[Federal Register Volume 69, Number 219 (Monday, November 15, 2004)]
[Notices]
[Pages 66918-66920]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-24757]



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Part IV





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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Medicare Program; Coverage and Payment of Ambulance Services; 
Recalibration of Conversion Factor; Inflation Update for CY 2005; 
Notice

Federal Register / Vol. 69 , No. 219 / Monday, November 15, 2004 / 
Notices

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-1267-N]
RIN 0938-AN20


Medicare Program; Coverage and Payment of Ambulance Services; 
Recalibration of Conversion Factor; Inflation Update for CY 2005

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Notice.

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SUMMARY: This notice sets forth: (1) A discussion of the annual review 
of the conversion factor (CF) used to calculate the Medicare program 
ambulance fee schedule; and (2) the annual ambulance inflation factor 
for ambulance services for calendar year 2005.

EFFECTIVE DATE: The revised CF is effective for services furnished on 
or after January 1, 2005.

FOR FURTHER INFORMATION CONTACT: Anne E. Tayloe, (410) 786-4546.

SUPPLEMENTARY INFORMATION:

I. Background

A. Legislative and Regulatory History

    The Secretary will annually review the conversion factor (CF) and 
will adjust the CF if actual experience under the fee schedule is 
significantly different from the assumptions used to determine the 
initial CF, as stated in Sec.  414.610(g). Additionally, the ambulance 
inflation factor (AIF) must be adjusted annually, as stated in section 
1834(l)(3)(B) of the Social Security Act (the Act) and in Sec.  
414.610(f).
    Under section 1861(s)(7) of the Act, Medicare Part B (Supplementary 
Medical Insurance) covers and pays for ambulance services, to the 
extent prescribed in regulations at 42 CFR parts 410 and 414, when the 
use of other methods of transportation would be contraindicated for the 
beneficiary. The House Ways and Means Committee and Senate Finance 
Committee Reports that accompanied the 1965 legislation creating the 
Act suggest that the Congress intended that: (1) The ambulance benefit 
cover transportation services only if other means of transportation are 
contraindicated by the beneficiary's medical condition; and (2) only 
ambulance service to local facilities be covered unless necessary 
services are not available locally, in which case, transportation to 
the nearest facility furnishing those services is covered (H.R. Rep. 
No. 213, 89th Cong., 1st Sess. 37 and S. Rep. No. 404, 89th Cong., 1st 
Sess., Pt I, 43 (1965)). The reports indicate that transportation may 
also be provided from one hospital to another, to the beneficiary's 
home, or to an extended care facility.
    Our regulations relating to ambulance services are located at 42 
CFR part 410, subpart B, and 42 CFR part 414, subpart H. Section 
410.10(i) lists ambulance services as one of the covered medical and 
other health services under Medicare Part B. Ambulance services are 
subject to basic conditions and limitations set forth at Sec.  410.12 
and to specific conditions and limitations included at Sec.  410.40. 
Part 414, subpart H describes how payment is made for ambulance 
services covered by Medicare.
    Ambulance services (air and ground) are divided into different 
levels of services based on the medically necessary treatment provided 
during transport. These services include the levels of service as 
follows:
    For Ground:
    <bullet> Basic Life Support (BLS)
    <bullet> Advanced Life Support, Level 1 (ALS1)
    <bullet> Advanced Life Support, Level 2 (ALS2)
    <bullet> Specialty Care Transport (SCT)
    <bullet> Paramedic ALS Intercept (PI)
    For Air:
    <bullet> Fixed Wing Air Ambulance (FW)
    <bullet> Rotary Wing Air Ambulance (RW)
    Historically, payment levels for ambulance services depended, in 
part, upon the entity that furnished the services. Prior to 
implementation of the ambulance fee schedule on April 1, 2002, 
providers (hospitals, including critical access hospitals, skilled 
nursing facilities, and home health agencies) were paid on a 
retrospective reasonable cost basis. Suppliers, which are entities that 
are independent of any provider, were paid on a reasonable charge 
basis.
    The Balanced Budget Act of 1997 (BBA) (establishing section 1834(l) 
of the Act) mandated the development of an ambulance fee schedule (AFS) 
through negotiated rulemaking. On February 27, 2002, we published a 
final rule in the Federal Register (Fee Schedule for Payment of 
Ambulance Services and Revisions to the Physician Certification 
Requirements for Coverage of Nonemergency Ambulance Services, 67 FR 
9100) that established a fee schedule for the payment of ambulance 
services under the Medicare program, effective for services furnished 
on or after April 1, 2002. The fee schedule replaced the retrospective 
reasonable cost payment system for providers and the reasonable charge 
system for suppliers of ambulance services. Additionally, the final 
rule: (1) Implemented a statutory requirement that ambulance suppliers 
accept Medicare assignment; (2) codified the establishment of new 
HealthCare Common Procedure Coding System (HCPCS) codes to be reported 
on claims for ambulance services; (3) established increased payment 
under the fee schedule for ambulance services furnished in rural areas 
based on the location of the beneficiary at the time the beneficiary is 
placed on board the ambulance; (4) revised the certification 
requirements for coverage of non-emergency ambulance services; and (5) 
provided for a 5-year transition period during which program payment 
for Medicare covered ambulance services would be based upon a blended 
rate comprised of a fee schedule portion and a reasonable cost 
(providers) or reasonable charge (suppliers) portion. We are now in the 
third year of that transition over to full payment based solely on the 
fee schedule amount.

B. Ambulance CF Review

    The February 27, 2002 final rule also provided that we would 
annually review rates and adjust the CF and air ambulance rates if 
actual experience under the fee schedule is significantly different 
from the assumptions used to determine the initial CF and air ambulance 
rates. The CF and air ambulance rates would not be adjusted solely 
because of changes in the total number of ambulance transports (Sec.  
414.610(g)). This notice describes the claims data for the first 9 
months of the AFS (April 1, 2002 through December 31, 2002) and 
explains the calculations used to determine whether the existing CF has 
resulted in a significant discrepancy between assumptions and actual 
experience under the AFS. These 2002 claims data were used because they 
were the most recent complete period of claims data under the AFS that 
were available for this analysis.

C. Ambulance Inflation Factor for CY 2005

    Section 1834(l)(3)(B) of the Act (implemented by regulation at 
Sec.  414.610(f)) provides the basis for updating payment amounts for 
ambulance services. This provision requires that the AFS be updated by 
the AIF annually, based on the percentage increase in the consumer 
price index (CPI) for all urban consumers (U.S. city average) for the 
12-month period ending with June of the previous year (Sec.  
414.610(f)).

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II. Data and Methodology for Recalibration

    As stated in section I.B. of this notice, we used claims data from 
the period April 1, 2002 through December 31, 2002 because this was the 
latest complete period for which we had claims data during which the 
AFS was in effect. We used a similar methodology to set the original CF 
as described in the February 27, 2002 final rule. We counted the number 
of trips at each level and determined the percentage of utilization of 
each to the total number of trips, then we compared these percentages 
to the same percentages from the original data used to set the CF. This 
method provided a means to evaluate the accuracy of the assumptions 
that were used to set the original CF. We also examined the degree to 
which ambulance billers' charges were less than the AFS amounts. This 
gave the actual amount of ``low billing.'' We then determined the 
conversion factor for ground services based on the actual claims data 
and compared that amount to the CF that has been in use based on the 
assumptions. The resulting CF was only eight-tenths of 1 percent (0.8 
percent) lower than the CF that was in use. We then performed a similar 
analysis using the 9-month 2002 claims data to evaluate the payment 
rates for air ambulance services. This resulted in payment rates that 
were 2.8 percent lower than the rates currently in use. We have 
determined that this is not a significant difference. Therefore, in 
accordance with Sec.  414.610(g), we have determined that no adjustment 
to the existing payment rate structure is warranted.
    The February 27, 2002 final rule also stated that we would review 
the basis for the bonus amounts paid for ambulance transports that 
originate in a rural area. Given that the Congress, through enactment 
of section 414 of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003, has provided for significant additional 
spending for these services, we have determined that no further 
adjustment in the payment amounts for these rural ambulance services is 
warranted.

III. Provisions of the Notice

A. AFS CF Update

    In accordance with Sec.  414.610(g), we have reviewed actual claims 
data and determined that actual experience under the AFS is not 
significantly different than the assumptions used to set the CF. 
Therefore, we are not revising the existing CF as a consequence of 
actual experience.

B. AIF for 2005

    Section 1834(l)(3)(B) of the Act, as specified in Sec.  414.610(f), 
provides for an update in payments for CY 2005 that is equal to the 
percentage increase in the CPI for all urban consumers (CPI-U) for the 
12-month period ending with June of the previous year (that is, June 
2004). We will use the actual percentage increase and not an estimate 
or projection. The AIF for 2005 is 3.3 percent.
    During the transition period (see Sec.  414.615), the AIF is 
applied to both the fee schedule portion of the blended payment amount 
and to the reasonable charge or cost portion of the blended payment 
amount separately for each ambulance provider or supplier. Then, these 
two amounts are added together to determine the total payment amount 
for each provider or supplier.

IV. Waiver of Proposed Rulemaking

    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register to provide a period of public comment before the 
provisions of a notice such as this take effect. We can waive this 
procedure, however, if we find good cause that a notice and comment 
procedure is impracticable, unnecessary, or contrary to the public 
interest and incorporate a statement of finding and its reasons in the 
notice issued.
    We find it unnecessary to undertake notice and comment rulemaking 
because the statute and regulation specify the methods of computation 
of annual updates, and we have no discretion in this matter. Further, 
this notice does not change substantive policy, but merely applies the 
update methods specified in statute and regulation. Therefore, for good 
cause, we waive notice and comment procedures.

V. Collection of Information Requirements

    This document does not impose information collection and 
recordkeeping requirements. Consequently, it need not be reviewed by 
the Office of Management and Budget under the authority of the 
Paperwork Reduction Act of 1995.

VI. Regulatory Impact Analysis

    We have examined the impact of this notice as required by Executive 
Order 12866 (September 1993, Regulatory Planning and Review), the 
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), 
section 1102(b) of the Act, the Unfunded Mandates Reform Act of 1995 
(Pub. L. 104-4), and Executive Order 13132.
    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). A regulatory impact 
analysis (RIA) must be prepared for major rules with economically 
significant effects ($100 million or more in any 1 year). As stated 
above, the AIF (equal to the percentage increase in the CPI-U of June 
30, 2004 as compared to June 30, 2003) for 2005 is 3.3 percent. We 
estimate that the application of the AIF will result in this notice 
being considered a major rule because it will result in an additional 
total program expenditure of approximately $100 million in CY 2005.
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and government agencies. 
Most hospitals and most other providers and suppliers are small 
entities, either by nonprofit status or by having revenues of $6 
million to $29 million in any 1 year. For purposes of the RFA, all 
ambulance providers or suppliers are considered to be small entities. 
Individuals and States are not included in the definition of a small 
entity.
    We consider that a substantial number of entities are affected if 
the rule impacts more than 5 percent of the total number of small 
entities as it does in this notice. This notice will impact every 
ambulance provider and supplier in the same way because all ambulance 
payment rates for all ambulance services furnished by all types of 
ambulance suppliers and providers are increased by the same ambulance 
inflation factor. We estimate the impact of this notice will be an 
approximate 3 percent increase in Medicare revenues for all ambulance 
suppliers and providers that furnish services to Medicare 
beneficiaries. This will be a somewhat less than 2 percent increase in 
total revenues (that is, Medicare plus non-Medicare revenues). This 
estimated impact does not meet the threshold established by HHS to be 
considered a significant impact. Nonetheless, we have prepared the 
analysis below to describe the impact of this notice.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of

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a substantial number of small rural hospitals. This analysis must 
conform to the provisions of section 604 of the RFA. For purposes of 
section 1102(b) of the Act, we define a small rural hospital as a 
hospital that is located outside of a Metropolitan Statistical Area and 
has fewer than 100 beds. This notice applies to small rural hospitals 
that furnish at least one Medicare covered ambulance service to at 
least one Medicare beneficiary.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule that may result in expenditure in any 1 year by State, 
local, or tribal governments, in the aggregate, or by the private 
sector, of $110 million. This notice does not result in an expenditure 
in any 1 year by State, local, or tribal governments of $110 million.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it publishes a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. This notice will not have a substantial effect on State 
or local governments.
    We estimate that the total program expenditure for CY 2005 for 
ambulance services covered by the Medicare program is approximately 
$3.7 billion. This estimate of program spending includes application of 
an AIF assumed to be approximately 3 percent. This assumption results 
in an additional total program expenditure of approximately $100 
million distributed over 16,000 suppliers and providers that furnish 
ambulance services to Medicare beneficiaries.
    For recalibrating the AFS, there are two alternatives: (1) To make 
an adjustment to the AFS, if actual experience is significantly 
different from our initial assumptions; or (2) to make no adjustment to 
the AFS because actual experience is not significantly different from 
our initial assumptions. As discussed in section II.A. of this notice, 
we have decided not to make an adjustment to the AFS because actual 
experience is not significantly different from our initial assumptions; 
however, we note that making the adjustment would have lowered payments 
to suppliers and providers of ambulance services. Therefore, payments 
to suppliers and providers of ambulance services are slightly higher 
than would otherwise be made if we were to make these adjustments to 
the AFS. We estimate the impact of this action will be an approximate 
0.8 percent increase in Medicare revenues for all ambulance suppliers 
and providers that furnish ground ambulance services to Medicare 
beneficiaries and an approximate 2.8 percent increase in Medicare 
revenues for all ambulance suppliers and providers that furnish air 
ambulance services to Medicare beneficiaries. This will be a 0.5 
percent and 1.5 percent increase in total revenues for ground and air 
ambulance services respectively (that is, Medicare plus non-Medicare 
revenues). The estimated impact of this action is, therefore, not 
significant.
    In accordance with the provisions of Executive Order 12866, this 
notice was reviewed by the Office of Management and Budget.

    Authority: Section 1834(l) of the Social Security Act (42 U.S.C. 
1395m(l)).

(Catalog of Federal Domestic Assistance Program No. 93.774, 
Medicare--Supplementary Medical Insurance Program)

    Dated: July 29, 2004.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: September 21, 2004.
Tommy G. Thompson,
Secretary.
[FR Doc. 04-24757 Filed 11-2-04; 4:45 pm]
BILLING CODE 4120-01-P