What’s Next for Rural/Metro After Recent Bankruptcy Filing

Ambulance company prepares to move forward

 

 
 
 

From the September 2013 Issue | Wednesday, August 21, 2013


Citing an estimated $735 million in debt, declining revenues from collections and on-going financial setbacks that eventually impacted its operations, Rural/Metro Corporation sought relief under Chapter 11 bankruptcy Aug. 4. The Scottsdale, Ariz.-based ambulance company negotiated a bankruptcy proposal with lenders and select noteholders to significantly cut debt and obtain a new infusion of equity capital, according to a press release from the company.

The filing states that Rural/Metro will receive a $75 million “debtor-in-possession” loan from Credit Suisse Group AG that would help it continue operating while under bankruptcy protection. Credit Suisse arranged the loan financing for Rural/Metro’s leveraged buyout with Warburg Pincus. Bondholders for the company have pledged an additional $135 million in the fourth quarter of this year to complete the financial restructuring.

According to the petition, Rural/Metro has until Sept. 15 to submit a reorganization plan. The bankruptcy petition includes more than 50 affiliated agencies—primarily ambulance transport providers—from across the country.

The press release states that the financial restructuring process will “help ensure that Rural/Metro can continue to invest in its business, meet the needs of customers, patients and communities, and further improve service.” It further pledges that operations are expected to continue as normal throughout the process.

Scott A. Bartos, Rural/Metro’s new president and chief executive officer (CEO), says, “This agreement is good news for Rural/Metro and for the clients and communities we serve. We have a solution that keeps our operations moving forward while cutting our debt in half. The significant infusion of new capital by our lenders underscores their confidence in the value of our business, and will help ensure that we have a strong financial footing to resume growth and investment while honoring our agreements and continuing to provide outstanding service and patient care.”

How Did Rural/Metro Get to This Point?

The bankruptcy petition, signed by Rural/Metro Chief Financial Officer Stephen Farber, comes after a string of disappointing financial setbacks. On July 15, Rural/Metro opted to exercise a 30-day grace period on a $15.6 million interest payment. 

Two months earlier, Moody’s Investors Service downgraded Rural/Metro’s corporate family and probability of default ratings. In addition, Moody’s lowered the senior secured credit facilities and the senior unsecured notes. The rating affects approximately $737 million of rated debt.

Moody’s reports that the negative outlook reflects Rural/Metro’s “highly leveraged capital structure and weak liquidity position,” as well as reduced earnings, negative free cash flow and acquisitions that have resulted in the use of a majority of its revolving credit.

Rural/Metro says it has taken steps to reduce costs. It recently realigned nationwide field operations, consolidating four zones into three. On April 16, Rural/Metro laid off 90 administrative and corporate employees. The action didn’t impact front-line EMS or fire protection personnel.

Less than a month after the layoffs, Bartos replaced Michael P. DiMino as president and CEO. DiMino, who had served as president, CEO and director since 2010, left the company when he was replaced. Bartos previously served as president and CEO of LaVie Care Centers, a leading national skilled-nursing management organization. Before joining LaVie, he was the president and chief operating officer (east)

for Gambro Healthcare/USA, the second largest operator of kidney dialysis clinics in the world.

Unfortunately, efforts to right the ship were too little, too late.

Humble Beginnings

Rural/Metro was founded by newspaper reporter Lou Witzeman in 1948, after he watched a neighbor lose his house to a fire because there was no fire service for their rural neighborhood outside Phoenix. Witzeman encouraged his neighbors

to pool their money and established the Rural Fire Department, which later became the Rural/Metro Fire Department. In 1969, Rural/Metro added its first ambulance. Today, Rural/Metro employs nearly 10,000 people in 21 states and provides more than 1.5 million transports annually, according to its website (www.ruralmetro.com). Rural/Metro also owns Southwest Ambulance of Arizona. The company still provides community fire protection services nationwide. 

Financial Struggles

Some analysts believe Rural/Metro’s financial troubles began in 2002, when a group of current and former Scottsdale firefighters filed suit against Rural/Metro and national accounting firm Arthur Andersen, charging that between 1996 and 2001, the ambulance provider had “concealed its true financial condition for years and, as a result, cost the employees their retirement savings,” according to charging papers.

After that, Rural/Metro was forced to take a massive write-off over aging receivables, and it dismissed the accounting firm. Although the company did not file for bankruptcy, it continued to struggle financially, taking on additional debt in the form of secured and unsecured bonds. The interest on one of these series of unsecured bonds, similar to a mortgage balloon payment, is the missed July 15 payment.

Rural/Metro was acquired by Warburg Pincus LLC in a leveraged buyout that, according to Moody’s, was financed with $213 million in equity and the sale of $515 million in debt.

Shortly after its purchase, Rural/Metro incurred an additional $108 million in debt to buy two regional ambulance operators—Pacific Ambulance and Bowers Ambulance. 

The law firms Willkie Farr & Gallagher LLP and Young Conaway Stargatt & Taylor LLP have been hired to handle the bankruptcy. Investment bank Lazard Ltd., financial adviser FTI Consulting FCN and turnaround firm Alvarez & Marsal will represent the company, according to insiders.

One week before the July 15 payment was due, four of Rural/Metro’s independent board members abruptly resigned, leaving current negotiations to a smaller board.

What’s Next?

Industry insiders believe that, ultimately, bankruptcy will be a good thing for Rural/Metro. The reduction of debt and infusion of cash will allow the company to continue operations and provide enough breathing room to make changes needed to reduce its debt. It’s possible the company will sell off some of its holdings. One option bankruptcy provides is to modify collective bargaining agreements with employees. Rural/Metro has been the subject of a couple of public labor disputes, including an eight-hour strike by Teamsters Local 375, in New York State, which ended in a signed contract.

In the meantime, it’s business as usual for Rural/Metro.

—Teresa McCallion, EMT-P

There’s nothing more important than clear, concise and accurate communication between you and your patient. It’s the hallmark of good patient care. The patient needs to communicate complaints and concerns so that proper treatment can be initiated. From a legal standpoint, it’s essential the patient fully understand the extent of treatment to make an “informed decision” about their healthcare. This is a critical challenge when dealing with refusal of care cases, especially when there are barriers to effective communication. If the patient doesn’t fully understand the risks of refusing treatment, then the validity of a signed “refusal and release” may be called into question in court. 

There are many barriers to communication EMS providers face every day, such as barriers based on language and disabilities including blindness, hearing loss or impaired mental capacity. Communication barriers can cause significant anxiety, fear and frustration for the patient, so these issues demand our special attention. We can’t let the patient’s frustration cause us to be frustrated and short with the patient. We must accept the patient on their terms instead of ours. An outward display of frustration will only make the situation worse.

EMS providers are judged on whether they conduct themselves as other reasonable and prudent providers would given similar circumstances. In some states, EMS providers enjoy limited immunity from liability as long as they act in good faith within their scope of practice, and don't commit “gross negligence” (which is more than a mistake and is often described as willful or wanton lack of regard for the patient). Can you be liable for harm to the patient caused in part by a lack of understanding between you and the patient? Yes. So the key to avoiding liability is to always act in good faith and with the patient’s best interests in mind. The bottom line is to be engaging and tolerant when confronted with communication barriers, and do the best you can to communicate with the patient.

Make careful note in your patient care documentation if there were communication issues that limited your ability to assess and treat the patient, or in obtaining the patient’s consent for treatment. Describe the steps you took to minimize those barriers, such as reliance on an interpreter like a family member, and clearly describe the patient’s response, such as the use of hand gestures, nodding of the head and other nonverbal cues. 

The following suggestions can help minimize communication barriers, improve your care in these sometimes difficult situations, and reduce your risk of liability:

Positive Attitude on Approach. How you approach the patient can make or break the communications process. Always be positive, courteous, look the patient in the eye and speak clearly and distinctly, especially when you first meet the patient. First impressions are important when setting the stage for effective communication throughout the patient encounter.

Use All Your Senses and Be Sensitive to Body Language. We sometimes rely too much on verbal communication and don’t pay enough attention to the nonverbal aspects of communication. Observe the patient’s surroundings, their body language, the look on their face, the movements and noises they make, the tone of their voice, and the gestures they make. These can help you synthesize what the patient is really trying to say and if they understand what you’re saying. Be careful not to judge the patient’s movements and gestures too quickly—use all your senses to interpret them.

Recognize Cultural Differences. Many cultures use different words or phrases to describe how we would describe the same things in English. Be respectful and sensitive of these differences, and try to ensure that you understand what the patient is trying to say before moving to the next point. It’s OK to rely on family members or others at the scene with better English skills who know the patient and who can help interpret.

Use Language Boards and Other Technology. Interpretive technology has advanced so much in recent years. Language boards can help communicate with a patient through simple phrases and images. Products like the Kwikpoint Medical Translator have boards specially designed for EMS. These “visual language translators” include pain scales as well as pictures for the patient to express common symptoms such as nausea, dizziness and other common maladies that may prompt a call to 9-1-1. There are also many smartphone applications that can be used such as iTranslate, a free app that takes short English phrases you speak and translates them into a wide range of other languages.

An excellent list of resources to help overcome communication barriers with patients can be found in an article by the Central Coast Children's Foundation entitled “Overcoming Communication Barriers in Emergency Situations: Some Basic Tools.” (www.patientprovidercommunication.org/pdf/23.pdf). The authors list many software products, smartphone applications, and simple devices and charts to improve our ability to communicate with patients in the field.

We have become a more diverse society. We need to embrace this diversity and take positive steps to ensure that we are meeting the needs of those in our community who need our help, but who have a difficult time with that process of “simple conversation” we sometimes take for granted. This approach will not only improve the EMS experience for the patient, it can also help keep you out of legal trouble down the road since “miscommunication” is one of the key drivers of lawsuits against EMS providers and their EMS agencies.

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