Legislature(2015 - 2016)HOUSE FINANCE 519

04/09/2015 08:30 AM House FINANCE

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08:37:12 AM Start
08:38:05 AM HB148
10:16:29 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Time Change from 9:00 a.m. --
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                                                                    
8:38:05 AM                                                                                                                    
MATT  EISENHOWER,  DIRECTOR, COMMUNITY  HEALTH  DEVELOPMENT,                                                                    
PEACEHEALTH KETCHIKAN MEDICAL  CENTER, KETCHIKAN, shared his                                                                    
intent to  provide a  "boots on  the ground"  perspective on                                                                    
population health  and work the  center had done  through an                                                                    
innovation  program funded  by  a Centers  for Medicare  and                                                                    
Medicaid  Services (CMS)  grant.  He  provided a  PowerPoint                                                                    
presentation   titled  "Envisioning   Better  Care,   Better                                                                    
Health,  a Better  You!"  (copy on  file).  He relayed  that                                                                    
Ketchikan had a population  base of approximately 16,000. He                                                                    
addressed  the  CMS Demonstration  Project  on  slide 3.  He                                                                    
relayed  that in  2010  the Affordable  Care  Act (ACA)  had                                                                    
given  over $10  billion to  CMS over  a ten-year  period to                                                                    
look at demonstration  population health improvement models;                                                                    
some of the  models were related to payment  reform and care                                                                    
delivery changes.  PeaceHealth had  been a recipient  of one                                                                    
of the  initial grants, which  was awarded for  a three-year                                                                    
period  at  a   total  of  $3.1  million.   The  project  at                                                                    
PeaceHealth  had functionally  started in  January 2013  and                                                                    
had   touched   about   3,300   lives   in   the   community                                                                    
(approximately 20 percent of the community residents).                                                                          
Mr. Eisenhower  addressed that CMS was  trying to accomplish                                                                    
part of the  "Triple Aim," which was a  per capita reduction                                                                    
of cost for  patients receiving care and  some confidence in                                                                    
population  health  (slide  4). PeaceHealth  had  looked  at                                                                    
payment reform  related to how  numbers were  tracked, which                                                                    
was largely  a new concept in  healthcare. Additionally, the                                                                    
project had  focused on how  to shift some care.  He relayed                                                                    
that for  the past 50  years the healthcare  delivery system                                                                    
had been experts on how to  fix people, but were by in large                                                                    
not very good  about keeping people healthy.  He opined that                                                                    
it should  more appropriately be  called "sick care"  due to                                                                    
the way clinicians  were trained and the  way providers were                                                                    
paid for fee-for-services. He  explained that providers only                                                                    
got  paid when  they  worked with  patients, typically  when                                                                    
they were fixing a problem;  they did not typically get paid                                                                    
when helping patients to stay  healthy.  He spoke to various                                                                    
ways  to reduce  the  cost of  care:  1) reduce  readmission                                                                    
rates;   2)  reduce   unnecessary  utilization   of  certain                                                                    
procedures that may  not be necessary if  patients are given                                                                    
the  preventative treatment  they needed;  3) increase  care                                                                    
for  chronic disease  surrounding  hypertension, high  blood                                                                    
pressure,  and  diabetes  (cost of  care  for  these  issues                                                                    
dramatically  decreases when  treated properly  at an  early                                                                    
age);  4) increase  community understanding  and encouraging                                                                    
ownership in  patients' healthcare;  and 5)  increase access                                                                    
to care.                                                                                                                        
8:42:19 AM                                                                                                                    
Mr. Eisenhower highlighted outcomes  on slide 5. Examples of                                                                    
outcomes  illustrated  on  the  slide  included  controlling                                                                    
diabetes  (especially  for  patients  with  out  of  control                                                                    
diabetes, which lead to  complications), emergency room (ER)                                                                    
clinic referrals when a patient  should be seen in a primary                                                                    
care  physician setting,  hypertension improvement,  and how                                                                    
to  provide better  follow  up after  a  patient leaves  the                                                                    
hospital.  He addressed  readmission  rates on  slide 6.  He                                                                    
stated that  typically if  a patient needed  to return  to a                                                                    
hospital  within 30  days for  the same  diagnosis something                                                                    
was wrong  (either they were  not properly treated  or their                                                                    
post-acute care  was not  accurately handled).  He addressed                                                                    
that  based  on  other  hospitals of  a  similar  size,  the                                                                    
facility's  readmission rate  should  be approximately  8.87                                                                    
percent.  Prior  to  the  work  PeaceHealth  had  done,  its                                                                    
historical  rate had  been 9  to 9.5  percent over  the past                                                                    
five years.  He pointed  out that raw  data for  an 18-month                                                                    
period showed a decrease in  readmission over the period. He                                                                    
noted  that the  facility's current  adult readmission  rate                                                                    
was  5.93  percent compared  to  the  expected 8.87  percent                                                                    
readmission  rate.   He  continued  that  as   some  of  the                                                                    
interventions  had been  refined  over  a six-month  period,                                                                    
readmission  rates had  dropped  from 7.42  percent down  to                                                                    
4.86  percent,  which  represented a  45  percent  reduction                                                                    
(slide  9). There  were about  1,200 hospital  admissions in                                                                    
Ketchikan  annually,  which   equated  to  approximately  50                                                                    
patients  who  did  not  need  to  return  to  the  hospital                                                                    
unnecessarily.   He   estimated   that   the   savings   was                                                                    
approximately $500,000.                                                                                                         
8:45:14 AM                                                                                                                    
Mr.  Eisenhower  discussed  that CMS  wanted  hospitals  and                                                                    
caregivers  to improve  per beneficiary  per encounter  cost                                                                    
reduction  (slide  10).  He  detailed   that  the  cost  for                                                                    
Medicare  (patients  over  the   age  of  65)  and  Medicaid                                                                    
(federal/state entitlement  for people with needs)  had gone                                                                    
from $536/encounter in  FY 12 to $457/encounter in  FY 13 (a                                                                    
reduction  of 15  percent).  All  payers (private  insurance                                                                    
companies) had also seen the  same savings. He addressed the                                                                    
lower portion of  slide 10. Hospital data for  2012 and 2013                                                                    
was shown  on the  right and  clinic data  was shown  on the                                                                    
left.  He  pointed  out that  the  clinic  data  represented                                                                    
regular  doctors providing  preventative  care; the  payment                                                                    
dollars for  all payers was approximately  $200. He remarked                                                                    
that the payment  dollars for Medicare and  Medicaid had not                                                                    
changed  significantly; the  numbers  may  actually rise  if                                                                    
providers were doing their jobs  properly. He pointed to the                                                                    
"all payers" under  the hospital columns and  noted that the                                                                    
deep costs  resided in this  area. He pointed to  a dramatic                                                                    
reduction for  hospitals per beneficiary per  encounter from                                                                    
$1,373  in  2012  to  $1,028  in  2013.  From  a  prevention                                                                    
standpoint costs were  expected to remain about  the same or                                                                    
rise, with a cost or  payment reduction on the inpatient and                                                                    
hospital side.                                                                                                                  
Mr. Eisenhower  provided an example related  to transitional                                                                    
care on slide 11. He explained  that when a patient left the                                                                    
hospital  the   discharge  report   was  provided   to  care                                                                    
coordinators (social  worker, licensed practical  nurse, and                                                                    
registered nurses)  who discussed  next course  of treatment                                                                    
and medication  reconciliation with patients.  He elaborated                                                                    
that   medication  reconciliation   was  used   for  certain                                                                    
diseases  such as  heart failure;  understanding and  taking                                                                    
medication  was  a  key component  of  reducing  readmission                                                                    
rates.  He  emphasized  that  there  were  many  non-medical                                                                    
hurdles to healthcare that resulted in medical failures.                                                                        
8:48:32 AM                                                                                                                    
Co-Chair Thompson noted that  Representative Gara had joined                                                                    
the meeting.                                                                                                                    
Vice-Chair  Saddler asked  for  a  definition of  medication                                                                    
reconciliation.  Mr.  Eisenhower   replied  that  medication                                                                    
reconciliation  was  helping  the patient  with  medications                                                                    
they were taking,  what they should be taking,  and how much                                                                    
they take. For example, it  boiled down to telling a patient                                                                    
to take one  blue pill in the morning and  two pink pills at                                                                    
Vice-Chair  Saddler  asked  for clarification  on  what  was                                                                    
being    reconciled.    Mr.    Eisenhower    replied    that                                                                    
reconciliation referred to whether  a patient was doing what                                                                    
the  doctor  prescribed.  He emphasized  that  frequently  a                                                                    
patient either did not understand  the discharge planning or                                                                    
failed to pick up their  prescription because they could not                                                                    
afford it, they  did not have transportation to  pick it up,                                                                    
or other. He  reiterated that patients ended up  back in the                                                                    
hospital due to many hurdles  that were not necessarily from                                                                    
a scientific or medical standpoint.                                                                                             
Mr.  Eisenhower  continued  to discuss  a  snapshot  of  the                                                                    
process on  slide 12. The  hospital employed  social workers                                                                    
and primary  care physicians for transitional  care; it also                                                                    
worked    with    financial    educators    and    community                                                                    
organizations. The  hospital followed  up with  patients two                                                                    
days after they were  discharged to provide post-acute care.                                                                    
He addressed the  transition of care call  template on slide                                                                    
13.  He explained  that the  template was  easily replicated                                                                    
for other organizations if needed.  Slide 14 showed examples                                                                    
of things  a nurse  did prior  to making  a phone  call. The                                                                    
nurse reviewed  a patient's experience  in the  hospital and                                                                    
looked for  red flags  that may  result in  readmission. For                                                                    
example,  if a  person went  in for  knee surgery  the nurse                                                                    
would  not  find  it  important  to  check  their  ear;  the                                                                    
preparation  was  specifically   related  to  the  patient's                                                                    
recent   procedure.   The   preparation  also   included   a                                                                    
medication  review,  follow  up appointments,  home  health,                                                                    
other community  support, and supplies.  He looked  at slide                                                                    
15   and   addressed    the   importance   of   motivational                                                                    
interviewing  and  active   listening  with  patients.  Care                                                                    
coordinators  aimed  to  ensure  that the  patient  did  not                                                                    
return to the hospital and provided their recommendation.                                                                       
8:51:52 AM                                                                                                                    
Representative Wilson asked if  Mr. Eisenhower was referring                                                                    
to the  ER when  he discussed  the hospital.  Mr. Eisenhower                                                                    
replied in the negative. He  explained that he was referring                                                                    
to discharged  patients leaving the hospital  after they had                                                                    
been  admitted.  He  detailed that  frequently  a  patient's                                                                    
visit  began  in  the  ER  and ended  up  in  the  hospital.                                                                    
However,  similar procedures  were used  for ER  patients as                                                                    
well. He  continued that  once a  person was  admitted their                                                                    
level of acuity or difficulty  was typically higher than the                                                                    
emergency room.  The goal  was to  keep patients  from using                                                                    
the ER repeatedly if the environment was not appropriate.                                                                       
Representative  Wilson  recalled  visiting  Unalaska  a  few                                                                    
years earlier.  She discussed that  the Unalaska  clinic was                                                                    
also  the emergency  room. She  explained that  the clinic's                                                                    
model focused  on steps  it could  take to  prevent patients                                                                    
from unnecessarily  using the  emergency room.  She surmised                                                                    
that the model  used by PeaceHealth focused  on following up                                                                    
with discharged patients to reduce readmission rates.                                                                           
Mr.  Eisenhower replied  in  the  affirmative. He  clarified                                                                    
that on a federal Medicare  level the items were starting to                                                                    
be  paid for  with fee-for-service.  The Medicaid  world did                                                                    
not currently have  the tools from a  payment standpoint. He                                                                    
continued addressing  psychosocial hurdles that  resulted in                                                                    
expensive medical  care (slide  15). For example,  a patient                                                                    
may not fully understand  their insurance or their coverage,                                                                    
may be  concerned with pricing  transparency, and  other. He                                                                    
discussed that often times  homelessness could contribute to                                                                    
a   lack  of   healing.  Other   issues  included   adequate                                                                    
caretaking  at home,  transportation  challenges (access  to                                                                    
food  and   basic  needs),  disabilities,   general  medical                                                                    
literacy challenges, and other  (slide 16). He believed that                                                                    
addressing the  issues was part  of the  medical community's                                                                    
responsibility. He stated that the  only way it would happen                                                                    
and would be incentivized was  through payment reform and by                                                                    
holding   hospitals  and   clinics  responsible   for  their                                                                    
patients.  He continued  that medical  facilities should  be                                                                    
given  the  financial tools  of  payment  in order  to  hire                                                                    
people  who  could  help  (i.e.   social  workers  and  care                                                                    
Co-Chair Thompson  noted that Representative  Guttenberg had                                                                    
joined the meeting.                                                                                                             
Mr.  Eisenhower addressed  the  final  slide "Questions  and                                                                    
Discussion" (slide 17):                                                                                                         
   · Tough math: $700,000 in operational costs results in                                                                       
     about a $1.5 million in lost revenue. Where is the                                                                         
     incentive to change?                                                                                                       
   · Key ingredient currently missing in most facilities is                                                                     
     capital and confidence.                                                                                                    
   · Care   coordination   requires   local   knowledge   by                                                                    
Mr. Eisenhower elaborated that there  was a net $2.2 million                                                                    
loss  the  hospital  was  realizing.   He  stated  that  the                                                                    
hospital did  it in  part because  it had  a grant  to cover                                                                    
operational  costs  and  philosophically it  was  the  right                                                                    
thing  to do;  however, the  model was  not sustainable.  He                                                                    
believed capital  for the upfront  startup costs  of similar                                                                    
programs  was  missing.  Additionally,  confidence  that  it                                                                    
would work in communities  was lacking. PeaceHealth had been                                                                    
fortunate to  receive capital  from a  grant. He  added that                                                                    
the   care   coordination   required  local   knowledge   by                                                                    
caregivers.   He  noted   that  based   on  the   facility's                                                                    
experience, it  was not  practical to use  a call  center in                                                                    
Chicago to help with the  items the organization found to be                                                                    
8:58:11 AM                                                                                                                    
Representative Gara  wondered if Medicaid expansion  had any                                                                    
bearing on  the Ketchikan community. He  referenced previous                                                                    
testimony  from  the  Alaska  Regional  Hospital  that  with                                                                    
expansion it could reduce ER  costs by constructing a clinic                                                                    
to provide needed services for a much lower price.                                                                              
Mr.  Eisenhower  replied  that  the  scenario  described  by                                                                    
Representative  Gara  was  called  a  "fast  track"  in  the                                                                    
medical  system;  where a  person  came  into the  emergency                                                                    
room,  but was  fast tracked  through a  different level  of                                                                    
services.   He   stated   Medicaid  expansion   would   help                                                                    
PeaceHealth provide  self-payers with a tendency  to use the                                                                    
ER with more optimal clinic  or fast track options. He added                                                                    
that from  a researcher standpoint, the  cost really resided                                                                    
in  preventable  expensive  readmissions to  hospitals.  For                                                                    
instance,  the  hospital  costs  to  the ER  may  be  a  few                                                                    
thousand dollars,  whereas a readmission of  a heart failure                                                                    
patient could  be $30,000 or  $40,000. He discussed  that in                                                                    
smaller communities  like Ketchikan, the  hospitals averaged                                                                    
about 24  patients in the  ER every 24 hours.  He elaborated                                                                    
that  even  if  the   number  was  reduced,  the  hospital's                                                                    
staffing and  cost for  the ER did  not change.  He detailed                                                                    
that  PeaceHealth could  not really  adjust its  staffing to                                                                    
realize  savings due  to the  facility's volumes.  He stated                                                                    
that  from a  patient perspective  it was  about quality  of                                                                    
care - getting a person in  the right place, which was often                                                                    
not the ER.                                                                                                                     
Representative Gara wondered if  uncompensated costs sent to                                                                    
private insurance  payers would  be reduced  if ER  care was                                                                    
reduced through  Medicaid expansion.  He asked  if expansion                                                                    
would  have  a  side   benefit  for  Alaskans  with  private                                                                    
insurance who  had their premiums  hit due  to uncompensated                                                                    
Mr. Eisenhower  deferred the question  to another  party. He                                                                    
remarked  that there  was  a  widely understood  perspective                                                                    
that  the   whole  trend  of  healthcare   was  changing  to                                                                    
population   health;  there   was   an  understanding   that                                                                    
hospitals would have a different  role in the future. From a                                                                    
hospital standpoint,  there were  many things that  could be                                                                    
prevented. He continued that the  cost based on volume would                                                                    
reduce  through  a  combination of  good  population  health                                                                    
management (keeping people  out of the hospital)  as well as                                                                    
ensuring  patients in  the hospital  could  pay their  bills                                                                    
through Medicaid  expansion. He recognized  that PeaceHealth                                                                    
would have to  redeploy many of its resources  and move away                                                                    
from the  acute setting  towards the preventative  world. He                                                                    
believed  the perspective  was  widely understood.  However,                                                                    
there was  currently not much  incentive to make  the change                                                                    
based on  a payment perspective;  he could not get  paid for                                                                    
much  of  the preventative  work  that  was currently  being                                                                    
done.  He   explained  that  the  prevention   was  actually                                                                    
decreasing the revenue in the hospital setting.                                                                                 
9:03:37 AM                                                                                                                    
Co-Chair Thompson  liked the idea of  improving wellness and                                                                    
working to prevent  people from coming back  to the hospital                                                                    
repeatedly; however,  he believed  for larger  hospitals the                                                                    
scope of the increased work would be very difficult.                                                                            
Mr. Eisenhower answered that  his presentation represented a                                                                    
small sliver of population  health. He communicated that CMS                                                                    
and  Medicare   provided  chronic  care   management,  which                                                                    
allowed  the  hospital  the  enrollment  of  patients  on  a                                                                    
monthly basis  in a registry.  As long as the  patients went                                                                    
through  the preventative  components dictated  by CMS,  the                                                                    
hospital was  paid for the work.  Currently traditional care                                                                    
and chronic  care management were the  two options available                                                                    
to  the  hospital.  He agreed  with  Co-Chair  Thompson.  He                                                                    
continued  that  often   in  the  Lower  48   the  work  was                                                                    
segmented; there  were staff who only  worked with discharge                                                                    
patients, while others worked  only with chronic management.                                                                    
He discussed that  it was doable; for every  $1 the hospital                                                                    
spent it  was saving $2.  The hospital knew  improvement was                                                                    
possible, that it was the wave  of the future, and the right                                                                    
thing to do.                                                                                                                    
Vice-Chair  Saddler asked  if PeaceHealth  was a  for-profit                                                                    
hospital. Additionally, he wondered  if the facility was the                                                                    
only hospital in Ketchikan and if  it was part of a national                                                                    
association.  He asked  for detail  on  the facilities.  Mr.                                                                    
Eisenhower responded  that PeaceHealth was part  of a system                                                                    
of  eight  hospitals in  the  Northwest.  He furthered  that                                                                    
PeaceHealth was the  only hospital in Ketchikan;  it had one                                                                    
clinic in Craig. PeaceHealth was  a critical access hospital                                                                    
with  25  beds;  the  facility   offered  a  wide  array  of                                                                    
specialty services  including obstetrics and  orthopedic and                                                                    
general  surgery. He  remarked that  a lot  of Alaska  had a                                                                    
closed  system, including  PeaceHealth.  He elaborated  that                                                                    
within its system,  most of the physicians  were employed by                                                                    
PeaceHealth;  therefore,  the  facility  had  a  very  close                                                                    
relationship  with the  inpatient world,  which was  not the                                                                    
case  everywhere. He  was not  opposed to  clinics remaining                                                                    
independent, but  he believed  there needed  to be  a closer                                                                    
collaboration;  in the  past much  of the  patient care  had                                                                    
been siloed.                                                                                                                    
Vice-Chair  Saddler   asked  how  many  hospitals   were  in                                                                    
Ketchikan. Mr.  Eisenhower replied that there  was only one.                                                                    
He  detailed that  there was  not significant  incentive for                                                                    
the  hospital to  compete for  patients due  to the  lack of                                                                    
competition.  People had  questioned  why  the hospital  was                                                                    
paying money to lose money; the  hospital was doing it to be                                                                    
a leader, because it believed it  was the right thing to do,                                                                    
and because ultimately it would benefit.                                                                                        
Vice-Chair  Saddler  asked   about  the  hospital's  current                                                                    
funding  stream.  He  asked  for  the  number  of  Medicare,                                                                    
Medicaid, and other payers.                                                                                                     
9:08:40 AM                                                                                                                    
Mr. Eisenhower  replied that public payers  accounted for 50                                                                    
percent (Medicare  at 21 percent/Medicaid at  18 percent), 8                                                                    
percent were dual payers, 37  percent private payers, and 12                                                                    
percent were uninsured or self-pay.                                                                                             
Vice-Chair Saddler  pointed to  slide 16 related  to hurdles                                                                    
to follow up care.  He believed addressing patients' housing                                                                    
needs, family support, transportation,  and food was a broad                                                                    
mandate of care. Mr. Eisenhower  replied in the affirmative.                                                                    
He did not  believe it was the  hospital's responsibility to                                                                    
handle the items, but he  did believe the hospital needed to                                                                    
take some ownership  to help patients navigate  the items to                                                                    
some degree. He furthered that  the hospital did not have to                                                                    
provide  housing,  but  in  many cases  it  needed  to  help                                                                    
patients figure out housing through other organizations.                                                                        
Vice-Chair  Saddler asked  if the  hospital  needed to  help                                                                    
patients  figure  out  housing  out of  a  sense  of  social                                                                    
obligation or because it was good for the business.                                                                             
Mr. Eisenhower answered that it  was good for public health.                                                                    
He believed the  days were gone where a  payer was agreeable                                                                    
to continue  paying every  time a patient  showed up  to the                                                                    
hospital; the  payers wanted true capitation  and population                                                                    
health.  He  elaborated  that  hospital  organizations  took                                                                    
responsibility  for a  life and  would  negotiate what  that                                                                    
life cost would  be. For PeaceHealth the scenario  was 10 to                                                                    
15 years down the road;  however, there were affordable care                                                                    
organizations  in  the  Lower   48  that  had  a  capitative                                                                    
Vice-Chair Saddler asked for a definition of capitative.                                                                        
Mr. Eisenhower  explained that a capitative  agreement meant                                                                    
that a  hospital would receive one  allocated payment amount                                                                    
per  year  for a  patient.  For  example, PeaceHealth  would                                                                    
receive  $6,000 per  year to  take  care of  a patient.  The                                                                    
structure incentivized  PeaceHealth to make  sure prevention                                                                    
was  done  because any  cost  above  $6,000 would  cost  the                                                                    
hospital, whereas  if the  hospital did a  good job  and the                                                                    
patient  only  cost  $4,000,  the  hospital  would  net  the                                                                    
remaining $2,000. He  remarked that there had  been waves of                                                                    
the  scenario through  the 1980s  through  managed care  and                                                                    
other.  Ultimately,  the  consumer would  drive  the  change                                                                    
through  the expectation  to receive  good  care. He  opined                                                                    
that outside of capitation, it  was difficult to see how the                                                                    
situation would change.                                                                                                         
Vice-Chair Saddler  believed Mr. Eisenhower was  saying that                                                                    
people would  be willing  to give up  more control  of their                                                                    
lives to the influence of  the healthcare system in order to                                                                    
receive healthcare  at a  lower cost. He  thought it  was an                                                                    
interesting  trend to  have a  healthcare  system take  over                                                                    
more responsibility for  food, disabilities, housing, family                                                                    
support, and social work.                                                                                                       
9:12:57 AM                                                                                                                    
Representative   Edgmon   referred   to   Mr.   Eisenhower's                                                                    
statement  that  healthcare  should  be  more  appropriately                                                                    
called  sick care  due to  the high  number of  patients who                                                                    
returned  prematurely.   He  pointed  to   Mr.  Eisenhower's                                                                    
thorough discussion about all  of the things PeaceHealth did                                                                    
to  reduce readmission  rates to  8.7  percent. He  surmised                                                                    
that  the takeaway  was more  about payment  reform and  the                                                                    
fact  that  if  healthcare  providers  received  the  proper                                                                    
resources   they  could   provide   better  care,   increase                                                                    
efficiency, and reduce readmissions.                                                                                            
Mr.  Eisenhower  agreed.  He detailed  that  most  providers                                                                    
understood  what needed  to be  done to  keep people  out of                                                                    
hospital.  He  relayed  that there  was  currently  not  the                                                                    
incentive  to do  so.  He believed  payment  reform was  the                                                                    
Representative  Edgmon asked  for verification  that payment                                                                    
reform  was  more  important than  expanding  Medicaid.  Mr.                                                                    
Eisenhower  believed   the  two   went  hand  in   hand.  He                                                                    
elaborated  that  Medicaid   expansion  would  provide  more                                                                    
revenue  to  the  hospital  because   of  the  reduction  in                                                                    
uncompensated care.  However, what he was  referencing would                                                                    
not  be  accomplished   primarily  with  Medicaid  expansion                                                                    
without some payment and Medicaid reform.                                                                                       
Representative Wilson  referred to  the 12 percent  who were                                                                    
uninsured  or   self-payers.  She  asked  if   the  hospital                                                                    
received any  federal funds  that offset  the 12  percent if                                                                    
they could  not pay. Mr.  Eisenhower did not believe  so. He                                                                    
added that there were self-payers who paid their bills.                                                                         
9:16:05 AM                                                                                                                    
Representative  Wilson  stated  that many  people  had  gone                                                                    
through the  exchange in the  past year. She  commented that                                                                    
individuals  had  been  given   the  choice  to  buy  health                                                                    
insurance or take  the federal tax penalty.  She wondered if                                                                    
the 12  percent figure  had declined  when the  exchange had                                                                    
been implemented.                                                                                                               
Mr. Eisenhower  prefaced that he  was not a  chief financial                                                                    
officer.  He answered  in the  first  quarter of  FY 14  the                                                                    
percentage   of  self-payers   had   been   17  percent   at                                                                    
PeaceHealth; the number was currently 12 percent.                                                                               
Representative Wilson asked  how much of the  12 percent had                                                                    
no funds to offset their  costs. Mr. Eisenhower would follow                                                                    
up with the information.                                                                                                        
Vice-Chair Saddler asked about  the specific Medicaid reform                                                                    
requirements  needed  to  accomplish the  triple  aims  care                                                                    
coordination  process.  Mr.   Eisenhower  replied  that  the                                                                    
hospital's  experience  had  demonstrated that  capital  was                                                                    
needed to  start up  a program, get  the training  in place,                                                                    
and  to ensure  tracking is  done properly.  He shared  that                                                                    
capital was  necessary for the  first step in  Alaska, which                                                                    
would lead  to confidence in  policy makers to do  even more                                                                    
payment reform. True payment reform  would mean ensuring the                                                                    
hospital  was  compensated  for its  work  from  a  fee-for-                                                                    
service standpoint (which was not currently occurring).                                                                         
Vice-Chair Saddler  asked about  elements of  payment reform                                                                    
needed.  Mr.  Eisenhower  answered  that  payment  could  be                                                                    
provided  to the  hospital by  a private  insurance company,                                                                    
Medicaid, or  Medicare. He detailed  that for over  50 years                                                                    
it  had  been  a  fee-for-service. He  stated  that  payment                                                                    
reform could come in many  forms. He used true capitation as                                                                    
an  example of  an extreme  payment reform  that he  did not                                                                    
foresee the state  seeing in the next few  years. Clearly in                                                                    
payment   reform  models,   the  fee-for-service   would  be                                                                    
shifting  or  adding  fees for  services  the  hospital  was                                                                    
providing that it  was not currently paid  for. For example,                                                                    
the hospital  was not currently paid  for transitional care;                                                                    
there  was no  fee structure  that enabled  the hospital  to                                                                    
bill for the service.                                                                                                           
Vice-Chair  Saddler  asked  for  verification  that  payment                                                                    
reform  would  be  separate  from  Medicaid  expansion.  Mr.                                                                    
Eisenhower replied that it was possible.                                                                                        
9:21:04 AM                                                                                                                    
Vice-Chair Saddler  referred to the hospital's  $3.1 million                                                                    
grant for  three years. He  asked how much capital  would be                                                                    
needed  for  the  facility.   Mr.  Eisenhower  replied  that                                                                    
PeaceHealth would  need approximately  $700,000 per  year to                                                                    
implement  all   of  the  population  health   benefits.  He                                                                    
explained  that  PeaceHealth  had  received  more  than  the                                                                    
$700,000 because  a piece  of the project  was to  track the                                                                    
data  and conduct  the research;  most facilities  would not                                                                    
need that extra layer.                                                                                                          
Vice-Chair Saddler asked  if it would be fair  to divide the                                                                    
$700,000 by  the hospital's 1,200 patients  to determine the                                                                    
cost per  patient. Mr. Eisenhower  replied in  the negative.                                                                    
He detailed that it was only  one piece of what the hospital                                                                    
was   doing.  He   could   provide   the  information.   The                                                                    
transitional  care  management   piece  represented  in  the                                                                    
presentation was  only one facet  of the broader  work being                                                                    
Vice-Chair    Saddler   appreciated    seeing   what    care                                                                    
coordination  and   cost  containment  could  be.   He  also                                                                    
understood  that  the  items   were  exclusive  of  Medicaid                                                                    
expansion. Mr. Eisenhower agreed.                                                                                               
Co-Chair  Thompson referred  to discussion  that Alaska  was                                                                    
the only  state that had  no medical provider tax.  He asked                                                                    
for comment. Mr.  Eisenhower replied that the  topic was out                                                                    
of his expertise.                                                                                                               
9:23:16 AM                                                                                                                    
Co-Chair Thompson  noted that the following  presenters were                                                                    
working on a coordinated care project in Kenai.                                                                                 
RICK DAVIS,  CEO, CENTRAL  PENINSULA HOSPITAL  (CPH), KENAI,                                                                    
read from a prepared statement:                                                                                                 
     Central  Peninsula  Hospital  is a  49-bed  acute  care                                                                    
     hospital  in  Soldotna.  It  is   owned  by  the  Kenai                                                                    
     Peninsula Borough and leased  to a nonprofit board CPGH                                                                    
     Inc.  I'm  testifying  today  in  support  of  Medicaid                                                                    
     reform and  Medicaid expansion.  In addition  I'm going                                                                    
     to  cover  a  demonstration  project  that  we've  been                                                                    
     working  on   that  could  help   put  Medicaid   on  a                                                                    
     predictable  and  sustainable  glide  path.  Reform  is                                                                    
     necessary  for Alaska  and expansion  is necessary  for                                                                    
     those Alaskans  who can't afford coverage.  When I talk                                                                    
     about  reform I'm  really talking  about both  delivery                                                                    
     and  payment   reform  combined.  Because  CPGH   is  a                                                                    
     standalone  community hospital,  we must  figure out  a                                                                    
     glide path on our own.  There isn't a big health system                                                                    
     behind us or  a corporate swat team to call  in to help                                                                    
     us   navigate    the   rapidly    changing   healthcare                                                                    
     Some  of you  on the  committee may  have hospitals  in                                                                    
     your   districts   that    operate   under   the   same                                                                    
     circumstances and  pressure. As  a result, we  are left                                                                    
     to   our   own   devices   to   survive   the   ongoing                                                                    
     transformation while  continuing to provide  those high                                                                    
     quality services  that make  sense for  our populations                                                                    
     we serve.  The process  and timeline  for us  to change                                                                    
     and  how we  deliver  and  pay for  care  has now  been                                                                    
     accelerated due  to the current fiscal  climate we find                                                                    
     in Alaska  today. For our  part CPH began  developing a                                                                    
     pilot demonstration  over a year  ago for  the Medicaid                                                                    
     population  on the  peninsula. The  demonstration is  a                                                                    
     managed care  plan model that  is risk  baring, locally                                                                    
     governed  provider network  that  we  call a  community                                                                    
     care organization  or CCO for  short. It  would provide                                                                    
     all   Medicaid  beneficiaries   with  physical   health                                                                    
     services and  potentially behavioral health  and dental                                                                    
     services in one benefit package.  The CCO would be paid                                                                    
     under a  single global  budget for these  services that                                                                    
     can only grow at a  fixed rate per year. That stability                                                                    
     should be  attractive from  a state  budget architect's                                                                    
     standpoint as it eliminates the  peaks and valleys that                                                                    
     occur from year to year with the budget.                                                                                   
     The CCO would be held  accountable by the state to meet                                                                    
     performance metrics and quality  values that align with                                                                    
     industry  standards, new  systems  of governments,  and                                                                    
     payment   incentives   that  reward   improved   health                                                                    
     outcomes.  Healthcare in  Alaska is  fragmented and  it                                                                    
     lacks  coordination   and  efficiency,   which  reduces                                                                    
     quality  and  increases   unnecessary  care.  Currently                                                                    
     Alaska does  not utilize managed care  organizations or                                                                    
     managed  health  plans,  but   I  understand  there  is                                                                    
     language  in  nearly  every  bill  the  legislature  is                                                                    
     considering that provides for  elements of the Medicaid                                                                    
    population to be enrolled in a managed health plan.                                                                         
     I  support making  this necessary  step. We  must begin                                                                    
     structural payment  reform in  Alaska now  because it's                                                                    
     clear to  me that  this will  be the  next stop  in the                                                                    
     road to  reform. We're talking about  global payment as                                                                    
     a payment reform mechanism here.                                                                                           
     I view  our CCO as  the step beyond payment  reform. My                                                                    
     belief  is simply  based on  the funding  structure and                                                                    
     risk  baring nature  of the  program. More  importantly                                                                    
     providers will no longer be  paid for treating illness,                                                                    
     but  instead  for  a  highly  coordinated  system  that                                                                    
     prevents  illness and  the high  costs associated  with                                                                    
9:27:55 AM                                                                                                                    
Mr. Davis continued reading a prepared statement:                                                                               
     As a  hospital administrator I see  things almost every                                                                    
     day  which  do  not  make much  sense  with  regard  to                                                                    
     patient care.  The reason  for this  is because  of the                                                                    
     way  providers are  reimbursed  or to  take  it a  step                                                                    
     further,  the  way  incentives   in  our  business  are                                                                    
     misaligned.  An example,  a terminally  ill person  who                                                                    
     has managed  to stay at  home until their  condition or                                                                    
     pain  has deteriorated  to a  point  that their  family                                                                    
     could no longer provide the  level of care necessary to                                                                    
     manage their  loved one's pain.  What happens  next for                                                                    
     that  patient? Probably  many of  you are  thinking the                                                                    
     next  logical step  would be  hospice care.  That would                                                                    
     seem to make  the most sense, but in  our community you                                                                    
     won't  find  a  robust   hospice  program.  We  have  a                                                                    
     volunteer hospice program that  does their best loaning                                                                    
     out equipment  providing some  home health  visits with                                                                    
     the limited donations that  they currently receive. But                                                                    
     most  patients still  come to  the  hospital for  those                                                                    
     final  days of  their life.  As a  hospital, we're  not                                                                    
     incentivized  to  provide   home  hospice  care  simply                                                                    
     because we're  not paid  for it. But  I would  like the                                                                    
     flexibility to  do that. So  what happens  instead? The                                                                    
     patient's admitted  to the hospital where  they're most                                                                    
     likely to spend their last  days receiving care, but in                                                                    
     the wrong high-cost environment.                                                                                           
     Under the  CCO model  a global  budget would  allow the                                                                    
     organization  flexibility  to  develop  a  more  robust                                                                    
     hospice   program   that   would  provide   this   pain                                                                    
     management, palliative  care, and respite  services for                                                                    
     the family in a less expensive home environment.                                                                           
Vice-Chair  Saddler  asked  for  a definition  of  the  term                                                                    
global payment.  Mr. Davis replied  that it could  be called                                                                    
capitation,  per  diem, or  other;  it  was a  mechanism  of                                                                    
payment. For  example, on the Kenai  Peninsula Borough there                                                                    
had been a  given number of Medicaid  beneficiaries who paid                                                                    
a given amount for service.  The concept would be to present                                                                    
a global budget  for the population for  the following year,                                                                    
capped  at   a  certain   level;  it   would  then   be  the                                                                    
organization's  responsibility to  manage  the  care of  the                                                                    
given  population  under  the   defined  global  budget.  He                                                                    
believed  it had  to be  done through  a coordinated  effort                                                                    
between   the   physicians,  hospitals,   post-acute   care,                                                                    
insurance, and other.                                                                                                           
Vice-Chair Saddler surmised that  it [global payment] looked                                                                    
at history  to determine  how much it  cost to  provide care                                                                    
for a population  and then limiting the  organization to the                                                                    
historical average to eliminate outliers.                                                                                       
9:31:44 AM                                                                                                                    
Mr. Davis continued to read a statement:                                                                                        
     I would like for us to  have the flexibility to be able                                                                    
     to put these care models in  place, but if we do divert                                                                    
     our  current   resources  to  non-paying   services  it                                                                    
     jeopardizes our  other services that we  do provide for                                                                    
     our residents.  It sounds ridiculous because  it is. We                                                                    
     need to restructure  our payment system so  that we can                                                                    
     do what is best for  the patient at a sustainable cost.                                                                    
     The  demonstration project  we're building  would allow                                                                    
     us  to  do   that.  You  may  be   wondering  what  the                                                                    
     coordinated care organization looks  like. It's a model                                                                    
     based on  a clinically  integrated care  and population                                                                    
     health  management  model.  It  includes  the  hospital                                                                    
     employed  and  independent   primary  care  physicians,                                                                    
     behavioral  health   providers,  specialists,   and  an                                                                    
     insurer. And they all work  together instead of against                                                                    
     each  other,  which is  kind  of  the way  our  current                                                                    
     system is  built. This structure requires  a great deal                                                                    
     of frontend  work to  bring the  stakeholders together,                                                                    
     agree on  a payment structure within  the organization,                                                                    
     and we would  need to form a network,  a shared savings                                                                    
     distribution program,  and develop quality  targets and                                                                    
     metrics for accountability.                                                                                                
     We're  currently  in  the   process  of  analyzing  our                                                                    
     current  Medicaid population  to better  understand our                                                                    
     needs. Under traditional managed  care health plans the                                                                    
     system  separates  physical   health,  behavioral,  and                                                                    
     other types  of care. That makes  things more difficult                                                                    
     for the  patients and providers and  more expensive for                                                                    
     the state. A CCO would  have the flexibility to support                                                                    
     new models of  care that are patient  centered and team                                                                    
     focused, and reduce health disparities.                                                                                    
     I'm  not  guaranteeing  we can  provide  all  of  these                                                                    
     benefits   together   just   yet.  We're   doing   that                                                                    
     assessment now. We  believe a CCO would  be better able                                                                    
     to coordinate  services and  also focus  on prevention,                                                                    
     chronic illness  management, and  person-centered care.                                                                    
     We  would have  the  flexibility within  our budget  to                                                                    
     provide services  along with medical benefits  with the                                                                    
     goal of  making and meeting  the triple aims  of better                                                                    
     health,   better  care,   and  lower   costs  for   the                                                                    
     population  we  serve. There's  not  a  better time  in                                                                    
     Alaska  to   consider  implementing  these   models  in                                                                    
     combination  with   authorizing  Medicaid   to  expand.                                                                    
     Transforming  newly eligible  members into  the managed                                                                    
     care delivery system and our  global budget model would                                                                    
     help ensure sustainability in the  state funding of the                                                                    
     expansion when that time comes.                                                                                            
     Alaska should  strongly consider  moving into  the care                                                                    
     coordination organization  model to  stabilize Medicaid                                                                    
     funding,   prevent   future  reductions   in   Medicaid                                                                    
     coverage  and  benefits  for Alaska's  most  vulnerable                                                                    
     constituents, and  begin working towards  providing the                                                                    
     preventative care needed for a healthier Alaska.                                                                           
Mr.  Davis  relayed  that  there  was  an  upfront  cost  to                                                                    
developing  a program  like the  one  under discussion.  The                                                                    
organization had some employed  physicians, but the majority                                                                    
were independent.  He communicated  that integrating  all of                                                                    
the providers into  a system was a  substantial project with                                                                    
associated   costs.  He   explained  if   the  project   was                                                                    
successful,  reimbursement at  the hospital  would decrease.                                                                    
For  example,  recently  there  had  been  nine  psychiatric                                                                    
patients.  He  emphasized that  CPH  was  not a  psychiatric                                                                    
hospital and was  not the best place for the  care to occur.                                                                    
Additionally, there  had been  a waiting  room full  of sick                                                                    
and  injured patients.  He communicated  that  there was  no                                                                    
safety  net  system in  the  community  to help  the  people                                                                    
before they  reached a point  of suicidal tendency  or other                                                                    
that brought them to the  emergency room. He elaborated that                                                                    
the state  paid the  hospital for  the very  expensive care;                                                                    
some  of  the  patients  ended  up  being  admitted  to  the                                                                    
hospital  and   others  were  helicoptered  to   the  Alaska                                                                    
Psychiatric  Institute. He  furthered that  a global  budget                                                                    
would  allow the  hospital to  begin  putting hospice,  home                                                                    
health,  and other  services  in  place. Expanding  Medicaid                                                                    
would  allow the  hospital to  fund the  program. He  stated                                                                    
that without a grant, there had  to be a revenue stream from                                                                    
somewhere to help develop the innovations.                                                                                      
9:37:16 AM                                                                                                                    
Vice-Chair Saddler  asked if  CPH was  the only  hospital on                                                                    
the Kenai  Peninsula. Mr. Davis replied  in the affirmative.                                                                    
He   elaborated   that    South   Peninsula   Hospital   was                                                                    
approximately  80 miles  south in  Homer. Central  Peninsula                                                                    
Hospital was  a 49-bed  facility; it  received approximately                                                                    
50  percent  of  its   payment  from  Medicare/Medicaid,  35                                                                    
percent commercial, 6  percent self-pay, and 7  or 8 percent                                                                    
federal   pay  (Indian   Health  Services   and  the   state                                                                    
Department of Corrections).                                                                                                     
Vice-Chair  Saddler  asked  if  there was  a  trend  towards                                                                    
consolidation.  He  heard  Mr.  Davis  saying  that  if  the                                                                    
providers  and  follow up  could  all  be coordinated  there                                                                    
would be  more control  over the system  and costs  would be                                                                    
reduced.  He  wondered if  it  was  the long-term  trend  in                                                                    
healthcare.  Mr. Davis  was  looking  at integration  rather                                                                    
than  consolidation   moving  forward.  For   instance,  the                                                                    
contracts the  hospital was working on  for participation in                                                                    
the  CCO  involved  transparency  of  data  and  sharing  of                                                                    
electronic  health  information  between   all  of  the  CCO                                                                    
members. Part  of the  problem with  the current  system was                                                                    
the  absence of  primary  care-centered  case management;  a                                                                    
patient could visit the ER and  go see a specialist, but was                                                                    
lost  outside  of  the  system.  The  clinically  integrated                                                                    
coordinated  care   model  was  based   on  patient-centered                                                                    
primary care  medical homes; the  primary care  medical home                                                                    
model was  where the coordination  began. He  furthered that                                                                    
there  was access  to outcomes  data  from specialists,  the                                                                    
organization  knew where  the good  care was  found and  was                                                                    
able to keep  them within the system to keep  sight of their                                                                    
Vice-Chair Saddler  could see the  clear benefits.  He asked                                                                    
about physicians and healthcare  providers who were not part                                                                    
of the CCO.  Mr. Davis answered that the goal  was to better                                                                    
coordinate the care. He expounded  that if a physician chose                                                                    
to not participate  in the network, it did  not exclude them                                                                    
from being part of a patient's care.                                                                                            
Vice-Chair   Saddler  remarked   that  "resistance   is  not                                                                    
futile."  Mr.  Davis agreed.  He  explained  that a  patient                                                                    
would be referred to a  physician who would provide the best                                                                    
care (whether they  were inside or outside  the network). He                                                                    
continued  that  ideally there  would  be  better access  to                                                                    
outcomes data  for someone in  the network because  they had                                                                    
already agreed to  share the data and  meet certain outcomes                                                                    
criteria. The goal  would be to have  everyone involved with                                                                    
more data transparency.                                                                                                         
Vice-Chair  Saddler understood  that CPH  supported Medicaid                                                                    
expansion. He wondered if the  CCO was dependent on Medicaid                                                                    
9:41:26 AM                                                                                                                    
Mr. Davis  replied that  the CCO  was dependent  on Medicaid                                                                    
Vice-Chair  Saddler  asked  for verification  that  the  CCO                                                                    
could not  currently be accomplished.  Mr. Davis  replied in                                                                    
the  negative.  He  detailed that  the  hospital  could  not                                                                    
afford the  upfront cost of  developing the  program without                                                                    
Medicaid  expansion. He  explained that  if the  project was                                                                    
successful  its  ER  volumes  would  drop.  He  shared  that                                                                    
recently the  hospital had  7 patients at  one time  who had                                                                    
been over the age of 87.  He relayed that the patients would                                                                    
probably have been better served  at home through hospice or                                                                    
a  palliative care  program, but  because the  community did                                                                    
not have the service, the  patients had come to the hospital                                                                    
for their final days. He  remarked that the hospital was not                                                                    
the best place to go for  a lot of the individuals; however,                                                                    
there  was currently  no alternative.  He communicated  that                                                                    
there  was a  cost associated  with developing  the program.                                                                    
The hospital's goal was to  help fund some of the post-acute                                                                    
care  and  pre-acute  care   programs  for  the  psychiatric                                                                    
patients.  He noted  that PeaceHealth  had  received a  $3.1                                                                    
million grant  to get its  feet on  the ground, but  CPH did                                                                    
not have any grants available to help.                                                                                          
Vice-Chair Saddler did not see  how the reforms the hospital                                                                    
wanted to  accomplish were dependent on  Medicaid expansion.                                                                    
He believed they were money dependent.                                                                                          
Mr. Davis  replied that it  was the uncompensated  care that                                                                    
would  become eligible  for  Medicaid  expansion that  would                                                                    
backfill  the holes  in the  hospital's  revenue stream.  He                                                                    
furthered that as the Medicaid  ER population dropped due to                                                                    
improved coordination  of care,  the hospital would  be able                                                                    
to  replace   the  patients  with  newly   covered  Medicaid                                                                    
expansion patients.                                                                                                             
Vice-Chair  Saddler commented  that  Medicaid expansion  was                                                                    
one way to provide the hospital with the money it needed.                                                                       
9:44:10 AM                                                                                                                    
Representative  Guttenberg thought  CPH may  be the  largest                                                                    
unaffiliated  hospital  in  the   state.  He  mentioned  the                                                                    
Fairbanks  and Ketchikan  hospitals that  were a  part of  a                                                                    
larger  system.  He  remarked that  CPH  had  problems  that                                                                    
others did  not have. He  wondered how  easy it would  be to                                                                    
change  the  culture inside  the  hospital.  He wondered  if                                                                    
change of  culture inside the  hospital was governed  by the                                                                    
way the hospital managed care  and assigned doctors, nurses,                                                                    
and physician's assistants. He wondered  if it was difficult                                                                    
to  align people  with the  different  missions and  whether                                                                    
there was an additional cost.                                                                                                   
Mr.  Davis answered  that  it was  difficult  to change  the                                                                    
culture  within  an organization.  He  did  not believe  the                                                                    
model's  focus  was about  changing  the  culture within  an                                                                    
organization  because   doctors  were  trained   to  perform                                                                    
procedures to heal people and  nurses were there to care for                                                                    
people.  The  model  pertained more  to  the  management  of                                                                    
population health  in the community  that was  not currently                                                                    
taking place.  The incentives were  for everyone to  do what                                                                    
they  were  trained  to  do  (i.e.  procedures,  visits,  or                                                                    
other).  He explained  that a  global budget  for population                                                                    
health  management  incentivized  the cultural  shift  to  a                                                                    
clinically  integrated network  coordinated care-type  model                                                                    
where  people became  incentivized  to provide  preventative                                                                    
care,  psychiatric safety  net care,  or to  coordinate with                                                                    
the appropriate caregiver (as opposed  to a person trying to                                                                    
do  it  all themselves  because  of  payment incentive).  He                                                                    
added that  value-based purchasing was a  large component of                                                                    
the overall picture.                                                                                                            
Representative  Guttenberg asked  for detail  on value-based                                                                    
purchasing.  Mr. Davis  replied that  value-based purchasing                                                                    
meant  being paid  for outcomes  as  opposed to  procedures.                                                                    
Currently   hospitals  were   incentivized  do   more  MRIs,                                                                    
procedures, and  volume. He furthered  that the  model would                                                                    
incentivize the  hospital to  provide valuable  care instead                                                                    
of just more care.                                                                                                              
Representative  Guttenberg  shared   that  his  most  recent                                                                    
experience  with  hospice  had been  dramatically  different                                                                    
than  the   previous  experience.  He  addressed   what  had                                                                    
changed. He  explained that the hospice  culture had changed                                                                    
in the  Fairbanks medical community. He  elaborated that one                                                                    
doctor had  taken the operation  of the whole  program under                                                                    
his wing. He  observed that hospitals were  not getting fees                                                                    
to deliver  an adequate  program such  as hospice.  He asked                                                                    
for further detail.                                                                                                             
Mr. Davis  answered there was  no payment incentive  for the                                                                    
scenario   described   by  Representative   Guttenberg.   He                                                                    
referred back  to the elderly  patients who had been  in the                                                                    
hospital  recently; some  of the  patients  would have  been                                                                    
served better and more cost-effectively  at home. The global                                                                    
payment model  would provide incentive  for the  hospital to                                                                    
put  a more  robust hospice  program in  place to  help keep                                                                    
similar  patients  at home.  He  furthered  that the  global                                                                    
payment  would  enable the  hospital  to  prepare a  hospice                                                                    
program more  cost-effectively. He  summarized that  under a                                                                    
global payment  model the hospital would  be incentivized to                                                                    
develop a  hospice program, whereas under  a fee-for-service                                                                    
model  it  was  incentivized  to  admit  them  and  to  bill                                                                    
9:49:53 AM                                                                                                                    
Representative  Guttenberg   asked  for   verification  that                                                                    
Medicaid expansion  would be necessary  for the  hospital to                                                                    
make  the  changes described.  Mr.  Davis  replied that  the                                                                    
hospital could  make the  changes currently  if it  chose to                                                                    
invest significant funds into a  program that would bring it                                                                    
no reimbursement.  However, CPH  was community owned  and he                                                                    
did not believe the community would support the idea.                                                                           
Co-Chair Thompson  noted that  Representative Dan  Ortiz was                                                                    
present in the committee room.                                                                                                  
Vice-Chair Saddler asked how much  it would cost to make the                                                                    
changes Mr. Davis had described.  Mr. Davis answered that he                                                                    
did not currently have a  dollar estimate. He explained that                                                                    
the real cost for the  hospital would be in reduced services                                                                    
it was  providing for the current  Medicaid population (i.e.                                                                    
services provided when  individuals inappropriately used the                                                                    
high-cost emergency room). He  reasoned that the development                                                                    
of the network, legal  costs, manpower, and consulting costs                                                                    
would  be  expensive.  He  relayed  that  the  hospital  was                                                                    
working with the Rural Policy  Research Institute, under the                                                                    
University  of Ohio  [correction: University  of Iowa];  the                                                                    
institute  had  received  federal   grant  funds  for  rural                                                                    
innovative healthcare model studies.  He elaborated that the                                                                    
institute  was  working  with  CPH  along  with  four  other                                                                    
hospitals  nationwide to  help  the entities  come to  terms                                                                    
with  how  to establish  making  the  changes discussed.  He                                                                    
reiterated  that CPH  was a  standalone entity;  it did  not                                                                    
have  the  manpower to  make  the  changes  on its  own.  He                                                                    
relayed that there would be  quite an expense going into the                                                                    
Vice-Chair  Saddler   appreciated  the  complexity   of  the                                                                    
challenge, but did  not know if some of  the costs described                                                                    
by Mr.  Davis to achieve  cost reductions had  been included                                                                    
in  the  public  discussion about  what  Medicaid  expansion                                                                    
would  bring.   He  asked  if  the   Rural  Policy  Research                                                                    
Institute  was  housed under  the  University  of Ohio.  Mr.                                                                    
Davis corrected  his earlier statement and  relayed that the                                                                    
institute was housed under the University of Iowa.                                                                              
Co-Chair  Thompson  referred  to  an  earlier  statement  by                                                                    
Representative Guttenberg about  the Fairbank's hospital. He                                                                    
stated that  the Fairbanks hospital was  privately owned; it                                                                    
was operated  by Bannister  Health. He  wondered if  the CPH                                                                    
management  was leased  to a  large  corporation. Mr.  Davis                                                                    
replied in the  negative. He explained that  CPH was managed                                                                    
by an 11-member, local community board.                                                                                         
9:53:43 AM                                                                                                                    
Representative  Edgmon   stated  that  one  of   the  bigger                                                                    
criticisms of  Medicaid expansion was the  inability to find                                                                    
Medicaid  providers. He  wondered if  the issue  would be  a                                                                    
challenge for CPH.                                                                                                              
Mr.  Davis answered  that the  savings pool  associated with                                                                    
the  global   payment  model  had  built-in   incentives  to                                                                    
compensate the primary  care physicians at a  level that was                                                                    
slightly  higher than  at present.  The increase  would come                                                                    
from  shared  savings  achieved   by  a  reduced  volume  of                                                                    
Medicaid patients  coming into the hospital  and from better                                                                    
coordination of specialty care  services. He elaborated that                                                                    
there was a risk pool  associated with the payment structure                                                                    
that  was   reallocated  back  to  members   with  a  higher                                                                    
percentage going  to primary  care providers  to incentivize                                                                    
the  primary  care  medical   home  model  development.  The                                                                    
primary  care providers  then became  the care  coordinators                                                                    
for  the population  and  helped to  steer  patients to  the                                                                    
right  care and  the  right  place at  the  right time.  The                                                                    
organization  had  employed  and non-employed  primary  care                                                                    
physicians who were  very interested in the  project and had                                                                    
been participating  in the early  stages of  development. He                                                                    
believed there would be adequate coverage in the region.                                                                        
Representative    Edgmon   reasoned    that   the    current                                                                    
conversation was  a business  discussion. He  elaborated CPH                                                                    
was in the  business of helping people and  making sure they                                                                    
get the necessary medical services.  He stated that those in                                                                    
support of  Medicaid expansion often discussed  the economic                                                                    
multiplier effect it  would have. He asked  how the economic                                                                    
multiplier effect would impact the Kenai Peninsula.                                                                             
BRUCE   RICHARDS,    EXTERNAL   AFFAIRS/MARKETING,   CENTRAL                                                                    
PENINSULA  HOSPITAL,   answered  that   there  would   be  a                                                                    
significant   impact.  There   was   impact  when   economic                                                                    
expansion occurred; new physicians  came to the hospital and                                                                    
provided  a service  that had  not been  offered before.  He                                                                    
cited a new  spine surgeon as an example.  He continued that                                                                    
there  were significant  jobs that  followed  a new  service                                                                    
line into  the community  (e.g. new nurses,  assistants, and                                                                    
other).  He elaborated  that  sometimes  individuals had  to                                                                    
come  in from  out-of-state to  help a  new surgeon  with an                                                                    
opening.  He  did  not  know  the  exact  numbers,  but  the                                                                    
economic  multiplier  was  significant.   He  noted  it  was                                                                    
important to keep  in mind that the  economic multiplier was                                                                    
not always  the main objective;  the goal was to  get people                                                                    
covered  with  the right  care  in  the  right place  for  a                                                                    
reasonable  cost. He  remarked on  the complexity  of making                                                                    
the  improvements. He  highlighted  that  the movement  away                                                                    
from a  fee-for-service system  to a  system based  on value                                                                    
and  quality  where people  were  held  to measurements  and                                                                    
outcomes.  He   concluded  that  there  would   be  positive                                                                    
economic impacts as a result of the changes.                                                                                    
Representative Edgmon  referred to prior testimony  from the                                                                    
commissioner  of Department  of Health  and Social  Services                                                                    
that the state was looking at  $1 billion in benefits over a                                                                    
six-year period, including  $146 million in FY  16 alone and                                                                    
an  additional 4,000  jobs scattered  around  the state.  He                                                                    
noted that the statistics were all  on a macro level; he did                                                                    
not have detail on what it  would mean to various regions of                                                                    
the  state.   He  stated  that  the   discussion  was  about                                                                    
economics; better economics  provided better services, saved                                                                    
money, and made  people healthier. He thought  it was worthy                                                                    
for the  hospital to have  stronger numbers  to substantiate                                                                    
that better benefits would come  to the region from Medicaid                                                                    
10:00:12 AM                                                                                                                   
Representative Wilson  wondered if  Medicaid was  being done                                                                    
in the right direction. She  remarked that under the pay-as-                                                                    
you-go system  a patient had  to come  in [to a  hospital or                                                                    
other] before someone [the hospital  or other] got paid. She                                                                    
discussed that  there was no  incentive to  provide wellness                                                                    
care because it did not bring  in any money. She wondered if                                                                    
it  was  possible to  change  the  way the  Medicaid  system                                                                    
worked to  include preventative  services and  reduce costs.                                                                    
She  surmised  that grants  were  pushing  hospitals in  the                                                                    
direction  of making  the changes;  however,  if the  grants                                                                    
were successful there  would be no money to  replace them in                                                                    
the future.                                                                                                                     
Mr.  Davis replied  that CPH  had not  received any  grants.                                                                    
From  CPH's perspective,  the Medicaid  expansion population                                                                    
would help provide  the needed funding. He  relayed that the                                                                    
global payment  model would incentivize  CPH to  provide the                                                                    
preventative  care programs.  He had  looked at  the Eastern                                                                    
Oregon coordinated  care organization; one of  the facets of                                                                    
its  program  was  a coordinated  care  model.  The  program                                                                    
targeted the high  utilizers of the ER and  offered them the                                                                    
ability to participate in a  coordinated care model (similar                                                                    
to the project at PeaceHealth  in Ketchikan) that taught the                                                                    
individuals to  learn better habits or  steered them towards                                                                    
mental  health  services. He  stated  that  the model  would                                                                    
incentivize  CPH  to  provide  many kinds  of  wellness  and                                                                    
preventative programs  because of  a global  budget payment,                                                                    
whereas, at  present the hospital was  paid when individuals                                                                    
inappropriately came to the ER.                                                                                                 
10:02:57 AM                                                                                                                   
Representative  Wilson  remarked   that  Medicaid  expansion                                                                    
would  offer a  different  payment method.  She thought  Mr.                                                                    
Davis was saying that  expansion would incentivize hospitals                                                                    
to offer  [preventative or wellness] programs  that were not                                                                    
possible under the current Medicaid system.                                                                                     
Mr.  Richards replied  that  the  demonstration project  was                                                                    
included in the legislation in  order to utilize and try the                                                                    
new  payment  system.  He asked  for  clarification  on  the                                                                    
Representative Wilson  restated her question, which  did not                                                                    
assume the passage  of the legislation. She  wondered if the                                                                    
model  used in  Ketchikan could  be used  under the  current                                                                    
Medicaid system.  Mr. Richards responded that  there was not                                                                    
currently the payment  system in place for  hospitals to get                                                                    
paid for the work.                                                                                                              
10:04:26 AM                                                                                                                   
Representative  Wilson   wondered  if  one  year   would  be                                                                    
sufficient  to know  whether the  model was  successful. She                                                                    
was  interested to  learn how  to take  care of  the current                                                                    
Medicaid   recipients   before   expanding   to   a   larger                                                                    
population. Mr. Davis replied that  any global payment model                                                                    
would  help  the  medical system  achieve  better  care  for                                                                    
patients.  Expansion  of  the  program  would  be  partially                                                                    
determined  by the  associated revenue  or revenue  that was                                                                    
lost. He  explained that  there would be  some benefit  to a                                                                    
global payment  model for  the current  Medicaid population;                                                                    
however,  uncompensated care  costs would  continue and  the                                                                    
population  benefitting would  be smaller.  He did  not know                                                                    
how long it would take to  implement the model, but he hoped                                                                    
it  would not  take long.  He  added that  the hospital  was                                                                    
working hard on the project.                                                                                                    
Representative  Wilson did  not  have  a good  understanding                                                                    
about whether  some of  the issues were  related to  how the                                                                    
system  was worked  and how  much flexibility  there was  to                                                                    
change the current system in  order to increase cost savings                                                                    
to hospitals and lower costs  for payers. She believed there                                                                    
was opportunity the state could  utilize that did not relate                                                                    
to Medicaid expansion.                                                                                                          
Co-Chair  Thompson noted  that  the committee  would end  at                                                                    
10:20 a.m. He relayed that  the committee would meet at 9:00                                                                    
a.m. the following day to continue the conversation.                                                                            
Vice-Chair  Saddler  referred  to  testimony  given  by  Mr.                                                                    
Eisenhower and Mr. Davis about  the complexity of setting up                                                                    
coordination and  other. He asked  if the bill  would enable                                                                    
the hospital to take advantage  of coordination at the start                                                                    
of  the upcoming  fiscal year  in July.  Mr. Davis  answered                                                                    
that CPH  was currently in  the beginning stages  of setting                                                                    
up the program. He did not  know where the precise start and                                                                    
finish lines would be.                                                                                                          
Vice-Chair  Saddler remarked  that Mr.  Davis had  testified                                                                    
that  the  project  could  not   be  done  without  Medicaid                                                                    
expansion. He  asked for verification  that CPH  was working                                                                    
on the project anyway. Mr.  Davis answered that the hospital                                                                    
was  working   on  a   coordinated  care   organization.  He                                                                    
explained  that the  model  would be  much  more robust  and                                                                    
better if  an estimated  4,100 people  below 100  percent of                                                                    
the federal  poverty level  with no  coverage in  the region                                                                    
could  be incorporated.  He elaborated  that  CPH wanted  to                                                                    
achieve  population health  management;  it could  not do  a                                                                    
good  job without  including the  4,100  individuals in  the                                                                    
Medicaid population.                                                                                                            
Vice-Chair Saddler stated that  Mr. Davis had testified that                                                                    
the  hospital  could not  do  the  project without  Medicaid                                                                    
expansion; however, he observed  that CPH was moving forward                                                                    
without it. He asked for clarification.                                                                                         
Mr. Davis replied that CPH  was working on healthcare reform                                                                    
in some form  or other. The system he  had described earlier                                                                    
would  not be  possible without  Medicaid expansion  to help                                                                    
fund  it. He  furthered that  the hospital  would try  to do                                                                    
something regardless of the passage  of a bill. He explained                                                                    
that what the changes would  look like and the effectiveness                                                                    
of the  hospital's efforts would depend  on whether Medicaid                                                                    
expansion and reform or Medicaid reform were enacted.                                                                           
Vice-Chair   Saddler  asked   for  clarification   that  the                                                                    
organization  was  going  forward  with  the  CCO  currently                                                                    
without  a  commitment  for Medicaid  expansion.  Mr.  Davis                                                                    
answered that  the hospital was  exploring the idea,  but it                                                                    
could end at any time.                                                                                                          
Vice-Chair  Saddler asked  if the  establishment of  the CCO                                                                    
was conditional. Mr. Richards  answered that CPH had started                                                                    
designing   the   program   in  anticipation   of   Medicaid                                                                    
expansion, which  had been passed under  the Affordable Care                                                                    
Vice-Chair Saddler  asked if the program  would be continued                                                                    
if  the  bill did  not  pass.  Mr.  Richards did  not  know;                                                                    
however, the demonstration project in  the bill was based on                                                                    
Medicaid expansion.                                                                                                             
Vice-Chair Saddler asked how long  it would take to continue                                                                    
setting the project up. Mr.  Richards answered that it would                                                                    
probably be  sometime in the  fall, but  he did not  want to                                                                    
guess at a precise timeline.                                                                                                    
Vice-Chair Saddler  asked if  the timeline  was 6  months, 2                                                                    
years, or  5 years. Mr.  Richards replied that  the hospital                                                                    
would want to begin sooner.  He thought it could potentially                                                                    
be in the next 12 months.                                                                                                       
10:12:09 AM                                                                                                                   
Representative  Gara  spoke  to   the  testimony  that  with                                                                    
Medicaid  expansion  the  hospital could  provide  increased                                                                    
preventative care,  decrease costs,  divert people  from the                                                                    
ER, and increase  the economic multiplier in  the region. He                                                                    
wondered if  the same  savings and  other benefits  could be                                                                    
achieved without Medicaid expansion.                                                                                            
Mr.  Davis replied  that the  hospital would  have to  spend                                                                    
significant  money in  order to  lose money  to improve  the                                                                    
care of its community.  Without Medicaid expansion CPH would                                                                    
be asked to  spend money to lose money on  the Medicaid only                                                                    
population. He did  not know where it ended  up and surmised                                                                    
that it was  only possible to spend money to  lose money for                                                                    
so  long.  He  believed the  Medicaid  expansion  population                                                                    
would help backfill the beds  in the hospital. Currently, if                                                                    
the hospital  was successful it  would save the  state money                                                                    
on the current  Medicaid population, but the  money came out                                                                    
of the pockets of the community.                                                                                                
Vice-Chair  Saddler  about disproportionate  share  hospital                                                                    
payments at CPH. He wondered  how much the hospital received                                                                    
in a  year.  Mr. Richards  replied that CPH did  not receive                                                                    
disproportionate  share hospital  funding.  He believed  the                                                                    
total  coming  into the  state  was  about $22  million.  He                                                                    
approximated that  the state's General Fund  match was about                                                                    
half;   the  other   half  was   returned  to   the  federal                                                                    
Vice-Chair Saddler  asked about the amount  of uncompensated                                                                    
care the  hospital provided  through its  emergency program.                                                                    
Mr. Davis answered  that in 2014 CPH had $20  million in bad                                                                    
debt and charity care.                                                                                                          
Co-Chair Thompson thanked the testifiers for their                                                                              
presentations. He addressed the agenda for subsequent                                                                           

Document Name Date/Time Subjects
HAC Resolution-in-Support-of-Medicaid-Expansion.pdf HFIN 4/9/2015 8:30:00 AM
HB 148
HB 148 Eisenhower Presentation HFIN 4 9 15.pdf HFIN 4/9/2015 8:30:00 AM
HB 148
Log 3028 Response.pdf HFIN 4/9/2015 8:30:00 AM
HB 148
Mandatory Optional Services Summary 2011-2014.pdf HFIN 4/9/2015 8:30:00 AM
HB 148
PCG Document 1.pdf HFIN 4/9/2015 8:30:00 AM
HB 148
PCG Document 2.pdf HFIN 4/9/2015 8:30:00 AM
HB 148
HB 148 DHSS PCG Document 2.pdf HFIN 4/9/2015 8:30:00 AM
HB 148