IN THE OFFICE OF ADMINISTRATIVE HEARINGS

0 0 MARK BRNOVICH Firm Bar No. 0000 Attorney General Kevin D. Ray (#00) Molly Bonsall (#0) Assistant Attorneys General West Washington Street Phoenix, Arizona 00 Telephone: (0) - Facsimile: (0) -000 E-mail: EducationHealth@azag.gov Attorneys for Arizona Department of Health Services, Bureau of Emergency Medical Services and Trauma System In the Matter of: IN THE OFFICE OF ADMINISTRATIVE HEARINGS Hellsgate Fire District dba Rim Country Fire and Medical Services, Applicant. No. 0A-EMS-000-DHS ARIZONA DEPARTMENT OF HEALTH SERVICES LIMITED PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW Honorable Thomas Shedden The Arizona Department of Health Services ( ADHS ), Bureau of Emergency Medical Services and Trauma System ( BEMSTS or Bureau ), through undersigned counsel, hereby files its Limited Proposed Findings of Fact and Conclusions of Law pursuant to Judge Shedden s Case Management Order No.. LIMITED PROPOSED FINDINGS OF FACT BACKGROUND. The Applicant, Hellsgate Fire District dba Rim Country Fire & Medical Service ( Applicant or Hellsgate ), does not currently hold a Certificate of Necessity

0 0 ( CON ) to provide ambulance services in Arizona; therefore it filed an initial application on December, 0 (DHS 0).. After filing its initial application, Hellsgate amended its proposed service area several times. As presented at the hearing, Hellsgate s final proposed service area is described as follows: Beginning on State Highway at milepost 00, following a straight line east by southeast to milepost 0 on Highway 0, then following a straight line South to State Highway and forest service road 0 (Cherry Creek Road), then southwesterly to State Route, milepost, then due west to a point where the Gila County and Maricopa County borders meet, then following the Gila County border north to a point where the Coconino/Yavapai/Gila County borders meet, then following the borders of the Coconino and Yavapai county boundaries north to the point where the Zane Grey Highway (otherwise known as Highway 0) intersects with Yavapai and Coconino County borders, then following a straight line east by northeast to State Highway at milepost 00. (DHS ).. Hellsgate s proposed service area almost entirely overlaps with CON No., currently held by R/M Arizona Holdings, Inc. (DHS ).. Hellsgate s proposed service area also overlaps with CON No., currently held by Pine/Strawberry Fire Department, and CON No., currently held by Tonto Basin Fire District. (DHS ).. Hellsgate s proposed service area abuts the service areas of American Medical Response of Maricopa, LLC (CON ), the Blue Ridge Fire District (CON ), Action Medical Service, Inc. Winslow (CON 0), Rural/Metro Corporation (Maricopa)(CON 0), ABC Ambulance, LLC (CON ), SW General, Inc. (CON ), Tri-City Fire District Ambulance Service (CON ), and American Comtrans (CON ). (DHS ).. The Applicant s proposed type of ambulance service is for immediate response ground ambulance transports, either Advanced Life Support ( ALS ) or Basic Exhibits referenced throughout are referred to using the prefix system established for the CON hearing (ADHS Exhibits: DHS #; Hellsgate Fire District s Exhibits: HGFD #; and American Medical Response s Exhibits: AMR #). Individual page numbers will only be referenced when necessary. - -

0 0 Life Support ( BLS ) services, interfacility transports, and convalescent transports, twenty-four hours per day, seven days per week. (DHS ).. The Director of ADHS created Guidance Document GD-0-PHS-EMS: Certificates of Necessity for Ambulance Service in order to provide a resource for providers and the public on the State s CON program. In that document, the Director identified additional criteria that the Director deems relevant when considering whether a public need exists under Arizona Administrative Code ( A.A.C. ) R--0, including: A plan for a robust, on-going benchmarking and performance improvement process that encompasses all components of the EMS system from emergency medical dispatch through emergency department arrival; A plan to collect and submit electronic patient care reports consistent with BEMSTS guidelines; A plan to adopt clinical guidelines and operating procedures for time sensitive illness consistent with best practice guidelines; A plan to initiate guideline-based prearrival instructions for all callers accessing -- for assistance; Evidence of regular attendance and participation in meetings of the regional and State EMS Councils; A plan to ensure that ambulance service will be maintained and improved for rural communities; and assurance that the service model will be cost effective and not result in higher ambulance rates. (DHS )(bullet points omitted). HELLSGATE FIRE DISTRICT DBA RIM COUNTRY FIRE AND MEDICAL SERVICE S CON APPLICATION. Hellsgate filed an Application with the Bureau on December, 0, for an initial CON for ground ambulance service. (DHS 0).. On January, 0, the Bureau sent Hellsgate an administratively incomplete notice stating that the Applicant needed to provide certain information that appeared to be missing from the application. (DHS 0; Testimony of Ithan Yanofsky, December, 0, Tr. At 00). References to testimony will refer to the date on which it took place and the transcript page number where the testimony can be found. - -

0 0. On March 0, 0, Hellsgate provided the information requested by the Bureau for the administrative review. (DHS 0). By letter dated March, 0, Hellsgate requested to amend the response times in its application. (DHS 0).. On March 0, 0, the Bureau found Hellsgate s Application to be administratively complete, and sent Hellsgate a Notice of Substantive Review requesting additional information in order to allow a complete substantive review. (DHS 0).. On May, 0, Hellsgate responded to the Bureau s request and provided additional information regarding rates and charges, service area, various items as presented on Hellsgate s Ambulance Revenue and Cost Report ( ARCR ), and other items important to the Bureau s analysis. (DHS 0).. On June, 0, Hellsgate followed-up with additional information regarding its financial resources requested by the Bureau to complete the substantive review process. (DHS ).. On June, 0, the Bureau issued its findings pertaining to the Applicant s initial rate setting request. The Applicant proposed initial rates of $,00. per ALS and BLS transport, $. per mile, and $.0 for standby/waiting. BEMSTS recommended rates of $,. per ALS and BLS transport, $0. per mile, and $. for standby/waiting. (DHS ).. The Bureau s recommended rates were calculated based on Hellsgate s desired gross revenue (Testimony of Aaron Sams, December, 0, Tr. at ; DHS 0) and account for statutory limits on the mileage rate, reduced ambulance maintenance costs, and a projected increase in bad debt. (Testimony of Aaron Sams, December, 0, Tr. at -; DHS 0). 0. The Bureau s analysis of Hellsgate s proposal projects a $,.00 loss to the Fire District, while Hellsgate projects a $0,.00 profit. (DHS 0). - -

0 0 THE PREHEARING PROCESS. On June, 0, the Bureau notified every ambulance service in the affected area and other interested parties that Hellsgate had filed an Application. (DHS ).. American Medical Response (AMR) objected to the Hellsgate application on June, 0. (DHS ).. On August, 0, a Notice of Hearing was issued and the matter was transferred to the Office of Administrative Hearings. (Notice of Hearing).. On August, 0, counsel for AMR filed a motion to Intervene on behalf of two of AMR s certificated ambulance services, R/M Arizona Holdings, Inc. dba Canyon State Ambulance (CON No. ) and Rural/Metro Maricopa (CON No. 0). (Motion to Intervene).. On August, 0, BEMSTS filed a Response to the Motion to Intervene, stating that intervening party status is appropriate when the proposed service area overlaps the party s existing service area and did not object to intervention by either CON holder. (ADHS/BEMSTS Response to Motion to Intervene by Rural/Metro).. On August, 0, Applicant filed a Motion to reschedule the hearing originally set for October, 0 through October, 0. (Motion to Reschedule).. On August, 0, ALJ Shedden requested the Parties work together to find a mutually agreeable time to reschedule the hearing. (Case Management Order No. ).. On August, 0, ALJ Shedden granted the Motion to Intervene. (Case Management Order No. ).. On September, 0, Applicant filed on behalf of all parties a Stipulation to Reschedule Hearing and Pre-Hearing Deadlines. (Stipulation to Reschedule Hearing and Pre-Hearing Deadlines). 0. On September, 0, ALJ Shedden issued Case Management Order No. adopting the Parties stipulated hearing dates and the stipulated pre-hearing deadlines. (Case Management Order No. ). - -

0 0. On October, 0, counsel for Hellsgate provided the final description of the amended proposed service area by email to the Bureau and Intervenor. (DHS ).. The Bureau created a map of the final amended proposed service area on October, 0. (DHS ; HGFD ).. On October, 0, the Bureau issued an Amended Notice of Hearing to reflect the Applicant s revised proposed service area. (DHS ).. On November, 0, counsel for AMR withdrew CON No. 0 as an Intervenor because Applicant s revised proposed service area no longer overlapped CON No. 0. (Notice Withdrawing Rural/Metro s Intervention). THE ADMINISTRATIVE HEARING. The five-day hearing was held from December, 0 through December, 0.. At present, Hellsgate is a fire district of approximately 0 sq. miles (Testimony of Chief David Bathke, December, 0, Tr. at 0) that acts as first responder to -emergencies in the district (Testimony of Chief David Bathke, December, 0, Tr. at ). Approximately 0% of all the calls received by Hellsgate are for EMS. (Testimony of Chief David Bathke, December, 0, Tr. at ).. Hellsgate applied for a CON because it believes it can provide a higher level of care than is currently provided by Intervenor. (Testimony of Chief David Bathke, December, 0, Tr. at ).. In its initial application and ARCRs, Hellsgate proposed to take over all historic ambulance runs in CON. (DHS 0). Hellsgate subsequently attempted to introduce an alternate ARCR showing financial viability if it were to take half of the ambulance runs in CON. (Testimony of Dean Taylor, December, 0, Tr. at ). The Bureau objected to introduction of this evidence because it believed that it should have been filed as an amendment to the application so that it could be properly noticed. (December, 0, Tr. at -; Testimony of Ithan Yanofsky, December, 0 Tr. at ). Intervenor joined in the objection. (December, 0, Tr. at -). - -

0 0 ALJ Shedden excluded the evidence because without proper notice, it was outside his scope of authority. (December, 0, Tr. at ).. Despite its response to the Bureau s Findings letter (DHS 0) in which it concurred with the Bureau s rate analysis (Testimony of Chief David Bathke, December, 0, Tr. at -), Hellsgate stands by and requests the different rates proposed in its application. (Testimony of Chief David Bathke, December, 0, Tr. at ). However, it will accept and operate on the rates as calculated by the Bureau, if granted the CON and the Director so orders. (Testimony of Chief David Bathke, December, 0, Tr. at ). 0. Hellsgate believes there is a benefit to competition in the ambulance industry and that setting the rates higher than the current provider s would disadvantage Hellsgate. (Testimony of Chief David Bathke, December, 0, Tr. at ).. Arizona s regulatory model is set up such that the ambulance industry is not one of free competition. (Testimony of Ithan Yanofsky, December, 0, Tr. at ).. Hellsgate proposes to employ a consortium model for managing and staffing its ambulance service, if a CON is granted. The consortium would consist of several fire chiefs in the area who would provide operational input into management and staffing decisions for the ambulance service. The Hellsgate Fire Board would have ultimate authority over operational decisions. (Testimony of Chief David Bathke, December, 0, Tr. at - and -).. Hellsgate did not provide information about the consortium model to the Bureau in its application (Testimony of Chief David Bathke, December, 0, Tr. at ). The Bureau would have preferred that it do so because it provides the Bureau, the public, the ALJ and the Director a better understanding of the application. The Bureau was not able to include this aspect in its comments or analysis. (Testimony of Ithan Yanofsky, December, 0, Tr. at 0-0).. If granted a CON, Hellsgate will begin by staffing its ambulances with reserve personnel and overtime employees. Because reserve employees are shared among - -

0 0 various Fire Departments in the area, many staffing decisions will be made with input from the consortium oversight board. Staffing needs will be assessed on an ongoing basis and new hires brought on as necessary. (Testimony of Chief David Bathke, December, 0, Tr. at -).. Hellsgate s CON application is supported by the Chief of the Payson Fire District, David Staub (Testimony of Chief David Staub, December, 0, Tr. at 0), and the Chief of the Pine-Strawberry Fire District, Gary Morris (Testimony of Chief Gary Morris, December, 0, Tr. at ).. Hellsgate proposes a multi-station model in which it will house response units at strategic locations. (Testimony of Chief David Bathke, December, 0 at ). Hellsgate believes this will result in response times better than a single-station model can achieve. (Testimony of Robb Beery, December, 0, Tr. at -).. Hellsgate has commitments from other fire districts that hold CONs in the area to provide back-up service when necessary. (Testimony of Chief David Bathke, Dec., 0, Tr. at 0).. Intervenor continues to meet the response times required under its CON. (Testimony of John Valentine, December, 0, Tr. at ).. Hellsgate asserts that Intervenor does not have the necessary resources to meet the needs of the community because it has historically called upon AMR ambulances in Phoenix to complete many interfacility transports in CON. (Testimony of Chief David Bathke, December, 0, Tr. at 0-0). In response, Intervenor asserts that adding a fourth, peak-time ambulance to its fleet will cover a majority of the community s needs throughout the year. (Testimony of Glenn Kasprzyk, December, 0, Tr. at ). When that is not enough, Intervenor will rely on a contractual agreement with Banner hospital that gives it greater insight into the area s demand and better ability to pre-plan for high demand situations. (Testimony of Glenn Kasprzyk, December, 0, Tr. at -). - -

0 0 0. If granted a CON, Hellsgate intends to meet all the requirements associated with the Premier EMS Agency Program, along with participating in other quality improvement initiatives. (Testimony of Chief David Bathke, December, 0, Tr. at.).. Hellsgate will continue using e-pcr software compatible with the State EMS registry, and submit information to AZ-PIERS. (Testimony of Chief David Bathke, December, 0, Tr. at ).. Hellsgate audits 00% of patient records for completeness. (Testimony of Chief David Bathke, December, 0, Tr. at ).. Hellsgate representatives are regularly attending Regional EMS Council and State EMS Council meetings. (Testimony of Chief David Bathke, December, 0, Tr. at ).. The Hellsgate Fire Board passed a resolution on December, 0, acknowledging its support for the CON Application and the proposed ambulance service. (DHS 0-000).. The Payson City Council voted in opposition to signing a letter of support for Hellsgate s CON application. (Testimony of Chief David Bathke, December, 0, Tr. at -).. Intervenor asserts that there will be a significant financial impact on Intervenor if Hellsgate is granted a CON. If Hellsgate operates in accordance with its application, Intervenor will lose most of the revenue generated in the CON area, but will still incur expenses by having to cover the area pursuant to their CON. It would be very difficult for them to continue operations in CON. (Testimony of Rich Bartus, December, 0, Tr. at 00).. In response to Hellsgate s assertion that Intervenor is not meeting the community s EMS needs, Intervenor testified as to its ability to make operational improvements after taking control of CON. Intervenor bought the stock in Rural/Metro, previous holder of CON, in October 0. (Testimony of John - -

0 0 Valentine, December, 0, Tr. at ). Intervenor s operational control of CON was limited to maintaining the status quo until the CON was officially transferred to Intervenor in January 0. (Testimony of John Valentine, December, 0, Tr. at ). Intervenor took control of thirteen CONs at that time and leadership was unable to devote full attention to CON until March 0. (Testimony of John Valentine, December, 0, Tr. at -). At that time, Intervenor began restructuring the staffing model, refreshing equipment, and rebranding the operation. (Testimony of John Valentine, December, 0, Tr. at -).. Intervenor believes that adding a second provider to the area is an unsustainable model and will have a significant impact on its organization, and believes it is in the public s best interest tohave access to AMR s many resources. Additionally, Intervenor is concerned that if Hellsgate is awarded a CON and the ambulance service demonstrates poor financial performance, HGFD s operation as a whole may suffer. (Testimony of Glenn Kasprzyk, December, 0, Tr. at 0-). LIMITED PROPOSED CONCLUSIONS OF LAW. This administrative hearing was held under the authority of, and pursuant to, A.R.S. - and -0, et seq., and A.A.C. R--0, et seq. After a hearing held pursuant to A.R.S. - at the Office of Administrative Hearings, the presiding administrative law judge issues findings of fact and conclusions of law which the Director of ADHS considers in determining whether to grant the application or renewal.. The Applicant has the burden to prove, by a preponderance of the evidence, that the proposed CON should be granted. A.A.C. R--.. The Legislature, through enactment of the CON statutes, mandated a fully regulated ambulance industry. See A.R.S. - through -.. The Director and ADHS have jurisdiction over ground ambulance services under Arizona Revised Statutes Title, Chapter., Article and A.A.C. Title, Chapter, Articles -. ADHS, through BEMSTS, regulates ambulance services in the State - 0 -

0 0 of Arizona, including the CON application process and the CON renewal process. See A.R.S. - through -.. In addition to the statutory framework, ADHS adopted rules to regulate ambulances and ambulance services. See A.A.C. R--0 through -0.. Any entity that wants to operate an ambulance in the State of Arizona may do so only after being granted a CON by ADHS. A.R.S. -.. A.R.S. - governs the issuance of a CON for the operation of ambulance services in this State and requires, in pertinent part: a. That a CON applicant must apply for a CON on forms prescribed by the Director; b. That a CON applicant must demonstrate that public necessity requires the proposed service or any part of the service. A.R.S. -(B)(); and c. That a CON applicant must demonstrate that it is fit and proper to provide the service. A.R.S. -(B)();. A.A.C. R--0 outlines the application requirements for a CON.. Public necessity means an identified population needs or requires all or part of the services of a ground ambulance service. A.A.C. R--0(). 0. Public necessity includes, but is not limited to, a review of the need for additional transports, the financial impact of granting a new CON on the current providers, whether there is evidence of substandard performance by the existing providers, a review of current providers and the Applicant s proposed response times. A.A.C. R--0.. In determining public necessity, the Director shall also consider any information introduced at hearing on the applicable factors of A.A.C. R--0.. Further guidance on public necessity can be found in Guidance Document GD- 0-PHS-EMS. (ADHS-). The concept of public necessity recognizes that the primary focus of the inquiry should be on the best interests of the public and not upon - -

0 0 protecting the territory or property rights of current providers in the area. See, e.g., A.R.S. -(A).. Pursuant to A.R.S. -(A)(), the Director may issue a CON to more than one ambulance service in the same or overlapping service areas, provided there is a need for that service. In such instances, the Department refers to A.A.C. R--0(C) for the factors to be analyzed when considering whether there is a need for the proposed service.. Fit and proper means that the director determines that an application for a certificate of necessity or a certificate holder has the expertise, integrity, fiscal competence and resources to provide ambulance service in the service area. A.R.S. -0().. The Director has the authority to determine, fix, alter, and regulate just, reasonable and sufficient rates and charges for the provision of ambulances, including rates and charges for ALS service, BLS service, mileage, standby waiting, subscription service contracts and other contracts related to the provision of ambulance services. A.R.S. -(A)(); A.R.S. -; A.A.C. R--0, et seq.. The Director may consider any other information or documents that may assist in evaluating the application or the proposed rates and charges. A.A.C. R-- 0(A)(); A.A.C. R--0(A)(0).. A CON is not a franchise, may be revoked by the Director, and does not confer a property right upon its holder. A.R.S. -(A). DATED this th day of February, 0. MARK BRNOVICH Attorney General _/s/ Molly Bonsall Kevin D. Ray Molly Bonsall Assistant Attorneys General Attorneys for ADHS/BEMSTS - -

0 0 CERTIFICATE OF SERVICE ORIGINAL filed using the OAH electronic document filing system https://portal.azoah.com/oedf this th day of February, 0, with copies provided to all parties on the approved mailing list this th day of February, 0, by posting through the designated OAH website at https://portal.azoah.com/oedf/documents/0a-ems- 000-DHS/index.html. By: # /s/ Koren Lyons - -