Take a closer look

I’ve already written about why I feel that waiving the town’s Procurement Policy was both improper and unnecessary.  But there’s more to the story.  By negotiating with the current ambulance provider, bringing his terms for renewal to the board, and asking that they waive the policy and accept sole source renewal, the Town Manager had already violated the policy.

The whole thing was presented as a choice between sticking with Stewarts without bidding, creating a town run ambulance capability, or going in with Tuftonboro on a shared contract.

I’m not promoting a town run service.  I’m sure it’s complicated and the private sector has many advantages, but the argument presented against it was – silly.  The amount of the subsidy that the town pays in the ambulance contract was compared to the combined payroll expense for four dispatchers at the fire department.  Does anybody think that’s a thorough analysis?  Does anybody think that’s an analysis at all?

The town subsidizes the ambulance service.  The amount we pay them is intended to make up the difference between what they get paid by insurers, including Medicare, and what it costs them to do business.  The idea is that the town wants to exercise some degree of control over the quality of service by requiring, among other things, that two ambulances are dedicated to the town and that they are available and staffed 24/7.

The real money in the business is in the cash flow of those payments for service.  So in broad strokes, the equation is subsidy + insurance payments > payroll + operating expenses + equipment depreciation.   To do the comparison right, the Fire Chief would have to research what others have done, the cost of equipment, and get someone with a business acumen – that probably rules out our Town Manager – to make a fair assessment.

So how much money are we talking about with the insurance payments?  Well, let’s take a look at the presentation by the representative of Stewarts.  He says that they need a 13% increase in the subsidy because Medicare has reduced payments due to the sequester.  OK.  Let’s cut him some slack and say that maybe only 10% is due to the sequester and that they need and deserve 3% to cover other increases in costs.

Are you following me?  I’m using round numbers here to make it easy.  A 10% increase in our subsidy is about $20,000.  Effective April 1, Medicare reduced payments to providers by 2%.  So if you divide $20K by 2% you can see that the 10% increase will cover the reduced payments on $1 million in Medicare payments.

Do you think that Stewarts does $1 million worth of Medicare business in the town each year?  What proportion of their business do you think is medicare?  Say it’s half (I doubt it), but that says they do $2 million in billing.  With the town’s subsidy, that’s $2.2 million on the revenue side of the equation.  Still looking like a bad business at an estimated $200,000 in payroll expense?

Of course, I don’t believe they do anywhere near $1 million in Medicare business.  My point is that the Town Manager doesn’t seem to know anything about it and comes to the Selectmen’s meeting with a lame proposal, without any analysis, and hardly in command of the facts of the current contract.  He then wants to waive the standard procurement process and give Stewards everything they want.  One Selectman even suggested that they sign up for five years instead of three.

I can understand the Selectmen flubbing this issue.  They are not business people.  That’s why we have a well paid management professional.  Does anybody think we’re getting our money’s worth?

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8 Responses to Take a closer look

  1. Walter Spellman says:

    Bob,
    Thanks for the overview and applied logic. What concerns me is the precident being set here tucked behind a need for an “essential service”. Will this now lead to other negotiated agreements without going to market with an RFP or RFQ?

    You know Wolfeboro has had a Board of Police Commissioners for years. Maybe it is time to think about expanding the definition and membership to become a Board of Public Safety Commissioners encompassing Police, Fire/Rescue and EMS with a cohesive overview of services current and future. In my opinion having a contract ambulance service report up through the Town Manager and Board of Selectmen, perhaps with some input from the Chief of Fire Services, leaves sommething to be desired.

    Finally, I would like to see a carefully vetted proposal to bring emergency ambulance service in-house as part of the Fire/Rescue Service. It would be helpful if the Town Manager, or through the Wolfeboro Fire Chief ,gave a detailed report of the ambulance service dispatches over the term of the last contract to determine if it is even feasible to bring EMS in house and any cost/benefit analysis that could result in doing so. A number of nearby towns, including Alton, run their own “rigs” so reaching out to them could yield some initial insight.

    Take care,

    Walter Spellman

  2. Tom Bickford says:

    In analyzing what it would cost for the Town to take over ambulance services, Linda Murray left out that the fire department already has two to three full-time firefighter-EMTs on duty twenty-four hours a day, 7 days a week, capable of operating an ambulance. This is one EMT short of Stewart’s staffing.
    I’ve got no problem withStewart’s Ambulance getting the service, but I would expect the Board of Selectmen to thoroughly study the town’s options every five years before making a decision.

  3. Bob Tougher says:

    Bob

    You discussed Medicare reimbursement in your blog, but not reimbursement from private insurers, so I don’t know how that would impact your analysis.
    Our ambulance provider is an extremely important component of our public safety service, considering the fact that we have several senior citizen housing complexes, from apartments to our nursing home, and many schools in town. We also have a very active downtown core, especially in the summer season.
    I am convinced that setting up our own ambulance service would cost us far more than our contract with Stewart’s. A family health insurance policy alone in town costs some $25 thousand, not to mention salary, overtime,
    equipment, vehicles and a building for housing the operation. We all know how much it costs to either renovate or build new buildings, and maintain them.
    Setting up a joint operation with Tuftonboro would only be good for them, not for us, as they are not similar to us in the demographics I mentioned above.
    The Board of Selectmen made a very wise choice in re-signing with Stewart’s Ambulance. In this particular case, public safety trumps our procurement policy. The number one concern for any government is the protection of life!

    Bob Tougher

  4. wolfeblog says:

    Bob,

    Stewarts cited the Medicare reductions due to the sequester as the reason for the 13% increase.

    I didn’t say we should change the number or location of ambulance service. I think I said that the board came to a reasonable consensus on that.

    I’m not advocating that we look into setting up our own service. I think I actually said that private companies have advantages. My point was that if your going to talk about bringing it in-house, the payroll vs. subsidy argument was pointless. Similarly, I think that listing all of the expenses of operating a service without getting figures and estimating the revenue is an equally absurd argument. Look, it’s a serious move to bring EMT in house, and it would be a major undertaking that I doubt this town could do well. But rejecting it because you need equipment, a place to keep it, and EMTs with associated benefits is a pointless argument. You need to add the revenue side to make the financial comparison. That was my point.

    What does a family health insurance policy have to do with our subsidy of Stewart’s ambulance? Is the point that Stewarts doesn’t give it’s workers health insurance and the Town does? (I don’t know if that’s the case, I’m asking)

    I said that the board reached a reasonable consensus on not sharing with Tuftonboro. What’s your point?

    We’ll have to agree to disagree about the decision being public safety vs. procurement policy. I believe they can co-exist. But you are a good team player.

  5. Tom Bickford says:

    This comment was removed by request of the author.

  6. wolfeblog says:

    We have the Town Manager and BOS saying that they don’t want to go out to bid because they don’t want to end up with a company with a history like the one we have that magically transformed into a better company. They say that this is a much better price than any of the other towns have, yet they seem to be afraid that open bidding will result in a better price by another company. It just doesn’t make sense.

    I don’t think the town should be considering town run ambulance right now. It would be nice at some point if somebody did a credible feasibility study for the next time, but there simply isn’t time to make that kind of change. We need to contract that service, and the current provider is working out fine. My only issue is that it should be put out to bid, just to eliminate this kind of controversy.

  7. Bob Tougher says:

    I agree with Tom Bickford, in that the current provider, Stewart’s Ambulance, is working out fine. The Selectmen did the right thing, given our past problems with ambulance service in town. You guys should think about how much it would cost to create and run an ambulance service under the umbrella of the Fire Dep’t. Heck, our communications budget alone is almost $400 thousand a year.

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