Legislature(2015 - 2016)HOUSE FINANCE 519

04/08/2015 08:30 AM House FINANCE

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08:35:45 AM Start
08:36:28 AM HB148
10:22:32 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
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Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 148                                                                                                            
     "An   Act  relating   to   medical  assistance   reform                                                                    
     measures;   relating   to   eligibility   for   medical                                                                    
     assistance  coverage;  relating to  medical  assistance                                                                    
     cost containment  measures by the Department  of Health                                                                    
     and  Social Services;  and providing  for an  effective                                                                    
Representative Wilson wanted to  understand how the provider                                                                    
tax would work and how much revenue the tax would generate.                                                                     
VALERIE  DAVIDSON, COMMISSIONER,  DEPARTMENT  OF HEALTH  AND                                                                    
SOCIAL SERVICES,  explained that the provider  tax provision                                                                    
required  the  Department  of  Health  and  Social  Services                                                                    
(DHSS) to  recommend a provider tax  appropriate for Alaska.                                                                    
The  legislation  mandated  the  department  to  utilize  an                                                                    
independent third  party to analyze provider  taxes in other                                                                    
states  and   meet  with   providers  and   stakeholders  to                                                                    
accomplish  the  mandate.  She detailed  that  other  states                                                                    
exempted  small providers  from  a tax  in  favor of  taxing                                                                    
hospital  and nursing  homes based  on their  entire revenue                                                                    
and not solely  on Medicaid receipts. Alaska was  one of the                                                                    
few  states  that did  not  tax  providers. The  legislature                                                                    
would receive  a report on the  provider tax recommendation.                                                                    
Additional  legislation  would  be   required  in  order  to                                                                    
implement a provider tax.                                                                                                       
Representative Wilson wondered why  the state would initiate                                                                    
a provider tax and how the revenue would be spent.                                                                              
Commissioner Davidson  voiced that  Alaska was  actually the                                                                    
only state  in the country  that did not collect  a provider                                                                    
tax.  In  light of  the  budget  difficulties, the  tax  was                                                                    
proposed  as  a way  to  continue  to provide  programs  and                                                                    
services. She believed that  the providers should contribute                                                                    
by  having  "skin  in  the game."  Many  other  business  in                                                                    
Alaska were taxed.                                                                                                              
Representative Wilson  announced that  the provider  tax was                                                                    
not related  to Medicaid expansion and  could be implemented                                                                    
regardless of expansion.                                                                                                        
Commissioner  Davidson  responded  in the  affirmative.  She                                                                    
added that a  state was able to implement a  provider tax at                                                                    
any  time  as   long  as  the  tax   complied  with  federal                                                                    
regulations and the legislature chose to enact a tax.                                                                           
Representative  Wilson  felt   that  Medicaid  and  Medicare                                                                    
underpaid providers and the tax was unfair.                                                                                     
Vice-Chair Saddler  asked whether a healthcare  provider tax                                                                    
would only be levied on for profit providers.                                                                                   
Commissioner  Davidson answered  that  the department  would                                                                    
ask  the third  party provider  to review  how other  states                                                                    
levied  the  tax.  She  shared that  some  states  levied  a                                                                    
provider tax on both for profit and non-profit providers.                                                                       
Vice-Chair Saddler  asked how much of  Alaska's hospital and                                                                    
nursing  home   care  were  for  profit   versus  non-profit                                                                    
8:43:02 AM                                                                                                                    
JON SHERWOOD, DEPUTY COMMISSIONER,  MEDICAID AND HEALTH CARE                                                                    
POLICY, DEPARTMENT OF HEALTH  AND SOCIAL SERVICES; responded                                                                    
that  most  of  the  hospitals  in  Alaska  were  non-profit                                                                    
facilities. He  expounded that Alaska Regional  Hospital was                                                                    
a  for profit  facility and  was aware  of only  one private                                                                    
nursing home facility located in Anchorage.                                                                                     
Vice-Chair Saddler asked whether it  was fair to assume that                                                                    
a provider  tax would  cover non-profits  in order  to raise                                                                    
enough revenue.                                                                                                                 
Mr. Sherwood responded that a  broad based tax would have to                                                                    
include non-profits.                                                                                                            
Vice-Chair Saddler declared that  federal law placed a limit                                                                    
on the amount a provider  tax could impose. He asked whether                                                                    
the cap was 6 percent.                                                                                                          
Mr. Sherwood replied in the affirmative.                                                                                        
Vice-Chair Saddler asked  how much a 6  percent provider tax                                                                    
would raise  on for profit  and non-profit providers  in the                                                                    
Mr. Sherwood did not know  the answer but offered to provide                                                                    
an estimate.                                                                                                                    
Vice-Chair  Saddler asked  whether  the  provider tax  would                                                                    
raise  enough  to  cover  the   state's  share  of  Medicaid                                                                    
Mr.   Sherwood  did   not  know   but   would  provide   the                                                                    
MARGARET   BRODIE,  DIRECTOR,   DIVISION   OF  HEALTH   CARE                                                                    
SERVICES,  DEPARTMENT OF  HEALTH  AND  SOCIAL SERVICES  (via                                                                    
teleconference),  replied that  she  also did  not have  the                                                                    
information but would provide it to the committee.                                                                              
Co-Chair  Neuman wanted  verification  that  Alaska was  the                                                                    
only state without a provider tax.                                                                                              
Commissioner Davidson responded in the affirmative.                                                                             
Co-Chair  Neuman  remembered  that   a  tax  was  levied  on                                                                    
Medicaid  patients who  utilized hospital  services and  was                                                                    
reimbursed back  to the  state to  cover the  hospital costs                                                                    
for non-covered patient's emergency room visits.                                                                                
Commissioner Davidson  explained that  a provider  tax would                                                                    
be levied  on a  hospitals' entire revenue  base. Currently,                                                                    
the  state taxed  for profit  hospitals and  the taxes  were                                                                    
factored  into  the rates  charged  to  the patients.  Other                                                                    
states  implemented  provider  taxes  as  a  means  to  fund                                                                    
Medicaid expansion.                                                                                                             
Co-Chair Neuman commented  that he was trying  to follow the                                                                    
tax. He  asked how a  6 percent  tax would flow  through the                                                                    
Mr.  Sherwood   replied  that  the  tax   revenue  would  be                                                                    
deposited into the state's general  fund. He elaborated that                                                                    
the  cost  to  the  provider  would  be  factored  into  the                                                                    
Medicaid rates.  When Medicaid  reimbursed the  provider the                                                                    
cost of  the tax to  the provider  would be included  in the                                                                    
payment.  The  federal  government  capped  a  provider  tax                                                                    
because  it  paid  the  Medicaid  portion  of  the  tax  via                                                                    
reimbursement.  The   limit  was  a  way   to  avoid  states                                                                    
purposely inflating the federal match rate.                                                                                     
Co-Chair Neuman requested hearing  expert testimony from the                                                                    
hospital association.                                                                                                           
Representative Gara  announced that without a  provider tax,                                                                    
implementation of  Medicaid expansion was estimated  to save                                                                    
the state  $6.6 million  in the first  year and  increase to                                                                    
$20 million  each year for  the next five years  and totaled                                                                    
over   $100  million   in  state   savings.  He   asked  for                                                                    
Commissioner  Davidson  responded  in  the  affirmative  and                                                                    
added  that in  the  out years  the  projected savings  were                                                                    
actually $24.5 million per year.                                                                                                
Representative  Gara pointed  out that  administrative costs                                                                    
for  expansion  would be  approximately  $2  million in  the                                                                    
first  year. The  costs would  be split  between the  Alaska                                                                    
Mental  Health  Trust  Authority  (AMHTA)  and  the  federal                                                                    
government. He  heard concerns  from some  legislators about                                                                    
who would fund administrative  costs in succeeding years. He                                                                    
opined that  the state gained financially  from expansion in                                                                    
state  savings.   He  wondered  whether  the   provider  tax                                                                    
proposal  was put  forward as  a response  to concerns  over                                                                    
administrative costs.                                                                                                           
Commissioner Davidson confirmed his assumption.                                                                                 
Representative  Gara notified  the committee  that his  wife                                                                    
was  employed at  Providence Hospital.  He shared  that even                                                                    
though  Providence   Hospital  was   a  non-profit   it  was                                                                    
extremely  profitable   and  some  years   subsidized  other                                                                    
state's hospitals.  He asked whether the  provider tax rates                                                                    
would be lower for hospitals that made less revenue.                                                                            
Commissioner Davidson confirmed his statement.                                                                                  
Representative Gara related that HB  148 did not establish a                                                                    
provider tax  on page  2. The  legislation provided  for the                                                                    
development of a  provider tax that would  be recommended to                                                                    
the legislature to enact. He asked for verification.                                                                            
Commissioner Davidson affirmed  his statement. She indicated                                                                    
that in  order to implement  a provider tax  legislation was                                                                    
Representative  Gara  asked  how  many other  states  had  a                                                                    
provider tax.                                                                                                                   
Commissioner  Davidson replied  that 49  other states  had a                                                                    
provider tax.                                                                                                                   
Representative Pruitt  referred to  page 9  of the  bill and                                                                    
asked whether the provision was expanding Denali Kid Care.                                                                      
Commissioner Davidson  responded that HB 158  did not expand                                                                    
eligibility.  She  elaborated  that a  provision  under  the                                                                    
Affordable  Care  Act  (ACA) changed  the  way  states  used                                                                    
"income  disregards" for  determining Medicaid  eligibility.                                                                    
The ACA  established a new  rule called,  "modified adjusted                                                                    
gross income" that set disregards  aside and required states                                                                    
to calculate  the income disregard  and adjust  income after                                                                    
the  disregard   versus  before   the  disregard,   but  was                                                                    
essentially   "the  same   number."   Eligibility  was   not                                                                    
increased,   the  bill   merely   reflected   the  new   ACA                                                                    
requirement. She  added that  questions arose  regarding why                                                                    
the  ACA changed  the modified  adjusted  gross income.  She                                                                    
explained  that  as  the federally  facilitated  marketplace                                                                    
[health  insurance]  plans  were developed  the  eligibility                                                                    
change  to   using  modified   adjusted  gross   income  for                                                                    
determining eligibility for both  Medicaid and a marketplace                                                                    
plan  subsidy  was  commonly  required  as  a  way  to  make                                                                    
determinations easier.                                                                                                          
Representative  Pruitt stated  that modified  adjusted gross                                                                    
income was not always  different than adjusted gross income.                                                                    
He cited eligibility percentages  from the bill and inquired                                                                    
how the state determined that  25 percent for pregnant women                                                                    
and 28 percent for children under  the age of 19 was correct                                                                    
and not just  a random number that  separated the difference                                                                    
between  modified  and  adjusted   gross  income.  He  asked                                                                    
whether data was used to support the numbers.                                                                                   
Mr.  Sherwood  informed  the   committee  that  the  federal                                                                    
government performed a survey  called, "The Survey of Income                                                                    
and   Program    Participation"   (SIPP)    which   provided                                                                    
demographic  information  about  the types  of  expenditures                                                                    
that applied  to income disregards  specific to  each state.                                                                    
Calculations  for each  state were  made  to determine  what                                                                    
impact  the disregard  loss was  and provide  an adjustment.                                                                    
Each state  was required to either  use its own data  or the                                                                    
survey  data. The  state  accepted  the survey's  adjustment                                                                    
with  one  modifier  to  account   for  the  permanent  fund                                                                    
dividend  income  disregard.  He  shared  that  most  states                                                                    
utilized  the SIPP  conversion process  and Alaska  used the                                                                    
SIPP  plus one  that  included the  permanent fund  dividend                                                                    
disregard.  He  offered  that Alaska  used  the  process  to                                                                    
formulate  the Denali  Kid Care  eligibility numbers  in the                                                                    
bill.  The  disregards  impacted each  eligibility  category                                                                    
slightly  different than  the  previous calculations,  which                                                                    
explained the two  different eligibility percentages between                                                                    
pregnant women and children.                                                                                                    
8:57:01 AM                                                                                                                    
Representative   Pruitt  wanted   to  be   clear  that   the                                                                    
department  did  not  anticipate  an  increase  due  to  the                                                                    
Mr.  Sherwood responded  in  the  affirmative. He  furthered                                                                    
that the  required modified adjusted gross  income standards                                                                    
were  currently  in  effect.  The  modification  required  a                                                                    
statute   change    to   reflect   the    required   federal                                                                    
recalculation of adjusted income.                                                                                               
Representative Pruitt  relayed a  story about a  young woman                                                                    
suffering  with a  brain tumor  who was  forced to  pay $750                                                                    
out-of-pocket to see a specialist  who was turned away after                                                                    
a 15 minute  consultation. He read that  Alaskans paid three                                                                    
times  the national  average for  a primary  care visit.  He                                                                    
expressed frustration over the  situation. The woman was not                                                                    
on  Medicaid   and  he  wanted  assurance   that  a  similar                                                                    
situation  would  not  happen with  Medicaid  providers.  He                                                                    
noted the bill's references to  payment reform. He wanted an                                                                    
outline  of  what  payment   reform  entailed.  He  wondered                                                                    
whether  payment reform  would  cause someone  in a  similar                                                                    
situation to pay more.                                                                                                          
Commissioner Davidson  expressed concern that the  woman was                                                                    
not  getting  the  care she  needed.  She  explained  Alaska                                                                    
utilized a  fee for service  model. She provided  an example                                                                    
of  someone  visiting  a doctor  multiple  times  for  strep                                                                    
throat. The provider  was paid for each visit  under the fee                                                                    
for service model. Payment  reform provided opportunities to                                                                    
change  the fee  for service  system. She  noted paying  for                                                                    
outcomes   as   an   alternative;  the   doctor   would   be                                                                    
incentivized to  figure out why  the patient  was repeatedly                                                                    
getting   strep   throat   and  prevent   another   outbreak                                                                    
therefore,  reducing  the  number   of  future  visits.  She                                                                    
restated that  Alaska was  a fee for  service state  and the                                                                    
department intended  to change  the dynamic.  The department                                                                    
wanted to  reform Medicaid  not only  for expansion  but for                                                                    
everyone. She  emphasized that the  way the  state delivered                                                                    
care  was not  sustainable  and change  was imperative.  The                                                                    
payment  reform language  in the  bill was  purposely broad.                                                                    
She relayed  that some had  suggested a switch to  a managed                                                                    
care system.  She contended that managed  care was developed                                                                    
in the  1970's and was an  outdated system. The rest  of the                                                                    
country was implementing different  types of payment models,                                                                    
i.e.,  patient  centered   medical  home,  super  utilizers,                                                                    
accountable care organizations, etc.  New ways of paying for                                                                    
and  delivering  healthcare were  being  tested  by the  CMS                                                                    
Innovation Center. The state  was interested in implementing                                                                    
an innovative type of payment  reform. She noted that one of                                                                    
the challenges the  state had was a  small population spread                                                                    
over a  large geographic area. She  exemplified telemedicine                                                                    
as  one  method  to  extend  the  healthcare  reach  without                                                                    
transporting the  patient for service when  appropriate. The                                                                    
best  payment reform  opportunities  would  examine how  the                                                                    
state delivered appropriate care and how it was paid for.                                                                       
Representative  Pruitt voiced  that  the state's  healthcare                                                                    
system did not enforce cost  control and that many providers                                                                    
favored expansion  because of  that. He  asked how  to avoid                                                                    
higher  costs getting  shifted to  non-Medicaid patients  if                                                                    
the  state "started  to  narrow the  scope  of payment".  He                                                                    
suggested that maybe the state  needed Medical reform rather                                                                    
than  Medicaid reform.  He felt  that medical  costs in  the                                                                    
state  were  "out  of  control" due  to  price  gouging.  He                                                                    
reiterated his  concern that implementing cost  controls for                                                                    
Medicaid  would  shift  higher costs  to  other  payers  and                                                                    
wondered how to prevent  that scenario with Medicaid payment                                                                    
Commissioner Davidson  responded that currently many  of the                                                                    
providers were  shifting costs to cover  uncompensated care.                                                                    
She detailed that other states  such as Arizona that adopted                                                                    
Medicaid  expansion reduced  their uncompensated  care costs                                                                    
by  30  percent   in  the  first  year   of  expansion.  She                                                                    
emphasized that  the state  had to  work with  providers and                                                                    
could not  implement reforms alone because  the state needed                                                                    
providers to offer services for  the agreed upon price.  The                                                                    
department released an RFP (request  for proposal) to hire a                                                                    
third party  contractor to examine  what type of  reform was                                                                    
happening  in  other  states and  she  intended  to  include                                                                    
stakeholders in  the discussion.  She relayed  from personal                                                                    
experience  that she  wanted  to see  the  doctor engage  in                                                                    
healthy  outcomes by  asking  a patient  how  they can  work                                                                    
together  to improve  other health  concerns. She  wanted to                                                                    
figure  out  how  providers and  patients  can  jointly  own                                                                    
health  outcomes.  She  revealed  that  providers  supported                                                                    
payment  reform  as long  as  they  had the  opportunity  to                                                                    
participate  in the  process. Providers  were  aware of  the                                                                    
severe budget challenges ahead for  the state and recognized                                                                    
the need  "to do things  differently." She thought  that the                                                                    
budget challenges inspired innovation.                                                                                          
Representative  Pruitt referred  to a  report that  revealed                                                                    
the 300 specialists in Alaska  that collectively billed over                                                                    
$1 billion. He  deduced that a specialist  provider would be                                                                    
reticent to work with the state  on reform. He asked how the                                                                    
state would engage  the providers to "buy in"  to reform and                                                                    
in  some cases  "be the  bad guy"  and how  the state  would                                                                    
"bridge the gap."                                                                                                               
Commissioner  Davidson responded  that  the  first step  was                                                                    
simply to  try. She reported  that the state was  very clear                                                                    
with providers  that the current system  was not sustainable                                                                    
and if a provider wanted  to continue providing services for                                                                    
Medicaid or individuals' reform had  to occur. The state was                                                                    
a  significant  purchaser  of healthcare  in  a  variety  of                                                                    
settings; Medicaid  and state  employees and  retiree health                                                                    
plans.  The state  was in  a good  bargaining position.  She                                                                    
contended  that the  state was  currently in  a position  to                                                                    
coordinate collective negotiations  with providers on behalf                                                                    
of Medicaid and the insurance plans.                                                                                            
9:11:34 AM                                                                                                                    
Vice-Chair  Saddler  asked  what  the  primary  elements  of                                                                    
payment reform were.                                                                                                            
Commissioner Davidson  defined that payment  reform analyzed                                                                    
the ability  to provide  better quality service  and provide                                                                    
the service  at lower costs.  Payment reform was  focused on                                                                    
value; the value for services provided.                                                                                         
Vice-Chair  Saddler  wanted  a  better  definition  of  what                                                                    
payment reform was.                                                                                                             
Mr. Sherwood indicated that payment  reform was not just one                                                                    
thing.  He added  that several  options  were available  and                                                                    
were not mutually exclusive. One  option bundled payments at                                                                    
different  levels   in  a  variety  of   ways.  He  provided                                                                    
examples:  bundle all  payments related  to a  knee surgery,                                                                    
bundle  for   "larger  episodes   of  service"  such   as  a                                                                    
hospitalization, or  bundle payments even more  globally for                                                                    
accountable   care   organizations    and   community   care                                                                    
organizations.  He   highlighted  that   typically,  payment                                                                    
reform involved  a payment  method that  provided incentives                                                                    
for   quality  called,   "pay  for   performance."  Specific                                                                    
standards  were expected  of  the provider,  and  if met  or                                                                    
exceeded  different payment  levels  from  base payments  to                                                                    
enhanced   payments   were   awarded.   He   conveyed   that                                                                    
accountable and  community care organizations  were entities                                                                    
that  "conglomerated"  providers  and agreed  to  share  the                                                                    
benefits from  improved performance. He provided  an example                                                                    
of an agreement between  a hospital and community physicians                                                                    
to   enhance  primary   care  and   reduce  emergency   room                                                                    
expenditures.  The  state or  the  payer  could monitor  the                                                                    
outcomes  or the  accountable  or  community care  providers                                                                    
could monitor themselves.                                                                                                       
Vice-Chair  Saddler  asked   about  the  difference  between                                                                    
accountable  care  versus  managed  care  organizations.  He                                                                    
asked  whether  accountable  care organizations  existed  in                                                                    
Mr.   Sherwood  replied   that  each   model  had   a  legal                                                                    
definition. He  explained that  a managed  care organization                                                                    
operated  much like  an insurance  company and  attempted to                                                                    
achieve  savings through  utilization oversight  and control                                                                    
by  negotiating  favorable  rates   with  providers  in  its                                                                    
network. An  accountable care organization was  comprised of                                                                    
providers that collectively  carried out utilization control                                                                    
and  oversight and  payment distribution  themselves without                                                                    
an outside entity.                                                                                                              
Vice-Chair Saddler  asked whether  there was  an accountable                                                                    
care organization in Alaska.                                                                                                    
Mr. Sherwood replied in the negative.                                                                                           
Vice-Chair  Saddler  wanted  to  know what  the  impacts  of                                                                    
Medicaid  expansion  would  be  on Denali  Kid  Care  (SCHIP                                                                    
Mr.  Sherwood  responded  that expansion  would  not  impact                                                                    
Denali Kid Care.                                                                                                                
Vice-Chair Saddler  referenced the claim that  4000 new jobs                                                                    
would be  created in the  state through  Medicaid expansion.                                                                    
He wanted to know what the claim was based on.                                                                                  
Commissioner  Davidson responded  that  the information  was                                                                    
derived  from  an  independent  study  by  the  organization                                                                    
Northern Economics.  The organization performed  an economic                                                                    
impact study on the infusion  of approximately $1 billion of                                                                    
new  federal dollars  flowing into  the  state. She  offered                                                                    
that not all of the jobs would be in healthcare.                                                                                
Vice-Chair Saddler asked whether  the study's conclusion was                                                                    
based  on  the  infusion  of $1  billion  into  the  economy                                                                    
equaled 4000 jobs.                                                                                                              
Commissioner  Davidson indicated  that the  4000 figure  was                                                                    
the result of the analysis  and took the mid-range between a                                                                    
high and low number.                                                                                                            
Vice-Chair Saddler asked whether the study was available.                                                                       
Commissioner Davidson answered in  the affirmative and would                                                                    
distribute the study to the committee.                                                                                          
Representative Gara  commented that  Alaska had  the highest                                                                    
costs  for  medical care  in  the  country and  the  highest                                                                    
increases in  costs annually. He  stated that  the situation                                                                    
"had nothing  to do with  Medicaid expansion" and  could not                                                                    
be  attributed to  any past  administrations. He  maintained                                                                    
that that  there had  been a number  of proposals  from past                                                                    
governors and governor's commissions  that were not acted on                                                                    
by the  legislature. He  understood that  Alaska was  one of                                                                    
the most  generous states that  allowed provider  billing at                                                                    
the top  range of  costs at the  80th percentile.  He shared                                                                    
that other states  endorsed the median costs.  He noted that                                                                    
the information was presented  in every prior administration                                                                    
and  the  legislature  chose  to  ignore  action.  He  asked                                                                    
whether  DHSS was  aware  of the  rule and  if  it could  be                                                                    
changed in regulation or by statute.                                                                                            
Mr.  Sherwood responded  that the  agency only  establisheda                                                                    
very  small percentage  of the  Medicaid rates  and was  not                                                                    
aware of  how the state insurance  payers established rates.                                                                    
Medicaid rates  were established  from the  Medicare formula                                                                    
with an  added adjustment.  He mentioned that  nursing homes                                                                    
and hospital rates were based  on a cost-based rate that was                                                                    
facility  specific  and  paid at  the  facility's  projected                                                                    
costs. He remembered that the  median rate was utilized when                                                                    
pricing  new durable  medical  equipment.  He would  provide                                                                    
additional  information about  when  the department  applied                                                                    
the median rate.                                                                                                                
Representative Gara  announced that he  had a great  deal of                                                                    
respect for  the prior commissioner [Bill  Streuer] of DHSS.                                                                    
He stated that  Alaska had been one of the  few state's that                                                                    
did  not  cover lung  transplants  for  cystic fibrosis.  He                                                                    
related  that a  citizen from  the Matanuska-Susitna  Valley                                                                    
asked Rep.  Gara for  help to obtain  a lung  transplant. He                                                                    
worked  with the  previous  commissioner  and currently  the                                                                    
state provided the coverage. He  warned that in an effort to                                                                    
achieve  savings, "waivers  could  not  be stripped  without                                                                    
human consequences."                                                                                                            
9:23:28 AM                                                                                                                    
Co-Chair Neuman  requested information regarding  a hospital                                                                    
BECKY HULTBERG,  SENIOR VICE  PRESIDENT AND  CHIEF EXECUTIVE                                                                    
OFFICER,   ALASKA   STATE    HOSPITAL   AND   NURSING   HOME                                                                    
ASSOCIATION, voiced that  the association conducted research                                                                    
about   provider  taxes   and   provided  information.   She                                                                    
explained that 49 states had  a provider tax because the tax                                                                    
was used  as a mechanism  to leverage  federal participation                                                                    
to  increase  provider  rates  and allow  a  tax  to  obtain                                                                    
Medicaid  match  funding. She  deemed  that  the tax  was  a                                                                    
potential  mechanism   to  help  the  state   and  not  harm                                                                    
providers. She  detailed that a  provider tax helped  in two                                                                    
ways.  First,   a  provider   tax  leveraged   federal  dish                                                                    
payments. She  elaborated that  provider taxes  leveraged an                                                                    
additional  disproportionate  share  for  hospital  payments                                                                    
from Medicaid,  known as "dish"  payments. She  defined that                                                                    
"Dish"   payments  were   authorized   for  hospitals   that                                                                    
performed  a  high  percentage   of  uncompensated  care.  A                                                                    
provider   tax   can    also   lavage   additional   federal                                                                    
reimbursement  when the  Medicaid  rate was  lower than  the                                                                    
Medicare  rate,  which most  likely  applied  to Alaska  for                                                                    
inpatient  services.  Therefore,  an  Alaskan  provider  tax                                                                    
could be  employed to  leverage additional  federal matching                                                                    
funds  up to  the Medicare  rate. She  pointed out  that the                                                                    
mechanism  was complex  and  required additional  consulting                                                                    
assistance  to determine  whether  provider  taxes would  be                                                                    
beneficial  to  the state  and  positive  to providers.  She                                                                    
informed the  committee that  the answer  was not  known yet                                                                    
but the  association thought  that the  issue was  worthy of                                                                    
further exploration.                                                                                                            
Representative Wilson thought that  Medicaid was paying more                                                                    
than Medicare.                                                                                                                  
Ms.  Hultberg   replied  that   the  statement   applied  to                                                                    
outpatient  care. She  suspected  the reverse  was true  for                                                                    
inpatient  care. Medicaid  is a  relatively better  payer in                                                                    
Alaska than  other states. The association  was surprised to                                                                    
discover  that inpatient  Medicaid rates  were likely  lower                                                                    
than the Medicare rate.                                                                                                         
Representative Wilson  understood that the provider  tax was                                                                    
unworkable if  Medicaid was paying  more than  Medicare. She                                                                    
stated that  a provider  tax would  be based  on all  of the                                                                    
provider's  revenues   and  the  tax  would   be  levied  on                                                                    
providers  that did  not accept  Medicaid and  Medicare. She                                                                    
asked for more details on the provider tax.                                                                                     
Ms. Hultberg  responded that there  were 19  different types                                                                    
of providers that could be  taxed under the federal program.                                                                    
Typically the tax  was only levied on  hospitals and nursing                                                                    
homes and was also known  as a "hospital" tax. She expounded                                                                    
that federal  regulation required  that the tax  was broadly                                                                    
applied. All providers  within a certain category  had to be                                                                    
taxed  whether  the  provider   accepted  Medicaid  or  not.                                                                    
However,  subcategories  were   allowed.  She  provided  the                                                                    
example within  the hospital category. She  explained that a                                                                    
subcategory   of  hospitals   called  "prospective   payment                                                                    
system"  hospitals,   which  were  large   versus  "critical                                                                    
access" hospital, which were small  and less able to pay the                                                                    
Representative  Edgmon  suggested  that  if  the  department                                                                    
estimated revenue  expected from  a provider tax  the figure                                                                    
would be "highly speculative"  until the association's study                                                                    
was completed.                                                                                                                  
Ms. Hultberg  agreed with the statement.  She explained that                                                                    
many variables existed for the  manner that the tax could be                                                                    
levied  and subgroups  could be  taxed and  would be  highly                                                                    
speculative at this time.                                                                                                       
Representative  Guttenberg  spoke  in  regards  to  circular                                                                    
billing.  He  observed that  the  tax  was used  to  capture                                                                    
federal funds  and "at  the end of  the day  everyone raised                                                                    
rates because  the tax  increased costs.  He wanted  to know                                                                    
who ultimately paid for circular billing.                                                                                       
Ms. Hultberg answered that  through matching federal dollars                                                                    
the cost of  the tax was offset and was  net neutral for the                                                                    
facility  therefore, rates  were  not  increased. She  added                                                                    
that if it  was true that costs to  providers increased then                                                                    
the costs would be allocated  to other payers where the rate                                                                    
was not fixed.                                                                                                                  
Representative Guttenberg  provided a reform  scenario where                                                                    
the savings were not evenly  distributed to all entities and                                                                    
providers raised rates which  ultimately negated any savings                                                                    
in  the system.  He wondered  whether there  were guarantees                                                                    
that rates would  not be increased with  implementation of a                                                                    
provider tax.                                                                                                                   
Ms.  Hultberg  agreed  and   emphasized  the  importance  of                                                                    
thoroughly  studying the  issue  before implementation.  She                                                                    
maintained that  it would  not be  beneficial if  a provider                                                                    
tax resulted in  increased rates. She believed  there was an                                                                    
opportunity to examine  the issue because it  was possible a                                                                    
provider tax would  be a net positive for the  state and net                                                                    
neutral for providers.                                                                                                          
Representative  Guttenberg asked  the department  to provide                                                                    
the  legal  definitions  for managed  care  and  accountable                                                                    
care.  He referred  to billing  reform and  described issues                                                                    
with repeated  patient billing  until claims  were processed                                                                    
and thought  it was  onerous for the  patient and  costly to                                                                    
the system. He asked whether  the department figured out how                                                                    
to streamline the billing process.                                                                                              
Mr.  Sherwood empathized  with the  issue. He  detailed that                                                                    
providers did  not bill Medicaid  recipients, the  state was                                                                    
billed and  providers accepted payment  from the  state. The                                                                    
reconciliation was  between the state and  the providers and                                                                    
Medicaid  patients  were  not  billed.  He  added  that  the                                                                    
department had its own challenges  with individuals that had                                                                    
other  insurance. The  state contracted  with  a company  to                                                                    
help recover third-party payments.                                                                                              
9:37:14 AM                                                                                                                    
Representative  Guttenberg referred  to  his wife's  medical                                                                    
experience  with Medicare  and his  state insurance  and the                                                                    
difficulties with billing from  providers. He stated that he                                                                    
had  received bills.  He referred  to a  charge master  that                                                                    
providers  used  for billing.  He  asked  how hospitals  and                                                                    
providers  used  the  charge  master and  how  it  fit  into                                                                    
Mr. Sherwood  responded that the  state did not  have access                                                                    
to provider's rate  schedules and moved away  from the usual                                                                    
and customary  charge approach. The  department did  not set                                                                    
rates  based  on  what  providers  charged  and  utilized  a                                                                    
separate  methodology. The  department was  aware of  what a                                                                    
provider  normally  charged  for  a  service  since  it  was                                                                    
included  on the  billing  claim  but had  no  need for  the                                                                    
information. A  condition of Medicaid was  that the provider                                                                    
accepted a Medicaid rate as payment in full.                                                                                    
Representative Gara  stated that the collective  goal was to                                                                    
curb healthcare costs for everyone  in the state. He relayed                                                                    
that  Alaska  Regional  Hospital's chief  executive  officer                                                                    
deduced  that  with  the additional  revenue  from  Medicaid                                                                    
expansion,  the   hospital  could  establish   an  on-campus                                                                    
medical clinic and treat patients  who went to the emergency                                                                    
room  (ER) for  non-emergency care.  The cost  savings would                                                                    
spread  through the  system. He  asked whether  the scenario                                                                    
was  "a  way  to  bend  the  cost  curve"  through  Medicaid                                                                    
expansion  and what  was the  potential  for clinics  beyond                                                                    
Alaska Regional Hospital.                                                                                                       
Commissioner  Davidson  answered   in  the  affirmative  and                                                                    
stated  the opportunity  existed for  other facilities.  She                                                                    
reported  that the  emergency room  was legally  required to                                                                    
provide  services,  therefore   individuals  with  no  other                                                                    
resources  for medical  services go  to the  emergency room,                                                                    
typically after an illness progressed.  Once more people had                                                                    
access to  healthcare the state  could help  direct patients                                                                    
to   the   appropriate   providers.   She   referenced   the                                                                    
Superutilizer  Program and  gave credit  to her  predecessor                                                                    
William Streur,  for implementing cost saving  measures. She                                                                    
offered  that the  superutilizer  program  was designed  for                                                                    
individuals  with excessive  use  of the  ER. Currently  the                                                                    
program  was voluntary  but  HB 148  would  establish it  in                                                                    
statute.  She   explained  that  when  an   individual  with                                                                    
multiple  ER  visits   was  flagged  in  the   system  as  a                                                                    
superutilizer  a   contractor  would  contact   the  person,                                                                    
discuss the  condition, recommended the  appropriate primary                                                                    
care  provider  and  followed  up   with  the  patient.  She                                                                    
emphasized the  enthusiastic response for the  program; 2000                                                                    
people  had  voluntarily  enrolled.  She  noted  that  other                                                                    
providers indicated  that they would  like to engage  in the                                                                    
same type of involved patient care.                                                                                             
Representative  Gara   reiterated  his   question  regarding                                                                    
Alaska  Regional Hospital's  plan for  building a  clinic on                                                                    
the same campus. He asked  whether the plan would be allowed                                                                    
under federal law.                                                                                                              
Commissioner  Davidson  answered  in  the  affirmative.  She                                                                    
remarked that  the ER  at the  Alaska Native  Medical Center                                                                    
had a similar program in place.                                                                                                 
Vice-Chair Saddler  asked if an  individual who went  to the                                                                    
ER for treatment could decline to be sidetracked.                                                                               
Mr. Sherwood  responded that a patient  could always decline                                                                    
care  with the  exception  of  involuntary commitments.  The                                                                    
hospital was  required to triage and  stabilize the patient,                                                                    
once stabilized  the hospital  fulfilled it  requirement. He                                                                    
was  uncertain at  what clinical  point  the hospital  could                                                                    
legally relinquish care.                                                                                                        
Vice-Chair Saddler  wanted to clarify  that there  would not                                                                    
be any  obligation to  force the  patient into  primary care                                                                    
treatment if the patient objected.                                                                                              
Commissioner Davidson pointed out  that once the patient was                                                                    
triaged and stabilized and was  referred to primary care the                                                                    
hospital  was  absolved  from   further  treatment  and  the                                                                    
patient  could  decline  care from  a  clinic  or  alternate                                                                    
9:49:44 AM                                                                                                                    
Vice-Chair Saddler  asked whether a healthcare  provider was                                                                    
obligated to accept a Medicaid patient.                                                                                         
Mr. Sherwood responded that there was no obligation.                                                                            
Vice-Chair  Saddler asked  if  the  department analyzed  the                                                                    
effects  of   expanding  Medicaid   on  the   recipients  of                                                                    
Medicare.  He shared  concerns that  a higher  population of                                                                    
Medicaid  recipients would  crowd out  Medicare patients  at                                                                    
Mr. Sherwood reported  that the department had  not done any                                                                    
formal analysis.                                                                                                                
Vice-Chair  Saddler   asked  whether  the  issue   had  been                                                                    
discussed and  if so,  list some  providers that  engaged in                                                                    
the discussions.                                                                                                                
Mr.  Sherwood  responded  that  the  department  engaged  in                                                                    
discussions with provider organizations  who felt they could                                                                    
meet the  anticipated expanded demand. He  reported that the                                                                    
issue  was  discussed  with the  Primary  Care  Association,                                                                    
Behavioral  Health,  and  Tribal   Behavioral  Health  as  a                                                                    
partial list.                                                                                                                   
Vice-Chair  Saddler confirmed  that the  department had  not                                                                    
analyzed the effect of adding  20,000 more Medicaid patients                                                                    
on the rest of the healthcare system.                                                                                           
Mr.   Sherwood  responded   in  the   affirmative  that   no                                                                    
quantitative analysis was performed.                                                                                            
Representative  Edgmon  remarked   that  the  discussion  on                                                                    
Medicaid expansion  and reform  was far reaching.  He wanted                                                                    
to know what  the role of the Alaska  Health Care Commission                                                                    
(AHCC) was in Medicaid expansion  and whether DHSS relied on                                                                    
the commission for any data.                                                                                                    
Commissioner  Davidson  responded  that the  commission  had                                                                    
provided helpful  information on payment reform  and factors                                                                    
that contributed  to the high  costs of Medicaid  in Alaska.                                                                    
However  she   shared  that  the  commission's   budget  was                                                                    
completely cut and would not be a resource moving forward.                                                                      
Co-Chair Thompson  directed attention  to the  fiscal notes.                                                                    
He  referenced the  new DHSS  fiscal note  allocated to  the                                                                    
Behavioral  Health   Treatment  and  Recovery   Grants,  OMB                                                                    
(Office of Management and Budget) component number 3099.                                                                        
Mr. Sherwood explained that the  fiscal note reduced general                                                                    
fund  grant  funding  for behavioral  health  treatment  and                                                                    
recovery   grants.  Medicaid   expansion  would   cover  the                                                                    
behavioral  health grant  services  for Medicaid  recipients                                                                    
currently receiving  the grants. The reduction  increased in                                                                    
the  out years  as  the conversion  from  grant to  Medicaid                                                                    
increased.  Additionally, beginning  in FY  2018 a  1915 (i)                                                                    
[Home and Community Based  Services] option became available                                                                    
that  provided   home  and  community  based   services  for                                                                    
behavioral   health  that   further   reduced  funding   for                                                                    
behavioral health treatment grants,  which would be replaced                                                                    
by Medicaid dollars.                                                                                                            
Vice-Chair  Saddler asked  when  the savings  began for  the                                                                    
1915 I option.                                                                                                                  
Mr. Sherwood replied that the savings began in FY 2018.                                                                         
Vice-Chair Saddler suggested it was  a 2.5 year process from                                                                    
implementation of the 1915 (i) option and realized savings.                                                                     
Mr. Sherwood stated the process would take 2 years.                                                                             
Representative Wilson  asked what  the process would  be for                                                                    
the individual receiving the mental health grants.                                                                              
Mr.  Sherwood  answered that  the  grants  services were  an                                                                    
option  and waivers  were not  required.  However, a  person                                                                    
must  meet a  functional standard  impairment determined  by                                                                    
the  state  to  establish  the  need  for  the  option.  The                                                                    
individual  would  participate   in  an  assessment  process                                                                    
similar to the waiver process.                                                                                                  
Representative  Wilson asked  whether the  1915 (i)  program                                                                    
was an option the state could decline.                                                                                          
Mr. Sherwood concurred that the program was optional.                                                                           
Commissioner Davidson  stated that the state  currently paid                                                                    
for and  provided the service.  Through the 1915  (i) option                                                                    
the  federal government  paid 50  percent  of the  program's                                                                    
Representative  Wilson  requested  actual  figures  for  the                                                                    
grant programs  and number of  recipients being  served. She                                                                    
announced  that  some  viewed   the  federal  assistance  as                                                                    
opportunity  while  others  thought  that  they  were  "more                                                                    
charges."  She  wanted  to more  thoroughly  understand  the                                                                    
grant programs.                                                                                                                 
Co-Chair   Neuman  announced   that   he   wanted  to   find                                                                    
opportunities to reduce the state's  costs. He asked whether                                                                    
accepting  the 1915  (i) option  was dependent  on accepting                                                                    
Medicaid expansion.                                                                                                             
Commissioner  Davidson answered  that  the  option could  be                                                                    
pursued without expansion.                                                                                                      
10:00:02 AM                                                                                                                   
Vice-Chair  Saddler referenced  the 1115  waivers and  noted                                                                    
that  the waivers  must be  renewed  every 5  years and  the                                                                    
state was  not committed  to renewal. He  wanted to  know if                                                                    
the same renewal option applied to the 1915(i) option.                                                                          
Mr. Sherwood  responded that  the 1915  (i) options  did not                                                                    
have a similar renewal period.                                                                                                  
Vice-Chair  Saddler   understood  that  1115   waivers  were                                                                    
required to be  budget neutral and asked if  that applied to                                                                    
the 1915 (i) option.                                                                                                            
Mr. Sherwood answered in the negative.                                                                                          
Co-Chair Thompson referred to the  new DHSS fiscal note, OMB                                                                    
component number  2665, allocated for the  Behavioral Health                                                                    
Mr. Sherwood detailed  that the fiscal note  added one staff                                                                    
position  to work  on the  development, implementation,  and                                                                    
oversight of  the 1915 (i)  option. The amount in  the first                                                                    
year  was higher  than  the out  years due  to  the cost  of                                                                    
adding the  position. The 1915(i) option  provided a federal                                                                    
match of 50 percent.                                                                                                            
Representative  Wilson asked  how many  people one  position                                                                    
would serve.                                                                                                                    
ALBERT  WALL,  DIRECTOR,   DIVISION  OF  BEHAVIORAL  HEALTH,                                                                    
DEPARTMENT  OF HEALTH  AND SOCIAL  SERVICES, explained  that                                                                    
the estimated number  of recipients for the  1915 (i) option                                                                    
was 1000. The oversight was  needed for program approval and                                                                    
the  staff provided  administration of  the program  for the                                                                    
provider group that delivered the services.                                                                                     
Representative  Wilson  wanted to  know  how  much work  was                                                                    
demanded of the additional staffer.                                                                                             
Mr. Wall articulated  that there was one  other staffer that                                                                    
performed  similar work  with other  programs  and that  the                                                                    
load would be divided out amongst the staff.                                                                                    
Co-Chair Neuman believed that the  fiscal note revealed that                                                                    
the  option  qualified  the state  for  50  percent  federal                                                                    
matching funds  and would pay  for between $56  thousand and                                                                    
$60 thousand of the staffs'  annual wages with general funds                                                                    
covering  the remaining  50 percent.  The  state would  save                                                                    
between $5  million and  $20 million  in overall  savings by                                                                    
accepting 1915 (i) option.                                                                                                      
Commissioner Davidson  stated that under a  previous version                                                                    
of the fiscal note that  the savings were calculated at $3.5                                                                    
million per year.                                                                                                               
DAVID   TEAL,   DIRECTOR,  LEGISLATIVE   FINANCE   DIVISION,                                                                    
notified the committee that it  was a standard policy not to                                                                    
reflect increases in the out years for personal services.                                                                       
Co-Chair  Thompson  moved  to  the  new  DHSS  fiscal  note,                                                                    
component  number of  2330, allocated  for Catastrophic  and                                                                    
Chronic Illness Assistance.                                                                                                     
Mr. Sherwood explained that the  fiscal note served very low                                                                    
income  individuals with  chronic  conditions  that did  not                                                                    
currently  qualify for  Medicaid.  Medicaid expansion  would                                                                    
cover all of  the individuals currently being  served in the                                                                    
program.  The  fiscal note  showed  a  reduction in  general                                                                    
funds that increased in the out years.                                                                                          
Co-Chair  Neuman wondered  whether  the  constituent with  a                                                                    
brain  tumor that  Representative Pruitt  referred to  would                                                                    
fall under the catastrophic  category if she qualified under                                                                    
poverty levels.                                                                                                                 
Mr. Sherwood  responded that the  Chronic and  Acute Medical                                                                    
Assistance (CAMA)  program provided  maintenance medications                                                                    
with  individuals for  chronic  conditions  such as;  mental                                                                    
illness, hypertension,  seizure disorders and  were awaiting                                                                    
for  a disability  determination  from  the Social  Security                                                                    
Administration  before they  could qualify  for Medicaid  or                                                                    
Medicare.  Cancer  was also  covered  but  the benefit  were                                                                    
limited to physicians, drugs, and some cancer therapies.                                                                        
Co-Chair Neuman  asked if the state  currently provided CAMA                                                                    
services and at what cost.                                                                                                      
Mr. Sherwood stated that the  state provided the services to                                                                    
approximately  500 recipients  at  a cost  to  the state  of                                                                    
approximately $1.5 million annually in general funds.                                                                           
10:12:09 AM                                                                                                                   
Mr.  Teal  clarified that  many  of  the fiscal  notes  were                                                                    
linked  and that  with Medicaid  expansion the  CAMA program                                                                    
would  go  away.  He  explained that  roughly  half  of  the                                                                    
general  fund  savings  accounted  for in  the  fiscal  note                                                                    
showed  up  as  a   Medicaid  expense  included  in  another                                                                    
Medicaid fiscal note related to expansion.                                                                                      
Mr.  Sherwood  stated  that he  anticipated  that  the  CAMA                                                                    
recipients would  be covered under expansion  by 100 percent                                                                    
federal funds in  the first year of  expansion which dropped                                                                    
to  90  percent  in  subsequent   years.  The  general  fund                                                                    
increase in the  out years would be much  smaller than under                                                                    
the current 50/50 match.                                                                                                        
Co-Chair  Thompson referred  to  the new  DHSS fiscal  note,                                                                    
component  number  242,  allocated  for  Medical  Assistance                                                                    
Mr.  Sherwood  elaborated  that the  fiscal  note  contained                                                                    
administrative  costs  for  Medicaid expansion  and  reform.                                                                    
The costs added four positions  that eventually grew to six.                                                                    
One  of  the positions  was  needed  to implement  the  1115                                                                    
tribal  demonstration waiver  and the  other positions  were                                                                    
associated with Medicaid expansion.                                                                                             
Co-Chair  Neuman thought  that  the  AMHTA would  contribute                                                                    
funding  in  the  first  year of  expansion.  He  asked  for                                                                    
Mr.  Sherwood  pointed to  the  MHTAAR  fund source  on  the                                                                    
fiscal  note  and  explained   that  covered  one  expansion                                                                    
Co-Chair  Thompson  moved  to  the  new  DHSS  fiscal  note,                                                                    
component number 2696, allocated to Rate Review.                                                                                
Mr. Sherwood expounded  that the fiscal note  was related to                                                                    
costs  associated   with  Medicaid  reform.   One  provision                                                                    
required  a  demonstration  project focused  on  coordinated                                                                    
care  that  included a  global  payment  fee structure.  The                                                                    
costs  reflected the  need to  contract with  an actuary  to                                                                    
assist in  determining appropriate pricing and  payment. The                                                                    
bulk of the work would occur  in the first year with ongoing                                                                    
consulting work for monitoring the rates.                                                                                       
Vice-Chair Saddler  cited a reference  to "managed  care" in                                                                    
the third  paragraph of the  fiscal note analysis.  He noted                                                                    
the commissioner's  previous allusion to managed  care as an                                                                    
old  model  that should  not  be  pursued  and asked  for  a                                                                    
reconciliation of the opposing positions.                                                                                       
Commissioner  Davidson   replied  that  the   "managed  care                                                                    
system" referenced  in the fiscal  note related  to managing                                                                    
the care of a population  versus a managed care organization                                                                    
as a specific legal structure.                                                                                                  
Co-Chair  Neuman asked  whether  general  fund expenses  for                                                                    
expansion could  be supplanted by  provider tax  revenues if                                                                    
Medicaid Expansion was implemented.                                                                                             
Mr.   Sherwood  thought   that  the   answer  lied   in  the                                                                    
legislative authority to retroactively appropriate funds.                                                                       
Commissioner Davidson  reminded the committee  that separate                                                                    
legislation was required to impose a provider tax.                                                                              
Vice-Chair  Saddler  referred  to  paragraph  three  of  the                                                                    
fiscal note analysis and wanted  to better understand what a                                                                    
managed  care   system  that   included  a   global  payment                                                                    
structure involved.                                                                                                             
Mr. Sherwood  indicated that the  language was  referring to                                                                    
an  accountable care  or  community  care organization  that                                                                    
operated  in  a  geographic   region  where  providers  came                                                                    
Commissioner  Davidson specified  that some  kind of  global                                                                    
payment models enacted  via fees based per  member per month                                                                    
or  based  upon  disease   burden,  disease  complexity,  or                                                                    
patient complexity  were examples.  An actuary  would assist                                                                    
in figuring out a more complex payment model fee structure.                                                                     
Vice-Chair Saddler  wanted to ensure all  stakeholders would                                                                    
be  involved in  the implementation  of an  accountable care                                                                    
Mr. Teal  clarified that the  first paragraph of  the fiscal                                                                    
note  analysis  estimated  the   cost  of  the  consultant's                                                                    
contract at  $175 thousand. He  assumed that  the department                                                                    
would absorb the cost and asked for confirmation.                                                                               
Commissioner Davidson answered in the affirmative.                                                                              

Document Name Date/Time Subjects
HB 148 HFIN FN Summary.pdf HFIN 4/8/2015 8:30:00 AM
HB 148
HB 148 HFIN FN Chart.pdf HFIN 4/8/2015 8:30:00 AM
HB 148