Ambulance companies rely on growth in volume of reimbursable transports to cover expenses and even turn a profit.
But since the COVID-19 pandemic struck in March 2020, Michigan companies have been facing more severe staffing shortages, they have seen volume decline by as much as 40% as people choose not to call 911 to avoid potential coronavirus exposure at hospitals and inter-facility transfers have slowed.
Across Michigan, ambulance companies' and EMS responders' revenue fell, but their expenses didn't.
Last year, 13 ambulance providers went out of business or merged with another company, according to the Michigan Department of Health and Human Services. Six providers closed and five merged with other operators. Closures were in the counties of Saginaw, Cheboygan, Kalkaska, Delta and Alger.
Even before the pandemic, the nation's 911 system was strained. In Michigan, 911 calls are answered by a patchwork of nonprofit, for-profit, hospital-affiliated, fire department and municipal-run services. Michigan has about 800 licensed life-support agencies but only 300 that transport patients. The other 500 are medical first responders or basic life support agencies.
"Most likely the closures were first responders. The majority happened in northern Michigan. The pandemic has exposed even more the reimbursement and staffing issues we face," said Angela Madden, executive director of the Michigan Association of Ambulance Services in Lansing.
Kolby Miller, CEO of Medstar Ambulance in Clinton Township, said consolidation in the ambulance industry has been going on for several years and the COVID-19 pandemic will hasten the trend. Medstar is owned by Ascension Michigan, Henry Ford Health System and McLaren Healthcare Corp.
"You get to a point where ambulance organizations, whether they're public or private, the revenue doesn't keep up with the demand for wages and benefits. And eventually it becomes insurmountable. And organizations just close when you can't meet your paychecks," Miller said.
Traditionally, ambulance companies were owned by funeral homes, fire or police departments or government-affiliated. Later, private companies, including hospitals and for-profit companies, began operating ambulance services.
For example, Medstar is a nonprofit owned by hospitals and Emergent also is a 501c(3) organization owned by six local community ambulance providers. Last year, Beaumont sold its ambulance company to Superior Air-Ground Ambulance Service of Michigan Inc.
Over the past decade, private equity firms have acquired ambulance companies. Three private companies have taken over nearly 70% of the market, including Kohlberg Kravis Roberts & Co., the largest, and portfolio company Enhanced Equity.
While ambulances respond to all types of 911 calls, they are often only reimbursed when they transport people to the hospital. During the pandemic, calls for medical help in many areas of the state have surged, but those resulting in transport to hospitals have fallen.
Larger ambulance companies like Medstar, which employs 800 healthcare workers, will continue to grow as smaller companies seek to survive by sharing expenses and through economies of scale, Miller said.
"The model also allows for stability in both the 911 delivery and the inter-hospital delivery because it consolidates the geography of volume, and then we can improve service by sharing resources," Miller said.
Another problem affecting all ambulance providers is the shortage of paramedics and emergency medical technicians. During the pandemic, fewer emergency personnel have been trained and replacements have been insufficient to keep up with demand.
"We are an accredited paramedic training institution. We were doing our part, but the number of education programs have diminished, so the access to training that people might need for EMT and paramedic has diminished," Miller said.
Emergent Health Partners in Ann Arbor, one of the state's largest EMS providers with six affiliate ambulance companies and 849 employees, is another emergency provider hit hard by multiple factors all connected with the COVID-19 pandemic, but also by longstanding reimbursement and staffing issues.