Purpose

At the request of the City Council, the Fire Department will provide an analysis of the fiscal obligation and revenue resources of the Emergency Medical Services (EMS) Division of the Fire Department, commonly know as the paramedic program.  In addition, the Fire Department will discuss EMS billing and collection procedures as they relate to current issues within the health industry and other associated agencies.

Background

The Fire Department manages a multitude of programs related to public safety, from elementary school education programs to Urban Search and Rescue, from studio Fire Safety Officers to fire suppression activities, from building plan check to hazardous materials inspections and emergency responses.  In 1974, the Department was charged with implementing and maintaining a new proposal called the paramedic program.  The Fire Department placed the first Mobile Intensive Care Unit Paramedics and Rescue Ambulances (RA) into service in January of 1975.  Shortly thereafter, as a response to the overwhelming call for service, an engine company was staffed and equipped to perform paramedic functions.  In 1978, a second RA was put into service and a third RA was added in 2000 to meet the continuing increase in medical responses.

Even though the first RA was capable of carrying patients, paramedics did not transport patients due to the need to accommodate the contract with the private ambulance service established with the City at that time.  It quickly became apparent that coordinating a privately operated ambulance service with patient needs often did not occur.  Managers of the newly formed Emergency Medical Services Division made the argument that paramedics were waiting extended periods of time for the private ambulance service to arrive on-scene, sometimes to the patient�s detriment.  At the same time, block grant monies provided by the Federal Government for start-up paramedic programs began to dissipate and a proportionally larger draw on the City�s General Fund was needed to accommodate the program�s costs.

As the Fire Department�s paramedic program grew and pre-hospital care matured throughout the nation, innovative changes were taking place within the industry.  Public and private providers of EMS began to visualize a revenue stream, through paramedic care and transportation, as a viable means of partially offsetting program costs.  In 1978, the Burbank Fire Department was granted permission by the City Council to charge for services and began transporting patients.  The Fire Department had successfully argued that a �complete paramedic service� would include treating patients and transporting them in Fire Department operated RAs.  A nominal fee, far short of that allowable, was charged to offset the loss of block grant monies.  These charges included a fee for Advanced Life Support (ALS) or Basic Life Support (BLS), which can include paramedic and Emergency Medical Technician level 1 (EMT-1) care, medical supplies and transportation.

In the early development of the Fire Department�s Emergency Medical Services Division, decisions were made based not so much on attempting to recover as many dollars as possible, but to be a benevolent provider.  The City of Burbank had a wonderful reputation regarding all its services and this program would add to that reality, especially at a reduced cost.  In addition, it was felt that many citizens did not understand that an EMS program was not mandated, like fire suppression, and therefore not paid for through taxes. 

There were several modest changes to the fee schedule between 1978 and the early 1990s.  In 1993, a change in the City�s philosophy of undercharging for services rendered was considered.  The revenue stream associated with the treatment and transportation of patients was seen as a viable and necessary way of offsetting program costs and loss of block grant money.  The Fire Department requested and received permission to raise fees to the maximum amount allowed by the governing body, the Los Angeles County Board of Supervisors.  Each time the Board has raised fees, the Fire Department has requested a rate change commensurate with the Board�s allowable increase.

Analysis

Beginning in the early 1990�s, a change in the health care industry was underway.  Health care expenses were on the rise.  The insurance industry began to look for ways to maximize profits by reducing costs.  Many companies began capping the amount they would pay out for a specific service, regardless of the true cost to the health care provider.  Government agencies like Medicare and Medi-Cal took this philosophy a step further, paying out only a small fraction of the actual fees billed.  Over time, these �write-downs� by insurance companies and government health programs have resulted in health care and pre-hospital care providers collecting smaller portions of their anticipated revenues each year.  The chart below shows how payments from these agencies compare to Burbank�s current ambulance transportation fees and identifies the loss in revenue to the City for each paramedic patient.

The practice of reimbursing less to health care providers led health care providers to seek new devices to keep pace with their real costs.  One innovation was to bill for services provided in anticipation of a reduced payment by the insurance company in order to collect the actual costs of providing the service after a write-down is applied.  Advanced and Basic Life Support and transporting patients to the hospital are no different, and the County Board of Supervisors recognizes this problem.  They raise the allowable fees so that private and public sector providers can overcome the discrepancy between real costs and written-down insurance payment.  As the population continues to age, cities and counties will see an increased reliance on Medicare as the primary form of medical coverage among patients, and therefore will continue to experience a decline in revenue collected from ambulance transportation services.  The chart below shows the current profile of pre-hospital care patients in Burbank.

Established in 1993, the EMS Membership Program provides an avenue for those citizens of Burbank who cannot afford private insurance or are ineligible for government health care programs to cover costs of pre-hospital care.  A membership fee of $4 per month covers all paramedic fees for an entire household should the need for an ambulance ever arise.  This program helps offset the rising costs of pre-hospital care for those who participate and can save hundreds or potentially thousands of dollars to seniors or low income families who are residents of Burbank.  Currently, the Burbank EMS Membership Program has approximately 4400 participant households out of a potential 42,000 households citywide.  Currently, the program is self-supportive with the remainder of its revenue flowing into the General Fund at approximately $150,000 annually.  Should this program ever optimize, the potential annual value could be $2 million.

Fiscal Impact

It is difficult to quantify the cost/benefit ratio of the paramedic program.  The services of the EMS Division are inexorably interrelated to all other Fire Department activities.  For example, paramedics respond to structure fires, train all fire department personnel to the level of EMT-1, respond to hazardous materials incidents as part of the HazMat team, respond with Urban Search and Rescue to provide patient care at the scene, and perform fire prevention inspections.  Below is the list of annual operating costs for the Emergency Medical Services Division, based on the current fiscal year budget.  The paramedic program operates with a budget of approximately $3.6 million annually, with most of those expenses related to personnel. 

Unlike private transportation operations, a publicly managed Emergency Medical Services program will rarely achieve a fiscal balance. The costs of a public system will out weigh any revenue stream generated.  Even in the most austere public programs, wages and the cost of equipment will out perform available revenue sources.

There are many factors that must be considered when comparing a public vs. private system.  Most private providers use paramedic services as a �loss leader� to gain exclusive rights to the more lucrative interfaculty transportation in a particular zone.  The Fire Department never considered becoming an interfaculty transporter first, because the service is already provided by the public sector.  We would drive away an important medical resource, private ambulance transportation, leaving the City to develop new resources needed beyond our day-to-day requirements to mitigate multiple incidents or incidents with a large a casualty count.

The two revenue streams used to offset the EMS program�s operating cost are fees for medical service and transportation and the EMS Membership program.  Combined they produce approximately $1.5 in revenue, leaving $2.1 million in paramedic program costs to be paid by the General Fund.  While expenses continue to grow as healthcare and personnel costs increase, revenue collection rates are on the decline due to insurance and Medicare write-downs (see above chart).  The only means to offset this growing financial disparity is to maximize revenues, which can be accomplished by raising fees for paramedic ambulance services.  The proposed fees are equivalent to those charged by Los Angeles County and most public and private pre-hospital care providers within its jurisdiction.  While raising fees is never an easy decision, Fire Department Staff believes this is the best option to minimize the impact of this financial gap on the City�s General Fund and maintain the highest quality of Emergency Medical Services in Burbank. 

Recommendation

The current fees for Paramedic Ambulance Services according to the Fiscal Year 2004-05 Citywide Fee Schedule, along with the Fire Department�s recommended increases are as follows:

In order to offset a small portion of costs of operating the Emergency Medical Services Division, Staff of the Fire Department recommends that the City Council approve the resolution amending the Burbank Fee Schedule to incorporate the fee increases allowed by the Los Angeles County Board of Supervisors.

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