The question is whether allowing more competition between hospitals and clinics would benefit Alaska, said Rep. Jeannette James, R-North Pole.
The answer from officials at two Kenai Peninsula Borough-owned hospitals is an emphatic "no."
At issue is the requirement that anyone who wants to open a medical facility costing $1 million or more must first prove to the state it is needed. David Pierce, certificate of need coordinator for the Department of Health and Social Services, said the rule cuts costs by ensuring that existing facilities are fully used before new ones are built.
James, though, wants to consider whether competition could help control soaring medical costs.
"We've gone through this with the phone companies," she said. "Now we're doing it with utilities. The Legislature last year had a task force to look at privatizing government services."
She and several co-sponsors have introduced House Bill 297, which would raise the present $1 million threshold to $7 million. But that could open the door for private clinics to skim the most profitable business from public hospitals, said Charlie Franz, administrator for borough-owned South Peninsula Hospital in Homer.
For $3 million or $4 million, he said, a private physician easily could open a substantial out-patient surgery clinic in Homer or Kenai.
"They'll take the low-cost, high-profit cases, the easy cases they can turn over quickly," he said. "The hospitals will be left with the high-cost complex cases, and cases with minimal reimbursement."
Public hospitals take all comers, whether they can pay or not, he said. They take patients on Medicare and Medicaid, which do not fully reimburse the cost of service. They subsidize charity service from more profitable services. Franz said opening the doors for competitors to skim off profitable business could increase the cost to the community of maintaining a local hospital.
The bill also drew criticism from Dolly Farnsworth, vice president of Central Peninsula General Hospital Inc., the nonprofit corporation that runs the borough hospital in Soldotna.
"If they raise it to $7 million, then any number of doctors from Anchorage could come and put something in Kenai," she said. "They could skim the cream of the
James said the bill could help small towns. When South Peninsula Hospital in Homer proposed $9.2-million in improvements, including a 10-bed expansion to its long-term care facility, it had to apply for a certificate of need.
The state questioned the need for 10 new long-term care beds, because many assisted living beds at the Homer Senior Center were empty, and because Heritage Place in Soldotna was adding 12 beds, a project costing less than $1 million and exempt from the certificate-of-need requirement. The state approved five new long-term care beds at South Peninsula Hospital.
"Homer had taxpayers willing to pay," James said. "They had saved money for expansion. Why should they have to go through the certificate-of-need process?"
Franz said he disagrees with the state's assessment of the need, but supports the certificate-of-need process.
"It does serve to make a community or organization demonstrate to some objective outside party that you need these facilities," he said.
Voters approved the hospital expansion, he said, but their decisions are influenced by emotions as well as facts. Meanwhile, the hospital is still adding enough space for 10 new long-term care beds. When the first five beds are filled, it will ask for more.
CPGH Inc. and the Kenai Peninsula Borough Assembly have passed resolutions opposing HB 297. James said a House State Affairs subcommittee is considering a substitute bill that would retain the $1 million threshold for communities of less than 15,000 people. That should cover all communities except Anchorage, Fairbanks and Juneau, she said.
"I have absolutely no interest in interfering with health care providers in small communities by opening the door to competition without their approval," she said.
However, she said she was not sure how the 15,000 population figure would apply in the Kenai-Soldotna area, which includes more than 23,000 people, though the incorporated cities of Kenai and Soldotna have fewer than 15,000 residents each.
There also may be better ways to protect hospitals in small communities, she said. If someone saw the need for a new service, maybe the local hospital should have first crack at providing it. If the hospital declines, the state should allow someone else to step in, she said. Then, perhaps, the competition should be required to prove the need. If the hospital files a competing application, the need is proved, she said.
Rep. Hal Smalley, D-Kenai, who sits with James on the subcommittee reviewing the issue, said there are too many unanswered questions. He said James picked the $7 million threshold to accommodate an ambulatory surgery clinic several private physicians want to build in Fairbanks. The state is not presently willing to issue a certificate of need.
"I think we need to slow this horse down," Smalley said.
James denied submitting HB 297 specifically to accommodate the proposed Fairbanks clinic. Smalley suggested forming a task force representing hospitals, doctors hoping to build clinics, local communities and legislators. During the legislative interim, he said, that group could research problems and identify solutions.
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