OAR 333-590-0060: Relationship of Proposed New Hospitals to Existing Health Care System

An applicant proposing a new acute inpatient facility, rather than replacement or expansion of an existing facility, must weigh its plans against the availability of beds at existing, reasonably accessible facilities, especially those within the proposed service area of the applicant; and against the feasibility of development of alternative facilities and services. To develop a quantitative estimate of the situation, the following methodology will be used. Its results are to be evaluated against factors such as quality of care; types of services; levels of care available; anticipated changes in hospital locations, patient origins, service mix, age mix, reimbursement mix, transportation patterns, population shifts, and locations of physician specialists; and documented commitments to develop pro-competitive initiatives such as alternative delivery systems, selective contracting, successful competitive bidding, and other market oriented changes: (1) Identify as other significant providers, those hospitals located within the service area of the applicant facility. (2) For the applicant and for each other significant provider, estimate the anticipated commitment ratio, considering the ratio of each facility’s patient days originating from the service area of the applicant facility, to the total patient days originating from that service area, using the most recent available statewide patient origin data, or a more recent less than statewide study, properly adjusted for balance-of-state origins and utilizations. (3) Calculate expected first year average daily census at the applicant facility, based on OAR 333-590-0050(7), and for each other significant provider for that year. (4) Calculate peak daily census for that year at each facility by applying the methodology in OAR 333-590-0050(6) through (9) to the service area and utilization statistics for these facilities, using a multiplier of 2.33 in order to adjust for the low probability that all facilities will simultaneously be full. (5) Estimate the commitment of beds by each facility to the hospital service area at peak occupancy as defined in section (4) of this rule, by multiplying the results of section (4) of this rule by the commitment ratios calculated in section (2) of this rule. (6) To estimate available beds at each facility, subtract the peak occupancy of each, as defined in section (4) of this rule, from: (a) The capacity defined in OAR 333-590-0010(3); and (b) The measure in subsection (a) of this section, plus “shelled space,” that is, convertible space which requires construction rather than merely changing furniture. (7) Estimate the number of beds in excess of peak occupancy which could readily be committed to the service area of the applicant, by multiplying the results from section (6) of this rule by the commitment ratios developed in section (2) of this rule. (8) Taking into consideration the factors listed at the beginning of this rule, evaluate the feasibility and costs of meeting the estimated future need at the applicant facility, as determined under OAR 333-590-0050, from the inventory of available beds identified in section (6) of this rule. Consider the financial feasibility of utilizing “shelled space” rather than new construction. The impact of approval of the proposal on the financial viability of facilities which share the applicant’s market area shall be evaluated by the division using the financial ratios specified in OAR 333-580-0100(3) and (4). (9) If need for acute inpatient beds is not demonstrated under OAR 333-590-0050; or if need is demonstrated but, under this rule, it is found that the need can be met by utilization of available beds at existing facilities which are within 50 miles by road of the proposed facility’s location; the applicant must consider whether an alternative health facility, such as a freestanding emergency center, backed up by one or more existing acute inpatient facilities, would be the least costly way to solve the applicant’s problem of meeting health care needs of the population involved. In addition, the applicant may prepare an analysis related to: (a) Whether one or more of the factors indicated in OAR 333-590-0030(3)(b), (c) or (d) is likely to generate at least 30 percent or more of reasonably estimated acute inpatient care utilization by the population proposed to be served, and if so; (b) Whether the applicant can document unsuccessful good faith efforts, prior to submission of the letter of intent, to arrange for utilization of existing facilities and/or services (if any such facilities or services exist within 50 miles by road of the proposed facility’s location), consistent with meeting the needs of the population to be served in the least costly, least duplicative manner; and, if OAR 333-590-0030(3)(c) applies, consistent with the intended HMO service model and the provisions of section (10) of this rule. (10) The division shall take into account the acute inpatient care needs of members, subscribers and enrollees of institutions, HMOs or health care plans, as defined in OAR 333-545-0020(14), that operate or support particular health care facilities for the purpose of rendering health care to such members, subscribers and enrollees: (a) An applicant to serve such groups shall: (A) Identify the needs of their members, subscribers and enrollees for the proposed facility or service; (B) Demonstrate that the identified needs are reasonable when related to the health care costs of present and future members, subscribers and enrollees; (C) Describe the proposal’s potential for reducing the use of inpatient care in the community through an extension of preventive health services and provision of more systematic and comprehensive health services; (D) Identify the availability, and estimate the cost, of obtaining proposed beds, services or equipment from existing providers in the proposed hospital service area, other than the applicant. (b) A certificate of need shall be issued to meet the needs or reasonably anticipated needs of such group members when beds, services or equipment are not available from non-plan providers in the area to be served. Beds, services or equipment are not available to an HMO from a non-HMO provider unless: (A) They would be available through a long-term contract of sufficient duration and with sufficient provisions for notice of termination to enable the HMO to negotiate an alternative contract with another non-HMO provider, or to develop facilities and/or service capabilities and operate same after notice of contract termination from the non-HMO provider; (B) They would be available and accessible to physicians associated with the HMO on a basis comparable to physicians not affiliated with the HMO (e.g, HMO physicians have or will have staff privileges); (C) They could be provided by a non-HMO provider in a manner that can demonstrate to be as cost effective as if they were developed and operated by the HMO; and (D) They would be available in a manner that is consistent with the HMO’s basic method of operation (e.g., acute care centralized at one non-HMO provider as opposed to contracts for care at multiple non-HMO providers). (11) Based on subsections (9)(a) and (b), and (10)(a) and (b) of this rule, the division may consider proposed findings of need and feasibility, taking into account such factors as: (a) At least 70 percent of the population to be served is more than 50 miles by road from the nearest hospital with 45,000 patient days or more in the most recent year for which data are available; (b) Population base sufficient to sustain the new facility or service; (c) Community effectively isolated from reasonable access to acute care services, given road and weather conditions; (d) Financial condition of applicant adequate to handle consequences of failure of facility or service to open or to stay open, without financial impact on proposed population to be served; (e) Whether the proposed service(s) and bed capacity(ies) represent the least costly approach, in relation to capital and operating expenses, to meet acute inpatient care need; (f) Whether the facility, sized as required under subsection (e) of this section, is designed so that future expansion would be architecturally feasible; (g) Restrictive admissions policies; (h) Access to care for public paid patients; (i) Restrictive staff privileges and/or denial of privileges at existing and proposed facilities.