High Performance EMS
Financial Analysis
Jonathan D. Washko, BS-EMSA, NREMT-P
Director of Strategic Development – REMSA
President – Washko & Associates, LLC
Session Overview
 Defining and Calculating Schedule
Costs
 Defining Direct & Indirect Costs
 Calculating the Types of Costs per
Unit Hour
 Calculating the Costs of Accurate
Coverage
A Short Poem…
A dollar spent (or wasted) here,
Cannot be spent (or wasted) there.
HPEMS Financial Analysis
 So why are we discussing this in an
SSM class?
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The changing of shift schedules and
deployment plans have a direct economic
impact on your system (either good or bad)
Mistakes made in not recognizing the financial
impacts of these changes can have DIRE
consequences (CLM / CEM Concept)
Hopefully we can show you the pitfalls and
mistakes made by others in order to keep
you from making a CEM!
Schedule Costing
Where men are men and the CEM’s & CLM’s run free
Schedule Costing
 Flexible schedules and work weeks are
necessary in order to efficiently and
effectively match supply with demand
 Schedule costing allows you to determine
how much each type of schedule costs and
its impact on your budget
 Helpful knowledge when designing
schedules to meet demand to ensure the
most efficient schedule possible
 Two Types of Schedule Costing Models
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Non-adjusting (traditional approach)
Adjusting (controversial approach)
Schedule Costing
WARNING – WARNING – WARNING – WARNING
This CANNOT be emphasized enough
If these calculations get screwed up…
it’s gonna HURT!
BAD!!!
Defining Schedule Costs
Non-adjusting compensation model
(Traditional approach)
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Base hourly field wages remain the same no matter
the length of the work week
Scheduled overtime costs / compensation rise and
fall based on hours worked
Creates disparate annual compensation between
providers based on length of scheduled work weeks
Creates an inappropriate inverse pay to workload
relationship
This approach, if you are not careful, will bite you in
the A$$, especially if you use quite a bit of scheduled
overtime in your schedules
Non-adjusting Compensation Model
Wage Conversions Made Simple
 Employee working 40 hours a week base (5x8)
 Paramedic Hourly Wage = $16.83
Using the “count up” method
((40 + 0 + 0) x 52) x $16.83 = $35,000
((ST + OT + ½ OT) x 52) x BW = TC
BW = Base Hourly Wage
ST = # of Straight Time Hours Worked / Week
OT = # of Overtime Hours Worked / Week
TC = Total Annual Compensation
Non-adjusting Compensation Model
Wage Conversions Made Simple
 Employee working 45 hours a week base (5x9)
 Paramedic Hourly Wage = $16.83
Using the “count up” method
((40 + 5 + 2.5) x 52) x $16.83 = $41,570.10
((ST + OT + ½ OT) x 52) x BW = TC
BW = Base Hourly Wage
ST = # of Straight Time Hours Worked / Week
OT = # of Overtime Hours Worked / Week
TC = Total Annual Compensation
Non-adjusting Compensation Model
Wage Conversions Made Simple
 Employee working 48 hours a week base (4x12)
 Paramedic Hourly Wage = $16.83
Using the “count up” method
((40 + 8 + 4) x 52) x $16.83 = $45,508.32
((ST + OT + ½ OT) x 52) x BW = TC
BW = Base Hourly Wage
ST = # of Straight Time Hours Worked / Week
OT = # of Overtime Hours Worked / Week
TC = Total Annual Compensation
Defining Schedule Costs
Adjusting Compensation Model (a.k.a. Straight
Time Equivalent Model – Controversial
approach)
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Base hourly field wages adjust based on the length of
the scheduled work week and shift length
Scheduled overtime costs / compensation are built
into the employee’s annual compensation
Equalizes annual compensation between providers
based on length of scheduled work weeks
Creates an appropriate pay to workload relationship
(which is what makes this legal in the US)
Gives you maximum flexibility to produce Unit Hours
and shift configurations that are affordable
This approach is what gave SSM a bad reputation as a
means by which to save money for obvious reasons
Defining Schedule Costs
Adjusting Compensation Model (a.k.a. Straight
Time Equivalent Model – Controversial
approach)…continued…
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Employee’s hourly wage adjusted based on the length
of the shift worked in OT situations
PT / PRN wages also adjust based on the length of the
shift worked
Causes your payroll folks to get a bit excited. Need to
ensure payroll systems can handle various rates by
provider if using this method
Is not an easy approach to sell (hence the “where men
are men” statement), but can economically turn the
tides for many systems (reduction or elimination of
subsidy, improvement of profits, improved employee
compensation, better equipment, etc.)
Adjusting Compensation Model
Hourly Wage STE Conversions Made Simple
 Employee working 40 hours a week base (5x8)
 Paramedic Base Annual Wage = $35,000
Using the “count up” method
$35,000 ÷ ((40 + 0 + 0 ) x 52) = $16.83 / Hour
((40 + 0 + 0) x 52) x $16.83 = $35,000
TC ÷ (ST + OT + ½ OT) x 52) = BW or ((ST + OT + ½ OT) x 52) x BW = TC
BW = Base Hourly Wage
ST = # of Straight Time Hours Worked / Week
OT = # of Overtime Hours Worked / Week
TC = Total Annual Compensation
Adjusting Compensation Model
Hourly Wage STE Conversions Made Simple
 Employee working 45 hours a week base (5x9)
 Paramedic Base Annual Wage = $35,000
Using the “count up” method
$35,000 ÷ ((40 + 5 + 2.5 ) x 52) = $14.17 / Hour
((40 + 5 + 2.5) x 52) x $14.17 = $35,000
TC ÷ (ST + OT + ½ OT) x 52) = BW or ((ST + OT + ½ OT) x 52) x BW = TC
BW = Base Hourly Wage
ST = # of Straight Time Hours Worked / Week
OT = # of Overtime Hours Worked / Week
TC = Total Annual Compensation
Adjusting Compensation Model
Hourly Wage STE Conversions Made Simple
 Employee working 48 hours a week base (4x12)
 Paramedic Base Annual Wage = $35,000
Using the “count up” method
$35,000 ÷ ((40 + 8 + 4 ) x 52) = $12.94 / Hour
((40 + 8 + 4) x 52) x $12.94 = $35,000
TC ÷ (ST + OT + ½ OT) x 52) = BW or ((ST + OT + ½ OT) x 52) x BW = TC
BW = Base Hourly Wage
ST = # of Straight Time Hours Worked / Week
OT = # of Overtime Hours Worked / Week
TC = Total Annual Compensation
Adjusting vs Non-adjusting
Compensation Model
Impact Comparison
Work
Week
Non Adjust Non Adjust Adjusted
Hourly
Annual
Hourly
Adjusted
Annual
40 Hours
$16.83
$35,000.00
$16.83
$35,000.00
45 Hours
$16.83
$41,570.10
$14.17
$35,000.00
48 Hours
$16.83
$45,508.32
$12.94
$35,000.00
Can you see why this gave SSM such a bad reputation?
Defining Direct & Indirect
Financial Models and the Cost
per Unit Hour
Defining Direct & Indirect Costs
 HPEMS Financial Overview
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Most HPEMS systems cost budget and/or pro
forma new business using the Direct and
Indirect method
This approach provides a framework to easily
build financial models that can be
automatically adjusted by changing
transports, unit hours and UHU projections
This enables the capabilities of “what if”
scenario modeling for system changes based
on changing assumptions and performance
variables
Defining Direct & Indirect Costs
 Direct Costs (Above the line)
 Those costs involved directly in the
production of unit hours
 Typically variable in nature based on hours
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worked, miles driven, number of ambulances
equipped, per call fees (like contracted
dispatch or billing services), etc.
Strongly effected by Unit Hour Utilization and
system efficiency
What is being priced and for what purpose
will effect what expenses go into what
category
 Selling services vs budgeting for services
Defining Direct & Indirect Costs
 Examples of Direct Costs
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Field Wages
Field Payroll Taxes
Field Benefit Costs
Field Uniforms
Field Training
Ambulance Depreciation
Medical Equipment Depreciation
Medical Supplies
And so on…
Defining Direct & Indirect Costs
 Indirect Costs (Below the line)
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Overhead costs
Typically fixed costs that do not vary with the
addition or subtraction of unit hours
Seldom effected by Unit Hour Utilization but
may be effected by department efficiency
What is being priced and for what purpose
will effect what expenses go into what
category
 Selling services vs budgeting for services
Defining Direct & Indirect Costs
 Examples of Indirect Costs
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Management Overhead / Allocations
Facilities Costs
Support Services Overhead
General Expenses
Legal Expenses
Utilities
Communications Costs
Fixed Asset Deprecation
And so on…
Defining Marginal & Fully Loaded
Costs per Unit Hour
 Marginal Costs Per Unit Hour
 All the costs associated with producing one more
unit hour
 These costs are typically variable in nature
 The calculation of this number enables
organizations to assess the effects of taking on
new business on a marginal basis (increasing
transport volumes)
 It also allows for the costing of system
inefficiency and the cost of Lost Unit Hours
 Assumes that overhead and support services do
not expand or contract when business volumes
change (+/-)
 Calculated by taking total Direct variable costs
divided by the total number of Unit Hours
Defining Marginal & Fully
Loaded Costs per Unit Hour
Marginal Cost Per Unit Hour
Direct Expense Description
Costs
Paramedic & EMT Wages, Benefits, Taxes
$123,564
Fuel
$9,086
Vehicle Maintenance (no labor)
$6,432
Employee Uniforms
$250
Employee Training
$1,500
Disposable Medical Supplies
$3,254
Vehicle & Medical Equipment Depreciation
$800
Total Direct Expenses
$144,886
Total Unit Hours
2,587
Marginal Cost per Unit Hour
$56.00
Defining Marginal & Fully Loaded
Costs per Unit Hour
 Fully Loaded Costs Per Unit Hour
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All the costs associated with running an
EMS agency on a per Unit Hour basis
The calculation of this number allows for
benchmarking and comparisons against
other services, bidders, system designs
and budgetary variance reporting
Calculated by taking the total Direct
variable and Indirect Fixed costs and
dividing by the total number of Unit
Hours
Defining Marginal & Fully
Loaded Costs per Unit Hour
Fully Loaded Cost Per Unit Hour
Indirect Expense Description
Costs
Management Wages, Benefits & Taxes
$42,132
Support Services Wages, Benefits & Taxes
$25,154
Facility Costs
$2,500
G & A Costs, Legal Fees, Etc.
$1,100
Fixed Asset Depreciation
$500
Total Indirect Expenses
$71,386
Total Unit Hours
2,587
Indirect Cost per Unit Hour
$27.59
Marginal Cost per Unit Hour
$56.00
Fully Loaded Cost per Unit Hour
$83.59
Cost per Unit Hour Facts
 Average cost / unit hour divided by UHU = cost per
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patient transport
Cost per patient transport divided by collection rate =
average user fee at zero subsidy
The industry range of average cost per unit hour is
$25 to $80 (1988)
Marginal cost/unit hour ranges from about 40% to
60% of average UH costs
Direct street labor costs (non-management) make up
more than 50% of total average unit-hour costs
Unit Hour costs are powerfully affected by economies
of scale
Unit-Hour cost is a poor predictor of clinical quality
Unit-Hour cost is a poor predictor of cost per patient
transport
Unit-Hour cost is a poor predictor of subsidy
requirements
Far less money is wasted in the production of unit
hours than is wasted from squandered unit hours
Calculating the Costs of
Accurate Coverage
A Real World Example….
The cost savings of an all ALS model versus
tiered ALS & BLS model
The effect of using Adjusted versus Nonadjusted Schedule Costing
Costing Coverage
 Client of Washko & Associates looking to
convert from a tiered ALS / BLS model to an
all ALS model
 Wanted to assess the impact of this
conversion to determine the savings (if any)
 Also wanted to look at the impact of moving
to a 48 hour work week from a 40 hour work
week
 Wanted to assess the impact of both the nonadjusted and the adjusted schedule costing
approach and their impacts to the bottom
line.
The Impacts of
Shift
Configuration
Changes
WITHOUT STE
Adjustments and
a Comparison of
ALS versus
Tiered Model
Savings
The Impacts of
Shift
Configuration
Changes WITH
STE Adjustments
and a
Comparison of
ALS versus
Tiered Model
Savings
Questions & Contact Information
REMSA
Phone: 775-858-5700 x140
Email: jwashko@remsa-cf.com
Web: www.REMSA-CF.com
Washko & Associates, LLC
High Performance EMS Consulting Services
Phone: 775-240-6125
Email: jw@washkoassoc.com
Web: www.WashkoAssoc.com