The Disagreeable Absence of a Free Lunch

While doing a project for a large county on the west coast a few years ago, I was told my job was to solicit input from all the stakeholders and design an EMS and trauma system the incorporated everybody’s wants. “After all,” the elected officials said, “it’ll just go on the insurance bill, and everybody wins.” Despite my objections, I went forth and undertook the task, put the system together and readied myself for my presentation to the Board.

“Congratulations,” I muttered, “based on your theory of system design, you will be the proud owners of the world’s first $4,000 average ambulance charge and your starting ED bill will be around $13,000”

For more than two decades we have been involved in this internecine conflict between public and private providers, between tax and health care dollars and our whimsical belief that more always equates to better. Despite our virtuous screams about concerns of “patient care,” I dare say that our efforts are much more often about the flow of revenues and the creation/retention/distribution of jobs than about the real, verifiable impact of our decisions on the ultimate outcome on the patient or on the total community cost of what we are providing.

And I am as guilty as anyone. I was at the forefront of delivering those system designs and negotiating those contracts that created the mirage of a revenue generating feeding trough and only postponed the inevitable. Because, at the end of the day, there is no free lunch. The days of transferring all forms of cost to health care bills in the form of ambulance service charges are quickly coming to an end. At the leading edge of this exodus are two unavoidable realities: The collapse of the marginal collection rate curve and rising cost of healthcare.

The collapse of the marginal collection rate is complex to explain (if you are reading this you probably understand it anyway, but...) basically given that Medicare reimbursement is based on their ability to pay rather than on value, the rates are set at artificial (read low) levels. As the demographic aging wage sweeps through, there are less and less people paying the real cost of providing care, so their charges go up, because the percentage that will be realized from those charges continually go down – to the point you will receive exactly zero dollars for any new dollar you add to a charge.

And then there’s the dirty little secret that gets lost in the rhetoric of the overall health care debate: Costs are going to go up. You can put a cap on insurance rates and reimbursement - but costs will go up. Simple fact: People are living longer and there is more stuff we can, and will, do to, and for them. So costs will go up – which will create continued pressure on our current forms of reimbursement and compensation. Things that add value will be expanded and things that detract value will be killed. This represents one of the greatest un-recognized trends affecting EMS and public safety today: We are moving from emotionally based drivers to economically based drivers.

Historically, we have always been able to play the emotion card in public policy debates: “If it was your grandmother who needed help, you wouldn’t want this or that...”, “I know if it was my family member I wouldn’t want...etc.”

The unintended consequence of our time tested ability to pull at the emotional heartstrings of our communities to continually expand our services and enhance our service levels has led us to a false sense that the future will resemble the past. The fact is, that the growing reliance of health care dollars has created the environment where the change to economically driven decision drivers will obliterate these cries of concern.

The ability to clearly demonstrate the value added (from an economic perspective) of EMS is becoming more difficult every day as literature shows us the minimal impact that ALS has in the vast majority of patient outcomes, and the fact that where patient stabilization is most important, we invest the least.

So what can be done to manage in these shifting currents? Well, here’s a minimal approach to think about:

- Develop scenario plans of the impact of losing 15%, 30% and 60% of the revenue you receive from ambulance service or pass through fees. Create a picture of what your service delivery would look like if you had to manage to that level of revenue

- Develop value generating scenarios for each element of your value chain. If your organization has a billing service, can they monetize your accounts receivable and accelerate your cash flow? Can they provide revenue advances or revenue anticipation bonding for capital asset acquisition? To what extent are your vendors at risk for the quality of their supplies?

- Invest in technology that improves productivity and efficiency. Stop investments in innovation for innovation’s sake. Predictive modeling logic has developed tremendously and “intelligent asset utilization” should be a minimum requirement of new CAD investments or improvements. Utilize medical equipment that has a definitive positive impact on real outcomes, not arrival at ED statistics.

- Work with the quality initiatives of your primary facilities and/or groups. Extend their quality initiatives both on the pre- and post-hospital experiences. Quality always costs less.

- Integrate, integrate and when you are done, integrate some more. Integrate your data – CAD to ePCR to RMS to Hospital EMR to Outcome to whatever. Integrate your quality initiatives as stated above, integrate professional development, integrate call taking. Wherever you can do it...integrate.

It’s been a good ride – but it is now clearly prudent to prepare for the next chapter. Despite our proclivity to believe that somehow everything will work out, it is quickly becoming the time to put on our big people pants and recognize that for every action there is an equal reaction, that to be accountable is part of being an adult, and that there is a disagreeable absence of a free lunch anywhere in the real world.