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Agenda 02/26/2008 Item #10F Agenda Item No.1 OF February 26, 2008 Page 1 of 5 EXECUTIVE SUMMARY Recommendation to amend the FY08 Emergency Medical Services Department budget by reducing personnel, operating and capital expenditures to offset anticipated ambulance fee revenue shortfalls. OBJECTIVE: To implement a plan to avoid deficit spending in EMS in FY08 and FY09. CONSIDERATIONS: On May 22, 2007, Agenda Item 16F4, the Board approved an Agreement with Advanced Data Processing, Inc. (AD PI) of Miami, FL to outsource EMS ambulance transport fee billings. Revenue projections for the FY08 budget were provided by ADPI and incorporated into the FY08 adopted budget. Late in FY07, a downward trend in revenues began and ADPI has provided a revised revenue projection for FY08 of $8.8 million, a shortage of $2.4 million. Staff is proposing actions to rebalance the FY08 budget incorporating this anticipated decrease in revenues with off-setting proposed reductions in operating expenses, deferment of ambulance purchases and personnel reductions. It is expected that this trend will continue in FY09. Staff has received a revised forecast of $9.1 million for that year which is $2.7 million below the original projection. Without implementing staffs proposed rebalance, EMS will go into FY09 with a deficit of $1,654,123 coupled with reduced revenue projections for that year. _. There are a number of factors accounting for these revenue shortfalls: 1. Lower than projected transports The number of ambulance transports for 2008 was projected to increase by 5% over the projected 2007 transport level based on population increase projections. The revised transport forecast for FY08 is for a level slightly less than the 2006 actual transport level, based on first quarter billings and is illustrated below. Transports 30,000 ~-_...- ~---~-_._----~.....~~ ,..._"------"--"----------- 25,730 25,000 ~-- 20,158 20,000 - :ElActual l 18 Forecast I 15,000 10,000 - 5,000 - 0 2004 2005 2006 2007 200Best - Agenda Item No. 10F February 26, 2008 Page 2 of 5 ,.~" This pattern of decreased billable transports in FY07 is not exclusive to Collier County. Lee County EMS has experienced a similar pattern of call reduction, after a significant rise in 2004 due to Hurricane Charley. Currently they are forecasting an increase of 2% or less for FY08 over FY07. The hospitals are also seeing a decline in patients. HMA Pine Ridge experienced a 16% decline over FY06, and the Collier Boulevard location is down 20% from that projected for their first year. NCH at the North Collier Hospital location experienced a nearly 9% drop in Emergency Room visits for 2007 vs. the 2006 level, while the downtown location had experienced almost an 18% decrease from 2006. 2. Mix of business The mix of business, or mix of payment methods (self pay, insurance, Medicare, etc.) has considerable impact on projected and actual revenues. When ADPI performed their analysis and compiled their projections for the five year period FY07 - FYII, the portion of billable calls attributable to Medicare were budgeted at 40% of EMS total revenues, however, we are experiencing 47% collections from Medicare. This results in a substantial decrease in collections as Medicare will only pay their allowable charge of $304, even though our rate for an ALS I ground transport is $700. Also, at the time projections were made for FY07 and forward, certain assumptions were made by the consultant as to Medicare annual increases in their allowable charge. For FY07 it was assumed that the Medicare annual inflation factor would be 4.3%. In actuality, this adjustment turned out to be only 3.3%. For FY08 and going forward, the Medicare adjustment was assumed /'" to be 4.3%. The actual inflation figure just released for FY08 is 2.7%. In addition, the mix of commercial insurance and self pay has changed. Self pay accounts (accounts where the patient has no insurance of any type) are significantly higher than experienced by Collier County in the past. This can be attributable to many factors, including the resultant loss of group insurance coverage due to unemployment, employers dropping coverage, individuals unable to continue to pay premiums to private carriers, as well as the overall economic conditions. Due to higher mortgage costs, property/casualty premiums, gas prices, etc., many people find themselves unable to meet these debts and feed their families, let alone pay for medical expenses, including insurance premiums and ambulance transports. Further complicating the collection process, many insurance carriers are now "short paying" benefits. This means they are paying what they feel are usual and customary rates for the area, sometimes less than that paid by Medicare. In the past, providers have been able to appeal the short payment, but Aetna (a major carrier) is no longer accepting appeals and that appears to be a growing trend among carriers. Also, Blue Cross/Blue Shield (BClBS) has begun paying benefits directly to the insured rather than the provider. This requires EMS to bill the individual directly and attempt to collect payment irom them after they have received the money. The billing consultant is making an effort to identify when these payments are made directly to the insured so that an invoice can arrive timed to the patient's receipt of the check from BClBS and hopefully be more apt to make the payment for their ambulance fee. Proposed plan to bring expenses into alignment with decreased revenues: .- The billing consultant is making many adjustments to processes and procedures in an effort to maximize co llections, including adding staff dedicated to our account. Even with such improvements, the projected revenue of $8.8 million for FY08 is $2.4 million less than the Agenda Item No. 10F February 26, 2008 Page 3 of 5 budgeted amount of $11.2 million. Additionally, it is anticipated that FY09 will experience only a small 3% improvement over the revised FY08 revenue projections. Staffs plan to balance this shortfall is as follows: I. Since nearly 77% of the EMS Operating Budget is comprised of personal service costs, the largest impact to reduce expenses immediately would be made in a reduction of personal services. A reduction of four EMS units (24 field medics) at this time would provide $983,345. EMS field staff would be reduced to the 2006 level, which is consistent with projected transport levels. The level of service would have a slight negative impact. Our current adopted level of service is to arrive on the scene within 8 minutes 90% of the time. In 2006 the response time for arriving on scene within 8 minutes was 83% in the urban area, 70% rural and 81 % countywide. This countywide level had improved to 84% at the end of FY07, with 87% urban and 71 % rural. Given the proposed personnel reductions, EMS management anticipates that response times will more closely resemble FY 06 levels. 2. Staff proposes to postpone the purchase of three scheduled replacement ambulances for a reduction of $555,000. 3. Operating costs and year-to-date attrition, including the reduced fees to ADPI result in another decrease of $454, 173. The above actions, along with the absorption of current budgeted reserves for FY08 would result in a slight positive year-end balance of$I,670 entering into FY09. An alternative to the above plan would be to transfer money from General Fund reserves to offset the net $1,654,123 shortfall for FY08, keeping staff levels status quo and procuring the planned ambulance units. However, the impact of the decreased revenue projection for FY09, coupled with a full year service for these personnel will require an additional contribution from the General Fund in 2009 of $4.9 million. (See detailed chart attached). FISCAL IMPACT: Revenue reduction of$2.4 million, reduction in expenses of$2 million and utilization of remaining reserves of $.4 million would rebalance EMS Fund 490 for the current FY08 and avoid a deficit carryforward into FY09. GROWTH IMPACT: There is no Growth Management Impact resulting from this action. RECOMMENDATION: That the Board of County Commissioners accept staffs proposal to amend the FY08 EMS budget by adjusting revenues, deferring ambulance purchases and implementing staff reductions to cover the forecasted shortage of $1,654,123 and approve necessary budget amendments. PREPARED BY: Jeff Page, Chief, Emergency Medical Services Agenda Item No. 10F February 26,2008 Page 4 of 5 - EMS _ Affect on Carryforward and General Fund Transfer from Revenue Expense & Personnel Changes Projections with Staff Proposed Reductions 2008 2008 2009 Amended Forecast Current Personal Services 19,073,100 17,895,830 18,790,622 Operating Expenses 4,143,300 4,000,500 4,000,500 Capital Expenses 1,568,848 896,400 500,000 Reserves 1,241,100 1,164,600 Reserve for Attrition (670,200) (657,672) Transfers 6,000 6,000 6,000 Total Expenses 25,362,148 22.798.730 23,804,050 Ambulance Fee Revenue 11.212,000 8,832,000 9,100,000 Reduced revenue projections Carryforward 1,376,248 633,800 I 1,670 I 2008 and 2009 Miscellaneous Revenues 22,800 22,800 22,800 General Fund Contribution 13,311,800 13,311,800 15,240,280 I 1,928,480 I Increased GF contribution 5% Revenue Reserve (560,700) (560,700) in FY 09 with staff proposed reductions. Total Revenues 25,362,148 22,800,400 23,804,050 1,670 Carryforward Projections without Staff Recommended Reductions 2008 2008 2009 Amended Forecast Current Personal Services 19,073,100 18,879,175 20,049,684 Operating Expenses 4,143,300 4,000,500 4,000,500 Capital Expenses 1,568,848 1,568,848 500,000 Reserves 1,241,100 1,227,500 Reserve for Attrition (670,200) (701,739) Transfers 6,000 6,000 6.000 Total Expenses 25,362,148 24,454,523 25,081,945 Ambulance Fee Revenue 11,212,000 8,832,000 9,100,000 Reduced revenue projections Carryforward 1,376,248 633,800 1 (1,654,123)1 2008 and 2009 Miscellaneous Revenues 22,800 22,800 22,800 General Fund Contribution 13,311,800 13,311.800 18,173,9681 4,862,168 I Increased GF contribution 5% Revenue Reserve (560,700) (560,700) in FY09 if no expense reductions are implemented Total Revenues 25,362,148 22,800,400 25,081,945 (1.654,123) Carryforward ...,..- >.~-<"~ ..----... -_."--'-'-~'--'" Page I of I Agenda Item NO.1 OF February 26,2008 Page 5 of 5 COLLIER COUNTY BOARD OF COUNTY COMMISSIONERS Item Number: 10F Item Summary: Recommendation to amend the FY08 Emergency Medical Services Department budget by reducing personnel, operating and capItal expenditures to offset anticipated ambulance fee revenue shortfalls. (Jeff Page. EMS Chief) Meeting Date: 2/26120089.0000 AM Prepared By Jeff Page EMS Chief Date Bureau of Emergency Services EMS 2/14/2008 3:02:28 PM Approved By Jeff Page EMS Chief Date Bureau of Emergency Services EMS 2/14/20083:21 PM Approved By Dan E. Summers Bureau of Emergency Services Director Date County Manager's Office Bureau of Emergency Services 2/14/20083:25 PM Approved By OMS Coordinator Applications Analyst Date Administrative Services Information Technology 2/14/20084:37 PM Approved By Sherry Pryor Management & Budget Analyst Date County Manager's Office Office of Management & Budget 2/151200810:52 AM Approved By James V. Mudd County Manager Date Board of County Commissioners County Manager's Office 2/18120087:27 PM file://C:\AgendaTest\Export\ 10 l-February%2026, %202008\ I 0.%20COUNTY%20MANAG... 2/20/2008