Regulation of Emergency Medical Services: Phase 2
Chapter II

Determination of Need (DON)

DON Process Should Be Streamlined

Findings Summary  

·       DON process is not a proactive review of overall market needs but an examination of an individual provider’s need  

·       Standards used by DPH to make need decisions are unclear 

·       DON is used to determine need for purchase of a single vehicle 

·       Evaluation of what number of vehicles are needed is mostly based on a prospective estimation of what service needs will be or a demonstration of poor or inadequate service being performed 

·       Purpose of DON is to contain costs, but not all significant cost drivers are included in DON review  

·       The current DON process is cumbersome and time consuming  

·       Traditional government health care cost containment functions are increasingly being replaced by managed care organizations  

·       Very few other states have a determination of need process  

·       There is no retrospective review of market or how well need is met  

Recommendation Summary  

Streamline the determination of need process by allowing providers the opportunity to operate any number of vehicles and any number of branches they believe is necessary.  New services and providers requesting to charge for the first time would still be required to go through an initial DON process to prove a need exists before operating. 

Background and Analysis  

A major regulatory tool used by DPH, in conjunction with rate setting, is the determination of need (DON) requirement. Historically, the medical market place has been thought of as imperfect and increased capacity did not always result in a reduction in costs.  The purpose of DON is to regulate the supply of health care facilities and equipment to contain utilization and costs.   

An overview of the DON process was provided in phase one of the EMS study (May 1999).  In this section, a brief description of DON components is provided followed by analysis and recommendations.  

            DON requirements. It is DPH’s responsibility to plan, coordinate, and administer the state’s EMS system.  One of the enumerated duties of the health commissioner is to annually inventory all medical emergency service resources within the state to determine need and effectiveness of existing services (C.G.S. § 19a-177(3)).  Taken together, the statutes appear to assign DPH the responsibility to monitor and evaluate the entire EMS system -- including gaps in service and the identification of poorly served areas.  But, the department is only now beginning to inventory the system and has not yet completed any systematic statewide needs assessment.  Instead, needs of the system are brought to the department on an individual provider basis. Thus, the committee finds that, while DPH has the responsibility to assess the needs of the entire EMS system, in effect it reviews only small parts of the system on an ad-hoc basis.  

While DPH makes no proactive effort to determine need or effectiveness of services, no provider may engage in a “new or expanded” service without securing approval from the department through its DON process (C.G.S. §19a-180).  What is considered new or expanded service is defined in regulation and includes:   

·       operating a new emergency medical transport service, non-emergency ambulance  transport service, or invalid coach service;  

·       adding emergency medical vehicles, ambulances, and invalid coaches to  operations (not replacements); or  

·       adding branch office locations.  

While not technically defined as a new or expanded service, the regulations also require that any certified provider requesting to change from a non-charging to a charging service must go through a determination of need hearing. 

Exclusions.     An ambulance service already licensed to provide the basic level of service does not have to go through the determination of need process to provide advanced life support service.  By regulation, any sale of an existing ambulance service is exempt from demonstrating need under certain conditions, which include the requirement that the entire company be purchased.  Finally, any volunteer ambulance service that provides a new or expanded service and does not charge for the service is exempt from the determination of need process.  

Factors.  The factors to be considered by DPH in determining whether there is a need for new or expanded medical service are set out in regulation.  No other defining criteria are spelled out in statute or regulation.  The factors are:  

1)               population to be served by the proposed service;

2)               geographic area to be served by the proposed service;

3)               volume of calls for the previous 12 months within such areas;

4)               impact of the proposed service on existing services in the area;

5)               potential improvement in service in the area including cost effectiveness and response times;

6)               location of the proposed principal and branch places of business in relation to health facilities and other providers;

7)               need for special services, if applicable; and

8)               recommendations of any applicable regional council.  

The fourth factor has been the source of some controversy.  Providers argued the factor called for a review of the business impact on existing providers from any new potential competition.  The Connecticut Supreme Court in 1997 ruled against the providers on the grounds that the statute, upon which the regulation is based, requires DPH “to protect the public at large and not the interests of individual competitors.” (Citing earlier cases).2

Analysis of DON Decisions

            Program review staff examined all department decisions for DON over the last 2½ years.  Table II-1 shows the outcome of the cases by year.  Of the 23 cases that came before DPH, only two were denied, 16 were approved, and five were modified.  Thus, 70 percent of all DON applications were approved, and if modified decisions are included, the approval rate rises to 91 percent.   

            DON decisions were analyzed in terms of major issues, and the result is presented in Table II-2.  Most DON activity involves applications for new vehicles (58 percent).  This is also the area where all modifications and most denials occurred.   (It should be noted that new vehicles mean additions to the current fleet, not replacement vehicles.)   

            Applications must be made to purchase any of three types of vehicles:  ambulances; invalid coaches; and non-transport emergency vehicles.  Ambulances are used for the transport of emergency and non-emergency patients at the basic or advanced life support level; invalid coaches are used to transport non-ambulatory patients who are not stretcher-bound; and non-transport vehicles are typically vehicles that carry paramedics and often referred to as “fly cars”.  

            New vehicle analysis.  Because most DON activity is in the area of new vehicles, program review staff analyzed each decision involving the addition of ambulances and invalid coaches to determine if any standards or defining criteria could be discerned.  As noted above, the hearing officer is obliged to consider eight factors to determine whether there is a need for the requested service.  Population, square mileage of service area, number of health care facilities in the service area, call volume, response time, regional council approvals, etc., were examined in each case.    <![endif]>

While all those factors are usually mentioned in the decisions, committee staff analysis and interviews with DPH disclosed the most important items were the number of passed calls, the volume of calls, and response times (or other contractual performance measures, such as maximum wait times for invalid coaches).  But even these factors were not subject to any consistent measure or benchmarking.

            For example, successful applications for an emergency service ambulance indicated the number of passed calls (where the company had to refer the call to another provider) ranged from 2 percent to 25 percent of all calls.  Furthermore, the most specific measure that could be derived was calls per vehicle per day (ambulance or invalid coach).  This call volume evaluation is essentially based on prospective estimation of what service needs are projected to be or a demonstration of current bad or inadequate service performance over the previous year or more.  In many instances, this measure was mentioned as a deciding factor.  

            Program review staff determined the calls per vehicle per day based on the available evidence, if it was not calculated in the decision.  The ranges for calls per ambulance or invalid coach for certified and licensed providers, including the approved additional vehicle(s), are shown in Table II-3.  There was a significant amount of variation in the call ranges that DPH ultimately found acceptable.  In other words, because “need” is defined by providers, one town, for example, saw a need for a new ambulance with about one call every day, while another waited until the anticipated call volume was more than four calls a day.  Both had their “need” approved by DPH and each received the additional ambulance. 

            Table II-4 shows what the call per day per vehicle outcome would have been if all the requested vehicles were approved.  In the absence of a DON review, the range would have been 2.4 to 3.0 for ambulances and 2.4 to 4.6 for invalid coaches, (as compared to the ranges for approved applications shown in Table II-3 of 2.8 to 3.5 for ambulances and 3.5 to 4.5 for invalid coaches).  Two conclusions may be inferred: 

·       the applications at the upper end of those ranges (3.0 for ambulances and 4.6 for invalid coach) were denied even though other applications were approved at a lower call volume; and   

·       even though the DON review prevented the low end of the range to drop further (a .4 drop in the case of ambulances and 1.1 for invalid coaches), it is unknown whether providers would actually buy the maximum number of vehicles requested.  The process is one where providers may ask for more than they really need in order to get approval for a number close to what they want.  

            Thus, there is no actual standard for approval; individual cases vary and individual decision-makers can hold different standards. In addition, the committee concludes that decisions are made in the absence of any statewide needs assessment, but are provider based and are founded on negative factors such as past poor performance.  Finally the committee finds that some services -- that could be significant cost drivers, such as upgrades to an ALS service -- are excluded from the DON process.   

            National standards or practices. Program review attempted to locate standards for the optimal numbers of vehicles as well as EMS providers.  No national or industry standards could be found. Staff queried other states as to the number of ambulances and number of providers that each state has and calculated a measure of each based on each state’s population.  Table II-5 shows the results of the survey.  While certainly not the only, or even the best, measure of a system, this gauge allows some type of comparison to be made among states.  

The survey reveals that Connecticut is about in the middle (15 out of 33) with regard to the number of providers per 100,000 population.  (No distinction was made between the number of volunteer versus commercial providers.)  Further, the ambulance measure indicates the state is below average (17 in Connecticut versus 22.3 average) in the number of ambulances compared to other states and places eighth lowest out of 29 states that responded.  While not all the states responded to the committee’s survey, it nonetheless tends to indicate that Connecticut is not overloaded with ambulances.  On the other hand, it does not indicate what the appropriate number is.   

Complicating considerations.  Two additional factors complicate the determination of need process.  One is the fact that while a service provider must indicate the geographic area the service intends to operate in the need application, nothing prevents the provider from going into another area or not serving the specified area once the request is approved.  This is especially true for invalid coach and non-emergency ambulance transport services.  Also, while the primary service area responders (PSARs) are responsible for emergency services (9-1-1) in a specific territory, they may justify need for additional vehicles for other service areas if they provide backup to other PSARs.  

Secondly, with regard to non-emergency transportation services there is a recognized statutory overlap between the oversight of invalid coaches by DPH and that of livery services by the state Department of Transportation. The General Assembly has tried unsuccessfully to resolve the overlap issue through the creation of a task force on the issue and legislative attempts to consolidate the responsibility of regulating non-emergency transportation under one agency.3  Several elements outlined below are important to understanding this dilemma:  

·       Non-emergency transportation may be provided in an invalid coach, falling under DPH’s purview.  DPH is mandated to license providers of emergency and non-emergency transportation for patients who are “…injured, ill, crippled or physically handicapped person requiring assistance and transportation” (C.G.S. § 19a-175 (2)).  

·       Non-emergency transportation may also be provided through livery services, regulated by DOT.  The department issues two types of licenses for livery service under C.G.S. § 13b-103 for general livery services or under C.G.S. § 13b-105 for specialized elderly and handicapped services;  

·       DSS, one of the largest purchasers of non-emergency transportation services, treats wheelchair-accessible livery vehicles and invalid coaches as providing the same service;  

·       In addition to the restrictions imposed by statute (e.g., patients must be non-ambulatory, going to or from a medical appointment, etc.), the Attorney General has attempted to make a distinction between invalid coach and livery services by interpreting legislative intent.  It was concluded that invalid coaches are to be used for people who need medical assistance.  Livery services should be provided to people who may need physical assistance but not medical assistance during transit; and  

·       In spite of this interpretation, DPH only requires invalid coach drivers to have certification in CPR. This in effect creates a rather slender, if any, distinction between the two types of services.  

            The difficulty from a DON perspective is two different agencies are trying to oversee and project need for essentially the same market.  There are indications  the standards against which invalid coach and livery service providers are evaluated may differ even though they are attempting to serve the same customer base.  In one DPH case, a livery service provider was denied invalid coaches, even though the provider was performing on average over six calls per day per vehicle -- well above the 3.5-4.5 range cited above for other invalid coach providers.  Though individual cases can vary, DOT staff indicated the acceptable average call volume range for livery service vehicles is approximately 12 calls per day per vehicle.   

            Timeliness.  The process for DON can be cumbersome and time consuming.  Program review staff calculated the time it takes to complete a DON decision involving additional ambulances or invalid coaches:   

·       For certified providers, who all received their requested ambulances, the time elapsed between application submittal to final decision ranged from three to seven months with an average of nearly five months.   

·       For commercial providers, the time elapsed between application and final decision ranged from about five months to over 1½ years.  The average was 422 days or over one year.  Many of these DON cases involved several hearings and were appealed to the commissioner, which contributed to the longer time frame.  

The lengthy process and slow decision making may discourage some providers from coming forward.  In its 1991 review of Connecticut’s EMS system, the National Highway Traffic Safety Administration (NHTSA) stated, “while there is a certificate of need process, it appears to discourage the development of new and improved services.”  It can be difficult for some providers to make business decisions when it takes over a year to get a result.  

Lessening of Need Determination in Other State Agencies  

The Office of Health Care Access (OCHA) and the Department of Social Services  (DSS) implement a certificate of need (CON) program for certain aspects of the health care market that operate like the DON requirement in the Department of Public Health.  However, the recent trend has been to raise thresholds that trigger a CON review, streamline procedures, or eliminate some services from CON review.   

            Office of Health Care Access.  Similar to DPH’s determination of need process, OCHA’s program reviews capital expenditures by health care facilities and the institution of new services.  OCHA also reviews the purchase of major medical equipment, termination of services, and transfer of ownership issues.   

An examination of OCHA’s statutory mandate and practices discloses a trend toward eliminating or reducing the need for regulatory oversight of the health care market.  The legislature has increasingly shifted OCHA’s role from cost containment to developing a planning capacity to assist in establishing goals and priorities that promote citizen access to a variety of health care services.4  In recent years, OCHA has greatly simplified and streamlined its CON process.  For example, it has:  

·       eliminated CON requirements for 12 categories of facilities;

·       instituted an exemption process for nonprofit facilities that fill a service need identified by another state agency; and 

·       created waivers for CON review for certain replacement equipment.  

Department of Social Services.  DSS maintains a CON process for, among other things, the capital expenses for nursing homes.  The threshold for triggering a CON review was raised in 1997 (PA 97-2).  A CON application is now required only for capital expenditures in excess of $2 million or a capital expenditure exceeding $1 million and which increases the facility by 5,000 square feet or 5 percent of existing square footage.  Prior law required facilities to obtain a CON from DSS for any capital expenditure exceeding $1 million.   

            Thus, the committee finds a lessening of the regulatory thresholds of determining need.  The committee believes this is largely because traditional government cost containment efforts have been somewhat ineffective and are increasingly being replaced by managed care organizations.

Very Few Other States Have a Determination of Need Process  

Of the 36 states that responded to a program review survey, only 13 had some sort of DON process at the local or state level.  The predominate area covered by a DON process in other states was for new services.  No other state regulated the number of vehicles a provider operated.  In addition, four of the 13 states allow, but do not require, local governments to engage in a DON process.  

No Retrospective Review of Market or Individual Provider Needs  

After receiving authorization for vehicles there is little review to see if they are being used and for what period of time;  nor is there any check to ensure that areas specified in the application are the areas actually being served.  There is no revocation of authorization for permits or vehicles not being used.

A review of the number of vehicles authorized by the department for the last five years versus the actual number of vehicles reveals the following:  

·       For commercial services, the percentage of authorized vehicles in excess of the actual number ranged from 6 to 18 percent.  

·       For certified services, the percentage of authorized vehicles in excess of the actual number ranged from 2 percent to 8 percent.

Recommendation  

Based on the above findings, the Legislative Program Review Committee recommends the determination of need process be streamlined by allowing providers the opportunity to operate any number of vehicles (i.e., ambulances, invalid coaches, and non-transport emergency vehicles) and any number of branches they believe is necessary to render adequate ambulance or invalid coach service.  New services (for ambulance and invalid coach) and services requesting to charge would still be required to go through an initial DON process to prove a need exists before operating.  
 

Providers shall continue to notify DPH of the number of vehicles they have in service each year and receive a permit for each vehicle in use.  The department may consider the appropriateness of the number of vehicles when analyzing any application for a rate increase.  If, during the normal course of a rate review, the department finds an excessive number of vehicles and branch offices, it may revoke authorization for those vehicles and disallow the expenses related to those vehicles and branch operations for rate determination purposes.

Rationale  

Protection from excessive costs..  The primary purpose of a determination of need process is to contain costs. The patterns of health care delivery and reimbursement, though, have changed dramatically over the past several years.  Managed care providers have altered the landscape by scrutinizing each aspect of the health care delivery system, reducing the need for strict government oversight.  Other state agencies (e.g., OCHA and DSS) have recognized this fact and have scaled back their management of the health care market.

There are significant cost factors, such as personnel expenses, that could be used currently by providers to inflate expenses if they wished to, which are not covered by DON.  But there is little benefit to be gained in stocking up on vehicles that cannot be used just to inflate costs. Without calls, no one will pay for them.  As indicated above, some providers maintain a number of permits in excess of the actual number of vehicles.  Some of this excess may be due to providers waiting for vehicle delivery.  But in three of the last five years the permitted number exceeded the actual number of vehicles by over 8 percent (reaching a high of 18 percent) for commercial providers.  If vehicles were needed to raise costs (and rates), then one would expect all permits to be filled.  

Medical transport providers cannot create markets.  There are only so many customers and so much reimbursement that a provider can rely upon -- the overwhelming majority of which come from government or managed care payers.  This is the ultimate determinate of how much capital a provider is willing to invest in vehicles and branch operations.  Therefore, the need for vehicles and how they will be paid for is a business decision that should be left up to the individual provider to determine.   

Streamlining the current DON process.  Without DON if abuse is suspected, it may be scrutinized during the rate review process, as all expenses can be now.  In the past, almost all requests have not been for great expansions.  Except in a few instances, most providers have asked for an additional one to five vehicles.  Most DON requests have been approved; only two cases in the last 2½ years have been denied outright.  

Projecting need is a very inexact science; different hearing officers will use different standards.  Under the current system, the hearing officer attempts to project what will happen in the health care market or review a case of poor service to determine if need exists. Further, a defacto practice of requiring a record of bad service as a means to get an additional vehicle is perverse.  In addition, there is no follow-up after a decision is made.  A major difference offered in this recommendation is that there will be an actual record of use of the additional vehicle -- an indisputable record of need.  

New providers.  Under the recommendation, new providers will still be subject to the DON process to provide some market stability. It has been stated that the non-emergency and invalid coach transport market subsidizes a portion of the emergency market.  A benefit may accrue to limiting the entrance of new providers, based on a demonstrable need, rather than allowing anyone to provide service at temporarily discounted rates which could negatively impact the provision of emergency services.

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