Summary
Supplying prompt ambulance services around the clock is particularly difficult in some rural areas because these providers serve a large geographic area with a low population density, resulting in significant overhead costs. To reduce costs, they must often maintain a volunteer staff. Mileage reimbursement is crucial to these providers because their ambulance trips are longer than those of their urban counterparts. In addition, because of the scarcity of hospitals, beneficiaries are sometimes taken to hospitals that do not allow Medicare reimbursement. The proposed Medicare fee schedule will alter the way rural ambulance providers are paid. Variations in payment rates will be eliminated, and providers that transport beneficiaries in rural areas will receive enhanced payments to sustain service in sparsely populated areas. GAO recommends that the Health Care Financing Administration refine the payment adjuster to better target the necessary fixed costs of providers in rural areas. A review of 1998 claims data reveals that payment denials have varied widely among carriers, resulting in unequal coverage for Medicare beneficiaries. Different practices among carriers, differences in local policies, and carriers' failure to apply the coverage appropriately may have contributed to the variation in claim denials.
GAO noted that: (1) because many rural ambulance providers serve a large geographic area with a low population density, they face a set of unique challenges; (2) unless they rely on volunteers, they tend to have high per-trip costs because of the lower volume of transports as compared to urban and suburban providers; (3) rural providers also tend to have longer ambulance transports than their urban counterparts, making the adequacy of reimbursement for mileage costs more central to their overall payments than for providers in more densely populated areas; (4) in addition, because rural residents may have fewer alternatives for transportation to hospitals, ambulances may transport some beneficiaries whose conditions do not allow for Medicare reimbursement; (5) furthermore, revenue sources are changing for rural providers with an increasing reliance on Medicare revenues; (6) moreover, maintaining volunteer staffs, which are more common in rural than urban areas, is becoming more difficult; (7) the proposed Medicare fee schedule will alter the way rural ambulance providers are paid; (8) much of the variation in payment rates among similar rural providers will be eliminated; (9) some providers that now are paid more than the national average are likely to receive lower payments under the fee schedule; (10) others, including rural South Dakota providers, that are paid less than the national average are likely to receive increased payments; (11) in addition, providers that transport beneficiaries in rural areas will receive enhanced payments intended to help sustain essential ambulance service in sparsely populated areas; (12) however, this adjustment does not sufficiently distinguish the providers serving beneficiaries in isolated areas and may not be applied appropriately; (13) GAO's review of 1998 claims data show that payment denials have varied widely among carriers, which are the contractors that process claims for freestanding ambulance providers; (14) such variation can result in unequal coverage for Medicare beneficiaries; (15) different practices among carriers, including increased attention to potential fraud, differences in local policies, and carriers' failure to apply the coverage criteria appropriately, may have contributed to the variation in claims denials; (16) claims have also been denied because providers did not properly fill out forms; and (17) the absence of a national coding system that readily identifies the beneficiary's medical condition at the time of the transport has impaired providers' ability to convey information to carriers in a way that facilitates review of claims.
Recommendations
Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
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Recommendations for Executive Action
Recommendation: The Administrator, Health Care Financing Administration, should develop a more refined payment adjuster that better targets the ambulance providers that serve isolated, rural areas where their services are essential to ensuring that Medicare beneficiaries have access to ambulance transports. The rural adjuster should also be structured toward providers' high fixed costs incurred because of the low volume of transports in these isolated areas.
Agency Affected: Department of Health and Human Services: Health Care Financing Administration
Status: Closed - implemented
Comments: CMS agreed that a more refined payment adjuster than the one agreed upon during negotiated rulemaking was needed for ambulance providers that serve isolated rural areas. CMS agreed to work with the ambulance industry after the final rule was published, to identify and collect relevant data to refine the adjustments. The agency issued a final rule on the ambulance fee schedule on February 27, 2002, with an implementation date of April 1, 2002. The rural payment adjuster in the final rule was the one GAO and CMS agreed needed to be further refined. However, responding to concerns about Medicare payment rates for rural ambulance trips, in the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, the Congress increased the base Medicare payment for ambulance trips that originate in qualified rural areas. This fulfilled the intent of GAO's recommendation.
