Arizona uses a Certificate of Necessity (CON) system to regulate ground ambulance service. The overall idea is to have a regulatory system that optimally allocates resources, makes sure every place in the State has adequate emergency medical services, and that reduces rates to the extent possible.
Any entity that wants to run an ambulance service needs to get a CON from the ADHS. It’s basically a license to run an ambulance service. The CON describes the geographic service area, level of service (advanced life support or basic life support), hours of operation, response times, effective date, expiration date for emergency medical services in the specific geographic area.
An ambulance service that gets a CON is supposed to stick with the criteria on their certificate and operate in accordance to the statutes and rules by which it's governed.
A common misconception is that Arizona’s CON system is designed to limit the number of ambulance services in Arizona. That’s not the case. Parts of the State (especially areas with high populations lots of transports) have multiple providers and overlapping service areas where more than one ambulance company can provide services.
The Statutes and Rules require that people who want to start an ambulance service have to demonstrate that there's "a public necessity" for the proposed service. There are detailed statutes that define what the words “public necessity” mean for the purposes of providing direction to the ADHS Director when she or he decides whether to approve a CON application. There’s also a guidance document that outlines what the words “other things as determined by the Director” means.
How it Works
When someone wants to get a CON they apply to the ADHS. There are usually competitors that don’t want the applicant to get it (because the new applicant will be taking some of their cheese). When someone challenges an application (called an intervenor) a hearing is scheduled with the Office of Administrative Hearings (in the ADOA).
A new statute limits that hearing to 10 days of testimony (a big improvement because these hearings used to go on for weeks or even months). The Hearing Officer listens to the testimony and documents and issues an “Order” with their opinion whether the Director should issue the CON.
The ADHS can take or not take the Hearing Officer’s opinion. She or he can approve the CON, deny it, or approve it with some modifications. There's a lot of interest among the parties when these CON applications are being considered - mostly because there's a bunch of money at stake. CON applications are quite litigious.
Here's a couple of recent cases that illustrate recent urban and rural CON applications.
The Case of Community Ambulance (Urban)
An outfit called Community Ambulance applied for a CON to be able to do inter-facility transports (no 911 service) in Maricopa County. The goal was to have a CON that would provide inter-facility service between the Dignity Health facilities in Central AZ. Dignity Health was supportive of the application because they believe contracting with Community Ambulance would help them more efficiently transport their patients between facilities- improving patient care and reducing costs.
While the current providers (AMR and a couple others) can and do provide inter-facility transports in Maricopa County, the applicant and their supporters believe that a specific service dedicated strictly to interfacility would improve efficiency (Dignity would have contracted with Community Ambulance for this specific service).
After reviewing the application and documents, a Hearing Officer at the Office of Administrative Hearings recommended that the ADHS deny the application. Here’s that Opinion. Upon review of the Hearing Officer’s opinion, the ADHS Director agreed with the hearing officer opinion and denied the CON.
There’s an opportunity to appeal, and Community Ambulance filed a Motion for Review with the Director. The ADHS Director can review the case and change her mind or stay with the initial decision. If the CON remains denied, Community Ambulance can appeal to Maricopa County Superior Court.
The Case of Timber Mesa (Rural)
Back in 2017, an outfit called the Timber Mesa Fire District applied to extend the boundaries of their CON to include the city of Show Low. An existing CON was in place in Show Low (Show Low EMS- now called Arrowhead Mobile Healthcare).
After hearing the evidence- the Hearing Officer recommended that the ADHS deny the CON application because: 1) Timber Mesa didn’t show that more resources were needed in the service area; 2) the reduction in call volume for Show Low EMS would make Show Low EMS unable to meet their current obligations; and 3) Timber Mesa didn’t prove that Show Low EMS has engaged in substandard performance in either 911 or interfacility service.
The ADHS Director didn’t agree with the Hearing Officer’s recommendation and approved Timber Mesa's CON boundary expansion into Show Low.
Show Low EMS (now Arrowhead Mobile Healthcare) appealed the ADHS Director’s decision in Superior Court. Last week, the Superior Court judge in the case agreed with Arrowhead that “the Director exceeded her statutory authority when she "sua sponte" amended CON 111 to include the Expanded Service Area”. It’s now the ADHS’ job to read the Judge’s decision and figure out what to do next.
Editorial Note: When I was in the Director position, I was reluctant to issue additional CONs in rural areas because adding too many providers in rural areas can jeopardize overall service and increase costs. That’s because when transports are spread “too thin”, one or both ambulance service providers may not be able cover their expenses - which can cause them to ask for rate increases or neglect underpopulated areas which jeopardizes response times.
In urban and suburban urban areas, I was more inclined to approve CONs that met the basic statutory requirements because there are usually plenty of transports around to ensure that ambulance providers can meet their expenses... and increasing the number of providers can safely increase competition. In urban and suburban areas there’s a lot less risk that adding additional resources will cause rate increases or result in providers neglecting the less populated parts of the service area.
This primer is just a short summary of the CON system and how it works in Arizona. One can spend an entire career on this subject and still learn something every day- so take this for what it’s intended- a small window into the complicated world of Ambulance service Certificates of Necessity in Arizona.