With Profits Slow to Materialize, San Diego Considers Another Overhaul of its Ambulance Service

Ambulance service in San Diego may soon undergo significant changes despite the recent success of a new model where private ambulances transport patients and the city oversees deployment, staffing, and billing.

The new set-up called the alliance model, has improved emergency response times since it began in October, and fire officials say it's on track to generate millions in revenue the city could use to enhance services.

But Chief Colin Stowell says he will soon launch a comprehensive analysis to determine whether to stick with the alliance model, bring ambulance service completely in-house, or go with some sort of hybrid approach.

Bringing the service in-house means ambulance workers would become city employees and no longer work for private ambulance companies. Los Angeles, San Francisco, and Chula Vista have in-house ambulance services.

"The alliance model has stabilized our system, but where do we take that?" Stowell told the City Council's Budget Review Committee last week. "We're in for a very exploratory next year on the EMS front."

Stowell estimated that fire officials, with help from a consultant, will come forward this winter with recommendations for what the city's ambulance system should look like moving into the future.

The analysis will evaluate the three options — alliance, in-house, or hybrid — on emergency response times, financial risks, financial benefits, and other factors, he said.

"Those are all going to be options on the table, and we'll evaluate the risks and benefits of those," Stowell said.

Officials had been expecting millions in profits from the switch to the alliance model — but that has been slow to materialize because of delayed payments for ambulance transports and what city officials characterize as flawed projections.

Before the switch, the private ambulance company Falck USA handled staffing, deployment, and billing for the city. Under the alliance model, the city took over those roles — and the financial risks and potential benefits that come with them.

The shift was prompted by frustration with poor response times and a new state law that boosts reimbursement rates on ambulance transports for government agencies. A consultant had estimated the city would generate $15 million in surplus cash during the alliance model's first three years.

The consultant projected $6.5 million during the ongoing fiscal year that ends in June, another $3 million in fiscal year 2025, and $5.5 million in fiscal 2026.

But Stowell said the city is certainly going to lose money this year. Fire officials have projected a $6.1 million surplus in fiscal 2025, but Stowell and the city's independent budget analyst said that's also in doubt.

Stowell said the main problem has been the long lag times between when an ambulance transport takes place and when the city gets paid by Medicare, MediCal, private insurers, and the state reimbursement program.

"There is a significant lag time, and we have to remember that the money will eventually come in and we will eventually be whole," Stowell said. "We're still on track."

But Stowell also conceded that some of the projections from last year have turned out to be off the mark.

He said projections for collection rates and the percentage of patients who are covered privately seem to be accurate, but that estimates of call volumes and state reimbursement money have been off.

"We're working completely on projections that were done," he said. "We are seeing things that maybe weren't as accurate on those projections."

The boosted reimbursements come under the state's public provider ground emergency transportation inter-governmental transfer program.

But Stowell stressed that the lag time was the main problem, explaining that the city was more than $8 million in the red during the first month of the alliance model last October.

The city pays roughly $9 million a month total to primary ambulance provider Falck USA and secondary provider American Medical Response for ambulance services on a per-hour basis.

Because of lag time, the city received only $135,000 in payments last October. That's why it was well over $8 million in the red for that month.

While payments and reimbursements have been rising, city officials don't expect to be in the black during the ongoing fiscal year and have expressed doubts about fiscal 2025.

Councilmember Marni von Wilpert, who leads the council's Public Safety Committee, said last week she was disappointed that the city is not meeting the earlier projections.

Stowell said last year he hoped to have enough excess revenue to add new programs like nurse triage, telemedicine, and street-based interventions.

Signaling a major shift in priorities, he said last week that the goal is to have enough excess revenue to have adequate "seed money" to possibly bring ambulance service in-house.

But Mayor Todd Gloria's proposed budget for fiscal 2025, which relies significantly on one-time revenue sources to close a large deficit, anticipates taking $6 million in projected surplus from the city's ambulance fund.

The city's independent budget analyst cautioned last week that such a move could be problematic because of the alliance model's disappointing results so far.

The IBA says revenue will exceed expenses under the alliance model in fiscal 2025, but probably not by enough to generate the $6 million Gloria wants to take away to balance the city budget.

The IBA says Gloria should consider reducing that amount when he releases a revised version of his budget proposal next week.

Stowell recommended waiting until this fall to revisit the situation. He said the doubts fire officials expressed to the IBA were partly based on being uncomfortable making projections 14 months into the future.

This story originally appeared in the San Diego Union-Tribune.

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