HomeMy WebLinkAboutMINUTES - 11172015 - D.8RECOMMENDATION(S):
Acting as the Board of Supervisors of Contra Costa County:
1. APPROVE and AUTHORIZE the Health Services Director, or designee, to execute a contract with the Contra
Costa County Fire Protection District to provide advanced life support (ALS) emergency ambulance services within
Exclusive Operating Areas (EOA) I, II and V for the period January 1, 2016 through December 31, 2020.
APPROVE OTHER
RECOMMENDATION OF CNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE
Action of Board On: 11/17/2015 APPROVED AS RECOMMENDED OTHER
Clerks Notes:
VOTE OF SUPERVISORS
AYE:John Gioia, District I Supervisor
Candace Andersen, District II
Supervisor
Mary N. Piepho, District III
Supervisor
Karen Mitchoff, District IV
Supervisor
Federal D. Glover, District V
Supervisor
Contact: Timothy Ewell, (925)
335-1036
I hereby certify that this is a true and correct copy of an action taken and entered on the minutes of the
Board of Supervisors on the date shown.
ATTESTED: November 17, 2015
David Twa, County Administrator and Clerk of the Board of Supervisors
By: June McHuen, Deputy
cc: County Administrator - Finance, Auditor Controller - Special Accounting, Auditor Controller - General Accounting, Contra Costa Fire Protection District
- Admin., American Medical Response West Inc., County Counsel - Gelston
D. 8
To:Board of Supervisors
From:David Twa, County Administrator
Date:November 17, 2015
Contra
Costa
County
Subject:APPROVE AND AUTHORIZE CONTRACT FOR ALS AMBULANCE TRANSPORT SERVICES AND ADOPT
RELATED ACTIONS
RECOMMENDATION(S): (CONT'D)
Acting as the Governing Board of the Contra Costa County Fire Protection District:
1. ACKNOWLEDGE that the power to provide ambulance services by a California Fire Protection District is
authorized by Health and Safety Code section 13862(e), pursuant to section 1797 of the Health and Safety Code.
2. APPROVE and AUTHORIZE the Fire Chief, or designee, to execute a contract with Contra Costa County to
provide ALS emergency ambulance services within EOAs I, II and V for the period January 1, 2016 through
December 31, 2020.
3. APPROVE and AUTHORIZE the Fire Chief, or designee, to execute a contract with American Medical
Response West (AMR), in an amount not to exceed $200,000,000 to provide ALS emergency ambulance services
within EOAs I, II and V, on behalf of the District, for the period January 1, 2016 through December 31, 2020.
4. APPROVE and AUTHORIZE the Fire Chief, or designee, to execute a contract with Advanced Data
Processing, Inc., in an amount not to exceed $8,500,000 to provide billing and related services for the provision of
first responder and ambulance transport emergency medical services for the period November 17, 2015 through
December 31, 2020.
5. ADOPT Resolution No. 2015/449 establishing the “CCCFPD EMS Transport Fund” within the County
Treasury.
6. AUTHORIZE the Auditor-Controller to make transfers from the CCCFPD Operating Fund (Fund No. 202000)
to the new CCCFPD EMS Transport Fund, as necessary, to maintain appropriate fund balance available to pay
expenditures secured by anticipated receivables from the provision of ambulance services.
FISCAL IMPACT:
Citygate Independent Financial Review
On July 21, 2015, the Board of Supervisors received a comprehensive presentation related to an independent
financial analysis of the financial feasibility of the proposed “Alliance” service delivery model. The Report was
commissioned by the Board, administered by the County Administrator's Office and conducted by Citygate
Associates LLC. The Report concluded that, over the three-year period (CY 2016-18), the District could generate
approximately $7.2 million in retained earnings; $2.0 million in CY2016, $2.4 million in CY2017 and $2.8
million in CY2018. For a business activity, the term retained earnings is defined as the amount of funds remaining
after operating expenditures are deducted from operating revenues.
Following the Citygate presentation, the Board adopted a series of recommendations from Citygate, including
financial risk mitigation strategies. Among those strategies is establishing a reserve equivalent to six months of
operating revenues. Using the projected CY2018 operating revenues cited in the Report, this reserve amount
would be approximately $21.2 million. The strategy is prudent given the unknown landscape with regard to
private and public health care insurance reimbursements over the next 3-5 years with the continued rollout of the
Affordable Care Act nationally. It is expected that, absent other revenue sources, it would take in excess of ten
years to fund a six month reserve. However, additional recommendations from Citygate include providing
quarterly financial reports and annual audits to the Board to maintain transparency and the ability to react quickly
to a potentially adverse financial situation during the period in which a sufficient reserve is being funded. The
Report and related PowerPoint presentation are attached for reference.
It is important to note that the above financial review does not take into account Ground Emergency Medical
Transport (GEMT) revenue, which could be available to the District, but was not included in the Alliance bid
proposal. Due to the public private partnership model between CCCFPD and AMR being the first of its kind in the
state, it was important to analyze whether the financial model could be viable absent the GEMT revenue stream,
should the state not allow the District to draw on that revenue. GEMT revenue is made available to public
providers only (i.e., governmental entities).
Update on Cash Flow Metrics and Registration with Medicare and Medical
If approved, ambulance service within EOA I, II, and V will officially transition from AMR to the District on
January 1, 2016. While the service begins immediately, actual receipt of transport-related revenues will be
delayed while provider applications are submitted and approved; claims are prepared and submitted by a billing
service provider; and claim requests are processed by payers.
The current payer mix for ambulance transports, as reported in the Contra Costa County Request for Proposals, is
illustrated in the table below:
Payer % of Transports
Medicare 42.9 %
Medi-Cal 26.3 %
Insurance 14.4 %
Private Pay 16.4 %
Total 100 %
The District must be approved as a provider by the Centers for Medicare and Medicaid Services prior to being
eligible to submit claims to Medicare and Medi-Cal (California’s Medicaid program). Concurrently, the District
will be responsible for making payments to its ambulance services subcontractor, AMR, upon receipt of an
invoice at the end of each monthly billing cycle, and the District will be responsible for making payments to its
billing service provider as a percentage of net cash collections for any payments received.
In consideration of the above, CCCFPD assembled a cash flow analysis for the period January through June 2016,
which shows a net fund balance of approximately $20,000 as of June 30, 2016. However, at the end of the first
quarter (Jan.- Mar.) of CY2016, the District estimates a cash deficit of $1.2 million. By the end of May 2016, that
cash deficit is projected to shrink to under $500,000, and by the end of June, the deficit is projected to be entirely
eliminated. This analysis is based on annual transports of 68,532 (2015 AMR transport data), an average patient
charge of $2,505 per transport (Citygate Report), and a projected 24.6% net cash collections rate for 2016
(Citygate Report). A copy of the cash flow analysis is attached for reference.
During the first six months of ambulance service provision, the District will rely on its general operating reserve
funds to bridge the revenue-expenditure gap. The District currently has a healthy fund balance in excess of $20
million, and therefore, will be able to maintain its 10% fund balance reserve designation during this transition.
BACKGROUND:
Request for Proposals Process
On February 27, 2015 the Contra Costa County EMS Agency (CCCEMSA) posted the Board approved 2015
Contra Costa County RFP for Emergency Ambulance Service for EOAs I, II and V. On March 19, 2015 the
CCCEMSA and RFP consultant Fitch and Associates conducted a mandatory bidder’s conference with three (3)
prospective bidders in attendance:
1. The Alliance: The contractor and subcontractor arrangement established between Contra Costa County Fire
Protection District (CCCFPD) & American Medical Response (AMR), and approved by the CCCFPD Governing
Board on May 12, 2015.
2. Falck Northern California
3. Medic Ambulance
The deadline for receipt of the emergency ambulance service proposals was May 21, 2015 in accordance with the
requirements approved by the California EMS Authority (EMSA). A single emergency ambulance proposal was
received from the Alliance.
The Alliance bid was subsequently reviewed and scored by a multi-disciplinary proposal review panel. The panel
consisted of four, out-of-county independent EMS professionals and one, local representative appointed by the
Board. In addition two board appointed independent observers from the county were invited to observe during the
two day panel review proceedings on June 4-5, 2015. The proposal review panel concluded with a presentation
from the Alliance on June 5, 2015.
The findings of the proposal review panel were submitted to the Health Services Director and additional
information was subsequently requested from the Alliance on June 22, 2015. This information was received prior
to the request deadline of July 6, 2015. Concurrent with the RFP review panel process, a separate independent
financial analysis and report was conducted by the County Administrator’s consultant Citygate Associates, LLC
as discussed above.
Links to key documents associated with this emergency ambulance procurement, award and contract can be found
at:
Summary of 2015 Contra Costa Emergency Ambulance Plan A RFP Requirements
Contra Costa EMS RFP webpage: http://cchealth.org/ems/rfp.php
Request for Proposals: Exclusive Operator for Emergency Ambulance Service Contra Costa County (February 27,
2015)
Alliance Proposal and Supporting documents:
http://cchealth.org/ems/pdf/RFP2015-ccfpd-amr-proposal.pdf
http://cchealth.org/ems/pdf/RFP2015-ccfpd-amr-exhibits9.pdf
Note: The above hyperlinks are provided in lieu of print attachments due to the voluminous document sizes.
Recommendation to Award to Contra Costa Fire and Negotiation of Contract
On July 21, 2015 the Board approved the Health Services Director recommendation to award the contract to
CCCFPD and directed staff to commence with contract negotiations between CCCFPD and CCCEMSA and
return with a negotiated contract for final approval. Over the past four months, County Counsel has facilitated
several all-hands contract negotiation sessions to discuss critical details of the proposed, new service delivery
model. The negotiated contract supports opportunities to build efficiencies and support EMS stakeholder
collaboration. Unlike emergency ambulance service contracts in the past, this agreement also provides the County
with significant flexibility to adjust terms and conditions in response to external factors that may affect emergency
ambulance services in the future.
The Alliance model, with a first responder Fire District as contractor and the private ambulance services provider
(AMR) as subcontractor is an entirely new approach for providing emergency ambulance services not seen
previously in California. The Alliance model has the potential to provide a Countywide EMS System with both
benefits and challenges as described during the award presentation on July 21, 2015 and outlined in the Final
Report from Citygate Associates LLC.
As a California Fire Protection District, Health and Safety Code section 13862(e) gives the District power to
provide ambulance services as part of its general operations, pursuant to 1797. In the case of CCCFPD, the
District did not previously provide ambulance services and, therefore, does not have the right to provide
ambulance services under Health and Safety Code section 1797.201. In the future, the District will be required to
bid on the provision of ambulance services during the County EMS Agency request for proposal process, should
there be a desire to continue with those contract services.
Establishment of CCCFPD EMS Transport Fund and Authorization to the Auditor-Controller
Following the presentation of the independent financial review by Citygate on July 21, 2015, the Board of
Supervisors adopted several recommendations, including the establishment of a separate fund to track revenue
and expenditures generated by the new, ambulance transport activity. Such a fund is being recommended as part
of this action. This not only provides transparency for the Board and the public on the financial transactions
associated with the new ambulance transport operation, but will make future evaluations of the financial viability
of this function less cumbersome.
In addition, the Auditor-Controller is being authorized to make transfers from the CCCFPD Operating Fund to the
new CCCFPD EMS Transport Fund to maintain an appropriate fund balance on an as needed basis. As with any
new venture, initial working capital is necessary to fund operations for a period of time before newly established
revenue sources become accessible. The District anticipates a period of negative cash flow (i.e., expenditures are
greater than reimbursement revenues), which could result in a deficit in the new fund absent resources from the
CCCFPD Operating Fund as discussed previously.
Fee Resolution and Collections Policy
The District plans to return to the Board of Directors on December 8, 2015 with a proposed fee Resolution and
Billing/Collection policy for consideration by the Board. Today's recommended actions include approval to
contract with Advanced Data Processing, Inc., to serve as the District's billing and collections vendor following a
competitive RFP process. The District plans to work with the vendor to establish the ability to invoice public and
private health insurance carriers as well as develop the proposed billing/collection policy for approval by the
Board to ensure that the District is able to begin billing for services rendered on the January 1, 2016 transition
date.
CONSEQUENCE OF NEGATIVE ACTION:
The emergency ambulance contract would not be approved. The county’s current contract with AMR for
emergency ambulance service ends on December 31, 2015. In order to continue emergency ambulance services to
Exclusive Operating Areas I, II and V (which covers approximately 90% of the county emergency ambulance
services) beyond December 31, 2015 the county would need to renew the current AMR contract to allow for
sufficient time to go back out-to-bid for emergency ambulance services.
CHILDREN'S IMPACT STATEMENT:
Approximately 10% of EMS response involves children under the age of 15 years of old.
ATTACHMENTS
Resolution No. 2015/449
Service Contract: Contra Costa County and Contra Costa County Fire Protection District
Service Subcontract: Contra Costa County Fire Protection District and American Medical Response West
Service Contract: Contra Costa County Fire Protection District and Advanced Data Processing, Inc.
PowerPoint Presentation - Citygate Associates LLC, July 21, 2015
Final Report: Independent Financial Review of Elements Associated with the County's Ambulance RFP. Citygate
Associates, LLC. July 2015
EMS Transport Enterprise Fund: January-June 2016 Projected Cash Flow
17/16/2015 www.citygateassociates.com | (916) 458www.citygateassociates.com | (916) 458--51005100
Independent Economic Review of the Ambulance Transport RFP Result
Board of Supervisors Briefing
County of Contra Costa
Presented on July 21, 2015
2
What This Review Contains
•The background on current ambulance economics
•The structure of the Alliance business partnership
•Operational measures, since they drive costs
(ambulance staffing)
•The reasonableness of the Alliance revenue
estimations
•Citygate’s Opinions, Fiscal Risk Control Strategies, and
Implementation Recommendations, should the
Alliance approach be approved by the Board of
Supervisors
3
•It is undisputed that 9-1-1 ambulance system
revenues are falling nationally to the point
where some systems will no longer be able to
operate without a public subsidy.
•If there are not enough health care system
payments to cover the costs of ambulance
care, the taxpayers in every community are
the fallback resource to fund 9-1-1 ambulance
services.
Citygate’s Capstone Opinions
4
•The Alliance proposal shifts the ultimate economic
responsibility from the ambulance contractor (which
will be guaranteed a fixed payment) to the taxpayers of
the Contra Costa County Fire Protection District
(CCCFPD).
•Even if this is an acceptable policy alternative, the
CCCFPD is smaller in service area than the area covered
by the ambulance contract.
•Consequently, the taxpayers in some non-CCCFPD
service areas would have less exposure to ambulance
fiscal risk in the case of system default.
Risk Shift to the Fire District Taxpayer
5
•Costs and estimated revenues are conservative and consistent with the system demand for ambulances.
•As such, the Alliance Plan A offers similar services to the current system in a positively balanced economic model.
•To the Alliance’s credit, its proposed Plans A and B are not reliant on using new revenue sources, such as Ground Emergency Medical Transport (GEMT) revenues on some types of Medi-Cal transports.
Alliance Proposal Economics
6
•The Alliance’s approach in projecting Average Patient
Charges (APC) and expected net collections by payer
type are both conservative and prudent.
•While this approach is reasonable, we believe that
continued deterioration of net collections due to
changes in payer mix remains one of the largest risks
going forward.
•To shield against this, Citygate has made several
contractual implementation recommendations to
separate and ensure, to the degree possible, the
economic solvency and sustainability of the system.
Alliance Proposal Economics (cont.)
77
Expense to Revenue Comparisons
8
Economic Assumptions
•The Alliance projected declines in net collections from the
recent past of 27.1% to 24.6% and a flat incident demand.
PLAN A PLAN B
Description Year 1 (2016)Year 2 (2017)Year 3 (2018)Year 1 (2016)Year 2 (2017)Year 3 (2018)
Revenue $39,184,619 $40,707,971 $42,293,630 $39,184,619 $40,707,971 $42,293,630
Expenses $37,211,143 $38,327,477 $39,477,301 $36,741,220 $37,843,457 $38,978,760
Gain $1,973,476 $2,380,494 $2,816,329 $2,443,399 $2,864,514 $3,314,870
9
Deployment Plan A vs. B
•The only major cost difference between the two plans is eight
field employees and a small reduction in operating costs.
•There are no overhead personnel expense reductions.
•There is an addition in Plan B for a required annual payment
of $750,000 to the County EMS Agency for EMS system
enhancement uses.
Plan B Difference Amount
Plan B Cost Reductions ~ ($1,220,000)
Plan B EMS Agency Fee ~ $750,000
Plan B Net Reductions ~ ($470,000)
10
The Fiscal Health of AMR
•The AMR profit component is segregated as a
separate line item in the Alliance Expense Budget,
providing a level of transparency.
•AMR allocated a reasonable 10% of total expenses to
cover non-field Depreciation and Amortization,
Interest, Taxes, thus leaving a reasonable level of Net
Profit for AMR in the range of 3 to 6%.
•We note that AMR national liquidity ratios stayed
very consistent between 2013 and 2014, and the
profitability ratios improved from 2013 to 2014.
11
The Fiscal Health the CCCFPD
•Given the CCCFPD’s current reserves and inclusion in
the overall County tax distribution system, the
CCCFPD has the funds to begin monthly payments to
AMR for several months and fund other start-up
costs, until new ambulance billing revenue catches
up to expenditures.
•At that point, the CCCFPD must first repay its cash
advances and then build the recommended
ambulance enterprise reserves before it can true up
revenue-to-ambulance rates or system
enhancements.
1212
Risk Control Strategies
13
Key Risk Control Strategies
1.Establish Alliance contracts as an Enterprise
Operation, similar to other local governmental fee-
for-service programs, such as water and sewer
operations.
2.Establish a significant reserve fund of 6 months of
revenues plus a capital equipment replacement
reserve; also establish best practice financial policies.
3.Eventually calibrate transport fees to true costs
through audits of expenses and adherence to
stipulated contract provisions.
14
Key Risk Control Strategies (cont.)
4.When revenues exceed needed reserves, consider
lowering transport fees, not cross-subsidizing non-
Alliance CCCFPD or County EMS Agency operations.
5.Establish a County Board of Supervisors and CCCFPD
“Compassionate” set of billing policies for CCCFPD-
managed first responder and ambulance revenue
collection to include a write-down and write-off
policy.
1515
Implementation Recommendations
16
1.Identify the fiscal relationship between the parties,
their separate fiscal exposure for each other’s
decisions (such as staffing levels), and start-up
capital costs.
2.Board policy should require that ambulance loss risk
only be transferred to the taxpayer for unforeseen,
catastrophic losses, as would be the case in the
current system if the ambulance contractor were to
fail.
3.Fine the contractor only for material breach, not
small, per-minute fines.
Recommendations Should the Alliance
Proposal Move Forward
17
4.Rather than fine for small response time misses,
require that the deployment plan account for
equitable response time coverage for similar land use
and population densities. Then if the Alliance delivers
the required response time performance, only gross
neglect to deploy or respond should trigger a fine
and/or lead to default.
5.Define in the contract between the County EMS
Agency and the CCCFPD a clear delineation of roles,
responsibilities, and authorities as it pertains to
operational authority and regulatory oversight.
Recommendations Should the Alliance
Proposal Move Forward (cont.)
18
6.Require the CCCFPD to report to the Board of
Supervisors quarterly on response times, payer
mix, and a rolling revenue-to-date report and
near-term revenue-to-expense forecast.
7.Annually require an independent audit of the
revenues to expenses and the viability going
forward of the contract terms. Once ambulance
reimbursements settle under health care
reform, the formal audits could possibly move to
two-year cycles.
Recommendations Should the Alliance
Proposal Move Forward (cont.)
1919
Questions?
Table of Contents page i
TABLE OF CONTENTS
Section Page
Section 1—Executive Summary....................................................................................................1
1.1 What This Review Is ....................................................................................... 1
1.2 What This Review Is Not ................................................................................ 1
1.3 Citygate’s Capstone Opinions ......................................................................... 2
1.3.1 Total Expense to Revenue Comparison for Plan A and B .................. 3
1.4 The Fiscal Differences of Plan A and Plan B .................................................. 4
1.5 The Fiscal Health of AMR and the CCCFPD ................................................. 5
1.6 Risk Control Strategies and Implementation Recommendations .................... 5
Section 2—Background .................................................................................................................7
2.1 Citygate’s Document Review .......................................................................... 7
2.2 Citygate’s Project Methodology ...................................................................... 7
Section 3—Current State of Ambulance Economics ..................................................................9
3.1 The State and Regional EMS Picture .............................................................. 9
3.1.1 Medi-Cal, Medicare, Covered California, and Commercial
Insurance ............................................................................................. 9
3.2 Covered Contra Costa ................................................................................... 11
3.2.1 Health Insurance Coverage in Contra Costa County ......................... 11
3.3 AMR Revenue History in Contra Costa County ........................................... 12
Section 4—The Business Structure of the Alliance Proposal...................................................18
4.1 AMR’s Subcontract with CCCFPD .............................................................. 18
4.1.1 Deployment Plan A and B Costs to be Paid to AMR by CCCFPD .. 18
4.1.2 Terms of the CCCFPD and AMR Contract ....................................... 19
4.1.3 Alliance Proposal Risk Impact to the Taxpayer ................................ 20
4.2 CCCFPD Roles and Responsibilities in the Alliance Proposal ..................... 21
4.2.1 One Chief Officer Oversight Position ............................................... 22
Table of Contents page ii
4.2.2 Ambulance Billing ............................................................................ 22
4.2.3 Merged Dispatch ............................................................................... 23
4.2.4 Separate Training/CQI for Fire Paramedics – “As Is” ...................... 23
4.3 AMR’s Roles and Responsibilities in the Alliance Proposal ........................ 23
4.3.1 An Almost Identical AMR Effort to the Current Model ................... 23
Section 5—Operations Review as the Cost Driver....................................................................26
5.1 Deployment Levels and Resultant Staffing ................................................... 26
5.1.1 Alliance Plan A Deployment ............................................................. 27
5.1.2 Alliance Plan B Deployment ............................................................. 27
5.2 Plan A Likely Response Time Compliance .................................................. 28
5.3 Plan B Likely Response Time Compliance ................................................... 29
5.4 Staffing for Administrative, Training, Dispatch, and Community Education
Support .......................................................................................................... 31
5.4.1 Community Education ....................................................................... 32
5.4.2 Quality Control and Overall Logistical Positions Needs and
Appropriateness ................................................................................. 32
Section 6—Alliance Economic Proposal ....................................................................................33
6.1 Transport Volume Over Time ....................................................................... 33
6.2 Billing by Payer Type .................................................................................... 34
6.3 Alliance Revenue Estimate Model ................................................................ 35
6.4 GEMT Absence, Near-Term Forecast, and the Wide Variance of Possible
Revenues ....................................................................................................... 36
6.4.1 Description of GEMT Program ......................................................... 36
6.4.2 CCCFPD’s Intent to Seek GEMT Reimbursement ........................... 37
6.4.3 The GEMT Program, Medi-Cal Fee for Service, and Medi-Cal
Managed Care .................................................................................... 37
6.4.4 Characteristics of Contracted Billing Service Agreement ................ 38
6.4.5 DHCS’s Determination of the CCCFPD’s Allowable GEMT
Expenses ............................................................................................ 38
Table of Contents page iii
6.4.6 Potential Expansion of the GEMT Program to Medi-Cal Managed
Care ................................................................................................... 40
6.5 Plan A and B Revenue and Cost Projection Analysis ................................... 40
6.5.1 Total Expense to Revenue Performance for Plan A and B ............... 43
6.6 Estimate of AMR Profit and Reasonableness ............................................... 44
6.7 AMR Fiscal Health/Corporate Review ......................................................... 45
6.8 CCCFPD Fiscal Health / Corporate Review ................................................. 47
6.8.1 CCCFPD Financial Capacity ............................................................. 47
Section 7—Fiscal Risk Control Strategies .................................................................................51
7.1 Risk Control Strategy #1: Establish Alliance Contracts as an Enterprise
Operation ....................................................................................................... 51
7.2 Risk Control Strategy #2: Establish a Significant Reserve Fund of 6 Months
of Revenues Plus a Capital Equipment Replacement Reserve ...................... 52
7.3 Risk Control Strategy #3: Eventually Calibrate Transport Fees to True Costs
through Audits of Expenses and Adherence to Stipulated Contract
Provisions ...................................................................................................... 54
7.4 Risk Control Strategy #4: When Revenues Exceed Needed Reserves,
Consider Lowering Transport Fees, Not Cross-Subsidizing Non-Alliance
CCCFPD or County EMS Agency Operations ............................................. 54
7.5 Risk Control Strategy #5: Establish a County Board of Supervisors and
CCCFPD “Compassionate” Set of Billing Policies for CCCFPD-Managed
First Responder and Ambulance Revenue Collection to Include a Write-
Down and Write-Off Policy .......................................................................... 55
Section 8—Opinions Summary and Implementation Recommendations ..............................56
8.1 Citygate’s Opinions ....................................................................................... 56
8.2 Implementation Recommendations ............................................................... 58
Appendix A—List of Acronyms .................................................................................................60
Table of Tables
Table 1—Alliance Plan A and B Economics .................................................................................. 3
Table 2—Cost Differences for Plan B ............................................................................................ 4
Table of Contents page iv
Table 3—Total System Costs per Unit Hour for Plans A and B .................................................... 4
Table 4—Plan A Staffing Hours and Costs .................................................................................. 19
Table 5—Plan B Staffing Hours and Costs .................................................................................. 19
Table 6—Administrative and Logistical Support ......................................................................... 31
Table 7—Number of Transports in Contra Costa County ............................................................ 33
Table 8—Payer Types from AMR in Contra Costa County ......................................................... 34
Table 9—AMR National Payer Experience ................................................................................. 35
Table 10—County RFP Ambulance Rates ................................................................................... 35
Table 11—AMR Contra Costa County Net Cash Collections by Type ....................................... 36
Table 12—Plan A and B Cost per Unit Hour ............................................................................... 41
Table 13—Deployment Plan A ..................................................................................................... 42
Table 14—Deployment Plan B ..................................................................................................... 42
Table 15—Cost Differences Between Plans A and B .................................................................. 43
Table 16—Total System Costs per Unit Hour for Plans A and B ................................................ 43
Table 17—Plan A and B Economics ............................................................................................ 44
Table 18—Deployment Plan A Expenses..................................................................................... 45
Table 19—Deployment Plan B Expenses ..................................................................................... 45
Table 20—Envision Healthcare Holdings, Inc. (EVHC) Fiscal Health Measures ....................... 46
Table 21—CCCFPD “Balance Sheet” by Fiscal Year ................................................................. 48
Table 22—CCCFPD Statement of Revenues, Expenditures, and Change in Fund Balance ........ 49
Table of Figures
Figure 1—Increase in 9-1-1 Government Payments in Contra Costa County .............................. 13
Figure 2—Average County Patient Charge and Net Cash Received per Transport ..................... 14
Figure 3—Historical and Projected Annual Incident Volume ...................................................... 14
Figure 4—Historical and Projected Annual Transports................................................................ 15
Figure 5—Historical and Projected Monthly Incident Volume .................................................... 16
Figure 6—Historical and Projected Monthly Transports.............................................................. 16
Section 1—Executive Summary page 1
SECTION 1—EXECUTIVE SUMMARY
Citygate Associates, LLC was retained by Contra Costa County to independently review the
economics of the next generation ambulance proposals expected to be received in response to the
County’s February 27, 2015 Emergency Ambulance Service Request for Proposals (RFP). While
this fiscal review was designed to analyze competing proposals, only one proposal was received
from the Contra Costa County Fire Protection District (CCCFPD) and American Medical
Response, West (AMR), which they labeled the “Alliance.”
1.1 WHAT THIS REVIEW IS
This fiscal review therefore was directed at evaluating the Alliance proposal economics and the
key drivers of those economics for reasonableness of methods and results. Additionally, the
fiscal health of each provider was analyzed to understand the capacity of the Alliance to not just
provide the promised service, but to reasonably weather economic downturns. The key areas
covered by Citygate’s review are:
The background of ambulance economics
The structure of the Alliance business partnership
Operational measures, since they drive costs (ambulance staffing)
The reasonableness of the Alliance revenue estimations
Citygate’s Opinions, Fiscal Risk Control Strategies, and Implementation
Recommendations should the Alliance approach be approved by the Board of
Supervisors.
1.2 WHAT THIS REVIEW IS NOT
This review is not a complete review of all aspects of the Alliance proposal, which is the purview
of the County’s separate proposal review committee and process. This fiscal analysis also does
not examine the fiscal health and needs of the County EMS Agency and other EMS care needs in
the County. This review provides enough background to compare the two service-to-cost plans
(Plan A and B) proposed by the Alliance against reasonably expected revenues. The overall
policy choice of whether to proceed with either plan proposed by the Alliance and make other
decisions as to the services provided by the County EMS Agency and CCCFPD is up to the
Board of Supervisors.
Section 1—Executive Summary page 2
1.3 CITYGATE’S CAPSTONE OPINIONS
In the technical sections of this report (Sections 4 through 6), Citygate offers a total of 15
opinion statements. These statements are also found in list form for ease of reading in Section 8
on page 56. These discrete opinions are collectively summarized in this Executive Summary.
It is undisputed that 9-1-1 ambulance system revenues are falling nationally to the point where
some systems will no longer be able to operate without a public subsidy, as many have for over
30 years. Selecting the best alternative pathway and approach to managing the EMS fiscal risk
will be a critical policy decision. The optimal path should contain fiscal and performance triggers
as well as decision points to assist the Board in making the course corrections necessary to avoid
long-term fiscal issues and hasty short-term operational changes. Identifying early warning flags
that will provide the needed lead-time to make responsible and prudent decisions is a vital policy
objective.
The approach to managing the ambulance system fiscal risk can take alternative forms. The
Board may choose to become more fully involved by managing the ambulance service contract
via its EMS Agency and the CCCFPD leadership for dispatch and field services coordination.
This arrangement may contain certain operational and logistical advantages. Revenue collection
and monitoring will be a key indicator of success. If a further decline of rev enue collection is
inevitable, early identification is critical. Timely development and implementation of mitigation
alternatives is vital to long-term program sustainability. Alternatively, the Board can choose to
operate under the old model of ambulance provider direct contracts and hope that the private
provider would give sufficient notice if default becomes evident.
Generally speaking, as this report will describe, if there are not enough health care system
payments to cover the costs of ambulance care, the taxpayers in every community are the
fallback resource to fund 9-1-1 ambulance services. The current Alliance proposal shifts the
ultimate economic responsibility from the ambulance contractor (which is guaranteed a fixed
payment), to the taxpayers of the CCCFPD. Even if this is an acceptable policy alternative, the
CCCFPD is smaller in service area than the area covered by the ambulance contract.
Consequently, the taxpayers in some non-CCCFPD service areas would have less exposure to
ambulance fiscal risk in the case of system default (for example, the taxpayers in the City of
Richmond). This creates a greater burden on the CCCFPD taxpayer base from a risk perspective.
As for the overall economics of the Alliance proposal, they are conservative and consistent with
the system demand for ambulances and the available revenues in the current and near-term
system. As such, the Alliance Plan A offers similar services to the current system in a positively
balanced economic model.
To the Alliance’s credit, its proposed Plans A and B are not reliant on using new revenue
sources, such as Ground Emergency Medical Transport (GEMT) revenues on some types of
Section 1—Executive Summary page 3
Medi-Cal transports. As this study will describe, it is problematic that these revenues can not be
realized quickly, or at high volumes, so the Alliance was again conservative in its approach.
The Alliance’s approach in projecting Average Patient Charges (APC) and expected net
collections by payer type is both conservative and prudent. The question of payer mix is one of
the most difficult and problematical aspects of this projection, given the uncertainties
surrounding health care reform. AMR believes that much of the change resulting from the
Affordable Care Act (ACA) has already been reflected in the 2014 paye r mix data, that those
shifts are stabilizing in 2015, and therefore projecting the status quo is the most prudent course
of action at this time.
While this approach is reasonable, we believe that continued deterioration of net collections due
to changes in payer mix remains one of the largest risks going forward, and one that will need to
be evaluated in light of other risks and opportunities in the Alliance projections. To shield
against this issue, Citygate has made several contractual implementation re commendations to
separate and ensure, to the degree possible, the economic solvency and sustainability of the
system.
1.3.1 Total Expense to Revenue Comparison for Plan A and B
Before reviewing total revenue to expenses, it must be understood that the Alliance projected
declines in net collections from the recent past of 27.1% to 24.6%. Such declines could actually
exceed that forecast if recent trends of rising deductibles and rejected payment claims above the
Medicare or regional averages continue. What makes the 24.6% net revenue also disturbing is
that, before the last recession and federal health care reform pressures, for decades a “low” net
ambulance collection rate was 66%. Some communities collected more than that, although no
community collected more than 90%. The Emergency Medical Services (EMS) industry is
openly discussing the net collection percentage at which a public subsidy would need to occur
since a private provider cannot be expected to run the system, incur all the risk, and make only a
profit of 3-5%.
In summary, the total revenue to expense projection of the Alliance’s Plan A and B are shown
below:
Table 1—Alliance Plan A and B Economics
PLAN A PLAN B
Description Year 1 (2016) Year 2 (2017) Year 3 (2018) Year 1 (2016) Year 2 (2017) Year 3 (2018)
Revenue $39,184,619 $40,707,971 $42,293,630 $39,184,619 $40,707,971 $42,293,630
Expenses $37,211,143 $38,327,477 $39,477,301 $36,741,220 $37,843,457 $38,978,760
Gain $1,973,476 $2,380,494 $2,816,329 $2,443,399 $2,864,514 $3,314,870
Section 1—Executive Summary page 4
1.4 THE FISCAL DIFFERENCES OF PLAN A AND PLAN B
The only major cost difference between the two plans is eight field employees and a small
reduction in operating costs. There are no overhead personnel expense reductions. The Alliance
made a public education commitment of $300,000 per plan, exceeding the Plan A requirement of
$100,000 and meeting the Plan B requirement of $300,000. The Alliance also met the
requirement that it price and provide paramedic-level inter-facility transports (IFT) between
health care facilities upon request. The Alliance’s proposed pricing is in the middle of what
could be expected, and the IFT billing will be completed by the CCCFPD and any resultant
revenues remain with the Alliance.
There is an addition in Plan B for a required annual payment of $750,000 to the County EMS
Agency for system patient care enhancement uses and emerging issue pilot projects. This charge
is theoretically funded from operational savings due to longer response times and shifted
response time measurement zones in Plan B. The cost differences between the plans can be
summarized as:
Table 2—Cost Differences for Plan B
Plan B Difference Amount
Plan B Cost Reductions ~ ($1,220,000)
Plan B EMS Agency Fee ~ $750,000
Plan B Net Reductions ~ ($470,000)
Given these statements by the Alliance on Plan A versus Plan B, the fact that the cost savings for
Plan B are only $470,000 net due to the charge for County EMS Agency program enhancement
uses, and the better response times and system compliance provided by Plan A (to be explained
in our report), it is obvious that Plan A provides shorter response times at a lower Unit Hour cost.
In both Alliance Plan A and Plan B proposals, the total system costs per Unit Hour are:
Table 3—Total System Costs per Unit Hour for Plans A and B
Plan Unit Hour Cost
Plan A $148.89
Plan B $152.52
Thus, the reduced coverage in Plan B actually costs more per Unit Hour than Plan A due to the
EMS Agency programs enhancement fee mandated in Plan B.
Citygate observes that the deployment hours for Plan B are estimated from a software model
used by AMR and, due to the changes in response zones, new estimations are involved. No
Section 1—Executive Summary page 5
software model estimates are perfect. In deployment planning, different mathematical
approaches yield different results.
Citygate would strongly encourage the County not to implement Plan B all at once, if at all. If
chosen for implementation, the Alliance should be allowed to test some reductions in some areas
and then, based on closely-observed metrics, make adjustments. This measured, incremental
approach is consistent with the values of Continuous Quality Improvement (CQI).
1.5 THE FISCAL HEALTH OF AMR AND THE CCCFPD
The AMR profit component is segregated as a separate line item in the Alliance Expense Budget,
providing a level of transparency. Also, AMR allocated a reasonable 10% of total expenses to
cover non-field Depreciation and Amortization, Interest, Taxes, thus leaving a reasonable level
of Net Profit for AMR in the range of 3 to 6%.
We note that AMR national liquidity ratios stayed very consistent between 2013 and 2014, and
the profitability ratios improved from 2013 to 2014. Given the diversity of ambulance costs and
declining payer type payments across the country, for AMR to have stable liquidity and profit
ratios showing slight improvement, it suggests AMR is weathering the ambulance industry
revenue decline as well as, if not better than, the other large national providers.
Given CCCFPD’s current reserves and inclusion in the overall County tax collection and
distribution system, the CCCFPD has the funds to begin monthly payments to AMR for several
months and fund other start-up costs, until new ambulance billing revenue catches up to
expenditures. At that point, the CCCFPD must first repay its cash advances and then build the
recommended ambulance enterprise reserves before it can true up revenue to ambulance rates.
1.6 RISK CONTROL STRATEGIES AND IMPLEMENTATION RECOMMENDATIONS
In Section 7 of this report Citygate offers several Fiscal Risk Control Strategies. They are
summarized here:
Risk Control Strategy #1: Establish Alliance contracts as an Enterprise Operation,
similar to other local governmental fee-for-service programs, such as water and
sewer operations.
Risk Control Strategy #2: Establish a significant reserve fund of 6 months of
revenues plus a capital equipment replacement reserve; also establish best practice
financial policies as part of the business plan.
Risk Control Strategy #3: Eventually calibrate transport fees to true costs through
audits of expenses and adherence to stipulated contract provisions.
Section 1—Executive Summary page 6
Risk Control Strategy #4: When revenues exceed needed reserves, consider
lowering transport fees, not cross-subsidizing non-Alliance CCCFPD or County
EMS Agency operations.
Risk Control Strategy #5: Establish a County Board of Supervisors and CCCFPD
“Compassionate” set of billing policies for CCCFPD-managed first responder and
ambulance revenue collection to include a write-down and write-off policy.
Based on our Opinions and Fiscal Risk Control Strategies, Citygate recommends the CCCFPD,
AMR, and the County EMS Agency pursue final implementation contracts, and offers the
following best practice-based recommendations to guide this process:
1. Fully identify the fiscal relationship between the parties, their separate fiscal
exposure for each other’s decisions (such as staffing levels), and start-up capital
costs.
2. Board policy should require that ambulance loss risk only be transferred to the
taxpayer for unforeseen, catastrophic losses, as would be the case in the current
system if the ambulance contractor were to fail.
3. Fine the contractor only for material breach, not small, per-minute fines.
4. Rather than fine for small response time misses, require that the deployment plan
account for equitable response time coverage for similar land use and population
densities. Then if the Alliance delivers the required response time performance,
only gross neglect to deploy or respond should trigger a fine and/or lead to
default.
5. Define in the contract between the County EMS Agency and the CCCFPD a clear
delineation of roles, responsibilities, and authorities as it pertains to operational
authority and regulatory oversight.
6. Require the CCCFPD to report to the Board of Supervisors quarterly on response
times, payer mix, and a rolling revenue-to-date report and near-term revenue-to-
expense forecast.
7. Annually require an independent audit of the revenues to expenses and the
viability going forward of the contract terms. Once ambulance reimbursements
settle under health care reform, the formal audits could perhaps move to two-year
cycles.
Section 2—Background page 7
SECTION 2—BACKGROUND
2.1 CITYGATE’S DOCUMENT REVIEW
To conduct our fiscal adequacy review we collected multiple documents from the County
Emergency Medical Services (EMS) Agency, including the 2014 EMS System Modernization
report, the ambulance contract Request for Proposal (RFP), and current system performance data
the EMS Agency receives from the existing contractor, American Medical Response, West
(AMR).
Once the Alliance (comprised of the Contra Costa County Fire Protection District and AMR)
proposal was received, we examined it along with the cost of services detailed fiscal information
received. We then issued a substantial list of follow-up questions to the Alliance and met with its
representatives to reach final understanding on the fiscal components of its proposal.
2.2 CITYGATE’S PROJECT METHODOLOGY
Citygate’s review process consisted of the three critical steps described below.
First, before the proposal was received we independently built a deployment model to evaluate
the response time and geographic coverage needed. This served as a baseline from which to
compare the current system as understood by County staff with the single proposal received.
Using this method, we endeavored to understand an appropriate level of ambulance staffing and
spacing across the geography for the near term. Appropriate staffing is critical to an
economically viable system since personnel costs drive the majority of system costs. We had to
ensure that a proposal to provide fewer EMS field personnel than the number presently
contracted would not be considered only because it could appear less expensive.
Second, once the deployment model was refined, the numbers of field personnel drove our
expectations for the logistical support personnel needed, including the positions for training and
Quality Assurance (QA). We also had to understand facility, supplies, equipment, and ap paratus
costs. The RFP requested that respondents deliver a detailed logistical staffing plan and line item
budget. We compared the logistical staffing plan proposed to the estimates we independently
formed and used our own EMS Agency operating experience to make the best evaluation. Again,
the goal was to ensure that a proposal that provided fewer personnel than currently, or was
insufficiently budgeted, would not receive a passing grade.
Third, we had to understand current ambulance revenues from all sources and prepare a revenue
forecast based on the historical incident demand data for the last four years. We obtained not
only the three years of County EMS data (2011-2013) supplied by the RFP, but we also obtained
County EMS incident data from calendar year 2014 so we could use the most recent data
available to the EMS Agency. We used both a historical and a Citygate data forecast to prepare a
Section 2—Background page 8
revenue projection and assumptions that would be compared to the existing AMR system data
and to proposals received.
Thus, three views exist for evaluating data and determining staffing: the system currently
provided by AMR, the system “check model” as envisioned by Citygate, and the system
envisioned by the respondent (Alliance). As a validation test, at least two of the three views
should have reasonable agreement. If not, an explanation is necessary for the Board of
Supervisors of why the operating and economic assumptions cannot be tightly relied upon.
Section 3—Current State of Ambulance Economics page 9
SECTION 3—CURRENT STATE OF AMBULANCE ECONOMICS
3.1 THE STATE AND REGIONAL EMS PICTURE
Throughout California, Emergency Medical Services (EMS) systems, and especially ambulance
providers, are facing unprecedented economic pressures. During the past ten years, large
populations have shifted from higher-paying commercial insurance plans to lower-paying
government plans. Many commercial insurance plans are also decreasing payment rates for
ambulance transport. In total, more people are insured due to federal health care reform, but the
average insurance payment rate has significantly decreased for ambulance care, causing some of
Northern California’s largest EMS systems and ambulance providers to lose millions of dollars
annually, threatening their short- and long-term financial solvency. Three of the most significant
factors influencing aggregate ambulance reimbursement are: (1) the increase in number of Medi -
Cal insured; (2) the decreased reimbursement rates by commercial insurance companies; and (3)
the increased number of high deductible health insurance plans.
3.1.1 Medi-Cal, Medicare, Covered California, and Commercial Insurance
Medi-Cal
Medi-Cal (California’s version of Medicaid) reimburses ambulance providers at rates
significantly less than the cost of providing ambulance services. Medi-Cal’s average payment is
approximately $130 to $150, which is approximately 15% to 25% of the cost of an ambulance
transport.1, 2 California law prohibits ambulance companies from billing the patient for the
difference between the ambulance cost and Medi-Cal reimbursement, causing ambulance
companies to write off this difference as a contractual allowance to accept Medi-Cal payments.3
Throughout California, most of the newly-covered patients who received insurance through the
provisions of the Patient Protection and Affordable Care Act (PPACA or abbreviated as ACA)
are new, previously undiscovered eligible enrollees to Medi-Cal, and estimates are that now a
full 30% of Californians are covered by Medi-Cal. Across California as high as 80% of those in
Medi-Cal are enrolled in Medi-Cal Managed Care, while 20% are enrolled in Medi-Cal Fee for
Service.4 While both programs pay standard Medi-Cal rates and prohibit billing for the
difference between the billed and reimbursed amounts, ambulance services owned or operated by
public agencies who meet certain requirements can seek cost-based reimbursement for those
1 “Medi-Cal Rates as of June 15, 2015.” California Department of Health Care Services, Medi-Cal. 15 June 2015.
Web. Accessed 18 June 2015. <https://files.medi-cal.ca.gov/pubsdoco/rates/rateshome.asp>
2 “California’s Ground Emergency Ambulance Transportation (GEMT) Certfiied Public Expenditure.” California
Ambulance Assocation. 17 July 2013. Web. Accessed 7 June 2015. <www.the-caa.org>
3 Citygate interviews with numerous ambulance industry representatives.
4 “Total Monthly Medicaid and CHIP Enrollment.” Henry J. Kaiser Family Foundation. April 2015. Web. Accessed
16 June 2015. <http://kff.org/health-reform/state-indicator/total-monthly-medicaid-and-chip-enrollment/>
Section 3—Current State of Ambulance Economics page 10
patients who are covered by Medi-Cal Fee for Service through the Ground Emergency Medical
Transport (GEMT) Program. The GEMT program will be explained in Section 6.4.
Medicare
Medicare sets its allowable ambulance payment rate through the Medicare Ambulance Fee
Schedule, allowing charges only for an ambulance transport base rate and mileage charges to a
hospital. Medicare will pay 80% of its allowable rate, regardless of the charges by the ambulance
company, causing the ambulance company to write off the difference between its billed rate and
Medicare’s allowable rate. The patient or the patient’s supplemental insurance must pay the
remaining 20% balance between Medicare’s allowable rate and the Medicare payment.
Medicare’s average transport payment is approximately $540 to $600 and thus is also below the
full cost of a transport at both the Basic or Advanced Life Support (BLS or ALS) level of care.5
Commercial Insurance Plans
Historically, commercial (private) insurance companies paid 80% or greater of an ambulance
company’s billed charges, and the population covered by commercial insurance was much larger.
Thus, commercial insurance helped transport providers cover losses generated by the lower-
paying government insurance providers, such as Medi-Cal and Medicare.6
Commercial insurance rates of reimbursement are now also decreasing. Rather than paying the
traditional 80% of the rate charged by ambulance companies, many commercial insurance
companies now pay either Medicare rates, rates they unilaterally determine as “reasonable and
customary,” or charges based on a region’s average rate structure. Many insurance compan ies
also review ambulance records, routinely determine that a patient’s condition did not warrant an
ambulance, and disallow the entire charge.7
High Deductible Health Plans
Covered California, the state’s health care exchange, provides five insurance plan levels,
commonly called the “metal plans or metals” using labels such a gold, silver, and bronze. Two of
the five, along with many commercial plans, are High Deductible Health Plans (HDHP). Such
HDHP plans have a minimum individual deductible of $1,300, but the average deductible for an
individual HDHP is $2,098, and 18% of workers have a deductible of at least $3,000. Other
plans are offered with $4,000-$5,000 deductibles. Enrollment in employer-sponsored HDHP
plans has rapidly and significantly increased from 4% in 2006 to 20% of covered workers in
5 “Ambulance Fee Schedule Public Use Files.” Centers for Medicare and Medicaid Studies. April 2015. Web.
Accessed 17 June 2015. <http://kff.org/health-reform/state-indicator/total-monthly-medicaid-and-chip-enrollment/>
6 Citygate interviews with numerous ambulance industry representatives.
7 Citygate interviews with numerous ambulance industry representatives and EMS Agency Administrators.
Section 3—Current State of Ambulance Economics page 11
2014.8 The rate of growth of HDHP plans will continue to dramatically rise. Many people
purchase HDHP plans because of their less expensive premiums, but cannot pay the prohibitively
high deductible following a medical emergency.9, 10
3.2 COVERED CONTRA COSTA
3.2.1 Health Insurance Coverage in Contra Costa County
Since 2005, Contra Costa County has seen an increase in patients covered by Medi-Cal (due to
Covered California) and Medicare, and fewer patients covered by commercial insurance, private
pay, and other contract pay sources. In 2005, 41.7% of patients receiving ambulance services had
Medicare and Medi-Cal, which increased to 59.6% by 2011, and is now 69.2%. Conversely, in
2005, 36.5% of ambulance patients had commercial insurance, which decreased to 18.2% in
2011, and is now 14.4%. The percentage of ambulance patients without insurance or who have
other pay sources was 21.0% in 2005, 22.2% in 2011, and now is 16.4%.11
Through the ACA (Covered California), more people in Contra Costa County become insured
every year. However, most people’s status has changed from uninsured to underinsured, because
they now are covered through Medi-Cal Expansion rather than a Covered California exchange-
based plan. Since January 1, 2014, more than 80,000 persons in Contra Costa County received
health insurance coverage through provisions of the ACA. Of these, approximately 65,000
persons (or 81%) have Medi-Cal. As mentioned above, Medi-Cal now insures approximately
30% of all persons in Contra Costa County. In Contra Costa County, 80% of those in Medi-Cal
are enrolled in Medi-Cal Managed Care, while the remaining 20% are enrolled in Medi-Cal Fee
for Service.12
Approximately 15,500 persons in Contra Costa County have an exchange-based health insurance
plan provided through Covered California. Of those in Covered California, approximately 88%
receive subsidies to reduce the cost.13 Subsidy levels are an important proxy to predict a person’s
8 Renter, Elisabeth. “Should You Roll the Dice on a High Deductible Health Plan?” US News and World Reports. 10
November 2014. Web. Accessed 7 June 2015. <http://health.usnews.com/health-news/health-
insurance/articles/2014/11/10/should-you-roll-the-dice-on-a-high-deductible-health-plan>
9 “Understanding High Deductible Health Plans.” Fair Health Consumer. n.d. Web. Accessed 7 June 2015.
<http://fairhealthconsumer.org/reimbursementseries.php?id=48&terms=understanding-high-deductible-health-
plans>
10 “2014 Employer Health Benefits Survey.” Henry J. Kaiser Family Foundation (NORC at the University of
Chicago, and Health Research & Educational Trust). 10 September 2014. Web. Accessed 8 June 2015.
<http://kff.org/health-costs/report/2014-employer-health-benefits-survey/>
11 Citygate analysis of data and documents submitted by Contra Costa County EMS Agency and AMR.
12 Contra Costa Health Plan Chief Executive Officer Patricia Tanquary, interview by Citygate, 21 April 2015,
Martinez.
13 Contra Costa Health Plan Chief Executive Officer Patricia Tanquary, interview by Citygate, 21 April 2015,
Martinez.
Section 3—Current State of Ambulance Economics page 12
ability to pay his or her insurance deductible, and in two of the five Covered California plans
deductibles exceed $1,300 annually.14
Approximately 15% of persons in Contra Costa County remain uninsured. Uninsured persons
constitute a large, disproportionately share of high and repeat users of medical services (not just
9-1-1 ambulance service) within Contra Costa County.15
To place Medi-Cal’s average payment of approximately $130 to $150 per transport into
perspective, the Contra Costa County rates per the 2015 County Ambulance RFP for Contract
Year 1 for the base rate, plus the cost to drive 10 miles to the hospital and cost to provide oxygen
to the patient, would total $2,775. This Year 1 rate is higher than the current County equivalent
rate that would yield a charge of $2,582.
This amount does not include advanced paramedic treatment and drug rates, which are allowed
separately by many insurance companies. It is therefore not at all unreasonable that a $3,000-plus
ambulance bill can be incurred and still not reach an individual’s deductible amount in his or her
insurance coverage.
Ambulance companies have known for years that raising billed rates cannot cover the difference
between the ambulance cost billed and the reimbursement provided. The marginal return on
higher rates continually diminishes as insurance providers refuse to fully pay them. Stated this
way, the County cannot simply increase rates to resolve the problem between the amounts billed
and received.
3.3 AMR REVENUE HISTORY IN CONTRA COSTA COUNTY
To place the above observations into macro perspective for this RFP proposal analysis, Citygate
asked AMR for historical revenue projections for its existing Contra Costa County Exclusive
Operating Area (EOA) contract. We received data for all payer types, volumes, and receiv ables
for the years 2005 through 2014. The 2013 and 2014 data is not complete yet as some
receivables are aged and the books cannot be closed yet for those years. The mathematical trends
are complicated as there are multiple moving parts (e.g., payer mix changes, ambulance rate
changes, decline in receivables, and growth in incident volume). Generally, though, as
receivables declined and operating costs increased, the average patient charge increased even as
total revenues also increased due to volume growth.
To place these movements into perspective, the ambulance industry uses a measure called “Net
Revenue per Transport” or NRT. For this measure from 2005 to 2014, the NRT has fallen from
$613 to $583.
14 Covered Contra Costa Plans. Citygate analysis.
15 Contra Costa Health Plan Chief Executive Officer Patricia Tanquary, interview by Citygate, 21 April 2015,
Martinez.
Section 3—Current State of Ambulance Economics page 13
The following charts show the change over time for how payments shifted from the private pay
and private insurance to public insurance—Medicare and Medi-Cal. These six charts contain
Contra Costa County data, as provided by AMR at the request of Citygate. We received and
verified the source data and methods with AMR’s Regional Finance Officer.
Figure 1—Increase in 9-1-1 Government Payments in Contra Costa County
To place this shift into an ambulance rates perspective, as total ambulance rates have risen just
over double since 2005, the net revenue per trip has stayed relatively flat. This is why the
ambulance industry tells clients that as payer mix has changed and reimbursements have been
aggressively lowered by private pay sources, an ambulance system “can’t raise rates enough” to
fix the revenue problem:
-
5,000
10,000
15,000
20,000
25,000
30,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Transports Increase in 9-1-1 Government Payments in Contra
Costa County
Medi-Caid Medicare Private Insurance Self Pay
Section 3—Current State of Ambulance Economics page 14
Figure 2—Average County Patient Charge and Net Cash Received per Transport
The next two charts show the volume trends ahead based on the last four years of system data:
Figure 3—Historical and Projected Annual Incident Volume
$-
$500
$1,000
$1,500
$2,000
$2,500
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Average County Patient Charge and Net Cash Received
per Transport
Average patient charge Net cash per trip
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
2011 2012 2013 2014 2015 2016 2017 2018
Historical and Projected Annual Incident Volume
Total Calls - Actual Total Transport - Actual Total Cancelled - Actual
Total Calls - Trend Line Total Transport - Trend Line Total Cancelled - Trend Line
Total Calls - RFP Forecast Total Transport - RFP Forecast Total Cancelled - RFP Forecast
Section 3—Current State of Ambulance Economics page 15
Figure 4—Historical and Projected Annual Transports
As will be discussed in the economics sections of this report (Sections 4 through 6), the Alliance
proposal took a conservative revenue approach and used flat volume growth even though the
above projection shows continuing volume increases.
The last two charts show the more variable movement month to month for incident demand and
total transports:
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
2011 2012 2013 2014 2015 2016 2017 2018
Historical and Projected Annual Transports
Priority 1 Transport - Actual Priority 3 Transport - Actual Priority 1 Transport - Trend Line Priority 3 Transport - Trend Line
Section 3—Current State of Ambulance Economics page 16
Figure 5—Historical and Projected Monthly Incident Volume
Figure 6—Historical and Projected Monthly Transports
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
Jan-11Mar-11May-11Jul-11Sep-11Nov-11Jan-12Mar-12May-12Jul-12Sep-12Nov-12Jan-13Mar-13May-13Jul-13Sep-13Nov-13Jan-14Mar-14May-14Jul-14Sep-14Nov-14Jan-15Mar-15May-15Jul-15Sep-15Nov-15Jan-16Mar-16May-16Jul-16Sep-16Nov-16Jan-17Mar-17May-17Jul-17Sep-17Nov-17Jan-18Mar-18May-18Jul-18Sep-18Nov-18Historical and Projected Monthly Incident Volume
Total Calls - Actual Total Transport - Actual Total Cancelled - Actual
Total Calls - Trend Line Total Transport - Trend Line Total Cancelled - Trend Line
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Jan-11Mar-11May-11Jul-11Sep-11Nov-11Jan-12Mar-12May-12Jul-12Sep-12Nov-12Jan-13Mar-13May-13Jul-13Sep-13Nov-13Jan-14Mar-14May-14Jul-14Sep-14Nov-14Jan-15Mar-15May-15Jul-15Sep-15Nov-15Jan-16Mar-16May-16Jul-16Sep-16Nov-16Jan-17Mar-17May-17Jul-17Sep-17Nov-17Jan-18Mar-18May-18Jul-18Sep-18Nov-18Historical and Projected Monthly Transports
Priority 1 Transport - Actual Priority 3 Transport - Actual Priority 1 Transport - Trend Line Priority 3 Transport - Trend Line
Section 3—Current State of Ambulance Economics page 17
While monthly demand is more fluid, these monthly projections show slightly less increased
demand when compared to the annual demand trend lines. The Alliance revenue proposal is
based on 63,500 transports in Contract Year 1 (2016), which, if the monthly trend line ends up
more accurate that the annual projection, that volume may not be reached until late 2016. So
again, the Alliance took a balanced, conservative position on its transport demand numbers as
will be explained more fully in the sections to follow.
Section 4—The Business Structure of the Alliance Proposal page 18
SECTION 4—THE BUSINESS STRUCTURE OF THE ALLIANCE
PROPOSAL
4.1 AMR’S SUBCONTRACT WITH CCCFPD
In response to the Contra Costa County Local Emergency Medical Services Agency’s (LEMSA)
February 27, 2015 Request for Proposal (RFP) for Exclusive Operator for Emergency
Ambulance Service, Contra Costa County Fire Protection District (CCCFPD) and American
Medical Response, West (AMR), formed an alliance (referred to as the “Alliance”) and
submitted a single unified proposal to provide emergency ground ambulance services. No other
proposal was received. The business structure of the Alliance between the CCCFPD and AMR is
a subcontract relationship, in which the CCCFPD subcontracts with AMR to provide emergency
ground ambulance services, at CCCFPD’s direction, in the RFP’s requested Response Areas,
except for those portions that are in the jurisdiction of the Moraga-Orinda and San Ramon Valley
Fire Protection Districts.
The CCCFPD will be the billing agent of record. It has secured its own National Provider
Identification (NPI) number from the Center for Medicare and Medicaid Services and intend to
bill for the ambulance services provided by AMR. The revenue received by CCCFPD, through
patient billing and reimbursements from health insurers and other emergency ambulance
transport revenue sources, would be used to offset the cost of its contract with AMR to provide
the transport ambulance system as a complete, “turn key” operation. This billing arrangement
might also allow CCCFPD to seek Ground Emergency Medical Transport (GEMT) cost -based
reimbursement for emergency medical services provided by the CCCFPD (but this allowance is
not an absolute guarantee as will be explained in Section 6.4).
4.1.1 Deployment Plan A and B Costs to be Paid to AMR by CCCFPD
Separate from the Alliance proposal to the County, is a contract between CCCFPD and AMR
that stipulates that the CCCFPD will pay AMR for each ambulance unit/hour of emergency
ground ambulance service that AMR provides, as full compensation for all services and costs
provided or incurred by AMR in performing its obligations pursuant to the contract. According
to the Alliance response to the RFP, for Plan A, during the first year of service (January 1, 2016
through December 31, 2016), CCCFPD will compensate AMR at a rate of $135.19 per deployed
Unit Hour. During the second year of service (January 1, 2017 through December 31, 2017),
CCCFPD will compensate AMR at a rate of $139.25 per hour. During the third year of service
(January 1, 2018 through December 31, 2018), CCCFPD will compensate AMR at a rate of
$143.43 per hour. Compensation rates for year 4 and 5 were not identified; however, the
CCCFPD/AMR contract contains an escalator clause which increases unit/hour payments
beginning April 1, 2017. The amount of the escalator has not been quantified. Unless modified,
Section 4—The Business Structure of the Alliance Proposal page 19
the payment limit of the subcontract will be approximately $188,000,000 over the five years of
the subcontract.
Note: The costs in the two tables below are the contractual obligations that CCCFPD must pay
AMR, its subcontractor, regardless of the actual revenues received. Including costs in addition to
those of AMR, the total Alliance costs per year and the resultant Unit Hour costs are higher. A
comparison of total Alliance costs to total estimated revenues will be provided in a later section
of this report.
Table 4—Plan A Staffing Hours and Costs1
Plan A Year 1 Year 2 Year 3
Average Weekly Staffed Unit Hours 4,788 4,788 4,788
Average Annual Staffed Unit Hours 249,660 249,660 249,660
AMR Burdened Unit Hour Cost $135.19 $139.25 $143.43
Estimated CCFPD Payment to AMR $33,752,634 $34,765,213 $35,808,170
1 All Unit Hours and costs from AMR only Plan A costs dated July 6, 2015.
The Alliance also submitted, as required, a second deployment plan called Plan B. The summary
of that plan’s AMR staffing and costs is:
Table 5—Plan B Staffing Hours and Costs
Plan B Year 1 Year 2 Year 3
Average Weekly Staffed Unit Hours 4,6201 4,620 4,620
Average Annual Staffed Unit Hours 240,900 240,900 240,900
AMR Burdened Unit Hour Cost 135.302 $139.35 $143.54
Estimated CCFPD Payment to AMR $32,592,803 $33,570,588 $34,577,705
1 Unit Hours from Alliance updated Plan B proposal received on July 3, 2015.
2 Unit Hour Cost per AMR Plan B fiscal spreadsheet for AMR only Plan B costs dated July 6, 2015.
4.1.2 Terms of the CCCFPD and AMR Contract
The Emergency Ambulance Services subcontract between the CCCFPD and AMR begins on
January 1, 2016 and ends December 31, 2020. Through this contract AMR is responsible to
provide 24-hour/day, 365-day/year paramedic-staffed emergency ambulance service within
Contra Costa County in a manner that meets the standards articulated in the Contra Costa County
EMS Agency’s RFP and the CCCFPD’s proposed contract with AMR. This includes owning and
maintaining the ambulance fleet; employing paramedics and EMTs to staff the ambulances;
providing quality improvement, training, and community outreach programs; providing field
Section 4—The Business Structure of the Alliance Proposal page 20
supervision; and maintaining an electronic clinical care and billing records system. These
services are normally expected of an ambulance provider servicing a 9-1-1 Exclusive Operating
Area (911EOA) Emergency Ambulance contract in a metropolitan area, such as Contra Costa
County. These roles are further detailed in Section 4.3—AMR’s Role and Responsibilities in the
Alliance Proposal.
The contract also includes default provisions, providing CCCFPD the ability to take over AMR’s
stations, ambulances, and equipment if AMR cannot correct certain material deficiencies within
7 days following notice of default by CCCFPD. AMR is not prohibited from conducting non -
emergency work that does not interfere with the contract.
The contract also obligates AMR to provide equipment, programs, and services normally
expected of an ambulance provider servicing a 911EOA Emergency Ambulance contract.
4.1.3 Alliance Proposal Risk Impact to the Taxpayer
In the Alliance proposal, the CCCFPD pays AMR, its subcontractor, a predetermined unit/hour
fee to provide emergency ground ambulance services. CCCFPD will serve as the billing agent of
record, and through a subcontractor separate from AMR, will bill Medicare, Medi-Cal, insurance
companies, patients, and other potential revenue sources. In this arrangement, the financial risks
associated with operation of the ambulance service, including decreasing reimbursement rates,
accounts receivables management, and increased cost of staffing, materials, and supplies, is
transferred from AMR to the CCCFPD, putting the CCCFPD and the taxpayers of the CCCFPD,
not the balance of the taxpayers of Contra Costa County, at risk of financial loss. This risk, if
realized as a liability, becomes a general liability of the CCCFPD and its taxpayers. Citygate
believe that this financial risk is small, because the deployment plan and the revenue and expense
budgets are realistic. Nonetheless, it is important to make note of this risk, because this
subcontracting model is new and untested within California. Understanding, monitoring, and
evaluating the implications associated with ongoing taxpayer risk for ambulance systems should
be of the utmost importance to the CCCFPD management. This is especially important
considering the changing health care payment environment in America.
Citygate believes that all governmental entities that directly provide ambulance service or
subcontract for ambulance service are potentially at financial and operational risk. These risks
include decreasing rates of reimbursement, unexpected changes in volume, and increasing costs
of service, including labor, capital asset acquisition, and costs caused by regulatory changes.
Similarly, government jurisdictions that contract for ambulance services also retain some degree
(albeit probably less) of financial and operational risk, because if net revenue decreases to less
than the cost to provide the service, the jurisdiction is at risk to maintain the solvency of the
ambulance operator by raising rates, providing a subsidy, or selecting a new provider.
Further, should an ambulance provider in financial trouble discharge the contract through
bankruptcy, the governmental entity retains the responsibility of maintaining a stable ambulance
Section 4—The Business Structure of the Alliance Proposal page 21
transport system, which may entail the financial and operational risks of engaging a new
contractor or, directly at taxpayer expense, providing ambulance service, without time for a well-
planned transition.
Citygate Opinion #1 – Alliance Economic Risk: It is undisputed that 9-1-1
ambulance system revenues are falling to the point where some, if not all, systems
will no longer be able to operate without a public subsidy as many have for over
30 years. The choice before Contra Costa County is whether the Board wants to
more fully be involved in managing the contractor via the CCCFPD, and if a
revenue collapse is inevitable, be able to detect the problem with enough time to
develop and implement thoughtful mitigation measures.
The other option is to operate the existing type of contract model and hope the
private provider would provide enough notice before default. Ultimately,
taxpayers are the fallback resource to fund 9-1-1 ambulance services. If ultimately
the ambulance system needs an allocation of CCCFPD or County general
discretionary resources to stabilize ambulance services, that could force the
reduction of services in other areas. Monitoring and understanding how this issue
evolves is critical if the County is to minimize the impact of a potentially
damaging ambulance fiscal shock wave.
The CCCFPD and AMR “Alliance” is designed to provide full EMS system integration for the
communities serviced. The Alliance notes that this organizational structure will provide single-
source dispatch, integrated oversight for first response and transportation, consistent training for
all responders, common and shared language and response culture, and eliminate redundancies in
service.
4.2 CCCFPD ROLES AND RESPONSIBILITIES IN THE ALLIANCE PROPOSAL
The CCCFPD’s roles and responsibilities, as specified in the Alliance proposal, are coordinating
the overall AMR contract and ensuring close coordination with all of the first responders in the
ambulance service area. These actions do not replace, but enhance, the oversight functions
mandated by state regulations to the County EMS Agency.
The Alliance support for first responder functions is compliant with the terms of the County’s
RFP and includes costs for issues such as replacing first responder supplies and equipment, plus
group supply purchasing savings or discounts. These first responder support costs are in the
Alliance operating expense and revenue proposals.
For its coordination with AMR, CCCFPD is not adding significant personnel or costs in order to
supply both AMR contract coordination and first responder coordination functions.
Section 4—The Business Structure of the Alliance Proposal page 22
4.2.1 One Chief Officer Oversight Position
The Alliance proposal does not significantly change the number of personnel employed by the
CCCFPD or AMR. In fact, only one new position is created in the Alliance organization: an
EMS Chief, who will be employed by the CCCFPD. The EMS Chief will oversee first responder
training, the clinical manager, and clinical education services support. The EMS Chief will also
work closely with AMR’s Medical Director and the County’s EMS Medical Director and the
AMR General Manager. The fully-benefitted cost of this new fire department chief officer
position is budgeted at $400,000 annually.
4.2.2 Ambulance Billing
In the current Contra Costa County EMS System, AMR directly bills insurance providers and
patients for ambulance medical care and transport. In the Alliance proposal, the CCCFPD will
perform first responder and ambulance billing through a contract with an external billing agency.
AMR will continue to perform the “front end” billing process, which includes ensuring proper
documentation, reconciling trip information, and timely submitting billing information to the
external billing agency. CCCFPD expects to pay approximately about 5% of collections, if a
percentage collection agreement is negotiated to the external billing contractor.
Ambulance billing systems contain a hard cost. In the current contract with the County, AMR
performs the billing, the cost of which is included in its bills to patients under the County-
approved ambulance rate structure. Under the Alliance approach, its plan to try to acquire
supplemental Medi-Cal revenues known as GEMT (explained in Section 6.4 of this report)
possibly requires, under state regulations, that the billing to be performed by the CCCFPD, not
its ambulance subcontractor. Given this is not yet settled, the Alliance proposal calls for a
separate billing contractor under CCCFPD control. The cost of this is included in the Alliance
cost structure at an estimated amount of $2,078,548. Billing contracts can be priced at fixed rates
or a percent of the amount billed. Because the Alliance does not know if it will be required to
separate billing from AMR, at this time its proposal uses a cost that is closely estimated, but not
agreed to contractually.
If the Alliance proposal is approved by the Board of Supervisors and implementation begins,
Citygate hopes that the Alliance can make the case to the state that the more effective billing
approach would be to let the current and capable AMR billing process remain in one integrated
patient data system from point of dispatch to final patient destination.
In either case, the final Alliance costs cannot be determined until the billing question and costs
are firmly fixed.
Billing for Inter-Facility Transports (IFT)
Another part of the EMS system RFP for 9-1-1 ambulance services allows the 9-1-1 ambulance
operator to provide, at the request of hospitals, clinics, and others, a paramedic unit to transfer
Section 4—The Business Structure of the Alliance Proposal page 23
patients between sites. As required, the Alliance priced this option in Appendix 19 of its
response and identified a rate structure set at 50% of the Usual and Customary Rates (UCR)
charged for 9-1-1 calls. The Alliance expects that requests for these services will be extremely
low.
The billing for IFTs will be performed by the CCCFPD along with all other billing. Therefore,
the IFT revenues are part of the overall Alliance revenue submittal and any revenues in excess of
costs will remain with the CCCFPD for use within the Alliance structure.
4.2.3 Merged Dispatch
In the current Contra Costa County EMS System, the CCCFPD and AMR operate separate,
geographically-distinct dispatch centers. In the Alliance proposal, AMR will relocate its medical
dispatch personnel to the Contra Costa County Regional Fire Communications Center, allowing
CCCFPD and AMR to operate one consolidated dispatch center that will provide fire and
ambulance dispatching services. The Alliance’s communication center provides the
infrastructure, technologies, and redundancies normally associated with an emergency services
dispatch center serving an urban or suburban area. This communication center will process
medical requests for assistance using the Medical Priority Dispatch System including Medical
Dispatch Quality Assurance, both of which are considered the state-of-the-art in EMS dispatch.
Consolidated communication centers are associated with shorter call transfer and processing
times, improved inter-organizational situational awareness, and improved coordination of fire
and ambulance resources to complex incidents.
4.2.4 Separate Training/CQI for Fire Paramedics – “As Is”
The CCCFPD will not be merging or changing how it currently trains and conducts Continuous
Quality Improvement (CQI) for the paramedics on its fire engines, so there are no new costs for
these programs in the Alliance proposal.
4.3 AMR’S ROLES AND RESPONSIBILITIES IN THE ALLIANCE PROPOSAL
4.3.1 An Almost Identical AMR Effort to the Current Model
AMR’s roles and responsibilities, as specified in the Alliance proposal, are nearly identical to its
roles and responsibilities in the current Contra Costa County EMS System. AMR will have the
sole responsibility for owning, maintaining, and upgrading the ambulance fleet. AMR is
responsible to respond to all calls dispatched from the County-designated Public Safety
Answering Points (PSAPs) with Advanced Life Support (ALS (paramedic-staffed)) ambulances.
AMR is responsible to provide ALS service (paramedic-staffed ambulances), with the exception
that Basic Life Support (BLS (EMT-staffed)) ambulances may be used for response to multi-unit
responses and when BLS response is appropriate according to the Contra Costa County EMS
Agency’s policies and procedures. AMR must also provide equipment, programs, and services
Section 4—The Business Structure of the Alliance Proposal page 24
normally expected of an ambulance provider servicing a 911EOA Emergency Ambulance
contract.
The equipment, programs, and services that AMR must provide include:
Performing comprehensive data analysis and quality improvement activities,
using a dedicated quality improvement staff conducting practices according to the
County’s EMS Agency policies
Assuring all personnel are properly vetted, licensed or certified, credentialed, and
trained
Providing field supervision using trained supervisors
Providing continuing education for CCCFPD and AMR personnel
Operating a dispatch center within the CCCFPD dispatch center, maintaining
dispatch-related equipment, and dispatching ambulances to requests for
emergency ambulance services
Using and maintaining an electronic PCR system
Providing records to CCCFPD to verify clinical and operational performance
standards
Employing a full-time Community Outreach Coordinator to work towards
improving community health status and providing community education
Maintaining disaster and multi-casualty incident capability, including the ability
to recall personnel, staff a disaster response vehicle, and participate in disaster
training and exercises.
In addition to the change in ambulance billing service described above, another significant
change from the current Contra Costa County EMS System in the Alliance model is AMR’s
reporting structure to the County. In the current Contra Costa County ambulance contract, AMR
is an independent organization. The Contra Costa County EMS Agency has an EOA contract
directly with AMR, which is responsible to the EMS Agency for meeting the standards contained
in that contract.
In the Alliance model, the EMS Agency will not have a direct contractual relationship with
AMR. The EMS Agency will have a direct EOA contractual relationship with CCCFPD, which
in turn has a subcontract agreement with AMR.16
This reporting relationship is reflected in the Alliance’s organizational chart. In the Alliance, all
CCCFPD and AMR positions and functions report into CCCFPD’s command structure. The
16 The LEMSA and AMR must have a paramedic service provider agreement, pursuant to 22 CCR 100168 (b) (4).
Section 4—The Business Structure of the Alliance Proposal page 25
manager of the consolidated communications center reports to CCCFPD’s Assistant Support
Chief, the CCCFPD’s new billing contractor reports to CCCFPD’s Administrative Chief, and
AMR’s positions report through the supervisors and general managers to CCCFPD Emergency
Operations Assistant Chief. All Assistant Chief positions report to CCCFPD’s Fire Chief.
Additionally, in the field setting, AMR’s personnel are contractually placed under the authority
of the fire officer in charge.
Another significant change from the current Contra Costa County EMS System in the Alliance
model is the consolidation of AMR dispatching into the CCCFPD communication center. AMR
does experience cost savings from the dispatch merger, but these savings are already reflected in
its lowered cost per Unit Hour charge to the CCCFPD.
Section 5—Operations Review as the Cost Driver page 26
SECTION 5—OPERATIONS REVIEW AS THE COST DRIVER
5.1 DEPLOYMENT LEVELS AND RESULTANT STAFFING
Determining the number of ambulances needed at any given hour across the diverse topography
and populations of a large county is complicated. Current ambulance systems typically deploy a
mix of 24-hour and partial-day units with overlapping schedules. The highest quantity and
location of units is clustered in the hours of the day and in the communities having the greatest
demand for service. In a deployment plan, a baseline number of units is placed across the
geography to provide equitable response time to an emergency, assuming the closest assigned
area unit is available.
The County RFP requested two deployment plans labeled A and B. Plan A is what the current
system operates; the ambulance contract area is divided into four Emergency Response Zones
(ERZs) for calculation of ambulance response times and penalties.
Under Plan B, the ambulance contract area is divided into three ERZs for calculation of
ambulance response times and penalties. In aggregating performance zones from four to three,
Plan B significantly expands areas designated as “urban” instead of “rural.” While Plan B
increases the response time requirement in existing urban zones from 10:00 or 11:45
minutes/seconds to 12:45 minutes/seconds for the highest priority emergencies, the shift of the
rural areas to urban lowers response time requirements from 16:45 minutes/seconds to 12:45
minutes/seconds. Thus, Plan B changes response time requirements in multiple areas.
Both plans are fully described in the County Ambulance RFP in Appendix 3 and will not be fully
repeated here.
The calculation used to summarize a deployment plan is measured in “Unit Hours,” defined as
the total number of two-person ambulance units on duty in each hour block (24 hours per day for
a week or monthly cycle). In the case of Contra Costa County, the County is divided into
response time measurement zones as the major population clusters are separated by large open
space or rural areas.
Once the plan is set into motion, the ambulance contractor and County EMS Agency measure
response times delivered by the deployment plan against a pre-determined policy goal. If the
deployment plan under-delivers response time performance to an area, the deployment plan must
be adjusted. If the response time performance exceeds the goal, then the deployment plan can be
adjusted to save cost.
In the current system, AMR’s 2014 Unit Hour deployment plan delivered, on average, 17,140
Unit Hours per month. As a simple average, this is approximately 23 units per hour Countywide.
After 2:00 am the quantity is lower; it is highest in the afternoon and early evening hours.
Section 5—Operations Review as the Cost Driver page 27
The previous 2004 AMR contract required a minimum of 17,437 Unit Hours per month. In
September 2009, the Board of Supervisors allowed the Unit Hours to be slightly lowered to
control excessive system costs. Averaged per month for calendar year 2014, AMR’s Unit Hour
plan delivered 17,140 Unit Hours. Starting in the fall of 2014, with the closure of Doctors
Medical Center, the Unit Hours were increased because transports that could not be diverted to
less acute clinic care needed to go to hospitals further away, increasing unit out of service times
during incidents.
By January 2015, AMR’s monthly Unit Hour plan had risen to 18,172. In reviewing the 2014
incident demand data, and AMR’s Unit Hour plan by hour per week for March 2015, Citygate
finds that this early 2015 level of Unit Hours is the minimum necessary to meet system response
time goals in each of the three zones.
5.1.1 Alliance Plan A Deployment
The Alliance deployment proposal under Plan A is for 20,748 Unit Hours per month. In its
proposal the Alliance states:
“Core (lowest) deployment will be 18 ambulances, with a peak of 39 ambulances
during the highest demand. As this is a performance-based contract and call
demand is dynamic, we are committed to increasing units to match volume and
contractual requirements. Analyzing the County call volume and hot spots, we
will strategically deploy 12-hour units, with the ability of backfill, if needed.”
Citygate reviewed the proposed Unit Hour plan for one week against what AMR delivered in
March/April of 2015 and found the Alliance slightly increased hours at key parts of the day and
days of the week in the sample weekly ambulance schedule provided by the Alliance.
Citygate Opinion #2 – Plan A Deployment Hours: Citygate’s extensive review
of the incident demand data by zone, hour of the day, and day of the week found
the proposed Alliance deployment plan capable of meeting the current needs of
the requested Plan A.
5.1.2 Alliance Plan B Deployment
The Alliance deployment proposal under Plan B is for 20,020 Unit Hours per month. In its
proposal the Alliance states:
“Core (lowest) deployment will be 18 ambulances, with a peak of 37 ambulances
during the highest demand. As this is a performance-based contract and call
demand is dynamic, we are committed to increasing units to match volume and
contractual requirements. Analyzing the County call volume and hot spots, we
will strategically deploy 12-hour units, with the ability of backfill, if needed.”
Section 5—Operations Review as the Cost Driver page 28
Citygate reviewed the proposed Unit Hour plan for one week against what AMR delivered on
July 3, 2015 and found the Alliance slightly decreased Unit Hours at key parts of the day, and at
key days of the week in the sample weekly ambulance schedule provided by the Alliance.
Citygate Opinion #3 – Plan B Deployment Plan Hours: Citygate’s extensive
review of the incident demand data by zone, hour of the day, and day of the week
found the proposed Alliance Plan B insufficiently documented regarding where
the reductions and resultant reduced response times occur. As such, it is not
possible to state whether the plan will meet the response time objectives for the
cost proposed.
5.2 PLAN A LIKELY RESPONSE TIME COMPLIANCE
Contra Costa County’s current contract with AMR requires a 10-minute response 95% of the
time for calls determined to need a “lights and sirens” response in the City of Richmond, while in
the remainder of West County emergency response times are 11:45 minutes, 90% of the time
(similar to the remainder of the County). The variation in response requirements between these
communities was based on the goal of providing a paramedic within 10 minutes on scene,
established by the County as part of the 2004 ambulance service agreement for areas not served
by fire paramedic first response.
The 2015 Ambulance System RFP required, in Plan A, response time performance across four
geographic zones. The zones are the City of Richmond, the balance of the West County, the
Central County, and the East County. The response time measures are:
High Priority Emergencies – to 90% of the incidents from a low in Richmond of
10 minutes to 11:45 minutes/seconds across the mid-County and to rural East
County areas at 16:45 minutes/seconds.
In documents to the County EMS Agency, and in the Alliance proposal, response times by AMR
from March 1, 2014 through February 28, 2015 in the current five performance zones exceeded
90% in all zones ranging from a low of 91% to a high of 97%, with West County and more
specifically Richmond, typically averaging 94-95%.
Citygate Opinion #4 – Plan A Response Time: Given the historical response
time compliance reported by AMR under the current contract, as well as the
increased Unit Hours in the Alliance Deployment Plan, Citygate is of the opinion
that the Alliance can maintain the desired response time goals of the requested
Deployment Plan A.
Section 5—Operations Review as the Cost Driver page 29
5.3 PLAN B LIKELY RESPONSE TIME COMPLIANCE
The County’s RFP requested an alternative Response Plan B that reduced the response time
zones to three and increased response time for 90% of the incidents ranging from a low of 12:45
minutes/seconds in urban/suburban areas to 20:00 minutes/seconds in rural areas. The goal was
intended to allow a few less ambulances in the system for cost control given the lower severity
incidents that dominate workload across the system.
The three response time zones were West, Central, and East County, with response time
measures focused on population density areas. This plan removed the City of Richmond from
being its own performance area.
Based on a one-week, Countywide ambulance deployment schedule, and the fact that Plan B
merges Richmond into the western compliance zone, it is impossible to validate if the reductions
in Plan B are excessive, or if they will even meet the County’s lessor response time goals. There
is no way to know if one zone is more affected by reductions than another zone.
While the Alliance offered a different Unit Hour deployment exhibit for Option/Plan B, it did not
prefer its implementation. In its RFP response, the Alliance stated:
Our submission under Plan “A” provides shorter response times than provided
for under option B and we believe that is what the public wants and demands. Our
submission addresses the concerns that the LEMSA has for system sustainability,
while simultaneously providing what the public wants in their ambulance delivery
model, which is an efficient, cost-effective emergency response. Our plan is
designed to meet the public’s desire and does not require any subsidy from the
County.
We have also provided a Plan “B” that includes longer response times for
responding ambulances, thus decrease the cost of providing the service through
reduction of unit hours. We would like to highlight that this plan comes at a
significant cost to not only the patient that is required to wait longer for the
arrival of the ambulance but also the County’s first responders from all agencies
as they will be required to remain on scene until the ambulance arrives. This
includes all first responder such as fire, police, sheriff and highway patrol.
Diminished resources due to increased response times for transport providers is
not in the best interest of any of the County’s stakeholders. Our submission of
Plan “A” provides for all the needs identified in the modernization report at no
cost to the County.
In response to further Plan B questions from Citygate Associates, the Alliance stated:
The unit hours proposed under Plan A are higher than our 2014 deployment. The
difference in deployment is driven by several factors. First, the closure of Doctors
Section 5—Operations Review as the Cost Driver page 30
Medical Center earlier this year has resulted in a significant disruption to the
previous deployment model requiring the addition of unit hours to maintain West
County coverage. Next, while the current RFP does ease some response time
requirements, it also provides additional complexity and cost by initiating outlier
penalties and rolling daily compliance requirements. Lastly, both the District and
AMR felt it was necessary to build a deployment plan that would ensure success,
especially given the unknown effects of further first responder reductions in East
Contra Costa County. As such, we built a robust deployment plan that may allow
for future reductions once the system is stable.
Given these numerous system dynamics outlined above, the Alliance felt it would
be imprudent to propose unit hour reductions under Plan B. Unit hour reductions
would result in longer on-scene times for our local fire departments at a time
when their resource capabilities are already stretched thin. In addition, such unit
hour reductions would provide for less flexibility to address the recent system
changes and those new requirements outlined in the RFP.
Citygate also observes that the deployment hours for Plan B are estimated from a software model
used by AMR and, due to the changes in response zones, the deployment hour estimations are
new. No software model estimates are perfect, and different mathematical approaches yield
different results.
Even with historical incident data to model from, the 9-1-1 system demand is a chaotic
mathematical model; it is not simply linear. There are many simultaneous and sometimes
unexpected factors that generate 9-1-1 demand. The emergency system is not like a supermarket
where a large volume of data supports how many checkout registers to have open on busy
afternoons. In that scenario, the volume of use over time is very predictable. In a 9-1-1 system,
an event such as a wildland fire, multi-patient auto accident, a heat wave, or hazardous materials
leak can throw unexpected hourly demands on the system. It is preferable to have some reserve
capacity in a system for such moments. Proposed Plan A has proven historically positive
response times, and the Alliance has offered that plan in a cost-to-revenue structure that is
positively balanced.
Citygate Opinion #5 – Plan B Response Time: The response time compliance
for Plan B cannot be benchmarked to current system compliance given the change
from four to three zones and a relaxation of response time measures. Citygate
would strongly encourage the County not to implement Plan B all at once, if at
all. If chosen for implementation, the Alliance should be allowed to test some
reductions in some areas and then, based on closely-observed metrics, make
adjustments. This measured, incremental approach is consistent with the values of
Continuous Quality Improvement (CQI).
Section 5—Operations Review as the Cost Driver page 31
5.4 STAFFING FOR ADMINISTRATIVE, TRAINING, DISPATCH, AND COMMUNITY EDUCATION
SUPPORT
The ambulance deployment plan drives the total number of paramedics and EMTs needed. Each
of these types of employees needs state- and County-mandated training and quality assurance
clinical oversight. Additionally, any ambulance operation needs support staff to provide
administration, fiscal, supply, and ambulance fleet repair. An all-encompassing term for these
positions and resultant costs would be administration and logistical support. The Alliance
staffing proposal for Plan A requires 114 paramedics and 114 EMTs, totaling 228 personnel.
Deployment Plan B only requires 8 fewer field personnel, so the following logistical support
analysis only uses proposed Plan A, and there is a negligible decrease to oversight position costs
under Plan B.
To provide the needed support for these field positions, AMR’s portion of the Alliance will
provide 47 full- and part-time positions across these categories:
Table 6—Administrative and Logistical Support
Position Title
Number of
Positions
General Manager 1
Clinical Manager 1
Operations Manager 1
Data Analyst 1
Community Outreach 1
Clinical Education Specialist 1
Clinical Education Coordinator 1
Deputy Operations Manager 1
Logistics Supervisor 1
Administrative Supervisor 1
Administrative Assistant 1
Scheduling 2
EMS Operations Supervisor 9
Vehicle Service Technicians 7
Lead Mechanic 1
Vehicle Mechanic 3
Pre-billing Staff 3
Dispatchers 10
Assistant Medical Director 1
Total AMR Positions 47
Section 5—Operations Review as the Cost Driver page 32
In the Alliance proposal for administration, there is only one (CCCFPD) position added and
expensed from ambulance revenues: an EMS Chief Officer to oversee the Alliance operations on
behalf of CCCFPD. This position would presumably be the key liaison between AMR, fire
operations staff, and the County’s EMS Agency.
5.4.1 Community Education
The Ambulance RFP required the contractor to allocate $100,000 under Plan A, and $300,000
under Plan B, annually for community education and improvement activities. The Alliance
proposal allocated $300,000 under Plan A, exceeding the RFP requirement, and $300,000 under
Plan B, as required by the RFP.
This amount is shown in the proposed Alliance budget in two locations: (1) personnel costs,
because people provide community training; and (2) a separate line item of $50,000 for outreach
supplies and publications. Personnel include a dedicated Community Education Coordinator that
will be dedicated to providing support to the Community Education programs. In addition,
members of the management team, Paramedics, and EMTs will be used to staff high volume
community outreach programs, and those wages also are included in the Alliance budget.
5.4.2 Quality Control and Overall Logistical Positions Needs and
Appropriateness
Quality emergency medical care and transport services are dependent upon an effective
Continuous Quality Improvement (CQI) program that is tied to a living training plan and
calendar. The CQI program focuses on both the individual care provider (EMT or paramedic) as
well as on the system as a whole. It is both internal to the Department and external to the EMS
community at large. Trend analysis through consistent data review, as well as individual run
review (patient care report audits), are used to identify training needs. The four positions
identified on the Alliance’s organization chart (Community Outreach, Continuing Education
Specialist, Continuing Education Coordinator, and Data Analyst) will provide the fundamentals
for an effective CQI and training program.
Citygate Opinion #6 – Alliance Logistical Staffing Expense: Given the staffing
provided by AMR, and a verbal confirmation that AMR support services staffing
will remain the same as in the current contract, the CQI, training, and community
education staff appears appropriate for the size of the projected AMR operation.
CCCFPD will continue to separately manage the training and CQI for its
firefighter/paramedics, as it does currently.
Section 6—Alliance Economic Proposal page 33
SECTION 6—ALLIANCE ECONOMIC PROPOSAL
6.1 TRANSPORT VOLUME OVER TIME
An ambulance system’s revenues are fundamentally driven by total transports. Citygate’s review
of County EMS-provided raw data found that, in the calendar year of 2014, there were a total of
79,358 AMR initial responses in all zones in the County. This was an increase of about 5,000
response incidents over 2013.
These incidents resulted in a total of 63,488 transports to the region’s hospitals. Over four years
the number of transports has grown steadily:
Table 7—Number of Transports in Contra Costa County
Year Transports
2011 57,590
2012 60,751
2013 60,804
2014 63,488
In Contract Year 1 (2016), the Alliance proposal has estimated total transports to be 63,500, or a
growth rate of essentially zero. Citygate sees this flat-line projection as conservative and
reasonable given the slight increase in overall incident demand from 2012 to 2014. Even given
the closure of Doctors Medical Center, the Alliance believes that transport demand under the
health care reform impacts will be flat for several years. In response to question s from Citygate
about the demand for service assumptions, the Alliance stated:
In reviewing transport history, 2014 had considerably higher transport growth
(4.4%) than the previous year growth (1.8%). The historic growth rates included
years with both positive as well as negative transport growth rates. We identified
2014 as a higher than average year as the Affordable Care Act (ACA) was
implemented and more patients had access to insurance and therefore utilized
ambulance service. Based upon this information, we took a conservative
approach to forecasting transport growth to ensure system stability and kept 2015
and 2016 projections flat.
Citygate Opinion #7 – Number of Transports Volume: Given the conservative
projection of total transports for at least Contract Year 1 (2016), we find that the
Alliance proposal had not inflated transport projections upon which to base
revenues. If anything, the projections could end up being slightly low, thus
providing a possible economic cushion by 2017.
Section 6—Alliance Economic Proposal page 34
6.2 BILLING BY PAYER TYPE
Table 2 on page 9 of the RFP provided the current breakdown of pa yer types for AMR in Contra
Costa County:
Table 8—Payer Types from AMR in Contra Costa County
Payer Type
RFP Percent of
Payer Type 2014 Actual
Alliance
Proposal
Medicare and Medicare HMO 42.9% 43.2% 42.9%
Medi-Cal and Medi-Cal HMO 26.3% 26.8% 26.3%
Insurance 14.4% 14.5% 14.4%
Private Pay & Other 16.4% 15.5% 16.4%
Total 100.0% 100.0% 100.0%
In its revenue projections for the bid response, the Alliance assumed that the payer mix would
remain the same for all three years of the projection period (2016-2018). In response to a
question regarding why it assumed a constant payer-type mix, the Alliance stated:
It is AMR’s practice in developing cost projections to keep payer mix steady,
unless there are known factors that would result in a material change. At this
point, the 2015 payer mix appears stable. The majority of the changes associated
with the ACA occurred in 2014. With the future of the ACA uncertain at this time,
we assumed the status quo was the most prudent approach to take.
Consequently, while the payer mix has clearly changed over time, Contra Costa County already
has a much higher proportion of Medicare and Medi-Cal customers, a much lower proportion of
Commercial Insurance than AMR’s contracts in other regions, and supports AMR’s response
that much of the changes associated with ACA have already been reflected in the 2014 payer
mix.
As discussed in Section 3, the trend in recent years has been a shift from higher-paying
commercial insurance plans to lower-paying governmental plans. From the most recent 10-K for
Envision Healthcare Holdings, Inc., the parent holding company for AMR, the payer breakdown
for AMR in total (including all regions, not just Contra Costa County) was as follows:
Section 6—Alliance Economic Proposal page 35
Table 9—AMR National Payer Experience
Payer 2012 2013 2014
Medicare 28.6% 32.1% 30.4%
Medicaid (Medi-Cal) 6.3% 7.4% 8.8%
Insurance 41.4% 39.2% 36.8%
Self-pay & Other 23.7% 21.3% 24.0%
Total 100.0% 100.0% 100.0%
6.3 ALLIANCE REVENUE ESTIMATE MODEL
Regarding the revenue projection for Total (Gross) Charges, the Alliance appropriately used the
stipulated ambulance rates for rate Contract Year 1, as required in Appendix 10 of the RFP, as
well as the annual 3% rate increase specified on page 55 of the County’s Ambulance RFP.
Table 10—County RFP Ambulance Rates
Charge Type Charge Amount
Emergency Base Rate $2,100.00
Mileage Rate (per loaded mile) $50.00
Oxygen $175.00
Treat and Refused Transport $450.00
The Alliance assumed 6 miles per transport, and oxygen usage on 60% of transports, resulting in
an Average Patient Charge (APC) of approximately $2,505. The Alliance took a conservative
position related to “Treat and Refused Transport” charges. Given the unfavorable political
considerations, and historically low net collection experience for Treat and Refused Transport
fees, at this time AMR does not intend to pursue such fees even though the RFP and proposed
contract would permit them to do so.
In terms of expected net collections by payer type, the Alliance again took a conservative
approach to its revenue projections compared to AMR’s experience in 2014:
Section 6—Alliance Economic Proposal page 36
Table 11—AMR Contra Costa County Net Cash Collections by Type
Payer 2014 Actual 2016 Projected 2017 Projected 2018 Projected
Medicare 22.7% 18.8% 18.6% 18.4%
Medi-Cal 6.5% 5.5% 5.4% 5.2%
Insurance 92.0% 91.2% 91.2% 91.2%
Self-pay & Other 13.1% 12.1% 11.9% 11.7%
Average 27.1% 24.6% 24.5% 24.3%
This lower projected collection percentage is prudent given the recent trend in high deductible
health plans, as well as the stipulated rate increases specified in the RFP, which will increase
Total (Gross) Charges, but will not necessarily increase the amount collected, especially for
Medicare and Medi-Cal customers.
Citygate Opinion #8 – Net Collections: The Alliance’s approach in projecting
Average Patient Charges (APC) and expected net collections by payer type is both
conservative and prudent. The question of payer mix is one of the most difficult
aspects of this projection given the uncertainties surrounding health care reform.
AMR believes that much of the change resulting from the ACA has already been
reflected in the 2014 payer mix data and that projecting the status quo is the most
prudent course of action at this time. While this approach is reasonable, we
believe that continued deterioration of net collections due to changes in payer mix
and increases in the number of high deductible health plans remains one of the
largest risks going forward, and one that will need to be evaluated in light of other
risks and opportunities in the Alliance projections (see Section 6.5).
6.4 GEMT ABSENCE, NEAR-TERM FORECAST, AND THE WIDE VARIANCE OF POSSIBLE
REVENUES
6.4.1 Description of GEMT Program
The Ground Emergency Medical Transportation (GEMT) supplemental reimbursement program
is a supplemental program designed to compensate governmental providers of GEMT services
for up to 50% of the uncompensated cost of providing GEMT services to Medi-Cal Fee for
Service beneficiaries. The GEMT program uses Certified Public Expenditures (CPE) for
payment of the federal share of the supplemental reimbursement. The GEMT statute was enacted
as California Welfare and Institution Code, Section 14105.94 on October 2, 2011, and approved
in a State Plan Amendment by the Centers for Medicare and Medicaid Services (CMS) on
September 4, 2013. The program is retroactive to January 30, 2010.
Section 6—Alliance Economic Proposal page 37
To qualify for GEMT program reimbursement, an EMS provider must meet the following
criteria: (1) provide GEMT services to Medi-Cal beneficiaries; (2) be enrolled as a Medi-Cal
provider for the period being claimed; and (3) be owned or operated by the state, a city, a county,
a city and county, a fire protection district, a health care district, a community services district, a
special district, or a federal Indian tribe. Eligible providers must also enter into a Provider
Participation contract with the California Department of Health Care Services (DHCS) and agree
to reimburse DHCS and the fiscal intermediary for their administrative expenses.
To receive supplemental reimbursement pursuant to the GEMT program, service providers
submit an annual cost report to DHCS. The payment is based on claiming federal financial
participation in CPEs that have been incurred by the public GEMT provider during the preceding
fiscal year. Expenses that may be submitted in the cost report include direct and indirect costs,
such as capital assets, including depreciation of buildings and equipment; salaries and benefits
for line and management staff; and administrative and general expenses, such as operations and
maintenance, insurance, and materials and supplies.
In the GEMT program, the participating provider is subject to retrospective audit after
reimbursement is provided, creating a potential liability for the participating agency.
Representatives of some fire departments that have received audits of their GEMT programs
described the audit as being very thorough and detailed, more “like preparing to go to court.”
This potential liability can be minimized by maintaining complete and original records justifying
all claims made pursuant to the GEMT program.
6.4.2 CCCFPD’s Intent to Seek GEMT Reimbursement
The CCCFPD has stated that it intends to submit for GEMT reimbursement in the future, but has
not included GEMT revenue in its budget. Citygate agrees with this decision, because there are
numerous variables that make it difficult to quantify current and future benefits of the GEMT
reimbursement for the Alliance. These variables include: (1) whether the GEMT program will
expand to cover Medi-Cal Managed Care (HMO) beneficiaries; (2) characteristics of CCCFPD’s
contracted billing services agreement; and (3) DHCS’s determination of CCCFPD’s allowable
expenses.
6.4.3 The GEMT Program, Medi-Cal Fee for Service, and Medi-Cal Managed Care
The GEMT supplemental reimbursement program, as currently defined in statute, provides
supplemental reimbursement for the federal share of providing GEMT services to Medi-Cal Fee
for Service beneficiaries. The GEMT program does not provide supplemental reimbursement for
GEMT services provided to Medi-Cal Managed Care beneficiaries. During the past two years,
there have been two attempts at legislation to expand GEMT supplemental reimbursement to
include Medi-Cal Managed Care beneficiaries, but those attempts have not been successful. It is
likely these attempts will continue in the next legislative year.
Section 6—Alliance Economic Proposal page 38
In Contra Costa County, approximately 26% of ambulance transports are Medi-Cal beneficiaries.
Also in Contra Costa County, only 20% of Medi-Cal beneficiaries are in Fee for Service
programs. The majority of Medi-Cal beneficiaries (80%) are in Medi-Cal Managed Care Plans.
Thus, the CCCFPD would be eligible to claim cost-based GEMT supplemental reimbursement
on only approximately 5.2% of all ambulance transports.
6.4.4 Characteristics of Contracted Billing Service Agreement
Because CCCFPD has not entered into an agreement with a contracted billing service, it is not
possible to determine whether DHCS would determine whether this expense would qualify for
GEMT reimbursement. DHCS, in Policy and Procedure Letter 14 -001, issued on December 18,
2014, clarified allowable reimbursement of GEMT contracted billing and accounting service
costs. DHCS stated that expenditures for contracted billing services would be allowable for
supplemental GEMT reimbursement only if those billing services are paid fees, based on a flat
rate per transport or for the time of work rather than paid fees based on the amount collected,
amount billed, or historical costs.
6.4.5 DHCS’s Determination of the CCCFPD’s Allowable GEMT Expenses
The GEMT statute requires, to be eligible for GEMT supplemental reimbursement, that the
public provider “own and operate” the GEMT service. The GEMT statute also restricts
reimbursable costs to those costs incurred by the public provider. On September 30, 2013, DHCS
issued Policy and Procedure Letter 13-001, which clarified the meaning of “owns and operates”
by explaining the intent of “costs incurred by the public provider” in the GEMT statute. DHCS
stated:
Eligible Contracting Arrangements - satisfying "owns or operates"
Eligible public providers that contract for the provision of GEMT services to a
private provider, and the public provider directly bills the Department of Health
Care Services (DHCS) for GEMT services, satisfies the "owns or operates"
requirement in Welfare and Institutions Code section 14105.94, subdivision (b),
paragraph (3), and the public provider is eligible to participate in the GEMT
program. However, the public provider may claim supplement reimbursement
only for the costs the public provider incurs, not the contracted provider's costs.
Therefore, costs eligible for reimbursement under this program would be the
public provider's contract costs attributed only to providing GEMT services to
Medi-Cal beneficiaries, billing costs, and the public provider's overhead costs
allocated to the Medi-Cal GEMT services program, as allowed by State Plan
Amendment (SPA) 09-024. The public provider may not claim supplemental
reimbursement for any other cost incurred by the contracted private provider.
Eligible public providers that contract for the provision of GEMT services to a
private provider, and the public provider also contracts out its billing activities to
Section 6—Alliance Economic Proposal page 39
a billing agent that bills DHCS on the public provider's behalf, satisfies the "owns
or operates" requirement in Welfare and Institutions Code section 14105.94,
subdivision (b), paragraph (3), and the public provider is eligible to participate in
the GEMT program. However, the public provider may claim supplemental
reimbursement only for its contract costs. Therefore, costs eligible for
reimbursement under this program would be the public provider's contract costs
attributed only to providing GEMT services to Medi-Cal beneficiaries, and the
public provider's overhead costs (including the public provider's billing agent
costs) allocated to the Medi-Cal GEMT services program, as allowed by SPA 09-
024. The public provider may not claim supplemental reimbursement for any
other cost incurred by the contracted private provider and the billing agent.
Non-Eligible Contracting Arrangements
If a public provider contracts for the provision of GEMT services and its billing
activities to a private provider, and such private provider or its billing agent
directly bills DHCS, then the public provider is not eligible to participate in the
GEMT program because it does not satisfy the "owns or operates" requirement in
Welfare and Institutions Code section 14105.94, subdivision (b), paragraph (3).
Under this scenario, it is the private provider who "owns or operates" as the
provider of GEMT services rather than the public provider. A public provider that
contracts for the provision of GEMT services and its billing activities, and allows
the contracted private provider or the private provider's billing agent to use the
public provider's National Provider Identification number for billing to DHCS,
does not satisfy the "owns or operates" requirement in Welfare and Institutions
Code section 14105.94, subdivision (b), paragraph (3), and the public provider is
not eligible to participate in the GEMT program.
If CCCFPD applies to DHCS for GEMT reimbursement, DHCS will evaluate the business, legal,
and organizational structure between CCCFPD and AMR. DHCS will also assess CCCFPD’s
relationship with its separate contracted billing agency. DHCS will then determine which of
CCCFPD’s costs, incurred directly or through contract, are eligible for reimbursement pursuant
to the GEMT program guidelines.
Citygate Opinion #9 – Fee for Service GEMT Availability: Citygate will not
attempt to predict which of CCCFPD’s costs DHCS will or will not allow for
GEMT reimbursement, as the scope of the Fire Department / Ambulance
Company / Billing Contractor hybrid has not been tried yet in California, to our
knowledge, since the inception of the GEMT program. Therefore, given that the
CCCFPD has just obtained DHCS’s national provider number and must still apply
to DHCS, the Alliance approach to not assume any GEMT reimbursement in its
fiscal pro-forma was the correct, conservative approach.
Section 6—Alliance Economic Proposal page 40
6.4.6 Potential Expansion of the GEMT Program to Medi-Cal Managed Care
It is difficult to accurately predict the future of GEMT program reimbursement. GEMT
advocates will likely continue to attempt to expand the GEMT program to include supplemental
reimbursement for GEMT services provided to Medi-Cal Managed Care beneficiaries. Because
approximately 80% to 85% of Medi-Cal beneficiaries statewide are in Medi-Cal Managed Care
plans, expansion of GEMT services to these beneficiaries would significantly increase the cost-
based reimbursement for eligible GEMT providers.
Should the GEMT program reimbursement be approved in law for Medi-Cal Managed Care
beneficiaries, the cost-based reimbursement would be facilitated through Intergovernmental
Transfers (IGTs) rather than certified public expenditures. IGTs are a mechanism used to secure
federal funds for use by local or state government. IGTs do not require the use of a cost report. In
the federal Medicaid program, the quantities of funds that can be transferred through IGTs are
capped at the state and local level. The difference between the local cap and the amount already
received through other IGTs is called “headroom.” Each county must assess whether it has
adequate headroom within its local Medicaid IGT-based cap. If it does not have adequate
headroom under the local cap, GEMT IGT claims will result in IGT revenue being reallocated
from other existing in-county IGT programs, or denied due to the importance of other programs
or the headroom cap. There is an approved pilot program in one other county that has open
headroom, but it is unknown if IGT permission for EMS will be allowed statewide.
Citygate Opinion #10 – HMO GEMT: There is no near-term assurance in
Contra Costa County that the IGT program for Medi-Cal Managed Care
beneficiaries will become available. As such, the Alliance decision to not depend
on GEMT funds for Medi-Cal Managed Care is correct.
6.5 PLAN A AND B REVENUE AND COST PROJECTION ANALYSIS
As the incumbent operator for Emergency Ambulance Service in Contra Costa County, AMR
has unique insight into the factors that drive revenues and costs, and the recent trends in those
factors. AMR has managed to continue to meet service obligations while maintaining
profitability through very adverse trends in payer mix and net collection rates in recent years.
The County Ambulance RFP stipulated ambulance rate for Contract Year 1 provides for a net
increase of approximately 7.4% over existing rates in Contra Costa County. That increase
enabled the Alliance to conservatively estimate a reduction in net collections and maintain
profitability.
Clearly, one of the largest risks facing the Alliance and Contra Costa County is the uncertainty
surrounding health care reform and the potential continuing shift of payer mix and deteriorating
net collections below the already conservative Alliance revenue projection. While the Alliance
Section 6—Alliance Economic Proposal page 41
projected declines in net collections from 27.1% to 24.6%, such declines could actually exceed
that forecast if recent trends of rising deductibles and rejected claims continue.
In considering the overall strength and weakness of the revenue projection, there are several
potential opportunities that could offset the risks associated with payer mix and net collections.
As described in Section 6.1 previously, the Alliance took a conservative approach to projecting
transport volume over time. If transport volumes exceed the levels in the Alliance projection,
there should be a positive impact to profit margins. This is because revenues should generally
grow in proportion to transport volume increases, while costs will not likely grow as quickly due
to certain fixed costs, and the improved economies of scale.
Similarly, the Alliance took the conservative approach of not projecting any incremental
revenues associated with two potential new sources of revenue. The RFP would permit the
contractor to charge for “Treat and Refused Transport” services, which the Alliance says it does
not plan to do, at least initially. In addition, as described in Section 6.4 previously, the potential
for supplemental reimbursement under the GEMT program could be a source of incremental
revenue. While both “Treat and Refused Transport” and GEMT revenues could have some
incremental billing costs associated with them, their net collections would still contribute to the
bottom line.
Cost projections are driven by the deployment plan, and a detailed analysis of the deployment
plan, staffing levels, and operations is contained in Section 5 of this report. The resulting cost
per Unit Hour provided by the Alliance for the first three years of the contract is as follows,
including a projection of 3% increases each year to cover increases in the collective bargaining
agreement, merit increases, and inflation:
Table 12—Plan A and B Cost per Unit Hour
Plan Year 1 (2016) Year 2 (2017) Year 3 (2018)
Plan A
Cost per Unit Hour $148.89 $153.36 $157.96
Plan B
Cost per Unit Hour $152.52 $157.09 $161.80
Section 6—Alliance Economic Proposal page 42
Combining the revenue and cost projections by year with the projected transport volumes yields
the following results:
Table 13—Deployment Plan A
Description Year 1 (2016) Year 2 (2017) Year 3 (2018)
Transport Volume 63,500 64,450 65,418
Net Revenue / Transport $617.08 $631.62 $646.51
Expenses / Transport $586.00 $594.69 $603.46
Gross Profit / Transport $31.08 $36.94 $43.05
Gross Profit Percentage 5.0% 5.8% 6.7%
The potential for supplemental reimbursement under the GEMT program is the largest
opportunity, and growth in transport volumes above currently-projected levels could also provide
a cushion. The strategies in Section 7 regarding risk control will further help the County manage
risk over the life of the contract.
Table 14—Deployment Plan B
Description Year 1 (2016) Year 2 (2017) Year 3 (2018)
Transport Volume 63,500 64,450 65,418
Net Revenue / Transport $617.08 $631.62 $646.51
Expenses / Transport $578.60 $587.18 $595.84
Gross Profit / Transport $38.48 $44.45 $50.67
Gross Profit Percentage 6.2% 7.0% 7.8%
The only major cost difference between the two plans is that in Plan B there are eight less field
employees and a small reduction in logistical expenses, such as insurance. There are no
meaningful administrative and logistical personnel expense deductions.
Plan B contains a new and significant required annual payment of $750,000 to the County EMS
Agency for system administration uses. This charge is, in theory, to be funded from operational
savings due to longer response times. The cost shifts between Plans A and B can be summarized
as:
Section 6—Alliance Economic Proposal page 43
Table 15—Cost Differences Between Plans A and B
Plan Difference Amount
Plan B Cost Reductions ~ ($1,220,000)
Plan B EMS Agency Fee ~ $750,000
Plan B Net Reductions ~ ($470,000)
Given the comparison of Plan A and Plan B provided by the Alliance, and the fact that the cost
savings for Plan B are only $470,000 due to the charge for County EMS administration, it is
obvious that Plan A provides better response times and compliance at a lower Unit Hour cost. In
both Alliance Plan A and Plan B proposals, the total system costs per Unit Hour are:
Table 16—Total System Costs per Unit Hour for Plans A and B
Plan Unit Hour Cost
Plan A $148.89
Plan B $152.52
Thus, the reduced coverage in Plan B actually costs more per Unit Hour than Plan A due to the
EMS Agency fee mandated in Plan B.
Plan A also maintains a response time compliance zone in Richmond, which Citygate believes is
positive due to the unique workload demands in that city. It does not make sense to Citygate to
include a very busy area such as Richmond with adjoining areas that are far less busy. The result
could well be that the high call volume areas either suffer slow response times as units are
outside the city, or the low call volume areas suffer as their units are inside the city. It would be
preferable to require the contractor to balance Richmond for compliance separate from the rest of
the West County.
6.5.1 Total Expense to Revenue Performance for Plan A and B
It must be remembered that the Alliance projected declines in net collections from 27.1% to
24.6%. Net collection declines could actually exceed that forecast if recent trends of rising
deductibles and rejected payment claims continue. What also makes the projected 24.6% net
revenue disturbing is that, in the decades preceding the last recession and federal health care
reform, a “low” ambulance collection rate was 66%. Some communities collected more;
however, no communities collected more than 90%. Because private providers may not be able
to run a regional ambulance system for a profit of only 3-5%, the EMS industry is openly
discussing the question, “At what net collection rate will a public subsidy be required?”
Section 6—Alliance Economic Proposal page 44
In summary, for total revenue to expense, the two plans project:
Table 17—Plan A and B Economics
PLAN A PLAN B
Description Year 1 (2016) Year 2 (2017) Year 3 (2018) Year 1 (2016) Year 2 (2017) Year 3 (2018)
Revenue $39,184,619 $40,707,971 $42,293,630 $39,184,619 $40,707,971 $42,293,630
Expenses $37,211,143 $38,327,477 $39,477,301 $36,741,220 $37,843,457 $38,978,760
Gain $1,973,476 $2,380,494 $2,816,329 $2,443,399 $2,864,514 $3,314,870
Based on the above analysis, and our experience, Citygate offers the following:
Citygate Opinion #11 – Plan A Economics: The economic proposal for Plan A
submitted by the Alliance is based on reasonable and generally conservative
assumptions. Projected costs are less than conservatively estimated revenues.
While there is no way to completely address the risks that are faced in the
industry regarding the impact of health care reform, and trends of declining
collections from insurance carriers, Plan A has a revenue safety cushion without
the receipt of any GEMT supplemental revenues.
Citygate Opinion #12 – Plan B Economics: Given that Plan B provides a system
with longer response times for a few less Unit Hours and small revenue cushion
for the uncertainties in ambulance revenue trends, Citygate does not see a reason
to implement a significant system change to, for the most part, simply generate
new revenues to the County’s EMS Agency. Citygate would rather see the
Alliance build a larger revenue-to-cost projection to build its reserves first.
6.6 ESTIMATE OF AMR PROFIT AND REASONABLENESS
During our meeting with representatives from the Alliance, Citygate confirmed that the provision
for profit for AMR under the contract with CCCFPD is contained in the Expense Budgets in
Appendix 16 of the bid response under the line item titled “AMR Contract Administration Fees.”
Citygate compared the Administration Fee to total AMR expenses before the Fee and then total
expenses, including CCCFPD expenses, which are presented in the table below:
Section 6—Alliance Economic Proposal page 45
Table 18—Deployment Plan A Expenses
Description Year 1 (2016) Year 2 (2017) Year 3 (2018)
AMR Contract Admin Fee $3,375,263 $3,476,521 $3,580,517
Total AMR Expenses Fee $33,752,634 $34,765,213 $35,808,170
Fee as a % of AMR Expenses 10.0% 10.0% 10.0%
Total Alliance Expenses Fee $37,211,143 $38,327,477 $39,477,301
Fee as a % of Total Expense 9.1% 9.1% 9.1%
Based on discussions with representatives from AMR, this profit percentage effectively
represents Earnings Before Interest and Taxes (EBIT), and actually also covers a small am ount
of Depreciation and Amortization for certain AMR non-field assets which were not included in
the expense budgets.
Table 19—Deployment Plan B Expenses
Description Year 1 (2016) Year 2 (2017) Year 3 (2018)
AMR Contract Admin Fee $3,259,280 $3,357,059 $3,457,771
Total AMR Expenses Fee $32,592,803 $33,570,588 $34,577,705
Fee as a % of AMR Expenses 10.0% 10.0% 10.0%
Total Alliance Expenses Fee $36,741,220 $37,843,457 $38,978,760
Fee as a % of Total Expense 8.9% 8.9% 8.9%
Citygate Opinion #13 – AMR Profit: The AMR profit component is segregated
as a separate line item in the Alliance Expense Budget, providing a level of
transparency. Also, AMR allocated a reasonable 10.0% of total expenses to cover
non-field Depreciation and Amortization, Interest, Taxes, and leave a reasonable
level of Net Profit for AMR.
6.7 AMR FISCAL HEALTH/CORPORATE REVIEW
AMR is the nation’s largest medical transportation company. AMR is a wholly owned subsidiary
of Envision Healthcare Holdings, Inc. (ticker symbol EVHC). In addition to AMR, EVHC also
owns a subsidiary called EmCare. EmCare is a leading provider of integrated facility-based
physician services, including emergency, anesthesiology, hospitalist/inpatient care, radiology,
tele-radiology, and surgery. EmCare also offers physician -led care management solutions outside
the hospital.
Section 6—Alliance Economic Proposal page 46
The following are some facts about AMR obtained from its company website:
Number of employees: 18,000+
Number of vehicles: 4,200
Number of states served: 40, plus the District of Columbia
Number of communities served: 2,100
Number of patient transports in 2014: 3 million +
Citygate reviewed the 10-K reports for EVHC as submitted with the Alliance proposal and as
filed with the U.S. Securities and Exchange Commission for the years ended December 31, 2012,
2013, and 2014. Selected liquidity and profitability ratios for EVHC are shown on the following
table:
Table 20—Envision Healthcare Holdings, Inc. (EVHC) Fiscal Health Measures
Item 2012 2013 2014
Days Sales Outstanding 69.1 78.4 78.9
Net revenue $3,300,121 $3,728,312 $4,397,644
Trade accounts receivable, net $625,144 $801,146 $950,115
Current Ratio 1.57 2.40 2.36
Current assets $753,259 $1,082,283 $1,363,239
Current liabilities $478,694 $451,329 $576,868
Quick Ratio 1.48 2.29 2.26
Cash and cash equivalents $57,832 $204,712 $318,895
Securities (insurance collateral) $24,481 $29,619 $32,828
Trade accounts receivable, net $625,144 $801,146 $950,115
Current liabilities $478,694 $451,329 $576,868
Debt Ratio 0.87 0.63 0.62
Total liabilities $3,492,146 $2,690,264 $2,934,712
Total assets $4,036,833 $4,300,017 $4,703,753
Long-Term Debt-to-Equity Ratio 4.86 1.18 1.15
Long-term debt $2,647,098 $1,895,381 $2,025,877
Total equity $544,687 $1,609,753 $1,769,041
Interest Coverage Ratio 1.41 1.48 3.52
Income from operations $256,742 $276,755 $388,486
Interest expense $182,607 $186,701 $110,505
Section 6—Alliance Economic Proposal page 47
Item 2012 2013 2014
Operating Margin 7.8% 7.4% 8.8%
Income from operations $256,742 $276,755 $388,486
Net revenue $3,300,121 $3,728,312 $4,397,644
Net Profit Margin 1.2% 0.3% 2.7%
Net income $41,185 $11,495 $119,866
Net revenue $3,300,121 $3,728,312 $4,397,644
Return on Equity 5.6% 1.1% 7.1%
Net income $41,185 $11,495 $119,866
Average equity $729,089 $1,077,220 $1,689,397
Return on Assets 1.0% 0.3% 2.7%
Net income $41,185 $11,495 $119,866
Average assets $4,036,833 $4,168,425 $4,501,885
Citygate Opinion #14 – AMR Fiscal Strength: Citygate notes that AMR
national liquidity ratios stayed very consistent between 2013 and 2014, and the
profitability ratios improved from 2013 to 2014. Given the diversity of ambulance
costs and declining payer type payments across the country, for AMR to have
stable liquidity and profit ratios showing slight improvement, it suggests AMR is
weathering the ambulance industry revenue decline as well as, if not better than,
the other large national providers.
6.8 CCCFPD FISCAL HEALTH / CORPORATE REVIEW
6.8.1 CCCFPD Financial Capacity
Citygate conducted a preliminary review of CCCFPD’s last three financial statements. The
CCCFPD provides fire and emergency medical service activities to nine cities and certain
unincorporated areas in the County. The CCCFPD is principally financed by property taxes and
services, such as fire prevention plan review and inspections.
Citygate’s initial review showed that the finances of the CCCFPD have been improving over the
past three years, with steady increases in the unassigned fund balance as well as cash. From FY
2012/13 to FY 2013/14, the cash balance increased by approximately $4.0 million. This is due to
both an increase in property tax revenue and decrease in expenses.
Section 6—Alliance Economic Proposal page 48
The following tables 21 and 22 provide a snapshot of the CCCFPD balance sheet over the past
three years as reported in the County’s Comprehensive Annual Financial Reports (CAFR) for
Fiscal Years 11-12, 12-13, and 13-14:
Table 21—CCCFPD “Balance Sheet” by Fiscal Year
Item FY 2011-12 FY 2012-13 FY 2013-14
Assets
Cash and investments $23,851,000 $27,519,000 $31,508,000
Accounts receivable and accrued revenue
(net) $940,000 $689,000 $1,135,000
Inventories $551,000 $760,000 $666,000
Due from other funds $59,000 $51,000 $48,000
Notes receivable
Prepaid items, deposits land held for resale $1,355,000 $1,127,000 $1,614,000
Restricted cash and investments
Total Assets $26,756,000 $30,146,000 $34,971,000
Liabilities, Deferred Inflows of Resources, and Fund Balances
Liabilities:
Accounts payable and accrued liabilities $4,593,000 $4,335,000 $4,294,000
Due to other funds $157,000 $106,000 $118,000
Welfare program advances
Unearned/deferred revenue $41,000 $51,000
Total Liabilities $4,791,000 $4,492,000 $4,412,000
Deferred Inflows of Resources:
Unavailable Revenue $59
Fund Balances:
Nonspendable $1,906,000 $1,887,000 $1,614,000
Restricted $12,393,000 $10,092,000 $10,623,000
Committed
Assigned $7,666,000 $13,675,000 $18,263,000
Unassigned
Total fund balances $21,965,000 $25,654,000 $30,500,000
Total Liabilities, Deferred Inflows of
Resources, and Fund Balances $26,756,000 $30,146,000 $34,971,000
Over the past three years, tax revenue has grown by approximately $8.0 million, or a 10%
increase. This reflects a significant growth in income and is an indication of the recovery of the
Section 6—Alliance Economic Proposal page 49
property tax revenue post-recession. It does not show how much of the tax base recovery is
related to increased assessed value and how much is related to new property tax base. This can
be an important distinction because new property tax base may mean housing growth that will
translate into service level requirements over time.
Table 22—CCCFPD Statement of Revenues, Expenditures, and Change in Fund Balance
Item FY 2011-12 FY 2012-13 FY 2013-14
Revenue
Taxes $77,270,000 $80,202,000 $85,274,000
Licenses, permits and franchise fees
Fines, forfeitures
Use of money and property $31,000 $16,000 $2,000
Intergovernmental $7,122,000 $8,226,000 $3,342,000
Charges for services $5,372,000 $6,380,000 $6,119,000
Other revenue $226,000 $1,541,000 $123,000
Total Revenue $90,021,000 $96,365,000 $94,860,000
Expenditures
Current
Public safety $93,978,000 $92,700,000 $90,033,000
Total Expenditures $93,978,000 $92,700,000 $90,033,000
Excess of revenues over expenditures ($3,957,000) $3,665,000 $4,827,000
Other Financing Sources
Transfers in $164,000 $24,000 $19,000
Transfers out
Capital lease financing
Total Other Financing Sources $164,000 $24,000 $19,000
Net Changes in Fund Balance ($3,793,000) $3,689,000 $4,846,000
Fund Balance at Beginning of Year $25,758,000 $21,965,000 $25,654,000
Fund Balance at End of Year $21,965,000 $25,654,000 $30,500,000
Although the CCCFPD appears to be making significant strides on both the revenue and
expenditure fronts, there are also areas with will present significant long-term financial
challenges. These include retirement contribution rates and other post-employment benefits
(OPEB) primarily due to retirement health care cost underfunding and increasing health care
costs.
Section 6—Alliance Economic Proposal page 50
Citygate Opinion #15 – Fire District Economic Health: Given CCCFPD’s
current reserves, and inclusion in the overall County tax distribution system, the
CCCFPD has the funds to begin monthly payments to AMR for several months
and fund other start-up costs until new ambulance billing revenue catches up to
expenditures. At that point, the CCCFPD must first repay its cash advances and
then build the recommended ambulance enterprise reserves before it can true up
revenue to ambulance rates.
Section 7—Fiscal Risk Control Strategies page 51
SECTION 7—FISCAL RISK CONTROL STRATEGIES
7.1 RISK CONTROL STRATEGY #1: ESTABLISH ALLIANCE CONTRACTS AS AN ENTERPRISE
OPERATION
The Contra Costa County Fire Protection District (CCCFPD) is accounted for as a special
revenue fund. Property taxes are the primary income source for CCCFPD’s fire and emergency
medical service activities. CCCFPD serves nine cities and certain unincorporated areas in the
County. CCCFPD’s financial activities are reported as a major fund in the County’s
comprehensive annual financial statement.
It is important to consider how CCCFPD will account for and manage the financial arrangement
with AMR. It is beneficial to distinguish that CCCFPD’s property taxes are the core revenue
source for the fire and emergency medical services. Ideally, ambulance service expenses would
be fully funded by transport fees. When governments engage in business-type activities where
their intent is to either fully or partially recover the cost of the service, an enterprise accounting
and management structure is a suitable approach.
General governmental funds often provide a focus that is proper for the flow of resources, while
an enterprise fund provides a structure closely resembling a business orientation in which cost
recovery is the focus. Ambulance services are financed and operated in a manner similar to a
private business in which the intent of the governing body is to recover the cost (including
depreciation) of goods and services to beneficiaries on a continuing basis, primarily through user
fees.
Using the enterprise approach provides financial and management information that can be
valuable from a public policy perspective:
Measuring and monitoring business activity performance
Analyzing the impact of financial and operational decisions
Determining the full cost of providing the service
Identifying any cost subsidy from the CCCFPD operating fund for providing the
service
Documenting short- and long-term financial inter-fund advances.
In practice, these types of governmental business funds are routinely used to account for
activities where costs are fully recovered through user fees and charges (such as water, trash
collection, and wastewater operations). They are also used for activities in which the primary
source of financing comes from subsidies rather than user charges (such as transit operations).
Section 7—Fiscal Risk Control Strategies page 52
Enterprise funds are reported using a flow of economic resource measurements as well as a full
accrual basis accounting system. These are the same financial measurements used in commercial
enterprises. Revenues are recognized when they are earned and expenditures are recognized as
soon as the liability is incurred. This approach provides a proper platform for cost recovery
purposes. In most cases the use of enterprise funds is permitted rather than required; however;
Citygate believes, in this case, its usage would represent a best practice from a perspective of full
cost recovery and transparent public policy accountability.
7.2 RISK CONTROL STRATEGY #2: ESTABLISH A SIGNIFICANT RESERVE FUND OF 6 MONTHS
OF REVENUES PLUS A CAPITAL EQUIPMENT REPLACEMENT RESERVE
Reserve policies are a critical element in any business plan. The most critical questions are
always, “What level of reserve is adequate to meet the needs of a particular type of reserve?
When are reserves either too high or too low?” Insufficient reserve levels could jeopardize
CCCFPD’s long-term financial sustainability, and unwarranted levels of reserves could impact
the cost-effectiveness of services and ultimately undermine constituent confidence.
There are a variety of reasons to establish reserves, including:
To handle cash flow challenges
To provide insulation from economic impacts
To maintain equipment and infrastructure (deferred maintenance)
To meet bond/debt-related requirement
To fund liabilities
To bolster emergency preparedness
To provide fee/rate stabilization for business activities
To fund investments/opportunities in the future.
Evaluating reserve policies is a continual process, and reserve policies should be evaluated
annually as part of the budget plan. These policies are closely tied with the economy and service
delivery environment. Reserve policies cannot be adequately developed without a complete
understanding of the CCCFPD’s core service requirements and significant cost and revenue
drivers. It is particularly important that the reserve policies be continually evaluated and refined
as additional operations, performance, revenue, and cost information are developed.
CCCFPD’s cash flow needs are similar to many special districts that derive their primary funding
from property tax revenue. This source of funding is the typical means for supporting special
district public safety-related activities, including fire protection services. CCCFPD receives the
first property tax payment in late December. The lag time between the start of the fiscal year
Section 7—Fiscal Risk Control Strategies page 53
(July 1st) and the first property tax payments received leaves a six -month dry financing period.
Most of CCCFPD’s employee-related expenses are consistently spread over the fiscal year. For
CCCFPD to be a self-sustaining financial entity, it needs enough available cash to make it
through the end of the fiscal year to the first property tax payment, assuming that it does not
want to utilize restricted fund balances.
To monitor cash flow, an understanding of the month-to-month timing of revenue receipts and
expenditure patterns is required. Fortunately, during the “dry period financing,” between the
receipt of property taxes, the County can simply charge the CCCFPD its pooled cash investment
rate for short-term borrowing in order to meet typical cash flow needs.
The projected January 2016 start date in the Alliance proposal will provide a fiscal advantage
because the CCCFPD will have received its first property tax payment. This will provide an
additional cash flow cushion. A successful billing and collection process will be a critical factor
in the cash flow requirements. Cash flow must be able to fund the difference between the
monthly CCCFPD payments to AMR and received and accumulated transport revenue.
Given these anticipated cash flow challenges due to the periodic nature of revenue, the unknown
financial risks associated with ambulance billing, and the changing and uncertain economics of
the health care landscape, the Alliance should build a 6-month reserve for cash flow purposes.
While monitoring cash flow will be a critical element of managing the AMR contract, it appears
that the transport revenue collection model provides a reasonable starting point to understand the
fiscal relationship between revenue collections and AMR contract payment.
Another critical component is equipment and infrastructure replacement funds. This component
of the business plan should also have adequate reserve levels to meet the future needs of
CCCFPD and should be supported by a multi-year capital replacement programs that details
these future needs. From a long-term financial sustainability perspective, this represents a best
practice.
Several other liabilities are important considerations for CCCFPD fire protection cost to revenue
balance; those include equipment and infrastructure replacement, liabilities for pension related
costs, sick leave, vacation, and other post-employment benefits (OPEB). To CCCFPD’s credit, it
has made progress on OPEB and pension liabilities and has improved its funding payments to
these obligations annually.
CCCFPD’s primary operating fund, and the Alliance enterprise fund, need established reserve
policies. Initially, CCCFPD may be required to subsidize the Alliance enterprise fund, but this
subsidy can be reimbursed at a later time. These subsidies need to be booked on each fund’s
balance sheet.
Section 7—Fiscal Risk Control Strategies page 54
7.3 RISK CONTROL STRATEGY #3: EVENTUALLY CALIBRATE TRANSPORT FEES TO TRUE
COSTS THROUGH AUDITS OF EXPENSES AND ADHERENCE TO STIPULATED CONTRACT
PROVISIONS
With the enterprise fund established, the Alliance can better understand its costs. It should take
the time to carefully determine its direct and indirect costs, including equipment and
infrastructure. Because this can be even more complicated if costs are part of a General Fund
operation, it may be beneficial to hire a firm to conduct a Cost of Service Fee Study.
7.4 RISK CONTROL STRATEGY #4: WHEN REVENUES EXCEED NEEDED RESERVES,
CONSIDER LOWERING TRANSPORT FEES, NOT CROSS-SUBSIDIZING NON-ALLIANCE
CCCFPD OR COUNTY EMS AGENCY OPERATIONS
The CCCFPD operation is primarily financed by property tax revenue and fees from fire
prevention plan review and fire inspections. CCCFPD is a special revenue fund and is accounted
for in the Contra Costa County comprehensive annual financial statements as a major fund. An
enterprise fund established to account for transport services would be a separate and distinct
accounting entity with a separate balance sheet, revenue budget, and expense budget. There may
be certain CCCFPD employee costs that are allocated to the Alliance enterprise fund for direct
and indirect services. These charges need to be carefully documented and justified because they
may be eligible to become part of the transport fees base. Costs that are part of the basic/core fire
protection operations should not be part of the ambulance fee structure. This cross-subsidization
would violate the basis for establishing proper fees and charges in an enterprise fund. Any such
inter-fund activity needs to be thoughtfully accounted for and budgeted.
Citygate believes it would be imprudent to, under the decreased deployment capacity in Plan B,
pay $750,000 up front to support County EMS Agency functions instead of saving for a reserve
fund and then, if fiscally secure, lowering rates to individuals and insurance companies. The
older systems that removed revenues for County EMS, dispatch, and first responder fire
department functions are now under the worst economic stress. Additionally, the insurance
company payers simply will not support $2,500+ ambulance bills. The revenues in the system
should first offset a medically necessary transport system, not other community health services
or EMS agency oversight services.
If a subsidy is needed for a county EMS oversight operation, a public policy debate is needed to
determine the funding source (several are available for a county to use). Additional non-transport
costs should not be placed on the ambulance provider, and a new public subsidy should not be
considered the fault of the ambulance company. With good fiscal practices for the ambulance
contract, if for direct costs the ambulance provider cannot stay solvent, then a county can make a
straightforward case to the public for a transport subsidy.
Section 7—Fiscal Risk Control Strategies page 55
7.5 RISK CONTROL STRATEGY #5: ESTABLISH A COUNTY BOARD OF SUPERVISORS AND
CCCFPD “COMPASSIONATE” SET OF BILLING POLICIES FOR CCCFPD-MANAGED
FIRST RESPONDER AND AMBULANCE REVENUE COLLECTION TO INCLUDE A WRITE-
DOWN AND WRITE-OFF POLICY
Through the AMR Compassionate billing program, a patient requesting a Compassionate billing
discount applies to AMR, which then verifies the applicant’s income level and insurance
coverage. If the applicant meets AMR’s criteria for a Compassionate billing discount, the
applicant is informed as to the amount of the discount. In Contra Costa County and other
services areas, AMR’s Compassionate billing policies have been well regarded by members of
the Board of Supervisors, EMS agencies, and the public.
The County EMS Agency currently informs the public about the effective AMR Compassionate
billing policy. However, since that program is AMR’s, not County Board of Supervisors policy,
if the Alliance proposal is implemented, CCCFPD, as the billing entity, should adopt its own
policy to legally guide its billing contractor.
Citygate recommends the County policy to be identical or similar to the one AMR currently uses.
Section 8—Opinions Summary and Implementation Recommendations page 56
SECTION 8—OPINIONS SUMMARY AND IMPLEMENTATION
RECOMMENDATIONS
8.1 CITYGATE’S OPINIONS
Listed here for ease of summary reading are Citygate’s Opinions:
Citygate Opinion #1 – Alliance Economic Risk: It is undisputed that 9-1-1 ambulance system
revenues are falling to the point where some, if not all, systems will no longer be able to operate
without a public subsidy as many have for over 30 years. The choice before Contra Costa County
is whether the Board wants to more fully be involved in managing the contractor via the
CCCFPD, and if a revenue collapse is inevitable, be able to detect the problem with enough time
to develop and implement thoughtful mitigation measures.
The other option is to operate the existing type of contract model and hope the private provider
would provide enough notice before default. Ultimately, taxpayers are the fallback resource to
fund 9-1-1 ambulance services. If ultimately the ambulance system needs an allocation of
CCCFPD or County general discretionary resources to stabilize ambulance services, that could
force the reduction of services in other areas. Monitoring and understanding how this issue
evolves is critical if the County is to minimize the impact of a potentially damaging ambulance
fiscal shock wave.
Citygate Opinion #2 – Plan A Deployment Hours: Citygate’s extensive review of the incident
demand data by zone, hour of the day, and day of the week found the proposed Alliance
deployment plan capable of meeting the current needs of the requested Plan A.
Citygate Opinion #3 – Plan B Deployment Plan Hours: Citygate’s extensive review of the
incident demand data by zone, hour of the day, and day of the week found the proposed Alliance
Plan B insufficiently documented regarding where the reductions and resultant reduced response
times occur. As such, it is not possible to state whether the plan will meet the response time
objectives for the cost proposed.
Citygate Opinion #4 – Plan A Response Time: Given the historical response time compliance
reported by AMR under the current contract, as well as the increased Unit Hours in the Alliance
Deployment Plan, Citygate is of the opinion that the Alliance can maintain the desired response
time goals of the requested Deployment Plan A.
Citygate Opinion #5 – Plan B Response Time: The response time compliance for Plan B
cannot be benchmarked to current system compliance given the change from four to three zones
and a relaxation of response time measures. Citygate would strongly encourage the County not
to implement Plan B all at once, if at all. If chosen for implementation, the Alliance should be
allowed to test some reductions in some areas and then, based on closely-observed metrics, make
Section 8—Opinions Summary and Implementation Recommendations page 57
adjustments. This measured, incremental approach is consistent with the values of Continuous
Quality Improvement (CQI).
Citygate Opinion #6 – Alliance Logistical Staffing Expense: Given the staffing provided by
AMR, and a verbal confirmation that AMR support services staffing will remain the same as in
the current contract, the CQI, training, and community education staff appears appropriate for the
size of the projected AMR operation. CCCFPD will continue to separately manage the training
and CQI for its firefighter/paramedics, as it does currently.
Citygate Opinion #7 – Number of Transports Volume: Given the conservative projection of
total transports for at least Contract Year 1 (2016), we find that the Alliance proposal had not
inflated transport projections upon which to base revenues. If anything, the projections could end
up being slightly low, thus providing a possible economic cushion by 2017.
Citygate Opinion #8 – Net Collections: The Alliance’s approach in projecting Average Patient
Charges (APC) and expected net collections by payer type is both conservative and prudent. The
question of payer mix is one of the most difficult aspects of this projection given the
uncertainties surrounding health care reform. AMR believes that much of the change resulting
from the ACA has already been reflected in the 2014 payer mix data and that projecting the
status quo is the most prudent course of action at this time. While this approach is reasonable, we
believe that continued deterioration of net collections due to changes in payer mix and increases
in the number of high deductible health plans remains one of the largest risks going forward, and
one that will need to be evaluated in light of other risks and opportunities in the Alliance
projections.
Citygate Opinion #9 – Fee for Service GEMT Availability: Citygate will not attempt to
predict which of CCCFPD’s costs DHCS will or will not allow for GEMT reimbursement, as the
scope of the Fire Department / Ambulance Company / Billing Contractor hybrid has not been
tried yet in California, to our knowledge, since the inception of the GEMT program. Therefore,
given that the CCCFPD has just obtained DHCS’s national provider number and must still apply
to DHCS, the Alliance approach to not assume any GEMT reimbursement in its fiscal pro-forma
was the correct, conservative approach.
Citygate Opinion #10 – HMO GEMT: There is no near-term assurance in Contra Costa County
that the IGT program for Medi-Cal Managed Care beneficiaries will become available. As such,
the Alliance decision to not depend on GEMT funds for Medi-Cal Managed Care is correct.
Citygate Opinion #11 – Plan A Economics: The economic proposal for Plan A submitted by
the Alliance is based on reasonable and generally conservative assumptions. Projected costs are
less than conservatively estimated revenues. While there is no way to completely address the
risks that are faced in the industry regarding the impact of health care reform, and trends of
declining collections from insurance carriers, Plan A has a revenue safety cushion without the
receipt of any GEMT supplemental revenues.
Section 8—Opinions Summary and Implementation Recommendations page 58
Citygate Opinion #12 – Plan B Economics: Given that Plan B provides a system with longer
response times for a few less Unit Hours and small revenue cushion for the uncertainties in
ambulance revenue trends, Citygate does not see a reason to implement a significant system
change to, for the most part, simply generate new revenues to the County’s EMS Agency.
Citygate would rather see the Alliance build a larger revenue-to-cost projection to build its
reserves first.
Citygate Opinion #13 – AMR Profit: The AMR profit component is segregated as a separate
line item in the Alliance Expense Budget, providing a level of transparency. Also, AMR
allocated a reasonable 10.0% of total expenses to cover non-field Depreciation and Amortization,
Interest, Taxes, and leave a reasonable level of Net Profit for AMR.
Citygate Opinion #14 – AMR Fiscal Strength: Citygate notes that AMR national liquidity
ratios stayed very consistent between 2013 and 2014, and the profitability ratios improved from
2013 to 2014. Given the diversity of ambulance costs and declining payer type payments across
the country, for AMR to have stable liquidity and profit ratios showing slight improvement, it
suggests AMR is weathering the ambulance industry revenue decline as well as, if not better
than, the other large national providers.
Citygate Opinion #15 – Fire District Economic Health: Given CCCFPD’s current reserves,
and inclusion in the overall County tax distribution system, the CCCFPD has the funds to begin
monthly payments to AMR for several months and fund other start-up costs until new ambulance
billing revenue catches up to expenditures. At that point, the CCCFPD must first repay its cash
advances and then build the recommended ambulance enterprise reserves before it can true up
revenue to ambulance rates.
8.2 IMPLEMENTATION RECOMMENDATIONS
Based on our Opinions and Fiscal Risk Control Strategies, Citygate recommends the CCCFPD,
AMR, and the County EMS Agency pursue final implementation contracts, and offers the
following best practice-based recommendations to guide this process:
1. Fully identify the fiscal relationship between the parties, their separate fiscal
exposure for each other’s decisions (such as staffing levels), and start-up capital
costs.
2. Board policy should require that ambulance loss risk only be transferred to the
taxpayer for unforeseen, catastrophic losses, as would be the case in the current
system if the ambulance contractor were to fail.
3. Fine the contractor only for material breach, not small, per-minute fines.
4. Rather than fine for small response time misses, require that the deployment plan
account for equitable response time coverage for similar land use and population
Section 8—Opinions Summary and Implementation Recommendations page 59
densities. Then if the Alliance delivers the required response time performance,
only gross neglect to deploy or respond should trigger a fine and/or lead to
default.
5. Define in the contract between the County EMS Agency and the CCCFPD a clear
delineation of roles, responsibilities, and authorities as it pertains to operational
authority and regulatory oversight.
6. Require the CCCFPD to report to the Board of Supervisors quarterly on response
times, payer mix, and a rolling revenue-to-date report and near-term revenue-to-
expense forecast.
7. Annually require an independent audit of the revenues to expenses and the
viability going forward of the contract terms. Once ambulance reimbursements
settle under health care reform, the formal audits could possibly move to two-year
cycles.
Appendix A—List of Acronyms page 60
APPENDIX A—LIST OF ACRONYMS
The following list of acronyms occurs throughout the report:
911EOA 9-1-1 Exclusive Operating Area
Sometimes referred to as Exclusive Operating Area or EOA
ACA Affordable Care Act
Sometimes referred to as PPACA, and sometimes called Covered California
ALS Advanced Life Support
AMR American Medical Response, West
APC Average Patient Charges
BLS Basic Life Support
CCCFPD Contra Costa County Fire Protection District
CMS Centers for Medicare and Medicaid Services
CPE Certified Public Expenditures
CQI Continuous Quality Improvement
EBIT Earnings Before Interest and Taxes
EMS Emergency Medical Services
EMT Emergency Medical Technician
EOA Exclusive Operating Area
ERZ Emergency Response Zone
EVHC Envision Healthcare Holdings, Inc
GEMT Ground Emergency Medical Transport
HDHP High Deductible Health Plan
HMO Health Maintenance Organization
IFT Inter-Facility Transfers
IGT Intergovernmental Transfers
LEMSA Local Emergency Medical Services Agency
NPI National Provider Identification
NRT Net Revenue per Transport
OPEB Other Post-Employment Benefits
PPACA Patient Protection and Affordable Care Act
Sometimes referred to as ACA, and sometimes called Covered California
PSAP Public Safety Answering Points
QA Quality Assurance
RFP Request for Proposal
SPA State Plan Amendment
UCR Usual and Customary Rates
JanuaryFebruaryMarchAprilMayJuneTotalExpenditures:American Medical Response‐West 0 0 3,080,802 2,882,041 3,080,802 2,981,42212,025,067Advanced Data Processing, Inc. 0 0 0 55,744 105,810 95,570257,1240 0 3,080,802 2,937,785 3,186,612 3,076,99212,282,192Revenue:0 0 1,889,623 3,586,785 3,239,675 3,586,78512,302,869Monthly Surplus / Deficit 0 0(1,191,179)649,000 53,063 509,793 20,677Cumulative Fund Surplus/Deficit00(1,191,179) (542,178) (489,116)20,677Assumptions:1. 5,173 Unit Hours Per Week2. $134.48 /unit hour paid to AMR3. 68,532 Transports per year (based on 2015 data from AMR‐West)4. $2,505 Average Patient Charge5. 24.6% Net Collections Rate6. 2.95% Cost of Collections (payable to Advanced Data Processing, Inc.)EMS Ambulance Transport Enterprise FundContra Costa County Fire Protection DistrictJanuary ‐ June 2016 Estimated Cash Flows