ALASKA STATE LEGISLATURE
HOUSE HEALTH, EDUCATION AND SOCIAL SERVICES
STANDING COMMITTEE
March 28, 2002
3:01 p.m.
MEMBERS PRESENT
Representative Fred Dyson, Chair
Representative John Coghill
Representative Vic Kohring
Representative Sharon Cissna
Representative Reggie Joule
MEMBERS ABSENT
Representative Peggy Wilson, Vice Chair
Representative Gary Stevens
OTHER LEGISLATORS PRESENT
Representative Joe Hayes (via teleconference)
COMMITTEE CALENDAR
CONFIRMATION HEARING
Commissioner, Department of Health and Social Services
Jay Livey - Juneau
- CONFIRMATION ADVANCED
SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 292
"An Act relating to child care grants; and providing for an
effective date."
- MOVED SSHB 292 OUT OF COMMITTEE
HOUSE BILL NO. 407
"An Act relating to the certificate of need program."
- HEARD AND HELD
HOUSE BILL NO. 309
"An Act relating to the Interstate Compact on Placement of
Children."
- SCHEDULED BUT NOT HEARD
HOUSE BILL NO. 259
"An Act relating to testing public and private school students
for abnormal spinal curvature."
- BILL HEARING POSTPONED TO 4/4/02
HOUSE BILL NO. 408
"An Act relating to questionnaires and surveys administered in
the public schools."
- BILL HEARING CANCELED
PREVIOUS ACTION
BILL: HB 292
SHORT TITLE:INCREASE CHILD CARE GRANTS
SPONSOR(S): REPRESENTATIVE(S)HAYES
Jrn-Date Jrn-Page Action
01/14/02 1951 (H) PREFILE RELEASED 1/4/02
01/14/02 1951 (H) READ THE FIRST TIME -
REFERRALS
01/14/02 1951 (H) HES, FIN
01/28/02 2086 (H) COSPONSOR(S): GUESS
02/01/02 2115 (H) SPONSOR SUBSTITUTE INTRODUCED
02/01/02 2115 (H) READ THE FIRST TIME -
REFERRALS
02/01/02 2115 (H) HES, FIN
03/19/02 (H) HES AT 3:00 PM CAPITOL 106
03/19/02 (H) -- Meeting Canceled --
03/21/02 (H) HES AT 3:00 PM CAPITOL 106
03/21/02 (H) -- Meeting Canceled --
03/28/02 (H) HES AT 3:00 PM CAPITOL 106
BILL: HB 407
SHORT TITLE:CERTIFICATE OF NEED PROGRAM
SPONSOR(S): REPRESENTATIVE(S)COGHILL
Jrn-Date Jrn-Page Action
02/13/02 2232 (H) READ THE FIRST TIME -
REFERRALS
02/13/02 2232 (H) CRA, HES
03/04/02 2469 (H) COSPONSOR(S): JAMES
03/13/02 2530 (H) COSPONSOR(S): SCALZI
03/14/02 (H) CRA AT 8:00 AM CAPITOL 124
03/14/02 (H) Scheduled But Not Heard
03/18/02 2593 (H) COSPONSOR(S): DYSON
03/19/02 (H) CRA AT 8:00 AM CAPITOL 124
03/19/02 (H) Heard & Held
03/19/02 (H) MINUTE(CRA)
03/21/02 (H) CRA AT 8:00 AM CAPITOL 124
03/21/02 (H) Moved Out of Committee
03/21/02 (H) MINUTE(CRA)
03/22/02 2638 (H) CRA RPT 2DP 2NR 3AM
03/22/02 2638 (H) DP: SCALZI, MEYER; NR: GUESS,
HALCRO;
03/22/02 2638 (H) AM: KERTTULA, MURKOWSKI,
MORGAN
03/22/02 2638 (H) FN1: (HSS)
03/26/02 (H) HES AT 3:00 PM CAPITOL 106
03/26/02 (H) Heard & Held
03/26/02 (H) MINUTE(HES)
03/28/02 (H) HES AT 3:00 PM CAPITOL 106
WITNESS REGISTER
JAY LIVEY, Commissioner
Department of Health and Social Services
P.O. Box 110601
Juneau, Alaska 99811-0601
POSITION STATEMENT: Testified as appointed commissioner of the
Department of Health and Social Services.
MELINDA BRUNO, Staff
to Representative Joe Hayes
Alaska State Legislature
Capitol Building, Room 422
Juneau, Alaska 99801
POSITION STATEMENT: Presented SSHB 292 on behalf of
Representative Hayes, sponsor.
YVONNE CHASE, Deputy Commissioner of Early Development
Office of the Commissioner
Department of Education and Early Development (EED)
333 West Fourth Avenue, Suite 320
Anchorage, Alaska 99501-2341
POSITION STATEMENT: Offered EED's support for SSHB 292.
KALEN SAXTON, Child Care Connection
P.O. Box 141689
Anchorage, Alaska 99504
POSITION STATEMENT: During hearing on SSHB 292, expressed
support for the geographic cost differential.
ELIZABETH RIPLEY, Director
Community Health Planning
Valley Hospital
515 East Dahlia
Palmer, Alaska 99645
POSITION STATEMENT: Testified in opposition to the population
delimiter in SSHB 292, saying Valley Hospital supports, with
certain provisions, retaining the certificate-of-need threshold
at $1 million for equipment and raising it to a $2 million for
buildings.
JAN OWEN-DENTON
7209 Richardson Highway
Salcha, Alaska 99714
POSITION STATEMENT: Testified in opposition to HB 407, saying
it will exacerbate the shortage of health care workers.
JEROME SELBY, Regional Director
Planning, Development, and Advocacy
Providence Health System in Alaska
P.O. Box 1962
Kodiak, Alaska 99615-1962
POSITION STATEMENT: Spoke in opposition to the 55,000-
population threshold in HB 407; suggested language changes.
KAREN LOSINSKI, R.N., Manager
Home Health Care
Fairbanks Memorial Hospital
3479 Sharon Road
North Pole, Alaska 99705
POSITION STATEMENT: Testified in opposition to HB 407, saying
it will promulgate building unnecessary health care facilities.
SHEILA SIEGLER, Patient Service Finance Manager
Fairbanks Memorial Hospital
1905 Esquire Avenue
Fairbanks, Alaska 99709
POSITION STATEMENT: Testified in opposition to HB 407, saying
it wouldn't foster good competition in the field of health care.
CHARLES HOLYFIELD, Respiratory Therapist and Manager
Respiratory Care and Cardiology Departments
Sleep Disorders Lab
Fairbanks Memorial Hospital
1223 Wildrose Avenue
Fairbanks, Alaska 99701
POSITION STATEMENT: Testified in opposition to HB 407; conveyed
strong support for retaining the certificate of need.
PATRICIA CONNELLY, R.N.
Fairbanks Memorial Hospital
4525 Woodriver Drive
Fairbanks, Alaska 99709
POSITION STATEMENT: Testified in opposition to HB 407,
concurring with her colleagues.
CAROL BARNETT, Registered Health Information Administrator
Medical Record Department
Fairbanks Memorial Hospital
1696 Dredgeview Drive
Fairbanks, Alaska 99712
POSITION STATEMENT: Spoke in opposition to HB 407, indicating
the number of Fairbanks patients is stable and that added
facilities would unevenly divide this limited population among
providers.
ACTION NARRATIVE
TAPE 02-26, SIDE A
Number 0001
CHAIR FRED DYSON called the House Health, Education and Social
Services Standing Committee meeting to order at 3:01 p.m.
Representatives Dyson, Coghill, and Kohring were present at the
call to order. Representatives Cissna and Joule arrived as the
meeting was in progress.
CONFIRMATION HEARING
Commissioner, Department of Health and Social Services
CHAIR DYSON announced the first order of business, the
confirmation hearing on the appointment of Jay Livey as
commissioner of the Department of Health and Social Services.
Number 0160
JAY LIVEY, Commissioner, Department of Health and Social
Services (DHSS), offered background information, noting that he
came to Alaska in 1973 to work in Bethel for the Yukon-Kuskokwim
Health Corporation, where he worked on and off for about ten
years; he also worked as Bethel's city planner for a few years,
in addition to other jobs. He returned to school, received a
master's degree in 1982, and moved to Juneau, where he worked
three years in what was then the House of Representatives
Research Agency. In 1987, he became the department's special
assistant to the commissioner, staying on as a deputy
commissioner through the Hickel Administration and Knowles
Administration through last October. He added that for six or
eight months he served as the administrative director for the
department.
COMMISSIONER LIVEY noted his difficulty in being a "self-
promoter," but offered his belief that he is the right person
for the job as commissioner; he cited his experience in the
department, his knowledge of most of the issues, and that it
seems to be a "good fit." He had been working on projects in
the department, he said, and wished to finish those; therefore,
he'd decided it would be a good job for him.
Number 0342
REPRESENTATIVE COGHILL said he has learned a great deal from
[Commissioner] Livey, who he agreed knows the issues well. He
expressed appreciation for his work.
REPRESENTATIVE KOHRING also offered appreciation for
Commissioner Livey's work, despite possible philosophical
differences. He asked for his views on the size of the DHSS
budget and ways to trim it. He also asked, "What can we do to
explore non-government-type funding of programs?"
Number 0420
COMMISSIONER LIVEY replied that this is on "department minds" as
well, since the budget is big and growing. He explained three
responsibilities of the commissioner. First, because DHSS
provides many direct services and grant management, the
department manages a lot of money; therefore, the commissioner
needs to be a good manager and possess the sense to hire others
who are good managers as well. Second, the commissioner has a
charge to be an advocate for Alaskans who don't have a voice,
whether they are poor, disabled, or low-income; many
philosophical discussions [at DHSS] center on [this] function of
the commissioner and the department. Third, a responsibility
exists to continually try to find more efficient, less expensive
ways to do things. Furthermore, DHSS must seek out other
partners, including the federal government, for assistance,
which the department has been doing.
REPRESENTATIVE KOHRING reported that many of his constituents
have been helped by the department. He said the goal of helping
people is a shared one, although [he and Commissioner Livey]
don't share the same path to reach that goal.
Number 0600
CHAIR DYSON offered his impression that Commissioner Livey has
integrity and that many people have been helped. He said he
might not agree with Commissioner Livey on everything, but that
it has been a pleasure working with him, and that he has a
growing level of confidence in him. [Although no formal motion
was made, Commissioner Livey's confirmation was treated as
advanced from the House Health, Education and Social Services
Standing Committee.]
HB 292-INCREASE CHILD CARE GRANTS
CHAIR DYSON announced the next order of business, SPONSOR
SUBSTITUTE FOR HOUSE BILL NO. 292, "An Act relating to child
care grants; and providing for an effective date."
[Representative Joe Hayes, sponsor, explained via teleconference
that he would listen in while his staff person presented the
bill to the committee.]
Number 0715
MELINDA BRUNO, Staff to Representative Joe Hayes, Alaska State
Legislature, presented SSHB 292 on behalf of Representative
Hayes, sponsor. Calling SSHB 292 a simple but important bill,
she explained that current statute calls for a child care grant
to not exceed $50. Statute also calls for [child care] grants
to be adjusted on a geographic basis by the same adjustment
factors used for funding school districts. This statute is AS
14.[17].460.
MS. BRUNO noted that a geographic adjustment is not possible in
several communities with a grant cap set at $50. If the statute
were revised to cap the base rate at $50, it would provide the
opportunity, given the availability of funding in any fiscal
year, for a rate increase to occur. Therefore, SSHB 292 will
change the $50 cap to a $50 maximum base rate. Currently, child
care grants are available a program that is fully funded with
federal dollars. Therefore, it won't cost the state anything.
MS. BRUNO indicated federal funds cannot be fully utilized with
the cap in statute. Alaska now receives a little more than $3.7
million; unless the change is made to a maximum base, these
funds will not be fully utilized. This will allow the state to
adjust for the geographical cost index and distribute more
money.
Number 0835
YVONNE CHASE, Deputy Commissioner of Early Development, Office
of the Commissioner, Department of Education and Early
Development (EED), testified via teleconference in support of
SSHB 292. She explained that the state-funded child care grant
program was created in 1981 as a small-business subsidy for
licensed child care providers, with a statutory cap of $50 a
month for each full-time-equivalent child attending the
facility. She offered her belief that the original intent of
the child care grant was to ensure that spaces were available
for children in the subsidy program, since language required
participating providers to have a certain percentage of
available slots reserved for subsidized families. She pointed
out that the department doesn't take issue with that.
MS. CHASE explained that over the years the department has
attempted, when funds have been available, to increase the rate.
Because the program is now federally funded and receives an
appropriation at the beginning of the year and "as providers
either come or go in the program," the rate may vary. She told
members, "We would like to have the ability to have the rate be
flexible, based on the amount of funding that's there at any
point in time." She said this is why the fiscal note is zero.
CHAIR DYSON asked why the administration hadn't brought this
bill forward.
Number 0970
MS. CHASE answered, "Well, it could be that Representative Hayes
beat us to the punch." She reiterated that the department is
very supportive of the bill.
CHAIR DYSON asked whether, over the last 20 years, anyone in the
administration had thought it necessary to request this change.
MS. CHASE offered her thought that during the early years of the
program, the funding was relatively [stable], and when the
program began, the monthly base rate was as low as $8.31 a
child. "So, it seemed like a long way to $50 at the time," she
concluded.
Number 1000
KALEN SAXTON, Child Care Connection, testified via
teleconference, noting that her resource-and-referral agency has
worked with family child care homes and centers from Glennallen
to Unalaska. She expressed support for the geographic
differential as a better way to share the funds, which are
needed and appreciated.
CHAIR DYSON temporarily suspended the hearing on SSHB 292.
HB 407-CERTIFICATE OF NEED PROGRAM
CHAIR DYSON announced the next order of business, HOUSE BILL NO.
407, "An Act relating to the certificate of need program."
[Before the committee was Version F, 22-LS1389\F, Lauterbach,
3/21/02, adopted as a work draft on 3/26/02.]
Number 1133
ELIZABETH RIPLEY, Director, Community Health Planning, Valley
Hospital, testified via teleconference, noting that Valley
Hospital opposes the proposed population delimiter in HB 407.
Valley Hospital serves one of the only large communities
affected by the proposed delimiter for the certificate of need
(CON) process, she reported; a private business and a not-for-
profit enterprise, it receives no assistance from the borough
government, which has "limited health powers."
MS. RIPLEY said the hospital competes directly with Anchorage
providers. She offered that 16,000 Matanuska-Susitna area
residents travel daily to Anchorage for work; studies have shown
that most of those commuters receive their health care in
Anchorage. She reported that over the last five years, Valley
Hospital has made $1.5 million to $2.5 million in net revenue,
which is invested into the hospital's infrastructure for new
equipment in order to stay competitive, and also in the
workforce. She predicted that the nation's health care
workforce shortage won't improve in the near future;
consequently, a great deal must be invested in the workforce.
Number 1223
MS. RIPLEY told members that despite these costs, Valley
Hospital takes its not-for-profit status very seriously; it
invests 10 percent of net revenues - in excess of expenses -
into its Healthy Communities program. This is a way for the
hospital to give back to the community out of its revenue to
raise health status. Suggesting the hospital is very fiscally
responsive to the community by providing such programs, she
said, "Acknowledging the benefits of fair competition, we assert
that this proposed delimiter does nothing to support a level
playing field. And we are particularly concerned about the
establishment of medical 'boutiques' that ... limit services to
those without third-party insurance, thereby 'cherry-picking'
most of the paying customers."
MS. RIPLEY pointed out that the Matanuska-Susitna Borough has
the highest per-capita rate of Medicaid [eligible] patients of
any borough in the state; that is the fastest-growing payer
segment in [the borough's] population. Furthermore, the
Medicare population is expected to double in the next eight to
ten years, from 6 percent to 12 percent. In the last three
months, self-pay clients at Valley Hospital doubled from 8 to 16
percent; this has a huge fiscal impact. The hospital writes off
about 80 percent of these bills from patients who have no
insurance. She noted that Valley Hospital is legally and
ethically bound to serve all patients who walk through its
doors, regardless of ability to pay. Conversely, a medical
"boutique" such as a freestanding imaging or surgery center does
not operate under the same regulations and may, in fact, limit
customers of a particular payer status. She reported that there
are physicians in the [Matanuska-Susitna area] and throughout
the state who don't accept Medicaid and Medicare or who limit
the number of clients who fall into those payer categories.
MS. RIPLEY told members that Valley Hospital supports retention
of the CON at a $1-million threshold for equipment and raising
the CON to a $2-million threshold for buildings. She explained
that [Valley Hospital] can support altering the CON so long as
the following provisions are included in the legislation:
first, all providers, including private physicians, must meet
the terms of the CON; and second, all providers must provide
care for all financial classes. She noted that if this level
playing field could be created to generate competition, [Valley
Hospital] would be "all for it." She indicated the payers must
reflect the locale within which the [provider] operates. She
suggested that the current CON bureaucracy could track this.
All expenditures, whether for capital, equipment, operations, or
bricks and mortar, must fall under the $2-million threshold, she
said. She noted that she would provide written comments.
Number 1384
CHAIR DYSON asked how, were the committee to aim at a level
playing field, she suggested the committee deal with differences
in the taxes paid by [for-profit] and nonprofit [providers]. He
said it appears it would be an advantage for the nonprofits that
don't pay taxes.
MS. RIPLEY replied that the question of accountability of not-
for-profit [providers] has been raised in earlier committee
hearings. She said the spirit of the 501(c)(3) code requires
nonprofits to give back and invest in their communities, whereas
shareholder profits can go anywhere, even outside of Alaska. As
a not-for-profit, [Valley Hospital] is being responsive to its
community in ways that are different from for-profit
[providers]. By example, 95 percent of hospitals nationwide
invest less than 1 percent into their communities in terms of
health care, whereas [Valley Hospital] is investing 10 percent.
So although it doesn't pay taxes, chances are that it would
demonstrate a greater investment in its community, compared with
most for-profit [providers], which must make profits for their
shareholders. She reported that the hospital has been
recognized nationally for its program.
Number 1486
CHAIR DYSON offered his understanding, then, that her answer is
that the 10 percent given for community health is equivalent to
the taxes paid by for-profit [providers]. He asked whether
[Valley Hospital] charges the same rate for the same service,
regardless of the [payer].
MS. RIPLEY replied that the way the Medicaid and Medicare
regulations work is that these programs must be able to take
advantage of the lowest price the hospital would charge. In
other words, that discount must be available to everyone, should
any discount or incentive be offered. She reiterated that
[Valley Hospital] competes with providers in Anchorage, and
charges the same rate for services.
CHAIR DYSON queried, "So there's only one price and ... someone
who's indigent or the one that pays their own bills or has a
third-party payer, all pay exactly the same rate?"
MS. RIPLEY replied, "That's correct." She said the hospital has
an active charity care program and writes off up to 2 percent of
its bills through this program. She added that bad debt costs
the hospital about $25 million. Combining both charity care and
bad debt, that represents another $25 million back into the
community each year, she said.
CHAIR DYSON expressed his understanding that large groups with
insurance would receive a significant discount over the
individual payer who has only the buying power of one person.
He noted that he understood this to be true in all hospitals in
the state. He asked if this is the case.
MS. RIPLEY replied, "We do have preferred provider agreements
where we offer that discount, but we have to match that discount
for Medicaid [and] Medicare." She added, "We're writing off 80
percent of every self-pay bill."
Number 1580
CHAIR DYSON asked whether it is correct that those who pay their
own bills must pay the top rate, without a discount.
MS. RIPLEY responded that the hospital negotiates with
individuals to put them on a payment plan to facilitate
recouping some revenue. She explained that their customer
service program negotiates with people to get those bills paid
in whatever way possible. She offered to look more closely at
those numbers.
CHAIR DYSON said he'd like that information, but that his point
is that the rare people who pay their own bills are paying the
very highest rate. He requested confirmation.
MS. RIPLEY replied, "Well, they don't get an advertised
discount, but I'm wondering if once they go through our customer
service process ... that, in effect, they get that discount or
better." She added that when people come into the [Valley
Hospital] system, they receive care and are then billed. This
is very different from an electric company where the power would
be shut off for lack of payment, because the operation [or
service] has been completed, and the hospital must work very
hard to secure the revenue to pay its staff and bills.
CHAIR DYSON remarked that he appreciates that and the fact that
they never turn anyone away.
Number 1678
JAN OWEN-DENTON, Nurse Manager, Fairbanks Memorial Hospital,
testified via teleconference in opposition to HB 407, noting
that she has been a nurse since 1977, practicing in Fairbanks
since 1981 and raising her family there. She indicated she has
worked for many of the clinics and medical facilities in
Fairbanks. She told members that her main concern centers on
providing experienced, qualified staff to care for patients.
She said although most people realize the nation is facing a
shortage of nurses, similar shortages exist in radiology and
pharmacy positions.
MS. OWEN-DENTON expressed her fear that having multiple medical
[facilities] in a community the size of Fairbanks will only add
to the shortage problem. Facilities that can entice staff with
the highest wages and best benefits will do so. The facilities
that might serve only the best payers, primarily private
insurance companies, will [have no] obligation to provide care
to the poor, she suggested. She indicated that these facilities
would recruit staff from facilities such as Fairbanks Memorial
Hospital that truly serve the community.
Number 1776
JEROME SELBY, Regional Director; Planning, Development, and
Advocacy; Providence Health System in Alaska ("Providence"),
testified on HB 407 via teleconference. Drawing attention to
page 2, line 13, he suggested deleting "without obtaining" and
inserting "by submitting a written request to the department for
a certificate", and later indicating this certificate should be
issued within a reasonable amount of time. He offered that the
department might be better able to [suggest a reasonable
timeframe], but he suggested 60 days. This is pertaining to
replacement facilities, he noted, and provides for the
requesting and receipt of the certificate, "pretty much no
questions asked."
MR. SELBY pointed out that the significance of this [proposed
change] is related to eligibility under the federal guidelines
for reimbursement. He remarked, "So, what we're concerned about
here is, for example, we know the Wrangell folks want to replace
their hospital; we're suggesting they should be able to do that
without a certificate of need, since there isn't any other
hospital around." He noted, however, that if "it stays the way
it is" and Wrangell doesn't get a CON, the $8 million slated for
the hospital's replacement wouldn't be recoverable under the
federal system. On the other hand, if Wrangell is issued a
certificate, that community investment could be recovered over
time, he said. This is a significant issue, particularly for
the smaller communities.
MR. SELBY stated, in addition to the items he'd covered at the
last hearing, that quality is a huge concern with the proposed
[legislation]. He urged members to delete the 55,000-population
[threshold] and leave the CON for everyone in the state, to
ensure a level playing field and avoid such quality-of-care
issues. He referenced his recent testimony wherein he'd cited a
study indicating a 21-percent increase in mortality in states
without a CON. He reemphasized the damage this would do to
Alaska: it would prohibit the ability of [providers] in
Fairbanks and the Anchorage area to generate funds that allow
them to deliver "high-level, ... heavy-duty medical care here in
Alaska for Alaskans."
MR. SELBY observed that providers in these areas have been
striving for this high level of care over the course of the last
20 years that the CON has been in place; this positive outcome
is a result of having a CON in place. He urged members to
"really think about not destroying that by leaving this 55,000
population thing in here, basically having a feeding frenzy, a
free-for-all, in the three larger areas of the state."
Number 1906
MR. SELBY suggested that Providence should back away from things
it has planned, such as the PET [positron emission tomography]
scanner, which has a highly advanced ability to detect pre-
cancerous cells in the body, preventing the patient from ever
getting cancer. He noted that Providence would like to bring
this equipment to Alaska, but that it is a significant
investment. He said, "But we should set that on the side and go
build about ten surgery centers around the state and get real
competitive. If folks really want competition, we can compete;
we're not afraid of competition." He suggested that members did
not want Providence to do so; it does not advance medical care
in the state. However, this is the one way that Providence
could continue its revenue stream to allow it, in four or five
years, "after the dust settles," to return to the task of
developing high-level medical care.
MR. SELBY said this will be a great cost to the state, as well
as a great cost to some of the physician groups around the state
with whom Providence would be competing. He concluded, "We
don't want to go there. We would ask you to not make us go
there. And we think that this thing [has] a really negative
effect on the state of Alaska's health care system." He
mentioned that other provisions in the bill are positive, but
said the 55,000-population threshold for the removal of the CON
is "a showstopper" for this bill.
Number 1980
REPRESENTATIVE COGHILL requested that Mr. Selby fax suggested
language for Section 2 of the bill. He added that he would be
willing to entertain some sort of a review process to discuss
this matter. He mentioned discussion with department personnel
and said these suggestions might be a "good fix."
MR. SELBY reported that the Kodiak Legislative Information
Office (LIO) would be faxing that momentarily.
Number 2063
MR. SELBY, in response to a question from Chair Dyson, said that
surgery centers, if allowed to proliferate, would eliminate the
revenue stream that enables Providence to raise the capital to
invest in that equipment. He said, "We can't go buy it because
we don't have the money to do it." This is the focus of his
concern; the state's surgical capacity becomes overbuilt, and
this eliminates the revenue stream generated by a fairly high
utilization of the surgery [resources] at Providence. This
would be true of other providers doing surgery. When this
capacity is overbuilt, these facilities would be treating 50
percent or less of the patients they could be treating;
therefore, the revenue stream wouldn't be available to pursue
the "heavy-duty medical treatment options."
CHAIR DYSON requested confirmation of his understanding, saying:
The implication is that you make enough money off of
surgery, or enough extra revenue off the services
beyond what it costs you to provide them, that it
makes extra revenue available for you to ... transfer
over into other areas of medical service, and make
investments in equipment or subsidize other areas of
medical-service providing that are not as
remunerative.
MR. SELBY said that is true; it is the nature of health care.
Number 2140
CHAIR DYSON observed that most consumers believe they are
charged whatever it costs to provide the service. He asked,
"But you ... do, indeed, add some other factors when you go
about deciding what to bill us? Is that correct?"
MR. SELBY responded that the health care delivery [system] is a
"fairly complicated financial mess, as you know." He noted that
simply put, there is a lot of care, such as intensive, advanced
cancer care, for which the full charge cannot possibly be
charged to [the payer]. Nor can anyone afford to reimburse to
providers the cost of that treatment. He explained that for
anyone to be in that business, there must be a revenue stream
from another source in order to deliver that kind of care.
Number 2175
CHAIR DYSON offered his understanding, then, that "you kind of
overcharge in some other areas." As a consumer, he asked in
which areas of service he is charged beyond the cost, by the
greatest margin.
MR. SELBY replied, "It's so complicated ... that we don't have
time here today to even try to sort through that." However, he
explained that he is not telling any secrets when he tells the
committee that a well-organized surgical center operation is
profitable when it is efficient. That is the premise on which
these surgery centers and other, targeted operations establish
themselves in the absence of a CON. He said it is common
knowledge that money can be made with such centers, which is why
they exist. He elaborated:
In most people's view, they're a guaranteed moneymaker
for you, so it's a great business to go into. So,
we're not making any bones about the fact that, yes,
we at the hospitals also make money on surgery, and
that's one of the places we count on to be able to
keep our doors open on a 24-hour basis, 7 days a week,
and subsidize things like emergency medicine. ... Very
few emergency rooms pay their own way, just because of
the huge staffing overhead that you have to keep the
place open 24 hours a day, 365 days a year. That's
extremely expensive.
MR. SELBY reiterated that there must be a revenue stream from
somewhere to keep the emergency room open.
Number 2283
KAREN LOSINSKI, R.N., Manager, Home Health Care, Fairbanks
Memorial Hospital (FMH), testified via teleconference in
opposition to HB 407, saying it will allow unnecessary,
physician-owned-and-operated, for-profit, ambulatory service
centers into the Fairbanks area. She continued, "These
physicians will then direct their patients [with] private
insurance coverage to their own facilities, leaving the patients
with no insurance, Medicare, or Medicaid to be served by FMH."
This will cause a considerable financial impact to the hospital,
jeopardizing the ability to support the vital, non-revenue-
generating services such as home health care.
MS. LOSINSKI reported that FMH is the only home health care
agency in the Fairbanks area providing skilled nursing and
therapeutic services to homebound patients. Without these
services, patients will need to stay in the hospital much
longer, thus increasing the need for frequent hospitalization
and emergency room visits, and it will not allow patients to die
with dignity and comfort in their homes. Many Fairbanks
residents will be forced to look for nursing and assisted-living
homes and, in turn, will have to leave the Fairbanks community
because these facilities are not available. She concluded, "The
CON process is vital to protecting our community."
TAPE 02-26, SIDE B
Number 2368
SHEILA SIEGLER, Patient Service Finance Manager, Fairbanks
Memorial Hospital, testified via teleconference in opposition to
HB 407. She reported that she is a 17-year resident of
Fairbanks. She said competition in most industries is a good
thing, but that changing the existing CON policy would not
create a positive, competitive market. Patients don't "shop
around" for health care services as they do for other products,
she explained; physicians make the purchase decision for
patients and provide the service.
MS. SIEGLER said a owner's income for a freestanding ambulatory
surgery center is tied directly to the amount of care
[provided]; unlike other business owners, physician-owners have
the power to order their own services. She noted that in this
setting, physicians might be inclined to choose an inappropriate
setting for a surgical procedure because of personal financial
gain; physicians would have the power to choose the place of
service based on the reimbursement rather than on the most
appropriate setting for the patient. She explained that studies
conducted by the office of the inspector general and other
government agencies have shown that referrals to entities with
which physicians have a financial relationship encourage
excessive use of those services, often resulting in higher costs
to the health care program.
Number 2309
CHAIR DYSON said that if doctors are indeed doing things that
are not medically indicated just for profit, he believes that to
be a breach of professional ethics. He added his understanding
that a mechanism is in place to address that. He asked, "Is
that not working as well as it should?"
MS. SIEGLER replied that studies indicate physician-owned labs
have more diagnostic tests ordered than labs in which the
physician [doesn't have a financial interest]; this indicates to
her that more diagnostic services are ordered when the physician
financially benefits from the services.
Number 2271
CHAIR DYSON inquired about her comment regarding surgery being
performed in inappropriate places, and the danger of that
happening in a for-profit setting.
MS. SIEGLER replied, "You could have a physician that would make
a decision to do a surgery in an out-patient surgery center that
might be more ... appropriately done in a hospital setting,
based on the condition of the patient or other medical
decisions."
CHAIR DYSON queried whether the medical board's ethics
enforcement might be unlikely to catch that.
MS. SIEGLER agreed.
CHAIR DYSON expressed his understanding that FMH's gross
revenues are about $160 million and asked if that is in the
ballpark.
MS. SIEGLER replied, "Between the two facilities, yes." She
said this represents combined revenues from FMH and [Denali
Center].
CHAIR DYSON asked what the [combined] budget is and what the
hospital's excess revenues were for the last accounting period.
MS. SIEGLER said she'd have to refer him to FMH's chief
financial officer for those answers.
Number 2195
CHARLES HOLYFIELD, Respiratory Therapist and Manager,
Respiratory Care and Cardiology Departments and the Sleep
Disorders Lab, Fairbanks Memorial Hospital, testified via
teleconference in opposition to HB 407. He expressed concern
that if the CON is eliminated, unnecessary facilities can be
built by any organization or person with enough money to do so.
However, most health care programs are not profitable and must
be subsidized to exist. Anyone who wishes to build a program
will select only the few profitable ones: radiology, pharmacy,
laboratory, and outpatient surgery. He remarked, "As a total
health care community, we must be able to provide even the non-
profitable programs to the public; this could be seriously
jeopardized if House Bill 407 is passed." Conveying support for
a strong CON law in Alaska to provide a measure of discipline to
the market, he said weakening the CON statute will open the door
to a multitude of problems.
Number 2125
PATRICIA CONNELLY, R.N., Fairbanks Memorial Hospital, testified
via teleconference in opposition to HB 407, noting that her
testimony was quite similar to that of her colleagues. A
longtime Fairbanks resident and employee of FMH, she said the
current CON process works for Fairbanks; 100 percent of the
hospital's [net] revenue is reinvested in the community.
Number 2090
CAROL BARNETT, Registered Health Information Administrator,
Medical Record Department, Fairbanks Memorial Hospital,
testified via teleconference in opposition to the bill, noting
that she has been a health care manager for 15 years, the last 4
in Fairbanks. She said the bill would reduce or eliminate the
requirement for the CON. She related that her greatest concern
is the potential for additional, freestanding ambulatory service
centers to be built in Fairbanks. She argued against this
because the Fairbanks region has a stable population of patients
requiring surgical services; this volume is not expected to
grow, thus limiting the patient base for any facilities.
MS. BARNETT explained that whether one or five facilities
provide the service, the volume remains the same. The
distribution of services would be unequal, and the ambulatory
surgery center would treat only profitable and less complex
cases, reimbursed by private insurance on a fee schedule rather
than reduced Medicaid/Medicare rates. The hospital would bear
the burden of these [less profitable] cases, a high percentage
of which are [covered by] Medicaid or Medicare, or which involve
sicker patients or more complex cases. She indicated neither
type of facility would benefit; even the [ambulatory surgery
center] eventually would feel the strain of flat patient volume
and would need to raise rates.
MS. BARNETT offered that her other argument was from the
patient's perspective, whose primary concern is not the choice
of facility but the surgeon who will perform the surgery.
Number 1940
REPRESENTATIVE COGHILL, sponsor of HB 407, in reply to comments
by Representative Kohring and Chair Dyson, indicated witnesses
next week would offer another perspective. He noted that some
amendments would be entertained, if necessary; if convinced it
was necessary, he also would work with the department on a
proposed committee substitute (CS) dealing with Section 2,
regarding moving facilities and the associated review process.
Number 1880
MR. SELBY, in response to Chair Dyson, said he doesn't know what
"magic" there is about a population base of 55,000. If one is
addressing competition, the most competitive market in Alaska is
in Anchorage, where the most physicians and health care
providers are competing. He said he fails to follow the logic
of removing the CON from them but not the rest of the state.
Number 1814
MR. SELBY, in response to Chair Dyson, clarified that his point
with regard to a CON program is that the state is keeping an eye
on what is being developed and how much is being spent on
facilities for health care. It doesn't matter if a proposed
facility is for Anchorage or the smallest village - the state
should be aware of that and have an opportunity to look at the
need is, he said. That is the premise of the CON, matching the
need for facilities with the demand for services.
MR. SELBY said, "There's nothing magic that happens at 55,000 in
terms of needed services and the ability to meet those needs.
You either have a program statewide that looks at that and makes
a determination that, yes, that's a needed facility and a needed
thing in the state of Alaska, or no, it's not needed 'cause
we've already got 50 of those." He added that the CON seeks to
"keep a lid on" the facilities, because that cost translates
into money from the state's budget for Medicare and Medicaid.
He emphasized that the state is somehow going to help pay for
each of these facilities. Capping the number of facilities
built will cap the cost to the state, he suggested.
Number 1736
CHAIR DYSON thanked Mr. Selby for the clarification. He asked
if Mr. Selby's responsibilities at Providence are related to
facilities.
MR. SELBY said no; he is the director of planning and
development for Providence.
CHAIR DYSON asked, "The Sisters [of Providence] own hospitals
outside of Alaska, do they not?"
MR. SELBY answered in the affirmative.
CHAIR DYSON inquired whether those were all financially
independent from one another, such that one facility doesn't
subsidize another across state lines.
MR. SELBY said he believed that was correct, but was "a little
fuzzy about California" because of unfamiliarity with some
recent acquisitions there. He offered that Alaska operates
"pretty independently," and said he knows this be true of
Washington and Oregon.
CHAIR DYSON asked Mr. Selby if he was involved in the purchase
of the mall on Tudor Road in Anchorage.
MR. SELBY answered that he was aware of the purchase but not
directly involved.
CHAIR DYSON asked what the intention of that purchase was.
MR. SELBY said the land ownership around Providence is such that
it is landlocked to the point that nothing else could be
developed on those Providence properties because of the zoning
regulations and parking requirements. Providence was seeking
adjacent property where future development could take place.
Over the course of the next 50 years, he suggested, it is
obvious that adjustments and additions will need to be made.
[The mall on Tudor] was the closest available property and thus
provided an option for future considerations.
Number 1630
CHAIR DYSON said he could see the wisdom of that. He offered
his impression that the existing retail businesses will be
allowed to operate there.
MR. SELBY replied that [Providence] has no immediate plans; it
is a long-term, strategic holding.
CHAIR DYSON asked whether [Providence] would be paying taxes on
that property before it is converted to hospital use.
MR. SELBY answered yes; those properties, because of their
leasehold nature, aren't part of [Providence's] normal operation
and do pay income tax. As to whether property taxes would still
be paid, he said he didn't know. He said each business has a
leasehold agreement.
CHAIR DYSON asked Mr. Selby to find that answer for the
committee. [HB 407 was held over.]
HB 292-INCREASE CHILD CARE GRANTS
CHAIR DYSON returned the committee's attention to SPONSOR
SUBSTITUTE FOR HOUSE BILL NO. 292, "An Act relating to child
care grants; and providing for an effective date."
Number 1538
REPRESENTATIVE JOULE moved to report SSHB 292 out of committee
with individual recommendations and the accompanying zero fiscal
note.
REPRESENTATIVE KOHRING objected and requested a synopsis of the
bill.
Number 1515
MELINDA BRUNO, Staff to Representative Joe Hayes, Alaska State
Legislature, speaking on behalf of Representative Hayes,
sponsor, said the bill allows the state to increase the grants
awarded to child care facilities for quality measures under the
child care grant program. She added, "We have this federal
money, and we want to be able to give out the maximum amount.
So this allows them to adjust the amount that's given out."
REPRESENTATIVE KOHRING asked what the money is used for.
MS. BRUNO referenced the bill packet, noting that the sponsor
statement lists what the child care grant program does. She
said that it betters these facilities by providing funds for
additional staff and training, thereby improving the environment
for children.
REPRESENTATIVE KOHRING expressed concern that these are private
businesses receiving government subsidies, and offered his
philosophical objection. He asked, "If they're being given
monies, then why should not other entities and different
industries be given money, too, from government?" He noted that
he struggles with this underlying concept. He indicated he
wished to maintain his objection.
Number 1425
REPRESENTATIVE COGHILL asked if the child care grant could be
used for anything from playground equipment to augmenting wages.
MS. BRUNO said she believed that to be correct.
REPRESENTATIVE COGHILL surmised that the $50 base amount could
expand rather rapidly, depending on the funds.
MS. BRUNO said it depends on the amount of federal funding being
used; it will not be a cost to the state. This makes the
maximum amount of federal money available to adjust for the
geographical differences.
REPRESENTATIVE COGHILL said he disagreed with the whole concept.
Number 1354
REPRESENTATIVE CISSNA suggested SSHB 292 is an economical way to
provide professional care for children. Noting that she has
worked with kids off and on for over 40 years, she remarked that
in the past 10 years, Alaska's children have taken the largest
"hit" because [the state] has systematically lowered standards
of care. She pointed out that wages of state workers and most
others are much higher than those of people who work with
children. She spoke in support of the bill.
Number 1213
A roll call vote was taken. Representatives Dyson, Joule,
Coghill, and Cissna voted to move [SSHB 292] out of committee.
Representative Kohring voted against it. Therefore, SSHB 292
was reported out of the House Health, Education and Social
Services Standing Committee by a vote of 4-1.
ADJOURNMENT
There being no further business before the committee, the House
Health, Education and Social Services Standing Committee meeting
was adjourned at 4:18 p.m.