SECTION 1. Medicare beneficiaries in Hawaii are experiencing a reduction in access to quality care as a result of the change in the way medicare purchases its durable medical equipment and prosthetics, orthotics, and supplies. Round two of medicare's durable medical equipment competitive bidding program began July 1, 2013, in the city and county of Honolulu. The unintended consequences of the implementation of this national program in Honolulu have been disastrous.

Only thirteen of the ninety-seven vendors selected are located within the State. The minimum shipping time is two to four days, and the typical wait time for physician-ordered wheelchairs and hospital beds is four to eight weeks. These vendors do not have special phone or service hours to account for the time difference, which means when medicare beneficiaries in Hawaii call after 11:00 a.m., the offices are closed. Without access to timely, local services, medicare beneficiaries in Hawaii have been forced to forego necessary durable medical equipment devices. This restricted access to care has led to reductions in health, increases in preventable admissions and readmissions, and increases in costs to beneficiaries and the medicare system and has impacted the quality of life for medicare patients.

The national bidding program has the laudable intention of cutting down on fraud and abuse and reducing medicare costs nationally. A reduction in cost, however, by twelve to fifty-six per cent in Hawaii is unsustainable given the fixed costs of higher rent, utilities, and shipping costs that businesses in Hawaii face. Hawaii's fees are now on par with those in the Washington, D.C. area, even though the cost of living index in Honolulu is 21.4 per cent higher than Washington, D.C.

Medicare costs in Hawaii were already low. A review of 2011 fee-for-service medicare spending for durable medical equipment shows that Hawaii has the lowest per capita durable medical equipment cost in the nation. On average, each Hawaii beneficiary consumes only $82.54 in durable medical equipment, compared with $230.16 nationally. Furthermore, the total medicare cost for a Hawaii beneficiary, on average, is only $530.98, compared with $792.99 nationally.

The purpose of this Act is to provide for licensure of suppliers of durable medical equipment, prosthetics, orthotics, and related supplies through an annual inspection by the office of health care assurance. This licensure program will ensure that Hawaii's durable medical equipment patients have access to the critical, life-sustaining medical supplies they need.

SECTION 2. Chapter 321, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:

"Part . Durable medical equipment supplier licensing and patient protection program

§321-A Title. This part shall be known and may be cited as the "Durable Medical Equipment Supplier Licensing and Patient Protection Program".

§321-B Definitions. As used in this part:

"Appropriate physical location" means a physical facility within the boundaries of the State used to store durable medical equipment inventory.

"Durable medical equipment" means equipment that can stand repeated use, is primarily and customarily used to serve a medical purpose, is generally not useful to a person in the absence of an illness or injury, is appropriate for use in the home, and does not contain any prescription drug.

"Supplier" means a supplier of durable medical equipment, prosthetics, orthotics, and related supplies.

§321-C Licensing. (a) All suppliers doing business in this State shall be licensed.

To receive a license, a supplier shall:

(1) Maintain an appropriate physical location within the State;

(2) Pass an annual inspection performed by the office of health care assurance; and

(3) Provide proof that it has complied with the business registration laws of the State and has all required tax identification numbers.

(b) The office of health care assurance shall maintain a list of suppliers licensed under this part.

§321-D Annual inspection. (a) The office of health care assurance shall perform an inspection of all suppliers licensed pursuant to this part.

(b) The inspection shall consist of:

(1) Confirmation that the supplier maintains an appropriate physical location within the State;

(2) Confirmation that the supplier maintains a working local telephone number;

(3) Confirmation that a full-time employee is available to Hawaii residents during normal business hours to answer customer inquiries; and

(4) Confirmation that the supplier has complied with the business registration laws of the State and has all required tax identification numbers.

§321-E License fee. The department may assess a licensure fee on all suppliers licensed pursuant to section 321-C(a). The license fee collected shall be deposited in the health care assurance special fund pursuant to section 321-1.4.

§321-F Supplier duties. (a) A supplier and its agents shall have a good faith duty to comply with the annual inspection performed by the office of health care assurance.

(b) A supplier shall provide proof that it has complied with the business registration laws of the State and has all required tax identification numbers and shall provide a copy of such proof to the office of health care assurance during its annual inspection.

§321-G Exemptions. Pharmacies licensed pursuant to chapter 461 are exempt from this part.

§321-H Severability. If any provision of this part or the application thereof to any person or circumstance is held invalid, the invalidity shall not affect the other provisions or application of this part that can be given effect without the invalid provision or application, and to this end the provisions of this part are severable."

SECTION 3. Section 321-1.4, Hawaii Revised Statutes, is amended by amending subsections (a) to (c) to read as follows:

"(a) There is established within the department of health, to be administered by the department of health, the office of health care assurance special fund into which shall be deposited moneys collected under section 321-11.5(b), license fees for the administration of the durable medical equipment supplier licensing and patient protection program collected pursuant to section 321-E, and all administrative penalties imposed and collected by the office of health care assurance pursuant to section 321-20.

(b) Moneys in the special fund shall be expended by the department of health:

(1) To assist in offsetting operating costs and educational program expenses of the department of health's office of health care assurance; and

(2) For the purpose of enhancing the capacity of office of health care assurance programs to:

(A) Improve public health outreach efforts, program and community development, and consultations to industries regulated; [~~and~~]

(B) Educate the public, the staff of the department of health, [[]and[]] other departments within the State, as well as staff and providers of all health care facilities and agencies regulated[.]; and

(C) Administer the durable medical equipment supplier licensing and patient protection program established pursuant to part of this chapter.

Not more than [~~$300,000~~] $ of the special fund may be used during any fiscal year for the activities carried out by the office of health care assurance.

(c) Any amount in the special fund in excess of [~~$356,000~~] $ on June 30 of each year shall be deposited into the general fund."

SECTION 4. The office of health care assurance shall submit a report to the legislature no later than twenty days prior to the convening of the regular session of 2016. The office of health care assurance shall report on the status of the durable medical equipment supplier licensing and patient protection program, including its findings and conclusions on the program's effectiveness, along with any proposed legislation.

SECTION 5. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2015-2016 and the same sum or so much thereof as may be necessary for fiscal year 2016-2017 to be paid into the office of health care assurance special fund established pursuant to section 321-1.4, Hawaii Revised Statutes.

SECTION 6. There is appropriated out of the office of health care assurance special fund established pursuant to section 321-1.4, Hawaii Revised Statutes, the sum of $ or so much thereof as may be necessary for fiscal year 2015-2016 and the same sum or so much thereof as may be necessary for fiscal year 2016-2017 for two permanent full-time equivalent (2.0 FTE) positions to establish and administer the durable medical equipment supplier licensing and patient protection program and other expenses incurred by the office of health care assurance licensure programs.

The sums appropriated shall be expended by the office of health care assurance for the purposes of this Act.

SECTION 7. Section 26H-6, Hawaii Revised Statutes, shall not apply to this Act.

SECTION 8. In codifying the new sections added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

SECTION 9. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 10. This Act shall take effect on July 1, 2112.

THE SENATE	S.B. NO.	307
TWENTY-EIGHTH LEGISLATURE, 2015		S.D. 2
STATE OF HAWAII		H.D. 2