Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

JUNE GIBBS BROWN 

Inspector General 

DECEMBER 1998 

OEI-09-95-00412 

MEDICAL NECESSITY 

OF MEDICARE AMBULANCE SERVICES 
OFFICE OF INSPECTOR GENERAL 

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, is to 

protect the integrity of the Department of Health and Human Services programs as well as the 

health and welfare of beneficiaries served by them. This statutory mission is carried out through a 

nationwide program of audits, investigations, inspections, sanctions, and fraud alerts. The 

Inspector General informs the Secretary of program and management problems and recommends 

legislative, regulatory, and operational approaches to correct them. 

Office of Evaluation and Inspections 

The Office of Evaluation and Inspections (OEI) is one of several components of the Office of 

Inspector General. It conducts short-term management and program evaluations (called 

inspections) that focus on issues of concern to the Department, the Congress, and the public. The 

inspection reports provide findings and recommendations on the efficiency, vulnerability, and 

effectiveness of departmental programs. 

OEI's San Francisco Regional Office prepared this report under the direction of Kaye D. Kidwell, 

Regional Inspector General, and Paul A. Gottlober, Deputy Regional Inspector General. Principal 

OEI staff included: 

REGION 

Deborah Harvey, Project Leader

Robert Gibbons

Donald Loeb

Thomas Purvis

HEADQUARTERS 

Tricia Davis, Program Specialist

Alan Levine

Linda Moscoe

Brian Ritchie

Barbara Tedesco

Stuart Wright

To obtain copies of this report, please call the San Francisco Regional Office at 415-437-7900. Reports 

are also available on the World Wide Web at our home page address: 

http://www.dhhs.gov/progorg/oei 
EXECUTIVE SUMMARY 

PURPOSE 

The purpose of this inspection was to assess the medical necessity of a sample of Medicare 

ambulance services that did not result in hospital or nursing home admissions or emergency 

room care. 

BACKGROUND 

Medicare pays for medically necessary ambulance services when other methods of 

transportation would endanger the beneficiary's health. Medicare reimbursement for 

ambulance services has increased substantially over the last decade from $602 million to 

almost $2.1 billion. 

We examined the Health Care Financing Administration’s (HCFA) 1 percent sample of all 

ambulance claims submitted and paid by Medicare carriers from January through June 

1996. We divided the 1 percent sample into groups based on where the ambulance supplier 

transported the patient, and we reviewed the associated claims for other significant services 

on the same date of service that may explain the medical necessity of the transport. Of 

these, we identified a group of ambulance claims that did not result in hospital or nursing 

home admissions or emergency room care on the same date of service. This group, 

hereafter called Group 7, comprised 6.3 percent of all ambulance services. We then 

randomly selected 30 beneficiaries from Group 7 and collected the medical records for all 

services rendered on the same date as the ambulance transport. Staff at two Medicare 

carriers completed the medical review and assessed whether (1) the transport and 

associated services were medically necessary and (2) the level of service was appropriate to 

the patient’s condition. 

FINDINGS 

Two-thirds of ambulance services in Group 7 were not medically necessary 

Twenty of the 30 sampled cases were not medically necessary because alternative 

transportation would not have endangered the patient’s health. Of the 20 unnecessary 

cases, 70 percent were for nonemergency services such as routine transports for outpatient 

diagnostic tests or transports between doctors’ offices and nursing homes. 

We recognize that the 30-case sample is small, but with such a high percentage of 

unnecessary services, the sample size is sufficient to show that more than half of the 

services in this group are medically unnecessary at the 95 percent confidence level. 

Medicare Ambulance Services--Medical Necessity 1 OEI-09-95-00412 
Medicare allows approximately $104 million each year for medically unnecessary 

Group 7 ambulance services 

Based on the sample, we estimate that approximately 70 percent of the allowed 

reimbursement was for ambulance services that did not result in hospital or nursing home 

admissions or emergency room care and for which an alternate, less costly means of 

transportation would have been more appropriate. 

RECOMMENDATION 

The HCFA should develop a prepayment edit to verify the medical necessity of 

ambulance claims that are not associated with hospital or nursing home 

admissions or emergency room care 

The Office of Inspector General is aware that HCFA plans to work with the ambulance 

industry and other affected parties to establish a negotiated fee schedule effective 

January 1, 2000. This recommendation would provide a solution for one group of 

ambulance services until HCFA and the industry can better address issues of medical 

necessity, including clear and consistent definitions. 

AGENCY COMMENTS 

We received comments on the draft report from HCFA. The HCFA concurred with the 

need for medical review of ambulance claims that are not associated with hospital or 

nursing home admissions or emergency room care. However, due to HCFA’s efforts to 

ensure that Medicare payment systems are renovated before January 1, 2000, the agency 

does not believe that it can implement a prepayment edit prior to implementation of the 

major overhaul of ambulance payment policies required by The Balanced Budget Act of 

1997. In the interim, HCFA will ask its Medicare carriers to review ambulance data and 

decide whether edits accompanied by local medical review policies or focused medical 

review of potential aberrant suppliers are appropriate. 

OFFICE OF INSPECTOR GENERAL RESPONSE 

The Office of Inspector General appreciates that HCFA is undertaking a massive effort to 

ensure that all health care payment systems are fully and correctly operational before 

January 1, 2000. We suggest that HCFA take whatever action it can now consistent with 

available resources and also include the issue identified in this report on their agenda during 

negotiations on the ambulance fee schedule. 

We also made changes based on HCFA’s technical comments. The full text of HCFA’s 

comments appears in appendix C. 

Medicare Ambulance Services--Medical Necessity 2 OEI-09-95-00412 
TABLE OF CONTENTS 

PAGE

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

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

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

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

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

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

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

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

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

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

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

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

Medicare Ambulance Services--Medical Necessity 3 OEI-09-95-00412 
INTRODUCTION 

PURPOSE 

The purpose of this inspection was to assess the medical necessity of a sample of Medicare 

ambulance services that did not result in hospital or nursing home admissions or emergency 

room care. 

BACKGROUND 

Medicare Coverage and Reimbursement of Ambulance Services 

Medicare pays for ambulance services when "the use of other methods of transportation is 

contraindicated by the individual's condition, but only to the extent provided in 

regulations."1 Health Care Financing Administration (HCFA) regulations state that 

ambulance services are covered only if other forms of transportation would endanger the 

beneficiary's health. Usually, the patients are not ambulatory; that is, they are bedridden. 

Medicare does not cover other forms of transportation, such as a wheelchair or stretcher 

van, that could transport patients who do not require ambulance services. 

Medicare beneficiaries may receive medically necessary ambulance services while they are 

in the hospital under Part A coverage. For example, a bedridden patient may be 

transported from one hospital to another for specialized treatments, such as radiology 

imaging or chemotherapy services. The ambulance supplier is reimbursed by the first 

hospital because payment for these services is included in the hospital's prospective 

payment for the patient's stay. 

Part B covers ambulance services when Part A coverage is unavailable and the following 

three criteria are met: 

1. The vehicle and personnel providing the service meet certain quality and 

crew size requirements; 

2. Other methods of transportation would endanger the patient’s health; and 

3. The ambulance trip, as a general rule, stays within certain distance and 

destination limitations. 

The cost of Medicare ambulance services has increased substantially over the last decade. 

1

The Social Security Act, Section 1861(s)(7). 

Medicare Ambulance Services--Medical Necessity 4 OEI-09-95-00412 
Reimbursement more than tripled between 1987 and 1996 from $602 million to almost 

$2.1 billion. To address the increases, HCFA implemented new codes in 1995 that 

instructed Medicare carriers to assign one of four billing methods to ambulance suppliers in 

their jurisdictions. The four methods differ by the degree to which suppliers can bill 

separately for their various charges including base rate, mileage, and supplies. Currently, 

suppliers bill with codes that are based on the service status (emergency or 

nonemergency), the level of service (basic or advanced life support), and the billing system 

(all-inclusive rate or base rate, mileage, and supplies billed separately). 

Medical Necessity of Ambulance Services 

Medicare criteria state that ambulance services must be reasonable for the treatment of the

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

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

< the need to restrain the patient;

< an unconscious patient;

< the instability of the patient’s condition during transport;

< sustained acute stroke or heart attack; or

< severe brain hemorrhages.

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

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

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

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

denied by one carrier might be paid by another.

Previous Office of Inspector General Work on Medicare Ambulance Services 

The Office of Inspector General (OIG) has released several reports about the medical 

necessity of ambulance services. In 1992 and 1994, the OIG found that advanced life 

support ambulances were used routinely for nonemergency trips, when, based on patients' 

medical conditions, basic life support ambulances could have met their transportation 

needs.2 Furthermore, Medicare’s allowance for advanced life support ambulance services 

had almost tripled in 4 years.3 Other OIG reviews of ambulance services to kidney dialysis 

patients found medically unnecessary transports and significant variances in payments to 

2

Office of Inspector General, Review of Medical Necessity for Ambulance Services, October 1992 

(A-01-91-00513). 

3 , Follow-Up to Review of Medical Necessity for Ambulance Services, June 1995 

(A-01-94-00528). 

Medicare Ambulance Services--Medical Necessity 5 OEI-09-95-00412 
suppliers within the same geographical areas.4 

Recent reports noted that (1) the current Medicare payment system “lacks common 

sense,”5 (2) Medicare ambulance costs and services are skyrocketing, and (3) while all 

States regulate ambulance services, less than half mandate levels of service and only one 

State requires advanced life support.6 The OIG continued to recommend that HCFA base 

reimbursement on the patient’s medical condition rather than the type of vehicle and 

personnel used. 

Proposed Changes for Medicare Ambulance Services 

The HCFA released a proposed regulation in June 1997 to revise the Medicare guidelines 

and reimbursement for ground ambulance services (air services were excluded). The 

proposed regulation would base reimbursement primarily on services that are medically 

necessary for the beneficiary's condition rather than the type of vehicle and personnel used. 

Several new provisions, such as requiring suppliers to obtain written physician certification 

for scheduled nonemergency ambulance transports, were included. 

After HCFA released the proposed regulation, President Clinton signed The Balanced 

Budget Act of 1997. The Act includes several provisions for ambulance services. Major 

provisions: 

< mandate that HCFA work with the industry to establish a negotiated fee schedule 

effective January 1, 2000; 

< restrict Medicare increases to the Consumer Price Index minus 1 percent for 3 

years; and 

< authorize three demonstration projects with local governments to study alternative 

reimbursement methods for ambulance services. 

In March 1998, some members of Congress were concerned that various sections of 

HCFA’s proposed regulation overlapped with ambulance payment issues in The Balanced 

Budget Act. They then urged HCFA to incorporate these sections into the negotiations. 

The HCFA will start negotiations with the ambulance industry and other affected parties 

before the end of 1998. 

4 , Ambulance Services for Medicare End-Stage Renal Disease Beneficiaries: Medical Necessity, 

August 1994 (OEI-03-90-02130) and Ambulance Services for Medicare End-Stage Renal Disease 

Beneficiaries: Payment Practices, March 1994 (OEI-03-90-02131). 

5 , Medicare Ambulance Payments, November 1997 (OEI-05-95-00300). 

6 , State Ambulance Policies and Services, February 1998 (OEI-09-95-00410). 

Medicare Ambulance Services--Medical Necessity 6 OEI-09-95-00412 
1

2

3

4

5

6

7

METHODOLOGY 

Targeted Sample Selection 

During initial data analysis, we examined a 1 percent sample of all Medicare ambulance 

claims paid under Part B between January and June 1996. We reviewed combined hospital, 

nursing home, and outpatient data for each beneficiary. We then: 

< divided the 1 percent sample into groups based on where the ambulance supplier 

transported the patient and when the service occurred, 

< reviewed some claims within each group for (a) consistency of the expected 

association between the transport and the explanatory claims and (b) correct 

coding, and 

< adjusted the placement of claims within each group, if necessary. 

The following table shows the breakdown of the 1 percent sample of Medicare ambulance 

claims for January through June 1996. The groups show the association between the 

transport and the patient outcome. The percents may not total 100.0 percent due to 

rounding. 

Grou 

p Description of Ambulance Service Frequency Percent of Services 

Allowed 

Amounts 

At beginning of inpatient stay 16,429 43.8 $ 4,621,716 

Included with emergency room visit 9,710 25.9 2,695,118 

At end of inpatient stay 5,545 14.8 1,154,362 

At end of skilled nursing stay 383 1.0 84,403 

At end of multiple-day outpatient claim 419 1.1 134,311 

Patients with end-stage renal disease 2,666 7.1 1,020,681 

Other claims not included above 2,368 6.3 724,437 

TOTAL 37,520 100.0 $ 10,435,028 

After reviewing a sample of claims in each group, we noted that one group (population size 

2,368 claims) was for ambulance transports that did not result in the expected hospital or 

nursing home admissions or emergency room care on the same date of service. We 

selected this group, hereafter called Group 7, for further review. We reviewed both Part A 

and Part B claims for this population. Group 7 claims usually were not associated with 

other significant services on the same date of service that may explain the medical necessity 

Medicare Ambulance Services--Medical Necessity 7 OEI-09-95-00412 
of the ambulance trip. For the first half of 1996, Medicare reimbursed the 1 percent 

population of suppliers in Group 7 approximately $724,437. If we assume that the last 6 

months mirror the first 6 months, we estimate that Medicare reimbursed suppliers in Group 

7 approximately $149.28 million for calendar year 1996. 

Medical Review 

We selected a simple random sample of 30 beneficiaries from Group 7 for medical review. 

We requested copies of ambulance trip reports and documentation submitted with 

ambulance claims. We then collected medical records for other services rendered on the 

same date as the transport, such as physicians’ records and nursing home records. When a 

patient used an ambulance within 1 week before and 1 week after the sampled transport, 

we requested additional records to document further the medical necessity for multiple 

transports. 

Post payment medical review staff at two Medicare carriers completed the medical review. 

We asked the medical reviewers to assess whether (1) the transport and associated services 

were medically necessary and (2) the level of service was appropriate to the patient’s 

condition. We originally intended to use the 30 cases as a medical probe sample. After 

completion of the medical review and analysis, we determined that we did not need a larger 

sample because the results of the 30-case sample were statistically valid. 

We used the results to: 

< determine the percent of medically unnecessary ambulance services,7 

< calculate the overpayment for medically unnecessary services in the sampled Group 

7, and 

< estimate the potential savings for all claims in Group 7 for calendar year 1996, 

assuming the last 6 months mirror the first 6 months of the year. 

Interviews with Ambulance Suppliers 

We interviewed ambulance suppliers whose medical records were included in the simple 

random sample. Respondents were national, municipal, and small family-owned suppliers. 

Using a structured discussion guide, we obtained data on their revenue mix of emergency, 

nonemergency, advanced life support, and basic life support services. Suppliers described 

how they document medical necessity on ambulance trip reports and Medicare claims. 

This report is part of a series on Medicare ambulance services prepared by the Office of 

7

See appendix A for the point estimate and confidence intervals for the proportion of medically 

unnecessary services. 

Medicare Ambulance Services--Medical Necessity 8 OEI-09-95-00412 
Inspector General. 

Medicare Ambulance Services--Medical Necessity 9 OEI-09-95-00412 
FINDINGS 

The following findings relate to the 6.3 percent of ambulance services in Group 7 only. 

Two-thirds of ambulance services in Group 7 were not 

medically necessary 

Most cases did not meet Medicare’s criteria for medical necessity 

In 20 of the 30 sampled cases, transportation by ambulance was unnecessary because other 

means of transportation would not have endangered the patient’s health. The 20 cases did 

not meet a major criterion for Medicare payment. Other medical records, especially from 

nursing homes and hospital outpatient departments, often disputed the patient’s bedridden 

status that was claimed in the ambulance report. The table on the following page shows 

the sample’s breakdown by service status (emergency or nonemergency) and level of 

service (basic or advanced life support).8 

8

Basic life support services are rendered by basic and intermediate emergency medical technicians, 

while the more intensive advanced life support services generally are rendered by paramedic emergency 

medical technicians. Though some suppliers may use different vehicles, the more important distinction 

between the levels of service is the personnel who staff the ambulance. 

Medicare Ambulance Services--Medical Necessity 10 OEI-09-95-00412 
Service Status 

and Level of Service 

Medically Necessary? 

Yes No 

Cases 

in Sample 

Percent 

of Cases 

Cases 

in Sample 

Percent 

of Cases 

Emergency 

Basic 

Life Support 3 10.0 2 6.7 

Advanced 

Life Support 4 13.3 4 13.3 

Nonemergency 

Basic 

Life Support 2 6.7 12 40.0 

Advanced 

Life Support 1 3.3 2 6.7 

Total 10 33.3 20 66.7 

We recognize that the 30-case sample is small, but with such a high percentage of 

medically unnecessary services, the sample size is sufficient to show that more than half of 

the services in this group are medically unnecessary at the 95 percent confidence level. 

(Refer to appendix A for details.) 

The 10 medically necessary cases were billed at the appropriate level of service. Medical 

reviewers noted that the emergency advanced life support cases involved unconscious and 

unresponsive patients or patients with chest pain. Services, such as oxygen and 

intravenous medications, were appropriate to the patients’ conditions and well-documented 

in the ambulance reports. Though the medical necessity was questionable for one case, the 

patient’s condition was severe enough for hospital admission within 1 week. 

Most unnecessary transports were for nonemergency services 

Though medical reviewers found medically unnecessary cases in each service status and 

level of service, about 70 percent were for nonemergency services. For example: 

< a patient was sitting unaided in a chair the day of and the day after the ambulance 

transport; 

< another patient was sitting in a wheelchair for a long period of time before the 

transport, and she refused to be assisted back to bed once the ambulance arrived; 

< guerney transport would have been appropriate for two patients; 

Medicare Ambulance Services--Medical Necessity 11 OEI-09-95-00412 
< a patient called for an ambulance himself because he wanted an injection to control 

his trembling after drinking alcohol for 12 hours; 

< one patient was transported to the doctor’s office for a follow-up appointment and 

then back to the nursing facility (a nonapproved Medicare transport); and 

< a pleasant and cooperative 92-year-old patient was ambulatory with a walker and 

minimal assistance from ambulance staff. 

Interviewed suppliers reported that they provide more nonemergency than emergency 

transports. They report that 60 to 93 percent of their transports are nonemergency while 7 

to 40 percent are emergency transports. They described that, aside from inter-facility 

transfers, their nonemergency transports include standby for special events such as high 

school sporting events, community fairs, holiday celebrations with fireworks, and music 

concerts. They also provide emergency transportation as backup for their community’s 

primary 9-1-1 supplier. 

Suppliers claim that many medically unnecessary transports stem from lack of 

adequate information prior to pickup 

Some ambulance suppliers expressed frustration with the lack of complete and valid 

medical data on incoming calls, especially for nonemergency transports. Ambulance staff 

often arrive and find that some patients, particularly in nursing homes, do not meet 

Medicare’s criteria for ambulance transportation. Some nonemergency ambulance 

transports are completed for the convenience of the nursing home staff, especially for 

difficult patients. For example, one patient was ambulatory with assistance from a nursing 

aide or a wheelchair. However, the staff called an ambulance because the patient was 

noncommunicative (which was a normal situation for this patient) and exhibited obsessivecompulsive tendencies. 

Suppliers often will transport patients with questionable medical necessity due to local 

medical standards and potential liability. They prefer to err on the side of being overly 

cautious rather than denying transport. One supplier commented, “We make a lot of runs 

to take blood pressure and put patients back in their beds who have fallen out. You never 

know when something will be serious.” 

Medicare allows at least $104 million each year for medically 

unnecessary Group 7 ambulance services 

Medicare allowed approximately $9,479 for the 30-case sample, of which $6,606 (or 

70 percent) was for medically unnecessary ambulance services. Applying the same 70 

percent rate to all Medicare ambulance services for the first 6 months of 1996, Medicare 

allowed approximately $52.1 million for the medically unnecessary services in Group 7. If, 

as we believe, the last 6 months of claims in Group 7 mirror the first 6 months of claims, 

Medicare Ambulance Services--Medical Necessity 12 OEI-09-95-00412 
then we estimate that Medicare allows as much as $104 million each year for medically 

unnecessary ambulance services.9 (See appendix B for the explanation of the cost estimate 

for the allowed amounts of medically unnecessary services in Group 7.) 

9

This is a non-statistical estimate which multiplies the full-year 1996 Medicare allowance for 

Group 7 of $149.28 million by the proportion of medically unnecessary services which is 0.7. 

Medicare Ambulance Services--Medical Necessity 13 OEI-09-95-00412 
RECOMMENDATION 

The HCFA should develop a prepayment edit to verify the 

medical necessity of ambulance claims that are not 

associated with hospital or nursing home admissions or 

emergency room care 

The OIG recommends that HCFA screen incoming ambulance claims by matching them 

with hospital, nursing facility, emergency room, and physician claims. This could be 

accomplished by means of a prepayment edit in the Common Working File database. We 

expect that 90 percent of ambulance claims would pass through this screen successfully and 

would continue toward payment. Most of the remaining claims would consist of the Group 

7 claims that we described in this report. Carriers would conduct a manual review of the 

remaining claims to determine whether they should be paid. These claims also could be 

analyzed for further program vulnerabilities such as fraud or abuse by individual ambulance 

suppliers. 

The OIG is aware that HCFA plans to work with the ambulance industry and other affected 

parties to establish a negotiated fee schedule effective January 1, 2000. This 

recommendation would provide a solution for one group of ambulance services until HCFA 

and the industry can better address issues of medical necessity and consistent definitions. 

AGENCY COMMENTS 

We received comments on the draft report from HCFA. The HCFA concurred with the 

need for medical review of ambulance claims that are not associated with hospital or 

nursing home admissions or emergency room care. However, due to HCFA’s efforts to 

ensure that Medicare payment systems are renovated before January 1, 2000, the agency 

cannot divert resources to implement a prepayment edit prior to the implementation of 

ambulance payment policies mandated by The Balanced Budget Act of 1997. In the 

interim, HCFA will ask its Medicare carriers to review ambulance data and decide whether 

edits accompanied by local medical review policies or focused medical review of potential 

aberrant suppliers are appropriate. 

The full text of HCFA’s comments appears in appendix C. 

OFFICE OF INSPECTOR GENERAL RESPONSE 

The Office of Inspector General fully understands that HCFA is undertaking a massive 

Medicare Ambulance Services--Medical Necessity 14 OEI-09-95-00412 
effort to ensure that all health care payment systems are fully and correctly operational 

before January 1, 2000. We suggest that HCFA take whatever action it can now consistent 

with available resources and also include the issue identified in this report on their agenda 

during negotiations on the ambulance fee schedule. 

We also made changes based on HCFA’s technical comments. 

Medicare Ambulance Services--Medical Necessity 15 OEI-09-95-00412 
APPENDIX A 

Proportion of Medically Unnecessary Services

To calculate the proportion of services that were medically unnecessary, we simply divided 

the number of services in our sample (30 services) by the number that the medical 

reviewers determined were unnecessary (20 services). The resulting estimate and 95 

percent confidence interval are displayed below. 

Point estimate 

95 percent confidence interval 

Lower Upper 

0.67 0.50 0.84 

Ambulances--Medical Necessity 16 OEI-09-95-00412 
APPENDIX B 

Cost Estimate for Allowed Amounts 

of Medically Unnecessary Services in Group 7 

In this report, we used the more conservative of two methods for calculating the amount 

that Medicare allowed for medically unnecessary services in our target population. These 

methods, which are described in more detail below, were (1) projection of the mean and 

(2) ratio estimation. Both methods yielded approximately the same estimate. We used the 

ratio estimate method in this report because it represented the more conservative (smaller) 

allowed amount. From this ratio estimate, we then calculated a nonstatistical estimate for 

all twelve months of 1996. 

Projection of the Mean 

For this method, we multiplied the sample mean medically unnecessary amount ($220 per 

service) by the number of services in our target population (236,800 services)10 to estimate 

the amount that Medicare paid for medically unnecessary services provided to our target 

population during January through June 1996. The resulting estimate and 95 percent 

confidence interval are displayed below. 

Point estimate 

95 percent confidence interval 

Lower Upper 

$52.1 million $36.5 million $67.8 million 

Ratio Estimation 

For this method, we calculated the ratio of (1) the medically unnecessary allowed amount 

for January through June 1996 ($52.1 million, as calculated above) to (2) the total allowed 

amount for the same time period ($74.8 million, as projected from our sample). The 

resulting ratio and 95 percent confidence interval are displayed on the next page. 

10For the calculations in this appendix, we treated 1 percent-sample amounts, multiplied by 100, as if 

they represented population amounts. Because the one-percent sample was so large, this approximation 

would not have changed the 95 percent confidence intervals that we report in this appendix. 

Ambulances--Medical Necessity 17 OEI-09-95-00412 
APPENDIX B 

Point Estimate 

95 percent confidence interval 

Lower Upper 

0.697 0.5213 0.8725 

We then multiplied this ratio by $72.44 million, which represents the actual allowed amount 

for the population that we selected our sample from.11 The table below shows the resulting 

estimate and 95 percent confidence interval. 

Point Estimate 

95 percent confidence interval 

Lower Upper 

$50.5 million $37.8 million $63.2 million 

We then calculated a nonstatistical estimate for the amount that Medicare allowed for 

medically unnecessary services in our target population for all twelve months of 1996. We 

multiplied the ratio calculated earlier (0.697) by the amount that Medicare allowed for our 

target population during all twelve months of 1996 ($149.28 million) to arrive at an 

estimated $104.0 million for medically unnecessary services. 

11The $74.8 million is a projection from our sample, while the $72.44 million is the actual amount for 

the population from which that the sample was selected. 

Ambulances--Medical Necessity 18 OEI-09-95-00412 
APPENDIX C 

Agency Comments 

The full text of comments received from the Health Care Financing Administration follows. 

Ambulances--Medical Necessity 19 OEI-09-95-00412 
APPENDIX C 

Ambulances--Medical Necessity 20 OEI-09-95-00412 
APPENDIX C 

Ambulances--Medical Necessity 21 OEI-09-95-00412