Traffic Incident Management Cost Management and Cost Recovery Primer
Chapter 3. State of the Practice
The high profile development of the NUG for TIM and the subsequent outreach efforts by the National Traffic Incident Management Coalition (NTIMC), the FHWA as well as other agencies, associations, and organizations has led to a renewed and intensified focus on TIM. Increased attention has particularly focused on promoting best practices to improve responder safety, promoting safe quick clearance policies and legislation, and improving the interoperability of incident communications and performance measurement. However, to date efforts to promote best practices and discussions about performance measurement have not identified long-term funding streams that agencies may use to pay for services.
To understand the state of the practice with regard to funding TIM programs, the study team conducted an extensive search for and evaluation of documents available in the public domain. This evaluation documents the legislation related to TIM cost recovery, advocacy group positions, and how individual TIM disciplines approach funding for TIM. The search yielded valuable information upon which to base the synthesis of current suggested or implemented practices.
Overall, the study team identified and reviewed 39 documents to determine their applicability and gather any relevant follow-up documentation or specific practices deemed worthy of replication. The majority of published material dealt with the topic of cost recovery, which was typically described:
A summary table and the document abstracts are included in the Appendix.
Legal considerations are an important part of any decision that TIM agencies face because the risk of litigation and the possibility of negligence can cause negative publicity and hurt the ability of the agency to deliver services.
Research did not reveal any evidence of legislation that requires agencies to manage the costs associated with TIM.
Figure 5 shows the levels of government where legislation has been enacted to address TIM. As the figure shows, the authority to seek reimbursement for TIM can be granted from almost every level of government; however, the type of costs that can be recovered can be as specific as the exact type of actions taken at the scene.
The Federal Government, through Federal law and rulemaking, has enacted legislation designed to safeguard the environment and overall public safety. State legislation is enacted by State Legislatures and is assigned to an agency for policy development and enforcement. These policies have been aimed at providing guidance to local governments regarding their latitude for implementing ordinances. Finally, ordinances enacted by local governments define from whom costs may be recovered, the types of costs that may be recovered, and the applicable fee structures.
TIM Cost Recovery: Federal Legislation
The best documented type of TIM cost recovery is related to the release of chemicals from vehicles. The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) of 1980 (amended in 1986) and the Oil Pollution Act of 1990 provide the basis for authorization to recover costs associated with the release of hazardous materials into the environment. Each Act specifically addresses the authority of jurisdictions to respond to emergencies with impending or actual substance release, and each Act also addresses the responding agencies' right to reimbursement. An excerpt from the CERCLA Chapter 103 in Figure 6 outlines local authority parameters. The Oil Pollution Act has wording similar to that in the example below. Notably, no Federal legislation exists to recover costs associated with TIM when the environment is not at risk.
TIM Cost Recovery: State Legislation
A number of States have enacted legislation addressing TIM cost recovery. The two types of laws that jurisdictions at the State and local level must abide by are either enacted laws or common law doctrine. Enacted laws are those which are introduced by elected officials of the legislative branch of government and are signed by the chief executive (Governor or Mayor). Common law doctrine embodies precedents that have been set based on decisions made by courts. When a court makes a decision, if a similar case comes before the same court or a lower court in the same jurisdiction in the future, the court is bound by the precedent set by the earlier case.
Common law doctrine is applicable to TIM cost recovery because of the municipal cost recovery model or free public services doctrine,6 which has been defined by court cases dating back to the 1970s. Opponents of TIM-related cost recovery argue in support of this doctrine, which states that public expenditures made in the performance of governmental functions are not recoverable because this would represent a form of double taxation. Proponents of TIM cost recovery argue that the doctrine is only applicable for situations where the jurisdiction would sue for recovery. If user fees are instead implemented, this would not be a form of double taxation as only those who choose to use the roadway and operate a vehicle in a way that causes a crash would be charged the fee. Proponents further argue that these fees are needed to supplement depleted emergency responder budgets and that the allocation of tax money to support them is solely for the purpose of making the service available and sustaining the infrastructure to support it.
The free public services doctrine does not apply in cases where damage to public property occurs because of the crash. In this case, the doctrine allows States to recover the cost to repair the infrastructure. A summary of the way States have interpreted this doctrine and addressed it with legislation is summarized in the Appendix.
The types of cost recovery different States have allowed include:
Many States have not enacted legislation either permitting or prohibiting specific types of cost recovery. This means that in these States the free public services doctrine governs, and allowable procedures are dictated by local court decisions. Where legislation exists, it can be classified into the categories shown below:
There are both proponents and opponents to legislation that allows agencies involved with TIM to recover costs. The most often stated arguments focus on the enactment of ordinances by local jurisdictions that allow response agencies to charge a fee for response. Table 5 shows common arguments used by both the opponents and proponents of accident recovery fees.
Fire departments bear a significant amount of cost when it comes to traffic incidents. They purchase and maintain some of the most expensive equipment at the crash scene, have rigid training requirements, and are often put in harm's way for the longest duration. Firefighters often experience many of the same costs whether they are career or volunteer personnel.
The U.S. Fire Administration (USFA) developed a publication that identifies sources of funding from Federal and local revenue sources with potential to supplement EMS agencies and fire departments budgets, including the Firefighter Investment and Response Enhancement (FIRE) Act, the Staffing for Adequate Fire and Emergency Response (SAFER) Act grant program(s), as well as other important grant programs.7 Many of these sources identified by the USFA may be applicable to TIM response resource needs.
According to the U.S. Fire Administration, emergency medical incidents comprise two-thirds to three-quarters of fire department calls.8 As described in the sample of a rural volunteer fire company shown at the right,9 there is no effort or emphasis placed on cost forecasting and tracking costs related to TIM because in many cases there is a large discrepancy between the costs to do business versus the amount that can be recovered. Similarly, at career fire departments where salaries are a major portion of costs, the emphasis is not usually placed on the type of call being responded to but on the pure volume of calls. In both the case of volunteer fire departments and career fire departments, the knowledge of how much of their operating budget is dedicated to TIM is seen as being of little benefit. Instead, the emphasis is on paying salaries (in career departments) and determining what the needs will be for gear and equipment.
The accurate assessment of costs associated with a fire company's TIM responses could, in fact, be useful in working with local and State officials to help identify not only fire company funding sources and levels, but the importance of a coordinated overall TIM approach.
Rural Volunteer Fire Company Experience
Q: How does your fire department manage the costs associated with responding to crashes?
A: We don't really track the differences in the type of events that we respond to. When we are planning for the next budget, we look at what our costs were from last year and add a percentage for inflation and rising costs, what we want to invest in next year and what the needed level of revenue will be to obtain our goals. For instance, we currently need to purchase a new rescue unit so we looked at the average amount of new and used rescue units then divided up the cost until the yearly amount that we need to save fits into what we think we can collect with fund raisers and other revenue sources. Currently, it may be 8 years or more until we can afford to get the vehicle we need, so we also have to consider what will need to be done to maintain the current rescue unit we have. Another important aspect to consider is that even though we know that an ambulance call will cost us approximately $450 - $500 and a response to a crash will cost $750, often we cannot collect that because Medicare for example, only pays $80 per call. So we have to write-off and subsidize the rest of the cost in other ways.
Thomas J. Schofield, President
The U.S. Fire Administration's publication on funding alternatives offers 10 different ways that fire departments can recover costs:10
While none of the 10 cost recovery methods mentioned above is directly linked to TIM, these methods are all ways that fire departments can recover costs in general. This recovery allows them to offer their services in their jurisdictions and can be enacted at the local government level.
In addition to the local cost recovery methods mentioned above, the U.S. Fire Administration's publication also highlighted eight methods that individual States can use to help fire departments offset operating costs.11
On June 8, 2010 the Madison County Board of Supervisors enacted an ordinance, pursuant to Section 32.1-111.14 of the Code of Virginia, to authorize an Emergency Medical Services ("EMS") Cost Recovery Program. Under this program the County will obtain financial reimbursement for the cost of providing emergency medical services and medically necessary ambulance transportation. EMS Cost Recovery will allow Madison County to recoup costs from individuals who benefit directly from these emergency services, including many non-County residents. The vast majority of costs collected will be reimbursed from Medicare, Medicaid and private insurance companies. Madison County will begin billing for EMS services, effective August 1, 2010.
Q: How will billing for EMS services work?
A: Beginning August 1, 2010, Madison County will generate a bill each time EMS services, including ambulance transports, are provided to a patient by the staff of the County's Department of Emergency Medical Services ("MEMS"). Madison County has contracted with Diversified Ambulance Billing, LLC ("DAB"). Following receipt of EMS services, a patient will receive correspondence asking for confirmation of residence address and insurance coverage. Once information about a patient's insurance coverage has been verified, a claim form will be forwarded to his insurance provider, Medicare, or Medicaid as may be applicable. Patients themselves will not be billed until all insurance options have been exhausted.
Q: Will I be billed for amounts not covered by insurance?
A: A County resident will be billed only to the extent of his or her Medicare, Medicaid or other health insurance coverage. Any remaining cost-sharing amounts (e.g., co-payments, deductibles) will be waived for County residents. If you are a County resident who is not covered by Medicare, Medicaid or any other health insurance coverage, charges for EMS services will be waived. If you are a non-resident, then your insurance company will be billed and you will subsequently receive a bill for applicable cost-sharing amounts remaining after insurance claims have been processed. Any non-resident who is without any form of insurance coverage will be billed for the entire amount of the EMS services delivered. If a patient who receives a bill is unable to pay, then the patient may apply for a financial hardship waiver.
Q: What are the billing rates for EMS services?
A: Madison County will charge a fee of $9.00 per mile for each ambulance transport and a fee of $350 to $575 for EMS services provided in connection with the transport, depending on the level of EMS care required by the patient. There are three levels of EMS care: (1) Basic Life Support (BLS); (2) Advanced Life Support-1 (ALS1); and (3) Advanced Life Support-2 (ALS2). Madison County's fees are established by resolution of the Board of Supervisors, consistent with rates allowed by the Center for Medicare and Medicaid Services (CMS) for our geographic region.
Q: I receive requests from the Volunteer Rescue Squad for donations. Does this program replace the need for volunteer funding?
A: No. Revenue recovered as a result of this program goes into the County's General Fund. Although the County's Volunteer Rescue Squad receives financial support from the County's General Fund each year, a significant portion of the volunteer agency's costs must be covered by donations received from the community.
The services associated with TIM are included in the recovery methods shown above since they are all efforts to recover the cost of providing service.
Since many fire departments also provide EMS service, the cost of operating the ambulance service is included in annual budget planning. Below is an example of fees being implemented for responding to emergencies by Madison County, Virginia.12
The example from Madison County, Virginia, shows that jurisdictions see the need to implement these types of fees but are very careful to be explicit in describing how the fees will be imposed, how and when they will be collected, and how much will be charged.
Overall, the state of the practice for TIM cost recovery within public safety groups such as volunteer and career fire departments and EMS providers is based on local ordinances and is typically not divided into a separate category for TIM.
As with fire and EMS services, law enforcement agencies provide staffing on a 24/7 basis regardless of the specific needs of citizens. For that reason, no significant emphasis is placed on cost management of TIM activities at law enforcement agencies unless the costs are being managed for a specific reason, such as grant reimbursement or targeted enforcement.
For cost recovery the experience is similar. Some States have enacted legislation that prohibits cost recovery associated with incident response while others are silent on the matter. The practice of recovering costs associated with TIM is not widespread among law enforcement agencies. The Florida Highway Patrol provided the following example of a cost management tool. Figure 7 shows an example of the system they use to record the agency's time spent dealing with a crash. This system combines the need to track time spent at crashes with elements that are usable as performance measures for elements on the standard incident timeline. Key data points collected include time of event, report, dispatch, arrival on scene, roadway clearance, and scene clearance.
To determine the extent to which TIM cost management and cost recovery is taking place at State transportation agencies, the Research Team conducted a survey of practitioners who belong to the NTIMC's TIM Network. The TIM Network is comprised of practitioners from all disciplines of traffic incident management. With responses received from 21 separate agencies, 15 respondents indicated that their agency performs at least one type of cost management while 9 agencies attempt to recover costs.
According to the agencies that indicated they manage TIM costs, the most frequently used type of cost management is planning. These agencies plan for TIM costs in a variety of categories, but the most common type of cost that is managed is for personnel overtime. Those costs are seen as most controllable when costs are being managed or eliminated. The most common types of TIM operational costs tracked are equipment time and personnel overtime.
Some discrepancy exists in the current practice between the costs that are planned for versus the costs that are tracked. As discussed in previous sections, most of the costs that are tracked fall under the tactical portion of a traffic incident. Costs for strategic and support activities are less documented.
TIM cost planning and tracking information were examined by asking three questions relative to how TIM cost information is collected and reflected through transportation agencies:
In most cases, the amount budgeted for TIM is typically only known at the local level, where employees are usually not required to record TIM activities individually. This indicates that it would be very difficult for many transportation agencies to determine total annual TIM expenditures. Only three of the responding agencies have specified areas within their budget management process or system that show a breakdown of these costs.
The solution for TIM cost management appears to coincide with the larger issues that face TIM regarding organizational visibility. As mid-level managers search for ways to express the overall benefit of a TIM program, a way to identify resources is needed to demonstrate the value of cost management and show how the knowledge of cost management activities can translate into a better understanding of the true return on investment.
As previously mentioned, the survey indicated that cost tracking is taking place at agencies. Figure 8 shows an example of cost tracking by the Kansas Department of Transportation for a crash where a truck hauling a backhoe struck a bridge. This event resulted in a long-term closure for at least a portion of the roadway while repairs were made to the bridge. As the image in Figure 8 shows, costs are tracked for four categories: direct labor, travel expense, equipment usage and materials. A hand-written note indicates that the majority of the labor costs were for traffic control.
It is unclear if there is a true demarcation point between TIM costs and the costs associated with repairing the infrastructure as described in the material category of the tracking sheet. However, for Kansas, the total cost was captured as being due to the crash.
Finally, survey respondents were asked to specify the methods that their agency uses to analyze and evaluate the costs associated with TIM. Respondents indicated performance measurements were the most frequently used method followed by cost-benefit ratios and a comparison of revenues and expenses.
The most common type of cost recovery employed by State transportation agencies is the recovery of those costs related to infrastructure damage. Many States have enacted legislation that allows for the transportation agency to submit claims to individuals or insurance companies for damages to infrastructure. Figure 9 shows an example of this type of legislation from Alabama.15
Another example of cost recovery can be found in California, where public agencies are allowed to collect fees from drivers that crash, require emergency response, and are found to be driving under the influence of drugs or alcohol. The applicable sections of the law are summarized in Figure 10.16
United States Department of Transportation - Federal Highway Administration