Two consequences of health care reform – lower reimbursement rates and more patients – have put some local ambulance companies on life support as they struggle to balance higher volumes of trips with less money in return. As a result, ambulance companies have left certain regions of the state amid consolidations and closures. “California has one of the lowest reimbursements for ambulance services in the country, and at the same time, the cost of doing business here is probably the highest in the nation,” said Jason Sorrick, director of communications for American Medical Response Inc., which operates ambulances in the Antelope and Santa Clarita valleys. “(Medi-Cal reimbursement rates are) below 1999 levels. It is (now) $10 less, and in that same period, our cost of providing care has more than doubled.” Medi-Cal, California’s version of Medicaid, which is paid for by state and federal funding but is primarily administered by the California Department of Health Care Services in Sacramento, currently repays $118.20 for each emergency medical transport by ground, plus a little extra for mileage or ancillary services, according to the department. However, Sorrick said hard costs for such a trip amount to about $600 for ambulance companies, leaving an almost $480 discrepancy that the service provider has to eat. In comparison, he said the reimbursement rate for Medicare, the national social insurance program for people 65 and older, is about $500, which is a lot closer to how much it actually costs to transport a patient. ‘Double hit’ Medicaid and California’s comparable Medi-Cal are programs designed to pay for medical expenses – such as doctor visits, hospital stays and prescription drugs as well as ambulance services – for people with lower incomes. According to Ross Elliott, executive director of the California Ambulance Association in Sacramento, more than 6 million Californians have been added to the rolls of these programs since expansion under the Affordable Care Act, also known as health care reform or Obamacare. Previously, ambulance companies would accept government money from Medi-Cal and bill the patient some in addition. Now billing the patient is illegal, Elliott explained. “By law, the (ambulance companies) have to accept the Medi-Cal rate, and there are more people that are covered by it, so it’s a double hit,” he said. Greenwood Village, Colo.-based American Medical Response, which has its Los Angeles County headquarters in Lancaster, has a size and infrastructure advantage in the industry as it is one of the larger providers. Yet according to the company’s Sorrick, about half of its charges for service go unpaid. “The 20 percent of the patient population that is on commercial insurance and not on the exchange or government insurance is essentially paying for all these other patients,” he said. “When people complain about why health care costs are going up so much, it’s because the 25 percent of patients on Medi-Cal are paying hundreds of dollars below cost.” Aside from transferring the cost to the commercially insured, American Medical Response has been forced to resort to other tactics to make up for the lost revenue. For example, the company was forced to completely discontinue its emergency services in Tulare County in Central California. “It is usually a last resort for an ambulance service to pull out of an area,” said Tristan North, senior vice president of government affairs for the American Ambulance Association headquartered in McLean, Va. “In some cases, it may be the only access to emergency medical services in a small rural community.” Sorrick said while the problem is more critical in rural areas than in the suburbs such as the San Fernando Valley, the financial impact is across the board. He said even though American Medical Response is a large ambulance company, it is still not financially viable to be in certain rural markets as call volumes are lower and the population is spread out so far, making it almost impossible to serve. As for the smaller providers, which made up the majority of ambulance companies in the Valley, they have a harder time absorbing the revenue decline. “Locally, there has been a massive consolidation and multiple bankruptcies of ambulance companies,” said Founding Partner Harry Nelson of boutique health care law firm Nelson Hardiman in Los Angeles. “Many ambulance companies have been driven out of business and forced to sell to competitors. On the ground, there are far fewer providers, and the ones that are left are bigger.” Over the summer, American Medical Response ceased its Bowers Ambulance operation, closing its two facilities in North Hollywood and Long Beach. The reasons the company cited for the shutdown was it already had an existing presence in these areas and that it wasn’t a viable option to continue both services. In Torrance, Gerber Ambulance Service folded last year after losing the city’s ambulance contract, which led to not having the volume to support the costs associated with its services. Since 2015, Cotati-based ambulance and transport service ProTransport-1 acquired PRN Ambulance of North Hills, Century Ambulance Service of Jacksonville, Fla. as well as ATS Medical Services of Loves Park, Ill. A study by the American Ambulance Association found the industry has lost more than $2 billion due to health care reform. The Business Journal reached out to several small ambulance companies in the San Fernando Valley that declined to comment because of their poor financial condition. One executive who wished to remain anonymous said the loss to the industry is at least that amount. Alternative transportation As ambulance companies close their doors, response times grow longer and certain services become scarce. California Ambulance Association’s Elliott believes government agencies will have to start picking up the slack if the trend continues. “Fire departments will have to fill in the gap where private ambulance companies can’t do it anymore, and the price to the public will be astronomical,” he said. The cost could approach as much as four times more – or about $2,400 – if government takes over ambulance service rather than private businesses, Elliott figured, citing the high salaries and benefits packages public employees receive. And if fire departments begin to fill the market void, the costs will be passed onto taxpayers. Conversely, the California Department of Health Care Services said there is not an issue with access to care. “DHCS is not aware of ambulance companies closing or limiting these services in certain geographical areas,” wrote Katharine Weir, information officer for the department, in an email to the Business Journal. “However, should DHCS become aware of any access to care issues, the department will review the circumstances, the geography and whether there are alternative providers available.” Nevertheless, during the last legislative session, American Medical Response along with other major ambulance providers formed a coalition that lobbied in Sacramento for Senate Bill 1300, which would increase Medi-Cal rates closer to federal levels. California Ambulance Association’s Elliott said the bill should bring reimbursement rates to approximately $300 or $340, which is closer to cost but still about half. The bill passed the legislature with both Republican and Democratic support, and at press time, faced a Sept. 30 deadline for Gov. Jerry Brown to either sign or veto the bill. But the outlook appeared bleak for SB-1300 as many believed it would be vetoed by the governor. “If this fails, I don’t know how soon ambulance companies will close their doors, but they will certainly stop providing services,” said Elliott. “They can’t afford to continue.” Another alternative lies in finding market substitutes for ambulances. For example, San Francisco-based Uber Technologies Inc. is beginning to enter the health transport industry. “Uber has jumped into this space,” said attorney Nelson. “The company is working with a number of large managed care groups and home care companies and has specifically built out a service to transport patients. It’s not reimbursed, but generally people are paying out of pocket and are being subsidized by hospitals and managed care organizations.” He said it can be cheaper to use low cost services like Uber and Lyft Inc., also of San Francisco, to provide patient transport. However, it only works in non-emergency situations, such as moving patients to a clinic or nursing home. On the emergency transport side of the business, health care reform has resulted in a financial tailspin in which training, equipment, medications, call centers and the ambulance vehicles themselves are subsidized for Medi-Cal patients. “If you calculate all the people who work in bringing you that service, it (Medi-Cal reimbursement) would not cover paying minimum wage,” said American Medical Response’s Sorrick. “It’s ironic the state demands companies pay livable wages based on location, yet they pay an amount that doesn’t even meet their own standard.”
Driving Down Prices
