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Imaging Associates of Providence LLC, with offices in Anchorage and on the Parks Highway in the Matanuska Valley, is owned equally by the radiology group and Providence Alaska Medical Center.
State officials say Imaging Associates must obtain a Certificate of Need to operate, because the facilities are independent diagnostic testing facilities and, therefore, health care facilities. Imaging Associates argues the costly certificate is not required in its case, because they constitute offices of physicians in a group practice.
A Certificate of Need is a permit issued by the state to operate health care facilities. It is required for facilities that make capital investments of $1 million or more.
Independent diagnostic centers were not required to get a state permit until 2004, when the Legislature passed a law extending the requirement to independent imaging clinics. Independent centers owned by physicians, either alone or in group practice, remained exempt under that law.
The Imaging Associates case is the latest in a series of economic battles between major hospital groups, who argue they must treat many people regardless of their ability to pay, and operators of independent medical centers, who can choose to serve only those who can pay. Imaging services at hospitals help to make up costs associated with patients who cannot pay.
The scheduling order issued in mid-December by Chief Administrative Law Judge Terry Thurbon, notes that both sides agreed to allow the judge until March 27 to make a decision.
Alaska Commissioner of Health and Social Services Karleen Jackson determined in late September that Imaging Associates required a Certificate of Need to operate, because it is a health care facility under state law and because the project exceeds the Certificate of Need expenditure threshold.
Jackson said it is true that physicians' offices are exempt from Certificate of Need requirements under state statutes. Still, the underlying statute and the department's regulations recognize that an independent diagnostic treatment facility may be co-located with other entities, including physicians' offices, and remain subject to Certificate of Need requirements, the commissioner said.
Chakri Inampudi, medical director of Imaging Associates, disagreed.
Inampudi maintains that their offices, similar to all other physician offices in Alaska, are not subject to the Certificate of Need program. While the practice is equally owned by the radiology group and Providence Alaska Medical Center, the practice is fully managed by the radiologists, Inampudi said.
Jackson specifically noted in a Sept. 22 letter to officials of Imaging Associates that the group's Anchorage facility is substantially similar to the imaging facility formerly operated by Alaska Open Imaging Center in Fairbanks.
Open Imaging closed its doors 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 Certificate of Need to operate its radiographic imaging center in competition with the hospital.
Alaska Open Imaging had argued it did not need the state certificate under terms of state legislation passed in 2004, and the state Department of Health and Social Services concurred.
Last August, Judge Niesje Steinkruger did not agree with Alaska Open Imaging and the department's interpretation of the 2004 law. Steinkruger gave the company six months to get the certificate or close.
At the time of Steinkruger's order, Jeff Kinion, chief executive officer for Alaska Open Imaging, said the action by Banner Health Systems was a move to stamp out competition.
Alaska Open Imaging's prices for services were in some cases substantially lower than Fairbanks Memorial, he said. Some sophisticated cancer screening tests, for example, cost $10,000 at Fairbanks Memorial, and $4,000 at Alaska Open Imaging, he said.
Elizabeth Ripley, a spokeswoman for Mat-Su Regional Medical Center, noted that hospitals are required in many cases to treat patients regardless of their ability to pay, while Imaging Associates and other like business ventures can choose to serve only insured people.
Hospitals are known for adding to the costs of certain services, medications, use of equipment and other items to those who do pay, to make up for debt resulting from unpaid bills.
Kinion's group meanwhile, is appealing Steinkruger's decision, while maintaining Alaska Open Imaging's Fairbanks facilities, but not offering medical services.
Alaska Opening Imaging is also working with legislators sponsoring bills to substantially streamline the Certificate of Need program. One bill is House Bill 4, sponsored by Rep. Bob Lynn, R-Anchorage. The other is Senate Bill 65, sponsored by Sen. Charlie Huggins, R-Wasilla.
Margaret Bauman can be reached at
margie.bauman@alaskajournal.com.
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