Last month, when Orange County bucked a 30-year tradition and began an experiment with private paramedics, it brought to the fore a long-running debate regarding the wisdom of privatizing the work of lifesaving.
Currently, the experiment is limited only to paramedics doing hospital transfers. Nonetheless, there is a growing concern that this is a first tangible step toward a larger privatization effort.
“I’ve been in this profession for 33 years,” said Wolfgang Knabe, fire chief in Fullerton and Brea, who heads the Sacramento-based California Fire Chiefs Association.
“I’ve seen every model. I know what works and doesn’t. Emergency medical services are not there to make money. … A public service provides the most accountability.”
To illustrate the consequences of privatization, Knabe and others point to the recent experience of Alameda County, which lies acroos the bay from San Francisco. The county has contracted out its paramedic services for years. In November 2011, a new firm, Texas-based Paramedics Plus, took over with a five-year contract.
But things turned ugly this year when the company revealed it had so far lost $9.5 million on the contract and accumulated $3.9 million in county fines for failing to meet performance standards.
Despite these problems, Paramedics Plus is seen by independent authorities as one of the more enlightened emergency firms. It is owned by a nonprofit hospital group based in Tyler, Texas, and primarily operates paramedic systems for public emergency authorities.
As of now, officials at Alameda County and Paramedics Plus have said the company won’t fail and are they are moving to reduce the losses. Company officials say they likely will seek a rate increase in June.
The key message from Alameda’s experience is that there must be rigorous regulatory oversight for such private operations, something some see missing in Orange County. “We don’t trust anyone,” said Alex T. Briscoe, director of Alameda County’s Health Services Agency, pointing to heavy fines as proof. “We hit them hard” if they don’t comply with requirements, he said
The Orange County Fire Authority provides public paramedics to 23 municipal jurisdictions, partnering with a mix of private ambulance companies to transport 911 patients to the closest appropriate hospital. This hybrid model — public paramedics from for-profit ambulance firms — shifts risk for transport bills to the private firms, since they do most billing. Firefighting agencies generally receive only reimbursement for rescue expenses.
But in contrast to Alameda, Orange County’s system for scrutinizing basic ambulance services is so outdated that firms facing sanctions in other jurisdictions continue to operate here.
For instance, Los Angeles a year ago fined Shoreline Ambulance Corp. of Huntington Beach $33,750 for improper operations there. Orange County Health Care Agency officials say they don’t have the power to take action against Shoreline. Last year, Westminster granted a new contract to Shoreline to provide ambulances for fire authority paramedic transports.
The firm’s overall track record now is exceeding the contract stipulations, meeting response times in more than 90 percent of the runs.
Despite the issues with its contract, Dale Feldhauser, new manager for Paramedic Plus in Alameda County, said it is the “biggest myth” in emergency services that public paramedics provide higher quality clinical care than private paramedics. “If they do proper cost accounting, they can’t touch [a private firm’s] cost structure,” he said.
Such statements are well received in Orange County, where elected leaders are more than happy to hear someone extol the virtues of private enterprise. Supervisor John Moorlach for one has mused publicly about what would be required to have a private paramedic program in the county.
“It is an interesting industry, one I’ve tried the best to figure out,” said Moorlach. However, Moorlach also insisted that “I don’t have an agenda on paramedics.”
The Orange County experiment, which will consist of 100 paramedic-assisted calls, is designed to take pressure off busy hospital emergency rooms, Health Care Agency officials said. But the Orange County Professional Firefighters Association took strong exception and suggested that it is a stealth campaign to open the door eventually for private paramedics for 911 emergencies.
Briscoe in Alameda County said officials there have no issue with an ambulance company being in business to make money. Yet the county takes its responsibility “to curtail the shameless profiteering in health care” seriously.
“Paramedic companies want to make a profit; we want them to earn a buck,” he said. “But our job is to get the highest service at the lowest possible cost for our constituents.” Alameda County caps Paramedics Plus’ annual profit at 7 percent of net earnings.
The firm won the Alameda contract with a bid to charge of $1,500 per paramedic transport, officials said. The losing firm bid $3,000.
But these numbers are deceiving because in most cases the companies don’t receive that much revenue for the service. Consider, for example, that Medicare will pay only around $400 for an ambulance transport and Medi-Cal closer to $200.
Although private insurance can pay considerably more, on average, Paramedics Plus earns about $500 per transport while its costs have been about $600 per run, Feldhauser said.
With such margins, some ambulance companies are known for fraud and abuse of governmental programs.
Consider the issues surrounding the private ambulance company that has served the Dallas-Forth Worth metropolitan area, the fourth largest in the U.S.
In 2005, the public ambulance authority for Greater Forth Worth booted Arizona-based Rural/Metro Corp., one of the largest ambulance services, for performance issues.
Fort Worth’s paramedic system now has an annual operating budget of about $35 million, ending last year with $2.8 million in “net returned earnings” to plow back into a better-performing system, said its chief executive, Douglas R. Hooten.
But in Dallas, they faced a potentially disastrous federal lawsuit over years of alleged illegal billing for the city’s fire and rescue service. Dallas had used Southwest General Services of Dallas, a billing company, that was a subsidiary of Rural/Metro. Now defunct, Southwest General was alleged in court records and documents to have defrauded Medicaid and Medicare.
In 2011, Dallas paid nearly $2.5 million to settle the case, and a dozen outlying cities paid $1.7 million for similar irregularities.
Other California governments have followed Alameda’s crackdown. Since July 2011, Santa Clara County officials say they fined Rural/Metro $4.5 million for failing to adequately meet paramedic response times.
Orange County’s experiment with private paramedics is already attracting interest from small ambulance firms in Los Angeles, where authorities have cracked down on wayward operators.
On March 29, Orange County officials received a letter from Impulse Ambulance of North Hollywood criticizing the county’s method for launching the paramedic transport program, alleging violations by other ambulance firms in the county and seeking to participate in future paramedic endeavors. Impulse Ambulance is permitted by the Orange County Health Care Agency to operate ambulances staffed by emergency medical technicians. In Los Angeles, the firm also provides paramedics and nurses for interfacility transports of patients.
In an April 1 letter, Dr. Samuel J. Stratton, the HCA’s emergency-disaster services’ medical director, responded, disputing criticism of the program’s launch, declaring that allegations of staffing ambulances with unlicensed personnel would be investigated and noting that other private paramedic operators may seek to be interfacility transport services.
Rex Dalton is a San Diego-based journalist who has worked for the San Diego Union-Tribune and the journal Nature. You can reach him directly at email@example.com.