The Tower City Council took an important step forward when it approved the development of a business plan for the city-run ambulance service. It’s critical information not just for the future financial success of the service, but to restore confidence among township officials in the department’s leadership.
It’s been a challenging period for the ambulance service as its expenses skyrocketed with the shift to paid on-call staffing. It appears last year’s record number of runs helped the service post a modest profit margin in 2019 despite those higher costs, yet it’s highly unlikely the service will achieve that number of runs this year. That was true even before the recent decision to halt non-emergency transfers for the time being. A decline in runs, in part related to the COVID-19 closures and stay-at-home orders, combined with the cost of paying for a new ambulance later this year, will almost certainly push the service’s budget deeply into the red in 2020.
The business plan, which is expected to include a cost-of-service analysis, utilization rate analysis, a monthly profit and loss analysis, and a cash flow, should, for the first time, give city and ambulance officials a clear understanding of the financial status of the service as well as critical guidance for future decision-making. City officials, without question, should have demanded that kind of information before approving the shift to paid on-call staffing in 2017.
The financial impact of that change will certainly be a key component of the business planning effort. While we have not opposed the use of some paid on-call staffing, the approach adopted by the former ambulance director was far more costly than necessary. Neighboring small ambulance services, like Cook and Orr, pay their paid on-call staff a modest stipend, around $2-$4 an hour, which is far less than Tower pays. The high wage paid by Tower is among the many reasons that the city would almost certainly lose a complaint under the Fair Labor Standards Act for failure to pay overtime.
The former city council approved the paid on-call staffing plan and pay scale based on promises made at the time that non-emergency transfers would easily cover the costs and generate even higher profits for the service than before. That never happened, largely because the non-emergency transfers proved to be not as lucrative as expected.
As a recent analysis by Tower Council Member Dave Setterberg revealed, those transfers generated about one-third the profits that had earlier been projected— and those profits disappear entirely once the depreciation cost on the ambulances is factored into the equation.
That’s where business planning comes in. If private individuals want to risk their own money on ventures without doing the hard work of truly understanding their revenues and expenditures, that’s their right to gamble. But when we’re dealing with public funds and the future of a critical city service, there’s no room for guesses or wild-eyed optimism.
The good news is, there is still time to turn things around, but only if the city starts making well-informed decisions about the future direction of the ambulance service. Developing a solid business plan is the first critical step down that path.