New surgery center to compete with Bartlett Regional

State allows competitor despite initial concerns over certificate of need

Posted: Tuesday, October 14, 2008

A Juneau physician is building an ambulatory surgery center outside Bartlett Regional Hospital, with opening scheduled for early next year.

David Sheakley / Juneau Empire
David Sheakley / Juneau Empire

That's the kind of thing that sometimes scares the daylights out of hospital administrators, but Bartlett's administrator isn't opposing the new center.

That may be a combination of resignation to losing some lucrative orthopedic business, as well as the limited scope of the facility proposed by Dr. John Bursell at 3200 Hospital Drive.

Bursell is proposing to spend $669,260 to remodel space as an operating room to be used for pain management procedures, which typically involve injections to relieve chronic pain.

Bartlett's "operating room isn't really set up for this kind of procedure, which is fairly high turnover," Bursell said.

Bartlett CEO Shawn Morrow largely agreed.

"Pain management is not normally done inside an operating room, a hospital operating room, per se," he said. "We do it here, and we do it well, but it's not quite as efficient" as an ambulatory surgical center designed for the purpose.

Bartlett has a Class C operating room, offering full anesthesia services. Bursell's Class B operating room, the only one in Juneau, will be more limited.

Bursell's plan touches on the battle in Alaska over the Certificate of Need process, which is designed to prevent duplicate or excessive health care facilities.

Gov. Sarah Palin during the last session made repeal of the certificate of need process one of her two primary health care initiatives. The other was cost transparency. Lawmakers fearful of potential impacts on hospitals in their communities didn't act on her proposals.

Morrow was among state medical leaders urging retention of the certificate of need requirements. Hospitals say only a handful of their services are profitable, but those profits subsidize other necessary but money-losing areas of care.

Palin pushed deregulation of health care as a way to bring down medical costs, and said that repealing CON regulations was a way to do that.

Morrow said that a full-service ambulatory surgical center could be "devastating" for the hospital, siphoning off a portion of the customers with insurance but leaving Bartlett with all of the non-paying patients.

The limited operation proposed by Bursell will not do that, however.

"There is a financial impact to the hospital, it's not huge," Morrow said. "It's a financial hit, it's money were not going to have in the future, but it is something we feel we can absorb."

Bursell said his facility was intended to do pain management care, not the actual surgeries themselves, which will continue to be done at the hospital.

Bartlett is working on a major remodel, but Bursell said it wasn't able to include space for procedures such as spinal injections.

"We all agreed that it was more appropriate for that to take place offsite," Bursell said.

Morrow said Bartlett figured it was going to lose that business anyway.

At the same time, Morrow said the surgical department was already "bottlenecked" at times in post-operation beds. Bursell's pain management patients can be more efficiently served in his own facility, he acknowledged.

The Department of Health and Social Services determined that a certificate of need was not required by Bursell, because it did not meet the $1.2 million threshold.

That determination was made on Oct. 2, and while requests for redetermination can be made until Oct. 30, Morrow said the hospital will not oppose the decision.

State officials with the Health Planning & Systems Development section looked at the issue closely, because Bursell is affiliated with the Juneau Bone and Joint Center, which had earlier received approval for Magnetic Resonance Imaging services at the center.

"Phased activities to avoid the requirements of a certificate of need are not allowed," wrote David Pierce, the state's certificate of need coordinator, in a letter to Bursell.

Bursell said it was a separate facility, despite the building being owned by the same company, BBGH Development LLC, which owns the Juneau Bone and Joint Center building.

When the center applied for a certificate of need for its MRI, Bartlett called it a "cover" to compete with the hospital. At the time the hospital said it would likely cost Bartlett $720,000 a year in lost revenue.

The actual ownership of the ambulatory surgery center will be different from the Juneau Bone and Joint Center, Bursell and Pierce said.

"Although the corporate structure has not been entirely put together yet, Dr. Bursell gave us the assurance that they were different, there was not going to be a connection," Pierce said.

Also raising concerns among state regulators was that Bursell inadvertently listed the address of the Juneau Bone and Joint Center on the application, instead of the new facility.

That was just an accident, Pierce said.

The new ambulatory surgery center will not be allowed to gradually exceed the certificate of need threshold, he said.

Bartlett's own orthopedic expansion is underway. The hospital plans to spend $4 million in each of the next two years upgrading its facilities. Morrow said he expects to be able to do that without borrowing any money.

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