Audit Report on the Compliance of the Health and Hospitals Corporation with the Financial Provisions of the Ambulance and Pre-hospital Emergency Medical Services Memo of Understanding

On January, 19, 1996, Mayor Rudolph Giuliani and the President of the New York City Health and Hospitals Corporation (HHC) executed a Memorandum of Understanding (MOU) setting forth the terms and conditions for the transfer of Emergency Medical Services (EMS) from HHC to the New York City Fire Department (FDNY). The transfer of responsibilities sought to improve the effectiveness of ambulance and pre-hospital emergency medical services by combining EMS personnel with the FDNY emergency response system.

The MOU specifies that HHC will bill and receive all amounts arising from EMS’s delivery of patients to HHC hospitals pending FDNY’s assumption of the billing and collection responsibilities itself. The MOU requires the City Budget Director and President of HHC jointly to project the amount of EMS-anticipated collections (projected collections) prior to each fiscal year. The amount of projected collections must be repaid to the City by HHC in four payments, three at the end of each of the first three quarters, and one final payment within 60 days of the end of the City’s fiscal year. The final payment may require adjustment based on differences between actual and projected collections and from adjustments or expenses incurred or paid by HHC on behalf of EMS.

In 2002, FDNY assumed responsibility for billing and collection of non-Medicaid payments—third-party insurance, self-pay patients, and Medicare—for EMS services provided to patients delivered to HHC hospitals. Currently, those payments are sent to a lockbox and transferred daily to an HHC bank account. HHC remits these amounts, less any HHC deductions, as part of its quarterly payments to the City.

Audit Findings and Conclusions

HHC did not adhere to the financial terms of the MOU. Since 2000, HHC improperly deducted $2,450,578 in offsets against EMS payments due the City. These offsets include $1,454,638 for use of space to operate the fleet maintenance facility at Sea View, even though an agreement exists between the City and HHC for use of the premises; $947,447 in bank charges for its own lockbox account; and $48,493 in unsubstantiated payments to vendors. Furthermore, HHC and the City did not negotiate a payment schedule once FDNY assumed the responsibilities of billing and collecting of non-Medicaid revenue. As a result, there has been an unwarranted delay in payments by HHC to the City of non-Medicaid revenue. In addition, HHC did not obtain prior written approval from the City when it delayed making quarterly Medicaid payments in 2006. Finally, FDNY made untimely rental payments for a radio transmittal tower resulting in $5,052 in unnecessary late fees for Fiscal Year 2008.

The City could have prevented these issues through closer oversight, enhanced controls, and better coordination. Although the City may be able to recoup the improper deductions from HHC, the City is at risk of losing potential interest income until the parties establish new due dates and associated late payment penalties.

Audit Recommendations

We make seven recommendations to HHC that it should:

• Pay the City $2,450,578.
• Abide by the terms of the July 20, 2000 license agreement and cease assessing the City an indirect cost associated with the City’s use of Sea View Hospital and surrounding area.
• Cease charging the City bank fees associated with HHC’s lockbox account.
• Maintain supporting documentation for any adjustments or credits against the payments made to the City.
• Negotiate with OMB a more expeditious payment schedule, establish a liquidated damages clause for any delayed non-Medicaid revenue payments and formalize any modifications to the MOU accordingly.
• Formally memorialize any modifications to the terms of the MOU as they occur.
• As EMS lease agreements expire, subsequent renewals should be in the name of the FDNY.

We make four recommendations to OMB, on behalf of the City, to ensure that:

• HHC pays the City $2,450,578.
• HHC adheres to the terms of the MOU and that payments of EMS funds are promptly made to the City.
• An annual reconciliation is performed to verify that all adjustments and credits taken by HHC against the final payment are valid.
• A more expeditious payment schedule, a liquidated damages clause for delayed non-Medicaid revenue payments, and any other revisions are formalized within the MOU.

We make two recommendations to FDNY that it should:

• Ensure that rental payments are processed on time.
• All EMS lease renewals should be in the name of FDNY, and all lease payments processed through the FDNYs normal budgetary process.