Public invited to comment on health care law

IMAGING: Future of some services hinges on clarifying wording.

By BECKY STOPPA
Anchorage Daily News
Published: August 1, 2007

The state is seeking public comment on further regulations it proposes under
a law that governs health care planning and limits competition in an effort to
keep health care costs down. The proposed regulations are aimed at defining
and clarifying key terms in the state certificate-of-need law, the merits of
which have been debated for years.

But they’ve left some in the Valley’s health care industry shaking their heads.
“I wasn’t quite sure exactly what it meant or what it changes. It’s kind of
ambiguous the way it’s worded,” said Norman Stephens, Mat-Su Regional
Medical Center’s chief executive officer.

The future of some types of health care operations hinges on clearing up that
ambiguity, says Mark Ackley, chief executive officer of Imaging Associates of
Providence, which has facilities in Anchorage and the Mat-Su.

Its Mat-Su facility sits on Woodworth Loop near Mat-Su Regional. It provides
diagnostic imaging services such as magnetic resonance imaging and CT
scans. Mat-Su Regional provides many of these same services.

The law requires health care providers to demonstrate sufficient need in a
community before embarking on new health care projects. Proponents say it
helps keep consumer costs down by weeding out niche providers that might
cherry-pick the most profitable services, such as imaging or surgery, leaving
community hospitals to bear the burden for more costly and generally
unprofitable services like emergency or neonatal care.

INTERPRETING TERMS

At issue is the state’s definition of “physician’s office” and “independent
diagnostic testing facility.”

Understanding those terms has been key in interpreting Alaska’s certificateof-
need law since the Legislature amended the law in 2004. The change
required independent diagnostic testing facilities to obtain a certificate of
need in order to do business. Physicians’ offices, however, remained exempt.

But the 2004 amendments failed to define an “independent diagnostic testing
facility” and failed to clarify the definition of a physician’s office, according to
the state Department of Health and Social Services.

As such, the state has seen a string of appeals to decisions it has made
either requiring organizations to apply for the certificates or exempting them
from the requirement.

Imaging Associates of Providence is among those that have appealed.
The state health commissioner, Karleen Jackson, allowed the organization to
open its Mat-Su facility in June 2006 without a certificate, despite written
protests from Mat-Su Regional, which claimed the facility threatened the
hospital’s financial viability.

The commissioner changed her mind in August, though, after a Superior
Court judge in Fairbanks ruled in favor of Fairbanks Memorial Hospital in a
similar dispute.

That hospital filed suit against Alaska Open Imaging, which opened an
imaging center in Fairbanks without a certificate of need. It opened with the
commissioner’s blessings since she deemed the imaging center a physician’s
office and not an independent diagnostic testing facility.

A Superior Court judge in Fairbanks, however, found the commissioner had
ignored the legislative intent behind the 2004 amendments.

Those amendments were meant to level the playing field between hospitals
and independent facilities, making both groups subject to the same process,
according to the original legal complaint by Banner Health Systems, which
operates the Fairbanks hospital.

After the court’s ruling, the commissioner ordered Imaging Associates of
Providence to apply for a certificate of need for both its Mat-Su and
Anchorage facilities.

Imaging Associates appealed the decision in October, claiming it is a
physician’s office, not an independent diagnostic testing facility. A decision in
that appeal is still pending.

SEEKING CLARIFICATION

The definitions provided in the state’s proposed regulations will do little to
clarify the matter, Ackley said.

Under those definitions, an independent diagnostic testing facility is “a fixedlocation
or mobile outpatient facility that is designed and equipped solely to
perform diagnostic testing using major diagnostic testing equipment for an
independent diagnostic purpose. ...”

Imaging Associates, a partnership with Providence Health System, maintains
that it is owned and staffed by board-certified radiologists who perform
interventional and outpatient care, in addition to diagnostic services, and
should, therefore, be regarded as a physician’s office.

A physician’s office, though, under the state’s proposed definitions, is a place
that is “wholly owned or operated by a licensed physician or group of
physicians as a corporation ... or a partnership” and is “designed and
equipped to provide outpatient medical treatment to its patients.”

That treatment, the definition states, includes treatment that is diagnostic,
therapeutic, rehabilitative, preventative and palliative, under the proposed
regulations.

According to that wording, Ackley said, it seems all five criteria must be met
in order for a facility to be deemed a physician’s office.

“Again, this is an example of language that makes little sense and would
make it nearly impossible to meet this definition,” he stated in written
comments he said he plans to present during a public hearing Thursday on
the proposed changes.

But holding facilities such as Imaging Associates of Providence to the
certificate of need law hurts consumers, according to Chakri Inampudi,
Imaging Associates medical director.

“We own and operate equipment that is equal or more expensive than the
hospital equipment and our charges to the patients and insurance companies
are much less compared to the Mat-Su hospital charges,” he stated in March.

LOWERING PRICES

The competition, Stephens admits, has forced Mat-Su Regional to “cautiously
lower prices” on some of its radiological services. So far, he said, the hospital
has absorbed the losses.

But hospitals, he said, count on profitable services like diagnostic imaging to
recoup losses incurred in providing other services. If Mat-Su Regional
continues lowering prices in its radiology department, it must eventually
“transfer those losses to other departments,” Stephens said.

In other words, when prices go down in one department, they’ll likely go up
in others, he said.

“I’m all for competition,” Stephens said. “If we get to the point where our
radiology department is burgeoning, then sure, let them in.”

But at this point, he said, much of the hospital’s radiology equipment is
underused.