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Calif. county considers renewing Rural/Metro contract

Some officials in other jurisdictions weren’t happy to see the contract extension appear on the agenda

San Jose Mercury News

SAN JOSE, Calif. — Santa Clara County officials on Tuesday will consider a three-year contract extension with an ambulance company that has a history of financial woes a move that took some observers by surprise.

Rural/Metro offered a lowball bid five years ago that turned out to be too good to be true the company was soon losing money hand over fist and the contract had to be rejiggered just to keep services afloat. But the new contract now contains significant tweaks worth millions of dollars.

Regardless, Santa Clara County Chief Operating Officer Gary Graves said it likely still wouldn’t turn a profit for Rural/Metro.

“I don’t believe it will bring them in the black, but it will get them fairly close,” he said.

Meanwhile, some officials in other jurisdictions weren’t happy to see the contract extension appear on the agenda.

“There’s no reason to rush this,” said San Jose Mayor Sam Liccardo, who heard that it was going to the Santa Clara County Board of Supervisors last Friday. “Fire chiefs throughout the county have been clamoring to have a dialogue with county staff about improving medical response to residents by looking at all the models out there.”

Rural/Metro’s current five-year deal, however, is set to expire on June 30. County Executive Jeff Smith said last fall that he would recommend the contract be extended, given Rural/Metro’s sale to the parent company of chief rival American Medical Response.

Some supervisors had wanted to put the contract out to bid, but that development deflated such interest.

Smith said at the time that even if they wanted to put the contract out, “we can expect only one competitor bidder. AMR and Rural/Metro will respond as one.”

The initial five-year contract was for $375 million. Graves said the contract’s annual value since then has dropped, and estimated the new contract would be worth between $160 million and $180 million over three years. It would be modified with a 10 percent increase in base rates and mileage fees, as well as an elimination of the $500,000 franchise fee and reduction of the communications fee by $200,000. That’s on top of similar measures taken in the spring that saved the company about $7 million. “We foreshadowed this would be done last May,” said Graves. “We signaled that we would continue to really look at how we can stabilize the system.”

Rural/Metro initially struggled to meet response times, and reorganized under bankruptcy protection. In late 2013, the county agreed to use $2.6 million that Rural/Metro had paid in franchise fees and penalties to help pay Rural/Metro’s bills while the company reorganized.

With the new rates in place, Rural/Metro’s increased base rate of $1,476 per call is still well below the Bay Area average of $1,820. Alameda County’s rate is $1,895 while Contra Costa County’s is $1,821. San Mateo County comes in higher than the average, at $2,101.

Although Rural/Metro’s response times improved over the years, the company’s fiscal woes have remained worrisome.

While the county report states that concerns remain over finances, “At this juncture, the administration believes the (ambulance) system is moving in the right direction. Response times are the best they have been in recent memory and the quality of care is high. We continue to operate with one of the lowest transport rates in the Bay Area.”

San Jose officials have been critical of the contract since it was chosen over a model that would have paired AMR with city fire response. On Monday, Liccardo said he still has “fundamental concerns” about the company.

“They’ve had a far from sterling past record with the county,” he said. “This company declared bankruptcy and misbid the contract, requiring a taxpayer bailout. And now they’re rewarded twice with rate increases.”

Liccardo said he would like to see the contract extended for six months or a year, as more studies are done on incorporating municipal fire crews into the mix.

That’s something that Palo Alto Fire Chief Eric Nickel, who is also president of the Santa Clara County Fire Chiefs’ Association, said will continue to be looked at no matter what the county decides. He said Contra Costa County recently adopted such a system, and they are watching carefully to see what works there. However, Graves said Santa Clara County isn’t like Contra Costa, and a key funding mechanism there is already being used by Santa Clara Valley Medical Center.

Nickel added that it’s not an unsurmountable task to come up with such a system in Silicon Valley, it just needs more time and dialogue and a dozen involved entities all working together.

“Look at the Super Bowl,” he said. “It was tons of work and years of preparation, but if we can pull that off we can certainly pull off an innovative, financially stable ambulance service.”

Graves said the county is “not closed minded” to such ideas, adding that a three-year contract isn’t prohibitively long.

“Three years is a long time if you are in jail, but with things like this it goes pretty fast,” he said. “There are a lot of reasons that make sense for us to do this.”

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