Some Thoughts about System Redesign

*and maintaining intellectual virtue while doing it

Dan Smiley Intellectual Virtue --Aristotle (384-322 BC) • Intellectual virtues are character traits necessary for right action and correct thinking • A sense of justice, perseverance, empathy, integrity, intellectual courage, confidence in reason, and autonomy What is the Role of an EMS Agency?

• Plan, Implement, and Evaluate an EMS System? • Coordination of Multiple Autonomous Organizations with Functional Interdependence? • Consumer (Patient) Advocate? • Champion of Public Safety? • Economist and Philosopher?

A Little Economic History . . .

• Economics describes the factors that determine the production, distribution, and consumption of goods and services • Consumers need to be able to “quality and price shop for services” • Adam Smith, 1776, Wealth of Nations • Father of Modern Economics and laid the foundation of free market economic theory • Described the “invisible hand” that controlled supply and demand, and price and quality under the conditions of perfect competition • But warned of self-interest

Why do we Regulate? Protect the Consumer (Public) or “Private Market Failure” • Economic Regulation – Prevent Natural – Provide Public Goods – Price Controls • Social Regulation – Provide Adequate Information – Mitigate Undesirable Externalities – Redistribution of Wealth

WARNING: Capture Theory

• George Stigler, Noted Economist • 1971, Economic Theory of Regulation (AKA Capture) • Nobel Prize, 1982 for economics of information • “Systematic examination of the self-interest of the various participants in political life” • Form of Government Failure • Occurs when a Regulatory Agency, created to act in the public interest, instead advances the commercial or political concerns of special interest groups that dominate the sector it is charged with regulating • That Agency is considered “captured” Antitrust Policy

• Sherman Anti-Trust Act (1890) – Prohibits anti-competitive behavior for monopolies, , and trusts • Clayton Antitrust Act (1914) – Added other impermissible Activities ie price discrimination, exclusive dealings, mergers and acquisitions

Anti-competitive practices under • • – occurs when rival companies cooperate for their mutual benefit ie Cartels, , or • Example: Bid Rigging/Bid suppression occurs where some of the conspirators agree not to submit a bid so that another conspirator can win the contract • • • • Dividing territories • Conscious Parallelism • • Misuse of Patents Antitrust Cases

• Parker v. Brown (1943) --State Action Anti-Trust Immunity reflects Congress’ intention to embody the federalism principle that States have sovereignty and that there is a “dual system of government” (Federal and State). • City of Lafayette v Louisiana Power and Light (1976) – Subordinate state governmental body is not exempt from antitrust laws • Community Communication Company v. City of Boulder (1982) – Cities don’t have direct delegation of powers and that there must be a “clearly articulated and affirmatively expressed state policy” to have state action immunity.

• Then came along AB 3153 in 1984 that added 1797.6 . . . Role of EMSA Health and Safety Code 1797.6 • (a) It is the policy of the State of California to ensure the provision of effective and efficient emergency medical care. • The Legislature finds and declares that achieving this policy has been hindered by the confusion and concern in the 58 counties resulting from the United States Supreme Court’s holding in Community Communications Company, Inc. v. City of Boulder, Colorado, 455 U.S. 40, 70 L. Ed. 2d 810, 102 S. Ct. 835, regarding local governmental liability under federal antitrust laws. • (b) It is the intent of the Legislature in enacting this section and Sections 1797.85 and 1797.224 to prescribe and exercise the degree of state direction and supervision over emergency medical services as will provide for state action immunity under federal antitrust laws for activities undertaken by local governmental entities in carrying out their prescribed functions under this division. Health and Safety Code 1797.224

• A local EMS agency may create one or more exclusive operating areas in the development of a local plan, if a competitive process is utilized to select the provider or providers of the services pursuant to the plan. • No competitive process is required if the local EMS agency develops or implements a local plan that continues the use of existing providers operating within a local EMS area in the manner and scope in which the services have been provided without interruption since January 1, 1981 • A local EMS agency which elects to create one or more exclusive operating areas in the development of a local plan shall develop and submit for approval in advance to the authority, as part of the local EMS plan, its fair competitive process for selecting providers and determining the scope of their operations. This plan shall include provisions for a competitive process held at periodic intervals. Nothing in this section supersedes Section 1797.201. • Note the Slight modifications in Red

What does this mean?

• Means “we” can be anti-competitive, and restrict trade • But must do it following our State law • Must be State direction and supervision • Protects all local governmental entities from antitrust claims

Competitive Process, as part of the EMS plan • EMSA provides supervision • Approved in Advance • Fair (note earlier anti-competitive practices) • Must adhere to the approved competitive process, including the contracting phase • No “negotiation” after the RFP • No significant deviation from the approved process • EMSA may withdraw approval of the EMS plan

Protecting Winners and Losers

• Yes, we know that there will probably only be one “winner” • EMSA has the responsibility to ensure a level playing field • “Gee, if I knew that the rules, conditions, or specifications were going to change, I would have bid it differently . . . ” • Fair criterion and evaluation process to select winner (Eel River Disposal v County of Humboldt, 2013) • No, you can’t just select yourself

What Happens if the Economics Changes? • You can always rebid it. • Or, perhaps you planned for it . . . • Described in the Competitive Process • Metrics for Analysis of Financial Viability – Unit/Hour Utilization – Cost/Unit Hour – Revenue/Transport • More frequent bid cycles System Redesign

• If in doubt, follow the law • Be fair and consistent • Remain neutral • Protect the consumer • Be an Economist • Maintain Intellectual Virtue

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