April 6 2011 12:00 AM

Poking the sacred cow of public versus private emergency medical services


What started out as a simple question — how can deficit-ridden Lansing save $1 million in its emergency medical service, or EMS, budget? — turned into an inquiry so fraught with political and economic feuds, that one private ambulance company told me I was “poking the sacred cow” that is ambulance service.

Questions like, “If a private ambulance company can make money, why can’t the government?”; “Could the government effectively break even on a portion of public safety spending?”; and “Is public-based EMS better and faster than private-based EMS?” became relevant after cities started charging fees for giving rides to the hospital. Now the two sides — fire departments and private ambulance companies — are essentially competitors.

According to Lansing’s finance director, the city spends $4.2 million a year on EMS while recouping $3.2 million in fees charged for ambulance transports. The city says that’s just the cost of doing business and if you want good public safety, it’s going to cost you. The city also says it’s not in the public safety business to make money.

EMS has two components: first response and transport. All public safety departments — police, fire and EMS crews — are trained to be first responders to the scene of an accident. The transportation aspect — carting that person to the hospital — is where the cost/revenue debate gets complicated. Over the past 15 years, municipal fire departments that were in the transport business have started seeing it as a revenue generator and a job-securer as the number of fires decline. Private ambulance services have been doing it all along.

But despite bringing in $1 million less than it spends on EMS, Lansing Mayor Virg Bernero said there is no interest in privatizing ambulance transports. In his proposed fiscal year 2012 budget, there is no plan to take any of the city’s five ambulances out of service, one of which was just brought online in July. Bernero also recommends raising user fees by 15 percent.

“I wouldn’t privatize police and fire,” Bernero said on a recent Monday after his budget proposal. “There are certain things government should do … . If you put a profit motive in them, the service might not be as good.”

However, Bernero also recommends closing three fire stations (he couldn’t specify which three the night he proposed his budget) and eliminating 71 positions in the Fire Department. But if Lansing voters approve a 4-mill property tax in a May 3 election, Bernero said $3.65 million of the nearly $9 million to be generated would go back into the Fire Department, bringing back two fire stations and 36 of those 71 positions.

Yet it is unclear what effect, if any, the cuts will have on EMS, Finance Director Jerry Ambrose said. Bernero said the notion of the city’s fire-based EMS being better than a private company is “just beginning” to be looked at.

“It’s not something we’ve studied in the past. It was something that was just not questioned,” he said. “People have been very happy with the paramedic response and ambulance service the city provides. It doesn’t pay for itself, but we can recoup some of the costs of it.”

Dennis Palmer, president of private-based Mercy Ambulance Service at 1422 E. Michigan Ave. on Lansing’s east side, said he is there if the city needs support. While six ambulances sit at the east side garage, Palmer said he could spread those out if necessary around the city, if the city were to eliminate one or two ambulances. But Palmer, who has unsuccessfully sought the city’s business before, doesn’t expect the city to call on him.

Revenue and job security

Even though a majority of municipalities use private-based ambulance transportation, some government officials say getting the local fire department to take it over means firefighters keep their jobs. It’s a common saying that fire departments that transport are really EMS departments, because EMS calls make up around 80 percent of a fire department’s call volume.

Bob Krause, a battalion chief at the Toledo Fire Department, said the best thing a city can do is “maintain staffing levels.” That means keeping private companies out.

“The unions would be against that (contracting work to private companies),” Krause said. “It’s a union shop, and they want to have their guys doing the work.”

Toledo switched to full fire-based EMS about five years ago and brings in about $2.5 million a year in transport fees. The city started leasing six ambulances and now is up to 10. Based on a higher call volume, which is about 50,000 a year, the city plans to add five more vehicles, Krause said.

Guy Haskell, executive director of the Indiana-based Emergency Medical and Safety Services Consultants, agrees with Krause.

“Cities have said: Why are we losing all of this money and giving it away to private services when we can take it over?” he said of municipalities getting into the ambulance transport game. “Obviously private services can make money off of it. If you have the personnel and stations (as a city), why can’t you organize that way?”

On the other hand, if a city starts contracting out to private services: “You’re going to have severe cuts in personnel. It would be a big dislocation of the fire department. That’s of course very difficult politically and problematic.”

Further, Haskell claims — as does the city of Lansing — that fire-based EMS is superior to private companies.

“You have higher pay, more consistency, more expertise when you have folks at a full-time fire department. As far as integration (of fire departments picking up EMS), you already have the stations, personnel, dispatch,” he said. “It probably makes for a more professional operation.”

The role of private ambulances

On that last point, Palmer says wait a minute — there’s a reason his private, for-profit, family-owned business has been around since 1955.

“We provide the same service that you see by city governments and provide that same exact service with no subsidy,” he said.

A popular critique of private services is that if you switch to them, response time will go up. Lansing, in its fiscal year 2011 budget book, says its response times average between five and six minutes. While the Fire Department might be spread out at eight different stations in the city (ambulances are kept at four of them, sometimes fire engines are dispatched if they’re closer to a call), Palmer said his company is “mobile” and can “sit point” to position near higher call volumes and trends.

Palmer also said it’s “perplexing as a taxpayer and Lansing resident” that Lansing charges more for an ambulance ride than he does. Palmer charges between $400 and $600, while the city charges between $600 and $725, depending on the type of emergency. And Bernero proposes raising those rates by 15 percent from $600 to $690 for basic life support, $725 to $833.75 for advanced life support and $12 per mile to $13.80 per mile.

Mercy has two stations and 10 ambulances in the Lansing area. Six are parked at the Michigan Avenue station. About 60 people are on staff (which also includes a station in Barry County). Palmer said he is not interested in overtaking the Fire Department’s EMS, but “partnering” with it.

But he is tired of taking criticism for being a for-profit company.

“When you’re a private company, sometimes you’re an evil entrepreneur for profit.

The foundation of this company was done out of the goodness of the heart of the founder: my father. It is all about the patient, all about the satisfaction of helping someone in need,” Palmer said. “It’s frustrating to have it spun that they’re doing it as a non-profit out of the goodness of their heart and I’m doing it as a profit. Quite frankly, every paramedic is in it for the reasons I just told you. I find that frustrating.”

The switch

Tristan North, vice president of government affairs at the Virginia-based American Ambulance Association, said he has seen municipalities “go both ways” when it comes to switching from a private- to a public-based EMS service.

“Traditionally, I think folks have been pretty pleased with private sector company performance,” North said. “It’s obviously very difficult to move from a fire-based system. Firefighters worry if they go into a private company (to be a paramedic), will they get the same level of benefits?” North said “contrary to popular belief,” a majority of ambulance transporters around the country are non-governmental providers, either a private for-profit or nonprofit. That ratio is about 60 percent to 40 percent, he said.

North said it’s usually smaller communities that switched from public- to private-based services because of low call volumes.

Sumter County in Florida recently switched from a public, bi-county ambulance transport service to a private-based one because the county-based service “couldn’t justify” the $2.5 million subsidy it was getting from taxpayers.

Bradley Arnold, Sumter County administrator, said a request for proposals was sent out that required eight-minute urban response times 90 percent of the time. A private, Orlando, Fla.-based ambulance service won the bid on a $1.5 million subsidy.

“They weren’t justifying the $2.5 million subsidy,” he said. “We got the accountability, the meeting of solid standards and a lower subsidy (out of the private company).”

In Toledo, the switch went the other way. Officials there say it was worth it to keep firefighters employed during a sluggish economy and because the number of fires are dropping.

But a switch is not embraced everywhere. Ann Arbor and Muskegon are a couple of cities that depend on privatebased ambulance services. Officials there have explored the idea of transitioning the fire department to do it, but it didn’t make sense financially, they said, because the cost to switch to fire-based EMS would have cost more.

Is government a business?

Some argue that municipalities should not be in the business to make money when it comes to public safety programs like police, fire and EMS. And most taxpayers are OK with that and are willing to subsidize their police and fire departments.

But EMS is different. There’s a way to make a profit in the ambulance transport business. It’s challenging when Medicaid and Medicare only pay for a fraction of a bill. For the uninsured who can’t afford to pay, it’s up to the city or private company how vigilantly it wants to pursue collections. But the nature of EMS transports is to charge people for rides to the hospital, whether it’s a municipality or a private company giving the ride. Lansing has been charging for ambulance rides for 14 years. Before 1997, taxpayers paid for the service.

Dave Boerger, a financial consultant with the Southeast Michigan Coalition of Governments, said Lansing’s situation of spending $1 million more than it brings in for EMS is “not unusual. In fact it’s normal.”

But that margin is not exorbitant. Maybe if the Fire Department cut back on an ambulance or trimmed a few layers of the employment “superstructure,” Lansing could narrow that $1 million gap, Boerger said.

But if there is an opportunity to recoup costs — and transporting patients is one way to do so — why not go for it? When is it OK for a government to operate at a loss and when should it break even? If it can make money, why shouldn’t it?

“You have to start with the fact that it’s the sworn bound duty to protect and serve citizens. Start with that promise,” Boerger said. “Then you superimpose simple business principals: Expenditures have to equal revenues, otherwise you end up in default.”

Boerger added that this concept of “business principals” applied to government is new.

“In the old days before applying business principals to the public sector, it was just tax and spend. If we want to raise revenue, raise the millage rate. Or you got lucky and had home values increasing each year,” he said.

Boerger and North of the American Ambulance Association agree that there are multiple variables at play when cities determine if a fire-based service is for them. These include population, run volumes and how many patients are on Medicaid, Medicare or uninsured.

“It really varies from city to city as to the viability of whether or not they see a return on annual service,” North said.

A day in the life

James Swindlehurst and Bob Voisinet are paramedics at Mercy in Lansing. Swindlehurst, an Okemos native, is 22 and has been at Mercy for about a year. Voisinet, a Victor Township native, is 25, dual-trained as a firefighter and has been at Mercy for four years. They both did their paramedic training at Lansing Community College.

Between 1 p.m. and 5 p.m. last Saturday, the two were stationed in an ambulance in DeWitt Township on standby while another Mercy ambulance responded to a call to pick up a decomposing body.

At about 3:45, back at the Michigan Avenue station, a BLS (basic life support) call came in to transport a woman from the Pines nursing home in south Lansing to Ingham Regional Medical Center. Voisinet said most of the calls out of the Lansing station are for these types of runs, while ambulances at the DeWitt station respond to more ALS (advanced life support) calls. Mercy services southern Clinton County, where most fire departments don’t do ambulance transports.

Employees serve two 24-hour shifts in a week. One day on, one day off, next day on, four days off. They rotate shifts at the two stations, Voisinet said.

For the men and women out in the field, treating cardiac arrest or simply carting a senior for a scheduled trip to the hospital, the political bickering and economic stress of being solvent is out of sight, out of mind. All of that is for the higher-ups. Who cares if you work for a public or a private company as long as you have a job doing what you love to do?

“I don’t get into the politics of it. If I’m filling out a report at the hospital, I could have a conversation with LFD,” Voisinet said. “We look at ourselves as public servants just like anyone else. It doesn’t effect how we do our job.”