For those of us who rely on billing to fund our services, it seems we have always been chasing the almighty dollar. It’s been a long, interminable ride dating back to the enactment of Medicare in 1966, which provided the first permanent reimbursement mechanism for EMS. Along the way we’ve weathered many storms, including HMOs, DRGs, volatile tax subsidies and the establishment of the national fee schedule in 2002.
During this time, we’ve seen our costs rise relentlessly. Increasing wages and benefits, advancing medical technology, proliferation of medications and the growing sophistication of vehicles have all contributed to exponentially rising costs. And yet, as our costs rise, our revenues are more often at risk—or even declining.
2011 saw, for the first time, an across-the-board reduction in Medicare reimbursement. In some states, Medicaid rates are under assault as well. Managed care and traditional insurance companies have negotiated stern limits on reimbursement rates and stringent prepayment authorization. The increase in paperwork required to satisfy Medicare’s ever-restrictive requirements has added substantial administrative costs to our services. Adding to this mix is our country’s new attempt at universal health care, which will be accomplished by driving billions of dollars to the uninsured through the expansion of Medicaid. In most states, Medicaid’s rates are lower than Medicare’s.
When we look at the bottom line, we see a dismal picture that is worsening by the month. The era of cost-shifting—using profits gained from commercial insurance patients to subsidize losses associated with Medicaid and Medicare—is over. No matter what we charge, insurance companies have reached their limits. We can’t rob Peter to pay Paul any longer.
The long-held myth that health care is recession-proof is fading quickly. The financial pinch is now seriously affecting commercial and hospital providers and is also hitting governmental agencies hard as their budgets are slashed due to rising deficits and falling taxes. The number of poor is increasing as the economic downturn deepens and lengthens. Those losing their jobs lose their health insurance. And undocumented residents who have no health care insurance coverage are at record numbers.
The long-awaited “baby boom” generation retirement has begun; Americans are turning 65 at an escalating and alarming pace. If Medicare’s low rates and projected insolvency weren’t bad enough, we now hear talk in Washington of killing the program off sooner through “privatization.”
Not a time to get into the ambulance business, one would think … or is it? Recently, three major shifts have occurred in the American EMS market. First, very quietly, a company from Denmark purchased two mid-sized ambulance firms, one on the West Coast and one on the East. This same firm has also acquired 15 percent of Rural/Metro’s stock. Second, a private equity group purchased the parent corporation of AMR. And lastly, another private equity firm became the majority stockholder of Rural/Metro. The dollars being invested by Falck, Clayton, Dubilier & Rice and Warburg Pincus are staggering considering the bleak outlook many see for our industry. So why the sudden interest in non-governmental American EMS, especially when the country’s fire service has made it clear it intends to take EMS away from the private sector?
Sometimes those of us in the trenches are so busy keeping our heads down that we can’t see the horizon. A common thread among these three investors is their long-term view. As one says in its marketing material: “In the face of rapid technological development, changing reimbursement and regulatory environments, shifting investor sentiment and financing cycles, management teams benefit from our expertise and long term, patient capital.” [Emphasis added.]
Perhaps these “investors” sense the integral part EMS will play in our new health care system, where funds will flow to those integrated groups of providers that actually improve patient outcomes. They’re called ACOs (accountable care organizations). Integration requires a connective infrastructure. In order to be accountable, one must control delivery of service and ensure compliance by the patient.
Perhaps they recognize that baby boomers will have to, and will demand to, be taken care of. Even though legislators will try to stem the tide of rising Medicare expenditures, the fact is millions more beneficiaries are being added to the rolls and will need our services.
Perhaps they sense that government will become more prone to outsource its costliest services as it scrambles to cut its budgets. The private sector can easily deliver EMS for less than government-based operations. The cost of public sector emergency services is generally much higher than in the private sector.
It seems to me our future lies with understanding the changing dynamic of our new health care environment. It’s time to throw out the old strategic plan. Stick your head up and look around!
Vince Robbins is the president/CEO of MONOC, a hospital cooperative in New Jersey and the state’s largest EMS and medical transport service. A member of the Board of the National EMS Management Association, he is also a fellow with the American College of Healthcare Executives and has been involved in EMS for nearly 40 years.
Editor’s Note: John Becknell is on sabbatical. Look for him again in an upcoming issue.
