Earlier this month, the Newport Beach (Calif.) City Council voted to end its relationship with MedTrans, a private ambulance company serving the city, and instead turn the business over to local firefighters.
In New York, Medicare investigators are accusing some private ambulance companies of billing for patient transport trips that HCFA contends weren't medically necessary.
What seemed a few years ago like a golden business opportunity- consolidating the highly fragmented ambulance industry-is becoming more of a challenge as private ambulance companies encounter some politically charged roadblocks.
Despite the challenges, large ambulance consolidators continue to acquire companies and develop strategies to show managed-care companies how their expertise in emergency services can save money.
There's no doubt private companies are gaining ground in a splintered industry of some 12,000 ambulance operators. According to the Journal
of Emergency Medical Services, based in Carlsbad, Calif., private operators had 25.5% of the market in 1995 compared with 17% in 1988.
In addition, publicly traded companies like American Medical Response, Rural/Metro Corp. and Laidlaw continue a frenetic acquisition spree.
Aurora, Colo.-based American Medical bought 22 ambulance companies in 1995, up from 19 in 1994 and six in 1993. The company's success has been so stunning that its founder, Paul Verrochi, was named National Entrepreneur of the Year last December by Inc. magazine.
However, just as other consolidation-minded healthcare companies face obstacles in purchasing not-for-profit hospitals, ambulance companies are experiencing opposition as well.
For example, investor-owned ambulance companies, like investor-owned hospitals, are running into stiff competition in some areas where that service has been provided by the city or county fire department.
"The number of fires has decreased, and firefighters are interested in protecting their jobs," said Ann Marie Dunlap, vice president of American Medical.
She acknowledged that a move to privatize ambulance services can be difficult because firefighters are "extremely organized and active politically." However, American Medical and other for-profit companies argue that they can save money because firefighters earn salaries of $60,000 to $80,000, or about $20,000 more than paramedics, she said.
In some areas, like San Jose, Calif., American Medical has worked out compromise agreements with local firefighters. American Medical trains local firefighters as paramedics so they can respond to more emergency calls, she said. The company's ambulances also respond, but the firefighter/paramedic stabilizes the patient at the scene. If the patient needs to be transported to the hospital, American Medical provides that service.
Not surprisingly, the issue usually boils down to money. For example, in Orlando, Fla., the fire department this month received the blessing of county commissioners to negotiate with its private ambulance contractor to receive a share of its billings.
While Rural/Metro, a Scottsdale, Ariz.-based operator, has the Orange County, Fla., contract to provide ambulance services, the fire department is the first responder in any emergency. Usually, Rural/Metro takes the patient to the hospital, charging between $350 and $515, according to news reports. The fire department, which is supported through taxes, charges nothing.
The county now will require Rural/Metro to split some of its billings with the fire department in order to have its emergency medical services contract extended to 1998. For example, Rural/Metro may have to pay the department $20 each time a fire truck responds to an emergency and $125 when a county paramedic rides in the ambulance to assist with a patient.
Another reimbursement squabble involves Medicare. Last November, HCFA said it intended to revise its ambulance coverage policy, particularly regarding transporting patients to kidney dialysis centers. Because nearly all patients that receive kidney dialysis are on Medicare, they're often transported to those centers in an ambulance. A typical ambulance transport in response to a 911 call costs $400 to $600. Medicare then picks up the bill for both the ambulance call and the dialysis.
However, critics say many of those patients don't need an ambulance; they just need a ride. If Medicare paid for taxis, many patients could take those. The problem is Medicare won't pay for taxis, so the dialysis patients would have to pick up the cost.
In a report by HHS' inspector general last year, government investigators said unnecessary ambulance transports to kidney dialysis centers cost the government $44 million a year. That has prompted Medicare intermediaries to start scrutinizing reimbursement for nonemergency transports for dialysis patients. Companies that transport patients who don't really require an ambulance could be charged with fraudulently billing Medicare.
However, the large ambulance companies have been careful to ensure that their Medicare transports are only for patients who qualify because of medical necessity. "We're squeaky clean in that regard," said American Medical's Dunlap.
Michel Sucher, M.D., Rural/Metro's medical director, acknowledges that many of the overall ambulance runs aren't medically necessary, but points out that some calls provide a big opportunity for for-profit companies to offer value.
Currently, ambulances are dispatched to about 90% of calls to 911, yet only 10% of those may need the expensive technology and personnel offered in a mobile intensive-care unit, Sucher said. Many patients simply need a less expensive ride in a medi-van, which doesn't have the advanced life-support equipment of an ambulance.
By working with managed-care payers, including Medicare HMOs, ambulance companies can show how capitation dollars can be better spent on emergency care, he said. Patients can be shifted to less expensive transportation, Sucher said.
However, the ambulance company often must convince the managed-care company that it can manage the risk for emergency services through a capitated contract. "A lot of the dollars are carved out, and we have to reclaim them," he said. For example, Rural/Metro is teaming up with a 50-member emergency physician group practice in Phoenix to offer a capitated product for emergency services.
American Medical executives say that 60% of patients transported to emergency rooms are treated and released, indicating many of them didn't need an expensive ambulance ride. To counter the problem, the company has developed a new managed-care product called Medical Pathway Management.
"Ambulances are the gateway to the most expensive healthcare provider," Dunlap said, referring to hospital emergency rooms. Through its medical management program, American Medical performs triage to decide whether a patient really needs an ambulance or whether a less expensive transport would suffice. The program's personnel also can offer healthcare advice by phone or schedule follow-up doctor appointments.