George Grob

Deputy Inspector General

for Evaluation and Inspections

Medicare Payments for Ambulance Services--Comparison to Non-Medicare Payers

(OEI-09-95-00411)

See Addressees Below

This memorandum is a progress report on the Office of Inspector Generals ongoing evaluation

of Medicare ambulance services, policies, and costs.  We are aware of the upcoming

negotiations with the ambulance industry and other parties on the ambulance fee schedule as

mandated in the Balanced Budget Act of 1997.  To provide information that the Health Care

Financing Administration might consider during the negotiations, we contacted a purposeful

sample of payers including 10 commercial health plans, 4 Medicaid programs, the Department

of Veterans Affairs, and TRICARE, the Department of Defenses new regional managed health

care program for military personnel and their families.  We compared Medicare payments to

rates we obtained from these payers to assess the differences between their payment structures

and Medicares.

We were unable to draw any conclusions about differences in payment levels between these

payers and Medicare.  The payment rates are so varied that meaningful comparisons are not

possible.  Therefore, we cannot recommend that negotiations involving the Medicare fee

schedule be based on the fee schedules of any other government agencies or the private sector. 

However, we were able to discern some broad patterns and issues which we believe are

important to recognize and understand during the negotiated rulemaking process.

In summary, we found that:

1.  Fee-for-service is the prevailing reimbursement method among commercial payers 
and other Federal payers. 
2.  Like Medicare, these payers pay different amounts for advanced life support (ALS) 
and basic life support (BLS) ambulances. 
3.  Emergency services are generally more expensive than nonemergency services, 
regardless of  the type of vehicle. 
4.  Like Medicare, commercial health plans and other Federal payers base 
reimbursement on historical charges, not costs. 
5.  Historical charges do not appear to be related to the cost of providing ambulance 
services.  Page 2 - See Addressees Below 
6.  Unlike Medicare, other payers sometimes negotiate lower rates, particularly for 
nonemergency transportation. 
7.  Medicaid, although increasingly a managed care program, offers examples of 
innovative approaches to reimbursement for its fee-for-service populations. 
I have attached for your information a description of the various payment practices we 
encountered in this preliminary review. 
Our work in this area continues.  In an upcoming report, we will recommend alternative 
approaches to the Medicare fee schedule for ambulance services. 
If you have any questions or would like additional information, please call me at 
(202) 619-0480 or have your staff contact Mary Beth Clarke at (202) 619-2481. 
Attachment 
Addressees: 
Robert Berenson, M.D. 
Director, Center for Health Plans 
and Providers, HCFA 
Kathleen A. Buto 
Deputy Director, Center for Health Plans 
and Providers, HCFA 
Tom Gustafson 
Director, Planned and Providers 
Purchasing Policy Group, CHPP/HCFA  Attachment 
COMPARISON TO NON-MEDICARE PAYERS 
Payment Policies Among Commercial Health Plans and Other Federal Payers 
Sampled commercial health plans, lacking alternative ways to price ambulance services, use 
reimbursement methods similar to Medicares.  Although specific arrangements between 
commercial health plans and suppliers vary, the result is still fee-for-service or discounted fee-for-
service, which includes fee schedules.  The sampled plans typically pay different rates for ALS and 
BLS transport and may offer benefits that Medicare does not, such as critical care transport 
(CCT) and neonatal transport.  CCT generally refers to an ambulance with a nurse or physician on 
board to treat the patient.  The nurse or physician is in addition to the personnel operating the 
ambulance. 
Some plans pay rates reflecting bundled charges for mileage; others pay separately for miles. 
Some plans receive discounts from suppliers; others pay a contract rate.  Commercial health plans 
sometimes have no control over 911 emergency rates, which counties or cities may establish and 
impose on all payers.  Although some commercial health plans have negotiated discounts, 
particularly for nonemergency transportation, they still reimburse suppliers based on historical 
charges rather than the actual cost of providing ambulance transportation. 
Sample Fees for Nonemergency Ambulance Transportation 
Payments for ambulance services vary greatly among commercial payers.  We obtained fee 
schedules from 7 of the 10 commercial health plans we contacted.  The three plans for which we 
have the most complete information are in Los Angeles and Orange counties in southern 
California.  The fee schedules for two commercial health plans in the same geographic area show 
the broad range of rates for nonemergency ambulance transportation (see the chart below).  Both 
of these  plans operate in an area where the city or county sets rates for 911 emergency 
ambulance transport.  These rates are nonnegotiable, and all payers must use the established rates.  Comparisons Between Two Commercial Health Plans 
for Nonemergency Ambulance Transportation 
Health  ALS  BLS  CCT  Miles in 
Mileage 
Plan  Base Rate  Base Rate  Base Rate  Base Rate 
Plan A*  $125 - $550  $90 - $421  $260**  $0 - $12  0 - 15 
Plan B***  $300 or  $155 or $351  $400 or  $7  5 
$554  $714 
Note: 
*  The commercial health plan provided several contracts covering different geographic 
areas. Each location has a different rate, thereby explaining the range of rates for the same 
plan. 
**  The commercial health plan negotiated a critical care transport (CCT) rate with one 
supplier only. The other contracts do not include this transport option with a separate base 
rate. 
***  The rates for this commercial health plan cover two counties only. 
Source: Office of Evaluation and Inspections analysis, 1998. 
Commercial Health Plan A once had arrangements with 14 different ground ambulance suppliers; 
today, a large national ambulance corporation owns 4 of these companies, and the commercial 
plan currently is negotiating with the corporation to provide statewide coverage.  Commercial 
Health Plan Bs contract rates for nonemergency transportation cover all charges (e.g., base rate, 
supplies) with the exception of miles over the first 5 miles. 
Mileage is one area where health plans successfully negotiated concessions from ambulance 
suppliers.  Unlike Medicare, some of the health plans we contacted negotiated base rates that 
included a certain number of miles, typically 5 to 15. 
Comparison of Rates for Emergency and Nonemergency Transportation 
Like Medicare, commercial health plans and other Federal payers pay different rates based on the 
type of vehicle.  We found that emergency (or unscheduled) services are more expensive than 
nonemergency (or scheduled) services, regardless of the type of ambulance.  The average rates for 
one large, regional health plan show the impact of the type of service on rates. 
2
 One Plans Average Rates for ALS and BLS 
Percent 
Vehicle and Type of Service  Reimbursement 
Difference 
Emergency  $511 
ALS  28.1% 
Nonemergency  $399 
Emergency  $441 
BLS  78.5% 
Nonemergency  $247 
Source:  Office of Evaluation and Inspections analysis, 1998. 
Other Federal Payers 
We contacted the TRICARE Support Office and the Department of Veterans Affairs to determine 
how their health care systems cover and reimburse ambulance services.  TRICARE, the successor 
to CHAMPUS, pays for ALS and BLS and uses a reasonable charge methodology similar to 
Medicares to adjudicate ambulance claims in different geographic locations.  The program allows 
separate charges for supplies and mileage.  TRICARE contracts with prepaid health plans to 
provide care to members electing managed care coverage.  These plans may contract directly with 
ambulance suppliers (similar to managed care Medicaid programs). 
The Department of Veterans Affairs, which serves 3.4 million beneficiaries, has regional contracts 
with varying rates for ambulance services.  Local or regional medical centers have the option of 
contracting with ambulance suppliers or paying traditional fee-for-service rates through 911 or 
local suppliers.  The Department generally pays flat rates for ambulance transport (i.e., BLS, 
ALS, and advanced cardiac life support) regardless of the mileage in a metropolitan area, but will 
reimburse mileage for transportation beyond the city limits or in a rural area.  For example, the 
Department of Veterans Affairs Medical Center in San Francisco, California allows $135 per BLS 
scheduled transport from the medical center with an additional $6.75 per mile outside the city 
limits.  If the transport is ALS or an emergency, an additional $250 is added to the $135 base rate. 
The Veterans Affairs Medical Center must pre-approve all nonemergency transports or the 
supplier will not receive payment. 
Selected Medicaid Plans 
Although most States are increasing their enrollment of Medicaid recipients in managed care 
programs, most States maintain fee-for-service plans for selected populations.  We contacted 
Arizona, Oregon, Minnesota, and New York to find out how they cover and pay for ambulance 
transportation under their fee-for-service programs.  We obtained information from all States 
except New York.  The three States that responded have high managed care enrollment for their 
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 Medicaid populations,* but maintain small fee-for-service ambulance programs.  We reviewed
these programs to determine how closely they resembled Medicares ambulance benefit. 
Oregons fee schedule reflects a different approach to payment.  The States prepaid health plans 
may negotiate a subcontract with ambulance suppliers based on the State contract or use the 
States rates, which were effective on March 1, 1998: 
Emergency = $166 base rate (includes the first 10 miles) 
Nonemergency = $137.60 base rate (includes the first 10 miles) 
Mileage = $3.44 per mile after the first 10 miles 
Oregons payment policy is unusual because the State does not base payment on the type of 
vehicle used.  We learned that the State adopted the emergency/nonemergency distinction as the 
result of a compromise with the ambulance industry, which wanted the State to end prior 
authorization for emergency transport.  The State agreed, provided that the industry accepted one 
rate for both BLS and ALS services.  Oregon continues to subject nonemergency transportation 
to prior authorization. 
In Minnesota, the State Legislature establishes the rates payable under Medicaid for ambulance 
transportation.  The fee schedule mirrors Medicares coding system but differs dramatically with 
respect to payment.  The State has two rates:  $249.14 and $85.75.  The higher rate is paid only 
when there is an emergency transport in an ALS vehicle.  All other services, even an emergency 
transport in a BLS vehicle, are paid at the lower rate. 
Arizonas fee schedule contains separate charges for BLS and ALS base rates, mileage, and 
supplies.  Unlike most payers, though, Arizona also reimburses suppliers that respond to an 
emergency call and treat patients at the scene without transporting them.  The suppliers are 
eligible for reimbursement limited to the approved base rate and medical supplies. 
*As of June 30, 1997, 81 percent of Arizonas Medicaid population and 83 percent of Oregons 
Medicaid population were enrolled in managed care plans.  Although the comparable figure for 
Minnesota is only 42 percent, effective January 1999, the State will enroll all but its disabled 
population in managed care plans. 
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