children in the State of Arkansas, some of whom are from Alaska. He noted that these clients are in the process of purchasing land in Kenai upon which to construct a children's psychiatric treatment center. He asked that consideration be given to implementing an October 1, 2004 effective date for the bill rather than an immediate effective date as specified in Section 9, page five, line 27, as their project would be negatively impacted were it required to adhere to the CON specifications. Mr. Gilman also requested adding the words "if necessary" to building permit language as specified in Section 8, subsection (c)(1)(B) on page five, line 23. He noted that while the land currently identified for purchase by his clients is within the Kenai Municipal Borough city limits, an alternate site is located outside of the Municipality and, as such, is exempt from building permit requirements. He asked that consideration be given to both amendment suggestions. Co-Chair Wilken asked the Department of Health and Social Services to respond to Mr. Gilman's concern regarding the bill's effective date. JOEL GILBERTSON, Commissioner, Department of Health and Social Services, affirmed that this legislation would incorporate residential psychiatric treatment centers into the CON process. He noted that, due to the unavailability of in-state services, approximately half of the State's youth in need of these services are receiving treatment outside of the State. He noted that the effective date identified in this bill was determined based on the Department's historical Certificate of Need process that has addressed such things as how a project "in the works" would be recognized. He furthered that the traditional interpretation of grandfathering in a project that is "in the works" would include projects that have a building permit; have a valid set of architectural drawings; and of which valid construction has begun. He stated that the Department's historical interpretation policy was incorporated into the Senate HES committee substitute, as referenced in Section 8, subsection (c) beginning on page five, line 17 of Version "X". Commissioner Gilbertson informed the Committee that there are, currently, a number of private for-profit and non-profit organizations examining whether or not to construct residential treatment centers in the State, and he noted that were they all furthered, they might provide more beds than the State requires. Therefore, he communicated that the Department is supportive of incorporating these types of facilities into the CON program as it would provide the State the opportunity to oversee what the actual needs of the State are and to determine the appropriate geographical placement of these centers in order to best serve those in need of services. He concluded therefore that the Department supports an effective date consistent with historical Department interpretation. Co-Chair Wilken noted that the effective date issue had been discussed in other committee hearings on the bill, and, while he acknowledged Mr. Gilman's concern, he voiced understanding the Department's "logic" in this regard. There being no further questions regarding the effective date clause, Co-Chair Wilken asked the Department to address the building permit issue for facilities being constructed outside of an organized community Commissioner Gilbertson stated that Mr. Gilman's concern regarding the appropriateness of requiring a building permit in an area where none is otherwise required is "a fair comment." Therefore, he stated that the Department would support an amendment to clarify that were a building permit not otherwise necessary, the State should not require it. Conceptual Amendment #2: The intent of this conceptual amendment is to clarify that a building permit would not be required for a facility being constructed in a location that would otherwise not involve a building permit, such as being outside of an organized borough. The language being affected by this amendment is located in Sec. 8, subsection (c) (1) (B) on page five, line 23 of Version "X". Senator Dyson moved to adopt Conceptual Amendment #2. There being no objection, Conceptual Amendment #2 was ADOPTED. Co-Chair Green asked whether the Senate HES Committee Letter of Intent would supersede the House of Representatives Letter of Intent. Senator Dyson affirmed that it would. Senator Dyson moved to adopt the Senate HES Committee Letter of Intent. Ms. Nielsen acknowledged that the Senate HES Committee Letter of Intent was appropriate. Co-Chair Green objected to the motion. Co-Chair Green brought to the Committee's attention her on-going concern regarding the discrepancies that exist "between regulations and current statutes;" particularly in regards to some of the decision making that is conducted in regards to the CON process. She noted that this Letter of Intent specifies that CON applicant information should not be made available before the CON has been declared complete by the Department, as those involved in the CON process should be assured that their preliminary information would be kept confidential until that point. Co-Chair Green removed her objection. There being no further objection, the Senate HES Committee Letter of Intent was ADOPTED. Co-Chair Green moved to report the bill from Committee. Senator Olson interjected that the CON process has evolved beyond its original intent. Continuing, he declared that there is a belief that the CON process is used as a tool by large health care organizations to refrain smaller local health care entities from advancing their service. Therefore, he asked how he could assure small entities that this bill would not inhibit their ability to compete with larger organizations or businesses. Commissioner Gilbertson agreed that the Certificate of Need program has been an issue of debate for a long time. He stated that the Department endeavors to manage the CON program in a fair manner. He stated that when reviewing a CON, one of the Department's primary considerations is whether there is a need for the service. He noted that the lone exception would be that the cost factor is an additional concern in the case of long-term care facilities. He stated, therefore, that the CON program has provided the State with the ability to appropriately determine the level of need in a community and statewide. He stressed that the Department has worked aggressively to expand health care services in the State, and he opined that the CON program "is not a barrier" to this goal. He stated that this legislation would affect residential psychiatric care facilities, imaging facilities, and ambulatory surgery centers, as they are not currently included in the CON requirements. He agreed that health care has changed since the inception of the CON process; however, he stressed that the Department is aware of the on-going challenge of fairly administering the CON program during these "changing times." Senator Olson reiterated the concern that the CON is a complicated program and that providers in rural areas of the State are concerned that larger organizations could use the program to the disadvantage of smaller programs. Commissioner Gilbertson replied that the Department reviews and approves appropriate applications and denies inappropriate ones, both from large and small organizations. Senator Dyson declared that this bill would provide some improvement to the current process. He stated that, in the bigger picture, the process might not work well for a small entity that wishes to offer services also offered by a larger facility. However, he stated that assistance in the effort to address "the deeper underlying problems" of providing health care in the State is welcome. Co-Chair Green restated her motion to report the bill, as amended, and the HES Letter of Intent, from Committee with individual recommendations and accompanying fiscal notes. There being no objection, SCS CS HB 511(FIN) was REPORTED from Committee, accompanied by the HESS Letter of Intent, and zero fiscal note #1, dated March 1, 2004 from the Division of Public Health, Department of Health and Social Services and zero fiscal note #2, dated March 1, 2004 from the Division of Behavioral Health, Department of Health and Social Services AT EASE 11:20 AM / 11:21 AM RECESS TO THE CALL OF THE CHAIR 11:21 AM / 3:54 PM.