A Fire Department program on life support

Tuesday night, former IAFF Local 689 president and current fire chief Mike D’Orazi is scheduled to appear before Council to get the “basic life support ambulance transport” program run by the fire department moved from “pilot” to “regular” – i.e., from “temporary” to “permanent” – status.

Not to be confused with “advanced life support” – you know, when an ambulance, always accompanied (at least in Alameda) by a fully staffed fire truck, responds to an emergency medical call – the BLS transport program provides an ambulance for “inter-facility transports,” like schlepping a patient from the hospital to a nursing home.

The Merry-Go-Round has absolutely no doubt that Chief D’Orazi will get his wish.  Indeed, the only issue will be which member of Council is most extravagant in endorsing the proposal.  (We’re betting on Stewart Chen, D.C.)

But here’s a question we think should – but won’t – be asked:

Just what is the City of Alameda doing in the BLS transport business anyway?

Back in February 2012, Chief D’Orazi proposed that the fire department begin a “pilot” BLS transport program using a “reserve” ambulance and employing six part-time EMTs.  The program would be run out of Fire Station No. 4.

The BLS transport program wasn’t proposed as a response to a pressing public need, since, as the staff report noted, seven private ambulance companies already offered the same service in Alameda.  Nor was it put forward as a way to reduce health-care costs for ill or infirm Alamedans, since patient charges are based on reimbursement rates set by government and private insurers.

No, the major selling point for the BLS transport program was that it would make money for the City.

The staff report contained two years worth of revenue and expense projections, which Chief D’Orazi told Council were “conservative.”  In the first year of operations, fiscal year 2012-2013, the program would generate $342,911 in revenue and incur $270,032 in expenses – for a net profit of $72,879.  Assuming a second ambulance was brought on line in the second year, FY 2013-14 would be even better:  $488,221 in revenue and $269,368 in expenses for a net profit of $218,853.

Both Chief D’Orazi and City Manager John Russo assured Council that, if the pilot program didn’t perform as promised, “we’ll pull the plug.”

Staff didn’t really have to make much of a sales pitch to get a Council majority to authorize the “pilot” program, since Mayor Marie Gilmore, Councilwoman Lena Tam, and Councilman Rob Bonta all had ridden the firefighter’ union truck into office in the last election.  And, indeed, Mr. Bonta, who was serving out his Council term after announcing his candidacy for State Assembly, was especially enthusiastic:  “I’m very excited about this program,” he said.  “It’s something members of the fire department have been talking about for some time.”

So how have things turned out?

In October 2013, with the books closed on fiscal year 2012-13, staff reported to Council that the BLS transport program actually hadn’t earned the profit projected for its first year of operations.  In fact, the program had barely broken even:  Revenue – including amounts billed but not yet received – was more than $100,000 short of the forecast, and expenses were higher.

But the staff report had an explanation:  “delays” in the Alameda Health Care District contract.  Apparently, Alameda Hospital hadn’t gotten the message that it should give the fire department all of its BLS transport business; it continued to employ private ambulance companies as well.  But staff assured Council that this wouldn’t happen again.  The City had gotten the Health Care District to sign a contract making clear that the Hospital was obligated to call the fire department first for every BLS transport.

Had this “delay” not occurred, the staff report said, the BLS transport program would have made money in FY 2012-13.  So now it was time to expand the program by leasing a brand-new ambulance and hiring two more part-time EMTs to staff it.  True, this would add nearly $100,000 in expenses, but the additional revenue would be worth it:  For FY 2013-14, the report projected $438,900 in “payments received/pending” and $321,652 in expenses – a profit of $117,248.

No one on Council asked why the FY 2013-14 profit projection was about half the original forecast, with lower revenues and higher expenses.  Indeed, no one on Council asked questions at all, since the item was placed on the consent calendar.  With Councilman Doug deHaan and Councilwoman Beverly Johnson now off Council and IAFF Local 689 endorsees Marilyn Ezzy Ashcraft and Dr. Chen taking their places, there undoubtedly was nothing to discuss.

So how has the expanded BLS transport program performed?

Well, it’s harder to find an answer to that question than we supposed.

Here’s what the staff report for Tuesday’s meeting has to say:

Revenue and expense data from the two-year pilot period demonstrate that the Program is financially sustainable. Expenses are covered by revenue received and anticipated. Revenue projections are based on transports billed and a realistic estimate of payments pending from third party payers. Using service trend data from the two-year pilot period, tracking the rate at which reimbursements are received from third-party payors, and accounting for course corrections such as an additional ambulance and increased services, the Department has determined that a positive net operating income is realized with the current operations of the Program.

Hey, wait a minute.  “Financially sustainable”?  What does that mean?  Expenses “covered by revenue received and anticipated”?  How can you pay bills due today with revenue “anticipated” in the future?  And what happened to all those expected profits?

The PowerPoint presentation that Chief D’Orazi is scheduled to give Tuesday night provides more details.  It contains a chart showing revenue and expenses for the two-year pilot.

But the chart is hardly reassuring.  For FY 2013-14 (apparently year-to-date, since the fiscal year doesn’t end till June 30), total expenses are $291,567 and revenue is $201,911, resulting in an $89,656 net operating loss.  For “12/13 and 13/14” (apparently covering the period since inception), total expenses are $388,241 and total revenue is $384,033, resulting in a $4,208 net operating loss.  (Based on these figures, it appears that the program made some money when it operated one ambulance and began losing money when it went to two).

This is a far different picture than Chief D’Orazi gave Council back in February 2012 when they approved the BLS transport program or back in October 2013 when they OK’d expanding the program.  It sure looks like an enterprise projected to contribute nearly $300,000 (February 2012) or more than $100,000 (October 2013) to the General Fund instead has cost the City money to operate.

But hang on!  Right below the “net operating income” line on the chart is another item called “balance revenue due (45%).”  If you add the numbers on this line to net operating income, the losses turn into profits.  The “potential net operating income” becomes $55,536 in FY 2013-14 and $166,221 since inception!

What’s that all about?  We wondered, too, so we asked Finance Director Fred Marsh, who referred us to fire department administrator Maria Raff.  Ms. Raff was kind enough to explain how the department ”tracks” payments received from insurance companies. If the payment relates to services provided in FY 2012-13, it’s counted as “revenue” for that year regardless of when it is received.  So if a check comes in today for a transport made before June 30, 2013, staff goes back and adjusts the FY 2012-13 revenue total to include it.  A similar process will be followed for FY 2013-14 revenue.

Now this sounds to us like a mishmash of cash and accrual accounting, but if the methodology was approved by Mr. Marsh, who finds a way every year to make the General Fund budget balance (almost), we can hardly quibble.  Even so, the bottom line is that no one can say for a fact how much money the BLS transport program has made or lost since it began in July 2012.  It all depends on how much of that “balance revenue due” item eventually comes through the door as cold, hard cash.

This may explain the weaselly language in the staff report.  To some, having precise information about actual operating results would be important to the decision about whether to make the BLS transport program permanent.  But we doubt this Council will care.

Remember how Chief d’Orazi and Mr. Russo told the prior Council that they would “pull the plug” on the program if it failed to deliver the financial goods?  That was never going to happen.  The Chief and City Manager may have called it a “pilot” program, but, being run by the fire department in a city where Fire Knows Best, it was running on auto-pilot from the day it was approved.

And maybe operating results shouldn’t matter after all.  When the BLS transport program was proposed, Mr. Russo declared that, “the challenge that faces Chief D’Orazi and many fire departments in the modern environment is to diversify the service.”  The BLS transport program was the first step, he said, toward “mov[ing] away from the very single-minded fire and rescue operation and provid[ing] a more multi-lateral set of services.”

Maybe Mr. Russo is right.  If the BLS transport program can be deemed successful – however the politicians and staff choose to measure success – it would encourage Chief D’Orazi to look for ways to “diversify” the fire department even further.  Opportunities abound.  Indeed, we hear the Rockefeller Foundation is handing out money to start a “resiliency” program.

Sources:

February 7, 2012 staff report: 2012-02-07 staff report (BLS)

May 21, 2013 staff report: 2013-05-21 staff report (BLS)

October 1, 2013 staff report: 2013-10-01 staff report (BLS)

June 17, 2014 staff report: 2014-06-17 staff report re BLS

June 17, 2014 staff presentation: 2014-06-17 staff presentation re BLS

About Robert Sullwold

Partner, Sullwold & Hughes Specializes in investment litigation
This entry was posted in Budget, City Council, Firefighters and tagged , , , , , , , , , , , , , . Bookmark the permalink.

2 Responses to A Fire Department program on life support

  1. Denise Lai says:

    again, THANK YOU for your article on this. Fire does not need to diversify. Ever. They need to unskew staffing and fire service strategies, bringing them in line with national standards, optimizing tax-payer paid city services for what’s needed: some fire, but most calls are medical. Other fire departments adapt and optimize specifically for the services the residents need. Why doesn’t ours? Oh, that’s right: our city council optimizes for fire staff salaries . . .

  2. Steve Gerstle says:

    In the end, the AFD will go the way of Alameda Hospital. It simply will not be able to provide the level of service using high tech equipment that is needed in the 21st Century. We will chew through a lot of tax dollars before accepting the inevitable. The day will come that we will join with San Leandro, Dublin, Newark, Union City and Emeryville in Alameda County Fire. Alameda County Fire clearly states why:

    “Why is it a benefit to receive service from the ACFD versus our own fire department?
    Increased depth of services; decreased costs to the economies of scales; access to specialty services that jurisdictions cannot maintain on their own (i.e., Type 1 heavy rescue, Type I hazardous materials team); benefits of a regional provider with an identity and involvement of your local fire department.”
    http://www.co.alameda.ca.us/fire/faqs/#03

    Hopefully we will make the change before taking on yet another never ending parcel tax.

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