Transportation turf war:

Non-emergency transport at issue in clash between AMR and Dignity Health

Dignity Health, operator of St. Joseph’s Hospital and Medical Center, and American Medical Response, an ambulance company, are embroiled in a turf battle over non-emergency transportation services.

The health system that owns and operates St. Joseph’s Hospital and Medical Center is seeking state approval to operate its own ambulances.

But Dignity Health’s decision to pursue its own non-emergency transportation has met stiff resistance from current ambulance providers seeking to protect their turf.

American Medical Response, the ambulance company that currently provides the bulk of non-emergency transports for Dignity-owned facilities, has even moved to terminate its contract with Dignity.

AMR said the contract dispute won’t disrupt ambulance services for Dignity patients, but it could result in higher medical transportation bills for Dignity.

AMR insists those higher charges won’t trickle down to consumers and health insurance plans. Patients who use the service include the medically frail who need rides from their homes to appointments at Dignity-owned facilities as well as trips between Dignity facilities.

Sharp disagreements and public infighting are common in the metro Phoenix ambulance industry when new entities try to break into the market for nonemergency and 911 municipal contracts. Mergers also have winnowed competition, with rivals buying each other.

The Arizona Department of Health Services must authorize a “certificate of necessity” for any new ambulance company that wants to serve a particular geographic region. Dignity filed an application in June 2016 through a company it mostly owns and controls, Community Ambulance, to provide non-emergency ambulance service in Maricopa County.

When a company applies for such a certificate, it opens a public process that allows competitors to “intervene” with state hearings before an administrative law judge.

That’s exactly what Maricopa County’s largest ambulance company, AMR, has done, filing paperwork with the state’s Office of Administrative Hearings to oppose Dignity’s application.

At least two other ambulance providers, ABC Ambulance and Maricopa Ambulance, also have intervened to bar Dignity’s ambulance company from transporting patients in Maricopa County.

“There are enough providers to serve the market,” said Neal Thomas, founder of ABC Ambulance. “We have excess capacity and everybody is fighting to provide calls.”

Although a hearing date has not yet been scheduled, the case will go before an administrative law judge who will evaluate evidence and recommend whether to grant a certificate to Dignity Health’s ambulance partner, Community Ambulance. The state Health Department director decides whether to authorize a certificate.

“We believe the market is very well served currently,” said John Karolzak, AMR’s Arizona government and public affairs director. “Other providers in the marketplace agree.”

While incumbent providers see a crowded market of providers, San Francisco-based Dignity Health sees a lack of competition.

Dignity Health owns hospitals such as St. Joseph’s, Chandler Regional and Mercy Gilbert as well as other health clinics, doctors’ practices, a Medicaid insurance plan and the renowned Barrow Neurological Institute.

Dignity formed Community Ambulance to serve its health facilities in the Las Vegas area in 2010. Now, the company wants to expand to metro Phoenix.

In its initial application filed with ADHS in June 2016, Dignity cited a lack of competition in the metro Phoenix ambulance market.

“In reviewing the landscape of the current ambulance providers in Maricopa County, it is apparent that the past practice of having multiple ambulance providers providing ambulance service through competitive services has dwindled ... “Dignity’s Community Ambulance said in its application to Arizona regulators.

Earlier this decade, the ambulance and fire-protection company Rural/Metro held a virtual monopoly over the Valley despite the company’s financial woes that earlier led to a bankruptcy filing.

The market loosened a bit in 2015 when ADHS approved AMR’s application to serve metro Phoenix. But a bruising fight for non-emergency and 911 contracts between two ambulance heavyweights never materialized. The Colorado-based company that owns AMR struck a deal in July 2015 to buy Rural/ Metro, too.

Just four years earlier, Rural/Metro used the same tactic when it acquired PMT Ambulance in 2011.

That left one private ambulance company competing for municipal and private health-facility contracts in the Valley.

That lack of competition, along with Rural/Metro’s August 2013 bankruptcy, paved the way for AMR’s entry in the market in 2015.

Former Arizona Department of Health Services Director Will Humble signed off on AMR’s application in January 2015.

Knowing that approving a new ambulance provider could be politically sensitive in an industry served by powerful lobbyists and well-connected attorneys, Humble waited until a few hours before Doug Ducey was sworn in as governor on Jan. 5, 2015.

In other words, such a decision would be too late for outgoing Gov. Jan Brewer to object to, while not technically occurring on Ducey’s watch.

Humble said he thought Maricopa County was large and robust enough to offer plenty of business opportunities for both companies while providing a competitive marketplace that benefited municipalities, private health facilities and consumers.

He said many factors should be considered.

A company that only wants to provide non-emergency transportation could have more predictable costs and profits because trips are often scheduled and preapproved by insurance.

However, 911 calls are unpredictable and require ambulance companies to provide adequate, round-the-clock staffing and equipment.

Humble said it would be more challenging to approve a certificate only for non-emergency services in a rural community because it could financially harm a competitor that had to cover 911 calls.

Humble approved AMR’s certificate because he thought that metro Phoenix needed another ambulance provider, particularly given Rural/Metro’s history of financial trouble.

“My thinking was always geographically dependent,” Humble said. “You take a large urban areas like ours, and there are lots of transports.”

While AMR remains a dominant ambulance provider in metro Phoenix, it is not the only provider.

Two much smaller providers, ABC Ambulance and Maricopa Ambulance, have since gained approval to serve the Valley.