Rural/Metro Corp., one of the country’s largest ambulance operators, is buying Pacific and Bowers Ambulance, one of the area’s oldest and largest private ambulance companies, for an undisclosed amount. Pacific and Bowers has a significant presence in the San Fernando Valley region with 112 ambulances and 650 employees, many of them local. The company serves most area hospitals in providing non-emergency ambulance services. For Rural/Metro, a $530 million company based in Scottsdale, Ariz., the deal marks the company’s entry into the greater Los Angeles market. Small private operators nationwide continue to be swallowed up by increasingly larger, national players. Behind the new wave of consolidations are tighter reimbursement rates from Medicare, which is squeezing small operators, and the increasing cost of equipment and fuel. Already, this has resulted in some bankruptcy filings by small ambulance operators on the East Coast. Meanwhile, larger companies such as Rural/Metro see opportunity in expanding in the relatively stable and largely recession-proof health care market. “It’s really a win-win,” said Lucien Badica, marketing manager of Pacific and Bowers. “It’s getting harder for smaller companies to operate. With Medicare and MediCal reimbursements tightening, people getting sicker and fuel costing more, a larger company can do things that will benefit both employees and customers.” Partnering with a national company such as Rural/Metro will provide Pacific and Bowers “depth of expertise…allowing us to continue to provide the high quality patient transport services we have become known for,” Paul Scarborough, vice president of Pacific and Bowers, said in a statement. Elizabeth Merritt, a spokesman for Rural/Metro, confirmed the company has entered into a transaction to buy Pacific and Bowers. She said the company believes “exceptional opportunities remain for continued growth.” The deal is slated to be completed in December. Merritt would not provide terms of the deal. Pacific and Bowers is itself the result of a consolidation. In 2004, Pacific Ambulance Inc., a longtime Orange County operator, purchased Bowers Ambulance, the oldest private ambulance company in Los Angeles, started in 1938. The company is one of 82 licensed to operate in the city of Los Angeles, according to the Los Angles Emergency Medical Services Agency, which licenses ambulance operators. Of these only four are licensed to respond to 911 calls. The rest, including Pacific and Bowers, derive the vast majority of their income from inter-facility transports, agency officials said. Many of the region’s smallest operators were bought out in an initial wave of consolidation to sweep the industry in the mid 1990s. That wave was driven by a handful of companies, among them American Medical Response (AMR), which saw an opportunity to unite a highly fragmented business of mostly small mom and pop-type operators. AMR grew quickly from a small regional operator to a national operator with hundreds of millions in revenue by 1995. It was eventually bought by Laidlaw, Inc., which ultimately filed for bankruptcy. The company is now owned by Greenwood Village, Co.-based Emergency Medical Services Corp. (EMS), the largest private and 911 ambulance operator in the country. EMS reported $132 million in net income on $2.9 billion in revenue for the year ending Dec. 31, 2010. Its revenue increased 52 percent while net income rose 238 percent between 2006 and 2010, growth fueled largely by acquisitions, according to filings with the U.S. Securities and Exchange Commission. That industry shift resulted in many non-compete agreements with the mom and pop operators who stayed out of the business for about a decade, according to Cathy Chidester, director of the Los Angles Emergency Medical Services Agency. In the last few years, those small companies have come back into the business, and in recent years, the number of private operators in the Los Angeles area has swelled to 82, Chidester said. Most hold only a permit to operate from the California Highway Patrol. Chidester said her agency is now pushing for stricter licensing standards. Under an ordinance that will go into effect next July all private ambulance operators will need to be licensed by the agency and meet much tougher patient safety and care standards, she said. The tougher requirements may be what’s driving another wave of consolidations. Chidester said her agency has received numerous phone calls from consultants checking on the records of the city’s 82 licensed operators. “I’m not sure what’s going on,” she confessed. “But we’ve had calls from as far away as Denmark.” While the consolidation of the 1990s was domestic, it appears to be more international in nature this time, as companies such as Copenhagen-based Falck Danmark look to enter the potentially lucrative U.S. business. The company bought Los Angeles-based Care Ambulance Services in January. Care is one of four companies licensed by the city of Los Angeles to respond to 911 calls. It operates 135 ambulances in Los Angeles and Orange Counties. Falck has reportedly also bought shares in Rural/Metro, according to a report in the Arizona Republic earlier this year. Meanwhile, the larger companies — which are still on the prowl for small operators — are becoming attractive investments for private equity funds. Rural/Metro was sold in June to Warburg Pincus in a cash deal valued at about $438 million. EMS, which bought AMR, was sold to New York-based private-equity firm Clayton, Dubilier & Rice for $3.2 billion. The deal consisted of $875 million in equity and the rest was debt, according to a Dow Jones news report. When the ambulance industry went through its first phase of consolidation in the 1990s, many people argued that larger companies would be able to deliver better, more efficient service and be in a position to invest in costly new equipment. That didn’t necessarily pan out. AMR, which acquired hundreds of companies in a short span of time, had difficulties meeting the demands of local communities, according to published reports, and struggled to meet local public safety standards. The company lost some key contracts in cities such as Dallas, Houston, Boulder and Oklahoma City. Since then, the company has won back many of those contracts, including Boulder. The hope behind the new wave of acquisitions is that larger companies such as Rural/Metro can help small operators buy critical and often expensive equipment, and be more efficient in general. For example, Badica said, Bowers is looking forward to supplying all ambulances with electronic medical records capabilities. This enables the hospital where a patient is being transported to have all the patient’s vitals before the patient arrives.
Local Ambulance Firm Purchased
