Rural/Metro: Another Casualty Of Corporate EMS

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Like the little Dutch boy who put his finger in the dike to stop the leak, recently Rural/Metro Corp. must feel like it needs a cement truck to repair a dike that appears to be crumbling.

Over the past several months, negative headlines have plagued the private ambulance provider: "Rural/Metro Drops Big Cities," "Rural/Metro Announces Extension Of Bank Waiver," "Rural/ Metro Money Woes Met For Now," "Rural/Metro Denies Talk Of Bankrupt-cy," "Ambulance Firm's Troubles Mount As Another Executive Leaves," "Talk Of Bankruptcy Follows Rural/Metro" and "Rural/Metro Reports Loss Of $42 Million." These are just some of the headlines that have appeared lately.

And investors in Rural/Metro Corp. are not exactly singing the praises of its stock. Unfortunately, many of those investors include the employees of the corporation who bought shares of the corporation under an employee stock ownership plan. Just over two years ago, the stock hit a little over $36 a share. As of May 19, 2000, the price for a share of Rural/Metro stock was sitting at 1 3/8 at the close of the market.

Rural/Metro Corp., based in Scottsdale, AZ, is the second-largest private ambulance company in the country that is publicly traded on a U.S. stock exchange (NASDAQ). Besides providing ambulance service, the company furnishes firefighting services to companies, governmental authorities and communities that wish to employ their services.

Some of the fire protection provided includes not only municipal, but industrial, wildland, petrochemical, offshore, and airport fire and rescue. Rural/Metro also provides industrial training for professionals in manufacturing facilities.

Rural/Metro is another Wall Street corporate EMS company that had visions of huge profit returns under President Clinton's 1992 universal health care plan and then managed care. But Rural/Metro was not always a publicly traded company on the NASDAQ national market system.

Rural/Metro was founded in 1948 by newspaper reporter Louis A. Witzeman, who saw a lack of fire protection and emergency services in the community where he lived. Witzeman witnessed a house in an unincorporated area near Phoenix burn to the ground without a fire response. This event inspired him to create a fire service to protect houses in his neighborhood.

Initially, Witzeman offered fire protection and emergency service paid for by subscription. Essentially, if you wanted fire protection, you paid a yearly fee to Rural/Metro. In 1951, Rural/Metro expanded to Scottsdale, and then to Tucson, and then to Yuma in 1969. Witzeman retired in 1978, and by 1984, the company expanded to Florida, Tennessee and Texas.

On July 16, 1993, Rural/Metro went public with its stock with an initial public offering (IPO) of 1.8 million shares at $12.50 per share. The net proceeds from the IPO were used to repay debt and for general corporate purposes, including potential acquisitions.

Acquisitions was the name of the game through the 1990s as Rural/Metro made approximately 70 of them. As did other corporate ambulance companies like American Medical Response (AMR), Careline, Lifefleet and Medtrans, Rural/Metro was buying up small "mom-and-pop" private ambulance companies in markets which it felt were profitable. Besides the states they already operated in, Rural/Metro moved into markets in Florida, Nebraska, New York and Ohio.

Until about two years ago, things were looking pretty rosy for Rural/Metro. Except for the occasional scraps with the fire service over 911 contracts for fire and/or ambulance service, Rural/Metro was showing a small profit margin in its operations. But then its strategy changed and Medicare money started drying up. Instead of fighting the fire service, the corporate strategy was to create an appearance that it wanted to partner with the fire service.

Rural/Metro suddenly formed an alliance with the San Diego Fire Department after it appeared both stood no chance of getting the ambulance contract for San Diego. The joint proposal as new partners called for Rural/Metro to infuse cash into the deal by building a new communications center and purchasing ambulances. The San Diego Fire Department and Rural/Metro proposal won the San Diego contract. Another such partnership between Rural/Metro and a fire department cropped up in Aurora, CO; a joint proposal was unsuccessful in San Mateo County, CA.

While Rural/Metro was wearing the white hat with the fire departments in San Diego and Aurora, it found itself embroiled with fire departments for EMS contracts in Lincoln, NE, and Orange County, FL. Additionally, at the same time it was trying to show its friendship with the fire service in San Diego, it - along with other major players in the private ambulance industry - was helping to fund a secret smear campaign against the fire service through the Goldwater Institute in Arizona. Witzeman and Warren Rustland, both members of the Rural/Metro board of directors at the time, also sat on the Goldwater Institute board of directors.

With rumors and counter rumors flying of Rural/Metro filing for Chapter 11 bankruptcy protection, it finds itself trying to keep the dike from springing a major leak. In January 2000, Rural/Metro ousted its president and announced it would revamp its ambulance operations. On Jan. 19, 2000, the Rural/Metro board of directors announced it had promoted Senior Vice President and Chief Operating Officer Jack E. Brucker to president and COO. The board also accepted the resignation of Robert E. Ramsey from the position of executive vice president and board member. Ramsey had owned Southwest Ambulance in Arizona before it was bought out by Rural/Metro.

Another resignation shortly thereafter came from Rural/Metro's chief financial officer, Mark E. Liebner. Shortly before Liebner's resignation, Rural/Metro reported that it was not in compliance with several financial ratio covenants of its revolving credit agreement.

Rural/Metro's strategy at this point to remain financially solvent is to:

  • Reduce non-emergency ambulance operations for locations that are highly dependent upon Medicare and Medicaid reimbursement.
  • Focusing on determining prospectively if a transport will be reimbursed rather than fighting denied claims and pursuing patients without insurance.
  • Examine new cutoff points for internal collection efforts.
  • Take millions of dollars in charges to restructure.
  • Pull out of approximately 30 markets, resulting in roughly 1,000 layoffs.

As a result of its ongoing restructuring, Rural/Metro reported a $42.4 million loss for its second quarter and a $16.6 million loss for its recent third quarter, ending March 31, 2000. Additionally, Rural/Metro reported in May 2000 that it would be shutting down operations in Corpus Christi, Dallas, Houston and San Antonio, TX. The resulting shutdown of operations will result in approximately 300 employees being laid off.

Whether Rural/Metro survives remains unknown. What is clear is that its financial failure follows the same pattern as AMR - demonstrating that Wall Street and the delivery of emergency medical service were never destined to flourish.


Gary Ludwig, MS, EMT-P, a Firehouse® contributing editor, is the chief paramedic for the St. Louis Fire Department and is the vice chairman of the EMS Executive Board for the International Association of Fire Chiefs. He has lectured nationally and internationally on fire-based EMS topics and operates The Ludwig Group, a consulting firm specializing in EMS and fire issues. He can be reached at GaryLudwig@aol.com.

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