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SR - - FINANCIAL ANALYSIS CITY OF ORANGE EMERGENCY MEDICAL SERVICES PROGRAMpP 0R�_ ,p er O •, ewu4W° �SS AUNTY C AGENDA ITEM May 13, 2014 TO: Honorable Mayor and Members of the City Council THRU: John W. Sibley City Manager FROM: Richard Jacobs, Finance Director Pat is i , Fi Chief© 1. SUBJECT . ReviewedNcrified City Manag Finance Dir ctor To Be Presented By: Richard Jacobs, Financ Director Cons Calendar _ City Mgr Rpts Council Reports _ Legal Affairs Boards /Cmtes _ Public Hrgs X Admin Reports Plan/Environ Financial analysis of the City of Orange's Emergency Medical Services (EMS) Program and recommended actions related to the budgeting of this program. 2. SUMMARY During the adoption of the Fiscal Year (FY) 2013 -14 budget, City Council requested staff to analyze the EMS program to determine the total cost of the program, the need for rate adjustments, and the feasibility of combining the Emergency Medical Transport Fund (125) with the General Fund. 3. RECOMMENDED ACTION Direct staff to prepare a fee resolution to adjust the rate for the Basic Life Support (BLS) fee from $225 to $670 and the Advanced Life Support (ALS) fee from $325 to $775 starting July 1, 2014. 4. FISCAL IMPACT The approval of the rate adjustments will net an increase in revenue of approximately $1.0 million per year. 5. STRATEGIC PLAN GOAL(S) 2. Be a fiscally healthy community b. Analyze future fiscal needs and potential revenue opportunities ITEM - 7. t 5/13/14 d. Effectively manage and develop City assets 6. GENERAL PLAN IMPLEMENTATION Not applicable 7. DISCUSSION and BACKGROUND Executive Summary The Orange City Fire department began providing Emergency Medical Services ( "EMS ") to the community more than 40 years ago. Initially, firefighters provided first aid. In 1973, all firefighters were trained as Emergency Medical Technicians ( "EMT ") and nine firefighters were trained as paramedics, thus beginning the "Paramedic Program." Sometime later, a fee structure (Advance Life Support - ALS and Basic Life Support - BLS fees) and a subscription program were established to partially offset costs of the program. In 1995, in an effort to improve service and reduce ambulance response times, the City Council approved taking the ambulance transportation program in- house. To initiate the new program, six additional firefighter /paramedics were hired with the understanding that the ambulance /transport program needed to generate sufficient revenue through patient transport fees to offset the costs of personnel, ambulances, supplies, and equipment associated with the new program. Today, the EMS program consists of 18 firefighter /paramedics assigned specifically to the Ambulance /Transport program and another 27 firefighter /paramedics supporting the paramedic program. During Fiscal Year 2014, the City Council requested staff to return with a report assessing the Ambulance /Transport program as well as the entire EMS program costs and associated structure. After extensive financial review, the Ambulance /Transport program continues to exceed the initial goals of funding six firefighter /paramedics and associated costs of the program. In FY 2013, revenues generated from the program totaled $2,000,195 while expenditures totaled $1,997,580. However, in assessing the entire EMS program (which is inclusive of the Paramedic program and Ambulance /Transport program), the program runs at a deficit with the General Fund offsetting the difference. Net EMS revenue which includes ALS /BLS fees and transport fees totaled $3,196,581 in FY 13 while total expenditures were $7,261,109. Therefore, total program expenditures outpaced revenues by $4,064,528. While it was never intended that the EMS program be self - supporting, the gap between revenues and expenditures has grown significantly. There are multiple factors for this including increased demand for service, increased operating and labor costs, and changes in the ability to fully recover fees. Fees for ambulance transport are established by the County while the ALS and BLS fees are established by the local agencies. Increasing ALS and BLS fees will allow the city to recover a portion of the paramedic services but still not the full cost of EMS operations. A comparative assessment of neighboring city fees suggests that our ALS and BLS fees are lower than the other cities in the County. As a result, it is recommended that the BLS fee be increased from the current rate of ITEM 5/13/14 $225 to a new rate of $670 and the ALS fee be increased from the current rate of $325 to a new rate of $775. The proposed fee structure would generate an additional $1.0 million in annual revenue. Background Orange City Fire Department (Fire) began providing Emergency Medical Services (EMS) more than 40 years ago. Initially firefighters were trained to provide basic first aid. Eventually, the training standard increased to the Emergency Medical Technician (EMT) level. In 1973, the paramedic program started with two firefighters trained to paramedic (EMT -P) level on duty every day. The paramedic team of two were assigned to a paramedic unit and responded from Fire Headquarters, serving the entire population of 70,000 residents. Soon after, due to demand, a second team of paramedics was added and each team covered half the city. In 1989, a third team of paramedics was added. EMS was referred to as the "paramedic program" and generated limited revenue through Advanced Life Support (ALS) and Basic Life Support (BLS) assessment and treatment fees (paramedic direct fees). The ALS and BLS fees were deposited in the General Fund and the paramedic program was funded by the General Fund. Prior to 1995, under the direction of the City, private ambulance providers supplied most 911 ambulance transportation to the hospital. Fire paramedics accompanied ALS patients to the hospital in the private ambulances. The private ambulances billed the patients for transport, oxygen and mileage generating a significant amount of revenue for the provider even though Fire personnel, using Fire supplies and equipment, were providing the ALS care. In 1995, the City Council approved Fire taking the ambulance transport program in- house. The goals to improve ALS service and reduce ambulance response times were achieved when three Fire ambulances were strategically deployed throughout the city, staffed with 18 firefighters. To accomplish this new program six additional firefighters were hired and twelve existing fire fighters were used with the understanding that the Ambulance /Transport program needed to generate sufficient revenue to cover the costs of the six new firefighters, the ambulances, supplies and equipment associated with the program. A new fund, Emergency Medical Transport Fund (125) was created to closely monitor the fiscal impact of the new program. The initial goal of tracking the expenses and revenues was to assess if the cost of the six new firefighters and expenses related to the transport of patients was offset by the new revenue generated by the transport fees. The program has expanded from providing basic first aid to providing more extensive medical care for patients. Currently each ambulance is staffed with two firefighters who are licensed paramedics (18 total). Each of the City's fire engines /trucks is staffed with three or four firefighters, with a minimum of two firefighters trained as EMT's and one a licensed paramedic (27 total). All firefighter paramedics receive additional pay for providing further medical treatment to injured and ill patients for city -wide coverage 24 hours a day, 365 days a year. Additional cost included as part of the Paramedic program are related to incidents when an ALS patient requires additional medical care during transport and an additional firefighter paramedic ITEM 5/13/14 (assigned to the engine /truck) must travel with the patient. In total, there are 45 firefighters who work as licensed paramedics on fire apparatus. When a 911 call is received, the closest fire engine or truck responds and the EMT's and paramedic(s) begin assessing and treating the patient. Should medical transport be needed, the patient is loaded in the responding ambulance and when necessary, EMT firefighters from the engine /truck travel in the ambulance to continue assessing and treating the patient. Examples of patients who require additional EMT support in the ambulances include those that are acutely ill, in cardiac arrest, or seriously injured. Discussion As part of the FY 14 budget adoption, staff recommended combining the 125 Fund with the General Fund to accurately manage and reflect the total costs and revenue of providing EMS. City Council requested staff to return with a report assessing the EMS program costs and associated fee structure before any action was taken on combining the funds. In September 2013 as staff was in the process of analyzing the program, the State of California approved the Ground Emergency Medical Transportation (GEMT) Amendment, which instituted a supplemental reimbursement program to eligible public agencies providing transport services to Medi -Cal patients to offset costs that Medi -Cal does not cover. The voluntary supplemental reimbursement program was retroactive to January 30, 2010. The State Department of Health Care Services (DHCS) is the state agency responsible for administering the program and required all eligible agencies to submit cost reports for each fiscal year, from FY 10 through FY 13 by February, 2014. The reimbursable amount is based on specific eligible annual expenses associated with ambulance transportation services provided by the City and is estimated to generate approximately $40,000 in additional revenue each year. With the GEMT program coinciding with staff's analysis of the City's EMS program, expenditure information that was collected for FY 13 was used as part of this report to determine the full cost of providing EMS as requested by Council. While the City submitted all required documentation for the GEMT supplemental reimbursement program and an estimated $140,000 (total for all four years) in additional revenue is expected to be received this calendar year, that unanticipated revenue is not part of the revenue included in this report. Ambulance /Transport Program Operating Costs (Transport) In 1995 when Council approved taking the ambulance program in- house, the assumption was that the revenue from transport related fees would sufficiently cover the cost of Transport operations which included the full salary cost for the six additional firefighter personnel, maintenance and operation costs, medical supplies and materials, and the cost to purchase, maintain, and replace the ambulance vehicles. Revenues associated with the Transport program include the transport and supplies fees and half of the Paramedic Enrollment Fee. The City initiated the Paramedic Enrollment Fee prior to the establishment of the Transport program but this fee was increased by 50% following the service being taken in- house. The program budget was expanded in later years with the addition of an Emergency Medical Services Manager to oversee paramedic training as well as ensuring that the program maintains high levels of care for patients. Initially, the program more than realized the expected revenue and therefore was able ITEM 5/13/14 to fund a part of the EMS efforts by funding additional paramedic positions beyond the original six paramedic positions. Rising costs associated with transport apparatus replacement costs, increases in salary and retirement costs, and the reduced amounts received for Medi -Cal and Medicare patients, have put pressure on the Emergency Medical Transport Fund (125) thereby, the fiend is barely able to fund its initial costs. The following is a breakdown of actual revenue and expenditure data for FY 13: Revenues Transport Fee $1,634,411 Medical Supplies, Mileage, Oxygen* $107,175 Paramedic Enrollment Program (50 %)* $258,609 Total Transport Revenues $2,000,195 Expenditures Salaries $1,460,571 Operation Cost $221,046 Medical Supplies /Materials $79,734 Vehicle Cost $236,229 Total Transport Expenditures $1,997,580 Revenues over Expenditures $2,615 *Recognized in General Fund Again it is important to note that the above salary costs only reflect the six additional paramedic positions that were hired in 1995. The true cost of the Transport program, which includes 18 firefighter paramedic positions would be significantly higher. That being said, the cost of the remaining 12 positions is reflected below. Combined Transport and Paramedic Program Operating Costs In analyzing the full cost of providing EMS and the Transport programs, staff assessed the combined revenues and expenditures for both programs. However, the costs were separated by direct expenditures for the Transport and Paramedic programs and indirect expenditures which include expenses related to providing EMS. By reflecting all 18 firefighter paramedics assigned to an ambulance as part of the total cost, rather than the original six firefighters approved in 1995, the EMS program costs the City $6.6 million in direct costs. When all direct and indirect costs are added (shared between Fire, Paramedic and Transport), the total annual cost for the EMS program in FY 13 was $7.3 million (see Cost Analysis attachment for detailed direct and indirect costs). These direct and indirect costs consist of salaries and benefits for 18 firefighter paramedics assigned to ambulances; additional paramedic pay for 27 assigned firefighter paramedics on all fire apparatus; and all maintenance and operation costs associated with the EMS program (materials, medical supplies, training costs, EMS equipment, vehicle costs, etc.). ITEM 5/13/14 Revenue for the EMS /Transport/Paramedic program in FY 13 was approximately $3.2 million and includes the voluntary Paramedic Subscription Program ($517,218), ALS and BLS direct fee for assessment and treatment ($937,777), reimbursement for medical supplies used ($107,175) and transport, oxygen and mileage fees ($1.63 million). The following is a complete analysis of the full cost of providing EMS including the combined revenues and expenditures for the Transport and Paramedic programs: Revenues EMS — ALS /BLS Fees $1,562,170 Transport Fees $1,634,411 Total EMS /Transport/Paramedic Revenues $3,196,581 Expenditures Indirect* and ALS $636,539 Direct, including Transport and BLS $6,624,570 Total EMS /Transport/Paramedic Expenditures $7,261,109 Expenditures over Revenues ($4,064,528) *Costs associated with the Transport program but budgeted and expended in Fire Over the past 19 years, multiple factors have increased the cost of providing EMS. The number of medical aid incidents, patients and ambulance transports has risen significantly. Fire is treating more patients and the sophistication of ALS care provided, especially in the area of cardiovascular assessment and treatments have expanded considerably. Advancements and improvements in EMS have been associated with a steady increase in the cost of providing that service. Additionally, regardless of the costs, Medicare and Medi -Cal pay a fixed amount (now partially supplemented by GEMT) that is significantly less than the amount billed which results in a significant write -down of anticipated revenue Periodic fee increases and increased call volume have steadily increased revenue over the years, with billing reaching $6.7 million in FY 13. However, changes in Medicare reimbursement in 2003 and reductions in Medi -Cal reimbursement (as mentioned above) combined with the economic downturn have significantly reduced collection rates and ultimately net receipts. The current collection rate (net receipts compared to revenue) for all amounts billed is currently 40.61 %. A more accurate rate compares net receipts to net revenue (after write downs have been subtracted), which is currently 72.45 %. These percentages are consistent with other public and private providers. Despite the significant increase in write downs and bad debt, net receipts were $800,000 higher in FY 13 than FY 02, which was the peak of the program. Unfortunately, the revenues are not sufficient to match expenditures for the EMS program (paramedic and transport programs combined). Listed below is the current fee structure associated with the transport program: ITEM 5/13/14 ALS /BLS Transport Oxygen Medical Total Fee Fee Fee Mileage Supplies Billing BLS Service $225 $731 $0 $16 $32 $1,004 ALS Service $325 $731 $82 $16 $32 $1,186 While ALS /BLS fees are set in the City's fee schedule, other charges relative to ambulance transportation are determined in accordance with Orange County Emergency Medical Services Policy 720.00, Section 314, Orange County Ambulance Rules and Regulations Related to Ground Emergency Ambulance Service Rates Adjustment. The rates for transport, oxygen, mileage and medical supplies are reviewed annually and adjusted countywide based on the methodology that specifically calculates the percentage difference in the prior year's LA- Riverside- Orange County "all items" Consumer Price Index (CPI) rounded to the nearest tenth. To illustrate a more accurate view of what an average fee is for BLS and ALS services, staff surveyed local agencies that provide similar transport services. These agencies are also currently studying increases to their fee structure. The following is a comparison of current ALS /BLS fees: Agency Current Fee BLS ALS Orange Fire $225 $325 Anaheim NA $350 Fullerton $250 $500 Huntington Beach* $350 $450 Newport Beach $243 $325 Orange County Fire NA $387 *For non - transported patients only In FY 13, Fire responded to 12,434 emergency incidents. Of those, 8,601 (69.17 %) were medical aid calls. Of the 8,601 calls, 5,594 (65.04 %) patients were transported to the hospital; 3,451 (61.69 %) required ALS level care and 2,143 (38.31) required BLS level care. Based on the total number of medical aid calls (8,601) in FY 13, the cost of providing BLS service was $405.23. The cost of providing an ALS service was $507.68. The current fee for BLS service is $225 and $325 for ALS service. In order to balance the cost of providing EMS with incoming revenue, it is recommended that ALS and BLS assessment and treatment fees be adjusted. The last adjustment to the ALS /BLS fee structure was in April, 2003. Noted below are two options for proposed rates. The first option, which is recommended by staff, establishes a fee that will generate approximately $1.0 million in revenue and recover the full cost of providing ALS and BLS services, considering the 40% collection rate. A second option will generate approximately $400,000 in revenue which will capture a portion of the cost difference between current fees versus actual cost but still leave a large subsidy required by the General Fund. ITEM 5/13/14 Estimated Revenue BLS ALS Increase Current $225 $325 $0 Recommendation $670 $775 $1.0 million Reduced Alternative $405 $508 $400,000 Neither recommended fee increase would affect a resident who subscribes to the voluntary Paramedic Subscription Program ($48 /year). Increasing fees will allow the City to recover a portion of the costs for ALS and BLS services but still not the full cost of EMS operations. As a component of the rate adjustment, it is recommended that starting FY 15, the Emergency Medical Transport (125) Fund be combined with the Paramedic program (General Fund), under the umbrella of the EMS Program. Of the $7.3 million in costs for the EMS Program, only $1.9 million in expenditures is budgeted in Fund 125, as is only the $1.6 million revenue for transport fees, resulting in a $300,000 annual shortfall in the 125 Fund. The $107,175 in revenue for medical supplies, mileage and oxygen has always been recognized in the General Fund as has the full $517,218 from the Paramedic Enrollment Program. Because these two revenue sources are not reflected in the 125 Fund, the fund has been depleted and is unable to sustain itself as it stands today. For this reason, staff is recommending to combine the 125 Fund with the General Fund so that the Ambulance /Transport and Paramedic programs are collectively identified as the EMS Program. Transport related revenue and expenses would still be accounted for separately, to continue to monitor the program on an ongoing basis and make future adjustments as needed. Therefore if approved, there will be no impact to the General Fund when combining the 125 Fund with the General Fund while at the same time increasing ALS and BLS fees. Staff will also return to Council at a later date to adjust the budget for the Emergency Transport Fund (125). At current revenue and expenditure estimates, the 125 Fund will most likely require an additional appropriation in FY 14 to end the year with a positive fund balance. 8. ATTACHMENTS Cost Analysis ITEM 5/13/14