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HomeMy WebLinkAboutIR 7238 INFORMAL REPORT TO CITY COUNCIL MEMBERS N0. 7238 - pq To the Mayor and Members of the City Council 6- December 8, 1987 ts Z5 Subject: EXPANSION AND RESTRUCTURING OF THE MEDSTAR EMERGENCY MEDICAL SERVICES SYSTEM The City of Fort Worth' s MedStar ambulance system, based on the newly designed failsafe franchise model ( FFM) for emer- gency medical services, became operational on April 1, 1986. Under the FFM, a competitively selected firm is authorized to do business under a business trade name owned by the City of Fort Worth, and is allowed to use certain city-owned facil- ities and communications infrastructure. These provisions were designed to preserve business continuity across procure- ment cycles, and to ensure an orderly takeover of operations in the event of default by a contractor. Recently, the Texas Department of Health named Texas Lifeline Corporation (TLC) , contractor for the MedStar system, as "pri- vate provider of the year" . Now in its second year, MedStar is nationally recognized for its clinical capability, response time reliability and economic efficiency. The original failsafe franchise model was created for the City to provide service in a monojurisdictional setting. How- 0011 ever, recognizing that certain economies of scale could be achieved by expansion of the system, four special provisions were built into Fort Worth' s current EMS ordinance and the MedStar business structure to allow for multi-jurisdictional coverage: First , provision is made in Fort Worth's EMS ordinance for eventual conversion of the Fort Worth Ambulance Au- thority to a multi-jurisdictional entity under the Texas Interlocal Cooperation Act ( Subsection 6. 058, Fort Worth EMS Ordinance ) ; Second, the Authority is authorized to contract with neighboring jurisdictions to provide EMS services, and provision is made in the contract with Texas Lifeline Corporation to provide additional compensation through rates and subsidies paid by the additional jurisdictions to TLC for coverage of the additional areas; Third, TLC is authorized to sell its services directly to neighboring jurisdictions , provided such services are rendered under the MedStar trade name, and provided the Authority is fairly reimbursed for its system startup and infrastructure costs; and, Fourth, TLC is allowed to provide emergency service to ri neighboring jurisdictions for a period of up to six months -ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7238 - pg 2 To the Mayor and Members of the City Council December 8, 1987 Subject: EXPANSION AND RESTRUCTURING OF THE MEDSTAR EMERGENCY MEDICAL SERVICES SYSTEM without reimbursing the Authority for system startup and infrastructure costs, after which the jurisdiction must enter into a long-term service contract approved by the Fort Worth Ambulance Authority which provides for a fair sharing of system startup and infrastructure costs. These provisions were specifically intended to allow neighbor- ing communities to take advantage of MedStar' s economies re- sulting from serving Fort Worth and to provide for a fair sharing of Fort Worth' s system startup and ongoing infrastruc- ture costs . These provisions also allow each municipality to decide for itself the subsidy/price ratio to be employed in its community. The provisions have been adequate to manage small scale expansion, and have been utilized in providing service to the cities of Westworth Village and Westover Hills. It is being proposed to add Burleson in the very near future. On August 28, 1987 , TLC purchased the Meissner-Brown ambulance operation and began service to nine communities under that trade name. With the addition of the Meissner-Brown service to TLC, the potential for expansion of the MedStar service area has greatly increased. The magnitude and timetable of such an expansion raised questions and issues that were not anticipated in the original EMS ordinance and MedStar con- tract. Based on the assumption that certain of these cities, and perhaps other cities in Tarrant County may wish to join the MedStar system, the Fort Worth Ambulance Authority recommend- ed, and City Council approved the hiring of Jack Stout , The Fourth Party, (M&C G-7283 ) to review the current system struc- ture and provide recommendations for an expansion and restruc- turing of the system that would be an orderly process and that would protect the interests of the City of Fort Worth. Attached is a copy of the report that was submitted by The Fourth Party to the Fort Worth Ambulance Authority. The Au- thority recommended that it be presented to the City Council for consideration. Summary of The Fourth Party Report Expanding the Service Area. There are three potential advan- tages to expanding the MedStar system: 1. More Efficient System. Greater cost effectiveness is achieved in the production of emergency medical services as the population base served by the system grows . This cost -ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7238 - pg rs of the City Council of �p To the Mayor and Members 8, 1987 opk Subject: EXPANSION AND RESTRUCTURING OF THE MEDSTAR EMERGENCY MEDICAL SERVICES SYSTEM curve continues to decline until a single firm serves a total population of about 1.2 million people. Preliminary analysis of cost savings indicates that MedStarls total cost per trans- port would be about 14% less than current costs if the system were expanded to serve all of Tarrant County. The estimates of percentage cost savings to the system which could be achieved are as follows: Population Served Cost Saved 600, 000 4% 700, 000 7% 800,000 10% 900, 000 12% County 14% 2 . Better Service/Reliability. Ensuring uniform medical care and optimum "real time" resource management , major advan- tages of the multi-jurisdictional plan, are also advantages of expanding the MedStar system. 3. More Stable Business Structure. It is assumed that sev- eral municipalities will opt to join the current or a restruc- tured system. It is also possible that a different firm may someday be awarded the MedStar contract by the City of Fort Worth. Unless the neighboring communities are somehow includ- ed in the rebidding process , an award of the MedStar contract to a new provider could very well result in a collapse of services to neighboring communities. Official expansion of the MedStar system would solve this problem, and also improve the combined "purchasing power" of participating communities . Analysis of Current System Structure The current system structure is inadequate to manage a large- scale expansion for the following reasons: 1. Business Continuity Not Assured. Because each municipal- ity awards its own EMS contract on its own contracting cycle, expansion achieved between contract cycles cannot be incor- porated into subsequent bid processes. 2. Infrastructure Ownership Not Shared. Ownership of the entire MedStar infrastructure by the City of Fort Worth in the event of expansion creates two problems: First , with expansion of the service area, certain compo- nents of the system' s infrastructure must also be expanded -ISSUED BY THE CITY MANAGER I FORT WORTH, TEXAS INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7238 - pg 4 .'a T U U.AP T J -oo To the Mayor and Members of the City Council December 8, 1987 Subject: EXPANSION AND RESTRUCTURING OF THE MEDSTAR EMERGENCY Isl MEDICAL SERVICES SYSTEM and upgraded through long-term financing. Even if Texas Lifeline Corporation reimburses Fort Worth for an amor- tized share of infrastructure costs, there is no practical way to finance needed improvements unless the City of Fort Worth guarantees the debt . Second, if such a debt is partially retired using income generated from the sale of ambulance services to neighbor- ing communities, or from subsidies paid by neighboring communities, ownership of the system' s infrastructure should probably be shared by the participating communities helping to pay the system' s bills. 3 . No Enterprise Fund Income To Pay Ongoing Costs. The fail- safe franchise model does not incorporate an enterprise fund structure, i.e. , an accounting structure allowing income to be earned by the Authority and net worth accrued. Thus , there is currently no way for the Ambulance Authority to generate income from the sale of services to cover its administrative and ongoing infrastructure maintenance and improvement costs. This is not a problem so long as the MedStar service area is mainly Fort Worth. But as the system expands , a way must be found for the Ambulance Authority to "earn" the income to cover these costs via an enterprise fund business structure. 4 . No Voice for Other Communities in Contractor Selection. Under the present structure, the City of Fort Worth unilat- erally conducts the periodic procurement process. If other communities are to be served by the MedStar contractor, they should probably have a voice in the bidding and selection process. 5 . Management Focus Distracted. Under the present structure, TLC' s management must deal directly with 13 different munici- pal governments. If the system expands under the current structure, it is possible that TLC' s management would be try- ing to deal with 30 or more clients. Such an arrangement can only distract TLC' s management from its primary responsi- bilities of street-level performance. Consultant ' s Recommendations The Ambulance Authority has reviewed the consultant ' s recom- mendations and present them for City Council consideration. ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7238 - pg 5 To the Mayor and Members of the City Council December 8, 1987 _ �a4faar,�m 40, Subject: eta EXPANSION AND RESTRUCTURING OF THE MEDSTAR EMERGENCY MEDICAL SERVICES SYSTEM 1. Conversion to Enterprise Fund Model. The Authority would assume direct responsibility for all rate-setting, billing and collection functions, and would pay TLC a fixed monthly payment for emergency and nonemergency service plus "extra work" payments for services rendered. TLC ' s basic monthly payment would be reduced by the amount of the Authority' s monthly billing and collection costs . Thus, the structural change would be a shifting, not an increase, in system costs. In order to compute the monthly basic services payment , the original maximum allowable charges of $230 for emergency bills and $153 for nonemergency bills would be used . These rates would be multiplied by the transport volume for each respec- tive rate, with TLC being paid 63 percent of the resulting amount in monthly basic services payments in addition to the original subsidy. The contractor would also be paid 70% of the income collected from "extra work" services rendered, such as Medicare "DRG" transports in which a hospital con- tracts directly with an ambulance service for the transporta- tion of its admitted Medicare patients , special events cover- age, long distance transfers, etc. The negotiated basic service monthly payment made to the con- tractor would be reduced as the system expands in accordance with the following formula: Population Served Cost Saved 600, 000 4% 700,000 7% 800,000 10% 900, 000 12% County 14% Facilities, equipment , and related debts of the MedStar system which are now the responsibility of Fort Worth would be trans- ferred to the Authority. Future subsidy/price decisions would no longer involve TLC. Since both subsidies and fee-for-ser- vice income would go directly to the Authority, any surplus income would accrue to the Authority' s net worth and be used to offset future subsidy requirements , rate increases, or to fund future infrastructure costs. 2. Conversion to Multi-jurisdictional Control. An Interlocal Cooperation Agreement should be developed to allow conversion of the Authority to multi-jurisdictional status. As soon as the Agreement is approved by the City of Fort Worth and -ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS INFORMAL REPORT TO CITY COUNCIL MEMBERS N0. 7238 - Pa 6 To the Mayor and Members of the City Council December 8, 1987 Subject: EXPANSION AND RESTRUCTURING OF THE MEDSTAR EMERGENCY MEDICAL SERVICES SYSTEM at least one other municipality, the conversion would take place. The agreement would provide for uniform clinical stan- dards and response time reliability throughout the service area. Each member jurisdiction would annually select its own subsidy/price ratio from a table of options prepared by the Authority. The Authority' s subscription program would be available to residents of all member jurisdictions. The membership of the Authority would consist of municipali- ties which have approved the Interlocal Cooperation Agreement and have adopted a Uniform EMS Ordinance. For continuity of leadership, the members of the current Ambulance Authority should be automatically appointed to the board of the multi- jurisdictional authority, with additional members collectively appointed by representatives of other member jurisdictions in accordance with provisions set forth in the Interlocal Cooperation Agreement . Until such time as Fort Worth has been relieved of its contin- gent liabilities for long-term financed infrastructure costs, the City of Fort Worth should be designated within the Inter- local Cooperation Agreement to administer the Authority' s financial affairs and should be reimbursed by the Authority for its reasonable administrative costs. At such time as the City of Fort Worth has been released from its contingent liabilities for MedStar debts, and at the discretion of the Authority' s board of directors, the board may assume direct control over the Authority' s financial affairs. The recommended system structure change calls for a proposed implementation date of April 1, 1988. If the City Council approves the concept as outlined above, the Ambulance Authori- ty will proceed with the development of a plan of action that will result in a formal recommendation for City Council con- sideration. This proposal will be discussed at the Pre-Council meeting on December 8, 1987. In the meantime, if additional informa- tion is desired, it will be supplied upon your request . Harman arman City I itvM ity Manager DH:abt -ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS EXPANDING THE MEDSTAR SYSTEM*' ISSUES, OPTIONS,, AND RECOMMENDATIONS op" Prepared by: Jack Stout The Fourth Party, Inc. November, 1987 EXPANDING THE MEDSTAR SYSTEM: ISSUES, OPTIONS, AND RECOMMENDATIONS Prepared by: Jack Stout The Fourth Party, Inc. November, 1987 BACKGROUND. Prior to creation of the Medstar system, The Fourth Party was retained by Tarrant County to design a state-of-the-art, countywide EMS system. The countywide system was designed and approved, but was never implemented. Under Texas law, county governments do not have the power to regulate EMS, but city governments do. Thus, to implement the countywide system, the cities had to agree to "pool' their regulatory powers by adopting a uniform EMS ordinance and becoming members of a multi- jurisdictional "ambulance authority" established to oversee the system. Such agreement was never achieved. Without a countywide EMS system, each municipality was forced to arrange separately for its EMS during a time when clinical, technological, and financial aspects of EMS were becoming increasingly complex, and competing needs for local tax dollars reduced funding options. Those conditions still exist. Faced with these realities, the City of Fort Worth implemented the Medstar system based upon an entirely new EMS system design-- i.e., the "failsafe franchise model". Under that model, a competitively selected firm is authorized to do business under a business trade name owned by the City of Fort Worth (i.e., "Medstar"), and is allowed the use of certain city-owned facilities and communications infrastructure. These provisions were designed to preserve business continuity across procurement cycles, and to ensure an orderly takeover of operations in the event of default by a contractor. Recently, the Texas Department of Health named the Medstar system "private provider of the year". Now in its second year of (Fourth Party Report on Medstar Expansion,cont.... operation, Medstar is already nationally recognized for its clinical capability, response time reliability, and economic efficiency. Despite its "fast track" implementation, a legal challenge to its very existence, and some initial "debugging" of its experimental design, the Medstar system has earned a well-deserved reputation as one of America's finest EMS systems. THE ISSUE: EXPANDING THE MEDSTAR SERVICE AREA. Because of the recent acquisition of the Meissner-Brown operation by Medstar's current contractor, Texas Lifeline Corporation (TLC), and because of the system's contractual responsibilities for serving the cities of Westover Hills and Westworth Village under the Medstar trade name, the Fort Worth Ambulance Authority has requested this review of existing provisions governing system expansion. There are three potential advantages to expanding the Medstar system: 1. More Efficient System. As advocates of the countywide system well understood, no single municipality within Tarrant County has sufficient population to allow maximum potential economy of scale of EMS production. In economic terms, the "average cost curve" (of EMS production) continues to decline as population grows until a single firm serves a contiguous population of about 1.2 million. Our preliminary analysis of potential cost savings indicates that Medstar's total cost per transport would be about 14% less than current costs if the system were expanded to serve all of Tarrant County. While such savings would benefit the citizens of Fort Worth, the economic benefit to smaller communities would be even greater since, separately, their economies of scale are not as good as that of Fort Worth. The table below estimates the percentage cost savings which could be achieved by combining service areas. Po .Served: 500,000 600,000 700,000 800,000 900,000 Whole Co. Cost Saved: N/A 4% 7% 10% 12% 14% 2. Better Service/More Reliability. While Medstar's service is already very advanced and highly reliable, an expanded system 2 {Fourth Party Report on Medstar Expansion,cont... would be even better. Levels of training, on-board equipment inventories, and even medical protocols vary considerably throughout Tarrant County. In a disaster situation or major incident involving multiple providers, or even during an ordinary "mutual aid" response, this lack of consistency invites dangerous errors in both system response and patient care. Furthermore, without a single communications center in control of the "system", optimum deployment/redeployment of available units cannot possibly be maintained. Ensuring uniform medical care and optimum "real time" resource management were major advantages of the original countywide EMS plan. They are also advantages of expanding the Medstar system. 3. More Stable Business Structure. The Medstar system is designed to employ bid competition on a periodic basis. If neighboring communities come to depend upon Medstar's contractor, now or in the future, it is possible that a different firm may someday be awarded the Medstar contract by the City of Fort Worth. Unless these neighboring communities are somehow included in the rebidding process, an award of the Medstar contract to a new provider could very well result in a collapse of services to neighboring communities. The provisions for expansion recommended in this report would solve this potential problem, and also improve the combined "purchasing power" of participating communities. Unless the Medstar system is substantially restructured, these potential advantages will remain exactly that--"potential". While the proposed countywide EMS system structure was specifically designed for multi jurisdictional responsibility and participation, the present structure of the Medstar system was not. The "failsafe franchise model" has proven to be an excellent structure for managing a mono-jurisdictional EMS system. But for the reasons outlined below, the failsafe franchise model is inappropriate for on- going management of a multi-jurisdictional system. Opk 3 (Fourth Party Report on Medstar Expansion,cont... PRESENT PROVISIONS FOR MULTI-JURISDICTIONAL COVERAGE. In anticipation of a possible desire on the part of neighboring communities to take advantage of Medstar's resources, four special provisions were built into Fort Worth's current EMS ordinance and the Medstar business structure: First, provision is made in Fort Worth's EMS ordinance for eventual conversion of the Fort Worth Ambulance Authority to a multi-jurisdictional entity under the Texas Interlocal Cooperation Act (i.e., Subsection 6.05,B of Fort Worth EMS Ordinance); Second, even without reorganization the Authority is authorized to contract with neighboring jurisdictions to provide EMS, and provision is made in the TLC contract to provide additional compensation for coverage of such areas; Third, TLC is authorized to sell its services directly to neighboring jurisdictions, provided such services are rendered under the "Medstar" trade name (required for re-bidding 001• purposes), and provided the City of Fort Worth is fairly reimbursed for its system startup and infrastructure costs; and, Fourth, TLC is allowed to provide short term (i.e., 6 months) emergency service to neighboring jurisdictions without reim- bursing the Authority for system startup and infra—structure costs. These provisions were specifically intended to allow neighboring communities to take advantage of Medstar's resources and to provide for a fair sharing of Fort Worth's system startup and on- going infrastructure costs (e.g., facility costs, communications system costs, costs of medical quality control, etc.). These provisions also allow each municipality to decide for itself the subsidy/price ratio to be employed in its community. Mile these provisions are adequate to manage small scale expansion, for reasons discussed below they are inadequate to manage a major expansion of service area and infrastructure requirements. 4 {Fourth Party Report on Medstar Expansion,cont.... DEFICIENCIES OF CURRENT BUSINESS AND LEGAL STRUCTURE. The recent acquisition by TLC of the Meissner-Brown operation involves a type of expansion that was not anticipated or provided for under the above-discussed provisions. That is, services and geographic areas covered by the above-discussed provisions are those which are sold under the Medstar trade name and are, therefore, subject to periodic rebidding in a combined procurement package. (The requirement for use of the Medstar trade name has two important purposes: to prevent a potential collapse of service to neighboring jurisdictions upon the award of a future Fort Worth contract to a new provider; and, to prevent major readjustment of the system's finances with each contract cycle.) As noted earlier, the current business and legal structure was never designed for large scale expansion. Even if the Meissner-Brown services were being provided under the Medstar trade name, the current business and legal structure would still inadequate to manage the expansion for the following reasons: 1. Business Continuity Not Assured. Under the present legal structure, each municipality separately awards its own EMS contract on its own contracting cycle. There is currently no mechanism for "pooling" the municipalities' purchasing power, or even of establishing a common contracting and procurement schedule. Thus, unless the structure is changed as recommended herein, expansion achieved between contract cycles cannot be incorporated into subsequent bid processes. 2. Infrastructure Ownership Not Shared. Under the present design, the "infrastructure" of the Medstar system (e.g., office and maintenance facilities, dispatch facilities, medical and dispatch communications systems, even the "Medstar" trade name itself, etc.) is entirely owned by the City of Fort Worth. This creates two problems which increase with the size of the Medstar service area: First, as the area expands, certain components of the system's infrastructure must also be expanded, modified, or upgraded. The cost of the current infracture was paid oph, for via long-term financing arrangements guaranteed by 5 {Fourth Party Report on Medstar Expansion,cont.... the City of Fort Worth. Under the present legal structure, even if TLC reimburses the City of Fort Worth for a fair share of these amortized costs, there is no practical way to finance improvements and enhancements necessary to system expansion unless the City of Fort Worth guarantees the additional debt. Second, if Fort Worth's current infrastructure-related debt is partially retired using income generated from the sale of ambulance services in neighboring communities, or from subsidies paid by neighboring communities, ownership of the system's infrastructure should probably be shared by the participating communities helping to pay for the system. 3. No "Enterprise Fund" Income to Pay On-Going Costs. The "failsafe franchise model" does not incorporate an "enterprise fund" structure--i.e., an accounting structure allowing income to be earned by the Authority and net worth accrued. Thus, there is currently no way for the Ambulance Authority to generate income from the sale of services to cover its administrative and on-going infrastructure maintenance and improvement costs. This is not a problem so long as the Medstar service area is mainly the City of Fort Worth. But as the system expands, a way must be found for the Ambulance Authority to "earn" the income to cover these costs--i.e., via an '"enterprise fund" business structure. 4. No Voice for Other Communities in Contractor Selection. Under the present structure, the City of Fort Worth unilaterally conducts the periodic procurement process and selects the Medstar contractor. If other communities are to be served by the Medstar contractor, they should probably have a voice in the bidding and selection process. 5. Management Focus Distracted. Under the present structure, TLC's management must deal directly with 13 different municipal governments. If the system expands further and the structure is not changed, it is possible that TLC's managers may someday be trying to deal directly with 30 0011 6 (Fourth Party Report on Medstar Expansion,cont....) or more municipal clients. Such an arrangement can only distract the focus of TLC's management from its primary responsibility for street-level performance. By allowing TLC to serve a single, multi-jurisdictional ambulance authority representing the collective interests participating munici- palities, TLC's management can return its full attention to the reason TLC was hired in the first place--expert management of emergency medical services. SUMMARY OF FINDINGS. The EMS system's present business and organizational structures were simply not designed to finance and manage a large scale multi-jurisdictional system. The major conclusion of this report is that, because of the success of the Medstar system and its growing importance to neighboring communities, the time has come to reorganize the system to allow full participation by neighboring communities in a true multi- jurisdictional structure with shared control by member jurisdictions. Neighboring communities need not be forced to join such a system, Poll, and should continue being served under special business arrangements acceptable to those communities. Even so, regardless of how elaborately such special arrangements may be structured, they can never protect the interests of those communities as well as bona fide membership in, and shared control of, a multi- jurisdictional Authority. The time has come to begin implementation of a countywide EMS system.....even if it means adding one jurisdiction at a time. The remainder of this report presents recommendations for: continuing service to the Meissner-Brown communities; converting Medstar's business structure from the "failsafe franchise model" to an "enterprise fund" model; converting the Fort Worth Ambulance Authority into a multi-jurisdictional entity with shared control by member governments; expanding and upgrading control center operations and other infrastructure components; and, providing continuing service to non-mernber communities. 0011 7 (Fourth Party Report on Medstar Expansion,cont.... INTERIM SERVICE TO THE MEISSNER-BROWN COMMUNITIES. At the option of the respective municipalities, TLC should be allowed to continue its Meissner-Brown services under the terms of the existing Meissner-Brown contracts, with compensation to be paid the City of Fort Worth to cover a fair share of system startup and infrastructure costs, as proposed by TLC. However, the municipalities served under Meissner-Brown contracts should be offered the option of membership in the multi-jurisdictional authority proposed in this report, and should be allowed to terminate their Meissner-Brown contracts in favor of full membership at any time. As discussed later in this report, the cities currently served under Meissner-Brown contracts would receive better service at lower user fees through membership in the multi-jurisdictional system. (Note: The $85,000 owed the City of Fort Worth by TLC to cover amortized costs of infrastructure components shared by the Meissner-Brown communities should be sufficient to fund implemention of this report's recommendations. As an "enterprise fund" operation, the restructured Authority can later reimburse the City of Fort Worth, and other participating governments, from its earned income.) REGARDING THE COST SHARING FORMULA. There are two problems in using the findings from the financial study recently performed by David M Griffith and Associates as the basis for sharing system startup and infrastructure costs with neighboring communities. While the study did accurately determine Fort Worth's per capita startup and infrastructure costs, those figures cannot reasonably serve as a basis for allocating costs to other communities, for two reasons: First, to determine Fort Worth's per capita costs, expenditures were divided by Fort Worth's population. Obviously, if the service area expands, the population sharing those costs would also increase, lowering the per capita cost. Thus, as the system expands, the per capita cost to neighboring communities would be reduced. Otherwise, it is not impossible that the system's startup and infrastructure costs might be paid for entirely by neighboring jurisdictions, with no investment at all by the City of Fort Worth. opk 8 (Fourth Party Report on Medstar Expansion,cant....) „, Second., as the system expands, its infrastructure must eventually be expanded and upgraded. If these fees were paid to the City of Fort Worth as reimbursement for expenses already incurred, they would not be available to fund improvements needed to facilitate the expansion. However, if such per capita fees are paid into the enterprise fund of a multi- jurisdictional authority, the funds can be used to finance on- going infrastructure improvement and maintenance. Eventually, the multi-jurisdictional authority can repay the investments of the City of Fort Worth, and other member jurisdictions, from its own retained earnings. (Note: Every "enterprise fund” model EMS system implemented by our firm has gradually declined its subsidy requirement, in two cases to zero, and is capable of repaying its original startup costs. See the attached recent financial statement from the Tulsa EMS system, and the annual report from the Fort Wayne EMS system.) Poll CONVERSION TO "ENTERPRISE FUND" MODEL. Assuming reasonable cooperation from TLC owners, it should be possible to convert to an "enterprise fund" model by renegotiating the current TLC contract. The basis of conversion would be generally as follows: 1. The Authority would assume direct responsibility for all rate-setting, billing, and collection functions, and would pay TLC for services rendered under compensation provisions generally along the lines of those employed under a "public utility model" contract--i.e., a fixed monthly payment for intra- jurisdictional emergency and nonemergency service (i.e., "basic services"), plus "extra work" payments for long distance transfer, special events coverage, DRG transports, etc. (See Figure, "Cash Flow in Restructured System", follow page.) Under a negotiated "turnkey contract" including on-going software maintenance, the Authority would purchase or lease from TLC its existing computer hardware, software, and related equipment used for billing/collection purposes. TLC's current data entry and accounts receivable management 9 CA G > 0 i _ = U) d 0 t? � U. tat dt t n * } tti tJ J LL E o U i V W U. � +� � a C © 0 cc 0 a ttT E L—; Z IJ? 0 C.}CL E 0 m E 4 CL u W 0 o " _ m Etuo 13 o Eum C W L r i •� u- Q .;� to o C? Ri i C i.. r0 4) a V V? tli Cl) U) y d ++ 0 CM 7 Cc ow co ... _ o E m o — o C? ca c c o c tL .G Q _ o U. 'Q m (n d LL Jc to i o .fl R4 x U M ' o c0 o H _ Cf) CL cn as N 0 CA o _ N .� E L.U. Q' N d 0 A au E = emu- caEv � U. 00. tt3 o to CO o �' 4 °' s"„ E {n = 0 10 E ca 0 J (Fourth Party Report on Medstar Expansion,cont.... personnel would, at their option, become employees of the Authority. Note that TLC's "basic service monthly payments" 001k would be reduced by the amount of the Authority's monthly billing/collection costs. Thus, this structural change is merely a shifting of system costs--not an increase in system costs. 2. The "basic services" monthly payment amount to TLC would be established by assuming: a 63% unadjusted collection rate on the current volume of " basic services" at the average charge levels which were in effect prior to negotiation of the temporary adjustments now in place; plus, the monthly subsidy prior to the adjustment; less, TLC's actual costs of performing data processing, billing, and collection functions. TLC originally projected a 63% overall unadjusted collection rate; thus the 63% figure should be acceptable to TLC's owners. Payment for "extra work" (e.g., long distance transfers, special events coverage, etc.) would be based upon 70% of collected income from such "extra work" sales. These changes would be effective approximately April 1, 1988. (Note: the contract amendment currently being negotiated to implement the agreed-upon temporary rate/subsidy adjust- ments should not be executed until a decision has been made regarding these recommendations.) 3. The amended contract with TLC would incorporate a discount schedule in anticipation of system expansion. Such schedule would provide a reduction in the per capita cost of the "basic service monthly payment" (for the combined service areas--not merely the areas being added) based upon the contiguous population served by the system. That is, the monthly per capita fee owed TLC by the Authority for "basic services" would be reduced as the system expands, in accordance with the formula discussed earlier, which formula is repeated below for the reader's convenience. Po .Served: 500,000 600,000 700,000 800,000 900,000 Whole Co Cost Saved: N/A 4% 7% 10% 12% 14% (Fourth Party Report on Medstar Expansion,cont.... .4. Current contract provisions governing inflation adjustments and additional compensation for increased production standards would remain in force, as would the financial allowance for "clinical upgrades" (i.e., TLC's financial responsibility) already included in the current contract. 5. The Ambulance Authority's financial structure would be converted to an "enterprise fund" account. Facilities, equipment, and related debts of the Medstar system which are now the responsibility of the City of Fort Worth would be transferred to the Ambulance Authority. A contract for subsidy of ambulance services between the City of Fort Worth and its Ambulance Authority would be developed and approved. "Late run" and other penalties charged TLC would be paid to the Authority and used for EMS purposes. Responsibility for subscription sales would rest with the Authority--not TLC-- and all income derived from the sale of subscriptions would be retained by the Authority. 6. Since the system's working capital is currently furnished by TLC and now appears as the net present value of currently- outstanding Medstar accounts receivable (less associated billing/collection costs), provision must be made by the Ambulance Authority to purchase Medstar's accounts receivable as of the date of transition to the enterprise fund structure. Since TLC earns no interest on the value of these accounts receivable, TLC should be willing to finance the Authority's purchase at zero interest so long as TLC remains the Medstar contractor, not to exceed a reasonable period of time. 7. At such time as the Authority's financial track record and own net worth are adequate to justify assumption by the Authority of all Medstar-related financial responsibilities, the City of Fort Worth would be released from its contingent liabilities relative to these debts. 8. After conversion to the enterprise fund structure, future subsidy/price decisions would no longer involve TLC or future 0111 Medstar contractors. Since both subsidies and fee-for-service 12 (Fourth Party Report on Medstar Expansion,cont.... income would go to the Authority--not to its contractor, any • surplus income realized by the Medstar system would accrue to the Authority's net worth and be used to offset future subsidy requirements or rate increases, or to fund future infrastructure costs. CONVERSION TO MULTI-JURISDICTIONAL CONTROL. An Interlocal Cooperation Agreement should be immediately developed to allow conversion of the Ambulance Authority to multi-jurisdictional status. As soon as the Agreement is approved by the City of Fort Worth and at least one other municipality, the conversion would take place, ideally prior to conversion to the enterprise fund structure. The agreement would provide for uniform clinical standards and response time reliability throughout the service area. (Modified response time standards should be developed for rural and non- contiguous areas.) The Agreement would, of course, allow each member jurisdiction to annually select for itself the subsidy/price ratio to be effective within its own jurisdiction, from a table of options prepared by the Authority and annually revised. The Authority's subscription membership program would be available to residents of all member jurisdictions. As the system expands, member jurisdictions would benefit equally from the improved economies of scale. The membership of the Authority would consist of municipalities which have approved the Interlocal Cooperation Agreement and which adopt and enforce the Uniform EMS Ordinance. (By joining the system, Tarrant County could make the subsidy/price decisions for the unincorporated areas. However, because it lacks regulatory power, the County cannot adopt or enforce the Uniform EMS Ordinance.) For continuity of leadership, the Board of Directors of the current Ambulance Authority should be automatically appointed to the board of the multi-jurisdictional authority, with additional members collectively appointment by representatives of other member jurisdictions in accordance with provisions set forth in the Interlocal 13 (Fourth Party Report on Medstar Expansion,cont.... Cooperation Agreement. Because of the specialized nature of the Authority's responsibilities, future appointments should be structured so that, collectively, membership of the board has expertise in health care administration, business management,, business law, and finance. The Medical Director of the system should be an ex officio but voting member of the restructured authority. Until such time as the City of Fort Worth has been relieved of its contingent liabilities for long-term financed infrastructure costs, board members not appointed by the City of Fort Worth would serve in an advisory, non-voting capacity. However, when the City of Fort Worth has been released from its liabilities for Medstar debts, all board members would have equal voting rights. Note: as the system expands, membership on the Emergency Physicians Advisory Board (EPAB) must also be expanded to include physician representatives from throughout the combined service area. The three dollar per transport franchise fee which currently funds the cost of medical quality control should be retained and should also apply to all member jurisdictions, as per requirements set forth in the Uniform EMS Ordinance. EXPANSION OF CONTROL CENTER OPERATIONS. As the system expands, the time will come when it will be necessary to expand and relocate Medstar's control center operations. Experience of other systems has shown that operating costs can be slightly but significantly lowered by co-locating ambulance control center operations within the ambulance service's administrative office and maintenance facility. Such a change should be anticipated and provided for in the restructured authority's long term financial projections. CONTINUING SERVICE To NON-MEMBER COMMUNITIES. After conversion to the enterprise fund structure, service to non-member jurisdictions can be continued the following arrangement: Primary emergency services provided directly to non-member jurisdictions by TLC would be sold under a trade name and license other than 14 (Fourth Party Report on Medstar Expansion,cont.... "Medstar". TLC would be solely responsible for funding any needed infrastructure improvements, and such improvements would become the property of the Authority. TLC would be responsible for all data processing, billing, and collection functions associated with such services. In addition, Authority members would receive benefit of the population-based area expansion discount schedule by way of reduced "basic service monthly payments" to TLC, even if the jurisdictions being served directly by TLC (or a TLC affiliate company such as Meissner-Brown) are not members of the Ambulance Authority. IMPLEMENTATION OF RECOMMENDATIONS: If this report is approved in principle by the Fort Worth City Council, implemen- tation will require completion of the following tasks prior to April 1, 1988: 1. Development of an Interlocal Cooperation Agreement allowing conversion of the Ambulance Authority to multi- jurisdictional status and establishing the Authority's new 00,11 duties, responsibilities, and operating contraints; 2. Development of a Uniform EMS Ordinance to be adopted and enforced by member jurisdictions (except the County), authorizing the Emergency Physicians Advisory Board (EPAB) to provide medical quality control for all participating jurisdictions, providing for administration of the "franchise fees" for funding EPAB operations, and providing for enforcement of ordinance provisions. 3. Renegotiation of the current contract with TLC to allow conversion from the "failsafe franchise model" to a n "enterprise fund" business structure, to incorporate the expansion-related discount schedule, and to provide for "turnkey" transfer of TLC's billing/collection operations to the Authority.- 1 4. Development of medium range (i.e., 5 to 7 year) financial projections of the Authority's operations, based upon several OW sets of assumptions ranging from "worst case" to "best case", 15 (Fourth Party Report on Medstar Expansion,cont....) and assuming both "fast" and "slow" expansion of the Medstar service area; 5. Development of a subsidy contract to operate between the City of Fort Worth and the Ambulance Authority. This contract would establish the rate/subsidy balance for the City of Fort Worth, including the schedule of subsidy reduction over the next five years, and would also provide for the transfer of infrastructure assets and related liabilies to the Authority; and, 6. Presentation of the revised system structure to officials of neighboring local governments who may be interested in joining the system. (Of course, officials of interested governments should be consulted during development of the Interlocal Cooperation Agreement and the Uniform EMS Ordinance.) 001 16