Department of Health and Human Services 
OFFICE OF 
INSPECTOR GENERAL 
MEDICAL NECESSITY 
OF MEDICARE AMBULANCE SERVICES 
JUNE GIBBS BROWN 
Inspector General 
DECEMBER 1998 
OEI-09-95-00412  OFFICE OF INSPECTOR GENERAL 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, is to 
protect the integrity of the Department of Health and Human Services programs as well as the 
health and welfare of beneficiaries served by them.  This statutory mission is carried out through a 
nationwide program of audits, investigations, inspections, sanctions, and fraud alerts.  The 
Inspector General informs the Secretary of program and management problems and recommends 
legislative, regulatory, and operational approaches to correct them. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) is one of several components of the Office of 
Inspector General.  It conducts short-term management and program evaluations (called 
inspections) that focus on issues of concern to the Department, the Congress, and the public.  The 
inspection reports provide findings and recommendations on the efficiency, vulnerability, and 
effectiveness of departmental programs. 
OEI's San Francisco Regional Office prepared this report under the direction of Kaye D. Kidwell, 
Regional Inspector General, and Paul A. Gottlober, Deputy Regional Inspector General.  Principal 
OEI staff included: 
REGION  HEADQUARTERS 
Deborah Harvey, Project Leader
 Tricia Davis, Program Specialist

Robert Gibbons
 Alan Levine

Donald Loeb
 Linda Moscoe

Thomas Purvis
 Brian Ritchie

Barbara Tedesco

Stuart Wright

To obtain copies of this report, please call the San Francisco Regional Office at 415-437-7900. Reports 
are also available on the World Wide Web at our home page address: 
http://www.dhhs.gov/progorg/oei  E X E C U T I V E  S U M M A R Y  
PURPOSE 
The purpose of this inspection was to assess the medical necessity of a sample of Medicare 
ambulance services that did not result in hospital or nursing home admissions or emergency 
room care. 
BACKGROUND 
Medicare pays for medically necessary ambulance services when other methods of 
transportation would endanger the beneficiary's health.  Medicare reimbursement for 
ambulance services has increased substantially over the last decade from $602 million to 
almost $2.1 billion. 
We examined the Health Care Financing Administrations (HCFA) 1 percent sample of all 
ambulance claims submitted and paid by Medicare carriers from January through June 
1996.  We divided the 1 percent sample into groups based on where the ambulance supplier 
transported the patient, and we reviewed the associated claims for other significant services 
on the same date of service that may explain the medical necessity of the transport.  Of 
these, we identified a group of ambulance claims that did not result in hospital or nursing 
home admissions or emergency room care on the same date of service.  This group, 
hereafter called Group 7, comprised 6.3 percent of all ambulance services.  We then 
randomly selected 30 beneficiaries from Group 7 and collected the medical records for all 
services rendered on the same date as the ambulance transport.  Staff at two Medicare 
carriers completed the medical review and assessed whether (1) the transport and 
associated services were medically necessary and (2) the level of service was appropriate to 
the patients condition. 
FINDINGS 
Two-thirds of ambulance services in Group 7 were not medically necessary 
Twenty of the 30 sampled cases were not medically necessary because alternative 
transportation would not have endangered the patients health.  Of the 20 unnecessary 
cases, 70 percent were for nonemergency services such as routine transports for outpatient 
diagnostic tests or transports between doctors offices and nursing homes. 
We recognize that the 30-case sample is small, but with such a high percentage of 
unnecessary services, the sample size is sufficient to show that more than half of the 
services in this group are medically unnecessary at the 95 percent confidence level. 
Medicare Ambulance Services--Medical Necessity  1  OEI-09-95-00412  Medicare allows approximately $104 million each year for medically unnecessary 
Group 7 ambulance services 
Based on the sample, we estimate that approximately 70 percent of the allowed 
reimbursement was for ambulance services that did not result in hospital or nursing home 
admissions or emergency room care and for which an alternate, less costly means of 
transportation would have been more appropriate. 
RECOMMENDATION 
The HCFA should develop a prepayment edit to verify the medical necessity of 
ambulance claims that are not associated with hospital or nursing home 
admissions or emergency room care 
The Office of Inspector General is aware that HCFA plans to work with the ambulance 
industry and other affected parties to establish a negotiated fee schedule effective 
January 1, 2000.  This recommendation would provide a solution for one group of 
ambulance services until HCFA and the industry can better address issues of medical 
necessity, including clear and consistent definitions. 
AGENCY COMMENTS 
We received comments on the draft report from HCFA.  The HCFA concurred with the 
need for medical review of ambulance claims that are not associated with hospital or 
nursing home admissions or emergency room care.  However, due to HCFAs efforts to 
ensure that Medicare payment systems are renovated before January 1, 2000, the agency 
does not believe that it can implement a prepayment edit prior to implementation of the 
major overhaul of ambulance payment policies required by The Balanced Budget Act of 
1997.  In the interim, HCFA will ask its Medicare carriers to review ambulance data and 
decide whether edits accompanied by local medical review policies or focused medical 
review of potential aberrant suppliers are appropriate. 
OFFICE OF INSPECTOR GENERAL RESPONSE 
The Office of Inspector General appreciates that HCFA is undertaking a massive effort to 
ensure that all health care payment systems are fully and correctly operational before 
January 1, 2000.  We suggest that HCFA take whatever action it can now consistent with 
available resources and also include the issue identified in this report on their agenda during 
negotiations on the ambulance fee schedule. 
We also made changes based on HCFAs technical comments.  The full text of HCFAs 
comments appears in appendix C. 
Medicare Ambulance Services--Medical Necessity  2  OEI-09-95-00412  T A B L E  O F  C O N T E N T S  
PAGE

EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1

INTRODUCTION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  4

FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  9

Two-thirds medically unnecessary  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  9

High cost of unnecessary services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11

RECOMMENDATION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13

AGENCY COMMENTS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13

OFFICE OF INSPECTOR GENERAL RESPONSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13

APPENDICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15

A:  Proportion of medically unnecessary services  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15

B:  Cost estimate  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16

C:  Agency comments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  18

Medicare Ambulance Services--Medical Necessity  3  OEI-09-95-00412  I N T R O D U C T I O N  
PURPOSE 
The purpose of this inspection was to assess the medical necessity of a sample of Medicare 
ambulance services that did not result in hospital or nursing home admissions or emergency 
room care. 
BACKGROUND 
Medicare Coverage and Reimbursement of Ambulance Services 
Medicare pays for ambulance services when "the use of other methods of transportation is 
contraindicated by the individual's condition, but only to the extent provided in 
regulations."1  Health Care Financing Administration (HCFA) regulations state that 
ambulance services are covered only if other forms of transportation would endanger the 
beneficiary's health.  Usually, the patients are not ambulatory; that is, they are bedridden. 
Medicare does not cover other forms of transportation, such as a wheelchair or stretcher 
van, that could transport patients who do not require ambulance services. 
Medicare beneficiaries may receive medically necessary ambulance services while they are 
in the hospital under Part A coverage.  For example, a bedridden patient may be 
transported from one hospital to another for specialized treatments, such as radiology 
imaging or chemotherapy services.  The ambulance supplier is reimbursed by the first 
hospital because payment for these services is included in the hospital's prospective 
payment for the patient's stay. 
Part B covers ambulance services when Part A coverage is unavailable and the following 
three criteria are met: 
1.	 The vehicle and personnel providing the service meet certain quality and 
crew size requirements; 
2.  Other methods of transportation would endanger the patients health; and 
3.	 The ambulance trip, as a general rule, stays within certain distance and 
destination limitations. 
The cost of Medicare ambulance services has increased substantially over the last decade. 
1The Social Security Act, Section 1861(s)(7). 
Medicare Ambulance Services--Medical Necessity  4  OEI-09-95-00412  Reimbursement more than tripled between 1987 and 1996 from $602 million to almost 
$2.1 billion.  To address the increases, HCFA implemented new codes in 1995 that 
instructed Medicare carriers to assign one of four billing methods to ambulance suppliers in 
their jurisdictions.  The four methods differ by the degree to which suppliers can bill 
separately for their various charges including base rate, mileage, and supplies.  Currently, 
suppliers bill with codes that are based on the service status (emergency or 
nonemergency), the level of service (basic or advanced life support), and the billing system 
(all-inclusive rate or base rate, mileage, and supplies billed separately). 
Medical Necessity of Ambulance Services 
Medicare criteria state that ambulance services must be reasonable for the treatment of the

illness or injury involved.  Other criteria may include, but are not limited to:

<  emergency situations, such as accidents, injury, or acute illness;

<  the need to restrain the patient;

<  an unconscious patient;

<  the instability of the patients condition during transport;

<  sustained acute stroke or heart attack; or

<  severe brain hemorrhages.

Current HCFA guidelines do not define clearly the term "medical necessity."  Over the

years, HCFA has allowed the Medicare contractors to interpret the term based on the

medical practices of the local community.  Therefore, definitions may differ among the 25

Part B Medicare carriers who process ambulance claims.  An ambulance claim that is

denied by one carrier might be paid by another.

Previous Office of Inspector General Work on Medicare Ambulance Services 
The Office of Inspector General (OIG) has released several reports about the medical 
necessity of ambulance services.  In 1992 and 1994, the OIG found that advanced life 
support ambulances were used routinely for nonemergency trips, when, based on patients' 
medical conditions, basic life support ambulances could have met their transportation 
needs.2  Furthermore, Medicares allowance for advanced life support ambulance services 
had almost tripled in 4 years.3  Other OIG reviews of ambulance services to kidney dialysis 
patients found medically unnecessary transports and significant variances in payments to 
2Office of Inspector General, Review of Medical Necessity for Ambulance Services, October 1992 
(A-01-91-00513). 
3 , Follow-Up to Review of Medical Necessity for Ambulance Services, June 1995 
(A-01-94-00528). 
Medicare Ambulance Services--Medical Necessity  5  OEI-09-95-00412  suppliers within the same geographical areas.4 
Recent reports noted that (1) the current Medicare payment system lacks common 
sense,5 (2) Medicare ambulance costs and services are skyrocketing, and (3) while all 
States regulate ambulance services, less than half mandate levels of service and only one 
State requires advanced life support.6  The OIG continued to recommend that HCFA base 
reimbursement on the patients medical condition rather than the type of vehicle and 
personnel used. 
Proposed Changes for Medicare Ambulance Services 
The HCFA released a proposed regulation in June 1997 to revise the Medicare guidelines 
and reimbursement for ground ambulance services (air services were excluded).  The 
proposed regulation would base reimbursement primarily on services that are medically 
necessary for the beneficiary's condition rather than the type of vehicle and personnel used. 
Several new provisions, such as requiring suppliers to obtain written physician certification 
for scheduled nonemergency ambulance transports, were included. 
After HCFA released the proposed regulation, President Clinton signed The Balanced 
Budget Act of 1997.  The Act includes several provisions for ambulance services.  Major 
provisions: 
<	 mandate that HCFA work with the industry to establish a negotiated fee schedule 
effective January 1, 2000; 
<	 restrict Medicare increases to the Consumer Price Index minus 1 percent for 3 
years; and 
<	 authorize three demonstration projects with local governments to study alternative 
reimbursement methods for ambulance services. 
In March 1998, some members of Congress were concerned that various sections of 
HCFAs proposed regulation overlapped with ambulance payment issues in The Balanced 
Budget Act.  They then urged HCFA to incorporate these sections into the negotiations. 
The HCFA will start negotiations with the ambulance industry and other affected parties 
before the end of 1998. 
4 , Ambulance Services for Medicare End-Stage Renal Disease Beneficiaries: Medical Necessity, 
August 1994 (OEI-03-90-02130) and Ambulance Services for Medicare End-Stage Renal Disease 
Beneficiaries: Payment Practices, March 1994 (OEI-03-90-02131). 
5 , Medicare Ambulance Payments, November 1997 (OEI-05-95-00300). 
6 , State Ambulance Policies and Services, February 1998 (OEI-09-95-00410). 
Medicare Ambulance Services--Medical Necessity  6  OEI-09-95-00412  METHODOLOGY 
Targeted Sample Selection 
During initial data analysis, we examined a 1 percent sample of all Medicare ambulance 
claims paid under Part B between January and June 1996.  We reviewed combined hospital, 
nursing home, and outpatient data for each beneficiary.  We then: 
<	 divided the 1 percent sample into groups based on where the ambulance supplier 
transported the patient and when the service occurred, 
<	 reviewed some claims within each group for (a) consistency of the expected 
association between the transport and the explanatory claims and (b) correct 
coding, and 
<  adjusted the placement of claims within each group, if necessary. 
The following table shows the breakdown of the 1 percent sample of Medicare ambulance 
claims for January through June 1996.  The groups show the association between the 
transport and the patient outcome.  The percents may not total 100.0 percent due to 
rounding. 
Grou  Percent  Allowed 
Description of Ambulance Service  Frequency 
p  of Services  Amounts 
1 At beginning of inpatient stay  16,429  43.8  $ 4,621,716 
2 Included with emergency room visit  9,710  25.9  2,695,118 
3 At end of inpatient stay  5,545  14.8  1,154,362 
4 At end of skilled nursing stay  383  1.0  84,403 
5 At end of multiple-day outpatient claim  419  1.1  134,311 
6 Patients with end-stage renal disease  2,666  7.1  1,020,681 
7 Other claims not included above  2,368  6.3  724,437 
TOTAL  37,520  100.0  $ 10,435,028 
After reviewing a sample of claims in each group, we noted that one group (population size 
2,368 claims) was for ambulance transports that did not result in the expected hospital or 
nursing home admissions or emergency room care on the same date of service.  We 
selected this group, hereafter called Group 7, for further review.  We reviewed both Part A 
and Part B claims for this population.  Group 7 claims usually were not associated with 
other significant services on the same date of service that may explain the medical necessity 
Medicare Ambulance Services--Medical Necessity  7  OEI-09-95-00412  of the ambulance trip.  For the first half of 1996, Medicare reimbursed the 1 percent 
population of suppliers in Group 7 approximately $724,437.  If we assume that the last 6 
months mirror the first 6 months, we estimate that Medicare reimbursed suppliers in Group 
7 approximately $149.28 million for calendar year 1996. 
Medical Review 
We selected a simple random sample of 30 beneficiaries from Group 7 for medical review. 
We requested copies of ambulance trip reports and documentation submitted with 
ambulance claims.  We then collected medical records for other services rendered on the 
same date as the transport, such as physicians records and nursing home records.  When a 
patient used an ambulance within 1 week before and 1 week after the sampled transport, 
we requested additional records to document further the medical necessity for multiple 
transports. 
Post payment medical review staff at two Medicare carriers completed the medical review. 
We asked the medical reviewers to assess whether (1) the transport and associated services 
were medically necessary and (2) the level of service was appropriate to the patients 
condition.  We originally intended to use the 30 cases as a medical probe sample.  After 
completion of the medical review and analysis, we determined that we did not need a larger 
sample because the results of the 30-case sample were statistically valid. 
We used the results to: 
<  determine the percent of medically unnecessary ambulance services,7 
<	 calculate the overpayment for medically unnecessary services in the sampled Group 
7, and 
<	 estimate the potential savings for all claims in Group 7 for calendar year 1996, 
assuming the last 6 months mirror the first 6 months of the year. 
Interviews with Ambulance Suppliers 
We interviewed ambulance suppliers whose medical records were included in the simple 
random sample.  Respondents were national, municipal, and small family-owned suppliers. 
Using a structured discussion guide, we obtained data on their revenue mix of emergency, 
nonemergency, advanced life support, and basic life support services.  Suppliers described 
how they document medical necessity on ambulance trip reports and Medicare claims. 
This report is part of a series on Medicare ambulance services prepared by the Office of 
7See appendix A for the point estimate and confidence intervals for the proportion of medically 
unnecessary services. 
Medicare Ambulance Services--Medical Necessity  8  OEI-09-95-00412  Inspector General. 
Medicare Ambulance Services--Medical Necessity  9  OEI-09-95-00412  F I N D I N G S  
The following findings relate to the 6.3 percent of ambulance services in Group 7 only. 
Two-thirds of ambulance services in Group 7 were not 
medically necessary 
Most cases did not meet Medicares criteria for medical necessity 
In 20 of the 30 sampled cases, transportation by ambulance was unnecessary because other 
means of transportation would not have endangered the patients health.  The 20 cases did 
not meet a major criterion for Medicare payment.  Other medical records, especially from 
nursing homes and hospital outpatient departments, often disputed the patients bedridden 
status that was claimed in the ambulance report.  The table on the following page shows 
the samples breakdown by service status (emergency or nonemergency) and level of 
service (basic or advanced life support).8 
8Basic life support services are rendered by basic and intermediate emergency medical technicians, 
while the more intensive advanced life support services generally are rendered by paramedic emergency 
medical technicians. Though some suppliers may use different vehicles, the more important distinction 
between the levels of service is the personnel who staff the ambulance. 
Medicare Ambulance Services--Medical Necessity  10  OEI-09-95-00412  Medically Necessary? 
Service Status  Yes  No 
and Level of Service 
Cases  Percent  Cases  Percent 
in Sample  of Cases  in Sample  of Cases 
Basic 
3  10.0  2  6.7 
Life Support 
Emergency 
Advanced 
4  13.3  4  13.3 
Life Support 
Basic 
2  6.7  12  40.0 
Life Support 
Non-
emergency 
Advanced 
1  3.3  2  6.7 
Life Support 
Total  10  33.3  20  66.7 
We recognize that the 30-case sample is small, but with such a high percentage of 
medically unnecessary services, the sample size is sufficient to show that more than half of 
the services in this group are medically unnecessary at the 95 percent confidence level. 
(Refer to appendix A for details.) 
The 10 medically necessary cases were billed at the appropriate level of service.  Medical 
reviewers noted that the emergency advanced life support cases involved unconscious and 
unresponsive patients or patients with chest pain.  Services, such as oxygen and 
intravenous medications, were appropriate to the patients conditions and well-documented 
in the ambulance reports.  Though the medical necessity was questionable for one case, the 
patients condition was severe enough for hospital admission within 1 week. 
Most unnecessary transports were for nonemergency services 
Though medical reviewers found medically unnecessary cases in each service status and 
level of service, about 70 percent were for nonemergency services.  For example: 
<	 a patient was sitting unaided in a chair the day of and the day after the ambulance 
transport; 
<	 another patient was sitting in a wheelchair for a long period of time before the 
transport, and she refused to be assisted back to bed once the ambulance arrived; 
<  guerney transport would have been appropriate for two patients; 
Medicare Ambulance Services--Medical Necessity  11  OEI-09-95-00412  <	 a patient called for an ambulance himself because he wanted an injection to control 
his trembling after drinking alcohol for 12 hours; 
<	 one patient was transported to the doctors office for a follow-up appointment and 
then back to the nursing facility (a nonapproved Medicare transport); and 
<	 a pleasant and cooperative 92-year-old patient was ambulatory with a walker and 
minimal assistance from ambulance staff. 
Interviewed suppliers reported that they provide more nonemergency than emergency 
transports.  They report that 60 to 93 percent of their transports are nonemergency while 7 
to 40 percent are emergency transports.  They described that, aside from inter-facility 
transfers, their nonemergency transports include standby for special events such as high 
school sporting events, community fairs, holiday celebrations with fireworks, and music 
concerts.  They also provide emergency transportation as backup for their communitys 
primary 9-1-1 supplier. 
Suppliers claim that many medically unnecessary transports stem from lack of 
adequate information prior to pickup 
Some ambulance suppliers expressed frustration with the lack of complete and valid 
medical data on incoming calls, especially for nonemergency transports.  Ambulance staff 
often arrive and find that some patients, particularly in nursing homes, do not meet 
Medicares criteria for ambulance transportation.  Some nonemergency ambulance 
transports are completed for the convenience of the nursing home staff, especially for 
difficult patients.  For example, one patient was ambulatory with assistance from a nursing 
aide or a wheelchair.  However, the staff called an ambulance because the patient was 
noncommunicative (which was a normal situation for this patient) and exhibited obsessive-
compulsive tendencies. 
Suppliers often will transport patients with questionable medical necessity due to local 
medical standards and potential liability.  They prefer to err on the side of being overly 
cautious rather than denying transport.  One supplier commented, We make a lot of runs 
to take blood pressure and put patients back in their beds who have fallen out.  You never 
know when something will be serious. 
Medicare allows at least $104 million each year for medically 
unnecessary Group 7 ambulance services 
Medicare allowed approximately $9,479 for the 30-case sample, of which $6,606 (or 
70 percent) was for medically unnecessary ambulance services.  Applying the same 70 
percent rate to all Medicare ambulance services for the first 6 months of 1996, Medicare 
allowed approximately $52.1 million for the medically unnecessary services in Group 7.  If, 
as we believe, the last 6 months of claims in Group 7 mirror the first 6 months of claims, 
Medicare Ambulance Services--Medical Necessity  12  OEI-09-95-00412  then we estimate that Medicare allows as much as $104 million each year for medically 
unnecessary ambulance services.9  (See appendix B for the explanation of the cost estimate 
for the allowed amounts of medically unnecessary services in Group 7.) 
9This is a non-statistical estimate which multiplies the full-year 1996 Medicare allowance for 
Group 7 of $149.28 million by the proportion of medically unnecessary services which is 0.7. 
Medicare Ambulance Services--Medical Necessity  13  OEI-09-95-00412  R E C O M M E N D A T I O N  
The HCFA should develop a prepayment edit to verify the 
medical necessity of ambulance claims that are not 
associated with hospital or nursing home admissions or 
emergency room care 
The OIG recommends that HCFA screen incoming ambulance claims by matching them 
with hospital, nursing facility, emergency room, and physician claims.  This could be 
accomplished by means of a prepayment edit in the Common Working File database.  We 
expect that 90 percent of ambulance claims would pass through this screen successfully and 
would continue toward payment.  Most of the remaining claims would consist of the Group 
7 claims that we described in this report.  Carriers would conduct a manual review of the 
remaining claims to determine whether they should be paid.  These claims also could be 
analyzed for further program vulnerabilities such as fraud or abuse by individual ambulance 
suppliers. 
The OIG is aware that HCFA plans to work with the ambulance industry and other affected 
parties to establish a negotiated fee schedule effective January 1, 2000.  This 
recommendation would provide a solution for one group of ambulance services until HCFA 
and the industry can better address issues of medical necessity and consistent definitions. 
AGENCY COMMENTS 
We received comments on the draft report from HCFA.  The HCFA concurred with the 
need for medical review of ambulance claims that are not associated with hospital or 
nursing home admissions or emergency room care.  However, due to HCFAs efforts to 
ensure that Medicare payment systems are renovated before January 1, 2000, the agency 
cannot divert resources to implement a prepayment edit prior to the implementation of 
ambulance payment policies mandated by The Balanced Budget Act of 1997.  In the 
interim, HCFA will ask its Medicare carriers to review ambulance data and decide whether 
edits accompanied by local medical review policies or focused medical review of potential 
aberrant suppliers are appropriate. 
The full text of HCFAs comments appears in appendix C. 
OFFICE OF INSPECTOR GENERAL RESPONSE 
The Office of Inspector General fully understands that HCFA is undertaking a massive 
Medicare Ambulance Services--Medical Necessity  14  OEI-09-95-00412  effort to ensure that all health care payment systems are fully and correctly operational 
before January 1, 2000.  We suggest that HCFA take whatever action it can now consistent 
with available resources and also include the issue identified in this report on their agenda 
during negotiations on the ambulance fee schedule. 
We also made changes based on HCFAs technical comments. 
Medicare Ambulance Services--Medical Necessity  15  OEI-09-95-00412  APPENDIX A 
Proportion of Medically Unnecessary Services

To calculate the proportion of services that were medically unnecessary, we simply divided 
the number of services in our sample (30 services) by the number that the medical 
reviewers determined were unnecessary (20 services).  The resulting estimate and 95 
percent confidence interval are displayed below. 
95 percent confidence interval 
Point estimate 
Lower  Upper 
0.67  0.50  0.84 
Ambulances--Medical Necessity  OEI-09-95-00412 
16  APPENDIX B 
Cost Estimate for Allowed Amounts 
of Medically Unnecessary Services in Group 7 
In this report, we used the more conservative of two methods for calculating the amount 
that Medicare allowed for medically unnecessary services in our target population.  These 
methods, which are described in more detail below, were (1) projection of the mean and 
(2) ratio estimation.  Both methods yielded approximately the same estimate.  We used the 
ratio estimate method in this report because it represented the more conservative (smaller) 
allowed amount.  From this ratio estimate, we then calculated a nonstatistical estimate for 
all twelve months of 1996. 
Projection of the Mean 
For this method, we multiplied the sample mean medically unnecessary amount ($220 per 
service) by the number of services in our target population (236,800 services)10 to estimate 
the amount that Medicare paid for medically unnecessary services provided to our target 
population during January through June 1996.  The resulting estimate and 95 percent 
confidence interval are displayed below. 
95 percent confidence interval 
Point estimate 
Lower  Upper 
$52.1 million  $36.5 million  $67.8 million 
Ratio Estimation 
For this method, we calculated the ratio of (1) the medically unnecessary allowed amount 
for January through June 1996 ($52.1 million, as calculated above) to (2) the total allowed 
amount for the same time period ($74.8 million, as projected from our sample).  The 
resulting ratio and 95 percent confidence interval are displayed on the next page. 
10For the calculations in this appendix, we treated 1 percent-sample amounts, multiplied by 100, as if 
they represented population amounts.  Because the one-percent sample was so large, this approximation 
would not have changed the 95 percent confidence intervals that we report in this appendix. 
Ambulances--Medical Necessity  OEI-09-95-00412 
17  APPENDIX B 
95 percent confidence interval 
Point Estimate 
Lower  Upper 
0.697  0.5213  0.8725 
We then multiplied this ratio by $72.44 million, which represents the actual allowed amount 
for the population that we selected our sample from.11  The table below shows the resulting 
estimate and 95 percent confidence interval. 
95 percent confidence interval 
Point Estimate 
Lower  Upper 
$50.5 million  $37.8 million  $63.2 million 
We then calculated a nonstatistical estimate for the amount that Medicare allowed for 
medically unnecessary services in our target population for all twelve months of 1996.  We 
multiplied the ratio calculated earlier (0.697) by the amount that Medicare allowed for our 
target population during all twelve months of 1996 ($149.28 million) to arrive at an 
estimated $104.0 million for medically unnecessary services. 
11The $74.8 million is a projection from our sample, while the $72.44 million is the actual amount for 
the population from which that the sample was selected. 
Ambulances--Medical Necessity  OEI-09-95-00412 
18  APPENDIX C 
Agency Comments 
The full text of comments received from the Health Care Financing Administration follows. 
Ambulances--Medical Necessity  OEI-09-95-00412 
19  APPENDIX C 
Ambulances--Medical Necessity  OEI-09-95-00412 
20  APPENDIX C 
Ambulances--Medical Necessity  OEI-09-95-00412 
21