Behind the Sirens: The Hidden Costs of EMS Readiness

By Michael Brook, Senior Vice President, Digitech

You are the EMS Chief of a midsize Midwestern agency called “Any Town Fire & Rescue Department” or ATFRD. It's 2 AM, and the call comes in — a 45-year-old male with chest pain. Your crew jumps into action, the ambulance's red lights flashing through the deserted streets. This scene, a lifeline in moments of crisis, is repeated countless times across the country daily. But what does it take to keep this service available around the clock? The costs are staggering and often hidden from view. Let's delve into the actual price of maintaining emergency ambulance services and our financial challenges.

The Hidden Infrastructure of EMS

As the crew responds, consider the intricate web of readiness behind this response. Maintaining an EMS system capable of responding to emergencies 24/7 involves substantial costs. While the spotlight is often on the staggering costs of ambulance services for patients, there's less focus on what each EMS incident costs the provider. These expenses extend far beyond the visible efforts of our paramedics and EMTs and include the readiness of staff, facilities, equipment, and supplies.

At Digitech, we process bills for over 5 million EMS incidents annually and assist clients in reporting cost data to CMS. To provide a clear picture of the true costs of readiness, we analyzed 2023 data from 11 diverse ambulance service providers across six states, including Fire-based and EMS-only services. This analysis reveals the extensive financial demands of maintaining an EMS operation.

Breaking Down the Costs: Where Your Budget Goes

Understanding the detailed cost breakdown is essential for managing an efficient EMS operation. Here’s a comprehensive look at the categories involved:

Capital Costs – 2%

• Depreciation of buildings, vehicles, and operational equipment
• Leases, rental, and interest costs

Salaries – 57%

• Regular, overtime, vacation, and holiday pay for all EMS staff, including EMTs, paramedics, chiefs, 911 call technicians, dispatchers, and support staff

Benefits – 25%

• Employer-paid health and life insurance, retirement plans, payroll taxes, and tuition assistance

NOTE: While salaries and benefits are over 80% of an EMS agency’s costs, the industry still faces a staffing crisis; wages are simply not high enough to keep pace with the cost of living and pay in other competing fields. In New York City, EMT salaries start at $39,386 annually. That’s less than the pay for an app delivery worker making the new city minimum wage of $19.56 plus tips while working 40 hours a week.

Medical Supplies – 1%

• Non-capital medical supplies such as medications, monitors, and consumables

Fleet Maintenance – 3%

• Maintenance parts, labor costs, and fuel for vehicle upkeep

Other Admin – 12%

• Professional services, contracted labor, medical director costs, training, utilities, and communications

Case Study: Any Town Fire & Rescue Department

Let's zoom out to understand the broader financial picture. The average cost for ATFRD to run one ambulance trip is nearly $2,000. Most ambulances make multiple trips daily, so the cost of keeping an ambulance operational and ready to respond is significant.

Cost Per Transport Breakdown

Using the example from above, here’s how the cost from ATFRD breaks down:

The Financial Gap: Charges vs. Costs

Your ATFRD crew stabilizes the patient and transports him to the hospital. This vital service comes at a significant cost. The disparity between the transport cost and the patient's charge is substantial. In 2020, the average charge for an ALS emergency ground ambulance service was $758 (report), while the Medicare reimbursement for the same service was only $463. This leaves providers like ATFRD facing a significant shortfall for each transport unless they align fee schedules to costs, a decision with many downsides.

Moreover, for uninsured patients, ATFRD often recovers very little of the billed amount — not because the patients do not want to pay their bills but because they simply cannot. The collection rate for this “self-pay” group may be 5% or lower, meaning that if 1,000 uninsured patients are charged $1,000 each for an ALS transport, it would cost (ATFRD, for example) $1,955,000, and they may only recoup $50,000 on $1,000,000 invoiced.

Conclusion: Bridging the Financial Divide

As the patient receives definitive care at the hospital, your crew is already preparing for the next call. The cost of their service is the furthest thing from their minds — they are rightly focused on responding to that call and delivering high-quality pre-hospital medical care. However, for EMS leaders and administrators, understanding the true costs of EMS services is the first step towards bridging the financial divide. We must advocate for fair reimbursement rates that support our agencies and ensure sustainability. The math doesn’t add up, and while the solution isn’t simple, acknowledging and addressing these financial gaps is crucial for the future of EMS.

By shedding light on these hidden costs, we aim to foster a deeper understanding among our peers and drive the necessary changes to support our EMS providers. Together, we can work towards sustainable solutions that ensure our readiness and capability to serve our communities effectively.

The next call is just minutes away. Are we ready?

Michael Brook has been in the EMS billing industry for 15 years in a variety of capacities, including both overseeing billing operations and managing client accounts. He currently provides leadership and support to Digitech clients, partnering with them to optimize revenue and navigate a changing marketplace. Michael would love to hear your thoughts and can be reached on LinkedIn.