Hospital fears injury from Palin plan

Posted: Wednesday, February 13, 2008

Gov. Sarah Palin's plan for improving health care in Alaska could cripple Juneau's only hospital, said Shawn Morrow, CEO of Bartlett Regional Hospital.

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Chief among Morrow's concerns is repeal of the state's Certificate of Need requirements that he said would devastate the state's midsize hospitals. Under current requirements, medical businesses must prove a community need for their services exists before they're allowed to launch operations that would compete with those of a local hospital.

Bigger hospitals may have multiple departments that make money, helping subsidize those that don't, such as running an emergency room and a 24-hour laboratory. Because hospitals are required to provide certain services even to those who can't pay, hospital administrators worry that without a Certificate of Need, a competing business could draw patients away from the hospital's profitable services.

"We don't have eight or nine services that generate a profit," Morrow said. "We have two or three."

The Palin administration wants to drop the Certificate of Need process because it's triggered at least seven lawsuits and the administration says it has found no other way to eliminate these lawsuits, according to Karleen Jackson, commissioner of the Department of Health and Social Services.

Palin already has made some changes to the health care bill she's introduced after hearing concerns about dropping the Certificate of Need program. She originally called for eliminating the certification process because of her desire to reduce health care costs and bureaucracy.

In an interview Tuesday with the Empire, Morrow outlined his concerns about some aspects of Palin's health care reform efforts.

As CEO of two small community hospitals in Oklahoma, a state that does not require certificates of need, Morrow watched 13 hospitals close in seven years, and other cities had to impose sales taxes to keep their community hospitals going.

"The lack of a CON (regulation) was not the sole reason, but it left those hospitals in a financially weakened state," he said.

Palin stunned the Alaska health care community in January when, in her State of the State address, she proposed eliminating the Certificate of Need process.

Legislative opponents to Palin's plan were taken by surprise by her proposal as well, but they've since been organizing opposition.

Rep. Mike Kelly, R-Fairbanks, and Rep. Peggy Wilson, R-Wrangell, have been especially outspoken.

"I do not believe the CON, which has been the rule, and is still the law in 36 states, can just be ripped out from under the system without significant other changes," Kelly said.

Kelly, who spent years on the board of his local hospital in Fairbanks, said the state and federal laws that regulate hospitals and services are so intertwined that removal of just a single one, such as certificate of need, could have far-reaching impacts.

Among the services that are profitable for Bartlett are imaging and outpatient surgery. Among the most costly are operating an emergency room and a laboratory, both of which must be staffed 24 hours a day and don't cover their costs.

Hospitals in communities of 15,000 to 60,000 may have just a few profitable services, and aren't big enough to make money on services that take big capital investments, Morrow said.

"I do think there is a population threshold that is critical," he said.

If a city the size of Juneau were to lose protection provided by the Certificate of Need process, it would likely get competition that would cost it business - and profits, he said.

"Those high margin services are very attractive to investors," Morrow said.

Rep. Bob Lynn, R-Anchorage, said the government should not be making those decisions about services in the first place, even in a mid-size city such as Juneau.

"It just violated basic, capitalistic, conservative values here," he said. "The government in our great wisdom is going to decide what is and what is not needed, instead of the marketplace."

Lynn introduced his own bill to repeal certificates of need in recent years, but has not been able to get it out of committee. He thinks Palin's bill will be more successful, but will still face stiff opposition.

Among the reasons Morrow said he was taken by surprise by Palin was that he'd served on a group convened by Jackson, the health commissioner, to review Certificate of Need regulations.

Jackson said one of her goals with repeal was to end several lawsuits in Southcentral and Fairbanks over the Certificate of Need. Morrow said 90 percent of the group supported keeping the program, but recommended making changes to reduce lawsuits.

"We had passionate arguments on how it should be changed to reduce litigation," Morrow said.

Morrow said the developing opposition to repeal the program has been encouraging.

"It's a very complex issue, but people really seem to be listening," he said.

Another part of Palin's bill, called the Health Care Transparency Act, would put more data, such as cost and quality information, online as a way to improve choice and lower costs.

Bartlett Regional Hospital is supportive of that part of the bill, hospital spokeswoman Michelle Casey said.

"We have no issue with that piece," she said. "It is something we're already doing and it can only help our consumers make better decisions."

• Contact reporter Pat Forgey at586-4816 or e-mail him at

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