HOUSE HEALTH, EDUCATION AND SOCIAL SERVICES STANDING COMMITTEE April 13, 1999 3:04 p.m. MEMBERS PRESENT Representative Fred Dyson, Co-Chair Representative John Coghill, Co-Chair Representative Jim Whitaker Representative Joe Green Representative Carl Morgan Representative Tom Brice Representative Allen Kemplen MEMBERS ABSENT All members present COMMITTEE CALENDAR * HOUSE BILL NO. 113 "An Act relating to a program of postsecondary education for high school students." - HEARD AND HELD * HOUSE BILL NO. 168 "An Act relating to actions of the Department of Health and Social Services regarding certain health facility payments." - HEARD AND HELD HOUSE BILL NO. 152 "An Act relating to access to criminal history records and to revocation of or failure to renew certain licenses based on criminal conduct or alleged criminal conduct; and providing for an effective date." - SCHEDULED BUT NOT HEARD (* First public hearing) PREVIOUS ACTION BILL: HB 113 SHORT TITLE: POSTSECONDARY EDUC FOR HIGH SCHOOL STUDENTS SPONSOR(S): REPRESENTATIVES(S) MASEK, Dyson Jrn-Date Jrn-Page Action 2/24/99 301 (H) READ THE FIRST TIME - REFERRAL(S) 2/24/99 301 (H) HES, FIN 4/08/99 694 (H) COSPONSOR(S): DYSON 4/13/99 (H) HES AT 3:00 PM CAPITOL 106 BILL: HB 168 SHORT TITLE: HEALTH FACILITY PAYMENT DECISIONS SPONSOR(S): REPRESENTATIVES(S) GREEN Jrn-Date Jrn-Page Action 3/31/99 625 (H) READ THE FIRST TIME - REFERRAL(S) 3/31/99 625 (H) HES, JUD 4/13/99 (H) HES AT 3:00 PM CAPITOL 106 WITNESS REGISTER EDDIE GRASSER, Legislative Assistant for Representative Beverly Masek Alaska State Legislature Capitol Building, Room 432 Juneau, Alaska 99801 Telephone: (907) 465-3306 POSITION STATEMENT: Presented sponsor statement on HB 113. ROBERT SEWELL, Student Resources Coordinator University of Alaska Southeast 11120 Glacier Highway Juneau, Alaska 99801 Telephone: (907) 465-6359 POSITION STATEMENT: Testified on HB 113. BETH LAPE, Special Assistant Office of the Commissioner Department of Education 801 West Tenth Street, Suite 200 Juneau, Alaska 99801 Telephone: (907) 465-2803 POSITION STATEMENT: Provided information on HB 70. JEFF LOGAN, Legislative Assistant for Representative Green Alaska State Legislature Capitol Building, Room 214 Juneau, Alaska 99801 Telephone: (907) 465-3727 POSITION STATEMENT: Presented sponsor statement for HB 168. DAN HOUGHTON, Chief Financial Officer Alaska Regional Hospital 18753 May Court Circle Eagle River, Alaska 99577 Telephone: (907) 264-1713 POSITION STATEMENT: Testified in support of HB 168. JAY LIVEY, Deputy Commissioner Department of Health and Social Services P.O. Box 110601 Juneau, Alaska 99811 Telephone: (907) 465-3030 POSITION STATEMENT: Testified on HB 168. ACTION NARRATIVE TAPE 99-35, SIDE A Number 0001 CO-CHAIRMAN COGHILL called the House Health, Education and Social Services Standing Committee meeting to order at 3:04 p.m. Members present at the call to order were Representatives Dyson, Coghill, Morgan, Brice and Kemplen. Representatives Whitaker and Green joined the meeting at 3:05 p.m. and 3:16 p.m. respectively. HB 113 - POSTSECONDARY EDUC FOR HIGH SCHOOL STUDENTS Number 0076 CO-CHAIRMAN COGHILL announced the first order of business as House Bill No. 113, "An Act relating to a program of postsecondary education for high school students." Number 0096 EDDIE GRASSER, Legislative Assistant for Representative Beverly Masek, came forward to present the sponsor statement: House Bill 113 will provide eleventh and twelfth grade students in secondary schools in the state of Alaska an option for taking postsecondary classes at a nearby college campus. It is modeled after a program already in effect in 21 other states. House Bill 113 gives high school students the opportunity to take more advanced classes within the university system and count them toward their requirements for graduation from high school or for college credit. The bill further recognizes that secondary students are part of the public education foundation formula and provides for tuition assistance whenever the secondary student chooses to count college courses toward his or her high school graduation requirements. House Bill 113 will give our public school students more options in planning their curriculum. Instead of being limited to those classes offered by the local high school, this bill, if enacted, would give our public school students a wider variety of options by including courses available at the local college campus. Such an option will provide for an inexpensive method for high school students to take advanced education classes that wouldn't otherwise be available. We are all looking for ways to improve our educational system. Expanding opportunities for our young people is one way we can accomplish that. House Bill 113 takes a step in that direction. CO-CHAIRMAN DYSON commented that in many communities the "nearby" college courses are offered right in the high school. He desires that the line between secondary and postsecondary education get really blurry. High school students and adults could be taking courses intermingled during the day in the same facility. Number 0312 CO-CHAIRMAN COGHILL asked if it was true that Mark Hamilton, President of the University of Alaska, had asked for a seamless transition between high school and college, and he asked if this is what he was talking about. MR. GRASSER replied that this bill is the result of requests from several constituents in their area. He believes it is true in regard to what President Hamilton said, but that wasn't the reason for the bill. Representative Masek's office has been working with Co-Chairman Dyson's office on this bill, and there is a proposed committee substitute. Number 0419 CO-CHAIRMAN DYSON made a motion to adopt the proposed committee substitute (CS) for HB 113, version 1-LSO461\G, Ford, 3/31/99, as a work draft. There being no objection, that proposed CS was before the committee. REPRESENTATIVE BRICE asked whether they are just asking the school district to pay the tuition for those high school students who are already taking college course. He asked how the system works now. Number 0464 MR. GRASSER agreed that there are several places in the state where students are taking college classes. There are a variety of systems out there dealing with this. Nome-Beltz pays a flat fee per class rather than the normal tuition fee; other places charge whatever any college student would pay, and the students get college credit. This bill is looking for a way to fund the tuition for those students who would like to take the advanced classes but are not financially capable. REPRESENTATIVE BRICE asked why a student couldn't get college credit as well as high school credit. MR. GRASSER explained the bill says they can choose either one; but they will also get college credit if they choose to enroll in the University of Alaska system after high school. They can get dual credit after they have graduated from high school. REPRESENTATIVE BRICE noted that the University of Alaska Fairbanks (UAF) has high school students taking college courses and getting credit for both, and he doesn't want this bill to undermine that ability. MR. GRASSER indicated that their goal is to come up with a workable solution for students in high school to take advanced classes at the college. CO-CHAIRMAN DYSON pointed out that in Section 1 in the CS, it is his intention to remove the age of 20 as the cap for which a child can attend a secondary school, and allow the school to get reimbursement under the foundation formula. This bill allows students to finish high school who were not able to finish before they were 20 for whatever reason. Some districts have been allowing those students to attend, even when the foundation formula didn't follow; this allows the foundation formula to follow the students. Some very enlightened districts in this state are allowing people who are older than 20, who are not a problem or threat to the school, to finish their studies with the high school students. There have been good results from that. One of the districts has a 58-year-old grandmother and a 28-year-old ex-drunk. When the high school students see these older people come back because they believe education is important and valuable, perhaps the high school students will appreciate the value of their own education. CO-CHAIRMAN DYSON pointed out that schools are capable of excluding those people over 20 who are going to be a threat to the students or a problem to the school. REPRESENTATIVE BRICE commented that he is glad to see the protection for the school in there. He wonders if they will run afoul of the Americans with Disabilities Act (ADA) on line 12 where a governing body is allowed to not include someone based on a physical ability. MR. GRASSER explained if the school didn't have an ability to make some assertion as to the progress of students above the age of 20, they could end up with people who would be there for a long time, and the state would have to pay under the foundation formula. This is the language the bill drafter came up with. CO-CHAIRMAN COGHILL asked if a student gets credit for a college course but doesn't complete his high school diploma, what happens to the college credit. Number 1146 CO-CHAIRMAN DYSON said if he got the college credit, he got the college credit. It won't do him any good if he doesn't meet the standards to get into the university. If he takes another route to get into the university, once he is there the credits ought to be there for him. Number 1208 ROBERT SEWELL, Student Resources Coordinator, University of Alaska Southeast (UAS), came forward to testify. He was asked by Representative Masek's office to speak to some of his concerns and considerations. He speaks as a representative of the university, as a parent and as a child advocate. He spoke briefly of three efforts that relate to this bill, although to this point, they have all been independent. The first is the College Connection at UAS, the "Ahead Program" at UAF, and another through the Anchorage school district called "Credit by Choice." To some extent this is an idea whose time has come. A number of the states already offering this program, offer dual credit, where the student can get simultaneous credit at the high school and college, and he advocates that. This is not a dangerous nor new concept. There are Juneau-Douglas High School students enrolled at UAS now. There is a fiduciary issue. Today most of the students who take the college students have parents who can afford to pay the tuition. This should be a concern to them. The haves are getting it, and the have-nots aren't. DR. SEWELL said there is a way to get dual enrollment. There is a form to fill out at the local school, but he is concerned that the students who take the university classes are not aware of that process. This is not a systematic program. The College Connection at UAS is still conceptual and has gone through committee work involving the school district, the university and an advocacy voice called the Extended-Learning (EL) Pact. The EL Pact is a group of parents of students who are identified as extended learning or gifted and talented, of which there are over 400 in the Juneau school district. Those parents are very concerned, and he is one of them, that their children are not getting the degree of acceleration and enrichment as befits their intellectual acumen. This is the second issue. DR. SEWELL has a 13-year-old daughter. When she was 12 she took a English 110 at UAS. She did fine, and she was well received. He suggested that there are many students still waiting to be challenged in the high school classes, and often students whose needs are not met tend to drift. The cost in those cases is an opportunity cost. He recommended that HB 113 allow students younger than eleventh grade be considered eligible. The College Connection at UAS allows juniors and seniors to take two courses per semester and freshmen and sophomores to take one; there are some rare middle school students, who can and are, taking classes that they can benefit from. DR. SEWELL mentioned the third issue as a child advocate where this is one of those steps towards individualizing the educational process. It is a relatively cost-effective step. Number 1512 REPRESENTATIVE GREEN asked if the high schools students who wanted to take college courses would displace college students. DR. SEWELL said the general answer is no. A lot of courses are offered whether or not they have the maximum number of students. There are almost always a few seats available. Some states give priority to the college students, and the high school students have to wait until there is a spot. He doesn't see overdemand as a big problem. Number 1574 REPRESENTATIVE GREEN asked if there is an affect from the maturity level of the high schools students. DR. SEWELL believes that there is parental responsibility to be sure their child is not getting in over his head. He suggested that the student and his parents would have to meet with the high school counselor and the college counselor where three things would be emphasized: This starts your college transcript; this is different than high school, they are not going to follow the students around; and college is a place where they talk about all things, and some of those are necessarily adult content. Number 1768 MR. GRASSER noted that the bill on page 2 answered Representative Green's question. Students who have graduated from high school have priority over those still enrolled in high school. The bill also protects the high school from students leaving en masse to take a college course, if the same course is available at the high school. REPRESENTATIVE BRICE asked if they were acknowledging the receipt of the GED [general equivalency diploma] as the same as having a high school diploma in Section (d). MR. GRASSER wasn't sure but would get back to him on that question. REPRESENTATIVE KEMPLEN asked if there was anyone present from the school district to testify. Number 1866 BETH LAPE, Special Assistant, Office of the Commissioner, Department of Education (DOE), spoke up and said they weren't prepared to testify on the bill yet. They were still working on the fiscal note and the CS. MR. GRASSER said the sponsor's intent is that the HES Committee work on several of the issues brought up today before it is moved out. He believes they still need to discuss the funding mechanisms with both the school districts and the DOE and address the issue of how the students make it from the high school to the college classroom. Number 1968 REPRESENTATIVE KEMPLEN asked about the implications of adults finishing their high school education on the adult basic education (ABE) programs. He wondered if one impact of this legislation would be to move the people currently in ABE programs into the high schools. CO-CHAIRMAN DYSON explained that in many communities there is not a good basic adult education program. A good model for delivering high school equivalence is in a local high school. In some areas, it may make more sense logistically or for childcare, for the adults to go to the local high school. He guesses that there will be an interesting nexus between the university, adult basic education and secondary schools about who gets the money, and who can deliver the services. His major interest is what is best for the student. Hopefully, there will be a marketplace out there where students can pick the option that works best for them. CO-CHAIRMAN COGHILL understood that the university was offering free tuition to students with good grades, and if they reach into the high school for certain college courses, and there are exceptional students, it may be that the university could be a part of the funding picture. Number 2215 REPRESENTATIVE GREEN noticed that the bill says a student "shall" be admitted. CO-CHAIRMAN DYSON noted that in the original draft the "shall" was modified to "may," and he didn't realize in this version the "shall" is still in. He will amend that. He wants the school districts to want the students and to take advantage of this but not be forced to do it. Number 2270 CO-CHAIRMAN DYSON made a motion to amend HB 113, page 1, line 10 to replace the word "shall" with "may." CO-CHAIRMAN COGHILL asked whether there was any objection to Amendment 1. There being none, Amendment 1 was adopted. CO-CHAIRMAN DYSON mentioned he has had extensive talks about this bill with Shirley Holloway [former Commissioner of DOE] before she retired, and she was really enthusiastic about the blurring of the lines between college and high school and allowing adults who chose to and were qualified to come back and finish their high school diploma. TAPE 99-35, SIDE B Number 2327 CO-CHAIRMAN DYSON asked if the DOE knows when they will have the numbers for them. Number 2322 MS. LAPE answered they are working on it right now. She thought she could have the numbers by next Thursday. CO-CHAIRMAN DYSON suggested that the sponsor look at page 2, line 3 and consider lowering the age requirement of eleventh grade in light of the testimony they heard. He also suggested adding something about the process of the student meeting with both high school and college counselors. MR. GRASSER offered to work with the committee and the suggestions they heard to try to make this an Alaskan bill. They are open to suggestions, and they are trying to offer an opportunity to students to better their educational format. Number 2195 CO-CHAIRMAN DYSON made a motion to continue the hearing on HB 113 until Tuesday of next week. There were no objections. The Committee took an at-ease from 3:54 p.m. to 4:01 p.m. HB 168 - HEALTH FACILITY PAYMENT DECISIONS Number 2176 CO-CHAIRMAN COGHILL announced the next order of business as House Bill No. 168, "An Act relating to actions of the Department of Health and Social Services regarding certain health facility payments." Number 2164 JEFF LOGAN, Legislative Assistant for Representative Green, presented the sponsor statement for HB 168. He explained that the legislature has issued expressions of support for small and large businesses in the state. One way they did that a few years ago, was to provide a clear time line in which the state was supposed to pay businesses for services and goods that were rendered to the state. There was much discussion then that paying the state's bills on time was important. This bill is about paying the state's bills to health care providers, who are reimbursed for services covered under Medicaid. The issue is the reimbursement and the reimbursement rate, and specifically how to appeal that rate, if the business doesn't think it covers their expenses. MR. LOGAN explained that HB 168 accelerates the process through which providers appeal those reimbursement rates. This issue has been around for ten years. In March 1989 then-Governor Cowper issued Executive Order 72, which moved the rate setting and appeals process into the Department of Health and Social Services (DHSS). There was a bill in the legislature which tried to clarify what the governor had said and further specify what some of the timeliness were. The legislation was SB 431 in 1990. This has been a topic of discussion since then. MR. LOGAN told them that currently the process is that rate is appealed to a hearing officer, and the hearing officer renders a decision to the commissioner. He directed their attention to page 2, line 5 of the bill which is capitalized and says: THE COMMISSIONER MUST, WITHIN 30 DAYS AFTER RECEIVING THE RECOMMENDATION OF THE HEARING OFFICER, EITHER RENDER A DECISION IN THE CASE OR REFER THE CASE BACK TO A HEARING OFFICER FOR ADDITIONAL FINDINGS. The crux of HB 168 is found on page 2 on line 16 at (c) where it changes the capitalized language to: "The commissioner shall, within 30 days after receiving the recommendation of the hearing officer, render a final administrative decision in the case. If after 30 days the commissioner does not render a final administrative decision, the hearing officer's recommendation becomes the final administrative decision." There is no provision for the commissioner to send it back to the hearing officer. The commissioner has to make a decision in 30 days or the hearing officer's decision stands. That decision can then be further appealed to the superior court. The people who are providing these services came to the sponsor and said they needed some help. They are not getting their money back for the services they provide. It was agreed that providing some finality might be the way to take care of this. Number 1999 REPRESENTATIVE WHITAKER wondered if the rather large fiscal note attached to this bill was reasonable. REPRESENTATIVE GREEN explained that a couple of years ago he had a bill to adjust the procedure by which tax appeals were rendered. To set up two Administrative Law Judges, an office manager and a new office, the total would be $284,000 a year, as opposed to these people looking at $367,000. He submits it does seem disproportionate. REPRESENTATIVE WHITAKER concurred and said this isn't the first time in this committee that they have seen this sort of fiscal note. He commented that when he sees this sort of thing, it certainly jades his decision making process. In the future, those that do this should be aware of that. REPRESENTATIVE BRICE asked if the changes reflect strictly back on the Medicaid rate establishment. MR. LOGAN answered that is correct. It is the administrative procedure under AS 47.07.075 which deals with the reimbursement rates for those Medicaid procedures the state covers. Number 1879 DAN HOUGHTON, Chief Financial Officer, Alaska Regional Hospital, testified via teleconference from Anchorage in support of HB 168. They need a timely appeals process in place that allows them to bring to the table issues that have either not been resolved or disputed in the informal rate hearing process. In the appeals process, when the hearing officer renders a decision that the commissioner still does not feel comfortable with, the facility will have legal judicial review in place that they can appeal to a body outside the [DHSS]. He urged the committee to support HB 168. CO-CHAIRMAN DYSON asked what the time lag is between when they submit a bill to the time they get paid. Number 1808 MR. HOUGHTON answered that an interim payment on a current year bill is averaging 70 to 75 days per payment. In the appeals process, they are most concerned about when they do not agree with the rate that has been given, and they do not feel that their costs are being covered, they need to have a timely process in place to resolve the issues. CO-CHAIRMAN DYSON asked if they get paid during an appeal or are the rates suspended. MR. HOUGHTON replied if the hearing officer rules in their favor and the commissioner agrees, the rate will be adjusted per that decision back to whatever year they are actually appealing, and there is an incremental payment given to the facility. Or vice versa, there would be a money withheld from future payments to that facility. Number 1688 LARRAINE DERR, President, Alaska State Hospital and Nursing Home Association (ASHNHA), came forward to testify. The association supports this legislation. There are appeals outstanding from 1994, and there is any where from $10 to $25 million dollars in the pipeline. It has been a problem for some time. She had a letter dated October 3, 1994 that Representative Gary Davis sent to the DHSS from which she quoted: It is my understanding that imposing a deadline on the hearing officer's proposed decision was the legislature's intent when it passed Senate Bill 431 in 1990. It seems one of the concerns addressed by SB 431 was the backlog of medicaid appeals. In several cases, health facilities have waited, or are waiting, for more than two years for a decision to be proposed. Again, this does not seem to be fulfilling the legislation's intent. I hope the department will consider the inclusion of a deadline for a proposed decision within these proposed regulations. MS. DERR noted five years ago they were talking about some sort of a deadline to give some finality to the process. Number 1598 GARTH HAMMOND, Chief Financial Officer, Bartlett Regional Hospital (BRH), shared their experience related to a current appeal. In December 1993, BRH installed a magnetic resonance imager (MRI). Eighteen months later in June 1995, the department conducted an audit and concluded, among other things, to disallow costs associated with the MRI; there were other issues in that audit. Twelve months later, the hearing officer of the department issued a decision that was partly in their favor relating to the MRI. They had not, in fact, exceeded the cost up to the threshold to be allowed. In December of 1997, the commissioner sent the appeal back to the hearing officer with instructions to require more information about this Certificate of Need. Eight months later in August 1998, a decision was issued by the hearing officer on the Certificate of Need issue; and they still don't have a resolution to that question. The MRI was installed in December 1993. Now it is 1999, and there has been no decision on that issue. The department takes a long time. The fact that the decisions take too long costs money, as they have consultants and attorneys involved. Since they have an open appeal rated to their fiscal year 1994 audit, their 1996 rate; then it has become necessary for them to appeal subsequent rates, and they pile up. MR. HAMMOND noted that in July 1998, they made their final payment on the MRI. Now they are considering whether they need to upgrade or replace that equipment since technology changes so quickly. They are still waiting for a decision from the state as to whether they will pay them for the services provided to all patients, including Medicaid patients, which they pay for since the time the equipment was installed. There will be times when they will disagree, but there is no way to get resolution and move on in the process. The hearing is hung up waiting for whatever is next. REPRESENTATIVE BRICE asked what the level of complexity is involved in the issues at Bartlett. Number 1440 MR. HAMMOND replied that the Medicaid rate system is a complex system, but the hearing officer moved along in making recommendations on it. They went through a two week hearing, and he has a box of paper; attorneys and consultants were involved on both sides. The hearing officer has made a recommended decision a couple of different times on the issues. The issues are complex, but five or six years is a long time. REPRESENTATIVE GREEN asked if there would have been a quicker resolve had there been some impartial way or fact that could say the MRI charges are valid or not, and then allow them to get on with the process. Since they are in limbo, they have no recourse, except to try and get it rendered before they can go beyond that. Number 1381 MR. HAMMOND commented that it could look like the hearing officer is not impartial since she works for the department, but she has ruled in their favor, and they still cannot get a decision out of the department. REPRESENTATIVE GREEN noted that Ms. Derr was commissioner of the Department of Revenue at one time and asked her if, at that time, there was an intermediary in tax appeal cases. MS. DERR concurred there was a mediation step. REPRESENTATIVE GREEN asked her if she thought something like that would be helpful in this case. Number 1325 MS. DERR agreed there has got to be something better. CO-CHAIRMAN DYSON asked Mr. Hammond if they borrow against their accounts receivable. MR. HAMMOND answered no they do not. CO-CHAIRMAN DYSON asked what it costs them to have outstanding money due them. Number 1291 MR. HAMMOND said BRH is in reasonable financial shape. They borrowed on the MRI at about 5 percent; they earn 5 to 6 percent on their investments. There are hundreds of thousands of dollars for them each year these appeals are outstanding. Each year there is the opportunity cost of not having that money for operations. The back interest is not paid so they don't have the money, and there is no interest coming when there is a settlement. CO-CHAIRMAN COGHILL asked for clarification on the process of appeal. MR. HAMMOND explained that a rate is established, which in the hospital's case is a percent of charges. When there is a dispute or disagreement about that rate being too low, they appeal that rate. If the department sets a rate at 65 percent of charges, they are paid at that rate, and what is in dispute is the other 10 percent the hospital thinks it should be. The hospital is paid at the lower rate; that is the cash they receive. They appeal and, pending a settlement, then the additional 10 percent will be computed and forwarded on. CO-CHAIRMAN COGHILL asked about the nature of the disputes and the reason they are declined. Number 1164 MR. HAMMOND explained it is a complex issue. The kinds of appeals are varied. In their case, the appeal on the MRI was that they had signed a contract for the unit to be installed for less than $1 million, which is the ceiling threshold on a Certificate of Need. There were some unforeseen costs, and the bill was over $1 million, so then the department disallowed all costs for that, saying BRH should have obtained a Certificate of Need. There is a complicated year-end conformance calculation; there are allowances or disallowances disputes over whether certain kinds of costs should be allowed or not. MR. HAMMOND cited an example in the Medicare program. They make an adjustment each time that disallows the cost of a telephone or television in a patient's room. Most people take those things for granted, but the Medicare program doesn't allow those costs. It is disputes over what kinds of costs are allowable and the kinds of adjustments that are made to allowable costs to compute the payment rate in the facility. Number 1001 JAY LIVEY, Deputy Commissioner, Department of Health and Social Services, came forward to testify. He explained that DHSS is concerned about this bill because they believe it directly affects their ability to control the Medicaid budget. The facility's portion of the Medicaid budget is about 40 percent of total expenditures. The primary method they have to control facility costs is how they set the reimbursement rate. In hospitals, they set up a percentage of charges, and in nursing homes they set a per day rate. That rate is set once a year for each facility. That rate is challengeable by the facilities, and that becomes the nature of the appeals. MR. LIVEY explained that every bill they get from BRH, they pay at 65 percent (or whatever the rate is), and that rate applies for the rest of that year. The nursing homes are paid a per day rate, and hospitals are paid a per procedure rate, which includes supplies, drugs, lab tests, x-rays, and so on. CO-CHAIRMAN DYSON asked Mr. Livey what the hospital would be contesting. Number 0754 MR. LIVEY explained the way the rate system works is: The department pays the facilities based on their cost of providing service to Medicaid patients. The facilities fill out a cost report, which tells the department what all their costs are, and the department audits the cost report. Then they will say there is a misallocation of square footage to Medicaid. When the hospital submits the bill to the department, they don't take the cost of televisions for Medicaid patients out of their bill, but the department takes them out. Once those costs are taken out, then the cost basis left becomes what the rate is calculated on. They are arguing about the costs that the department has taken out of the bill, but the department pays the facilities the rate percentage of each bill throughout the year. They set up the rate at the beginning of the year; every time the hospital submits a bill on behalf of a Medicaid patient, they pay that rate. CO-CHAIRMAN COGHILL asked if it is true during the appeals process that the department pays in the 70 to 80 day period. Number 0485 MR. LIVEY replied that that is what the gentleman from Alaska Regional Hospital testified, and he was actually surprised; he thought they paid the bills faster. In the Medicaid program, they pay bills electronically, and he believes they pay almost all of their bills within ten days. Hospital bills must be treated differently, he is not questioning Mr. Houghton, but they pay on a regular schedule. The percentage that BRH gets goes into the computer when the bill comes in, and the bill is cleared, then they just pay it. They don't have to argue over every bill that comes in. CO-CHAIRMAN COGHILL asked if their auditing process happens after the fact. MR. LIVEY answered yes. When they are ready to set a rate for a facility, and if the facility has a July 1 fiscal year, they will set a rate that starts their new fiscal year on July 1, 1999. They will have taken a look at all of their expenditures in their fiscal year 1996. The facility does a cost report for the DHSS; they tell the department all their expenditures related to Medicaid for the year 1996. The DHSS then audits those 1996 costs; they inflate those costs by two years, because there are two years in between, and that becomes their 1999 rate. They are arguing over the cost that is located in the cost report. If the DHSS doesn't take those costs out, then they will roll into 1999 and into future years. Being able to audit those cost reports is critical. CO-CHAIRMAN COGHILL asked if the time frame on those might require a history search of two years. MR. LIVEY answered any appeal that is filed, for example, if they set a facility rate in July 1999, that rate will be appealing the 1996 audit. There is a history then of going back and reviewing the costs, and the cost report that went into setting that 1999 rate. Number 0295 CO-CHAIRMAN COGHILL asked how long the hearing officer has to review that before forwarding it on, and if there is a time frame for the hearing officer. Number 0285 MR. LIVEY answered there is language in AS 47.070.075 that the hearing officer has to schedule a hearing within 120 days, unless there is good cause for her not to do that. In the past, they have assumed that good cause meant that they couldn't get hearings scheduled. They have one hearing officer and limited attorneys on the state side to do this work. There are a couple of attorneys on the facility's side that do most of this work, and so the reality is, it takes a year and a half to even schedule a hearing. In one proposed decision from the hearing officer for the DHSS to review, the decision itself was 200 pages. The transcripts that they were sent to review in that case had 1,500 pages, and that didn't include all the depositions. These are very complicated cases. CO-CHAIRMAN COGHILL agreed all that paperwork would take a long time to go over, but also there should be some finality. He wondered if they put more than a 30-day limit would that give the department more latitude. Number 0074 MR. LIVEY agreed a longer period of time would make them feel comfortable. He agrees that it takes too long to do appeals. He thought Ms. Derr's suggestion of setting up a mediation process is a good idea. Once they get in to the appeal, and they are under the Administrative Procedures Act, then they are into depositions and evidence and formal hearings, post hearing briefs, and so forth, which takes a lot of time and costs money. They need to set up a process to short circuit the appeals, or reduce the number of issues that go forward. TAPE 99-36, SIDE A [Due to recording malfunction, the following testimony was reconstructed from log notes.] CO-CHAIRMAN DYSON asked Mr. Livey why the department hasn't done anything about this problem sooner. MR. LIVEY answered that they have had other things take priority for their time and money. It hasn't been at the top of their list, but now it is. CO-CHAIRMAN DYSON asked if it was because they don't have enough people. MR. LIVEY answered that they only have one hearing officer. CO-CHAIRMAN DYSON asked if there has been any discussion on paying interest. MR. LIVEY would have to check on that; it may be a legal issue. CO-CHAIRMAN DYSON asked how long would it take them to improve the process. MR. LIVEY answered it will take time to find the resources, but he believes it will take at least a year to see a reduction in time. CO-CHAIRMAN DYSON asked him if they could work out the mediation aspect. MR. LIVEY agreed they could work on that. REPRESENTATIVE GREEN hopes they can find a real workable solution and he is amenable to that by next Thursday. Time is of the essence for the businesses, and he hopes they can move toward a resolution that represents both sides. CO-CHAIRMAN COGHILL announced they will take this up again a week from Thursday. [HB 168 is held over.] ADJOURNMENT There being no further business before the committee, the House Health, Education and Social Services Committee meeting was adjourned at 4:50 p.m.