GAO

United States General Accounting Office

Report to the Honorable

Thomas A. Daschle, U.S. Senate

July 2000 RURAL

AMBULANCES

Medicare Fee

Schedule Payments

Could Be Better

Targeted

GAO/HEHS-00-115

Page 1 GAO/HEHS-00-115 Rural Ambulance Providers

Contents

Letter 3

Appendixes Appendix I: Scope and Methodology 26

Appendix II: Medicare Coverage Criteria for Emergency and

Nonemergency Ambulance Transports 27

Appendix III: Medicare Payment Method for Freestanding

Ambulance Providers 29

Appendix IV: Organizations Represented on the Negotiated

Rulemaking Committee on Medicare Ambulance Fee

Schedule 30

Appendix V: Recommendations From the Negotiated Rulemaking

Committee on Medicare Ambulance Fee Schedule 31

Appendix VI: Comments From the Health Care Financing

Administration 33

Tables Table 1: Characteristics of Medicare Ambulance Transport by Urban

and Rural Freestanding Providers, 1998 9

Table 2: Maximum Medicare Payments to Freestanding Ambulance

Providers by Service in Selected Rural Areas, 1999 12

Table 3: Levels of Ambulance Assistance 31

Figure Figure 1: Denied Emergency Ambulance Transports for the Nine

Carriers, as a Percentage of Total Submitted Claims, 1998 19
Contents

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Abbreviations

ALS advanced life support

BBA Balanced Budget Act of 1997

BLS basic life support

EMS emergency medical services

EMT emergency medical technician

GPCI geographic practice cost index

HCFA Health Care Financing Administration

ICD International Classification of Diseases, 9th revision

IIC inflation-indexed charge

MSA Metropolitan Statistical Area

RVU relative value unit
Page 3 GAO/HEHS-00-115 Rural Ambulance Providers

United States General Accounting Office

Washington, D.C. 20548

Health, Education, and

Human Services Division

B-283274 Letr

July 17, 2000

The Honorable Thomas A. Daschle

United States Senate

Dear Senator Daschle:

Ambulance services are essential to an effectively functioning emergency

medical services (EMS) system. Ambulance providers must be ready to

supply services rapidly and at all times, otherwise services may be of little

value. Maintaining this capacity may be particularly difficult in some rural

areas because rural providers are likelier than others to have a relatively

low volume of ambulance trips in relation to significant overhead costs. In

addition, the population they serve is dispersed, raising the direct costs of

ambulance trips, known as transports. Some freestanding ambulance

providers in rural states believe that Medicare payment for their services is

not adequate and that their claims for payment are too often denied by

Medicare.1

In an effort to ease administrative burdens for both the Health Care

Financing Administration (HCFA) and providers, offer predictable rate

increases, and incorporate payment incentives for providers to improve

their efficiency, the Medicare program has begun to change its payment

system for ambulance services. In the Balanced Budget Act of 1997 (BBA),

the Congress mandated that by January 1, 2000, HCFA develop an

ambulance fee schedule that reflects the different types of ambulance

services provided.2 However, development of the fee schedule has been

delayed and, according to HCFA, the fee schedule will be implemented

January 1, 2001.

Currently, Medicare payments for ambulance services are determined using

a complex method based on historical charges for freestanding providers

and reasonable costs for hospital-based providers. The fee schedule will

standardize payment rates across provider types and will be based on

1

The term freestanding is used to describe ambulance providers that are not affiliated with a

hospital or other health care facility.

2

P.L.105-33, 4531(b), Stat. 251, 450-52.
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national rates for particular services. In this context, you asked us to

address the following questions: (1) What are the challenges faced by rural

ambulance providers? (2) How will the upcoming fee schedule affect rural

providers relative to their current situation? (3) What factors have affected

claim denial rates for ambulance services?

To answer these questions, we interviewed ground and air ambulance

providers, local and state government officials, and other knowledgeable

individuals. We also interviewed officials from HCFA; observed meetings of

the Negotiated Rulemaking Committee on Medicare Ambulance Fee

Schedule; reviewed pertinent laws, policies, and regulations; and observed

a contractor’s claims processing system. In addition, we analyzed Medicare

claims data for ambulance services provided in calendar years 1997 and

1998. We performed our work in accordance with generally accepted

government auditing standards between January 1999 and June 2000. (See

app. I for more information about our methodology.)

Results in Brief Because many rural ambulance providers serve a large geographic area

with a low population density, they face a set of unique challenges. Unless

they rely on volunteers, they tend to have high per-trip costs because of the

lower volume of transports as compared to urban and suburban providers.

Rural providers also tend to have longer ambulance transports than their

urban counterparts, making the adequacy of reimbursement for mileage

costs more central to their overall payments than for providers in more

densely populated areas. In addition, because rural residents may have

fewer alternatives for transportation to hospitals, ambulances may

transport some beneficiaries whose conditions do not allow for Medicare

reimbursement. Furthermore, revenue sources are changing for rural

providers with an increasing reliance on Medicare revenues. Moreover,

maintaining volunteer staffs, which are more common in rural than urban

areas, is becoming more difficult.

The proposed Medicare fee schedule will alter the way rural ambulance

providers are paid. Much of the variation in payment rates among similar

rural providers will be eliminated. Some providers that now are paid more

than the national average are likely to receive lower payments under the

fee schedule. Others, including rural South Dakota providers, that are paid

less than the national average are likely to receive increased payments. In

addition, providers that transport beneficiaries in rural areas will receive

enhanced payments intended to help sustain essential ambulance service in

sparsely populated areas. However, this adjustment does not sufficiently
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distinguish the providers serving beneficiaries in isolated areas and may

not be applied appropriately. Therefore, we recommend that HCFA refine

the payment adjuster to better target the necessary fixed costs of essential

providers in isolated areas. HCFA agreed with this recommendation and

said it would take action to obtain the information needed to enable better

targeting in the future.

Our review of 1998 claims data shows that payment denials have varied

widely among carriers, which are the contractors that process claims for

freestanding ambulance providers. Such variation can result in unequal

coverage for Medicare beneficiaries. Different practices among carriers,

including increased attention to potential fraud, differences in local

policies, and carriers’ failure to apply the coverage criteria appropriately,

may have contributed to the variation in claims denials. Claims have also

been denied because providers did not properly fill out forms. Additionally,

the absence of a national coding system that readily identifies the

beneficiary’s medical condition at the time of the transport has impaired

providers’ ability to convey information to carriers in a way that facilitates

review of claims.

Background Medicare is the nation’s largest health insurance program, with nearly 40

million beneficiaries. It includes almost all persons 65 years of age and

older and certain disabled persons. Medicare’s Part A, the hospital

insurance program, covers inpatient hospital, some home health, skilled

nursing facility, and hospice services. Part B, the supplemental insurance

program, covers physician, outpatient hospital and laboratory services, and

an array of other services, including ambulance service.

HCFA, the agency that administers the Medicare program, contracts with

more than 50 insurance companies to process and pay Medicare claims.

These contractors include both fiscal intermediaries and carriers. Fiscal

intermediaries process inpatient hospital and skilled nursing facility claims

under Part A as well as certain services covered under Part B, such as

ambulance claims submitted by hospital-based providers. Carriers process

other Part B claims, including ambulance claims submitted by freestanding

providers. Before paying claims, the contractors must ensure that the

claims meet Medicare’s coverage criteria that identify whether Medicare

will pay for a service, and they must deny inappropriate claims. They are

also responsible for supplying information to providers (through

educational workshops, newsletters, or other methods) about coverage

policy and required procedures.
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Medicare Coverage of and

Payment for Ambulance

Services

Medicare covers medically necessary ambulance services when no other

means of transportation to receive health care services is appropriate given

the beneficiary’s medical condition at the time of transport. Medicare pays

for both emergency and nonemergency ambulance transports that meet the

established criteria. To receive Medicare reimbursement, providers of

ambulance services must also meet vehicle and crew requirements.

Transport in any vehicle other than an ambulance—such as a wheelchair or

stretcher van—does not qualify for Medicare payment. (For more

information on Medicare’s coverage criteria, see app. II.)

Between 1987 and 1995, Medicare payments to freestanding ambulance

providers more than tripled from $602 million to almost $2 billion, an

average annual increase of 16 percent. Overall Medicare spending during

that same time increased 11 percent annually. From 1996 through 1998,

payments to freestanding ambulance providers stabilized at about $2.1

billion.

Currently, Medicare uses different payment methods for hospital-based and

freestanding ambulance providers. Hospital-based providers are paid based

on their reasonable costs, and freestanding providers are paid based on a

reasonable charge system, which includes an upper limit. (For more

information about the reasonable charge system, see app. III.) For

freestanding providers, Medicare pays a base rate, and providers can bill

separately for mileage and certain supplies.3

Diverse Ambulance Industry In 1997, 11,135 freestanding and 1,119 hospital-based providers billed

Medicare for ground transports.4 Approximately 10 percent of Medicare

ambulance providers are hospital-based.5 The freestanding providers are a

diverse group, including private for-profit and nonprofit and public entities.

They include operations staffed almost entirely by community volunteers,

public ventures that include a mix of volunteer and professional staff, and

3

This is true for 99 percent of all freestanding ground ambulance transports. The payment

for the remainder is a base rate that includes mileage.

4

Project Hope, “Results from the National Survey of Ambulance Providers,” presented by

Penny Mohr to the Negotiated Rulemaking Committee on Medicare Ambulance Fee

Schedule (Dec. 1999).

5

Penny E. Mohr, Michael Cheng, Curt D. Mueller, and others, “Findings from the 1999

National Survey of Ambulance Providers,” Final Report, Project Hope (Mar. 2000).
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private operations using paid staff operating independently or contracting

their services to local government. About 34 percent are managed by local

fire departments. In several communities a quasi-government agency owns

the ambulance equipment and contracts with private companies for staff.

The majority of air ambulance transports are provided by hospital-based

providers. An estimated 275 freestanding and hospital-based programs

provide fixed-wing and rotor-wing air ambulance transports, which

represent a small proportion (about 5 percent) of total ambulance

payments.6

Medicare pays for different levels of ambulance services, which reflect the

staff training and equipment required to meet the patient’s needs. Basic life

support (BLS) is provided by emergency medical technicians (EMT).

Advanced life support (ALS) is provided by paramedics or EMTs with

advanced training. ALS with specialized services is provided by the same

staff as standard ALS but involves additional equipment.

Medicare Fee Schedule

Being Developed

The BBA required that a fee schedule be developed for all ambulance

services to replace the current charge- and cost-based reimbursement

systems.7 Although the fee schedule was to have applied to services

furnished on or after January 1, 2000, HCFA does not expect to implement

it until January 1, 2001.

The BBA stated that the fee schedule for ambulance services should

include

• mechanisms to control increases in expenditures,

• definitions linking payments to the type of services provided,

• consideration of regional or operations differences in costs,

• payment adjustments to account for inflation and other relevant factors,

and

• an efficient and fair phase-in period.

6

Estimated number of air ambulance companies is from Report of Findings From the

National Air Ambulance Cost Study, Ernst & Young LLP (Dec. 1999), p. 3. Estimated

percentage of Medicare air transport payments is from the Association of Air Medical

Services.

7

Section 4531(b) of the BBA established a new subsection 1834(l) of the Social Security Act.

42 U.S.C. 1395m(1).
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The law also stipulated that total payments under the fee schedule for

ambulance services in 2000 should not exceed essentially what total

payments would have been under the old payment system. This

requirement is known as a budget neutrality provision.

As required by BBA, HCFA is developing the fee schedule using a

negotiated rulemaking process, which involves a committee made up of

representatives from different interested parties. The Negotiated

Rulemaking Committee on Medicare Ambulance Fee Schedule was

charged with developing recommendations for HCFA that are to be used as

the basis of the fee schedule. The committee had a series of meetings

beginning February 1999, completed its work in February 2000, and

published recommendations for the fee schedule. If HCFA’s resulting

payment proposal adheres to the committee’s recommendations, the

members agree not to oppose it. HCFA will use those recommendations as

the basis of the proposed fee schedule to the maximum extent possible.

(See app. IV for a listing of all the organizations participating in the

Negotiated Rulemaking Committee and app. V for details of the report.)

Rural Ambulance

Providers Face

Multiple Challenges

Several factors characterize rural ambulance providers and may need

consideration in implementing an appropriate payment policy. Some of

these factors may affect providers’ per-transport costs, such as low volume

of transports and the long distances traveled in rural areas to provide

ambulance care. The lack of alternative transportation in rural areas results

in some providers transporting beneficiaries whose conditions do not meet

Medicare coverage criteria. Increasing reliance on Medicare revenue and

changing staff composition are other characteristics of rural providers.

More specifically, the issues are as follows:

• High per-transport costs in low-volume areas. Compared to their urban

and suburban counterparts, rural ambulance providers have fewer

transports over which to spread their fixed costs because of the low

population density in rural areas. According to Project Hope, rural

providers—both freestanding and hospital-based—average fewer than

1,200 transports per year while urban providers average over 14,000

transports per year.8 Yet, rural providers must meet many of the same

basic requirements as other providers to maintain a responsive

8

Project Hope (1999).
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ambulance service, such as a fully equipped ambulance that is

continually serviced and maintained and sufficient numbers of trained

staff. As a result, rural providers that do not rely on volunteers generally

have higher per-transport costs than their urban and suburban

counterparts.

• Longer distances traveled. A common characteristic of rural ambulance

providers is a large service area, which generally requires longer trips.

Longer trips increase direct costs from increased mileage costs and staff

travel time. They also raise indirect costs because ambulance providers

must have sufficient backup services when vehicles and staff are

unavailable for extended periods. Among the freestanding ground

providers that bill Medicare, rural ground providers had more than 10

times as many transports of 50 miles or greater than their urban

counterparts and at least four times as many trips of 20 to 49 miles as

urban providers. (See table 1.) Current Medicare payment policy

generally allows freestanding providers to be reimbursed for their

mileage costs. Nevertheless, mileage-related reimbursement issues,

such as the amount paid for mileage, represent a greater concern to

rural providers because of the longer distances traveled.

Table 1: Characteristics of Medicare Ambulance Transport by Urban and Rural Freestanding Providers, 1998

a

Defined as rural if the address of the beneficiary who was transported was not in a metropolitan

statistical area (MSA).

Note: Figures from this table represent all claims in which mileage was billed separately.

Source: HCFA, National Claims History 100% Nearline File, 1998 (June 1999).

• Lack of alternative transportation services. Rural areas may lack

alternative transport services, such as taxis, van services, and public

transportation, which are more readily available in urban and suburban

Number of transports

Transports of 20-49 miles

(percentage)

Transports of 50+ miles

(percentage)

Transport type Urban Rurala Urban Rurala Urban Rurala

Ground

nonemergency 2,405,524 580,130 3.2 11.3 0.5 5.3

Ground

emergency 2,404,369 802,412 2.1 10.7 0.2 3.6

Air (emergency and

nonemergency) 427 459 3.8 5.2 4.2 36.8
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areas. According to one expert, rural elderly beneficiaries may call the

emergency number (911) because they have no other transport options.

This situation is complicated by the fact that some localities require

ambulance providers to transport in response to an emergency call,

even if the severity of the problem has not been established. Because of

this situation, some providers end up transporting a Medicare

beneficiary whose need for transport does not meet Medicare coverage

criteria and, consequently, they must seek payment from the beneficiary

or another source.

• Increasing reliance on Medicare revenue. Medicare payments account

for an increasing share of revenue for rural providers that bill Medicare.

Among these providers, 44 percent of their annual revenue, on average,

was from Medicare, in contrast to an estimated 15 percent in 1989,

according to Project Hope.9 (Urban providers’ reliance has risen from 31

to 37 percent.) For some rural providers, this is because, to some extent,

other revenue sources—such as subsidies from local tax revenues,

donations, or other fundraising efforts—have not kept up with

increasing costs of delivering the services.

• Decreasing availability of volunteer staff. Rural ambulance providers

traditionally have relied more heavily on volunteer staff than providers

in urban or suburban areas. According to Project Hope, half of the

providers based in nonmetropolitan counties rely on volunteer staff,

compared to 24 percent of providers based in metropolitan counties.10

Volunteer staff can make a substantial difference in cost for rural

providers. Rural ambulance providers that rely on volunteers had lower

costs per transport than their nonrural counterparts, according to a 1991

study by Project Hope. However, if the rural providers used paid staff,

their average costs per transport were higher than those of providers in

more densely populated areas. Some communities are having difficulty

recruiting and retaining volunteers and may have had to hire paid staff,

which increases the costs of providing services. To support volunteer

services, some state governments have intervened. For example, North

Dakota, a predominantly rural state, will provide a total of $940,000

9

Current data reflect the providers’ most recent fiscal year, which for most is 1998, and were

provided to GAO by Penny Mohr, Project Hope (personal communication, Jan. 11 and 14,

2000). Data for 1989 are from a Project Hope survey of 206 ambulance providers in four

states (California, Massachusetts, Michigan, and Texas), which were chosen because they

represented different regions of the country.

10Volunteer providers are defined by Project Hope as those with volunteer staff composing

80 percent or more of the total staff. Nonmetropolitan is the designation used to identify

rural providers.
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during fiscal years 2000 and 2001 to help volunteers maintain their

certification as EMTs and paramedics.

New Fee Schedule Will

Alter the Way Medicare

Pays for Ambulance

Services

HCFA is developing a fee schedule for ambulance payments based on

recommendations from the Negotiated Rulemaking Committee and has

agreed to follow the committee’s recommendations to the maximum extent

possible. Therefore, even though the fee schedule details have not been

finalized, it is clear that Medicare payments for ambulance services will

change as a result. A fee schedule will eliminate the current wide variation

in payments that exists across similar providers for similar services. It will

also eliminate the different payment methods used for freestanding and

hospital-based providers. Under the likely proposal, all providers who

transport beneficiaries in rural areas will receive a supplement to their

mileage payment. However, the higher payment is not targeted to

transports by low-volume providers in isolated areas but rather applies to

all transports involving rural residents. Implementation of a fee schedule

will increase payments for those providers who historically have received

low payments and reduce them for those with relatively high payments.

Fee Schedule Will Reduce

Wide Variations in Payments

The design of the new fee schedule will be substantially different from

Medicare’s current payment method for ambulance services. Under the

present system, there are considerable variations in payments to similar

providers for the same type of services. The fee schedule, which will likely

be phased in over 4 years, will assign one payment amount for each type of

ambulance service. This amount will vary across geographic areas to

account for labor and other cost differences across the country. The

amount will also vary based on whether the beneficiary was transported

from an urban or rural location. (See app. V for details about the fee

schedule.)
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In the rural states that we surveyed, we found that the current system has

led to widely varying payments to freestanding providers for similar

services. For example, emergency providers in rural South Dakota had

much lower reimbursement rates in 1999 for ambulance services and

associated mileage than providers in neighboring rural states—North

Dakota, Wyoming, and Montana (see table 2). The variation stems from the

way providers are paid under the reasonable charge system. Under this

system, payment amounts are limited to a maximum allowable amount,

which is based on 1985 charges that have been updated for inflation.11

These charges were billed during a time when providers may have had

proportionally higher subsidies from local or state governments or more

volunteer staff and, therefore, had lower charges than those of an

unsubsidized, fully professional service. While the situation of the provider

may have changed—particularly with regard to subsidies or volunteer

staff—the Medicare payment has been updated only to account for

inflation. Consequently, the maximum allowable amounts may vary

because of underlying historical charges. They also may not reflect the

current costs of delivering services.

Table 2: Maximum Medicare Payments to Freestanding Ambulance Providers by

Service in Selected Rural Areas, 1999

a

Unlike South Dakota, the maximum payment amount in Montana, North Dakota, and Wyoming is the

same for urban and rural areas.

Note: Except for per-mile payments, amounts are rounded to the nearest dollar.

Source: GAO analysis of 1999 carrier reasonable charge data provided by HCFA.

11For more information about the current payment method for freestanding providers, see

app. III.

Maximum payment amount in rural areas (in dollars)

Ambulance service South Dakota Montana North Dakotaa Wyominga

BLS, emergency $85 $189 $150 $144

ALS, emergency 137 231 347 138

ALS, emergency,

specialized services 167 231 350 227

BLS per-mile payments 2.17 4.00 3.00 4.00

ALS per-mile payments 2.17 5.67 4.13 6.00
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The shift to the fee schedule will narrow the wide variation in payments to

freestanding providers for similar services. Under the likely proposal,

payments to providers in rural areas for the same service will be adjusted

only to account for geographic cost differences, such as for wage rates.

This adjustment will likely be based on the practice expense component of

Medicare’s geographic practice cost index (GPCI), which is used for the

physician fee schedule. The practice expense component of the GPCI

measures the relative cost differences of nonphysician labor and overhead

costs in physician practices across the country. Under this method,

payments will vary at most by about 2 percent in the four states we

examined.12 This variation is considerably smaller than the current range of

maximum allowable amounts for services among the four states. For

example, payment for emergency BLS is about 120 percent greater in

Montana than in South Dakota, and payment for emergency ALS is about

150 percent greater in North Dakota than in South Dakota.

Current variations in maximum payment rates do not necessarily reflect

expected differences in provider costs. For example, the maximum

payment amounts for emergency ALS with no specialized services and for

ALS with specialized services are the same in Montana and are almost the

same in North Dakota. By contrast, the payment levels differ for these two

types of service in Wyoming and South Dakota, where both services are

paid at much lower levels. Some of Wyoming’s rates are anomalous; for

example, the maximum payment amount for a BLS emergency is higher

than for an ALS emergency, which requires a higher skill level of care.

12The practice expense component of the GPCI is relative to 1.0, so values below 1.0 reduce

payments below the average and values above 1.0 raise payments. The states we examined

have lower costs than the national average. The GPCI for South Dakota is 0.873 (45th among

the 50 states) compared to 0.877 for North Dakota (42nd), 0.877 for Montana (41st), and

0.895 (34th) for Wyoming. Only 10 states (not including metropolitan areas that have

separate GPCI values) have a GPCI practice expense number above 1.0. The GPCI will be

applied to 70 percent of the base payment rate.
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Under the current system, payments to hospital-based providers, which

represent 26 percent of providers in rural areas and 12 percent in urban

areas, also may vary substantially.13 Hospital-based providers are paid

under a system separate from freestanding providers with payments based

on their reported costs.14 The fee schedule is not likely to distinguish

between types of providers for payment purposes. Therefore, for the same

service, payments to hospital-based and freestanding providers in the same

area will be identical.

The fee schedule will eliminate the payment differences based on

individual ambulance provider costs or historical charges. Most likely,

there will be one fee for each level of service. This fee is not expected to

vary among providers except for two possible adjustments—one for

geographic wage and price differences and the other based on the

beneficiary’s location, rural or urban.

Likely Rural Adjuster Does

Not Target Essential

Providers in Low-Density

Areas

As part of its mandate, the Negotiated Rulemaking Committee was directed

to consider the issue of providing essential ambulance service in isolated

areas. The committee recommended a rural payment adjustment to

recognize the higher costs associated with low-volume providers and to

ensure adequate ambulance services. The proposed adjustment is an

additional mileage payment for the first 17 miles for all transports of

beneficiaries in rural areas. HCFA intends to define rural as any area

outside of a metropolitan statistical area (MSA) and areas within MSAs that

are identified as rural. (See app. V for details about the rural adjuster.)

An adjustment based on a non-MSA classification treats all providers in a

range of rural areas identically. However, characteristics of rural areas may

vary greatly. Some are near metropolitan areas and have relatively large

populations, while others are sparsely populated and far from any urban

centers. This variety among rural areas is illustrated by the U.S.

Department of Agriculture’s rural-urban continuum code. The code

classifies rural counties based on the size of their urban population and

proximity to an MSA. There are six categories for nonmetropolitan

13Project Hope (Mar. 2000).

14During any given year a hospital receives an interim payment based on its costs from the

previous year. The final payment is determined at the end of the hospital’s fiscal year, as part

of a year-end cost settlement process. The determination of the final payment may also

include an audit by fiscal intermediary staff of the reported costs.
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counties, ranging from counties with an urban population of 20,000 or more

and adjacent to a metropolitan area to those with less than 2,500 urban

population and not adjacent to a metropolitan area. The latter are defined

as completely rural.

Furthermore, HCFA’s intended definition of rural does not target providers

that offer the only ambulance service for residents in an isolated area. This

may have two results. First, some providers may receive the payment

adjustment when they are not the only available source of ambulance

service. Second, the adjustment may be too low for the truly isolated

providers because it was extended to a larger group. For example,

payments to rural health clinics were modified in an attempt to ensure

access to primary care in rural, underserved areas. However, our previous

work showed that because of the overly broad eligibility criteria, the

supplemental payments benefited well-staffed, financially viable clinics in

suburban areas. Furthermore, we found that sparsely populated,

underserved communities still needed help and were not receiving it.15

Medicare has recognized the need to develop targeting mechanisms that

extend beyond the MSA/non-MSA distinction. For example, Medicare’s

“sole community hospital” designation aims to identify facilities located in

geographically isolated areas. These hospitals are defined as the sole

providers of inpatient, acute-care hospital services in a geographic area.

This definition is based on distance and travel time to other facilities,

severe weather conditions, market share, or some combination of those

factors. Not all of these sole providers are rural, and not all rural hospitals

qualify as sole community hospitals.

There are indications that the rural adjustment in the ambulance fee

schedule may not be sufficiently targeted. The Negotiated Rulemaking

Committee members were not satisfied with the definition that HCFA

intends to use for rural areas, which they believe does not sufficiently

target the low-volume, isolated rural providers. They accepted the

definition because no other option could be easily adopted and

implemented by HCFA, and they did not want this issue to delay

implementation of the fee schedule. However, they stated that the currently

proposed rural adjustment should be temporary and expressed their belief

15Rural Health Clinics: Rising Program Expenditures Not Focused on Improving Care in

Isolated Areas (GAO/HEHS-97-24, Nov. 1996).
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that a new methodology needs to be developed that more adequately

targets the low-volume, isolated rural areas.

In addition, the intended rural adjustment will be tied to the mileage

payment rather than the base rate and, therefore, may not adequately help

low-volume providers. Such providers may not have enough transports to

enable them to cover the fixed costs associated with maintaining

ambulance service. The per-mile cost would not necessarily be higher with

longer trips. It is the base rate, which is designed to pay for general costs

such as staff and equipment—and not the mileage rate—that may be

insufficient for these essential providers. For that reason, adjusting the

base rate rather than the mileage rate would better account for their higher

per-transport fixed costs.

Fee Schedule Will Boost

Payments for Some

Providers and Reduce Them

for Others

Even though the actual payment amounts have not yet been finalized, a

national fee schedule is likely to provide increased per-trip payments to

those providers that under the current system receive payments

considerably below the national average and decreased payments to

providers with payments that have been substantially above the national

average. For example, the maximum payment in 1999 for ALS emergency

services in North Carolina was $106, compared to $347 in North Dakota.

Payments for ALS emergency services in North Carolina were about 70

percent less than those in North Dakota. However, the practice expense

component of the GPCI for North Carolina exceeded that of North Dakota

by about 5 percent.16 Under the likely design of the fee schedule, for the

same distance transport, the payment to a rural provider in North Carolina

will be about 4 percent higher than the payment for a rural provider in

North Dakota.17

16The practice expense component of the GPCI is 0.924 for North Carolina (26th among the

50 states for their nonmetropolitan areas), compared to 0.877 for North Dakota (42nd).

17It is about 4 percent higher because the GPCI will be applied only to 70 percent of the base

rate payment.
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Because the geographic wage and price adjuster for all non-MSA areas

varies 43 percent between the lowest and highest areas, payments under

the likely fee schedule will move closer together.18 For example, in

Colorado, the maximum payment to freestanding providers for BLS

emergency in 1999 was about 320 percent higher than the payment for the

same service in South Dakota. Yet, the geographic payment adjustment

under the fee schedule will likely result in a payment that is only 11 percent

greater for Colorado providers than for South Dakota providers.19

In conjunction with the fee schedule, all ambulance providers will be

required to accept Medicare’s allowed payment amount as payment in full

(known as accepting assignment), which could affect whether providers’

payments go up or down under the fee schedule. Providers that accept

assignment receive 80 percent of the allowed amount from the Medicare

program and bill the beneficiary for the remaining 20 percent of the

Medicare-allowed amount.20 Providers that do not accept assignment can

bill beneficiaries for the balance of their charge above the Medicareallowed amount up to a limit. (This is known as balance billing.) Currently,

ambulance providers may choose whether or not to accept assignment.

Eliminating the balance billing option may not affect the Medicare

revenues of providers in low-payment areas because their fee schedule

rates will be higher than their historic payments. For others, in cases where

the fee schedule is considerably lower than current rates, their payments

may decrease even more after implementation of the fee schedule if they

have generally billed the beneficiary above the Medicare-allowed amount.

Because HCFA intends to require providers to accept assignment at the

beginning of the 4-year transition to the fee schedule, providers in lowpayment areas that have not accepted assignment may see decreased

payments in the short term.21

18This percentage is based on the range of non-MSA GPCI (from 0.828 to 1.183) for all states.

19The GPCI is 0.873 for South Dakota (45th among the 50 states). The GPCI is 0.97 for

Colorado (15th).

20Providers that accept assignment receive a higher payment from Medicare and can be paid

directly by Medicare. If providers do not accept assignment, Medicare payment is sent to the

beneficiary, who must then pay the provider.

21According to HCFA, the law requires that assignment take effect when the fee schedule is

first implemented.
B-283274

Page 18 GAO/HEHS-00-115 Rural Ambulance Providers

Claims Denials Vary

Considerably Across

Carriers

Whether a claim for ambulance transport is approved varies among

carriers, and these discrepancies can translate into unequal coverage for

beneficiaries. Different practices among carriers, including increased

scrutiny due to concerns about fraud, may explain some of the variation in

denial rates. In addition, some variation in denials may result from

providers in certain areas lacking information about how to fill out

electronic claim forms correctly. Claims review difficulties are exacerbated

by the lack of a national coding system that easily identifies the

beneficiary’s health condition and links it to the appropriate level of service

(BLS, ALS, or ALS with specialized services). As a result, the provider may

not convey the information the carrier needs to understand the

beneficiary’s medical condition at the time of pickup, creating a barrier to

appropriate reimbursement.

Denial Rates Among

Carriers for Ambulance

Transports Varied

Substantially

For both emergency and nonemergency ambulance transports, the denial

rates in 1998 varied from about 9 to 26 percent for the nine carriers that

processed two-thirds of all ambulance claims.22 For emergency transports,

denials ranged from about 2 to 20 percent (see fig. 1). Noridian, the carrier

serving 11 states including North Dakota and South Dakota, had the highest

denial rate for emergency ambulance transports and, along with

Trailblazers, the highest overall denial rate.

22These denial rates are based on our analysis of HCFA’s National Claims History 100%

Nearline File database and include all 1998 claims that were paid prior to June 1999.
B-283274

Page 19 GAO/HEHS-00-115 Rural Ambulance Providers

Figure 1: Denied Emergency Ambulance Transports for the Nine Carriers, as a Percentage of Total Submitted Claims, 1998

Source: GAO analysis of HCFA National Claims History 100% Nearline File, 1998, as of June 1999.

0

5

10

15

20

25

Wisconsin

Physician

Services

United

Health Care

Pennsylvania Trailblazers

Blue Shield

National Nationwide Noridian

Heritage

Florida

Blue Shield

Alabama

Blue Shield

Carrier

Percentage of Denied Transports
B-283274

Page 20 GAO/HEHS-00-115 Rural Ambulance Providers

Carriers’ Practices Affect

Denial Rates

Variation among carriers in their efforts to combat fraud and abuse may

have resulted in some carriers scrutinizing claims more carefully than

others, and more closely than previously. A June 1996 National Fraud Alert

from HCFA focusing on nonemergency ambulance transports may have

resulted in carriers giving individual claims greater scrutiny. Studies

conducted by the Office of the Inspector General of the Department of

Health and Human Services have shown that ambulance services can be

susceptible to abuse. One study indicated that about $52 million was paid

in the first 6 months of 1996 for ambulance transports that did not meet

Medicare coverage criteria.23

Noridian’s claim denial rates in North Dakota and South Dakota increased

substantially between 1996 and 1997. The percentage of denied claims rose

from about 11 to 24 percent in North Dakota and from about 16 to 34

percent in South Dakota. Providers in those two states have complained of

high claim denial rates.24 A HCFA representative suggested that the

increased denial rates could reflect increased scrutiny of these claims.

Noridian also attributed the increase in claims denial to an effort to get

providers to properly use their provider identification numbers.

Another possible reason for the variation in denial rates is that national

coverage policy exists only for some situations. Providers have

complained, and HCFA officials agree, that the national medical coverage

criteria for ambulance services are vague. Generally, Medicare coverage

policies are set by individual carriers rather than nationally by HCFA.

Consequently, similar claims may be treated differently across carriers. For

example, in 1998, the carrier covering ambulance providers in New Jersey

and Pennsylvania, where local ordinances mandated ALS as the minimum

standard of care for all transports regardless of the beneficiary’s medical

condition, reimbursed transports at ALS levels. However, an ambulance

provider in Fargo, North Dakota, had many of its ALS claims reduced to

BLS payment rates even though a local ordinance required ALS services in

all cases. The carrier’s policy has changed since then. Now, if a provider

23Office of Inspector General, Medical Necessity of Medicare Ambulance Services, OEI-09-

95-00412 (Washington, D.C.: Department of Health and Human Services, Dec. 1998).

24There are three sequential levels of appeal for a denied Medicare claim. The first appeal is

a second review of the claim conducted by an employee of the contractor who did not

review the claim initially. If that employee decides to uphold the initial denial, the decision

can be appealed to a Hearing Officer employed by the contractor. If the claim denial

continues to be upheld, the denial can be appealed to an Administrative Law Judge.
B-283274

Page 21 GAO/HEHS-00-115 Rural Ambulance Providers

sends an ALS-level vehicle and personnel, the carrier will not reduce the

claim to the BLS payment level.

In addition, some carriers may be applying criteria inappropriately,

particularly for nonemergency transports. For example, Medicare coverage

of a nonemergency ambulance transport requires that a beneficiary be bedconfined. This requirement does not apply to emergency transports

because that coverage is based on the need for immediate medical care.

(For more information about criteria for emergency and nonemergency

transports, see app. II.) Noridian was applying bed-confined criteria to both

emergency and nonemergency transports. During the course of our review,

HCFA became aware of this situation and in September 1999, Noridian

consolidated the bed-confined policies for the 11 states for which it

administered Part B claims to conform to national policy.

Furthermore, some providers are concerned that carriers sometimes

determine medical necessity using the patient’s ultimate diagnosis, rather

than the patient’s condition at the time of transport. HCFA officials have

stated that the need for ambulance services should be based on the

patient’s medical condition at the time of transport, not the diagnosis made

later in the emergency room or hospital.

Inaccurate information on what services particular hospitals offer may

result in inappropriate partial denials, in which the carrier may allow

payment for some but not all of the mileage, contending that the

beneficiary should have been transported to a closer facility. Carriers are

responsible for determining whether the beneficiary was taken to the

nearest appropriate facility, as required for Medicare reimbursement. At

least some of the carriers use surveys from hospitals in their states to

determine what services a hospital offers and, thus, whether it could have

appropriately served a beneficiary. However, the survey information does

not always accurately reflect the situation at the time of transport, such as

whether a bed was available or if the hospital was able to provide the

necessary type of care. Although these denials can be appealed, doing so

requires additional time and work. Furthermore, these partial denials can

have a more serious effect on rural ground and air ambulance providers

than on urban providers because of the potential for a larger number of

disallowed miles.
B-283274

Page 22 GAO/HEHS-00-115 Rural Ambulance Providers

Providers’ Unfamiliarity

with Claims Processing

Affects Denial Rates

In addition to carrier practices, other factors, such as incorrectly filled-out

claim forms, contribute to denials. According to Noridian officials, some

providers have put insufficient information on the claim form to determine

if a patient’s condition warranted an ambulance transport. Providers in

South Dakota, North Dakota, and Wyoming told us that Noridian has not

provided sufficient instructions or provider education to enable them to fill

out claims correctly. However, Noridian provided a manual on Medicare

ambulance services to ambulance providers to help them better understand

how to fill out a claim form. In addition, because the South Dakota EMS

Director was concerned about denied claims, the state paid to have carrier

staff conduct provider education classes.

Volunteer staffs in particular may have difficulty filling out Medicare claim

forms, and an improperly filled-out claim form increases the possibility of a

denial. According to one state EMS director, volunteers do not have the

time to learn about the Medicare reimbursement process. Consequently,

some volunteer providers have not billed Medicare because they lack the

expertise to file claims. Other volunteer companies have addressed the

problem by hiring billing agents that charge from 12 to 17 percent of the

collected amount to fill out their claims. North Dakota recently conducted

a pilot program to help volunteer staffs by hiring a professional ambulance

billing company to file volunteer company claims.

Rural ambulance providers in certain states appear to have difficulty with

electronic claims filing. Medicare policy states that electronic claims will

be paid more quickly than paper claims. In 1997, 80 percent of Part B claims

were submitted electronically. In stark contrast, in South Dakota, North

Dakota, and Wyoming, more than 98 percent of the claims submitted in

1997 and 1998 by freestanding ambulance providers were paper claims.

Some of the providers we spoke with in those states did not understand

how to use the electronic form to provide all the information carriers

needed to determine whether a transport met the coverage criteria. Some

incorrectly believed that they were limited to 22 characters to describe a

patient’s condition. Some said that they filed paper claims because, when

they had filed claims electronically in the past, they were later required to

submit the trip report, which cannot be submitted electronically. However,

if the providers had known that they could include additional information

electronically about the beneficiary’s condition and done so, the trip report

might not have been requested.
B-283274

Page 23 GAO/HEHS-00-115 Rural Ambulance Providers

Absence of National Coding

System Contributes to

Claims Review Difficulties

Unlike the billing information required for physician services, the medical

information required for ambulance claims is not conveyed consistently to

carriers. Some carriers require providers to use a system of medical

condition codes called ICD-9 (International Classification of Diseases, 9th

revision). Other carriers simply rely on individual providers’ descriptions to

explain the beneficiary’s condition at the time of transport. Such

explanations may require considerable interpretation by the carrier.

Inadequate information on claim forms hinders carriers’ ability to

determine whether the transport meets Medicare criteria for medical

necessity and whether the appropriate level of service—ALS or BLS—was

provided. If the information is questionable or insufficient, the carrier may

be obliged to suspend or deny the claim.25

HCFA believes that a standardized, mandated coding system would be

helpful, and has proposed a coding system for claims using ICD-9 codes,

since these are an accepted set of diagnostic and symptomatic codes used

for payment of medical bills. According to HCFA, using these codes would

promote consistency in the processing of claims and reduce the

uncertainty for providers regarding claims approval because using the

codes would help in filing claims properly.

While they agree that a coding system would be helpful, a number of

ambulance providers are opposed to using the ICD-9 codes as the basis of

the system. One concern is that the ICD-9 codes are based on diagnosis, yet

EMTs and paramedics are not trained to diagnose patients. The Negotiated

Rulemaking Committee has developed an alternative coding system and

given it to HCFA for consideration. That system identifies medical

conditions and links them to the levels of services provided. HCFA has not

yet made a final decision on the use of that coding system.

Conclusion Implementation of a national fee schedule is likely to benefit those rural

freestanding ambulance providers whose payments are currently below the

national average because fee schedule payments will be based on average

payment amounts. For rural freestanding providers that receive lower-thanaverage payments currently, such as those in South Dakota, payments will

25When a claim is suspended, the carrier requests additional information before deciding

whether to approve or deny the claim. If a claim is denied, the claim must be appealed for

the carrier to give it additional consideration, and more information is provided to the

carrier at that time.
B-283274

Page 24 GAO/HEHS-00-115 Rural Ambulance Providers

likely increase. Overall, the fee schedule will improve the equity of

Medicare’s payment for rural ambulance providers. However, the system

will need to be refined after it is implemented. The Negotiated Rulemaking

Committee on Medicare Ambulance Fee Schedule concluded that a

payment adjustment would be appropriate for ambulance providers

transporting beneficiaries in low-population, isolated areas; yet the

adjuster that will likely be used does not adequately target these providers

or their higher fixed costs per transport.

Concerns about claims denials need to be addressed separately from

development of the fee schedule. Under the current system, coverage

policy can vary from carrier to carrier, which can lead to differences in

whether similar claims are paid. In addition, some rural providers may need

additional education about how to file claims. A uniform coding system for

ambulance claims is likely to improve claims processing and lead to more

transparent decisions about claims payment.

Recommendation We recommend that the HCFA Administrator develop a more refined

payment adjuster that better targets the ambulance providers that serve

isolated, rural areas where their services are essential to ensuring that

Medicare beneficiaries have access to ambulance transports. The rural

adjuster should also be structured toward providers’ high fixed costs

incurred because of the low volume of transports in these isolated areas.

Agency Comments and

Our Evaluation

We provided HCFA and Noridian an opportunity to comment on a draft of

this report. HCFA agreed with our findings and recommendation (see app.

VI). In its comments, HCFA said that assuring and enhancing access to

quality care for rural beneficiaries was an agency priority and discussed its

efforts to do so, particularly with regards to the new ambulance fee

schedule. HCFA agreed with our recommendation that a more refined

payment adjuster is needed for ambulance providers that serve isolated

rural areas. However, given the time frame for putting the fee schedule in

place and the limited available data, HCFA will follow the consensus of the

committee on the payment adjuster. HCFA said that this was a temporary

approach and that it would work with the ambulance industry to identify

and collect relevant data to refine adjustments to the fee schedule. HCFA

also highlighted its efforts to clarify ambulance coverage criteria and

provide guidance to contractors and providers so that claims are properly
B-283274

Page 25 GAO/HEHS-00-115 Rural Ambulance Providers

submitted by providers and paid by carriers. Noridian provided some

technical comments, which we incorporated where appropriate.

As agreed with your office, unless you publicly announce its contents

earlier, we plan no further distribution of this report until 30 days from the

date of this letter. At that time, we will send copies to Nancy-Ann Min

DeParle, Administrator of HCFA, and make copies available to others upon

request.

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

Sheila Avruch at 202-512-7277. Other major contributors were Deborah

Spielberg, Robert Sayers, Tom Taydus, and Wayne Turowski.

Sincerely yours,

Laura A. Dummit

Associate Director, Health Financing

and Public Health Issues
Page 26 GAO/HEHS-00-115 Rural Ambulance Providers

Appendix I

Scope and Methodology ApApenednxidexiIs

To do this work, we met with more than 50 ground and air ambulance

providers, both freestanding and hospital-based, in North Dakota and

South Dakota and received comments by telephone or in writing from

freestanding and hospital-based ambulance providers located in Minnesota

and Wyoming. We also interviewed the state Emergency Medical Services

(EMS) Directors in North Dakota, South Dakota, and Wyoming.

We attended meetings of the Negotiated Rulemaking Committee on

Medicare Ambulance Fee Schedule and met with the major groups whose

members are involved in providing ambulance services. We obtained

information from the Health Care Financing Administration (HCFA) and

reviewed studies prepared by Project Hope on the costs of providing

ambulance services, including the costs specific to rural ambulance

providers. In addition, we examined 1999 prevailing charge data from

HCFA and paid ambulance claims data for calendar years 1997 and 1998.

The data represent claims processed as of June 30, 1999. We did not

independently test the reliability of HCFA’s data. However, we note that a 5

percent sample of this database, which includes all Medicare Part B claims,

is often used by researchers investigating important issues in health

economics and policy.

We visited Noridian, where we observed the ambulance claims processing

system and appeal process for freestanding providers and interviewed staff

about the ambulance claims processing system. We also contacted by

telephone the fiscal intermediary that determines the payments for

hospital-based providers in South Dakota and Iowa.
Page 27 GAO/HEHS-00-115 Rural Ambulance Providers

Appendix II

Medicare Coverage Criteria for Emergency

and Nonemergency Ambulance Transports ApendxiI

Medicare covers ambulance services only when the use of other transport

methods would be harmful to the beneficiary’s health. Medicare coverage

includes both emergency and nonemergency ambulance transports. The

coverage is available when the beneficiary

• was transported in an emergency situation, for example, as a result of an

accident, injury, or acute illness;

• was unconscious or in shock;

• needed to be restrained;

• required oxygen or other emergency treatment on the way to the

destination;

• had to remain immobile because of a fracture that had not been set or

the possibility of a fracture;

• sustained an acute stroke or myocardial infarction;

• was experiencing severe hemorrhage;

• was bed-confined before and after the ambulance trip; or

• could be moved only by stretcher.

Emergency Transports Emergency ambulance transports are provided after the sudden onset of a

medical condition manifesting itself by acute symptoms of such severity

(including severe pain) that the absence of immediate medical attention

could reasonably be expected to result in any of the following:

• Placing the beneficiary’s health in serious jeopardy,

• Serious impairment of the beneficiary’s bodily functions, or

• Serious dysfunction of any bodily organ or part.

Nonemergency Transports Medicare also covers nonemergency transports—both scheduled and nonscheduled—if the beneficiary is bed-confined or meets other medical

necessity criteria, listed below. Bed confinement is defined as when the

beneficiary is unable to get up from bed without assistance, to ambulate, or

to sit in a chair or wheelchair.

Nonemergency nonscheduled ambulance transport requirements include

the following:

• For beneficiaries in a facility—such as a nursing home—and under the

direct care of a physician, ambulance providers must obtain a written

order from the beneficiary’s attending physician within 48 hours after

the transport certifying that the medical necessity requirements for bed
Appendix II

Medicare Coverage Criteria for Emergency

and Nonemergency Ambulance Transports

Page 28 GAO/HEHS-00-115 Rural Ambulance Providers

confinement were met. This is not a requirement for a beneficiary

residing at home or in a facility where he or she is not under the direct

care of a physician.

• Ambulance providers must obtain a written order from the beneficiary’s

attending physician certifying that the medical necessity requirements

for bed confinement are met.

• The certification must be dated no earlier than 60 days before the date

the service is furnished.
Page 29 GAO/HEHS-00-115 Rural Ambulance Providers

Appendix III

Medicare Payment Method for Freestanding

Ambulance Providers ApendxiI

Payments to freestanding ambulance providers are based on the

reasonable charge method. The Medicare-allowed amount (payment) for a

specific ambulance service is set at the lowest of the following:

• actual submitted charge;

• provider’s customary charge, which is the median charge for a

procedure by the particular provider in the prior year;

• prevailing charge in the locality, which is the 75th percentile of the prior

year’s customary charges, arrayed from low to high, weighted by

frequency that the charge occurs; or

• the inflation-indexed charge (IIC), which is the lowest of the provider’s

actual charge, customary charge or prevailing charge in the locality from

the previous year, updated for inflation.

The IIC was implemented in 1985 as a cost containment measure and limits

the amount of annual increase. Since then, providers cannot receive

payment for actual, customary, or prevailing charges that are higher than

the lowest charge in any of the four categories from the previous year. That

lowest charge updated for inflation becomes the IIC for the current year. In

four states we examined—Montana, North Dakota, South Dakota, and

Wyoming—the IIC is the amount paid for the majority of services.
Page 30 GAO/HEHS-00-115 Rural Ambulance Providers

Appendix IV

Organizations Represented on the Negotiated

Rulemaking Committee on Medicare

Ambulance Fee Schedule ApendxiIV

American Ambulance Association

American College of Emergency Physicians and National Association of

EMS Physicians

American Hospital Association

Association of Air Medical Services

Health Care Financing Administration

International Association of Fire Fighters

International Association of Fire Chiefs

National Association of Counties

National Association of State Emergency Medical Services Directors

National Volunteer Fire Council
Page 31 GAO/HEHS-00-115 Rural Ambulance Providers

Appendix V

Recommendations From the Negotiated

Rulemaking Committee on Medicare

Ambulance Fee Schedule ApendxiV

The committee agreed on the major points regarding the fee schedule,

which will be the basis for the payment regulations being developed by

HCFA. Services will be paid in relation to a base rate in a relative value

system, as is done for physician services. The committee defined the levels

of ambulance assistance and assigned relative value units (RVUs) for

ground ambulance services, as shown in table 3.

Table 3: Levels of Ambulance Assistance

HCFA will determine the total amount of money available for ambulance

payments and a dollar amount conversion factor that is multiplied by the

RVU.1 The following example illustrates how the RVUs will be used once

the dollar amounts are determined: if the conversion factor were $100, the

ALS1 would be $120 ($100 x 1.20 RVU).

To account for wage and overhead cost differences across the country, 70

percent of the base rate for ground ambulance will be adjusted by the

Service levela

a Medicare pays for different levels of ambulance services, which reflect the staff training and

equipment required to meet the patient’s needs. Basic life support (BLS) is provided by emergency

medical technicians (EMTs). Advanced life support (ALS1) is provided by paramedics or EMTs with

advanced training. ALS2 is provided by the same staff as standard ALS but involves additional

equipment. Specialty care transport is provided by health professionals in an appropriate specialty

area such as nursing, medicine, or cardivascular care or by a paramedic with additional training.

RVU

BLS 1.00

BLS—emergency 1.60

ALS1 1.20

ALS1—emergency 1.90

ALS2 2.75

Specialty care transport 3.25

Paramedic interceptb

bParamedic intercept is ALS service provided by an entity that does not provide the ambulance

transport. Under limited circumstances, these services are reimburable by Medicare.

1.75

1

BBA stipulated that total payments for ambulance services during the first year of the fee

schedule should not exceed what total payments would have been under the current

system. Therefore, HCFA must determine the amount that would have been spent under the

existing system before assigning a dollar conversion factor to be used with the relative value

units.
Appendix V

Recommendations From the Negotiated

Rulemaking Committee on Medicare

Ambulance Fee Schedule

Page 32 GAO/HEHS-00-115 Rural Ambulance Providers

practice expense portion of the geographic practice cost index (GPCI) used

to adjust payments to physicians. The GPCI will be applied to 50 percent of

the air ambulance base rate.

The committee agreed that all ground ambulance miles, regardless of the

level of service provided, should be paid $5 per mile. For air transports, the

committee agreed on $6 per mile for fixed-wing and $16 per mile for rotorwing (helicopter) transports.

The committee agreed to a payment adjustment that will increase by 50

percent the mileage rate for the first 17 miles for all ground transports of

beneficiaries picked up in a non-MSA area.2

For air transports, HCFA will set the RVUs and the conversion factor based

on Medicare expenditures attributed to air ambulance services in the base

year. The rural adjustment will be applied to the total payment. (The actual

percentage adjustment will be determined after the base year expenditures

for air transport are established.)

2

According to the committee statement, the definition of a rural area is an area outside of a

Metropolitan statistical area (MSA), a New England County Metropolitan Area, or an area

within an MSA identified as rural, using the Goldsmith Modification. The Goldsmith

Modification is used to identify small towns and rural areas within large metropolitan

counties that are isolated from central areas by distance or other features.
Page 33 GAO/HEHS-00-115 Rural Ambulance Providers

Appendix VI

Comments From the Health Care Financing

Administration ApendxiVI
Appendix VI

Comments From the Health Care Financing

Administration

Page 34 GAO/HEHS-00-115 Rural Ambulance Providers
Appendix VI

Comments From the Health Care Financing

Administration

(101788) Letr Page 35 GAO/HEHS-00-115 Rural Ambulance Providers
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