Page, Wolfberg & Wirth
By Kenneth E. Brody, Esq., Of Counsel, Page, Wolfberg & Wirth, LLC
It is tempting to expand fire operations to provide ambulance service in the pursuit of additional revenues. But there are several considerations that may cause a fire chief to think twice before deciding to take on this additional responsibility.
The fire department revenue dilemma
With rare exceptions, fire suppression services do not generate revenue. The primary funding for these services is generally property, or other taxes or assessments imposed by a municipality. That funding may be supplemented by donations and fundraising, and perhaps state and federal grants. Yet these additional revenues, combined with municipal funding, may fall short of meeting the operating expenses of the fire department, including ensuring the reserves needed to replace fire apparatus and equipment as needed.
These financial challenges may cause the fire department to seek increased funding from the municipalities they serve. Of course, obtaining that increased funding may not be easy. Securing the additional funds may be unpopular and politically difficult because doing so places an increased financial burden on whoever is being tapped for the additional bucks.
Revenues from providing ambulance service can be enticing
Not wanting to overburden the taxpayers for the cost of community fire suppression services, fire chiefs may be tempted to make the move to supplement funding by expanding the department’s operations to include revenue producing ambulance transports.
Will ambulance service revenues exceed the costs?
In many cases, the revenue from providing ambulance service will exceed the costs of doing so and the additional revenue can be put to good use by both the fire and ambulance service operations. If the fire department has relied on local taxes to help cover costs, the revenue generated by providing ambulance service may make it possible to reduce or even eliminate those taxes.
But, just because a provider of ambulance service can bill for its ambulance transports, does not always result in collected revenues, or revenues exceeding the cost of providing the service. Payor mix is critically important. What are the demographics of the population to be served? If the population is primarily the elderly, this means a large percentage of the patient mix will be Medicare beneficiaries. For most ambulance service providers, Medicare reimbursement does not cover their costs in transporting Medicare beneficiaries. Medicaid reimbursement is typically much worse. If a large part of the population is on Medicaid, the struggle to cover costs will be even more difficult.
As to persons who are uninsured, they are frequently unable to afford payment. Their unpaid charges may need to be written off after reasonable collection efforts fail. Commercial insurers, on the other hand, generally pay an amount that at least covers the ambulance provider’s costs of providing the service. But, even though commercial payers may provide the best reimbursement, the number of commercial payers that are willing to pay the ambulance service’s full charge is declining.
If a large portion of the population lives near the poverty line, or is covered by Medicaid or Medicare, it is likely that the ambulance service revenues will not cover the provider’s operating costs. Regardless of the size of the population, there will be certain fixed costs; and ambulances, just like fire apparatus, eventually need to be replaced. A new ambulance can easily cost more than $150,000.
If the population to be served is small or widely spread over a large area, it also may be difficult to generate enough revenue to cover costs, let alone produce a profit. Likewise, if the population is young, there may not be enough calls to cover the costs. Younger people tend to have fewer chronic conditions than the elderly that result in patient conditions justifying medically necessary ambulance transports.
Also, not all ambulance responses are reimbursable. Medicare only pays for medically necessary ambulance transports. Unless state law requires otherwise, most commercial insurers also will not pay for an ambulance service unless it results in an ambulance transport, and then the ambulance transport must also be medically necessary.
Consider fire department liability
Also consider; operating an ambulance service will expose the fire department to previously unexposed liability. Sometimes, a patient’s condition worsens during an ambulance transport or at the hospital. A lawsuit could be filed in which the patient alleges harm caused in whole or in part by the negligence or gross negligence of the ambulance crew.
Depending upon state law, there may be some protection from civil liability in the form of a qualified immunity – such as requiring the plaintiff to prove gross negligence rather than ordinary negligence in order to prevail. State law may provide additional liability protection for political subdivisions that provide ambulance service, but costs would nevertheless be incurred in defending against such lawsuits.
The worst case is that the patient prevails and the fire department is assessed damages. These are potential additional costs that a fire chief needs to consider in determining whether taking on the additional responsibility of providing ambulance service is the right decision.
Weighing the community benefit
Notwithstanding factors that could make providing ambulance service unprofitable, there may be great need in a community for a local provider of ambulance service, especially emergency ambulance service. The closest ambulance service provider may be 30 minutes away and may not always have an ambulance and crew available to respond when an emergency arises in an area served by the fire department. Residents may be demanding better ambulance service. In that event, the municipality or municipalities may be willing to raise revenues from property owners or other sources within their jurisdictions to adequately fund a fire department to provide ambulance service.
There are also other tangible and intangible benefits to a fire department providing ambulance service. There are many more ambulance calls than fire calls. Fire departments can face morale issues due to excessive firefighter downtime. If the fire department provides ambulance service, firefighters who are also certified as EMS providers can serve on ambulance crews and respond to ambulance calls. Due to the increased number of responses, there will also be greater public exposure of the fire department. If injured and ill persons who require ambulance transports receive excellent ambulance service, occasionally perceived as lifesaving by those who are transported and their families, this will add to the fire department’s goodwill.
When considering whether to assume the additional responsibility of providing ambulance service, a fire chief needs to evaluate many financial issues to determine if it would be a viable expansion of its traditional fire suppression services.
If the conclusion is that providing ambulance service would not at least cover the costs of providing it, the department must carefully re-evaluate the community need. In any event, a fire chief must consider many factors before deciding whether to undertake an ambulance service operation, and then strive to make the best decision for the service and the community it serves.