Thursday, March 28, 2013

American Ambulance Industry Cost Drivers Reported

The Other Side of the Equation
While this blog typically focuses on incoming revenue and everything ambulance billing, it certainly is a useful exercise to be aware of the costs that drive the American ambulance industry. Ultimately, costs determine our strategies for funding by whatever source in order to keep the wheels turning and the doors open.

Today’s blog focuses on “the other side of the equation” – costs.

To accomplish today’s goal, we thought it would be useful to share some of the findings of last year’s  2012 General Accounting Office (GAO) nationwide ambulance industry cost study, recently released by the Federal Government.

The Study

In October, as required by the Middle Class Tax Relief Act of 2012, the GAO undertook compiling the results of the study in an attempt to provide Congress with an update to the 2007 study which also looked at ambulance costs across the U.S.A.

The methodology came from the end-product of an April 2012 web-based survey of a sample invitation size of 294 ambulance providers of which 154 responses were accepted and considered valid as representative of the industry by the GAO.

Big Variation
The GAO reported finding that ambulance transport costs varied greatly across the country, ranging from $224 on the low end to $2,204 per run on the high end of the scale. The study ultimately focused on medians (not averages, as the 2007 study did.)

It was determined that the median per transport cost to provide EMS services in America is $429 per run with a projected overall median cost range coming in at between $401 to $475 across the board.

Urban/Rural/Super Rural
The sample showed a wide range of costs for urban ambulance providers versus rural ambulance providers versus super rural ambulance providers, as would reasonably be expected.

The urban providers who responded to the survey reported a median per trip cost of $397 per run with an estimated range of $374 to $410. Rural providers checked in with a range of $404 to $550 per trip and a median cost amount of $469.

Obviously, the super rural ambulance services noted their costs to be more, naturally including all sorts of extra cost centers just by sheer nature of their geographic “isolation.” These providers checked in with costs at a median amount of $545 and an estimated range from $445 on the low end to $639 at the top of the spectrum.

Contributing Factors
So, what drives an American ambulance company’s costs?

The survey showed three key factors as contributing to the variation in costs across the board. Those factors were the Volume of Transports that an ambulance service experiences (more runs, more staff, system utilization…), Type of Service (ie. Emergency versus Non-Emergency) and finally the Level of Government Subsidies received by individual ambulance services.

These items were noted by the survey participants to be the major contributing cost centers encountered by ambulance services in the U.S.A., globally. 

We really find no surprises, here.

We were surprised to learn of items that the study determined not to have more than a small effect on the variation in costs. Those items included: Level of Service (ALS versus BLS), Use of Volunteer Staff, Service Area and Type of Ownership.

In our opinion, the first two factors have a more direct impact than we believe the study sifted out.

Anyone in the business knows that ALS providers cost more than BLS providers, as does the equipment they are required to carry. So I find the conclusion that Level of Service has minimal impact on an ambulance services' costs to be questionable.

How the use of volunteer staffing versus paid staffing can be determined to have no major impact on variations in cost just blows my mind! Common sense would indicate that there is additional cost for payroll versus the no payroll scenario in the full or blended volunteer-based world.

I can understand that service area is service area, however living expenses would seem to drive wages and wages are costs– the biggest cost as we’ll report later.

Finally, there’s type of ownership, and this we won’t debate. Costs are costs. Whether a volunteer board or a private owner runs the company, it would seem logical that costs can be the same in either world.

Personnel is Top Cost Center
It’s no surprise that personnel costs were found to be the top cost center identified by the survey. Sixty-one percent (61%) of the average ambulance provider's costs were determined to come from personnel costs as a result of the sampling.

The next highest contributor category didn’t even come close in magnitude, as overhead/administration proved to account for about 11% of the costs to operate an EMS service. Vehicle costs (excluding fuel) and a lump category encompassing medical supplies/equipment and communications each accounted for 7% of the average costs to provide EMS services within the survey. 

Rounding out the remaining cost contributors was building and facility costs (5%), miscellaneous/other (5%), and fuel (4%).

How Does Your Service Compare?
All of this means nothing until you compare the results with what your ambulance service is experiencing.

So, how does your service compare?  Do you know?

It’s important for you to know, especially when compared to the reimbursement and funding trends in your particular location. One key factor to always keep an eye on is the rate of your costs and how they inflate over time compared to the rate of how your funding is flowing.

If your costs are inflating faster than the amount of funding you are taking in to cover those costs, then it’s time to consider what to do to add to the funding equation or take measures to subtract from the cost side of your business.

It’s basic math. You need to know what’s going on behind the scenes at all times.

Data Availability
Do you have all the data available to you that you need to understand what’s going on with your service’s equation?

Enhanced clients have multiple reports available to them using our unique Internet-based On-Demand reporting capability. Our clients can track their incoming reimbursement levels and result of their ambulance billing program.

However, you will still need to collect data regarding any public funding you may receive, funding from subscriptions and/or donations, grant money, etc.

On the cost side, those line items should be tracked closely, preferably using a computerized method to efficiently categorize and easily report the various cost centers for easy review.

Can We Help?
Enhanced is here to help. Contact us today and we can discuss how our highly-acclaimed billing services and easy-to-use reporting capabilities can assist you in making sense of your service’s financial equation.

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