ore patients than ever used the emergency room (ER) at Alaska Regional Hospital in 2022. The hospital counted 38,876 patients, an increase of more than 21 percent over the previous high in 2019. Each bed in the department cycled through 2,400 patients during the year, on average.

Other ERs in the city were busier: Alaska Native Medical Center handled 49,550 visits, and Providence Alaska Medical Center saw 58,024. By Alaska Regional’s calculations, Anchorage needs 101 ER beds to meet current demand, which is 17 shy of current capacity.

In response, Alaska Regional submitted an application last May for a Hospital-Satellite Emergency Department (HSED) in South Anchorage, to cover the other side of town. The application notes that Anchorage’s existing emergency medicine capacity is concentrated in a 2-mile radius.

The proposal was to build a 10,860-square-foot facility, estimated to cost nearly $18 million, scheduled for completion by the end of 2024. In addition to twelve emergency treatment rooms, the stand-alone HSED would add five beds for cardiac monitoring, as well as diagnostic X-rays, CT scanner, and ultrasound. Alaska Regional Hospital had proposed a similar facility, plus another in Eagle River, in 2015.

As they did in 2015, state authorities rejected the idea. In October, Heidi Hedberg, commissioner of the Alaska Department of Health, denied the application, citing staff findings that Anchorage has no need for a stand-alone ER. The denial further cited “certain portions of the application that were deficient,” such as a demonstration of stakeholder involvement.

But wait: Alaska Regional Hospital is a for-profit entity, owned by Galen Hospital Alaska as a subsidiary of HCA Healthcare, which operates 186 hospitals and nearly 2,000 other sites nationwide. A private sector business can set up shop wherever it wants, within certain land use regulations. Why must a hospital ask for government permission first?

Because healthcare capacity is regulated by Certificates of Need.

Thirty-five states, including Alaska, have Certificate of Need (CON) programs to determine whether proposed healthcare facility projects can advance—be they new, remodeled, or expanded.

CON laws started appearing in state legislatures in 1964 to address issues relevant at the time: curtailing healthcare inflation, creating equal access to medical care, reducing individual and government healthcare costs, and decreasing mortality rates. Congress followed suit in 1974, passing its own version of CON laws. In 1976, the State of Alaska enacted its version too. By 1980, forty-nine states had fully enacted these types of laws.

The economic principle behind CON laws is that, if left unregulated, hospitals would construct excess capacity in any given market. To fill those beds, hospitals might admit patients unnecessarily or they might raise prices to squeeze more revenue from the customer pool. Thus, hospitals must submit detailed applications to demonstrate the need for a proposed facility, and state authorities—in Alaska, it’s the CON Program within the Department of Health—facilitate public comment and then issue (or deny) a certificate that would allow the project to advance.

However, concerns about CON programs arose and spread quickly. States found increased costs, no change in mortality rates, disparities in rural services, and stagnant innovation. Established hospitals were essentially protected from competition. Furthermore, the application process itself is burdensome, requiring healthcare administrators in Alaska to complete a thirty-seven-page packet and provide up to ninety pages of detailed architectural and engineering schematics.

The federal CON program was repealed with bipartisan support in 1987. Since then, twelve states have repealed and eighteen states modified their CON laws, as of 2022. The Alaska legislature deleted federal requirements from its program in 1991 and passed statutory modifications in 1997 and 2004. No other updates have been enacted since.

The application for HSED had additional obstacles beyond run-of-the-mill bureaucracy. Its configuration as a stand-alone ER, detached from surgical suites, would require patients with intensive needs to be transported via what Alaska Regional Hospital called a “virtual corridor” (free of charge, the hospital promised). The difference is illustrated by the 2015 rejection, which came at the same time that Providence Medical Center was awarded a certificate to add thirteen ER beds to its existing campus.

Another argument is that a South Anchorage ER would be a more expensive level of service compared to other options, such as urgent care clinics or primary care visits. The state says it has an interest in controlling costs because it pays for services via Medicaid.

In her denial letter last fall, Hedberg said the HSED application did not correctly interpret population data or correctly identify the service area, among other criticisms.

According to the CON Program web page, the review process “involves evaluation of plan narratives, relevant data, and architectural designs to remodel, expand, or build healthcare facilities and add new services.” Later, the page also notes, “Demographic projections suggest that Alaskan healthcare services will expand to meet the needs of a growing population, including a much larger senior population. Therefore, circumstances mandate that new and expanded services be planned properly to get the highest quality and most appropriate services possible at the best price.”

Within the application packet itself, further emphases are placed on integration with community, regional, state, and federal health planning; evidence of stakeholder participation; alternative methods of providing services; anticipated impact on existing systems; and demonstration of accessible location. In short, determinations are based on more than the arithmetic of patients per bed. CON also hinge on how well healthcare facility architect-engineer service consultants make an economic argument.

In response to the denial for HSED, Alaska Regional CEO Jennifer Opsut insisted the need for emergency care exists, and she said hospital officials remain focused on enhancing services. Whether that would include a formal appeal of the department’s decision was unclear.

“We have boxes of data that CON laws don’t work in regard to the original idealization of keeping medical costs down,” says Senator David Wilson of Wasilla.

Last session, Wilson introduced Senate Bill (SB) 8 to repeal the state’s CON program. It advanced through the Health and Social Services Committee, but Wilson is concerned that it will stall in the Labor and Commerce Committee in the 2024 session.

“Everyone in Alaska agrees CON laws don’t work,” Wilson says, “but no one here wants to change anything.”

Opposition seems to derive from the complicated nature of healthcare policies and their implementation in general. Health insurance terminology and coverage decisions can be confusing and slippery even to experts in the field. Combine those issues with the sensitive nature of medical privacy, health facilities trending toward monopolies, and other interested parties—like government departments and architect-engineer services—and Wilson is hardly surprised that modifying or repealing CON faces an uphill battle.

“Changing them will take a lot of education and understanding,” Wilson says. “It takes a lot of time to get people moving, but I think momentum is on our side.”

To build his case, Wilson obtained a letter from the US Department of Justice, Antitrust Division last May. The letter states that the division has consistently advocated for the repeal or rollback of CON laws because they “created barriers to entry and expansion, suppressing cost-effective, innovative, and higher-quality healthcare options.” The letter says some companies have exploited CON programs to block competition, denied consumer benefits, and failed to control costs or improve access to care.

This position goes back more than a decade and is generally bipartisan. Wilson points out: “We’ve seen the Obama, Trump, and Biden administrations express their opposition to them.”

The senator can make his case for SB8 to skeptical colleagues as the legislative session resumes this month. A companion bill on the House side was introduced by Representative George Rauscher of Sutton last year, but no hearings were held.

The Alaska CON program received five applications in 2023. Two of the reviews are complete: the HSED application was denied, but a certificate was approved for Mat-Su Regional Medical Center to establish a catheter lab at its hospital.

A certificate was also approved for Aspen Creek Management to establish a skilled nursing facility in Anchorage, but the approval is being appealed. Still pending are applications for Bartlett Regional Hospital in Juneau to expand its ER and for South Peninsula Hospital in Homer to expand its nuclear medicine services, relocate its pharmacy, and co-locate its infusion department with its oncology department.

Such a level of scrutiny is hardly necessary if, say, a restaurant wished to add tables or if a hotel drew up plans for a spa. The business of healthcare, dealing in matters of life and death, must leap through additional hurdles, much like power companies cannot change electricity prices without a go-ahead from the Regulatory Commission of Alaska.

That comparison is apt, as Wilson sees it. “If we’re going to treat healthcare like another entity, we should treat it like a utility,” he says. “When there are issues, we’d have to go to federal regulatory authorities.”

Indeed, repealing Alaska’s CON laws would not wipe away all healthcare regulation. “I just want to level the playing field for healthcare facilities and services,” Wilson says. “I think we all want better quality of services and not just people starting small ambulatory service centers where they skimp on staffing and services and equipment. We deserve to have the right facilities that care for patients while keeping costs down.”