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transition to the national fee schedule. These temporary payment provisions are set to expire in December 2009. Despite the efforts of MMA, the cost to deliver service exceeds the reimbursements received from Medicare. These changes are the primary contributing factors to the system’s current financial state of affairs. In fact, recent reports provided by the Government Accountability Office (GAO) and the American Ambulance Association (AAA) found that: ? Ambulance providers are paid substantially below their average costs to provide services to patients covered by Medicare. ? Medicare’s share of transports is greater than Medicare’s share of payments. ? Ambulance services provide more uncompensated care than any other major healthcare provider groups. To place this situation in perspective, Medicare and Medicaid transports, along with Medicare HMO covered transports, account for about 60% of the system’s current business, and money is lost on each and every covered transport performed. In fact, the federal government and HMO capitated payments pay only about half of the standard fee for service and federal law does not allow the City, or any provider, to bill patients beyond what is allowable under the Medicare and Medicaid payment schedules. The City must therefore “write down” the amount that exceeds the federal reimbursement schedule since ambulance providers are not allowed to collect their fees or true costs for delivering the service if they exceed this amount. In addition to the write downs associated with Medicare and Medicaid, the City also provides transport service to patients who are either uninsured or underinsured, and unable to privately pay for their transport costs. These calls create a level of bad debt which frequently results in the system’s need to “write off” the debt for the City. Write offs and write downs collectively impact the ability to cover overhead costs for the system and assumes no margin to finance capital improvements for technology, communications systems, apparatus, equipment and facilities, and builds no reserve capital for maintaining services following a natural or economic disaster or terrorist event. Eugene Fire & EMS has made incremental changes over the past five years in its attempt to minimize the impact to the funding decrease and in hopes of the federal government passing legislation to reduce the impact. Incremental changes include increases in ambulance fees, increases in the FireMed membership fee, delayed replacements of ambulances and life-saving medical equipment, which has resulted in some adverse impacts, brought the ambulance billing function in-house, appropriately reallocated some first response costs back to the general fund, and decreased most non-essential EMS training. Although the department’s incremental system changes have produced some cost savings, these changes have not corrected the system’s operating deficit. Likewise, no substantive federal legislative relief appears to be on the horizon. Until now, adjustments to the system have been incremental in nature and directed more towards the symptoms of the problem, rather than the root cause of the problem, which is an inadequate funding structure that relies solely on fees for service and FireMed membership revenue. System Capacity Deficit: In addition to the financial deficit described above, the system is also struggling with a growing capacity and work load problem. In fiscal year 1995, the department staffed four 24-hour, dual-role ambulances and responded to 11,431 medical calls for service. In fiscal year F:\CMO\2008 Council Agendas\M080213\S080213A.doc