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?