After a 30-year long contract with emergency service provider
American Medical Response, Santa Clara County says it’s time to
After a 30-year long contract with emergency service provider American Medical Response, Santa Clara County says it’s time to switch.
Skyrocketing costs aimed at residents who need ambulance services forced the cash-strapped county to look for new bids, said Santa Clara County Supervisor Don Gage.
If negotiations are successful, Rural/Metro – a smaller provider based in Arizona with questionable financial stability and more than $100 million in debt according to a county executive report issued Oct. 19 – will be the new company serving Santa Clara County.
Despite the debt, county staff gave Rural/Metro’s initial proposal a thumbs up. For South County, this could mean two new ambulances and possibly more paramedics and emergency medical technicians. Rural/Metro has also promised to keep the employees who now work for AMR and maintain low rates for patients.
The Board of Supervisors issued a 3-2 vote Oct. 14 to start contract negotiations with Rural/Metro. The savings would be more than 12 percent for the five-year contract that is worth about $375 million.
In Gilroy, officials are being cautiously optimistic.
City Administrator Tom Haglund said the City Council will not be reviewing the issue, but said he has faith in the county’s decision.
“We’re in favor of a cost-effective ambulance service system, both in adhering to the appropriate response time as well as providing the services to the community with appropriately-trained personnel,” he said.
Gilroy Fire Chief Dale Foster, who met Monday with officials from Santa Clara County Emergency Medical Services in San Jose, said the county is taking input from the city when it comes to negotiating the contract.
“I agree with the process,” he said. “It’s a good idea that they asked for input about what should be considered in the contract.”
The decision to switch companies sparked a money brawl between the two major powers in Santa Clara County: The City of San Jose and the County government. While AMR was planning to reimburse the cities for their paramedic services, Rural/Metro will not.
San Jose said the changes will be bad for all cities in Santa Clara County, including Gilroy.
According to an Oct. 18 letter sent by San Jose Mayor Chuck Reed, changing gears on ambulance services will cost cities $33 million during the next five years.
“In the majority of cases, cities provide the first line of defense for emergency response,” stated Reed. “As a result we subsidize (Emergency Medical Services) and allow leaner staffing structure on the side of the emergency service/ambulance provider.”
Mayor spokeswoman Michelle McGurk said cities often house ambulance service providers in their fire stations and the City of San Jose expects a reimbursement. AMR was willing to provide $1 million annually to San Jose and Rural/Metro wasn’t. AMR had also set aside another $250,000 to reimburse other cities, said Acting County Executive Gary Graves.
But the issue for supervisors, including Gage, is the cost to those who need ambulance service.
According to Gage, AMR’s prices had become untenable. The firm proposed raising prices from $35 a mile to $90 a mile for patients, he said.
“It’s more than double,” Gage said. “And that’s a big deal. You’re paying that even if you have insurance. We have to look at it from a business point of view: If somebody else can do a good job for a lower price, I’d go with them.”
Rural/Metro has agreed to keep the cost for patients at $35 per mile.
That’s more important than reimbursements, says Gage, adding the county does not favor reimbursements of this kind.
According to Josh Davies, standards manager of the County Emergency Medical Services Agency, reimbursements to cities are meant to offset costs for training paramedics. Reimbursement costs for Gilroy also go toward firefighter/paramedic salaries.
Gilroy receives a reimbursement of $11,800 a month covering the partial cost for the city to have paramedics. Rural/Metro’s reimbursement money toward cities will not be established until the contract is drafted, but according to Haglund and Foster, Gilroy may be receiving more.
“We do get some reimbursements, and it is my understanding that under the new ambulance provider we may get more,” Haglund said. “The overall goal of Rural/Metro is to find additional means and methods to work with the first responders, which includes similar types of reimbursements.”
Jennifer Baker from the Gilroy Fire Department said ambulance provider reimbursement goes toward training and paramedic premium pay, which totals $10,179 a month. Firefighters trained as paramedics receive 11 percent more than base pay and support medics receive 6 percent more, Baker said.
There are currently five ambulance posts in the South County area. Gilroy’s main post, on the 7800 block of Church Street, houses three paramedics and three EMTs – two per shift.
Rural/Metro has proposed to increase the number of weekly unit hours from approximately 4,300 to 5,292, potentially putting more ambulances in South County.
“AMR uses a lot of part-time personnel, said Davies. “Rural/Metro uses all full-time people and a lot more units on the road.”
In its proposal, Rural/Metro said it will hold a job fair. It also stated salaries will rise $2.09 an hour for paramedics and $1.43 for EMTs. This will mean Paramedics will be getting $27.70 an hour and EMTs, who are not authorized to give shots or intravenous lifelines, will earn $18.99.
San Jose is skeptical AMR’s paramedics and EMTs will be taken on by Rural/Metro and, more importantly, doubt a company saddled with debt will be able to have all the employees they propose. AMR staff employs more than 450 full-time and part-time paramedics and EMTs.
“(City) staff who did the analysis said they were laying people off,” said McGurk.
The San Jose staff report analysis was based on other companies with negative equities, such as Ford Motor Company and Amazon.com.
“Ford is a company that has had negative equity,” it stated. “How have they mitigated their losses? … To deal with their losses, Ford laid off 30,000 workers and implemented a plan to shut down 14 plants over seven years.”
Gage said the firm promised it would keep the employees, and the county will make sure this is a part of the contract.
According to Graves, the contract will be signed within the next two months.
“They’re our employees and we would want to have them,” he said. “The headquarters are in Arizona. Employees from there would not know the area. The people that work here do. We’re going to monitor that very closely.”
Moreover, Santa Clara County’s review has shown the firm can pay back the debts, Graves said.
“The question is, do they have to wherewithal to pay the debt right now,” he said. “When we looked at the cash flow, it was clear they had the wherewithal to cover their debt and fulfill the promises they made.”
Even though Rural/Metro has reported a 7.9 percent growth in net revenue compared to fiscal 2009, Graves acknowledges the company’s past financial instability prompted county officials to look closer at the figures.
“They do have issues,” he said. “But there’s an explanation. Years ago, their strategy was to grow by acquisition and, in some cases, it didn’t work out.”
In the 2007 fiscal year, Rural/Metro reported a $1 million net loss, and some of the money generated from its business was to be used to repay the debt, according to a March 2008 story published in the Arizona Republic.
A few other warning flags in Rural/Metro’s past include a fraud lawsuit from investors who accused the firm of artificially inflating stocks and negotiated settlements with federal investigators over billing practices in Texas and South Dakota, according to the same newspaper.
Rural/Metro didn’t admit any wrongdoing but had to pay $3 million in settlements.
Gage said Rural/Metro would take over on July 1. Though a contract with Rural/Metro is likely, it’s not a done deal, Gage said.
“When we negotiate the contract, we’re extending AMR,” he said. “If (Rural/Metro) doesn’t give us what they think we need, or if we find something out in the interim, we’ll go back on this.”