By Nathan Stanaway
Saving money is a challenge all organizations struggle with. One of the easiest ways to save money is to grow. It may seem counterintuitive at first, but sometimes more is less based on the concept of economies of scale [1].
This refers to the notion that as more of an item is produced, each individual item costs less to make. The same rule is true for a provided service.
There are fixed and variable costs that go into operating an ambulance service. Whether a service uses three ambulances or 15, there are certain fixed costs for factors such as the building, managers, support staff and medical directors. As the number of ambulances in an EMS operation increases, those fixed costs are spread across the entire fleet. As a result, each ambulance and the calls they respond to cost less per unit of work.
Advantage: Purchasing
Large EMS organizations can take advantage of economies of scale when they purchase supplies by paying less per item than a smaller organization purchasing fewer units of each supply. For instance, if an EMS organization needs 20 uniform shirts they are going to pay more per shirt than an organization that buys 300 shirts. The uniform manufacturer enjoys economies of scale and can pass on some of the cost savings to the customer.
Organizations that buy a high volume of supplies, such as IV fluids, uniforms, catheters, and oxygen masks can command a discount from suppliers based on their procurement volume. Not only is the supplier taking advantage of economies of scale, they also don’t want to lose a valuable customer.
Advantage: Recruitment
Most EMS providers want to be part of a winning team. Large organizations can typically attract more talented employees and managers than smaller, lesser-known organizations.
Large organizations provide several benefits that attract potential employees. In addition to being part of a well-known team, employees typically receive better health insurance and other benefits at a lower price.
Since larger organizations by nature require more employees, there is more frequent opportunity for promotion or to move into a role beyond simply staffing an ambulance. Large organizations have bike teams, special operations, community paramedics, full-time educators, full-time quality assurance staff, mechanics, dispatchers, and other positions.
Tips from post-consolidated EMS professionals
I spoke with members of several EMS organizations that have consolidated, merged, or expanded into other areas. Each organization had their own unique reason for growing, but all were able to take advantage of growth benefits. Each organization has a pearl to share from the process they undertook.
1. Don’t rush the process
Guardian EMS, a critical care interfacility organization based in Oklahoma City, acquired “Plus” EMS which was close to failing due to low revenue. Guardian was looking to expand, and confident that they had the ability to improve the billing operations at Plus.
In addition to the acquisition of additional equipment and market share, Guardian obtained an outstanding medical director. The Guardian EMS merger, like most, was complicated and time-consuming.
“Any EMS leader thinking of consolidating should plan on it taking a significant amount of time,” said Kyle Norris, Guardian’s former clinical director. “Don’t rush it.”
2. Show and sell the benefits
Across Sedgwick County, Kansas, each municipality had its own standalone communications division. Each organization had its own dispatch center, radio system, and personnel. Depending on the location of the caller requesting EMS, calls would be placed on hold and transferred to the EMS system’s dispatch center. After the transfer was answered, the EMD process would begin
again.
Sedgwick County officials wanted to reduce the time required to activate critical EMS resources.
“Transferring a 911 caller several times can lead to stressful and costly delays,” said Steve Cotter, the former EMS director.
Consolidating multiple dispatch centers into one central system saved both time and money, and it created smoother day-today operations for the region. An unexpected benefit for the field crews was the ability for personnel from separate agencies to quickly communicate directly with each other by simply switching to that assigned channel.
As with many regions across the country, some personnel were hesitant to hand over dispatch to another organization because they felt they knew their area better than anyone else.
“This is a challenge to overcome, but with today’s mapping software, AVL systems, and CAD ability, this usually becomes a non-issue,” Cotter said.
Still, anticipate hesitance and be prepared to show the benefits of consolidation. Just like anyone else, you’ve got to be able to effectively “sell” the idea.
3. Watch how everything fits into the big picture
Since 2008, Grady EMS has been providing EMS services to Atlanta, Georgia, and several surrounding towns with no government subsidy. I talked to EMS Operations Vice President Michael Colman to learn how they are able to do this and still have room to grow.
“You’ve got to watch everything,” Colman said. “For instance, if a rep wants to sell you a different warning light system on the ambulance you are ordering, you’ve got to think about things like what shape the light heads are. If it’s different from your current version, that means you’ll be forced to keep additional replacement parts in inventory. That costs money. It doubles your current costs for stocking that part. That kind of thing seems trivial but they add up to very real costs.”
In addition to “watching everything” Grady has its own in-house maintenance department complete with a remounting service, towing service, and a paint shop. It’s important for the organization to return trucks to service as soon as possible.
“If the ambulance is stuck in the shop, we still have to pay for it but it’s not earning any money,” Colman said.
Over the last several years, Grady EMS has expanded into other regions. Most recently, Grady EMS was awarded the contract for Pike County in rural, central Georgia.
Grady won the bid for the county in part because they are able to take advantage of economies of scale. In most organizations, an important objective is to grow and increase revenue as available. In this instance, the objective was to bring cost-effective evidence-based health care to another region of Georgia.
There were also several unexpected benefits. One of the most visible was the equipment and ambulance upgrade. Additionally, the local EMS providers were given the opportunity to keep their jobs and retain their pay rates. In addition to keeping their pay and seniority, employees now have cheaper, more comprehensive health benefits and new benefits, like a matching 401k.
An expected challenge came locally from some who were skeptical of an “outside” organization moving into their area. That skepticism can be reduced when patients receive high-quality care and EMS personnel are provided with a quality work environment and benefits.
Survive or thrive
It’s no secret that teamwork and collaborative efforts can achieve more than would be possible by a divided effort. Often, smaller organizations would love to provide the benefits and advantages of a larger organization, but they simply cannot.
Consolidating resources or merging with another organization can greatly increase the ability of an EMS organization to survive and even thrive. If you are leading an EMS organization near death, consider the benefits of joining forces with a neighboring organization. It is likely you will be stronger together than if you stay separate.
