Ambulance Service Bilked San Diego Out of $18 Million – But Remains On the Job and Allowed to Increase Fees

It was one of those articles that after you read it, you have to go back and re-read it because what it describes doesn’t make sense. This was what happened when I first read Craig Gustafson’s June 13th article in the San Diego U-T about San Diego’s ambulance service – how they bilked the City out of $18 million but get to keep operating ambulances for us – and are able to increase their fees to San Diego residents – the users of ambulances.

In a quest to create a model public-private partnership with regards to providing the city with ambulance and paramedic service, San Diego made a deal with Rural/Metro, a Scottsdale firm, in 1997.  They would provide ambulance and paramedic service – which they’ve been doing ever since – and certain monies would be evenly split. It was supposed to be a model of how a public-private partnership, known as San Diego Medical Services Enterprise, would save lives and taxpayer money.

The Scottsdale, AZ, headquarters of Rural/ Metro.

Yet now there is overwhelming evidence that the partnership failed, due to a lack of public oversight of the private side of the arrangement.  Now it appears that Rural/ Metro – the city’s partner – has made off with an amount of $18 million – a great deal in these days of budget cuts and the gutting of public services.  Rural/ Metro is accused of:

“taking advantage of lax city oversight by hiding the partnership’s revenue from the city, taking money without proper documentation and overcharging the city for services.”

It turns out a whistle-blower – a former executive of the firm by the name of Robert Heffner – has made allegations in a legal suit against the company that it hid millions of dollars of revenue that it was supposed to split evenly with the city – its partner. Heffner said that Rural/ Metro owes San Diego up to $12 million.

To top it off, City Auditor Eduardo Luna has determined that the company – our partner – withdrew nearly $6 million from the partnership account that it wasn’t supposed to have.

That adds up to $18 million on our calculator.

So, was the company punished? Nope, not straight away.  The City Council did dissolve the partnership, but it extended the company’s contract for another two years. Not only that, beginning July 1st this year, San Diego patients will begin to spend more on an ambulance ride. According to the U-T:

The average cost for an ambulance ride in the city is currently $1,305 but increases to $1,533 in the contract’s first year and to $1,761 in the second. That would make costs in San Diego 20 percent higher than the statewide average of $1,468.

Who is on the five-member board that oversees the Partnership?

A letter to the U-T editor writer got it right:

Deal a reward for ambulance firm

A whistle-blower lawsuit and audit revealed that San Diego’s partner in ambulance services, Rural/Metro Corp., overcharged and failed to share profits of an estimated $18 million over the last 13 years, money our financially-strapped city could desperately use. Apparently, Rural/Metro was able to skim because there was no oversight; the city didn’t bother to audit the books of its “partner.”

Now, because Rural/Metro has been busted, surely the shamed company will be forced out, right? Actually its punishment, as approved by the City Council, is a two-year contract extension, and the company will be allowed to raise fees to a rate that is 20 percent higher than the state average (“San Diego votes to end ambulance deal,” June 14).

When it comes to services provided to the city, whether it’s debris removal or ambulance services, the private sector knows San Diego is run by rubes. Instead of being embarrassed by being asleep at the switch, the council vote just gave the inmates the keys to the city. Those in charge of running our city are incompetent when it comes to handling our money. — Al Stoffel, San Diego

Here is the San Diego U-T article:

Rural/Metro ambulance service stays for now

By Craig Gustafson / June 13, 2011

City leaders are dissolving a public-private partnership that provides ambulance service throughout San Diego after an audit and whistle-blower lawsuit revealed several flaws in the arrangement that may have cost taxpayers as much as $18 million or more through the years.

The City Council voted 5-3 Monday to have private partner Rural/Metro Corp. buy out the city’s share in San Diego Medical Services for $5.5 million but allow it to remain the city’s ambulance operator for the next two years. During that period, city officials would launch a competitive bidding process to possibly find a new provider and strike a better deal for taxpayers.

The new agreement with Rural/Metro is a more traditional outsourcing contract that calls for the company to pay the city an operational fee totaling $19 million rather than sharing profits and expenses as had been the case.

For the remainder of this article, please go here.

Go here for a San Diego Reader article on this mess, focusing on the City audit.