Promoting Innovation in EMS: Get to Know Value and Cost

Over 2018 EMS World, in conjunction with the National Association of EMTs, will provide detailed implementation strategies for key recommendations of the Promoting Innovation in EMS (PIE) project. The PIE project utilized broad stakeholder involvement over four years to identify and develop guidance to overcome common barriers to innovation at the local and state levels and foster development of new, innovative models of healthcare delivery within EMS. Each month we will focus on one recommendation and highlight the document’s actionable strategies to continue the EMS transformation. 

One of the recurring themes throughout the PIE project was the perceived challenge for EMS agencies to develop and grow their internal business acumen in order to effectively manage their service delivery model as a business. The reality is that the delivery of healthcare, whether in a fixed or mobile setting and regardless of organization type, would generally benefit from being run more like a business.

We provide services that are valuable to our customers, and we need revenue to help cover the cost. For any business to be successful, its customers must be willing to fairly compensate it for the value it brings to them. 

Over the next few columns, we will introduce some basic concepts of the “business” of EMS as a way to help promote innovation. We encourage EMS leaders to either invest the time and effort to develop a keen understanding of the business of EMS or to hire people who possess the business acumen that will be required to create and implement sustainable innovation. In this column we start with two business concepts, value and cost.

What Value Do You Bring?

In economic terms, value means the monetary worth of something—what someone is willing to trade money for. Value can be perceived differently depending on the motivation of the customer.

We understand that use of the term customer in EMS is somewhat controversial, but it can be instructive for the EMS leader or potential innovator to consider those we serve as customers because doing so forces us to think about the value we offer. Customers could be patients and their families, elected or appointed officials, payers (either those we bill for service or whose tax dollars support our operations), coresponders, other healthcare professionals, and other healthcare systems.

Patients may perceive value through the attainment of good outcomes as well as genuine empathy and the relief of their suffering through competent clinical interventions and the kindness shown by the healthcare provider. Elected or appointed officials may value response times to their constituents or reduced costs in other areas. Payers derive value from the effective use of their economic resources in the attainment of quality patient outcomes.

Coresponders and healthcare professionals we interface with feel valued when you recognize them for their contributions to the care provided to the patient. EMS providers and agencies can improve their value proposition by measuring how well they do the things that are most important to customers and implementing strategies that help them improve the benefits customers derive. 

Sometimes EMS leaders may think we understand the value proposition for each of these key customers, but the only reliable way to truly know is to ask them. In your next meeting with your local elected leaders or hospital liaisons, ask how they would define value for your agency.

Some things we’ve heard relate to patient satisfaction, most commonly measured as the lack of complaints or frequency of compliments heard about an EMS service from its constituents. Sometimes these meetings are also a valuable opportunity to inform such leaders of not-yet-realized value you might be able to bring through a new partnership.

You should also survey patients or host focus groups to determine what things they liked or didn’t like about their experience with your agency. The same can be done with healthcare partners and coresponders. Once you know the value proposition for your main customers, you can develop methods to demonstrate, and leverage, the value you bring to them.

Costs of Service Delivery

Without knowing what it costs to provide your service, it’s impossible to think of your service as a business. However, for some agencies that answer can be elusive—especially for multirole departments, like an EMS-based fire department that provides ambulance transport as well as first response services.¹ 

A simple way to begin evaluating the cost of EMS service delivery could be to honestly and transparently ask the question, “If we were to stop providing EMS services, what costs would we save?” For an agency that only provides ambulance services, the answer is easy: All costs would be avoided. But for a multirole agency, it’s more difficult.

Ambulance service costs—If an agency staffs an ambulance, all costs related to providing the ambulance service would be eliminated if you stopped providing EMS. For simplicity let’s assume the annual cost of operating one staffed ambulance is $650,000. The ambulance is staffed and in service 24 hours per day, 365 days a year, or 8,760 unit-hours (24 x 365). The cost per unit hour for the ambulance would then be $74.20 ($650,000/8,760 hours). You can repeat this for the number of units you have on duty. If a unit is staffed during peak times, say weekdays from 8 a.m. to 5 p.m., the calculation is similar: 10 hours per day times 260 days a year is 2,600 unit hours. Therefore, the annual cost to operate the unit is $192,920 (2,600 hours x $74.20).

First-response costs—In a multirole agency such as a fire department, EMS response is only one of the roles the engine serves. Let’s use the scenario of a single fire engine staffed with four firefighters (three EMTs and one paramedic) that responds to EMS calls, fire calls, vehicle crashes, and everything else. If this department stopped providing EMS, the engine and staff would likely not be eliminated, since they would still be needed for the other types of calls.

However, costs related to the engine’s EMS delivery—such as EMT/paramedic stipends for the personnel, costs for medical training, medical oversight, medical equipment and supplies on the engine, and fuel for EMS responses—could be eliminated. If we assume the annual EMS-related costs for the engine are $50,000, then the unit-hour EMS costs for the engine are $5.71 ($50,000/8,760 hours). Combining the ambulance and first response unit, the overall cost per unit-hour is $79.91 ($74.20 + $5.71). This cost exists even if there are no EMS calls, a concept often referred to as the cost of readiness.

Other cost evaluations—If the ambulance and engine responded to 1,000 EMS calls last year, your cost per response would be $700 ($700,000/1,000 calls). If the ambulance transported 700 patients, your cost per transport would be $1,000 ($700,000/700 transports). Finally, say the engine and ambulance serve a township of 10,000 people. The EMS cost per capita would be $75 ($750,000/10,000).

This is an overview of service-delivery costs and may not capture all associated costs. Additional costs come with EMS in a fire service—e.g., medical oversight, supervision and administration, human resources, payroll management and insurance—but for this article series, we’ll keep it simple.

Beyond Cost

EMS leaders should be able to perform these types of cost calculations at the least. More detailed analyses, such as fixed vs. variable costs, accounting for depreciation of capital assets, and marginal cost analysis, are additional ways to evaluate the cost of service delivery—or, put another way, the cost of producing a unit-hour of service. Understanding the cost of service delivery helps determine the economic impact of implementing innovation in EMS agencies, but it’s only one side of the equation. Revenue analysis is also necessary to see what impact an innovation might have on your service-delivery models.

Confused? Don’t worry. We’re addressing this because the authors of the PIE project identified our lack of business acumen as a barrier to innovation. Our desire is that as EMS agencies transform and evolve into innovative organizations ready to launch new service lines and participate in new economic models, their leaders will feel comfortable enough to conduct these types of evaluations or seek to hire or contract with people who do. 

In our next column we’ll explore how to estimate the costs of implementing some sample innovations. 

Reference

1. Zavadsky M, Hooten D. High-Performance EMS: New Economic Models for EMS. EMS World, https://www.emsworld.com/article/12323029.

Matt Zavadsky, MS-HSA, NREMT, is chief strategic integration officer at MedStar Mobile Healthcare, the exclusive emergency and nonemergency EMS/MIH provider for Fort Worth and 14 other cities in North Texas. He is a member of the EMS World editorial advisory board.

Kevin G. Munjal, MD, MPH, is a board-certified emergency medicine physician who completed an EMS fellowship with the New York City Fire Department (FDNY). He is the founder and chair of the New York Mobile Integrated Healthcare Association (NYMIHA), an organization seeking to empower EMS providers to play a larger, more integrated role within the healthcare system by promoting new models of mobile healthcare care better aligned with new accountable care organizations. He served as co-principal investigator for the PIE Project.