A local ambulance service has filed a lawsuit accusing another ambulance service of snuffing out competition in the private sector with the help of Mobile County taxpayers.
Newman’s Medical Services — a privately owned company since 1939 — provides ambulance services in areas outside those covered by the Mobile Fire-Rescue Department. That has made one of its biggest competitors the Mobile County Emergency Medical Services System Rescue Squad (EMS), which, despite what its name suggests, is not an agency of Mobile County.
While EMS was created in “a concerted effort of the Mobile County Commission” to help provide ambulance service in the more rural areas of the county, it has remained an independent nonprofit corporation since its establishment in the early 1990s.
Since that time, the County Commission has appropriated funding to EMS by way of annual contracts. The commission’s recently approved 2019 budget includes a $1.6 million contract to EMS, which is level funding from the 2018 budget and an average contract price historically.
In its lawsuit, Newman’s claims each of those contracts should be voided because they were not bid competitively, which the company believes could have given other private companies a chance to underbid EMS and potentially provide similar services at a lower cost to the county.
The company argues annual government contracts and additional agreements EMS has set up with smaller municipalities throughout Mobile County have allowed the nonprofit ambulance service to create a rather profitable enterprise using support from the public.
As a result, Newman’s claims it is “slowly being put out of business.”
“EMS no longer acts as a nonprofit corporation performing a public service, but acts as a nonprofit corporation who is attempting to monopolize the emergency ambulance services for all of Mobile County at taxpayers’ expense,” the lawsuit reads. “EMS performs these services by accepting public money and other public benefits in violation of Alabama law.”
In addition to damages for the alleged harm, Newman’s is asking the court to force EMS to reimburse the public entities that have supported it through direct allocations and the use of public equipment over the years.
So far, that includes the county, the Mobile County 911 Board and the city of Mobile, which began discussions about turning over the responsibility of emergency medical response within its three-mile police jurisdiction to EMS earlier this year.
“Mobile County has engaged in a waste of assets by illegally paying millions of dollars to EMS, which has held itself out to the public as being an affiliate of Mobile County and as a voluntary nonprofit ambulance service,” Newman’s complaint reads. “EMS is not affiliated with Mobile County and is not a volunteer nonprofit ambulance service under Alabama law.”
Alabama law permits counties and municipalities to create their own ambulance services or contract those services out and set user fees for those services. However, the state requires those publicly created and/or supported ambulance services “not be operated for profit.”
The county’s contract with EMS has a similar provision forbidding it to operate at a profit.
Newman’s is accusing EMS of doing just that through service fees it claims “appear to be inflated,” and by collecting an annual appropriation from taxpayers to compete with the few remaining ambulance services in the private sector.
“In 2014, EMS made a profit of $144,998 and in 2015 made a profit of $412,730 and had a cash reserve of $3,500,136,” the lawsuit claims. “In 2016, EMS reported a loss of $705,277, however, it increased its salaries by $800,000 from the previous year, when its gross receipts decreased $475,000 from the previous year.”
Because EMS is not technically a public entity, it can be a bit tricker to obtain financial records to corroborate the lawsuit’s claims. That said, the contract with Mobile County does require EMS to produce annual audits and monthly financial statements.
So far, the 911 Board, the city of Mobile and EMS have all declined to comment on the lawsuit, though the county has provided some financial records. Federal tax returns indicate EMS received roughly $11 million from the county between 2011 and 2017.
Over seven years, that’s in line with the average annual county appropriation of $1.5 million, but most of the revenue EMS generates comes from private payments for ambulance transports and not public dollars from local governments.
Though he declined to comment recently because of the pending litigation, Mobile County EMS Executive Director Mark Turner has previously said roughly 66 percent to 67 percent of the organization’s budget is generated from direct payments from customers.
Tax documents from 2013 indicate a similar ratio, with EMS reporting $1.5 million in revenue from “government grants” and $3.6 million from “ambulance transport” while paying out more than $4.5 million in expenses. Some net gains were reported, but seemed to vary.
In 2012, EMS reported a net gain of $126,290 after expenses, a figure that jumped to $720,596 the following year. It’s unclear what might have caused the variance, though, as Turner declined to discuss the various income streams EMS has due to the pending lawsuit.
A private audit from the same time period indicates EMS started 2014 with $2.2 million in assets, which included more than $670,000 in cash. It also offers insight into what some of EMS’ expenses, which included a $2.8 million cost for salaries in 2014. EMS reported roughly 131 employees at the time.
Before the county and city approved their respective budgets last month, Newman’s had requested the court enter an injunction preventing any additional contracts with EMS — a request Mobile County Circuit Judge James Patterson has yet to respond to.
So far none of the parties named as defendants in the lawsuit have filed an answer to Newman’s complaint, though they are all aware of the pending litigation. Lagniappe will continue to report on the lawsuit as it moves forward.