Underneath the county's ambulance contract fight is a mountain of debt that's coming due
As Knox County wrestles with whether to extend its deal with struggling ambulance provider American Medical Response, some local leaders are sounding the alarm that a crisis could be smoldering for the county's privately owned firefighting service as well.
Global Medical Response owns American Medical Response, which in turn operates Rural Metro Fire, the private outfit that fights fires for the county outside of the city of Knoxville. GMR, as it's commonly called, has amassed $4.3 billion in debt that is coming due in 2025, according to Bloomberg, and credit rating agencies are warning off investors.
The fear locally is that GMR, gasping under its debt, might unload Rural Metro to help lift the weight. That could happen at the same time Knox County is trying to fix its ambulance problem, one so severe it prompted Knoxville police spokesman Scott Erland to tell Knox News last month "there’s no guarantee an ambulance will show up quickly or at all."
County commissioners will vote this month whether to approve a contract with American Medical Response, commonly called AMR, for ambulance service after the company won the recommendation of a committee selected by County Mayor Glenn Jacobs.
Commissioners had some tough questions on Nov. 2 for the committee, including whether it had all the information it needed to make an informed recommendation.
Additionally, commissioners will have to quickly factor in whether GMR's debt and how it could affect Rural Metro's future is a canary in the coal mine for the ambulance provider. Commissioners can vote only yes or no on the contract, and if they vote no, the clock is ticking fast on selecting another ambulance provider.
At the Nov. 2 meeting to discuss the ambulance contract, Commissioner Larsen Jay asked AMR representatives directly about their fiscal health and their parent company's "astronomical" debt. His direct questions did not elicit direct answers.
"To me it’s a huge deal. If we’re about to pick a provider, we need to make sure they’re financially solvent, A, have the resources to invest, B, and have a prospect of a healthy company in the future, C,” said Jay, who is one of two at-large commissioners who represent all of Knox County.
One clue that the sale of Rural Metro could be under consideration is discussions that have arisen between Rural Metro and the county about having Knox County's 911 dispatch center take responsibility from Rural Metro for fielding calls and sending firefighting crews to scenes. Rural Metro currently handles that task itself.
Donna Itzoe, a GMR spokesperson, declined to answer questions from Knox News about whether incorporating Rural Metro dispatch calls into the county's system was a precursor to a possible sale.
Major debt coming due
AMR Regional Vice President Brett Jovanovich told commissioners at the Nov. 2 workshop the company is positioned well to handle its debt.
"I will tell you that the financial models we have run for Knox continue to be sustainable going forward," he said. "I don’t think it’s uncommon for an organization our size that has large capital in terms of ambulance equipment, aircraft (and) technology to have substantive debt."
Investor-ratings firms are skeptical about the health of GMR, the parent company. Both Moody’s (Caa2) and S&P (CCC+) downgraded GMR’s credit rating earlier this year. The company is no longer “investment grade.”
“The outlook is negative. Moody's expects operational expenses to remain high thus challenging GMR's earnings growth, profitability and liquidity,” Moody’s review said.
Itzoe, the GMR spokesperson, declined to answer a list of questions from Knox News about the parent company's financial stability and what that means for AMR and Rural Metro.
Those questions included:
If AMR is selected as Knox County’s EMS provider, what would you tell the community about the debt load and how it will or won’t impact service going forward?
Asked another way, how does, if at all, the upcoming debt payoff/refinancing (if GMR refinances) impact AMR’s ambulance service?
More to the point, is AMR financially viable enough to enter into a renewed contract with Knox County given its parent company’s debt load?
Locally, Rural Metro has been in talks with the 911 board about the potential of the county 911 service handling dispatch. If that were to happen, is that related to GMR’s debt load?
Related, what would be the purpose of having the county 911 service handle Rural Metro dispatch?
Experts in the field have suggested GMR may begin to siphon off services to help better manage the debt load. One of those services could reasonably be Rural Metro. Is that a possibility?
If Rural Metro were to be sold in the coming year, what impact would that have on fire and EMS services in Knox County?
Knox County Chief Operating Officer Dwight Van de Vate told Knox News that county leaders know about the possibility Rural Metro could be sold based on anecdotal information from within the industry and of GMR’s financial position. Neither are a concern, he said.
Rural Metro has been bought and sold several times, he pointed out. A change in ownership is “not cause for panic,” he said.
Van de Vate said he didn’t know whether the effort to get Rural Metro folded into the county's 911 dispatch center sets up Rural Metro for sale, but said county leaders think having all dispatchers under one roof is better for everyone anyway.
“We support consolidating all emergency dispatch. It just makes good sense for the emergency communications district to (be in the same place) to cross train personnel and physical proximity,” he said.
Tyler Whetstone is an investigative reporter focused on accountability journalism. Connect with Tyler by emailing him at tyler.whetstone@knoxnews.com. Follow him on Twitter @tyler_whetstone.
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This article originally appeared on Knoxville News Sentinel: 'Astronomical' debt is next battle in Knox County ambulance contract
