SB 8-REPEAL CERTIFICATE OF NEED PROGRAM      4:16:49 PM CHAIR WILSON reconvened the meeting and announced the consideration of SENATE BILL NO. 8 "An Act repealing the certificate of need program for health care facilities; making conforming amendments; and providing for an effective date." 4:18:00 PM CHAIR WILSON said SB 8 would repeal certificate of need (CON) laws. SB 8 provides a three-year window before taking effect so that companies and the state can prepare for needed changes. He stated that his office had examined historical and current arguments for certificate of need (CON) laws and determined they do not provide an economic justification for depriving customers of an open healthcare market. He stated that health care does not follow the same principles as a free market but should be as accessible as possible. He opined that Alaska's certificate of need program substantially threatens the proper performance of healthcare market services. There are examples of abuse taking place in Alaska. SB 8 is one of the most studied pieces of legislation heard at the Capitol. He stated that his office is willing to share information and studies. 4:20:37 PM GARY ZEPP, Staff, Senator David Wilson, Alaska State Legislature, Juneau, Alaska, said SB 8 speaks for Alaskans working and raising families that don't have time to follow legislation, hire a lobbyist or a special interest group to represent them. Competition matters for Alaskan consumers; data, peer-reviewed research, and analysis reflect this. 4:21:25 PM MR. ZEPP turned to slide 1 and spoke to the following: [Original punctuation provided.] 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, family members, and neighbors, our loved ones. But government laws and regulations have suppressed competition, caused constrained healthcare markets, disallowed new entrants, new technologies, and disincentivized innovation. Data/Research shows, without competition, the incentive to lower prices and improve quality and innovation diminishes. 4:22:30 PM MR. ZEPP advanced to slide 3, What is a Certificate of Need and provided information as follows: [Original punctuation provided.] Certificate of Need (CON) laws are state regulatory mechanisms for approving major capital expenditures and projects for new health care facilities, expansion of existing facilities, adding new equipment and technology, and providing new or the expansion of existing healthcare services. Healthcare entities must obtain government permission before proceeding, this permission is based on a 1970's (53 years ago) model. Note: Alaska's current CON threshold for approval is $1.5 million. The original Certificate of Need laws were created to contain rising healthcare costs (this was during the Great Inflation period, from 1965 thru 1982 the rate of inflation reached as high as 15% in 1980), prevent over-supply of medical infrastructure and services, and improve access to care, especially for indigent populations or in underserved areas. Note: Over forty years of peer reviewed data shows CON has failed and has not delivered on the promises made in the 1970s. Even the Federal Government realized the national law they passed did not work. They mandated this in 1982 (tied to federal funding) and repealed in 1987, it lasted a whopping five years. CON laws in Alaska require healthcare entities to obtain government permission for healthcare facilities, equipment, technology, and services for over 20 medical categories. Note: Alaska's CON approval process is not done by health care professionals like doctors and nurses, it's a government entity that decides what health care facilities, services, equipment, and new technologies should be available to you, your family, and friends. Certificate of Need laws have not worked how it originally was intended. It protects the incumbent healthcare providers. This is not good for Alaskans and it's time to repeal! 4:24:52 PM MR. ZEPP advanced to slide 4 and provided the following statistics on the status of states and CON programs: 35 States have CON programs  • 13 require review when ownership of a facility or large practice is transferred. • 9 states require a CON approval for expanding hospice, nursing home, or home health agency services. • 3 States do not operate a CON but have a variation of a CON  program as follows:  • Arizona - ambulance services and ambulances • Minnesota - moratorium on hospitals and beds; nursing home beds; intermediate care facilities; radiation therapy facilities in certain counties • Wisconsin long-term care; moratorium on nursing home and hospital beds 12 states that have fully repealed their CON:  • California, Idaho, Utah, Wyoming, Colorado, New Mexico, North Dakota, South Dakota, Kansas, Texas, Pennsylvania, New Hampshire.  • These twelve states represent 31 percent of the US population, or 101 million people living without a CON.    States with current legislation to repeal all or part of CON:  • Connecticut, Iowa, Kentucky, Montana, Mississippi, Oklahoma, South Carolina, Tennessee, West Virginia 4:27:07 PM MR. ZEPP said 35 states still have some form of CON. A major challenge facing those states is lobbying efforts, even though the federal government repealed the CON mandate in 1987. Lobbying efforts in Alaska have risen 152 percent over the last four years. Alaska passed its first CON law in 1976. In 1990 the state began charging for the submission of an application when seeking approval for a CON. January 2008 was the last major attempt to repeal CON in Alaska. At the time, the Commission of Health and Social Services stated, "?that the CON program was put in place to increase access to care and to keep the cost of facility care down; however, better tools to serve these purposes are now available." There were nine active lawsuits against the state's CON program. 4:28:47 PM MR. ZEPP turned to slide 5, Alaska's Legislative History of Certificate of Need, and spoke to the following laws: [Original punctuation provided.] 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. 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. 4:28:46 PM MR. ZEPP turned to slide 6 and said repealing CON is a battle between regulators and competing healthcare organizations fighting over who should receive the government's franchise for Alaska's newest technology and facilities. Alaskans have no choice. He stated the following are data and research points derived from various studies that support the repeal of CON: • There have been 93 peer reviewed studies of CON containing 115 tests; Mercatus published approximately 10 percent. • 3.5 times as many tests find CON is associated with lower quality than states without CON. • 10.5 times as many studies find CON is associated with worse cost, spending, and efficiency outcomes than states without CON. • 16.5 times as many studies find CON is associated with diminished access than states without CON. • CON programs limit the introduction and expansion of medical services & equipment, rehabilitation centers, nursing home beds, and medical imaging technologies. • Data and research show that rural hospital closures have nothing to do with having CON, but instead are related to: • Low patient volume • Challenging payer mix of Medicare and Medicaid patients, which pay less. • Geographic Isolation • Workforce shortages • Data and research indicate that deaths from treatable complications following surgeries and mortality from heart failure, pneumonia, and heart attacks are significantly higher in CON states. • Studies have shown no evidence that charity care is higher in CON states. In fact, racial disparities seem to increase in CON states due to the lack of access. • CON programs grant a government-protected monopoly to incumbent providers. According to a Milliman Group report on behalf of Primera Insurance Company, hospital margins in Alaska can range as much as 223 percent higher than states in the Lower 48. 4:32:20 PM SENATOR DUNBAR asked for more information about the nine CON- related lawsuits in 2008. 4:32:50 PM MR. ZEPP replied that he would provide the committee with additional information. He noted Mr. Mitchell and Ms. Cavanaugh were also available to answer questions. 4:33:25 PM MR. ZEPP moved to slide 7 and said Alaskans deserve a choice in healthcare. CON was designed to restrain healthcare costs. However, CON regulations' effect on costs has shown a consistent tendency to increase the costs of healthcare services. A Milliman report prepared for the Alaska Health Care Commission and two other reports provide points to consider regarding Alaska's healthcare markets: • Alaska’s general cost of living ranks seventh among states but has among the highest health care costs in the world. • Healthcare premiums in Alaska are 130 percent higher than the comparable states of Washington, Oregon, Idaho, Wyoming, and North Dakota. • Average hospital costs are 138 percent higher than comparable states. • Position payment levels are 148 percent higher than the national average. • Hospital payments are 56 percent higher than the national average. • Hospital margin averages in Alaska are approximately 15.6 percent. In Anchorage the margins can be 20 percent or greater. This is 5 percent higher than San Francisco. 4:35:12 PM MR. ZEPP moved to slide 8 and stated that from 1991 to 2017, the Anchorage consumer price index was up 77 percent while medical care was up 210 percent. Hospital payments are 1.7 times the national average. Using shoulder surgery as an example of Alaska's high costs, he reckoned Alaskans would pay approximately $16,000 out-of-pocket while other states would pay $4,000. Medical expenses are a leading cause of personal bankruptcy. 4:36:46 PM MR. ZEPP turned to slide 9 and said twenty-four states suspended CON laws and regulations during the COVID pandemic, which enabled healthcare providers flexibility regarding capacity and equipment. Alaska was without CON regulations for approximately 11 months. There was one application related to a certificate of need during this period. Proponents of CON laws say they are necessary for "health and safety." Yet the industry could meet the health care demand during a crisis without CON approval. He opined that getting through a pandemic without CON is evidence that Alaska does not need it. 4:37:54 PM MR. ZEPP advanced to slide 10 and said CON had not held healthcare costs down in Alaska. Alaska has one of the world's highest healthcare costs, which continue to rise. The CON process can cause legal battles and conflicts between an incumbent and an entrant seeking to bring new healthcare facilities or services to Alaska. He opined that this is not good for Alaska as it wastes money better spent investing in healthcare innovation, facilities, and access. Allowing incumbents and entrants to provide additional quality healthcare services for Alaskans is better. Territorial fights over who earns the high-profit margins do not improve or provide Alaskans with better healthcare. US Presidents G.W. Bush, Clinton, Obama, and Trump supported the repeal of CON. Governor Walker also supported its repeal. He likened the CON process to insider trading because it unfairly exposes healthcare facilities, services, and technology to competitors for review, objection, and filing legal proceedings. The data supporting the repeal of CON is voluminous. He opined that committee members should read the overwhelming peer-reviewed research and data to realize the support for its repeal. 4:39:53 PM MR. ZEPP advanced to slide 11 and stated the Alaska Hospital and Healthcare Association (AHHA) sponsored a consultant to protect the profit levels of some healthcare entities and responded to the sponsor's efforts to repeal CON. Not surprisingly its response favors the position of AHHA and claims the Mercatus Center's research is not peer reviewed. However, the research is one of many peer-reviewed studies favoring the repeal of CON. Studies supporting the repeal of CON have been done by reputable entities, several of whom have testified before the legislature in support of SB 8: [Original punctuation provided.] The Federal Trade Commission/Dept. of Justice; the Mercatus Center-George Mason University; the Centers for Medicaid/Medicare; the U.S. Department of Health & Human Services; the U.S. Department of the Treasury; the U.S. Department of Labor; The U.S. Government Accountability Office (GAO); the State of Alaska Department of Health & Social Services and the Department of Commerce, Community & Economic Development; UAA Institute of Social and Economic Research; American Medical Association; The American Journal of Medicine; American College of Emergency Physicians; the American Hospital Association; National Institute for Health Care Reform; National Academy for State Health Policy; Rutgers University- Center for Health Policy; Harvard Medical School; The Sanford School of Public Policy-Duke University; Brown University; Temple University; Columbia University School of Law; University of Maryland; Cecil G, Shep Center for Health Services Research-University of North Carolina; Providence Veterans Medical Center; Institute for Justice; 2018 Bipartisan Blueprint for Improving Our Nation's Health System Performance- Governors from Colorado, Ohio, Alaska, Pennsylvania, and Nevada; Millman Group-Primera Insurance Company; Becker's Hospital review 4:41:21 PM MR. ZEPP moved to slide 12 and stated that CON is not in the best interest of Alaskans because it silences their voice. He reiterated that some individuals in healthcare and lobbyists will say horror will happen if CON is repealed. Ask for data to back up the statements. Health care in Alaska needs to be more available, cheaper, and of higher quality. CON regulations do not help Alaska achieve what is needed to make healthcare more available, affordable, and of higher quality. SB 8 provides an opportunity for Alaskans to have a choice in health care and health care services. 4:44:11 PM CHAIR WILSON opened invited testimony on SB 8. 4:44:20 PM MATTHEW D. MITCHELL, Senior Research Fellow, Knee Center, West Virginia University, Morgantown, West Virginia, said CON is well-studied because of its history. The federal government repealed the CON mandate in 1987. Thirty-five states soon after repealed CON, which created many opportunities to compare its effects. There have been 93 peer-review studies comparing CON states to non-CON states. Evidence shows that states that repealed CON have better quality and access to healthcare. He provided numerous statistics supporting the elimination of CON to improve access, quality, and cost. The research is consistent with the basic economic theory that when supply is restricted, lower supplies result. Anti-trust authorities at the US Department of Justice and the Federal Trade Commission consistently make the case that certificate of need laws do not achieve intended goals. 4:49:14 PM SENATOR DUNBAR asked if Florida repealed its CON laws. 4:49:28 PM MR. MITCHELL responded that Florida had repealed most of its CON laws. Its repeal of laws pertaining to hospitals and hospital beds was of major significance. 4:49:53 PM SENATOR DUNBAR said the map on slide 4 shows Florida as a CON state, and he was only seeking clarity. 4:50:03 PM CHAIR WILSON opined that Florida appears as a CON state because of its partial repeal. 4:50:10 PM MR. ZEPP responded that a state would be categorized as a CON state if it has at least one service requiring a certificate of need. 4:50:34 PM SENATOR KAUFMAN asked for the most thoroughly tabulated study comparing CON and non-CON states addressing availability, cost, and quality. 4:51:24 PM MR. MITCHELL suggested that everyone should be skeptical of studies but have confidence in pieces of literature that point in the same direction. He advised members to read The Effects of Certificate of Need Laws on the Quality of Hospital Medical Services since it used a cross-border design and looked for a variety of outcomes. 4:53:22 PM CHAIR WILSON said his office would distribute the study to members. 4:53:54 PM JAMIE CAVANAUGH, Attorney, Institute for Justice, Arlington, Virginia, stated that the Institute for Justice has worked to end certificate of need laws through litigation and legislation. She said she published a policy report in 2020 about why repealing CON laws will decrease state spending. She conducted a survey in 2020 when states adjusted CON laws due to the pandemic and concluded that if CON laws created greater access to health care, then states would have needed more CON laws during the pandemic. However, the opposite was true. States had to suspend CON laws to allow hospitals to add beds and services; this happened in Alaska. In the Fall of 2022, some states also suspended CON laws for Respiratory Syncytial Virus (RSV) to allow healthcare providers the flexibility to respond to real- time patient needs. Doctors and patients should be deciding when care is necessary, not bureaucrats. MS. CAVANAUGH said another key point from her report is that CON laws did not prevent rural hospital closures. She shared the following findings: • Alabama, Oregon, Tennessee, and Washington have CON laws that do not apply to rural areas, presumably to encourage the expansion of healthcare facilities. • Idaho, North Dakota, South Dakota, and Wyoming have no CON laws and are among the most rural US states. • Utah and Colorado have no CON laws and have not experienced a rural hospital closure since 2005. 4:56:26 PM MS. CAVANAUGH stated that CON laws are known to increase healthcare costs, which leads to increased state and personal healthcare spending. North Carolina State Treasurer Dale Folwell filed a friend of the court brief with the North Carolina Supreme Court because rising health care costs are challenging the solvency of the teacher and state employer health care plan. She noted that the plan is partially funded by taxpayers and had almost $4 million in expenditures in FY 2022. She quoted his reasoning for filing the lawsuit as follows: "Con laws contribute to consolidated health care monopolies by distorting market power in favor of large institutional hospitals. This illegal distortion of market power then results in higher prices, lower quality, and less availability of health care services. In turn, large institutional hospitals create incredible excess revenue while failing to earn their tax except status through the provisions of charity care and engage in businesses practices harmful to North Carolinians." MS. CAVANAUGH stated that the content of this quote occurs in every state with CON laws. It is happening in Alaska. Repealing CON is one way to begin correcting the problems. 4:58:03 PM CHAIR WILSON held SB 8 in committee.