SEOEMS fighting for its life

Published 11:02 am Tuesday, July 13, 2010

Athens Messenger

Financial issues have made the future of Southeast Ohio Emergency Medical Services an uncertainty, and the possibility of a dissolution is looming.

SEOEMS has been serving the area since the mid-’70s, beginning as a federal demonstration project. Initially encompassing seven counties, it has narrowed its service area to Athens, Jackson and Lawrence Counties. According to Director Eric Kuhn and SEOEMS Board Chairman Larry Payne, the organization’s financial struggles are putting SEOEMS on shaky ground.

“SEOEMS is having serious financial issues right now,” Payne said, adding that the board will discuss at length the future of the organization at a meeting Tuesday. Payne said that the board will “look at all kinds of options.”

Payne said a number of financial issues have been carried over from year to year. Those issues, a struggling economy, uncollected revenue from uninsured patients and a less-than-efficient computer software accounting system are all combining to create “a perfect storm” of financial woe for SEOEMS, Payne said.

“You put everything together, and there’s not much we can do without cutting people and SEOEMS is a people operation,” Payne said.

Kuhn described the financial situation as “critical” but said he is holding out hope that SEOEMS can weather the storm.

According to Payne, bills from the Ohio Public Employees Retirement System were not paid for the months of April and May because of SEOEMS’ lack of funds. Payne said those bills were due this past week.

Payne said the board is trying to address the situation, acknowledging the many challenges ahead and citing several moves already made to try to balance the budget.

Payne said no raises were granted to staff at SEOEMS headquarters and other expenses were cut, but salaries make up 73 percent of the budget, and 91 percent of those salaries are locked into union contracts already in effect.

“There’s not much we can change there,” Payne said.

According to Payne, the budget has been frozen for the past year, but expenses continue to rise.

“There’s a number of expenditures that are way over our potential revenue,” Payne said. “The problem is, SEOEMS owes several hundred thousand dollars in invoices and the revenue is just not there to cover that.”

One of the biggest factors in SEOEMS’ dire financial straits is perhaps an overestimation of likely revenue, which factored into the organization’s budget. Payne said former Chief Fiscal Officer Micah McCathren, who served for only a year before resigning this past month, may have over-projected revenue from patient collections, which makes up a large part of the budget.

Revenue from patient payments from the beginning of the year through June was estimated at $2.3 million. Payne said the actual revenue received is around $1.1 million, leaving the district more than $1 million short.

Payne said levies from each county help to pay for buildings, ambulances and other equipment, but operating expenses, salaries, fuel and other costs are paid for mostly by patient collections.

More than half of SEOEMS’ $8 million budget is to be paid by patient collections.

“If that’s already running $1 million short, that’s a big problem,” Payne said.

The other major income source for SEOEMS’ budget is contracts from the participating counties — contracts that may also have played a role in the financial crunch.

Kuhn, who is now performing the duties of fiscal officer along with the duties of director, said SEOEMS heard cries from the financially strapped counties to keep contract rates as low as possible. Kuhn said he believes SEOEMS may have been “overly optimistic” about what revenue would be received from patient collections.

“That’s not a problem for one or two years, but that can’t be a practice,” said Kuhn.

According to Kuhn, SEOEMS moved to replace an old accounting software system a number of years ago. However, the new system was apparently never fully implemented and has resulted in a long-standing lawsuit between the software company and SEOEMS. Kuhn said that as a result, the board has had a difficult time obtaining solid financial numbers to base decisions on.

Another major factor in the crisis is that a majority of runs involve patients who receive Medicare or Medicaid. In 2010, Medicare announced it was cutting reimbursement for ambulance runs by 2 percent.

Both Kuhn and Payne said that Medicare may reverse that decision sometime this month and make the move retroactive to the beginning of the year.

That would help SEOEMS’ financial situation, but neither Kuhn nor Payne could say by how much.

As for SEOEMS’ future, Payne said dissolution of the EMS system is certainly possible and may even be likely, given the current financial landscape. Kuhn said the board will meet to discuss whether the organization is salvageable; he said that even if SEOEMS were to dissolve it would still have outstanding debts to pay. Kuhn said “all options are on the table,” but added that he hopes SEOEMS will survive and a plan can be devised to put the organization back on track.

(This story was originally printed in the Athens Messenger on July 10, 2010, and is being reprinted with permission.)

How bad is it?

Southeast Ohio Emergency Medical Services is facing serious financial trouble. How bad is it? That depends on who you ask.

Lawrence County Commission President Jason Stephens, who also serves as the SEOEMS board treasurer, thinks the challenges are significant but can be overcome.

“There are some serious financial issues, both long and short term that face the district. … As far as Lawrence County is concerned, we are committed to SEOEMS and providing public EMS,” Stephens said Monday. “However, I cannot speak for Athens and Jackson County.”

The SEOEMS board meets at 6 p.m. tonight in Jackson to potentially discuss the future. Stephens prepared an overview that he will present to the board.

Here is Stephens assessment in its entirety:

“The Southeast Ohio EMS District is facing serious financial difficulties. This memo summarizes how the district fell into this difficult financial situation, where the district stands financially, and what the future may hold.

How it got here…

After reviewing both the historical and current financial information available for the district, it is my opinion that SEOEMS is facing financial problems at this time due to the combination of many years of a flawed budget structure in the county contracts and an overestimation of patient payments for the budget year 2010.

Since 1999, all three counties have benefited financially, while at the same time the District has been hurt financially, because the contract language is tilted heavily in favor of the counties.

For example, from 1999 through 2007, Athens County was over budget by a cumulative $217,378, Jackson County was over budget by a cumulative $251,560, and Lawrence County was over budget by a cumulative $243,067.

None of these budget overruns have ever been remitted to SEOEMS, so the District has simply “absorbed” these losses of approximately $700,000 over the past decade. Over time, these shortages eroded any carryover that the district may have accumulated in previous years.

In 2008 and 2009, the budgets appeared mostly level on paper; however, it is obvious, by the current list of accounts payable, many major obligations were delayed significantly, which are now coming to light.

So now in 2010, receipts from patient payments (which is mostly Medicare, Medicaid and private insurance payments) budgeted for the first six months were $2,210,697, but actual payments through June 2010 have been approximately $1,960,000.

This is a pace to be short about $500,000 in budgeted patient payments for the whole of 2010.

This combination of years of absorbing losses and this years’ revenue shortfall have lead to the current financial situation.

Where it is…

The previous fiscal officer resigned in June 2010, and since that time, the district has been able to pay many major payables that the board and the executive director were led to believe were paid, but in fact were not.

In the last month, the district has caught up on many major past due obligations. Most notably, past due 941 Taxes of over $213,000 for the first and second quarter of 2010 were paid in June.

However, there are still many past due bills that face SEOEMS. Fortunately, the District has been able to make payroll, thanks to counties paying their contract early and watching cash flow carefully; however, the district is still in serious financial situation.

In summary, as of July 12, SEOEMS has $279,264 cash in the bank and past due accounts payable of $387,659.

Also the second payroll in the month of July is due on July 16 which is an estimated $160,000. This is a difference of $268,395.

What the future holds…

The question is: Where does the district go from here? From a short term financial stand point, I believe the District should look to sell unneeded assets to generate cash, such as the six communication towers, and reconfigure the contracts with the counties to avoid any further erosion of cash in the district.

As far as a long term solution, the respective Boards of County Commissioners and the SEOEMS Board must come together to determine what is the best course of action to take. SEOEMS has been a valuable part of local government in our counties for decades. I believe that it is possible to save the organization, but it will take a commitment of all involved to see that it happens.”