San Diego to pay $64.7M to Falck, AMR in ambulance service takeover
City officials moved to reduce financial risk for providers, reduce incentives and improve response times
By David Garrick
The San Diego Union-Tribune
SAN DIEGO — San Diego took control over city ambulance service Monday to improve response times and eliminate financial incentives private ambulance companies have had to reduce service and hours.
Private ambulances operated by Falck USA and American Medical Response will continue to transport patients in San Diego, but the companies are turning over to the city control of staffing, dispatch, deployment, billing and other crucial decisions.
The new model approved unanimously Monday by the City Council shifts some financial risk from private providers to the city, so the council also signed off on a 12.5 percent increase over two years in fees patients pay for an ambulance transport.
Council members called the fundamental changes to city ambulance service a major step forward for San Diego.
“No longer will we have to simply depend on a private ambulance company to tell us how they are going to run the ambulances,” Councilmember Marni von Wilpert said. “I believe this amendment will finally be the path forward to change our system delivery, change our model and make sure we do have an ambulance that shows up — on time — every time someone has to call 9-1-1.”
Instead of the existing model where Falck USA pays San Diego $9 million a year for the right to charge patients, the city will pay Falck and AMR $64.7 million total to operate ambulances and charge patients itself.
The new setup is projected to be quite lucrative, according to a consultant’s report. That’s partly because a new state law tripled Medicare and Medi-Cal reimbursement rates for government agencies compared to private providers.
The city’s independent budget analyst praised the consultant’s report and said the deal makes financial sense.
“On the whole, we found that the revenue and expense projections prepared by the Fire Department’s consultant AP Triton to be reasonable and conservative,” said Baku Patel, a fiscal and policy analyst for the IBA.
But Patel said the city could lose as much as $18 million a year if problems arise with the state’s new reimbursement model.
Under the model, money for the tripled reimbursements comes from federal dollars that are available only as matching funds contributed after health care providers contribute to the system first.
While health care providers have strong financial incentives to keep contributing, there is some small chance their contributions could drop and reduce the amount of federal money contributed, Patel said.
As a result, an aide to Mayor Todd Gloria agreed Monday to require the Fire Department to use any profits from taking over ambulance service to create a reserve fund before adding any new services.
Fire Chief Colin Stowell said recently that he plans to spend any profits on new programs like nurse triage, telemedicine and street-based interventions for homeless patients. But he said Monday that creating a reserve fund must come first because the city’s profit projections could be off.
“We want to have some time to make sure those projections are accurate,” Stowell told the council. “Once we feel those projections are right, that will be the time to invest in some of those alternative services.”
Stowell said making sure he turns a profit was the primary motivation for raising ambulance rates 5 percent during the fiscal year that began July 1 and another 7 percent next July. Compounded, the two hikes will total 12.5 percent.
Stowell stressed that the increases will affect only the roughly 23 percent of ambulance rides that aren’t covered by Medi-Cal or Medicare, which pay maximum rates for ambulance service that are below city rates.
Stowell also said many of the patients not covered by Medi-Cal or Medicare are people with private insurance who are charged only a copay for ambulance service and are unlikely to pay more than they already do.
The chief also stressed that the increases won’t make San Diego an outlier on ambulance rates in San Diego County.
“Right now, we are below the average,” he said. “Even with these increases, we will still be at or below the average countywide.”
The rate for the most expensive advanced life-support ambulance transports is rising from $2,805 to $2,945 immediately and will increase to $3,151 next July.
Councilmember Raul Campillo said he was convinced by Stowell, after some initial skepticism, that the increases are warranted. He said the additional money gives the city a crucial cushion and affects only a relatively small number of patients.
Assistant Fire Chief Jodie Pierce, who has guided the city through many recent changes to ambulance service, said the city’s shift Monday to the alliance model was a big move.
“Under the alliance model, the city can adjust the emergency medical system between two ambulance providers, allowing greater flexibility and ending the dependency on one workforce,” she said. “There’s no incentive to reduce unit hours or service to protect capital.”
Because profits for Falck and its predecessors have depended on billing revenue exceeding the company’s costs, private providers have had an incentive to keep costs low by reducing unit hours and limiting services.
Pierce said she was optimistic response times will improve.
“Over the decades, every private ambulance provider has struggled to deliver the level of service the city has contracted for,” she said. “Implementing the alliance model will break the cycle and allow the city to control and set the number of unit hours each day.”
But city officials said they still plan to issue a new call for ambulance contractors after they’ve had time to analyze the alliance model.
Another option could be bringing ambulance service fully in-house, where the city would own the ambulances and city workers would staff them. San Diego last year considered that option, which is how Los Angeles, San Francisco and Chula Vista handle it.