Optimizing Reimbursement in Medicare Ambulance Services: Financial Strategies

1. 9 Financial Management

2. Learning Objectives 9.1 Discuss the Medicare Ambulance Fee Schedule Final Rule and identify strategies for optimizing reimbursement within its requirements and limitations. 9.2 Describe the historical development of and programs administered by the Centers for Medicare and Medicaid Services.

3. Learning Objectives (Cont.) 9.3 Identify the requirements of Medicare Part B as they apply to ambulance suppliers, including levels of service, medical necessity, physician certification, origins and destinations, vehicles and staffing.

4. Learning Objectives (Cont.) 9.4 Explain the alternative components used to fund ambulance service. 9.5 Describe the financial policies that are addressed in budgeting and in types of budgets. 9.6 Calculate the unit hour utilization and various benchmarks and seasonal fluctuations for various levels of service.

5. Learning Objectives (Cont.) 9.7 Discuss various methods for costing out service. 9.8 Understand managed-care contracting strategies.

6. Financial Requirements and Billing • Revenue recovery is important • Ambulance rates and billing should be balanced • Cost of delivering EMS, collection of revenues, and non-service related monies coming into the organization • Rarely will rates reflect the cost of providing services

7. Who Sets the Rates? • Individual agencies, states, and local jurisdictions set ambulance rates • Medicare and large insurance carriers (third-party payers) set reimbursement rates

8. Marginal Costing • What is the marginal cost of the ambulance transport? • The cost of providing the transport divided by the transport volume = marginal cost per transport • Revenues collected • Can provide additional monies to enhance other EMS services • All revenues are needed for the delivery of the services

9. Funding Sources • Many sources of funding: • Public funds • Tax revenues • Sales taxes, property taxes, or impact fees • EMS operating levies • Municipal bonds

10. Funding Sources (Cont.) • Many sources of funding: • Government reimbursements • Medicaid • Medicare • Military or government dependent care • Other • Grants, capitated agreements with HMOs, philanthropic donations, and civic group donations and subscription programs

11. Medicare • Established in 1965 by the Social Security Act • Covered only those older than age 65 from 1965 to 1972 • In 1972 expanded to cover those with disabilities • Transferred to Health Care Financing Administration in 1997 • In 2001 restructured Centers for Medicare and Medicaid Services

12. Medicare (Cont.) • Provides coverage for low-income families; aged, blind, and disabled; and those eligible for federally assisted income

13. SCHIP • State Children’s Health Insurance Program • Established in 1997, as part of the Balanced Budget Act • Allowed states to provide health insurance for children

14. Balanced Budget Act of 1997 • Reformulated the ambulance fee structure through negotiated rulemaking conducted by: • Industry stakeholders who negotiate the regulations specifying how ambulance services are reimbursed under Medicare

15. FIGURE 9.1Organizations Represented on the Negotiated Rulemaking Committee. Organizations Represented on the Negotiated Rulemaking Committee

16. Medicare Part B • EMS systems are classified according to the level of service provided • ICD-9 coding • Not required on most ambulance claims • Does not generally trigger a payment or a denial of a claim

17. Medicare Part B (Cont.) • ICD-9 coding • Each patient receives a primary and alternative code • Primary code • Reflects condition on scene • Secondary code • Reflect on scene changes from the dispatch information versus what was found on scene

18. Levels of EMS Service • Basic Life Support (BLS) • Advanced Life Support 1 (ALS 1) • Advanced Life Support 2 (ALS 2) • Specialty Care Transport (SCT) Units • Paramedic Intercept (PI) • Fixed Wing (FW) • Rotary Wing (RW)

19. Basic Life Support • If the state allows EMT Basics to initiate IV lines or administer medications, regulations mandate reimbursement at the basic life support level

20. Medically Necessary • Medicare only allows billing at the ALS level when medical necessity has been met • ALS assessment is provided • Information at time of dispatch meets ALS level

21. Upbilling • A misrepresentation of provided services by billing for more expensive service • For example, if an agency performs an ALS assessment on every patient in an attempt to gain ALS reimbursement • Can result in fines, criminal charges, or suspension of Medicare benefits

22. Advanced Life Support,(Level 1) • At least one ALS intervention is performed • “Medically necessary” ALS assessment • An assessment that requires the use of ALS evaluation tools (such as ECG)

23. Advanced Life Support,(Level 2) • Must include the administration of at least three intravenous medications or the performance of at least one of the following skills: • Manual defibrillation/cardioversion, endotracheal intubation, central venous line placement, cardiac pacing, chest decompression, a surgical airway, an intraosseous line

24. Specialty Care Transport • Inter-facility transports requiring level beyond the scope of paramedic care • A higher level of billing • May be billed under Medicare Part A, but: • Must have a physician-documented medical reason for the trip

25. Paramedic Intercept • Paramedic services provided by non-transporting entity • Limitations: • Billing agency must bill all recipients of service regardless of Medicare status • Area must be a rural service area • Must be certified as an ALS service

26. Fixed Wing and Rotary Wing • Fixed and rotary wing aircraft • Covered when point of pickup is inaccessible by a land vehicle, great distances are involved, or other obstacles that are not defined by the rule-making committee

27. Calculation of Ambulance Fees • Base rate adjusted for geographical cost differences • Geographic physician cost index (GPCI) • National base rate of $204.65 • Take 70% and apply the GPCI • The remaining 30% of the $204.65 is added to the adjusted figure

28. Mileage • Services can charge for a loaded mileage, which starts at point of pick up • Currently rate of $5.47 per loaded mile but goes up annually • Zip code must be documented on each claim • Loaded miles only

29. Medicare Rates • Rates increase based on the CPI-urban percentage increase • Nonemergency transports require a physician certification statement (PCS) to bill Medicare • Signed by a physician; if not available, then a nurse, physician assistant, or nurse practitioner may sign

30. Billing for Multiple Patients • Medicare will reimburse multiple patients in the following manner: • Two patients • Will reimburse 75% of base rate for each patient • Three or more patients • Will reimburse 60% of base rate for each patient

31. Reimbursement Involving Death • If death is pronounced before the ambulance is called, then no reimbursement will be made • If death is pronounced after transport has begun, then normal nonemergency rates apply but no mileage and before arrival on scene • If death is pronounced during transport, normal reimbursement rates apply

32. Causes of Claim Denial FIGURE 9.3Causes of Claim Denial.

33. Scheduled Transfers • Medically necessary = success in billing • Medical necessity is established when the patient’s condition is such that transfer by any other means of transportation would endanger the health of the patient

34. Scheduled Transfers (Cont.) • Actual reason for the transfer by ambulance and exactly why the patient cannot ride in a car is required on run report

35. Future Medicare Changes • Medicare will become stricter • Expect to see: • Performance-based reimbursement • Will force EMS providers to provide care and complete transport based on medical necessity and evidence-based medicine • Evidence-based medicine • Interventions and actions that produce a positive outcome for the patient

36. Future Medicare Changes (Cont.) • Medicare Payment Advisory Committee • “Medpac” • May decide not to pay for the cost of the EMS to work an arrest knowing that evidence-based medicine indicates this will not have a favorable or positive outcome • Expect the same trend from third-party private insurance companies

37. Third-Party Billing • Anyone other than Medicare, Medicaid, or self-paying patient • Private insurance companies • HMOs, workers’ compensation insurance • Commercial automobile insurance • Homeowner insurance

38. Third-Party Billing (Cont.) • Restitution from crime victims • Bankruptcy, probate, small claims • Service organizations, travel insurance, embassies

39. HMO Contracting • Negotiated fees for service should actually represent costs • Can limit payment delays with good contract language • Definitions should be clear • Establish prompt payment rules and enforce them • Payment options

40. HMO Contracting (Cont.) • Capitated contract • Annual lump sum payment to the provider to cover an estimated number of patients under their plan • If EMS can provide service at a cost less than what it is paid, the agency can generate a surplus • If costs rise above capitated amount, the agency experiences a loss • Disease management coordinators

41. Financial Policy • Budgets • Basic, ongoing, or continuous expenses should be calculated • Equipment and supplied, vehicles and fuel, medical supplies, facilities, communications, personnel, training, and licensing • Indirect cost • Resources used that are necessary for logistics or infrastructure

42. Financial Policy (Cont.) • Budgets (Cont.) • Indirect cost • Cannot be traced directly to a specific product or service provided by the EMS agency • Insurance, legal and consultation, medical directors, billing services, contract service • Variable cost • Changes in total proportion to changes in the related level of total activity or volume • Fixed costs • Remain unchanged in total for a given period of time

43. EMS Budgets • Line-item budget • Focuses on inputs • Specific items or services by division, department, and unit • Easy to balance • Often requires last-minute spending to empty accounts • Does not focus on results

44. EMS Budgets (Cont.) • Integrative budgeting system • Modification of line-item budget • Three computerized categories: • Personnel, operations, and capital outlays

45. EMS Budgets (Cont.) • Service-based budget • Focuses on outputs or specific services, not dollars • All aspects of a specific type of service • Calls processes “call centers” • Requires full costing or recording of both the direct and indirect costs

46. EMS Budgets (Cont.) • Activity-based cost system • Assigns costs to activities • Cost objects are based on the consumption of resources • Attribute-based cost system • Integrates cost with quality, function, and deployment • Provides means for examining performance in the EMS system and customer levels

47. EMS Budgets (Cont.) • Program-based budget • All costs are summarized for each program, rather than placed in broad categories • Links system costs with results • Limits most line items for lump sums to major objects in EMS operations

48. EMS Budgets (Cont.) • Performance-based budgeting • Develops workload and unit costs • Specified categories are personnel, maintenance, operations, and development • Commonly used for shared functions

49. EMS Budgets (Cont.) • Zero-based budgeting • Requires EMS to justify the existence of a budget for the program or item • Takes a significant amount of administrative time • Has lost popularity • Employed only when a city or department is facing budget shortfalls or there is an economic downturn

50. Cost Per Response • Determined by dividing each provider’s total expenses by the total number of responses • Cost of service must include overhead that is allocated in a one-month period divided by the total responses in the same one-month period