Imaging office permit has far-reaching implications

PROVIDENCE: Certificate of need at issue as centers compete with
hospitals.

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

A medical imaging center that sprouted in June within a stone’s throw of Mat-
Su Regional Medical Center sparked a debate that, once settled, could have
ramifications for hospitals and health care facilities statewide. Providence
Health Systems and a group of radiologists own the center, Imaging
Associates of Providence, jointly. It provides radiological evaluations and
screenings, including magnetic resonance imaging, or MRI; computerized
tomography scans, also called CT scans; X-rays; ultrasounds; and bone
density studies, services that Mat-Su Regional just behind it on Woodworth
Loop also provides.

At issue is whether the Providence center requires a certificate of need and
what impact the competition for imaging services will have on patient costs
and the community.

Alaska law mandates that sufficient need exist in a community to warrant
new health care projects, said David Pierce, the certificate-of-need
coordinator. The Legislature in 2004 amended the law, making independent
diagnostic testing facilities subject to certificate-of-need requirements.

Imaging Associates of Providence maintains that it is a physicians’ office
offering diagnostic services, not an independent diagnostic testing facility. As
such, the group claims, it is exempt from the law.

The state health commissioner, Karleen Jackson, initially agreed and allowed
the facility to open without a certificate, despite written protests from Mat-Su
Regional, which claimed the Providence group 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.
The hospital filed suit against Alaska Open Imaging, which opened an
imaging center there without a certificate of need.

The commissioner had deemed Alaska Open Imaging a physician’s office and
not an independent diagnostic testing facility. Like Mat-Su Regional, the
Fairbanks hospital claimed the imaging center threatened its financial
viability.

In the Fairbanks case, Superior Court Judge Niesje J. Steinkruger found the
commissioner had ignored the legislative intent behind the 2004 certificateof-
need amendments.

That intent was 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.

The commissioner, citing Steinkruger’s ruling, ordered Imaging Associates of
Providence to apply for a certificate of need for both its Mat-Su and its
Anchorage Abbot Road facilities. The Providence group appealed and
requested a hearing.

The merits of Alaska’s certificate-of-need law have been debated for years.
About 75 percent of the states have similar laws, Pierce said.

Proponents say the process 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 emergent or neonatal care.
That competition, they argue, would force hospitals to raise prices to cover
the costs of underused beds and equipment.

Opponents say the law limits patient choice and actually leads to medical
monopolies. Gov. Sarah Palin during her 2006 campaign advocated doing
away with the certificate-of-need program as a way of promoting
competition.

Mark Ackley, Imaging Associates of Providence’s chief executive officer, said
his group’s primary focus is to provide choice for patients in communities
that might be underserved. In general, he said, “the quantity of services
does not drive prices up.”

But the Mat-Su core area is not underserved, says Elizabeth Ripley, Mat-Su
Regional director of marketing. Alaska Open Imaging runs an office in
Wasilla, and Mat-Su Regional operates two facilities: one at its outpatient
center on Bogard Road and one at the hospital.

Neither of the hospital facilities is fully utilized, Ripley said.

She said Mat-Su Regional, along with hospitals around the state, is anxiously
awaiting a decision in the Providence hearing – a decision that Stacie Kraly,
the chief assistant attorney general, said should come sometime in March.
“We’re hoping to find some clarification as to how these facilities will be
identified in the future,” Kraly said.