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 Monopolies
– 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,
cartels, and trusts
• Clayton Antitrust Act (1914) – Added other
impermissible Activities ie price
discrimination, exclusive dealings, mergers
and acquisitions
Anti-competitive practices under
Competition Law
• Monopolization
• Collusion – occurs when rival companies cooperate for their
mutual benefit ie Cartels, Price Fixing, or Bid Rigging
• 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
• Product Bundling
• Refusal to deal
• Exclusive dealing
• Dividing territories
• Conscious Parallelism
• Predatory Pricing
• 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
Next . . .