Fennell Wasmund

C. Clark

ELY- The Ely-Bloomenson Community Hospital once owned the local ambulance service here but gave it up over financial concerns. Yet a recently completed study suggests that the most cost-effective future for area ambulance services may be for the hospital to return to the emergency medical transport business once again.
That’s the conclusion of the analysis undertaken late last year by SafeTech Solutions, a consulting firm specializing in rural EMS. Hospital officials hired the company to study ways to improve the troubled finances of Ely’s ambulance service and explore ways that a regionalized approach could provide a solution for services in Tower and Babbitt as well.
SafeTech presented their results at a two-hour public meeting last Thursday at the Ely Senior Center. The consultants outlined three possible scenarios, but said they favored the one that calls for a unified regional system that would combine the Ely, Tower, and Babbitt ambulance services. They argued that creating one large EMS system could reduce redundant costs while maintaining or even improving on the level of service. The consultants also concluded that hospital ownership of a regional EMS was the most cost-effective business model of all those they studied.
The consultants and Ely-Bloomenson CEO Patti Banks acknowledged that the study results were not the end of the discussion but were intended as a starting point for further conversation.
Officials in Tower, several of whom attended last Thursday’s presentation, expressed interest in exploring the regional concept further. The Tower Area Ambulance Service has faced operational deficits in recent years, funding gaps which taxpayers in Tower have had to fill.
“I thought it was a great idea,” said Tower council member Kevin Norby, who has served on the city’s ambulance commission for the past few years. “I would like to see the communities get together and take it seriously.” Norby acknowledged there are many important details that would take time to work out, such as how such a regionalized service would be funded. “I would love to see the spreadsheet they used to test out the numbers and the assumptions,” he said.
The study
The Ely hospital’s board of directors had grown increasingly frustrated with the operations of the local ambulance service, which was spun off as a nonprofit after the hospital opted out of the service more than a decade ago. So, last August, the board voted to hire SafeTech Solutions of Isanti, Minn. to offer recommendations on “how to set up an ambulance service for success.” At the time, Banks told the members of the Ely Area Ambulance Joint Powers Board that the study would “look beyond Ely for that answer, potentially encompassing other area services in northern St. Louis and Lake counties.”
Safe Tech interviewed and gathered data from the ambulance service in Ely, as well as Tower and Babbitt.
Ben Wasmund, who gave the bulk of the presentation last Thursday for SafeTech, said the firm looked at five-years of data for all three ambulance services and interviewed “20 to 30 people a day” over three days last fall. They collected information on staff rosters, experience, certification levels, service areas, call volumes, the types of calls, when those calls come over time, equipment, and finances. SafeTech also profiled the hospital’s needs for EMS, such as patient volume, the number of calls received by EBCH and the volume of transfers to other hospitals.
Wasmund acknowledged that the information collected wasn’t perfect, or as complete as they wanted. For example, Wasmund explained, one of the services changed its billing company shortly after the study was commissioned. “The previous billing company that had five years of data wasn’t willing to share data with us because (the ambulance service) wasn’t using them anymore.”
Another service did not provide five years of data so the consultants had to rely on the information they collected during interviews. After gathering data, SafeTech took the information and built a profile of EMS in the area covered by the Ely, Tower, and Babbitt ambulance services.
Based on the 2023 data, the three services saw 1,620 emergency dispatches combined, or an average of 3.6 calls per day. Ely experienced 1.5 calls per day on average, Tower had 1.3, and Babbitt had 0.8. The Ely hospital requested a total of 292 transfers, about two-thirds of which were handled by Ely.
Wasmund added one chilling statistic, “11 percent of the patients in this area that needed ambulance transport had to be sent by (personal vehicle) due to the lack of an ambulance available.”
SafeTech emphasized that the way ambulance services are paid is at the heart of the financial woes for small town and rural EMS. Emergency calls are only reimbursed if they deliver a patient to a hospital, a fee-for-service model that may have worked 20 years ago, but no longer covers the total cost of equipment, training, staffing, and federally mandated on-call readiness. In rural EMS, where call volumes can be low, the cost of readiness can be disproportionately large compared to the amount a service can bill.
While transfers are typically profitable for most area ambulance services, that hasn’t always been the case for Ely, which is charging less than the national average for transfers, leaving some badly needed revenue on the table. At the same time, transfers in the local area are often to a facility 100 miles away, which can take an ambulance effectively out of service for emergency calls for four or more hours.
The results
SafeTech found that local ambulance services are facing many of the same problems that rural ambulance services have throughout the nation— including declining volunteers, inadequate pay, evolving federal standards, and a broken fee-for-service model that doesn’t cover the real costs of providing ambulance coverage in service areas with low population density.
Regardless of which of the study’s three scenarios, if any, is eventually adopted, Wasmund pointed to challenges that are complicating the search for solutions. First, he said, “the tense and often confrontational relationships between some of the stakeholders is likely the single greatest challenge facing the current system and the development of a future system.” He said such contention over EMS is not limited to the Ely, Babbitt, and Tower service areas, but is something they witness when working with clients across the country.
To move toward success, Wasmund said stakeholders must come together and agree on a model that can provide it. “There’s a lack of consensus around the specifics of EMS in northern St. Louis and Lake counties: who funds it, who ensures the provision of services, who governs it, and who operates it,” he said.
Once a new model is agreed upon, Wasmund said it should incentivize participation and not fund any service that chooses not to join. The adoption of the system must be planned, and the participating ambulance services must be supported during the transition. “You must assist unsustainable services in meeting immediate needs.”
Finally, said Wasmund, “Interfacility transfers must be prioritized, valued, staffed, and resourced at the same level as 911 response.” SafeTech identified transfers as lost revenue for local EMS because of northeastern Minnesota’s specific regional conditions. Capturing all the transfer volume and charging adequately for them was a large piece of the firm’s recommendations.
A regional system
SafeTech’s first scenario was to combine the three Primary Service Areas into one regional system, with seven ambulances distributed in three stations at Ely, Babbitt, and Tower. Four of the ambulances would be advanced life support rigs on duty around the clock, staffed with a paramedic and an EMT. Because this scenario uses full-time professionals without staff on-call, it has the highest yearly expenses, estimated at approximately $1 million per ambulance.
SafeTech argued that such a regional system would eliminate duplication of equipment, staff, and services, thus saving money at a time when federal reimbursements are falling and expenses rising. Putting all the EMS staff into one system would eliminate the competition between the ambulance services and the hospital for the same pool of EMS staff.
To make a regional system “sustainable,” Wasmund said, it should receive all the 911 calls and transfers in the service area and charge rates that maximize revenues. In comparing northeastern Minnesota rates, local EMS currently charges 30 to 60 percent less than national averages.
SafeTech preferred this scenario above all others. The staffing and resources of a regional EMS would cover demand “for some time” into the future, including the current burden of transfers.
The catch to the first scenario is that the hospital must own the regional EMS system to maximize cost savings. SafeTech suggested that ownership by a federally designated critical access hospital could exploit a potential loophole in the Medicare reimbursement rules which would allow hospitals to recover 101 percent of the costs of running an ambulance service.
The switch from fee-for-service to cost reimbursement would allow recovery of the expense of transfers, and generate a small but positive return. If a regional EMS system was unable to take advantage of the 101 percent reimbursement, it would lose around $1.4 million annually according to SafeTech’s financial models.
Nick Wognum, clerk for the Ely Area Ambulance Joint Powers Board asked what the profit would be with the 101 percent cost reimbursement.
“Our number was $50,000 to $75,000,” Wasmund responded.
The other two scenarios
The other two scenarios were scaled down versions of the regional system model. Scenario two used two advanced life support ambulances in Ely, a paramedic in a quick response vehicle, and basic life support ambulances staffed with EMTs in Tower and Babbitt.
This scenario was slightly less expensive, costing $3.5 million annually, with a loss of around $833,000 if the owner of the EMS system could not take advantage of the 101 percent reimbursement for critical access hospitals. The biggest downside was that “you lose the timeliness of paramedics to the areas of Tower and Babbitt.”
The third scenario, which was the cheapest, most profitable, and perhaps the most unrealistic option retains a similar level of service in Ely, while replacing fully staffed basic life support ambulances in Tower and Babbitt for ones staffed with part-time and volunteer staff. This scenario does not address the timeliness of paramedic response to Tower and Babbitt, nor does it address the challenges of finding volunteers and staff willing to work on an on-call basis. It’s upside was that it was the least expensive option, with expenses of approximately $2 million and a positive margin of $547,211 without the need to take advantage of a 101 percent cost reimbursement.
SafeTech did not present numbers for whether scenarios two and three would be in the red or the black if a new regional EMS system could take advantage of a 101 percent reimbursement rate instead of the current fee-for-service billing.
The caveats
All three of SafeTech’s scenarios were built on one model: that of one large, unified EMS system. The consultants did acknowledge that even with a 101 percent cost reimbursement from Medicare, all of their scenarios might require addition subsidies from the area’s communities.
Thomas Fennell of SafeTech presented detailed financial results. He explained that their financial modeling used the same assumptions for all the scenarios. That included the cost of an advanced life support ambulance at $1 million/year, a basic life support ambulance at $734,000/year, and starting wages for EMTs at $19.25 and $25.75 for paramedics with a 30 percent additional cost for benefits.
The assumptions also included rates of $1,500 for a basic life support ambulance 911 call and $2,500 for an advanced life support 911 call. Transport mileage was billed at $40/mile. Administrative costs were calculated at 25 percent of expenses, though Fennell did not clarify if that was 25 percent of total expenses or 25 percent of non-administrative expenses.
The 101 percent reimbursement
The largest caveat was the assumption that the hospital could convert the locations of Tower and Babbitt EMS into remote stations that would be exempt from the 2006-2008 Medicare rules change that caused EBCH to divest itself of the Ely ambulance in the first place. The regulation specifically disallowed the 101 percent reimbursement rate if another ambulance service was closer than 35 miles from a critical access hospital like Ely’s.
The SafeTech consultants presented the remote stations as one unified EMS system in Tower and Babbitt as a way to get around the 2008 regulations. The loophole would use the hospital location in Ely as the address of the hospital-owned EMS to establish the 35-mile limit, and not the remote stations in Babbitt and Tower.
SafeTech did not provide evidence that this was a workable loophole, nor did they present any legal opinion on the viability of the potential loophole. The consultants did not give any examples of whether any other critical access hospital had successfully used such a way around the federal regulation.
Study results not released
Those who could not attend the Thursday, June 13, meeting currently have no way to view the presentation by SafeTech other than reading about it in the local press. Both area newspapers requested copies of the study ahead of the presentation. Such studies are commonly made available to news services and other stakeholders when requested.
But Banks told the Timberjay that the printed report was not available because of confidential information. She said even a redacted version of the report would not be made available without approval of the hospital board. The Timberjay and the city officials in Ely both requested a copy of the slide stack from the presentation after the meeting on Thursday, but Banks again said she would need approval from the hospital board before releasing the materials.
What’s more, Banks told Todd Crego of Ely Area Television that he could not broadcast or record the meeting. City staff had asked Crego to record the meeting so it could air on the local access channel, but Banks wouldn’t relent.
The meeting was well attended by local elected officials from Ely, Morse, Fall Lake, and Winton, as well EMS professionals from Babbitt and Tower. At least one ambulance service felt that it wanted more detailed information.
The board of the Ely Area Ambulance Service met on Monday. Board chair Chuck Novak told the Timberjay, “We didn’t talk much about the presentation … We have more questions than answers right now. We feel we need more data because that was not there [at the presentation]. About the 101 percent reimbursement — it sounds good but we have questions. It’s a dilemma but we will continue to provide the ambulance care we can. This is about patient care and that should never be political.”