Shedding Light on the Economic Crisis: What's happening & what we can do to protect EMS

 

 
 
 

Michael G. Ragone | Richard Keller | From the June 2009 Issue | Monday, June 1, 2009


"Anne Arundel to Charge for Ambulance Rides"This long-existent EMS agency is introducing transport charges for the first time. Up to this point, they_ve been able to meet budgetary needs through general tax revenues and provide EMS as a public service. It_s estimated that charging insurance companies for ambulance transportation will generate as much as $2 million a year.

"Ohio Committee Wants Paramedic Roles Reduced"This committee recommended that one fire department ALS ambulance service be reduced to a BLS ambulance service. They cited a lack of research demonstrating the effectiveness of ALS services.

"Keyser EMS to Drop Paid Staff"A mid-Atlantic volunteer agency is eliminating the paid personnel it uses to support staffing during the day. The impact will be increased response times and reliance on a neighboring jurisdiction to support and respond to ambulance calls.

"County May Eliminate Rescue Trucks"In a Florida county that_s facing similar deficits in its budget, one fire department might close stations and move existing personnel from ALS rescue trucks to engine companies. The county_s response system currently includes an ALS ambulance, a fire engine, and an ALS rescue truck. The commissioners believe that reducing the multiple responses will save money without significantly impacting patient care.

"Rally Outside City Hall Over Further FDNY Cuts"The Fire Department of New York proposes to close 16 engine companies and eliminate 30 ambulance shifts each day in order to meet the budget shortfall. New York_s response to fiscal instability is to decrease personnel. The potential impact on fire suppression is key, but even more dramatic resultswill be incurred in the EMS division because of an extremely high call volume.

"A Snub of Ambulance Money Sparks Fire Chief_s Concern"The funding board for one fire-based ambulance service decided to eliminate the purchase of a new ambulance in this year_s budget. This will mean that the fire department will have to continue to use its 10-year-old ambulance and hope it doesn_t fail during a call.

"Rescue Squad Low on Funds"This rescue squad was unable to identify a source to buy basic medical supplies and had to prod local jurisdictions to support their volunteer efforts.

"Clemente Ambulance Service Files for Chapter 11 Bankruptcy Protection"A private Midwest ambulance service that has provided EMS to its community for nearly 40 years had to file for bankruptcy protection because of lost patient revenue and the economic downturn.

"Detroit EMS Employees Facing Layoffs"Detroit Fire Department EMS is considering laying off 12 of its EMS employees. Although this represents only 5% of its workforce, employees have long acknowledged their agency has been understaffed and unable to meet response time targets. The mayor has indicated that the city is willing to reconsider the layoffs if the union comes back tothe table to negotiate concessions.

The Big Picture

What brought us to this point? The situation for EMS stems from decreases in tax revenue. Property taxes have declined due to the significant number of foreclosures and, even more importantly, the devaluation of property. Governmental jurisdictions are just beginning to feel the full effect of the mortgage market collapse. As home values continue to erode, the valuations and reassessments by jurisdictions will result in lower tax revenue.

Consumers have responded by making fewer purchases. This has resulted in a sharp decline in the sales tax revenue often used to support local and state governments. The abrupt drop in automobile purchases has also had a significant impact on sales tax revenues.

The impact of declining tax revenues is a delayed phenomenon. Other than the federal government, most governmental jurisdictions are required to balance revenue and expenses. When tax revenue fails to meet projections during a budgeted year, officials must respond by cutting expenses, but major cuts are often deferred until the next budget cycle. Most have included lower revenue projections in their recent fiscal year budgets, but tax receipts are still falling below projections in many jurisdictions. This will result in continued mid-year cuts. The impact on public safety agencies will be unavoidable.

Further, as more individuals lose their jobs, the income tax revenue used to support some communities and many state governments will continue to drop. Plus, the unemployed don_t have health insurance, so they can no longer pay their medical bills, including ambulance fees. Some defer routine physician or hospital visits due to their inability to pay for the services. This deferment of preventive care can lead to more serious, acute illnesses, resulting in the need for ambulance services, as well as other higher cost medical needs.

In addition to tax-based revenue and self-paid bills, services will see drops in reimbursement. Because Medicaid programs are supported by state and federal funding, they are also exposed to funding decreases. This decreased funding will be passed on to all providers, including ambulance services, and it_s likely that Medicaid reimbursement may be delayed or reduced in many states.

The EMS Reaction

It_s important that EMS avoids knee-jerk reactions to decreases in funding and maintains its focus on the patient. Unfortunately, the first and most painful response (as seen in the headlines) is to lay off personnel. Many municipal budgets allocate more than 70% of funds to public safety. With such a large portion of the budget being used for public safety, and the most significant cost being personnel, it_s not surprising that budgetary cuts lead to public safety layoffs.

Another common response to budgetary pressures is the deferral of capital purchases, which has long-term consequences. Many jurisdictions and organizations have halted funding for equipment and ambulances, but when antiquated fleets become increasingly unreliable and present expensive maintenance issues, just as much (if not more) money ends up being spent to keep the vehicles running.

Other jurisdictions are closing EMS and fire stations. This action has the immediate effect of increasing response times. This is likely the only realistic response to a significant budget shortfall, but care must be taken in identifying which stations should beclosed to minimize the impact on the EMS patients, as well as fire-suppression activities.

Many jurisdictions believe it_s more palatable to have a rotation system of closing EMS and fire stations (often referred to as "brownouts"). It_s believed to be more fair if each area of the community suffers an equal amount of pain. Although this seems fair, the impact on EMS can be better measured by looking at patient volumes. Significant planning and the use of comprehensive deployment models can mitigate the impact on EMS patients in a community where stations are being browned out.

A few communities are downgrading the EMS services being delivered to the community. At least one community is considering moving from ALS to BLS for its ambulance transport units, while others are considering decreasing the ALS first response to a BLS level within their fire service. It_s often hard to fight this decision, because there_s just not enough definitive research to convince decision makers of the value of ALS.

Many fire departments are attempting to expand into ambulance transportation. They believe providing EMS transport and tapping into governmental and insurance reimbursement will offset the costs and help financially support their organization. However, the financial projections utilized in these transportation expansion opportunities are often shortsighted and don_t reflect what theprovision of the services will actually cost.

In some instances, fire services are able to assume the transportation component of EMS and cover the costs of providing those services through reimbursement. But in many situations, particularly in larger systems, the costs of providing EMS within the fire department actually exceed the costs of operating the transportation component separately.

One option being considered is decreasing first response from fire agencies. At least one fire department has opted to cease responding to medical aid calls, and others are looking at incorporating prioritization in the dispatch center to identify those calls where first response may not be needed. Some communities have seen a reduction of 20% or more of fire first responses when priority dispatch has been incorporated in the emergency medical dispatch center, making this an attractive cost-cutting measure.

The effect of cutbacks is frequently described in such generalities as decreased patient-care levels, extended response times, etc. Responses to budgetary shortfalls are typically extreme, sweeping measures, instead of targeted reductions. A blanket 10% budget cut without understanding and delineating the consequences endangers the sustainability of our EMS systems, as well as the healthand safety of the public.

A Time to Reinvent

The current economic crisis may actually represent a sentinel change in how EMS is to be delivered in the future. It also represents an opportunity to refocus on our primary missionƒreducing the mortality and suffering of patients. Whether the changes will be draconian and harmful to patients, or whether the changes are implemented with care and consideration to mitigate the impact on patients, is yet to be seen.

It_s necessary to think at the strategic level. First, the value of EMS must be demonstrated to the public. Few would opine that EMS isn_t needed, but many could argue about what services should be provided, how they should be provided, and most significantly, who should provide them.

These challenging financial times should provide the catalyst for EMS to look carefully at returns on investment for the services it provides. Again, fundamentally focusing on what benefits the patients and determining how those benefits could best be delivered is a much more compelling question than who delivers the care.

When determining the value of EMS within a community, it_s important to considerall costs of the system. This specifically means the costs of dispatch, training, quality management, medical direction, oversight, first response and ambulance transportation. Only by understanding the full cost can we improve efficiency and ensure value for the resources consumed.

During this change in EMS system delivery, it_s going to be important to align expectations with reality. Many systems involve high costs, high performance and high expectations. Changes to any of the fundamental services EMS systems provide must be explained and understood by the community in order to align expectations with financial and operational realities. This message can be delivered effectively as long as the patients_ considerations are at the forefront.

Maximize Efficiency

While EMS systems undergo this evolutionary change in models, each organization within the system may need to respond to economic exigencies. Responses to budget cuts must be researched and carefully planned, particularly when decreasing organizational resources.

Changes can be made within an organization to increase efficiency prior to layoffs and other more significant cutbacks. Three areas can be addressed to achieve increased system efficiency: matching resources to demand, reconsidering multiple agency responses and determining appropriate levels of services. First, it_s essential to match call volume with the resources available to respond to the calls. This often results in flexible schedules,in which more ambulances are available and on duty when activity is highest, and fewer are on duty during periods of low demand.

Another change that is receiving some focus and offers the opportunity for system wide savings is more conservative use of multiple agency resources. Specifically, this requires evaluation of the number of agencies, vehicles and people that respond to each EMS incident. Is there a better way to more appropriately match patient needs with the responding resources? Communities are implementing priority dispatch to identify calls for which first response isn_t needed, and many first responder agencies are looking at how they can cost-effectively respond to those patients who need immediate care while reducing operational costs.

A third potential area for maximizing efficiency within an EMS system is the level of service a patient needs versus the level of service they receive. It_s clear that medical first response with the capability of providing

automatic external defibrillation has an impact on patient outcomes. It_s unclear whether higher levels of ALS service have a positive impact on patient outcome, particularly when the ALS level of care is offered by both thefirst responders and ambulance service.

Fire departments spend a significant amount of money to maintain training, certification and pay differentials for paramedics. Many departments have a large number of paramedics who are individually offered few opportunities for ALS interventions. This increases the department_s costs to train and ensure skill competency. In response to these issues, some organizations are looking at decreasing the level of service for first responders to BLS with AED capability.

Optimize Revenue

In addition to maximizing efficiency, it_s possible to increase revenue. The complexities of Medicare and Medicaid and the thousandsof potential insurance payers make it challenging for many to optimize reimbursement through the billing and collection processes. One way to increase the revenue to support EMS is to ensure the appropriate processes are being followed to maximize the receipt of fee-for-service reimbursement.

Also, it may be possible to increase the revenue available to EMS through additional dedicated EMS taxes supported by the community. Even in this recession, a number of referendums have been placed on local and regional ballots to increase tax funding specifically earmarked for EMS. Surprisingly, a number of these ballot issues have been passed, which underscores the importance voters place on their EMS systems.

The flip side of increasing revenue is controlling costs. Ultimately, there are few ways to significantly reduce the costs of EMS without impacting personnel. It_s clear that EMS agencies have to face the high costs of personnel wages and benefits. This has been demonstrated by the opening of labor contracts and concessions from labor groups in the areas of pay freezes, reduced wages and changes to benefit plans.

Downsizing fleet expenditures may also offer significant savings. The re-specifications of the ambulance fleetƒusing lower-cost models, extending life cycles and carefully selecting medical equipmentƒmay result in savings in capital expenditures.

A Few Warnings

The following options at the strategic and operational levels must be addressed with care. Abrupt organizational changes can have long-term impacts that may end up costing more and adversely impacting patient care than more carefully though-out approaches.

Be cautious before taking any of the following actions:

  • Raising rates:Typically, 60Ï70% or more of ambulance bills are paid on fee schedules; raising the rates will not increase revenue significantly. For example, a $1 increase may result in only $0.10 in revenue. The fee schedule payers, who pay a flat amount, will continue to pay the same amount regardless of your rates.
  • Delaying capital investments:Certain purchases, such as a new computer-aided dispatch system, shouldn_t be delayed, because they may increase efficiency and, in turn, reduce operating costs. Vehicle replacement can also save money in the long run, because if older vehicles become inoperable or too expensive to maintain, it will take a larger one-time expenditure to replace them. In addition, continuing to repair and patch up units can increase liability exposure.
  • Reducing spending for training and education:Field providers are the most important asset of any EMS organization, and they must continually receive appropriate and expanded levels of training and education in order to best perform in their roles.
  • Eliminating quality improvement programs and medical direction:Without appropriate quality-improvement programs and medical direction, EMS agencies cannot provide the best level of care possible.
  • Putting a freeze on hiring and not filling open positions:This is a short-term response that may have a higher cost because minimal coverage and staffing requirements maydictate the use of overtime at a premium level. Rampant overtime often costs more than filling open positions.
  • Refusing to use part-time staff:EMS should take advantage of part-time personnel. This move can considerably reduce staffing costs.

Now What?

Turf battles among various providers competing to transport the patient need to end. In many communities, it may be necessary to redefine the gold standard. Response-time expectations, level of service, the size and extent of equipment, and other aspects of the EMS system should be carefully evaluated to determine which are essential and which are extraneous to the delivery of appropriateand effective patient care.

Systems should direct efforts to involve the public in the EMS response through public defibrillation, CPR training, injury prevention, etc. All EMS systems should redefine how the various agencies thatoperate within the system can function more collaboratively but without redundancy to optimize the use of each other_s resources in the medical response.

The current economic crisis is not expected to turn around soon. In fact, it_s projected that job losses will continue for the foreseeable future, until potentially more than 10% of the U.S. workforce is unemployed. There will also be the permanent recasting of property values. Therefore, it_s going to be necessary for decision-makers in EMS to change their paradigm and philosophy on how EMS care can be best delivered within a community to support more efficient and cost-effective models.

The situation can and should be used as an opportunity to improve system designs for today and the future. This means getting the right resources to the right place at the right time with trained individuals who have the right tools to positively impact patient outcomes.JEMS

Richard Kelleris a top EMS system analyst and creative designer. As a partner of Fitch & Associates, LLC for nearly 25 years, he has been a driver behind understanding the production efficiency and design of EMS systems. His areas of expertise include operations, fiscal systems development and deployment analysis. He leads the health-care finance component of the firm_s practice. Contact him atrkeller@emprize.net.

Michael G. Ragone, senior consultant at Fitch & Associates, LLC, has operations and executive experience in emergency services, health and safety, and the insurance industries. He used to be a firefighter/paramedic and served more than10 years as vice president of a large publicly traded service.

Learn more from Michael G. Ragone at the EMS Today Conference & Expo, March 2Ï6 in Baltimore.

References

  1. Bailey ED, O_Connor RE, Ross RW: "The use of emergency medical dispatch protocols to reduce the number of inappropriate scene responses made by advanced life support personnel." Prehospital Emergency Care. 4(2):186Ï189, 2000.
  2. Siriwardane V: "Nation Could Lose Two Million More Jobs." Inc.com.www.inc.com/news/articles/2009/01/jobs.html



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Related Topics: Administration and Leadership, Leadership and Professionalism, Operations and Protcols, Vehicle Ops, Jems Features

 

Michael G. RagoneMichael G. Ragone, senior consultant at Fitch & Associates, LLC, has operations and executive experience in emergency services, health and safety, and the insurance industries.

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Richard KellerRichard Keller, a partner of Fitch & Associates, LLC for nearly 25 years, leads the firm's health-care finance component. His areas of expertise include operations, fiscal systems development and deployment analysis. Contact him at rkeller@emprize.net.

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