The nuts and bolts behind city's ambulance utility rates doubling
October 01, 2012
City officials want to raise the ambulance utility rates in Sunnyside to more than double the current rate over the next two years in order to maintain the same level of service.
The rate increase proposal will be presented to the public at a hearing on Tuesday, Nov. 13, at the Sunnyside City Council meeting.
What ambulance service costs
The city of Sunnyside has an integrated fire and ambulance/EMS department. To determine what utility rates and service fees need to be to fund the ambulance service, those costs must be separated from the total fire department budget.
According to a service and rate study conducted by the FCS Group in July, the total costs for the city's fire and ambulance/EMS department were budgeted in 2012 at $2,218,156. Of this, the city budgeted $958,900 to ambulance/EMS.
But the study examined actual usage and found the ambulance service should have been budgeted at $1,290,529. It is the difference between what the city has budgeted for ambulance service and what it should have budgeted that means the city needs to raise the utility rate.
Ambulance service revenue
The city's ambulance service receives funding from multiple sources. Every person who uses the ambulance service is charged a transport fee, often paid through insurance. In 2012, $450,000 is budgeted to be collected through these fees, according to the study.
In addition, the ambulance utility tax is imposed on all citizens of the city through their city utility bill. The 2012 budget indicates $310,000 will be collected through the utility tax, according to the study.
The study states that the city also has an EMS levy that provided $160,000 to the fund in 2012. The hospital also contributed another $50,000.
The total revenues for the service in 2012 are $970,000. In order for the ambulance service to pay for itself, $320,529 more must be earned through its revenue sources.
Transport fees cannot be raised
The transport fees the city charges are at the highest level that can be set and still have the amounts accepted by Medicare and Medicaid, according to Fire Chief Aaron Markham.
This leaves only the utility rates as an option for raising the revenue the ambulance service requires.
Availability and demand costs
State law requires dividing the ambulance utility budget into two categories: availability and demand.
Availability covers the costs associated with the basic infrastructure of the service. This includes dispatch, labor, training, equipment, supplies and maintenance costs.
Demand covers the burden placed on the ambulance service by individual calls, including billing and fuel.
The study found that Sunnyside's ambulance utility incurred $1,071,408 in availability costs and $219,121 in demand costs.
The division of the budget into availability and demand limits how a city can collect and use revenues. Utility rates are set differently depending on which category the funds go into.
In Sunnyside's case, a state law which requires all revenue from transport fees to go into the demand fund means that all of Sunnyside's utility rates are set based on the rules governing availability.
Sunnyside's ambulance service earns more than its demand costs in transport fees. The extra amount goes toward the availability fund.
How the utility rate is set
Under state law, utility rates for an ambulance service's availability fund must be "uniformly applied" across all categories of users.
Sunnyside determines the rate using equivalent residential units (ERU). Each unit corresponds to an average household size in Sunnyside (3.6 persons).
To determine the utility rate for businesses, the city takes the total number of employees and divides it by the equivalent residential unit. In the current proposal, all businesses except nursing homes and hotels have rates determined by that calculation. There is a 200 employee cap per building, so larger employers get a break on the rate.
In the city's proposal, nursing homes and hotels are calculated using the number of rooms. For hotels a 75 percent occupancy is assumed. For nursing homes, the percentage of Medicaid eligible patients, who cannot be charged the utility rate, are subtracted in the calculation.
The total revenue needed to be raised to pay for the ambulance service is divided by the total number of equivalent residential units in the entire city to determine the utility tax rate.
Doing the math
The ambulance service required $1,290,529 to operate in 2012. Of that, $450,000 is paid through transport fees, $160,000 from the EMS levy and $50,000 from the hospital. That leaves $630,529 that needs to be raised through the city's utility tax.
The current utility tax is set at $4.16 per month, or $49.92 per year, for each equivalent residential unit. This raises $310,000 per year.
To raise the remaining $320,529 needed, the utility rates must more than double.
Softening the blow
In order to make the change as easy on the residents and businesses of the city as possible, the city has proposed raising the rates to the necessary level over the next two years.
Additionally, an annual inflation increase will be applied to the rate. There have been no rate increases for the ambulance utility in the last two years.
The city also proposes raising the employee cap from 101 to 200 and changing the calculation for nursing homes and hotels in order to spread the burden more fairly.
What residents of the city get
The Sunnyside Fire Department responded to 1,948 emergency calls in 2011. Of those responses, 1,477, or 76 percent, were for EMS.
The fire department has 16 full-time employees: seven paramedics, two advanced EMTs, four EMT/IV technicians, two with EMT basic training and an ambulance billing clerk. The fire department also has 23 volunteers, 15 of those have EMT basic training. All the employees and volunteers spend time responding to EMS calls.
The fire department also has three lifeline ambulances, equipped with all the life-support tools the department needs to respond to just about any emergency.