OAR 333-590-0050: Bed Need Methodology for Proposed New Hospitals

The method for estimating bed need at a proposed new general hospital shall be consistent with the principles enumerated in OAR 333-590-0030, and the legislative findings and policy of ORS 442.025: (1) Determine the service area of the applicant facility as those zip codes from which either ten percent or more of the hospital’s discharges are reasonably expected to originate, or in which the hospital would have at least a 20 percent market share. Minor adjustments to the boundaries of the service area may be made to create a contiguous service area or to conform more closely to the boundaries of demographic units for which census data are reported (county, county census division, enumeration district, or zip codes if conversion has been done). If a project proposes to serve a population group with special needs or beliefs, those factors must be taken into consideration as indicated in OAR 333-590-0030(3). (2) Determine the estimated population for the hospital service area identified in section (1) of this rule for the benchmark years 1970, 1980, 1985, 1990 and 1995, as a basis for estimating population for individual past and future years. Available historical information regarding changes in hospital service area, because of factors identified in section (1) of this rule, may justify numerical adjustments to base populations and increments under each of the following steps: (a) For 1970 and 1980, use the available U.S. census counts; (b) For 1985, use the estimates developed by the Center for Population Research and Census at Portland State University; (c) For 1990 and 1995, official population forecasts developed by the Center for Population Research and Census (CPRC) should be used. If previously prepared forecasts are not available from CPRC for the service area, then the applicant should contact the division to prepare a joint request for preparation of a service area forecast compatible with county and state forecast series. The applicant shall pay any associated costs. All reports prepared by CPRC must be made available to the division; (d) To ensure the consistency of special forecasts prepared by CPRC for applicant facilities, the division may develop a memorandum of understanding with CPRC which specifies that the method used to produce these special forecasts is the same as that used to produce the official county-level forecasts coordinated to the state forecasts; (e) If CPRC does not make available single-year projections, use linear interpolation to obtain estimated service area population for years between 1980, 1985, 1990 and 1995; (f) The most recent CPRC estimates for years prior to the present year will be utilized; (g) If age-specific forecasts are available, changes over time in the age composition of the service area population should be examined, and their implications for use-rates taken into consideration. (3) Determine current year hospital service area and historical health service area population-based discharge and patient day use-rates from statewide patient origin studies. More recent patient origin data on a less than statewide basis may also be considered if a method of adjustment for balance-of-state origins and utilization acceptable to the division and applicant can be developed. The historical rate of change in health service area average use-rate shall be estimated by the median of the annual percentage changes for the years 1977 through 1983. For health service areas I, II and III, the annual rates of change are, respectively, minus 2.875 percent, minus 0.774 percent, and minus 2.788 percent. This general assumption regarding future use-rate may be modified if one or more of the conditions specified in OAR 333-590-0030(3)(b), (c) or (d) are met: (a) Determine current year and historical utilization, by the service area population of existing facilities, using available patient origin studies and data from the Annual Reports for Hospitals for each of the prior ten years, unless a request is approved to use the Medicare Cost Reports. List, chronologically, factors which may have affected these statistics, such as population shifts, and changes in hospital location, service mix, age mix, reimbursement mix, transportation patterns, locations of physician specialists, and changes in the intensity or types of services delivered; (b) Estimate future utilization rates by the hospital service area population, based on CPRC projected age/sex breakdowns, according to consideration of each of a range of age/sex adjusted use-rates based on the most recent available statewide patient origin study for: (A) The state as a whole; (B) The health service area; (C) The nearest facilities with service mixes most comparable to the proposed facility; (D) The nearest facilities with comprehensive service mixes; (E) Available HMO age/sex use-rate data for California, Oregon and Washington. (4) Develop a consistent and reasonable set of well-documented assumptions regarding the appropriate use-rates reviewed in section (3) of this rule, and regarding the extent to which utilization at the proposed hospital will be “new” utilization and the extent to which it will replace utilization at existing hospitals. (5) Analyze the advantages and disadvantages of both “new” and “replacement” components of utilization, with respect to both the population to be served and existing facilities, considering the legislative findings cited in ORS 442.025 with respect to reasonable access to quality health care at a reasonable cost. (6) Given all information from the preceding steps, and the five- and ten-year population estimates, compute the range of possible future patient days in five years and in ten years at the facility, allowing appropriate adjustments for out-of-area utilization and other special factors or considerations indicated in OAR 333-590-0030(3). The division will assume that health service area use-rates will decline for the next ten years at the rate indicated in section (3) of this rule. The burden of proof for any different assumption will be on the applicant. (7) Convert each computed value of forecasted patient days based on preceding sections of this rule to average daily census (ADC). (8) For each of the values computed under section (7) of this rule, estimate the statistical variability, or standard deviation, of the daily census by the following rules: (a) For hospitals with an ADC of 50 or greater, the standard deviation of the daily census is estimated as 5.08 + .064 ADC; (b) For hospitals with an ADC less than 50, the estimate of the standard deviation is indicated in Table 1: Table 1 Average Estimated Daily Census Standard Deviation 10 4.0 15 5.0 20 5.6 25 6.2 30 6.7 35 7.2 40 7.6 45 8.0 (9) Estimate the statistically expected daily census at the facility by applying an appropriate multiplier to the results of section (8) of this rule, and adding that product to the results of section (7) of this rule. Select the appropriate multiplier by the following rules: (a) If the facility is more than ten miles by road from the nearest alternative facility, use a multiplier of 2.88 to assure an available bed on all but one day out of each 500 days, a 99.8 percent probability; (b) If the facility is ten miles or less by road from the nearest alternative facility, use a multiplier of 2.33 to assure an available bed on all but four days out of each 365, a 99 percent probability. (10) Using a ten-year projection from the calendar year of submission of the application, and the analysis in sections (4) and (5) of this rule, select from the results of section (7) of this rule the most likely average daily census, noting the assumption in section (6) of this rule. Include consideration of the following factors: (a) Whether it is planned that new health services will be added, or existing ones expanded, decreased or deleted; the best feasible mathematical estimates of appropriate utilization levels and patient days generated because of such changes; and the best available evidence of whether these will be “new” days areawide, or will shift present areawide utilization patterns for the service(s), or both; (b) Whether any new or expanded services will involve: (A) Adding physicians up to, but not beyond, established minimum physician-to-population ratios for applicable specialists; or (B) Adding physicians beyond such ratios. (c) Utilization generated as a result of addition of physician staff members, up to ratios specified in paragraph (10)(b)(A) of this rule may be considered in addition to utilization projected using the use-rate assumption in section (3) of this rule. In the event that the proposed situation is as in paragraph (10)(b)(B) of this rule, the estimated utilization so generated will not be counted as need. Physician-to-population ratios will not be used as a basis for reducing projected utilization derived from the basic use-rate assumptions in section (3) of this rule; (d) Established minimum physician-to-population ratios for various specialties are to be derived from the following references: Report of the Graduate Medical Education National Advisory Committee to the Secretary, Department of Health and Human Services, Vol. II, Modeling, Research and Data Technical Panel, DHHS Publication No. (HRA) 81–652, September 1980, p. 22; and M.A. Bowman, et. al., “Estimates of Physician Requirements for 1990 for the Specialties of Neurology, Anesthesiology, Nuclear Medicine, Pathology, Physical Medicine and Rehabilitation, and Radiology,” Journal of the American Medical Association, 250 (November 18, 1983): 2623–27, p. 2625. Physician-to-population ratios are to be derived using the estimated physician requirements in each specialty nationwide for the year 1990 from these studies; and the middle series projection of the 1990 U.S. population from “Projections of the Population of the United States: 1982 to 2050 (Advance Report),” Population Estimates and Projections, Series P-25, No. 922, Bureau of the Census, October 1982. This projection is 249,731,000 persons. (11) Select, from the results of section (9) of this rule, the peak daily census associated with the result of section (10) of this rule. If this number of beds exceeds the present number of acute inpatient beds within 50 miles by road of the population to be served, the applicant must evaluate the extent to which admissions scheduling by the applicant or by existing institutions could alleviate the need for new beds. The division shall evaluate the extent to which procedures and treatments that could be accomplished on an outpatient basis are planned to be handled on an inpatient basis at the applicant facility, and may make a compensatory adjustment in the bed need estimate. In performing this evaluation, the division shall consult with professional review organizations, third-party payers, and professional and provider organizations. One indication of need for compensatory adjustment may be a case mix adjusted Medicare diagnosis related group (DRG) length of stay or admission rate in excess of those at comparable facilities. (12) If the result of section (11) of this rule indicates that added beds may be needed in the proposed hospital service area, an applicant for a new facility shall weight its against the availability of beds at other facilities within 50 miles by road of the proposed facility’s location and against the feasibility of alternative health care services, under OAR 333-590-0060. (13) A certificate of need will be issued to meet the indicated need based on sections (11) and (12) of this rule, if supported by provisions of OAR 333-590-0060 and the division’s findings on the criteria in division 580. (14) If the number of beds proposed at the applicant facility cannot be justified under these general acute inpatient rules, a certificate of need for new specialty beds will not be issued unless an adjustment is indicated because conversion of other beds to sufficient specialty beds to meet calculated specialty bed need is not architecturally and economically feasible. [Publications: Publications referenced are available from the agency.]