The owners of a Fairbanks medical clinic closed by court order after a competitor filed suit have vowed to take the case to the Alaska Supreme Court.
Alaska Open Imaging Center closed in Fairbanks Feb. 5 in compliance with a state Superior Court order. The order followed a decision in a suit brought by Banner Health Systems, operator of Fairbanks Memorial Hospital.
Banner, which operates radiography services at Fairbanks Memorial, had complained that Alaska Open Imaging needed a state Certificate of Need, a permit issued by the state for health care facilities, to operate its radiographic imaging center in competition with the hospital.
Alaska Open Imaging had said it did not need the state certificate under terms of state legislation passed in 2004, a position that the state Department of Health and Social Services had agreed with.
However, last August, Judge Niesje Steinkruger did not agree with the interpretation of the 2004 law by Alaska Open Imaging and the department. Steinkruger gave the company six months to get the certificate or close shop.
Jeff Kinion, chief executive officer of Alaska Open Imaging, said the action by Banner Health Systems was a move to stamp out competition.
“All of this is an effort by the hospital to protect their monopolistic turf, and it leaves Fairbanks with just one provider for these kinds of services,” Kinion said.
Alaska Open Imaging's prices for services were lower than those at Fairbanks Memorial, he said. Some sophisticated cancer screening tests, for example, were priced at $10,000 at Fairbanks Memorial, but the same test was offered at Alaska Open Imaging for $4,000, Kinion said.
The certificate is a state permit required for health care facilities that make investments of $1 million or more.
Independent diagnostic centers like Alaska Open Imaging were not required to get the state permit until 2004, when the Legislature passed a law extending the permit requirement to independent imaging clinics. However, independent centers owned by physicians, either alone or in group practice, were exempted.
Under regulations subsequently adopted by the Department of Health and Social Services, Alaska Open Imaging felt it was exempted because the company is owned mostly by practicing heath care professionals.
In the August Superior Court decision, however, Judge Steinkruger threw the department's interpretation out, which brought Alaska Open Imaging under the certificate requirement.
Kinion said his company will maintain the center in Fairbanks and retain three employees there while the case is on appeal, but will not be offering services. “We're not going to let our employees or our patients down. We're not giving up on this,” he said.
Kinion's group will also work with two legislators who are sponsoring bills to substantially streamline the Certificate of Need program. One bill is House Bill 4, sponsored by state Rep. Bob Lynn, R-Anchorage. The other is Senate Bill 65, sponsored by Sen. Charlie Huggins, R-Wasilla.
Alaska Open Imaging operates three other independent imaging centers in Anchorage, Wasilla and Soldotna, which were in operation before the 2004 legislation took effect. The Fairbanks center opened last year, after the law became effective.
The litigation and Fairbanks court decision is the latest round in a battle that has raged for several years between the state's major hospital groups and operators of independent medical centers.
The independent operators say they are bringing more competition, and lower prices, to the health care services market, and that the hospital groups have used the state Certificate of Need program as a way to keep out competition.
Getting the permit is a complex and expensive process, and one that the state shouldn't use to preserve the hospitals' monopolies, Alaska Open Imaging has said in the past.
The hospitals' concern, they told legislators in 2004, is that as full-service community hospitals they must offer many services at or below cost, and services like radiographic imaging are profit centers that allow them to make up losses in other services.
The independent centers do not carry the other kinds of overhead that community hospitals do and can undercut the hospitals' charges for many services, the hospital groups have said. In doing so the independents can undercut the finances of the community hospital, it was argued.
Tim Bradner can be reached at
tim.bradner@alaskajournal.com.
