Market illusory in ambulance case

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Market illusory in ambulance case

by Linn and Ari Armstrong

The following article was originally published by Grand Junction Free Press on April 17, 2006.

This column would be easy to write if the choice were between a free-market ambulance service and a government controlled one. Alas, the facts behind the Grand Junction City Council's vote to end an ambulance contract with American Medical Response (AMR) and put the city's fire department in charge of ambulance service are rather more convoluted.

Even though the service that AMR has provided often is called "privatized" service, because AMR is an independent company, AMR's ambulance service hardly constituted a free market. Instead, AMR has enjoyed an exclusive city contract and indirectly collected tax dollars for services. (Notably, Lifecare does also offer some ambulance services in town.)

Council member Gregg Palmer, also a member of the Mesa County EMS Council, e-mailed a helpful review of ambulance service here, which we'll summarize.

Palmer writes, "The county was given the jurisdiction by the State to license all ambulance providers in the County, so as to ensure wall to wall EMS coverage." Then Grand Junction was "afforded the opportunity to select its own provider" and offer an exclusive contract. Various cities in the valley agreed to offer wider coverage to assure "border to border, uniform service."

What happened is that the fire department generally would respond first and "stabilize the patient in the field." Then the fire responders "would hand off the patient to a second party (AMR) who would transport the patient to the hospital, bill the insurance company, and collect the revenue" for transport.

According to Palmer, as population increased the split-service system strained the fire department's ability to respond quickly to emergencies. He writes, "We had far too many occasions where a station was under staffed or out of service. We were responding to heart attacks in a pumper or ladder truck. Often there were two or three emergency vehicles at one scene."

Palmer believes the switch, along with more staff for fire, will result in less redundancy, more efficiency, and speedier service.

However, even Palmer admits this "efficiency" isn't such a great deal for the city: "Fire, EMS and Police are legitimate government services, that are typically not expected to be a break even operation. At the worst case scenario, it figured to $5.60 per person per year extra."

Mayor Bruce Hill believes, "This issue was never about quality of care, that already existed." Furthermore, he argues that the old system "was a perfect example of how both public and private can provide service to our citizens that keeps cost reasonable."

And council member Bonnie Beckstein writes in e-mail, "The fiscal accountability [of the new plan] was incomplete, the report from the fire department was still and is still under development." She worries that reliance on Medicare and Medicaid to cover ambulance costs may be a mistake: "My involvement with medical practitioners is that the funds are continuing to decrease with more baby-boomers aging and the increase of illegal aliens being served on the Medicaid policies." Beckstein agrees with Hill that "quality of service was not a question" with AMR.

Beckstein writes, "You asked why I chose to vote for AMR and against the City Fire Department [to provide ambulance service]; it is mainly because I belive it was what was best for the taxpayers."

We question the wisdom of dumping the contract with AMR in order to solve the problems of efficiency that Palmer finds. If the problem is make-work for the fire department, the solution is not to give all the work to the fire department. The solution is to change policies to limit the redundancy of response. Surely that could be accomplished without ditching the long-standing and apparently successful contract with AMR.

Ultimately, even though AMR's service wasn't really free market in nature, generally we can expect incentives with such contracts to keep costs down and quality up. We would even favor regular reviews and competitive bidding of such contracts, based on defined standards.

Come to think of it, if the city can contract out ambulance service, couldn't the city also contract out fire service? While politics always enters into bidding for tax dollars, competitive bids likely would keep prices low and quality high. If a single company could most efficiently offer both fire and ambulance service, they could reflect that in a better bid. (A discussion of the possibility of a strictly free market in emergency services lies outside the scope of this article.)

Many communities used to provide emergency services largely without tax dollars. For example, one of our grandfathers was active on the volunteer Palisade Fire Department for many years. That system is gone now. Palmer admits that, relative to AMR, the fire department will have "greater wage base" and retirement expenses. It sounds to us like the push to transfer ambulance service from AMR to the fire department has little to do with efficiency.

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