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City inspector general targets ambulance fee collections

City Inspector General Joe Ferguson. | Sun-Times Library

Chicago began charging for ambulance service in 1985 and has struggled to collect those fees ever since.

On Thursday, Inspector General Joe Ferguson added a new chapter to that struggle—by maintaining that the cash-strapped city could boost collections and reduce contractor fees by $2.4 million by changing its billing rules and collection terms.

Although the Department of Finance is authorized to set “reasonable fees for all ambulance services,” Ferguson noted that the city “only bills for services that involve transporting patients to local hospitals.”

If a patient is “evaluated and treated on the scene without transport, the city does not bill the patient for any services,” the inspector general said.

By changing that policy alone, the city could boost annual ambulance fee collections by $696,594, the audit stated.

“Although Medicare and Medicaid will only pay for services that involve a transport, cities such as Dallas, San Antonio and San Francisco charge private insurers and self-pay patients for such ‘treat-no-transport’ services,” Ferguson wrote.

Although the city reviews accounts to “guard against overbilling” for ambulance services that can result in “penalties and fees,” Ferguson noted that the Department of Finance does not “routinely review unbilled accounts” to make certain that they were “accurately designated as not-billable.”

That oversight resulted in $160,799 in “missed fee revenue” in 2014 alone, the inspector general concluded.

But the biggest potential savings came when Ferguson compared Chicago’s ambulance billing contract to those of other municipalities. By adopting “certain compensation provisions” prevalent in other cities, the inspector general concluded that Chicago could “save between $883,211 to $1.5 million annually.”

“Opportunities exist to increase fee revenue and reduce costs….We recommend that [the city] take measures to ensure that it bills completely for all billable transports and consider expanding the range of services subject to a fee,” Ferguson wrote. Ferguson wrote in a cover letter to Mayor Rahm Emanuel and the City Council that accompanied his audit.

“We also recommend that DOF consider eliminating the incentive fees from its contract with the billing vendor as means of reducing costs. If it does not eliminate incentive fees, we recommend DOF more carefully review documentation used to justify monthly incentive payments.”

The Department of Finance responded to the audit with a promise to launch a “monthly review of unbilled accounts” and a “cost-benefit analysis to determine whether it should charge” in instances where patients are treated on the scene without transport.

“If charges are implemented, the department stated that it would “work to develop a plan to minimize the impact on low-income patients and patients declining treatment,” Ferguson said.

As for the recommendation that the city alter its billing contract, the Emanuel administration plans to “take this opportunity into account later this year when it negotiates a new contract,” the inspector general said.

For more than 30 years, ambulance fees have been a persistent source of controversy in Chicago.

In 2009, then-Mayor Richard M. Daley nearly doubled ambulance fees – from $325 and $8 a mile to $600 and $13 a mile for basic life support and from $400 and $8 a mile to $700 and $13 a mile for advanced life support. Nonresidents were asked to pay $100 on top of that.

But weeks before the increases took effect, Chicago tax¬payers were forced to give back $6.9 million in fees already collected for ambulance transport. Those fees had been collected from Medicare during the five-year period ending in September 2005.

Fifty paramedics were disciplined for making billing mistakes. All paramedics and emergency medical technicians were retrained.

Five years ago, the City Council’s most powerful alderman suggested that Chicago privatize the collection of city ambulance fees to raise a dismal 37.5 percent collection rate that has created a $50 million-a-year debt.

At the time, Finance Committee Chairman Edward M. Burke (14th) described the ambulance fee debt as “low-hanging fruit” that would go a long way toward maintaining Chicago Fire Department operations at a time when Emanuel was demanding a 20 percent cut.

“If private ambulance operators in Illinois can collect their fees, the Fire Department needs to investigate whether or not privatizing that function would be helpful. I’m not talking about a collection agency. That’s after-the-fact a year down the line. I’m talking about current collections,” Burke said.

“Almost every one of those victims has insurance, so it’s just a question of properly identifying the insurance carrier and properly billing and collecting from the insurance company. It’s not like harassing the person who might have been stricken with a heart attack or stroke or some victim of an auto accident out on the street.”

Overdue ambulance fees have been collected by the same vendor since 2007, under a contract that has been “extended four times” and expired on June 30. Payments totaled $22.1 million over a six-year period ending in 2014.

During the same period, the city collected $317.1 million in ambulance fee revenue. Despite the city’s ongoing struggles, collections have steadily risen–from $24.4 million in 2008 to $62.6 million in 2014.

After the most recent contract extension, the DeZonia Group promised to dramatically improve collections and reduce the number of transports for which insurance coverage was not identified for a flat rate of 7 percent of actual collections.

In 2012, Chicago taxpayers spent $529.2 million to provide emergency medical services. That was up from $518.2 million the year before.