Ambulance Providers: Costs and Medicare Margins Varied Widely; Transports of Beneficiaries Have Increased
Published: 2012-10-01T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Since 2004, Congress has authorized supplemental temporary payments, called "add-on" payments, to augment Medicare fee schedule payments to ambulance providers. The add-on payments increased payments for transports in urban, rural, and super-rural (the least densely populated) areas by $175 million in calendar year 2011, according to the Medicare Payment Advisory Commission. In 2007, GAO reported a decline in transports by beneficiaries in super-rural areas and recommended that the Centers for Medicare & Medicaid Services (CMS) monitor beneficiary use of ambulance transports to ensure access to services, particularly in super-rural areas. The Middle Class Tax Relief and Job Creation Act of 2012 required GAO to update the 2007 report. GAO examined, for 2010 (the most recent year complete data were available when GAO began the study), (1) ground ambulance provider costs for transports, (2) the relationship between Medicare payments and provider costs, and (3) beneficiary use of ground ambulance transports. To do this work, GAO sent a survey to a sample of eligible providers based on the 2007 report sample asking for provider costs and characteristics. The sample is representative of all ground ambulance providers that billed Medicare in 2003 and 2010, were operational in 2012, and did not share costs with nonambulance services or air ambulance services. GAO also performed a regression analysis to examine factors that affect costs, analyzed Medicare claims and enrollment data, and interviewed representatives of ambulance provider organizations. CMS reviewed a draft of this report and had no comments.
section_title: What GAO Found
paragraphs: Ground ambulance providers' costs per transport for 2010 varied widely. The median cost per transport for the providers in GAO's sample was $429, ranging from $224 to $2,204 per transport. Provider characteristics that affected cost per transport were volume of transports (including both Medicare and non-Medicare transports), intensity of transports (the proportion of Medicare transports that were nonemergency), and the extent to which providers received government subsidies. Higher volume of transports, higher proportions of nonemergency transports, and lower government subsidies were associated with lower costs per transport. Providers reported that personnel cost was the largest cost component in their 2010 total costs and the biggest contributor to increases in their total costs from 2009 to 2010.
The median Medicare margin, including add-on payments, was about +2 percent in 2010 (meaning that providers' Medicare payments per transport exceeded their overall costs per transport) for the providers in GAO's sample, but Medicare margins varied widely for those providers. When GAO removed the add-on payments, payments decreased for the providers in the sample, resulting in a lower median Medicare margin of -1 percent. Due to the wide variability of Medicare margins for providers in the sample, GAO cannot determine whether the median provider among the providers in the population that the sample represents had a negative or positive margin. The median Medicare margin with add-on payments ranged from about -2 percent to +9 percent, while the median Medicare margin without add-on payments ranged from about -8 percent to +5 percent.
Ground ambulance transports for all Medicare fee-for-service beneficiaries grew 33 percent from 2004 to 2010. Transports by beneficiaries nationwide grew the most in super-rural areas (41 percent) relative to urban and rural areas. The increase overall is attributable primarily to an increase of 59 percent over this period in basic life support (BLS) nonemergency transports, which include noninvasive interventions, such as administering oxygen. In comparing this growth by service area, BLS nonemergency transports in super-rural areas grew the most--by 82 percent. Representatives from an ambulance provider organization suggested the increase in transports may be from increased billing by local governments. Some local governments that used to provide Medicare transports free of charge may bill Medicare now because of increased budgetary pressures. The Department of Health and Human Services Office of Inspector General has cited improper payments--which can be the result of billing mistakes--as one potential cause for increases in Medicare ambulance utilization and has stated that the Medicare ambulance transport benefit is highly vulnerable to abuse, with some payments for transports not meeting program requirements.

section_title: Letter
paragraphs: Since 2004, Medicare payments to ambulance providers have been  augmented by supplemental temporary payments. These supplemental  payments, called “add-on” payments, increased payments for ground  ambulance transports by $175 million for calendar year 2011, according  to estimates from the Medicare Payment Advisory Commission. In  calendar year 2010, the most recent year for which complete data were  available when we began this study, ambulance providers furnished  almost 16.6 million ground ambulance transports for approximately   5.1 million Medicare fee-for-service beneficiaries. The Centers for  Medicare & Medicaid Services (CMS), which administers the Medicare  program, paid ground ambulance providers approximately $5.2 billion for  these transports, which includes the add-on payments.
We reported in 2007 that the costs of providing ground ambulance  transports varied greatly across providers, as did Medicare margins (the  relationship between the cost of providing a transport and the Medicare  payment for a transport). This variation reflected differences in provider  and community characteristics, such as the provider’s volume of  transports and the service area it predominantly serves. We also found  that in super-rural areas (where the population density is the lowest of the  rural areas), the number of ground transports per 1,000 Medicare  beneficiaries declined from 2001 to 2004. We recommended that CMS  monitor the utilization of ambulance transports to ensure that  beneficiaries had access to services, particularly in super-rural areas.  Subsequently, Congress increased payments for urban and rural  transports.
Because Congress would like information about the adequacy of  Medicare payments to ambulance providers and the need to continue  authorizing the add-on payments, the Middle Class Tax Relief and Job  Creation Act of 2012 required us to update the information in our 2007   We examined (1) 2010 ground ambulance providers’ costs for  report. furnishing transports, (2) the relationship between 2010 Medicare  payments and ground ambulance providers’ costs, and (3) Medicare  beneficiaries’ use of ground ambulance transports in 2010.
Pub. L. No. 112-96, § 3007(d), 126 Stat. 156, 190. In addition, the act directed the  Medicare Payment Advisory Commission to study Medicare ambulance payments,  including the appropriateness and effects of the add-on payments, and provide  recommendations for reforming the ambulance fee schedule, as appropriate. Pub. L.   No. 112-96, § 3007(e), 126 Stat. 190.
To examine 2010 ground ambulance providers’ costs for transports, in  April 2012, we sent a web-based survey to a random sample of 294  eligible ambulance providers to collect data on their costs, revenues,  transports, and organizational characteristics in 2010. We received  completed surveys from 154 providers, for a response rate of 52 percent.  Our sample was based on our 2007 report’s sampling frame, which was  representative of all ground ambulance providers that billed Medicare in  2003. Because we found previously that cost data from ambulance  providers that shared operational costs with other services, such as those  provided by fire departments or air ambulance services, were unreliable,  we excluded these providers from our current sample, as was done in the  2007 report; however, unlike the sample for the 2007 report, we also  excluded providers that shared operational costs with a hospital.
Therefore, our sample is representative of the population of  approximately 2,900 ground ambulance providers that billed Medicare in  2003 and in 2010, were still operational in 2012, and did not share costs  with nonambulance services or air ambulance services (an estimated   26 percent of the ambulance industry in 2010). We selected these  providers because they do not have to estimate costs across multiple  business lines and represent mature organizations, void of potentially  expensive start-up costs.
Using the survey data, we calculated providers’ costs per transport and  examined how costs per transport varied across providers. We also  determined which of the following cost components most contributed to  providers’ total cost, as well as to increases in total cost: personnel;  vehicle; fuel; medical supplies, equipment, and communications;  building or facility; overhead and administration; or other. We performed  a regression analysis to investigate the relationship between providers’  total cost and characteristics such as service area (urban, rural, or super- rural), volume of transports, mix and intensity of Medicare transports,  level of government subsidies received, use of volunteer staff, and type  of ownership. We divided predicted total cost by total transports to derive  cost per transport.
To ensure the reliability of the survey data, we incorporated internal data  checks in the survey instrument, contacted providers that submitted  inconsistent or incomplete data, and excluded three providers with  reported costs per transport that were more than three standard  deviations from the mean of the lognormal distribution for survey  respondents. Using Medicare claims data for all survey recipients, we  were able to test for potential nonresponse bias for the characteristics  contained in the claims data. The nonresponse analysis did not find any  statistically measurable bias that would affect our analyses of providers’  costs.
The survey data had some important limitations. We assumed that  providers’ total cost per transport was equivalent to their Medicare cost  per transport. This may introduce some bias since the mix and intensity of  ambulance services used by Medicare beneficiaries may be different than  those used by non-Medicare beneficiaries, and this could affect providers’  Medicare cost per transport. Similarly, providers generally do not track  costs by urban, rural, or super-rural transports. Therefore, we classified  providers by their predominant service area and there is likely to be some  measurement error in identifying the full effect of service area on costs.  Cost data reported in the survey are subject to some variability depending  on the accounting methodology used by ambulance providers. In  addition, the survey data were self-reported. Also, the small sample size  and variability of self-reported costs limit the precision with which we can  generalize our results.
To provide context for the factors associated with the costs of providing  ambulance services, we reviewed wage and workers’ compensation  insurance data from the Bureau of Labor Statistics, health insurance data  from the Kaiser Family Foundation, and fuel data from the Department of  Energy, and interviewed an official of the National Association of State  EMS Officials (NASEMSO).
To determine the relationship of 2010 Medicare payments to ground  ambulance providers’ costs, we used Medicare claims data to calculate  Medicare payments in 2010 for the providers in our sample, and we  calculated Medicare margins—the percentage difference between the  Medicare payment per transport and cost per transport. Using the  Medicare ambulance fee schedule and claims data, we calculated each  provider’s Medicare payment per transport with and without the add-on  payments. We then calculated the Medicare margin for each provider by  subtracting its cost per transport (as calculated in the methodology for  objective 1) from its Medicare payment per transport and dividing this  amount by its Medicare payment per transport.
To examine Medicare fee-for-service beneficiaries’ use of ground  ambulance transports in 2010, we analyzed 2010 Medicare claims and  beneficiary enrollment data to calculate the number of transports per  1,000 beneficiaries. We also analyzed 2004 Medicare claims and  beneficiary enrollment data to determine the change in beneficiaries’ use  of ground ambulance transports from 2004 to 2010. In addition, we  interviewed officials of the American Ambulance Association (AAA). We  assessed the reliability of Medicare claims and enrollment data and found  these data sufficiently reliable for our purposes. (See app. I for additional  details about our scope and methodology.)
We conducted this performance audit from April 2012 to September 2012  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: Ground ambulance services are provided by a wide range of  organizations that differ in organizational structure, staffing types, types of  transports offered, and revenue sources. Medicare payments for  ambulance services are made up of two components: a service-level  payment for the type of transport provided and a mileage payment.
subsections: section_title: Diversity of the Ambulance Industry
paragraphs: Providers may be affiliated with an institution (such as a hospital or a fire  department) and share resources and operational costs, or they may be  independent and freestanding. In addition, providers may be for-profit,  nonprofit, or government-based. Providers may rely heavily on  volunteers, use both volunteers and paid staff, or use only paid staff.  Providers may specialize in nonemergency transports, or offer both  nonemergency and emergency (those responding to a 911 call)  transports. Also, some providers offer only basic life support (BLS)  services, while others offer advanced life support (ALS) services. ALS  services require the skills of a medical technician who is more specialized  and trained, such as a paramedic, than the technician who can provide  BLS services.
Revenue sources depend on the resources available in communities and  communities’ choices about funding ambulance services. They may  include community tax support, charitable donations, in-kind  contributions, state and federal grants, subscription programs,payments from Medicare or Medicaid and private health insurance  companies (including patient copayments or coinsurance). The mix and  amount of revenues available may vary. Communities differ by the level  of tax support for specific services, such as ensuring a minimum level of  service in remote areas, sophistication of transport vehicles, and the  training level of the staff.
section_title: Medicare Ambulance Payment Policy
paragraphs: Medicare pays ambulance providers through a national fee schedule.  (See fig. 5 in app. I for an overview of the Medicare ambulance payment  formula.) Payments have two components:  1.  service-level payment: for the type of transport provided, such as an  ALS Level 1 transport;2.  mileage payment.
The mileage payment is determined by the number of miles traveled with a patient  during an ambulance transport and the mileage base rate. Since 2002, CMS has  increased the rural mileage rate (which also applies to super-rural transports) by   50 percent for miles 1 through 17. See 67 Fed. Reg. 9100 (Feb. 27, 2002) (adding subpart  H to 42 C.F.R. part 414); 42 C.F.R. § 414.610(c)(5)(i)(2011) (this mileage rate increase is  not set to expire). Also see fig. 5 in app. I for an overview of the Medicare ambulance  payment formula.
Improvement, and Modernization Act of 2003, temporarily extended by  subsequent acts, and most recently extended through the end of 2012  by the Middle Class Tax Relief and Job Creation Act of 2012.
section_title: Providers’ Costs and Medicare Margins
paragraphs: Providers paid under a fee schedule generally have an incentive to keep  their costs to deliver services at or below the fee schedule rate. Some  providers rely heavily on Medicare revenues, and adequate Medicare  margins for these providers may help ensure that beneficiaries have  access to ambulance services. In our 2007 report, we found that  providers with lower transport volumes generally had higher costs per   Because of  transport than providers with greater transport volumes.high fixed costs for maintaining readiness—the availability of an  ambulance and crew for immediate emergency responses—providers  with low volumes, which still need to maintain readiness, tended to have  higher costs per transport. Other significant factors that affected cost per  transport included level of volunteer staff hours, percentage of Medicare  transports that are BLS, percentage of Medicare transports that are  super-rural, and level of community tax support.
section_title: Providers’ 2010 Costs per Transport Varied Widely, Reflecting Differences in Certain Characteristics, and Personnel Constituted the Largest Cost Category
paragraphs: Providers’ costs for providing ground ambulance transports were highly  variable in 2010, ranging from a low of $224 per transport to a high of  $2,204, with a median cost per transport of $429. The variability of costs  per transport reflected differences in certain provider characteristics, such  as volume of transports, intensity of Medicare transports, and level of  government subsidies received. Providers reported that personnel costs  accounted for the largest percentage of their total costs in 2010 and  contributed the most to increases in total costs between 2009 and 2010.
subsections: section_title: Median Cost per Transport in 2010 Was $429, but Costs per Transport Varied Widely across All Providers
paragraphs: The median cost per ground ambulance transport for providers in our  sample was $429 in 2010, but providers’ costs per transport ranged from  a low of $224 to a high of $2,204. Five percent of providers had costs per  transport that were less than $253, and 5 percent had costs per transport  that were more than $924. Figure 1 shows the distribution of 2010 costs  per transport for providers in our sample.
Among the population of providers from which our sample was drawn, the  estimated median cost per transport ranged from $401 to $475, which  represents the 95 percent statistical confidence interval around the  median and is the range within which we expect the population median  cost per transport to fall in 95 percent of the samples we could have  drawn.
Super-rural providers had estimated median costs per transport that were  significantly higher than urban providers (see table 1). The variability  associated with our survey data did not allow us to conclude that rural  providers’ estimated median costs per transport were significantly  different from super-rural or urban providers. As will be discussed later,  when we controlled for other provider characteristics that affected cost  per transport using regression analysis, differences in cost per transport  by service area were not significant.characteristics other than service area were more important in explaining  the variation in cost per transport.
section_title: Median Medicare Margin for Providers in Sample Was about 2 Percent in 2010, but Medicare Margins Varied Widely across Providers
paragraphs: The median Medicare margin, including add-on payments, was about  positive 2 percent in 2010 for the 153 providers in our sample.removed the add-on payments, we found that payments decreased for  the providers in our sample, resulting in a lower median Medicare margin  of negative 1 percent for those providers. See table 2.
section_title: Ambulance Transports Increased from 2004 to 2010, with the Largest Growth Occurring in Super-Rural Areas
paragraphs: Ambulance transports for all Medicare fee-for-service beneficiaries in the  nation increased by 33 percent from 2004 to 2010. All three service  areas—urban, rural, and super-rural—experienced growth. Transports  per 1,000 beneficiaries in super-rural areas grew the most, by 41 percent,  and transports per 1,000 beneficiaries in rural and urban areas increased  by 35 percent and 32 percent, respectively. (See table 4.)
The increase in ambulance transports from 2004 to 2010 is attributable  primarily to an increase in BLS nonemergency transports, which rose by  59 percent from 2004 to 2010. Super-rural areas experienced the largest  increase in BLS nonemergency transports (82 percent). The increase in  Medicare beneficiaries’ use of ambulance services did not appear to be  caused by changes in the demographic characteristics of beneficiaries.  For example, factors such as age, race, and sex remained stable from  2004 to 2010 in urban, rural, and super-rural areas.
Representatives we spoke with from one ambulance provider  organization suggested that some of the increase in ambulance  transports was attributable to increased billing for Medicare ambulance  services at the local-government level. Some local governments that  provided ambulance transports free of charge had been reluctant in the  past to bill insurers such as Medicare because patients would then be  financially responsible for out-of-pocket insurance costs, such as  deductibles and copayments. The increased out-of-pocket costs for  patients had the potential to result in less community support of  ambulance providers through fewer charitable contributions and fewer  volunteers. However, these local governments have begun to bill  Medicare as well as other insurers because of increased budgetary  pressures. Representatives we spoke with also added that the  introduction of the national fee schedule in 2002 may have contributed to  increased billing because it allowed providers to better anticipate the  amount of revenue they could receive from Medicare.
The Department of Health and Human Services (HHS) Office of Inspector  General (OIG) has explored increases in ambulance utilization and has  cited improper payments as one potential cause. For example, HHS  OIG found that nonemergency transports, including BLS nonemergency  transports, made up the majority of improper payments for ambulance  services, and particularly transports for dialysis services. HHS OIG also  found that Medicare’s ambulance transport benefit is highly vulnerable to  abuse and found that many ambulance transports paid for by Medicare  did not meet Medicare program requirements, including transports that  were not medically necessary.
section_title: Agency and Industry Comments and Our Evaluation
paragraphs: We provided a draft of this report to HHS and invited representatives of  AAA to review the draft. HHS had no general or technical comments on  behalf of CMS. The AAA representatives provided oral comments and  generally agreed with our findings; however, AAA had some questions  regarding our methodology and conclusions, which we clarified in the  report where appropriate and discuss below. In addition, AAA provided  technical comments, which we incorporated as appropriate.
AAA representatives questioned whether the Medicare margin results  were comparable to those of the 2007 report and were concerned that  readers would conclude that providers’ Medicare margins have increased  over time. We clarified in the report that we do not consider the results  reported in 2007 and in the current report to be directly comparable  because the samples examined in each report were different and we  reported median Medicare margins in the current report whereas in 2007  we reported average Medicare margins. AAA representatives noted that  our sample contains providers that have been in business since at least  2003 and that the cost data from this sample may not be representative of  all ambulance providers. We agree that the providers in our sample  represent mature and well-established organizations—an advantage  because this approach avoids start-up organizations with potentially high  start-up costs, as described in our scope and methodology. Despite the  differences in the samples and the type of measure used for reporting  Medicare margins, both of these studies showed wide variation in costs  per transport and Medicare margins.
AAA representatives had some questions about the results of our  regression analysis. For example, the regression results suggest that  ambulance providers that receive a greater proportion of government  subsidies tend to have higher costs. The representatives theorized that  providers with higher costs seek additional government support and did  not think this finding was consistent with how their industry operates. As  described in the report, the Medicare Payment Advisory Commission  found an association between increased resources and increased costs  in the hospital industry and theorizes that such hospitals face less  pressure to control costs. We found an association in the ambulance  industry but determining causality was beyond the scope of our work.  AAA representatives also questioned the regression analysis results that  indicated that providers’ use of volunteer staff did not significantly  contribute to differences in providers’ total costs, because our survey data  indicated that personnel costs were, on average, 61 percent of providers’  total costs. The results may be a consequence of the relatively small  sample size and, in addition, a small proportion of providers in our sample  using volunteer staff (21 percent).
Finally, the AAA representatives commented that ground ambulance  providers’ current Medicare payments are lower than those we calculated  for 2010 because of the expiration of a required temporary increase in  Medicare payments for certain geographic areas, the implementation of  a policy for reporting fractional mileage, and the introduction of a  productivity adjustment relative to the annual inflation adjustment of the  fee schedule. In addition, AAA noted that the cost of fuel has increased  since 2010. We acknowledge that these factors likely lowered Medicare  payments and increased costs for some providers after 2010, the most  recent year for which data were available when we began our study.
We are sending copies of this report to other congressional committees  and the Administrator of CMS. In addition, the report is available at no  charge on the GAO website at http://www.gao.gov.
If you or your staffs have any questions about this report, please contact  me at (202) 512-7114 or cosgrovej@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of the report. GAO staff who made major contributions to  this report are listed in appendix II.
section_title: Appendix I: Data and Methods
paragraphs: This appendix describes the data and methods we used to respond to our  research objectives. We conducted a survey of ambulance providers to  collect data on their costs and other characteristics. We relied on these  survey data for much of our analyses and supplemented our survey  results with information from other sources, including Medicare claims  data, as appropriate. We also analyzed Medicare claims data to  determine payments to ambulance providers as well as to determine the  number of Medicare ambulance transports. We tested the internal  consistency and reliability of the data from our survey and the Medicare  claims data and determined that all data sources were adequate for our  purposes. We conducted our work from April 2012 through September  2012 in accordance with generally accepted government auditing  standards.
subsections: section_title: National Survey of Ground Ambulance Providers’ Costs
paragraphs: To collect data on ground ambulance providers’ costs, revenues,  transports, and organizational characteristics for calendar year 2010, or  for the fiscal year that corresponded to all or the majority of a provider’s  calendar year 2010 data, we sent a web-based survey to a random,  nationally representative sample of 294 eligible ambulance providers.  We obtained data from 154 providers for a response rate of 52 percent,  after excluding cost outliers and surveys with unreliable data. We  determined that our sample was nationally representative of the  approximately 2,900 ambulance providers that billed Medicare in 2003  and 2010, were still operational in 2012, and did not share costs with  nonambulance services or air ambulance services. However, the small  sample size and the variability of reported costs reduced the precision of  our estimates.
subsections: section_title: Sample Design
paragraphs: We drew potentially eligible providers for our survey from an existing  sample, originally developed for our 2007 report, of 900 non-hospital- based ground ambulance providers that billed Medicare in 2003.  Through Internet searches and phone contacts to ambulance providers,  we excluded any providers that (1) were no longer in business; (2) shared  costs with nonambulance services, such as those providers affiliated with  a fire department; or (3) we were otherwise not able to contact.did for the 2007 report, we excluded ground ambulance providers that  also provided air ambulance services. After all exclusions, we had 294  eligible providers for potential survey participation. On the basis of the  number of providers that were eligible for our sample and the number of  providers that responded to our survey, we calculated sample weights to  estimate how many Medicare ambulance providers our sample  represented.
section_title: Survey Instrument Development
paragraphs: To develop our survey instrument, we modified the survey instrument  used for our 2007 report, which was mailed to ambulance providers, to  tailor it to our current objectives and format it for use as a web-based  survey. We retained questions about ambulance providers’ costs,  revenues, and transports, as well as questions to identify organizational  characteristics that might affect ambulance providers’ costs, such as the  use of volunteer staff. We added questions related to changes in total  cost (increases or decreases) from 2009 to 2010 and the cost  components that most contributed to the changes. We also asked  providers for their National Provider Identifier (NPI), which providers use  to bill Medicare, and their Provider Transaction Access Number (PTAN).  These numbers enabled us to identify and analyze Medicare claims for   We needed these current identifiers to link  the providers we surveyed.the providers in our sample to Medicare claims data because our sample  was based on the sampling frame of our 2007 report, and Medicare has  implemented a new identification system since then.
We sought feedback on our survey instrument from both internal and  external sources. It was reviewed by internal survey experts and  pretested on seven ambulance providers. We also consulted with the  American Ambulance Association (AAA), an industry group that  represents ambulance providers. On the basis of the feedback we  received, we modified the survey instrument as appropriate.
section_title: Survey Administration
paragraphs: We sent our survey by e-mail to 294 eligible ambulance providers on   April 12, 2012. We asked providers to complete the survey within   2 weeks of receipt. We later extended this deadline 2 weeks to give  providers more time to complete the survey. Providers were encouraged  to contact us by e-mail or a toll-free number so that we could resolve any  questions or problems. We sent three reminder e-mails to providers that  had not yet completed the survey (6, 14, and 21 days after sending the  survey to providers) and made two rounds of reminder telephone calls to  encourage participation. AAA and the National Association of Emergency  Medical Technicians encouraged providers to participate in the survey.  When providers returned surveys that were incomplete, invalid, or  resulted in conflicting responses to key items, we conducted follow-up by  phone and e-mail.
section_title: Survey Data Validity and Reliability
paragraphs: We took steps to ensure that the data reported in the survey were valid  and reliable. First, we included in the survey instrument questions  intended to validate the reported cost data. For example, we asked  providers whether certain cost components (such as personnel costs)  were included in the total cost amount submitted, and we asked how  confident providers were about the total cost amount submitted. As a  result, we excluded from our analyses one provider that was not confident  in the total cost amount. Second, we conducted analyses to identify any  incomplete data or inconsistencies in responses. If we found such data,  we contacted the provider to try to obtain complete or corrected data. We  excluded three providers that were not able to provide complete data on  total cost or total transports. Third, we used a lognormal distribution to  exclude outliers with a cost per transport more than three standard  deviations from the mean. We excluded three providers with costs per  transport that were outliers. All computer programs we used for our  analyses were peer reviewed to verify that they were written correctly and  executed properly. On the basis of our efforts to validate the data,  including computer testing and corrections, we concluded that the data  were sufficiently valid and reliable for our purposes.
section_title: Interpretation of Confidence Intervals and Analysis of Nonrespondents
paragraphs: All sample surveys are subject to sampling error—that is, the extent to  which the survey results differ from what would have been obtained from  the population instead of the sample. The sample is only one of a number  of samples that we might have drawn. As a result, we reported the results  of our analyses with their 95 percent confidence intervals. The 95 percent  confidence interval refers to the range of values within which we would  expect the true population value to fall in 95 percent of the samples we  could have drawn.
We analyzed 2010 Medicare claims data for the survey nonrespondents  and compared this information with similar claims data for providers in our  sample. Using Medicare claims data for all survey recipients, we were  able to test for potential nonresponse bias for the characteristics  contained in the claims data. The nonresponse analysis did not find any  statistically measurable bias that would affect our analyses of providers’  costs.
section_title: Modeling Ambulance Costs
paragraphs: We used regression analysis to investigate the relationship between  providers’ total cost and provider characteristics that may have affected  their costs. We opted for a total cost model using a logarithmic functional  form because it is well grounded in microeconomic theory. Although we  considered using a similar model of the same functional form with cost  per transport as the dependent variable, we determined that the  parameter estimates of such a model would be similar to the total cost  model. Provider characteristics included in our model were: (1) volume of  transports, (2) cost of doing business, (3) mix of Medicare transports,   (4) intensity of Medicare transports, (5) service area, (6) use of volunteer  staff, (7) receipt of government subsidies, and (8) ownership type. We  used those results to produce a graph illustrating the relationship between  cost per transport and volume of transports. We also used the results of  the regression analysis to estimate the effect on providers’ cost per  transport of reducing the value of each of two variables that were  significant in the regression. See table 5 for the characteristics included in  the model, how each characteristic was measured, and the data source  for each characteristic.
Our regression analysis modeled total cost at the provider level as a  function of the provider characteristics described above. We used  ordinary least squares to model the log of total costs for a provider.model was specified in log-log form to conform to standard  microeconomic theory regarding cost functions. The two continuous  independent variables—transport volume and geographic practice cost  index (GPCI)—were entered in log form. The remaining variables were  not entered in log form because they were either indicator variables  (value of 0 or 1) or percentage variables (values ranging from 0 to 1.00).  Three of the explanatory variables in the regression were statistically  significant at the 1 percent or better level in explaining the variation in  providers’ total costs: total transports, percentage of revenues from   The  government subsidies, and percentage of Medicare transports that were  nonemergency. Table 6 shows the regression results.
We used the regression results to predict the log of total cost and then  converted it to total cost by taking the antilog. We applied an adjustment  to the resulting prediction of total cost to account for the fact that our  regression was for log total cost rather than total cost. We then divided  total cost by total transports to derive cost per transport. We used this  method to produce predictions of cost per transport for the range of 1 to  20,000 transports shown in figure 2 of the report.
We also used the regression results to estimate the effect on cost per  transport of a reduced percentage of revenues from government  subsidies and a reduced percentage of nonemergency transports. In each  case, we held the other variables in the regression model at their  regression sample mean and calculated cost per transport for the sample  two ways: one with the value of the variable of interest set at its sample  average and another with it set at a value 25 percent less. We reported  the difference between these two values for each variable.
section_title: Calculating Medicare Ambulance Payments and Use of Transports with Claims Data
paragraphs: To examine the relationship between Medicare payments and providers’  costs, we used Medicare claims data to calculate Medicare payments in  2010 for the providers in our sample, and we calculated Medicare  margins—the percentage difference between providers’ Medicare  payments per transport and their costs per transport. To examine  ambulance transports per 1,000 Medicare beneficiaries, we used  Medicare claims data and Centers for Medicare & Medicaid Services  (CMS) 2010 Medicare enrollment data. We found CMS’s claims and  enrollment data to be sufficiently reliable for the purposes of this report.
subsections: section_title: Medicare Payment Calculations
paragraphs: We calculated 2010 Medicare payments for the providers in our sample  using Medicare carrier claims data. We identified relevant ambulance  claims for 153 providers by using the NPIs (which providers use to bill  Medicare) and PTANs reported by providers on the survey. We  excluded any Medicare claims without either service-level or mileage  payments and any claims with service-level payments that were more  than three standard deviations from the mean of the log distribution for all  such claims. We also excluded any claims for transports with multiple  patients because the calculations for these payments require additional  information not available on Medicare claims.
See figure 5 for the payment formulas specified in the Medicare  ambulance fee schedule.
To calculate service-level payments, we used the type of transport  identified on the claim to determine the associated relative value unit,  which is a constant multiplier that adjusts the service-level base rate to  account for the mix and intensity of the service, and we used the 2010  service-level base rate of $209.65. We used the zip code where the  transport originated to determine the adjustment from the geographic  practice cost index (GPCI), which is used to account for the different  costs of operating ambulance services in different regions of the  country. In accordance with CMS’s payment methodology, we adjusted  70 percent of the service-level payment by the GPCI, and we did not  adjust the other 30 percent by the GPCI. We also used the zip code  where the transport originated to determine the applicable urban, rural, or  super-rural add-on payment rate. To calculate mileage payments, we  used the number of miles reported on the claim and the 2010 mileage  base rate of $6.74. We used the zip code where the transport originated  to determine the applicability of the permanent mileage increase for miles  1 through 17 for rural and super-rural transports and to determine the  applicable urban, rural, or super-rural add-on payment rate.
The total fee schedule payment for each transport is the sum of the  service-level and mileage payments. We calculated payments with and  without the applicable add-on payment rates, and we assumed that  providers charged the maximum allowed amount under the ambulance  fee schedule.that our payment calculations were comparable to actual payments made  based on the claims, we compared the payments we calculated with add- ons to the payment amounts on the claims for a random sample of 6,000  urban, rural, and super-rural claims, and we found the difference in the  amounts to be less than 1 percent.
All payments are expressed in 2010 dollars. To ensure  For the providers in our sample, we reported the median of providers’  Medicare payment per transport by predominant service area (urban,  rural, or super-rural) and for all providers. Medicare payment per transport, we divided the sum of the provider’s  Medicare payments by the sum of its Medicare transports.
section_title: Medicare Margin Calculations
paragraphs: To calculate each provider’s Medicare margin, we used the provider’s  cost per transport, as calculated from the survey responses, and its  Medicare payment per transport, described in the previous section. We  subtracted the provider’s cost per transport from its Medicare payment  per transport, and we divided this amount by the provider’s Medicare  payment per transport. For the providers in our sample, we reported the  median Medicare margin and the distribution of providers’ Medicare  margins by predominant service area (urban, rural, or super-rural) and for  all providers.
section_title: Calculating Number of Ambulance Transports per 1,000 Medicare Beneficiaries
paragraphs: As we did in the 2007 report, we classified providers as super-rural if 60 percent or more  of their Medicare transports in 2010 originated in a super-rural zip code. We classified  providers as rural if they did not meet the super-rural definition and 60 percent or more of  their Medicare transports in 2010 originated in rural or super-rural zip codes. We classified  providers as urban if they did not meet the rural or super-rural classifications. Since some  providers furnish transports in more than one area, there is likely to be some  measurement error in identifying the full effect of service area on costs. excluded claims with service-level payments outside of three standard  deviations from the mean of the log distribution for all such claims for  each of these years. We counted Medicare beneficiaries as the number of  months beneficiaries were enrolled in Medicare Part A or B in 2010  divided by 12. We then divided the number of transports by the number of  enrolled Medicare beneficiaries and multiplied the quotient by 1,000. We  also examined the change in transports per 1,000 Medicare beneficiaries  from 2004 to 2010.
section_title: Medicare Data Reliability
paragraphs: Medicare claims data, which are used by the Medicare program as a  record of payments made to health care providers, are closely monitored  by both CMS and Medicare Administrative Contractors—contractors that  process, review, and pay claims for Medicare Part B–covered services,  including ambulance services. The data are subject to various internal  controls, including checks and edits performed by the contractors before  claims are submitted to CMS for payment approval. Although we did not  review these internal controls, we assessed the reliability of Medicare  claims data by reviewing related CMS documentation, interviewing  agency officials about the data, and comparing payments in a sample of  claims to expected payments based on Medicare’s published ambulance  fee schedule. We determined that the Medicare claims data were  sufficiently reliable for the purposes of this report. In addition, we  assessed the reliability of CMS’s enrollment data by reviewing related  CMS documentation and comparing the enrollment data to published  sources. We determined that Medicare enrollment data were sufficiently  reliable for the purposes of this report.
section_title: Appendix II: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Christine Brudevold,   Assistant Director; Ramsey Asaly; Carl S. Barden; Stella Chiang;   Carolyn Fitzgerald; Leslie V. Gordon; Corissa Kiyan; Rich Lipinski;  Elizabeth T. Morrison; Aubrey Naffis; and Eric Wedum made key  contributions to this report.
section_title: Related GAO Products
paragraphs: Ambulance Providers: Costs and Expected Medicare Margins Vary  Greatly. GAO-07-383. Washington, D.C.: May 23, 2007.
Ambulance Services: Medicare Payments Can Be Better Targeted to  Trips in Less Densely Populated Areas. GAO-03-986. Washington, D.C.:  September 19, 2003.