SENATE BILL NO. 88 "An Act authorizing the state bond committee to issue certificates of participation to finance the construction and equipping of residential housing to serve the Anchorage campus of the Alaska Native Medical Center; and authorizing the Department of Administration to enter into a lease-purchase agreement for the benefit of the Alaska Native Tribal Health Consortium." 3:13:37 PM HEATHER SHATTUCK, STAFF, SENATOR PETE KELLY, stated that SB 88 authorized the Department of Administration to enter into a lease purchase agreement with the Alaska Native Tribal Health Consortium (ANTHC) for construction and equipping of a residential housing facility to be located on the Anchorage campus of the Alaska Native Medical Center (ANMC). The Department of Health and Social Services and the Alaska Tribal Health System are partners in providing community health care services throughout Alaska. Ms. Shattuck stated that ANMC provided comprehensive medical services to 143,000 Alaska Native and American Indian people across the Alaska Native Tribal Health Care system. Patients who need medical services beyond their local health clinic's capacity are referred to ANMC for specialty care services. Two years ago ANTHC and the Department of Health and Social Services began identifying ways in which working together could result in Medicaid cost savings for the State while providing a more robust array of services offered within the tribal health system. The State of Alaska manages the Medicaid Program. Ms. Shattuck explained that the Federal government and the State split the cost of services for most Medicaid patients 50/50. However, if the Medicaid patient is an Alaska Native/American Indian and receives services in a tribal facility, the State is reimbursed 100 percent of the cost. The additional 50 percent reimbursement rate resulted in significant savings to the State's Medicaid budget. A key element in providing these health care services is housing. Families who travel to Anchorage for services must have housing to have meaningful access to care. When the new hospital was built at the Tudor Road campus in 1997, it included a 54 semi-private room facility adjacent to the hospital, the Quyana House. As demand increasingly exceeded the current 110 bed capacity, the ANTHC began contracting with local hotels to provide for additional rooms. Even at increased cost, this still did not meet the demand. Senate Bill 88 addresses the critical need for patient housing by authorizing $35 million in State Revenue bonds for construction of a 170-bed residential housing facility with sky bridge access to ANMC. Ms. Shattuck stated that it is not surprising that housing is an integral part of ANMC's plans to increase services in the following areas: Maternal Child Health/NICU expansion, Operating Room Expansion, Endoscopy, Telemedicine Delivery, Advanced Radiology Services, Ophthalmology, ENT, General Surgery, Urology, Emergency Services, and Physical Therapy. Patients who have housing on campus will receive services at ANMC rather than another healthcare facility in the area. Those who are Medicaid eligible will save the State General Fund dollars. Ms. Shattuck announced that SB 88 anticipates state General Fund Medicaid savings of approximately $8.8 million per year. This number is likely to increase over the next 10 years due to increased utilization for all health care services provided to Alaska Natives/American Indians. The identified cost savings exceed the amount needed to pay debt service on the bond. It is a solid investment for the State and a good partnership outcome for the Alaska Native Tribal Health System. 3:17:33 PM Co-Chair Meyer commented that he appreciated the possibility of cost savings related to the bill. He understood that the premise of the bill was to provide long-term housing on the campus for the hospitals in Anchorage. Ms. Shattuck agreed, and furthered that there would be a sky bridge that would connect the housing facility with the hospital, in order to avoid the use of taxis on inclement weather days. Vice-Chair Fairclough wondered how it was determined that $8 million was a fair number related to the number of people. Ms. Shattuck responded that in FY 12, Alaska paid Providence and Alaska Regional $29 million for Alaska natives to receive care that could have been provided at ANMC. She furthered that the Consortium hoped that, with improved access, throughput, and efficiencies, they could save the $8.8 million which would translate into a 30 percent increase for those that would receive care at ANMC. Vice-Chair Fairclough shared that she was the former executive director of Standing Together Against Rape (STAR), and had worked with people who chose to go to other medical providers for personal reasons. She wondered what degree of certainty was available to determine if those people would choose to be treated at ANMC. Co-Chair Meyer remarked that the project was a Certificate of Participation (COP), and asked for further explanation on the funding of the project. 3:22:20 PM WILLIAM STREUR, COMMISSIONER, DEPARTMENT OF HEALTH AND SOCIAL SERVICES (DHSS), explained that it was not known whether or not an individual would choose ANMC. He stated that when a tribal member is brought into Anchorage, and boarded at a hotel, that individual would tend to seek treatment where they feel inclined. He felt that housing an individual near ANMC, they would obtain easier and accessible treatment. Vice-Chair Fairclough felt that one-third was a conservative estimate, and appreciated that conservative estimate. Co-Chair Meyer wondered if the facility contained 150 beds. Commissioner Streur replied that the facility would contain 170 beds. Senator Bishop wondered if part of the savings would be because of the lack of contracting line. Commissioner Streur responded that the $8.8 million was only related to health care cost savings. Senator Bishop commented that the project seemed like a smart option. 3:26:45 PM Co-Chair Kelly requested more information regarding savings related difficult pregnancies. Commissioner Streur asked for more clarification. Co-Chair Kelly remarked that he had conversations regarding savings related to difficult pregnancies. Commissioner Streur responded that the project would allow for early term pregnant women for prenatal services, would increase the chances for a normal delivery and a healthy baby. Co-Chair Kelly surmised that much of the prenatal care occurred at Providence. Commissioner Streur responded in the affirmative. Co-Chair Kelly queried the per-night cost for a stay at Providence versus at ANMC. Commissioner Streur agreed to provide that information, but stressed that the high costs were related to the length of time in the neo-natal intensive care unit. Senator Dunleavy wondered if there was a study for the hotels in the area related to the impact on their business. Commissioner Streur responded that he was unaware of any such study. Co-Chair Meyer wondered if the fiscal note was prepared by DHSS. Commissioner Streur responded in the affirmative. Co-Chair Meyer noted that the fiscal reflected a savings for DHSS, with a fund source of federal receipts. He asked for more information on the fiscal note. Commissioner Streur explained that the fiscal note was a zero fiscal note, because the federal receipts would be offset by increased federal receipts to offset the general fund (GF). 3:31:59 PM ANGELA RODELL, DEPUTY COMMISSIONER, TREASURY DIVISION, DEPARTMENT OF REVENUE, introduced herself. DEVEN MITCHELL, EXECUTIVE DIRECTOR, ALASKA MUNICIPAL BOND BANK AUTHORITY, DEPARTMENT OF REVENUE, introduced himself. Co-Chair Meyer requested information related to the COP. Mr. Mitchell responded that the COP was more complicated that past COPs, because of the complex partnerships. He explained that there would be a ground lease established on the property, with a sky bridge to ANMC, and a parking garage built adjacent to the parcel property. He stated that there would be a facility lease for the structure. He explained that the two leases would be granted to a trustee bank, that the state appoints. That trustee bank would then lease the facility back to the state, and the lease payments would be fractionalized into $5,000 blocks of participation in the lease, and sold to third party investors at varying interest rates, depending on how long the money is given. He stated that payments made under the lease would be matched by the trustee and the repayment of those investors over 15 years. Co-Chair Meyer wondered who would own the building after the 15 years. Mr. Mitchell responded that the state would own the facility during the term of the lease, and after 15 years ANTHC would own the facility. Vice-Chair Fairclough surmised that the stated would issue the COP bonds, the state would make the payments on the bonds, and the state would turn over ownership to ANTHC. Mr. Mitchell responded in the affirmative. Co-Chair Kelly stated that the payment for the bonds came from the 100 percent Medicaid match. He furthered that the delta from the 100 percent match came for these particular patients, rather than the 50 percent for a "normal" Medicaid patient. Mr. Mitchell noted that the DOR fiscal note had an estimation of $415,000 needed to issue the COPs for rating agencies, bond council, financial advisory services, and other required services in order to structure and issue the publicly offered debt. He explained that the bill contemplated $35 million from the proceeds of the COPs for the project. He stated that the DOR fiscal note indicated that $415,000 would come from the COPs to pay for the cost of issuance. He felt that it was common at the local level for general obligation bond issues, and the additional funding was realized by selling the bond at the premium. Vice-Chair Fairclough wondered why the funding method was chosen for the facility construction. Mr. Mitchell responded that COPs were often used in building construction. 3:38:23 PM Vice-Chair Fairclough queried the estimate of the cost of the sky bridge. Ms. Rodell replied that the cost was included in the $35 million, was did not know what portion. Vice-Chair Fairclough queried the actual cost of the project without the debt service. Mr. Mitchell replied that $35 million was the amount of the COP, which was the project fund deposit. He furthered that there could be an additional interest earnings on the project fund of $150,000, which was the state's anticipated contribution. Vice-Chair Fairclough surmised that there was 2.75 interest rate calculated for 15 years included in the package. She felt that there ought to be a lower estimate than $35 million, because the state was paying an outside entity for the project. Mr. Mitchell responded that the total payments would be estimated $42 million, after the interest differential. Ms. Rodell furthered that the other alternative was cash, so there would be a 1 percent earnings estimate on GF. Mr. Mitchell stressed that the project was not proposed by the administration. Senator Hoffman shared that there were two other assisted living projects in Bethel and Kotzebue that focused on Medicaid cost savings to the state that were funded completely with cash. He stressed that the long-term savings for those centers and the proposed project would occur exponentially. 3:43:05 PM VALERIE DAVIDSON, ALASKA NATIVE TRIBAL HEALTH CONSORTIUM, testified in support of SB 88. She stressed that the ANTHC had a positive impact on the native communities across the state. She stressed that Alaska benefited from various types of care that ANTHC provided, including immunizations. She shared that ANTHC was often the only medical provider in rural Alaska. She shared that ANTHC was not solely geared toward natives. She stated that the Veterans Administration entered into agreements with the tribal health organizations in Alaska, recognizing that the Veterans Administration would also benefit by having the tribal health systems provide services, so they would not be required to build infrastructure in rural Alaska. She stressed that the state did not build the additional infrastructure in Alaska, because the tribal health systems provided the health care. She shared that the average village size in Alaska was approximately 300 people, so sometimes services were limited beyond the local community's capacity to provide care. When that occurred, patients were referred to one of six regional hospitals located throughout the state: Barrow, Bethel, Dillingham, Kotzebue, Nome, and Sitka. She stressed that those hospitals provided incredible services, but there were some services that required people to be transferred to Anchorage to ANMC. She shared that more than half of the people that receive services at ANMC travel from outside Anchorage in order to access health care services. She shared some stories of patients who benefitted from health care at ANMC. Vice-Chair Fairclough supported the concept of the bill. She queried the construction cost. Ms. Davidson replied that the cost of construction and facilitating would be $35 million. She furthered that the cost of the sky bridge would be $2 million. Vice-Chair Fairclough wondered if a contractor had been selected. Ms. Davidson responded that a contractor had not yet been selected. Vice-Chair Fairclough wondered if the project would fall under the state procurement code. Ms. Davidson stated that she was not comfortable responding to that question. Vice-Chair Fairclough expressed was not sure why the project was using borrowed funds, rather than using capital funds. Co-Chair Meyer responded that there was an anticipation of savings to the operating budget over the 15 year period, without needed to provide $35 million immediately. 3:57:22 PM LINCOLN BEAN, CHAIR, ALASKA NATIVE HEALTH BOARD, ANCHORAGE (via teleconference), spoke in support of SB 88. He stated that the Alaska Native Health Board was a statewide organization, which represented 25 health providers that deliver health care in nearly every community in Alaska. When needed care was beyond the local assistance, the patients were sent to Anchorage. FLORA RODDY, SELF, FAIRBANKS, testified in support of SB 88. She shared a story about her grandson's health issue. She remarked that the project would provide necessary assistance to many individuals, like her grandson. Co-Chair Meyer CLOSED public testimony. 4:02:58 PM Co-Chair Kelly stressed that the native population currently received a 50 percent Medicaid reimbursement, when they receive care at non-tribal hospitals. He stated that it was important for those natives to receive care from the tribal hospitals, in order to receive 100 percent Medicaid reimbursement. He stated that SB 88 could provide significant savings in the Medicaid budget. Co-Chair Meyer agreed with Co-Chair Kelly, and asked for more information regarding the financing of the project. Ms. Rodell responded that there were discussions regarding maintaining savings, and capturing the identified population. She stated that the housing mechanism could benefit the system. She furthered Commissioner Streur was skeptical of the amount of savings, so there were significant estimate decreases, and how much money could be leveraged into a bond transaction. Co-Chair Meyer wondered if it was a good time to invest. Ms. Rodell replied that there were currently historically low rates. 4:10:03 PM AT EASE 4:10:10 PM RECONVENED SB 88 was HEARD and HELD in committee for further consideration.