High ambulance rates up for approval, again
March 21, 2011
The San Luis Obispo County Board of Supervisors will soon decide whether to approve a new contract with San Luis Ambulance Service, further solidifying one of the highest rate schedules in California — and stoking a controversy that burned years ago.
If the supervisors approve a new five-year contract, which would replace the old one that is set to expire June 30, it would continue the grandfathered designation of the private ambulance company as the exclusive service provider in the county’s north, central and south emergency response zones.
The county’s ambulance customers, averaging about 15,500 a year, are billed rates which represent the third highest in the state, according to a May, 2010 survey conducted by the Emergency Medical Services Administrators Association of California (EMSAA).
San Luis Obispo County’s base ambulance rate, which has nearly tripled in less than a decade, increased to the current rate of $1,947, which became effective Jan. 1. It’s a growth rate that has far exceeded the rate of inflation.
Back in 2002, the base transport rate was a mere $664.
The current critical care base rate is even higher at $2,466.33. Additional charges include the use of oxygen – $76.62, disposal of infections materials – $19.18, standby time – $153.41 and mileage – $19.85/mile, $24/mile for critical care.
Since health insurance companies take statewide averages into consideration in setting reimbursement rates, local residents may find their coverage fall short of paying the total bill.
Transport rates in the county are well above the median, so the customer is often left to pay the difference, which could amount to more than a $1,000 in out-of-pocket expenses.
While some criticize the high ambulance costs, no organized effort opposing the contract has surfaced from the general public.
San Luis Obispo County’s high ambulance rate schedule follows behind the state’s top two, Monterey and San Benito counties. However, Monterey County’s situation is unique since the contracted ambulance service provider suddenly pulled out, leaving the county to sign a short-term contract with American Medical Response (AMR) at a temporarily higher base rate while the county accepted bids for a long term transport provider.
Charges in Monterey County soared from $1,298 in 2008 to a 2010 base rate of $2,265.54 per transport.
“We are generally reimbursed for 50 out of every 100 transports we provide,” said Jason Sorrick, spokesperson for AMR (the largest ambulance service provider in the country). “In Monterey County we have a high percentage of fixed reimbursement with Medicare being 39 percent of our pay mix and Medi-Cal at 15 percent.”
Built into the high cost of an ambulance ride locally is the fact that San Luis Ambulance Service is facing first-responder fees of about $708,410 for the 2010/2011 fiscal year, a slight increase from the year prior due to a consumer price index increase.
First-responder fees are a relatively modern concept, coined within the last 20 years as a way for fire departments to receive compensation for assisting the private ambulance company as the first to arrive on scene in medical emergencies.
In several counties, fire departments have completely taken over emergency medical services and own and operate their own ambulances.
Other community emergency service programs mirror San Luis Obispo County’s. In those programs, firefighters are initially dispatched and generally arrive before paramedics from San Luis Ambulance Service, who then take the lead in patient care.
Some critics question the cost efficiency of the system.
“We are running these fire trucks on ambulance calls,” said Pacific Energy President John Ewan, who is also an energy analyst and former San Luis Obispo City Council member. “I can understand for a vehicle accident, understandably.
“But to run a fire truck to someone who has a heart attack, when they need an ambulance to transport them to the hospital and they need EMT care?
“We are paying the cost of equipment rolling out. We are paying the cost of not having the equipment available if there were a fire emergency. And we are paying the environmental cost.”
As the nationwide controversy over the costs versus the benefits of having firefighters respond to all medical calls heats up, several communities in California have switched or are in the process of switching to a system where private ambulance personnel respond to most medical calls without dispatching fire trucks and safety workers.
In San Joaquin County, for example, it adopted the practice of sending out the “correct resource” for each call during contract negotiations with ambulance agencies about five years ago.
“If you send the cavalry to each call, even if they are not needed, they may not be available when you need them,” said Dan Burch, San Joaquin County’s director of Emergency Services who also noted the cost saving of not rolling out unneeded vehicles for each call.
Burch said the change saved taxpayer dollars, but he has not put a specific figure on it.
Supporters of the current system defend the ambulance price schedule as being appropriate for San Luis Obispo County.
For one, ambulance companies are required to provide care regardless of a patient’s ability to pay, which increases the cost for those that can.
The cost of emergency responses for the homeless, uninsured and below-cost reimbursement from government insurers is absorbed into the overall cost to run operations, which, in turn, translates into increased prices for the average Joe.
The San Luis Obispo County Health Agency leads the ambulance contract negotiations, review, and rate setting. Among other things, it considers the ambulance company’s expenses, revenue/pay mix and pay sources.
Jeff Hamm, Health Agency director and chairman of a county advisory group that recommended the new five-year ambulance rate agreement to the county supervisors, defends the rates being one of the highest in the state because of the demographics of the county, the high level of service and increasing operating expenses.
Bob Neumann, a former San Luis Obispo fire chief who also is a consumer representative on the another county advisory body known as the Emergency Medical Care Committee, agrees, noting that the Cuesta Grade mountain range is like a barrier that creates a variety of population areas, some dense, and others far from hospitals.
“An ambulance company has a hard time delivering ambulance service in the county. Add on the [Oceano] dunes, which has a huge need; we have a large amount of trauma at the dunes,” Neumann said. “And the lakes are far from hospitals. There is a huge mechanism of injury.”
San Luis Ambulance General Manager Chris Javine said the relatively limited response volume is another factor. “We are a very rural area and that tends to increase the rates because you don’t have the call volume. We have to maintain a certain level of readiness,” Javine said.
The ambulance company reports it responds on average to more than 23,150 medical service calls per year. Of those trips about 30 percent are dry runs, which means the ambulance is discharged from service, doesn’t transport anyone to a hospital, and no one is billed for the cost.
On March 8, the San Luis Obispo County Ambulance Performance and Operations Committee (APOC), the advisory body that Hamm chairs, voted to recommend that the supervisors approve the new contract.
The new tentative ambulance agreement also calls for San Luis Ambulance to reduce its target profit margin nearly in half from a range of 8 to 11 percent to 5 to 7 percent. Kelton said the company is already complying.
Under the constraint of less profit, San Luis Obispo Ambulance Service is also expecting increased expenses as it prepares to make a $650,000 investment in the replacement of its EKG monitors, new ambulances and other equipment.
As budget crises threaten programs and jobs across the country, firefighters are also looking for a bigger piece of the pie, which may come in the form of more first-responder fees that could — once again — raise the cost of ambulance service.
Wade McKinney, Atascadero city manager and an APOC member, who within minutes of the start of the March 8 APOC meeting moved to recommend approval of the new contract, said they need to “make sure fire department staffing is correct.
“We don’t want to go to the public and say, ‘You are losing your house but we need to raise fees,’ ” McKinney said.
APOC moved quickly to recommend approve of the new contract despite concerns from some committee members, who wanted more time so that they could obtain and review the formula behind the first-responder fees.
At the time of the meeting, none of the members could recall the methodology behind the fees.
McKinney argued that with the ambulance contract expiring in just over three months, the committee members would be hard-pressed to find a mutual time to meet again, considering their busy schedules.
In the past, APOC had failed to comply with its own bylaws, which require the committee to meet quarterly.
Until last September, the committee had not met since the summer of 2006. It has since complied with its bylaws.
Despite the rush, two committee members, Paso Robles Fire Chief Ken Johnson and Acting County Fire Chief Rob Lewin, opposed the motion that recommended approval of the contract, which included the ambulance rate schedule and first-responder fees. Nevertheless, the motion was approved by a majority of APOC.
After the meeting, Johnson said that while the first-responder/San Luis Ambulance working relationship is “wonderful” compared to other counties, he “did not feel comfortable voting to approve the new contract” until he sees the first-responder payment calculation.
“It might be appropriate to see if it is applicable today,” Johnson said. “The decision was made in the past. We have more time, experience, and understanding today.”
A 2001 APOC report details the first-responder fee methodology as being a formula that includes individual fire department’s number of employees, number of medic credits, training costs, and equipment costs which have all most likely changed since the formula’s inception more than a decade ago.
However, at the ambulance contract’s optional rate reviews, those factors have not been recompiled and recalculated for a number of years.
Now that Johnson, who says his position represents municipal fire agency interests, has reviewed the methodology he believes a present recalculation is one of several factors that needs “to be jointly considered in preparing any recommendation for policy level changes.”
He said, “Our group will continue to internally discuss the fee issue, understanding that we represent only one perspective. I am confident that a clearer set of fire agency points will aid in the later APOC discussions and its ultimate recommendations.”
The history behind high ambulance rates
As some of the founders of the first-responder fee plan explained, the arrangement, which contributes to the high ambulance rates, was a compromise to keep the local fire agencies out of the paramedic transport business.
The history is a litigious one – a battle San Luis Obispo County has managed, for now, to keep out of the courts.
“People were suing each other left and right,” said retired San Luis Obispo City Fire Chief Bob Neumann.
“The court battles were about who had the authority to do transport. The cost of doing business increased and fire felt it was important to be reimbursed for the work they were doing in the field. That’s when they considered starting a transport operation.”
According to the California Fire Service, 80 percent of fire agencies’ responses are non-fire emergencies. It is a trend that began in the 1970’s.
Since then, building codes and improved construction meant new buildings and homes that are safer, resulting in fewer fire emergencies. Combined with an aging population that was growing, the paradigm shifted to a major majority of medical and rescue emergencies.
Under the pressure to maintain their jobs and pensions, firefighters across the nation launched an effort to expand into the paramedic/ambulance business. Adding fuel to the fire, a San Luis Obispo City Fire chief purchased an ambulance from the City of Los Angeles in the late 90s.
According to San Luis Ambulance Service President and CEO Frank Kelton, the fight for market share in San Luis Obispo County really heated up in the late 1990s with litigation in San Bernardino County that could have potentially threatened the future of the company’s contract. In two historic cases, the California Supreme Court was confronted with varying interpretations of the 1980 EMS Act.
While at the time, the lawsuits’ outcomes were yet to be determined, Kelton said he made a deal and proposed the first-responder fees.
“I thought, ‘How do we make this work for everyone without getting into a legal battle?’ So we came up with first-responder fees,” Kelton said.
“It later turned out that the county had the authority to handle ambulance contracts but nobody knew that at the time. We compromised and became a partnership so we didn’t have to go to court and fight over who was right and who was wrong.”
Neumann, the former San Luis Obispo fire chief, helped negotiate the first-responder fee deal.
“Fire is delivering a significant service,” he said. “If it was not for the fire company we would need more ambulances. We went out to find the budget to deliver these services. We put together the formula that exits today.”
The fight for market share is long from over across the country, where heated debates are calling into question the firefighters’ role as an integrated part of the emergency medical services system.
But in San Luis Obispo County, the “official” response from the Health Agency, San Luis Ambulance and several fire chiefs is that the fight for turf is over.
“Here we haven’t had those controversies. These systems have been in place for a number of years. They were put in place to enhance service and raise the level of service,” said San Luis Ambulance Service General Manager Chris Javine.
Neumann said, “If the fire guys want to get into the transport world, they would get in — in a heartbeat. If they thought they could get into it– they would. It would cause ambulance rates to go ballistic.
“It is like taking the cream out of the center of the donut. They [firefighters] think about the county as a whole, which is why the troops get along really well together.”
Those who came up with the first-responder fee deal knew that the additional costs would likely result in higher rates for consumers. But they were of the opinion that the so-called “turf” war over responding to 911 calls was more important to settle.
“You can get away with a lot cheaper operations,” said Neumann. “But you really diminish the standing army available to you in a time of disaster. You just don’t have the same capabilities. That has been a characteristic this county has valued. Other counties don’t value that so ambulance companies can get away with a lot cheaper rates.”
While that fire may have been put out years ago, a looming fiscal crisis threatens to reignite it.
Once again, firefighter jobs are in jeopardy as cities try to get a handle on their soaring budget deficits under the threat of bankruptcy.
“The city of San Luis Obispo is projecting a $3-million shortfall this year and at least another $3 million next year, maybe as much as a $5-million shortfall. They are simply spending more than they take in, in revenue,” said Steve Barasch, San Luis Obispo Property Owners Association (SLPOA) treasurer.
In 2006, SLOPOA privately funded and hired a consultant, The Center for Government Analysis, to study San Luis Obispo’s finances. The author’s conclusion was that the city would go broke in five years. The group went to the city with a detailed report of the findings and suggestions for short and long term budget reduction measures and implementation strategies.
“They were laughing at us,” Barasch said. “They are not laughing anymore.”
SLOPOA, which has spent the last six years pressuring the city to reduce its costs, believes San Luis Obispo is paying far too much for public services than it needs to.
Looking at labor rates in San Luis Obispo’s public safety sector, Barasch says, “Everything is jacked up here. It’s considerably higher compared to other cities of similar demographics. It’s the local benefits that drive things up. Salaries are fairly high but the benefit packages are ungodly high.”
While Barasch did not want to comment directly on the ambulance-fire issues, he pointed out that “fire and police account for the largest salaries and benefits within the city’s general fund, about 79 percent.”
Critics contend there are too many firefighters on the job, which is driving up the cost, particularly in light of the public pension fund crisis brought on by the recession. They say emergency response in the county could be run more efficiently from an environmental and economic standpoint.
Currently, three to five firefighters arrive in a full-sized fire truck for medical calls, including heart attacks and seizures.
Considering how other cities introduced an ambulance service to offset public safety costs, a 2007-2008 San Luis Obispo Grand Jury report scrutinized “whether equipment and fire department personnel are appropriate to meet changing department service demands.”
It also concluded that the “fire department should evaluate the benefits versus the costs of adding an ambulance service.”
There is no doubt tough decisions lay ahead. And desperate times could call for desperate measures.
Former San Luis Obispo councilman John Ewan says, “People have not been willing to sit down and work it out and it is costing all of us. The moment I asked the question when I was on the [city] council, people said to me ‘this is the way it is.’ The issue, it’s not being talked about. A report needs to be done.”
One of the reasons for the apathy is, despite the price tag, by and large people are satisfied with the quality of the ambulance service and emergency medical response in the county, according to the officials we spoke to.
While every side has its cause, as Paso Robles Fire Chief Ken Johnson explains, the problems and any resolutions are complicated.
The “system participant (public providers, private ambulance, system administrators) focus has been to provide the highest level of pre-hospital emergency medical service possible at a reasonable cost. This lives within a dynamic environment that requires a continual balancing of interests and needs,” Johnson said.
“Changes in any one area also tend to affect others and I’m always hesitant to push for any solution without a better understanding of systemic impacts.”
When it’s all said and done, “each city has to decide how they want to service their citizens. We are the support.” Kelton said and added that if the ambulance and fire did not respond in tandem, the public would still be served.
“There would be times when we need additional help. Response times could be affected especially in remote areas and even in the cities, but not by much.”
Neumann says, “If we don’t deliver advanced life support in a certain level of time, the outcome would be significantly bad. This is not hocus pocus.”
Questions over why San Luis Obispo is using its new tiller ladder truck for most station one calls when it is larger than standard fire trucks, is manned by up to five firefighters and costs more to roll out, resulted in the following city response: