HomeMy WebLinkAboutItem 02 Fire & Life Safety Financial Challenges
AGENDA ITEM SUMMARY
SPRINGFIELD
CITY COUNCIL
Meeting Date:
Meeting Type:
Department:
Staff Contact:
Staff Phone No:
Estimated Time:
October 22, 2007 '
Work Session
Fire & Life Safety
Dennis Murph~
726-3737
60 Minutes
FIRE & LIFE SAFETY FINANCIAL CHALLENGES
ITEM TITLE:
Council direction on staff recommendations
ACTION
REQUESTED:
ISSUE
STATEMENT:
The Department of Fire & Life Safety is facing several financial, challenges
including Medicare ambulance reimbursement reductions, fire/rescue vehicle and
facilities replacement. Staff recommends implementing an interim ambulance
rate increase to begin addressing the Medicare issue and a multi-step process to
address firelrescue vehicles and facilities replacement.
ATTACHMENTS:
A. Council Briefing Memo
B. Joint Statement on Medicare Ambulance Reimbursement
C. Medicare Impact and Interim Ambulance Rate Increase Recommendation
D. Immediate, Intermediate, and Long Term Fire & Life Safety Needs
E Multi-Step Process for Funding Fire/Rescue Vehicles & Facilities Replacement
DISCUSSIONI
FINANCIAL
IMPACT:
In 2002, the federal Centers for Medicare and Medicaid Services (CMS) initiated
a series of ambulance reimbursement reductions that have resulted in a loss of
income on all Medicare and Medicaid patients transported by ambulance, A May
2007 report of the federal General Accountability Office (GAO) confirmed that the
new reimbursement level is an average of 6% below the actual cost of providing
services. The impact of the reduction on ambulance revenues is being felt locally in
Eugene and Springfield, statewide, and around the nation (Attachment A). The
financial impact in Springfield has resulted in depletion of the ambulance fund
reserves and recommendation for an interim rate increase (Attachment B). The
interim rate increase will provide limited relief while a long term strategy is being
developed.
Facilities maintenance and construction and vehicle replacement issues have
become an increasing problem for Fire & Life Safety. A General Obligation Bond
paid for, construction of a new Gateway Fire Station and several new fire vehicles in
1996. However, the ongoing funding for facilities maintenance and vehicle
replacement since then provides for less than 10% of .the actual need. In addition, no
funding is available for construction of new facilities.
A consultant's report in January 2000 identified maintenance, safety, and
functional space needs for existing fire stations, however no funding was identified
for these needs until October 2007 when the Council approved replacement of the
Thurston Fire Station, A Standards of Cover report in April 2007 identified the need
to relocate two other fire stations to accommodate development in Glenwood,
downtown and Jasper/Natron. An October 2005 functional and space study of the
Justice Center identified the needs for Fire & Life Safety administrative offices to be
co-located, However, the Justice Center project was scaled down for the purposes of
a bond election and fire offices eliminated.
While the city routinely sets aside money for vehicle replacement, the amount
budgeted for this purpose is inadequate to fund replacements. In the last
replacement cycle, one of the fire engines was leased due to lack of funds for
purchase.
These needs were identified as part of the FY 08 budget entitled Immediate,
Intermediate, Long Term budget needs (Attachment C),Given the expe'nse for fire
facilities and vehicles a multi-step resolution is recommended (Attachment D).
MEMORANDUM
ATTACHMENT A
City of Springfield
Subject:
October l7, 2007
Gino Grimaldi, City Manager
Dennis Murphy, Fire Chief
Fire & Life Safety Finances
COUNCIL
BRIEFING
MEMORANDUM
Date:
To:
From:
ISSUE:
A signicificant reduction in MedicareIMedicaid ambulance reimbursements and lack of adequate
funding for fire facilities and fire/rescue vehicles is challenging the budget ofthe Fire & Life
Safety Department. A Council Work Session on this topic is scheduled for October 22. The
purpose of this document is to summarize the challenges and provide supplemental information
for Council decisions.
BACKGROUND:
Medicare/Medicaid - A phased reduction in ambulance reimbursements since 2002 has resulted
in a loss of over $l81 on every Medicare patient transported. Since Medicare patients comprise
over 67% of all transports, at this rate, unless corrective action is taken, the ambulance fund
reserve will be depleted and a deficit of $96,000 will occur by the end of FY 08. As a short term
solution, an ambulance rate increase of $250 Base Rate and 50 cents per mile is recommended
for public hearing and implementation on November 5. This would raise approximately
$290,000 annually and allow time to consider various options for long term resolution. A long
term plan will be ready for Council consideration in time for potential implementation at the
beginning of FY 09. '
Virtually all urban jurisdictions in the nation are experiencing the same problem with Medicare.
Eugene Fire & EMS is considering a similar ambulance rate increase and will address this issue
at a November 28 Council meeting. Both cities have discussed joint efforts to lobby for
Medicare reform legislation through their Intergovernmental Relations offices. A current
proposed piece of legislation regarding an emergency 5% increase in Medicare reimbursements
if passed, would raise approximately $7l,000 annually. While this would help, far more
sweeping reform is needed to fill the gap created by reductions in reimbursements.
Fire Facilities - No funds have been set aside for rehabilitation of existing fire facilities or
construction of new or replacement facilities to accommodate growth in the city. Information
included with the FY 08 budget estimated the five year impact of facility needs at $17 million.
Of this, Council has approved $2.6 million for construction of a new Thurston Fire Station. As
part of the FY 09 budget process, a description of the projected timelines and cost for additional
facilites and options for funding will be included.
Fire Vehicles - Funds provided for fire vehicle replacement (Fund 713) have been less than
lO% of that needed to replace used vehicles within their lifecycle. As a result, one of the last two
fire engines was leased rather than purchased. Information included with the FY 08 budget
estimated the one time catch up replacement funds needed at $1.75 million and $500,000
thereafter. As part of the FY 09 budget process, a description of the projected timelines and cost
for vehicles and options for funding will be included.
RECOMMENDED ACTION:
Hold a public hearing and approve the interim ambulance rate increase request. Action on fire
facilites and vehicles will be considered as part of the FY 09 budget.
ATTACHMENT B
Fire & Life Safety
Fire & Emergency Medical
Services Department
Office of the Fire Chief
Office of the Fire Chief
City of Springfield
225 Fifth Street
Springfield, OR 97477
(541) 726-3737
(541) 726-2297 FAX
www.springfieldfire.org
City of Eugene
1705 W. 2nd Avenue
Eugene, Oregon 97402
(541) 682-7130
(541) 682-71]6 FAX
www.eugene-or.gov
MEMORANDUM
Date:
October 17,2007
To:
City Managers of Eugene and Springfield
From:
Eugene Fire Chief Randall B., Groves and Springfield Fire Chief Dennis M. Murphy
Subject: JOINT STATEMENT ON MEDICARE AMBULANCE REIMBURSEMENT
BACKGROUND
A portion of the Medicare Prescription Drug Improvement and Modernization Act (MMA) of2003 included a
significant reduction in Medicare and Medicaid ambulance reimbursement. Ambulance reimbursement reductions
will continue to be phased in until 2010.
The effect of these changes has directly resulted in a significant loss of ambulance funds for most urban
jurisdictions around the nation. In the cities of Eugene and Springfield, these losses have resulted in changing
ambulance funds from self-sustaining to losing money.
Part of the provisions ofMMA required a report by the Government Accountability Office (GAO) on whether the
reduction in ambulance reimbursement would be adequate to pay for the services received by ambulance patients
covered by Medicare and Medicaid. In May of2007, the GAO reported that these reimbursements were an
average of 6% below the actual cost of providing service to these patients. In Eugene and Springfield, preliminary
reports indicate that it is 10% or more below costs. However, no changes to Medicare rules have been made.
RECOMMENDATION
As soon as an adequate explanation of the issue can be completed with elected officials and information provided
to the public, a significant ambulance rate increase or series of increases should be implemented until viable
funding alternatives to support the service can be identified and implemented. These would be designed to offset
the Medicare-caused deficit. However, since Medicare will not pay the increases, and since as many as 60% of
local ambulance patients are covered by Medicare, the impact would effectively be shifted to non-Medicare
patients. It is also recommended that FireMed membership rates remain the same ($52 per household) to maintain
a low-cost alternative. Meanwhile we believe that every effort should be made to change Medicare regulations to
correct this problem long~term.
Attachment C
Page 1 of 3
CITY OF SPRINGFIELD
At E At 0 RAN D U Iff DEPARTMENT OF FIRE AND LIFE SAFETY
FIRE ADMINISTRATION
DATE:
TO:
FROM:
SUBJECT:
October 15, 2007
Gino Grimaldi
Dennis Murphy, Fire Chief
MEDICARE IMPACT AND INTERIM AMBULANCE RATE
INCREASE RECOMMENDATION
The following will serve as supplemental information for consideration of a request for an
interim increase in ambulance rates:
Background:
The federal Centers for Medicare and Medicaid Services (eMS) implemented a phased
reduction in ambulance reimbursement beginning in 2002. A May 2007 report from the
federal General Accountability Office (GAO) shows that this reimbursement level is an
average of 6% below the cost of providing ambulance service to Medicare and Medicaid
patients. Federal legislation for an emergency rate increase of 5% is proposed however
the fate of the legislation is uncertain and even if successful will be too little and too late.
FY 08 ADOPTED BUDGET FOR AMBULANCE TRANSPORT/BILLING
Total FY08 Budgeted Expenditure $ 3,210,983.39
FY07 Springfield Transports Billed 5,977
Average Cost Per Transport I $ 537.22 I
Average Medicare/Medicaid Payment Per Transport $ 355.83
Net $ (181.39)
Average Payment Per Transport All Other Payers $ 559.99
Net $ 22.77
Overall Mix Average Payment Per Transport $ 423.16
Net $ (114.06)
(Table 1)
Attachment C
Page 2 of 3
A review of the impact of CMS reimbursement reductions (Table 1) shows that while
ambulance rates for Medicare and Medicaid result in a loss of over $181 per ambulance
transport, all other payer groups cover all costs plus a surplus of over $22. Since
Medicare and Medicaid patients account for more than 67% of all patients transported,
when mixed with other reimbursements, the average loss on all calls is over $114.
Based on projections, by the end of FY 08, these losses will eliminate the ambulance
fund reserve and result in a deficit of approximately $96,000.
As an interim step in resolving the Medicare/Medicaid issue, staff recommends a rate
increase that is enough to overcome the problem short term and permit time to analyze
various long term options for Council consideration. It is estimated that an increase of
$250 to the ambulance base rate fee and $0.50 to the mileage fee would raise
approximately 42% of the money necessary to offset losses from Medicare. Due to the
refusal to pay any increases above the maximum allowed under CMS rules, Medicare
will not pay for any portion of the increase. Since the majority of patients are covered
under Medicare only a small portion of the increase is actually recovered (Tables 2 & 3).
Table 4 illustrates that even though rates are raised a substantial amount, the net
amount recovered is small. Since the result of this type of increase effectively shifts the
costs from Medicare covered patients to a minority of non-Medicare, it is important that
the FireMed membership fee (currently $52 per household annually) is kept as low as
possible to allow the non-Medicare group an alternative to what would otherwise be
substantially higher prices. A comparison of current rates to the proposed rate increase
shows an estimated increase in the average ambulance bill of $254 (Table 5).
Pa er
MedicareIMedicaid
Other Pa Sources
Total
Patients Trans orted
67.02%
32.98%
100.00%
Collection Rate
36.22%
58.00%
43.35%
Cb~rti:iu'~i'Es~illlated'Reveriue,ii6t':Rate,Iri~if~~se
Anticipated Collection
Rate for Increase
0.00%
58.00%
19.13%
(Table 2)
Payer
MedicareIMedicaid
Other Pa Sources
Total Mix
Average Increased Revenue Per Patient
$0.00
$145.00
Attachment C
Page 3 of 3
"lni:EY'O'i~08}SPRIN.GFIEED..ACC(jt:rNtS::RE'(SEiV.ABtE;/MIEE.AGE;;:jj.AT.A
,. """.."", .",."" "~,,,,,,,,.,
>>... w _,...,~.~ ,
, ,'<<-,,,",,,,""""=,
, '...".mV'MMm.'~^
Mileage Rate Increase of:
Average Transport Mile
6.4
Pa er
MedicareIMedicaid
Other Pa Sources
Total
Patients Trans orted
67.02%
32.98%
19.13%
36.22%
58.00%
43.35%
Pa er
Medicare/Medicaid
Other Pa Sources
Total Mix
Anticipated Collection
Rate for Increase
0.00%
58.00%
19.13%
(Table 3)
Avera e Increased Revenue Per Patient
TOTAL MIX BASE RATE
TOTAL MIX MILEAGE
GRANIl TOTAL
$
47.82
Patient Transports
Increase
5,977
Expected Revenue From Increase
(Table 4)
Date Rate 1m lemented Current Pro osed
4/20/06 11/1/07
$
Base Rate 900.00 $1,150.00
$ $
Milea e 15.00 15,50
$
996,00 $1,250.00
Avera 6.4 miles
(Table 5)
ATTACHMENT D
FIRE AND LIFE SAFETY DEPARTMENT FY 08
Immediate Issues (next 1 to 2 years)
./ Fire vehicles - Insufficient funding for the replacement of fire vehicles
. Fully funded replacement fund would require $1,750,000 million in FY 08 dollars initially and $500,000
annually thereafter.
./ Facilities - Funding for reconstruction of Thurston Fire Station and purchase of property and construction
of a new fire station for JasperlNatron and/or downtownlGlenwood is needed
. Immediate facility projects total an estimated $6,000,000 in FY 08 dollars.
./ Emergency, Safety, and Fire Station Equipment - Current budget does not fund replacement costs
. Initial "catch up" investment of $97,000 in FY 08, followed by annual increase of$75,000.
./ Business Fire Safety Inspections - 1.0 FTE Fire Safety Inspector position is needed to keep pace with need
for inspections in all non-residential structures (business, churches, schools, non-profit organizations) and
eliminate fire engine company inspections.
. Expenses are estimated at $80,000 in FY 08, possibly offset by inspection fees and grants
./ Administrative Support Records Personnel
. Increase personnel by adding personnel records entry and management (Clerk 2/ Records), estimated at
$40,000 annually.
Intermediate Issues (next 3 to 5 years)
./ Growth Related Service Needs
. Consultant report on Standard of Cover has identified personnel, capital, and materials resources
required to maintain services in FY 08 and beyond.
. Funding for property and construction of a new fire station for JasperlNatron and/or
downtownlGlenwoodare needed (may be partially funded by future development fees and charges).
Project totals an estimated $3,000,000 in FY 08 dollars.
./ Fire Truck Personne/- Future funding for operation of a sixth full-time fire apparatus (aerial truck
. company) is recommended by consultant report on Standard of Cover
. Intermediate strategy involves purchase of an upgraded replacement vehicle (estimated extra $150,000
over cost of regular fire engine), close coordination of automatic aid from Eugene Fire & EMS, and
adding one firefighter per shift ($400,000) in FY 08 dollars.
Lon!! term Issues (beyond 5 years)
./ Facilities - Funding for a training facility, business offices, and a storage facility are needed
. Projects total an estimated $8,000,000 in FY 08 dollars.
./ Fire Truck Personne/- Future funding for operation of a sixth full-time fire apparatus (aerial truck
company) is recommended by consultant report on Standard of Cover
· Annual estimated staffing cost is $1,250,000 in FY 08 dollars
· Intermediate strategy involves purchase of an upgraded replacement vehicle (estimated $150,000), close
coordination of automatic aid from Eugene Fire & EMS, and adding one firefighter per shift ($400,000).
ATTACHMENT E
Multi-Step Process for Funding Fire/Rescue Vehicles, Facilities Maintenance
and Replacement
1. Vehicles
a. Create FY08 Replacement Fund (713) Projections
b. Determine the number and type due for replacement and timing
c. Review options for lease or purchase
d. Recommend budget and options for funding
2. Facilities
a. Work with DSD to determine development threshold triggers for
construction of new fire stations.
b. Work with Public Works Department to determine triggers for office
space needs.
c. Work with Public Works Department to determine facilities
maintenance needs.
d. Evaluate training facilities options with Eugene Fire & EMS
e. Review priorities and schedule for improvements
f. Recommend budget and options for funding