Negotiating a sustainable tariff for your ambulance service

It needs to be emphasised private ambulance service owners or managers remain responsible for the final negotiation and acceptance of tariffs for the coming year.

While many medical aid scheme representatives may release baseline tariff structures for the coming year, ambulance service owners or managers need to be aware that these new tariff structures are simply that – baseline tariffs. Should you feel that the baseline tariffs that have been released will not be sufficient for the operations of your ambulance service in the coming year, or that certain economic factors affect the operating costs of your business in different proportions to other private ambulance services, you are well within your rights to engage any medical aid scheme or its representative to negotiate a tariff that is more appropriate for the unique operating environment of your service.

You should also be careful not to be fooled by false statistics or by figures that do not represent the largest cost drivers in your operating budget. For example, one medical aid scheme representative recently used the example of a “predicted and sustained drop in fuel prices”. This comment raises a number of concerns. Firstly, the drop in fuel prices has not been sustained. On 02 December 2016, the price of one litre of 95 unleaded petrol at the Reef was R12.40 per litre. On 06 July 2016 the same litre of 95 unleaded petrol at the Reef would have cost you R13.34 per litre and it currently costs R12.85. Over the past year, the price of petrol has fluctuated substantially and is currently more expensive than it was a year ago – hardly a sustained drop in price. In addition, South Africa is currently dealing with a volatile Rand value and the price of crude oil has been increasingly erratic, fluctuating between $37.00 per barrel and $55.00 per barrel over the past 12 months. Don’t be fooled folks – the price of fuel is anything but stable at the moment.

One also needs to take into account that the cost of fuel is generally only 8-11% of the annual operating cost of the average private ambulance service. Cost factors such as labour and vehicles remain significantly higher than the cost of fuel, with labour being approximately 60-65% of the annual operating cost of a private ambulance service, and vehicles and maintenance being between 14% and 16% of annual operating costs. You can expect the price of labour to rise between 6% and 8% year on year for 2017, and the price of vehicles and maintenance to rise by at least 10% year on year for 2017.

Ensure that you take full advantage of your right to negotiate a tariff that will ensure sustainability for your ambulance service operation in 2017. Medical aid scheme representatives have no right to force a predetermined annual increase on you for 2017 without your input, and if another ambulance service operator that is also the scheme representative tries to do this to you, then you should very seriously consider a submitting a complaint regarding the malpractice to The Competition Commission of South Africa.

If you are not happy with your tariff increase for 2017, do not sign any tariff increase letters from scheme representatives for 2017. Simply refuse to sign and continue to operate according to what you believe to be a sustainable tariff.  Medical aid schemes cannot legally refuse to pay PMB claims based on a tariff increase letter that has not been signed.

SAPAESA wishes you all well for 2017 and reminds you not to allow yourself or your ambulance service to be bullied in an anti-competitive manner.

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