The Death Of Consolidation!

Consolidation and commercialization of private ambulance companies is dead! The attempt to centralize private ambulance companies in various regions of the country under one corporate parent has been a tremendous financial setback to the shareholders of...


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Consolidation and commercialization of private ambulance companies is dead! The attempt to centralize private ambulance companies in various regions of the country under one corporate parent has been a tremendous financial setback to the shareholders of these publicly traded stock companies. The final blow came on Sept. 13, 1999, when Laidlaw Inc. announced it was selling American Medical Response (AMR) and would concentrate on its buses.

Laidlaw, which is expected to post a book loss of $1 billion on the sale, plans to get out of the ambulance business by divestiture of AMR. Laidlaw's departure from the ambulance industry after continually poor financial returns on its investment confirms that the consolidation of emergency medical services does not work and is best left at the local level, where managers and employees have relationships with public safety agencies and the medical community and where the priority is the delivery of service - not the shareholder and the value of the stock.

A college freshman economics major could have predicted this disaster. Corporate "suits" who have never worked on an ambulance and would probably cringe if they got blood on their hands cannot sit in their executive suites and dictate policy down to the local level after viewing the latest balance sheet.

These corporations have two missions - to provide quality and timely emergency medical service and to provide a return on investment to their shareholders. Unfortunately, these two missions sometimes clash. Sometimes, quality and timely care are the priorities, but at other times, the responsibility to the shareholders takes precedence. When that happens, quality and timely care suffer.

It all started in 1992, when the EMS profession was rocked by the news that an ambulance company was going public and would be traded on the New York Stock Exchange. The selling of stock was supposedly designed to facilitate expanded growth and provide capital for the acquisition of small ambulance companies that would be incorporated into one parent company. Actually, a few people got pretty rich, earning millions in salaries each year while the medics who worked on the ambulances earned minimum wage or a little better, under some insufferable work conditions. Many unionized in order to protect their rights as employees.

Paul Verrochi, who previously had built cleaning and environmental service companies and had no EMS background, was looking for another industry ripe for consolidation in 1991 when a banker friend mentioned emergency medical services. Verrochi flew down to Miami after finding out that an EMS trade show was taking place. As he describes it, he did not see any venture capitalists or anybody from Wall Street there. In August 1992, Verrochi bought and merged two East Coast and two West Coast ambulance companies. With the merger, American Medical Response went public and was traded on the New York Stock Exchange under the symbol EMT.

Although Laidlaw currently owns AMR, the companies actually competed at one time. Shortly after the formation of AMR, Laidlaw entered the ambulance market by forming a company called National Medical Transport Network Inc. (Medtrans) and bought the parent company of MedStar, a Fort Worth, TX, ambulance service, for an undisclosed sum of cash. By November 1994, Medtrans had grown to more than 4,000 employees and 600 ambulances in 14 states.

The first large ambulance company which Laidlaw bought was Careline Inc. of Santa Ana, CA, which also was a publicly traded ambulance company formed after AMR. That sale took place July 18, 1995. Laidlaw and Careline were considered two of the big four private ambulance companies operating in the United States. Careline was the third-largest private ambulance service operating in the United States with annualized gross revenues of $225 million. The entire transaction was valued at $355 million, including $175 million of assumed debt.

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