Transfer mileage fee

Several area townships are looking for ways they can better support the Tower Area Ambulance Service, which has been struggling financially for a combination of reasons. The TAAS is certainly not alone— the economic model for rural ambulance services is breaking down and services around the region are struggling.
But the TAAS is in a unique position because it is the only area service that is forced by local townships to pay what is, in effect, a tax for undertaking inter-hospital transfers.
Under an agreement reached three years ago, the city of Tower, which owns and operates the ambulance service, must pay $1.66 for every mile traveled by one of its ambulances on a transfer. This requirement has had two negative impacts on the TAAS. First, it detracts significantly from the operating revenue that the service achieves when it undertakes a transfer. Second, it means the TAAS undertakes fewer transfers, further slashing potential revenue.
While transfers are nowhere near as lucrative as purported by some former TAAS officials, on average a transfer can net the service about $450, according to the Emergency Medical Services Regulatory Board, which analyzed the TAAS’s financials. Do two of those a week and the service could net nearly $47,000 annually, which could help bridge TAAS’s financial gap.
Currently, undertaking transfers is the only viable way that ambulance services can generate additional revenue beyond the funds they generate from 911 emergency calls. But the TAAS isn’t taking advantage of transfers for the most part because as much as half or more of that additional revenue would be siphoned away. The funds don’t disappear, but under an agreement with area townships, the funds are directed into the service’s ambulance replacement account, rather than paying for operating costs.
As with every other ambulance service, TAAS is paid for transfers based on the number of loaded miles, which means only the miles in which a patient is on board. For example, if TAAS transfers a patient from Ely-Bloomenson to St. Mary’s in Duluth, the service is not paid for the trip to Ely nor for the trip from Duluth back to Tower. But the $1.66 is assessed on every mile driven, which means the TAAS would need to pay almost $375 to the ambulance replacement fund. That’s one reason that the EMSRB recommended scrapping the mileage charge in its entirety.
The conditions that led to the fee were understandable at the time. Back then, the ambulance service’s financials were tracked much differently, and there was zero accounting for the large number of miles that the service was putting on its ambulances to undertake transfers at the time. The $1.66 mileage fee served as a kind of stand-in for TAAS’s failure to account for depreciation on its vehicles.
But TAAS was converted to an enterprise fund in 2020, which means depreciation is now accounted for, and it’s a big number— $54,430 last year according to the city’s recent audit.
Throw in the nearly $20,000 that the service accrued from the mileage charge and that totals just under $75,000, or about three-quarters of the loss the service experienced in 2022.
By penalizing the TAAS for undertaking transfers, the mileage fee not only contributes to the service’s operating expenses, it likely reduces the service’s revenues because too many transfers simply aren’t worth undertaking given the fee. Other services provide their staff financial incentives to agree to undertake transfers, but the mileage fee makes it difficult, if not impossible, for TAAS to offer those incentives since the margins on transfers are already substantially reduced. That means the TAAS has to turn down potentially money-making transfers because it can’t find personnel to undertake them. Some TAAS personnel actually undertake transfers for other services that are able to provide financial incentives because they aren’t assessed a mileage fee.
Even worse, because factors like the mileage fee, along with high payroll costs, have left the ambulance service cash-strapped, it often can’t make its mileage payments on time, which at least one township has used to justify not making its own contribution to the ambulance replacement fund. The fee, which was implemented with the right intent, has become destructive to the TAAS and is no longer justifiable. The Tower Area Ambulance Commission should seriously consider ending the assessment. It’s time has passed.