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CBS 5 INVESTIGATES

Old laws stifle competition for ambulance service

PHOENIX (CBS5) -

When Rural/Metro Corp. filed for bankruptcy protection in 2013, competitors viewed the development as an opportunity to enter the Phoenix metro area's lucrative ambulance services business.

Very few municipalities own their own ambulances so companies like Rural/Metro supply the hardware and oftentimes the personnel to fill the need. But in Arizona, getting into the ambulance services business is more difficult than it might sound.

"It was far more daunting and expensive than I really ever dreamed it would be," said Neal Thomas, who owns a transportation service called Comtrans, which caters to people with special needs.

"Almost entirely what happens in an ambulance business, we already do. Your equipment is a little bit more expensive, but we have the experience. We've done it before," said Thomas, who worked in the ambulance services business before.

But three years and $1 million later, Thomas and his company were denied the opportunity to even compete for contracts with local medical service providers and municipalities.

"After three years, they said you didn't prove there was a need for another ambulance company in this town," said Thomas.

The stop sign Thomas ran into was the requirement under Arizona law that a business seeking to enter the ambulance business in a community prove there is a necessity for competition, and that the increased competition won't negatively affect the existing emergency services companies.

On paper, it might appear that Maricopa County has a thriving ambulance business. There are 13 agencies and businesses that offer ambulance services. But take a closer look at those numbers and any apparent competition between the ambulances disappears.

Six of the agencies are government fire departments or districts that serve their own areas, like the Phoenix Fire Department, which operates within the city of Phoenix. That leaves seven private companies to bid for contracts from the municipalities and health providers.

But it turns out, those remaining seven companies are all owned by Scottsdale-based Rural/Metro Corp. Southwest Ambulance, PMT and Rural/Metro are the three biggest names, but there are four more that Rural/Metro slowly acquired over the years.

"Since they are the only ambulance company in town, they set the market for wages, working conditions and benefits. They have nobody to compete with," said Josh Barkley, who is the president of one of the Rural/Metro employee unions.

Barkley said the wages for employees are lower in Phoenix than many other markets where Rural/Metro has competition. Employee contracts from two of those markets show starting salaries for EMTs in the Valley lag those of Rural/Metro companies in Santa Clara and San Diego in California by $3 and $5 per hour.

Rural/Metro says it provides services in more than 700 cities and countries across the U.S.

Barkley said another problem with no competition is the potential that patients, cities and taxpayers are getting a raw deal.

"I don't think taxpayers know how much they're paying. I don't think they know how the system is put together," said Barkley.

Rural/Metro does not set its own rates for ambulance service. It participates in a group rate that all providers in the county charge. But critics argue that the lack of competition means Rural/Metro has an outsized role in coming up with the group rate.

But the biggest concern among critics, employees, fire chiefs and state regulators contacted by CBS 5 Investigates, is that fact that Rural/Metro controls so much of the market and filed for bankruptcy.

"Quite honestly, I'm a little nervous about the amount of consolidation in the county, given the fact that we have an ambulance provider that has a track record of bankruptcy," said Will Humble, director of the Arizona Department of Health Services. That is the agency that oversees ambulance service.

"I think the reason it's consolidated is the way the laws are structured in Arizona," Humble said. He admits the way the system is set up now, it is very difficult for a competitor to enter the market and provide competition.

"Most people in the industry agree that the statutes need to be upgraded. That's easier said than done when you've got a vested interest. You've got folks with a financial interest in the outcome," Humble said.

This week, officials from the department of health services were at Rural/Metro headquarters looking through financial documents. Although the company contends it has made it through bankruptcy stronger than before, Humble said he is coming up with an emergency plan in case the company can no longer meet its obligations.

Rural/Metro's CEO turned down multiple requests by CBS 5 Investigates for an on-camera interview, but released the following statement through a Valley public relations firm:

"Rural/Metro is proud to have served the Valley and its residents for over 66-years.

"It is interesting that this station wrongfully raises question of a 'monopoly' and about Rural/Metro's successful reorganization shortly after both a judicial and state denial of a van company's request to be permitted to get into the life and death business of ambulance transport.

"The Company does not have a 'monopoly' in AZ or in Maricopa County. There are 13 certificates to operate ambulances in Maricopa County and Rural/Metro only holds 7 of them.

"Like many Arizona companies and millions of Americans, Rural/Metro took the opportunity at the end of last year to reorganize its finances to become a healthier more efficient company. During that process, Rural/Metro's operational performance actually improved as evidenced by improved response times. Rural/Metro reported positive EBITDA in first quarter of 2014, demonstrating a successful emergence from reorganization.

"While other applicants seek to enter the market to focus on serving only the wealthy, Rural/Metro proudly serves all residents in Maricopa County as they have done for more than six decades. In other words, no matter who you are, you can always count on Rural/Metro.  

"The Company will continue to work with its 2,305 outstanding employees and the Arizona Department of Health Services to deliver compassionate care and clinical excellence to the residents of Maricopa County."

Copyright 2014 CBS 5 (KPHO Broadcasting Corporation). All rights reserved.

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