Are We on the Brink Of EMS War II?

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For those of you who entered the fire service within the past five years, you may have heard the "old timers" talk about the 1990s, when factions within EMS were at war about the delivery of care. It was public versus the privates at its best. The battles were particularly noticeable and heated in California and Florida, where public and private ambulances sometimes would arrive simultaneously at the same scene.

At the center of the EMS wars were big corporations such as American Medical Response (AMR), Rural/Metro, Lifefleet, Medtrans and Careline. Merger mania started in 1992, when AMR started with four ambulance companies coming together and making an initial public offering (IPO) of its stock. Soon, others went public with their stock. Most of these publicly traded companies went on a frenzy buying small "mom-and-pop" ambulance services until everything that could be gobbled up was devoured. In all, AMR purchased over 200 small ambulance operations; Rural/Metro and Medtrans purchased far fewer of them, but still significant. Those "mom-and-pops" that remained chose to stick it out and do battle with the "big boys."

Eventually, the "big boys" started buying each other out until three were left: AMR, Rural/Metro and Medtrans. Medtrans was owned by a Canadian corporation, Laidlaw. In 1997, Laidlaw bought AMR for $40 a share, or about $1.2 billion, making a lot of people who owned AMR stock rich. But not only did Laidlaw buy the stock, it dumped the Medtrans name and started calling itself American Medical Response.

At the same time, the fire service found itself in a pitched battle with these large corporations and a few smaller ones for delivery of EMS and what the big conglomerates saw as "market share." After all, when you have investors to answer to, breaking even is not an option. There must be a return on their investment through escalating the share price or paying dividends. The only way to do this is to increase profit margins by increasing profits, cutting expenses and increasing market share. How do you increase market share? By taking away someone else's business through competition.

Suddenly, many fire departments found themselves having to justify their involvement in EMS. Fire chiefs found themselves sitting across the table from elected officials, trying to explain the need to keep EMS in the fire service instead of privatizing it. Other fire departments found themselves trying to get into the EMS business to increase service levels in their communities.

Sometimes, the battles were fierce, as fire departments and the privates battled it out in front of city councils. The "big boys" hired consultants, lobbyists and promoters to win contracts. In some communities, the large privates saw the futility of such battles and partnered with the fire service, as Rural/Metro did with the San Diego Fire Department in the mid-1990s.

After a few years, it did not look like Laidlaw's investment was working out so well. AMR starting paring back and closing some operations where it was losing money. In some communities, the fire departments had about six months' notice they were going to be in the EMS business, as AMR announced it was leaving town because it could not make enough money. The belt was tightened at Laidlaw when investors saw the stock's value slump to less than 25 cents a share at one point and they demanded that management heads roll.

But then when things looked as though they could not get any worse, Congress passed the Balanced Budget Act of 1997, which mandated that Medicare become more frugal with taxpayers' money. The privates predicted that EMS would collapse.

Starting in April 2002, the privates could no longer transport grandma from the nursing home to the hospital for kidney dialysis, stick a paramedic in the back with a monitor/defibrillator and bill a high-dollar ALS trip when no care took place. From then on, EMS reimbursement would be based on the level of service performed, not what service level at which the ambulance was equipped and staffed. This is a five-year phase-in program and culminates in 2007.

Finally, Laidlaw had enough. It sold off AMR to Emergency Medical Services Corp. (EMSC). EMSC made its first initial IPO in December 2005 and raised about $105.5 million before transaction costs. Its stock is traded on the New York Stock Exchange under the symbol "EMS."

But just like Gulf War I and Gulf War II, the question is beginning to be asked, are we on the brink of EMS War II?

Recent events suggest this may be true as sporadic fighting for control of "market share" is starting to pop back up after years of non-existence.

In November 2005, a bidding war erupted in San Joaquin County, CA, culminating in January 2006, when the county Board of Supervisors voted to finalize a contract with AMR to provide exclusive ambulance service in Tracy, Lodi and Stockton. Unfortunately, the Stockton Fire Department was already providing the EMS transport. This decision means Stockton Fire will be shutting down its EMS operation by May 1, 2006 and about 30 people will be wondering about their future.

Other skirmishes have been seen in recent months. In Grand Junction, CO, the fire department found itself in a bidding war against AMR for the contract to provide EMS transport to the community. In this case, Grand Junction Fire won and will be providing EMS transport. In Colorado Springs and El Paso County, CO, debate raged last year over whether the fire department should transition toward an EMS-transport role where AMR has held a long-term contract. Outside observers offered little hope for the fire department.

Only the future will tell whether the battles between public and private entities will escalate into EMS War II. One thing is for sure if it does - the fire service should not be complacent.


Gary Ludwig, MS, EMT-P, a Firehouse contributing editor, is a deputy fire chief with the Memphis, TN, Fire Department. He has 28 years of fire-rescue service experience, and previously served 25 years with the City of St. Louis, retiring as the chief paramedic from the St. Louis Fire Department. Ludwig is vice chairman of the EMS Section of the International Association of Fire Chiefs (IAFC), has a master's degree in business and management, and is a licensed paramedic. He is a frequent speaker at EMS and fire conferences nationally and internationally. He can be reached through his website at www.garyludwig.com.

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