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Pending ambulance merger cuts options for Calif. county

With AMR’s parent company acquiring Rural/Metro, the competition for a new contract for Santa Clara County EMS services is slim to nonexistent

By Eric Kurhi
San Jose Mercury News

SAN JOSE — A planned merger of the top two players in the Santa Clara County ambulance game has significantly limited options for rebidding the current contract, which was marred by a history of fiscal woes and expires in July, officials said Tuesday.

Rural/Metro, the current service provider, underbid American Medical Response in the last go-round in 2010 and secured a deal that turned out to be unsustainable. 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 in bankruptcy. The county has since then cut franchise fees and fines while allowing the company to charge more, saving Rural/Metro $7 million annually.

Supervisors had directed county staff to start the ball rolling on a new bidding process. But this summer, AMR’s parent company -- Envision Healthcare Holdings -- announced it is acquiring Rural/Metro in a $620 million deal.

And on Tuesday, local leaders said that means the competition for a new contract will be slim to nonexistent.

“We can expect only one competitor bidder,” said Santa Clara County Executive Jeff Smith. “AMR and Rural/Metro will respond as one.”

While no action was taken on Tuesday, Smith recommended that the board renew Rural/Metro’s contract, which includes options to continue it for two three-year terms. He said some extension is needed because there is no way a bidding process, especially one that takes a look at fire partnership possibilities, will be completed before the contract expires on July 1.

Smith said smaller companies would not adequately serve the county. He knows of only one possible foreign-based company that might be in the running, but it does not have experience in the United States.

However, San Jose and the Santa Clara County Fire Chiefs’ Association have urged that the board not rush into a deal without looking closer at a model that would team fire agencies with an ambulance provider.

Palo Alto fire Chief Eric Nickel, who is president of the fire chiefs association, said they could conceivably come up with a contract involving the various agencies around Silicon Valley and reap up to $15 million in federal funds annually for patient transport.

But Smith balked at Nickel’s revenue estimate, saying that figure is based on an inaccurate assumption of which patients qualify for the reimbursements.

“You shouldn’t throw those numbers around and expect people to believe it when it hasn’t been checked by anybody else,” Smith said. “I can assure you there’s no way there’s $15 million coming to us.”

Board of Supervisors President Dave Cortese said that he has been in contact with San Jose and other fire agencies since February and has yet to see a plan that would show how a partnership between the county’s 14 cities and a private operator would work.

“Other than indirect references, rhetoric and editorial positions,” he said, “we still have not received anything resembling a framework of how to start tackling these issues.”

Last month, San Jose City Manager Norberto Dueñas sent Smith a letter urging any decisions to be delayed until further consultations with the Santa Clara County Fire Chiefs’ Association have been completed.

“We are in this together, and we share the same goal,” Dueñas wrote.

Supervisors Mike Wasserman and Joe Simitian complimented Rural/Metro for its performance times -- which had a couple of hiccups early on but has consistently met goals since -- as well as the cost, which is significantly less than what is paid to providers in other parts of the Bay Area.

But Simitian said that the company’s bankruptcy and past financial instability has been cause for concern.

“There has been an impact on employees, some would say an impact on the safety and reliability of vehicles and an impact on the county in terms of our need to be ready and able in case of an honest-to-God bankruptcy and failure,” Simitian said.

The merger -- which is waiting for approval by federal officials who are considering antitrust issues -- would strengthen the provider’s fiscal position, said Smith. The board directed staff to return in January with an update on the status of the merger, as well as a potential timeline in working with stakeholder proposals and potentially including partnerships in the bidding process.

“I want to have it both ways,” Simitian said. “If I can hang on to a timely, low-cost option while still exploring other options to ensure we have an open and public process to see what is out there, I would like to do that.”

(c)2015 the San Jose Mercury News

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