Jim Mathes took one bad step out of his apartment in early September and wrenched his back. The pain was so intense he had to crawl back inside on all fours. He needed medical care, but there was no chance he could get himself down three flights of stairs to his car. So he did what anyone would do; he called for an ambulance.
That turned out to be an even bigger misstep, sending him into the demanding arms of a multibillion dollar global industry, and leaving him with a nearly $800 bill for a 5-mile ride.
The ambulance crew helped him downstairs, but once there, he felt well enough to drive himself to Parkwest Medical Center hospital, only five miles away in Knoxville, Tenn. The technicians urged him to ride in the ambulance, however.
“It’s no big deal,” Mathes recalls one technician saying, repeatedly. So Mathes got in.
Maybe the ride wasn’t a big deal, but it was an $800 deal.
Call it ‘Consumer Rage’
Today, Credit.com and BobSullivan.net are starting a feature called “Consumer Rage.” Most know it well, but just in case: Consumer Rage is the reaction you get when hit with an unfair fee, a surprise surcharge, or an automatic payment that is deducted from your account without your permission. It’s also fine print fraud, red tape entanglements, and what economists sometimes called “inflation by degradation” — when the price stays flat, but the service declines or the size of the package shrinks.
Rage, however, differs from anger, because rage is often associated with powerlessness. People who are angry get even; people who rage usually just shake their fist at the moon. With the Consumer Rage, we want to change that. Tell us your stories, filled with all the (suitable for children’s eyes) vitriol you can muster. We’ll examine the issue, ask readers to chime in, then offer tips for getting your money and your dignity back. Along the way, we’ll also offer a deeper explanation for why things are the way they are, and suggest systematic changes, too. Now, back to the $800 ambulance bill.
‘I Would Have Crawled’
Two weeks after the back incident, Mathes was stunned by another pain — a $798 bill he received from Rural/Metro of Tennessee. By Mathes’ math, the cost was more than $150 per mile.
“If I’d have known it would cost that much, I would have crawled to the hospital,” he said. His insurance won’t cover the ride, so Mathes is stuck paying the bill.
As if to add insult to back injury, the ambulance ride costs are itemized on a copy of the bill Mathes provided. It says the per mile cost was really only $8.73. The flat rate for sending the rig anywhere was $755.
“I feel like I was duped,” Mathes said. “I’m glad we’re not paying the amount for gas per mile that they do. Oh wait, that’s what they are asking me to do. Unbelievable.”
Perhaps he felt duped, but Mathes may have gotten off easy. A report issued to Congress last year by the Government Accountability Office found that ambulance rides can cost patients anywhere from $224 to $2,204, with costs generally higher in rural areas. It’s easy enough to find pricer rides, however, like this story of an 84-year-old man charged $3,000 for a ride next door.
Corporations, Health Care and High Finance
As America focuses more than ever on health care costs, thanks to the launch of Obamacare, an examination of the exorbitant cost of ambulance rides offers some valuable insights about the intersection between health care costs and private corporations.
When Mathes called for help, he had no idea that he’d just injected himself into a high-stakes game of global high-finance.
Rural/Metro was founded in 1948 in a small Arizona town by a newspaper reporter who’d witnessed a neighbor’s home burn to the ground because of inadequate emergency response. He bought a fire truck himself and charged neighbors $12 a year for service.
By 2011, Rural/Metro had expanded to 23 states and 700 communities across the country, having swelled into the second-largest private provider of fire and rescue service. A publicly-traded firm, Rural/Metro became the target of a controversial acquisition by private equity firm Warburg Pincus. The $438 million purchase was funded via leveraged buyout — Rural/Metro borrowed the money to pay for its own acquisition, the kind of debt-financed deal that attracted negative attention during Mitt Romney’s run for president. Warburg Pincus took the firm private, to the chagrin of shareholders, who sued over the deal. Within two years, Rural/Metro missed a payment on the debt it borrowed for the purchase. In June, Rural/Metro declared bankruptcy — in record time after a private equity deal, according to The Wall Street Journal. The firm has said repeatedly that the bankruptcy will not impact emergency services, and in fact, it was able to re-negotiate debts with creditors to buy itself time.
How Ambulances Became Big Business
Emergency transportation is big business. The largest player in the space, American Medical Response, operates in 42 states and has annual revenues of about $1.3 billion. It was also acquired by a private equity firm in 2011 — Clayton Dubilier & Rice, for a reported $3.2 billion
The nation’s third-largest service is an international affair, formed when Swedish firm Falck A/S bought up a set of smaller U.S. emergency services companies during the past three years. Falck A/S, Europe’s largest private ambulance provider, operates in 25 countries on five continents.
While the money is big, the competition isn’t. Patients certainly don’t try to compare emergency transportation rates when they are in crisis, and in most cases, they couldn’t anyway. Local jurisdictions negotiate set rates and exclusive contracts with emergency transportation teams, not unlike the way cable television contracts work. You get injured, you pay the ambulance company. Price pressure is exerted only when a local government puts its services contract out to bid. That makes emergency transport a lucrative part of the health care revenue pie.
Not that there aren’t challenges for emergency transport providers. Chief among them: unpaid bills. The Wall Street Journal reported earlier this year that Rural/Metro’s collection rate has been plummeting in recent years, down from 48 cents on the dollar in 2010 to 33 cents on the dollar earlier this year.
Justifying the Cost
Asked about Mathes’ bill, Rural/Metro said in a prepared statement that its rates are set by a contract approved by the Knox County Commission. The company also pointed out there are costs associated with operating an ambulance that might not be immediately apparent.
“Advanced life support (ALS) transport requires a high degree of specialized emergency medical care, including advanced emergency medical equipment and trained EMTs and paramedics,” the statement said. “Rural/Metro charges a flat fee for ALS transport that includes all lifesaving equipment used during transport without adding itemized fees that can be common among other providers. The cost also indirectly includes the cost of the ambulances; upgrades to the latest lifesaving medical equipment; the training and staffing of paramedics and EMTs; and costs associated with transporting uninsured patients.”
The statement added that patient insurance generally covers 80% of the cost.
Red Tape Wrestling Tips
So Mathes’ bill wasn’t for a simple five-mile ride; he was paying for an ambulance to be on call 24 hours per day, seven days a week, with the latest technology and technicians, whenever he might need it. He was also paying a premium to cover the cost of unpaid bills — perhaps doubling his cost. In that context, the price doesn’t seem quite so outrageous.
Still, many consumers are able to negotiate with transport firms and get a break on the bill, particularly if they promise to pay upfront. Consumers can also appeal a non-payment by their insurance companies. Most insurance doesn’t pay for ambulance rides that are considered a non-emergency, so the way the transport firm codes the bill is critical. Ask the ambulance provider to resubmit a bill coded as an emergency, if that’s appropriate.
None of those tips help the larger problem of escalating costs throughout the system, however. It’s impossible not to imagine founder Lou Weitzman, who sold the firm to his employees in 1978, turning over in his grave at the idea that his $12-a-year service has turned into an $800-per-ride service.
One model for providing emergency services involves collecting a little money from all residents so they are covered in case of emergency. Another is to collect a lot of money from residents who are unlucky enough to need help. The former model leads to complaints about higher taxes, but the latter leads inevitably to “gotcha” governing. Consumers who lose life’s lottery get stuck paying exorbitant bills to pay for the profits of multinational corporations.
And that leads to consumer rage. Have you been charged $800 or more for an ambulance ride? Have you been hit by other government or corporate gotchas? Rage away on our Facebook page designed to collect rage stories.
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