What’s next? How EMS can survive the economic downturn
Look to the factors impacting EMS revenues – logistics, technology and resource matching – to manage deliverables
By Guillermo Fuentes, MBA
Fitch & Associates
What is keeping you up at night as EMS leaders? With COVID-19, there is the immediate risk to the population you serve, the staff you must take care of, the supplies you require and the money required to make the operations continue. Political leaders at all levels are pledging support, but as the crisis continues, all leaders will have a tough time turning away public safety needs. But what comes “next?”
What lies over the horizon of new realities? First and foremost is what will tomorrow’s economy look like? A world-wide economic shut down has never happened, so there is no real-world example to lean on; there are only models. Recessions and recoveries are described by three models;
- V-shaped. The V-shaped recession recovery is marked by a rapid decline and a rapid recovery, usually measured in months. The end result of the recovery is growth that exceeds the economic position prior to the decline.
- U-shaped. The U-shaped recession recovery is marked by a rapid decline, a long duration in recession (recession is consecutive months of decline or no growth in the economy) and then potentially an equalizing of the economy, at least to where the economy was if not slightly better. One example of a U-shaped recession is the housing market crash of 2008-2009. It took seven years to fully recover and two more years to surpass the previous growth mark.
- L-shaped. The L-shaped recession recovery is marked by a rapid decline and an inability of the economy to recover to the prior point. Worse yet, because the economy was shut down and not a failure of any particular sector, the recovery will affect different segments of the economy differently. People’s behaviors will change and adapt to new realities, and some parts of the economic sector won’t be turned on fully or at all.
Focusing on public safety and its corresponding funding sources, public safety is extremely vulnerable to the economic downturn. Ambulance agencies and fire departments are funded by three distinct categories of revenue: transport fees, sales tax and ad valorem (property) taxes.
- Transports. Transports across the country are down. A non-scientific poll of the Fitch client base indicates a 30% to 50% decline in call volume. This reality is partly driven because of social consciousness (people don’t want to go to the hospital unless they are really sick) and partly because of new call avoidance mechanisms put in place by the industry, such as telemedicine and screen first protocols. Will these changes become a permanent part of our new reality? How does EMS survive with half the transport revenue?
- Sales tax. The direct sales industry was the first to close and will likely be one of the last to open fully. All indications are that social distancing will last for months if not years. The causal effect will be that stores, restaurants and bars will not quickly return to normal and the corresponding sales tax will not be available.
- Ad valorem. Ad valorem or property taxes are directly correlated to employment. Currently, more than 10 million Americans are unemployed and the numbers are growing. It is predicted that 20% of small and midsize businesses may never reopen. Property taxes are not likely to offset the other losses.
Matching resources to needs in the new reality
What should EMS leaders be thinking about to cope with a new reality?
Revenue. What revenues will look like when COVID-19 is behind us is a question on everyone’s mind, but two certainties arise:
- Proper documentation will be key, whether it is to keep your recently received Medicare infusion or to maximize collections in the future when every patient contact will count.
- ET3, or a similar model, will surely become the new norm. During COVID-19, many EMS agencies implemented some form of telemedicine and it is hard to see that unwinding. That means that preparing to generate revenues based on the new reality is key to your economic stability.
Expenses. Since the EMS role as transport agencies will likely change, then we should expect our required deliverables to also change. They will likely include:
- Logistics. The ability to reduce inventory and yet remain nimble for surge requirements will be a reality of the future. Excess dollars will not be available for massive inventories of perishable product. The challenge is to create a supply chain that can reduce cost by delivering a just-in-time product and yet have enough capacity when the next crisis hits.
- Technology. EMS has too many disparate systems – so much proprietary data that cannot not be shared that the emergency services and public safety in general had to go back to the phone during COVID-19 to maintain situational awareness. This needs to change. Leaders need to think of how to make meaningful use of the new data reality. Sharing information needs to be an everyday event that can be augmented in time of crisis.
- Resource matching. Matching resources to the need is key. Irrespective of what the new requirements will be for EMS, one reality is clear, additional dollars will not be available to layer needed resources on top of what is already there. That will mean that matching the right resource to the right requirement in the right amount is an essential strategy.
So, what should keep you up at night is, what comes next?
About the author
Guillermo Fuentes, MBA, is a senior partner at Fitch & Associates. He supervises statistical and operational analysis, computer modeling and the development of deployment plans, as well as major technology purchases and communications center installations for clients. He previously served as the chief administrative officer of the Niagara Regional Police Agency, in Ontario, Canada, and associate director of EMS for the Niagara Region. He can be contacted directly at firstname.lastname@example.org.