MINUTES OF THE SENATE COMMITTEE ON HUMAN RESOURCES AND FACILITIES Sixty-eighth Session May 22, 1995 The Senate Committee on Human Resources and Facilities was called to order by Chairman Raymond D. Rawson, at 1:45 p.m., on Monday, May 22, 1995, in Room 226 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Senator Raymond D. Rawson, Chairman Senator Sue Lowden, Vice Chairman Senator Maurice Washington Senator Kathy M. Augustine Senator Joseph M. Neal, Jr. Senator Bob Coffin Senator Bernice Mathews GUEST LEGISLATORS PRESENT: Senator Mike McGinness Assemblywoman Gene Wines Segerblom Assemblyman P. M. "Roy" Neighbors Assemblyman Dennis Nolan STAFF MEMBERS PRESENT: Kerry Carroll Davis, Senior Research Analyst, Legislative Counsel Bureau Linda Chapman, Committee Secretary Mary Gavin, Committee Secretary OTHERS PRESENT: Guy Rocha, Administrator, State Archives and Records Andrea Engleman, Lobbyist, Nevada State Press Association Rachel Nicholson, Administrative Counsel, Nye County W. Wayne Perkins, Nye County Commissioner Daniel C. McArthur, Certified Public Accountant William L. Offutt, Nye County Administrator Marie Soldo, Sierra Health Services Bill Welch, Nevada Rural Hospital Project April Townley, Deputy Administrator, Nevada Medicaid, Welfare Division Chairman Rawson opened the hearing on Assembly Bill (A.B.) 36. ASSEMBLY BILL 36: Revises provisions governing inspection of certain records in state archives. (BDR 33- 1115) Assemblywoman Gene Wines Segerblom told the committee A.B. 36 relates to the state archives and is necessary for those who do research. She said she was especially interested in section 2, because a young author in Boulder City, named McBride, who does research and writing discovered he could not get any information from the archives until 50 years had transpired, and he will probably be dead in 50 years. She stated this bill shortens the time frame to 30 years. Mrs. Segerblom stated the Governor's Office and the state archives assisted her on section 1. Guy Rocha, Administrator, State Archives and Records, testified he worked closely with Mrs. Segerblom, the Nevada State Press Association, and the Assembly Subcommittee onGovernment Affairs on A.B. 36. He stated there are two components of this bill, and pointed out section 1 deals with the governors' constituent mail. He stated the first reprint of the bill focuses on access to constituent mail in less than 10 years. He explained one must currently either receive consent from the person who sent the letter or demonstrate that person is dead before a letter can be released unless personal information is redacted. Mr. Rocha stated after 10 years all constituent letters are available for public inspection. He added the initial legislation dates back to 1983 and provides that any constituent mail from a private individual to a governor, going back to territorial Governor James Nye, could not be released to any researcher without proof that the writer was dead or had given his permission. Mr. Rocha told the committee the state archives were inundated with work on a lawsuit on the part of the McClatchy chain against Paul Laxalt, which related to gaming associations. They wanted to look at Governor Laxalt's records, and the state archives staff spent weeks redacting those letters to prevent the identification of individuals who had communicated with him as governor. He testified the state archives staff has been cut back tremendously, and spent weeks accomplishing the task. He said section 1 provides relief from some of those major requests, except in the first 10 years where they continue to use the practice of redacting. He told the committee the current system is very frustrating for the research community, and it is the opinion of the state archives that section 1 will provide relief for their staff as well as for the research community. Vice Chairman Lowden asked Mr. Rocha how the state archives deems something to be legally confidential, and further asked how that determination is made. Mr. Rocha replied records are deemed confidential by statute, and is a public policy issue determined by the Legislature. He stated, in section 1, the issue is that private individuals send those letters, and there is a presumption on the part of some individuals that they have a privileged communication with the governor, and will not find their letter open to the public at a later date. He said, whether that is a legitimate concern or not, the presumption is that they will have a certain degree of privacy. Mr. Rocha maintained once the letter is sent, it becomes the property of the state. He told the committee they tried to reach a balance in the Assembly Subcommittee on Government Affairs with regard to a "cooling off period." He said they would protect this presumed right of privacy on the part of the constituent for the first 10 years. He explained a presumptive right is associated with common law rather than statutory law, and added the judiciary has the capacity to order records sealed. Vice Chairman Lowden asked Mr. Rocha if, when a governor leaves office, he leaves personal records behind. Mr. Rocha answered in the negative, but stated they leave the governor's executive records behind. He explained those records generated in transacting the business of the Governor's Office, according to the 1983 law, are deemed public property. He stated Nevada requires outgoing governors to transfer those records to the state archives, but noted personal papers may be donated at the prerogative of the governor. Vice Chairman Lowden asked Mr. Rocha how a governor decides, which constituent letters are personal and which are so-called public records. Mr. Rocha answered constituent mail is generally considered casework where individual staff members are assigned follow-up. He insisted if staff members are paid public money and use public time to address those issues, those letters rightfully fall under the public domain. Senator Neal asked Mr. Rocha if letters of criticism would be protected by this bill Mr. Rocha replied, "For 10 years. Right now, under the existing law, they are protected in perpetuity unless you say someone can see them or we can prove that you are dead." Mr. Rocha asserted this bill makes those letters more readily available. Senator Neal asked Mr. Rocha if he knows how other states handle this issue. Mr. Rocha replied each state treats them differently. He said he considers the Nevada law very progressive in that the governor's executive records are deemed public property and must be turned over to the state archives. He said most states allow their governors discretion to do whatever they choose with them. He said Nevada has taken the position that those records are the people's property, and should be subject to disclosure at the appropriate time. Senator Neal asked Mr. Rocha what he believes the law should be in this area. Mr. Rocha replied he is satisfied that his department can live with... Senator Neal interrupted saying, "I'm not asking if you are satisfied with what you can get. I am asking what you think the law should be." Mr. Rocha replied he thinks the law should be more open. Mr. Rocha explained section 2 relates to a constituent of Mrs. Segerblom who was doing research on the first homicide in Boulder City. He said the person who committed that murder was subject to spousal abuse, and left a large manuscript giving insight into her life and situation. He stated when Mrs. Segerblom's constituent first approached the archives, they could not release that prison inmate case file because it required both her death and 50 years to have transpired, whichever comes later. He said, at the time of the request, the archives determined that she had died in 1952, and also that she had been released from prison to the state mental hospital in approximately 1939. He stated, since it did not come within the statutory limit, the researcher had to wait for a period of years until the archives could provide him the information. He said the constituent was encouraged, contacted the murderer's family who was willing to cooperate, but said he still needed the state mental institute records. Mr. Rocha told the committee the archives could not release those records because 50 years had not elapsed since her file was closed at the state mental hospital. He stated the constituent inquired as to why the archives protect those records, and they told him they are sometimes concerned with third party information. Mr. Rocha said he believes 50 years errs on the side of privacy. He said 30 years protects individual privacy, particularly third party privacy such as psychologists, psychiatrists and others who may be in jeopardy, but thinks this bill strikes a balance between those who stand to gain and those who may suffer. Andrea Engleman, Lobbyist, Nevada Press Association, told the committee she has worked for months on this piece of legislation which looked quite different when it was first introduced. She said the committee has before them a compromise to which all involved parties agreed. She stated the Nevada Press Association supports it, although it is not as open as they would like, neither is it as closed as other people would have liked. Senator Neal asked Ms. Engleman if she would mind if they shaved 5 years off of the proposed amendment. Ms. Engleman responded that Congress has just put the time limit for records in the National Archives at 25 years, and is looking at 20 years next year. She said she believes Mrs. Segerblom is going to come back next session and request that the time period be changed to correspond with the national standard. Senator Coffin asked Ms. Engleman what kind of records the Congress is talking about. Ms. Engleman replied all records that go to their archives. Senator Coffin asked Ms. Engleman if that could be the papers of a member of Congress. Ms. Engleman replied she is not sure. She told Senator Coffin there is a list of what goes to the archives. Mr. Rocha told the committee that the papers of a member of Congress are treated as personal property under federal law, and are generally deposited throughout the country. He stated many of the papers of former Nevada representatives are at the University of Nevada, Reno, special collections, or the University of Nevada, Las Vegas, special collections. He asserted that is currently negotiated between the legislator and the repository. He explained the records Ms. Engleman referred to are the executive branch records at the federal level. He said Congress did not address the Supreme Court or the judiciary. Senator Coffin asked Mr. Rocha to explain how privacy can be protected without stifling correspondence. Mr. Rocha said their concern with the 1983 law is that every constituent letter going back to territorial Governor James Nye, in 1861 is treated in the same manner across the board. He said that means if the archives have a letter from 1862, and a researcher came into the archives and wanted a copy of the letter, they would have to require proof that the person is dead or granted permission to release it, which paralyzes research. Ms. Engleman maintained there are 295 exemptions to Nevada's public records law and 90 percent of the governor's correspondence and correspondence sent to state agencies falls within those 295 exemptions and remain confidential. Senator Neal asked Ms. Engleman, other than the privacy of the individual who wrote a letter to the Governor's Office, what public purpose should the committee be concerned with in either amending this statute or getting rid of it altogether. Ms. Engleman replied one of the issues is the release of information relative to public safety. She said much is contained in public records that affect people's health, including radiation testing done on human beings which was kept secret until this year. Senator Neal said he understands that and requested that Ms. Engleman just answer the question: "Given the fact that you are going to store these particular records, but in terms of the time limit, whether or not they should be made available, you know, as soon as the governor, or whoever, left office. You know, what is the public purpose, you know, of 30 years, you know, versus 50, or 2 years versus 30." Mr. Rocha replied there are two issues here. Section 1, the presumption on the part of the constituent that when they communicate with the governor, or a senator, that communication is privileged... Senator Neal interrupted saying everyone has a key to his office, the guards, the security, the attaches; everybody walks into his office. Mr. Rocha insisted the state archives try to secure their facility. He reiterated section 1, is an attempt to strike a balance between the governors' concern about releasing information too readily and the public's right to know. He said the 10- year figure was a compromise between the Governor's Office and the Assembly Subcommittee on Government Affairs, working with the Nevada Press Association; they all agreed that they could live with 10 years. Mr. Rocha stated section 2 attempts to strike a balance between the need to protect third parties from possible acts of retribution and the public's right to know. Senator Neal said he can understand that part of it, but what he is having difficulty with is an individual writing to the governor and asking him to take action in that capacity. He said those records should be open to the public because that right of privacy is somewhat tainted by the public action which is requested of the governor. Ms. Engleman replied she could not agree with Senator Neal more. She said it is her contention that the correspondence the governor receives that is not exempted by one of the 295 exemptions in the public records law should be public information. She said they did agree that someone would have to know about a letter in order to request a copy of it, but, if, for instance, a prominent person in this state wrote a letter to the governor asking him to veto a certain piece of legislation, it is her belief that it should be public information. She contended information which they all agree should be confidential is probably covered by one of the 295 exemptions. Mr. Rocha said Senator Neal made a valid and compelling point, and other states deal with this issue in a number of ways. He said his colleague in Oregon has the authority to in camera review each record and make a decision. He said Nevada does not take into account the in camera case analysis, and that is the shortcoming of this legislation. Senator Neal said he thinks the committee needs to look at this issue, and probably give the archivists some authority to examine certain records in camera and make the determination as to whether or not they should be released. Senator Coffin said he hopes Chairman Rawson does not call the bill up for a vote at the present time because he would like to think about it. He said he is someone who corresponds with people, and thinks 30 years is the blink of an eye in a person's lifetime. He said 50 years is an old number for obvious reasons, even though people had shorter life spans 50 or 60 years ago. He said he needs to find out if, for example, under this provision, he sent a letter to Governor Mike O'Callaghan in 1971 on a controversial issue, and in Senator Coffin's late 50s that letter would become public record. He said not every piece of correspondence should be the public's business, and feels it would stifle public intercourse. Senator Augustine said she read some discourse in the newspaper that some past governors are opposed to the 10-year provision in section 2, subsection a. Ms. Engleman told the committee, prior to this bill being heard, she checked with former Governor O'Callaghan and other former governors, and pointed out this legislation does not affect the previous agreements former governors had with the department of archives. She said Mike O'Callaghan has released certain of his records to journalists ever since he left office. Senator Augustine stated the problem is: former governors were given that discretion, which will not change, but the governors from Governor Miller forward will not have that privilege. Ms. Engleman told the committee Governor Miller's office was involved in the discussion on this legislation. Mr. Rocha said much of the policy relative to the discretion governors previously had evolved because there was a lack of direction, and the archives staff has had difficulty contacting certain former governors or members of Congress. He told the committee Governor O'Callaghan has been extremely responsive, but former Senator Paul Laxalt has been nonresponsive. He said they must rely on former chief executives, or their designee to communicate with them, and they find that piecemeal at best. He said it has been his longstanding position that once a public official is out of office his control over those documents should cease. Vice Chairman Lowden told Chairman Rawson she does not have a problem with this bill and is ready to go forward; but thought Senator Neal had an amendment changing it to 25 years. Senator Neal said he would like to look at the Oregon law before taking action on this bill. Senator Coffin said he wants to make sure they understand the papers of a governor include the papers of the citizens as well, and he is not so much interested in protecting a public official as he is the person who wrote the letters. He reiterated he does not want to stifle that intercourse. Chairman Rawson said they would allow the staff time to review the Oregon law before acting on this bill. He closed the hearing on A.B. 36, and opened the hearing on Assembly Bill (A.B.) 436. ASSEMBLY BILL 436: Authorizes the board of county commissioners in certain counties to serve as the board of hospital trustees. (BDR 40-1396) Senator Mike McGinness testified A.B. 436 was introduced by Assemblyman P.M. "Roy" Neighbors. He told the committee he is aware of the financial difficulties Nye County Hospital is experiencing and several people from Nye County are present to testify thereto. He suggested all rural hospitals are facing crises in providing frontier medicine. He stated he is aware of the frustrations of the Nye County Commission which is ultimately responsible for the acts of the hospital and the welfare of the hospital, but do not have the authority to control the expenses. He opined, after going over this bill with the representatives of the hospital, there are sufficient safeguards in the bill to protect current boards if they are properly executing their jobs, but there are enough triggers that will allow takeover by the county commission if they are not. Chairman Rawson asked Senator McGinness if this is currently the law for the larger counties. Senator McGinness answered in the affirmative, and added this bill will just extend that privilege to the smaller counties as well. Chairman Rawson asked Senator McGinness if there is any reason why this bill should not be passed. Senator McGinness said he is not aware of any. He stated the county commissioners are ultimately responsible and feel that if they have the ultimate responsibility, then they should also have the control. Chairman Rawson said he thinks it can be argued that they may not get a better level of expertise as far as managing a hospital, but it will bring it down to those who are accountable for it. Senator McGinness reiterated that there are sufficient safeguards in the bill. Chairman Rawson said he thinks the committee can see from some of the larger counties' experience that hospital administration is a significant issue. He said it is especially difficult if they have indigent responsibility. He said there are going to be some unfunded issues, and he is not sure that they do any real service to the people of the county in doing this, but at least there is a note of accountability, and on that basis he can support it. Senator McGinness said the county commissioners are not overjoyed at the prospect of running the hospital either; they would much rather not have to do it. Chairman Rawson said probably the best action that the county could take is to hire a good manager or management firm to take care of it. Senator Augustine told Senator McGinness that she was on a committee which heard a similar bill, and is wondering if there is a representative of the hospital, because the problem was that the county was not paying the hospital for indigent care, and the hospital was losing thousands and thousands of dollars providing services and could not recoup the money from the county to pay for those services. She said she knows that is what precipitated this whole thing, and is wondering if there is someone from the hospital here today. Senator McGinness answered in the affirmative. Rachel Nicholson, Nye County Administrative Counsel, and Hospital District Counsel, said she is not sure what time frame Senator Augustine is referring to. Senator Augustine stated it was 2 years ago. Ms. Nicholson told the committee the Delapeza No. 1 case "came down" which raised a question about funding by the county for visits to the emergency room for people who were not indigents. She said the first Delapeza case found the county is not required to pay for anyone except indigents. Ms. Nicholson said the second Delapeza case was decided and made it more difficult for the county to deny payment on the basis of lack of indigency because the hospital proves, at a basic level, that a person is indigent, the burden falls on the county to prove otherwise. She said, at this point, Nye County is not only fully funding its indigency program, but in the last 8 months the county passed a new ordinance and regulations having to do with making the indigency level much more generous for the hospital, specifically to help the hospital, and to pump more money into the hospital. She said, at one point about 2 years ago, the county had been paying approximately $18,900 a month on a contract rather than paying by statute for indigent care. She testified, after the Delapeza case, they stopped doing that, but said they do fully fund the indigent program, and also meet all other requirements having to do with payment for indigent care at the hospital. Senator Augustine stated that was the problem; the county was getting the money from the state for indigent care, but it was not being passed on to the hospital. Ms. Nicholson frankly disagreed with Senator Augustine. She said she does not believe there was ever any state money which was not passed on to the hospital. She said Daniel McArthur, the hospital district's independent auditor, will tell the committee the amount outstanding, pending the determination of indigency, is approximately $60,000, and net receivables are $3 million. She reiterated indigency is not the problem here. Senator Augustine said she will dig up the bill because she knows it dealt with the Nye County Hospital and the county commissioners. Chairman Rawson stated the issue is: they had some uncompensated care, and asked Ms. Nicholson if that is not the problem. Ms. Nicholson stated that is true. She said there was a question, which was the issue of the Delapeza case: whether or not the county was responsible for paying all unpaid bills, or whether they were responsible for paying only those unpaid bills by indigents. Chairman Rawson said he would like to narrow the scope of the discussion a bit. He surmised if we are talking about an unfriendly takeover by the county commissioners, then the committee wants to hear that, but if that is not the case, the focus should be on the real issue. Assemblyman P.M. "Roy" Neighbors, Assembly District 36, told the committee the Nye County Hospital is having severe financial problems. He said three sessions ago, when the Legislature did away with the emergency sales tax fund, they gave the county $400,000 so the hospital could pay the money they owed the Public Employees' Retirement System (PERS). He said Nye County gave the hospital another $400,000 last year. He told the committee, when the management company left a few years ago, he went to the Governor and the Interim Finance Committee to get them money. He said the auditor will tell the committee that Nye County Hospital may go into the hole as much as $1 million. He pointed out when he was the Nye County Manager these concerns were raised and he asked the board of the county commissioners to ask the attorney general what the responsibility of the county is. He said the attorney general ruled that the county commissioners, even though they have no say, are responsible for the actions of the doctors, the bills and everything else. He said they have a hospital district which does not go into Pahrump which is the largest, fastest growing area of the county. He emphasized, every time there is a bailout, it is paid by the entire county, not just the hospital district. He asserted there was no opposition to the bill in the Assembly. He said Clark County requested an amendment on page 3, line 7, which states, "In counties where the board of county commissioners is the board of hospital trustees, the board of hospital trustees may appoint a hospital advisory board which shall exercise powers...", in other words, they want to be able to appoint trustees, but they still want to have the ability to take control if certain conditions exist. He maintained that was the only issue brought up by Clark County. Mr. Neighbors told the committee the Nevada Rural Hospital Project (RHP), of which Phil Welch is the director, had some concerns with the bill. He said they worked together with the legal counsel of the Legislative Counsel Bureau to work out certain conditions. He assured the committee the county commissioners do not want to be in the hospital business, but asserted if the hospital goes in the hole $1 million next year the county cannot keep bailing them out. He said the conditions that Mr. Welch wanted in the bill will provide for certain things to happen financially before the commissioners could even consider doing what Clark County already does. Chairman Rawson told Mr. Neighbors the counties have responsibility for indigent care, and presumably they are treating those patients, or they would not be $1 million in debt. Mr. Neighbors said indigent care expense is just a part of the problem and pointed out, even though this bill has been in the mill since January, the Nye County Hospital Board has not had a meeting to discuss this issue. Mr. Neighbors told Senator Augustine the issue she mentioned had to do with emergency room care. He mentioned the hospital administrator called it the "sweetheart" contract. He explained the counties have taken the position that if somebody goes into the emergency room, and the hospital tries unsuccessfully to collect, the county is responsible for payment. He said there was a court decision which indicated it was never the intent of that bill to have the county pay for deadbeat, non-indigent patient care. He said even if the county had continued to pay for those charges, there is no way the county could meet the kind of losses the hospital had. Mr. Neighbors said even though the hospital reported a $300,000 loss last year, that figure did not take into account the $400,000 that the county gave them 4 or 5 months ago. He said he believes the county commissioners can make the hard decisions to bring the hospital back to financial stability. Senator Augustine asked Mr. Neighbors if the board of hospital trustees are elected. Mr. Neighbors answered in the affirmative. He said they are elected by the district. Senator Augustine stated they will officially be out of office if the county commission takes over. Mr. Neighbors replied, that is right, unless the... Senator Augustine interrupted, asking "Do you think that is right, if they are elected by the people in the county, that all of a sudden they are out of office because the Legislature takes them out of office?" Mr. Neighbors said he feels if they are not doing the job then maybe they should be removed from office. He asked Senator Augustine how serious it will be if Nevada loses that rural hospital because the county cannot continue to pay $700,000 to $1 million a year for something over which they have no control. He insisted that is the critical issue. Senator Augustine told Mr. Neighbors it was not just indigent care. She said a couple of doctors testified that they are the only game in town when one is traveling on Highway 95. She point out that this bill would affect many other hospital districts throughout the state besides Nye County Hospital, so conceivably every county in the state except for Clark County could put their board of trustees out of business. Mr. Neighbors replied, if Senator Augustine reads the bill, she will realize that certain conditions would have to be met before the county commissioners could exercise that power. Ms. Nicholson asserted the legislation as proposed is perfectly clear: a three-pronged test must be passed. The board of commissions would have to make three independent findings: one, they would have to find that they had fully funded their indigent care fund; two, they would have to make a finding that they had fulfilled their duty to reimburse for indigent care; and, three, they would have to make a finding that at least one of the very serious financial conditions existed. She reiterated it is not a whim to say that a hospital's accounts payable are more than 90 days past due, or any of the other three options. She said the Nye County Hospital District has met those prongs. She maintained the county gave them $400,000 last fall because the electric company called the county and said they were going to turn off the electricity to the hospital. She stated that is a serious financial condition, and this is not about a board that is doing a great job, and has no serious financial mismanagement. Senator Augustine said she thinks even 90 days is a short period of time. She said many businesses have accounts payable for more than 90 days. Chairman Rawson suspended the hearing on A.B. 436, and opened the hearing on Assembly Bill (A.B.) 105. ASSEMBLY BILL 105: Requires each school district to provide for instruction relating to violent and other crimes. (BDR 34-1144) Assemblyman Dennis Nolan told the committee A.B. 105 was originally intended to give the local school districts the opportunity to include, within an existing course of curriculum at the secondary level, education on crime and punishment, including a component which addresses the psychological and physiological effects on victims. He stated there are several bills before the Legislature this session which address the issue of juvenile crime, and increasing the penalties therefor. He opined, despite the efforts of the Legislature, there is an ever-increasing number of crimes committed by juveniles. He said it is his belief there are certain juveniles which society will never have to worry about because their moral upbringing will prevent them from ever developing a life of crime, and some who, despite the efforts of society, will not be dissuaded from a life of crime, but the vast majority are impressionable youth, and this bill targets those individuals. Chairman Rawson asked Mr. Nolan which version of the bill he prefers. Mr. Nolan replied the first reprint of the bill. He said A.B. 105 passed the Assembly Committees on Education and Ways and Means with Amendment Number (No.) 370. He explained Amendment No. 370 eliminated the fiscal note, placed the curriculum under the framework of American government, and added a provision to teach the law and its effects on the individual. He stated the amendment made the teaching of the physiological and psychological effects upon the victims and their families permissive. He explained local school districts will be required to develop a curriculum which can be as detailed or limited as the district sees fit. Additionally, Mr. Nolan pointed out the Nevada District Attorneys Association testified they would be willing to assist the individual school districts in developing curriculum at no cost. He insisted there is no fiscal impact with this amendment. Mr. Nolan pointed out the Assembly heard testimony from Henry Etchemendy, Executive Director, Nevada Association of School Boards (NASB), in opposition to the original bill, but he, Douglas Byington, Legislative Specialist, Nevada Association of School Administrators, and the Clark County School District all "bought off" on the original amendment which is... Chairman Rawson asked Mr. Nolan if he recommends the first reprint. Mr. Nolan responded in the affirmative. He said the second reprint was passed off the floor and was an amendment that was brought very late, and passed by one vote, and added it was not a partisan effort. Senator Augustine stated this bill establishes a requirement for a course of instruction, and believes it would require a fiscal note. Chairman Rawson clarified that since the course of study is already in place, of which this would be a part, it would not require additional funding. Mr. Nolan confirmed Chairman Rawson's observation. He referred the committee to Exhibit C which demonstrated that point. Chairman Rawson closed the hearing on A.B. 105 and returned to A.B. 436 for further hearing. Daniel McArthur, Certified Public Accountant (CPA), Independent Auditor, told the committee he is performing an independent audit for Nye County and the Nye County Hospital District. W. Wayne Perkins, Nye County Commissioner, read his written testimony (Exhibit D) to the committee. Chairman Rawson asked Mr. Perkins to describe the hospital trustees. He further asked Mr. Perkins if they are average people within the community. Mr. Perkins responded they are good people; four business people and a couple of professional ladies. Chairman Rawson surmised they are all interested in having a quality hospital. Mr. Perkins confirmed Chairman Rawson's observation. Chairman Rawson further surmised the hospital trustees want more services. Mr. Perkins concurred and added they have a problem with cutting costs, specifically contract changes with the doctors because they fear running the doctors off and jeopardizing their good health care. He stated Nye County does have good doctors. Chairman Rawson asked Mr. Perkins to convey the feeling of the community with regard to this change. Mr. Perkins told the committee the community is fearful that they will lose the hospital. He stated they can see the problems, too, and want to keep the doctors. He suggested if each person was asked whether he is willing to pay more money to keep the doctors there, and keep the hospital open, he would probably say, "No." He further suggested if each person was asked whether he wants to give up the hospital, he would probably also say, "No." He opined those who do not care or are in favor of something usually are not the ones to vocalize; only those who oppose the change come forward. Chairman Rawson told Mr. Perkins he will run into those same types of reactions when it comes to the choice of paying more for care or cutting back on services as well. Mr. Perkins asserted the Nye County Commission is not afraid to make changes, or make decisions in a positive manner. Chairman Rawson said the concern from the state's standpoint is the trauma network. He stated if the hospital in Nye County closes because of actions taken by the county commission, it would jeopardize the people on the state's highway between the two principal cities. Mr. Perkins surmised the hospital will close within a few months if positive action is not taken to make the necessary changes. He added the doctors have very lucrative contracts, earning between $250,000 and $300,000 per year. He said the commission feels they can hire competent staff doctors to work for the hospital for between $150,000 and $175,000 per year. Chairman Rawson asked Mr. Perkins if the county commission would allow the current doctors to accept a proposal of that nature before replacing them. Mr. Perkins answered in the affirmative, and reiterated, "They are good doctors." Senator Augustine asked Mr. Perkins if the board of hospital trustees is elected by the people of the county, and is not performing its job, why has the county not held a recall for those elected officials. She commented this is dangerous territory for the Legislature to allow the county commission to remove elected officials from office, even if the specified criteria are met. She reminded Mr. Perkins this bill affects every county in the state. Chairman Rawson explained the question before the committee is whether the Legislature should grant the authority to the counties to handle this matter in the manner described in the bill. Senator Augustine insisted hospital trustees elected by the people should not be removed from office without a recall. Ms. Nicholson pointed out the board of hospital trustees is not elected by the entire county's population. She explained there are two different hospital districts within Nye County. She explained the Pahrump Community Hospital District is the other county hospital district where 60 to 70 percent of the population of the county resides. She testified those people are becoming increasingly upset with the fact that General Fund monies are going to support Nye County Hospital. Ms. Nicholson told the committee she did a study on the constitutionality of removing elected officials from office, and insisted the case law is fairly clear: if the intent is to oust a particular public official from a particular job because of a specific prejudice, that would not be constitutional. However, in this case the intent is not to remove any particular person, but rather to get rid of what has proven to be an ineffectual institution. She asserted the hospital board of trustees has been ineffectual as a county hospital board for at least 12 years since its inception. Ms. Nicholson noted there was a suggestion that the best thing the county could do would be to hire a management firm. She pointed out Nye County spent about $1 million on the last management firm who left in the middle of the night, and the county is not likely to seek out another management firm. Senator Augustine asked Ms. Nicholson if the problem has been ongoing for 12 years, why the county commissioners did not dissolve the hospital board of trustees last November by putting it on the ballot and letting people decide. Ms. Nicholson said she knows of no statute that would allow them to put that issue on the ballot. She assured the committee they examined all possible solutions to this dilemma. She stated the Nye County Hospital District came into existence by way of resolution and then ordinance, and said they could have dissolved it in that manner, but the problem is: "What happens then?" She reiterated they are dealing with a county which has two different hospital districts, and if the Nye County Hospital District is dissolved, the tax rate that is set for that district would have to be spread out over the whole county. She surmised the people in Pahrump would then be entitled to a rebate for double taxation, and the Nye County Hospital would end up with only a fraction of its current tax revenues. She said they looked at all possibilities, but there was no way to do it and sustain the tax rate in a manner beneficial to the hospital. Ms. Nicholson insisted all options considered would have created more problems than they solved. Senator Neal told Ms. Nicholson, as he understands her testimony, the Nye County Hospital District constitutes all of Nye County with the exception of Pahrump. Ms. Nicholson explained Nye County has two hospital districts; one encompasses all of Nye County except for Pahrump and Amargosa Valley; the other is Pahrump Community Hospital District which does not include Amargosa Valley either. Senator Neal asked Ms. Nicholson if she is essentially talking about the city proper of Tonapah. Ms. Nicholson replied the Nye County Hospital District includes Tonapah, Round Mountain, the Great Smoky Valley and the Little Smoky Valley, and all of northern Nye County. She said the Nye County Hospital also draws patients from parts of Esmeralda County including Fish Lake Valley and Goldfield. Ms. Nicholson mentioned the hospital nearest to Nye County Hospital is in Bishop, California. Senator Neal asked Ms. Nicholson if the hospital in Bishop is comparable in size to the Nye County Hospital. Ms. Nicholson replied the Bishop hospital is larger than the Nye County Hospital. Senator Neal said he noticed Ms. Nicholson listed the county commissioners as "ex-officio." Ms. Nicholson explained that language was picked up from the original language having to do with Clark County. Senator Neal said: I noticed that it was in the Clark County language, but I didn't understand why it was there either, because when it said...that the county commissioners would...serve as the hospital trustee board. Now, these conditions that you have in the bill which would permit you to become the ex-officio operator of the hospital, you kind of put this in like, for instance, the county has fulfilled its duty to reimburse the hospital for its indigent care provided for qualified indigent patients, and at least one of the hospital accounts payable was more than 90 days in the rear. Why do you have such language as that? Ms. Nicholson replied the language came from the Nevada Rural Hospital Project (NRHP). She explained Bill Welsh asked for some kind of safeguard triggers preventing the commissioners from taking over a hospital where detrimental financial conditions did not prevail. Senator Neal said, "Oh! These conditions have to be found first before..." Ms. Nicholson interjected, "At least one of those four, under c, would have to be found before the commissioners could pass the ordinance." Senator Neal said, as he understood the bill, it did not seem to him, if the Legislature passed this bill, that they would immediately take over. Ms. Nicholson pointed out that before the ordinance would be passed by the county commissioners, those three findings would have to be made. Senator Neal asked Ms. Nicholson who wrote A.B. 436. He observed the language in the beginning of the bill modifies the language that follows, which is the opposite of how it usually is. Ms. Nicholson told Senator Neal the Legislative Counsel Bureau worked with them in drafting the bill, and reiterated the language in section 3 came from the NRHP. Senator Neal said Senator Augustine raised the question concerning the termination of the trustees' obligation to serve on the hospital board, and said he gathers her answer to that question is that they remove the board, and when they remove the board, they have no place to serve. He asked her if his understanding is correct. Ms. Nicholson replied that issue is addressed in the bill. Senator Neal interrupted Ms. Nicholson saying: We cannot pass an ordinance to eliminate...the trustees, you see. I think you framed the issue very well. You can eliminate the board, and thereby the trustees do not have any place to serve, but you got in the bill here...is that on line 44 or 43, 'if the hospital trustees have been elected pursuant to subsection 1, the term of office of each hospital trustee of the district who is serving in the capacity on the effective date of the ordinance is terminated,' and you are an attorney, are you not? Ms. Nicholson responded in the affirmative. Senator Neal said, "That particular language put into this particular bill, I think it might give you some trouble if you got a group of trustees out there who are going to fight this." Ms. Nicholson explained she thinks this type of language is absolutely supportable as long as... Senator Neal interrupted again, saying, "You are making it [s]pecific to a group of individuals, and, see, we cannot pass a law that would point to a [s]pecific person in a [s]pecific county, as it would be in this particular case, because we are constitutionally forbidden from passing special legislation." Ms. Nicholson declared this is not special legislation; it applies to every county which has a population of less than 400,000 which is every county in Nevada except Clark County, which already has that power. She said the fact that Nye County might be the first to put it to use does not mean that it is special legislation. Senator Neal said: The counties is a constitutional body under our constitution, okay? We cannot, from this office of state Legislature, direct the counties to do anything in terms of election, okay? When we put into a law that allows you, as county commissioners, to take action on this, we cannot do that. Now, we probably could conjure this in some other terms, you know, but we cannot [s]pecifically state in the statute that you have that authority, because you are a constitutional body. You know, we talked to this with George Franklin. You know, we tried to pass legislation to allow for the senator districts, and he took us to court and beat...us on that each time we did that. And he did it on the basis of the fact that we could not deal with...county elections as the state Legislature. Now we could pass broad authority...to give you power, but we could not be [s]pecific in terms of...terminating any particular elected official or elected office in the county unless we are given that authority by the constitution to do so. And that is very restricted in terms of those county office[s] that we can actually deal with, and they are listed in the constitution: the county assessors...we can pass laws to wipe them, or her out, and things like that, but because they are set out in the constitution. When you talk about that election process, then we have to tread very lightly on that now. We might have to come up with some kind of terms that would give you that authority to do that if this bill...pass[es...this committee. Vice Chairman Lowden told Senator Neal if he would like her to, she would request a legal interpretation, but said it has been brought to her attention that the Legislative Counsel Bureau has looked at this and it is all copacetic. Senator Neal insisted the committee does need another interpretation because, "We do not have the authority to empower them to act in this fashion." Vice Chairman Lowden asked Mr. Perkins if the doctors' salaries in Nye County are comparable with other rural hospitals, or if the payment of the exhorbitant fees are a blatant disregard for the problems that exist in Nye County. Mr. Perkins replied that is what they have been led to believe. He said the community feels that all of the doctors should be board-certified physicians, and that is not the county commissioners' contention. He said the commissioners feel the county needs good internal medicine doctors and good emergency care. He testified he has spoken with hospital boards in other counties and has been assured good physicians are available in the salary range he mentioned earlier. Vice Chairman Lowden told Mr. Perkins she does not have a problem with this bill. She said she was part of the group that removed the board from the State Industrial Insurance System (SIIS) 2 years ago when they were $2.2 billion in the red. She insisted, if there is a legal problem, it must be resolved. Mr. Perkins said he does not want to leave the committee with the impression that the county commissioners are chomping at the bit to remove the hospital board of trustees from office. He asserted if the hospital board straightens out the financial problems, the commissioners will have no reason to remove them from office. Mr. McArthur told the committee he serves as independent auditor for Nye County and the Nye County Hospital District. He stated the attorney general's office issued an opinion 4 or 5 years ago that losses within the Nye County Hospital District are always the responsibility of the county commission. He suggested the problem is: the commission is responsible for the debts, but have no power or authority to control them. He asserted this legislation provides for certain financial conditions to exist prior to the commisioners taking action. Mr. McArthur maintained the problems at Nye County Hospital have existed since 1981. He testified the Nye County Commission asked him to to examine the hospital records in March 1994, and make suggestions on how to keep the hospital solvent. He said it was determined the administration of the hospital was weak and the board was not functioning appropriately, and suggested that the board take action to correct the financial difficulties. He said he met with the hospital board at the request of the county commissioners in October 1994 to review the financial status of the hospital, and determine the means to cut their budget by approximately $100,000. He said he also examined the issue brought up by Senator Augustine concerning indigent care, because he, too, heard that the problem with Nye County Hospital was that indigent care expense was not being reimbursed. He stated there was an agreement whereby Nye County would pay Nye County Hospital approximately $19,000 per month for "indigent care" whether people met the requirements under Nevada Revised Statutes (NRS) to be considered indigent or not. He said after the Delapeza decision came down, automatic monthly payment ceased. He stated the county pays the hospital approximately $230,000 per year for indigent care, but the hospital lost $400,000 last year. He said he projects the loss through June 30, 1995, to be approximately $1 million. He said, therefore, the $230,000 cannot be the only item impacting the financial difficulty of the hospital. Mr. McArthur testified, as of March 31, 1995, indigent monies receivable were $222,000. Mr. McArthur told the committee insurance companies and Medicare are cutting back on the amount they reimburse the hospital, and his professional opinion is: the entity responsible for paying for the insolvency also needs to have the ability to control that insolvency. He opined none of those involved want to see the hospital closed. Senator Neal asked Mr. McArthur what he perceives to be the cause of the deficit at the hospital. Mr. McArthur replied there are several issues: one is patient mix; depending on what type of patient is admitted, the hospital may collect as much as 80 percent of the billed charges; some as little as none. He said there has been an increase in the number of patients for whom they do not receive a large percentage of billed charges. Mr. McArthur asserted many people in the community use the emergency room instead of making an appointment with a doctor, because they know they have to be seen by the doctor in the emergency room and do not have to pay at the time of treatment. Mr. McArthur also referred to the doctors' contracts which are paid on the basis of a percentage of billed charges, and opined it is human nature for the doctors to look at patients differently when he knows that his compensation is based on 50 percent of the billed charges. He stated, in the area of expenditures, there are some serious problems in determining the cost breakdown of the center because there is an extended care facility. He contends they are losing a significant amount of money in that facility which is basically a nursing home and houses 25 people. He questioned whether they need a nursing home in Tonopah at the cost of $500,000 above revenues, and insisted those issues need to be addressed. He said the financial statements of the hospital suggest an $800,000 profit for the year, yet his review of the records indicate a loss to date of $600,000 to $900,000. Senator Neal said, "Now, you being a district simply says to me that the hospital is collecting money for some type of taxes." Mr. McArthur confirmed Senator Neal's assertion. Senator Neal asked Mr. McArthur how much money the tax generates. Mr. McArthur responded the taxes collected generally run between $500,000 and $700,000 per year. Senator Neal asked Mr. McArthur what the expenses of the hospital are per year. Mr. McArthur replied approximately $6 to $7 million. He pointed out, for the fiscal year ending June 20, 1994, property tax collections were approximately $750,000, and even with that, the hospital shows a loss of $400,000. Senator Neal asked Mr. McArthur how much hospitals collect in terms of patients, and government contracts such as Medicaid and Medicare. Mr. McArthur said he estimates the current year to be at about $6 million. Vice Chairman Lowden asked Mr. McArthur if the hospital trustees are aware of those testifying before this committee, and further asked if any of the members of the hospital board of trustees have come forward to testify. Ms. Nicholson replied the trustees are aware of their presence today, and were also aware of their presence before the Assembly as well, but none came forward to testify. Mr. McArthur told the committee, for the year ended 1994, collections for the Nye County Hospital were $6,600,000 and expenditures were $7,848,000. Senator Neal asked Mr. McArthur if the collection figure includes taxes. Mr. McArthur responded in the negative, and added that prior to receipt of the taxes, the loss was $1,136,000, and after collection of taxes, the net loss was $383,000. He said the hospital, in the last several years, has collected about 74 cents on every dollar it billed. He said current records indicate the hospital will only collect about 56 cents on the dollar for the receivables due as of March 1995, due to patient mix. Senator Neal asked Mr. McArthur what percentage of the hospital census comes from the hospital district. Mr. McArthur replied he does not have those figures. Senator Neal commented that a few sessions ago the Legislature provided that the county of residence of a patient who is treated in another county is responsible for payment of indigent care expenses, and asked if those expenses are being reported back to the county of residence. Mr. McArthur answered they are still doing that; but said only 10 percent of those billings are of an indigent nature. Senator Augustine remarked she thought the loss was much greater than $383,000. She stated there is no reciprocal agreement for out-of-state indigent payment and there is a chance the hospital will not be able to collect those monies from other states. William L. Offutt, Nye County Manager, corrected Senator Augustine stating there is a reciprocal agreement. He recalled a case where a man from Utah had a heart attack and said Utah reimbursed the hospital for his care. Senator Augustine told Mr. Offutt, "Not in all cases." She said there was a bill last session dealing with this issue. Mr. Offutt commented reciprocal reimbursement is a very small percentage of their problem. Senator Augustine said one of the three doctors in Tonapah told her he was recruited to go to Tonopah, and the county actually went to get him. Mr. Offutt insisted that is absolutely not true. He said the hospital advertised for doctors through headhunters, and the doctors decided they wanted to work at the Nye County Hospital, and received contracts with the hospital board. Senator Augustine maintained that is recruitment. Mr. Ollfutt told her that it was not the county, but the hospital board. Senator Augustine asked Mr. Offutt what the term is for the doctors' contracts. Ms. Nicholson replied they run until the end of June 1996. She drew attention to the fact that Battle Mountain Hospital doctors' contracts were identical to those in Nye County where 50 percent of all billable charges are paid to the doctors, without regard to collections. She said Battle Mountain Hospital was in similar straits 4 or 5 years ago, and decided they could not continue with those contracts, has since turned around, and is currently running in the black because they were able to get other doctors under other types of contracts. She said the doctors in Tonopah have been given the opportunity to renegotiate their contracts, but have steadfastly refused. She said, as of last week, the doctors informed the hospital board if they attempt to bring in any other doctors at a different contractual level, they would "blackball" them, and will not accord them staff privileges. She said that kind of blackballing goes on a national data base, so no doctors will come and interview because they would be ruining their professional careers if they did. She said that is the kind of "Catch-22" that the hospital administration currently faces. Vice Chairman Lowden asked Ms. Nicholson if she has read the contracts, and asked if the doctors can be dismissed with cause. Ms. Nicholson answered in the affirmative. She pointed out there is also a 180-day non-cause dismissal provision which the board has been asked many times to consider. She insisted the board has been unwilling to do that as well. Vice Chairman Lowden asked Ms. Nicholson if the Nye County Hospital undergoes any utilization review process. Ms. Nicholson replied there is no utilization review process at present, but added there would be, under a proposed Health Maintenance Organization (HMO) contract, by way of services provided to senior citizens thereunder. Mr. McArthur asserted utilization review was discussed at the meeting of October 26, 1994, to ensure that it was taking place. He said a utilization review team was to be developed. He said they were concerned about being able to find someone who possesses the appropriate expertise to conduct the utilization review. He concluded it has not been accomplished to date. Senator Neal asked Mr. McArthur who the hospital is negotiating with as far as the HMO is concerned. Ms. Nicholson replied she thinks it is Sierra Health Services (SHS). She said SHS was trying to build a link between Las Vegas and Reno. Mr. Offutt drew attention to the fact the doctors would not allow them to become an HMO for the district, unless they got a 3-year no-compete clause built into the process even though it provided for seniors to receive a much higher level of reimbursement. He stressed, if the hospital board is not able to accomplish something in the next 4 or 5 months, the hospital is going to have to be closed. He added the county is going broke, but the hospital board refuses to do anything because they do not want to have to make tough decisions. Vice Chairman Lowden asked Mr. Offutt if the county has the authority to close the hospital. Mr. Offutt insisted the hospital will go bankrupt on its own. He pointed out within 5 or 6 days of going bankrupt last November, when he talked the board into giving the hospital $400,000, the hospital could not even get drugs except by means of cash on delivery. Ms. Nicholson stated, besides the fact they cannot pay day-to- day expenses of the hospital, the facilities have not been maintained over the years. She told the committee the county is building the hospital a firewall which must be in place by June 15, 1995, or the hospital will be out of business due to a lack of compliance with the law. Ms. Nicholson reiterated the county is doing all it can to keep the hospital open. Senator Augustine summarized what the committee is essentially looking at is: removal of the hospital board of trustees; the county commissioners taking over; getting rid of the doctors contracts; and, going to an HMO through Sierra Health. She asked Ms. Nicholson for confirmation. Ms. Nicholson said that is not necessarily what would happen. She said she does not believe that the intention is to get rid of either of the doctors if they will renegotiate their contracts. Senator Augustine interrupted asking, "Where did SHS come into this thing?" Ms. Nicholson she does not believe SHS has anything to do with it. Mr. Offutt emphatically stated SHS has nothing to do with this whatsoever. Ms. Nicholson replied she believes SHS made a proposal to the board of hospital trustees, where they would reimburse 110 percent of billed charges in order to establish a link between Reno and Las Vegas. She emphasized the doctors opposed that proposal. Senator Augustine asked if the HMO would be a separate facility from the hospital. Ms. Nicholson replied in the negative. Marie Soldo, Sierra Health Services (SHS), explained SHS was attempting to expand Health Plan of Nevada's service area, sought a link through Nye County, and approached the hospital for a contract. She insisted they are not building any facilities, displacing any doctors, or taking over the medical care of the county, but were merely trying to bring their senior dimension to Nye County. Vice Chairman Lowden asked Ms. Soldo if SHS does that in other counties as well. Ms. Soldo told Vice Chairman Lowden they have done it in many areas, and it is not unusual. She mentioned the only thing unusual about the negotiations in Nye County was that the doctors were involved, and there were some very unusual provisions in the contract as a result thereof. Vice Chairman Lowden asked if those provisions were a result of the doctors negotiating their own contracts. Ms. Soldo said, "Yes, basically. And the trustees allowed them to do that." Senator Washington summarized the problems relate to patient mix, the doctors contracts, indigent care and extended services such as the long-term care facility. He asked Mr. Perkins if the commissioners have any solutions or plans to rectify their problems if this bill passes. Mr. Perkins replied the commissioners will rely on Mr. Offutt and their legal counsel to guide them. He submitted they do have plans to cut costs, but said their biggest concern right now is how to keep the hospital open. He mentioned there is about $1 million in deferred maintenance at the facility. He said Mr. Offutt has some plans in mind should this law pass. He maintained the hospital board will have time to make some positive moves before the commission is forced to take action, and added the hospital administrator also has some ideas which she has been prevented from exercising to this point. Mr. Offutt testified the hospital administrator in Nye County was formerly with one of the world's largest hospital administrators' groups, but cannot put any of the practices in place that would be normal under these conditions in a hospital setting, and advised the hospital cannot possibly thrive under current policy. Mr. Offutt said he has been communicating with hospitals and doctors in other communities, and will be offering the county commissioners a variety of options to examine. He insisted the current hospital board is not interested in hearing any of those options. Mr. Offutt told the committee Mr. McArthur made a half dozen recommendations for the hospital board to review in October last year, but they have refused to even discuss them! He submitted he does not want to run the hospital, or the hospital district, but insisted something must happen or the hospital will close due to bankruptcy. He reiterated the county has bailed the hospital out before, but they are right back where they were last year. Senator Augustine asked Mr. Offutt if the hospital trustees and the county commissioners serve together. She said that is the way she reads it currently in statute, "five hospital trustees and three county commissioners." Mr. Ollfutt replied the hospital board has seven members, and the county commission has five, and they meet separately. Ms. Nicholson told Senator Augustine this involves a county hospital district, not a county hospital which is the difference. She testified, because Nye County has less than 100,000 people, it would be allowed only one county commissioner on the board. She added that the people in Tonopah want the hospital to remain open, and it is not just because of the people traveling on Highway 95. Ms. Nicholson added Nye County Hospital employs 100 people out of a population of less than 4,000 and constitutes a large percentage of their economy. Senator Mathews asked what would happen if the county did not pay the bills, and further asked if the doctors would just go away. Mr. Offutt replied the contractual agreements that the hospital district has with the doctors would still have to be honored. Ms. Nicholson told the committee if the hospital goes bankrupt, the doctors are entitled to 3 months' salary. Mr. Perkins told Senator Augustine a county commissioner served on the board of hospital trustees but was unable to affect a change in attitude. He stated he has attended most of the meetings since he has been a commissioner, and the board has never discussed finances. He said they are aware of the county commissioners' concerns but have failed to take action on them. Bill Welch, Executive Director, Nevada Rural Hospital Project (NRHP), said NRHP had some reservations about the original bill since it affected elected public officials, and as a result proposed a number of amendments which have been incorporated into the bill to ensure that there are triggers which must be in place before action to remove the board could be initiated. He said the county of Nye agreed to the amendments and incorporated them into the bill, and NRHP supports the bill as amended. Vice Chairman Lowden said she is curious as to why the trustees did not come forward to defend themselves. Mr. Welch told Vice Chairman Lowden he cannot answer that question because he knows the hospital board of trustees are aware that the bill is being heard. He said the NRHP is careful to poll its members to make sure that their positions are accurately represented. He said the Nye County Hospital administrator is fully aware of this hearing, and expressed her support for this legislation. Senator Neal asked what the Nye County Hospital administrator is paid. Mr. Offutt replied, "$55,000." Vice Chairman Lowden closed the hearing on A.B. 436, and opened the hearing on Assembly Concurrent Resolution (A.C.R.) 21. ASSEMBLY CONCURRENT RESOLUTION 21: Directs development of proposal to amend state plan for assistance to medically indigent to include coverage for treatment of substance abuse provided to recipient of Medicaid in nonhospital setting. (BDR R-1269) Kerry Carroll Davis, Senior Research Analyst, Legislative Counsel Bureau, read from prepared testimony (Exhibit E) to explain the history of the resolution. April Townley, Deputy Administrator, Welfare Division, Nevada Medicaid, Welfare Division, read from prepared written testimony (Exhibit F) to express the views of the Welfare Division relevant to A.C.R. 21. Senator Augustine asked Ms. Townley which lines were amended. Kerry Carroll Davis replied page 1, lines 18 and 19; the sentence which reads, "the proposal must not operate to restrict or replace any services currently provided." Ms. Townley suggested the reason for the amendment was concern that Medicaid might close down a service such as hospital inpatient care for drug and alcohol abuse. She stressed that would not be possible because they are required by federal regulation to provide those services. She said they could, however, restrict those services to make them more cost- effective. She said the concern is that unless they are able to utilize the positive benefits of non-hospital based services it is no longer cost-effective. Vice Chairman Lowden asked Ms. Townley if she testified before the Assembly regarding the financial impact. Ms. Townley replied the amendment was added after she testified before the Assembly, and explained her testimony before the Assembly concerned the Welfare Division's effort to structure the change to be budget neutral, requiring them to divert people and precipitating the modification. Vice Chairman Lowden asked Ms. Townley if she believes the financial impact will be substantial. Ms. Townley said the Welfare Division believes it can be. She told the committee they have met with the Bureau of Alcohol and Drug Abuse to explore how the program could be structured, but do not have any figures at this point. Ms. Townley pointed out other states have been able to make it cost neutral by structuring the program to use the funds already provided by the state which are unmatched for any other grant as the non-federal share for Medicaid. She explained the state has to put up 50 percent of the money that is spent with Medicaid to be able to collect the federal money. She said Nevada has been very effective in doing that with many of the divisions, and is bringing in a large amount of additional federal funds to support programs that were primarily only state- supported. She said the difference is that the Bureau of Alcohol and Drug Abuse is not a direct provider like other agencies, but they certify and distribute funds, so she is not sure a definition can be constructed to limit it to programs where there is only state money. She said a Medicaid state plan cannot restrict the service to only those providers who will put up the state funds. She concluded, "The taxing mechanism went away." Senator Neal told Ms. Townley she confused him, because the resolution mentions a coordinated effort to develop a proposal to amend the state plan, which says to him that they already have a state plan, but they want to amend that to include coverage for treatment of substance abuse provided in a non- hospital setting. He insisted treatment for substance abuse is already being provided in a non-hospital setting in this state. Ms. Townley explained this resolution has to do with what Medicaid will reimburse. She said they do pay for outpatient treatment, but do not currently pay for residential inpatient facilities which are not licensed as hospitals. Senator Neal referred Ms. Townley to subsection 1 of the resolution which asks them to seek a waiver. He stated if you cannot get the waiver, you cannot get the program. Ms. Townley replied there is a definite possibility that Medicaid could adopt this service, but the problem is that they did not receive any additional funds for it. She said they want to make it a cost-effective program by having people use those facilities instead of hospitals, but the way the bill was submitted in the Assembly they are concerned they would be barred from that. Senator Washington said if they want to pursue this program, perhaps they should have been seeking the federal waivers a long time ago. Ms. Townley replied Medicaid did not cover hardly anything for alcohol and substance abuse prior to about 2 years ago. Senator Washington asked if the division is currently seeking those waivers. Ms. Townley replied in the negative, but said they have expanded coverage in hospitals, etc., and have met with the Bureau of Alcohol and Drug Abuse to discuss how to structure this program and define the service. Vice Chairman Lowden closed the hearing on A.C.R. 21 and opened the hearing on A.C.R. 22. ASSEMBLY CONCURRENT RESOLUTION 22: Encourages Department of Human Resources to require person who contracts with Medicaid to provide coordinated care to use national data base to obtain certain information. (BDR R-1253) Ms. Davis read from prepared text (Exhibit G) to explain the background on A.C.R. 22. Ms. Townley submitted Exhibit H to the committee to explain Medicaid's position on A.C.R. 22. Vice Chairman Lowden asked Ms. Townley if this is redundant. Ms. Townley said, basically they will be in there before they pass this resolution. Vice Chairman Lowden closed the hearing on A.C.R. 22. There being no further business before the committee, Vice Chairman Lowden adjourned the meeting at 4:25 p.m. RESPECTFULLY SUBMITTED: Linda Chapman, Committee Secretary APPROVED BY: Senator Raymond D. Rawson, Chairman DATE: Senate Committee on Human Resources and Facilities May 22, 1995 Page