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Ambulance industry could face battle over competition


Rep. Michelle Ugenti (File photo)

Rep. Michelle Ugenti (File photo)

An ad hoc committee on the ambulance, medical and social service transportation industry set the stage for what could become a contentious debate over ambulance laws during the 2014 legislative session.

Republican Rep. Michelle Ugenti of Scottsdale is heading the new committee, which met for the first time Sept. 24 to review laws, policies and procedures of the ambulance industry and focus on the certificates of necessity that she says encourage monopolies and restrict competition.

The halls of the Legislature came alive and the House hearing room was overflowing with lobbyists, ambulance industry insiders and emergency responders by the time the committee got started.

“I don’t see these numbers in Appropriations (Committee meetings),” Ugenti said.

The meeting laid the groundwork for those in favor of deregulating the ambulance industry — mostly ambulance companies that want to expand their operations — to make their case before the committee, and eventually testify in favor of new legislation and a more competitive regulatory environment over the industry.

The study committee reflects a shift in strategy from those working to change regulations on the ambulance industry after several failures to get bills through the Legislature in recent years.

They hope by educating lawmakers on the regulations that bar entry of new companies into the industry, they can make a case for stricter auditing requirements on current certificate holders, and for removing certain requirements on those applying for a new certificate.

One of the most controversial requirements is that the Arizona Department of Health Services must consider whether issuing a certificate to more than one ambulance service within the same area is in the public’s interest.

That determination is based on, among other factors, the financial impact on current certificate holders.

“Right now, (obtaining a certificate) is a very complicated, time consuming, expensive process — one that arguably has benefited the incumbent (ambulance providers),” Ugenti said.

Regulated for a reason

Before the committee met, Roy Ryals, president of the Arizona Ambulance Association and a member of the committee, said the current system of requiring ambulance providers to obtain certificates of necessity “has served Arizona extremely well” and lawmakers shouldn’t change it.

“It’s a very bad concept to start changing the (certificate of necessity) process under the guise of adding competition when really all it will do is detract service and push the rates up higher for people who need the service in the periphery area of the state,” Ryals said.

He said the ambulance industry is heavily regulated for a reason: to ensure the public receives the best possible emergency transportation for the best price.

“As long as the existing providers are appropriately serving the public, the fewer providers you have, the more cost-effective it is,” he said.

Lobbyist Paul Walker, who works on behalf of ABC Ambulance, which is trying to obtain a certificate of need to operate ambulances in Maricopa and Pima counties, said the regulations equate to state-sanctioned monopolies in the ambulance industry.

Walker said he understands the need for certificates of necessity, which ensure that the business is profitable and serves the public equitably by giving ambulance companies often-exclusive rights to operate within certain geographic areas.

But there are two types of ambulance services: emergency 9-1-1 services and scheduled inter-facility transportation.

Walker’s client wants to enter the $100 million per year non-emergency transportation market, and has been fighting for nearly three years to gain a certificate.

To that end, ABC Ambulance is urging lawmakers to remove the provision that takes into account financial impact on current certificate holders for non-emergency inter-facility transport, at least in parts of the state where they argue that 9-1-1 calls alone are enough to sustain the incumbent ambulance company.

But Marcus Dell’Artino, a lobbyist who works for the Arizona Ambulance Association, said the reason certificates were implemented in the first place is to ensure that ambulance companies have to take the less-profitable portions of the business, like 9-1-1 calls from low income neighborhoods, along with the more lucrative portions of the business, like inter-facility transportation.

“The system is a system, and what (they) want is take apart a piece of that system, which makes the entire system therefore unstable,” Dell’Artino said.

He equates the push to do away with certificate requirements for non-emergency ambulances to cherry picking the most profitable portions of the ambulance industry.

“These guys don’t want to serve AHCCCS patients, and the uninsurable and the underinsured, that’s certainly not why they’re so eager to change the system that has been in place for years,” he said.

A new reason for concern

Ambulance regulatory reform has been a continuing issue at the state Capitol. In the last legislative session, lawmakers took a crack at changing the way the Arizona Department of Health Services issues certificates of necessity, though the bill never received a preliminary committee hearing.

However, the state’s largest ambulance provider, Rural/Metro, filed for bankruptcy in August, leaving legislators and regulators at the ADHS with reason to worry that Rural/Metro’s financial status could affect its ability to properly do its job.

ADHS recently opened an investigation into the company regarding its financial health and failure to meet promised response times.

ADHS bureau chief Terry Mullins penned a letter to Rural/Metro stating the department is not getting enough information from the company about how its financial situation could affect its ability to provide service.

“Clearly, the department is concerned that the financial health of Rural/Metro Inc. may prevent it from meeting its obligations as a certified ambulance service provider,” Mullins wrote in the letter.

And that has made those who want to change the certificate process hopeful for a different outcome at the Legislature this year.

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