Licensing and Cronyism

This is a depressing but all too familiar story of crony protections for incumbent operators

Only one company is competing for Tempe’s lucrative contract for ambulance services to support the Fire Department.

The Tempe City Council chose to allow only Professional Medical Transport to compete for the contract because city officials believe that the state’s approval last year of Rural/Metro Corp.’s purchase of that company effectively ended competitiveness in the market.

Indeed, the Ambulance market used to be competitive. State law makes it nearly impossible to start an ambulance company, or for an existing company to get access to the Arizona market. However, this used to be ok, because there once were a handful of companies competing in the market. That meant that having a statute that artificially blocked new entrants wasn't a huge problem.

Then a strange thing happened...Rural Metro bought all the other companies. Then they hired a team of the best lobbyists in the state in order to prevent the law from being changed. Frankly, it's a brilliant move.

This session, I worked with a client that wants to break into the inter-facility transfer market. Inter-facility transfers are scheduled transports of stable patients who aren't able to ride in cabs, private cars or stretcher vans. They are by definition, non-emergency transfers, but they still require an ambulance. And that ambulance has to be licensed as an "ambulance". The problem is that it is statutorily impossible to break into the market...which like I said, was fine until Rural Metro bought the other companies.

Our bill to open up the market to competition didn't even get a hearing.

The one disagreement I have is that it was somehow "OK" to prevent competition when there were three competitors but not when there is one.  This reminds me of why Republicans can't be trusted to make a case for free market capitalism.  New competitors can bring just as much to the table in already crowded markets as they can to monopolies.  Were we "OK" when there were just 3 major networks, or are we better off with competition from 600 cable channels?  Were we "OK" with just the big 3 auto makers or are we better off with Toyotas and Kias as choices?

One of the great under-reported stories of the health care field has been the certificate of need process for hospitals which, in most communities, has prevented construction of competing hospitals.  So then, like in this example, all the hospitals in a local community buy each other, and an instant monopoly is created.  Capitalism is blamed, but in fact the resulting high prices are a result of government action.


  1. zjohna:

    Here in Fort Mill, SC three hospital groups have been fighting for over 10 years to see who will get the CON to build a hospital in this growing town. The CON has twice been awarded only to be challenged by the losers in court. 10 years past, and we still have to drive to the next town to get to a hospital. Tell me how this law is helping the average citizen.

  2. irandom419:

    Just let the cities get into it like in my area. That way at tax time, they can threaten to cut it. I never see levies for street sweepers or central planners or meter maids.