United States Government Accountability Office

GAO Report to Congressional Committees

AMBULANCE 

PROVIDERS 

Costs and Expected 

Medicare Margins 

Vary Greatly 

May 2007 

 

GAO-07-383 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

May 2007

AMBULANCE PROVIDERS 

Costs and Expected Medicare Margins 

Highlights of GAO-07-383, a report to Vary Greatly 

congressional committees 

In 2002, Medicare implemented a 

national fee schedule designed to 

standardize payments for ambulance

services. The Medicare Prescription

Drug, Improvement and 

Modernization Act of 2003 (MMA) 

required GAO to study ambulance 

service costs. GAO examined 

providers’ costs of ground

ambulance transports in 2004 and 

factors that contributed to cost

differences; average Medicare

ambulance payments expected 

under the national fee schedule in

2010 and how those payments will 

relate to providers’ costs per 

transport; and changes that 

occurred in Medicare beneficiaries’

use of ambulance transports from

2001 to 2004. GAO estimated costs 

of ambulance transports based on a 

nationally representative survey of 

215 ambulance providers that did 

not share costs with nonambulance 

services. Providers that shared costs 

with other institutions or services 

and could not report their costs for

ambulance services separately, such

as fire departments, were excluded

because their reported costs 

appeared unreliable. GAO used its 

survey, Medicare claims, and other 

data for its analyses. 

What GAO Recommends

GAO recommends that the

Administrator of CMS monitor 

utilization of ambulance transports 

to ensure that Medicare payments 

are adequate to provide for

beneficiary access to ambulance

services, particularly in super-rural 

areas. CMS agreed with GAO’s 

recommendation. 

Costs of ground ambulance services were highly variable across providers that 

did not share costs with nonambulance services in 2004, reflecting differences

in certain provider and community characteristics. Costs per transport among 

these providers varied from $99 per transport to $1,218. Providers without 

shared costs that had higher costs per transport typically had fewer transports 

per year, a greater percentage of transports in which more than a basic 

medical intervention occurred, more transports in super-rural areas (rural 

counties with lowest population density), lower productivity—measured as 

number of transports furnished per staffed hour, and a greater percentage of

revenues from local tax support. 

Average payments under the national fee schedule in 2010 are expected to be 

higher than historical payments, but providers’ Medicare margins will vary 

greatly. GAO could not assess whether, on average, providers without shared 

costs would break even, lose, or profit under the national fee schedule, 

because the average Medicare margin for providers without shared costs was 

estimated to fall from negative 14 percent to positive 2 percent. However, GAO 

estimated that approximately 39 to 56 percent of providers without shared 

costs would have average Medicare payments above their average cost per 

transport under the national fee schedule in 2010. 

From 2001 to 2004, utilization of ambulance transports per beneficiary 

increased 16 percent overall. However, use declined by 8 percent in superrural areas. 

Declining utilization coupled with potentially negative Medicare margins in 

super-rural areas, which could be exacerbated when the MMA temporary 

payment provisions expire, raise questions as to whether Medicare payments 

will be adequate to support beneficiary access in super-rural areas. 

Distribution of Cost per Transport for Providers without Shared Costs, 2004 

Providers

0

100

200

300

400

500

600

700

800

900

1,000

Source: 2005 GAO Survey of Ambulance Services.

415

Cost per transport in 2004 dollars

0 100 200 300 400 500 600 700 800 900 1,000 1,100 1,200

Note: Based on a sample of 215 providers, weighted to represent more than 5,200 providers in the 

United States that did not share costs with nonambulance services. 

www.gao.gov/cgi-bin/getrpt?GAO-07-383.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Kathleen M. 

King at (202) 512-7119 or kingk@gao.gov. 
Contents 

Letter 1

Results in Brief 6

Background 7

Costs per Transport Were Highly Variable, Reflecting Differences 

in Certain Provider Characteristics 17 

Average Payments under the National Fee Schedule Will Be 

Greater Than Average Historical Payments, but Providers’ 

Expected Medicare Margins Will Vary Greatly 22 

MMA Provisions Resulted in Greater Average Payments for HigherCost Super-Rural Transports and Adjusted Payments Regionally 

Where No Significant Cost Differences Were Observed 27 

Medicare Beneficiaries’ Use of Ambulance Transports Increased 

from 2001 to 2004, Except in Super-Rural Areas 29 

Conclusions 30

Recommendation for Executive Action 31 

Agency and External Comments and Our Evaluation 31 

Appendix I Data and Methods 34 

Appendix II Comments from the Centers for Medicare & 

Medicaid Services 52 

Appendix III GAO Contact and Staff Acknowledgments 54 

Related GAO Products 55 

Tables 

Table 1: Summary of MMA Temporary Payment Provisions, 

Implemented July 1, 2004 16 

Table 2: Estimated Average Cost per Transport for Provider 

Characteristics That Affect Costs 20 

Table 3: Payments Prior to and under the National Fee Schedule 

after MMA Provisions Expire 23 

Page i GAO-07-383 Ambulance Providers’ Cost 
Table 4: Expected Average Medicare Margins under the National 

Fee Schedule for Providers without Shared Costs in 2004 

Dollars 24

Table 5: Average Payments prior to MMA Implementation and after 

Implementation 28

Table 6: Percentage Changes in Average Payments prior to MMA 

Implementation and after Implementation, by Region 29 

Table 7: Ambulance Transports per 1,000 Beneficiaries in Urban, 

Rural, and Super-Rural Areas 30 

Table 8: Provider and Local Area Characteristics Included in 

Analysis of Average Cost per Transport, 2004 41 

Table 9: Results for Average Cost of an Ambulance Transport 

Regression—Estimated Effects of Selected Provider and 

Local Area Characteristics on the Average Cost of 

Ambulance Transports for Providers, Not Including Impact 

of Productivity and Community Tax Support 43 

Table 10: Results for Average Cost of an Ambulance Transport 

Regression—Estimated Effects of Selected Provider and 

Local Area Characteristics on the Average Cost of 

Ambulance Transports for Providers, Including Impact of 

Productivity and Community Tax Support 44 

Table 11: Census Divisions 47 

Table 12: Average Mile per Transport, First Half of 2004 49 

Table 13: Mileage Rates 50 

Figures 

Figure 1: Medicare Ambulance Payment Formula under the 

National Fee Schedule 13 

Figure 2: National Fee Schedule and Regional Fee Schedule 15 

Figure 3: Distribution of Cost per Transport for Providers without 

Shared Costs in 2004 18 

Figure 4: Expected Medicare Margins for Urban, Rural, and SuperRural Providers without Shared Costs 26 

Page ii GAO-07-383 Ambulance Providers’ Cost
Abbreviations 

ALS advanced life support 

BLS basic life support 

CF conversion factor 

CMS Centers for Medicare & Medicaid Services 

CPI-U Consumer Price Index for All Urban Consumers 

EMS emergency medical services 

EMT emergency medical technician 

GPCI geographic practice cost index 

MMA Medicare Prescription Drug, Improvement and 

Modernization Act of 2003 

MSA metropolitan statistical area 

NECMA New England county metropolitan area 

NFS national fee schedule 

RVU relative value unit 

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Page iii GAO-07-383 Ambulance Providers’ Cost 
United States Government Accountability Office

Washington, DC 20548 

May 23, 2007

The Honorable Max Baucus 

Chairman 

The Honorable Charles E. Grassley 

Ranking Member 

Committee on Finance 

United States Senate 

The Honorable John D. Dingell 

Chairman 

The Honorable Joe Barton 

Ranking Member 

Committee on Energy and Commerce 

House of Representatives 

The Honorable Charles B. Rangel 

Chairman 

The Honorable Jim McCrery 

Ranking Member 

Committee on Ways and Means 

House of Representatives 

In 2005, ambulance service providers completed more than 12.6 million 

ground transports for Medicare beneficiaries.1

 Medicare paid more than 

$4 billion for ground ambulance transports and is likely the largest single 

payer of ambulance services in the United States.

As part of a series of Medicare payment reforms in 1997, Congress 

required the Health Care Financing Administration, now the Centers for 

Medicare & Medicaid Services (CMS), to develop a national fee schedule 

for Medicare ambulance services, which was implemented in 2002.2

Historically, CMS had used two methods to pay for ambulance services, 

which resulted in wide variations in payment for the same service among 

different types of ambulance service providers. In particular, CMS had 

 1

We use the term providers to refer to all types of organizations that provide ambulance 

transports for Medicare beneficiaries.

2

42 U.S.C. § 1395m(l). 

Page 1 GAO-07-383 Ambulance Providers’ Cost 
used one method—reasonable costs3

—to pay hospital-based providers. It 

used another method—reasonable charges4

—to pay other, nonhospitalbased types of ambulance service providers. This meant that hospitalbased and nonhospital-based providers were paid different amounts for 

the same ambulance services. 

In 2002, CMS began phasing in a national fee schedule that established a 

single payment method for all ambulance services regardless of the type of

provider.5

 This fee schedule standardized Medicare payments for 

ambulance services. In general, providers strive to keep their costs of 

delivering a service at or below the standard fee schedule rate for that 

service. Under the Medicare ambulance national fee schedule, providers 

that have costs of delivering ambulance services above the fee schedule 

payment lose the difference between the payment amount and their costs, 

while providers with costs below the fee schedule payment are able to 

keep the difference between the payment amount and their costs. In 

aggregate, these differences are known as Medicare margins and express 

whether the provider makes a profit or loss on its Medicare transports. 

Some providers rely heavily on Medicare revenues and adequate Medicare 

margins help ensure the continuing availability of beneficiaries’ access to 

ambulance services. 

CMS phased in the ambulance national fee schedule from April 2002 

through December 2005. During this transition, the new fee schedule 

payments were blended with the previous reasonable-cost payments for 

hospital-based providers and reasonable-charge payments for nonhospitalbased providers. In 2003, Congress passed the Medicare Prescription Drug, 

Improvement and Modernization Act (MMA), which introduced several 

temporary payment provisions, including a regional fee schedule that 

overlapped with the transition to the national fee schedule.6

 Beginning in

 3

Reasonable-cost payments were based on the provider’s cost of providing ambulance 

services as reported on cost reports.

4

Reasonable-charge payments were based on the bill from the ambulance service provider 

but were subject to an upper limit. 

5

The national fee schedule applies to ground and air ambulance services, but this report

and our analysis are limited to ground ambulance services only, which include water 

ambulance services and account for nearly all ambulance services. We use the terms 

service, transport, and ambulance service to refer to ground ambulance transport services 

only. 

6

Pub. L. No. 108-173, § 414, 117 Stat. 2066, 2278-80 (2003). 

Page 2 GAO-07-383 Ambulance Providers’ Cost 
July 2004, these temporary payment provisions were expected to add 

about $840 million to Medicare payments for ambulance services through 

December 2009, when the last of these provisions are set to expire. 

The Medicare, Medicaid, and SCHIP Benefits Improvement and Protection

Act of 20007

 and the MMA required GAO to study ambulance service costs. 

As discussed with the congressional committees of jurisdiction, in this 

report we (1) examined the differences in providers’ costs of ambulance 

transports in 2004 and the factors that contributed to these cost 

differences, (2) assessed how the ambulance national fee schedule in 2010 

is expected to affect average ambulance payments and how those 

payments will relate to providers’ costs per transport, (3) determined the 

effect of MMA temporary payment provisions on ambulance payments, 

and (4) described the change that occurred in Medicare beneficiaries’ use 

of ambulance transports from 2001 to 2004. 

To examine differences in costs of providing ambulance transports, we 

conducted a national survey of ambulance providers in 2005. In our 

survey, we requested information about providers’ costs, revenues, 

transports, and organizational characteristics for their most recently

completed fiscal year.8

 We selected a stratified,9 random sample of 500 

eligible providers that billed Medicare, and we received 321 completed 

questionnaires for a response rate of 64 percent. We used this nationally 

representative sample of 321 providers to describe the ambulance 

industry.10 However, after excluding two cost outliers, our analysis was 

further limited to a subgroup of providers that (1) did not share costs with 

other institutions or services or (2) shared costs but reported costs of 

ambulance services separately from the costs of their other services. Our 

analysis and findings are nationally representative of this subgroup of 

ambulance providers, which we refer to as providers without shared 

 7

Pub. L. No. 106-554, appendix F, § 436, 114 Stat. 2763, 2763A-527 (2000). 

8

The GAO Survey of Ambulance Services asked providers to report on their organizations’ 

costs of providing ground ambulance services. As such, the survey measures organizations’

expenses, or spending, for ground ambulance services. 

9

The sample was stratified by five types of ambulance providers: hospital-based, volunteer, 

fire-based, government, and freestanding. 

10To make our survey sample representative of all Medicare ambulance providers, we

computed a sample weight for each respondent provider. 

Page 3 GAO-07-383 Ambulance Providers’ Cost 
costs.11 We excluded 104 providers that shared costs of ambulance 

services with other institutions or nonambulance services and could not

distinguish their costs for providing ambulance services from other costs, 

including but not limited to all fire departments. We excluded these 

providers because their reported costs appeared to be unreliable. The 

resulting sample size for our analysis was 215 providers without shared 

costs. Although our sample is nationally representative of an estimated 

5,200 providers without shared costs, the small sample size along with the 

variability of responses reduces the precision of our estimates, increasing 

the range of the 95 percent confidence intervals we report. A 95 percent 

confidence interval is the range within which we expect the true 

population estimate to fall 95 percent of the time, and it is the range of the 

confidence interval that expresses the precision of our estimates. 

To examine factors that contributed to differences in costs, we used our 

survey data and Medicare data supplemented by data from two other 

sources. The Oil Price Information Service was our source for the average 

annual retail price of fuel by zip code, and the United States Postal Service 

supplied building rents because it tracks its facility costs in each zip code.

We used regression analysis to analyze the relationships between various

provider and local area characteristics and cost per transport among 

providers without shared costs. We also compared Medicare claims data 

for all nonrespondents with those of respondent providers without shared 

costs and determined that our cost estimates were not biased by 

nonresponse. See appendix I for details regarding our survey, other data 

sources, data limitations, and the analytic methods we employed. 

To assess the effect of the ambulance national fee schedule on payments, 

we used Medicare claims data to compute average payments for 

ambulance transports in 2001, before the implementation of the 

ambulance national fee schedule, and in 2004, 2 years after the phase-in of 

the fee schedule had begun. For Medicare payment analyses, payments 

were expressed in 2004 dollars to exclude the effects of inflation. We also 

 11We applied our sample weights to the subgroup so the providers were nationally 

representative of all ambulance service providers without shared costs. 

Page 4 GAO-07-383 Ambulance Providers’ Cost 
compared average payments for urban, rural, and super-rural transports.12

We used Medicare claims data and payment formulas as specified in 

federal regulations to simulate average payments under the national fee 

schedule in 2010, after all of the MMA provisions expire, but computed 

these payments in 2004 dollars, the year that best reflects the cost data 

collected in our survey. To compare the simulated Medicare payments 

under the national fee schedule for providers without shared costs with 

the costs per transport of those providers, we computed providers’ 

Medicare margins—the percentage difference between average Medicare 

payments and providers’ costs per transport.13 All costs per transport and 

provider margins are based solely on our sample of providers without 

shared costs, and for this reason, these estimates are reported with their 

confidence intervals. 

We also assessed the effect of the MMA temporary payment provisions on 

payments in 2004 using Medicare claims data by examining the change in

payments from the first half of the year, before the MMA changes went 

into effect, with the second half of the year, when MMA payment 

provisions had their maximum effect. To assess the change in Medicare 

beneficiaries’ use of ambulance transports from 2001 to 2004, we used 

Medicare claims and CMS enrollment data, which contain information 

about beneficiaries, to compute transports per 1,000 beneficiaries for both 

years. 

We tested the internal consistency and reliability of our survey data and all 

non-Medicare data sources and determined that all data sources were 

adequate for our purposes. We conducted our work from July 2004 

through April 2007 in accordance with generally accepted government 

auditing standards. 

 12To define urban, rural, and super-rural transports, CMS uses the metropolitan statistical 

areas (MSA) definitions established by the Office of Management and Budget. During the 

period of our study, CMS defined urban transports as those that originate within MSAs and

New England county metropolitan areas (NECMA), rural transports as those that originate

in rural counties that are outside of MSAs and NECMAs as well as small towns and rural 

areas within MSAs or NECMAs that are isolated from central areas by distance or other 

features, such as mountains. CMS defines super-rural transports as those that originate in

the bottom 25 percent of rural areas as defined by population density. 

13This comparison assumes that providers’ cost structures under the fee schedule would be

the same as they were in 2004. 

Page 5 GAO-07-383 Ambulance Providers’ Cost 
Costs of ground ambulance transports were highly variable across 

providers without shared costs, reflecting differences in certain provider 

characteristics. Costs per transport for providers without shared costs 

averaged $415, but varied from $99 to $1,218 per transport—a range of 

more than $1,100. Contributing to the variability were differences in 

providers’ volume and mix of transports; service area (urban, rural, or 

super-rural); productivity, which we defined as the number of transports 

per staffed hour; and the percentage of total revenue derived from local 

tax support. Providers without shared costs had higher costs per transport 

when they had fewer transports per year, a greater percentage of 

transports in which more than a basic medical assessment or intervention

occurred, and more transports from super-rural areas than providers 

without shared costs that did not have these characteristics. In addition, 

providers without shared costs that had lower productivity and those 

receiving a greater percentage of revenues from local tax support had 

higher costs per transport than providers without shared costs that had 

higher productivity and less local tax support. Other provider and local 

area characteristics, such as type of provider, region as determined by 

census division, building rent, and price of fuel, did not significantly affect

average costs per transport among providers without shared costs. 

Results in Brief 

Average payments under the national fee schedule in 2010, after all of the 

MMA temporary payment provisions are set to expire, are expected to be

higher than payments in 2001, but Medicare margins for providers without 

shared costs will vary greatly. In 2010, average ambulance national fee 

schedule payments are estimated to be 3 percent higher overall than 

payments in 2001, after adjusting for inflation and assuming that providers 

bill the maximum amounts allowed. Further, a greater percentage than the 

overall increase in payments will accrue to rural and super-rural 

transports, on average, while urban transports will receive a decrease in 

payments under the national fee schedule in 2010. We could not assess 

whether providers without shared costs will break even, lose, or profit, on 

average, under the ambulance national fee schedule after the MMA 

temporary payment provisions expire, because the 95 percent confidence

interval for the average expected Medicare margin for providers without 

shared costs spanned from negative 14 percent to positive 2 percent when 

we took into account the number of respondents in our sample and the 

range of their reported costs. However, across all providers without 

shared costs, we estimated that 39 to 56 percent will have average 

Medicare payments above their average costs per transport under the 

ambulance national fee schedule in 2010. 

Page 6 GAO-07-383 Ambulance Providers’ Cost 
The MMA’s temporary payment provisions, which included base- and 

mileage-rate increases as well as the introduction of a regional fee 

schedule, resulted in raised average ambulance payments overall, 

particularly for super-rural transports, which we determined were 

typically more costly to provide. However, regional payment adjustments 

by census division under the MMA did not appear to be warranted on the 

basis of regional cost differences. The regional fee schedule increased 

payments substantially for some regions but not others. After controlling 

for various characteristics that affected the costs of providing ambulance 

transports, we did not discern any significant differences in average cost 

per transport across regions. 

From 2001 to 2004, Medicare beneficiaries’ use of ambulance transports 

increased overall, even in those regions that had a decrease in average 

payments after the MMA was implemented. However, beneficiaries’ use in 

super-rural areas decreased by 8 percent over the same period. The 

decline in the use of super-rural ambulance transports did not appear to be

related to any significant change in the population of Medicare 

beneficiaries residing in super-rural areas. 

In light of the variability in ambulance providers’ Medicare margins and 

the potential for negative margins to have an impact on beneficiary access,

we recommend that the Administrator of CMS monitor utilization of 

ambulance transports to ensure that Medicare payments are adequate to 

provide for beneficiary access to ambulance services, particularly in 

super-rural areas. In its comments on a draft of this report, CMS stated 

that it agreed with our recommendation. External commenters generally

agreed with our findings. 

Ground ambulance services are provided by a wide range of organizations

that differ in their organizational structure, types of services offered, 

staffing, and revenue sources. Local conditions—including whether 

providers are affiliated with other organizations; whether their service 

areas are predominately urban, rural, or super-rural; and the amount of 

community-dedicated revenues—contribute to this diversity. 

Background 

In addition, communities have few, if any, tools to help them decide the 

optimal organizational structure, staffing, or amount of funding for 

ambulance services, given local conditions. Although there have been 

Page 7 GAO-07-383 Ambulance Providers’ Cost 
efforts to establish national performance or quality standards,14 there is 

limited information about how to best evaluate the costs of providing 

ambulance services in a community. In recent years, industry associations

and federal agencies have worked to develop a data system and 

mechanisms for measuring the performance of emergency medical 

services (EMS); however, these tools cannot yet be applied to measure 

performance and evaluate the efficiency of ambulance services.15 The lack 

of data and performance standards makes it difficult to assess whether 

any given provider is delivering quality care or whether services are being 

provided efficiently. 

Organizational structures differ in that some ambulance providers are 

affiliated with another institution, such as a hospital or fire department, 

and in that providers may or may not offer other types of services, such as 

hospital services, fire suppression, rescue, or wheelchair transportation. 

Providers affiliated with another institution or that offer other types of 

services may share resources and operational costs, such as building 

space, administrative support, or personnel, with these other entities and 

services. About two-fifths of the ambulance industry shared operational 

costs with other institutions or services in 2004.16 Nine percent of the 

ambulance industry was affiliated with a hospital, while 37 percent was 

affiliated with a fire department and 21 percent was affiliated with another 

government agency. Other communities (33 percent of the ambulance 

industry in 2004) were served by freestanding, for-profit or not-for-profit 

provider organizations. 

The types of services offered and the staff employed also vary among 

providers. Some providers perform only emergency transports, in 

 14The Commission on Accreditation of Ambulance Services and the Commission of

Accreditation of Medical Transport Systems have established ambulance service 

accreditation standards. 

15The National Association of State EMS Officials has worked with other industry 

associations and federal partners to develop tools for measuring the performance of EMS

systems: (1) EMS system indicators, which were released for public comment and are

being finalized; (2) the National EMS Information Management System; and (3) a cost

framework for cost analysis in EMS research. The American Ambulance Association 

published its Community Guide to Ensure High-Performance Emergency Ambulance 

Services in 2004. 

16Unless otherwise noted, all background information on the ambulance industry is from 

the GAO 2005 Survey of Ambulance Services. These estimates are based on the 321 total 

providers that responded to our survey. 

Page 8 GAO-07-383 Ambulance Providers’ Cost 
response to a 911 or equivalent call, while other providers offer 

nonemergency transports, which are typically transfers from one facility to

another and may be scheduled in advance. In 2004, 45 percent of the 

ambulance industry performed only emergency transports; 55 percent 

performed emergency and nonemergency transports. Some providers 

perform only basic life support (BLS)17 transports because their staff are 

not certified to perform more intensive medical assessments and 

interventions, such as advanced life support (ALS)18 and other more 

complex services. In 2004, 9 percent of the ambulance industry specialized

in only ALS and more complex Medicare transports, such as those 

requiring one or more ALS services or respiratory care; 14 percent 

performed only BLS Medicare transports; and 86 percent provided a mix 

of BLS, ALS, and more complex Medicare transports.19 Fire departments 

are more likely to be specialized in ALS and more complex services. 

According to the fire departments that responded to our survey, 

70 percent of their Medicare transports, on average, required ALS or more

complex services; for other providers ALS and more complex transport 

services constituted only 49 percent of their Medicare transports. 

Ambulance providers use of a variety of staff to deliver services to their 

communities. First, providers and communities determine what 

proportion of their staff will be emergency medical technicians (EMT) 

trained to perform BLS services, and what proportion will be EMTintermediates or paramedics, who have training to perform more intensive 

ALS interventions.20 In 2004, 77 percent of providers that completed our 

survey reported having at least one staff member trained as a paramedic, 

 17BLS services include basic, noninvasive interventions to reduce morbidity and mortality 

associated with acute out-of-hospital medical and traumatic emergencies. 

18ALS services include advanced, invasive, and pharmacological interventions to reduce

morbidity and mortality associated with acute out-of-hospital medical and traumatic 

emergencies. 

19Under the Medicare program, there are seven levels of ambulance transports. BLS and

ALS transports each constitute two levels, emergency or nonemergency. The remaining 

levels of service—ALS Level 2 and specialty care transport (both of which involve invasive 

or specialized care) and paramedic ALS intercept (when a paramedic provides ALS 

services but does not transport the patient)—made up less than 2 percent of all Medicare 

transports in 2004. 

20EMT-Basic personnel are trained in BLS services only. EMT-Intermediate personnel are 

qualified to perform essential advanced techniques and to administer a limited number of 

medications. Paramedics have the competencies of EMT-Intermediate personnel in 

addition to other enhanced skills and can administer additional interventions and 

medications. 

Page 9 GAO-07-383 Ambulance Providers’ Cost 
nurse, or physician, but the remaining 23 percent of respondent providers 

relied on staff with less training than a paramedic. Other staffing choices 

include whether to employ career-oriented paid staff, rely on volunteers, 

or use a mix of paid and volunteer staff. Some providers choose to employ 

cross-trained staff.21 In 2004, two-fifths of the ambulance industry relied 

substantially on volunteer staff.22 In addition, providers and communities 

make different choices about whether to maintain backup vehicles and 

staff or to rely to a greater extent on nearby providers for backup 

assistance. 

Providers’ service areas can be urban, rural, super-rural, or a mix of areas. 

During 2004, CMS defined urban transports as those that originate within 

metropolitan statistical areas (MSA) and New England county 

metropolitan areas (NECMA), rural transports as those that originate in 

rural counties that are outside of MSAs and NECMAs,23 and super-rural 

transports as those that originate in the bottom 25 percent of rural areas as

defined by population density. About half of the ambulance providers 

served predominately urban areas, and the other half served 

predominately rural and super-rural areas.24 However, three-fourths of all 

Medicare transports originated in urban areas. Therefore, rural and superrural providers performed fewer transports on average than urban 

providers. In addition, rural and super-rural transports were longer than 

urban transports, on average, requiring more time and resources per 

transport. In 2004, urban Medicare transports averaged 7 miles, while rural 

Medicare transports averaged 13 miles and Medicare transports from 

super-rural areas averaged 20 miles.

Providers have several potential revenue sources depending on their 

communities and their choices about funding ambulance services. 

 21Cross-trained staff typically refers to firefighters who are also trained as EMTs. 

22We defined substantial use of volunteer staff as 20 percent or more of staff hours spent 

providing ambulance services, exclusive of administration. 

23Rural areas can also be small towns and rural areas within large metropolitan counties 

that are isolated from central areas by distance or other features, such as mountains. 

24From this point forward in the report, we refer to providers that served predominately 

urban, rural, and super-rural areas as urban, rural, and super-rural providers, respectively. 

We classified providers as super-rural if 60 percent or more of their Medicare transports in

2004 originated in a super-rural zip code. We classified providers as rural if they did not 

meet the super-rural definition and 60 percent or more of their Medicare transports in 2004

originated in rural or super-rural zip codes. We defined providers as urban if they did not

meet the rural or super-rural classifications. 

Page 10 GAO-07-383 Ambulance Providers’ Cost 
Revenue sources can include community tax support (such as revenue 

from local governments); charitable donations; state and federal grants; 

subscription programs;25 and reimbursements from Medicare or Medicaid 

patients, and private health insurance companies. Not all providers receive 

revenues from all sources, and the mix and amount of revenues available 

may vary.26 For example, 48 percent of the ambulance industry indicated

that a state or local government approves the fees they may choose to 

charge. In communities that limit ambulance providers’ fees, providers 

may bill Medicare (and other payers) less than the allowed amount and 

therefore do not receive the maximum Medicare payment allowed for their 

services. In 2004, Medicare payments for ambulance transports accounted 

for 31 percent of the providers’ revenues, on average, while Medicare 

beneficiaries accounted for about 40 percent of their transports during 

that same year.27 However, the percentage of Medicare revenues among 

providers ranged from less than 1 percent to 80 percent. Furthermore, 

different communities provide different levels of tax support to address 

specific issues, such as ensuring a minimum level of service in remote 

areas or being equipped with more sophisticated transport vehicles or 

having more highly trained staff. 

 25A subscription program is an arrangement in which an ambulance service provider is paid 

an annual fee for providing emergency transportation for a community. 

26In 2004, the annual spending of providers that responded to our survey ranged from less 

than $10,000 to more than $70 million. 

27This estimate is based on a smaller sample of 209 providers that reported Medicare 

revenues and total revenues on the GAO 2005 Survey of Ambulance Services. 

Page 11 GAO-07-383 Ambulance Providers’ Cost 
The ambulance national fee schedule was part of a series of payment 

reforms to make Medicare a more equitable and prudent purchaser of 

health care services. Phased in from April 2002 through December 2005, 

the national fee schedule standardized payment rates and reduced wide 

variations in payments for the same service. 

Medicare Ambulance 

National Fee Schedule 

Medicare ambulance payments under the fee schedule have two 

components: a base-rate payment and a mileage payment.28 The base-rate 

component of ambulance payments under the fee schedule consists of the 

relative value unit (RVU), the conversion factor (CF), and a geographic 

adjustment factor. Ambulance RVUs account for the relative resources 

needed to provide services during an ambulance transport.29 The 

ambulance CF converts the RVU into a payment expressed in dollars and 

is set by CMS annually. Ambulance base-rate payments are also adjusted 

by a geographic practice cost index (GPCI), which is intended to account

for regional differences in the cost of providing ambulance services.30 The 

mileage component consists of the number of miles traveled during an 

ambulance transport multiplied by the applicable mileage rate. (See fig. 1 

for an example of the payment formula.31) 

 28Medicare ambulance transports must be deemed medically necessary in order for 

Medicare payments to be disbursed. 

29There is an RVU for each of the seven levels of service defined by Medicare. 

30The practice expense portion of the physician fee schedule’s GPCI is used to adjust the 

ambulance national fee schedule. 

31See 42 C.F.R. § 414.601 et seq. 

Page 12 GAO-07-383 Ambulance Providers’ Cost 
Figure 1: Medicare Ambulance Payment Formula under the National Fee Schedule 

Source: GAO analysis of CMS information.

1.90 

x

$176.04

x

1.166a

2

x

$5.65

1

STEP

$373.34 $11.30

2

STEP

+ = $384.64

RVU 

x

CF

x

GPCIa

Number 

of miles

x

Mileage 

rate

1

STEP

Base rate

payment

Mileage

payment

2

STEP

Total fee schedule

ambulance payment + =

Example of a fee schedule 

ambulance payment, after all 

MMA temporary payment 

provisions expire, for an ALS 

emergency transport traveling 

2 miles within Washington, DC

General framework Hypothetical example

Note: Payments are expressed in 2004 dollars.

a

The GPCI is applied to only 70 percent of the unadjusted base rate payment, which is the product of 

the RVU and the CF. For example, the base rate payment equals 1.90 x $176.04 x [0.30 + (0.70 x 

1.166)]. The RVU, CF, GPCI, and mileage rate are based on 2004 values. 

The ambulance national fee schedule was phased in from April 2002 

through December 2005 by blending new fee schedule payments with 

historical payments. During this transition, the national fee schedule 

portion constituted a greater share of the total blended ambulance 

payment each year until January 2006, when the historical payment 

portion of the blend was discontinued. For example, in the latter part of 

Page 13 GAO-07-383 Ambulance Providers’ Cost 
2002, total ambulance payments were a blend of 20 percent under the 

national fee schedule and 80 percent under the historical payment system. 

In 2004, the blend was 60 percent national fee schedule and 40 percent 

historical payment system. (See fig. 2 for further details on the blending of 

historic payments and national fee schedule payments.) 

MMA Temporary Payment 

Provisions 

The MMA introduced several temporary ambulance payment provisions 

that were implemented in 2004, the last of which expires at the end of 

2009. CMS estimates that these payment adjustments will add $840 million 

to Medicare ambulance services over the 5 years they are in effect. The 

MMA provisions increased payment rates for urban and rural transports 

and for transports 51 miles or greater. The MMA also provided a 

significant base rate increase for transports originating in super-rural areas 

and provided for a new regional fee schedule based on the nine census 

divisions.32

The regional fee schedule was designed to ease the transition from the 

historical payment system to the national fee schedule. The introduction 

of the regional fee schedule overlapped with the phase-in of the national

fee schedule. The regional fee schedule gave temporarily higher 

ambulance payments than what would generally be paid under the 

national fee schedule to ambulance providers in census divisions that had 

historically higher payments. If the regional base-rate payment was 

determined to be greater than the national base-rate payment for a 

particular region, then the region received the more advantageous blend of 

the regional fee schedule base-rate payment and the national fee schedule 

base-rate payment. For example, in the second half of 2004 under the 

regional fee schedule, affected regions received a blend of 80 percent of 

their regional fee schedule base-rate payment and 20 percent of the 

national fee schedule base payment rate. This base-rate payment was then 

further blended with historical payments as a part of the gradual phase-in 

of the ambulance national fee schedule.33 The regional fee schedule 

component of the base rate blend was reduced each year from 2005 

through 2007, and expires at the end of 2009. (See fig. 2 for further details 

 32In this report we use the term regions to refer to the nine census divisions as defined by

the U.S. Census Bureau. See table 11 in app. I for a description of the nine census divisions. 

33The national fee schedule portion blend with historical payments includes mileage 

payments. The regional fee schedule is only applicable to the base rate payment. 

Page 14 GAO-07-383 Ambulance Providers’ Cost 
on the blending of historical, national fee schedule, and regional fee 

schedule payments.) 

Figure 2: National Fee Schedule and Regional Fee Schedule

0

20

40

60

80

100

2004 2005 2006 2007 2008 2009 2010 e 2002 2003 b 2001a

Percentage of total reimbursement

Year

Regional fee schedule base rate payment

National fee schedule base rate payment

Source: GAO analysis of CMS information.

0

20

40

60

80

100

2002 2003 2004 2005 2006 2007 2008 2009 2010 b 2001a

Year

Historic fee schedule payment

National fee schedule payment

Percentage of total reimbursement

100

80

20

60

40

40

60c

20

80c

100c 100d 100d 100d 100

Regional fee schedule in effect from July 1, 2004 through Dec. 31, 2009

Regional fee schedule in effect from July 1, 2004 through Dec. 31, 2009

A.

Blend of historical 

reasonable costs

and charges and

national fee 

schedule payments, 

including mileage

B.

Blend of regional 

fee schedule 

base rate payment 

and national fee 

schedule base 

rate payment, 

excluding mileage 100

20

80d

20

80d

20

80d

40

60c

60

40c

80

20c

Note: All years refer to calendar years unless otherwise specified.

a

January 1, 2001 through March 31, 2002. 

b

April 1, 2002 through December 31, 2002. 

c

The national fee schedule payment portion includes MMA increases of 1 percent and 2 percent for 

urban and rural transports, respectively, and an approximate 23 percent base rate increase for superrural transports. 

Page 15 GAO-07-383 Ambulance Providers’ Cost 
d

The national fee schedule payment portion includes an MMA base rate increase of approximately 

23 percent for super-rural transports only. 

e

July 1, 2004 through December 31, 2004. 

In addition to providing for a regional fee schedule, the MMA temporarily 

required higher payment rates for super-rural transports. As a result, base

rate payments for transports originating in super-rural areas increased 

about 23 percent. The MMA also provided for a 25 percent increase in the 

mileage rate for every ambulance mile traveled exceeding 50. Finally, the 

MMA required an increase in payment rates for mileage and transports 

originating in urban and rural areas by 1 percent and 2 percent, 

respectively. (See table 1 for MMA temporary payment provisions and 

their expiration dates.) 

Table 1: Summary of MMA Temporary Payment Provisions, Implemented July 1, 

2004 

Payment provision Expiration date

The regional fee schedule December 31, 2009 

An increase in the base rate for super-rural transportsa December 31, 2009 

A 25 percent increase in the urban and rural mileage rate for 

every ambulance mile exceeding 50

December 31, 2008

A 1 percent and 2 percent increase for urban and rural transports 

and mileage, respectively 

December 31, 2006 

Source: 42 U.S.C. § 1395m(l)(10)-(13). 

a

CMS determined that this increase would be approximately 23 percent. 69 Fed. Reg. 40288 (July 1, 

2004). 

Medicare Margins and 

Costs 

A provider’s Medicare margin under a fee schedule generally depends on 

whether the provider’s costs of delivering a service are below its Medicare 

payments for the service. Under the ambulance national fee schedule, 

providers with costs per transport less than the Medicare payment for that 

transport are able to retain the difference between the fee schedule 

payment and their costs per transport. Likewise, providers with costs per 

transport above the national fee schedule payment will lose the difference 

between the Medicare payment and their costs per transport. Therefore, 

ambulance providers that can control their costs per transport may have

an advantage over those that cannot control their costs per transport. 

Page 16 GAO-07-383 Ambulance Providers’ Cost 
A 2003 GAO study found that transport costs are likely to be higher in less 

densely populated rural areas because rural providers furnish fewer 

transports and because fewer transports were linked to higher costs per 

transport.34 As a result, we recommended that CMS adjust payments for 

transports in rural counties with particularly low population density to 

help ensure Medicare beneficiaries’ access to ambulance services in those

areas. Subsequently, the MMA increased payments for super-rural 

transports from July 1, 2004, through December 31, 2009. The report also 

found that the majority of ambulance providers’ costs were related to 

readiness—the availability of ambulance and crew for immediate 

emergency response—and were fixed costs. Fixed costs, such as staff on 

call, vehicles, building space, and administration, generally do not increase 

as the number of transports increases. Fuel costs and supplies are not 

fixed costs because they increase with the number of transports. 

Costs of ground ambulance transports were highly variable across 

providers without shared costs; an average ambulance transport ranged 

from a low of $99 to a high of $1,218 during 2004, the year for which we 

gathered data. The variability of costs per transport reflected differences 

in certain characteristics—volume and mix of transports; service areas 

(urban, rural, and super-rural); productivity, which we defined as 

transports per staffed hour; and amount of local tax support.35 As 

expected, low volume, a greater percentage of ALS and more complex 

transports, and more transports from super-rural areas were key 

characteristics that helped explain why some providers without shared 

costs had higher costs per transport. Two other provider characteristics—

productivity and amount of local tax support—were also associated with

higher costs per transport for providers without shared costs. Other 

provider and local area characteristics—such as type of provider, region, 

building rent, and price of fuel—did not significantly affect average costs 

per transport among providers without shared costs. 

Costs per Transport 

Were Highly Variable, 

Reflecting Differences 

in Certain Provider 

Characteristics 

 34GAO, Ambulance Services: Medicare Payments Can Be Better Targeted to Trips in Less

Densely Populated Rural Areas, GAO-03-986 (Washington, D.C.: Sept. 19, 2003). 

35Transports per staffed hour is the total number of transports divided by the total number 

of hours that an ambulance and crew were staffed and available to respond to an

emergency call.

Page 17 GAO-07-383 Ambulance Providers’ Cost 
Providers’ average costs for a ground ambulance transport varied from 

$99 to $1,218—a range of more than $1,100—across providers without 

shared costs in 2004. Figure 3 shows the wide variation in the reported 

costs per transport among providers without shared costs. Five percent of 

providers without shared costs had average costs per transport that were 

less than $152, while 5 percent of providers had average costs per 

transport more than $913. From our sample of providers without shared 

costs, we estimated the average cost per transport at $415, with a 95

percent confidence interval—the range within which we expect the 

population average cost per transport to fall 95 percent of the time—of 

$381 to $450.

36 This means that the actual average cost per transport across 

ambulance providers in the United States without shared costs was from

$381 to $450 in 2004. 

Providers’ Reported Costs 

per Transport Were Highly 

Variable

Figure 3: Distribution of Cost per Transport for Providers without Shared Costs in 2004 

Providers

0

100

200

300

400

500

600

700

800

900

1,000

Source: 2005 GAO Survey of Ambulance Services.

415

Cost per transport in 2004

0 100 200 300 400 500 600 700 800 900 1,000 1,100 1,200

Note: Based on a sample of 215 providers, weighted to represent more than 5,200 providers in the 

United States that did not share costs with nonambulance services.

 36Because our cost information is estimated from a sample of providers, all costs per 

transport are reported with confidence intervals. The range of the confidence interval is

affected by the variability of the responses within the sample and the size of the sample. 

See app. I for a full discussion of our sample, methods, and computations. 

Page 18 GAO-07-383 Ambulance Providers’ Cost 
When we categorized providers without shared costs by service area and 

compared the average costs per transport across the groups, average cost 

per transport among super-rural providers was statistically significantly 

different from that of urban providers, but rural providers’ average cost 

per transport was not statistically significantly different from that of urban

providers. The average cost per transport for super-rural providers 

without shared costs was $538,37 statistically significantly different from 

the $370 average cost per transport for urban providers without shared 

costs. The 95 percent confidence interval for average costs per transport 

among super-rural providers without shared costs ranged from $448 to 

$628 and among urban providers without shared costs ranged from $326 to

$414. The average cost per transport among rural providers without shared 

costs was $409 within a confidence interval spanning $354 to $465, an 

interval that overlapped with the average costs per transport estimates for 

both urban and super-rural providers without shared costs. 

Certain Provider 

Characteristics 

Contributed to Differences 

in Costs per Transport 

The variability of costs per transport among providers without shared 

costs reflected differences in certain provider characteristics. The 

provider characteristics that contributed to significant differences in costs 

per transport were volume, mix of transports, service area, productivity, 

and amount of local tax support.38 (See table 2 and app. I for a full 

description of our methods.) 

 37The average cost per transport of super-rural providers without shared costs was based 

on the average costs of survey respondents without shared costs that served predominantly 

super-rural areas, and reflects the different characteristics of those respondents, including 

the volume of trips they provided. It is different from the estimated average cost of a superrural transport based on our regression analysis. 

38For each characteristic, we measured its effect on providers’ average cost per transport, 

independent of other characteristics, by assuming the national average value for the other 

variables. 

Page 19 GAO-07-383 Ambulance Providers’ Cost 
Table 2: Estimated Average Cost per Transport for Provider Characteristics That 

Affect Costs

Provider characteristics Assigned values 

Estimated average cost 

per transport

a

Volume of transports 2,000 or less $464

2,001 – 3,000 388

3,001 – 4,000 327

4,001 – 5,000 330

5,001 – 6,000 276

6,001 or more 330

Mix of transports Only BLS 360

ALS or more intensive services 476

Service area Urban only 358

Rural only 420b

Super-rural only 545

Productivity—transports 1 transport per 8 hours (0.12) 437

per staffed hour 5 transports per 8 hours (0.64) 386

Local tax support No tax support 392

Local tax support as 81% of 

revenues 

632

Sources: GAO analysis of 2005 GAO Survey of Ambulance Services and 2004 Medicare claims. 

a

The estimated average cost per transport is for providers without shared costs. It was created by 

assigning a value to the provider characteristic of interest for all cases and using the national average 

value for the other characteristics. See app. I. for detailed information about our methods. 

b

The estimated cost of a rural transport was not significantly different from the estimated cost of an

urban transport. 

Providers without shared costs that had lower transport volumes generally

had higher average costs than providers without shared costs with higher 

transport volumes. Our analysis affirms the finding of our prior work, that 

volume of transports was the main characteristic affecting providers’ costs 

per transport.39 Because most ambulance costs are fixed, and therefore do 

not increase significantly when a provider completes more transports, it is 

expected that as the number of transports provided increases, associated

costs per transport will be lower. In 2004, the volume of transports 

completed by a provider without shared costs ranged from 21 to more 

than 50,000. Estimated average cost per transport is reduced, from $464 

 39GAO-03-986. 

Page 20 GAO-07-383 Ambulance Providers’ Cost 
for providers without shared costs completing 2,000 or fewer transports a 

year to $327 for those completing from 3,001 to 4,000 transports. Although 

estimated average cost per transport is slightly higher for 4,001 to 5,000 

transports, rising to $330, and again above 6,000 transports, rising to $330,

every other volume category of provider without shared costs had lower 

estimated average costs per transport than the lowest volume group of 

2,000 transports or less. 

Also, as expected, we observed that average costs per transport were 

higher for providers without shared costs that also had a greater 

percentage of ALS and more complex transports (compared with BLS 

transports) and those with a greater percentage of super-rural transports 

(compared with urban transports)—two characteristics incorporated into 

the national fee schedule to account for the additional costliness 

associated with more intensive services and isolated service areas. ALS 

and more complex transports completed by providers without shared 

costs ranged from 0 to 100 percent of transports provided. We estimated 

that providers without shared costs specializing in ALS and more complex 

transport services had average costs of $476, which was 32 percent higher

than providers without shared costs specializing in BLS transport services. 

We estimated that the average cost of a super-rural transport was $545,40

while the average cost of an urban transport was $358. Rural transports 

were not significantly higher cost than urban transports. 

Two other provider characteristics—productivity and amount of local tax 

support—were also associated with higher average costs per transport. 

Costs were higher when providers without shared costs had lower 

productivity or a lower ratio of transports per staffed hour. The average 

level of productivity for providers without shared costs was 0.12, or about

one transport per 8 staffed hours, and had an estimated average cost per 

transport of $437. The second highest level of productivity for these 

providers was 0.64, or more than five transports per 8 staffed hours, and 

had an estimated average cost per transport of $386. The impact of 

productivity on average costs may be explained by the fixed costs incurred 

in maintaining readiness—having an ambulance and crew available to 

 40The estimated average cost of a super-rural transport is different from the average cost 

per transport of super-rural providers without shared costs that was explained in 

footnote 37. The estimated average cost of a super-rural transport was calculated using

regression analysis that assumed all providers without shared costs only performed 

super-rural transports and had the national average for the other variables in our analysis. 

See our app. I for more details on our methodology. 

Page 21 GAO-07-383 Ambulance Providers’ Cost 
respond to emergency calls. Although providers may have discretion about

staffing and the ability to make backup arrangements to substitute for 

additional staff, not all providers can increase productivity by increasing 

the number of transports they provide or reducing the number of staffed 

ambulance hours. For example, providers that operate in small or isolated 

communities with one ambulance on call may serve only their own 

community’s needs and may not be able to expand their service area or 

increase their volume of ambulance transports. 

Average costs were also higher for providers without shared costs that 

derived a larger percentage of their total revenues from local tax support. 

Among providers without shared costs, those with the largest percentage 

of revenues from local tax support (81 percent of revenues) had estimated

average costs that were $240, or 61 percent, above those with no local tax 

support. Again, this effect was independent of volume and mix of 

transports, service area, cost of labor, use of volunteers, productivity, and

other provider and local area characteristics. The relationship between 

greater local tax support and higher average costs may be explained as the 

income effect: if an organization has more money, it is able to and likely to

spend more. Moreover, if costs increase without resulting in additional 

transports, the average cost per transport will increase. 

Characteristics that did not significantly contribute to the variability of 

average costs per transport among providers without shared costs 

included type of provider; a provider’s region, as measured by the nine

census divisions that defined the regional fee schedule; building rent; and

the price of fuel. 

Average ambulance national fee schedule payments in 2010 are estimated 

to be 3 percent higher overall than payments in 2001, after adjusting for 

inflation and assuming that providers bill the maximum amounts allowed. 

However, the Medicare margins of providers without shared costs—

whether they make a profit or a loss on Medicare transports—will vary 

under the national fee schedule. We cannot assess whether providers 

without shared costs will break even, lose, or profit on average under the 

ambulance national fee schedule in 2010 after all of the MMA temporary 

payment provisions have expired, because the 95 percent confidence 

interval surrounding the average Medicare margin spans from negative 

14 percent to positive 2 percent. However, across all providers without 

shared costs, we estimate that 39 to 56 percent will have average Medicare 

payments above their average costs per transport under the ambulance 

national fee schedule even after all of the MMA provisions expire. 

Average Payments 

under the National 

Fee Schedule Will Be 

Greater Than Average 

Historical Payments, 

but Providers’ 

Expected Medicare 

Margins Will Vary 

Greatly 

Page 22 GAO-07-383 Ambulance Providers’ Cost 
Compared with average historical payments in 2001, average payments 

under the national fee schedule in 2010 will be 3 percent higher, after 

adjusting for inflation and assuming providers will bill the maximum 

amount allowed under the national fee schedule. According to our 

analysis, urban transports will experience a decrease in payments, on 

average, while rural and super-rural transports will receive an increase 

that is greater than the overall increase. Average payments for rural and 

super-rural transports will increase 20 percent and 15 percent,

respectively, while average payments for urban transports will decline 

3 percent compared with average payments prior to the fee schedule. (See

table 3.) 

Table 3: Payments Prior to and under the National Fee Schedule after MMA 

Provisions Expire 

Transports

Payment prior to

national fee schedule

Payments under

national fee schedule Percentage change

Urban $309 $301 -3

Rural 303 363 20

Super-rural 379 437 15

National 309 319 3

Sources: GAO analysis of 2001 and 2004 Medicare claims. 

Notes: All payments are in 2004 dollars. Payments under the national fee schedule assume that 

providers charge the maximum allowed amount. 

After all of the MMA temporary payment provisions expire, expected 

Medicare margins under the national fee schedule will vary greatly among 

providers without shared costs. When we compared expected payments 

under the national fee schedule in 2010 with providers’ costs per transport, 

the resulting Medicare margins ranged from negative 194 percent for one 

provider to positive 76 percent for another provider. This wide difference 

is related to the great variability in reported costs among providers 

without shared costs. 

Average Payments under 

the National Fee Schedule 

Will Be Greater Than 

Average Historical

Payments and Will Be 

Redistributed from Urban 

Transports to Rural and 

Super-Rural Transports 

Expected Medicare 

Margins Will Vary Greatly 

Among providers without shared costs, we estimated that the average 

Medicare margin, or the average percentage difference between these 

providers’ Medicare payments and their costs, will be about negative 

6 percent with a 95 percent confidence interval from negative 14 percent 

to positive 2 percent. (See table 4.) This span in the confidence interval 

means we cannot assess whether providers without shared costs would 

break even, lose, or profit, on average, under the national fee schedule in 

2010 after all of the MMA temporary payment provisions have expired. 

Page 23 GAO-07-383 Ambulance Providers’ Cost 
Similarly, we estimated that the average Medicare margin for urban, rural,

and super-rural providers without shared costs will be negative under the 

national fee schedule, but each estimate will fall within a broader 

confidence interval range that includes positive Medicare margins. The 

estimated Medicare margin for an urban provider without shared costs 

will be negative 18 percent to positive 6 percent, while the estimated 

Medicare margin for a rural provider without shared costs will be negative 

13 percent to positive 12 percent. We estimated that a super-rural provider

without shared costs will have an estimated Medicare margin from 

negative 35 percent to positive 2 percent, making it more likely that the 

average Medicare margin for any given super-rural provider without 

shared costs would be negative rather than positive. However, given the 

confidence intervals surrounding the estimated average margin for each 

subset of providers without shared costs and the lack of statistical 

difference between them, we cannot conclude with certainty that any 

subset of providers would have significantly better or worse financial 

experience under Medicare’s national fee schedule than another. Rather,

we can conclude only that Medicare margins are likely to vary even among 

urban, rural, and super-rural providers without shared costs. 

Table 4: Expected Average Medicare Margins under the National Fee Schedule for 

Providers without Shared Costs in 2004 Dollars

Providers’ 

predominate service 

area 

Payment under 

national 

fee schedule

Average cost 

(95 percent 

confidence interval) 

Providers’ average 

Medicare margins

 in percentage

(95 percent 

confidence interval)

Urban $350 $370

( 326 to 414) 

-6

(-18 to 6 )

Rural 408 409 

(354 to 465) 

-1

(-13 to 12)

Super-rural 471 538

( 448 to 628) 

-17

(-35 to 2)

All 394 415

( 381 to 450) 

-6

(-14 to 2)

Sources: GAO analysis of 2005 GAO Survey of Ambulance Services and 2004 Medicare claims. 

Notes: All payments and costs are in 2004 dollars. Payments under the national fee schedule assume 

that providers charge the maximum allowed amount. The range of the confidence interval is affected 

by the variability of costs per transport within the sample and the size of the sample. Providers’

average Medicare margin is the average margin across all providers in the sample. 

Page 24 GAO-07-383 Ambulance Providers’ Cost 
When we assessed the likely experiences of all providers without shared 

costs under the national fee schedule after all of the MMA temporary 

payment provisions expire, we estimated that 39 to 56 percent of them will 

have positive Medicare margins. Among urban and rural providers, 39 to 

65 percent and 34 to 64 percent, respectively, will have positive Medicare 

margins, according to our estimations. Among super-rural providers, 

however, we estimate that 18 to 51 percent will have positive Medicare 

margins, while 49 to 82 percent would have zero or negative Medicare 

margins. (See fig. 4.) The breadth of these confidence intervals reflects the 

variability of providers’ costs in 2004 and expected financial experience 

under the national fee schedule after MMA temporary payment provisions 

expire. 

Page 25 GAO-07-383 Ambulance Providers’ Cost 
Figure 4: Expected Medicare Margins for Urban, Rural, and Super-Rural Providers without Shared Costs

Super-rural providers (N=968)

Sources: GAO analysis of 2005 GAO Survey of Ambulance Services and 2004 Medicare claims.

Percentage difference

0

50

100

150

200

250

300

350

400

Rural providers (N-1,829)

Percentage difference

Payments > costs

for 34-64% of providers

Urban providers (N=2,409)

Percentage difference

0

50

100

150

200

250

300

350

400

0

50

100

150

200

250

300

350

400

Payments > costs

for 39-65% of providers

-190 -150 -100 -50 -10 10 50 70

Payments > costs

for 18-51% of providers

Break-even

-190 -150 -100 -50 -10 10 50 70

-190 -150 -100 -50 -10 10 50 70

Notes: The range of the confidence interval is affected by the variability of costs per transport within 

the sample and the size of the sample. Percentages and confidence intervals are rounded. 

Page 26 GAO-07-383 Ambulance Providers’ Cost 
The MMA temporary payment provisions, which were implemented by 

CMS in the second half of 2004, resulted in raised ambulance average 

payments overall, particularly for super-rural transports, which we found 

typically more costly to provide. Payment adjustments under the MMA’s 

regional fee schedule were not justified on the basis of regional cost 

differences, as we did not find significant differences in average cost per 

transport across regions. 

When we compared ambulance payments in the first half of 2004, prior to 

the implementation of the MMA provisions, with ambulance payments in 

the second half of 2004, after the temporary payment provisions were 

implemented and had their maximum effect, we found that payments, on 

average, increased by 5 percent overall. Super-rural transports received 

more substantial payment increases than urban or rural transports. (See 

table 5.) After MMA temporary payment provisions were implemented, 

average payments for urban and rural transports increased by 5 and 

3 percent, respectively, while average payments for super-rural transports 

rose by 12 percent, compared with average payments before the MMA 

provisions were implemented. Increased payments for super-rural 

transports under the MMA were in keeping with our finding that superrural transports were more costly than urban transports, independent of

other characteristics that affected ambulance costs. 

MMA Provisions 

Resulted in Greater 

Average Payments for 

Higher-Cost SuperRural Transports and 

Adjusted Payments 

Regionally Where No 

Significant Cost

Differences Were 

Observed 

Payment Increases Were 

Targeted to Higher-Cost 

Super-Rural Transports 

Page 27 GAO-07-383 Ambulance Providers’ Cost 
Table 5: Average Payments prior to MMA Implementation and after Implementation

Transports

Average payment per 

transport prior to MMA

Average payment per 

transport under MMA 

Average percentage

change in payment 

under MMA

Urban $306 $322 5

Rural 358 370 3

Super-rural 442 497 12

National 322 338 5

Source: GAO analysis of 2004 Medicare claims. 

Notes: The period prior to MMA implementation for which payments were computed was January 1, 

2004 through June 30, 2004. The period after implementation of the MMA for which payments were 

computed was July 1, 2004 through December 31, 2004. 

Regional Payment 

Adjustments Required by 

the MMA Were Not 

Justified on the Basis of 

Regional Cost Differences 

Regional payment adjustments under the MMA were not warranted on the 

basis of regional cost differences. The MMA required a regional fee 

schedule, which resulted in ambulance payments for similar services that

differed based on the region where they were provided. When comparing 

average regional payments before the implementation of MMA provisions 

to payments after implementation of the MMA, when the regional fee 

schedule had its greatest effect, we found that average payments increased 

substantially for some regions but not others. (See table 6.) However, we 

found no significant differences in costs by region, after controlling for 

differences in volume and mix of transports, cost of labor, service area, 

and other characteristics that may have affected costs. The regional fee

schedule is due to expire on December 31, 2009.

Page 28 GAO-07-383 Ambulance Providers’ Cost 
Table 6: Percentage Changes in Average Payments prior to MMA Implementation 

and after Implementation, by Region 

Region Percentage change in average payments

Pacific 19

New England 12

Mountain 8

West South Central 7

West North Central 3

Middle Atlantic 3

South Atlantic 1

East North Central 1

East South Central 0

Source: GAO analysis of 2004 Medicare claims. 

Notes: East South Central received a decrease in average payments of -0.04 percent, which rounds 

to 0 percent. The period prior to MMA implementation for which payments were computed was 

January 1, 2004 through June 30, 2004. The period after implementation of the MMA for which 

payments were computed was July 1, 2004 through December 31, 2004. See table 11 in app. I for a 

listing of the regions, or census divisions, and their corresponding states. 

Nationally, the use of ambulance transports by Medicare beneficiaries 

increased by 16 percent, from 2001, the year before the transition to the 

national fee schedule began, to 2004, the year we studied. (See table 7.) 

Medicare beneficiaries’ use of ambulance transports in urban areas 

experienced the greatest growth, 19 percent, while rural areas experienced 

a modest increase of 6 percent. However, Medicare transports per 1,000 

beneficiaries in super-rural areas decreased by 8 percent. The decrease in

Medicare beneficiaries’ use of ambulance transports in super-rural areas 

was driven mostly by a decline in the volume of transports rather than any 

significant change in the number of beneficiaries or the demographic 

characteristics of beneficiaries residing in super-rural areas. For example, 

factors such as age, race, and gender remained stable in the super-rural 

Medicare population. Meanwhile, Medicare beneficiaries’ use of 

ambulance transports increased in all regions from 2001 to 2004, including

one region that had a decrease in average payments under the MMA 

compared with before the implementation of MMA payment provisions. 

Medicare 

Beneficiaries’ Use of 

Ambulance 

Transports Increased 

from 2001 to 2004, 

Except in Super-Rural 

Areas 

Page 29 GAO-07-383 Ambulance Providers’ Cost 
Table 7: Ambulance Transports per 1,000 Beneficiaries in Urban, Rural, and SuperRural Areas

Area Transports, 2001 Transports, 2004 

Percentage change, 

2001-2004

Urban 371 443 19

Rural 372 396 6

Super-rural 264 244 -8

Total 364 420 16

Sources: GAO analysis of 2001 and 2004 Medicare claims and CMS enrollment data. 

The diversity of the ambulance industry is reflected in its range of 

organizations, services offered, staffing, revenue sources, and costs per 

transport. We found that certain ambulance provider characteristics, such 

as volume, mix of transports, service area, productivity, and amount of 

local tax support, affected the cost per transport of providers without 

shared costs. For some providers and communities, these characteristics 

may be self-determined and may reflect those communities’ preferences 

for readiness, quality standards, and ambulance services offered. For 

example, some communities may prefer to fund the greater costs of 

operating at a higher level of readiness or being equipped with more 

sophisticated transport vehicles and more highly trained staff. Other 

providers and communities have little or no control over the 

characteristics that affect providers’ cost per transport. These 

communities, particularly more rural areas with low population density, 

may be constrained by local conditions, including their financial 

resources. Therefore, local conditions and community preferences may 

explain some of the predicted variability in the financial experience of 

providers without shared costs under the Medicare national fee schedule. 

Conclusions 

We are unable to discern whether providers without shared costs would 

be compensated appropriately under the national fee schedule for two 

reasons. First, when providers experience the national fee schedule 

payments in 2010 after all of the MMA temporary payment provisions 

expire, they may make changes to control or reduce their costs. The cost 

data we collected were from 2004 and may not reflect any changes 

providers may make to control or reduce their costs in response to the 

national fee schedule. Second, we did not assess if Medicare beneficiaries 

are receiving quality care that is delivered efficiently. There are no 

national performance standards to use as benchmarks for determining 

quality and efficiency of services or for assessing whether providers could

increase productivity by increasing the number of transports they provide 

Page 30 GAO-07-383 Ambulance Providers’ Cost 
or by reducing the number of staffed ambulance hours. However, current 

efforts to develop a national data system and indicators for EMS systems 

may, in the future, yield useful tools for measuring efficiency and quality of

ambulance services under the Medicare program. 

Based on our survey of ambulance costs, we were able to estimate that 

some providers without shared costs would have positive Medicare 

margins under the national fee schedule after the MMA provisions expire, 

while others would have negative Medicare margins. Among super-rural 

providers, we estimated that 18 to 51 percent would have positive 

Medicare margins. However, 49 to 82 percent would have zero or negative 

Medicare margins. Ideally, Medicare payments should be adequate to 

ensure beneficiary access to services while using the program’s resources 

judiciously. The decline in use of super-rural ground ambulance transports 

from 2001 to 2004, a time when payments for super-rural transports were 

increased, suggests that Medicare payment levels may not be linked to the

decreased utilization of transports in super-rural areas. However declining 

utilization coupled with potentially negative Medicare margins in superrural areas, which could be exacerbated when the MMA provisions expire, 

raise questions as to whether Medicare payments will be adequate to 

support beneficiary access in super-rural areas. 

In light of the variability in ambulance providers’ Medicare margins and 

the potential for negative margins to have an impact on beneficiary access,

we recommend that the Administrator of CMS monitor utilization of 

ambulance transports to ensure that Medicare payments are adequate to 

provide for beneficiary access to ambulance services, particularly in 

super-rural areas. 

We provided a draft of this report to CMS and to five associations that 

represent the ambulance industry: the American Ambulance Association, 

the National Association of State EMS Officials, the National Ambulance 

Coalition, the National Volunteer Fire Council, and the International 

Association of Fire Chiefs. CMS’s written comments are reprinted in 

appendix II.

Recommendation for 

Executive Action 

Agency and External 

Comments and Our 

Evaluation 

CMS stated that, for the most part, the report reinforces its findings. CMS 

also stated that it agreed with our recommendation that the agency

monitor utilization of ambulance transports to ensure that Medicare 

payments are adequate to provide for beneficiary access to ambulance 

services, particularly in super-rural areas. CMS noted that it would 

Page 31 GAO-07-383 Ambulance Providers’ Cost 
continue to monitor ambulance rates and would make adjustments should 

the original assumptions made during the development of the ambulance 

fee schedule need to be changed. In addition, CMS also highlighted its 

implementation of a refinement in the definition of rural areas that should 

enable rural areas within urban areas to receive the benefit of higher rural

payments under the ambulance fee schedule. 

CMS noted that we should have discussed in our conclusions the 

implications of omitting “shared services” providers from our analysis, as 

these providers tend to have higher costs. As we discussed in the report, 

ambulance providers that could not separately report the costs of the 

ambulance portion of their business were excluded because their cost 

data were determined to be unreliable. Consequently, we have no basis or 

information to suggest that providers with shared services have higher or 

lower costs than other providers. 

Ambulance industry associations generally agreed with our findings. 

However, the associations raised various concerns regarding our 

calculations and assumptions. Two associations questioned the inclusion 

in our analysis of ambulance providers that used unpaid staff and 

suggested that it might have been more appropriate to focus on providers 

who bear the full cost of providing ambulance services. As we note in the

report, use of unpaid staff by ambulance providers is widespread with an 

estimated two-fifths of the industry relying substantially on volunteers in

2004. Thus, in order for our analysis to be representative of ambulance 

providers, we included those that used volunteer staff. We recognize that 

use of volunteer staff affects ambulance providers’ costs and included the 

percentage of volunteer hours as a control variable in our cost model. 

Two associations were concerned that we did not allow for the effect of 

Medicare bad debt in our analysis and may have therefore overestimated 

payments. We acknowledge that bad debt will affect the percentage of 

costs recoverable for providing ambulance services. However, we 

explicitly state that our payment estimates assume providers are paid the 

full Medicare payment amounts. It was beyond the scope of our study to 

estimate the effect of Medicare bad debt on ambulance payments or to 

determine the extent to which payments should be adjusted to reflect bad 

debt. 

Two associations expressed concern that our analysis showed a 3 percent 

increase in payments to ambulance providers with the transition from the 

historical payment system to the fully implemented national fee schedule 

and thought payments should have been relatively level. We note that our 

Page 32 GAO-07-383 Ambulance Providers’ Cost 
analysis incorporated increases in mileage rates over time that likely 

accounted for some of this increase. In addition, when simulating 

payments under the national fee schedule, we assumed that providers 

would bill Medicare for all services they were entitled to bill. However, as 

we noted in the report, nearly half of the industry indicated that a state or 

local government approves the fees they may charge, and some providers 

are required to bill Medicare less than the allowed amount and therefore 

do not receive the maximum Medicare payment allowed under the fee

schedule. This discrepancy between the state or local allowed amount and

the actual Medicare payment could also account for some of the 3 percent 

increase. 

CMS and the associations also provided technical comments and 

clarifications, which we incorporated as appropriate. 

We are sending copies of this report to other interested congressional 

committees and the Administrator of CMS. We will also provide copies to 

others upon request. The report will also be available at no charge on the 

GAO Web site at http://www.gao.gov. 

If you or your staff have any questions, please contact me at (202) 512-7119

or kingk@gao.gov. Contact points for our Offices of Congressional 

Relations and Public Affairs may be found on the last page of this report. 

GAO staff who made major contributions to this report are listed in 

appendix III. 

Kathleen M. King 

Director, Health Care 

Page 33 GAO-07-383 Ambulance Providers’ Cost 
Appendix I: Data and Methods 

Page 34 GAO-07-383 Ambulance Providers’ Cost 

Appendix I: Data and Methods 

This appendix describes, in detail, the data and methods we used to 

respond to our research objectives and evaluate ambulance providers’ 

costs per transport and Medicare payments under the national ambulance 

fee schedule. We conducted a survey of ambulance costs to collect cost 

data. We relied on these survey data for much of our analyses of costs and

supplemented our survey results with information from other sources, 

including Medicare claims data, as appropriate. We also analyzed Medicare 

claims data to determine the effect of the national fee schedule and the 

Medicare Prescription Drug, Improvement and Modernization Act of 2003 

(MMA) temporary payment provisions on payments, as well as to describe 

changes in beneficiaries’ use of ambulance transports over time. We tested

the internal consistency and reliability of the data from our survey and

other non-Medicare data sources and determined that all data sources 

were adequate for our purposes. We conducted our work from July 2004 

through April 2007 in accordance with generally accepted government 

auditing standards. 

To collect data on ground ambulance providers’ costs, revenues, 

transports, and organizational characteristics for their most recently

completed fiscal year, we mailed a survey to a nationally representative 

sample of 500 eligible ambulance service providers that billed Medicare in 

2003.

1

 We used a two-stage sampling process to select a stratified,2 random 

sample of providers. In the first stage, we selected a preliminary sample of 

hospital and nonhospital-based providers for screening. In the second 

stage, we conducted telephone screening interviews to confirm eligibility 

for the study and, for nonhospital-based providers, to identify provider 

type. We obtained 321 completed surveys for a response rate of 64 percent. 

We excluded two cost outliers. We also excluded from our analysis 

providers that reported sharing ambulance costs with other institutions or 

other nonambulance services, including, but not limited to, all fire 

departments, after preliminary analysis revealed problems with the 

reliability of their reported costs. The resulting sample size was 215 

providers. The results from our analysis are nationally representative of all 

Medicare ambulance providers that can distinguish their costs for 

providing ambulance services from the costs of other services they 

National Survey of 

Ground Ambulance 

Providers’ Costs 

 1

Our survey asked providers to report on their organizations’ costs of providing ground 

ambulance services. 

2

The sample was stratified by types of ambulance providers: hospital-based, volunteer, fire 

departments, government, and freestanding.
Appendix I: Data and Methods 

provide.3 However, the small sample size and the variability of reported 

costs reduce the precision of our estimates. 

To develop our survey instrument, we reviewed other survey instruments 

and analyses of ambulance cost data, consulted with experts in survey 

methods and the ambulance industry, and tested our survey instrument. 

We reviewed cost data collected in 1999 by Project HOPE Center for 

Health Affairs, which was a nonprofit health policy research organization, 

during a survey effort sponsored by the American Ambulance Association. 

We also reviewed other surveys of emergency medical services, as well as

industry and association guidelines about emergency medical and 

ambulance services. In addition to surveying ambulance providers on their 

costs and revenues, we included questions to identify organizational and

local area characteristics that might affect ambulance costs, such as the 

number of emergency transports and number of volunteer hours. 

Industry experts and a survey specialist reviewed and commented on the 

draft survey instrument. We conducted a pilot test of the survey with 104 

ambulance service providers as well. We redesigned and refined the 

instrument based on the experience of the pilot test. Then, to further 

refine the wording of our survey questions, we asked four types of 

ambulance service organizations and a former volunteer fire chief to 

pretest the instrument and point out any issues they noted. These pretests 

were conducted mostly by telephone—one pretest was in person. 

We developed separate lists for all hospital-based and nonhospital-based 

providers from information maintained by the Centers for Medicare & 

Medicaid Services (CMS), the agency that oversees the Medicare program. 

Next, we used a two-stage sampling process to select a stratified, random 

sample of providers. In the first stage, we sorted each list by census 

division and predominant service area (urban, rural, or super-rural), began 

sampling the list at a random starting point, and chose providers at regular 

intervals from their respective lists. This method of sampling implicitly 

included representation across census divisions and service areas. In the

second stage, telephone screening interviews were conducted with each 

Survey Instrument 

Development 

Sample Design 

 3

Our cost analysis sample includes only those providers that could apportion the ground

ambulance component of any cost shared between their ambulance services and other

services. Thus, our results only reflect the experiences of providers that did not share costs

or that could feasibly apportion them. 

Page 35 GAO-07-383 Ambulance Providers’ Cost 
Appendix I: Data and Methods 

sampled provider to confirm eligibility for the study and, for nonhospitalbased providers, to identify their type—volunteer, fire department, 

government, or freestanding. Once a provider’s type was established, 

providers were stratified by type and randomly selected to ensure 

somewhat equal representation among all provider types. We developed 

initial sample rates for each type of provider and adjusted the rates 

midway through the screening process. Each provider representative was 

told at the close of the telephone screening call whether the provider had 

been selected to participate in our survey. Finally, a survey instrument was 

mailed to the selected providers. 

To identify nonhospital-based ambulance providers that billed Medicare, 

we contacted Medicare carriers4

 for a list of ambulance providers and 

matched this list to 2003 carrier claims for ambulance services by provider 

identification numbers. Our nonhospital-based sample frame included 

12,082 unique provider identification numbers.5

 We later learned that a 

number of provider identification numbers in the nonhospital-based 

sample frame were duplicate entries for ambulance providers that had 

more than one Medicare provider identification number for the same 

location.6

 We analyzed the extent of duplication in the sample frame and 

reduced the estimated population size to 7,968. Although our sample frame 

included a substantial number of duplicate entries, there were only 28

duplicates among our first-stage sample of 900 nonhospital-based 

providers. The sample weights were adjusted to account for the duplicate 

entries in the sample frame. 

To identify the total number of hospital-based ambulance providers that 

billed Medicare, we matched Medicare’s Provider of Service file with 

Medicare Part A inpatient and outpatient claims for ambulance services. 

We excluded skilled nursing facilities for a total of 828 hospital-based 

ambulance service providers. We then selected a first-stage sample of 150 

hospital-based ambulance providers.

 4

Carriers are private companies that have contracts with Medicare to administer payment 

of providers’ bills for covered Medicare Part B services. 

5

We excluded provider identification numbers that had been selected to participate in the

pilot study. 

6

Duplicate entries for the same nonhospital provider were identified by name, address, and

other information. 

Page 36 GAO-07-383 Ambulance Providers’ Cost 
Appendix I: Data and Methods 

To make our survey sample representative of all Medicare ambulance 

providers, the population from which the sample was drawn, we 

computed a sample weight for each respondent provider. The computation 

of the sample weight took into account the type of provider, sample rate, 

and the response rate for the type of provider—hospital, volunteer, fire 

department, government, or freestanding. 

Survey Administration We contracted with CODA Inc., an independent survey research firm, to 

perform the telephone screening and administer the mailed survey 

instrument.7

 The contractor screened the 900 nonhospital-based and 150 

hospital-based providers we selected for our first-stage sample, and mailed 

the survey instrument to 500 eligible organizations, randomly sampled by

provider type. In order to properly select our sample with even 

representation across all types of providers nationally, we designed our 

sampling strata using data collected from our pilot test. 

CODA Inc., administered the mailed surveys and conducted all follow-up 

and data coding in coordination with us. Our survey period began in April 

2005 and ran through September 2005. The survey instruments were 

mailed using Federal Express and 2-day Priority Mail. Telephone contact 

was initiated 3 business days after the instrument was mailed to ascertain

when the respondent could return the completed instrument. Prompting 

and follow-up requests for data were conducted by phone and occurred 

whenever providers’ returned instruments were incomplete, vague, or 

included conflicting responses to key items. In some cases, follow-up 

requests involved multiple contacts, faxing survey instruments, and 

spending an hour or more on the phone with the respondent. On average, 

more than 4 phone calls were made for each respondent with as many as 

20 calls made to one respondent. 

All requests for data were conducted by CODA Inc. staff following strict 

protocols that we developed. Respondents were encouraged to contact 

CODA Inc. and GAO via toll-free numbers, so that any questions or 

problems could be resolved. All survey data were double-key entered into 

an electronic file, and computer programs were checked for keying 

 7

CODA Inc. also administered the 1999 ambulance survey for Project HOPE and our pilot

survey. During the course of the contract, CODA Inc. became Survey and Epidemiology 

Services Division of Social & Scientific Systems, Inc. 

Page 37 GAO-07-383 Ambulance Providers’ Cost 
Appendix I: Data and Methods 

discrepancies and data inconsistencies. In all, we received 321 completed 

surveys; this represents a response rate of 64 percent. 

Survey Data Validity and 

Reliability 

In addition to the survey administration procedures described above, we 

took several measures to ensure that the data reported on the survey were 

valid and reliable.8

 First, the survey instrument included items intended to 

validate the reported cost data. We also used strict protocols during 

follow-up to validate the reported cost data. For example, if respondents 

could not provide cost breakdowns by the categories listed in our survey 

instrument, a separate phone protocol was used to verify the reported cost 

data. 

Second, we tested the data for internal consistency and excluded cases 

when necessary. Computer analyses were performed to identify and, 

where possible, correct any inconsistencies in responses or other errors. 

We also excluded 2 providers that appeared to be cost outliers. These 

providers had costs per transport that were at least three standard 

deviations above the mean of the standard statistical distribution (the 

lognormal), and no other variables explained their extraordinary costs. 

Through our analyses, we determined that the costs reported by providers 

that shared costs with other institutions or offered other services appeared 

to be unreliable. We found the costs reported by these “shared costs” 

providers to be highly variable, which may reflect inconsistent methods 

for separating staff time and other resources across different services. 

Therefore, we excluded these providers—including but not limited to all

fire departments—from our analysis. The resulting sample size was 215 

providers, representing a population of more than 5,200 providers without 

shared costs.9

 8

For a randomly selected subsample of 30 providers—6 of each type of ambulance 

provider—we requested providers’ financial records to match to their survey responses.

We were only able to validate costs, revenues, and transport volumes for 2 providers in the

subsample because providers either did not return supporting documentation or the

categories—particularly those for costs—on providers’ supporting documentation were

different from those on the survey. As a result, we concluded that this method for 

validating survey data was not viable because of differences in data reporting, particularly 

cost categories, on providers’ supporting documents. 

9

We could not determine a separate response rate for our subgroup of providers without 

shared costs because we could not identify which nonrespondents in our original sample 

were providers without shared costs. However, we have no reason to believe that the 

response rate for providers without shared costs would be different from the overall survey 

response rate. 

Page 38 GAO-07-383 Ambulance Providers’ Cost 
Appendix I: Data and Methods 

Third, we compared information reported on the survey to information on 

Medicare claims submitted by respondents, such as the number of 

Medicare transports and percentage of emergency Medicare transports. All 

computer syntax was peer reviewed and verified by separate programmers 

to ensure that the syntax was written and executed correctly. 

We used providers’ total costs and total transports reported on the survey 

to compute providers’ average costs per transport. This cost information 

and other information about revenues and provider characteristics were 

used to model ambulance costs per transport. Although these survey data 

were self-reported and had not been audited, based on efforts to validate 

the data, computer testing, and corrections and comparisons with 

Medicare data, we have concluded that they were sufficiently valid and 

reliable for our purposes. 

Interpretation of 

Confidence Intervals and 

Analysis of 

Nonrespondents 

All sample surveys are subject to sampling error—that is, the extent to 

which the survey results differ from what would have been obtained if we

had collected responses from every ambulance provider in the country. 

Because we used a sample, it is only one of a large number of samples that 

we might have drawn. As each sample could have provided different 

estimates, we express our confidence in the precision of our particular 

sample’s results as a 95 percent confidence interval.10 This is the interval

that would contain the actual value for all providers for 95 percent of the 

samples we could have drawn. As a result, we are 95 percent confident 

that the reported confidence intervals based on the mailed survey include

the true values for all providers. For this reason, all costs per transport 

and provider margins are reported with their confidence intervals. 

We also analyzed 2004 Medicare claims data for survey nonrespondents 

and compared this information with similar claims information for 

providers without shared costs in our sample. Nonrespondents served 

predominantly urban areas rather than rural or super-rural areas. On 

average, nonrespondents completed about half the number of Medicare 

transports in 2004 compared with providers without shared costs. 

Nonrespondents also had a higher percentage of basic life support (BLS) 

transports, as opposed to advanced life support (ALS) and more complex 

 10The range of the confidence interval is affected by the variability of the responses within 

the sample and the size of the sample. 

Page 39 GAO-07-383 Ambulance Providers’ Cost 
Appendix I: Data and Methods 

transports, and about the same percentage of nonemergency transports 

compared with providers without shared costs. 

It is unclear whether nonrespondents had higher or lower costs, on 

average, than providers without shared costs. In our regression analysis of 

the cost information for providers without shared costs, we found that 

those with fewer transports per year generally had higher costs per 

transport than those with more transports. Providers without shared costs 

that served predominately urban areas had lower costs compared with 

providers serving super-rural areas. We also found that providers with 

higher percentages of BLS transports had lower costs compared to 

providers with no BLS transports. Although nonrespondents’ 

characteristics differed from those of providers without shared costs, 

these differences were associated with both higher and lower costs among 

providers without shared costs. Therefore, we have no basis for 

concluding that nonresponse has biased our cost estimates in any 

particular direction. 

We analyzed the relationship between providers’ average costs of 

ambulance transports and the provider and local area characteristics that 

may have affected their average costs. We used regression analysis to 

examine the effect of these characteristics on providers’ costs per 

transport. We then used the results from this regression analysis to predict 

the average costs per transport across all providers without shared costs, 

based on five key provider characteristics: (1) total transports per year, 

(2) percentage of BLS Medicare transports, (3) percentage of Medicare 

transports in rural and super-rural areas, (4) number of ambulance 

transports per staffed hour, and (5) amount of revenue derived from local 

tax support. 

Modeling Ambulance 

Costs per Transport 

To perform these analyses, we identified measures and data sources for 

each of the provider and local area characteristics that we identified as 

potentially contributing to differences in costs per transport. A summary 

of these characteristics, measures we used to assess their potential 

relationship to costs per transport, and data sources used is presented in 

table 8. 

Page 40 GAO-07-383 Ambulance Providers’ Cost 
Appendix I: Data and Methods 

Table 8: Provider and Local Area Characteristics Included in Analysis of Average Cost per Transport, 2004 

Characteristic Measure Source of data 

Transport volume Indicator of volume group: <=2,000, 2001-3000, 

3001-4,000, 4001-5000, 5001-6000, 6001+

GAO Survey of Ambulance Services 

Type of provider Staffing and organizational structure GAO Survey of Ambulance Services 

Productivity Transports per staffed ambulance houraGAO Survey of Ambulance Services 

Price of fuel Annualized average retail price of fuel in the provider’s 

zip code

Oil Price Information Service

Building rent Price per square foot of office space in the provider’s 

zip code

United States Postal Service

Geographic practice cost index (GPCI)bMedicare Ambulance Fee Schedule Public 

Use File 

Cost of labor used by 

providers 

Percentage of volunteer hours, including on-call time GAO Survey of Ambulance Services 

Revenue derived from 

local tax support 

Community tax support as a percentage of total 

ambulance provider revenuec

GAO Survey of Ambulance Services 

Regulation of fees State or local government approval of fees charged GAO Survey of Ambulance Services 

Mix and intensity of Percentage of emergency transports GAO Survey of Ambulance Services 

transports Percentage of Medicare transports that are BLS Medicare claims 

Service area Percentage of Medicare transports that are rural Medicare claims 

Percentage of Medicare transports that are super-rural Medicare claims 

Census Division 1 – New England Medicare claims 

Census Division 2 – Middle Atlantic Medicare claims 

Census division in which 

the ambulance provider 

was located 

Census Division 3 – East North Central Medicare claims 

Census Division 4 – West North Central Medicare claims 

Census Division 5 – South Atlantic Medicare claims 

Census Division 6 – East South Central Medicare claims 

Census Division 7 – West South Central Medicare claims 

Census Division 8 – Mountain Medicare claims 

Census Division 9 – Pacific Medicare claims 

Sources: 2005 GAO Survey of Ambulance Services, Oil Price Information Service, United States Postal Service, Medicare Ambulance

Fee Schedule Public Use File, and Medicare claims. 

a

This measure was computed as the total number of transports in the year divided by the total number 

of hours that an ambulance and crew were staffed and available to respond to an emergency call. 

This measure is also known as unit hours of utilization. 

b

The practice expense portion of the physician fee schedule’s GPCI is used to adjust the ambulance 

national fee schedule. 

c

This measure was computed as the total amount of revenues derived from community tax support 

divided by total revenues. 

Page 41 GAO-07-383 Ambulance Providers’ Cost 
Appendix I: Data and Methods 

Our regression analysis modeled the average cost of a transport at the 

provider level as a function of the provider and local area characteristics 

described above. We modeled the lognormal distribution of average cost

per transport for a provider, which was calculated as the log of total costs 

divided by the total number of transports for that provider. We estimated 

the model using least squares11 and applied the appropriate sample 

weights. We used the statistical program SUDAAN® in SAS to estimate 

this model, which takes account of the sample stratification and weighting 

to obtain appropriate parameter estimates and standard errors. We tested 

for and found no specification problems in the model resulting from 

heteroscedasticity, misspecification, or evidence of a particular 

observation having undue influence.

Average Cost Regression 

Analysis—Methods and 

Results 

Tables 9 and 10 show the regression results for estimating the 

determinants of cost per transport. We ran two sets of average cost 

regressions. The first regression results, in table 9, do not include two 

provider characteristics, (1) transports per staffed ambulance hour and 

(2) community tax support as a percentage of total ambulance provider 

revenue, because data on these variables were not available for a number 

of providers in our sample. Including these variables as explanatory 

independent variables reduces the number of observations in the 

regression from 205 to 157. Nevertheless, we wanted to measure the 

impact of these policy variables, in addition to maintaining a larger sample 

size, in order to have a more precise estimate of the impact of the other 

explanatory variables. Therefore, we ran the same regression model with 

and without these two explanatory variables. 

 11Least squares is a common method of regression analysis. 

Page 42 GAO-07-383 Ambulance Providers’ Cost 
Appendix I: Data and Methods 

Table 9: Results for Average Cost of an Ambulance Transport Regression—Estimated Effects of Selected Provider and Local 

Area Characteristics on the Average Cost of Ambulance Transports for Providers, Not Including Impact of Productivity and 

Community Tax Support 

Characteristic Variable used to measure characteristic 

Parameter 

estimate t-value

Transport volumea 2,001-3,000 per year -0.18 -1.70*

3,001-4,000 per year -0.35 -2.98***

4,001-5,000 per year -0.34 -3.33***

5,001-6,000 per year -0.52 -2.71***

6,001+ per year -0.34 -2.86***

Cost of labor used by providers GPCI 1.34 2.27**

Percentage of volunteer hours, including on-call time -0.28 -2.73***

Regulation of fees State or local government approval of fees charged -0.08 -1.00

Mix and intensity of transports Percentage of emergency transports 0.17 0.99

Percentage of Medicare transports that are BLS -0.28 -2.39**

Service areabPercentage of Medicare transports that are rural 0.16 1.61

Percentage of Medicare transports that are super-rural 0.42 3.11***

Census Division 1 – New England -0.27 -1.66*

Census Division 2 – Middle Atlantic -0.24 -1.66*

Census division in which the ambulance 

provider was locatedc

Census Division 3 – East North Central 0.23 1.61

Census Division 5 – South Atlantic 0.07 0.41

Census Division 6 – East South Central -0.07 -0.43

Census Division 7 – West South Central -0.16 -0.85

Census Division 8 – Mountain 0.15 0.97

Census Division 9 – Pacific -0.27 -1.39

Intercept 4.83 8.73***

R-squared 0.33

Observations 205

Sources: GAO analysis of 2005 GAO Survey of Ambulance Services, Medicare Ambulance Fee Schedule Public Use File, and 

Medicare claims. 

*** significant at the 1 percent level. 

** significant at the 5 percent level. 

* significant at the 10 percent level. 

a

Transports less than or equal to 2,000 per year is the excluded category. In order for the regression 

model’s parameters to be estimated, we needed to exclude one of the transport volume categories. 

b

The percentage of Medicare transports that are urban was the excluded category. In order for the 

regression model’s parameters to be estimated, we needed to exclude one of the service area 

categories. 

c

The West North Central census division was the excluded category. In order for the regression 

model’s parameters to be estimated, we needed to exclude one of the census divisions. 

Page 43 GAO-07-383 Ambulance Providers’ Cost 
Appendix I: Data and Methods 

Table 10: Results for Average Cost of an Ambulance Transport Regression—Estimated Effects of Selected Provider and

Local Area Characteristics on the Average Cost of Ambulance Transports for Providers, Including Impact of Productivity and

Community Tax Support 

Characteristic Variable used to measure characteristic 

Parameter 

estimate t-value

Transport volumea 2,001-3,000 per year -0.17 -1.84*

3,001-4,000 per year -0.30 -2.69***

4,001-5,000 per year -0.34 -3.40***

5,001-6,000 per year -0.31 -1.72*

6,001+ per year -0.22 -1.92*

Cost of labor used by providers GPCI 1.29 2.62***

Percentage of volunteer hours, including on-call time -0.10 -0.79

Regulation of fees State or local government approval of fees charged -0.11 -1.49

Mix and intensity of transports Percentage of emergency transports 0.06 0.29

Percentage of Medicare transports that are BLS -0.31 -2.25**

Service areabPercentage of Medicare transports that are rural 0.06 0.67

Percentage of Medicare transports that are super-rural 0.26 1.93*

Productivity Transports per staffed ambulance hour -0.24 -2.76***

Community tax support Community tax support as a percentage of total ambulance 

provider revenue 

0.59 3.81***

Census Division 1 – New England -0.24 -1.55

Census Division 2 – Middle Atlantic -0.24 -1.42

Census division in which 

the ambulance provider was 

locatedc

Census Division 3 – East North Central 0.17 1.04

Census Division 5 – South Atlantic 0.09 0.48

Census Division 6 – East South Central -0.16 -1.00

Census Division 7 – West South Central -0.30 -1.48

Census Division 8 – Mountain 0.20 1.38

Census Division 9 – Pacific 0.02 0.12

Intercept 4.95 9.81***

R-squared 0.51

Observations 157

Sources: GAO analysis of 2005 GAO Survey of Ambulance Services, Medicare Ambulance Fee Schedule Public Use File, and 

Medicare claims. 

*** significant at the 1 percent level. 

** significant at the 5 percent level. 

* significant at the 10 percent level. 

a

Transports less than or equal to 2,000 per year is the excluded category. In order for the regression 

model’s parameters to be estimated, we needed to exclude one of the transport volume categories. 

Page 44 GAO-07-383 Ambulance Providers’ Cost 
Appendix I: Data and Methods 

b

The percentage of Medicare transports that are urban was the excluded category. In order for the 

regression model’s parameters to be estimated, we needed to exclude one of the service area 

categories. 

c

The West North Central census division was the excluded category. In order for the regression 

model’s parameters to be estimated, we needed to exclude one of the census divisions. 

We estimated the average cost per transport associated with a range of 

values for each of five provider characteristics by using our regression 

result parameter estimates and fixed values for five provider 

characteristics. For each of the five provider characteristics, we assumed 

that all providers in the sample had the same value for one provider 

characteristic and used the national average value for all other 

characteristics. The five provider characteristics of interest were (1) total 

transports per year, (2) percentage of BLS Medicare transports, 

(3) percentage of Medicare transports in rural and super-rural areas, 

(4) number of transports per staffed ambulance hour, and (5) amount of 

revenue derived from local tax support. We estimated the cost per 

transport associated with two or more values for each of five provider 

characteristics. Our estimates are presented in table 2 of this report. 

In order to create the estimated costs per transport for one value of a 

provider characteristic, we performed the following steps. First, we 

modified the data set we used in the regression model by assigning one 

fixed value for one provider characteristic, such as the percentage of 

super-rural Medicare transports, for all observations in the data set. For 

this characteristic, we fixed the percentage of Medicare super-rural 

transports to 100 percent and the percentage of Medicare rural transports 

to 0 percent for all observations in the data set.12 Second, we used our 

regression result parameter estimates for all the other characteristics in 

the regression model and calculated an estimated average cost per 

transport for each provider. Third, we computed the mean of these 

estimated costs per transport. We report this hypothetical value as the 

estimated average cost per transport associated with the fixed value of the 

provider characteristic of interest. In the example above, we computed 

our estimated average cost per transport of a super-rural Medicare 

 12The percentage of super-rural and rural Medicare transports were two separate variables 

in our model and the percentage of urban Medicare transports was our reference category. 

To assume that 100 percent of a provider’s Medicare transports were rural, we set the 

percentage of rural Medicare transports to 100 percent and the percentage of super-rural

Medicare transports to 0 percent. To assume that 100 percent of a provider’s Medicare 

transports were urban, we set the percentage of super-rural Medicare transports to 

0 percent and the percentage of rural Medicare transports to 0 percent.

Page 45 GAO-07-383 Ambulance Providers’ Cost 
Appendix I: Data and Methods 

transport assuming that every provider in the sample provided only superrural Medicare transports and their other characteristics—volume and mix 

of transports, productivity, and amount of local tax support—were the 

national average. 

To assess the effect of the ambulance national fee schedule on Medicare 

payments, we used Medicare claims data to compute average payments in

2001, before the implementation of the fee schedule, and in 2004, 2 years 

after the phase-in of the national fee schedule had begun. For all analyses 

of Medicare payments, we expressed payments in 2004 dollars. We also 

used Medicare claims data and payment formulas as specified in federal 

regulations to simulate average payments under the national fee schedule 

in 2010, after all the MMA provisions are due to expire on December 31, 

2009, but computed these payments in 2004 dollars, the year that best 

reflects the cost data collected in our survey. We used the simulated 

payments to compute providers’ Medicare margins, a comparison that 

assumes that providers’ cost structures under the fee schedule would be 

the same as they were in 2004.13 We also assessed the effect of the MMA 

temporary payment provisions on payments in 2004 using Medicare claims 

data by examining the change in payments from the first half of the year, 

before the MMA changes were implemented, with the second half of the 

year, when MMA payment provisions had their maximum effect. 

Estimating Average 

Medicare Ambulance 

Payments and Use of 

Transports with 

Claims Data 

To estimate average Medicare ambulance payments in 2001 and 2004, we 

used Medicare Part A and Part B claims data from Medicare’s National 

Claims History files. We constructed summary data sets with the number 

of ambulance transports, miles, and their Medicare payments, total14 and 

by level of service,15 at the zip code level for 2001 and 2004 to compare 

payments over time. These data sets were classified by three geographic 

levels: national; census divisions; and urban, rural, and super-rural areas. 

 13The Medicare margin reflects the percentage difference between the average Medicare 

payment and a provider’s cost per transport. It was computed as the difference between

the average Medicare payment and the cost per transport, divided by the payment. 

14Total ambulance payments in 2001 and 2004 included any payments made for supplies in 

addition to mileage payments and service-level payments. 

15Under the Medicare program, there are seven levels of ambulance transports. BLS and

ALS transports each constitute two levels, emergency and nonemergency. The remaining

levels of service are ALS Level 2 and specialty care transport (both of which involve 

invasive or specialized care) and paramedic ALS intercept (when a paramedic provides

ALS services but does not transport the patient). 

Page 46 GAO-07-383 Ambulance Providers’ Cost 
Appendix I: Data and Methods 

Census divisions were categorized according to the U.S. Census Bureau’s 

guidelines. (See table 11 for a listing of census divisions.) CMS designates

urban, rural, and super-rural areas according to population density. 

Table 11: Census Divisions

Census divisions States

New England Connecticut, Maine, Massachusetts, New Hampshire, Rhode 

Island, Vermont 

Middle Atlantic New Jersey, New York, Pennsylvania 

East North Central Illinois, Indiana, Michigan, Ohio, Wisconsin 

West North Central Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, 

South Dakota 

South Atlantic Delaware, District of Columbia, Florida, Georgia, Maryland,

North Carolina, South Carolina, Virginia, West Virginia 

East South Central Alabama, Kentucky, Mississippi, Tennessee

West South Central Arkansas, Louisiana, Oklahoma, Texas 

Mountain Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, 

Utah, Wyoming 

Pacific Alaska, California, Hawaii, Oregon, Washington 

Source: U.S. Census Bureau. 

Medicare Payment 

Calculations and 

Simulation 

We chose to examine payments in three distinct time periods: 2001, the 

first half of 2004, and the second half of 2004. The year before the national

fee schedule was implemented was 2001. The first half of 2004 represented 

a period after the implementation of the national fee schedule but before 

the introduction of MMA temporary payment changes. It also coincided 

with the year for which we have cost data. The second half of 2004 

represented a period after the introduction of MMA provisions when the 

regional fee schedule had its greatest effect. 

In general, average Medicare payments were estimated as the sum of the 

average base rate payment—that is, the amount paid for the level of 

service16—and the average mileage payment. Base rate payments and 

mileage payments for each period were computed separately. Average 

Medicare payments were calculated nationally; by census division; and by

 16Estimated average base rate payments for 2001 and 2004 included ambulance supply 

payments. Under the fee schedule, the base rate payment was meant to incorporate the 

transport and any necessary services or supplies used during the transport.

Page 47 GAO-07-383 Ambulance Providers’ Cost 
Appendix I: Data and Methods 

urban, rural, and super-rural areas. All payments are expressed in 2004 

dollars. 

For the first half of 2004, the average base rate payment was calculated by 

dividing total base rate payments by the total number of transports 

provided in the first half of 2004. For 2001 and the second half of 2004, the 

average service-level base payment rate was calculated by dividing total

base rate payments for each level of service by the total number of 

transports provided at each level of service. Then we computed a 

weighted average base rate payment for 2001 and for the second half of 

2004 by applying the percentage of transports for each level of service 

(also known as the mix of services) for the first half of 2004 to the servicelevel base payment rates in 2001 and the second half of 2004, respectively.

The 2001 payments were adjusted to 2004 dollars by multiplying weighted 

average base rate payment by the ratio of the 2004 Consumer Price Index 

for All Urban Consumers (CPI-U) over the 2001 CPI-U. 

For simulated 2010 base rate payments, we multiplied the 2004 conversion 

factor (CF) and applicable relative value unit (RVU) for each level of 

service to compute the service level payments.17 Then, we computed a 

weighted average base rate payment by applying the service mix from the 

first half of 2004 to the 2004 service-level payments. The weighted average 

base-rate payment was adjusted for regional differences in the cost of 

providing ambulance services by the GPCI.18 In accordance with CMS’s 

payment methodology, only 70 percent of the average base rate payment 

was adjusted by the GPCI. 

Average mileage payments were calculated by multiplying the average 

miles per transport in each geographic level from the first half of 2004 by 

mileage rates in the other periods. (See tables 12 and 13.) For example, 

when estimating average 2001 mileage payments for urban transports, the 

2001 mileage rate applicable to urban areas was used,19 but the average 

mile per transport in urban areas for the first half of 2004 was applied. For 

 17Ambulance RVUs account for the relative resources needed to provide services during an 

ambulance transport. There is one RVU for each of the seven levels of service. 

18In many cases, more than one GPCI would apply to our average base rate payment. For 

these cases we applied an average GPCI, which was weighted by the total number of 

transports in each geographic area of interest—national; census division; or urban, rural, or 

super-rural area. 

19The 2001 mileage payments were eventually adjusted to 2004 dollars. 

Page 48 GAO-07-383 Ambulance Providers’ Cost 
Appendix I: Data and Methods 

simulated payments in 2010, mileage rates from the first half of 2004 were 

applied. For average national and census division mileage payments, 

weighted mileage rates were applied reflecting the applicable percentage

of urban and rural miles in the first half of 2004. Because the average mile 

per transport for super-rural areas was above 17, simulated payments for 

super-rural areas were computed using the two rural mileage rates—$8.48

for miles 1 through 17 and $5.65 for miles 18 through 50. 

Table 12: Average Mile per Transport, First Half of 2004

Area Average mile per transport

National 9

Urban 7

Rural 13

Super-rural 20

East North Central 9

East South Central 12

Middle Atlantic 7

Mountain 9

Pacific 7

New England 7

South Atlantic 10

West North Central 14

West South Central 11

Source: 2004 Medicare claims. 

. 

Page 49 GAO-07-383 Ambulance Providers’ Cost 
Appendix I: Data and Methods 

Table 13: Mileage Rates

Period Urban Rural (1-17) Rural (18-50)

2001 $5.33 $5.33 $5.33

1/1/04 – 6/30/04 5.65 8.48 5.65

7/31/04 – 12/31/04 5.71 8.65 5.76

Simulated fee schedule 5.65 8.48 5.65

Sources: 67 Fed. Reg. 9100 and 2004 Medicare Ambulance Fee Schedule Public Use File.

Notes: All mileage rates are expressed in 2004 dollars. The 2001 mileage rate is based on the 

mileage rate for ground ambulance services used by CMS when creating the national fee schedule. 

Rural mileage rates also apply to super-rural transports. 

We used simulated Medicare payments and costs per transport to compute 

Medicare margins under the national fee schedule after MMA temporary 

payment provisions are due to expire, to determine how much providers 

stood to lose or gain. To do this, we merged the survey results with 

providers’ Medicare payment information from 2004. For each provider, 

we computed the mix of services and the average miles per transport for 

January 2004 through June 2004. This information was used to simulate 

each provider’s average Medicare payment under the national fee schedule 

in 2010 after all MMA temporary payment provisions are set to expire on 

December 31, 2009.20 We subtracted the provider’s 2004 cost per transport 

from the simulated average Medicare payment under the national fee 

schedule, and then divided by the simulated average payment to compute 

the provider’s Medicare margin. 

To estimate transports per 1,000 Medicare beneficiaries, we supplemented 

our Medicare claims data with CMS enrollment data from 2001 and 2004,

which contained information regarding Medicare beneficiaries. The 

numbers of Medicare beneficiaries in 2001 and 2004 were measured as the 

number of months beneficiaries were covered by Medicare in each year 

divided by 12. A ratio of the number of transports over the number of 

Medicare beneficiaries was estimated in each year and multiplied by 1,000. 

Analysis of Medicare 

Margins 

Estimating Use of 

Ambulance Transports by 

Medicare Beneficiaries 

 20We simulated the average payments under the national fee schedule in the same way 

described earlier in this appendix. 

Page 50 GAO-07-383 Ambulance Providers’ Cost 
Appendix I: Data and Methods 

Medicare claims data, which are used by the Medicare program as a record 

of payments made to health care providers, are closely monitored by both

CMS and Medicare carriers—contractors that process, review, and pay 

claims for Medicare Part B-covered services, including ambulance 

services. The data are subject to various internal controls, including 

checks and edits performed by the carriers before claims are submitted to 

CMS for payment approval. Although we did not review these internal 

controls, we found the data to be sufficiently reliable for the purposes of 

this report. We also assessed the reliability of CMS’s enrollment data. We 

found these data to be sufficiently reliable for the purposes of this report. 

Medicare Claims Data 

Reliability 

Page 51 GAO-07-383 Ambulance Providers’ Cost 
Appendix II: Comments from the Centers for 

Medicare & Medicaid Services 

Page 52 GAO-07-383 Ambulance Providers’ Cost 

Appendix II: Comments from the Centers for 

Medicare & Medicaid Services 
Appendix II: Comments from the Centers for 

Medicare & Medicaid Services 

Page 53 GAO-07-383 Ambulance Providers’ Cost 
Appendix III: GAO Contact and Staff Acknowledgments 

Page 54 GAO-07-383 Ambulance Providers’ Cost 

Appendix III: GAO Contact and Staff 

Acknowledgments 

Kathleen M. King, (202) 512-7119 or kingk@gao.gov

In addition to the contact named above, Christine Brudevold, Assistant 

Director; Jennie F. Apter; Carl S. Barden; Stella Chiang; Kevin J. Dietz; 

James M. Fields; Leslie V. Gordon; Michael Kendix; and Jessica Cobert 

Smith made key contributions to this report. 

GAO Contact 

Acknowledgments 
Related GAO Products 

Page 55 GAO-07-383 Ambulance Providers’ Cost 

Related GAO Products 

Ambulance Services: Medicare Payments Can Be Better Targeted to 

Trips in Less Densely Populated Rural Areas. GAO-03-986. Washington,

D.C.: September 19, 2003. 

Ambulance Services: Changes Needed to Improve Medicare Payment 

Policies and Coverage Decisions. GAO-02-244T. Washington, D.C.: 

November 15, 2001. 

Emergency Medical Services: Reported Needs Are Wide-Ranging, With A 

Growing Focus on Lack of Data. GAO-02-28. Washington, D.C.: 

October 12, 2001. 

Rural Ambulances: Medicare Fee Schedule Payments Could Be Better 

Targeted. GAO/HEHS-00-115. Washington, D.C.: July 17, 2000. 

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