Legislature(2017 - 2018)BELTZ 105 (TSBldg)

02/06/2018 01:30 PM LABOR & COMMERCE

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01:31:20 PM Start
01:31:55 PM SB62
03:23:24 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
-- Testimony <Invited and Public> --
Scheduled but Not Heard
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
          SENATE LABOR AND COMMERCE STANDING COMMITTEE                                                                        
                        February 6, 2018                                                                                        
                           1:31 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Senator Mia Costello, Chair                                                                                                     
Senator Kevin Meyer                                                                                                             
Senator Gary Stevens                                                                                                            
Senator Berta Gardner                                                                                                           
Senator Peter Micciche                                                                                                          
MEMBERS ABSENT                                                                                                                
All members present                                                                                                             
COMMITTEE CALENDAR                                                                                                            
SENATE BILL NO. 62                                                                                                              
"An Act repealing the certificate of need program for health                                                                    
care facilities; making conforming amendments; and providing for                                                                
an effective date."                                                                                                             
     - HEARD & HELD                                                                                                             
SENATE BILL NO. 105                                                                                                             
"An  Act  relating  to  the   licensure  of  marital  and  family                                                               
therapists;  relating  to  professional liability  insurance  for                                                               
marital  and family  therapists; relating  to medical  assistance                                                               
for marital  and family  therapy services;  and providing  for an                                                               
effective date."                                                                                                                
     - SCHEDULED BUT NOT HEARD                                                                                                  
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: SB  62                                                                                                                  
SHORT TITLE: REPEAL CERTIFICATE OF NEED PROGRAM                                                                                 
SPONSOR(s): SENATOR(s) WILSON                                                                                                   
02/17/17       (S)       READ THE FIRST TIME - REFERRALS                                                                        
02/17/17       (S)       L&C, FIN                                                                                               
04/06/17       (S)       L&C AT 9:00 AM BELTZ 105 (TSBldg)                                                                      
04/06/17       (S)       Heard & Held                                                                                           
04/06/17       (S)       MINUTE(L&C)                                                                                            
04/06/17       (S)       L&C AT 1:30 PM BELTZ 105 (TSBldg)                                                                      
04/06/17       (S)       -- MEETING CANCELED --                                                                                 
04/07/17       (S)       L&C AT 9:00 AM BELTZ 105 (TSBldg)                                                                      
04/07/17       (S)       Heard & Held                                                                                           
04/07/17       (S)       MINUTE(L&C)                                                                                            
02/06/18       (S)       L&C AT 1:30 PM BELTZ 105 (TSBldg)                                                                      
WITNESS REGISTER                                                                                                              
SENATOR DAVID WILSON                                                                                                            
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Sponsor of SB 62.                                                                                         
NAOMI LOPEZ-BAUMAN, Director                                                                                                    
Healthcare Policy                                                                                                               
Goldwater Institute                                                                                                             
Phoenix, Arizona                                                                                                                
POSITION STATEMENT: Provided supporting testimony for SB 62.                                                                  
DR. HAL SCHERZ, Founder and Secretary                                                                                           
DOCS 4 Patient Care Foundation                                                                                                  
Atlanta, Georgia                                                                                                                
POSITION STATEMENT: Testified in support of SB 62.                                                                            
DANIEL GILMAN, Attorney Advisor                                                                                                 
Office of Policy Planning                                                                                                       
Federal Trade Commission (FTC)                                                                                                  
Washington, DC                                                                                                                  
POSITION STATEMENT: Testified in support of SB 62.                                                                            
MATTHEW D. MITCHELL, Economist                                                                                                  
Mercatus Center                                                                                                                 
George Mason University                                                                                                         
Arlington, Virginia                                                                                                             
POSITION STATEMENT: Testified in support of SB 62.                                                                            
BECKY HULTBERG, President and CEO                                                                                               
Alaska State Hospital and Nursing Home Association (ASHNHA)                                                                     
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Testified in opposition to SB 62.                                                                         
MARY KASPARI, President                                                                                                         
Interior Alaska Hospital Foundation                                                                                             
Delta Junction, Alaska                                                                                                          
POSITION STATEMENT: Testified in support of SB 62.                                                                            
RANDY BEALER, representing self                                                                                                 
Delta Junction, Alaska                                                                                                          
POSITION STATEMENT: Testified in support of SB 62.                                                                            
BILL WARD, representing self                                                                                                    
Delta Junction, Alaska                                                                                                          
POSITION STATEMENT: Testified in support of SB 62.                                                                            
MICHAEL JESPERSON, representing self                                                                                            
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Testified in support of SB 62.                                                                            
JOE FONG, Administrator                                                                                                         
Providence Seward Medical and Care Center                                                                                       
Seward, Alaska                                                                                                                  
POSITION STATEMENT: Testified in opposition to SB 62.                                                                         
DR. RICHARD MANDSAGER                                                                                                           
Providence Alaska Medical Center                                                                                                
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Testified in opposition to SB 62.                                                                         
DR. TIMOTHY SILBAUGH, MD FACEP, Business Manager                                                                                
Alaska Emergency Medicine Associates                                                                                            
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Testified in opposition to SB 62.                                                                         
DR. ANNE ZINK, Emergency Physician                                                                                              
MatSu Regional Medical Center                                                                                                   
Palmer, Alaska                                                                                                                  
POSITION STATEMENT: Testified in opposition to SB 62.                                                                         
DAVID MORGAN, representing self                                                                                                 
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Provided supporting testimony for SB 62.                                                                  
DAWN WARREN FRASIER, Member                                                                                                     
Interior Alaska Hospital Foundation                                                                                             
Delta Junction, Alaska                                                                                                          
POSITION STATEMENT: Testified in support of SB 62.                                                                            
JOHN LEWIS, Vice President                                                                                                      
Interior Alaska Hospital Foundation                                                                                             
Delta Junction, Alaska                                                                                                          
POSITION STATEMENT: Testified in support of SB 62.                                                                            
JOSHUA RUSSEL, representing self                                                                                                
Delta Junction, Alaska                                                                                                          
POSITION STATEMENT: Testified in support of SB 62.                                                                            
DAVID WALLACE, CEO                                                                                                              
Mat-Su Regional Medical Center                                                                                                  
Palmer, Alaska                                                                                                                  
POSITION STATEMENT: Testified in opposition to SB 62.                                                                         
MIKE POWERS, COO                                                                                                                
Tanana Valley Clinic                                                                                                            
and former CFO/CEO Fairbanks Memorial Hospital                                                                                  
Fairbanks, Alaska,                                                                                                              
POSITION STATEMENT: Testified in opposition to SB 62.                                                                         
KARL GARBER, President                                                                                                          
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Testified in opposition to SB 62.                                                                         
ACTION NARRATIVE                                                                                                              
1:31:20 PM                                                                                                                    
CHAIR MIA COSTELLO called the  Senate Labor and Commerce Standing                                                             
Committee meeting  to order at 1:31  p.m. Present at the  call to                                                               
order  were   Senators  Stevens,   Meyer,  Micciche,   and  Chair                                                               
Costello. Senator Gardner arrived shortly.                                                                                      
            SB  62-REPEAL CERTIFICATE OF NEED PROGRAM                                                                       
1:31:55 PM                                                                                                                    
CHAIR COSTELLO announced the consideration of SB 62. She asked                                                                  
the sponsor to remind the members what they heard when they                                                                     
considered the bill last year.                                                                                                  
1:32:26 PM                                                                                                                    
SENATOR DAVID WILSON, Alaska State Legislature, Juneau, Alaska,                                                                 
introduced SB 62 speaking to the following sponsor statement:                                                                   
      Senate Bill 62 repeals Alaska's certificate of need                                                                       
        (CON) program and provides for a two year window                                                                        
     before the repeal becomes effective.                                                                                       
     The certificate  of need  programs were  first mandated                                                                    
     nationally  by the  federal  government  in 1974,  then                                                                    
     subsequently   repealed   in   1987  by   the   federal                                                                    
     government. Thirteen  states have since  repealed their                                                                    
     certificate of need programs  across the nation, thirty                                                                    
     four  have  CON  laws,  and  three  don't  have  a  CON                                                                    
     program,  but require  approval for  certain facilities                                                                    
     and services.                                                                                                              
     Certificate of  need programs were  originally intended                                                                    
     to  reduce healthcare  costs, improve  access to  card,                                                                    
     and regulate and limit the  entry and supply of medical                                                                    
     services and  facilities. CON programs  create internal                                                                    
     subsidies  and  encourage  the   use  of  the  economic                                                                    
     profits to cross-subsidize indigent care.                                                                                  
     However, the healthcare system has  evolved from a fee-                                                                    
     for-service  system, which  lacked incentives  to lower                                                                    
     prices, to a prospective  payment system. CON laws over                                                                    
     the last forty years  have stifled competition, created                                                                    
     a barrier  to new  medical facilities and  services for                                                                    
     healthcare  consumers, and  prevented  the free  market                                                                    
     forces which  improve the quality  and lower  the costs                                                                    
     of healthcare services.                                                                                                    
     Alaska's   certificate   of   need  program   poses   a                                                                    
     substantial  threat   to  the  proper   performance  of                                                                    
     healthcare markets and services.                                                                                           
CHAIR COSTELLO opened public testimony on SB 62.                                                                                
1:36:50 PM                                                                                                                    
NAOMI  LOPEZ-BAUMAN,   Director,  Healthcare   Policy,  Goldwater                                                               
Institute, Phoenix, Arizona,  stated that SB 62  is important for                                                               
Alaskans because the  certificate of need (CON)  laws put process                                                               
before patient health  care needs and preferences.  CON laws were                                                               
adopted in  the 1970s  and allow competitors  to veto  new health                                                               
care providers  or a new  hospital. These laws persist  today and                                                               
stifle  competition.  She drew  a  parallel  to the  smart  phone                                                               
industry. "Imagine what  our smart phones might look  like if the                                                               
manufacturer first  had to get  permission from  its competitor."                                                               
She  emphasized that  just  as there  shouldn't  be laws  against                                                               
smart phone innovations,  the State of Alaska should  not make it                                                               
illegal  or  onerous  to  offer  more  health  care  options  and                                                               
services, particularly in rural areas.                                                                                          
MS. LOPEZ-BAUMAN referred  to research by the  Mercatus Center at                                                               
George Mason  University that found  that CON laws  reduce health                                                               
care quality,  access to  care, and  the availability  of medical                                                               
equipment.  She  opined  that Alaskans  may  be  more  profoundly                                                               
affected because traveling  to other states for  treatment can be                                                               
prohibitively expensive and logistically difficult                                                                              
She  pointed out  that CON  laws were  originally established  to                                                               
counter  the  cost-plus  reimbursement   system  that  no  longer                                                               
exists.  Instead,  hospitals  today  generally  receive  a  fixed                                                               
amount from insurers  for patient care, which makes  the CON laws                                                               
MS.  LOPEZ-BAUMAN read  the following  joint  statement from  the                                                               
U.S. Department  of Justice and  the Federal Trade  Commission to                                                               
show that the federal government has abandoned the CON system:                                                                  
     Certificate of  need laws  impede the  efficient performance                                                               
     of  health care  markets.  By their  very  nature, CON  laws                                                               
     create barriers to  entry and expansion to  the detriment of                                                               
     health  care   competition  and  consumers.   They  undercut                                                               
     consumer  choice,  stifle  innovation, and  weaken  markets'                                                               
     ability to  contain health care  costs. Together  we support                                                               
     the repeal of  such laws as well as steps  that would reduce                                                               
     their scope.                                                                                                               
She noted that she submitted written testimony.                                                                                 
1:37:31 PM                                                                                                                    
SENATOR GARDNER joined the committee.                                                                                           
CHAIR COSTELLO  asked Ms. Lopez-Bauman to  describe the Goldwater                                                               
Institute's work.                                                                                                               
MS.  LOPEZ-BAUMAN explained  that  the Goldwater  Institute as  a                                                               
nonpartisan  501  (c)(3)  libertarian research  institution  that                                                               
works on public policy issues and is involved in litigation.                                                                    
SENATOR  MICCICHE commented  that  for someone  like himself  who                                                               
believes in a free market, this seems like an easy decision.                                                                    
He  asked  if she  was  aware  that  huge  swaths of  Alaska  had                                                               
essentially   no  medical   services  and   thus  counted   on  a                                                               
certificate of need to develop  initial services "Have you worked                                                               
much in Alaska?"                                                                                                                
MS.  LOPEZ-BAUMAN replied  she did  some research  on Juneau  and                                                               
found that health  care consumers  lives are better  in that part                                                               
of  the state  than  they  were 15-18  years  ago because  cancer                                                               
patients now have the option of treatment closer to home.                                                                       
SENATOR MICCICHE  observed that he  and Ms. Lopez-Bauman  seem to                                                               
be talking  about two  different things. He  thanked her  for the                                                               
CHAIR COSTELLO encouraged people to submit written testimony.                                                                   
1:43:14 PM                                                                                                                    
DR.  HAL  SCHERZ, Founder  and  Secretary,  DOCS 4  Patient  Care                                                               
Foundation, Atlanta, Georgia,  testified in support of  SB 62. He                                                               
related that this  physician-run health care think  tank has been                                                               
involved  nationwide in  efforts  to repeal  certificate of  need                                                               
laws. He  highlighted a  conference in  Washington, D.C.  in 2017                                                               
that  brought together  experts from  academia, medicine,  public                                                               
policy,  patient  advocacy,  the   legal  profession,  and  state                                                               
government. The  consensus was that  CON laws harm  patients both                                                               
medically  and financially,  stifle  competition and  innovation,                                                               
and harm physician practices. He  opined that these laws may also                                                               
be unconstitutional and monopolistic.                                                                                           
He directed attention to the  article he coauthored and submitted                                                               
for the record titled, "Eliminating  CON Law is a Meaningful Step                                                               
in Lowering Alaska's Health Care Costs."                                                                                        
DR. SCHERZ  shared his opinion of  CON laws speaking as  a policy                                                               
expert and a practicing physician:                                                                                              
     CON laws are  a remnant of health care  policy from the                                                                    
     1960s and  1970s that clearly  no longer apply  in this                                                                    
     new era  of health  care. They  came into  existence to                                                                    
     protect  hospitals and  nursing homes  from competition                                                                    
     at  a time  when  medical  services were  predominantly                                                                    
     paid  for by  fee-for-service.  The federal  government                                                                    
     incentivized states  to adopt  these laws  with funding                                                                    
     that  they  terminated  a   decade  later  because  the                                                                    
     promises of  savings and improved patient  access which                                                                    
     were  promised,   were  never   realized.  Nonetheless,                                                                    
     states  retained these  laws  because  of the  powerful                                                                    
     lobbying  efforts  of   hospitals  which  benefited  by                                                                    
     eliminating competition.                                                                                                   
     Fast forward to 2018. Most  of the laws and regulations                                                                    
     that are on the books  in health care protect hospitals                                                                    
     and  they give  them  carte blanche  when  it comes  to                                                                    
     controlling  the  health  care market.  Most  hospitals                                                                    
     call themselves  not-for-profit entities,  which simply                                                                    
     means  that  they do  not  distribute  the earnings  to                                                                    
     shareholders.  These enterprises  are in  fact some  of                                                                    
     the most profitable entities in the community.                                                                             
     Since  1970,  the  number   of  physicians  across  the                                                                    
     country has  gone up  100 percent  while the  number of                                                                    
     hospital  administrators  during  this same  period  of                                                                    
     time has risen 3,400 percent.  Salaries for CEOs at the                                                                    
     largest  hospitals  are  typically   in  excess  of  $1                                                                    
     million annually and those  of other medical executives                                                                    
     are not  far behind. If  you travel to any  large city,                                                                    
     the  most  ambitious  building projects  are  those  of                                                                    
     hospitals.  And  the  trend  toward  consolidation  and                                                                    
     mergers and  acquisition have positioned  the hospitals                                                                    
     as the power brokers of  health care. This trend, which                                                                    
     also  includes the  hospital  acquisition of  physician                                                                    
     practices, has  left patients with very  little patient                                                                    
     choice  regarding  where  to  get  their  health  care.                                                                    
     Simultaneously,  hospitals charge  fees  that are  5-10                                                                    
     times  that   of  the  services  received   at  outside                                                                    
     There  is  no  transparency  or  consistency  regarding                                                                    
     hospital  fees. Patients  have no  idea  what they  are                                                                    
     being  charged  and  two patients  can  have  identical                                                                    
     services and pay vastly different  amounts for them. As                                                                    
     an  anecdote   to  illustrate  the  insanity   of  this                                                                    
     situation,  understand  that hospitals  are  purchasing                                                                    
     physician  practices because  it is  good business  for                                                                    
     them. This is because they  get paid often ten times as                                                                    
     much  for  the  identical   service  delivered  at  the                                                                    
     hospital as it would be at a doctor's practice.                                                                            
     For example, if Dr. Smith who  is a GI specialist as he                                                                    
     does colonoscopies in his  office-based GI lab, charges                                                                    
     $200  for the  colonoscopy  and the  patient  has a  20                                                                    
     percent  copay,  then   they're  responsible  for  $40.                                                                    
     However, if  Dr. Smith sells his  practice to Anchorage                                                                    
     general hospital,  he keeps the same  office but simply                                                                    
     changes  the signage  and then  does a  colonoscopy the                                                                    
     very next  day. That charge  for the colonoscopy  is no                                                                    
     longer  $200,  but  $2,000  and   the  patient  is  now                                                                    
     responsible  for $400  out of  pocket.  CON laws  allow                                                                    
     this  practice  to   continue  because  competition  is                                                                    
     prevented. The losers are the  patients. They no longer                                                                    
     have any choice.                                                                                                           
     Please give Alaskans a choice.                                                                                             
1:48:56 PM                                                                                                                    
SENATOR  GARDNER  asked  if  he   submitted  the  publication  he                                                               
DR. SCHERZ replied he submitted the article to Mr. Zepp.                                                                        
CHAIR  COSTELLO advised  that the  sponsor's  staff indicated  he                                                               
would provide the article.                                                                                                      
1:49:51 PM                                                                                                                    
DANIEL  GILMAN,  Attorney  Advisor, Office  of  Policy  Planning,                                                               
Federal  Trade  Commission  (FTC), Washington,  DC,  thanked  the                                                               
committee for the opportunity to present  the views of the FTC on                                                               
certificate  of need  (CON)  laws. He  stated  that the  prepared                                                               
remarks  review recent  statements  on the  effects  of CON  laws                                                               
issued jointly by the Federal  Trade Commission and the Antitrust                                                               
Division  of  the  US  Department   of  Justice.  He  called  the                                                               
committee's attention  to the Agencies'  joint 2017  statement on                                                               
Alaska Senate  Bill 62 and  CON laws. He requested  the committee                                                               
include  that  statement  in  the record.  He  said  these  prior                                                               
statements  reflect  the   Agencies'  extensive  experience  with                                                               
health care competition and the effects of CON laws.                                                                            
MR. GILMAN  clarified that any  additional comments  or responses                                                               
to questions do  not necessarily reflect the views of  the FTC or                                                               
any individual commissioner or the Department of Justice.                                                                       
He read the following:                                                                                                          
     CON laws,when   first enacted,  had the  laudable goals                                                                    
     of reducing  health care costs and improving  access to                                                                    
     care.However,  after  considerable experience, it   has                                                                    
     become   apparent that  CON  laws do  not   provide the                                                                    
     benefits they originally  promised. Worse, in operation                                                                    
     CON laws  can undermine some  of the very  policy goals                                                                    
     that they are supposed to advance.                                                                                         
     As  detailed   in  our   written  statement,   we  have                                                                    
     identified  at least  three types  of serious  problems                                                                    
     with  CON   laws.  First,   CON  laws   create  costly                                                                     
     regulatory   barriers  to  entry  and expansion.  Those                                                                    
     barriers can  increase prices,  limit  consumer choice,                                                                    
     and  stifle  innovation. Second,  incumbent  firms  can                                                                    
     use  CON laws  to  thwart  otherwise beneficial  market                                                                    
     entry  or expansion  by  new or  existing  competitors.                                                                    
     Third, as  illustrated by  the FTC's experience  in the                                                                    
     Phoebe Putney case, CON  laws can  deny  consumers  the                                                                    
     benefit   of   an   effective  remedy   following   the                                                                    
     consummation   of    an   anticompetitive   merger   or                                                                    
     acquisition.   For  these   reasons,   last  April   we                                                                    
     respectfully suggested that Alaska  repeal its CON laws                                                                    
     and we're  here today to reiterate  that suggestion. We                                                                    
     urge you  to consider  all the ways  that CON  laws may                                                                    
     harm health care  consumers. Namely, individual patient                                                                    
     as well as both  public and private third-party payers.                                                                    
     And those ways include these.                                                                                              
     I.   Entry  restrictions   tend  to  raise   costs  and                                                                    
          prices.   They   also  limit   opportunities   for                                                                    
          providers to  compete, not just on  price but also                                                                    
          on nonprice  aspects of  health care  like quality                                                                    
          and   convenience   that   may   be   particularly                                                                    
          important to patients.                                                                                                
     II.  Impeding new  entry to health care  markets can be                                                                    
          especially harmful in  rural and other underserved                                                                    
          areas.   CON  laws   may   delay   or  block   the                                                                    
          development of facilities  and services where they                                                                    
          are  needed most.  And they  can reinforce  market                                                                    
          power  that  incumbent   providers  may  enjoy  in                                                                    
          already  concentrated areas.  (By concentrated  we                                                                    
          mean  concentrations of  the number  of providers,                                                                    
          not that there are many providers.)                                                                                   
     III. Empirical evidence  on competition in  health care                                                                    
          markets  generally  has   demonstrated  that  more                                                                    
          competition leads to  lower prices. In particular,                                                                    
          studies  of provider  consolidation  by FTC  staff                                                                    
          and  independent  scholars  consistently  indicate                                                                    
          that, "Increases in  market hospital concentration                                                                    
          lead to increases in the  price of hospital care."                                                                    
          In  particular, the  best empirical  evidence also                                                                    
          suggests  that  greater  competition  incentivizes                                                                    
          providers  to  become   more  efficient  and  that                                                                    
          repealing  or narrowing  CON laws  can reduce  the                                                                    
          per-patient   cost  of   health  care.   Empirical                                                                    
          evidence  has  not  shown that  CON  laws  control                                                                    
          spending,   improve   quality  of   care,   cross-                                                                    
          subsidize  charity  care,  or  improve  access  to                                                                    
          care.  We have  found no  empirical evidence  that                                                                    
          CON laws have restricted so called over-                                                                              
     We urge you to consider  the detailed discussion of the                                                                    
     available empirical  evidence that is contained  in the                                                                    
     2017  statement.   We  would  be  happy   to  entertain                                                                    
     questions about that as follow  up. We urge you also to                                                                    
     consider  that  more  targeted  policies  may  be  more                                                                    
     effective  at  ensuring  more access  to  care  without                                                                    
     inflicting   the   same   harm  on   competition   and,                                                                    
     ultimately, health care consumers.                                                                                         
1:55:13 PM                                                                                                                    
SENATOR  GARDNER  said  an  argument  she's  heard  in  favor  of                                                               
maintaining CON is  that it helps hospitals that  are required to                                                               
provide care  to everybody  regardless of  their ability  to pay.                                                               
Competing facilities  draw away  business that hospitals  need to                                                               
help subsidize the services that  competing facilities don't want                                                               
to offer.                                                                                                                       
MR.  GILLMAN  said the  CON  laws  do  help hospitals,  but  it's                                                               
important  to  look  at  whether they  improve  charity  care  or                                                               
provide more  services to the  indigent community. He  noted that                                                               
the  2017 joint  statement  discusses  several empirical  studies                                                               
that found that CON laws  neither foster charity care nor deliver                                                               
on the cost-shifting promise. The  evidence is lacking to support                                                               
the  notion that  hospitals will  exploit their  market power  to                                                               
generate  extra  profits  and  then  spend  those  profits  in  a                                                               
socially  useful way.  He suggested  there  are other  approaches                                                               
such  as  the  Medicare  Critical Access  Hospital  Program  that                                                               
provides   extra   reimbursement   for  rural   critical   access                                                               
CHAIR  COSTELLO   asked  how  repealing  CON   laws  will  affect                                                               
emergency rooms.                                                                                                                
MR.  GILLMAN replied  there is  no  evidence that  CON laws  have                                                               
helped sustain emergency room services.                                                                                         
SENATOR MICCICHE asked  if he was speaking for  the Federal Trade                                                               
Commission in opposition to CON laws.                                                                                           
MR.  GILLMAN  clarified  that  the statement  that  he  read  was                                                               
screened  and  approved  by the  Federal  Trade  Commission.  The                                                               
subsequent questions he fielded  do not necessarily represent the                                                               
views of  the FTC. The 2017  statement was jointly issued  by the                                                               
Federal Trade  Commission and  the Antitrust  Division of  the US                                                               
Department of Justice. It's an official statement.                                                                              
SENATOR  MICCICHE  pointed  out  that  Alaska  is  geographically                                                               
diverse, is more  than twice the size of Texas,  has a population                                                               
of 734,000, and very limited availability of medical care.                                                                      
MR. GILLMAN  responded that  Alaska is  unique in  some respects,                                                               
but  other  states  also  have   substantial  rural  regions  and                                                               
concerns about  delivery of care  and critical  access hospitals.                                                               
They have not done a special  study in Alaska, but nationally CON                                                               
laws,   including   in  rural   states,   do   not  improve   the                                                               
availability, quantity, or quality of charity care.                                                                             
He added:                                                                                                                       
     We do  understand that  there is  a concern  about what                                                                    
     will  happen to  critical access  hospitals. We  simply                                                                    
     have  not found  evidence that  these rural  hospitals,                                                                    
     that  remote  hospitals  do a  better  job  and  thrive                                                                    
     better under  CON laws  than they  do without  them. We                                                                    
     just haven't found that.                                                                                                   
2:04:48 PM                                                                                                                    
MATTHEW  D. MITCHELL,  Economist, Mercatus  Center, George  Mason                                                               
University, Arlington,  Virginia, testified in support  of SB 62.                                                               
He referenced  the February  6, 2018 letter  he submitted  to the                                                               
committee and stated the following:                                                                                             
     CON laws require health care  providers wishing to open                                                                    
     or expand  a health care  facility to first prove  to a                                                                    
     regulatory body  that the  community needs  the service                                                                    
     they  plan to  offer.  Policy makers  hoped that  these                                                                    
     programs  would restrain  health  care costs,  increase                                                                    
     quality,  and  improve  access to  care  for  poor  and                                                                    
     underserved  communities. However,  by limiting  supply                                                                    
     and  undermining  competition,  CON laws  may  undercut                                                                    
     each of these laudable aims.                                                                                               
     Because 15  states have  repealed their  certificate of                                                                    
     need programs,  we have quite  a bit of  information to                                                                    
     help predict  what would happen  if other  states, such                                                                    
     as Alaska,  were to repeal  their CON  laws. Economists                                                                    
     have  been able  to use  modern statistical  methods to                                                                    
     compare outcomes in CON and  non-CON states to estimate                                                                    
     the effects  of the  regulation. These  methods control                                                                    
     for  factors  such  as  socioeconomic  conditions  that                                                                    
     might confound the estimates.                                                                                              
     TABLE  1 in  my  written testimony  summarizes some  of                                                                    
     this research. It is organized  around the stated goals                                                                    
     of CON  laws. Briefly, it  is hoped that CON  laws will                                                                    
     ensure  an adequate  supply of  health care  resources.                                                                    
     The  evidence suggests  they do  not.  States with  CON                                                                    
     laws have  fewer hospitals, they have  fewer ambulatory                                                                    
     surgery centers, they have  fewer dialysis clinics, and                                                                    
     they have  fewer hospice  care facilities.  Patients in                                                                    
     these  states  have  access to  fewer  beds  and  fewer                                                                    
     medical imaging devices. They are  more likely to leave                                                                    
     their  counties in  search of  care and  they are  more                                                                    
     likely to leave their states in search of care.                                                                            
     The data  suggests that Alaska  without CON  would have                                                                    
     42 percent  more hospitals than  it currently  does. Of                                                                    
     particular interest  to Alaskans, it is  hoped that CON                                                                    
     laws  will  ensure  access to  health  care  for  rural                                                                    
     communities.  They do  not. States  with CON  laws have                                                                    
     fewer rural  hospitals, they have fewer  rural hospital                                                                    
     substitutes,   and  they   have  fewer   rural  hospice                                                                    
     facilities. Residents of CON  states must drive further                                                                    
     to obtain  care, and the  data suggests that  an Alaska                                                                    
     without CON would have 45  percent more rural hospitals                                                                    
     than it currently does.                                                                                                    
     It's  hoped that  CON laws  will promote  high quality.                                                                    
     They  do  not.  Research   suggests  that  deaths  from                                                                    
     treatable    complications   following    surgery   and                                                                    
     mortality  rates  from  heart failure,  pneumonia,  and                                                                    
     heart  attacks  are  all statistically  higher  in  CON                                                                    
     states  relative  to  non-CON states.  In  states  like                                                                    
     Alaska  with especially  comprehensive  CON programs                                                                       
     that   is  they   require   CON   for  many   different                                                                    
     procedures,  patient  satisfaction is  lower.  Patients                                                                    
     are much  less likely to  rate their experience as  a 9                                                                    
     or a 10 on a scale of 1 to 10.                                                                                             
     It's hoped  that CON laws will  encourage charity care.                                                                    
     They do not. It is hoped  that CON laws promote the use                                                                    
     of hospital  substitutes. They do  not. Finally,  it is                                                                    
     hoped that  CON laws  will restrain  the cost  of care.                                                                    
     They do not.                                                                                                               
     All of this research is  cited in my written testimony.                                                                    
     I have also attached  two working papers addressing the                                                                    
     effect  of CON  on rural  care  and on  spending, as  I                                                                    
     believe these  papers should be of  particular interest                                                                    
     to your state.                                                                                                             
     Given  the substantial  evidence that  CON laws  do not                                                                    
     achieve their  stated goals, one  may wonder  why these                                                                    
     laws continue to  exist in so much of  the country. The                                                                    
     explanation  seems  to  lie  in  the  special  interest                                                                    
     theory  of  regulation.  Mainly,  CON  laws  perform  a                                                                    
     valuable  function for  incumbent  providers of  health                                                                    
     care  services  by  limiting   their  exposure  to  new                                                                    
     competition.  Research finds  that existing  hospitals,                                                                    
     for example, are not affected  by CON laws, whereas new                                                                    
     hospitals  and  hospital  substitutes  like  ambulatory                                                                    
     surgery centers  are. This helps explain  why antitrust                                                                    
     authorities at  the federal  Department of  Justice and                                                                    
     at the  Federal Trade  Commission have long  argued (as                                                                    
     we've   heard  today)   that   these  regulations   are                                                                    
     anticompetitive and harmful to consumers.                                                                                  
2:09:05 PM                                                                                                                    
At ease                                                                                                                         
2:10:03 PM                                                                                                                    
CHAIR COSTELLO reconvened the meeting and welcomed Ms. Hultberg.                                                                
2:10:26 PM                                                                                                                    
BECKY  HULTBERG, President  and  CEO, Alaska  State Hospital  and                                                               
Nursing Home  Association (ASHNHA), Juneau, Alaska,  testified in                                                               
opposition  to   SB  62.  She   said  she  enjoyed   hearing  the                                                               
perspectives of  the previous  testifiers, all  of whom  are from                                                               
the  Lower  48. She  questioned  their  relevance in  Alaska  and                                                               
provided several fact-checks before starting the presentation.                                                                  
   • In Alaska, CON is a rigorous state process; it does not                                                                    
     require a competitor's stamp of approval.                                                                                  
   • The cost-plus system exists in Alaska. All hospitals are                                                                   
     paid by Medicaid based on cost and rural hospitals are                                                                     
     cost-plus under the Medicare methodology.                                                                                  
   • Alaska is primarily fee for service and most states that                                                                   
     have repealed CON laws have replaced them with something                                                                   
She  said that  whether to  repeal CON  can be  distilled to  two                                                               
questions.  1) Will  CON repeal  increase competition  and reduce                                                               
costs, and  2) What will the  consequences be to the  health care                                                               
system if we take that action?                                                                                                  
MS. HULTBERG  highlighted that the  State of Alaska has  a vested                                                               
interest  in CON  in protecting  its budget.  She explained  that                                                               
skilled nursing in  Alaska is paid 85-90 percent  by the Medicaid                                                               
program. That includes  cost-based reimbursement and construction                                                               
assistance to  cover the capital  costs. Should CON  be repealed,                                                               
the cost of  developing new skilled nursing beds  would be shared                                                               
equally between the state and federal government.                                                                               
She  disputed the  assumption that  repealing  CON will  increase                                                               
competition and  lead to  lower health  care prices.  She pointed                                                               
out  that  the largest  market  in  the  state already  has  many                                                               
ambulatory  surgery   centers  and   imaging  centers   and  this                                                               
competition has not resulted in any reduction of prices.                                                                        
2:13:20 PM                                                                                                                    
MS. HULTBERG  displayed a chart  showing the impact  of increased                                                               
supply  with no  change in  demand.  She said  the assumption  is                                                               
health care  behaves like a  normal market,  but that is  not the                                                               
reality for a number of reasons.                                                                                                
   • Third-parties pay the bill, so consumers are less price                                                                    
   • Information is asymmetric information between the people                                                                   
     providing the service and those consuming the service.                                                                     
   • Quality is sometimes more important that price.                                                                            
She  said the  reality is  that in  certain cases  competition in                                                               
health care can  result in increased prices. She  drew an analogy                                                               
to a  Starbucks on every corner.  To the question of  whether CON                                                               
addresses  the   cost  problem,  she  maintained   that  lack  of                                                               
competition in the health care  market is not commonly identified                                                               
as a cost  driver in health care. She clarified  that the factors                                                               
that many  studies identify as  health care cost drivers  are not                                                               
necessarily directly related to certificate of need.                                                                            
2:15:20 PM                                                                                                                    
MS. HULTBERG  presented the  hospital perspective  of certificate                                                               
of  need  and  why  it  is  important.  She  explained  that  the                                                               
Emergency  Medical  Treatment  and   Active  Labor  Act  (EMTALA)                                                               
requires hospitals to  see patients 24 hours a  day regardless of                                                               
their ability to  pay. Hospitals lose money on  some services and                                                               
make  it  up  on  others.   When  services  migrate  outside  the                                                               
hospital, there  is less volume  over which to spread  cost. Some                                                               
of the facilities that have migrated  out do not see patients who                                                               
cannot  pay and  sometimes do  not see  Medicaid or  Medicare. To                                                               
demonstrate this  point, she  drew an  analogy between  two fast-                                                               
food restaurants. One is required by  law to be open 24 hours per                                                               
day and to give  food away for free to those  who cannot pay. The                                                               
other doesn't have those restrictions.                                                                                          
She listed the ways hospitals subsidize community services.                                                                     
   • Primary care senior clinics (The Medicare clinics in                                                                       
     Anchorage are run by the two hospitals)                                                                                    
   • Forensic nursing sexual assault response                                                                                   
   • Subspecialty services for children                                                                                         
   • Homeless services (medical respite)                                                                                        
   • Community health programs                                                                                                  
She  compared a  hospital to  a public  utility pointing  out the                                                               
significant  cost of  maintaining  a functioning  infrastructure.                                                               
She emphasized  that undercutting  the ability  of a  hospital to                                                               
pay for  its infrastructure, could  jeopardize that  service. She                                                               
highlighted that  during the tsunami  warning people went  to the                                                               
hospital because it was open and safe.                                                                                          
2:18:15 PM                                                                                                                    
MS. HULTBERG displayed  2016 data on rural  hospital closures and                                                               
warned against assuming  that hospitals will be  able to maintain                                                               
services indefinitely  given the  current market.  The facilities                                                               
most  at  risk  are  Homer,   Kodiak,  Ketchikan,  Soldotna,  and                                                               
Fairbanks. It is  these mid-size community hospitals  that do not                                                               
have a significant market. To  demonstrate this point, she quoted                                                               
a  health  care  futurist  who  said,  "Are  community  hospitals                                                               
obsolete?  It's a  serious question.  Just about  every trend  of                                                               
late seems  to suggest  the days  are numbered  for many,  if not                                                               
most."  Given these  trends,  it  seems that  the  first step  in                                                               
maintaining viable  community hospitals  is don't make  it worse.                                                               
She pointed out  that government plays a significant  role in the                                                               
financing  and  regulation of  health  care  through the  dollars                                                               
spent on Medicaid and the potential increase in that spending.                                                                  
She said part  of this conversation is about what  we value. It's                                                               
the value of the services  that hospitals provide. It's the value                                                               
of having facilities  in the community that are  willing and able                                                               
to serve  the poor  and vulnerable.  It's the  value of  having a                                                               
well-equipped and  staffed emergency room available  anytime it's                                                               
2:20:26 PM                                                                                                                    
MS.  HULTBERG  addressed the  question  of  whether we  have  the                                                               
information to  make a  decision about CON  by quoting  the Lewin                                                               
Group that evaluated Illinois' CON program in 2007. They said,                                                                  
     The  traditional  arguments  for  CON  are  empirically                                                                    
     weak?  However,   given  the  potential  for   harm  to                                                                    
     specific critical  elements of the health  care system,                                                                    
     we  would  advise  the  Illinois  legislature  to  move                                                                    
     forward with an abundance of caution.                                                                                      
She advised the  committee to also move forward  with caution and                                                               
understand  the  implication  of   CON  repeal  on  the  critical                                                               
elements  of   the  health  care  system.   She  welcomed  future                                                               
conversations  about   CON  regulations   and  the   health  care                                                               
2:21:15 PM                                                                                                                    
SENATOR  MICCICHE   commented  on   the  $2.7   billion  Medicaid                                                               
expenditure  and  asked  if conversations  are  taking  place  to                                                               
develop  a hybrid  model that  protects  critical services  while                                                               
expanding private innovation to help keep costs down.                                                                           
MS.  HULTBERG opined  that the  state's regulatory  CON framework                                                               
provides  many vehicles  for  competition, and  it  that was  the                                                               
answer, prices  would already  be lower.  She suggested  that the                                                               
goal everyone  should be  aiming for  is how  to lower  the total                                                               
cost  of care  over a  person's life.  She directed  attention to                                                               
slide  11 that  lists  the primary  factors  driving health  care                                                               
   1. Fee-for-service system, which rewards volume of procedures,                                                               
     incentivizing overtreatment                                                                                                
   2. Prescription drugs                                                                                                        
   3. New medical technology, and our use of new medical                                                                        
   4. Aging population                                                                                                          
   5. Unhealthy lifestyles                                                                                                      
   6. High administrative costs                                                                                                 
   7. Service provider consolidation (not much of a factor in                                                                   
She acknowledged  that her  answer wasn't  entirely satisfactory.                                                               
"Nobody  has figured  this  out in  our country  and  we are  all                                                               
continuing  to struggle  with  it." She  noted  that health  care                                                               
stakeholders in Alaska are holding conversations on this topic.                                                                 
SENATOR  STEVENS  asked her  to  comment  on the  statement  that                                                               
without CON Alaska would have  45 percent more hospitals. He said                                                               
he couldn't imagine that.                                                                                                       
MS. HULTBERG replied  it doesn't apply to the  Alaska market, but                                                               
if  it  did it  would  also  mean  45  percent more  spending  on                                                               
hospitals in Alaska.                                                                                                            
2:25:23 PM                                                                                                                    
MARY  KASPARI, President,  Interior  Alaska Hospital  Foundation,                                                               
Delta Junction, Alaska,  testified in support of SB  62. She said                                                               
she is  a 20-year resident of  Delta Junction and has  been an RN                                                               
for 35  years. In  2011, she  started working  to get  a critical                                                               
access hospital  in Delta Junction. The  feasibility study showed                                                               
the  community could  sustain a  10-bed  long-term care  facility                                                               
along  with  a 10-bed  critical  access  hospital with  swing-bed                                                               
capabilities. In 2013  the foundation applied for  and received a                                                               
new access point grant to  open the first community health center                                                               
in the  Interior. The  Interior Alaska  Medical Clinic  opened in                                                               
2014 and  the Interior Alaska  Pharmacy opened in 2017.  The last                                                               
phase  of  the  project  is  to  construct  the  critical  access                                                               
hospital with 24/7 emergency room  coverage. The roadblock is the                                                               
certificate  of need  even though  there is  no competition  in a                                                               
200-mile radius.  She urged the  committee to dissolve CON  or at                                                               
least make a rural exemption that is immediately effective.                                                                     
2:29:43 PM                                                                                                                    
RANDY   BEALER,  representing   self,  Delta   Junction,  Alaska,                                                               
testified  in support  of SB  62.  He reported  that medical  air                                                               
transport became  unavailable in Delta Junction  when the 24-hour                                                               
medical  facility  reduced hours  to  the  work day.  Emergencies                                                               
after hours, weekends,  or holidays require an  ambulance ride to                                                               
Fairbanks. He  shared personal  medical emergencies  and stressed                                                               
that the certificate of need  requirement is a roadblock to basic                                                               
health care. Denying 24-hour emergency  care and a small hospital                                                               
for rural communities is not beyond comprehension.                                                                              
2:32:37 PM                                                                                                                    
BILL WARD,  representing self, Delta Junction,  Alaska, testified                                                               
in support  of SB  62. He stated  that the  statutory requirement                                                               
for certificate  of need is  a tool that municipal  hospitals and                                                               
large  health care  organizations use  to strengthen  their power                                                               
base   and  thwart   the  legitimate   needs  of   small  Alaskan                                                               
communities.  The community  of Delta  Junction has  demonstrated                                                               
the need for  a critical access hospital but is  being stymied by                                                               
the CON  requirement. The  lack of  primary and  emergency health                                                               
care jeopardizes  the desire  of older  residents to  continue to                                                               
live in the community. The clinic  and EMTs are obligated to send                                                               
anyone who  has an  undetermined illness  or trauma  to Fairbanks                                                               
for diagnostic  testing. This  is expensive,  time-consuming, and                                                               
sometimes an overreaction.  It is also a burden  on the Fairbanks                                                               
emergency  room. He  urged  the  committee to  do  away with  the                                                               
outmoded and restrictive requirement to obtain a CON.                                                                           
2:36:10 PM                                                                                                                    
MICHAEL   JESPERSON,   representing  self,   Anchorage,   Alaska,                                                               
testified in  support of SB  62. He opined  that the best  way to                                                               
reduce prices  in any industry  is more competition. He  lives in                                                               
midtown Anchorage and can get care  if he needs it, but it's more                                                               
difficult  in  rural  areas.  Small  communities  need  emergency                                                               
services  and access  to medivacs.  Removing  the certificate  of                                                               
need   requirement   increases   competition  and   reduces   the                                                               
substantial cost  of opening a medical  facility. He acknowledged                                                               
that opening new medical facilities  takes time but removing this                                                               
one hurdle will save a step  for everyone, make it less expensive                                                               
to open a new  facility, and save a few more  lives. He urged the                                                               
committee to pass  SB 62 to remove certificate of  need and bring                                                               
competition back to the market.                                                                                                 
2:39:21 PM                                                                                                                    
JOE  FONG,  Administrator,  Providence Seward  Medical  and  Care                                                               
Center, Seward,  Alaska, said he supports  the conversation about                                                               
whether the  current CON  is appropriate,  but doesn't  believe a                                                               
full repeal is  the answer. He clarified that the  center is part                                                               
of the  Providence system, but  it is  city owned so  its success                                                               
directly   impacts  the   state,   not   the  larger   Providence                                                               
organization. He  explained that  rural hospitals  generally have                                                               
small margins and  they rely heavily on  outpatient services like                                                               
imaging, therapies,  labs, and  surgical services  to be  able to                                                               
offer 24-hour  ER coverage. The  Seward center doesn't see  a lot                                                               
of people in  a 24-hour period but there is  no argument that the                                                               
community  needs access  to these  services. However,  removing a                                                               
barrier  or  incentivizing  competition   may  have  a  long-term                                                               
negative  impact  on  the  ability to  provide  urgent  care  and                                                               
emergency  services.  He  provided  an example  of  the  way  the                                                               
community addressed competition  through collaboration and opined                                                               
that  may  not always  be  feasible.  He reiterated  support  for                                                               
continued  conversation about  the current  law, but  not a  full                                                               
2:43:04 PM                                                                                                                    
DR. RICHARD  MANDSAGER, Administrator, Providence  Alaska Medical                                                               
Center, Anchorage, Alaska, urged the  committee to hold SB 62 and                                                               
continue the dialog about how  to improve the CON regulations. He                                                               
said hospitals are  a public utility in the sense  that they need                                                               
to  be open  all the  time,  but in  many communities  supporting                                                               
these services is marginal. He  acknowledged that the current CON                                                               
statute isn't perfect  and opined that it provides a  way to talk                                                               
through  and rationalize  services.  He  advised that  Providence                                                               
didn't  oppose awarding  CONs for  Alaska Regional  and MatSu  to                                                               
build  more behavioral  health services.  More of  these services                                                               
are needed  and it's a  useful dialog  to talk this  through with                                                               
the community,  he said.  Hospitals have become  a place  for the                                                               
very sick, and  the challenge is to make sure  these services are                                                               
available  into  the  future.   He  reiterated  his  support  for                                                               
continuing the dialog about how to improve CON regulations.                                                                     
2:46:30 PM                                                                                                                    
DR.  TIMOTHY   SILBAUGH,  MD  FACEP,  Business   Manager,  Alaska                                                               
Emergency Medicine Associates (AEMA),  Anchorage, Alaska, said he                                                               
is  affiliated  with  Providence  Alaska Medical  Center  and  is                                                               
speaking in opposition  to SB 62. He opined that  the CON process                                                               
provides  thoughtful use  of state  medical  resources, has  been                                                               
effective  in developing  a strong  health care  system, and  has                                                               
prevented  the introduction  of expensive  medical entities  that                                                               
would drive up costs.                                                                                                           
He related  that in  2015 to 2017  the Providence  Alaska Medical                                                               
Center  successfully applied  for a  CON to  develop a  pediatric                                                               
specialty emergency care center.  There was a thorough discussion                                                               
of  the proposal  and  competitors  were free  to  oppose it.  He                                                               
opined  that   lifting  the  CON   process  would  result   in  a                                                               
proliferation of  expensive facilities that would  drive up costs                                                               
but  provide no  coordinated benefit  to the  Alaska health  care                                                               
Referring to Senator Costello's  question about what would happen                                                               
to emergency  rooms should  CON be appealed,  he said  they would                                                               
become  freestanding emergency  centers. These  unique facilities                                                               
are allowed  by federal regulations  to charge the  same hospital                                                               
facility   fee   as   a  traditional   hospital-based   emergency                                                               
department.  They   do  not  currently   exist  in   Alaska,  and                                                               
essentially  provide service  where  it isn't  needed  at a  much                                                               
higher  cost.   They  also  directly  translate   into  allowable                                                               
increases  in   Medicaid  fees   to  offset   the  infrastructure                                                               
2:49:39 PM                                                                                                                    
DR.  ANNE  ZINK,  Emergency  Physician,  MatSu  Regional  Medical                                                               
Center, Palmer,  Alaska, testified  in opposition  to SB  62. She                                                               
mentioned the  $1.5 million  exemption that  people in  MatSu and                                                               
Anchorage  have taken  advantage of,  which has  added facilities                                                               
and  increased competition,  and she  agreed with  testimony from                                                               
Delta Junction  that access  to emergency  care is  critical. She                                                               
expressed  concern that  repealing CON  would threaten  emergency                                                               
departments.  Surgery  centers  would  come in  and  wouldn't  be                                                               
required to cover  costs at the hospital,  which would jeopardize                                                               
emergency  services for  Medicare,  Medicaid  and the  uninsured.                                                               
These  centers would  also attract  itinerant  surgeons from  the                                                               
Lower 48 who may not be available in emergencies.                                                                               
DR. ZINK said  she has seen the certificate of  need process work                                                               
well in  Alaska. First, it  doesn't accommodate  the freestanding                                                               
emergency  departments  that  Dr.   Silbaugh  talked  about  that                                                               
significantly increase costs without  helping patient care. Also,                                                               
Mat-Su Regional went  through the arduous process to  apply for a                                                               
certificate of need for behavioral  health. It ultimately brought                                                               
the community to resolution and  the state approved the beds. She                                                               
concluded  saying  that Alaska  has  unique  challenges and  it's                                                               
necessary to look at what makes  sense in each community. That is                                                               
why she is opposed to SB 62.                                                                                                    
2:52:22 PM                                                                                                                    
DAVID  MORGAN, representing  self, Anchorage,  Alaska, stated  he                                                               
has worked  in health care  finance and management for  31 years.                                                               
He  noted that  he  submitted written  testimony  and the  Alaska                                                               
profile that  George Mason University  prepared about  what would                                                               
happen  without the  certificate  of need.  It shows  significant                                                               
reductions on  spending, improved  access, and  positive trending                                                               
quality measures.                                                                                                               
He said the experience in  Illinois in getting rid of certificate                                                               
of  need was  that rural  hospitals  responded to  the threat  of                                                               
competition  by  changing  the services  they  delivered,  adding                                                               
swing beds  and long-term beds.  He said he is  currently working                                                               
with the  Kaiser Foundation  on market  place average  bench mark                                                               
premiums from 2014 to 2018.  That identifies what was really paid                                                               
in insurance and health care.  Economists found that those states                                                               
without certificate  of need  had a lower  rate of  increase than                                                               
those states  that did. California  was an exception, but  it has                                                               
embedded regulations more  severe than CON and  major health care                                                               
taxes that helped raise costs.                                                                                                  
MR. MORGAN warned  that examples that are given of  the effect of                                                               
the repeal  of CON don't  necessarily look  at the total  cost of                                                               
health  care in  the state  or community.  He noted  that Senator                                                               
Giessel said  there is  a three-year  wait for  behavioral health                                                               
and suggested  looking at the  economic issues  to see who  has a                                                               
material interest.  That will  lead you to  look more  closely at                                                               
the certificate of need issue, he said.                                                                                         
He  advised that  he sent  most  of the  information from  George                                                               
Mason about  what would happen  in Alaska without  certificate of                                                               
need.  He would  follow up  shortly with  the market  place bench                                                               
mark costs.  This shows which  states do  and don't have  CON and                                                               
ranks them  according to  the percentage  those costs  have grown                                                               
over four years. It's very surprising, he said.                                                                                 
SENATOR GARDNER asked him to share the information.                                                                             
MR. MORGAN said  he sent everything to Mr. Zepp  except the study                                                               
that uses Kaiser Foundation information  and that should be ready                                                               
to send shortly.                                                                                                                
CHAIR  COSTELLO asked  Margaret Brody  to provide  information on                                                               
the cost  for an application for  a certificate of need,  and the                                                               
timeframe for the  department to process the  application and get                                                               
back to the applicant.                                                                                                          
MARGARET BRODIE  Department of Health and  Social Services (DHSS)                                                               
deferred the  question to Donna  Stewart, the  executive director                                                               
of the Office of Rate Review. It falls under her purview.                                                                       
CHAIR COSTELLO said she would follow up with her.                                                                               
3:02:20 PM                                                                                                                    
DAWN   WARREN   FRASIER,   Member,   Interior   Alaska   Hospital                                                               
Foundation, Delta  Junction, Alaska,  testified in support  of SB
62. She  said this small  community has no hospital  or emergency                                                               
services  for  a hundred  miles  in  any direction.  People  from                                                               
surrounding communities  pass through  Delta Junction  heading to                                                               
Fairbanks  for  emergency  medical services.  She  described  the                                                               
members  of the  Interior Alaska  Hospital Foundation  as regular                                                               
folks looking to improve health  care options for their families,                                                               
friends, and  neighbors. They have  been able to open  a pharmacy                                                               
and  a community  health clinic.  The  next phase  is a  critical                                                               
access  hospital  that could  have  up  to  10  beds and  a  24/7                                                               
emergency room. The  foundation has raised some  funds to proceed                                                               
but has  discovered it  needs a certificate  of need  to proceed.                                                               
This will  cost close  to $200  thousand. This  requirement seems                                                               
silly given the circumstances in Delta Junction, she said.                                                                      
3:04:45 PM                                                                                                                    
SENATOR GARDNER asked Ms. Brodie  if the Department of Health and                                                               
Social Services (DHSS) will take a position on the bill.                                                                        
MS. BRODIE said she didn't believe so.                                                                                          
3:05:24 PM                                                                                                                    
JOHN LEWIS, Vice President,  Interior Alaska Hospital Foundation,                                                               
Delta  Junction,  Alaska,  testified  in support  of  SB  62.  He                                                               
advised that  he is a 14-year  resident of Delta Junction  and an                                                               
82-year-old senior.  He opined that  the community should  not be                                                               
required to apply  for a certificate of need  because the closest                                                               
hospital  is   100  miles.  An   immediate  exemption   from  the                                                               
requirement  is in  order. The  application is  very costly,  and                                                               
that money should  instead be used for the  project. He requested                                                               
the committee eliminate the bill.                                                                                               
3:07:11 PM                                                                                                                    
JOSHUA  RUSSEL,   representing  self,  Delta   Junction,  Alaska,                                                               
testified in  support of SB  62. He recounted  previous testimony                                                               
and  observed  that no  one  seems  to want  to  get  rid of  the                                                               
roadblock to  access emergency medical  services for half  of the                                                               
state.  He related  that  he  is a  father  of  four, a  disabled                                                               
veteran with  health problems, and a  certified emergency medical                                                               
technician (EMT).  He pointed out  that anyone who  experiences a                                                               
medical emergency  has a much  better chance of survival  if they                                                               
receive medical care within the  first "golden" hour. Under ideal                                                               
conditions,  the  closest  hospital  for Delta  residents  is  90                                                               
minutes away. He listed the  emergencies he has experienced as an                                                               
EMT in  Delta and  suggested that their  chances of  survival and                                                               
better quality of  life would have increased if  the proposed 10-                                                               
bed critical  access hospital  had been  available. He  said $200                                                               
thousand is a lot to spend  on a certificate of need application,                                                               
particularly when  there is no  competition in the  community. He                                                               
asked the  committee to do  the right thing  and pass SB  62 from                                                               
committee. At the  very least, exempt rural  communities from the                                                               
certificate of need process.                                                                                                    
3:11:28 PM                                                                                                                    
DAVID  WALLACE,  CEO,  Mat-Su Regional  Medical  Center,  Palmer,                                                               
Alaska, testified  in opposition to  the wholesale repeal  of the                                                               
certificate of need.  He said his opposition to SB  62 is for the                                                               
same reasons that his colleagues  articulated. He highlighted Dr.                                                               
Zink's  testimony  for  laying  out  the  challenges  the  Palmer                                                               
hospital  faces.  He  acknowledged   the  challenges  that  Delta                                                               
Junction  residents  face  trying   to  get  basic  health  care,                                                               
confirmed that  the certificate  of need  could be  improved, and                                                               
agreed with  Ms. Hultberg  that hospitals should  be part  of the                                                               
discussions to improve  the CON statute and allow  health care to                                                               
evolve in Alaska.                                                                                                               
He  referenced  testimony  from people  living  out-of-state  and                                                               
offered his perspective  that Alaska is different  than any other                                                               
state, but that it could learn  things about what has worked well                                                               
in  other jurisdictions.  He suggested  that full  repeal of  the                                                               
certificate could  have negative  consequences. He cited  a drill                                                               
for  responding to  mass  casualties  as an  example  of how  the                                                               
hospital partners with  the state to provide  services. He listed                                                               
competing imaging  and surgery centers  in town that  have either                                                               
worked   around  the   CON   law  or   used   the  $1.5   million                                                               
expansion/development  provision,  and   reiterated  support  for                                                               
collaboration to improve the current law.                                                                                       
3:15:44 PM                                                                                                                    
MIKE  POWERS,  COO,  Tanana Valley  Clinic,  and  former  CFO/CEO                                                               
Fairbanks  Memorial  Hospital,  Fairbanks, Alaska,  testified  in                                                               
opposition  to SB  62.  He  cited experience  with  a variety  of                                                               
certificate  of  need approvals  over  the  past 30  years.  Most                                                               
important, he said, is the  build out of responsive and effective                                                               
ER  services.   He  related  his   experience  with   three  mass                                                               
casualties that flooded the ER after  hours. He also noted that a                                                               
number  of CONs  were not  approved over  the same  timeframe. In                                                               
each instance  the CON  process was  followed, and  the community                                                               
was  engaged. "There  was  rational,  thoughtful health  planning                                                               
deployed;  there was  high-quality,  right-sized health  capacity                                                               
created." He  said he appreciates  Delta Junction's desire  for a                                                               
critical access  facility and believes that  Fairbanks would like                                                               
to see  additional capacity in  that location. However,  it needs                                                               
to be  done constructively or  it won't provide the  service that                                                               
can stand the  24/7 test of quality  and consistency. Appropriate                                                               
planning  [through  the  CON process]  is  imperative  to  ensure                                                               
"judicious, efficacious, quality service.He    stated support for                                                               
amending  CON regulations  to improve  health planning  abilities                                                               
and  encouraged the  committee to  seek Alaskan  data on  charity                                                               
care and who is providing the services.                                                                                         
3:19:21 PM                                                                                                                    
KARL  GARBER, President,  AgeNet,  Juneau,  Alaska, testified  in                                                               
opposition to  SB 62. He  related that  he is also  the Executive                                                               
Director   of  Alzheimer's   Resource  of   Alaska  and   was  an                                                               
administrator  of  an  Alaskan  nursing home  for  10  years.  He                                                               
explained that  AgeNet is a  statewide association  that provides                                                               
home  and community-based  services  for  seniors that  typically                                                               
have  nursing-home-level-of-care  needs.  It serves  over  10,000                                                               
seniors  annually,  so  they  can  remain  at  home  as  long  as                                                               
possible.   Preventing   adverse   events  like   falls,   missed                                                               
medications,  and missed  meals from  happening helps  to prevent                                                               
high-cost hospitalizations and long-term nursing home stays.                                                                    
He stated  support for  the continuation  of certificate  of need                                                               
for  nursing homes  because adding  more  isn't affordable  right                                                               
now. He opined that the best  use of scarce resources is to focus                                                               
on  developing   more  home  and  community-based   services.  He                                                               
reported that AARP recently released  a study showing that Alaska                                                               
ranks fifth  in the U.S.  for long-term services and  support. In                                                               
part this  is due to  the certificate  of need law  that requires                                                               
identification of the need and the best use of state resources.                                                                 
3:21:57 PM                                                                                                                    
CHAIR COSTELLO closed public testimony on SB 62.                                                                                
SENATOR GARDNER said she would  like to hear about the regulatory                                                               
changes the state might agree are appropriate.                                                                                  
CHAIR COSTELLO said  she would reach out and  request DHSS engage                                                               
in the process.                                                                                                                 
[SB 62 was held in committee.]                                                                                                  
3:23:24 PM                                                                                                                    
There being  no further  business to  come before  the committee,                                                               
Chair Costello adjourned the meeting at 3:23 pm.                                                                                

Document Name Date/Time Subjects
SB 62, ver A.pdf SL&C 2/6/2018 1:30:00 PM
SB 62
SB 62 Sponsor Statement.pdf SL&C 2/6/2018 1:30:00 PM
SB 62
SB 62 - Sectional Analysis.pdf SL&C 2/6/2018 1:30:00 PM
SB 62
SB 62 - Institute for Justice - Iowa CON Program - June 2017.pdf SL&C 2/6/2018 1:30:00 PM
SB 62
SB 62 - LOS - Joint DOJ Antitrust and Federal Trade Commission Statement 4-7-17.pdf SL&C 2/6/2018 1:30:00 PM
SB 62
SB 62 - Mercatus Center - Mitchell Testimony - February 2018.pdf SL&C 2/6/2018 1:30:00 PM
SB 62
SB 62 - Mercatus Center - Dr. Stratmann's Testimony.pdf SL&C 2/6/2018 1:30:00 PM
SB 62
SB 62 - Robert Cimasi _Alaska_CON_Testimony_4.6.17.pdf SL&C 2/6/2018 1:30:00 PM
SB 62
SB 62 - Reason - News Story - Virginia's CON Laws Lead to Infant Death - January 2017.pdf SL&C 2/6/2018 1:30:00 PM
SB 62
SB 62 - Mercatus Center - Dr. Stratmann's Testimony.pdf SL&C 2/6/2018 1:30:00 PM
SB 62
SB 62 - Certificate of Need - Letters of Support.pdf SL&C 2/6/2018 1:30:00 PM
SB 62
Senate Labor and Commerce -ASHNHA Presentation, SB 62 - 02.06.18.pdf SL&C 2/6/2018 1:30:00 PM
SB 62
SB 62 - AEMA letter of Opposition.pdf SL&C 2/6/2018 1:30:00 PM
SB 62
SB 105 ver D.pdf SL&C 2/6/2018 1:30:00 PM
SB 105
SB 105 Sponsor Statement.pdf SL&C 2/6/2018 1:30:00 PM
SB 105
SB 105 Sectional Analysis.pdf SL&C 2/6/2018 1:30:00 PM
SB 105
SB 105 Letters of Support.pdf SL&C 2/6/2018 1:30:00 PM
SB 105