Knighton Gold Award Webinar for ALGA November 14, 2012

2 This presentation covers our audit of the San Diego Fire-Rescue Department's provision of emergency medical services The audit was largely focused on the City's partnership with a private ambulance company The audit work entailed:  Gaining an understanding of ambulance billing practices  Performing complex data analyses  Evaluating an unusual partnership arrangement Introduction

3 1. San Diego Medical Services (SDMS), the City’s partnership with a private ambulance company, grosses more than $45 million per year 2. The results of our citywide risk assessment led to its inclusion in our annual audit work plan 3. City Attorney’s Office concerns about the structure of the partnership Why We Did The Audit

4 The City partnered with Rural/Metro and established SDMS, LLC, in 1997 Previously, the City had contracted with private ambulance companies The City awarded SDMS contracts for the delivery of Emergency Medical Services (EMS) SDMS reimburses the City and Rural/Metro for their expenses monthly, and profits are distributed periodically San Diego Medical Services History

5 SDMS Monthly Revenue and Expense Cycle

6 The majority of SDMS paramedics and EMTs are Rural/Metro employees The City is contractually obligated to provide first responders to emergency calls The Fire-Rescue Department provides first-responders on fire engines or trucks Over 85 percent of emergency calls to Fire-Rescue are for medical services EMS Delivery in San Diego

7 This partnership was advertised an innovative model and an example of public-private cooperation In fact, the City had inadvertently:  Turned over all the power to its private partner  Conducted negotiations with itself  Formed a wrong paradigm about how this relationship was functioning  Received unfavorable contract terms A Model Public-Private Partnership?

8 Fire Union  Some control over the emergency medical business  Promise of no competition for fire services Fire Department  A share of the emergency medical services business  Operational control over ambulances at the scene Private Company  Assets and financing for its new venture  Foothold in a new geographic region Stakeholders in SDMS

9 The Fire-Rescue Department cared about control over ambulances at the scene and service to the public, not administrative and financial issues The Fire-Rescue Department’s satisfaction with the performance of SDMS contributed to lax oversight A Failure of Oversight & Monitoring

10 The City had a three-person majority on the partnership’s board; however, board’s oversight activities were minimal One City employee responsible for monitoring the contract  This person had limited financial training  Was not provided with resources to help with her work  Monitoring consisted of comparing budgeted to actual performance A Failure of Oversight & Monitoring

11 There are three types of payers for ambulance services 1.Medicare/Medi-Cal (Medicaid) 2.HMOs and insurance companies 3.Private payers The Average Patient Charge (APC) Ambulance Billing 101

12 The City Attorney’s Office informed us that a whistleblower had filed a qui tam lawsuit against Rural/Metro Allegation that Rural/Metro had not remitted to the City monies from collections on bad debt that had previously been written off Amount in question was approximately $200K per month for a period of 10 years Complaint was under seal, and the City had a limited period of time to decide whether or not to join the lawsuit Allegations of Fraud

13 Poor control environment Reluctance to provide us with patient billing data An initial response from Rural/Metro’s lawyer stating that the auditor’s request for information was onerous, etc. Rural/Metro was under a corporate integrity agreement with the OIG of the U.S. Department of Health and Human Services The company’s own financial statements warned about its exposure to qui tam lawsuits Red Flags

14 1. Several potential SDMS financial accounting issues, and improper or unreasonable costs and fees remain unresolved 2. The City lacks adequate financial oversight of the contract with SDMS and its partnership with Rural/Metro 3. The City is not seeking full reimbursement for the provision of required first responder city paramedics to advanced life support calls 4. Current reporting inflates results and does not accurately reflect the true EMS response time What We Found

15 Several Accounting Issues are Unresolved Expense reimbursements to Rural/Metro are not reviewed by the City Collections on debts that were previously written off may not have been remitted to the City  $4.2 million not deposited in accordance with contract terms (between May 2002 and February 2007)  Excess reimbursement of $5.8 million (for Fiscal Year 2006 through 2010) Certain fees and interest charges that the City agreed to pay Rural/Metro appear excessive or potentially duplicative Finding 1

16 Financial Oversight of SDMS and Partnership with Rural/Metro is Inadequate The City does not sufficiently analyze financial reports it receives from Rural/Metro The SDMS Board of Managers did not provide proper financial oversight Finding 2

17 The City is not Seeking Full Reimbursement for First Responder Costs The City incurs the cost of providing first responders to Priority 1 calls These costs amount to approximately $11 million a year The EMS Agreement between SDMS and the City allows for expense reimbursements Finding 3

18 Current Reporting Inflates Results And Does Not Accurately Reflect the True EMS Response Time The City was reporting ambulance response time performance as defined in its contract with SDMS The contract excluded calls from the calculation of response time whenever 12 or more ambulances were deployed, considering this situation to be an “unusual system overload” The effect was to exclude 37 percent of calls from this calculation, making performance appear much better than it actually was Finding 4

19 1. We issued our audit report in April The report was covered extensively in local media 3. The City dissolved its partnership with Rural/Metro and issued a traditional vendor contract for two years 4. The City raised the average patient charge 5. Rural/Metro purchased the partnership’s assets Audit Outcomes

20 1. The fraud allegations became public 2. The City and Rural/Metro entered into mediation 3. They hired a forensic accountant to review disputed accounting issues 4. The forensic accountant did not substantiate the fraud allegations The Aftermath

21 Our audit work generated another audit of emergency medical response We published an audit report in February 2012  We recommended a change in the dispatch of Fire-Rescue units  This change will reduce response time by one minute, on average  Significant impact on certain emergency medical calls such as cardiac arrests Dispatch Audit

22 Contacts: Eduardo Luna, City Auditor, (619) , Chris Constantin, Assistant City Auditor, (619) , Toufic Tabshouri, Performance Auditor, (619) , Questions?