Rural Ambulances:

Medicare Fee Schedule Payments Could Be Better Targeted

HEHS-00-115: Published: Jul 17, 2000. Publicly Released: Aug 3, 2000.

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Pursuant to a congressional request, GAO reviewed Medicare payments for ambulance services in rural areas, focusing on: (1) the challenges faced by rural ambulance providers; (2) how the upcoming fee schedule will affect rural providers relative to their current situation; and (3) what factors have affected claim denial rates for ambulance services.

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.

Recommendation for Executive Action

  1. 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.

    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


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