Legislature(2015 - 2016)CAPITOL 106

02/16/2016 03:00 PM House HEALTH & SOCIAL SERVICES

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Audio Topic
03:04:04 PM Start
03:04:14 PM HB227
04:12:41 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
-- Testimony <Invitation Only> --
+ Bills Previously Heard/Scheduled TELECONFERENCED
                HB 227-MEDICAL ASSISTANCE REFORM                                                                            
3:04:14 PM                                                                                                                    
CHAIR SEATON announced  that the only order of  business would be                                                               
a presentation by  Becky Hultberg on the  landscape for hospitals                                                               
and  some of  the demonstration  projects in  the proposed  bill,                                                               
HOUSE  BILL  NO. 227,  "An  Act  relating to  medical  assistance                                                               
reform  measures; relating  to  administrative  appeals of  civil                                                               
penalties  for  medical  assistance providers;  relating  to  the                                                               
duties of the Department of  Health and Social Services; relating                                                               
to audits  and civil penalties for  medical assistance providers;                                                               
relating to  medical assistance cost containment  measures by the                                                               
Department  of Health  and Social  Services; relating  to medical                                                               
assistance coverage  of clinic  and rehabilitative  services; and                                                               
providing for an effective date."                                                                                               
3:05:53 PM                                                                                                                    
BECKY HULTBERG, President/CEO, Alaska  State Hospital and Nursing                                                               
Home  Association,  stated that  she  would  discuss the  broader                                                               
concept of  payment reform  and the  various models  discussed in                                                               
proposed  HB 227,  and other  proposed  bills.   She stated  that                                                               
hospitals  felt  that  payment  reform  was  inevitable  and  had                                                               
already  started, both  at the  state and  national levels.   She                                                               
declared  that  the  Alaska  State   Hospital  and  Nursing  Home                                                               
Association  (ASHNHA) represented  all but  one of  the hospitals                                                               
and  nursing   homes  in  Alaska,  employing   more  than  10,000                                                               
Alaskans.    She noted  that  hospitals  were often  the  largest                                                               
private sector employer in the  community, as well as the largest                                                               
health care providers.                                                                                                          
MS.  HULTBERG  introduced  a PowerPoint,  titled  "Hospitals  and                                                               
payment   reform,"   and   directed   attention   to   slide   3,                                                               
"Definitions: concepts."   She shared  that one  concept, managed                                                               
care, was a  confusing term as it was used  in various context to                                                               
mean many things, but it was  really just a method of health care                                                               
delivery that focused on collaboration  and coordination to avoid                                                               
unnecessary  and duplicative  care,  and delays.    There was  an                                                               
emphasis  on  timeliness and  effectiveness  of  treatment.   She                                                               
declared that it  was a system for actively  managing health care                                                               
to  reach  a desired  outcome  for  quality, and  possibly  lower                                                               
costs.  She  stated that the payment in this  environment was not                                                               
fee  for  service.   She  explained  that  fee for  service,  the                                                               
current system  in Alaska,  was payment based  on volume  and the                                                               
services were not  bundled, but paid for separately.   Each visit                                                               
to a provider  resulted in separate charges for each  part of the                                                               
3:08:39 PM                                                                                                                    
REPRESENTATIVE WOOL asked about the  designation for payment of a                                                               
flat rate for service.                                                                                                          
MS. HULTBERG  expressed her agreement  that there  were different                                                               
iterations of  managed care, and this  was one type.    She moved                                                               
on to slide 4, "Types  of payment: risk continuum," and explained                                                               
that  this risk  continuum  depicted the  scale  from a  provider                                                               
having no  financial risk  for outcomes, fee  for service  as the                                                               
transaction  was  based  on  volume;  to the  other  end  of  the                                                               
spectrum  wherein   the  provider  was  bearing   full  risk  for                                                               
outcomes,  known  as  a  partial or  full  capitation  or  global                                                               
budget.  She reported that  providers would bear different levels                                                               
of  risk along  this  continuum.   She  reiterated  that fee  for                                                               
service  was  defined as  payment  per  unit, with  the  provider                                                               
bearing no risk,  whereas with pay for  performance, although the                                                               
payment may remain per unit  perhaps the provider is incentivized                                                               
based on quality outcomes.  There  could be a holdback of payment                                                               
until  certain  quality  objectives  are met,  or  a  bonus  type                                                               
structure  based on  outcomes.   This would  still be  a fee  for                                                               
service  although   with  built   in  incentives   for  different                                                               
behavior.   She explained  that an example  of a  bundled payment                                                               
would be  for a  knee replacement,  as rather  than pay  for each                                                               
individual service, there  would be one bundled  payment for that                                                               
person for  that procedure, even  as the  provider was at  a risk                                                               
for  whether the  case  cost  more or  less.    She relayed  that                                                               
bundling was  often used  for discreet events  that were  easy to                                                               
measure  and providers  typically know  what the  cost would  be,                                                               
even though  the provider  was at  risk for  the outcome  and the                                                               
cost  of  the  procedure.   She  defined  episode  or  case-based                                                               
payment as a  broader type of bundling for a  service.  The final                                                               
payment  listed on  the continuum,  slide 4,  was for  partial or                                                               
full  capitation, which  she defined  as a  per member  per month                                                               
type of  fee, based  on the  number of  patients and  the average                                                               
patient cost.  She pointed out  that the provider was at risk for                                                               
the health care cost of that population.                                                                                        
3:12:30 PM                                                                                                                    
MS.  HULTBERG  moved  on  to  slide  6,  "Definitions:  types  of                                                               
payment,"  and paraphrased  from the  definition for  capitation,                                                               
which  read:   "a payment  arrangement  that pays  a provider  or                                                               
group  of  providers  a  set  amount  for  each  enrolled  person                                                               
assigned to them, per period of  time, whether or not that person                                                               
seeks  care."   She pointed  out that  the person  receiving care                                                               
under the capitation  model could either receive no  care or cost                                                               
a lot  more than the  payment on  any given month.   Essentially,                                                               
this was  a mechanism by which  the provider was taking  risk for                                                               
the population.   She  directed attention  to the  definition for                                                               
global budget, which  she defined as similar to  capitation.  She                                                               
relayed that  there were often  very defined quality  and outcome                                                               
metrics built into the global  budget contract environments.  She                                                               
offered as  an example the Oregon  Coordinated Care Organizations                                                               
(CCOs) in  which the State  of Oregon  had decided that  it would                                                               
manage its  Medicaid population  in a  regional structure  so, as                                                               
these CCOs  would get  a set amount  of money to  take care  of a                                                               
defined  Medicaid  population, they  would  be  at risk  for  the                                                               
health  cost  of  this  population.     This  would  create  very                                                               
incentivized  care  delivery  at  the  lowest  cost  and  highest                                                               
quality.  She  reported that quality metrics were  built into the                                                               
contracts, as  sometimes a  lot of money  could be  spent without                                                               
getting great quality.   She offered an example  for the purchase                                                               
of  an air  conditioner  for  a patient  with  a heart  condition                                                               
living in  a hot climate,  in order to reduce  repeated emergency                                                               
room  visits.   She pointed  out that  heath conditions  could be                                                               
exacerbated  by  the  physical environment  or  psychological  or                                                               
social needs.   With the global budget  or capitated environment,                                                               
the  providers were  incentivized to  do some  things that  could                                                               
seem  strange  from  a  health  care  perspective,  but  actually                                                               
impacted  health  care needs.    She  stated that  capitation  or                                                               
global  budget environments  allow the  health care  providers to                                                               
address  the underlying  causes of  health care  spending whether                                                               
they are health care or related to some other factors.                                                                          
3:16:32 PM                                                                                                                    
REPRESENTATIVE TALERICO asked  in which of the  six categories of                                                               
payment Alaska currently stood.                                                                                                 
MS.  HULTBERG replied  that  Alaska  had fee  for  service.   She                                                               
offered her belief that there  were some small projects beginning                                                               
to  be discussed  or  initiated that  would  move Alaska  further                                                               
along on  the continuum.   She  listed a CCO  pilot on  the Kenai                                                               
Peninsula, and a care coordination  program in Ketchikan as "baby                                                               
steps."  She offered Ketchikan as  an example of a hospital doing                                                               
a great job managing care and  keeping people out of the hospital                                                               
even as  it resulted in a  loss of revenue through  their fee for                                                               
service system.   She declared that there was  not any incentive;                                                               
even though  it was  a good  outcome to not  have someone  in the                                                               
hospital, the payment structure did  not reward that, it rewarded                                                               
volume and sickness.                                                                                                            
REPRESENTATIVE   WOOL  mused   about   the   quality  and   value                                                               
differences,  and whether  the fee  was  disproportionate to  the                                                               
service provider.                                                                                                               
MS. HULTBERG  opined that the  key to the  organizations involved                                                               
in global budget  models was that providers were at  the table as                                                               
part  of the  risk  sharing.   She  shared that  an  out of  line                                                               
physician  fee brought  a  strong incentive  to  the hospital  to                                                               
negotiate that  fee; whereas, a  fee for service  environment did                                                               
not have the same pressure from providers to manage costs.                                                                      
CHAIR  SEATON  asked   what  was  the  general   driver  for  the                                                               
assumption of risk.                                                                                                             
MS.  HULTBERG replied  the  short answer  was  that Medicare  was                                                               
driving the  shift from  volume to  value right  now.   She noted                                                               
that this complete  shift in the business model to  move from fee                                                               
for service  was really hard  and that it  required sophisticated                                                               
data analytics  to understand the  health of your  population and                                                               
what could  be impacted.   She  opined that  it was  important to                                                               
keep in  mind that  this was  a journey,  and that,  as providers                                                               
needed to start down the path,  it would take time and experience                                                               
in learning how  to do it well.   She stated that this  was a big                                                               
shift to taking a financial risk.                                                                                               
3:21:15 PM                                                                                                                    
MS.  HULTBERG  moved  on  to  slide  7,  "Definitions:  types  of                                                               
organizations,"  and stated  that  these  were all  organizations                                                               
that managed  care, even  though the names  were different.   She                                                               
reported   that  accountable   care  organizations   (ACOs)  were                                                               
Medicare  driven which  tied provider  reimbursements to  quality                                                               
metrics and reductions  in the total cost of care,  even as there                                                               
could  be different  levels  of risk  bearing in  the  ACO.   She                                                               
referenced the aforementioned CCO  models in Oregon, pointing out                                                               
that  there was  a  pilot  program in  the  proposed  bill.   She                                                               
relayed that  managed care organizations (MCOs)  were an umbrella                                                               
term  for   health  plans  that   provided  health  care   for  a                                                               
predetermined  monthly  fee,  and   coordinated  care  through  a                                                               
network of  physicians and  providers.  MCOs  were a  health plan                                                               
that was  bearing the  risk, contracting  with providers  for the                                                               
delivery of care  and was not the model that  ASHNHA would select                                                               
as it  did not necessarily  change the payment  structure between                                                               
the insurer and the provider.   She stated that the biggest thing                                                               
to remember  was that  all these models  were for  active managed                                                               
care, and  for the organization  to take  some level of  risk, so                                                               
the interests of the provider and the payer were aligned.                                                                       
MS. HULTBERG addressed slide 8,  "Volume to value," and described                                                               
the fee  for service movement  toward value, whereby  payment was                                                               
tied to  cost and quality.   She said that Alaska  could remain a                                                               
fee for  service environment for a  while, as part of  the market                                                               
could  always  be fee  for  service.   However,  nationally,  she                                                               
stated that "the  train really has left station"  and that Alaska                                                               
will  be  forced  to  move   to  these  models  from  a  hospital                                                               
standpoint, which would help drive the market.                                                                                  
3:24:37 PM                                                                                                                    
MS.  HULTBERG  pointed  to  slide   9,  "Hospital  trends:  lower                                                               
inpatient  use."   She stated  that hospitals  were seeing  a lot                                                               
fewer  inpatients than  previously;  although,  when revenue  was                                                               
related  to volume  and  inpatient use,  that  was a  significant                                                               
trend over the 20 years depicted on the graph.                                                                                  
MS.  HULTBERG moved  to slide  10,  "Reduced readmission  rates."                                                               
She  reported  that, as  CMS  was  now penalizing  hospitals  for                                                               
readmissions, thereby  changing them  from revenue  to penalties,                                                               
these rates were declining.                                                                                                     
REPRESENTATIVE  TALERICO  asked  if  the  hospital  was  able  to                                                               
participate in the evaluation of  the readmission penalty as some                                                               
patients participated in activities  that required readmission at                                                               
no fault to the health care provider.                                                                                           
MS.  HULTBERG   replied  that  she   would  respond   later  with                                                               
specifics, noting that these were  typically for certain types of                                                               
events  and for  certain defined  time frames.   She  agreed that                                                               
there was  a concern  among hospitals that  they were  not always                                                               
responsible  for what  happened outside  the hospital.   CMS  was                                                               
saying that the  hospital didn't quite take care  of the patient,                                                               
hence the readmission, although it  could be related to something                                                               
different.   She  reported  that these  were  the pressures  that                                                               
hospitals  were  under, and  these  pressures  would most  likely                                                               
REPRESENTATIVE  WOOL pointed  out  that  people sometimes  became                                                               
sicker in hospitals.                                                                                                            
MS.  HULTBERG  acknowledged  that   these  were  called  hospital                                                               
acquired  conditions,  and  the  hospital  was  penalized.    She                                                               
declared  that payments  were  now  changing due  to  this.   She                                                               
offered that this was an example of tying payment to quality.                                                                   
CHAIR SEATON asked  if these were measured  in a 30 day  - 90 day                                                               
admission rate for the same condition.                                                                                          
MS. HULTBERG stated her agreement.                                                                                              
3:28:12 PM                                                                                                                    
MS. HULTBERG  shared slide 11,  "Employer health  insurance," and                                                               
read that  this was the  cumulative increase in  health insurance                                                               
premiums compared to wage increases  and inflation over 15 years.                                                               
She  shared that  the take  away from  the chart  was, as  health                                                               
insurance costs have gone up,  employers were shifting more costs                                                               
to the  employee.  She opined  that it would become  difficult to                                                               
continue  that cost  shift.    She stated  that  real wages  were                                                               
affected by this shift to  employees paying more for their health                                                               
insurance premium.                                                                                                              
3:29:23 PM                                                                                                                    
MS.  HULTBERG turned  to  slide 12,  "Growth  in high  deductible                                                               
plans."    She  pointed  to   the  considerable  growth  in  high                                                               
deductible health  plans since 2006,  noting that there  were two                                                               
implications: one was  that it really did  provide employees with                                                               
skin in the  game and awareness of cost when  shopping for health                                                               
care  so  that patients  were  acting  more like  consumers;  the                                                               
second was for bad debt, as the  new amount of money was now cost                                                               
shifted to consumers  for payment.  She reiterated  that this was                                                               
cheaper for employers.   In Alaska, as the public  sector had not                                                               
moved in a  meaningful way to high deductible plans,  there was a                                                               
disconnect between private and public health care plans.                                                                        
REPRESENTATIVE  TARR asked  if there  were high  deductible plans                                                               
within  the  Affordable  Care  and  Patient  Protection  Act  and                                                               
whether these were higher risk.                                                                                                 
MS. HULTBERG replied that the  aforementioned would be within the                                                               
parameters  set by  the Affordable  Care  and Patient  Protection                                                               
Act.   She stated that  some of the  plans on the  current health                                                               
exchange were  considered high deductible, and  that self-insured                                                               
employers would still need to meet the general parameters.                                                                      
REPRESENTATIVE TARR asked if  the currently required preventative                                                               
health care changes  were included in the  high deductible plans,                                                               
and if the high deductible was  then applied for surgery and long                                                               
term stay.                                                                                                                      
MS.  HULTBERG replied  that preventive  care was  still available                                                               
with  no  out-of-pocket  cost.    She  explained  that  the  real                                                               
difference  with a  high  deductible  plan was  the  size of  the                                                               
deductible compared to the traditional  plan.  She explained that                                                               
often  there was  an employer  contribution to  a health  savings                                                               
account with a  high deductible in a  large self-insured employer                                                               
plan,  and  that employees  were  often  then more  sensitive  to                                                               
spending as it was spent out of their account.                                                                                  
REPRESENTATIVE WOOL  asked whether the growth  in high deductible                                                               
plans was  connected to the  price of health costs  going through                                                               
the roof,  noting that a company  would save money by  offering a                                                               
cheaper plan which had a higher deductible.                                                                                     
MS.  HULTBERG expressed  her agreement  that one  way to  address                                                               
more expensive plans  was to buy a cheaper  plan, which typically                                                               
had  a higher  deductible, but  that even  larger employers  were                                                               
finding that  their healthcare  spending was  growing at  a lower                                                               
rate under this aforementioned  model structure because employees                                                               
had more incentive to act like consumers.                                                                                       
REPRESENTATIVE WOOL  observed that, with a  high deductible plan,                                                               
as soon as  people reach their deductible,  they "start consuming                                                               
a lot more."                                                                                                                    
MS. HULTBERG expressed agreement that  this "tends to be the case                                                               
no matter  the structure of the  plan."  She opined  that the key                                                               
takeaway for  the provider, based  on slide  12, was that  it was                                                               
becoming increasingly  difficult for  providers to cost  shift to                                                               
commercial pay, as employees could only  take so much of the cost                                                               
shifting and employers could only pay so much more.                                                                             
3:34:55 PM                                                                                                                    
MS. HULTBERG moved on to  slide 13, "Projected Medicare Spending,                                                               
2013-2023."    She referenced  a  report  which stated  that  the                                                               
Medicare  trust  fund  would  be exhausted  in  2026,  which  was                                                               
driving a lot of activity on the federal level.                                                                                 
REPRESENTATIVE  TALERICO asked  about  a  graph showing  Medicaid                                                               
spending versus Medicare spending.                                                                                              
MS.  HULTBERG  replied  that  she  did  not  have  anything  that                                                               
compared the two.                                                                                                               
3:35:46 PM                                                                                                                    
MS. HULTBERG  returned to slide 13  and stated that, as  the baby                                                               
boomers aged  into Medicare, there was  a significant recognition                                                               
that, absent  some changes, the  program would be  very difficult                                                               
to maintain.                                                                                                                    
3:35:57 PM                                                                                                                    
MS. HULTBERG  referenced slide  14, "Medicare  payment policies,"                                                               
which  depicted   Medicare  cuts  to  nine   of  Alaska's  larger                                                               
hospitals, which  would result in  $591 million of  reductions in                                                               
payment  over 15  years.   She reported  that an  additional $400                                                               
billion  reduction had  been  proposed in  the  recent budget  by                                                               
President Obama,  although she  stated that she  did not  know if                                                               
this would  be enacted.   She declared that Congress  had figured                                                               
out that hospitals were piggy  banks, and consequently there were                                                               
cuts extended into  the future to pay for current  spending.  She                                                               
emphasized  that this  environment  created a  lot  of stress  on                                                               
hospitals from Medicare payments.                                                                                               
REPRESENTATIVE  TALERICO  asked  if  Medicaid  reimbursement  was                                                               
similar to Medicare.                                                                                                            
MS. HULTBERG  relayed that Medicaid reimbursement  was structured                                                               
completely  differently than  Medicare reimbursement.   She  said                                                               
that Medicare  pays more on  an encounter basis  whereas Medicaid                                                               
pays a daily  rate based on cost, a  completely different payment                                                               
3:37:34 PM                                                                                                                    
MS.  HULTBERG  addressed  slide  15,  "Medicare  delivery  system                                                               
changes," a  copy of  a press release  from January,  2015, which                                                               
stated  that Medicare  was  moving  from volume  to  value.   She                                                               
paraphrased the article,  stating that "the first goal  is for 30                                                               
percent of  all Medicare provider  payments to be  in alternative                                                               
payment  models that  are tied  to  how well  providers care  for                                                               
their patients instead  of how much care they provide,  and to do                                                               
it by 2016."   She went on to  share that the goal was  to get to                                                               
50 percent  by 2018, and that  the second goal was  for virtually                                                               
all Medicare fee  for service payments to be tied  to quality and                                                               
value, at least 85  percent in 2016 and 90 percent  in 2018.  She                                                               
reiterated that  this was  a move  away from  fee for  service to                                                               
value  based payments,  while  recognizing  that, although  there                                                               
would  still be  some  fee for  service, this  would  be tied  to                                                               
quality or other metrics.                                                                                                       
3:38:36 PM                                                                                                                    
MS.  HULTBERG  pointed to  slide  16,  "Shrinking of  Traditional                                                               
Payment,"  which  graphically  depicted  payment  movement  under                                                               
Medicare fee  for service, and  the volume  to value shift.   She                                                               
stated that  this was  important to hospitals  as Medicare  was a                                                               
"huge part of  a hospital payer mix" so hospitals  did not really                                                               
have any  choice for whether  to accept Medicare.   Consequently,                                                               
when Medicare stated  that it was changing, the  hospitals had to                                                               
figure out how to manage this.                                                                                                  
3:39:07 PM                                                                                                                    
MS.  HULTBERG   shared  slide   17,  "Move   to  Population-based                                                               
Payment,"  which  was   another  way  of  looking   at  the  risk                                                               
continuum, specifically  for Medicare.   This moved from  fee for                                                               
service  to  population based  payment,  similar  to a  capitated                                                               
MS.    HULTBERG   explained    slide   18,    "Accountable   Care                                                               
Organizations,"  which showed  the location  of the  ACOs, noting                                                               
that there were  not any in Alaska.  She  reported that more than                                                               
70 percent  of the U.S.  population lived in  locations currently                                                               
served by  ACOs with almost  44 percent of the  population living                                                               
in areas served by two or more  ACOs.  The movement toward an ACO                                                               
model had  accelerated in the  last few  years, from 154  ACOs in                                                               
2012 to 426 ACOs in 2015.                                                                                                       
CHAIR SEATON  asked if  the majority were  plans with  seniors as                                                               
the primary clients.                                                                                                            
MS.  HULTBERG clarified  that these  depicted  were entirely  the                                                               
Medicare population,  and that  hospitals had  to move  with this                                                               
REPRESENTATIVE  WOOL  asked  for clarification  that  these  were                                                               
Accountable  Care Organizations  and  entirely  Medicare, and  he                                                               
questioned whether hospitals  were treating non-Medicare patients                                                               
in the accountable care format.                                                                                                 
MS. HULTBERG explained that the  slide represented Medicare ACOs,                                                               
although there  were others, noting  that ACOs were a  model, and                                                               
were not restricted to Medicare as a payer.                                                                                     
CHAIR SEATON  asked if  ACOs could have  two separate  billing or                                                               
payment systems, one for Medicare and one for other patients.                                                                   
MS. HULTBERG asked for a specific organization.                                                                                 
CHAIR  SEATON asked  if the  depicted ACOs  existed parallel  but                                                               
independent from the other billings into that facility.                                                                         
MS.  HULTBERG opined  that it  depended on  the organization  and                                                               
whether  it was  a  Medicare ACO,  while  also seeing  commercial                                                               
patients  as  fee for  service,  then  there would  be  different                                                               
financial arrangements.  She stated  that with Medicaid billings,                                                               
the ACO would not necessarily need to have different systems.                                                                   
CHAIR  SEATON   asked  specifically  about   Alaska,  questioning                                                               
whether  an   institution  which  had  three   payees,  Medicare,                                                               
Medicaid,  and commercial  patients,  would  have three  separate                                                               
payment systems.                                                                                                                
MS. HULTBERG replied  that, as many of  the organizations already                                                               
had different  rules and  system, she was  not sure  whether this                                                               
would necessarily recreate a lot  of different infrastructure, as                                                               
many  of   the  organizations  were  already   billing  Medicare,                                                               
Medicaid, and  commercial insurance.   She opined that  having to                                                               
live   within  all   the  current   payment  systems   would  not                                                               
necessarily be changed  by reconfiguring the billing  for any one                                                               
of  them.   She declared  that  health care  billing was  already                                                               
incredibly complex.                                                                                                             
REPRESENTATIVE  WOOL   asked  whether   a  Medicare   mandate  to                                                               
providers for  a certain percentage  of patients under  a managed                                                               
care model  would drive  hospital physicians out,  so it  was not                                                               
necessary to work under the mandate.                                                                                            
3:46:52 PM                                                                                                                    
MS. HULTBERG  directed attention to slide  19, "Joint replacement                                                               
comprehensive  pay  model,"  which clarified  that  Medicare  was                                                               
doing bundled  payments as well  as ACOs.   She stated  that this                                                               
demonstration  model   required  that  all  the   payment  in  75                                                               
geographic  areas  be  100  percent  bundled  payment  for  joint                                                               
replacement.   She allowed that  Anchorage was not  included, and                                                               
that  it was  not ready  for this  bundled payment  model, noting                                                               
that it  was necessary to first  coordinate who got what  part of                                                               
the  payment,  among  the hospital,  physicians,  and  post-acute                                                               
care.   She pointed  out that  this model was  a five  year pilot                                                               
that could become mandatory if it was successful.                                                                               
MS.  HULTBERG  replied  to Representative  Wool,  and  considered                                                               
slide 20,  "SGR out,  MACRA in."   She explained  that physicians                                                               
were paid  by Medicare  under the  Sustainable Growth  Rate (SGR)                                                               
formula,  a  formula  which  resulted  in  annual  cuts,  forcing                                                               
Congress to pass a bill to  restore payment so physicians did not                                                               
take  large  payment  cuts.    She stated  that  there  had  been                                                               
alignment to do away with SGR,  and utilize a new payment system,                                                               
Medicare Access and  Chip Reauthorization Act (MACRA).   She said                                                               
that this would move the  volume to value to physician practices,                                                               
incentivizing them to participate  in alternative payment models.                                                               
If they  chose to  remain in  a fee  for service  payment system,                                                               
there  would be  bonuses or  penalties  based on  outcomes.   She                                                               
declared that  this would be  a big  issue in Alaska  starting in                                                               
2018, as  it would  be difficult to  operate under  because there                                                               
was already a problem with Medicare access.                                                                                     
MS. HULTBERG shared slide 21,  "Volume to value: implications for                                                               
the market."   She  relayed that volume  to value  was inevitable                                                               
once  Medicare had  stated  that it  was moving.    The goal  was                                                               
better  health  care,  with  the triple  aim  for  improving  the                                                               
individual experience  of care, reducing  the per capita  cost of                                                               
care, and  improving the  health of the  population.   She stated                                                               
that  the volume  to  value transition  was  driving toward  this                                                               
triple aim goal.   She offered an anecdote of  moving from volume                                                               
to  value, as  it was  important for  the state  to consider  the                                                               
implications for this  transition and how it  would be navigated.                                                               
She  offered  a  recommendation   to  continue  to  review  pilot                                                               
projects similar  to those in proposed  HB 227, in order  to test                                                               
some demonstration  models for payment  reform with  hospital and                                                               
physician providers  willing to  assume some  risk.   She pointed                                                               
out that  the Alaska population  was not highly  concentrated, so                                                               
it could necessitate  "some tweaks to any model we  would want to                                                               
adopt  based on  our  unique geography  and  our unique  provider                                                               
community."   She acknowledged  that parts  of the  Alaska system                                                               
could retain  fee for  service for some  time; although  the high                                                               
likelihood was movement  toward a new model, it  was necessary to                                                               
immediately  start the  deliberative process  to determine  which                                                               
one was right for Alaska.                                                                                                       
CHAIR SEATON  asked if there  were additional models  which would                                                               
be good to incorporate into the proposed bill.                                                                                  
MS. HULTBERG  suggested a  primary care model  in Colorado  and a                                                               
similar Alabama model.  She opined  that the key was to create an                                                               
environment for  innovative projects  from providers,  possibly a                                                               
CCO, and  maybe a few others.   She relayed that,  as these could                                                               
be regional,  a strength  of the pilot  approach was  for letting                                                               
the  regions come  forward with  suggested  projects tailored  to                                                               
their unique needs.                                                                                                             
CHAIR SEATON opined  that there should not be  limitation for any                                                               
provider groups in the proposed bill.                                                                                           
3:55:29 PM                                                                                                                    
REPRESENTATIVE TARR  asked about  a hospital  perspective, noting                                                               
that  the  patient  would  be  accessing  Medicare  services  for                                                               
chronic  health conditions,  otherwise  they  would be  accessing                                                               
their primary  care provider.   She asked about  the relationship                                                               
between  Medicare  cuts  for  those people  who  would  now  have                                                               
Medicaid  to access  services to  which  Medicare had  previously                                                               
MS. HULTBERG shared that there  had been a concern under Medicaid                                                               
expansion about Medicaid patients  crowding out Medicare patients                                                               
and  whether providers  would take  the Medicare  patients.   She                                                               
reported that Anchorage  used to have a  Medicare access problem,                                                               
and,  in response,  there  were now  two  hospital based  clinics                                                               
seeing  Medicare patients.   She  declared that  private pay  was                                                               
following what Medicare  was doing, as were states.   She relayed                                                               
that with  the volume  of Medicare,  it was  expected to  see the                                                               
commercial payers  follow Medicare in the  payment reform market.                                                               
She declared  that, as  the goal  was to keep  people out  of the                                                               
hospital,  when the  providers became  part of  the risk  bearing                                                               
entity, there became a financial  incentive to keep people out of                                                               
the hospital.                                                                                                                   
3:58:17 PM                                                                                                                    
REPRESENTATIVE TARR returned attention to  slide 14, and asked if                                                               
it  was  known  whether  a growing  senior  population  with  the                                                               
accompanying  increase in  Medicare, and  the cost  shifting cuts                                                               
from  Medicaid  expansion,  would  be  represented  by  increased                                                               
spending in Medicaid.                                                                                                           
MS. HULTBERG replied  that these were really cuts  that were cuts                                                               
and were  not related  to quality  payment.   She said  that some                                                               
cuts were related  to the Affordable Care  and Patient Protection                                                               
Act, and some  were a result of sequestration,  a combined series                                                               
of  cuts  that  showed  the  increasing  financial  pressures  on                                                               
hospitals since  2010.   She declared  that there  were increased                                                               
efforts to improve  processes and be more  efficient, as Medicare                                                               
was  cutting reimbursement.   She  stated  that this  had a  huge                                                               
impact on the hospital business model.   She noted that the first                                                               
impacts would be on small  community hospitals.  She relayed that                                                               
there had  been a lot  of response nationwide, focusing  on rural                                                               
hospital sustainability.   She  suggested that  there was  a need                                                               
for  payment  policies  to  allow  community  hospitals  to  stay                                                               
REPRESENTATIVE WOOL acknowledged  the upcoming Medicare mandates,                                                               
and  he asked  if fewer  physicians  would accept  Medicare.   He                                                               
questioned  whether   other  insurance  payers  also   had  these                                                               
mandates, which  would lead  to physicians  having a  harder time                                                               
for opting out.                                                                                                                 
MS.  HULTBERG replied  that the  changes on  the payment  side to                                                               
physicians should  be watched,  as there  would be  a significant                                                               
administrative burden on  them.  If physicians remained  in a fee                                                               
for service  environment, it  would be  necessary to  collect and                                                               
report  the  metrics  on   four  different  variables,  including                                                               
satisfaction,  resource utilization,  and  quality.   She  opined                                                               
that there  was concern for  this huge administrative  burden, as                                                               
some physicians would opt out from Medicare patients.                                                                           
4:03:25 PM                                                                                                                    
CHAIR   SEATON   asked  whether   there   were   now  more   dual                                                               
eligibilities with the expansion of Medicaid.                                                                                   
MS. HULTBERG replied that she did not have the data.                                                                            
CHAIR  SEATON  asked if  this  had  been  rising to  the  surface                                                               
regarding  payment or  reimbursement for  dual eligibles  system-                                                               
MS. HULTBERG replied that she had not heard anything specific.                                                                  
CHAIR SEATON declared  that it was interesting to  try to address                                                               
this without trying  to design it, and  he expressed appreciation                                                               
for  the  global  perspective.    He asked  that  any  models  be                                                               
submitted for investigation.                                                                                                    
REPRESENTATIVE   WOOL   expressed   his   agreement   that   this                                                               
presentation  had been  very informative,  and he  suggested that                                                               
this information would  have been good to know prior  to the last                                                               
REPRESENTATIVE  TARR asked  about  the  health care  partnerships                                                               
between hospitals and primary care  providers.  She surmised that                                                               
a move from  volume to value based would be  of more interest for                                                               
a  hospital  to  become  a  primary care  provider,  and  that  a                                                               
challenge  would  be  that  many   hospital  based  primary  care                                                               
providers  did  not  offer  behavioral   health  services.    She                                                               
declared  that  this  could  be a  shortcoming  for  that  model,                                                               
whereas a  more traditional private  practice doctor may  be able                                                               
to take that on.                                                                                                                
MS. HULTBERG  replied that she  had not heard of  any controversy                                                               
between hospital  based and non-hospital  based physicians.   She                                                               
declared that hospitals were very  aware of the need to integrate                                                               
behavioral health  services into primary  care.  She  stated that                                                               
acute  behavioral  health problems  showed  up  in the  emergency                                                               
room, and that was not the place  to deal with these issues.  She                                                               
emphasized that  the organization  was very supportive  of models                                                               
that would support and integrate  behavioral health.  She relayed                                                               
that many  hospital CEOs  had very  high concerns  for behavioral                                                               
health.  She  pointed out that when people did  not have adequate                                                               
community  support and  adequate  follow up  care for  behavioral                                                               
health  issues, they  ended  up  in the  emergency  rooms or  in-                                                               
patient  hospitalization,  which  was not  necessarily  the  best                                                               
equipped  environment for  behavioral health  care.   She relayed                                                               
that Alaska State Hospital and  Nursing Home Association (ASHNHA)                                                               
has  gotten more  involved in  communication  with Department  of                                                               
Health  and Social  Services for  behavioral  health issues,  and                                                               
expressed  agreement  with  the   need  to  integrate  behavioral                                                               
health.     She  opined  that   recognizing  the   importance  of                                                               
behavioral health in  the overall system of care  was endorsed by                                                               
ASHNHA, which supported this ongoing conversation.                                                                              
4:09:22 PM                                                                                                                    
MS.  HULTBERG reflected  on her  earlier comments,  and clarified                                                               
her earlier  definition of  "30 day readmissions"  to be  for all                                                               
causes, that it  did not matter for what, the  hospital was still                                                               
REPRESENTATIVE  WOOL mused  that  as hospitals  and medical  care                                                               
improved and there was less need  for medical care, the people in                                                               
the  hospital business  suffered.   He suggested  that a  balance                                                               
needed to be met, as the  incentive should be to keep people away                                                               
from  hospitals and  doctors,  but not  to  punish hospitals  and                                                               
MS.  HULTBERG  opined  that  this  was  a  core  reason  for  the                                                               
acceleration of payment  reform, as currently there  were not the                                                               
right incentives.  She suggested  that the best scenario would be                                                               
when the  provider, the patient, and  the payer all had  the same                                                               
incentives for a quality outcome at a reasonable cost.                                                                          
4:11:00 PM                                                                                                                    
CHAIR  SEATON  recognized that  this  discussion  was for  better                                                               
understanding  to parts  of proposed  HB 227.   He  opened public                                                               
testimony, and noted that it would also be open in the future.                                                                  
[HB 227 was held over.]                                                                                                         

Document Name Date/Time Subjects
HB 227 Fiscal Note_DHSS-SDMS_update_02-02-16.pdf HHSS 2/16/2016 3:00:00 PM
HB 227
HB 227 Fiscal Note_DHSS-BHMS_updated_02.02.16.pdf HHSS 2/16/2016 3:00:00 PM
HB 227
Presentation_ASHNHA_House HSS Committee Feb. 16.pdf HHSS 2/16/2016 3:00:00 PM
HB 227