a

GAO

United States General Accounting Office

Report to Congressional Committees

September 2003 AMBULANCE 

SERVICES

Medicare Payments 

Can Be Better 

Targeted to Trips in 

Less Densely 

Populated Rural Areas

GAO-03-986
Trip volume is the key factor affecting differences in ambulance providers’ 

cost per trip. Ambulance providers’ total costs primarily reflect readiness—

the need to have an ambulance and crew available when emergency calls are 

received. Readiness-related costs are fixed, meaning that they do not 

increase with the number of trips provided, as long as a provider has excess 

capacity. As a result, providers that make fewer trips tend to have a higher 

cost per trip than those that make more trips. We also found that the length 

of providers’ trips had little effect on their cost per trip. 

The modest variation in Medicare payments to ambulance providers that 

serve rural counties probably does not fully reflect their differences in costs 

because the key factor affecting provider costs—the number of trips—varies 

widely across rural counties. In 2001, the least densely populated quarter of 

rural counties averaged far fewer trips than the most densely populated 

quarter. This suggests that the cost per trip is likely higher for providers 

serving the least populated rural counties. On average ambulance providers 

are paid somewhat more for trips in the least densely populated rural 

counties than for those in other rural counties. However, those payment 

differences are dwarfed by the difference in trip volume. Because trip 

volume is a strong indicator of costs, the Medicare payment differences 

across rural counties likely do not fully reflect differences in providers’ cost 

per trip. 

In implementing the fee schedule, CMS adjusted the mileage rate for rural 

trips to account for the higher cost per trip of providers serving rural areas. 

However, trip volume is a better indicator of providers’ cost per trip than is 

trip length. Thus, adjusting the base rates for rural trips—the portion of 

Medicare’s payment that is designed to pay for providers’ fixed costs—is a 

more appropriate way of accounting for rural low-volume providers’ higher 

cost per trip than adjusting the mileage rate. 

The Centers for Medicare & 

Medicaid Services (CMS) recently 

implemented a Medicare 

ambulance fee schedule in which 

providers are paid a base payment 

per trip plus a mileage payment. 

An adjustment is made to the 

mileage rate for rural trips to 

account for higher costs. CMS has 

stated that this rural adjustment 

may not sufficiently target 

providers serving sparsely 

populated rural areas. The 

Medicare, Medicaid, and SCHIP 

Benefits Improvement and 

Protection Act of 2000 (BIPA) 

directed GAO to examine rural 

ambulance costs. GAO identified 

factors that affect ambulance costs 

per trip, examined how these 

factors varied across geographic 

areas, and analyzed whether 

Medicare payments account for 

geographic cost differences. GAO 

used survey data on ambulance 

providers and Medicare claims 

data. 

GAO recommends that CMS better 

target the rural adjustment to trips 

in less densely populated rural 

counties by adjusting the base rates 

for ground ambulance services 

provided in those counties. CMS 

stated that the report will be useful 

as the agency develops a proposed 

rule to address appropriate 

payment for ambulance services 

furnished in rural, low-volume 

areas. 

www.gao.gov/cgi-bin/getrpt?GAO-03-986.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Laura A. 

Dummit, (202) 512-7114. 

Highlights of GAO-03-986, a report to 

congressional committees 

September 2003

AMBULANCE SERVICES 

Medicare Payments Can Be Better 

Targeted to Trips in Less Densely 

Populated Rural Areas 
Page i GAO-03-986 Rural Ambulance Services

Contents

Letter 1

Results in Brief 3

Background 4

Ambulance Providers’ Trip Volume Is the Main Factor Affecting 

Their Cost Per Trip 10

Medicare Ambulance Payments for Trips in Rural Counties Are 

Unlikely to Fully Reflect Differences in Providers’ Cost Per Trip 

14

Conclusions 20

Recommendation for Executive Action 20

Agency and External Reviewer Comments and Our Evaluation 20

Appendixes

Appendix I: Data and Methods 25

Appendix II: Characteristics of Rural Counties Grouped by Medicare 

Population Density 30

Appendix III: Comments from the Centers for Medicare & Medicaid 

Services 34

Appendix IV: GAO Contacts and Staff Acknowledgments 35

GAO Contacts 35

Acknowledgments 35

Related GAO Products 36

Tables Table 1: Ground Ambulance Services Covered by Medicare’s 

Ambulance Fee Schedule 7

Table 2: Ambulance Providers’ Cost Components, 1998 10

Table 3: Relative Cost Per Trip for Full Cost Ambulance Providers, 

1998 13

Table 4: Characteristics of Urban and Rural Counties, 2001 15

Table 5: Average Number of Medicare Ambulance Trips, Population 

and Land Area, by Counties Grouped by Population 

Density, 2001 16

Table 6: Characteristics of Rural Counties and Their Ambulance 

Providers, by Counties Grouped by Population Density, 

2001 18
Contents

Page ii GAO-03-986 Rural Ambulance Services

Table 7: Average Number of Medicare Ambulance Trips, Trip 

Length, and Estimates of Average Medicare Paymenta

 per 

Ambulance Trip, by Rural Counties Grouped by Population 

Density 19

Table 8: Full Cost Ambulance Providers by Average Number of 

Trips Per Day, 1998 26

Table 9: Full Cost Ambulance Providers by Average Number of 

Trips Per Year, 1998 26

Table 10: Rural Counties Grouped by Total Population Density and 

by Medicare Population Density, 2001 30

Table 11: Average Number of Medicare Ambulance Trips, Population 

and Land Area, by Counties Grouped by Medicare 

Population Density, 2001 31

Table 12: Characteristics of Rural Counties and Their Ambulance 

Providers, by Counties Grouped by Medicare Population 

Density, 2001 32

Table 13: Average Number of Medicare Ambulance Trips, Trip 

Length, and Estimates of Average Medicare Paymenta per 

Ambulance Trip, by Rural Counties Grouped by Medicare 

Population Density 33

Figure Figure 1: The Relationship between Cost Per Trip and Total 

Ambulance Trip Volume for Full Cost Providers With 

5,000 or Fewer Annual Trips, 1998 12
Contents

Page iii GAO-03-986 Rural Ambulance Services

Abbreviations

ALS advanced life support

ARF Area Resource File

BBA Balanced Budget Act of 1997

BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and 

Protection Act of 2000 

BLS basic life support 

CMS Centers for Medicare & Medicaid Services 

EMT emergency medical technician

HCFA Health Care Financing Administration

HHS Department of Health and Human Services

HRSA Health Resources and Services Administration

MSA metropolitan statistical area

OMB Office of Management and Budget

RUCA rural-urban commuting area

RUCC rural-urban continuum code

SCT specialty care transport

UIC urban influence code

Y2K Year 2000 

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. It may be reproduced and distributed in its entirety without further 

permission from GAO. However, because this work may contain copyrighted images or 

other material, permission from the copyright holder may be necessary if you wish to 

reproduce this material separately.
Page 1 GAO-03-986 Rural Ambulance Services

United States General Accounting Office

Washington, D.C. 20548

A

September 19, 2003 Letr

Congressional Committees

In 2001, Medicare paid over $2 billion for over 10 million ambulance trips 

for its 40 million elderly and disabled beneficiaries. Ambulance providers1

that deliver Medicare-covered services range from small community, onevehicle operations staffed entirely by volunteers to large privately owned 

firms or government agencies that operate many vehicles and rely on paid 

staff. Medicare covers medically necessary ambulance services when 

other means of transportation, such as a wheelchair van or a taxi, are 

inadvisable, given the beneficiary’s medical condition at the time. 

Medically necessary ambulance trips include both emergency care, such as 

responses to 911 calls, and nonemergency care, such as transfers from one 

hospital to another. 

In 2002, the Centers for Medicare & Medicaid Services (CMS) implemented 

a congressionally mandated ambulance fee schedule that substantially 

changed the way Medicare pays for ambulance services. Under the fee 

schedule, providers receive a base payment per trip, which varies by the 

kind of service provided, and a mileage payment, which varies by the length 

of the trip. A rural adjustment, which is applied to the mileage payment, 

increases the payment for trips that begin in rural areas, generally defined 

as areas outside of metropolitan areas. CMS has stated that this approach 

to a rural adjustment was the only one feasible at the time the agency was 

developing the fee schedule. However, as we have stated before2

 and as 

CMS has acknowledged, this adjustment may not sufficiently target the 

increased payments to providers serving sparsely populated rural areas. 

These providers may incur higher per trip costs than other providers 

because of their low volume of ambulance trips. We have recommended 

that CMS develop a more refined rural adjustment, and CMS is exploring 

alternative approaches to adjusting payments for rural ambulance trips. 

1

The Centers for Medicare & Medicaid Services uses the term “provider” to refer to 

institutional providers of ambulance services, including hospitals and skilled nursing 

facilities, and uses the term “supplier” to refer to freestanding ambulance providers—that is, 

those not associated with a hospital, skilled nursing facility, or other facility. In this report, 

unless otherwise indicated, we use the term “provider” to refer to all organizations that 

provide Medicare ground ambulance services—both institutional and freestanding.

2

U.S. General Accounting Office, Rural Ambulances: Medicare Fee Schedule Payments 

Could Be Better Targeted, HEHS-00-115 (Washington, D.C.: July 17, 2000). 
Page 2 GAO-03-986 Rural Ambulance Services

Developing a Medicare payment method for ambulance services that 

maintains beneficiary access to these services has been complicated by the 

wide variation in ambulance providers, their volume of trips, and the areas 

they serve. For example, ambulance providers in rural areas where there 

are few people are likely to be idle more often than providers in more 

densely populated areas, and may need to earn more per trip to maintain 

ambulances and crews. As a result, payments that are appropriate for 

providers serving densely populated urban areas may not be appropriate 

for those serving less densely populated rural areas. Recognizing cost 

differences across providers in the payment method is important because 

many providers rely on Medicare revenue and their continuing availability 

is critical to ensuring beneficiaries’ access to services.

The Medicare, Medicaid, and SCHIP Benefits Improvement and Protection 

Act of 2000 (BIPA) directed us to examine the cost of ambulance services 

in rural areas.3

 This report (1) identifies the factors that account for 

differences in ambulance providers’ costs per trip, and (2) analyzes the 

geographic differences, particularly among rural areas, in the factors 

affecting ambulance providers’ costs and whether Medicare’s payments for 

ambulance services under the fee schedule account for geographic 

differences in costs. 

Our analysis focused on ground ambulance services and did not include air 

ambulance services, which account for less than 1 percent of annual 

Medicare-covered ambulance trips. To identify the factors that influence 

ambulance providers’ costs, we used data from the 1999 National Survey of 

Ambulance Providers, conducted by the Project HOPE Center for Health 

Affairs.4

 This survey, the sole national data source on the costs of providing 

ambulance services, obtained responses from a nationally representative 

sample of 421 ground ambulance providers that participated in Medicare. 

To determine how the factors affecting ambulance providers’ costs vary 

geographically, we used data from the 2001 Area Resource File (ARF), 

which is maintained by the Health Resources and Services Administration 

(HRSA), to examine the characteristics of urban and rural counties, such as 

their population and land area. In addition, we used Medicare claims data 

for 2001 to determine the number and length of Medicare-covered 

3

Pub. L. No. 106-554, Appendix F, §221(b), 114 Stat. 2763A-463, 486-87 (2000).

4

The Project HOPE Center for Health Affairs is a nonprofit health policy research 

organization. 
Page 3 GAO-03-986 Rural Ambulance Services

ambulance trips delivered in urban and rural counties, and the number of 

providers that served those areas.5

 We also used these data to estimate 

Medicare’s average payments for ambulance trips under the fee schedule. 

Finally, we interviewed experts from eight industry and professional 

organizations as well as several ambulance providers. These data were 

adequate for addressing the issues in this report. Where appropriate, we 

examined the data for implausible values and tested the data for internal 

consistency. For more details on our data and methods, see appendix I. 

We performed our work from November 2001 through September 2003 in 

accordance with generally accepted government auditing standards.

Results in Brief Ambulance trip volume is the key factor affecting differences in ambulance 

providers’ average cost per trip. The majority of ambulance providers’ total 

costs are related to their need to have ambulances and crew available when 

an ambulance is required. As long as a provider has excess capacity, these 

readiness-related costs are fixed and do not increase with the number of 

trips. Consequently, providers that make fewer trips tend to have a higher 

cost per trip than those that make many trips. For example, providers 

surveyed by Project HOPE that averaged 3 or fewer trips per day had a cost 

per trip that was nearly twice as high as the average cost per trip among 

providers that averaged 9 to 12 trips per day. 

The modest variation in Medicare payments to ambulance providers that 

serve rural counties probably does not fully reflect their differences in cost 

per trip because the key factor affecting provider costs—the number of 

trips—varies widely across rural counties. In 2001, trip volume was much 

lower in the least densely populated quarter of rural counties than in the 

most densely populated quarter. Medicare per-trip payments are somewhat 

higher on average for trips provided in the least densely populated rural 

counties than for trips in other rural counties. However, the modestly 

higher payments are unlikely to fully account for the higher cost per trip of 

low-volume providers, which are most likely to serve the least densely 

populated rural counties. The Medicare payment differences are due to the 

greater length and the resulting higher mileage payments for trips in the 

least densely populated rural counties. The cost differences, however, are 

5

Our analysis focused on ambulance services paid under Medicare’s ambulance fee schedule 

and therefore excluded services paid for by Medicare managed care organizations. Further, 

our analysis did not include any ambulance services for Medicare beneficiaries that were 

not billed to Medicare.
Page 4 GAO-03-986 Rural Ambulance Services

due to a higher fixed cost per trip, for which Medicare’s base rates are 

intended to compensate. 

We recommend that the Administrator of CMS better target the Medicare 

rural payment adjustment to trips provided in rural counties with 

particularly low population density by adjusting the base rates, rather than 

the mileage rate, for ground ambulance services provided in those 

counties.

In written comments on a draft of this report, CMS stated that the report 

will be useful as the agency develops a proposed rule to address 

appropriate payment for ambulance services furnished in rural, lowvolume areas. The eight ambulance associations that commented on the 

draft report generally agreed with our findings and recommendation. 

However, four of the associations raised concerns about using counties to 

identify rural areas when targeting rural payments.

Background In recent years, the ambulance industry has experienced several changes. 

In 2002, CMS implemented a new Medicare fee schedule for ambulance 

services, replacing the previous system that paid providers on a reasonable 

cost or reasonable charge basis. In addition, according to industry experts, 

many volunteer providers have reported greater difficulty maintaining 

adequate staff. Rural providers in particular have begun to rely more 

heavily on paid staff. Experts also told us that while many rural volunteer 

providers have not billed Medicare—or have billed nominal amounts—

more of these providers have begun billing for services. 

Characteristics of Medicare

Ambulance Providers

Recently, both the number of ambulance providers that bill Medicare and 

the number of ambulance trips paid for by Medicare have increased. From 

1998 to 2001, the number of ambulance providers that billed Medicare 

increased from just under 9,300 to over 9,700, and the total number of trips 

paid for by Medicare rose from roughly 8 million to over 10 million. 

Medicare ambulance providers include a wide variety of provider types. In 

1998, about 8,200 freestanding providers and 1,100 hospitals and other 

institution-based providers billed Medicare for ground trips. Freestanding 

providers are a diverse group, including private for-profit, not-for-profit, 

and public entities. They range from small community one-vehicle 

operations to large fire and rescue departments serving major metropolitan 
Page 5 GAO-03-986 Rural Ambulance Services

areas. They include operations staffed almost entirely by community 

volunteers, public ventures that include a mix of volunteer and paid 

professional staff, and private firms that use only paid staff. In 1998, 

volunteer staff accounted for 80 percent or more of full-time equivalent 

personnel for over one-third of Medicare ambulance providers.6 About 

one-third of freestanding Medicare ambulance providers are managed by 

local fire departments. 

Medicare ambulance providers also vary in the types of services they 

provide. Some deliver only basic life support (BLS) while others deliver 

advanced life support (ALS) services.7

 In addition to responding to 

emergencies, ambulance providers may provide nonemergency 

transportation, such as transfers from one hospital to another. For some 

ambulance providers, nonemergency trips account for a significant share 

of their trips; for others, such trips account for few or none of their trips. 

Some ambulance providers are the sole providers serving their 

communities, while others operate in areas with multiple ambulance 

providers.

Medicare ambulance providers also differ in the percentage of their trips 

covered by Medicare and in their reliance on Medicare revenue. In 1998, 

Medicare beneficiaries on average accounted for about half of the total 

trips by providers that billed Medicare. However, Medicare beneficiaries 

accounted for less than one-quarter of trips for 13 percent of Medicare 

providers, and accounted for over 80 percent of annual trips for 9 percent 

of providers. On average, Medicare revenue accounted for 41 percent of 

providers’ cash receipts.8

 Other sources of ambulance providers’ revenue 

include local tax subsidies and payments from private insurers, Medicaid, 

and individuals. 

Requirements affecting ambulance providers vary by location. States and 

localities may require certain training for ambulance staff, establish 

maximum payment rates that licensed providers are allowed to charge, or 

specify response times through contracts with providers. Some 

6

See Penny E. Mohr and others, Findings from the 1999 National Survey of Ambulance 

Providers (Bethesda, Md.: 2000), p.13. 

7

ALS services are provided by personnel with advanced training and involve assessments by 

them or the provision of advanced interventions or procedures. 

8

See Mohr and others, pp. 19-20. 
Page 6 GAO-03-986 Rural Ambulance Services

jurisdictions—such as those that provide financial support to ambulance 

providers—prohibit providers from billing for services. In addition, some 

communities require all ambulance providers to maintain ALS capacity on 

all vehicles. 

Medicare Payment for 

Ambulance Services

CMS recently implemented a Medicare fee schedule that changed the way 

Medicare pays for ambulance services.9

 The fee schedule, mandated by the 

Balanced Budget Act of 1997 (BBA), recognizes seven levels of ground 

ambulance services, ranging from BLS services to specialty care transports. 

(See table 1.) Under the previous payment system, Medicare paid 

institutional providers on a reasonable cost basis and freestanding 

providers on a reasonable charge basis. This approach led to wide 

differences in payments across providers for the same services. The new 

fee schedule standardized payment rates across provider types by applying 

the same payment rates to both institutional and freestanding providers.10 

The fee schedule’s payment rates are updated annually. Medicare’s 

payment is based on the lesser of the actual charge or the applicable fee 

schedule amount. 

9

The fee schedule took effect April 1, 2002. The BBA had directed that the fee schedule be 

effective for services furnished on or after January 1, 2000. CMS stated that several 

factors—other statutory obligations, the scope of systems changes required to implement 

the fee schedule, and the need to ensure that its computer systems were compliant with 

Year 2000 (Y2K) requirements—delayed implementation of the fee schedule. 67 Fed. Reg. 

9100. A federal district court order, issued on January 16, 2003, required the Department of 

Health and Human Services (HHS) to adopt a fee schedule for freestanding providers for the 

period of January 1, 2000, through March 31, 2002. Lifestar Amb. Serv., Inc. v. U.S., 211 

F.R.D. 688 (M.D. Ga. 2003). On April 16, 2003, CMS published a notice in the Federal 

Register stating that Medicare’s fee schedule would apply to ambulance trips provided by 

freestanding providers during that period. 68 Fed. Reg. 18654. Payments would be adjusted 

retroactively. HHS has appealed the court’s decision.

10Several other changes to the way ambulance services are paid for were introduced with 

the fee schedule. For example, in accordance with the BBA, all providers must accept the 

Medicare payment amount as full payment for covered services and may only collect 

allowed cost-sharing amounts from beneficiaries. In addition, Medicare will pay a BLS rate 

for services furnished at the BLS level even when an ALS vehicle is used. This latter 

provision will be phased in over several years. As specified by BIPA, ambulance providers 

that are critical access hospitals or entities owned and operated by them are exempt from 

the fee schedule and paid on a reasonable cost basis if there is no other ambulance provider 

within 35 miles. Critical access hospitals are small, isolated hospitals that have an annual 

average length of stay of 4 days or less. 
Page 7 GAO-03-986 Rural Ambulance Services

Table 1: Ground Ambulance Services Covered by Medicare’s Ambulance Fee Schedule

Source: CMS.

Note: GAO summary based on information in CMS’s final rule as published in the Federal Register, a 

subsequent program memorandum regarding definitions of ambulance services, and the ambulance 

fee schedule public use file for calendar year 2003. See 67 Fed. Reg. 9100, CMS’s Program 

Memorandum AB-02-130 (Sept. 27, 2002).

a

This is the base rate for each level of service prior to the geographic adjustment for differences in 

wages across areas.

b

An ALS assessment is an assessment performed by an ALS crew as part of an emergency response 

that was necessary because the patient’s reported condition at the time of dispatch was such that only 

an ALS crew was qualified to perform the assessment. An ALS assessment does not necessarily 

result in a determination that the patient requires an ALS level of service. An ALS intervention is a 

procedure that is, in accordance with state and local laws, beyond the scope of practice of an EMTBasic.

Level of ambulance 

service Definition Staffing requirements Base rate (2003)a

Basic life support 

(BLS)

Transportation by ambulance and the 

provision of medically necessary supplies and 

services, including the provision of BLS 

ambulance services as defined by the state. 

The ambulance must be staffed by an 

individual who is qualified in 

accordance with state and local laws 

as an emergency medical technicianbasic (EMT-Basic). 

$172.42

BLS-emergency BLS level of service provided in immediate 

response to a 911 call or the equivalent. 

Same as BLS $275.87

Advanced life support, 

level 1 (ALS1)

Transportation by ambulance and the 

provision of medically necessary supplies and 

services, including an ALS assessment by 

ALS personnel or the provision of at least one 

ALS intervention.b

ALS personnel are individuals trained 

to the level of the emergency medical 

technician-intermediate (EMTIntermediate) or EMT-Paramedic.c

$206.90

ALS1-emergency ALS level of service provided in immediate 

response to a 911 call or the equivalent.

Same as ALS1 $327.60

ALS2 Transportation by ambulance and the 

provision of medically necessary supplies and 

services, including (1) at least three separate 

administrations of one or more medications by 

intravenous push/bolus or by continuous 

infusion,d

 or (2) the provision of at least one of 

seven ALS2 procedures.e

Same as ALS1 $474.16

Paramedic ALS 

intercept

EMT-Paramedic services furnished by a 

provider that does not furnish the ground 

ambulance transport, provided the services 

meet certain requirements.f

EMT-Paramedic $301.74

Specialty care 

transport (SCT)

Hospital-to-hospital transportation of a 

critically injured or ill patient, including the 

provision of medically necessary supplies and 

services, at a level of service beyond the 

scope of the EMT-Paramedic. 

SCT is necessary when a patient’s 

condition requires ongoing care that 

must be furnished by one or more 

health professionals in an appropriate 

specialty area, such as nursing or 

respiratory care, or a paramedic with 

additional training.

$560.37
Page 8 GAO-03-986 Rural Ambulance Services

c

An EMT-Intermediate is an individual who is qualified, in accordance with state and local laws, as an 

EMT-Basic and who is also certified, in accordance with those laws, to perform essential advanced 

techniques and to administer a limited number of medications. An EMT-Paramedic is an individual who 

has the qualifications of an EMT-Intermediate and, in accordance with state and local laws, has 

enhanced skills that include being able to perform additional interventions and administer additional 

medications.

d

This excludes certain solutions.

e

These include chest decompression, cardiac pacing, surgical airway, and other procedures.

f

Paramedic ALS intercept services are most often furnished for an emergency ambulance trip in which 

a local volunteer ambulance that can furnish only BLS services is dispatched to transport a beneficiary. 

If the beneficiary needs ALS services, another provider dispatches a paramedic to meet the BLS 

ambulance at the scene or enroute to the hospital. The ALS paramedics then provide ALS services for 

the beneficiary. In general, Medicare payment may be made only to the provider furnishing the trip. 

However, the BBA provided that payments also could be made for the ALS provider under limited 

circumstances. CMS has stated that New York is the only state in which providers meet the statutory 

requirements for Medicare payment.

For most ambulance services, the fee schedule payment is the sum of a 

base payment and a payment for mileage.11

• The base payment for a trip, which is intended to pay for fixed costs 

such as staff and equipment, reflects both a base rate and a geographic 

modifier. The base rate varies by the level of ambulance service 

provided. The geographic modifier, which is applied to 70 percent of the 

base rate, is intended to account for wage differences across areas.12 

• The mileage payment reflects both the length of a trip and the per-mile 

payment rate. For trips in which the beneficiary is picked up in an 

urban area, the per-mile rate is $5.53. Because of the fee schedule’s rural 

adjustment, the per-mile rate for rural trips is 150 percent of the urban 

mileage rate for each of the first 17 miles ($8.30) and 125 percent of the 

urban mileage rate for miles 18 through 50 ($6.91).13 The urban mileage 

rate applies to every mile over 50 miles. The mileage payment applies 

11For paramedic ALS intercept services, there is no separate payment for mileage. 

12The modifier is the same as that applied to the practice expense component of Medicare’s 

physician fee schedule.

13The mileage rate increase for the first 17 miles was not mandated by law, but was specified 

in CMS’s final rule. The increase for miles 18 through 50 is a temporary increase mandated 

by law. BIPA required that, for miles 18 through 50 of a rural trip, the mileage rate should be 

increased by at least half as much as the mileage rate increase established for the first 17 

miles of a rural trip. BIPA stated that this increase would apply to ground ambulance 

services provided on or after July 1, 2001, and before January 1, 2004. Pub. L. No. 106-554, 

§221, 114 Stat. 2763A-463, 486. 
Page 9 GAO-03-986 Rural Ambulance Services

only to “loaded miles”—the miles the beneficiary is transported by 

ambulance. 

Under the fee schedule, rural areas are defined as areas outside of 

metropolitan statistical areas (MSA) and New England County 

Metropolitan Areas, as well as parts of MSAs that are identified as rural by 

the Goldsmith modification.14 MSAs are groups of counties containing a 

core of at least 50,000 people, together with adjacent areas that have a high 

degree of economic and social integration with that core.15 The Goldsmith 

modification identifies small towns and rural areas within large 

metropolitan counties that are isolated from central areas by distance or 

other features, such as mountains. About one-quarter of the roughly 3,100 

counties in the United States are in MSAs, and about 75 of those counties 

have areas that are identified as rural under the Goldsmith modification. 

The ambulance fee schedule will be phased in over several years. During 

this period, payments will be based in part on the fee schedule’s servicespecific payment rates and in part on the amounts that Medicare would 

have paid under the prior payment system. The proportion of the payment 

based on the fee schedule will increase each year until 2006, when provider 

payments will be based entirely on the fee schedule.16 In 2003, payments 

are based on 40 percent of the fee schedule payment and 60 percent of the 

rates under the prior system.17 

14CMS has stated that it could not easily adopt and implement other methods for recognizing 

geographic differences in population density within the constraints necessary to implement 

the fee schedule in a timely manner. 67 Fed. Reg. 9100.

15CMS currently uses the MSA definitions established by the Office of Management and 

Budget (OMB) and in effect prior to June 6, 2003, when OMB announced revised definitions 

based on the 2000 census. 

16Medicare payment for ambulance services is based on the lesser of the actual charge or the 

applicable fee schedule amount. During the transition period, the applicable fee schedule 

amount is a blended payment, not the fee schedule payment. 

17In response to the federal district court order that required HHS to adopt a fee schedule for 

freestanding providers for the period of January 1, 2000, to March 31, 2002, CMS issued a 

notice in the Federal Register that specified blended payments applicable to 2000, 2001, and 

early 2002. 68 Fed. Reg. 18654-55. 
Page 10 GAO-03-986 Rural Ambulance Services

Ambulance Providers’ 

Trip Volume Is the 

Main Factor Affecting 

Their Cost Per Trip 

Trip volume is the major determinant of differences across providers in the 

average cost per trip. Ambulance providers’ total costs primarily reflect 

readiness—having an ambulance and crew available when emergency calls 

are received. These readiness-related costs are fixed costs, meaning that 

they do not increase with the number of trips provided, as long as the 

provider has the excess capacity to make additional trips. Consequently, 

providers that can spread these fixed costs across more trips have a lower 

average cost per trip than providers that make fewer trips. 

Providers’ Total Costs Are 

Predominantly Readiness 

Related, and Do Not Vary 

With Trip Volume 

The majority of ambulance providers’ total costs are related to readiness—

the need to have an ambulance and crew available when emergency calls 

are received. Readiness-related costs include costs of labor, vehicles, 

building space, and administration, as well as the cost of any back-up 

vehicles and crew, which constitute a reserve that permits responses to 

multiple simultaneous calls as well as scheduled maintenance on other 

vehicles. (See table 2.) Readiness-related costs are fixed, meaning that 

they do not vary with the number of trips a provider makes, as long as the 

provider has excess capacity. For example, total vehicle costs do not 

increase significantly when a provider makes more trips. Likewise, 

building and administrative costs are largely unaffected by trip volume. 

However, if a provider were to add another ambulance and crew to respond 

to higher volume, its fixed costs would rise substantially. 

Table 2: Ambulance Providers’ Cost Components, 1998

Source: Project HOPE.

Note: GAO analysis of data from Project HOPE’s National Survey of Ambulance Providers. Fuel costs 

are included in the vehicle and equipment costs category. These data are for full cost providers. Those 

that did not report costs for all five components were excluded. Full cost providers are defined as 

those that have 80 percent or more of their staff comprised of paid employees rather than volunteers, 

and that pay for 80 percent or more of their garage and office space. These data are for the fiscal year 

preceding the survey, which for most providers included 6 months or more of calendar year 1998. Cost 

component categories do not add to 100 percent due to rounding.

Cost component Percentage of total costs

Labor costs 65

Administrative costs 14

Vehicle and equipment costs 11

Building costs 6

Supply costs 3

Total costs 100
Page 11 GAO-03-986 Rural Ambulance Services

In contrast, an ambulance provider’s costs for fuel and supplies (such as 

drugs and oxygen) are variable because they increase with the number of 

trips. These costs, however, account for a small fraction of ambulance 

providers’ total costs.18

Fewer Trips Linked to a 

Higher Cost Per Trip

Providers that make fewer trips tend to have a higher cost per trip than 

those that make more trips. Figure 1 illustrates the average relationship 

between ambulance providers’ cost per trip and their total trip volume, for 

providers that made 5,000 or fewer trips.

19 As trip volume increases, the 

cost per trip decreases. Our statistical analysis considered other factors 

that affect providers’ costs, notably trip length, but trip volume was most 

strongly related to the cost per trip. 

18In the available data on ambulance costs, fuel costs are not always reported separately, so 

they are included in the vehicle and equipment costs category.

19Total trip volume includes all of a provider’s trips, not just those covered by Medicare.
Page 12 GAO-03-986 Rural Ambulance Services

Figure 1: The Relationship between Cost Per Trip and Total Ambulance Trip Volume 

for Full Cost Providers With 5,000 or Fewer Annual Trips, 1998

Note: GAO analysis of data from Project HOPE’s National Survey of Ambulance Providers. The curve 

represents the predicted average cost per trip, based on our statistical analysis of providers’ total 

costs, controlling for variation in type of service and trip volume, both of which were statistically 

significant. Total trip volume includes all of a provider’s trips, not just those covered by Medicare. 

These data are for full cost providers. Full cost providers are defined as those that have 80 percent or 

more of their staff comprised of paid employees rather than volunteers, and that pay for 80 percent or 

more of their garage and office space. Providers with over 5,000 trips were excluded. We found 

similar results when we analyzed all full cost providers. These data are for the fiscal year preceding 

the survey, which for most providers included 6 months or more of calendar year 1998.

Above

average

cost per

trip

Below

average

cost per

trip

0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000

Total trips

Predicted cost per trip

Average cost per trip for all providers

Providers' actual cost per trip

Source: Project HOPE.
Page 13 GAO-03-986 Rural Ambulance Services

In addition, we found that providers surveyed by Project HOPE that 

averaged 3 or fewer trips per day had an average cost per trip that was 

nearly twice as high as the cost per trip among those that averaged 9 to 12 

trips per day.20 (See table 3.) Providers that averaged 4 to 8 trips per day 

had a cost per trip that was 1.3 times as high as the average cost among 

providers with 9 to 12 trips per day. 

Table 3: Relative Cost Per Trip for Full Cost Ambulance Providers, 1998

Source: Project HOPE.

Note: GAO analysis of data from Project HOPE’s National Survey of Ambulance Providers. The 

relative cost per trip is the ratio of the average cost per trip for each group of providers to the average 

cost per trip of providers that averaged 9 to 12 trips per day. Total trip volume includes all of a 

provider’s trips, not just those covered by Medicare. These data are for full cost providers. Full cost 

providers are defined as those that have 80 percent or more of their staff comprised of paid employees 

rather than volunteers, and that pay for 80 percent or more of their garage and office space. Providers 

that had daily trip volumes outside the ranges shown above were excluded. The cost differences are 

statistically significant at the .05 level between the 3 trips or fewer group of providers and the other two 

groups (4 to 8 trips and 9 to 12 trips). The cost difference between the second and third groups was 

statistically significant at the .10 level. Significance was assessed using a one-tailed test. These data 

are for the fiscal year preceding the survey, which for most providers included 6 months or more of 

calendar year 1998.

20These data are for full cost providers, defined as those that have 80 percent or more of 

their staff comprised of paid employees rather than volunteers, and that pay for 80 percent 

or more of their garage and office space. These data are for the fiscal year preceding the 

survey, which for most providers included 6 months or more of calendar year 1998.

Providers’ average number of total trips 

per day (range)

Cost per trip relative to the average for 

providers with 9 to 12 trips per day 

3 or fewer 1.94

4 to 8 1.30

9 to 12 1.00
Page 14 GAO-03-986 Rural Ambulance Services

Medicare Ambulance 

Payments for Trips in 

Rural Counties Are 

Unlikely to Fully 

Reflect Differences in 

Providers’ Cost Per 

Trip

Although Medicare’s payments generally are higher for trips originating in 

the least densely populated rural counties than in other counties, the 

payment differential is probably not large enough to account for the higher 

costs incurred by low-volume providers likely to serve these areas. Far 

fewer Medicare-covered ambulance trips are typically provided in rural 

counties than in urban counties. Trip volume also varies widely across 

rural counties, with the least densely populated generally having 

substantially fewer trips than the most densely populated. This suggests 

that the cost per trip is likely higher for providers serving the least densely 

populated rural counties. Ambulance providers on average are paid more 

for trips originating in the least densely populated rural counties than for 

those in the most densely populated rural counties, but the payment 

differences are modest and unlikely to reflect the higher cost per trip of 

low-volume providers. 

Rural and Urban Counties 

Differ in Ambulance Trip 

Volume and Population 

Density

Rural counties, as defined by Medicare’s ambulance fee schedule, tend to 

have a much lower volume of ambulance trips than counties defined as 

urban.21 In 2001, rural counties averaged about 1,200 Medicare-covered 

trips (both emergency and nonemergency), while urban counties averaged 

about 9,100 trips. The lower number of trips in rural counties suggests that 

providers that serve these areas likely have a higher cost per trip than other 

providers.

The difference in the volume of Medicare ambulance trips provided in rural 

and urban counties largely reflects differences in their population density. 

Not surprisingly, the number of Medicare ambulance trips in a county is 

strongly related to its population, with counties with fewer residents 

having fewer trips. Trip volume is also related to a county’s land area, 

although to a lesser extent.22 Population density—the ratio of population 

to land area—reflects both of these measures. (See table 4.) 

21We classified counties as urban if they were in an MSA and as rural if they were not in an 

MSA, using 2001 Area Resource File data. The roughly 75 urban counties that contain areas 

identified as rural by the Goldsmith modification are included in the urban county group. 

We used the beneficiary’s address as a proxy for where each trip originated, since the 2001 

national claims files did not contain that information. (See app. I for details.) 

22Larger counties have somewhat fewer trips than smaller counties, after accounting for 

county population. 
Page 15 GAO-03-986 Rural Ambulance Services

Table 4: Characteristics of Urban and Rural Counties, 2001

Sources: HRSA and CMS.

Note: GAO analysis of HRSA and CMS data. We classified counties as urban if they were in an MSA 

and as rural if they were not in an MSA. The roughly 75 urban counties that contain rural areas as 

identified by the Goldsmith modification are included in the urban county group. We used the 

beneficiary’s address as a proxy for where each trip originated. 

Dominant Providers in Less 

Densely Populated Rural 

Counties Provide Fewer 

Trips 

The number of Medicare ambulance trips provided in rural counties varies 

markedly with population density, with the least densely populated rural 

counties tending to have fewer trips than other rural counties. For 

example, the quarter of rural counties that are the most densely populated, 

with 52 or more persons per square mile, averaged over 2,200 Medicare 

trips in 2001.23 (See table 5.) In contrast, only about 300 Medicare trips, on 

average, were made in the quarter of rural counties that are the least 

densely populated, with 11 or fewer persons per square mile. Even fewer 

Medicare trips—only about 200—were made in frontier counties, which are 

counties with 6 or fewer persons per square mile.24 This suggests that the 

cost per trip is likely higher for providers serving the least densely 

populated rural counties. 

Average 

number of 

Medicare 

ambulance 

trips

Average 

length of 

Medicare 

ambulance 

trips (miles)

Average 

population 

density 

(persons/

sq. mile)

Average 

population 

Average 

land area 

(sq. miles)

Urban 

counties 9,144 14 747 276,791 844

Rural 

counties 1,153 23 47 23,942 1,132

23We also grouped counties according to their Medicare population density. See app. II.

24“Frontier” is a term used to describe counties with very low population density, and in 

most cases frontier counties are defined as those with six or fewer persons per square mile.
Page 16 GAO-03-986 Rural Ambulance Services

Table 5: Average Number of Medicare Ambulance Trips, Population and Land Area, 

by Counties Grouped by Population Density, 2001

Sources: HRSA and CMS.

Note: GAO analysis of HRSA and CMS data. We classified counties as urban if they were in an MSA 

and as rural if they were not in an MSA. The roughly 75 urban counties that contain rural areas as 

identified by the Goldsmith modification are included in the urban county group. Rural counties are 

grouped by quartiles of total county population density. The first quartile (0-11 persons per square 

mile) is further divided into frontier counties (0-6 persons per square mile) and nonfrontier (7-11 

persons per square mile). We used the beneficiary’s address as a proxy for where each trip originated.

County categories

Number of 

counties

Average 

number of 

Medicare 

ambulance 

trips

Average 

population

Average land 

area 

(sq. miles)

Urban counties 854 9,144 276,791 844

Rural counties 2,273 1,153 23,942 1,132

52+ persons/sq. mile 569 2,254 45,612 502

30-51 persons/sq. mile 568 1,290 25,351 654

12-29 persons/sq. mile 568 771 16,744 898

0-11 persons/sq. mile 568 296 8,021 2,477

 7-11 persons/sq. mile 182 470 12,288 1,491

 0-6 persons/sq. mile 386 214 6,009 2,942
Page 17 GAO-03-986 Rural Ambulance Services

The dominant providers in the least densely populated rural counties tend 

to have far fewer trips than the dominant providers serving other rural 

counties. Overall, rural counties vary little in the number of providers 

serving them. However, in most rural counties, one or two providers 

dominate, delivering the bulk of Medicare trips, with others having a much 

smaller share. We found that in 2001, about 70 percent of the trips in a rural 

county were typically supplied by two providers. The number of trips 

made by these dominant providers varied with counties’ population 

density. In the quarter of rural counties with the lowest population density, 

the median number of Medicare trips made by each of the top two 

providers—in all of the counties they served—was 275.25 (See table 6.) In 

contrast, the median number of Medicare trips made by the top two 

providers was much higher—over 2,100 trips—in the quarter of rural 

counties that were the most densely populated.26

25Providers’ trips are not necessarily limited to one county, since providers may serve 

multiple counties. 

26The total number of trips made by these providers would be expected to be double the 

number of Medicare trips, since Medicare beneficiaries account on average for roughly half 

of providers’ total trip volume. 
Page 18 GAO-03-986 Rural Ambulance Services

Table 6: Characteristics of Rural Counties and Their Ambulance Providers, by 

Counties Grouped by Population Density, 2001

Sources: HRSA and CMS.

Note: GAO analysis of HRSA and CMS data. We classified counties as rural if they were not in an 

MSA. Rural counties are grouped by quartiles of total county population density. The first quartile (0-11 

persons per square mile) is further divided into frontier counties (0-6 persons per square mile) and 

nonfrontier counties (7-11 persons per square mile). We used the beneficiary’s address as a proxy for 

where each trip originated.

a

Providers that delivered less than 1 percent of their total Medicare trips in a county were excluded 

from the count of providers serving that county.

Medicare Ambulance 

Payments Are Somewhat 

Higher for Trips in Less 

Densely Populated Rural 

Counties 

Ambulance providers on average are paid 16 percent more for trips 

originating in the least densely populated quarter of rural counties than for 

trips in the most densely populated quarter.27 (See table 7.) Payments for 

those trips are higher because the trips are generally longer, resulting in a 

higher mileage payment. In 2001, while trips that began in the most densely 

populated quarter of rural counties averaged 18 miles, trips in the least 

densely populated quarter averaged 30 miles. The rural adjustment, which 

provides a higher per-mile rate for the first 50 miles of rural trips, also 

contributed to the higher mileage payments.

County categories

Number of 

counties

Number of 

Medicare 

providers 

serving a 

countya 

(median)

Percentage of 

a county’s 

Medicare 

ambulance 

trips covered 

by the top 2 

providers in a 

county 

(median) 

Number of 

Medicare 

ambulance 

trips in all 

counties for 

each of the 

top 2 

providers 

(median)

Rural 2,273 5 70 1,100

52+ persons/sq. mile 569 8 68 2,168

30-51 persons/sq. mile 568 6 70 1,422

12-29 persons/sq. mile 568 6 69 832

0-11 persons/sq. mile 568 4 74 275

 7-11 persons/sq. mile 182 5 71 433

 0-6 persons/sq. mile 386 4 75 215

27Payment estimates were calculated by applying 100 percent of the 2003 Medicare 

ambulance fee schedule rates to Medicare ground ambulance trips delivered in 2001. 
Page 19 GAO-03-986 Rural Ambulance Services

The modest difference in Medicare payment across rural counties is 

dwarfed by the difference in trip volume: The difference in trip volume 

between the least and most densely populated quarters of rural counties is 

nearly eightfold.28 Because trip volume is an indicator of costs, the 

Medicare payment differences likely do not fully reflect differences across 

rural counties in providers’ cost per trip.29 

Table 7: Average Number of Medicare Ambulance Trips, Trip Length, and Estimates 

of Average Medicare Paymenta per Ambulance Trip, by Rural Counties Grouped by 

Population Density

Sources: HRSA and CMS.

Note: GAO analysis of HRSA and CMS data. We classified counties as urban if they were in an MSA 

and as rural if they were not in an MSA. The roughly 75 urban counties that contain rural areas as 

identified by the Goldsmith modification are included in the urban county group. Rural counties are 

grouped by quartiles of total county population density. The first quartile (0-11 persons per square 

mile) is further divided into frontier counties (0-6 persons per square mile) and nonfrontier counties (7-

11 persons per square mile). We used the beneficiary’s address as a proxy for where each trip 

originated.

a

Payment estimates were calculated by applying 100 percent of the 2003 Medicare ambulance fee 

schedule rates to Medicare ground ambulance trips delivered in 2001. These estimates reflect the mix 

of ambulance services provided in the different county categories as well as the geographic 

adjustment to account for wage differences across areas.

28There is a similar difference in trip volume for the dominant providers serving these 

counties. 

29Differences in trip volume likely result in smaller differences in cost per trip. 

County categories

Number of 

counties

Average 

number of 

Medicare 

ambulance 

trips

Average 

length of 

Medicare 

ambulance 

trips (miles)

Average 

Medicare 

payment per 

ambulance 

trip

Rural counties 2,273 1,153 23 $463

52+ persons/sq. mile 569 2,254 18 $434

30-51 persons/sq. mile 568 1,290 21 $446

12-29 persons/sq. mile 568 771 25 $465

0-11 persons/sq. mile 568 296 30 $505

 7-11 persons/sq. mile 182 470 27 $490

 0-6 persons/sq. mile 386 214 31 $512
Page 20 GAO-03-986 Rural Ambulance Services

Conclusions Refining Medicare’s ambulance fee schedule to adequately account for cost 

differences in providing ambulance services across various geographic 

areas is important to ensuring beneficiaries’ access to services. Access is a 

particular concern in rural areas, since providers’ cost per trip is likely to 

be higher because they provide fewer trips. Moreover, our analysis shows 

that the cost per trip is likely to be highest in the least densely populated 

rural counties. While the fee schedule incorporates a rural adjustment to 

raise payments for trips provided in rural areas, its definition of “rural” is 

broad. As a result, the fee schedule’s rural payment adjustment does not 

sufficiently target trips provided in the least densely populated rural 

counties. 

In implementing the fee schedule, CMS adjusted the mileage rate for rural 

trips to account for the higher cost per trip of providers serving rural areas. 

However, trip volume is a better indicator of providers’ cost per trip than is 

trip length. Thus, adjusting the base rates for rural trips—the portion of 

Medicare’s payment that is designed to pay for providers’ fixed costs—is a 

more appropriate way of accounting for rural low-volume providers’ higher 

cost per trip than adjusting the mileage rate.

Recommendation for 

Executive Action

To help ensure that Medicare beneficiaries’ access to ambulance services is 

adequate, we recommend that the Administrator of CMS better target the 

rural payment adjustment to trips provided in rural counties with 

particularly low population density by adjusting the base rates, rather than 

the mileage rate, for ground ambulance services provided in those 

counties.

Agency and External 

Reviewer Comments 

and Our Evaluation

We received written comments on a draft of this report from CMS. We also 

received comments from eight ambulance associations: American 

Ambulance Association,30 American Hospital Association, Association of 

Air Medical Services, National Association of State Emergency Medical 

Services Directors, National Volunteer Fire Council, Rural EMS Advocate, 

American College of Emergency Physicians, and the National Association 

of EMS Physicians.

30The American Ambulance Association represents many types of ambulance providers. In 

this section we refer to it as representing ground ambulance providers because they account 

for the majority of the association’s members. 
Page 21 GAO-03-986 Rural Ambulance Services

CMS CMS stated that the report will be useful as the agency develops a proposed 

rule to address appropriate payment for ambulance services furnished in 

rural, low-volume areas. CMS also noted that the report reflects the 

complexity of the issues and the need for careful analysis to ensure that 

payment adjustments are made only for those ambulance providers that 

require additional payment because of their low volume, rather than, for 

example, inefficiency or competition from another provider. CMS’s 

comments appear in appendix III. CMS also provided technical comments, 

which we incorporated as appropriate. 

Ambulance Associations The associations that reviewed the draft report generally agreed with our 

findings and recommendation. All of the associations agreed with the need 

to address the higher cost of providing ambulance services in rural areas. 

Six agreed that an area’s ambulance trip volume reflects its population 

density, while the remaining two associations did not address this issue. 

The majority of the associations agreed that CMS should adjust the base 

rates to recognize the higher cost per trip of providing ambulance services 

in areas with low population density. However, three associations went 

further, proposing to use both mileage and base rates to address the higher 

costs in rural areas. While supporting the principle of paying higher base 

rates to providers in rural areas where costs are high, the state EMS 

directors’ and EMS physicians’ associations were concerned that higher 

payments for rural providers could be at the expense of other providers. 

Four associations raised concerns about using counties as the geographic 

areas for applying the adjustment. These associations said that a system 

that used counties would not accurately target rural ambulance payments. 

Three of these associations noted that, because counties may include both 

densely and sparsely populated areas, a system that used counties could 

overpay some providers and underpay others. They proposed using zip 

codes as the geographic areas for assessing population density and 

applying the adjustment. The rural ambulance association, in particular, 

also advocated the use of multiple rural categories based on population 

density to adjust payments for rural trips. The fourth association 

emphasized the need for a system that ensures that all areas with 

sufficiently low population density are eligible for an appropriate payment 

adjustment. 
Page 22 GAO-03-986 Rural Ambulance Services

Our Response GAO and the ambulance associations agree with the need to adjust 

payments for rural trips and that the adjustment should be applied to the 

base rate. With respect to adjusting payments for rural trips in low 

population density areas, we believe the adjustment should be applied to 

the base rate. We believe that the mileage rate for any trip, rural or urban, 

is best suited to compensating ambulance providers for costs that vary with 

trip length. As stated in the report, a base rate adjustment is a more 

appropriate way of accounting for rural low-volume providers’ higher costs 

per trip because base rates reflect fixed costs, and because trip volume is a 

better indicator of providers’ cost per trip than is trip length. With respect 

to possible payment reductions for other providers, implementing our 

recommendation could have this effect. If a revised rural adjustment is 

implemented in a way to keep total Medicare expenditures the same, some 

providers could face lower payments. 

With respect to the geographic unit used to identify trips for the rural 

adjustment, we agree that, since counties are relatively large geographic 

units, it is possible for trips in some areas to be overpaid and others 

underpaid. Moreover, in principle, a rural classification system that uses a 

smaller geographic unit, such as zip codes, might better target payments to 

trips in areas with low population density. Yet our analysis indicates that 

zip codes do not explain variation in trip volume as well as counties. 

Further, county boundaries tend to be more stable over time than zip code 

boundaries. In addition, a variety of technical difficulties hinder the use of 

zip codes for ambulance payments, including the absence of zip codes for 

some rural areas. With respect to multiple adjustment categories, we did 

not address whether there should be a single adjustment or whether there 

should be multiple adjustment amounts to reflect differing levels of 

population density. A decision on single or multiple categories would 

require balancing increased precision with increased complexity.

We are sending copies of this report to the Administrator of CMS, 

appropriate congressional committees, and other interested parties. We 

will also make copies available to others upon request. This report is also 

available at no charge on GAO’s Web site at http://www.gao.gov. 
Page 23 GAO-03-986 Rural Ambulance Services

If you or your staffs have any questions, please call me at (202) 512-7114. 

Other GAO contacts and staff acknowledgments are listed in appendix IV.

Laura A. Dummit

Director, Health Care—Medicare Payment Issues
Page 24 GAO-03-986 Rural Ambulance Services

List of Committees

The Honorable Charles E. Grassley

Chairman

The Honorable Max Baucus 

Ranking Minority Member

Committee on Finance

United States Senate

The Honorable W.J. “Billy” Tauzin

Chairman

The Honorable John D. Dingell

Ranking Minority Member

Committee on Energy and Commerce

House of Representatives

The Honorable William M. Thomas

Chairman

The Honorable Charles B. Rangel

Ranking Minority Member

Committee on Ways and Means

House of Representatives
Page 25 GAO-03-986 Rural Ambulance Services

Appendix I

Data and Methods AAppenednxidexiIs

1999 National Survey of Ambulance Providers. To identify the factors that 

influenced ambulance provider costs, we used the 1999 National Survey of 

Ambulance Providers. This survey, conducted by the Project HOPE Center 

for Health Affairs under the sponsorship of the American Ambulance 

Association, is the only nationally representative source for ambulance 

providers’ costs. Project HOPE selected a stratified random sample of 

providers that had billed Medicare in 1997, obtained 421 completed 

questionnaires, and reported a response rate of 56 percent.1 The survey 

included questions on costs, total number of trips by type of service, 

geographic location, and total mileage. 

We took several steps to ensure that the Project HOPE data were suitable 

for our analysis. We examined the accuracy and completeness of the data 

by testing for implausible values and internal consistency. In addition, we 

questioned an anomalous result in Project HOPE’s initial analysis of its 

data, which raised concerns about the credibility of the data: emergency 

advanced life support (ALS) trips cost less than nonemergency basic life 

support (BLS) trips.2

 In response, Project HOPE provided us with 

information about its subsequent analysis, which showed the expected 

result—ALS trips cost more than BLS trips, after controlling for providers’ 

volume. This result resolved our major concern about the data. 

We limited our analysis of the factors affecting differences in providers’ 

costs to full cost providers—those providers that paid for 80 percent or 

more of their staff and paid for 80 percent or more of their office and 

garage space. The costs reported by these providers are more likely to 

reflect the full cost of providing ambulance services. We also excluded 

ambulance providers that were part of fire departments, because about half 

could not separate ambulance costs from other costs. Finally, we excluded 

one provider that reported implausible values. After these exclusions, we 

had 114 cases for analysis. Certain analyses that did not pertain to all full 

cost providers used a smaller number of cases. (See tables 8 and 9.)

1

See Penny E. Mohr and others, Findings from the 1999 National Survey of Ambulance 

Providers (Bethesda, Md.: 2000), p.11. 

2

See Mohr and others, p. 25.
Appendix I

Data and Methods 

Page 26 GAO-03-986 Rural Ambulance Services

Table 8: Full Cost Ambulance Providers by Average Number of Trips Per Day, 1998

Source: Project HOPE.

Note: GAO analysis of data from Project HOPE’s National Survey of Ambulance Providers. Total trip 

volume includes all of a provider’s trips, not just those covered by Medicare. Full cost providers are 

defined as those that have 80 percent or more of their staff comprised of paid employees rather than 

volunteers, and that pay for 80 percent or more of their garage and office space. These data are for the 

fiscal year preceding the survey, which for most providers included 6 months or more of calendar year 

1998. The number of full cost providers is 114.

Table 9: Full Cost Ambulance Providers by Average Number of Trips Per Year, 1998

Source: Project HOPE.

Note: GAO analysis of data from Project HOPE’s National Survey of Ambulance Providers. Total trip 

volume includes all of a provider’s trips, not just those covered by Medicare. Full cost providers are 

defined as those that have 80 percent or more of their staff comprised of paid employees rather than 

volunteers, and that pay for 80 percent or more of their garage and office space. These data are for the 

fiscal year preceding the survey, which for most providers included 6 months or more of calendar year 

1998. The number of full cost providers is 114.

Area Resource File. The Area Resource File (ARF), which is maintained by 

the Health Resources and Services Administration (HRSA), is a countybased health resources information database that contains data from many 

sources, including the U.S. Census. From the 2001 ARF, we obtained 

county data on land area in 1990 and total population in 2000, which we 

used to calculate population density. We also obtained data on the number 

of persons age 65 and over in each county in 1999, which we used as a 

proxy for Medicare beneficiaries. The ARF is a standard data source that is 

Providers’ average number of total trips 

per day Percentage of full cost providers 

3 or fewer 22

4 to 8 27

9 to 12 9

13 to 20 7

21 or more 35

Total 100

Providers’ average number of total 

trips per year Percentage of full cost providers

5,000 or fewer 58

5,001 to 10,000 20

More than 10,000 22

Total 100
Appendix I

Data and Methods 

Page 27 GAO-03-986 Rural Ambulance Services

well documented and widely used, so we did not independently verify its 

accuracy or completeness.

Medicare claims files. We used Medicare claims data to determine the 

volume and length of all ground-based Medicare-covered trips, as well as 

Medicare’s payments for those trips. We used the 2001 national claims 

history 100 percent nearline file for physicians and suppliers to identify 

claims for ambulance services by freestanding providers, and the 2001 

outpatient 100 percent standard analytic file to identify claims for 

ambulance services by institutional providers. We used the zip code of the 

beneficiary’s primary address as a proxy for the point where the ambulance 

picked up the beneficiary because the point of pickup is not recorded in the 

2001 data.3

 Although we did not independently verify the reliability of the 

national claims files, we screened the files and excluded claims that were 

denied, claims that were superseded by an adjustment claim, and claims for 

services in other years. We retained all final claims for 2001.

Provider interviews. To gain an understanding of the ambulance industry, 

we interviewed experts from eight industry and professional organizations. 

We also interviewed several individual ambulance providers. 

Factors affecting ambulance providers’ costs. To examine the effect of 

selected factors on ambulance providers’ costs, we analyzed the Project 

HOPE survey data using a simplified version of a model reported by Project 

HOPE.4

 In our model, the natural logarithm of total costs is a function of 

the number of trips, the number of trips squared, and the proportion of the 

total trips that are ALS.5

 We tested a number of additional terms, including 

length of trips, but they were all either statistically insignificant or 

significant but with very small effects. We restricted our model to 

3

Beginning January 1, 2001, CMS required ambulance providers to include the point of pickup zip code on all claims, and on April 1, 2002, began using it for payment, to determine 

whether the rural adjustment should be applied. Although the CMS contractors—fiscal 

intermediaries and carriers—that pay the claims have had the point of pick-up zip code in 

their data bases, it was not incorporated into the national claims history files until April 1, 

2003.

4

See Mohr and others, pp. A1-A3.

5

The Project HOPE model resembles a type of model frequently used by health services 

researchers for analyzing costs of health care. For example, see T. Grannemann and others, 

“Estimating Hospital Costs,” Journal of Health Economics, vol. 5, no. 2 (1986), and J. 

Nyman, “The Marginal Cost of Nursing Home Care,” Journal of Health Economics, vol. 7, 

no. 4 (1988).
Appendix I

Data and Methods 

Page 28 GAO-03-986 Rural Ambulance Services

providers with 5,000 or fewer total trips per year because we were 

primarily interested in rural providers, which generally have fewer trips.6

 

However, our sensitivity analyses showed that the results were broadly 

similar when the model was applied to all full cost providers.7

 Our model 

has an adjusted R2 of 0.48, indicating that the model explains 48 percent of 

the variance in costs. In general, when trip volume declines, the estimated 

cost per trip increases, although less than proportionately. That is, a 10 

percent decrease in trip volume is associated with an increase in cost per 

trip of less than 10 percent. 

Analysis of variation in factors affecting costs across geographic areas. To 

examine differences between urban and rural areas in factors affecting 

ambulance costs, we grouped counties with similar characteristics. We 

followed CMS in classifying counties in metropolitan statistical areas 

(MSA) as urban counties and counties outside MSAs as rural.8

 However, 

for our analysis we did not apply the Goldsmith modification that CMS uses 

to identify as rural certain areas within MSAs.9

 These rural areas are 

typically small, so we did not treat them as rural counties because that 

would distort our urban and rural comparisons. Our sensitivity analyses 

determined that our findings would have been generally the same if we had 

considered these areas as rural counties, although in some cases the 

differences between urban and rural counties would have been heightened.

To examine differences among rural counties, we grouped them based on 

their population density. Population density—the ratio of population to 

land area—is a commonly used measure of rurality. We used population 

density to group counties into quartiles, and then divided the least densely 

populated quartile of rural counties into frontier counties—those with six 

or fewer persons per square mile—and nonfrontier counties, because of 

our interest in the most sparsely populated rural areas. Using this 

6

Although some rural providers have more than 5,000 total trips per year, most have less 

than 5,000 total trips per year.

7

The coefficients had the same signs, although they differed in magnitude.

8

MSAs are groups of counties containing a core of at least 50,000 people, together with 

adjacent areas that have a high degree of economic and social integration with that core. 

New England County Metropolitan Areas are considered urban.

9

The Goldsmith modification identifies small towns and rural areas within large 

metropolitan counties that are isolated from central areas by distance or other features, 

such as mountains. CMS uses a Goldsmith modification based on 1980 census data.
Appendix I

Data and Methods 

Page 29 GAO-03-986 Rural Ambulance Services

grouping, we found that ambulance trip volume decreased steadily from 

the most densely populated rural counties to the least densely populated. 

We also examined several other classification systems: urban influence 

codes (UIC), which classify counties based on each county’s largest city 

and its proximity to other areas with large, urban populations; rural-urban 

continuum codes (RUCC), which classify metropolitan counties by the size 

of the urban area and nonurban counties by the size of the urban 

population and proximity to a metropolitan area; and rural-urban 

commuting areas (RUCA), which classify census tracts using patterns of 

urbanization, population density, and daily commuting patterns, and then 

map the census tracts into zip codes.10 These systems are more complex 

than the system we used, and we found that they did not help explain 

variation in trip volume as well as counties grouped by population density.

To confirm the effect of population density on trip volume, we did several 

additional analyses. We regressed counties’ annual volume of Medicare 

trips (expressed as natural logarithms) on population and land area 

(expressed as natural logarithms). Population had a positive effect on the 

number of trips, while land area had a negative effect. An increase of 1 

percent in population increased the number of trips by about 1 percent in a 

county, while an increase of 1 percent in land area decreased the number of 

trips by about 0.1 percent.11 Population density combines the two effects: 

a 1 percent increase in population density increases the number of trips by 

0.7 percent.12

10For more information on UICs, see http://www.ers.usda.gov/Briefing/Rurality/urbaninf/; for 

more information on RUCCs, see http://www.ers.usda.gov/Briefing/Rurality/ruralurbcon/;

and for more information on RUCAs, see 

http://www.fammed.washington.edu/wwamirhrc/rucas/rucas.html.

11The adjusted R2

 for the model is 0.74. The adjusted R2 is a measure of the proportion of the 

variation in the dependent variable (the natural logarithm of trips) accounted for by the 

independent variables (the natural logarithms of land area and population).

12The adjusted R2

 for the model is 0.60.
Page 30 GAO-03-986 Rural Ambulance Services

Appendix II

Characteristics of Rural Counties Grouped by 

Medicare Population Density ApendxiI

Total population density is strongly related to Medicare population density. 

(See table 10.) For example, 525 rural counties with the lowest total 

population density were also lowest in terms of Medicare population 

density. In total, 83 percent of all rural counties were in the same density 

quartile, regardless of whether total population or Medicare population 

was used to group rural counties. Our results with respect to county 

characteristics and ambulance services would have been similar had we 

used Medicare population density to group counties rather than total 

population density. (See tables 11, 12, and 13.) 

Table 10: Rural Counties Grouped by Total Population Density and by Medicare 

Population Density, 2001

Source: HRSA.

Note: GAO analysis of the 2001 Area Resource File. Bolded numbers refer to the number of counties 

that fall in the same quarter of rural counties—whether rural counties are grouped by total population 

density or Medicare population density. We used the number of persons age 65 and over in each 

county in 1999 as a proxy for the number of Medicare beneficiaries.

Total population 

density

Medicare population density

7.6 + 

Medicare 

beneficiaries/

sq. mile

4.3-7.5 

Medicare 

beneficiaries/

sq. mile

1.8-4.2 

Medicare 

beneficiaries/

sq. mile

0-1.7 

Medicare 

beneficiaries/

sq. mile

52+ people/sq. mile 505 61 3 0

30-51 people/sq. mile 64 423 79 2

12-29 people/sq. mile 0 83 444 41

0-11 people/sq. mile 0 0 43 525
Appendix II

Characteristics of Rural Counties Grouped 

by Medicare Population Density

Page 31 GAO-03-986 Rural Ambulance Services

Table 11: Average Number of Medicare Ambulance Trips, Population and Land Area, 

by Counties Grouped by Medicare Population Density, 2001

Sources: HRSA and CMS.

Note: GAO analysis of HRSA and CMS data. We classified counties as urban if they were in an MSA 

and as rural if they were not in an MSA. The roughly 75 urban counties that contain rural areas as 

identified by the Goldsmith modification are included in the urban county group. We used the 

beneficiary’s address as a proxy for where each trip originated. We used the number of persons age 

65 and over in each county in 1999 as a proxy for the number of Medicare beneficiaries.

County categories

Number of 

counties

Average 

number of 

Medicare 

ambulance 

trips

Average 

population

Average 

land area 

(sq. miles)

Urban counties 854 9,144 276,791 844

Rural counties 2,273 1,153 23,942 1,132

7.6+ Medicare 

beneficiaries/sq. mile 569 2,279 45,362 517

4.3-7.5 Medicare 

beneficiaries/sq. mile 567 1,265 24,836 646

1.8-4.2 Medicare 

beneficiaries/sq. mile 569 752 16,584 841

0-1.7 Medicare 

beneficiaries/sq. mile 568 315 8,961 2,527
Appendix II

Characteristics of Rural Counties Grouped 

by Medicare Population Density

Page 32 GAO-03-986 Rural Ambulance Services

Table 12: Characteristics of Rural Counties and Their Ambulance Providers, by 

Counties Grouped by Medicare Population Density, 2001

Sources: HRSA and CMS.

Note: GAO analysis of HRSA and CMS data. We classified counties as rural if they were not in an 

MSA. We used the beneficiary’s address as a proxy for where each trip originated. We used the 

number of persons age 65 and over in each county in 1999 as a proxy for the number of Medicare 

beneficiaries.

a

Providers that delivered less than 1 percent of their total Medicare trips in a county were excluded 

from the count of providers serving that county.

County categories

Number of 

counties

Number of 

Medicare 

providers 

serving a 

countya 

(median)

Percentage 

of a county’s 

Medicare 

ambulance 

trips covered 

by the top 2 

providers in 

a county 

(median)

Number of 

Medicare 

ambulance trips 

in all counties 

for each of the 

top 2 providers 

(median)

Rural counties 2,273 5 70 1,100

7.6+ Medicare 

beneficiaries/sq. mile 569 9 67 2,080

4.3-7.5 Medicare 

beneficiaries/sq. mile 567 6 69 1,366

1.8-4.2 Medicare 

beneficiaries/sq. mile 569 6 71 834

0-1.7 Medicare 

beneficiaries/sq. mile 568 4 74 308
Appendix II

Characteristics of Rural Counties Grouped 

by Medicare Population Density

Page 33 GAO-03-986 Rural Ambulance Services

Table 13: Average Number of Medicare Ambulance Trips, Trip Length, and Estimates 

of Average Medicare Paymenta

 per Ambulance Trip, by Rural Counties Grouped by 

Medicare Population Density

Sources: HRSA and CMS.

Note: GAO analysis of HRSA and CMS data. We classified counties as urban if they were in an MSA 

and as rural if they were not in an MSA. We used the beneficiary’s address as a proxy for where each 

trip originated. We used the number of persons age 65 and over in each county in 1999 as a proxy for 

the number of Medicare beneficiaries.

a

Payment estimates were calculated by applying 100 percent of the 2003 Medicare ambulance fee 

schedule rates to Medicare ground ambulance trips delivered in 2001. These estimates reflect the mix 

of ambulance services provided in the different county categories as well as the geographic 

adjustment to account for wage differences across areas.

County categories

Number of 

counties

Average 

number of 

Medicare 

ambulance 

trips

Average 

length of 

Medicare 

ambulance 

trips (miles)

Average 

Medicare 

payment per 

ambulance 

trip

Rural counties 2,273 1,153 23 $463

7.6+ Medicare 

beneficiaries/sq. mile 569 2,279 19 $434

4.3-7.5 Medicare 

beneficiaries/sq. mile 567 1,265 21 $448

1.8-4.2 Medicare 

beneficiaries/sq. mile 569 752 25 $467

0-1.7 Medicare 

beneficiaries/sq. mile 568 315 29 $501
Page 34 GAO-03-986 Rural Ambulance Services

Appendix III

Comments from the Centers for Medicare & 

Medicaid Services ApendxiI
Page 35 GAO-03-986 Rural Ambulance Services

Appendix IV

GAO Contacts and Staff Acknowledgments ApendxiIV

GAO Contacts Jonathan Ratner, (202) 512-7107

Phyllis Thorburn, (202) 512-7012

Acknowledgments Major contributors to this report were Martha Kelly, Robin Burke, Eric 

Wedum, Michael Kendix, and Jessica Farb.
Page 36 GAO-03-986 Rural Ambulance Services

Related GAO Products

Ambulance Services: Changes Needed to Improve Medicare Payment 

Policies and Coverage Decisions. GAO-03-244T. Washington, D.C.: 

November 15, 2001.

Rural Ambulances: Medicare Fee Schedule Payments Could Be Better 

Targeted. GAO/HEHS-00-115. Washington, D.C.: July 17, 2000.

(290155)
GAO’s Mission The General Accounting Office, the audit, evaluation and investigative arm of 

Congress, exists to support Congress in meeting its constitutional responsibilities 

and to help improve the performance and accountability of the federal government 

for the American people. GAO examines the use of public funds; evaluates federal 

programs and policies; and provides analyses, recommendations, and other 

assistance to help Congress make informed oversight, policy, and funding 

decisions. GAO’s commitment to good government is reflected in its core values of 

accountability, integrity, and reliability.

Obtaining Copies of 

GAO Reports and 

Testimony

The fastest and easiest way to obtain copies of GAO documents at no cost is 

through the Internet. GAO’s Web site (www.gao.gov) contains abstracts and fulltext files of current reports and testimony and an expanding archive of older 

products. The Web site features a search engine to help you locate documents 

using key words and phrases. You can print these documents in their entirety, 

including charts and other graphics.

Each day, GAO issues a list of newly released reports, testimony, and 

correspondence. GAO posts this list, known as “Today’s Reports,” on its Web site 

daily. The list contains links to the full-text document files. To have GAO e-mail this 

list to you every afternoon, go to www.gao.gov and select “Subscribe to 

e-mail alerts” under the “Order GAO Products” heading.

Order by Mail or Phone The first copy of each printed report is free. Additional copies are $2 each. A check 

or money order should be made out to the Superintendent of Documents. GAO 

also accepts VISA and Mastercard. Orders for 100 or more copies mailed to a single 

address are discounted 25 percent. Orders should be sent to:

U.S. General Accounting Office

441 G Street NW, Room LM

Washington, D.C. 20548

To order by Phone: Voice: (202) 512-6000 

TDD: (202) 512-2537 

Fax: (202) 512-6061

To Report Fraud, 

Waste, and Abuse in 

Federal Programs

Contact:

Web site: www.gao.gov/fraudnet/fraudnet.htm

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470

Public Affairs Jeff Nelligan, Managing Director, NelliganJ@gao.gov (202) 512-4800

U.S. General Accounting Office, 441 G Street NW, Room 7149 

Washington, D.C. 20548

United States

General Accounting Office

Washington, D.C. 20548-0001

Official Business

Penalty for Private Use $300

Address Service Requested

Presorted Standard

Postage & Fees Paid

GAO

Permit No. GI00