Kori Kay Sandberg

Article 9

Ambulance Monopoly in Utah chases off competition

Summary: This article pertains to microeconomics (the study of the economy and all its parts) and how
it involves Utah and the Gold Cross Ambulance monopoly (the only supplier of a unique product with
no close substitutes.) The Ambulance Company provides a service (an intangible item such as education,
or health care) that no other competitor can get in on. This relates to what we have been learning in
class; monopolies have certain characteristics that keep them in that specific category.
Analysis: In 2006, when Southwest Ambulance Service set up shop in Salt Lake City after overcoming
very high barriers to enter the market, they began feeling the heat from Gold Cross Ambulance. Almost
immediately there was a financial competition that eventually resulted in driving Southwest from the
state putting the labor and human resource (the work effort of human beings both physical and mental)
force out of a job 4 days before Christmas. Gold Cross Ambulance began to funnel more than about
$154,000 into political campaigns, thus Gold Cross results in being the favored of the ambulance service
options in the City. These writings are based on positive economics (attempts to assess the economy and
economic policies without the use of value judgements) as there is proof that Gold Cross ambulance is
not in the market to be a competitive business. When Southwest won the bid in 2005 after overcoming
many constraints (things that limit) allowing them to obtain a contract in Salt Lake City, Gold Cross was
astounded, they have been the dominant industry for years. The bill to propose a non-emergency
ambulance system that would be executed by Southwest failed and Gold Cross basically forced
Southwest out. The overall marginal cost (additional cost incurred) proved to is greater than the marginal
benefit (the additional benefits that arise) for Southwest. Gold Cross Ambulance is an inelastic service
(something in which there is no substitute for, this gives Gold Cross 100% of the profits from emergency
transportation services and the ability to set whatever price for their services that they want. Gold Cross
is also considered to have the absolute advantage (an industry, individual or firm has an absolute

advantage over another if it takes fewer hours to perform a task) since they are the only company around
that can provide the service at all.

Bibliography
"Utah's Ambulance Monopoly Chases off Competition." Utah Local News. N.p., n.d. Web. 05 Dec.
2014.

Utah's ambulance monopoly chases off competition

By Derek P. Jensen
The Salt Lake Tribune
Published December 5, 2009 11:05 pm
Painful politics Muscle in Legislature pushes out Southwest, gives Gold Cross control.
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This is an archived article that was published on sltrib.com in 2009, and information in the article may be outdated. It is
provided only for personal research purposes and may not be reprinted.

On a clear but crisp November morning, the temperature was rising inside the cramped Salt Lake City
hub of Southwest Ambulance.
Company President Boo Heffner had just flown in to announce all 62 people will lose their jobs - four
days before Christmas - because, after four years of doing business in Utah, Southwest was being forced
out.
A "completely lopsided" state-sanctioned monopoly, he later laments, assures Gold Cross Ambulance
will dominate the Beehive State and quash competition. And it is all guaranteed, he bristles, by the probusiness, Republican-led Legislature.
"For a state that professes free-market values, the message we got very clear was: 'We're not open for
business,' " Heffner says. "I'm shocked that they would fight us this hard to protect this monopoly. It was
all about the protection of one company."
Legislators and Gold Cross brush off allegations of preferential treatment. But the numbers certainly are
stacked. Since 2006, the year Southwest set up shop in Salt Lake City, Gold Cross has funneled more
than $154,000 to political campaigns through dinners, barbecues and golf tournaments. Southwest has
donated $15,900, all of it in 2008.
During those four years, Southwest employed a who's who of lobbyists to try to change a nearly 7-yearold state law and open nonemergency ambulance transport to private competition. Gold Cross countered
with its own star-studded lobbying team - and Utah's influential League of Cities and Towns - to kill the
bills. In two of the years, those measures never even reached a vote.
"I don't know what I'm going to do for a job," Southwest EMT Andrew Ridd shrugs as the somber group
of street medics shuffles out of the building. Maybe, his eyes brighten, he will go to Utah Valley
University for paramedic certification. "What other state says, 'No, only one company can do this?' "
Politics of pain
Capitol Hill insiders say the saga between Gold Cross and Southwest could be a case study for ethics
reform.
Indeed, industry leaders told Southwest they would be "crazy" to try to crack Utah's ambulance market.
But, in 2005, the company scored a four-year contract with Salt Lake City to provide emergency 911
transportation. After a 36-year partnership, the capital was dumping Gold Cross, whose president said he
was "astounded" to lose the bid to Southwest. Worried they would lose revenue and employees, Gold
Cross sued, but lost.

Ironically, Southwest soon would have its own grievance. The company recognized that just to break
even, it somehow would have to get a state law changed to earn a shot at the more-profitable
nonemergency ambulance trips. That service - typical insurance-billed transports involve taking a patient
from a hospital to a clinic or rest home - is dominated across the Wasatch Front by Gold Cross.
"I thought it was a no-brainer," veteran lobbyist Charles Evans explains, "that Utah would be very open
and receptive to have competition. I was surprised to find out otherwise."
Observers characterize Southwest's four-year Capitol Hill fight as politics laid bare and Gold Cross
favoritism writ large. But the criticism doesn't just come from company shills, who cry that Southwest
has lost a half-million dollars a year due to free-market barriers.
"It was conservative versus conservative here," says Rep. Greg Hughes, R-Draper, an early Southwest
bill sponsor who calls the strange bedfellows in the ambulance wars "book-worthy."
"If you take it in the context of health care reform, I can't understand why the state would say no to
competition."
Conservative Rep. Mike Noel also is perplexed. As this year's Southwest sponsor, the Kanab Republican
calls the state law governing ambulances "uniquely unfair."
"Those who oppose this bill are motivated by a desire to protect their own monopolies," he said before
the bill failed on the House floor. "By state law, health care providers and patients have no choice
whatsoever in who provides their interfacility transports. Customers can't negotiate price, and they can't
demand better quality."
But Sen. Curtis Bramble, R-Provo, argues stakeholders are far from consensus. In 2003, he helped
assemble cities, counties, hospitals, fire chiefs and unions before the parties agreed to support his bill,
which opened a bid process for 911 transport. But the measure also forbid jurisdictions from soliciting
bids for nonemergency trips, effectively solidifying Gold Cross' reign.
Until all those parties are back at the table, Bramble says, he will oppose any ambulance amendments.
Besides, he argues, the 2003 law "struck a balance" and does not allow a private company to "cherrypick" the profitable piece without handling 911 calls.
"They had a problem, expecting they could come in and low-ball, and the Legislature would bail them
out," Bramble says about Southwest. "The impact of allowing a company to come in to skim the cream
off the top and then lay the cost on the taxpayers is problematic."
Gold Cross lobbyist Frank Pignanelli is equally dismissive. "This was essentially a bill by one company
trying to change the system because they made a bad deal with Salt Lake City," he says. "They spent
four years trying to change it, and they ran into a buzz saw."
Contract conundrum
Without a private rival for nonemergency transfers, Gold Cross has no incentive to lower prices or
improve customer service. And neither hospitals nor patients have a choice for ambulance service.
But Gold Cross President Mike Moffitt insists it was Southwest's "own fault" for signing a contract
limited by the 2003 law to emergency service. "If you underbid the project, you can't complain about it
four years later when you're not making any money," he says. "That's just not good business."

Moffitt also argues open competition would draw private providers to population centers, leaving rural
areas with inferior service. He rejects any link between Southwest's failed legislative efforts and Gold
Cross' political contributions to lawmakers, noting his company made donations long before 2006. And
the president says his 40-year-old, family-run company strives to put patient service first and has strict
oversight from the Utah Department of Health.
Even so, Southwest General Manager Raleigh Bunch, who spent 34 years as a Salt Lake City firefighter,
says his company had a perception there was "potential for growth."
"It was clearly represented to us that it was time for a change," Heffner adds. "We regularly get calls
from hospitals bewildered as to why they can't use us" for nonemergency transfers.
Both companies are careful not to bad-mouth the other, particularly since employee crossover is
common. Already, Gold Cross, which was fertile ground for Southwest's staffing hunt, has hired back 10
EMTs and paramedics. "If they meet our qualifications and they look like good candidates," Moffitt
says, "we certainly will hire them."
Static from cities
Southwest has run into pushback from a host of Utah cities, likely more concerned with their own selfinterest.
Several - including Ogden, Layton, Brigham City and Logan (operating before the 2003 law) - provide
their own emergency and nonemergency service. Others, such as West Valley City, Sandy, South Salt
Lake and Orem, self-provide for 911 calls.
In those cases, cities often subsidize their 911 ambulance debt from the nonemergency service, usually
provided by Gold Cross. "I'm sure there are contractual arrangements," Hughes says, "that makes
financial sense."
But Lincoln Shurtz, director of legislative affairs for the Utah League of Cities and Towns, says there is
a deeper anxiety among city officials about changing the ambulance law.
"If you go and negotiate a sweetheart deal with the hospitals, how do you ensure the less-profitable areas
continue to get service?" he asks. "Nobody wants to do Pioneer Valley Hospital. Everyone is going to
want to do Primary Children's."
Shurtz insists Southwest's proposal never addressed that principle. As a result, he helped orchestrate an
eleventh-hour defeat of the 2009 bill.
"We're fine with competition," he adds. "But competition should occur on the licensure side.
Competition shouldn't occur at the bedside."
Heffner says there was a "clear intent" by Bramble -- who crashed a House committee along with Rep.
Rebecca Lockhart, R-Provo - and the league to confuse lawmakers about the difference between
emergency and nonemergency service.
"The league," Heffner says, "pulled the rug out from under our feet."
As it stands, the only way a Utah city can consider another nonemergency ambulance provider is
through a determination of "Public Convenience and Necessity" - an expensive mechanism that requires
evidence a state-regulated provider is not adequately serving the public good.

Hughes, who plans to roll out his bill again in 2010 to open ambulance competition statewide, calls that
system "a crock." He insists it creates market barriers rather than promoting public safety.
"The burden of proof is so extraordinarily high," Heffner says, "that it never happens."
And it hasn't.
Et tu, SLC?
If Southwest thought it had an ally in Salt Lake City, second-year Mayor Ralph Becker never got the
memo.
"I don't feel it's appropriate for me to take on a private entities' lobbying interest at the state level,"
Becker says. "Unfortunately for them, they just haven't been successful."
In the same breath, Becker says he is "very satisfied" with Southwest's 911 work and understands its
frustration. "My job isn't to make state law."
Months before the 2007 election, Gold Cross gave then-candidate Becker and his mayoral opponent,
Dave Buhler, $7,500 apiece.
Heffner says he is disappointed in the lack of City Hall support, but notes city firefighters had
Southwest's back, going so far as to lobby at the Capitol. "It's a shame the city is going to lose an
exceptional provider that cost the city nothing," he says. "It's a travesty."
Told by the Attorney General's Office that it cannot extend its contract on an interim basis - to make
another run at the Legislature - Southwest will see its four-year term end Dec. 21.
"Boo Heffner is a very respected person around the country," Evans, the lobbyist, says. "When he tells
the story of what happened here, other ambulance companies are not going to come into this market."
The capital city must next decide whether to self-provide for 911 calls. Fire officials concede that
proposition won't break even for nearly five years -- sticking taxpayers with the bill for start-up costs.
Adding an ambulance fleet, equipment and 62 new paramedics would bleed the city's budget $1.6
million into the red the first year, plus $300,000 more in year two.
Becker is leaving the call up to his fire bosses.
In the vacuum, Moffitt notes Gold Cross has agreed to fill in, taking the capital back to the future.
Careers 'are just done'
With four kids at home and her fiance's business barely hanging on in the down economy, Southwest
EMT Melissa Alexander is beyond nervous. She says Heffner's speech about how the staff is
"marketable" did little to help. After all, there suddenly is only one private company in the city for street
medics.
"There are a lot of us that don't know what we're going to do," she says. "Our careers in the medical field
are just done. It's sad."
Supervisor Trisha Erickson, who left Gold Cross for Southwest after 15 years, agrees. Some single
employees may leave Utah for other jobs at the company. "But in this economy, I can't sell my house
and move. That reflects most of the employees. We're established here in Utah."

Alexander says the hardest thing is leaving something you love.

"It's such a monopoly," she exhales about Gold Cross. " When you've done something for so long and
you know so many people ... pockets are deep."
If there's any silver lining, Alexander won't have to work either Christmas Eve or Christmas Day. Her
last shift ends Dec. 20, at midnight.
djensen@sltrib.com" Target="_BLANK">djensen@sltrib.com
By the numbers

4 New Salt Lake City fire chiefs during the past four years.
10 Southwest employees hired by Gold Cross so far.
36 Markets Southwest operates in across the nation -- none with an exclusive, nonemergency
ambulance provider like Utah.
36 Years Salt Lake City used Gold Cross for 911 service before dumping provider in 2005 for
Southwest.
67 Reported percentage of 911 patients who fail to pay ambulance provider because they do not have
health insurance.
114 Ambulance providers, mostly municipalities, opposed to Southwest's legislative push, according to
Gold Cross President Mike Moffitt.
2003 Year law passed by Sen. Curtis Bramble, R-Provo, to allow competitive bids for emergency 911
service. It also cemented Gold Cross as state's primary nonemergency ambulance provider.
Anatomy of an ambulance ride

The two types of service - 911 emergency trips and nonemergency transports - have drastically different
profit margins since most patients for the latter carry insurance.
For four years, Arizona-based Southwest Ambulance tried to crack what it calls a state-sanctioned
monopoly to compete for "inter-facility" transfers -- taking nonemergency patients from hospital to
hospital or to a nursing home or clinic. That, after all, is where the money is.
Gold Cross and the Utah League of Cities and Towns successfully have battled back. Cities that provide
their own ambulance service worry that, if state law changed, private providers could go to hospitals and
"skim" profitable nonemergency transfers, siphoning revenues the cities tap to prop up 911 service.
Street medicine

62 Number of Southwest Ambulance EMTs, paramedics and managers to lose their jobs Dec. 21.
$154,000 Money Gold Cross has contributed to Utah politicians since 2006.
$15,900 Campaign contributions from Southwest, all in 2008.
4 Consecutive years Southwest has fought - and failed - to change state law on Utah's Capitol Hill.