Below are some of the most frequently asked questions from residents, along with a few background questions about the District and how it functions.
Harris County Emergency Services District No. 11 (the “District”) is an “emergency services district” under Texas law. Emergency services districts are political subdivisions of the State of Texas, formed under the Texas Constitution and governed by Chapter 775 of the Texas Health and Safety Code (among other laws, like the Local Government Code). Emergency services districts have the power and authority to provide emergency medical services to the residents of their area. They are authorized to fund those services through taxes paid by the residents. Emergency services districts like the District can use tax dollars to either directly provide emergency services to their residents or hire a third-party emergency services provider, like a private ambulance company. Providing services directly to residents is becoming increasingly popular with emergency services districts, since it cuts out the middleman, which reduces costs, streamlines communications, and allows for greater transparency concerning the use of taxpayer money.
CCEMS is a non-profit ambulance company. The District contracted with CCEMS to provide emergency medical services to the District’s 600,000-plus residents some time ago. The current Service Agreement was signed in 2013. It has an end date of 2023; however, the Service Agreement allows the District to terminate for any reason as long as CCEMS is given 360 days’ notice. And of course, the District can terminate anytime if CCEMS breaches the agreement. The District has paid CCEMS around $15 million- 16 million a year in recent years.
The District has historically had a great relationship with the rank-and-file first responders of CCEMS and has immense respect for the work they do. Unfortunately, the District’s relationship with CCEMS management has become very strained as the District questioned CCEMS’s use of District (taxpayer) dollars. In response to the District’s questions, CCEMS management has historically been aggressive, threatening, and evasive.
For some time now, the District has heard from CCEMS first responders that their equipment is outdated and beyond its useful life. The District Commissioners have also heard that CCEMS first responders are overworked, and that their health insurance claims go unpaid. The District does not understand how it can provide so much funding to CCEMS, and yet CCEMS has run down facilities and equipment and bad insurance. It is even more puzzling considering that CCEMS claims that, in addition to what the District pays CCEMS, CCEMS brings in approximately $12 million a year from Medicare, Medicaid, and private insurance billing for its calls inside the District and from other emergency service providers through the CCEMS 9-1-1 Communications Center (the “Comm Center”). However, if CCEMS were collecting on services rendered at the same level as other similar EMS providers and if the District wasn’t subsidizing the Comm Center costs for other emergency services providers that use the Comm Center (even those not even located in Harris County), CCEMS could realize revenues of around $25-30 million on its own and could pay for the regular maintenance to facilities CCEMS owns that have been ignored for many years or purchase new vehicles and equipment.
When the District finally started receiving some information about these and other issues, its initial discoveries were troubling. For example:
The District has learned that CCEMS has spent almost $4 million on employee insurance in the 2019/2020 insurance year, amounting to approximately $20,000 per employee for coverage. For comparison, the average statewide 2019 group health insurance premium was $14,563 to cover a family and $6,967 to cover an individual CCEMS spends an outrageous amount, especially since some first responders have approached District Commissioners to complain that they cannot get their insurance claims paid (before the District began withholding funds). The District also learned that CCEMS quietly added additional personnel, families of personnel, and services to the insurance plan paid for by District taxpayers without first getting District approval. The District estimates that it has overpaid CCEMS for insurance by hundreds of thousands of dollars per year.
The District also has learned that it has been overpaying for CCEMS dispatch services. CCEMS runs the Comm Center that services the District but also services at least 15 other customers (other fire departments and first responder organizations). For a long while, CCEMS refused to tell the District what percentage of 9-1-1 calls were related to the District, and what percentage were related to CCEMS’s other customers. After pressure from the District’s current Board of Commissioners, CCEMS finally admitted that only about 47% of all calls received by the Comm Center are related to the District, but CCEMS has been improperly billing the District for about 95% of the Comm Center’s employee salaries and health insurance. The District estimates it has overpaid CCEMS for Comm Center services by hundreds of thousands of dollars.
The District also has learned that CCEMS has chronically under-collected from insurance companies, Medicare, and Medicaid, leaving the District’s residents to fund more than their fair share of CCEMS’s operations. Because of the Service Agreement between the District and CCEMS, CCEMS is allowed to bill to and collect from patients to whom they provide emergency medical services. Without the Service Agreement, CCEMS would not have the authority to perform this service in the District and therefore, no ability to have this revenue source. CCEMS hires an outside company to handle billing and collections from sources like private insurance, Medicare, and Medicaid. If CCEMS’s outside billing company had a higher collection percentage, the District would not need to spend as much in taxpayer dollars for the services CCEMS provides. In fact, in many similarly situated places, ambulance services like CCEMS do not charge anything to the governments that hire them because the collections alone are substantial. The outside billing company used by CCEMS to collect from these other sources, however, collects at a much lower rate than most others in this industry. The company CCEMS uses is owned and operated by the wife of CCEMS’s CEO, Wren Nealy. When collections come in short, instead of changing its internal billing procedures or hiring a different independent billing and collections company, CCEMS has looked to the District’s taxpayers to supplement shortfalls in collections each year. However, since CCEMS receives far more in District taxpayer funds than it receives from other sources, including billing and collections, it is more appropriate to say that the billing and collections actually supplement the District taxpayer funds.
These alarming discoveries demanded action from the District, and in turn the District demanded answers from CCEMS. CCEMS has been very, very uncooperative in providing answers and information. However, the District has managed to learn that, on top of the problems already mentioned, CCEMS also has signed contracts in the District’s name without the District’s permission; claimed the District’s assets (like ambulances and medical equipment) as assets of CCEMS; pledged the District’s assets to CCEMS’ lenders as CCEMS collateral; and, purchased medical supplies using District taxpayer dollars, then sold those supplies to other first responder organizations without crediting the District with the sale proceeds.
The District has the right under the Service Agreement to review CCEMS’s books and records at any time. The concerns the District has about CCEMS’s use of taxpayer dollars explained above (as well as other taxpayer funds misuses), combined with CCEMS’s higher-than-average ambulance response times, is more than enough for any governmental entity funding a private company with taxpayer dollars to demand transparency and initiate a process to determine where taxpayer dollars are going and why there are so many management and operational concerns. Over the past several years, the District has repeatedly asked CCEMS to explain how it uses its public funding. In every instance, CCEMS has refused to fully cooperate. In fact, in 2018 the District tried to audit CCEMS’s use of District funds in 2017.. However, CCEMS would not provide the requested documents and refused to fully cooperate with the auditor. This resulted in an incomplete audit that did not answer the District’s questions about how CCEMS was using the District’s funds but it did highlight that the District was on track with its areas of concern..
In June 2020 the District initiated a second audit to tackle these unanswered questions along with a growing list of new ones about CCEMS’s spending. This audit is ongoing and will help guide the District as it makes decisions on how to better fund and support emergency medical services in its territory.
Until very recently, the District has not been able to obtain information from CCEMS about how CCEMS spends the taxpayer dollars provided by the District. However, based on the small amount of information that the District was able to obtain from CCEMS, the District has become very concerned that CCEMS has inflated the District’s portion of its budget and has been overcharging the District approximately $1.5 million dollars per year for the last several years. Specifically, and as explained above, the District believes that CCEMS has been overcharging the District for CCEMS’s employee healthcare, medical supplies, and Comm Center employees. Therefore, on June 18, 2020, the Board of Commissioners voted to withhold 30% of its monthly payment to CCEMS in order to offset the millions of dollars that have been overcharged by CCEMS. The District is withholding 30% of CCEMS’s monthly payments until the audit described above is complete. This audit will then be used to determine exactly how much CCEMS has overcharged the District. Once the District has this information, it can determine how much CCEMS owes the District for its overcharges and whether the District should continue withholding funding to make up the deficit.
When the audit began earlier this year, the District ran into the same wall of resistance that CCEMS has used for years to shield itself from the District’s questions. However, once the District applied some pressure and began withholding funds from CCEMS’s monthly payments, CCEMS began to cooperate. While it is good that the District is finally getting some answers, this is not the type of relationship the District wants or should have with its service provider. The District should not have to withhold funding to get information about how taxpayer dollars are spent and neither the District’s residents nor CCEMS first responders deserve to be caught in the middle. Not surprisingly, the deterioration in the relationship caused by CCEMS’s refusal to cooperate is one of the many reasons why the District terminated the Service Agreement.
The Service Agreement has always allowed for either party to terminate on the basis of convenience. In short, both the District and CCEMS have always had the option to cut the relationship short (with 360 days’ notice) for any or no reason at all. The District decided to trigger its right to terminate the Service Agreement for convenience for a variety of reasons including CCEMS’s failure to meet performance goals like response times; CCEMS’s long-standing position to fight all of the District’s requests for information about how CCEMS uses taxpayer dollars; and CCEMS administration’s hostile and uncooperative attitude toward the District. For these and many other reasons, the District cannot in good faith continue to use taxpayer dollars to prop up a failing partnership with CCEMS.
CCEMS has consistently failed to meet performance goals, allowed under-the-table repair schemes to run out of its maintenance facilities, and denied the District information that could be used to hold CCEMS accountable to the District’s taxpayers. Further, CCEMS has lied to its employees and the community about the District’s motives for terminating the Service Agreement with CCEMS. This is not conduct that elicits confidence from the District or the community; and it is definitely not conduct that the District wishes to bankroll with $16 million in taxpayer money every year. Given how many opportunities CCEMS has had to work with the District, CCEMS has failed to treat the Service Agreement with the care and respect it deserves. In an effort to restructure the terms of the relationship so the long-standing relationship wouldn’t have to end and to allow for peace, the District attempted twice (2017 and 2019-2020) to amend the Service Agreement with CCEMS. Both efforts failed because CCEMS was either non-responsive to the District, declined 99% of the amendments or stalled negotiations in other ways. The proposed amendments would have allowed for all capital costs to be shifted to the District while paying CCEMS a flat cost per call response and allowed for cost of living increases every year. It would have been a win-win situation for both the District and CCEMS, but despite the District’s best efforts,CCEMS was unwilling to budge. With this backdrop, it is very difficult for the District to see a path forward that involves CCEMS.
CCEMS has been terminated with 360 days’ notice. The District expects CCEMS to fulfill the terms of the contract until the 360 days ends in September 2021. In the meantime, the District will continue investigating CCEMS’s financial irregularities and pushing for performance and equipment improvements. The District could terminate at any time for cause if it finds that CCEMS has breached its agreement with and duties to the District and its residents.
The District has put back-up plans in place in the event that CCEMS fails to fulfill its obligation to serve the community during the 360-day notice period. For example, on September 3, 2020, the District entered into an agreement with Harris County Emergency Corps (“HCEC”) whereby HCEC agreed, in conjunction with other area EMS providers, to provide the District’s residents with emergency medical services in the event of a sudden stoppage in CCEMS’s services. HCEC and its partners in this back-up plan are top performing emergency medical services that have the capacity to serve the District’s residents on a moment’s notice. Further, the District is purchasing ambulances, hiring personnel, and working diligently to implement a long-term plan to provide the best possible emergency medical services to its residents- whether it be self-operated or through a long-term third party contract.
The District is purchasing real property so that it can ensure that the provider of emergency medical services to the District’s residents (whether it’s the District or a third party contractor) has a state-of-the-art facility where it can train, work, and grow.
The District is hiring an Executive Director to directly oversee and manage the District’s emergency medical services operations, whether those services are provided directly by the District or by a third-party company. The Executive Director will report directly to the District’s Board of Commissioners and will provide expert guidance as the District starts its next chapter in providing emergency medical services to its residents. The District Board of Commissioners is currently in the interview phase of the hiring process. The District expects to announce the new Executive Director before the end of December 2020.
In the lawsuit, CCEMS is trying to prevent the District from withholding funds from CCEMS. Essentially, CCEMS has asked the court to issue an order forcing the District and its Board of Commissioners to pay CCEMS despite CCEMS’s failure to pay employee healthcare claims, refusal to comply with the audit of CCEMS’s use of taxpayer dollars, and failure to meet performance standards. When CCEMS first filed its lawsuit, it tried to obtain this order on an emergency basis, arguing that CCEMS would suffer irreparable harm if the court did not interfere immediately. However, after a hearing in which CCEMS could not provide the proper legal basis that would allow a court to issue such a harsh order, the court denied CCEMS’s request for emergency relief. While CCEMS’s claims are still pending against the District, the court has rightfully refused to directly involve itself in the District’s right to withhold payments from CCEMS at this time.
Executive session is the portion of the District’s Board meetings where the Board of Commissioners ask everyone to leave the room so that the Commissioners can speak with the District’s attorneys about confidential topics. Just like other governmental entities, the Board of Commissioners has the right to speak confidentially with its attorneys about certain issues, such as pending or threatened litigation, employment issues, and its real estate transactions. Executive session provides that confidential setting.
By law, the Board of Commissioners can only gather to discuss District business at meetings that have been properly noticed via the posted agenda and are open to the public. Because executive sessions can only be held at board meetings, the Commissioners have limited opportunities (sometimes only once a month) to meet as a group to discuss legal issues with their attorney. Over the last year, the District’s concerns related to CCEMS’s use of taxpayer dollars and its performance under the Service Agreement have required that the Board of Commissioners spend more time in executive session speaking with its attorneys. Now that CCEMS has filed a lawsuit against the District, the Board of Commissioners needs additional time to receive updates about the lawsuit and legal guidance from its counsel.
While the District cannot predict the future and therefore does not know what will happen with real property values in the District, it is the current Board of Commissioners’ goal to continue to reduce the tax rate- just as it has done the past few years and just as it did when setting the 2020 tax rate in October 2020. The intention with this transition away from CCEMS is to, over time, increase the level of revenue collections for emergency medical services rendered while simultaneously decreasing the dependence on tax revenues. Once all of the necessary capital components are in place, taxpayers will likely see a reduction in their District tax bills. For reference, the average household currently pays $74.37 ANNUALLY ($6.24 per month) in taxes to the District.
No, the standard of emergency medical care in the District will not suffer. Regardless of which method of service the District chooses, the goal is to strategically put the systems in place to provide for improved response times and allow for a less grueling work schedule for the field staff. Further, in order to make sure the District’s emergency medical services meet or exceed the national standards, if the District takes over, it will pursue national accreditation; if the District contracts with a third party service provider, such provider will be accredited. In contrast, CCEMS has refused to seek any sort of accreditation from any national organization related to emergency medical services or 9-1-1 communications.