The Reason You Could End up in Court for Calling 911

June 27th 2016

Lucy Tiven

When you dial 911, you probably don't expect to be dragged into court for an outstanding bill months later.

However, as private equity firms gobble up at a greater share of the emergency services industry, everyday people are getting hit hard with sky-rocketing fees, the New York Times reports.

What are private equity firms? And are they taking over ambulance companies?

In simplest terms, a private equity firm is a group of investors that raises money to buy companies with the the hopes of increasing their value and turning a profit. While this often proves a winning strategy for investors, private equity firms don't bring much industry experience to the table and tend to focus on increasing short-term profits.

The 2008 financial crisis left both local fire departments and private ambulance services facing budgetary strains, creating an environment in which private equity investors could get into the ambulance business relatively cheaply. As these firms invested in private emergency care, more people found themselves subject to unexpected and excessive fees. The Times explained:

"Private equity put a unique stamp on these businesses. Unlike other for-profit companies, which often have years of experience making a product or offering a service, private equity is primarily skilled in making money. And in many of these businesses, The Times found, private equity firms applied a sophisticated moneymaking playbook: a mix of cost cuts, price increases, lobbying and litigation."

These companies charged people staggering sums of money for emergency care services and took legal action when they couldn't pay bills.

Employees of the providers also told The Times the policies made them provide worse care.

"In emergency care and firefighting, this approach creates a fundamental tension: the push to turn a profit while caring for people in their most vulnerable moments," the Times reported.

The EMS company Rural/Metro sold home owners subscription-based fire protection, but took calls from nonsubscribers and hiked up the cost.

The company then sued those who couldn't pay, many of whom were under the impression that the service was already paid for by their taxes.

The Times spoke to Lester Day, who called Rural/Metro when the chimney of his home in Knoxville, Tennessee caught fire in 2013. The Times explained:

"When firefighters arrived almost an hour later, 911 records indicate, the house had been reduced to ashes. That didn’t stop Rural/Metro from charging Mr. Day for their response and then placing a $15,000 lien on his home, which he had since rebuilt.

''Now I’m having to sell everything we’ve got,' Mr. Day said in an interview. 'It ain’t right.'

Rural/Metro also filed hundreds of lawsuits against ambulance patients in the same time period, including claims against families of people who died."

Some of the companies also required paramedics to get patients to "sign off" to big bills during medical emergencies, and raided hospitals for medical supplies without permission.

Unlike private equity firms, public EMS providers and firefighters rarely sue patients for bills.

"And yet, patients may not always have the chance to ride in a government ambulance," the Times reported. "Private companies now represent about 25 percent of all ambulance providers, according to the National Association of State EMS Officials."

The nature of private equity allows investors to get in and get out relatively unscathed, but the same cannot always be said for the services they invest in.

"Private equity firms technically have a decade or more to exit their investments, but they usually try to get out of the good ones within half that time," Forbes explained. "After all, those are the companies that other people want to own. What’s left behind is often less attractive."

You can read the full report on the New York Times.

[h/t the New York Times]