At the October 2, 2017 Board Meeting, Staff proposed that the Village’s ambulance transport fee be increased.  The increase was proposed in order to bring the Village’s ambulance fees more in line with average municipal rates.  The fee increase would also mitigate a budget gap caused by the State’s recent fiscal actions which resulted in a reduction in the Village’s revenue stream of over $900,000.  At that meeting, there were a number of questions posed by the Trustees which Staff will attempt to address in this report.  These questions included a clarification of whether such an increase would affect Arlington Heights insurance rates, a request to estimate the cost of providing ambulance services, an outline of efforts that could be taken for non-resident financial hardships, and consideration of reducing the proposed fee amount.

Arlington Heights Insurance Rates

Staff spoke with John Herr who is the Regional Vice President for Hub International, the Village’s Health Insurance Broker.  Mr. Herr used to be employed by Blue Cross/Blue Shield of Illinois as well.  He indicated that an increase in ambulance fees would not impact the insurance rates of Arlington Heights residents.  He said that insurers set a maximum claims allowance for every procedure type by CPT code, and that rates are based on the assumption that every health care provider will charge the maximum allowance for each of their services.  The current maximum allowance for ambulance calls for most insurers is a bit higher than what is currently being charged by private ambulance services ($2,300 to $3,000).

Estimated Cost of Ambulance Transport Services

While it is difficult to pull the cost of each ambulance transport out of the cost of running a Fire Department, we do know that the costs for running a Fire Department with EMS services are on the rise.  We have increased Advanced Life Support services by training more of our Firefighters as Paramedics, we have spent over $200,000 in stretcher loading systems that are safer for patients and reduce Firefighter injuries, and we continue to find ways to improve response times to all corners of the Village.  With the recent addition of facilities like Autumn Leaves, Waverly Inn Memory Care, and Transitional Care, and expansions at the Lutheran Home and the Moorings, calls and costs will continue to rise.

We have always been proud that we are one of the most efficient fire departments in the northwest suburbs.  We are proud of the services we provide and the way we provide them.  What we are asking for is an increase in our ambulance fees that will help the Village continue to fund the Fire Department in a way that will allow us to continue providing the best fire and ambulance services to the community.

We have taken a hard look at industry trends, and it appears that $1,500 is a fair price for the emergency medical services we provide.  It is in line with what other fire departments charge, and $1,500 is less than what private ambulances (who can schedule their services, or choose not to accept calls) often charge.

*Ambulance billing generated $1.7 million in revenue in 2016.

One way to estimate the “cost” to provide ambulance transport services is by calculating what private ambulance providers charge, less a profit margin.  Private ambulance providers generally do not answer calls for emergency services, and as a result the average pay for a private service Paramedic level is substantially lower than a trained municipal Paramedic.  Even with these differences, the average ALS2 transport fee is $2,347.  If a private ambulance company’s profit margin of 15% or 20% is taken out, the net cost for ALS2 transport services comes to around $1,900 to $2,000.

Another way to estimate the cost for Arlington Heights to provide ambulance services is as follows:

$22,440,000                FY2018 Proposed Fire Department Budget

                                    Less;

      (175,000)              Public Training Salaries and Wages

        (55,400)              Special Detail

        (48,200)              Equipment Maintenance

        (12,700)              Firefighter Training

          (3,000)              Training

       (538,000)             Vehicle Lease Charge (60% Fire Vehicles)

         (31,300)             Petroleum Products (50% Fire Vehicles)

         (68,500)             Small Tools

          (2,500)              Books

          (5,600)              Public Education Materials    

            $21,499,800                Net Budget, Less Fire Costs

$21,499,800 divided by 10,000 service calls equals about $2,150 per call.  This includes all calls for service.  Of this amount, only about 5,200 calls result in an actual ambulance transport.

Reduced Net Cost to Village Residents/ Non-Resident Financial Hardships

While $1,500 is a substantial increase, we are also proposing a change in the way we charge our residents.  We acknowledge that the taxpayers of Arlington Heights already contribute toward fire and emergency services, therefore, the Village will not charge Arlington Heights residents for any out-of-pocket expenses such as deductibles or co-pays.  The Village will accept insurance and Medicare or Medicaid as full payments for residents with an Arlington Heights address.  No action is required for a resident to benefit from this policy. This would reduce to zero the out-of-pocket costs for Arlington Heights’ residents.

Non-residents would be expected to pay the full fee, however, the Fire Department will continue to take a compassionate approach toward collection of those fees by using one of the many need-based protocols: 

·       Hardships and write-offs - When patients call to ask to have a bill waived, there are several options available to them, and these rules can be established through our billing agency.

o   Medicare and Medicaid set maximum billable rates for ambulance transports.  Any amounts billed over the limits are automatic write-downs that the patient will not have to pay.  Non-resident patients or their supplemental insurance carriers may be billed for their portion of the maximum.

Example:  A healthcare provider bills $1,500, but the Medicare maximum is $450.  If the patient’s Medicare plan is 80/20, the provider would collect 80% of the $450 and can only balance bill 20% of $450 to the patient or the patient’s supplemental insurance carrier.

o   Hardship – If a patient is claiming hardship the patient is currently turned over to the Emergency Assistance Program in Arlington Heights.  No action is taken on the bill until the billing company hears back from us. 

o   Hospital Hardship Letters - If patients provide a letter from the hospital they were transported to, stating they meet specific hardship criteria, we will provide the same discounts or write-offs as the hospital on their ambulance bill.

o   Pre-Collection Review - If a bill goes unpaid, it may be sent to us for review prior to going to collections.   No action will be taken by the billing company unless directed by us.

o   Uncollectible – We may opt to not send bills to collections.  This is currently only done for homeless patients.

In regard to past collection actions during 2016, 447 resident accounts were sent to collections with gross charges of $179,000.  During that same time period 252 non-resident accounts with gross charges of $151,000 were sent to collections.  It should be noted that gross charges don’t reflect actual cash received from collection attempts.  According to Andres Billing Services, actual cash receipts come to about 10% of the gross charges.  Under the new proposed system, resident accounts would no longer be sent to collections as there would be no out-of-pocket costs.  Non-residents would follow the revised financial hardship approach shown above.

As we have said, we are extremely proud of our reputation and of the services we provide.  The Village has traditionally funded EMS Services with typical general fund revenues and a modest amount of ambulance fees. However the service and economic landscape are changing. Funding from the State of Illinois, which we have relied upon for funding services such as EMS, has been reduced. At the same time, the cost of providing EMS services has been rising, as has the demand from residents.  Given these trends, we believe an increase in ambulance fees to $1,500 and charging for mileage is fair and justified.  This is a reduction from Staff’s previous recommendation to increase ambulance transport fees to $1,800.  The Fire Department’s annual operating budget is almost $22,000,000.  Raising the ambulance fee to $1,500 is anticipated to add $960,000 to the $1.7 million that we currently collect.  Increasing the user fee is a way to shift a fraction of the cost off all the taxpayers and to require the users of the service to assume a fair and reasonable share of the cost.

Recommendation:

Staff recommends that the Village increase its ambulance transport fee to $1,500, add a mileage charge of $12 per mile, and waive deductibles, co-payments, mileage, or any other associated costs for Village residents.  This change would be effective for all ambulance services provided as of January 1, 2018.