HOUSE HEALTH, EDUCATION AND SOCIAL SERVICES STANDING COMMITTEE January 27, 1994 3:00 p.m. MEMBERS PRESENT Rep. Cynthia Toohey, Co-Chair Rep. Con Bunde, Co-Chair Rep. Gary Davis, Vice Chair Rep. Al Vezey Rep. Harley Olberg Rep. Bettye Davis Rep. Tom Brice MEMBERS ABSENT Rep. Pete Kott Rep. Irene Nicholia (Excused) COMMITTEE CALENDAR Presentation: Critical Strategic Plan for State Health Laboratories WITNESS REGISTER DR. PETER NAKAMURA, Director Division of Public Health Department of Health and Social Services P.O. Box 110610 Juneau, Alaska 99811-0610 Phone: (907) 465-3090 Position Statement: Answered questions NEWTON CHASE, Chief of Facilities Department of Health and Social Services P.O. Box 110650 Juneau, Alaska 99801-0650 Phone: (907) 465-3037 Position Statement: Introduced steering committee members and answered questions LEIF SELLKREGG, Representative Heery International 621 W. 15th Ave Anchorage, Alaska 99501 Phone: (907) 279-8765 Position Statement: Conducted a presentation and answered questions MICHAEL PRESS, Representative Coopers & Lybrand C/O Coopers & Lybrand 130 Avenue of the Americas New York, New York (212) 259-2279 Position Statement: Answered questions DR. KATHERINE KELLY, Representative Centers for Disease Control 3247 S. Flower Rd. Atlanta, Georgia (404) 454-6221 Position Statement: Answered questions MARTHA ROBBINS, Representative Coopers & Lybrand 203 N. LaSalle Chicago, Illinois 60601 (312) 701-6422 Position Statement: Answered questions MARGARET LOWE, Commissioner Department of Health and Social Services P.O. Box 110601 Juneau, Alaska 99811-0601 Phone: (907) 464-3030 Position Statement: Discussed need for action on recommendations ACTION NARRATIVE TAPE 94-05, SIDE A Number 000 CHAIR TOOHEY called the meeting to order at 3:04 p.m. and asked for a roll call to be taken. Rep. Kott was not in attendance and Rep. Nicholia had been excused. Chair Toohey stated that the meeting was concerning the consolidation of Public Health Laboratories. She opened the meeting for discussion. Number 065 DR. PETER NAKAMURA, Director, Division of Public Health, Department of Health and Social Services (DHSS), stated that the state of Alaska was at a critical point regarding the infrastructure for public health for the next 30 years and the presentation would focus on the strategic laboratory plan. He introduced the "critical steering committee" for the strategic laboratory plan. Dr. Nakamura referred the meeting over to Newton Chase. Number 161 NEWTON CHASE, Chief of Facilities, Department of Health and Social Services (DHSS), stated he was also a member of the steering committee and project manager for DHSS in regards to the strategic laboratory plan. For background, he said that there are three public health labs (in Fairbanks, Juneau, and Anchorage) that are outmoded facilities. He mentioned that a conditions assessment combined with recommendations from the Center of Disease Control from Atlanta and the National Institute for Occupation Safety and Health (NIOSH) was done on the state of conditions of the three labs. He stated that as a result of the evaluations the state labs were found to be in very serious condition in regards to safety and health to the staff and to the public. Subsequently, funds for $200,000 were granted to proceed with a strategic plan based on the recommendations from the agencies involved in the evaluations. The three options - privatization, consolidation, or centralization - were offered as solutions to the state labs problem. Mr. Chase stated that the presentation was the result of the study undertaken to evaluate the three options. Number 293 CHAIR TOOHEY asked when the $200,000 was appropriated and when the strategic plan study began. Number 295 MR. CHASE answered that the appropriation was made in fiscal 1994 and that the strategic study started in October of 1994. Number 312 (CHAIR TOOHEY stated that Rep. B.Davis and Rep. Brice arrived at 3:08 p.m. and 3:11 p.m., respectively.) Number 317 MR. CHASE stated that a final report would be forwarded to the legislature upon its completion. Number 335 REP. BUNDE asked for the approximate date. Number 340 MR. CHASE said approximately three weeks. Number 356 LEIF SELLKREGG, Representative, Heery International, stated that he was part of the consulting team selected by the DHSS. He introduced other members of the consulting team: Martha Robbins, Michael Press, Tom Livingston, and Nolan Watson. Mr. Sellkregg presented the committee with the recommendations from the final steering committee meeting, held a day earlier. (Note: Mr. Sellkregg referred to charts, graphs, and also printed text that can be found in Attachment 1.) MR. SELLKREGG stated that the strategic plan had been requested to provide specific recommendations regarding the most cost-effective provision of quality public health services in Alaska. The areas of strategies focused on: operational effectiveness, position of laboratories for future growth, and aligning operational and fiscal goals. He stated that great effort was exerted to include the public in this discussion. MR. SELLKREGG said that their recent studies piggybacked thirteen previous studies conducted since 1985. Throughout those years, he said, the consistent theme has become more and more urgent. He stated that the steering committee had also been asked to address the medical examiner/state morgue issue. He continued on to say that a cost analysis had also been done. Number 553 CHAIR TOOHEY asked if he had the results, the cost, and the outcome of the recommendations. Number 556 MR. SELLKREGG responded that he did not have the cost results. Number 563 MR. CHASE said that to his knowledge the only cost to the state was the $225,000 that he had talked about. Number 595 MR. SELLKREGG said that Alaska health labs interacted with national public health labs. He said the national health labs extract data from state health labs to assess the health of the population's well being and referred to the process as a core function. He distinguished public health from health care by saying that public health deals with economic, social and cultural well-being of communities, and health care deals with the individual's well-being. MR. SELLKREGG stated that recognizing trends, detecting clusters of infection, recognizing unusual subtypes of agents, and providing surveillance for resistance were operations of Alaska public health labs endeavoring to understand sources and effects of disease. MR. SELLKREGG stated the difference between private and public health labs was that public health labs address community health risks, while private labs address individuals and their health risks. MR. SELLKREGG described the route specimens take to be tested in the public health labs. He said that information from the specimen is fed directly into epidemiology. He also stated that private labs in Alaska do not do large numbers of tests, and their results are not reported to epidemiology, therefore, a great deal of information is lost. MR. SELLKREGG said the Alaska public health labs face serious problems; all labs occupy leased space and require significant expenditures to solve safety and efficiency problems. He stated that due to physical building conditions, Anchorage and Juneau health labs were putting staff, other tenants of the facilities, and the public at risk to T.B. and multiple drug resistant strains of T.B. He said that both the Juneau and Anchorage health labs were in office buildings. He continued to describe the services offered in Alaska public health labs. He said there were currently 37 FTE (full time equivalents) working in the three lab locations. MR. SELLKREGG stated that, in comparison to three other states (Arizona, Delaware, and Tennessee) efficiency was looked at from the standpoint of overall productivity of staff (administrative and technical). The overall productivity of administration was average and technical productivity was above average in the state of Alaska. MR. SELLKREGG discussed privatization of public health labs. He said that Arizona, the most privatized state for public services, determined as the result of a state study that it is not appropriate to privatize public health labs. He stated that advocacy for public health, who raises concerns in the public interest and who is alert to solving previously unseen problems, are difficult concerns to privatize. He said that privatization would run the risk of losing vital information fundamental for epidemiology. He said that public health labs out-source to private labs, citing pap smears, western blood tests, and blood lead tests. He said that public health labs are the cutting edge for disease control and that as solutions to managing disease are discovered, they inevitably move on and often leave the testing to the private sector. He also said that the practice of fee-for-service reduces state government financial participation and it allows the public sector to compete for lab services. MR. SELLKREGG stated that the consolidation option that would combine the three public health facilities into only two facilities would provide an opportunity for improving efficiency in service and in cost. He stated that to consolidate it would mean the renovation of the Fairbanks lab and the combining of Juneau and Anchorage labs into one brand new facility. Number 921 REP. BUNDE asked if a new facility meant building one from the ground up. Number 926 MR. SELLKREGG said, "part of the problem that we have today is that we have labs existing in converted office buildings. That is really the wrong way to approach putting a public health lab operation into operation. It's different than a private lab, which is shipping many of their more complex tests out of state to a specialized lab facility and keeping their drawing services in an office building. We have a very high degree of air-handling, isolation, and materials have to be of a very high specification for the type of tests that are being done. You can only do that properly, efficiently, and probably cost-effectively if you build a new facility. If you go to renovate or convert, the numbers will show you that you spend as much if not more money trying to convert an office building into a public health lab than if you were to build it from the ground up." MR. SELLKREGG said the advantages of consolidation were more efficient use of equipment, facility space, computers, office and technical supplies and staff reduction. MR. SELLKREGG stated that centralization would provide the greatest opportunity to improve efficiency in service and cost. The advantages would be a reduction in FTEs, office and technical supplies, and most importantly there would be a centralized lab facility that would meet all regulatory, biological, fire, and other safety standards. He said that was not the case for the existing public health labs. He said the state is at high risk, for millions of dollars, from a potential claim from a staff person, a tenant of an existing structure, or the public being exposed (to harmful disease or physical conditions of existing structures). TAPE 94-05, SIDE B Number 000 CHAIR TOOHEY asked for the combined square footage of the three facilities. Number 012 MR. SELLKREGG said, after some discussion, that it was approximately 18,000 square feet. He went on to say that the centralization option costs included construction, equipment, consultants, project administration, and project contingency, approximately totalling $13.6 million. He listed the projected savings over 20 years if the centralization option were utilized. He said that in net savings compared to the status quo, in 20 years the consolidation option would save $1.9 million and the centralization option would save $7.7 million. Number 074 REP. BUNDE said, "and that's a savings on what total operating costs?" Number 076 MR. SELLKREGG replied that it was "on the total operating costs, if you were to take your status quo and project it forward into 1998... if you keep operating in your existing facilities... you will spend in 1998, these will be the net savings on that comparison." (Note: Mr. Sellkregg was pointing to numbers on a chart contained in Attachment 1.) Number 081 CHAIR TOOHEY said, "conversely, you'd be spending that if you saved status quo." Number 083 REP. BUNDE said he understood that but asked, "what's it going to cost to operate the lab to save that much money?" Number 085 MR. SELLKREGG said $3.9 million would be spent in 1998 on status quo and referred to his demonstration chart to show the annual net savings. Number 101 REP. BUNDE said, for clarification, that "you are anticipating the operating cost of 4.6 and 4.2 (million dollars) in 1998 dollars." Number 105 MR. SELLKREGG said the total annual cost in 1998 dollars, including operating and capital costs, would be $4.8 million for status quo, and $4.6 million for the consolidation option, and $4.2 for the centralized. He referred to Mr. Michael Press to help support those figures. Number 124 MICHAEL PRESS, Representative, Coopers & Lybrand, said that, "in forecasting forward, we use things like the consumer price index (CPI) forecasts by Wharton and Conametrics, and we used a medical component for that, as well as a general component for that. And, we divided each of the objects up into two groupings. A grouping that was most appropriate to use the medical inflation rate and then another grouping, which was everything else, for instance, the courier service; we use just a general CPI forecast for that, whereas others were in the medical category. Forecasting those forward and adding them up in 1998, when it's (we're) basically saying that we would have the first fully operating year under any of the scenarios, so we could do an apples to apples comparison in that year. We come out with these numbers for annual cost differentials. And as far as the total number here, that is displayed, this has to do with accumulation of costs over the full span up to the year 2012." Number 050 MR. SELLKREGG felt that an interesting point was that the state was going to spend $75,000,000 over the next 20 years in our public health labs. He said there are opportunities to reduce that number and, at the same time, address serious safety and facility risks. MR. SELLKREGG mentioned other state agencies with laboratory operations. He stated that there were two other lab facilities with compatible lab functions: the Department of Environmental Conservation (DEC), which does environmental testing in Palmer and Juneau; and Public Safety's Crime lab, which does forensic testing in Anchorage. He said that neither of the aforementioned would facilitate biological testing that takes place in public health labs. He also mentioned that the universities had labs for teaching but not for analysis. Number 073 CHAIR TOOHEY asked if any of the aforementioned labs volunteered to add on and let the public health labs use their facilities. Number 077 MR. SELLKREGG said none have said that specifically. He stated that some were in serious states of disrepair. He again said that for various reasons none of the other state agencies' health labs were compatible. MR. SELLKREGG stated that the state morgue was designed for a capacity of 70 bodies and it now is projecting a need to deal with 750 bodies a year, indicating serious health and safety issues. He felt the state morgue should co-locate with the new proposed facility. MR. SELLKREGG urged that immediate action should be taken to address the serious conditions of public health labs. He stated that the options have been identified that would save the state millions of dollars over 20 years, and the final report would support all the recommendations mentioned. Number 188 CHAIR TOOHEY asked if there were any questions. Number 091 REP. VEZEY asked Mr. Sellkregg if population growth or demand services growth factor into the projected status quo over 20 years. Number 212 MR. SELLKREGG said they projected two percent per annum, which he felt was realistic. He said they did not increase staff. Number 223 REP. VEZEY said he noticed that. Prefacing his next question by saying he had worked in the agricultural area of health, Rep. Vezey asked Mr. Sellkregg why one industry would prefer to go through the public sector and another would prefer to go through the private sector for testing. Number 263 MR. SELLKREGG said that no states were found that were totally privatized. Almost all states are looking for privatization opportunities, and wherever possible, specific tests are going to the private sector where it can be determined that there are real cost savings associated with that process. He said that it does not threaten the core function of public health labs. He speculated that the responsibility of national health could not be delegated to the private sector; it resides with state government. Number 304 DR. KATHERINE KELLY, Representative, Center of Disease Control, Atlanta, Georgia, said she agreed with Mr. Sellkregg. She stated that most states are charging their state government with the responsibility for community health. She offered, as an example, that there were persons within the population who could not afford the type of care that would provide them and everyone around them protection from disease. Number 371 CHAIR TOOHEY stated that the outcomes from the testings would be the charge of the state, not the physical "petri dish" result. Number 383 REP. VEZEY said, "I couldn't follow, you didn't state, to the extent of what percent of lab services or public health laboratory work had been privatized in Arizona or anything else. And, I didn't see anywhere in your numbers where you were talking about current expenditure levels, what portion, if any, of that was going out to the private sector for private services. And so, I couldn't extrapolate into that into the future. Could you elaborate?" Number 399 MR. SELLKREGG said he did not know what the total volume of testing by private labs was. He stated that Smith/Klein (a private lab) told him they processed 80,000 specimens last year. He compared that with a total of 120,000 performed by the public health labs last year. He suspected that the private sector was providing more tests in the state than the public health labs. Number 451 REP. VEZEY asked Mr. Sellkregg, "where do those reflect in the numbers that you're showing us about operating the public health labs? Are they not in there at all?" Number 454 MR. SELLKREGG said that they were not, and that the public health labs were not in competition with private health labs for testing. Number 469 REP. VEZEY, for clarification, stated that the numbers that were being reviewed are strictly the cost of operating the public health labs and not the total public health labs services the state was providing or paying for. Number 475 MR. SELLKREGG disagreed, saying that those numbers were the total costs for the public health labs services, not the total costs of all lab services going on in the state. He said private labs do not publicize those numbers. Number 486 REP. VEZEY asked how the state would pay the bill if private labs did not give numbers. Number 490 DR. NAKAMURA answered by saying that it would be difficult if not impossible to track the tests being done privately by request of the public health labs. He referred to a community that sent out all their tests to another state. Tests that showed for hepatitis came back to the community but never were reported to the public health labs. It was a hepatitis epidemic. Number 527 REP. B. DAVIS asked if there were reporting procedures for those types of test results. Number 532 DR. KELLY stated that there is no legal requirement on a lab that is outside the jurisdiction of the state to report back to the state. Number 540 REP. B. DAVIS asked if that information is, indeed, sent back to the state. Number 545 MR. SELLKREGG said only if requested do they return that information to the state. Number 547 REP. B. DAVIS, stating her confusion, questioned if the test done in another state would come back to the state or the doctor. Number 552 CHAIR TOOHEY said it would return to the private doctor. Number 553 REP. B. DAVIS said the private doctor should have the responsibility to report that to public health. Number 558 DR. KELLY said that is the way it should happen, but it rarely does. Number 559 REP. B. DAVIS asked, if indeed core functions were being maintained by the public health labs, could the remaining testing be done by private labs? Number 579 MR. SELLKREGG said that there is a difference in the way that a private lab and a public health lab look at performing a test. He said the private lab's job is to come up with the result as efficiently as possible, citing that they look for what they are asked to look for, but nothing more. The public health labs look for what was asked for but they also look for other critical diseases that may be there. He stated it was the extra effort taken by the public health labs to protect the population that was impossible to privatize. Number 603 CHAIR TOOHEY said, "but, if there were checklists on T.B. (bacillus), then you would check that off. And that could also be the function of the private lab, or you would find another private lab to do it." Number 607 MR. SELLKREGG asserted that it would be difficult to create a document that would articulate carefully enough to the private sector all the things that they would have to do to perform a public health lab service. The challenge of developing that contractual relationship would be close to impossible. He said an example of privatization of a public service was trash pick-up. He said that the private sector would be contracted to pick up three cans, throw them in the back of a truck and drive off. He said it was very straight forward contractual agreement. But, he felt the checklist approach did not cover the entire spectrum of services that public health labs provide. Number 646 MARTHA ROBBINS, Representative, Coopers & Lybrand, said that the way commercial labs make their money is by providing a very specific service at the quickest, automated rate. If further tests needed to be done on that specimen, additional fees would be added for each different test. Number 681 MR. SELLKREGG said that the state has an active program of identifying tests that should not be performed within the public health lab and finding more cost-effective ways of getting the tests done. Number 701 CHAIR TOOHEY asked if Mr. Sellkregg was finished with the presentation. Number 709 COMMISSIONER MARGARET LOWE, Commissioner, Department of Health and Social Services (DHSS), said that she wanted to call the committee's attention to the urgency of the public health labs situation, which she felt was the most "terrifying" to the DHSS. She said the state was on the edge of very serious health hazards. She encouraged immediate action to address those health problems. Number 730 REP. B. DAVIS asked if the anticipated full report would include recommendations to the legislature. Number 741 MR. CHASE responded yes. Number 747 REP. BRICE asked what the state's liability would be if in some type of natural disaster, some airborne diseases, were to escape into the general population. Number 764 DR. NAKAMURA said that if the power went out at a facility that was working with specimens with T.B., the organisms would circulate throughout the building, exposing others in the building. The liability is there. Number 793 CHAIR TOOHEY asked if the military had any shared labs that the state could use. She then asked what were the short- term plans for public health labs. Number 803 MR. SELLKREGG said the military does have labs, but they are not available to the state. He referred to Nolan Watson to answer questions about short-term plans. Number 834 NOLAN WATSON, Representative, McLellan & Copenhagen, Seattle, Washington, said that an office building that has been converted into a public health lab cannot respond to modern technical requirements. He said a prioritized report would list the short-term goals. Number 876 REP. BRICE stated that he not only had concerns for the general public at risk from health labs in poor states of repair, but he was also concerned for the employees working in public health labs. He suggested that it may be a cost saving measure to update and/or build new facilities than to undergo costly liable suits and then be ordered to make the proposed changes as well. Number 896 MR. SELLKREGG mentioned, "that we've had discussions with risk management. We are trying to help the state become aware of what it means to have a staff person contract T.B. through the work place, and what dollar number (exposure), and we're not in any way inflating numbers when we talk in terms of millions." Number 904 CHAIR TOOHEY said that one could get T.B. down on Fourth Avenue in Anchorage or in your neighborhood. Number 906 REP. BRICE indicated that there was a difference between contracting T.B. on Fourth Avenue than contracting it the work place. Number 909 CHAIR TOOHEY addressed Rep. Brice's comment by stating that people who work in labs take a somewhat inherent risk to exposure. Number 914 MR. PRESS said that because the state facilities are below standard, there would be great legal difficulty in defending the state in the cases of accidental exposure. Number 922 CHAIR TOOHEY said, "let me state, right now, that if that is the case, that I will recommend that the state labs be shut, right now! If they are in such bad condition that they are damaging the workers, then we will put out the word and we will close the state labs. And we will privatize, privatize, until those labs are brought up to task. Because I cannot see that if those workers are in that much danger, that they should remain in the work place." Number 931 REP. B. DAVIS remarked that, as she understood Mr. Press, it was more the possibility than inevitability for those health risks to become reality due to poor conditions at public health labs. Number 937 REP. VEZEY asked about the liability of the public school system in regards to approximately two dozen cases of exposure to T.B. in the Fairbanks/North Shore Borough School District. Number 947 MR. CHASE said that if a person is working with T.B. in a lab situation, liability of the state would be easier to prove. But, if a person who works, or attends, in the school system were to contract T.B., it would be difficult to say where it was contracted. Number 960 CHAIR TOOHEY said she had much faith in Commissioner Lowe and Dr. Nakamura that if they felt there was a health hazard in a public health lab, they would immediately address the problem. Number 971 DR. KELLY asserted that lab managers and DHSS have done everything possible to ensure employee protection. TAPE 94-06, SIDE A Number 000 MR. CHASE reiterated that the issues brought up by the committee will be addressed in the upcoming final report. Number 016 CHAIR TOOHEY thanked all those present. Seeing no further business before the committee, CHAIR TOOHEY adjourned the meeting at 4:25 p.m.