U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001

77–440 PDF 2002

S. Hrg. 107–264

OVERSIGHT OF THE CENTERS FOR MEDICARE

AND MEDICAID SERVICES: MEDICARE PAYMENT

POLICIES FOR AMBULANCE SERVICES

HEARING

BEFORE THE

COMMITTEE ON

GOVERNMENTAL AFFAIRS

UNITED STATES SENATE

ONE HUNDRED SEVENTH CONGRESS

FIRST SESSION

NOVEMBER 15, 2001

Printed for the use of the Committee on Governmental Affairs

(

(II)

COMMITTEE ON GOVERNMENTAL AFFAIRS

JOSEPH I. LIEBERMAN, Connecticut, Chairman

CARL LEVIN, Michigan

DANIEL K. AKAKA, Hawaii

RICHARD J. DURBIN, Illinois

ROBERT G. TORRICELLI, New Jersey

MAX CLELAND, Georgia

THOMAS R. CARPER, Delaware

JEAN CARNAHAN, Missouri

MARK DAYTON, Minnesota

FRED THOMPSON, Tennessee

TED STEVENS, Alaska

SUSAN M. COLLINS, Maine

GEORGE V. VOINOVICH, Ohio

PETE V. DOMENICI, New Mexico

THAD COCHRAN, Mississippi

ROBERT F. BENNETT, Utah

JIM BUNNING, Kentucky

JOYCE A. RECHTSCHAFFEN, Staff Director and Counsel

JASON M. YANUSSI, Professional Staff Member

DEBBIE FORREST, Legislative Assistant for Senator Lieberman

STEVE WYRSCH, Congressional Fellow for Senator Lieberman

JASON VANWEY, Legislative Assistant for Senator Dayton

HANNAH S. SISTARE, Minority Staff Director and Counsel

ELLEN B. BROWN, Minority Senior Counsel

ELIZABETH A. VANDERSARL, Minority Counsel

DARLA D. CASSELL, Chief Clerk

(III)

C O N T E N T S

Opening statements: Page

Senator Lieberman ........................................................................................... 1

Senator Dayton ................................................................................................. 2

Senator Collins ................................................................................................. 2

Senator Carnahan ............................................................................................ 8

Prepared statement:

Senator Torricelli .............................................................................................. 33

WITNESSES

THURSDAY, NOVEMBER 15, 2001

Hon. Thomas A. Scully, Administrator, Centers for Medicare and Medicaid

Services, U.S. Department of Health and Human Services ............................. 5

Mark D. Lindquist, M.D., Medical Director, Emergency Department, St.

Mary’s Regional Health Center ........................................................................... 14

James N. Pruden, M.D., FACEP, Chairman, New Jersey EMS Coalition .......... 16

Gary L. Wingrove, EMT–P, Minnesota Ambulance Association .......................... 18

Mark D. Meijer, Owner and CEO, Life EMS Ambulance Service ....................... 20

Laura A. Dummit, Director, Health Care-Medicare Payment Issues, U.S. General Accounting Office .......................................................................................... 26

Deputy Chief John Sinclair, Secretary, Emergency Medical Services Section,

International Association of Fire Chiefs ............................................................ 27

Lori Moore, MPH, EMT–P, Assistant to the General President, International

Association of Firefighters (IAFF) ...................................................................... 30

ALPHABETICAL LIST OF WITNESSES

Dummit, Laura A.:

Testimony .......................................................................................................... 26

Prepared statement .......................................................................................... 67

Lindquist, Mark D., M.D.:

Testimony .......................................................................................................... 14

Prepared statement .......................................................................................... 43

Meijer, Mark D.:

Testimony .......................................................................................................... 20

Prepared statement .......................................................................................... 54

Moore, Lori, EMT, MPH:

Testimony .......................................................................................................... 30

Prepared statement .......................................................................................... 83

Pruden, James N., M.D.:

Testimony .......................................................................................................... 16

Prepared statement .......................................................................................... 46

Scully, Hon. Thomas A.:

Testimony .......................................................................................................... 5

Prepared statement .......................................................................................... 35

Sinclair, Deputy Chief John:

Testimony .......................................................................................................... 27

Prepared statement .......................................................................................... 80

Wingrove, Gary L., EMT–P:

Testimony .......................................................................................................... 18

Prepared statement .......................................................................................... 48

Page

IV

APPENDIX

Chart entitled ‘‘Medicare Ambulance Payments 1991–2000,’’ submitted by

Mr. Scully ............................................................................................................. 87

Prepared statements referenced in Senator Carnahan’s statement:

Metropolitan Ambulance Services Trust (MAST) with attachments ........... 88

Ambulance District Association of Missouri ................................................... 99

Missouri Emergency Medical Services Association (MEMSA) ...................... 100

Missouri Ambulance Association ..................................................................... 101

State Advisory Council on Emergency Medical Services .............................. 102

Kansas Emergency Medical Services Association (KEMSA) ........................ 103

Prepared statements submitted for the record:

Hon. Don Wesely, Mayor of Lincoln, Nebraska ............................................. 104

Oregon State Ambulance Association ............................................................. 105

National Association of State EMS Directors with an attachment .............. 106

National Association of Emergency Medical Services Physicians

(NAEMSP) ..................................................................................................... 108

Lifeline Ambulance Services, Inc. ................................................................... 110

American Medical Response, Steven Murphy ................................................ 113

Emergency Medical Coalition of Ambulance Providers, Brian J. Connor,

Chairman, President, Massachusetts Ambulance Association, and Chief

Executive Officer, Armstrong Ambulance Service ..................................... 117

Question submitted by Ranking Member Fred Thompson and response from

Mr. Scully ............................................................................................................. 123

(1)

OVERSIGHT OF THE CENTERS FOR MEDICARE AND MEDICAID SERVICES: MEDICARE

PAYMENT POLICIES FOR AMBULANCE

SERVICES

THURSDAY, NOVEMBER 15, 2001

U.S. SENATE,

COMMITTEE ON GOVERNMENTAL AFFAIRS,

Washington, DC.

The Committee met, pursuant to notice, at 9:19 a.m., in room

SD–342, Dirksen Senate Office Building, Hon. Joseph I. Lieberman, Chairman of the Committee, presiding.

Present: Senators Lieberman, Dayton, Carnahan, and Collins.

OPENING STATEMENT OF CHAIRMAN LIEBERMAN

Chairman LIEBERMAN. The hearing will come to order. Good

morning. I am delighted to welcome everyone to this oversight

hearing on the proposed changes in Medicare reimbursement of

ambulance services and the impact the changes will have on the

beneficiaries who rely on them.

I am pleased to open this meeting of our Committee as Chairman

of the Committee, but I will in a few moments turn the gavel happily over to Senator Mark Dayton of Minnesota, whose interest and

energy in this important subject has led to, facilitated, and enabled

this hearing. For that, I thank him.

Let me start out by saying that the provision of ambulance transport in emergency situations is a critical aspect of access to medical

care that must be preserved and protected. When Medicare beneficiaries call 911 in a medical emergency, they have every right to

expect that an ambulance will arrive in a timely manner. It is our

responsibility to ensure that this right is honored and that our national health care policy does nothing to jeopardize it.

That said, problems with Medicare’s ambulance service reimbursement system are, unfortunately, longstanding and in dire

need of reform. In the last decade alone, the General Accounting

Office and the Department of Health and Human Services have

issued 10 separate reports detailing these problems, specifically

with regard to payment structure, the claims review and adjudication processes, and coding practices.

Under the Balanced Budget Act of 1997, ambulance requirements were supposed to move to a fee schedule instead of a reimbursement system based on medical diagnosis, and the Centers for

Medicare and Medicaid have been working on that shift for quite

some time. It now sounds like the rule on the fee schedule will be

2

issued, hopefully, early next year. The reimbursement levels presented by the proposal have, nonetheless, raised concerns among a

number of our witnesses today, although I gather that the International Association of Firefighters supports the fee schedule as negotiated last year.

So we all want to avoid any situation that jeopardizes the livelihood of ambulance providers and employees or that will disrupt

services for Medicare beneficiaries. We also want to avoid continuing problems with claims denials, inconsistent application of

standards and adjudication process, and prolonged delays in claims

processing that have led to unnecessary stress for patients.

This is a critically important subject and I am very grateful that

Senator Dayton has taken the lead on it and Senator Collins is

here as an expression of her interest in this, as well.

If I may say, just on a personal note, when I first came on this

Committee in 1989 as a freshman, the then-Chairman John Glenn

surprised me by telling me that if I had an interest in any subject

and I wanted to do a hearing on it, to let him know and he would

enable me to do that. I am happy that I told that story to Senator

Dayton. [Laughter.]

So in fairness, and I guess some kind of validation of the, what

is it, what goes around comes around, or what comes around goes

around, or one good deed definitely should engender another, I am

really proud to turn the gavel over to an outstanding freshman

Member of the Senate for whom I think this will be the first of

many hearings he will conduct, Senator Mark Dayton. There ought

to be a ceremony of some kind. Take care.

OPENING STATEMENT OF SENATOR DAYTON

Senator DAYTON [presiding]. It is certainly a first for me. Thank

you, Mr. Chairman. Thank you.

I certainly want to thank the departing Chairman for this opportunity. They say freshmen are meant to vote the way the leadership tells them to and not be heard otherwise, so I am pleased that

Senator Lieberman was true to his word, and Senator Collins, I

thank you for joining me here. I know you said you have to go on

to another hearing, so why do I not let you go ahead, if you have

any opening remarks.

OPENING STATEMENT OF SENATOR COLLINS

Senator COLLINS. Thank you very much, Mr. Chairman. That is

very kind of you, and thank you for chairing this oversight hearing

on Medicare’s payment policies for ambulance services.

I am particularly concerned about the effects that the new fee

schedule will have on our rural ambulance providers, and I know

this is a central concern of yours, as well. Payment under this new

fee schedule will preclude providers of ambulance services from recouping their actual costs. For the average high-volume urban provider, this should not pose a significant problem.

For ambulance providers in rural areas, however, it is a different

story. Ambulance services in rural areas tend to have higher fixed

costs and low volume, which means that they are unable to take

advantage of any economies of scale. I am, therefore, very conVerDate 11-MAY-2000 08:22 Aug 06, 2002 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 77440.TXT SAFFAIRS PsN: SAFFAIRS
3

cerned that the proposed rule failed to include a meaningful adjustment for rural low-volume ambulance providers.

Several ambulance providers in my home State of Maine have

expressed their concerns to me about the impact of the proposed

fee schedule. Let me just give one example of the impact that this

change will have on one of Maine’s hospital-based ambulance providers, Franklin Memorial Hospital in Farmington, Maine.

Logging, tourism, and recreational activities are central to the

economy of this region and good emergency transport is essential.

Franklin Memorial owns and operates five local ambulance services

that cover more than 2,000 square miles of rural Maine. They serve

some of the most remote areas of our State and ambulances frequently have to travel more than 80 miles to reach the hospital.

Moreover, these trips frequently involve backwoods and wilderness

rescues, which require a highly trained staff. Since there are only

30,000 people in Franklin Memorial’s service area, however, volume is very low.

Under the current Medicare reimbursement system, Franklin

Memorial has just managed to break even on its ambulance services. Under the proposed fee schedule, however, these services

stand to lose up to $500,000 a year systemwide. While the small

towns served by Franklin Memorial have helped to subsidize this

service, there is simply no way that they can absorb a loss of this

magnitude.

The Medicare, Medicaid, and SCHIP Benefits Improvement and

Protection Act did increase the mileage adjustment for rural ambulance providers driving between 17 and 50 miles by $1.25. While

this is helpful, it does not begin to adequately compensate low-volume ambulance services like Franklin Memorial Hospital.

Congress has required the General Accounting Office to conduct

a study of the costs in low-volume areas, but any GAO recommendations for adjustments in the ambulance fee schedule would

not be effective until 2004. I have, therefore, joined with Senator

Russ Feingold in introducing the Rural Ambulance Relief Act, S.

1367, to provide a measure of immediate financial relief to rural

providers, and I know that our Chairman also has legislation.

Our legislation establishes a ‘‘hold harmless’’ provision allowing

both hospital-based and freestanding rural ambulance providers to

elect to be paid on a reasonable cost basis until the Centers for

Medicare and Medicaid Services is able to identify and adjust payments under the new ambulance fee schedule for services provided

in low-volume rural areas.

Mr. Chairman, as we review Medicare’s payment and coverage

policies for ambulance services, I believe that it is critical that we

take the unique needs of rural providers into account. I, therefore,

hope that we can have some change in the fee schedule or perhaps

legislative action to provide relief and ensure that those of our constituents who are living in rural areas still have access to the ambulance care that they need.

In closing, I would note that Mr. Scully told me this was an issue

that was coming up in his town meetings. When I was traveling

throughout the State of Maine and visiting several hospitals in the

month of August and since then, it came up repeatedly. It is very

much of a problem and I am concerned that if we do not rectify and

4

come up with a reasonable fee schedule, that we really will jeopardize ambulance service to many of our constituents.

So thank you for your leadership and I do very much appreciate

your allowing me to proceed so that I can go on to an education

conference. Thank you.

Senator DAYTON. Thank you, Senator Collins. Minnesota and

Maine share many characteristics, including a wide expanse in our

rural areas, and those are very much the same concerns that my

ambulance providers in Minnesota expressed to me.

We are very pleased that Administrator Scully is here today and

is able to not only speak, but as I understand, to be here until

shortly before 10:30 a.m., when you need to go on to meet with

Senator Stevens of Alaska, who as the ranking member of the Appropriations Committee is certainly someone you want to be timely

to meet with.

Mr. SCULLY. He is not really happy with me on another issue,

so it is a bundle of joy in this job. [Laughter.]

Senator DAYTON. That is right, and there are 100 of us and only

one of you, so I am going to forego my opening statement. I am

going to put it into the record.

[The prepared statement of Senator Dayton follows:]

PREPARED STATEMENT OF SENATOR DAYTON

Mr. Dayton. Reliable ambulance service is often a matter of life and death. There

are growing problems that are putting ambulance providers in Minnesota and

across the country in financial jeopardy and affecting their ability to deliver emergency services to patients.

This summer my staff in Minnesota met with ambulance providers and Medicare

beneficiaries in Hibbing, Duluth, Moorhead, St. Cloud, Bemidji, Marshall, and Harmony, Minnesota to listen to their concerns over Medicare ambulance services. In

every part of the state the stories were the same. The biggest concern was Medicare’s denial of ambulance claims. Medicare has denied claims for such medical

emergencies as cardiac arrest, heart attack, and stroke.

The family of a deceased woman was charged for an ambulance trip between a

rehabilitation facility and a short-term care facility. Medicare denied that the ambulance transfer was medically necessary. My staff obtained notes from two doctors,

one which documented the need to discharge the patient to a facility that could

closely monitor her medical condition. The other letter explained the need for an

ambulance as the patient required oxygen during the entire trip. Only after these

efforts did Medicare agree to reopen the case and paid the initial ambulance charge

and the mileage to the next closest facility (the family paid the rest of the bill).

The date of her transport was on October 29, 1999. The constituent died soon

after, and her daughter contacted my campaign office on July 30, 2000. My staff

contacted the rehabilitation facility she was transported from, the short-term facility

she was transported to, the family on multiple occasions. In addition, my staff had

her two doctors document why she needed ambulance transportation. As a result,

the ambulance contractor, Noridian agreed to re-open her case on November 11,

2000, and subsequently pay for part of the bill on April 9, 2001.

In another instance, an elderly woman experienced nausea, vomiting, chest and

abdominal pain. She was taken to the emergency room, where she was admitted to

the hospital for a 3-day stay.

Medicare denied the claim because ‘‘Ambulance service is not covered when other

transport could be used without endangering the patient’s health. This rule applies

whether or not such other means of transport is actually available.’’ Medicare representatives felt the ambulance was a convenience and asserted that the patient’s

daughter (who lives over 200 miles away) should have driven her to the ER.

After months, the claim was finally paid. But the elderly woman from Duluth,

Minnesota was so upset with the Medicare process, that when she needed an ambulance again she called a taxi. This is unacceptable.

To make matters worse, when Congress enacted the Balanced Budget Act of 1997

it required that ambulance payments be moved to a fee schedule on a cost-neutral

5

1The prepared statement of Mr. Scully appears in the Appendix on page 35.

basis. Moving to a fee-schedule makes sense, but not on a cost-neutral basis for a

system that is already underfunded. The proposed fee-schedule is especially unfair

to rural areas and will mean the end of small ambulance providers in Minnesota

and throughout the country.

Medicare beneficiaries deserve more from the health insurance system than additional anxiety in an emergency situation for a system into which they have paid.

When people in Minnesota and across the country have an emergency requiring an

ambulance, they want to know that they will quickly and reliably get the care they

need. However, current Medicare policies and procedures are putting quality ambulance service at risk and are forcing many ambulance providers to struggle to stay

in business—especially in rural communities.

Senator DAYTON. I just want to say that, obviously, the issues

that Senator Collins has raised and others are of great concern to

me and to Minnesota, as well, and would ask you to proceed, then,

with your opening statement. Then we will have a chance to hopefully hear from other panelists who can give you their first-hand

experience with some of the difficulties they have encountered.

Please proceed.

TESTIMONY OF HON. THOMAS A. SCULLY,1 ADMINISTRATOR,

CENTERS FOR MEDICARE AND MEDICAID SERVICES, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES

Mr. SCULLY. Sure. Thank you, Senator. Thank you for having me

here today. As you will find in this statement, I have spent a lot

more time on ambulance issues than I could have ever imagined

6 months ago when I decided to take this job.

I think we have all been sensitive to the vital role that emergency service providers play in care for all patients, including

Medicare beneficiaries, but I think the events of the last 2 months

have even raised and heightened the awareness of all of us to that,

certainly what is going on all across the country, but in New York

City as recently as the other day in Queens. So we have always

been extremely aware of the importance that ambulance providers

provide to the country with their services, but even more so now.

We are in the very final—very, very final stages of putting this

regulation out. It is already a couple of years late, as you know,

and I think it will be out before the end of the year. Our goal is

to have it be effective April 1, and I think most of the ambulance

community is aware of that.

The current ambulance payment system, as I think you probably

found out, is very outdated and has led to huge discrepancies in the

payments between geographic regions, between different providers.

It is also incredibly burdensome from an administrative basis and

requires substantial record keeping.

Congress has generally, since 1981, been moving towards what

is called prospective payment and towards modernized fee schedules all across the board. The ambulance sector was really one of

the very few places we were actually still paying on costs or

charges, which are kind of amorphous terms, and I think it was a

wise move for Congress to direct HCFA, now CMS, to move towards up with an ambulance fee schedule.

These systems generally, whether it is PPS or a fee schedule, are

much more accurately reflecting the resources that are used in providing services. They generally reflect regional cost differences

6

1 Chart referred to by Mr. Scully appears in the Appendix on page 87.

much better. And overall, I think almost every move we made to

prospective payment or to a fee schedule, whether it is the physician fee schedule, hospital prospective payment, nursing home prospective payment, and home health prospective payment, every one

of these—and I just left the hospital business—was greeted with

great fear and skepticism ahead of time, and after they are actually

phased in and folded in, I believe in almost every case they have

turned out to be much more appropriate, much better payment systems, and have worked that much better. So that is certainly our

goal with the ambulance fee schedule.

I certainly understand the concern people have any time you

make a change and transition to a new fee schedule and I am sure

those fears are appropriate, but I hope we are going to find in a

couple years that the transition will have turned into a much better payment system, as it has with all the other payment systems.

Over the last 10 years, and I think I was going to put a chart

up here,1 the Medicare fees for ambulances have increased by nearly $1 billion, and the point of this chart is really, and I will get to

it in a minute, is to show that the goal here when you go to PPS

is to take what you would have spent under the old Medicare ambulance system and pay exactly the same amount under an improved and more appropriate and more adequate ambulance system. So that trend line that keeps going up, we are expecting about

$2.3 billion in ambulance spending this year, going up to, I think

it is $2.5 billion and $2.7 billion.

Our goal here is to restructure the ambulance payment system

so it works better but we pay the ambulance providers exactly the

same under the new law as they would under the old law. That is

one of the major concerns the ambulance providers have expressed

to me, and I will get into that in a minute, and it is a very legitimate one and I have done everything we can to make sure it works

more appropriately.

In 1997, the BBA, Congress mandated that we switch to a national fee schedule, and in mandating that fee schedule, they suggested—Congress directed us to have a negotiated rulemaking.

This was obviously in the last administration. Under the Clinton

Administration, every major party in the ambulance world was involved in a very long and detailed negotiated rulemaking process

that took a year, and in addition to CMS, then HCFA, the American Ambulance Association, the American Hospital Association,

the Association of Air Medical Services, the International Association of Firefighters, the Association of Fire Chiefs, the Volunteer

Fire Council, the Association of Counties, the State Emergency

Medical Services Directors, on and on, basically every major group

was involved in this, and having been involved in a number of negotiated rulemakings when I was running a hospital association, I

can tell you they are complex agreements, but generally at the end

of them, everybody signs on the dotted line, which is what happened in this case and everybody agrees to go forward.

So there was under the Clinton Aministration a year-long negotiated rulemaking. Everybody agreed to it. It was basically done

and it had been put out as a notice of proposed rulemaking. It was

7

finished. And so when I came in in May, I found that we had still

many controversies going on. So we have reopened the rule, but

there was an agreed-upon negotiated rulemaking that was completed in February 2000 and there was a consensus agreement.

As I have gone around the country, I have personally spent many

hours on this, hundreds of hours looking at ambulance regulations,

and I have also been to town hall meetings with Senator Hutchinson and Senator Lincoln in Arkansas, where this probably took

most of the day, with groups of ambulance providers driving in

from many States to express their unhappiness with the ambulance

regulation. I did town hall meetings in Tennessee, Alabama, Kentucky, North Carolina, spent a day largely on ambulance issues in

Montana with Senator Baucus, so there is no shortage of people

concerned about this rule and I am intensely aware of the concerns

and have spent a lot of time trying to fix it.

As I said, I have spent hundreds of hours on this rule. Secretary

Thompson has personally spent dozens of hours with me on this

rule, so there is nobody at HHS at any level that has missed the

importance of this rule, and I would say that $2 billion is a relatively small piece of the Medicare program, about less than one

percent, but it is taking a disproportionately enormous amount of

our time, as it deserves, in the last few months.

I am confident that we are very aware of most of the providers’

concerns. I cannot get into the details under the Administrative

Procedures Act of everything that is in the rule that is coming out,

but I do think that we have addressed most of them and that the

rule that comes out will be a significant improvement over what

was in the notice of proposed rulemaking.

There are a lot of concerns, certainly, about rural providers. As

I mentioned in this chart, one of the most appropriate concerns,

since I spent many years at OMB—in the last Bush Administration, I was at OMB and the White House for 4 years—one of the

concerns when people switch from an old fee schedule to a new fee

schedule is that we make hundreds of actuarial judgments about

what the payment fee schedule should look like so $2.3 billion of

spending under System A works out to $2.3 billion under System

B, and their concern is that we make all these assumptions and instead of spending $2.3 billion, we spend $1.8 billion and the money

is gone, and I think that was one of the major concerns the ambulance providers had in the assumptions we made about our initial

regulations.

I have gotten into that process in great detail. I think in the

draft regulation that is coming out, we made a number of adjustments that will assure that, in fact, the new system spends what

was projected to be spent under the old system. I think the system

is a substantial improvement over the old system. It is also phased

in over a number of years, and I am confident there is no doubt

that any time you have one of these systems, whether it is skilled

nursing facilities or hospitals or physicians, somebody is always unhappy because there is a redistribution of funds.

But I do think the impact on the redistribution has been minimized. I think the rule is a much more rational payment system

and I am confident that in a couple of years that the ambulance

8

community will find out that this is a much better payment system

that is fair for everybody, so I hope you find that, as well.

But anyway, Senator, thank you for having me here today and

I am happy to answer any questions.

Senator DAYTON. Thank you, Administrator Scully.

We are pleased to be joined here today by Senator Jean

Carnahan of Missouri. Senator Carnahan, do you have an opening

statement you would care to make.

OPENING STATEMENT OF SENATOR CARNAHAN

Senator CARNAHAN. Thank you, Mr. Chairman. The events of

September 11 have certainly reinforced the importance of emergency medical services. They are among our first responders and

they are on the front lines of the war on terrorism. It is important

to remember that their services are not only needed during major

medical incidents, they are oftentimes needed other times, as well.

They are ready and required to serve all Americans on a 24-hour

basis, 7 days a week, when any person has a medical emergency.

When someone is having a heart attack, they call an ambulance.

When there is a car accident, they call an ambulance. Ambulance

providers and emergency personnel need the financial resources to

perform their job well and to provide the quality of services that

Americans expect.

I commend Senator Dayton for calling for today’s hearing. The

purpose of the hearing is to examine the new fee schedule for ambulance services. Recently, I have heard from both urban and rural

ambulance providers in Missouri who are opposed to the level of reimbursement under the new fee schedule. They are concerned

about the impact the decrease in Medicare reimbursement would

have on their ability to provide services.

Missouri would be hit particularly hard by the changes, since the

State provides advanced life support services and the proposed fees

are significantly below the cost of providing this high-quality care.

The Metropolitan Ambulance Services Trust, also known as MAST,

serves 17 municipalities in Missouri and Kansas, including the

Kansas City metropolitan area. MAST estimates that it would lose

$2 million due to lower Medicare reimbursements the first fiscal

year that the new schedule is implemented. This loss would increase to $2.9 million annually when the fee schedule is fully

phased in.

The impact on rural areas is also significant. The Ambulance

District Association of Missouri represents tax-supported medical

and service transports in Missouri. Its members are predominantly

rural and must rely on third-party payers—insurance, Medicare,

and Medicaid—to provide the majority of its revenues. The Ambulance District Association has informed me that the proposed

changes in Medicare funding would shift the financial burden from

the Federal to the local level. But the many rural districts in Missouri do not have the tax base to replace the lost Federal revenue.

Other Missouri organizations have expressed concern about the

reimbursement level under the new fee schedule for ambulance

services. Mr. Chairman, I would like to insert for the record testimony that has been submitted by the following organizations: The

Metropolitan Ambulance Services Trust, the Ambulance District

9

1The information submitted by Senator Carnahan appears in the Appendix on pages 88 thru

103 respectively.

Association of Missouri, the Missouri Emergency Medical Services

Association, the Missouri Ambulance Association, the State Advisory Council on Emergency Medical Services, and the Kansas

Emergency Medical Services Association.1 I take the concerns of

these organizations seriously because of what they could mean, a

reduction in the availability and quality of emergency response

services. Lives are at stake.

I think that CMS should be very cautious not to implement

changes that would harm the country’s emergency medical services.

This is particularly true given the increased demands that are

being placed on emergency personnel since the September 11 attacks. I look forward to hearing from Mr. Scully about what steps

CMS has taken or plans to take to ensure that these cuts do not

do irreparable harm. Thank you.

Senator DAYTON. Thank you, Senator Carnahan, and without objection, the additional testimony will be submitted for the record.

Thank you.

Mr. Scully, there seems to be a disconnect between the assurances that you have given this Committee and expressed in all

good faith in terms of the proposed new fee schedule and its fairness and its sufficiency and what Senator Carnahan has heard

from her constituents, what Senator Collins expressed before, and

what I have heard from people in Minnesota, especially in greater

Minnesota, the more rural area of our State where the ambulance

services are increasingly dependent upon Medicare and Medicaid

reimbursements for their livelihood. The impact of this and the potential catastrophic effect—literally ambulance services going out of

business if there is a shortfall that cannot be made up from any

other source—have the providers and me seriously alarmed. Can

you explain why there seems to be this gap between what the rates

that you are proposing and where you think the equity lies and

these concerns?

Mr. SCULLY. Well, I do not want to promise you that they will

love it. Someone is not going to. But the process was that there was

a negotiated rulemaking from February 1999 to February 2000

that came out with—the result was a negotiated rulemaking by the

government. The Clinton Administration, Nancy Ann DeParl, who

was my predecessor and a good friend, was negotiated actually by

the National Mediation Service, I think, and all the various groups.

The Department adopted it, put it out as an NPRM for comment,

got 340-some comments, not all of them happy, as you can tell from

what you have heard, and basically, I did not get involved in the

process until I was confirmed in May.

So we basically have been in the process of taking the comments

and the proposed rule, and under the negotiated rulemaking, because it theoretically is an agreement among all the parties and all

the hospital groups in the country and the administration agreed

to it, it is a little more difficult to make changes. But I have gotten

into the details of every nook and cranny of the regulation and we

have made changes. We spent a lot of time with all the ambulance

providers and made changes where appropriate.

10

So I cannot tell you that the regulation is perfect. It still is based

on the notice of proposed rulemaking that was negotiated 2 years

ago. But I think it is substantially better or will be substantially

better. Again, I do not want to have my lawyers tell me I am violating the APA again, because the regulation will not be out for

probably a couple more weeks or maybe longer.

But our goal is to have it in effect on April 1. It will be phased

in over multiple years. And I think that most of the major concerns

that I have heard from the ambulance community have been addressed fairly substantially. That does not mean they are all going

to like it.

I mean, coming into it initially—I used to run a hospital association and sign on the dotted line of many negotiated rules I did not

like, but the process of a negotiated rulemaking is you sit around

for a year and you pound out your differences with the government

and you either agree or you do not agree, and so there was a basis

that, theoretically, everybody agreed to, and so when the new administration came in, as any group of providers would, they wanted

to reopen it, and they did, and I think we have responsively reopened the——

Senator DAYTON. And I am not questioning the process, but the

people that provide the services are going to have to live with the

result, not the process. I guess my concern—I have a couple of concerns, and we are all concerned about cost controls for these large

systems, but in some cases, the cost control has been seen to be

driving the process and the product. Are you satisfied that these

reimbursement levels are appropriate for the actual services being

provided or do you see this as being used as a way of spreading

the pain or the funding gap perhaps equitably and up to date, but

effectively reducing these payments below levels that the services

are actually providing?

Mr. SCULLY. I am comfortable that this is a responsible level of

payment across the board. I think when you look at the variation

in costs and charges State by State—for instance, if you look at

West Virginia, over Tennessee or North Carolina, all of whom, I

think, have sued us at various points for being underpaid under

the old system and are very anxious to have the new system come

in, they were vastly underpaid, arguably, and other States, arguably, in some places, there were things being overcharged.

Any time you move to a new payment system, there are going

to be some winners and losers. I am comfortable the system is

going to work much better. I have also spent a lot of time with the

ambulance providers, including a good part of the day yesterday,

telling them that as this rule goes forward, we will continue to

work with them to tweak it to make it work better.

It is phased in over multiple years so there will not be an immediate harsh impact, I do not believe, on anybody. It is a mix of the

new system and the old system for multiple years, more than 4

years, at least, and I am comfortable that—I have been through

this in the hospital business when we went to outpatient PPS last

year, which, when I used to run a hospital association, including

40 hospitals in Missouri, we all thought that the outpatient hospital system was going to be a disaster when it phased in last year,

11

and there were certainly difficulties, but I think it is a much better

payment system.

I think, in the long run, this is a better payment system. There

will be people that will not be happy with it, but I think it is very

equitable and it makes much more sense as a much more rational

payment system.

Senator DAYTON. My time for my first round of questions is up.

Senator Carnahan.

Senator CARNAHAN. Ambulance and emergency medical service

providers in Missouri have raised some concerns about the use of

1998 data to calculate the reimbursement levels. The concern is

that these numbers are outdated and do not adequately reflect the

current costs. How would you address this concern?

Mr. SCULLY. I think we already have addressed it. Again, I do

not want to get punched by one of my attorneys here, but the issue

for the NPRM was the best data we had at the time was 1998 data,

and that was updated and inflated up to current terms. The concern I think that some of the people in the provider community had

was that there were not as many services provided in 1998 as 2000

and that data might skew or throw off the numbers.

I think we have adjusted it to do it appropriately. The negotiated

rulemaking was based on 1998 data. The 2000 data really is not

clean enough to use yet, so if we had to use it, it would probably

delay the rule by a year, and there are some people that are very

unhappy that the rule is already a year and a half late.

So I think we have taken the 1998 data, which is the best data

available, inflated it and updated it for 2000, and I am comfortable

that the data is appropriate.

I think the biggest issue from the first day, and this is a little

bit of budget wonkish stuff, that the ambulance community had,

their number one concern is that we are going to spend $2.3 billion

this year on ambulance spending under the old system. As we

move to the new system, when you make all these assumptions

about the level of services, that when you throw all the services up

in the air and recalculate them, we might come back under conservative administration assumptions and only spend $1.9 billion

or $2 billion, and the way the budget system works, you have a

new base and the money evaporates forever.

That was a very legitimate concern. I think I have gone to great

lengths in the rule to take care of that and I am very confident

that the money we spend under the new system will be virtually

as close as is humanly possible to the money that would have been

spent under the old system, and I think that was the basis of

their—the fundamental core of their concern and I think that has

been addressed.

Senator CARNAHAN. When it comes to providing for rural services, what is CMS doing about the unique needs of emergency medical service providers in these rural communities, and how has

CMS responded to GAO’s concern that the new fee schedule does

not adequately address the needs of these providers in the most

isolated areas?

Mr. SCULLY. There are a number of changes we made in the rule

that is coming out to address those things. I think of the seven or

eight major concerns that the ambulance sector has raised to us,

12

we have addressed, I think, all of them. A couple of them, we did

not agree on, but there are a number of changes that will help

rural areas.

And I think if you look at the distribution tables that eventually

come out, you will find that, for the most part, it is not necessarily

every rural area of every rural State, but the rural States generally

actually do considerably better under this rule, and I think we

have taken virtually everything that we can, within reason, into account to make the rural payments more appropriate.

Senator CARNAHAN. You say they will be doing considerably better?

Mr. SCULLY. I can tell you, when you look through the tables,

which I have been able to do and they will be out at some point

in the regulation, it is not direct rhyme or reason, it is not that always the urbans do better than the rurals, but a lot of rural States

do significantly better and I think in a lot of cases the rural payment will be more appropriate.

Senator CARNAHAN. The negotiations that led up to the creation

of the new fee schedule took place before September 11. What is

CMS doing to ensure that the new fee schedule addresses the increased demands that are going to be placed on ambulance providers?

Mr. SCULLY. Well, the payments are based essentially on the

services, so if the volume of services go up, and obviously, in a lot

of cases there will be many more calls to ambulance services for

things, the payments go up. So, essentially, if the volume of services this year went up 10 or 12 percent, there is no cap over all

the payments, so the actual volume of services go up. So if you

have an advanced life services call in St. Louis or Kansas City and

they just happen to have more, they will get paid more. So there

could be significant inflation in the ambulance sector.

So the payments are set to the per visit, per service, and if there

happens to be a greater volume, then the payments go up, so there

is not really any limit on it. If there is more volume, they will get

paid for more volume.

Senator CARNAHAN. Thank you, Mr. Chairman.

Senator DAYTON. Thank you, Senator Carnahan.

The two main categories of concern I have—one is the amount

of payments and their sufficiency and the second is the timeliness

of the payments and the difficulty that a lot of ambulance providers in Minnesota report to me they have getting their legitimate

claims processed by the CMS. Why are such a significant number

of ambulance claims being denied by Medicare contractors in Minnesota on the first submission and paid on the first appeal?

Mr. SCULLY. Senator, I cannot tell you that I am totally familiar

with the Minnesota situation, but I spent a whole day in Montana

with Senator Baucus, most of that day spent in an interesting debate between the air ambulance and ambulance people and Blue

Cross of Montana, and it is a pretty small State so they know each

other pretty well, at least population-wise.

And part of it, I think, is due to the fact that it is one of the few

places we still pay based on costs and charges, so it is very difficult. The ambulance providers have to do a significant amount of

documentation for what are actually costs or charges, depending

13

whether they are hospital-based or independent, and the Blue

Cross plans, who are the Federal Government contractors—largely

Blue Cross, there are others around the country—are obviously

protectors of the trust funds to spend money appropriately are

tasked with asking tough questions about whether the services

were appropriate.

When you are under basically a heavy paperwork, heavy documentation system, which the old one is, where you have to justify

your costs and charges for every visit, there is just a lot more controversy before it gets paid and I think it slows up the system.

I believe the new system, which will be much clearer on what the

allowable fees are and charges, it will be a lot easier to implement

and a lot less paperwork, a lot less controversy over what gets paid

and probably will speed up the payment process. That is certainly

one of the goals.

But I can tell you, having sat there with Blue Cross of Montana,

which is a pretty community-friendly organization, and the tension

between them and the ambulance providers over the many unpaid

bills was—I think that is going on in every State. Some of that is

the complexity of the system, and to be honest with you, I hope—

in many cases, I do not want to discourage our local Medicare contractors from questioning bills anywhere, as long as it is appropriate. But I think the new system is going to be a lot better as

far as making the payment simplified and clear.

Senator DAYTON. Medicare’s claim processors often deny claims

as ‘‘not medically necessary’’ based on the codes provided by ambulance personnel, even though a patient had an obvious emergency

and needed an ambulance. A more appropriate ‘‘condition code’’ has

been developed with the involvement of Medicare officials. Is this

something that you can implement administratively to reduce the

number of denials?

Mr. SCULLY. Well, I talked to some ambulance folks about this

yesterday. The condition code thing—again, I was not here, this

was 2 years ago—was apparently a kind of side group of the negotiated rulemaking that went up and talked about condition codes,

which is a good idea. Apparently some then-HCFA, now CMS, staff

were involved in that and were aware of it, but it was not part of

the negotiated rulemaking as it went forward.

There really is not a direct tie between the payments and the

condition codes. The condition codes can help, but it is something

that we are very interested in moving forward and working with

the providers on. But if we had adopted those condition codes, they

are just not technically ready and I think that is pretty clear and

it would have delayed the rule at least a year and it is something

I think we need to keep working on.

The concept of the condition codes is a good concept, but it is just

not ready to put in this regulation and there was no way to implement it in this regulation. So there really is not a crosswalk between the condition codes and the payment codes and we are anxious to work on that and I think a lot of the providers think that

would simplify their lives, and it may well do it, but it is just not—

it was not ready to put in this regulation.

14

1The prepared statement of Dr. Lindquist appears in the Appendix on page 43.

Senator DAYTON. But do you support it in concept? Are you willing to proceed to work with the providers to develop that in the

months ahead?

Mr. SCULLY. Yes, and I think it is important because there has

been some controversy in the past where the hospitals were not

wild about condition codes because they do not bill on that. They

bill on ICD–9 codes and hospital-based codes and I think there is

some evidence that they are interested in sitting down and working

that out, too. So we are very interested in working it out, but it

just was not possible to do it in this regulation unless we delayed

it another year, and there are plenty of people that are not happy

with the current delay, so—— Senator DAYTON. Thank you very much.

I would like to call in the second panel of witnesses. I would like

to invite you, Mr. Administrator, if you would, to remain at the

table, if we can add another chair. I know you have to leave at

10:25.

Mr. SCULLY. I will have to sneak out at 10:25.

Senator DAYTON. All right. But I would like to have you hear

from these people directly. Two of them are from Minnesota, so

rather than give you another trip to the upper Midwest, we will let

you do so here. I think it is also symbolic that all of you are all

on the same side after all anyway, and I know share that goal.

So I now call the second panel, Dr. Mark Lindquist, who is the

Medical Director of the Emergency Department at St. Mary’s Regional Health Center; Gary L. Wingrove, EMT with Gold Cross

Ambulance Service; Mark Meijer, President of Life EMS Ambulance; and Dr. James Pruden, Chairman of New Jersey EMS Coalition. Welcome, gentlemen.

Dr. Lindquist, we will begin with you. Welcome.

TESTIMONY OF MARK D. LINDQUIST, M.D.,1 MEDICAL DIRECTOR, EMERGENCY DEPARTMENT, ST. MARY’S REGIONAL

HEALTH CENTER

Dr. LINDQUIST. First of all, I wish to thank Chairman Lieberman

and Ranking Member Thompson for inviting me to appear before

this Committee to discuss the proliferation of Medicare denials of

ambulance claims and the inconsistent application of standards

with regard to claim adjudication. I also would like to thank you,

Senator Dayton, for your hard work on the issues that we are talking about today. I am honored to be present for this hearing.

I am an emergency physician practicing in Detroit Lakes, Minnesota. I am the Medical Director of four advanced life support air

and ground ambulance services and eight police, fire, and rescue

departments in Minnesota. I am also the co-owner of an air ambulance service, an ambulance billing and consulting company, and

until just recently, two ground life support ambulance services.

On July 17 of the year 2000, my 69-year-old father suddenly collapsed while painting a gazebo in the backyard of his home in

Moorhead, Minnesota. My mother was trapped inside the gazebo

for a short time as my father was lying unconscious against the

door, bleeding from a head wound. She was eventually able to push

15

the door open, moving him away enough to go to a phone and call

911. Fargo-Moorhead Ambulance Service paramedics arrived quickly. My father began to regain consciousness. He had marked postconcussion confusion and agitation. Whether he also had neck or

other injuries was unknown at that time.

He was brought by ambulance to the emergency department at

a Fargo hospital, where an evaluation showed the presence of a

large complex brain aneurysm. My father’s sudden collapse had

been caused by a small leakage of blood from the aneurysm, which

is usually followed within a month by a catastrophic aneurysm rupture and massive brain bleeding.

Because of the size, location, and complexity of the aneurysm, he

was referred to a neurosurgeon at the University of Minnesota who

specializes in aneurysm repair and he underwent surgery on July

28. The long, complex surgery resulted in a serious secondary brain

injury. He subsequently developed serious infections and respiratory failure and he died on August 13, 2000. Medicare initially denied payment of the $500 911 ambulance

call to his home where he had collapsed. The explanation from Wisconsin Physicians Services (WPS), the CMS contracted carrier,

stated that the ambulance transfer from his home to the hospital

was not medically necessary. Apparently, according to WPS, my 67-

year-old mother should have been able to load his 190-pound body

into a car and drive him to the hospital.

Upon being informed that the claim had been denied, my mother

promptly paid the ambulance bill. It was only when I asked her

several weeks later whether my father’s medical bills were being

covered that she told me the claim had been denied by Medicare.

Like most non-medical laypersons, she was unaware that 20 percent or more of all Medicare ambulance claims are denied by this

CMS contracted carrier. I urged her to obtain a letter explaining

medical necessity from the attending physician and appeal the denial.

The bill was resubmitted to Medicare along with a letter from my

father’s attending neurologist explaining why the ambulance transport had been necessary. The explanatory letter was returned to

the neurologist by a WPS customer service employee who stated he

did not understand the reason for the letter. The bill was resubmitted a third time and was finally partially paid by Medicare after

the third submission.

Needless to say, my mother was perplexed. She did not understand why the ambulance claims were denied, as she strongly felt

that skilled emergency medical care was required when my father

collapsed. I have been unable to give her a logical explanation and

am, frankly, disgusted by the disregard shown by WPS for the competent medical judgment of my father’s physicians.

As an owner of ambulance services and an ambulance billing

company in Minnesota, I am very aware of these frequent claim denials, including cases where payment has been denied for patients

in complete cardiac arrest, the explanation being given that an ambulance transport was not necessary, even though the patient’s

heart had stopped beating.

This summer, the mother of one of my employees was brought

by ambulance to a hospital in Fargo after developing pneumonia

16

1The prepared statement of Dr. Pruden appears in the Appendix on page 46.

while recovering from a broken hip. The 1-year mortality rate for

patients recovering from a fractured hip is as high as 50 percent

because of such complications. The woman was short of breath, had

low blood oxygen levels and a build-up of fluid in her chest and she

died 16 hours after being brought to the hospital. WPS stated the

ambulance transfer was not medically necessary and denied payment of that claim, also. The patient’s daughter, who is a flight

nurse, resubmitted the claim with a harsh letter and it was ultimately partially paid.

The prudent layperson standard contained in S. 1350, the Medicare Ambulance Payment Reform Act of 2001, states that if a prudent non-medically-trained layperson has reason to believe that a

medical emergency exists when calling for an ambulance, Medicare

would be required to pay the claim. Currently, an ambulance claim

filed by a patient who suffered chest pain can be denied if he or

she is eventually found to have a non-cardiac source of pain. Of

course, at the time of initial symptoms, it is impossible for the patient, paramedics, and even emergency physicians to know that the

source of pain is not an emergency condition.

I ask you to carefully consider implementing the prudent

layperson standard as part of S. 1350, the Medicare Ambulance

Payment Reform Act of 2001. The standard would eliminate much

of the inconsistency currently found in the payment or denial of

Medicare claims.

Thank you for the opportunity to address this Committee and I

would be happy to answer any questions you may have.

Senator DAYTON. Thank you, Dr. Lindquist. We will have questions after all the panels have had a chance to make their presentations. Thank you. Dr. Pruden.

TESTIMONY OF JAMES N. PRUDEN,1 M.D., FACEP, CHAIRMAN,

NEW JERSEY EMS COALITION

Dr. PRUDEN. As a member of the New Jersey Statewide EMS Coalition, we cannot thank Senator Dayton enough for his initiative

in identifying shortcomings in the proposed ambulance reimbursement fee schedule and we applaud and support his efforts to effect

remedies. We also appreciate the opportunity to speak before this

Committee.

The proposed fee schedule threatens to dismantle EMS in the

State of New Jersey. In the Balanced Budget Act of 1997, the Secretary was directed to consider appropriate regional and operational differences. One of the differences not considered is the

non-police, non-fire EMS constituency. Eighty percent of the EMS

squads in the State of New Jersey are such squads. Additionally,

in the State of New Jersey, we have a unique system for delivery

of ALS care, and that, too, was not recognized in the negotiated

rulemaking process. Let me describe that system briefly.

When a 911 call goes to an ambulance, a basic life support unit,

BLS unit, is dispatched. Again, 80 percent of the time, those calls

are answered by volunteer squads that do not charge the patient

nor the insurance for the services they provide. Last year, 400,000

ambulance transports were accomplished by volunteers. This saved

17

Medicare $48 million in charges and, at an 80 percent reimbursement rate, saved them $39 million in costs. In the State of New

Jersey, only BLS units are allowed to provide a transport.

The BLS component—when your 911 call suggests a more serious illness—crushing chest pain, severe allergic reaction, breathing

difficulty—the paramedics are dispatched simultaneously with the

BLS squad, two rigs responding to the same call. Is this inefficient?

Well, nationally, 30 percent of the time a patient goes to the hospital by pre-hospital transport, they are accompanied by paramedics. In the State of New Jersey, only 13 percent of the time are

they accompanied by paramedics. If you get there, and you do not

need medics, they can leave. This allows us to cover the entire

State with advanced life support capability.

So what? Medics are expensive, take 2 years of additional training. They have additional skills and equipment. The average

charge for a paramedic-accompanied call in the State of New Jersey is $525. With implementation of the base reimbursement rate

at $152 and the mileage and the gypsy considerations, the average

reimbursement would be about $373 per ALS call, a loss of $150.

That is if it is accompanied by volunteers. If you have the proprietary ambulance accompany the ALS squad, they are entitled to

their cut, which takes away an additional $200 per call, on average. Paramedics are based at hospitals in the State of New Jersey

and the hospitals would stand to lose about $19.5 million a year

on ALS runs if this is implemented.

So what would happen? Well, the hospitals would either get out

of the ALS business or the hospitals would start transporting, and

then if the hospital starts transporting, there will be turf wars between proprietary and hospital transport units. The volunteers who

get their greatest sense of reward by responding to people in the

greatest need would get to a scene, an ALS transport unit would

be there, they (the volunteers) would have no role to play, they

would go home. It would not be long before the volunteer system

would disappear in the State of New Jersey.

Now, what would that mean? That would mean that the $48 million in charges and $39 million in costs that Medicare does not

have to pay right now, they will have to pay when this reimbursement takes place.

Additionally, disasters—in the events of 9/11, in the first few

hours, 450 ambulance squads from New Jersey reported to assist.

Ninety percent of those squads reporting were volunteer squads.

Additionally, the entire New Jersey Congressional delegation has

supported the efforts of this coalition, every member of the House,

every member of the Senate, Democrats and Republicans, have

supported our efforts to avoid implementation of this process.

So what are the options? The options are, leave it alone, let it

be as it is. Other options are to establish a carve-out. The Secretary

is entitled to establish a carve-out or waiver for different States to

cover the cost of pre-hospital care. CMS has the legal authority to

grant this carve-out waiver. Whatever options are addressed;

whether your bill goes through or they choose to leave us alone, or

they implement a waiver, it is imperative that the implementation

of the present reimbursement design by HCFA CMS, does not go

18

1The prepared statement of Mr. Wingrove appears in the Appendix on page 48.

through as it is now or we stand to lose significantly in the State

of New Jersey.

Senator DAYTON. Thank you very much, Dr. Pruden. Mr.

Wingrove.

TESTIMONY OF GARY L. WINGROVE,1 EMT–P, MINNESOTA

AMBULANCE ASSOCIATION

Mr. WINGROVE. Senator Dayton and Members of the Committee,

thank you for having me here today. This is a big day for me because I am here with you and the Committee and the other panelists and Administrator Scully.

My name is Gary Wingrove. I am a paramedic. I represent the

Minnesota Ambulance Association and MAA President Buck

McAlpin is also present today.

There are two major problems facing the ambulance industry and

these include an increase in the number of denied Medicare emergency ambulance claims and the impact of the proposed fee schedule.

In the written testimony that I submitted, I told you about four

Minnesotans—I would like to describe two of them today—that

have used ambulance service. A woman had an implanted

defibrillator that failed to function. She was in cardiac arrest. The

paramedics were summoned and successfully resuscitated her

using an external manual defibrillator.

A woman was moving a mattress in her apartment. She lost her

balance. The mattress fell on top of her and she could not breathe.

She screamed for help and a neighbor called 911. The paramedics

arrived and removed the mattress. She had excruciating back pain

and could not move and was transported to the hospital.

These people have a few things in common. They are all over 65.

They have Medicare as their primary health care insurance. They

were transported to hospitals for physician evaluation, diagnosis,

and treatment. Medicare paid all of their hospital, physician, lab,

and diagnostic bills, yet their ambulance claims were denied. The

reason given by the contractors was that the ambulance was not

medically necessary. We disagree, and like the beneficiaries, are

outraged that this occurred.

We find that 90 percent of the denied claims are paid on the first

appeal attempt. One of our members reports that they frequently

have to fax pages from the carrier’s own ambulance billing manual

back to them because they give wrong information over the telephone, both to us as providers and to beneficiaries.

In January of this year, the Medicare contractor processing hospital-based ambulance claims in our State put the ambulance services on focused review. This means they suspended 100 percent of

the claims submitted by the provider and required the provider to

submit both the ambulance run form and hospital records before

they would process the claims. By the middle of 2001, one hospitalbased ambulance provider had over 1,500 unpaid Medicare claims

totaling over $6 million.

Mr. Chairman and Members of the Committee, we submit that

the only person who should be allowed to determine whether a

19

medical emergency exists is the person who decides whether or not

to dial 911. Congress should establish a prudent layperson standard for the payment of emergency ambulance claims and Congress

should direct CMS to adopt a condition coding system for use in

ambulance claims.

The average Minnesota ambulance service has a payer mix that

is 50 percent Medicare. We predict a 50 percent decrease in reimbursement in our State as a result of the combination of mandatory

Medicare assignment and the implementation of the proposed fee

schedule. This means the average Minnesota ambulance service

will lose 25 percent of their total revenue. The ambulance industry

in Minnesota bills approximately $140 million per year, and we are

predicting a decline in revenue of $37 million.

While the anticipated payment rates are inadequate for urban

providers, the situation is much worse for rural providers. Many

rural government-operated ambulance services predict financial insolvency. Some ambulance services are anticipating reduction in

service provided to Medicare beneficiaries from paramedic level

ALS to EMT level BLS.

Even though the fee schedule has not yet been implemented,

some ambulance services are already in dire financial straits. According to the January 2001 edition of the EMS Insider, East

Texas Medical Center, which provides EMS to dozens of rural communities in West Texas, notified residents of Honey Grove, Texas,

that it would cease providing 24-hour coverage to the town, and beginning December 1, 2000, they would station a unit at Honey

Grove only from 7 a.m. to 4 p.m. on Tuesday through Saturday. At

all other times, it sends an ambulance from a town 20 miles away.

Then this town has no first responder service.

To illustrate the difficulties in providing rural ambulance service,

the cost per hour to provide ambulance service is almost identical

in greater Minnesota as urban Minnesota, but compared to urban

revenue, the greater Minnesota revenue per day must either cover

three units instead of one, or the ambulance service must make 1

day of urban reimbursement last the entire week.

The problem of underfunding Medicare ambulance reimbursement is disproportionately rural. Congress must recognize the fundamental flaw in this historical way that ambulance service has

been reimbursed. Payments for rural ambulance services must be

higher than urban payments. We urge Congress to set the urban

ambulance payment rates at a level consistent with the national

average cost of providing service and require CMS to adopt rural

payment adjustments next year in a manner yet to be determined

by the General Accounting Office. The proposed 4-year implementation plan works well for Minnesota, since we are a State that will

see substantial revenue declines.

And finally, I would like to address the issue of cost versus

charge. Ambulance service is a health care service that is delivered

in the public safety environment, and when other sectors of health

care have moved to fee schedules, as Administrator Scully mentioned, and we think that is a good thing, too, they have always

started from a different model. Physicians, hospitals, physical

therapists are all full-time providers and they are not tax subsidized. Our industry is different because we have some full-cost

20

1The prepared statement of Mr. Meijer appears in the Appendix on page 54.

providers. We have some very heavily taxed subsidized providers.

and then we have volunteers.

So ambulance service charges have nothing to do with the cost,

and because we have been on a historical charge payment system,

unlike the other segments that moved to fee schedules, the $2.3 billion that you hear about has nothing to do with what the actual

cost of providing the service is. It is average charges.

Thank you for the opportunity to address the Committee and I

would be happy to answer any questions you might have.

Senator DAYTON. Thank you, Mr. Wingrove. Mr. Meijer.

TESTIMONY OF MARK D. MEIJER,1 OWNER AND CEO, LIFE EMS

AMBULANCE SERVICE

Mr. MEIJER. Good morning, Senator Dayton.

Senator DAYTON. Good morning.

Mr. MEIJER. Thank you very much for allowing me to be here

this morning. I appreciate Gary’s comments on his twins and their

upcoming birthday. Being a fairly new first-time father, I could

talk all morning about our new daughter. [Laughter.]

Mr. MEIJER. At any rate, I appreciate the staff and the guests

here at the Senate Committee on Governmental Affairs for allowing us to be here. It is an honor to provide testimony this morning

on behalf of the American Ambulance Association as well as on behalf of all of those across the country that may have to call 911 in

the event of a medical emergency, as well as those of us that are

entrusted with their care on a daily basis.

I am Mark Meijer and I am the immediate Past President of the

American Ambulance Association and also a paramedic and President of Life EMS Ambulance, where our medics serve a combination of urban and rural areas throughout Western and Central

Michigan.

Ambulance responders are often the first point of entry for patients in our Nation’s health care system. Good emergency medical

care not only saves lives, it also saves money. It saves money by

providing immediate treatment of sudden illnesses and injuries and

thus reducing the amount of hospital time and rehab time to deal

with a patient’s final outcome. In many respects, ambulance service

can be described as the ultimate preventative medicine, which

sometimes people think, how can that be, because we react to existing illness or injury occurrences. But, in essence, by preventing

that illness or injury from becoming worse, we save a tremendous

amount of dollars as well as lives for the country.

Due to the fact that Medicare beneficiaries make up a large portion of those patients needing ambulance treatment and transport,

it is critical to the availability of the Nation’s emergency medical

safety net that Medicare provides an appropriate level of reimbursement in an efficient manner. Since Congress directed Medicare to cover ambulance transport years ago, it has often been difficult for many providers to be fully participating, in other words,

to bill Medicare rather than the beneficiary for services provided,

because of the program’s historic low-cost payments and erratic

claims processing history.

21

Just to recount a bit of history, when we first started Life EMS

Ambulance, my first encounter with directing our company to begin

participating with Medicare was an outgrowth of a patient that we

transported, an elderly woman who had a hip fracture and happened to be friends of my parents. I was called by her husband to

come over to the house and essentially sit down at their kitchen

table to look at this pile of invoices and paperwork to do with this

one hip fracture occurrence where he had claim forms and bills and

what have you, and it was at that point in time that I decided that

there is no way that the beneficiaries can be expected to bill for

these services, that we have to be able to bill those and know how

to do it efficiently as a provider of service, even though we were

not happy with the payment levels or the process at that time, but

we could not expect our patients to deal with that quagmire of paperwork.

Decades later, we are here today discussing below-cost payment

levels, more specifically to do with the upcoming fee schedule, as

well as erratic claims processing.

I appreciated Mr. Scully’s comment at the outset, and those of us

from the American Ambulance Association certainly appreciate Mr.

Scully and Mr. Patel and all the folks at CMS for their generous

amount of time in meeting with us, as well as being very candid

in trying to work through some of the issues.

Some of the things that we would like to stress, and Mr. Scully

referenced the negotiated rulemaking process being a consensus effort, it certainly was. I was President of the American Ambulance

Association at that time and was involved in every one of those

meetings, as were some of the folks in this room. And clearly, the

American Ambulance Association stands behind the agreement

that we entered into in the consensus making process in the negotiated rulemaking.

However, the issues that we have brought forth to CMS regarding the proposed rule and fee schedule have to do with things that

then-HCFA, now CMS, did not allow us to address in the negotiated rulemaking process, that being primarily the proposed rate

as well as getting into things like the condition codes that Gary has

mentioned, which are critical to the success of any new national fee

schedule. To move forward with the national fee schedule without

having the condition codes in place would be an extremely dangerous move for this country’s ambulance providers.

In addition to that, we certainly would like to mention that the

American Ambulance Association has provided the basis for a

crosswalk, as Mr. Scully identified one of the challenges of moving

from the current payment coding situation to the condition codes.

We have provided a basis for that and we certainly will work with

CMS to make that condition code process happy.

Finally, I certainly would like to thank you, Senator Dayton, for

introducing S. 1350. It certainly would address a lot of these issues

in a very up-front manner and we appreciate the opportunity to describe some of our challenges here today.

Senator DAYTON. Thank you, Mr. Meijer.

Mr. Scully, I know you have to leave. Thank you very much for

staying and listening to this panel and we look forward to working

with you and your staff as you implement the new regulations and

22

also to make, hopefully, some of these other improvements, as well.

So thank you very much. Will someone in your operation be able

to stay here, then, for the balance of this testimony?

Mr. SCULLY. Yes. Hopefully, she will be here quickly. I can stay

for a couple more minutes. Linda Fishman, who is the Policy Director at CMS and the former chief health care staffer for the Ways

and Means Committee for a number of years, who is pretty familiar with a lot of these issues and has worked a lot on this regulation, is going to come in a minute.

I would just say one thing. I know it is frustrating. In the, for

instance, Wisconsin Physician Services, the contractor, believe it or

not, is actually one of our better contractors. It is a huge program,

$240 billion a year, and we make lots of mistakes and do lots of

dumb things and we are doing the best we can to fix it. Obviously,

the situation with your parents and a lot of other problems, it is

just the nature of having a massive program.

One of the things we are trying to do, which I have mentioned,

is contractor reform, which I hope is going to pass the Senate and

looks like it is going to pass the House, which would take the 51

contractors we have nationally and try to cull them back to a

smaller, more manageable group of our better contractors, and generally what I have seen, believe it or not, Wisconsin Physician

Services is one of our better contractors and does a pretty good job.

But it is just a very big program and a lot of people do not realize that when they get mad at Medicare, it is generally done

through the 51 Blue Cross plans, Mutual of Omaha, and some others around the country that are our carriers and contractors, and

getting everything right in the context of the program group, a little over 10 percent last year, in the context of an enormous program that is growing very fast, and probably too fast to be sustained in the long run, is not easy.

So we are doing the best we can, and obviously, you are going

to find in a program that big a lot of indefensible things, and we

do and they are certainly not intentional, but we are doing the best

we can to fix them. Thank you.

Senator DAYTON. I appreciate that, and obviously, we all look for

perfection that is not achievable in a big system. I would just make

the observation that I think Dr. Lindquist’s testimony was pretty

compelling. As both a physician, a provider, and a person whose father and mother were directly involved by the nature of an ambulance service, each one is a crisis that involves someone’s life or

death situation. I think the impact of any of these denials, or the

emotional effect of them are compounded by the nature of the milieu in which you and they are operating.

I would also say—and you are probably aware of this—I was particularly struck in Minnesota by the percentage of the costs of

these, in many cases, small businesses and close-to-the-margin providers—the percentage of their operating cost that have to go into

claims administration and refiling and the like. I certainly support

what you said to the Administrator about the need for vigilance on

the part of the payer, but also anything that can be done to make

this whole process more efficient and, therefore, less costly and improves the quality of the service that can be provided and that

serves everybody’s purpose.

23

Mr. SCULLY. I do think, Senator, it will eventually be a better

payment system and we will do everything we can to work with

people like New Jersey who have some unique issues to make sure

it works.

Senator DAYTON. And I look forward to being involved with you

in that as well. Thank you very much for being with us today.

Let me ask a few questions here and invite each member of the

panel then to respond in turn. Going back to the point I raised with

Administrator Scully just a moment ago, can you give me an estimate of what percent of the claims that you believe, either in your

service or in the system you are representing here today, that are

denied at the first submission? Dr. Lindquist?

Dr. LINDQUIST. Well, the numbers vary greatly, anywhere from

20 percent all the way up to 85 percent. I believe in our system,

our initial denial on the first submission of the bill is somewhere

around 30 percent.

Senator DAYTON. OK. Dr. Pruden.

Dr. PRUDEN. We have no reason to dispute those numbers that

were just reported by Dr. Lindquist. What would happen to our

system, though, is we are presently reimbursed under Part A and

reconciled at the end of the year and that would go away with initiation of the reimbursement process.

May I make a clarification on your condition statement?

Senator DAYTON. Please, yes.

Dr. PRUDEN. People may not understand what the condition

statement versus an ICD–9 code means, but if you imagine a mother with a 2-year-old child who has a history of allergies to bee

stings, severe allergic reactions, and the child gets stung by an insect. She is afraid the child is going to die. She calls 911. They

send out paramedics and they get him to the hospital and they find

out it was not a bee, it was something else. The ICD–9 code would

reflect insect bite. That does not require a 911 call, but the paramedics and the BLS crew that were responding were responding to

what they thought was a life-threatening condition, and that is

why implementation of the condition codes is a critical component

of this implementation process.

Senator DAYTON. That is an excellent example. That clarifies my

understanding as well, so thank you. Mr. Wingrove.

Mr. WINGROVE. The numbers that Dr. Lindquist said represent

Minnesota, but I think that the striking thing that I would like to

point out is that of those claims that get denied, 90 percent of them

are paid on appeal. We are wondering where the QA loop is on the

other end, because the same claim keeps getting denied and denied

and denied.

Senator DAYTON. Exactly. Thank you. Mr. Meijer.

Mr. MEIJER. Just briefly, from a national level, Senator, it varies

wildly, and that is the challenges with all of the carriers in that

in some States, providers are on 100 percent prepayment review

and it has literally put operations out of business. It seems to kind

of cycle around through carriers and through States. We went

through this in Michigan a number of years ago, that actually put

a number of ambulance services out of business.

Senator DAYTON. Thank you. Going to the other part of my comment, then, could you give me an estimate of what percentage of

24

you operating costs are associated with claims management, with

the administrative side of that?

Dr. LINDQUIST. I personally cannot tell you with my companies.

I leave that to the operations director and I pretty much stay with

the medical direction of the company, so I cannot tell you.

Senator DAYTON. All right. Dr. Pruden?

Dr. PRUDEN. Again, I do not have specific numbers. I would venture to guess, based on other similar components of the system, as

much as 20 percent to 30 percent of your office overhead is related

to making claims.

Senator DAYTON. Thank you.

Mr. WINGROVE. I think that is in the ballpark. It is certainly the

only part of our business that is growing. We are cutting to prepare

for the fee schedule, but we are increasing staff in the business office.

Mr. MEIJER. And one of the critical aspects of that is not just the

overhead of processing the claims but the timely payments. That

is really what can be a disaster for, as you mentioned, Senator, ambulance services that operate on a low margin and the biggest part

of our costs, of course, are payroll for our medics, and in order to

make payroll, ambulance services need that consistent reimbursement, quite frankly. So it is the timely reimbursement that can be

a huge cost to services and impact lives.

Senator DAYTON. Any closing remarks any of you would like to

make, any point that was not made or you want to elaborate on

for the record? Dr. Lindquist.

Dr. LINDQUIST. One thing that struck me when we were talking

about the urban versus rural mileage differences, I realize that determining the nature of a community can be a little bit difficult,

but if you are familiar with Crookston, Minnesota—Crookston is a

small town of 7,000 people in Northwestern Minnesota. Its nearest

town of any size is Grand Forks-East Grand Forks, which is probably around 60,000 or 70,000. But because of the county proximity

to that metropolitan area, Crookston, Minnesota, is classified as an

urban area for purposes of reimbursement, and under no circumstances could anyone visiting Crookston possibly confuse

Crookston with an urban area. I think the nature by which these

determinations are made needs to be readdressed, as well.

Senator DAYTON. Thank you.

Dr. PRUDEN. I think Congress and HCFA/CMS are to be commended for making an effort to get some control of the situation,

but it is a very difficult animal to understand, and to pretend that

a one-size-fits-all solution is going to solve the problem is difficult.

As Mr. Wingrove pointed out, to base your reimbursement on

charges when charges do not adequately identify the costs, when

you have a large volunteer system that does not generate any

charges and then you are trying to reimburse based on that, on an

average, it becomes very compounded. So I think we have to look

more closely at identifying some of the difficulties that will accrue

when this is implemented.

Senator DAYTON. Thank you. Mr. Wingrove.

Mr. WINGROVE. Senator, thank you. I would just like to mention

that we think that implementation of these condition codes is very

critical to solving this problem for beneficiaries of their claims

25

being denied and for providers who have to help them through that

process when that happens.

I do not understand how it is so complex. There are 93 of them.

It seems that someone could number them 1 through 93 and make

a small change in the computer program, or just put a number in

a field in a computer, in a field that we have for text, and someone

on the other side could see that, and if one of the codes is there,

they know it is medical necessary and the claim gets paid. If the

code is not there, we can send that one in by hand if something

did not match up into that system. So I do not understand that

point and perhaps someone from CMS could delve into that a little

deeper with us later.

Senator DAYTON. Well, I think your point is well made. It occurs

to me that Administrator Scully committed to working with myself,

with you, and others to undertake that process. Let them publish

the final rules and then we will proceed on that immediately, because I think, as you say, this is one step either forward or backward, depending on your point of view, but we have got to take

some other steps forward.

Mr. Meijer.

Mr. MEIJER. Thank you, Senator. Just to amplify the condition

code aspect again, should the fee schedule move forward without

the condition codes in place April 1, I think it will be a disaster

for emergency ambulance services across the country, and we are

committed to assisting that process happening and are confident,

just as Gary described, that it can be done by then.

I think, as the Administrator mentioned, the spirit of the consensus process of negotiated rulemaking was very strong. A lot of

us in this room spent a lot of time there, and clearly one of the resounding things that came out of that process was the overall support for condition codes from all areas of providers and how everybody identified that that is critical in making this work, and I

think very consistent with CMS’s mission, as we heard earlier, of

simplifying the coding process in the claims processing scenario

that we all encounter, the condition codes would clearly do that.

Thank you very much.

Senator DAYTON. Thank you very much. Thank you all, gentlemen, for being here today, for your testimony. If you would like to

submit any additional testimony for the record, please do so by November 21. Otherwise, again, I assure you that I will be working

with you and others in the industry with CMS to try to minimize

whatever damage is done by these new regulations, and also moving with you to work on some of these other areas as quickly as

possible. Thank you very much.

Our next panel, we have Laura Dummit, the Director of Health

Care-Medicare Payment Issues for the U.S. General Accounting Office; Lori Moore, Assistant to the General President for EMS Services for the International Association of Firefighters; and Chief

John Sinclair, Secretary of the Emergency Medical Services Section

of the International Association of Fire Chiefs. Welcome to all of

you.

Let us begin with you, Ms. Dummit. Welcome.

26

1The prepared statement of Ms. Dummit appears in the Appendix on page 67.

TESTIMONY OF LAURA A. DUMMIT,1 DIRECTOR, HEALTH

CARE-MEDICARE PAYMENT ISSUES, U.S. GENERAL ACCOUNTING OFFICE

Ms. DUMMIT. Thank you. Senator Dayton, I am pleased to be

here today to discuss Medicare’s payment and coverage policies for

ambulance services.

We all understand the important role of ambulance transports in

a locality’s system of emergency medical services. Providers must

be ready to provide emergency transport services rapidly and at all

times. However, maintaining this ready stance may be difficult for

rural providers because of their special geographic and economic

circumstances.

In our July 2000 report on rural ambulances, we note the need

to consider these circumstances in developing appropriate payment

policies. Rural ambulance providers, which may serve sparsely populated areas, typically have fewer transports than their urban

counterparts. Thus, they have fewer trips over which to spread

fixed costs, such as staff salaries and vehicle maintenance. In addition, rural providers tend to have longer trips and, therefore, log

greater mileage and staff time. Longer distances translate not only

into higher fuel costs, but also the higher costs of maintaining

backup capacity as emergency equipment and staff may be unavailable for lengthy periods.

Rural providers can also find themselves to be the only means

of transportation in areas lacking taxis, van services, or public

transportation. This can be a particular problem when a State or

local government requires an ambulance provider to respond to all

emergency calls, even if the patient’s condition does not warrant

payment under Medicare’s criteria.

Finally, questions have been raised about the continued availability of volunteer staff. When volunteers cannot be recruited, providers have to hire salaried staff, which increases the cost of providing services.

Vagaries in the way Medicare now pays for ambulances have

added to the challenges facing rural providers. Medicare’s current

payment method has produced wide variation in payments for the

same service. For example, Medicare paid providers in North Dakota about $120 more per service than providers in Montana for

the same service. Similarly, it paid providers in Wyoming about $4

more per mile of ambulance transport than providers in South Dakota.

About 2 months after our report was issued, CMS, then called

HCFA, published a proposed ambulance fee schedule specifying

preset payment rates. This schedule is expected to reduce payment

variations. Fees will vary by the type of service provided and account for geographic cost differences. The fee schedule will raise

payments for providers now receiving payment below the national

average. Thus, many rural providers will actually see an increase

in Medicare payments under the fee schedule.

In addition, there will be a payment adjustment for providers

that transport beneficiaries in rural areas. This adjustment is intended to recognize the higher costs of essential, isolated ambuVerDate 11-MAY-2000 08:22 Aug 06, 2002 Jkt 000000 PO 00000 Frm 00030 Fmt 6633 Sfmt 6601 77440.TXT SAFFAIRS PsN: SAFFAIRS
27

1The prepared statement of Chief Sinclair appears in the Appendix on page 80.

lance providers. We are concerned, however, that the increased

payment applies to an excessively broad set of providers, so it may

not adequately target essential providers in isolated areas. Further,

the increased payment is tied to the mileage reimbursement rather

than the preset rates for services, so it may not adequately help

those providers with too few transports to cover their fixed costs.

In responding to our 2000 report, HCFA stated that it plans to

work with the ambulance industry to develop an alternative adjustment.

What ambulance services Medicare will cover is also important

in ensuring access. Providers have noted inconsistent treatment of

claims, leading to concerns about the fairness of claims payment

decisions. In the past, claims approval and denial decisions have

been problematic as, among other things, ambulance providers lack

standard documentation methods for reporting a patient’s condition

at the time of pick-up. CMS has taken steps to clarify Medicare

coverage criteria and educate providers on aspects of the claims

process.

In conclusion, we believe that Medicare payment policy for ambulance services is moving in the right direction in that the proposed

fee schedule seeks to link providers’ payments to the resources required to provide those services. Nevertheless, we all know that

Medicare’s payment rates are only as sound as the data supporting

them. Thus, we believe that ongoing data gathering and analysis

are critical to enable Medicare to revise rates as needed.

Most importantly, attention needs to be given to the refinement

of the rural payment adjustment so that it appropriately targets

providers that most need it. The consequences of paying inappropriately for ambulance services can result in limiting access to

some of Medicare’s most vulnerable beneficiaries or introducing opportunities to exploit the benefit.

Senator Dayton, as we move forward with the General Accounting Office’s forthcoming study of the costs of providing ambulance

services, particularly in rural areas, we look forward to working

with you and the Congress, and also, undoubtedly, we will be

speaking with many of the organizations that are represented here

in this hearing. Thank you.

Senator DAYTON. Thank you, Ms. Dummit. Thank you.

Chief Sinclair, welcome.

TESTIMONY OF DEPUTY CHIEF JOHN SINCLAIR,1 SECRETARY,

EMERGENCY MEDICAL SERVICES SECTION, INTERNATIONAL

ASSOCIATION OF FIRE CHIEFS

Chief SINCLAIR. Good morning, Senator. Mr. Chairman and Senate staff, my name is John Sinclair and I am the Deputy Chief of

Operations for Central Pierce Fire and Rescue in Takoma, Washington, and I am also the Secretary of the EMS Section of the

International Association of Fire Chiefs. I represented, along with

other team members, the International Association of Fire Chiefs

on the negotiated rulemaking body that drafted several components

of the Medicare ambulance fee schedule.

28

I represent the fire chiefs and other senior managers of the more

than 31,000 fire departments across the United States. While prehospital emergency systems are noted for a wide range of organizations that provide emergency medical care and ambulance transport, there is one unifying force in nearly all EMS systems nationwide: The critical role of local fire departments.

In over 80 percent of America’s communities, fire departments

are the provider of EMS of first response. In addition, the fire service is the single largest provider of ambulance transport, comprising over one-third of the Centers for Medicare and Medicaid

Services ambulance transport services.

Mr. Chairman, before turning over to the business of the hearing, I would like to thank you for your efforts on behalf of emergency and medical services everywhere. Recent events have certainly demonstrated the critical importance of local EMS systems

in the event of a natural or manmade disaster.

The issues this Committee is hearing about today, timely and

adequate reimbursement for ambulance transport services, are tremendously important to ensuring that local EMS systems have the

necessary resources to serve their communities in times of great

need.

In 1997, Congress passed a Balanced Budget Act that mandated

a single fee schedule for ambulance reimbursement in the United

States. The new fee schedule, created through negotiated rulemaking process, reflects the consensus of our industry on a wide

variety of issues. There are, however, several issues that were designated as being off the table by, at that time, HCFA. We view two

of these issues as being the most critical to successful implementation of the new fee schedule.

First, the proposed reimbursement rate must be raised to reflect

the actual cost of providing ambulance transport.

Second, CMS should implement the system of condition codes

that have been talked about by several other people. The implementation of these codes will reduce the number of denied and delayed claims that are a result of current practices and minimize the

substantial administrative burden of seeking reimbursement from

Medicare patients.

The issue of determining the cost of ambulance transport is notoriously difficult. The structure of EMS systems varies widely across

the United States, which makes it difficult to estimate costs around

the industry. However, we believe it is critical that Medicare reimbursement reflect, to the maximum extent possible, the actual cost

of providing the service.

Mr. Chairman, you recently introduced a bill, the Medicare Ambulance Payment Reform Act of 2001, S. 1350 that would require

CMS to set the reimbursement rates based on the average cost of

service. We strongly encourage Congress to direct CMS to set reimbursement rates on that basis.

Of great concern to all ambulance providers is the extremely uneven and seemingly arbitrary manner in which claims are accepted

for or denied payment by the Medicare carriers. The General Accounting Office report on rural ambulance payment under the proposed fee schedule notes that there are significant and somewhat

inexplicable disparities in denial rates across the carriers. The reVerDate 11-MAY-2000 08:22 Aug 06, 2002 Jkt 000000 PO 00000 Frm 00032 Fmt 6633 Sfmt 6601 77440.TXT SAFFAIRS PsN: SAFFAIRS
29

port states that difficulties with claims review and subsequent denial levels 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.

Let me provide the Committee with a very short example. One

of the most frequent calls received by EMS providers is for a patient with severe chest pain. Given the possibility of a life-threatening cardiac event, EMS providers will aggressively treat the patient as they rapidly transport to the hospital. Upon arrival, the

patient is ultimately diagnosed not with a heart attack but with a

case of severe indigestion. While it is impossible for the firefighters

in the field to know the patient’s actual condition, CMS would

refuse to reimburse the transport, deeming it medically unnecessary.

Mr. Chairman, this situation is simply unacceptable. Firefighters

in the field need to make rapid decisions based on the best interest

of the patient. To tie reimbursement to the patient’s diagnosis and

not to the condition of that patient on the scene is dangerous to

both the individual patient came and the long-term financial health

of our local EMS system.

A subcommittee of the negotiated rulemaking body developed a

comprehensive list of medical conditions codes. This list represents

a monumental effort to provide clarity to the issue of patient condition and should be utilized as recommended. Its implementation

would greatly reduce the number of delayed and denied claims and

ease the administrative burden upon local fire departments.

Finally, we are concerned about the poor coordination of Medicare policy through the carriers. It is clear from previous experience that discrepancies exist between policy development by CMS

and the implementation and the administration by the carriers. Recently, we have become concerned that the implementation of the

new fee schedule will be plagued by poor coordination, as it has become clear that many of the carriers have fundamental misunderstandings of basic definitions and level of service designated by

CMS. Given the significant impact the new fee schedule will have

on local government finances across the country, it is imperative

that CMS implement the fee schedule with as little administrative

confusion as possible.

America’s fire departments are the backbone of the Nation’s

emergency medical response system, providing over 60 percent of

the Nation’s emergency ambulance transports. It is essential for

the financial stability of our local governments that claims filed for

Medicare patients be processed and paid in a prompt, efficient, and

fair manner and that the amount paid reflect the actual cost of providing the service.

Mr. Chairman, the solutions that we have outlined above will

significantly aid America’s fire service as we adapt to the reality

of the new ambulance fee schedule. We encourage Congress to direct CMS to take these steps to ensure the financial stability of the

Nation’s local EMS system so that we may maintain the highest

level of emergency health care for our patients.

Thank you for providing me with the opportunity to testify before

you today. I will be happy to answer any questions.

30

1The prepared statement of Ms. Moore appears in the Appendix on page 83.

Senator DAYTON. Thank you, Chief Sinclair, and thank you and

all of your members for the outstanding dedicated service you provide to our country. Thank you.

Chief SINCLAIR. Thank you.

Senator DAYTON. Ms. Moore.

TESTIMONY OF LORI MOORE,1 MPH, EMT–P, ASSISTANT TO

THE GENERAL PRESIDENT, INTERNATIONAL ASSOCIATION

OF FIREFIGHTERS (IAFF)

Ms. MOORE. Thank you, Senator. My name is Lori Moore and I

am here today to represent the 250,000 professional firefighters

throughout the United States and their provision as the leader in

emergency medical services in this country, providing EMS to more

than 80 percent of this population.

I also represent the General President, Harold Schaitberger, and

on his behalf, we will present our comments and our position on

some of the things that have been said this morning as well as our

written testimony that has been submitted. So if I may, I would

just like to speak openly to that rather than following the written

testimony.

I am, in fact, a paramedic and have been since 1984, operating

in a large metropolitan system in Memphis, Tennessee, and am

now a specialist in EMS system design, evaluation, and performance measurement, so I am familiar with most systems throughout

this country and, in fact, have participated in designing the operations of many of those systems. We certainly appreciate the opportunity to speak on this fee schedule as well as some of the other

issues that have been presented this morning.

Just to reiterate some of the information that Mr. Scully presented earlier so that everyone in the room understands what took

place in the process of negotiated rulemaking, there is today and

has been historically some discrepancy throughout the United

States on payment for Medicare services provided through ambulance services. Again, as the gentlewoman to my right said, there

are discrepancies city to city for the exact same service. I will give

you an exact dollar amount, where in parts of California for an advanced life support transport pays as much as $541. The exact

same service here in Washington, DC, $113. There is a discrepancy

for you. That is what the fee schedule was designed to eliminate.

That is why in the 1997 Balanced Budget Act, we were directed

to come together as industry leaders to negotiate a fee schedule,

and that is, indeed, what occurred. The organizations, leadership

from all of the organizations sat at the table. I was one of those

that sat at the table, and none of the others, I would add, that

have testified this morning were actually in those negotiations or

signed on the dotted line. We all signed the agreement that we

could live with what was negotiated at that table and that is what

we expect to be implemented by HCFA, or now CMS.

That fee schedule was something that we all talked through. We

looked at all the data that was available at the time and we all

agreed that we could live with it. That includes all industry providers. We all compromised, including the International Association

31

1The question and response from Mr. Scully submitted by Senator Thompson appears in the

Appendix on page 123.

of Firefighters, as we were there seeking certainly payment for

treatment separate from transport, because under Medicare law

today, you have to transport the patient before you can be paid.

Much of the emergency medical services that are delivered in this

country are delivered separate and prior to the arrival of an ambulance on the scene. So no longer is emergency medicine linked to

that patient transport, and yet we compromised our position on

that for the betterment of the good and eliminating those discrepancies in payment throughout this country today.

There were also other considerations that took place. We did consider the rural providers. There was an adjustment made in there

and everyone stipulated it was an adjustment that we could live

with through the mileage adjustment that was made for the rural

providers. We considered labor costs. We considered call volume.

We considered historical charges and the way that was done.

So the process that took place throughout the negotiated rulemaking and the integrity of that process must be maintained and

Congress should encourage CMS to implement that fee schedule as

it has been negotiated.

We will, however, and stipulate to the fact that there are denials

of claims that should not be taking place. We will, however, also

say that through the implementation of the negotiated rulemaking

fee schedule as it was negotiated, and specific instruction to both

the carriers and the fiscal intermediaries that this can be eliminated, that is what is going to have to take place. As the fee schedule is implemented, we have to give the instruction to these carriers, to the fiscal intermediaries on how they are to process these

claims. That can be also handled through the process as has been

laid out to date.

One other thing I would like to remind everyone in this room is

that Medicare was never meant to be a funding source for emergency medical services systems in this country. That is the responsibility of local governments and local governments should take on

and carry forward that responsibility. Medicare is designed as an

entitlement program to pay for the services that Medicare beneficiaries use, not to fund the base of those systems. Just so there

is a point of clarification as to the intent of what Medicare is supposed to be providing.

With that, sir, I will sum up, and again encouraging that the fee

schedule be implemented as it was designed and that Congress encourage CMS to do so. Thank you.

Senator DAYTON. Thank you very much.

I am a member of the Senate Agriculture Committee, which is

marking up the reauthorization of the Federal law for the next 6

years and I have an amendment that I need to get there to introduce on behalf of Minnesota farmers, so I am going to need to bring

this hearing to a conclusion. I would like to reserve the right to ask

questions in writing to this panel and the others, as well.1

If you have any additional comments you would like to submit

for the record, the record will remain open until November 21.

32

1The letter from the Oregon State Ambulance Association appears in the Appendix on page

105. 2The prepared statement American Medical Response submitted for the record appears in the

Appendix on page 113.

There are other letters including one from the Oregon Ambulance Association 1 and also a prepared statement from Steven

Murphy, the CEO of National Products and Services for American

Medical Response, and without objection, those will be inserted in

the record, as well as any other items that anyone wishes to submit

before November 21.2

With that, I want to thank you very much for your presence here

today and I will conclude the hearing. Thank you.

[Whereupon, at 10:51 a.m., the Committee was adjourned.]

(33)

A P P E N D I X

PREPARED STATEMENT OF SENATOR TORRICELLI

Mr. TORRICELLI. Healthcare in New Jersey has a long history of innovation and

advancement. From the large number of pharmaceutical companies that create new

medicines, to the hospitals and facilities where innovative therapies are developed,

New Jersey remains one of the most progressive healthcare States in the country.

Our State was one of the first to introduce and pass a comprehensive patient’s bill

of rights, and one of the first to recognize the importance of expanding access to

healthcare to children and low income families.

One of New Jersey’s greatest innovations, and one which truly demonstrates the

community based approach which has been so successful, is the development of our

Emergency Medical Services (EMS) system. The current EMS system in New Jersey, which has been in place for roughly 25 years, was designed as a modern remedy

to the age old problem of guaranteeing access to emergency transport, while at the

same time preserving local involvement in the delivery of services and preventing

skyrocketing costs.

The New Jersey EMS system accomplished all three goals by establishing a twotiered approach to emergency transport. This two-tiered system includes volunteer

and for-profit Emergency Medical Technicians (EMTs) who provide basic life support

(BLS), and hospital-based paramedics, who provide advanced life support (ALS).

Basic and advanced life support are differentiated by the status of the victim, with

the most serious injuries, such as heart attacks, treated by ALS paramedics.

The two-tiered system has been an unqualified success in New Jersey, providing

universal access for all residents to affordable emergency services, while simultaneously ensuring that those persons in need of the most advanced care receive it

from the proper authorities. The system allows almost 500 local volunteer emergency medical technician (EMT) squads to blanket the entire State with quick and

effective initial responses to emergencies. In the case of more serious emergencies,

paramedics are strategically stationed at various hospitals throughout the State to

provide secondary assistance. In either case, the EMTs will generally transport patients to the hospital with the paramedics along, if necessary, to provide additional

care.

There are currently an estimated 20,000 EMTs providing ambulance transportation for virtually all BLS and ALS emergencies, close to 400,000 calls each year.

It is estimated that over 80 percent of these calls are handled by volunteers who

are not reimbursed by Medicare. In contrast, the hospital-based paramedics, also

known as mobile intensive care units (MICUs), are reimbursed by Medicare when

they respond to ALS emergencies, just as all other paramedics.

Unfortunately, the great success of this system would be jeopardized if the Centers for Medicare and Medicaid Services (CMS) finalizes plans to implement new

rules on EMS services, required when Congress enacted the Balanced Budget Act

(BBA). While I applaud CMS’ intentions in enacting a new fee schedule, which is

designed to control costs by enforcing one, standardized, system throughout the

country, I am dismayed by the impact this will have on New Jersey, an impact that

runs counter to the spirit of the BBA and the intent of the fee schedule itself.

The proposed Medicare Ambulance Fee Schedule would, in essence, require paramedics to be the only responders to provide transport for victims, regardless of medical condition, in order to be reimbursed by Medicare. This, in turn, would eliminate

the two-tier structure by solely recognizing MICUs, and thus also eliminate the

need for volunteer EMS units, which currently provide the bulk of the transport.

Under the new rules, there would be no incentive for EMS units to respond to calls

if they know their mission has been given to MICUs.

Our system, when compared to the system CMS is set to approve, would save an

estimated $39 million annually, due to the preponderance of BLS calls and the large

34

number of EMS volunteers who respond to these calls. But beyond the cost savings,

the limitation of EMS units would jeopardize the prompt service that New Jersey

residents have come to rely on.

This hearing is not the first time the Senate has considered the impact a proposed

fee schedule would have on Emergency Medical Services. In a resolution I sponsored

that was passed last year during consideration of the FY 2001 Labor/Education/

HHS Appropriations bill (S. Amendment 3612 to H.R. 4577), the Senate unanimously agreed that any changes to Medicare’s reimbursement for EMS must take

into account unique systems such as New Jersey’s, and that HCFA (now CMS) must

do its best to preserve this highly beneficial and cost effective system. While a Senate Resolution, as we all know, is non-binding, it certainly does signal the intent

of the Senate to closely monitor subsequent developments. CMS has always been

a strong supporter of measures that improve the delivery of healthcare services,

while lowering the cost to taxpayers. In passing this amendment last year, the Senate reaffirmed its belief that once CMS had been made fully aware of the importance of this issue, the agency would act responsibly. To date, CMS has not fully

acknowledged that any new fee schedule would hurt the two-tiered system in New

Jersey, nor has CMS committed to preserving the system.

While undoubtedly my interest in the Medicare Ambulance Fee Schedule arises

primarily from the impact it would have on New Jersey, I am concerned about the

national scope of the matter as well. Dozens of States, not just New Jersey, stand

to be negatively affected by the new fee schedule as it now stands. In recognition

of this, I was pleased to recently become a cosponsor of the Medicare Ambulance

Payment Reform Act, Senator Dayton’s bill to ensure that the new fee schedule is

based on the national average of ambulance service, and not harmful to emergency

responders. This bill represents a strong effort to address the clear problem that the

new fee schedule presents, namely, that reimbursements will not be high enough

to allow responders to continue their work.

It is my hope that this hearing will finally provide CMS with the impetus to implement a fair fee schedule, one that takes into account the unique systems in place

throughout the country.

35

36

37

38

39

40

41

42

43

44

45

46

47

48

49

50

51

52

53

54

55

56

57

58

59

60

61

62

63

64

65

66

67

68

69

70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

100

101

102

103

104

105

106

107

108

109

110

111

112

113

114

115

116

117

118

119

120

121

122

123

Æ