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Review of Financial Aspects of the Ambulance Service of NSW

An Issues Paper

March 2005

I N D E P E N D E N T P R I C I N G A N D R E G U L A T O R Y T R I B U N A L O F N E W S O U T H W A L E S

I N D E P E N D E N T P R I C I N G A N D R E G U L A T O R Y T R I B U N A L O F N E W S O U T H W A L E S

Review of Financial Aspects of the Ambulance Service of NSW

An Issues Paper

March 2005

Discussion Paper DP81 ISBN 1 920987 17 7

1 March 2005

This work is copyright. The Copyright Act 1968 permits fair dealing for study, research, news reporting, criticism and review. Selected passages, tables or diagrams may be reproduced for such purposes provided acknowledgement of the source is included.

Request for submissions Submissions are invited from interested parties. Unless confidentiality is sought, the submissions are generally available for public inspection at the Tribunal's offices and will be available on-line in PDF format from the time of processing of the submission until 3-4 weeks after the release of the final report of an inquiry. The Tribunal may exercise its discretion not to exhibit any submissions based on their length or content (containing material that is defamatory, offensive, or in breach of any law). Submissions should have regard to specific issues that have been raised. There is no standard format for preparation of submissions but reference should be made to relevant issues papers and interim reports. Submissions should be made in writing. Electronic submissions are preferred and, if submissions exceed 15 pages in length, they should be provided either by email or on computer disk in word processor, PDF or spreadsheet format. Electronic submissions should be sent to [email protected] For price reviews/determinations, submissions are initially sought from agencies or relevant associations. These submissions are available about 4-6 weeks before the due date for public submissions to allow for their consideration in the preparation of other stakeholder submissions. For this review, submissions from the Ambulance Service of NSW must be received by 17 March 2005. Submissions from other stakeholders are requested by 15 April 2005. Submissions should be sent to: Ambulance Service Review Independent Pricing and Regulatory Tribunal PO Box Q290 QVB Post Office NSW 1230 Confidentiality If you want your submission, or any part of it, to be treated as confidential, please indicate this clearly. The Tribunal may include in its publications a list of submissions received during the course of an inquiry. It may also refer to submissions in the text of its publications. If you do not want your submission or any part of it to be used in these ways, please indicate this clearly. A request for access to a confidential submission will be determined in accordance with the Freedom of Information Act and section 22A of the Independent Pricing and Regulatory Tribunal Act. Privacy All submissions will be treated in accordance with the Privacy and Personal Information Act 1998. Any personal information you give us will not be reused for another purpose. Public information about the Tribunal’s activities Information about the role and current activities of the Tribunal, including copies of latest reports and submissions can be found on the Tribunal’s web site at www.ipart.nsw.gov.au.

Inquiries regarding the reviews should be directed to:

Dennis Mahoney 02 9290 8494 Steven Tropoulos 02 9290 8403

Independent Pricing and Regulatory Tribunal of New South Wales

Level 2, 44 Market Street, Sydney NSW 2000 (02) 9290 8400 Fax (02) 9290 2061

www.ipart.nsw.gov.au All correspondence to: PO Box Q290, QVB Post Office NSW 1230

TABLE OF CONTENTS

1 INTRODUCTION 1 1.1 Review process and timetable 1 1.2 Key issues 2

2 OVERVIEW OF THE AMBULANCE SERVICE OF NSW 3 2.1 Organisation 3 2.2 Volume and quality of services 4 2.3 Costs 7 2.4 Revenues 10 2.5 Future funding requirements 15

3 IS THE CURRENT APPROACH TO FUNDING AND SOURCING REVENUE FOR THE SERVICE ADEQUATE? 19 3.1 What funding approach is appropriate? 19 3.2 What is the appropriate balance between community service obligation and user pays? 20 3.3 How should the revenue be sourced? 21

4 CAN THE EFFICIENCY AND EFFECTIVENESS OF THE AMBULANCE SERVICE BE IMPROVED? 27 4.1 Current activities of the Service relative to its responsibilities 27 4.2 Effectiveness 27 4.3 Efficiency 28 4.4 Standards of quality, reliability and safety 30

5 HOW SHOULD FEES BE ADJUSTED OVER TIME AND WHAT SHOULD BE THE ROLE OF AMBULANCE COST INDICES? 31 5.1 What are the main advantages of the cost index approach? 32 5.2 What are the main disadvantages? 32 5.3 How might a cost index approach be used to adjust the Ambulance Service’s fees? 33

6 OTHER ISSUES 35 6.1 Impact on borrowing and capital requirements 35 6.2 Effects on Government funding 35 6.3 Protection of consumers 35 6.4 Social impacts of fee changes 35

ATTACHMENT 1 TERMS OF REFERENCE 37

ATTACHMENT 2 ABBREVIATIONS USED IN THIS REPORT 39

Introduction

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1 INTRODUCTION

In response to a request from the Premier, the Independent Pricing and Regulatory Tribunal of NSW (the Tribunal) is undertaking a review of financial aspects of the Ambulance Service of NSW (the Ambulance Service, or the Service) under Section 9 of the Independent Pricing and Regulatory Tribunal Act 1992. The focus of the review is the way in which the Ambulance Service is funded, the charges for the medical and transport services it provides, and how its fees should be adjusted over time. In particular, the terms of reference ask the Tribunal to undertake a detailed analysis of the Service’s revenue and charging structures, and examine the possible use of a cost index to quantify changes in its operating costs. In doing so, the Tribunal is to consider a range of matters including: • the system-wide effects of implementing different fee structures

• the Ambulance Service’s costs in providing medical and transport services

• its future staffing and equipment requirements

• its efficiency and effectiveness

• the quality, reliability and safety of its services

• ambulance charging arrangements in other states and territories. The full terms of reference are set out in Attachment 1. The Tribunal intends to conduct its review in two parts. It will provide its final report on revenue and charging structures to the Premier and Minister for Health by June 2005, and its final report on the cost index by September 2005.

1.1 Review process and timetable In line with the terms of reference, the Tribunal will consult with major stakeholders in conducting its review, including those in the NSW health system. As part of its consultation process, it is seeking submissions from the Ambulance Service and other stakeholders, including members of the public. It will then consider each of the terms of reference, together with the submissions it receives, before making its recommendations. An indicative timetable for the review is set out below. Details on how to make a submission are provided at the front of this paper (on the page preceding the Table of Contents).

Independent Pricing and Regulatory Tribunal

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Indicative Timetable for the Review

Action Timeframe Release issues paper, advertise review, notify key stakeholders 3 March 2005 Receive submission from the Ambulance Service of NSW 17 March 2005 Receive submissions from other stakeholders and interested parties 15 April 2005 Deliver recommendations on charging structures to the Minister June 2005 Deliver recommendations on a cost index to the Minister September 2005

1.2 Key issues To assist stakeholders in making submissions, this paper outlines the key issues the Tribunal will consider as part of this review. These issues include: • Is the current approach to funding the Ambulance Service appropriate? How should

the revenue required to meet its funding requirements be sourced?

• Can the Ambulance Service’s effectiveness and efficiency be improved? What standards of quality, reliability and safety should it be required to meet?

• How should the fees charged by the Ambulance Service be adjusted over time? Is there a role for an appropriately constructed cost index in the fee adjustment process?

• What implications would changing the Ambulance Service’s charging structure have for its own borrowing and capital requirements? For its need for government funding? And for consumer protection and society in general?

The next chapter puts the review in context by providing an overview of the Ambulance Service and the way in which it is funded in NSW. The remaining chapters discuss each of the issues outlined above.

Overview of the Ambulance Service of NSW

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2 OVERVIEW OF THE AMBULANCE SERVICE OF NSW

The Ambulance Service is a statutory authority, managed by a Board of Directors that reports to the Minister for Health. Its Chief Executive Officer reports to this Board, and to the Director-General of the NSW Department of Health. The Ambulance Service provides a range of important services, including:

• emergency and non-urgent patient care and transport

• routine pre-hospital patient care and transport

• retrieval services

• accredited rescue services. It also provides ambulance officer education, counter disaster assistance and advice, and a variety of community education and awareness programs. This chapter provides an overview of the Ambulance Service’s organisation, the volume and quality of the services it provides, and its costs. It also describes the current approach to sourcing the revenues the Ambulance Service requires, and its future funding requirements. Terms used to describe and quantify its services are defined in Box 2.1 on page 5.

2.1 Organisation The Ambulance Service comprises five divisions – four road ambulance divisions and one aeromedical division. At the end of June 2004, it employed 3,301 full-time equivalent (FTE) staff, and 115 volunteer staff. Most of these staff are employed “in the field” as qualified ambulance officers (Table 2.1).1

Table 2.1 Ambulance Service staff (at June 2004) Salaried personnel FTEs %Ambulance operatives 2,865 86.8

Patient transport officers 96Student and base level ambulance officers 523Qualified ambulance officers 1,981Clinical other 18Communications operatives 247

Operational support personnel 226 6.8Corporate support personnel 210 6.4Total salaried personnel 3,301 100.0Volunteer ambulance operatives (no.) 115

Source: Productivity Commission Report on Government Services 2005, Tables 8A.21. Since the mid 1990s, the number of FTE staff has risen from around 2,600 to its present level of 3,300, which is an average increase of around 3 per cent per annum.

1 In 2003/04 86.8 per cent of the Service’s salaried personnel were classified as being ‘in the field’ - the

highest proportion of ambulance operatives to total staff of all the states and territories and well above the national average of 81.6 per cent. Source: Productivity Commission Review of Government Services 2005, Table 8A.21.


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The Ambulance Service operates 1,248 road ambulances and other vehicles (Table 2.2). The last major expansion in its road ambulance and other vehicles was in 2000/01, when the total number of vehicles increased by 146, and the size of its patient transport fleet more than doubled to meet the growing need non-urgent patient transport.2

Table 2.2 Ambulance Service stations and vehicles (at June 2004) Ambulance stations and locationsResponse locations 242Communications centres 4Other locations 44

Ambulance and other vehiclesAmbulance general purpose 852Patient transport 63Operational support 236Special operations 3Administrative 47Other 47

1,248 Source: Productivity Commission Report on Government Services 2005, Tables 8A.22. Aircraft are not included. The Ambulance Service leases (rather than owns) an increasing proportion of its vehicles. In 2003/04, 82 per cent of its general-purpose ambulances were leased. Leasing has significantly reduced the average age of the fleet to around 2.6 years (just over 80 per cent of the road fleet is less than 3 years old). The Ambulance Service’s aeromedical division plans and co-ordinates the use of five fixed-wing aircraft and nine helicopters. It contracts the use of these aircraft, which are operated by the Royal Flying Doctor Service and six non-government charitable organisations respectively.

2.2 Volume and quality of services The volume of services provided by the Ambulance Service is measured in several ways, including the number of incidents to which it is asked to respond, the number of individual ambulance responses it makes, and the number of patients it treats or transports (see Box 2.1 for definitions of these terms). In 2003/04, it: • was called to 786,000 incidents (of which 515,000 were emergency)

• made 928,000 responses (634,000 emergency and 294,000 non-emergency), and

• treated or transported 734,000 patients.3

2 ‘Ambulance general purpose’ is the fully equipped and staffed ambulance most people see on the streets.

Patient transport vehicles are stripped down versions designed to carry non-emergency cases. Operational support vehicles do not generally transport patients but support the ambulances with rapid response, extra supplies and extra officers. Special operations vehicles are a fourth type of road ambulance.

3 Ambulance Service of NSW, Annual Report 2003/04 pp 5-6. Transition to a different reporting system has created two estimates of patient numbers for 2003/04. The estimate of 734,000 is cited by the Productivity Commission and the Ambulance Service in their official publications. A higher figure of 753,300 has been provided by the Ambulance Service when a break-down of invoiced and non-charged patients is required (as, for example, in Tables 2.11, 2.14 and 3.2).


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Box 2.1 Definitions of terms used to describe and quantify ambulance services • An incident is a call or calls to one specific location for ambulance assistance or

transport where at least one ambulance response has been initiated.

• A response is an individual general purpose or other ambulance response to an incident. (Response time is measured from the time a call for assistance is received to the time the first ambulance arrives at the incident – see Figure 2.1.)

• A transport is an ambulance response that results in the transport of a patient.

• A treatment is an ambulance response that results in the treatment of a patient only. When patient is treated but not transported, it is termed a treat-and-not-transport (TNT).

• An emergency is any call received via the 000 network. (Such calls will receive varying levels of response depending upon the nature of the emergency once the Medical Prioritisation Dispatch System is implemented. In the case of inter-hospital transfers, the status accorded the transfer is determined by the hospital requesting it.)

• A non-emergency is any call not received via the 000 network, mainly scheduled patient transfers and out-patient appointments.

• A rescue is the safe removal of persons or domestic animals from actual or threatened danger of physical harm.

Source: Ambulance Service of NSW, Annual Reports, various, and private communication. Per 100,000 of population, this translates to: • 11,765 incidents

• 13,879 responses

• 10,976 patients.4 Most of these services were provided by the road ambulance divisions. For example, of the 734,000 patients treated or transported in 2003/04, fixed-wing aircraft carried just 5,720 patients on 3,130 flights, and helicopters carried just 2,747 patients on 3,095 flights. The quality of the services provided by the Ambulance Service is measured in two ways. The first is the time taken to respond to incidents that are emergencies. Over recent years, the Ambulance Service’s response times have remained fairly steady. For 50 per cent of emergency calls, it achieved a response time of around 10 minutes or less, while for 90 per cent of emergency calls the response time was around 20 minutes or less (Table 2.3).

Table 2.3 Response times for emergency calls in NSW (minutes)

1999/00 2000/01 2001/02 2002/03 2003/04

50% of responses 9.0 10.3 9.7 9.7 9.9

90% of responses 18.0 20.7 19.2 19.2 19.5 Source: Productivity Commission Report on Government Services 2005 Table 8A.24.

4 Productivity Commission, Report on Government Services 2005, Table 8A.20. WA does not keep separate

statistics for incidents and responses. The Productivity Commission publishes WA data on ‘cases’ which refers only to the number of patients treated. That said, the responses/incidents/patients per 100,000 are much higher in NSW than in WA, Tasmania and the ACT and broadly comparable to other jurisdictions.


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These response times are higher than those achieved by ambulance services in most other states and territories (Table 2.4). However, response times are not completely within the control of any ambulance service or its officers. They depend on several factors, including the speed at which the vehicle can safely travel, and the distances that must be travelled.

Table 2.4 Interstate response times for emergency calls (in minutes)

2003/04 NSW Vic Qld WA SA Tas ACT NT

50% of responses 9.9 9.0 8.0 9.0 9.2 10.3 7.5 9.0

90% of responses 19.5 16.0 17.0 15.2 15.8 21.3 12.3 14.0 Source: Productivity Commission Report on Government Services 2005 Table 8A.24. The total time involved in an ambulance case – from receiving the call to delivering the patient into the care of hospital staff – also depends on these factors, plus others such as the condition of the patient, and the arrangements for determining which hospital the patient is taken to, and how quickly the hospital’s emergency department is able to deal with the case.5 An overview of the steps involved in an ambulance case is shown in Figure 2.1.

Figure 2.1 Steps involved in an ambulance case

Receive call for assistance

Mobilise ambulance resources

Arrive at scene

Depart scene

Arrive definitive

care

Clear case

Travel Treatment Transport Hospital Mobilisation time time time time turnaround

time

Response time

Total case time

Source: Ambulance Service of NSW, Annual Report 2003/04, p 6. The second way the Ambulance Service’s quality of service is measured is by patients’ level of satisfaction. The Convention of Ambulance Authorities (CAA) regularly surveys the users of ambulance services in each state and territory. Its 2004 survey of 1,300 NSW users found that most were very satisfied or satisfied with many aspects of the service they received, including the call response time, their dealings with communication staff, the ambulance response time, and the care and treatment they received from the ambulance officers (Table 2.5).

5 The present arrangements whereby ambulances are directed to hospitals that are able to admit their

patients is the subject of a ministerial inquiry under the chairmanship of the Deputy Director General of NSW Health, Mr Robert McGregor.


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Table 2.5 Selected findings of the CAA 2004 National Patient Satisfaction Survey Key area Dissatisfied

or very dissatisfied

(%)

Neither satisfied nor dissatisfied

(%)

Very satisfied or satisfied

2004 (%)

Very satisfied or satisfied

2003 (%)

Call response time satisfaction rating 1 1 98 61 Satisfaction with communications staff 1 1 98 97 Ambulance response time 2 2 96 56 Ambulance officer care rating 1 1 98 98 Treatment satisfaction 1 1 98 99 Ambulance officer satisfaction rating 1 2 97 94 Trip/ride satisfaction 3 4 93 94 Overall satisfaction 1 1 98 97 Source: Ambulance Service of NSW, 2003/04 Annual Report p 55.

2.3 Costs The costs of maintaining an ambulance service can be looked at in several ways—including the total costs involved, costs per FTE salaried staff, costs per patient, and the growth in costs over time. The Ambulance Service costs for 2003/04 are presented in each of these ways below. Where possible, they have been compared with the costs of ambulance services in other states and territories.

2.3.1 Total costs The total cost of maintaining the Ambulance Service was $366.8m in 2003/04 (Table 2.6). The largest cost item was employee-related expenses, which accounted for $256.5m of the total cost. Within these expenses, salaries and wages accounted for $198.4m, of which $40.9m or 20 per cent was overtime payments. Significant non-employee-related expenses were medical goods and services, bad and doubtful debts, vehicle leases and maintenance, and depreciation.

Table 2.6 Costs of the Ambulance Service of NSW, 2003/04

Operating Expenses $m $m $m Employee Related 256.5 of which: Salaries and Wages 198.4 Long Service Leave 6.5 Annual Leave 20.9 Workers’ Compensation Insurance 11.9 Superannuation 18.7 Goods and Services 78.8 of which: Aeromedical 24.3 General Expenses 36.9 of which: Bad and Doubtful Debts 6.3 Motor Vehicle Operating Leases 13.2 Maintenance 16.0 Depreciation (vehicles, buildings, plant & equipment) 14.8 TOTAL EXPENSES (including $0.6m grants, borrowings) 366.8 Source: Ambulance Service of NSW, Annual Report 2003/04.


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2.3.2 Costs per FTE staff The Ambulance Service’s costs per FTE staff were around $111,117 in 2003/04. When these costs are adjusted by the Productivity Commission to enable comparison between the states and territories, they are around $113,854 per FTE. This cost is below the national average, substantially lower than in Victoria, substantially higher than in Queensland and SA, and marginally higher than in WA and the ACT (Table 2.7).

Table 2.7 Costs per full-time equivalent salaried staff, 2003/04 2003/04 NSW Vic Qld WA SA Tas ACT NT AustraliaTotal costs ($m) 375.8 310.3 277.3 66.8 90.2 21.3 14.1 10.3 1,166.3 Salaried staff (FTE) 3,301 2,246 2,662 596 849 187 128 117 10,008 Costs per FTE ($) 113,854 138,175 104,188 112,079 106,188 113,984 110,398 88,453 116,534 Source: Productivity Commission, Review of Government Services 2005, Tables 8A.21 and 8A.26.

2.3.3 Costs per patient The Ambulance Service either treated or transported 734,000 patients in 2003/04, which implies an average cost per patient of around $500. When adjusted by the Productivity Commission, the cost per patient becomes $512. 6 This is lower than the national average and lower than in Victoria, Queensland, Tasmania and the ACT (Table 2.8).

Table 2.8 Costs per patient, in 2003/04 dollars Ratio of FY04

2001/02 2002/03 2003/04 on FY02NSW 491.4 477.6 512.0 1.04Victoria 599.4 590.7 602.6 1.01Queensland 551.4 499.5 533.4 0.97WA 445.5 445.4 454.4 1.02SA 435.3 461.7 509.3 1.17Tasmania 475.5 491.4 666.1 1.40ACT 488.8 570.9 523.4 1.07NT 439.8 434.2 450.0 1.02Australia 521.6 506.9 536.2 1.03

Source: Productivity Commission Report on Government Services, 2004 and 2005. The 2002 report does not provide patient numbers for earlier years. The terms of reference require the Tribunal to distinguish between the different functions of the Ambulance Service, in particular between its emergency, non-emergency and rescue functions. No official disaggregated average cost data are published, but the Ambulance Service has provided the Tribunal with preliminary estimates. It intends to refine its estimates during the course of this review. These preliminary estimates suggest there are very significant differences in average costs per patient in NSW, depending on whether the patient is classified as an emergency or non-emergency case, a city or rural case, or a fixed-wing aircraft or a helicopter case. For example:

6 The Productivity Commission imputes a user cost of capital for plant and equipment that inflates the

Ambulance Service reported total costs of $366.8 shown in Table 2.6 to $375.8m in Table 2.7.


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• For city cases, the costs per emergency patient are around double those per non-emergency patient transported by ambulance, and triple those per non-emergency patient transported by a designated ‘patient transport vehicle’.

• The costs per rural patient are 50 per cent or more higher than the costs per city patient (except for rescue cases, where the costs per patient are about the same for city and rural patients).

• For aeromedical cases, the average costs per patient transported by helicopter are around four times higher than those per patient transported by fixed-wing aircraft.

If the Tribunal is to consider different fee scales for emergency, non-emergency and rescue services that relates in any way to the costs of providing these services, it will need to have reliable cost estimates for each of the three functions.

2.3.4 Growth in costs over time Over the five years to 2003/04, most of the Ambulance Service’s labour and other major cost items have increased by more than the annual rate of inflation. Selected costs are portrayed in Figure 2.2.

Figure 2.2 .Selected Ambulance Service costs since 1999/00

5

10

15

20

25

30

35

40

45

1999/00 2000/01 2001/02 2002/03 2003/04

Vehicle costs (excl.

maintenance)

Overtime

Other employee-related expenses

Aeromedical

Maintenance

$m

Source: Ambulance Service of NSW, private communication, and ABS. For example, although employee-related costs have been a relatively steady 70 per cent of its total annual costs, they have risen by an average of 9.1 per cent per year since 1996/97. As the number of FTEs has risen by just 3.2 per cent per year, this implies that employee-related costs per FTE have risen by 5.9 per cent per year, or 3.3 per cent higher than Sydney CPI inflation over the same period. Ambulance costs in NSW have risen more slowly than those in most other states and territories (Figure 2.3).7

7 To avoid clutter, Figure 2.3 does not show the Northern Territory, currently 1.13 times its 1997/98 base.


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Figure 2.3 Growth of ambulance service expenditures since 1997/98

1.0

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04

ACTVic

Tas

Qld

NSW

WA

SA

Index 1997/98 = 1.00

Source: Productivity Commission, Review of Government Services 2003 and 2005 Tables 8A.26 and 8A.27.

2.4 Revenues In Australia, the states and territories obtain the funds required to maintain their ambulance services from a variety of sources. The four main funding sources are: • direct government revenue

• subscriptions, such as those to and private health and ambulance insurance plans

• transport fees levied on certain users

• bulk agreements with hospitals, the Department of Veterans Affairs and the Motor Accident Authority.

In general, ambulance services tend to be free of direct charge to patients who: • subscribe to private health insurance funds or an ambulance insurance fund

• are injured in transport or workplace accidents

• are transported between public hospitals

• are Pensioner Concession cardholders, Health Care Concession cardholders, Department of Veterans Affairs (DVA) cardholders and Commonwealth Seniors Health Care cardholders.

However, there are some exceptions to this. For example, in Western Australia, the privatised ambulance subscription scheme imposes a $50 co-payment on any patient who is transported to somewhere other than a public hospital emergency ward. In South Australia, Health Care Concession cardholders who live in postcode areas beginning with 52 are invoiced at 50 per cent of the account; Pensioner Concession cardholders pay 5 per cent of the account; veterans who do not have a DVA concession card are invoiced at 50 per cent of the account.


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The amount and proportion of funding obtained from the various sources varies between jurisdictions (Table 2.9).

Table 2.9 Sources of ambulance service funding, 2003/04 2003/04 ($m, in 2003/04 dollars) NSW Vic Qld WA SA Tas ACT NT Australia

Direct & indirect government funding 252.1 178.9 226.9 13.7 43.9 16.1 3.3 7.1 742.0 Other revenue 79.1 140.7 59.2 64.0 49.8 3.5 9.8 4.5 410.6 Total funding 331.2 319.6 286.1 77.7 93.7 19.6 13.1 11.6 1152.6% government funding 76.1 56.0 79.3 17.6 46.9 82.1 25.2 61.2 64.4% other funding 23.9 44.0 20.7 82.4 53.1 17.9 74.8 38.8 35.6

Subscription fees 18.7 2.4 16.2 0.1 3.2 6.7Transport fees 21.4 19.5 16.9 59.3 35.0 16.1 10.0 9.7 23.1 of which: interhospital 12.7 4.1 7.3 4.3 6.7 8.5 7.5

other fees from citizens 4.1 8.5 1.5 48.6 19.7 0.1 5.2 8.8workers' comp 1.3 0.8 1.3 0.4 0.6motor accident insurance 4.0 5.1 2.6 3.4 5.7 7.1 3.0 4.0Veterans' Affairs 0.6 4.2 3.0 3.0 7.0 0.9 0.5 1.8other 0.6 0.4 0.6 0.6 0.6 0.3

Donations 0.1 0.4 1.0 0.1 0.2 0.2Miscellaneous 2.4 4.3 3.4 19.6 1.9 1.8 6.8 25.7 4.6$ per head of populationDirect & indirect government funding 37.5 36.0 58.4 6.9 28.6 33.4 10.2 35.5 36.9Other revenue 11.8 28.3 15.2 32.3 32.5 7.3 30.2 22.5 20.4Total funding per head 49.2 64.3 73.7 39.2 61.1 40.7 40.4 58.0 57.3

Other funding' sources as % of Total funding

Source: Productivity Commission Report on Government Services 2005, Tables 8A.19. Other revenue cannot be termed ‘non-government’ because it includes revenue from the Commonwealth Department of Veterans’ Affairs. The relative importance of each funding source in the different states and territories seems to be the result of history, circumstance, practicality and government policy. In NSW, the proportion of total funding that comes directly or indirectly from government revenue is higher than in Victoria, Western Australia and South Australia. At $49.20, total funding per head of population in NSW is lower than the national average $57.30 and significantly lower than in Victoria, Queensland and South Australia.

2.4.1 NSW funding sources in more detail In 2003/04, the Ambulance Service received total revenues of $366.8m (Table 2.10).8 Around $270m was from the NSW Government – some $250m in recurrent and capital allocations from the NSW Department of Health, and another $18.7m in the form of the Crown’s acceptance of the cost of meeting staff superannuation entitlements. Most of the balance came from user charges, shown in Table 2.10 as sales of goods and services. The Ambulance Service’s user charges are derived from inter-hospital transports, certain patients and patient insurers and employers, on the basis of rates specified by the NSW Health Department. Under Government policy and statutory determination, NSW residents transported by the Ambulance Service are exempt from charges if they: • are in receipt of a Pensioner Concession card, Health Care Concession card, DVA card

or a Commonwealth Seniors Health card or other Health Care card9

8 The Productivity Commission excludes the superannuation and miscellaneous items shown in Table 2.10

to derive the $331.2m in total funding for NSW shown in Table 2.9. 9 The Service has no control over who receives these cards. In 1996 the Audit Office, concerned by their

proliferation, noted that “since the present policy was introduced … demographic trends have shown significant increases in the quantity of people eligible for the age pension. At the same time, there have


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• are ministers of religion, corrective services inmates, under arrest, victims of sexual and domestic assault, SIDS patients, ambulance service employees and their immediate families, residents of New Caledonia, children at risk, Life Members. 10

Table 2.10 Funding of the Ambulance Service of NSW, 2003/04, $m

Sales of goods and services 72.5 Investment income 1.1 Grants and contributions 2.2 Other revenue 3.5 Total Revenues 79.3 NSW Health recurrent allocations 236.9 NSW Health capital allocations 14.2 Acceptance by the Crown Entity of employee superannuation benefits

18.7

Total Government Contributions 269.9 Miscellaneous (gain on asset disposal, net increase in Asset Valuation Reserve, reduction in owner’s equity)

17.6

TOTAL FUNDING 366.8

Source: Ambulance Service of NSW, Annual Report 2003/04, pp 30-39.

2.4.2 User charges in NSW in more detail User charges of $72.5m in 2003/04 resulted from fees applicable to certain transport and non-transport services to the volume of patients provided with those services (Table 2.11).

Table 2.11 NSW Ambulance Service volumes and fee scales, 2003/04 No.of Patients

(000s) Applicable fee scale

Interhospital Total 72.8 Y, Z

Primary Total: 680.5 of which: Direct charge 122.2 X

Medical Fund 59.9 XPension 374.7 no feeDVA 7.8 bulk agreementThird Party 15.0 bulk agreementTreat & Not Transport 100.9 no fee

Total 753.3 Source: Ambulance Service of NSW, private communication. Total patient numbers are based on internal Service data which are in transition to a new reporting system that records the total for 2003/04 as 734,000 (see footnote 3 on page 4). The capitalised letters of the alphabet X, Y and Z refer to specific fee scales set out in Table 2.12.

been significant improvements in the Commonwealth’s payments to many persons who remain eligible in NSW for ‘free’ ambulance services. Therefore, it is not at all clear that the circumstances existing in 1981 lead to the same outcome in equity terms in 1996. In many cases they arguably do not.” NSW Ambulance Service Charging and Revenue Collection, Performance Audit Report August 1996, p 22.

10 Patients who pay for ambulance services, but not directly to the Service, include those who have basic hospital coverage with a registered Private Health Insurance Fund, contribute to the State Ambulance Insurance Plan or are non-NSW residents who are interstate Ambulance Fund members covered under Reciprocal Rights Agreements or other arrangements. Since 1982 the NSW Government has imposed a health insurance levy on all NSW residents who take out basic hospital cover with private health insurers.


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Current fees

The Ambulance Service’s current fees, recently adjusted for the CPI by the Director General, are shown in Table 2.12. In many cases, these fees are lower than those charged for similar services in other jurisdictions (Table 2.13). In particular, the NSW charges for emergency services are lower than all other states and territories, and in most cases, significantly lower.

Table 2.12 NSW Ambulance Service fee scales effective 1 November 2004

X. Primary Response Transport Road/Fixed Wing/Helicopter

Y. Other Than Primary Response Transport – Road/Fixed Wing

Z. Other Than Primary Response Transport –

Helicopter Min. Charge (to 16 kms)

Add. Charge (> 16kms)

Max. charge

Min. Charge (to 16 kms)

Add. Charge (Over 16kms)

Max. charge

Min. charge (First 30 mins)

Add Charge (Per 6 mins)

$165 $4.23/km $3,967 $162 $4.15 $3,894 $1,785 $120 Notes: 1. Primary Response refers to any transport from the scene of an accident, illness or injury to a public

hospital or other destination nominated by the Ambulance Service. 2. Fee for Other Than Primary transport by road/fixed wing is levied on the sending hospital. 3. Fee for Other Than Primary transport by helicopter is apportioned equally between the sending

hospital/health service and receiving hospital/health service. Source: Table 2:9, Government Gazette No. 170 of 29/10/04.

Table 2.13 Current ambulance fee scales across Australia

Cost of 30km journey Relative to NSW Service

Charges for Primary Response Transport

Emergency Non-

Emergency

Emergency Non-

Emergency NSW $165 plus $4.23 per km over 16kms $224.22 $224.22 1.0 1.0 ViC (Metro)

Emergency: $735.16 + km charges below. Non-emergency: $304.68 + km charges below. Km charges: >10-100km $7.14 per km; >100-300km $4.47km, >300km $2.42km

$949.36 $447.48

4.2 2.0

ViC (Rural)

Emergency: $749 + $9.21 per minute + $0.90 per km return to station Non-Emergency: $136.58 plus $1.37 per minute plus $0.64 per km return to station

$1,328.60

$217.38

5.9

0.97

Qld* Emergency: $800 Non-Emergency: $298

$800.00 $298.00

3.6 1.3

SA Emergency $618.00 plus $3.60 per km. Non-Emergency $138.00 plus $3.60 per km

$726.00

$246.00 3.2 1.1

WA (Metro)

Emergency $499 Non-Emergency $271

$499.00

$271.00

2.2 1.2

ACT Emergency $219.00 + $7.00 per km > 16km Non-Emergency $167.00 + $7.00 per km >16km

$317.00 $167.00

1.4 0.7

NT Emergency $550.00 + $3.50 per km > 10 kms Non-Emergency $250 + $3.50 per km > 10 kms

$931.00 $320.00

4.2 1.4

Tas* Emergency $641.60 + $4.32 > 15 kms Non-Emergency $143.45 + $4.00 > 15 kms

$706.46 $203.45

3.2 0.91

* Queensland and Tasmanian rates do not apply to residents who are direct users of the services. Source: Ambulance Service of NSW, private communication.


14

Proportion of patients charged for services

Of the 753,300 patients the Ambulance Service transported and/or treated in 2003/04, only 152,400 (or 20 per cent) were charged directly for services rendered or ‘invoiced’ (Table 2.14). This figure includes patients whose invoice was addressed to a third party (such as the Department of Veterans Affairs). It does not include patients who were initially invoiced but whose invoices were then “written back” by the Service upon proof of eligible pensionership, or appropriate membership of a health fund or ambulance insurance fund.

Table 2.14 Number of patients invoiced and not invoiced, by patient category, 2003/04

Non Charged Invoiced Total % of TotalInterhospital Total 13.0 59.8 72.8 9.7%Primary Total: 587.9 92.6 680.5 90.3% of Which : Direct charge 52.4 69.8 122.2 16.2%

Medical Fund 59.9 59.9 8.0%Pension 374.7 374.7 49.7%DVA 7.8 7.8 1.0%Third Party 15.0 15.0 2.0%Treat & Not Transport 100.9 100.9 13.4%

TOTAL 600.9 152.4 753.3 100.0%

Number of patients (000s):

Source: Ambulance Service of NSW, private communication. The category ‘Invoiced’ does not include patients originally invoiced but subsequently shown to be members of a health fund or ambulance insurance fund. These patients are included in the “Non Charged” column under ‘Direct charge’ or ‘Medical Fund’. Revenue invoiced directly to patients

In 2003/04, the Ambulance Service raised $70.5m in revenue by invoicing patients directly (Table 2.15). It estimates that $118m was foregone as a result of not charging users of its services. This estimate does not include revenue foregone as a result of not charging for rescue services or standby services provided at incidents involving hazardous wastes, because no fee scale exists for these services, even in principle.

Table 2.15 Ambulance Service notional revenue by patient category, 2003/04

Non Charged Invoiced TotalInterhospital Total 4179.4 42033.7 46213.1Primary Total: 114272.2 28448.1 142720.3 of Which : Direct charge 8151.6 13647.0 21798.5

Medical Fund 14421.1 14421.1Pension 83762.8 83762.8DVA 1704.0 1704.0Third Party 13097.1 13097.1Treat & Not Transport 7936.7 7936.7

TOTAL 118451.6 70481.8 188933.4

Revenue in $000s:

Source: Ambulance Service of NSW, private communication. As with Table 2.14, ‘Invoiced’ does not include patients originally invoiced but subsequently shown to be insured.


15

The Ambulance Service estimates that the notional value of services provided to “treat and not transport” patients for 2003/04 was almost $8m (assuming that the patients would be charged for treatments based on the kilometres travelled by the ambulance times the per kilometre rate). Ambulance services in three other jurisdictions charge for “treat and not transport” services. In Victoria, the fee for this service is a flat $221. In Queensland, it is the greater of $84 or $11.55 per km travelled by the ambulance up to a maximum of $800. In Tasmania, it is $442.97 plus $4.32 for each kilometre travelled above 15kms.11 However, the Queensland Ambulance Service fee is only levied on residents of other states and territories. The Ambulance Service estimates that up to 14 per cent of emergency cases received “treat and not transport” services. It notes that the volume of patients receiving this service is growing, and that this growth is being driven by the shortage of doctors available for home visits and out-of-hours treatment, and by the rising level of medical competencies among ambulance officers related to training and improved equipment. Revenue received from invoiced patients

Much of the revenue the Ambulance Service invoices directly to users is never received. For example, in 2003/04, it directly invoiced patients for $13.6m (Table 2.15). However, it also made provision for $6.4m in bad and doubtful debts, which represents 47 per cent of the amount it invoiced to users. The level of non-payment of ambulance service invoices is similarly high in other states and territories. For example, Victoria’s ambulance service made provision for bad debts of $5.8m in 2003/04.

The Ambulance Service follows the guidelines for debt collection set down by NSW Health.12 It considers that the high level of its bad debts reflects:

• the high cost of initiating court action to recover low fees

• a general unwillingness to pay because of user expectations that ambulance services are free in NSW.

If the proportion of bad debts does not change, the Ambulance Service is likely to receive only half of any revenue gains that might be possible from increasing direct user charges.

2.5 Future funding requirements

2.5.1 Trends in the demand for ambulance services Demand for the Ambulance Service’s services is growing modestly in terms of the number of incidents it attends (up by an average 1.8 per cent per year since 1995/96), and the number of patients it treats or transports (up by an average 2.6 per cent per year over the same period). However, the number of responses13 is growing much faster – by an average 4.8 per cent per year since 1995/96 (Figure 2.4).

11 Data supplied by the Ambulance Service of NSW, private communication. 12 Procedures for "Money Recoverable by the State" are set out in the Accounting Manual for the

Department of Health and Ambulance Service, pages 3.8-3.9 and 5.26-5.28, on the department’s intranet. 13 That is, the number of individual vehicles that respond to incidents.


16

Figure 2.4 Reported incidents, responses and patients

550,000

600,000

650,000

700,000

750,000

800,000

850,000

900,000

950,000

1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04

Incidents

Responses

Patients

Source: Ambulance Service of NSW, Annual Reports, various and Productivity Commission, Report on Government Services 2005 Table 8A.20. Some years were interpolated but these do not distort the rising trends shown in the figure. The apparent drop in patient numbers in 2003/04 results from changed reporting requirements noted in footnote 3 on page 4. The rising ratio of responses to incidents reflects the introduction of Rapid Response vehicles in central Sydney. These vehicles get rapidly to an incident, assess needs and stabilise patients before an ambulance arrives. It would not be unusual for a general-purpose ambulance, rapid response vehicle and a back-up paramedic and/or rescue unit to be assigned to a major incident. Supervisors’ vehicles might also respond in such cases. One of the key drivers of growth in the use of ambulance services in NSW is growth in the NSW population, which has increased by an average of 1.1 per cent per year since 1995/96. However, this is not the only driver, as the upward trends in the number of incidents, patients and responses per 100,000 of population indicate (Figure 2.5). Other factors that have been underpinning, and are likely to keep underpinning, the growth in demand for ambulance services include: • the ageing of the population. The ABS projects that the NSW population will rise 16

per cent between 2002 and 2022 but that within that population the number aged 65 and over will increase from 875,000 to 1.5 million or by 70 per cent.14)

• changes in the hospital system, such as the trend towards shorter lengths of hospital stays and increased hospital patient turnover (related in part to higher rates of day surgery, day and out-patient treatment), and the development of technologies that centralise high-cost services. These changes are likely to induce greater demand for non-emergency transport, not least between hospitals.

14 “SLA Level Population Projections By Age and Sex: 2002–2022” April 2004 published by the Transport

and Population Data Centre; available on DIPNR website. Further, according to the Department of Family and Community Services (FaCS), 77 per cent of those aged 65 and over at 30 June 2004 received an aged pension or a DVA pension (Annual Report 2003/04 Group 3.4 – Support for the Aged).


17

• changes in the wider health system, such as the rising unavailability of after-hours service from GPs and other health care services (such as community nursing, palliative care, mental health crisis teams). These changes are likely to increase the demand for after-hours transport.

Figure 2.5 Incidents, Responses and Patients per 100,000 NSW population

9,500

10,000

10,500

11,000

11,500

12,000

12,500

13,000

13,500

14,000

1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04

Incidents

Responses

Patients

Source: as for Figure 2.4 and ABS for population data. Anecdotal evidence suggests that non-emergency use of ambulances is being displaced by other, less costly, transport between hospitals. That said, the number of ambulance responses since the mid-90s has been growing more rapidly in the non-emergency category than the emergency category (7.8 per cent per annum since 1995/96 compared 3.6 per cent per annum (Table 2.16)).

Table 2.16 Emergency and non-emergency responses in 000s 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 Ann Avg

Emergency 477 500 546 562 565 545 589 610 634 3.6%Non-Emergency 162 174 178 179 188 268 270 286 294 7.8%Total Responses 639 674 724 741 753 814 859 896 928 4.8%

Source: NSW Ambulance Service, private communication. The future mix of ambulance demand is obviously difficult to forecast. Given the forces driving demand and current government social and health policy arrangements, it seems reasonable to expect various overall measures of demand for ambulance services to continue to grow at least at current trend rates. The Tribunal invites stakeholders to comment on the likely future rate of expansion of demand for ambulance services and the staffing and equipment requirements that are likely to be required to meet that demand.


18

Is the current approach to funding and sourcing revenue for the service adequate?

19

3 IS THE CURRENT APPROACH TO FUNDING AND SOURCING REVENUE FOR THE SERVICE ADEQUATE?

One of the key issues the Tribunal will consider in this review is the approach that should be used to fund the Ambulance Service. For example, should it be funded using a ‘users pay’ approach, or should the provision of ambulance services be seen as a ‘community service obligation’ and thus be funded by government? Or should a combination of these and other approaches be used? If so, what balance between these approaches is appropriate? Once the funding approach has been identified, the Tribunal will need to consider how the revenue to meet the Ambulance Service’s funding requirements should be sourced. If some or all of the funds are to come from government grants, how should the money be collected from the community? If some is to come from users, what fees, charges and other user payments might be appropriate?

3.1 What funding approach is appropriate? Ambulance services, like all emergency services, involve a major investment in people and equipment that are on standby for much of the time. Who should pay for these dedicated resources to be available when they are needed, and for the services they provide? One view is that emergency services act as an insurance policy for the whole community they serve, and thus provide benefits to the whole community. For example, the Productivity Commission has noted that:

Emergency management aims to reduce the level of risk to the community of emergencies occurring, reduce the adverse effects of emergency events, and improve the level and perception of safety in the community . . .15

This suggests that emergency services should be funded primarily by governments as a community service obligation. At the same time, emergency services often provide valuable direct benefits to individuals. For example, the Ambulance Service provides many direct benefits to the individuals it treats and transports – such as saving their lives, reducing their pain and suffering, and contributing to better health outcomes. In this light, it seems appropriate that those who use the services should pay for them, at least to the extent that they can afford to do so. The Tribunal has not seen any document that sets out the current approach to funding the Ambulance Service, or explains the principles behind this approach. However, as Chapter 2 discussed, the Ambulance Service’s revenues are sourced from government grants and user charges (both direct and indirect). This suggests that the current approach is a mix of the community service obligation and user pays approaches. The Tribunal invites stakeholders to comment on the approach to funding the Ambulance Service. For example, is the current combination of community service obligation and user pays approaches appropriate? Or is another approach more suitable?

15 Productivity Commission Report on Government Services 2005, opening remarks to chapter 8.


20

3.2 What is the appropriate balance between community service obligation and user pays?

If the current mixed approach to funding is appropriate, a question remains as to the appropriate balance between the community service obligation approach and the user pays approach. That is, how much of the funds required to maintain the Ambulance Service should come from the government (or all taxpayers), and how much should come from individual and other users? The Tribunal recognises that this is a difficult question, in part because it is difficult to quantify the benefits the Service provides and to allocate them between the general community and individual users. In principle, it requires putting dollar values on services that, at times, may save some one’s life and that provide ongoing comfort to all members of the community from knowing that an ambulance service is there should they need it. An entirely user pays approach is unlikely to be appropriate for any standby service. All members of the community might well need an ambulance at some time in their lives and so all derive benefits from having ambulance services available to them. The NSW Government appears to share this view. In 1996, the Minister for Health stated that:

… it has been long standing policy of successive governments that the cost of providing ambulance services in this State shall be funded by the whole community and not solely by user charges structured on a cost recovery basis.16

However, it could be argued that all or most of the funding should come from government (or taxpayer) funding. Those who place a high value on community well-being might argue that effective, efficient ambulance services are a right of all NSW citizens, and so all funding should come from public funds. Others may argue that some individual users within the community—such as those on low incomes—should not be required to pay for a service that they may not have requested, or which may compound the financial stress they are already experiencing due to illness or accident. It might therefore be appropriate for some designated low-income residents not to be charged when they use ambulance services (or be charged a low fee that keeps trivial use in check), while those on higher incomes might be charged a higher fee for the same services, perhaps with upper dollar limits. One way to infer what is the current balance between community service obligation and user pays in funding ambulance services is to look at the proportion of revenues received from government grants. In Australia, this varies widely between the states and territories. For example, in Western Australia government funding accounts for less than 20 per cent of the ambulance service’s total funding. In Queensland and Tasmania, government funding accounts for more than 80 per cent (see Table 2.9 on p 11). In NSW, 76 per cent of the Ambulance Service’s total funds comes from direct and indirect government funding.

16 Quoted by the Audit Office, NSW Ambulance Service Charging and Revenue Collection Performance Audit

Report August 1996, p.21


21

However, some state and territory governments fund part of their grants to ambulance services from a subscription or levy scheme. Such schemes are by their nature indirect user pays (or beneficiary pays) schemes, even if the revenue goes to the Government and not directly to the ambulance service. The NSW Government imposes a Health Insurance Levy (HIL) on all NSW residents who take out basic hospital cover with private health insurers.17 The HIL is paid in lieu of contributors to health benefit funds paying for ambulance services. It raises about $100m for the Government. Although the revenue is not hypothecated to the Ambulance Service of NSW, its user-pays nature means that the current balance between community service obligation and user pays funding in NSW is around 47:53.18 The Tribunal invites stakeholders to comment on the appropriate balance between various approaches for funding the Ambulance Service, particularly the community service obligation and user pays approaches.

3.3 How should the revenue be sourced? Once an appropriate approach to funding the Ambulance Service has been identified, the next issue to consider is how the revenue should be sourced. For example, if a portion is to come from government grants as a form of community service obligation funding, should this revenue come from consolidated revenue, or should it be raised in some other way? If a portion is to come from users, should all users be charged or only some? nd how should charges be structured? If the current balance between community service/user pays funding is retained, it seems reasonable to expect that the recent growth in demand for ambulance services will continue. If so, a central issue is how should the revenue required to increase the supply of ambulance services to meet that demand be sourced. The Government will need to decide the extent to which it wants to meet the likely growth in demand for ambulance services and the extent to which it desires to manage that growth.

3.3.1 How should revenue provided by the government be sourced? The Tribunal recognises that how government grants are funded is a matter for government policy. However, it notes that apart from simply drawing on Consolidated Revenue, various possibilities for sourcing revenue for ambulance services have been canvassed in other jurisdictions, including:

• approaching the Commonwealth Government to fund ambulance services nationally via an increase in the Medicare Levy

• seeking to place a levy for ambulances on local government rate notices

• imposing a levy on household electricity bills (as is currently done in Queensland).

17 The Act describes itself as “An Act to impose a levy on organisations carrying on health benefits business

in New South Wales; to make provision to free contributors to health benefits funds and other persons from ambulance fees; and for other purposes” (Tribunal’s emphasis added). Health Insurance Levies Act 1982 No. 59.

18 If the HIL revenue of $98m received by the Government in 2003/04 were reallocated from ‘Direct and indirect government funding’ in Table 2.9 to ‘other revenue’, the percentage of other funding would rise to 53.4 per cent.


22

In NSW, government grants to the Ambulance Service, measured in inflation-adjusted or ‘real’ terms, have risen by an average 3.0 per cent a year since 1999/2000 (Table 3.1). If the 3.0 per cent trend were to continue, the dollar funding cost including inflation would rise by $14m in 2004/05. 19

Table 3.1 Inflation-adjusted funding of the NSW Ambulance Service

in 2003/04 dollars 1999/2000 2000/01 2001/02 2002/03 2003/04 Ann. Avg

Government grants (a) 223.7 233.6 216.6 250.3 252.1 3.0%Indirect government revenue and other revenue 70.8 81.7 81.7 77.3 79.1 2.8%

Total funding 294.5 315.3 298.3 327.6 331.2 3.0%

(a) From 2001/02 this category no longer included indirect government revenue (which includes the four categories: subscription fees, transport fees, donations and miscellaneous)

Source: Productivity Commission Report on Government Services 2005, Table 8A.19. Within the current funding arrangements, possible ways of funding Government grants to the Ambulance Service might include: • a one-off increase in the Health Insurance Levy (HIL)

• indexing the HIL to the CPI or some appropriate index

• widening the coverage of the HIL in some way

• or a mix of all of the above. The HIL applies to all organisations that provide health benefits to NSW contributors. The size of the levy paid by each organisation is calculated based on the number of single people and families who contribute to that organisation. However, pensioners of various kinds are exempt by law from the calculation of the payment to be made by the organisation. The HIL is expected to contribute $102m to Consolidated Revenue in 2004/05.20 Currently, the levy rate for a single contributor is $1.03 per week or $53.56 per year, while the rate for a family is twice as much, regardless of family size. This rate has increased much faster than the inflation rate in recent years. Since 1995/96, it has risen by almost 70 per cent, well ahead of the Sydney CPI, which rose by about 20 per cent over the same period. A levy of around $50 per single contributor is roughly equivalent to the $49.20 annual funding per head of population of operating the NSW Ambulance Service (see Table 2.9). But as less than 45 per cent of the NSW population have private health insurance, and not all these are counted in the calculation of the levy, it is likely that well under half the NSW population is paying the HIL.21 19 This calculation assumes inflation of 2.5 per cent, the middle of the Reserve Bank’s target range for

inflation as measured by the CPI. The $14m equals 2003/04 funding of $252m multiplied by 5.5 per cent. 20 NSW Budget Statement 2004-05, Table 3:6. 21 The population of NSW was estimated to be 6.73m at June 2004. The number of households in NSW is

around 2.57m - ABS projections, Series II Household and Family Projections Australia 2001 to 2026, ABS Cat No.3236.0, Table 6.11. Without knowing the division between singles and families, it is not possible to calculate how many ‘units’ are paying the HIL. The levy of the State Ambulance Insurance Plan (SAIP) is set at the same rate as the HIL. The revenue from SAIP (net of agents’ commission as set by the Minister) appears to be included with the HIL in the state budget.


23

Even so, it may assist the Ambulance Service if the HIL revenue were explicitly assigned or hypothecated to it. Such assignment would not alter the overall level of revenue flowing to the Ambulance Service, but it would increase own-source revenue to over 50 per cent of total revenue, and thus reduce the amount of ‘gap funding’ provided from Consolidated Revenue. Such a change may serve to lift the Ambulance Service’s morale and standing in the community.22

3.3.2 How should individual users be charged? If it is appropriate that individual users be charged for the ambulance services they receive, an issue to consider is which users should be charged and for which services. Related to this are how the charges should be determined—for example, what fee levels and structures should be set—and what possible system-wide effects might result from any changes to the current fee arrangements. Which users should be charged?

As discussed in Chapter 2, only 152,000 of the 753,000 patients treated or transported by the Ambulance Service are invoiced for the services they receive (Table 3.2). This represents just 20 per cent of all patients.

Table 3.2 Notional and actual revenue from transport and treatment fees, 2003/04

Non Charged Invoiced Total Non Charged Invoiced TotalInterhospital Total 13.0 59.8 72.8 322 703 635Primary Total: 587.9 92.6 680.5 194 307 210 of Which : Direct charge 52.4 69.8 122.2 155 196 178

Medical Fund 59.9 59.9 241 241Pension 374.7 374.7 224 224DVA 7.8 7.8 219 219Third Party 15.0 15.0 871 871Treat & Not Transport 100.9 100.9 79 79

TOTAL 600.9 152.4 753.3 197 463 251

Number of patients (000s): Average $ charge per patient:

Source: NSW Ambulance Service, private communication. The main category of patients not charged is pensioners with a concession card of some kind. The Ambulance Service estimates that, based on the present fee scales, it foregoes around $84m in revenue as a result. Other patients not charged include ministers of religion, victims of sexual assault and domestic violence, and children at risk.23 What services should be charged for?

The main type of service not charged for is the “treat and not transport” service. The Service currently treats about 100,000 patients each year without charge. Other services not charged for include rescue services, and standby services provided at incidents involving hazardous wastes. The main reason seems to be because no fee scale exists for these three services.

22 It would also be consistent with the Auditor-General’s suggestion that “all sources of revenue, including

the HIL, [be] credited to the Ambulance Service rather than dispersed between Treasury and the Service. This would improve transparency and provide a better alignment of income and costs. This can assist decision making on cost recovery and the level of community service obligations (i.e. government subsidy) to be provided”. NSW Audit Office Charging and Revenue Collection in the NSW Ambulance Service, August 1996, p 3.

23 A complete list of those not charged is provided on pp 11-12.


24

Other jurisdictions levy a so-called ‘first aid’ fee for treat and transport services, and there may be a case for adopting a similar approach in NSW. Alternatively, if a co-payment of $50 were introduced (as in WA), and all patients treated were charged, the Ambulance Service would generate an additional $5m in revenue per year (again, assuming it treated 100,000 patients per year). What fee levels and fee structures should be set?

At the current fee scales, the average price charged by the Ambulance Service in 2003/04 was $307 for Primary transports, and $703 for Inter-hospital transports (Table 3.2). It may be appropriate to increase the level of the current fees. However, because the base of patients charged is fairly narrow, this approach may have a limited impact on Ambulance Service revenues. For example, a uniform 10 per cent rise in user charges would add only $7m a year (based on $69.8m invoiced in 2003/04 in Table 3.2). Further, this calculation assumes that there is no reduction in demand in response to higher fees and, unrealistically, that there are no extra bad debts. Another possibility is to adjust the fee scale for emergency ambulance services. The fees the Ambulance Service charges for these services are the lowest in Australia (Figure 3.1).

Figure 3.1 Current fees for emergency ambulance transport in Australia

150

300

450

600

750

900

1,050

1,200

1,350

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

NSWmetro Vicrural VicQldSAmetro WAACTNTTas

$

NSW

KMs

Source: Ambulance Service of NSW, private communication. If, for example, this fee scale were brought into line with one of the two fee scales that sit at the median of the fee scales in other jurisdictions, the NSW “flagfall” would increase by a large amount and a rate would be charged for each kilometre travelled. To illustrate, if the SA fee scale were adopted, the charge for an eight kilometre emergency trip would increase from $165 to $647.24

24 An 8 km journey was chosen to proxy the average price that might apply across all journeys up to 16 kms,

the distance at which current NSW emergency fees start to rise.


25

It is not clear to what proportion of the 69,800 Primary transport services the Ambulance Service provided in 2003/04 were emergency cases. However, if two thirds of them were, then increasing the emergency fee scale as above would generate an additional $22.4m for the Ambulance Service, assuming no reduced demand and no extra bad debts.25 A further possibility is to introduce differential user charges for after-hours services. A significant proportion of demand for ambulance services occurs after-hours – that is, after 6pm and before 8am. For inter-hospital road transports, the percentage that occurred after hours ranged from 23 to 61, depending on the region (Figure 3.2).

Figure 3.2 NSW road ambulance transports, percentage which occur after hours

Out of Hours Inter Hospital Transports 2003-04 (6pm-7.59am)

0% 10% 20% 30% 40% 50% 60% 70%

Central Coast

Illawarra

South Western

Western Sydney

Central Sydney

Far West

Hunter

Wentworth

Mid West

Northern Sydney

South Eastern

Macquarie

New England

Greater Murray

Mid North Coast

Northern Rivers

Southern

New Childrens Westmead

Source: Ambulance Service of NSW, private communication. It may be reasonable for the Ambulance Service to charge a higher fee scale for after-hours services, especially for inter-hospital transports as the timing of these is likely to be discretionary. The difference in scales might depend, in part, on the cost differences between maintaining standard-hours and after-hours services. What system-wide effects might result from changing the current fee arrangements?

An increase in user charges is likely to have system-wide effects that may be as significant to some stakeholders as the increase in charges themselves. For example, a sizeable rise in fees for people who use the emergency 000 line would increase the cost of the risk of being uninsured. The health funds might gain new contributors, thus increasing HIL revenue to Government. The same rise in fees would increase costs to NSW hospitals and add to their funding requirements from NSW Health. Against this possible new inflow, the rise in direct user charges might also induce a rise in indirect charges, such as an increase in the rate of the Health Insurance Levy and SAIP premiums. 25 The 22.4m is derived by multiplying two-thirds of 69,800 by the $482 rise in the eight kilometre trip.


26

It is also worth noting that the Ambulance Service would not be able to increase some of its user charges immediately, as some are related to formulae that are subject to periodic renegotiation with third parties such as the Area Health Services and the DVA. The Tribunal invites comment on the various potential and practicable ways of sourcing revenue for the Ambulance Service. It also invites comment on: • which patients should be charged for ambulance services

• which services should attract a charge

• the size and structure of any increases in fees or new fee scales that might be introduced

• the likely effects such changes might have on participants in the NSW health system.

Can the efficiency and effectiveness of the Ambulance Service be improved?

27

4 CAN THE EFFICIENCY AND EFFECTIVENESS OF THE AMBULANCE SERVICE BE IMPROVED?

As part of its review, the Tribunal is required to consider the efficiency and effectiveness of the Ambulance Service in providing emergency transport, non-emergency transport and rescue services. It is also required to report on any observations on improving the current level of efficiency and effectiveness that arise from its review. In addition, it must consider the standards of quality, reliability and safety of these services.

4.1 Current activities of the Service relative to its responsibilities The Ambulance Service’s responsibilities appear to be mostly self-defined, driven by community needs. Its corporate plan for July 2004 – June 2006 includes the following mission statement:

…as part of the State’s health system, we will provide responsive, quality emergency clinical care and support for patient transport, rescue and retrieval services.

This statement and the objectives that flow from it, indicates that it considers its responsibilities to include both emergency and non-emergency responses. It has aligned its activities to those responsibilities. It makes over 600,000 emergency responses a year and just under 300,000 non-emergency responses a year. The corporate plan does not make clear to what extent the future growth in the Service is planned. At present it does not undertake formal projections of demand for its services. Historically, it appears to be the case that expansions in the Service have tended to occur in response to community pressure and Government policy initiatives.

4.2 Effectiveness Effectiveness refers to the Ambulance Service’s ability to deliver the results or outcomes that are expected of it. One indication of what these outcomes are, and how well the Ambulance Service delivers them, is the Key Performance Indicators (KPI) that it has set for itself. Others are its response times compared to those of ambulance services in other jurisdictions, and how satisfied users are with the services they received.

4.2.1 KPIs For any organisation, the outcomes consistent with effective performance are best defined, measured, monitored and enforced by means of KPIs. The Ambulance Service has several KPIs by which it measures its operational performance and clinical capability. Table 4.1 lists the operational KPIs and indicates how it performed against them last year. This performance suggests that the Ambulance Service is broadly effective in meeting its operational goals.


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Table 4.1 Key Operational Performance Indicators 2003/04

Indicator Report on targets

E10 (ambulance* to emergency within 10 minutes)

51.7 per cent achieved. (53.1 per cent 2002/03) Decreased E10 because handover times longer#

E15 (ambulance* to emergency within 15 minutes)

82 per cent achieved. Decreased E15 because of longer handover times #

R30 (routine cases arriving no later than 30 minutes after appointment time)

55.9 per cent achieved 2003/04 target was 55 per cent

Patient satisfaction score Target of 98 per cent achieved

% of staff trained in mental health issues Target of 100 per cent achieved * Sydney only. # Handover time is the time that elapses between arrival at a destination (eg. a hospital) and the time the care of the patient is assumed by another provider (eg. emergency department staff). Source: Ambulance Service of NSW, Annual Report 2003/04 p 9 and private communication.

4.2.2 Response times compared to other jurisdictions As Chapter 2 discussed, the Ambulance Service’s response times are slightly slower than those in most other states and territories. However, this does not necessarily indicate that it is less effective, as a range of external factors can affect response times. These include the speed at which the ambulance can safely travel, which depends on such factors as the condition of the road and the degree of traffic congestion.

4.2.3 User satisfaction Surveys by the Convention of Ambulance Authorities suggest that a very high proportion of users of the Ambulance Service are satisfied or very satisfied with the key aspects of the services they received. The 2004 National Patient Satisfaction Survey ranked NSW highly on most of its measures (see Table 2.5 on page 7). The Tribunal invites stakeholders to comment on the Ambulance Service’s effectiveness, including the appropriateness of its operational goals and the KPIs it currently uses to assess its performance.

4.3 Efficiency Efficiency refers to the Ambulance Service’s ability to meet its operational and clinical goals using the minimum resources required. None of its current KPIs refer to the costs involved in meeting these goals, so they do not provide a means of assessing its level of efficiency. However, several other measures might provide an indication of the Ambulance Service’s cost-efficiency. These include its costs per ambulance response, per incident, per patient;26 its costs per unit of input; and the level of utilisation of its ambulance fleet. As discussed in Chapter 2, the Ambulance Service’s costs per patient (CPP) are below the average for Australia as a whole. 26 The nature of the Service is such that the number of responses is the largest number. It exceeds the

number of incidents (because multiple ambulances may attend the one incident) and the number of incidents exceeds the number of patients (because some incidents result in no patients transported or treated).

Can the efficiency and effectiveness of the Ambulance Service be improved?

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Measures of costs per response (CPR) can be done at the most aggregated level or by organisational segments. In NSW, the CPR has risen from around $300 in the mid-90s to just under $400 by 2003/04 (Figure 4.1).

Figure 4.1 NSW ambulance costs per response

280

300

320

340

360

380

400

95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04

$$ per response

Source: Ambulance Service of NSW Annual Report 2003/04 pages 5 and 30. The 2003/04 data point is total expenses of $367m divided by 928,000 responses. CPR data comparable across all ambulance jurisdictions are available in constant dollar or real terms for the past five years. As with costs per patient, the Ambulance Service’s CPR was below the average for Australia for each of the past five years (Table 4.2). Its real costs per response have been relatively steady over the period, as have most jurisdictions.

Table 4.2 Total costs of ambulance services per response (in 2003/04 dollars) Ratio of FY04

1999/00 2000/01 2001/02 2002/03 2003/04 on FY00NSW 413.5 397.1 386.7 392.9 405.0 0.98Victoria 432.8 432.2 458.3 448.7 459.8 1.06Queensland 421.7 471.8 472.3 428.8 428.0 1.01WA 494.6 481.1 436.3 451.9 463.9 0.94SA 452.6 415.7 435.3 461.7 462.3 1.02Tasmania 435.5 484.6 416.1 404.7 417.9 0.96ACT 535.8 470.2 488.8 528.6 523.4 0.98NT 493.4 417.4 374.6 384.1 398.0 0.81Australia 430.5 416.6 432.1 425.2 432.9 1.01 Source: Productivity Commission Report on Government Services 2005 Tables 8A.19-20 and past issues. However, such comparisons can be misleading because jurisdictions may have very different mixes of road and air services and equipment needs.27 Less aggregated measures of costs per response may be more helpful. For example, it might be helpful to be able to measure and consider any trends in road ambulance costs per road ambulance response.

27 The mix matters because costs vary greatly between road and air services. In the case of NSW, the total

cost of road ambulance services per road ambulance was $296,235 in 2003/04. For the five fixed wing aircraft and nine helicopters the total cost per aircraft was $2.4m and $1.4m respectively.


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One way to look at costs per unit of input is costs per FTE staff. As noted in Chapter 2, the Ambulance Service’s costs per FTE staff are below the average for Australia as a whole, substantially lower than those for Victoria. The utilisation (or under-utilisation) of ambulances is another possible indicator of the Ambulance Service’s efficiency. If a high percentage of ambulances were out of the station on cases (measured by “casetime” – see Figure 2.1 on p 6) at some point in a 24-hour cycle, this would suggest that no capital resources (in terms of ambulances) are being wasted relative to peak demand (assuming that ambulance demand exhibits such peaks). The Tribunal would welcome any data that illustrate, for various segments, the percentage of ambulances on casetime during, say, a Friday/Saturday 24-hour cycle. It would also welcome comments on the extent to which the Ambulance Service is being under-utilised for inter-hospital transports during the day (because transport contracted by hospitals is less expensive) and being stretched in the face of much higher demand during the night hours, and what might be done to correct the situation. The Tribunal invites comment on the efficiency with which road ambulance services are being provided in NSW. It also invites comment on the efficiency with which other services are being provided and how efficiencies might be enhanced.

4.4 Standards of quality, reliability and safety The term 'service quality' can refer to a wide range of desirable outcomes for consumers. Aspects of service quality include the quality of the service itself and various indicators of reliability. The highest possible quality is not necessarily the most efficient, however, since better service involves costs, and trade-offs must be made between service quality and cost and price. The user satisfaction data discussed above indicates that customers are satisfied with the quality of the services the Ambulance Service provides, and suggests also that its services can be relied upon. The Tribunal would welcome any evidence on the safety, or otherwise, of its services. The Tribunal invites stakeholders to comment on any aspects of the operations of the Ambulance Service as they relate to the quality of the service, its reliability and its safety.

How should fees be adjusted over time and what should be the role of Ambulance cost indices?

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5 HOW SHOULD FEES BE ADJUSTED OVER TIME AND WHAT SHOULD BE THE ROLE OF AMBULANCE COST INDICES?

The fees charged by the Ambulance Service are set by the Minister for Health. At present, there appears to be no specific or regular process by which fees are reviewed and updated. As a result, there is a risk that its fees may not keep pace with the general rise in prices. Indeed, this appears to have occurred, as NSW ambulance fees are now lower in real terms than they were at the start of the 1990s (Figure 5.1).

Figure 5.1 NSW Ambulance flagfall and 30 km trip fee relative to inflation

100

120

140

160

180

200

220

240

1989/90 1991/92 1993/94 1995/96 1997/98 1999/00 2001/02 2003/04

$

Ambulance fee, 30 km trip

Sydney Consumer Prices

Ambulance flagfall

Source: Ambulance Service of NSW, private communication, and ABS for Sydney CPI. One way to ensure that a regular review process is implemented is to focus the review on the production of a suitable benchmark on which the need for fee increases, and the size of those increases, might be based. A cost index (or indices) is one such benchmark. The Tribunal is familiar with the industry cost index approach to fare setting, and has used this approach for some years to set private bus and ferry fares and taxi fares.28 This chapter discusses the main advantages of the approach, and how it might be used for adjusting ambulance fees and charges.

28 The Tribunal reviewed the cost index approach, highlighting its strengths and weaknesses, in its Review of

fares for taxis, private buses and private ferries in NSW, An Issues Paper, April 2003.


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5.1 What are the main advantages of the cost index approach? One of the main advantages of the cost index approach is that it is conceptually easy to understand. The approach would directly link increases in the Ambulance Service’s fees to increases in the costs it must incur to deliver its services. Thus both the Ambulance Service and its users would see it being ‘compensated’ when those costs increase. This kind of ‘cost-plus’ approach to pricing is widely perceived to maintain existing ‘profit margins’, an outcome which is often perceived to be ‘fair’ to all parties concerned. Another advantage is that it is relatively undemanding in terms of the data collection and analysis that key stakeholders would need to undertake.

5.2 What are the main disadvantages? The cost index approach has five main disadvantages, or weaknesses:

1. It ignores potential improvements that might have been achieved, or should be achieved, within the particular industry. Under a cost index approach, it is very difficult for regulators to create incentives for suppliers that might induce them to implement efficiency improvements. Instead, the incentive may be to mirror the weights in the cost index to reduce risk, rather than pursue better service or operating efficiencies.

2. It ignores the revenue side. If revenues have increased to a greater extent than costs over a particular period, there would appear to be little justification for a fee increase on the basis of a rise in unit costs alone. Faster growth in the economy and jobs that promoted increased patronage and enhanced the industry’s monopoly power might even present a case for a fare decrease.

3. It ignores the possibility of interaction between revenue and cost sides of the industry. Higher-than-expected revenues might induce a laxness in cost controls that would normally operate in more stringent times. Granting a large fee increase based on inflated costs would simply ‘lock-in’ poor cost control and reward the lax behaviour.

4. It only approximates costs on average, at best. It cannot reflect the circumstances of individual segments of a business.

5. It will almost always lead to fee increases. In the modern world, the average price level across the economy tends to rise (that is, inflation is entrenched, albeit sometimes at a low rate), and this is usually reflected in most if not all prices of services, including labour, that are inputs in ambulance service costs.

A more technical drawback common to all base-weighted indices is that the base on which it is originally constructed may, over time, move well away from the actual cost structure faced by the industry. Apart from a periodic update of the weighting pattern for the original components, evolution of the cost structure might well mean that ‘new’ costs have to be grafted in, and ‘old’ costs removed from the cost index with one-off adjustments to fees to compensate for any one-off rises or falls in the absolute levels of costs incurred to stay in business.

How should fees be adjusted over time and what should be the role of Ambulance cost indices?

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5.3 How might a cost index approach be used to adjust the Ambulance Service’s fees?

In considering a cost index approach for adjusting ambulance fees, the most relevant industry cost index is one that is expressed in unit cost terms. A unit cost index disentangles the effects of changes in input prices from changes in input volumes. Such a distinction is important when an industry is contracting or expanding, because volume changes are likely to be the major drivers of costs (and revenues) recorded in the organisations financial records. Since a price is, by definition, a unit of revenue, the relevant cost index for use in any price setting process has to be a unit cost index. For the Ambulance Service, if the unit of cost were the patient, any rise in the average level of unit costs as measured by the index may then be translated directly into a fee rise by the same percentage. Since such a change increases unit costs and prices by the same percentage, it leaves unchanged the margin between unit costs and prices. Thus it neither increases nor decreases the profitability, or otherwise, of the Ambulance Service (assuming ‘sales’ volumes are unaffected by the price change). Based on recent discussions with the Ambulance Service, the Tribunal believes calculating a cost per patient on an ongoing basis may be feasible. However, if it is not, obvious alternatives would be an index of changes in costs per ambulance, or costs per full-time equivalent employee. (The former would be akin to the cost per taxi provided to the Tribunal by the NSW Taxi Council.) The Premier has requested that the Tribunal investigate and report on a cost index that would quantify changes in the cost of providing medical and transport operations undertaken by the Ambulance Service and to sustain services into the future. It may be that one or more cost indices are relevant to this task. Emergencies and non-emergencies are likely to have very different cost structures. The costs of providing ambulance services to country NSW may be significantly different from the costs of doing so in urban NSW and from the costs of rescue services in general. The costs associated with fixed wing aircraft and helicopters are likely to be very different from road transport. An example of a unit cost index approach, which illustrates some of the cost items specific to taxis, may be found in the Tribunal’s 2004 report on NSW taxi fares.29 The Tribunal invites comment on the costs of providing ambulance services to different geographical or other segments of the NSW population. It also requests the Ambulance Service of NSW to provide one or more unit cost indices that would assist the Tribunal in its deliberations on this issue.

29 IPART, Review of Fares for Taxis in New South Wales in 2004, June 2004. The report is available on the

website of the Ministry of Transport, www.transport.nsw.gov.au/pubs_legal/IPART_taxi-fares-04-07-04.pdf.


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Other Issues

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6 OTHER ISSUES

The terms of reference for this review ask the Tribunal to consider several other issues when conducting its investigation into the Ambulance Service’s revenue and charging structures. These include:

• the impact of pricing policies on the Ambulance Service’s borrowing and capital requirements, and, in particular, the impact of any need to renew or increase relevant assets

• the effect of any changes to the current revenue and charging structures on the level of government funding to the Ambulance Service

• the protection of consumers from abuses of monopoly power

• the social impact of any recommendations the Tribunal might make.

6.1 Impact on borrowing and capital requirements To date, the Ambulance Service’s capital requirements have been effectively fully met by Government grants. The net book value of its non-current assets at 30 June 2004 was $168m. That is much less than even one year’s direct NSW Government grants (which were $251m in 2003/04). Given that non-NSW Government sources generate under a quarter of the Ambulance Service’s funding, the size of its current and future capital requirements are unlikely to be significantly affected by changes to pricing polices. However, these requirements may be reduced if the coverage of user charges was extended in a major way, to encompass some or all of those sections of the community that are currently exempt from paying for ambulance services.

6.2 Effects on Government funding Given that the Government currently funds $270m of the $367m of costs of running the Ambulance Service, any revenue obtained from other sources will ease the burden of the Ambulance Service on NSW taxpayers.

6.3 Protection of consumers The need to protect consumers from the abuse of monopoly power might arise if there was a significant change in the approach to funding, such as a major change in the current balance between the community service obligation and user pays approaches, or the adoption of an optimal use approach.

6.4 Social impacts of fee changes Given that the Ambulance Service’s current fees are low relative to interstate comparisons, especially for emergency responses and that they cover a small proportion of total costs of operating the Service, it is highly likely that it has been adding materially to the well-being of many NSW citizens at no, or comparatively low, cost to themselves. However, other people may be making a disproportionately large contribution to funding the Service.


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It may also be that the burden of contributing towards the costs of the Ambulance Service is falling inequitably on a small proportion of the population. Changes that widened the base from which contributions are collected, or addressed the high level of non-payment of invoices in some way, might have positive social impacts in terms of improving equity. It may be difficult for the Tribunal to assess the likely social impact of any sizeable increase in fees without data on users of ambulance services classified by income or some other measure of financial standing. The Tribunal invites comment on: • the impact of changes in pricing policies on the Ambulance Service’s borrowing, capital

requirements and asset renewal and acquisition

• the effect of any changes to the current revenue and charging structures on the level of government funding to the Ambulance Service

• the need to protect consumers from the abuse of monopoly power in terms of pricing or standards of service

• the likely social impact of increasing the level of ambulance or ambulance-related fees, charges and levies, or changing the fee structure.

Attachment 1 Terms of Reference

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ATTACHMENT 1 TERMS OF REFERENCE

I, Robert J Carr, Premier of New South Wales, pursuant to Section 9(1)(b) of the Independent Pricing and Regulatory Tribunal Act 1992, request that the Tribunal investigate and report on the following matters related to the Ambulance Service of NSW:

1. A detailed analysis of revenue and charging structures of the Ambulance Service, taking into account the system-wide effects of implementing different fee structures. 2. A cost index to quantify changes in the cost of providing medical and transport operations undertaken by the Ambulance Service and to sustain services into the future.

A final report on revenue and charging structures is to be provided to the Premier and Minister for Health by end March 2005. A final report on the cost index is to be provided to the Premier and the Minister for Health by end June 2005. In conducting the investigation into revenue and charging structures, the Tribunal should consider:

i. the views of major stakeholders in the NSW health system, in particular the

views of Area Health Services and their hospitals; ii. the cost of providing the medical and transport operations concerned; iii. staffing and equipment requirements to sustain the ambulance service into the

future iv. the efficiency and effectiveness of the ambulance service in terms of emergency transport, non-emergency transport and rescue functions, particularly in the context of other similar services in Australian jurisdictions; v. ambulance charging arrangements in other States and Territories; vi. the protection of consumers from abuses of monopoly power in terms of prices, pricing policies and standards of service; vii. the impact of pricing policies on borrowing and capital requirements and, in particular, the impact of any need to renew or increase relevant assets; viii. the social impact of the recommendations; ix. standards of quality, reliability and safety of the services concerned (whether those standards are specified by legislation, agreement or otherwise); and x. the effect of any recommendation on the level of Government funding.

Observations from the review that can improve the effectiveness and efficiency of the ambulance service should be reported as part of the review.


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Attachment 2 Abbreviations used in this report

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ATTACHMENT 2 ABBREVIATIONS USED IN THIS REPORT

ABS Australian Bureau of Statistics

CAA Convention of Ambulance Authorities

CPI Consumer Price Index as constructed by the Australian Bureau of Statistics. The context makes clear whether the national or the Sydney CPI is under consideration.

CPP Cost per patient (calculated by dividing total cost by the number of patients either transported or treated)

CPR Cost per response (calculated as for CPP but dividing by total responses)

DVA Commonwealth Department of Veterans Affairs

FTE Full-time equivalent (as applied to a measure of the workforce that is comparable across jurisdictions).

HIL Health Insurance Levy

KPI Key Performance Indicator

MAA Motor Accident Authority

SAIP State Ambulance Insurance Plan

TNT Treat and not transport. The term refers to patients who are treated by ambulance officers but not transported by an ambulance.


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