TO: Mayor Richard C. Irvin
FROM: Martin S. Lyons, Chief Financial Officer/City Treasurer
Gary Krientz, Fire Chief
DATE: November 3, 2020 (Revised November 24, 2020)
SUBJECT:title
Recommendation to Amend the Resident and Non-Resident Ambulance User fees.
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PURPOSE:
Resolution R16-030 (attached) authorizes the Chief Financial Officer to amend ambulance user fees based on market analysis either using the Naperville rate study or other data at his/her discretion. Based on data provided by the City's third party billing agency, Andres medical, and based on new revenue sources under the Ground Emergency Medical Transport program through the state of Illinois, the City is considering a new rate structure and analysis.
BACKGROUND:
Resolution R16-030 enabled the Chief Financial Officer to adjust ambulance rates as follows:
Section 4. The Chief Financial Officer/City Treasurer is empowered and herby authorized to annual adjust the City's user fee rates for ambulance/paramedic services provided to nonresidents so as to equal the corresponding averages reported in the Naperville Survey for the preceding year. If the City of Naperville ceases to conduct the annual survey of ambulance services, the Chief Financial Officer/City Treasurer will adjust the City's user fee rates for ambulance/paramedic services provided to nonresidents by the same approximate percentage that the United States Department of Health and Human Services adjusts Medicare rates.
Andres Medical Billing Services has been providing the City with quality billing services for more than a decade and also provides these same services to many Illinois and non-Illinois fire/EMS providers. As such, Andres has a larger data base from which to draw than the Naperville Survey. Furthermore, Andres maintains detailed information on billing structures for these communities to validate any adjustments the City of Aurora would like to make in the coming years.
In late 2019 and early 2020 the State of Illinois, working with the Illinois Fire Chiefs Association (IFCA) enacted a new program involving the use of federal funding (Medicare/Medicaid) to subsidize/support Ground Emergency Medical Transport (GEMT) for local providers with residents that are unable to pay for transport services. The City completed all applications for this program and began receiving funds in 2020. Unfortunately, due to the structure of the City's ambulance billing rates, compared to the City's actual ambulance run costs, the City only received a fraction of the GEMT funding. The State of Illinois has advised that the only way to increase this funding level is to increase the rates used for the City's ambulance/medical transport. The City has met with our billing provider to review GEMT data as well as regular ambulance billing data to devise a revised ambulance billing system.
DISCUSSION:
The 2020 Approved Budget included $3.0 million in new revenues associated with the GEMT program highlighted above. As a new program, the City did not expect the receipt of revenues immediately in 2020, however by the end of the second quarter of 2020, the Fire Chief, through the IFCA explored any issues as to why City of Aurora reimbursements were well below the amount that should have occurred using our volume of calls times our cost estimates. As noted above, the state response was that the City rate structure did not allow them to provide further federal reimbursements than had been received, which is just under $400,000 in 2020.
Raising resident and non-resident rates during a COVID pandemic would be a difficult process using our current structure and process for billing. This is mainly due to the City's current policy of balance billing for any fees not paid via Medicare or private insurance. The City has kept the resident rate much lower than surrounding communities in order to reduce the impact of this policy on lower income users.
In reviewing our rates and the rates of other Illinois communities we have found that Aurora rates are substantially below the average of other communities. Our research showed this was the case both for our comparable communities (used in bargaining situations and research) and for the entire list of customers served by Andres Medical Billing (Rate tables are attached). As noted in the original agenda item to the Finance Committee, which is attached, both resident and non-resident billing rates are substantially below our comparable communities with an average difference of $651.19 for non-resident rates and $909.03 for resident rates.
After discussion at the November 12, and November 19 Finance Committee meetings, below is a final recommended rate structure for resident and non-resident rates that take into account a rate that is equal to the cost of services provided for non-resident and a lower rate, that recognizes the payment of property taxes made by residents for these life safety services. The Chief Financial Officer will change rates to these levels effective January 1, 2021.
Current Resident Rate - ALS $ 447.38
Recommended Resident Rate - ALS $1,400.00
Current Resident Rate - ALS2 $ 647.53
Recommended Resident Rate - ALS2 $1,420.00
Current Resident Rate - BLS $ 376.74
Recommended Resident Rate - BLS $1,300.00
Current Non-Resident Rate - ALS $1,107.03
Recommend Non-Resident Rate - ALS $2,250.00
Current Non-Resident Rate - ALS2 $1,270.43
Recommended Non-Resident Rate - ALS2 $2,720.00
Current Non-Resident Rate - BLS $ 899.12
Recommended Non-Resident Rate - BLS $1,890.00
Because of the size of this rate change, this increase is only recommended if we change our current policy of balance billing. A majority of communities do not balance bill their residential users and this is allowed because residents pay taxes and therefore may be treated differently than non-residents for billing purposes. Attachment 4 shows the detail of all communities in our study. As noted in the analysis in Attachment 2, if we change our internal policy to allow for the write-off of resident billing that is not covered by insurance or Medicare, the City will lose approximately $200,000 annually. However, the change in rates will increase revenues by $1,244,000 for a net increase in revenues of $1,055,000. This increase still not cover our estimated costs for ambulance services, which is over $2,200 per ambulance run. Please note that all fees are for transport services and therefore ambulance calls that do not involve transport do not involve the above fees. Staff is reviewing non-transport fees as many communities also charge for this service at a lower rate and will bring a recommendation back to the City Council in 2021.
The 2021 proposed budget includes this recommendation as follows:
2020 Budgeted Ambulance Billing Revenues - $3,700,000
2021 Budgeted Ambulance Billing Revenues - $4,700,000
2020 Budgeted GEMT Revenues - $3,000,000
2021 Budgeted GEMT Revenues - $2,000,000
By changing the fees as noted above, the final revenue amount for the 2021 Ambulance billing revenues will be increased by another $100,000 to $4,800,000.
If the City continues with our current rate structure, we will need to reduce the Ambulance Billing revenue back down by $900,000 and will need to reduce the GEMT revenue by at least $1,000,000 based on our rates and the collections thereof in 2020.
IMPACT STATEMENT:
The change in fee structure will provide a net benefit estimated at $200,000 for users that have been balance billed in the past and increases General Fund revenues by an estimated $1,143,000 all paid from private insurance or Medicare. Not changing this fee structure will result in a budget deficit for 2021 of $1.9 million.
RECOMMENDATIONS:
It is recommended that the CFO make the changes in the City of Aurora ambulance billing rates as justified above and in accordance with Resolution R16-030.
cc: Finance Committee