California passes EMS bill but doesn’t address anti-competitive landscape
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California passes EMS bill but doesn’t address anti-competitive landscape

If fire agencies want to fully take over emergency medical services, they should face a competitive landscape that ensures they are tested against the best competition in the EMS industry.

The final version of California General Assembly Bill 389, which recently passed unanimously in the State Senate and was sent to the governor, was improved over previous versions of the bill. The amended language added competitive bidding requirements for fire districts wishing to establish a “fire alliance” emergency medical services model where fire agencies subcontract their ambulance services to private companies. As of the time of publication, California Gov. Gavin Newsom has just under one week to sign or reject the bill.

After initially not requiring any bidding process, the legislation now requires competitive bidding for fire alliance subcontracts. The bill’s changes help strengthen competition in determining subcontractors, but until a level playing field exists between public and private providers in the emergency medical service (EMS) space, fire agencies in the state will be able to take over EMS by taking advantage of greater taxpayer subsidies than their would-be competitors in the private sector.  

Despite AB 389’s changes and passage, the fire alliance model for EMS serves as a mere stopgap to a more anticompetitive end. In some cases, fire agencies are seeking to use the law to fully take over EMS operations without having to worry about subcontracting or competitors. Thus, the bill cannot overcome all of the perverse incentives and sketchy accounting that guides locales to adopt the alliance and to pursue “full fire” EMS without any semblance of a level playing field for competition, mostly fueled by heavy taxpayer subsidies. A few California locales have already seen this process fully play out, while others are in the midst of it.

Chula Vista first adopted the fire alliance model for EMS and has already moved on to a “full fire” EMS setup without a bidding process, much less a competitive one. Before shedding the city’s EMS subcontractor, American Medical Response (AMR), the Chula Vista Fire Department (CVFD) blamed the company for ambulance rate hikes. However, the subcontractor’s share of revenues from ambulance transport actually fell following the rate hikes. The city raised EMS rates drastically to $3,881 per ambulance trip, but the ambulance company only received $1,720 per trip while the fire district received the rest.

After wrongly blaming the subcontractor for rate hikes, the Chula Vista Fire Department convinced city leaders that, rather than hold another competitive bidding process, it could save the city money by being the exclusive ambulance services provider. In May 2020, Chula Vista’s City Council voted unanimously for the fire department to take over all of EMS in the city. At that point, Chula Vista Fire Department lowered the ambulance rate back to $2,800, which was still about $1,000 more than the subcontractor received under the alliance.

Contra Costa County and the Contra Costa County Fire Protection District (CCCFPD) are now looking to undergo the same process as Chula Vista, but not before the CCCFPD annexes other fire districts. Contra Costa County entered its fire alliance agreement with the Contra Costa County Fire Protection District in 2015 and renewed it late last year. After votes recently enabled CCCFPD to take over East Contra County’s Fire Protection District, the CCCFPD is now hoping to annex the joint fire protection district of locales Rodeo and Hercules on the other side of the county.

Assembly Bill 389 does not address California’s treatment of intergovernmental grants and taxpayer subsidies, which puts private ambulance providers at an inherent disadvantage compared to their public sector fire agency counterparts. While performing every bit as much of public service as public-sector EMS providers, private companies are unable to access intergovernmental grants—unless they subcontract with a fire district, which can receive the proceeds.

As with intergovernmental grants, access to other forms of taxpayer funding leads to an uneven playing field. To finance its annexation ambitions, CCCFPD says it “needs” $7 million annually from Measure X funds (a sales tax passed by voters in 2020 that was intended for transportation, not public safety) to re-open and operate two fire stations, about a quarter of the $28.9 million the fire district seeks from Measure X this year alone. While the total includes funds for traditional fire protection practices as well, CCCFPD projects over $160 million in revenue over the next fiscal year, of which all but $11 million is expected to come from taxes.

While some critics say that private companies should be able to make money without grants and additional taxpayer help, they rarely hold the public sector to the same standard. Emergency medical transport is really expensive for a variety of reasons, including government health care programs not reimbursing for the full price of the services. Without access to intergovernmental grants and greater taxpayer resources than their private ambulance competitors, fire agencies would struggle with providing EMS in addition to fire protection.

The uneven playing field made by discriminatory treatment of private ambulance providers threatens competition in the entire emergency transport space. Any trusted provider of emergency medical services should be able to access funds dedicated for such purposes. But changes to California’s AB 389 left that problem unresolved, allowing fire departments and districts to act as public safety revenue gatekeepers for EMS. That could place the entire private ambulance sector at risk for extinction since most fire agencies know they can access much more taxpayer funding than their private ambulance allies, which they increasingly see as competitors.

Competition has served California well for decades: public and private organizations have benefitted from a half-century of ambulance providers trying to treat and transport injured and sick people to medical facilities as quickly and safely as possible. If fire agencies want to fully take over emergency medical services, they should face a competitive landscape that ensures they are tested against the best competition in the EMS industry.

The amended language of AB 389 does make the fire alliance model more competitive on the surface. But Chula Vista’s experience shows the endgame for many fire districts—to take over EMS and eliminate any potential competition. Going forward, lawmakers should aim to provide a level playing field with equal treatment of all potential EMS providers that ensures a competitive landscape delivering high-quality, cost-efficient services for patients and taxpayers.