[Federal Register Volume 67, Number 39 (Wednesday, February 27, 2002)]
[Rules and Regulations]
[Pages 9100-9135]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-4548]



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Part IV





Department of Health and Human Services





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Centers for Medicare and Medicaid Services



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42 CFR Parts 410 and 414



Medicare Program; Fee Schedule for Payment of Ambulance Services and 
Revisions to the Physician Certification Requirements for Coverage of 
Nonemergency Ambulance Services; Final Rule

  Federal Register / Vol. 67, No. 39 / Wednesday, February 27, 2002 / 
Rules and Regulations  

[[Page 9100]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 410 and 414

[HCFA-1002-FC]
RIN 0938-AK30


Medicare Program; Fee Schedule for Payment of Ambulance Services 
and Revisions to the Physician Certification Requirements for Coverage 
of Nonemergency Ambulance Services

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Final rule with comment period.

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SUMMARY: This final rule establishes a fee schedule for the payment of 
ambulance services under the Medicare program, implementing section 
1834(l) of the Social Security Act. As required by that section, the 
proposed rule on which this final fee schedule for ambulance services 
is based was the product of a negotiated rulemaking process that was 
carried out consistent with the Federal Advisory Committee Act and the 
Negotiated Rulemaking Act of 1990. The fee schedule described in this 
final rule will replace the current retrospective reasonable cost 
payment system for providers and the reasonable charge system for 
suppliers of ambulance services. In addition, this final rule requires 
that ambulance suppliers accept Medicare assignment; codifies the 
establishment of new Health Care Common Procedure Coding System (HCPCS) 
codes to be reported on claims for ambulance services; establishes 
increased payment under the fee schedule for ambulance services 
furnished in rural areas based on the location of the beneficiary at 
the time the beneficiary is placed on board the ambulance; and revises 
the certification requirements for coverage of nonemergency ambulance 
services.

DATES: Effective date: April 1, 2002.
    Comment date: We will consider comments on portions of the 
regulation with respect to the following sections of the Medicare, 
Medicaid, and State Child Health Insurance Program Benefits Improvement 
and Protection Act (BIPA), Pub. L. 106-554: the provisions implementing 
the portion of section 205 relating to cost reimbursement for ambulance 
services furnished by certain critical access hospitals (CAHs) 
(Sec. 414.601 and Sec. 414.610(a)); the provisions implementing section 
221, establishing the rate for rural ambulance mileage greater than 17 
miles and up to 50 miles (Sec. 414.610(c)(5)); the provisions 
implementing section 423 with regard to immediate payment of the full 
ambulance services fee schedule amount for in-county ground mileage 
under certain circumstances (Sec. 414.615(g)), if we receive them at 
the appropriate address, as provided below, no later than 5 p.m. on 
April 29, 2002.

ADDRESSES: Mail written comments (an original and 3 copies) to the 
following address only: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-1002-FC, PO Box 
8013, Baltimore, MD 21244-8013.
    To ensure that mailed comments are received in time for us to 
consider them, please allow for possible delays in delivering them.
    If you prefer, you may deliver your written comments (1 original 
and 3 copies) to one of the following addresses: Room 443-G, Hubert H. 
Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201, 
or, Room C5-14-03, 7500 Security Boulevard, Baltimore, MD 21244-8013.
    Comments mailed to the above addresses may be delayed and received 
too late for us to consider them.
    Because of staff and resource limitations, we cannot accept 
comments by facsimile (FAX) transmission. In commenting, please refer 
to file code CMS-1002-FC. Comments received timely will be available 
for public inspection as they are received, generally beginning 
approximately 3 weeks after publication of a document, in Room C5-12-08 
at 7500 Security Blvd, Baltimore, MD, on Monday through Friday of each 
week from 8:30 a.m. to 5 p.m. Please call (410) 786-7197 to view these 
comments.
    For information on ordering copies of the Federal Register 
containing this document and electronic access, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Glenn McGuirk, (410) 786-5723.

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I. Background

    The Medicare program pays for transportation services for Medicare 
beneficiaries when other means of transportation are contraindicated. 
Ambulance services are divided into different levels of ground 
(including water) and air ambulance services based on the medically 
necessary treatment provided during transport. These services include 
the levels of service listed below, which we define later in this rule.
    For Ground:
     Basic Life Support (BLS)
     Advanced Life Support, Level 1 (ALS1)
     Advanced Life Support, Level 2 (ALS2)
     Specialty Care Transport (SCT)
     Paramedic ALS Intercept (PI)
    For Air:
     Fixed Wing Air Ambulance (FW)
     Rotary Wing Air Ambulance (RW)
    Currently payment levels for ambulance services depend, in part, 
upon the entity that furnishes the services. Providers (hospitals, 
including critical access hospitals, skilled nursing facilities, and 
home health agencies) are paid on a retrospective reasonable cost 
basis. Suppliers, which are entities that are independent of any 
provider, are paid on a reasonable charge basis. This final rule 
establishes a fee schedule payment system for all such services.

A. History of Medicare Ambulance Services

1. Original Statutory Coverage of Ambulance Services
    Under section 1861(s)(7) of the Social Security Act (the Act), 
Medicare part B (Supplementary Medical Insurance) covers and pays for 
ambulance services, to the extent prescribed in regulations, when the 
use of other methods of transportation would be contraindicated. The 
House Ways and Means Committee and Senate Finance Committee Reports 
that accompanied the 1965 Social Security Amendments suggest that the 
Congress intended that (1) the ambulance benefit cover

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transportation services only if other means of transportation are 
contraindicated by the beneficiary's medical condition, and (2) only 
ambulance service to local facilities be covered unless necessary 
services are not available locally, in which case, transportation to 
the nearest facility furnishing those services is covered (H.R. Rep. 
No. 213, 89th Cong., 1st Sess. 37 and S. Rep. No. 404, 89th Cong., 1st 
Sess., Pt I, 43 (1965)). The reports indicate that transportation may 
also be provided from one hospital to another, to the beneficiary's 
home, or to an extended care facility.
2. Medicare Regulations for Ambulance Services
    Our regulations relating to ambulance services are located at 42 
CFR part 410, subpart B. Section 410.10(i) lists ambulance services as 
one of the covered medical and other health services under Medicare 
part B. Ambulance services are subject to basic conditions and 
limitations set forth at Sec. 410.12 and to specific conditions and 
limitations included at Sec. 410.40.
    On January 25, 1999, we published a final rule with comment period 
(64 FR 3637) to revise and update Medicare policy concerning ambulance 
services. It identified destinations to which ambulance services are 
covered, established requirements for the vehicles and staff used to 
furnish ambulance services, and clarified coverage of nonemergency 
ambulance services for Medicare beneficiaries. This rule also 
implemented section 4531(c) of the Balanced Budget Act of 1997 (BBA), 
Pub. L. 105-33, concerning Medicare coverage for paramedic intercept 
services in rural communities.
    We published a final rule on March 15, 2000 (65 FR 13911) 
responding to public comments received on the January 25, 1999 final 
rule with comment period regarding Medicare coverage of, and payment 
for, paramedic intercept ambulance services in rural communities. It 
also implemented section 412 of the Medicare, Medicaid, and SCHIP 
Balanced Budget Refinement Act of 1999 (BBRA), Pub. L. 106-113, by 
adding a new definition of a rural area.
3. Negotiated Rulemaking Process
    Section 1834(l)(1) of the Act provides that the ambulance fee 
schedule be established through the negotiated rulemaking process 
described in the Negotiated Rulemaking Act of 1990 (Pub. L. 101-648, 5 
U.S.C. 581-590). Negotiations were conducted by a committee chartered 
under the Federal Advisory Committee Act (FACA) (5 U.S.C. App. 2). The 
Negotiated Rulemaking Committee on the Medicare Ambulance Services Fee 
Schedule (the Committee) consisted of individuals associated with 
national organizations that represent interests that are likely to be 
significantly affected by the fee schedule. There was a public 
solicitation through the Federal Register on January 22, 1999 (64 FR 
3474) for participation in the negotiated rulemaking process. 
(Additional information about the negotiations can be found in the 
January 22, 1999 Federal Register notice or may be accessed at our 
Internet Web site at http://www.hcfa.gov/medicare/ambmain.htm.)
    The Committee discussed various issues related to the ambulance fee 
schedule and a consensus Committee Statement was signed on February 14, 
2000.
4. Proposed Rule
    In our proposed rule, we discussed the negotiated rulemaking 
procedure used to formulate our policy for the ambulance fee schedule 
and proposed additions to part 414 based on recommendations of the 
Committee. We discussed operational and regional variations, cost of 
living differences, services furnished in rural areas, and mileage. The 
structure of the fee schedule, the ambulance inflation factor, and 
phase-in methodology were also discussed.
    In addition, we proposed changes unrelated to the Committee's 
consensus statement on matters including coverage of ambulance 
services, physician certification requirements, payment during the 
first year, and billing method. We discussed local or State law related 
to ambulance services, mandatory assignment, and miscellaneous payment 
policies, including multiple patients, pronouncement of death, multiple 
arrivals, and BLS services furnished in an ALS vehicle.
    We presented our methodology for determining the conversion factor 
(CF) and for implementing the fee schedule. We discussed expenditure 
control for ambulance services and adjustments to account for 
inflation. Finally, to seek input on the desirability and flexibility 
of developing a code set to describe patients' conditions, we included 
an addendum containing a list of medical conditions.
    In accordance with the negotiated rulemaking procedures, we 
proposed the following additions to part 414 based on the 
recommendations of the Committee.
    1. Definitions and levels of services. In part 414, we proposed to 
add subpart H, Sec. 414.605 to define several levels of ground 
ambulance services ranging from BLS to specialty care transport. (Note 
that the term ``ground'' refers to both land and water transportation. 
The definitions and RVUs for each of the levels of service were 
described in Sec. 414.605, ``Definitions.'') Also, we proposed that the 
rate per ground mile for all ground ambulance services would be the 
same for each level of service.
    We stated in the proposed rule that there would be two levels of 
air ambulance services to distinguish fixed wing from rotary wing 
(helicopter) aircraft. In addition, to recognize the operational cost 
differences of the two types of aircraft, there would be two distinct 
payment amounts for air ambulance mileage. The air ambulance services 
mileage rate would be calculated per actual loaded (patient onboard) 
miles flown, expressed in statute miles (that is, ground, not nautical, 
miles.)
    The Committee used an industry consensus document, described below, 
as the basis for defining the levels of ambulance service.
    During 1990, the development of a training blueprint and the 
evaluation of current levels of training and certification for 
prehospital providers were identified as priority needs for national 
emergency medical services (EMS). As a result, the National EMS 
Training Blueprint Project was formed.
    In May 1993, representatives of EMS organizations adopted the 
National EMS Education and Practice Blueprint consensus document 
(Blueprint). As stated in the National EMS Education and Practice 
Blueprint, Executive Summary, printed September 1993, ``The Blueprint 
divides the major areas of prehospital instruction and/or core 
performance into 16 `core elements.' '' For each core element, the 
Blueprint recommends that there be four levels of prehospital EMS 
providers ``corresponding to various knowledge and skills in each of 
the core elements.'' At the ``First Responder'' level, personnel use a 
limited amount of equipment to perform initial assessments and 
interventions. The ``EMT-Basic'' has the knowledge and skill of the 
First Responder, but is also qualified to function as the minimum staff 
for an ambulance. ``EMT-Intermediate'' personnel has the knowledge and 
skills identified at the First Responder and EMT-Basic levels, but is 
also qualified to perform essential advanced techniques and to 
administer a limited number of medications. The ``EMT-Paramedic,'' in 
addition to having the competencies of an EMT-

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Intermediate, has enhanced skills and can administer additional 
interventions and medications.
    Since the release of the Blueprint, a consensus panel of EMS 
educators has recommended that the Department of Transportation, 
National Highway Traffic and Safety Administration (DOT/NHTSA) revise 
the document. DOT/NHTSA has accepted the recommendation of the panel 
and expects to release a revised Blueprint or an equivalent document in 
the near future.
    To request a copy of the National Emergency Medical Services 
Education and Practice Blueprint, please fax your request to: NHTSA/EMS 
Division, (202) 366-7721. Please include your name and address. Because 
of staffing and resource limitations NHTSA will forward the requested 
document via regular mail.
    We proposed the following seven levels of ambulance services.
    a. Basic Life Support (BLS)--When medically necessary, the 
provision of basic life support (BLS) services as defined in the 
National Emergency Medical Services EMS Education and Practice 
Blueprint for the Emergency Medical Technician-Basic (EMT-Basic) 
including the establishment of a peripheral intravenous (IV) line.
    b. Advanced Life Support, Level 1 (ALS1)--When medically necessary, 
this is the provision of an assessment by an advanced life support 
(ALS) ambulance provider or supplier or the furnishing of one or more 
ALS interventions. An ALS assessment is performed by an ALS crew and 
results in the determination that the beneficiary's condition requires 
an ALS level of care, even if no other ALS intervention is performed. 
An ALS provider or supplier is defined as a provider or supplier whose 
staff includes an individual trained to the level of the EMT-
Intermediate or Paramedic as defined in the National EMS Education and 
Practice Blueprint. An ALS intervention is defined as a procedure 
beyond the scope of an EMT-Basic as defined in the National EMS 
Education and Practice Blueprint. These definitions are discussed later 
in the ``Discussion of Public Comments on the Proposed Rule'' section.
    c. Advanced Life Support, Level 2 (ALS2)--When medically necessary, 
the administration of at least three different medications or the 
provision of one or more of the following ALS procedures:
     Manual defibrillation/cardioversion.
     Endotracheal intubation.
     Central venous line.
     Cardiac pacing.
     Chest decompression.
     Surgical airway.
     Intraosseous line.
    d. Specialty Care Transport (SCT)--When medically necessary, for a 
critically injured or ill beneficiary, a level of interhospital service 
furnished beyond the scope of the paramedic as defined in the National 
EMS Education and Practice Blueprint. This is necessary when a 
beneficiary's condition requires ongoing care that must be furnished by 
one or more health professionals in an appropriate specialty area (for 
example, nursing, emergency medicine, respiratory care, cardiovascular 
care, or a paramedic with additional training).
    e. Paramedic ALS Intercept (PI)--These services are defined in 
Sec. 410.40(c) ``Paramedic ALS Intercept Services''. These are ALS 
services furnished by an entity that does not provide the ambulance 
transport. Under limited circumstances, Medicare payment may be made 
for these services. (To obtain additional information about paramedic 
ALS intercept services, please refer to the March 15, 2000 final rule 
(65 FR 13911).)
    f. Fixed Wing Air Ambulance (FW)--We proposed that fixed wing air 
ambulance services would be covered when the point from which the 
beneficiary is transported to the nearest hospital with appropriate 
facilities is inaccessible by land vehicle, or great distances or other 
obstacles (for example, heavy traffic) and the beneficiary's medical 
condition is not appropriate for transport by either BLS or ALS ground 
ambulance.
    g. Rotary Wing Air Ambulance (RW)--We proposed that rotary wing 
(helicopter) air ambulance services are covered when the point from 
which the beneficiary is transported to the nearest hospital with 
appropriate facilities is inaccessible by ground vehicle, or great 
distances or other obstacles (for example, heavy traffic) and the 
beneficiary's medical condition is not appropriate for transport by 
either BLS or ALS ground ambulance.

B. Current Payment System

    The Medicare program pays for ambulance services on a reasonable 
cost basis when furnished by a provider and on a reasonable charge 
basis when furnished by a supplier. (For purposes of this discussion, 
the term ``provider'' means all Medicare-participating institutional 
providers that submit claims for Medicare ambulance services 
(hospitals, including critical access hospitals (CAHs); skilled nursing 
facilities (SNFs); and home health agencies (HHAs).) The term 
``supplier'' means an entity that is other than a provider. See 
Sec. 400.202.) The reasonable charge methodology bases payment for 
ambulance services furnished by ambulance suppliers on the lowest of 
the customary, prevailing, actual, or inflation indexed charge (IIC).
    The following describes the current reasonable charge billing 
methods for ambulance services:
     Method 1: A single, all-inclusive charge reflecting all 
services, supplies, and mileage.
     Method 2: One charge reflecting all services and supplies 
(base rate) with a separate charge for mileage.
     Method 3: One charge for all services and mileage, with a 
separate charge for supplies.
     Method 4: Separate charges for services, mileage, and 
supplies.

C. Organization of the Preamble

    The headings for the discussion of various policy issues in this 
final rule correspond to the headings used in the September 2000 
proposed rule. For the convenience of the reader, the analysis of 
comments and their responses are integrated with the discussion of each 
issue.

D. Recent Legislation

    We do not intend for the aggregate amount of payments under the 
ambulance fee schedule to be lower than the aggregate amount of 
payments under the current system. Consequently, as described below, we 
will adjust the conversion factor (CF) and air ambulance rates if 
actual experience under the fee schedule is different from the 
assumptions used to determine the initial CF and air ambulance rates.
    We estimate that total spending (the sum of Medicare program 
payments and beneficiary copayments) for ambulance services over the 
next five years will be:

------------------------------------------------------------------------
                                                               Payments
                       Calendar year                         ($ billion)
------------------------------------------------------------------------
2002.......................................................          2.7
2003.......................................................          2.8
2004.......................................................          2.9
2005.......................................................          3.0
2006.......................................................          3.1
------------------------------------------------------------------------

These estimates are based on the assumption that the ambulance 
inflation factor will be 2.2 percent for 2002 and 2.5 percent for years 
2003 through 2006, that the ratio of services furnished at the various 
levels of intensity (for example, BLS versus ALS1 versus ALS2, etc.) 
will not change and that there will be an increase in Medicare 
beneficiary enrollment of 0.9, 0.8, 0.9, 1.3 and 1.0 percent in the 
years 2002 through 2006, respectively. To the extent that any of

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these assumptions are different from actual experience, actual payments 
will be higher or lower than these estimates.
    As we indicated in the proposed rule, we will monitor payment data 
and evaluate whether the assumptions used to establish the original CF 
(for example, the ratio of the volume of BLS services to ALS services) 
are accurate. If the actual proportions among the different levels of 
service are different from the projected amounts, we will adjust the CF 
accordingly and apply this adjusted CF prospectively. Similarly, if the 
level of low charge billing is significantly different from the assumed 
level, we will also adjust the CF and apply such an adjusted CF 
prospectively.
    Over the past 20 years, the Congress has been moving towards fee 
schedules and prospective payment systems for Medicare payment. In the 
case of ambulance services, the reasonable charge methodology has 
resulted in a wide variation of payment rates for the same service. In 
addition, this payment methodology is administratively burdensome, 
requiring substantial recordkeeping for historical charge data. The 
Congress, under the BBA, mandated the establishment of a national fee 
schedule for payment of ambulance services.
1. Balanced Budget Act of 1997 (BBA)
    Section 4531(b)(2) of the BBA added a new section 1834(l) to the 
Social Security Act (the Act). Section 1834(l) of the Act requires the 
establishment of a national fee schedule for payment of ambulance 
services under Medicare part B through negotiated rulemaking. This 
section also requires that in establishing the ambulance fee schedule, 
we will--
     Establish mechanisms to control increases in expenditures 
for ambulance services as a benefit under part B of the Medicare 
program;
     Establish definitions for ambulance services that link 
payments to the types of services furnished;
     Consider appropriate regional and operational differences;
     Consider adjustments to payment rates to account for 
inflation and other relevant factors;
     Phase in the fee schedule in an efficient and fair manner; 
and,
     Require that payment for ambulance services be made only 
on an assignment-related basis.
    In addition, the BBA requires that ambulance services covered under 
Medicare be paid based on the lower of the actual billed charge or the 
ambulance fee schedule amount. The law also provides, in a paragraph 
entitled ``Savings,'' that total payments during the first year of the 
ambulance fee schedule may be no more than what would have been paid if 
the ambulance fee schedule were not in effect. In addition, we are 
implementing the provisions of a regulation proposed in June 1997 that 
we would have made final prior to the fee schedule, but decided instead 
to implement coincident with the fee schedule, as discussed below.
    Section 4531(c) of BBA 1997 provided for payment of paramedic 
advanced life support (ALS) intercept services directly to the entity 
furnishing those services under limited circumstances. Paramedic ALS 
intercept services are ALS services delivered by paramedics that 
operate separately from the agency that provides the ambulance 
transport. This type of service is most often provided for an emergency 
ambulance transport in which a local volunteer ambulance that can 
provide only basic life support (BLS) level service is dispatched to 
transport a beneficiary. If the beneficiary needs ALS services such as 
EKG monitoring, chest decompression, or IV therapy, another entity 
dispatches a paramedic to meet the BLS ambulance at the scene or once 
the ambulance is on the way to the hospital. The ALS paramedics then 
provide their services to the beneficiary. One statutory criteria for 
payment is that the service must be furnished in a rural area. Other 
criteria (for example, the transporting entity must be volunteer) 
limited the application of this provision. The program defined a rural 
area as one that was outside any area defined by the Office of 
Management and Budget as a Metropolitan Statistical Area, (MSA) or New 
England County Metropolitan Area (NECMA).
2. Balanced Budget Refinement Act of 1999
    Section 412 of the BBRA provided a new definition for the term 
``rural'' in the context of the Medicare coverage provision for 
paramedic ALS intercept services. The BBRA states that, effective for 
services furnished on or after January 1, 2000:

    ``An area shall be treated as a rural area if it is designated 
as a rural area by any law or regulation of the State or if it is 
located in a rural census tract of a metropolitan statistical area 
(as determined under the most recent Goldsmith modification, 
originally published in the Federal Register on February 27, 1992 
(57 FR 6725).''

This definition applies only to the Medicare paramedic ALS intercept 
benefit implemented at Sec. 410.40(c). This is a very limited benefit 
and to date we know of only one State (New York) with areas that meet 
the statutory requirements. (See the March 15, 2000 final rule on 
``Coverage of, and Payment for, Paramedic Intercept Ambulance 
Services'' (65 FR 13911).) For all other ambulance services, the 
definition of ``rural'' specified in this final rule will apply.
3. The Medicare, Medicaid, and State Child Health Insurance Program 
Benefits Improvement and Protection Act of 2000 (BIPA)
    BIPA provided the following changes to the ambulance fee schedule 
that have been incorporated into this rule.
a. Critical Access Hospital (CAH)
    The proposed rule would have applied the ambulance fee schedule to 
all entities furnishing ambulance services to Medicare beneficiaries. 
Section 205 of BIPA provided that CAHs, or entities owned and operated 
by them, are paid for ambulance services based on reasonable cost if 
there is no other ambulance provider or supplier within a 35-mile 
drive. As a result, these entities are exempt from the ambulance fee 
schedule described in this final rule. These entities are also exempt 
from the current cost-per-trip inflation cap applicable to providers. 
This cap, established by section 4531(a)(1) of the BBA, limits 
increases in the cost per trip of ambulance services from one year to 
the next by the consumer price index for all urban consumers, reduced 
by 1 percentage point. Implementation of section 205 of BIPA requires 
us to establish a process for a CAH to qualify for this exemption. Such 
a process was addressed in a separate final rule, ``Medicare Program; 
Changes to the Hospital Inpatient Prospective Payment Systems and Rates 
and Costs of Graduate Medical Education; Fiscal Year 2002 Rates, Etc.; 
Final Rules,'' published August 1, 2001 (66 FR 39828). The payment 
policy component is addressed in this rule.
    Comment: Some commenters believe that we should pay all CAHs based 
on cost payment for ambulance services because, in their view, section 
1834(g) of the Act requires that CAHs be paid on a reasonable cost 
basis for all services, not just their services to inpatients and 
outpatients.
    Response: The Congress, in section 205 of BIPA, specifically 
provides that ambulance services furnished on or after December 21, 
2000 by a CAH or an entity owned and operated by a CAH be paid on a 
reasonable cost basis if the CAH or entity is the only provider or 
supplier located within a 35-mile drive of the CAH or entity. BIPA did 
not grant CMS broad authority to pay other CAHs on a cost basis. 
Therefore, CAHs that do not fall within the ambit of section 205

[[Page 9104]]

of BIPA will be paid under the ambulance fee schedule.
b. Rural Ambulance Mileage
    The proposed rule would have established payment for rural mileage 
greater than 17 miles at the same rate as mileage within urban areas. 
Section 221 of BIPA provided that the payment rate for rural ambulance 
mileage greater than 17 miles and up to 50 miles be increased by not 
less than one-half of the additional payment per mile established for 
the first 17 miles of a rural ambulance trip. We are establishing this 
rate at one-half of the additional payment per mile established for the 
first 17 miles of a rural ambulance trip. This amount is the minimum 
that is required by the plain language of the law and is not 
discretionary. We believe that proposed rulemaking, which would be 
necessary to set the amount at a level higher than the minimum, is 
impracticable in this instance for timely implementation the law. This 
is consistent with the amount established by the Congress for the 
period prior to April 1, 2002. We are waiving proposed rulemaking for 
this provision and will implement it as a final rule with comment 
period. Therefore, we will accept public comments on this policy.
c. Inflation Factor
    The proposed rule would have increased the per trip payments for 
services furnished in 2001 over the per trip payments for these 
services furnished in 2000 by an amount equal to the change in the CPI-
U reduced by one percent. Section 423 of BIPA provided that the 
ambulance inflation factor for services furnished during the period 
July 1, 2001 through December 31, 2001 be equal to 4.7 percent, an 
increase of two percentage points over the rate in the proposed rule. 
We have implemented this provision without proposed rulemaking because 
it was self-implementing, not discretionary for CMS, and did not 
require us to interpret the law. For that reason, we find notice and 
comment rulemaking unnecessary.
d. Ground Ambulance Mileage
    The proposed rule would have paid for all ground ambulance mileage 
during a four-year transition period based on a blend of the current 
payment rate and the fee schedule rate. Section 423 provided that there 
will be no phased-in blended payment for mileage for ambulance 
suppliers paid by carriers in those States in which, prior to the fee 
schedule, the carrier's payment to all suppliers did not include 
separate payment for all in-county ambulance mileage. Mileage paid by 
these carriers in these States will be paid based on the full fee 
schedule amount. This provision does not apply to providers. Because 
the law does not permit CMS to exercise any discretion in implementing 
the policy, we find notice and comment rulemaking unnecessary. 
Therefore, we are waiving proposed rulemaking for this provision and 
will implement it as a final rule with comment. Therefore, we will 
accept public comments on this policy.

E. Components of Ambulance Fee Schedule Payment Amounts

    Ambulances may be ground, water or air. We proposed that the 
payment amount for each ambulance service paid under the ambulance fee 
schedule would be the sum of a base payment amount and a mileage rate. 
The base payment amount for each air ambulance service paid under the 
ambulance fee schedule would be the product of two primary factors: (1) 
A nationally uniform unadjusted base rate; and (2) a geographic 
adjustment factor for an ambulance fee schedule area.
    We proposed that the base payment amount for each ground or water 
ambulance service paid under the ambulance fee schedule would be the 
product of three factors--
    (1) A nationally uniform relative value for the service;
    (2) A geographic adjustment factor for an ambulance fee schedule 
area; and
    (3) A nationally uniform conversion factor (CF) for the service.

We are proceeding with these proposals in this final rule. A detailed 
description of these factors is discussed in this final rule.
    Relative value units (RVUs) measure the value of ambulance services 
relative to the value of a base level ambulance service. Thus, if the 
value of the resources necessary to furnish service B is twice the 
value of the resources needed to furnish service A, service B will have 
twice as many RVUs as service A. RVUs are multiplied by a CF expressed 
as a dollar value to produce a payment amount. The RVUs represent, on 
average, the relative resources associated with the various levels of 
ambulance services. RVUs for each level of service were established by 
the Committee.
    Because the fee schedule is based on the relative values of 
different levels of ground ambulance services relative to a basic life 
support ground ambulance service, a factor is needed to convert the 
relative value to a dollar amount which is the national base payment 
rate. In order to determine the CF, the general approach is first to 
determine the total amount of money available and divide that total by 
the total number of relative value units that we estimate will be in 
the fee schedule for the base year. As we describe in more detail 
below, we used 1998 Medicare ambulance claims data to determine the 
total RVUs in this calculation.
    Section 1834(1)(3) of the Act states that, in establishing the 
ambulance fee schedule, the Secretary must ensure that the aggregate 
amount of payment made for ambulance services in calendar year (CY) 
2000 (originally expected to be the first year of the fee schedule) 
does not exceed the aggregate amount of payment that would have been 
made absent the fee schedule. In the January 22, 1999 notice concerning 
the meetings of the Committee, we stated that we were postponing final 
agency action, pending establishment of the ambulance fee schedule, on 
a proposal to base payment on the level of service (ALS or BLS) 
actually needed by the beneficiary. We stated our position that the 
savings that would have been realized through implementation of that 
policy in 1998 should not be lost to the Medicare program. We estimated 
that $65 million in program savings would have been realized in 1998 if 
this policy had been in effect at that time.
    Section 4531(b)(3) of the BBA, which added section 1834(l)(3) to 
the Act, provided that the fee schedule was to be effective for 
ambulance services furnished on or after January 1, 2000. However, 
because of other statutory obligations, the scope of systems changes 
required to implement the ambulance fee schedule, and the need to 
ensure that our computerized systems were compliant with the Year 2000 
(Y2K) requirements, we could not meet this statutory deadline.
    In the September 12, 2000 proposed rule, we indicated our intention 
to implement the fee schedule beginning January 1, 2001. However, 
although the proposed rule was largely based on an agreement reached as 
part of a negotiated rulemaking process with representatives of the 
ambulance industry and other interests, we received over 340 public 
comments. We did not have sufficient time to carefully consider all 
comments and publish a final rule in time to implement the fee schedule 
by January 1, 2001. This final rule establishes an implementation date 
of April 1, 2002. Our objective is to have the ambulance fee schedule 
become effective as soon as we can, in this case, April 1, 2002.

F. Negotiated Rulemaking Process

    Section 1834(l)(1) of the Act provided that the ambulance fee 
schedule be

[[Page 9105]]

established through the negotiated rulemaking process described in the 
Negotiated Rulemaking Act of 1990 (Pub. L. 101-648, 5 U.S.C. 581-590). 
Prior to using negotiated rulemaking under the Negotiated Rulemaking 
Act, the head of an agency must generally consider whether the 
following conditions exist:
     There is a need for a rule.
     There are a number of identifiable interests that will be 
significantly affected by the rule.
     There is a reasonable likelihood that a committee can be 
convened with a balanced representation of persons who--
    + Can adequately represent the interests identified; and,
    + Are willing to negotiate in good faith to reach a consensus on 
the proposed rule.
     There is a reasonable likelihood that a committee will 
reach a consensus on the proposed rule within a fixed timeframe.
     The negotiated rulemaking procedure will not unreasonably 
delay the notice of proposed rulemaking and the issuance of a final 
rule.
     The agency has adequate resources and is willing to commit 
its resources, including technical assistance, to the committee.
     The agency, to the maximum extent possible consistent with 
the legal obligations of the agency, will use the consensus of the 
committee as the basis for the rule proposed by the agency for notice 
and comment.
    Negotiations were conducted by a committee chartered under the 
Federal Advisory Committee Act (FACA) (5 U.S.C. App. 2). We used the 
services of an impartial convener to help identify interests that would 
be significantly affected by the proposed rule (including residents of 
rural areas) and the names of organizations who were willing and 
qualified to represent those interests. The Negotiated Rulemaking 
Committee on the Medicare Ambulance Services Fee Schedule (the 
Committee) consisted of individuals associated with national 
organizations that represent interests that were likely to be 
significantly affected by the fee schedule. (Additional information 
about the negotiations can be found in the January 22, 1999 Federal 
Register notice or may be accessed at our Internet Web site at http://www.hcfa.gov/medicare/ambmain.htm.)
    To the extent that the proposed rule accurately reflects the 
Committee Statement, signed on February 14, 2000, each member of the 
Committee has agreed not to comment on those issues on which consensus 
was reached.

G. Interaction With the Proposed Rule Published on June 17, 1997

    On June 17, 1997, we published a proposed rule (62 FR 32715) in the 
Federal Register to revise and update the Medicare ambulance services 
regulations at Sec. 410.40. Specifically, we proposed: To base Medicare 
payment on the level of ambulance service required to treat the 
beneficiary's condition; to clarify and revise the policy on coverage 
of nonemergency ambulance services; and to set national vehicle, staff, 
billing, and reporting requirements. As noted above, section 1834(1)(2) 
of the Act provides, in part, that in establishing the ambulance fee 
schedule, the Secretary establish definitions for ambulance services 
that link payments to the types of services furnished. One of the 
provisions of the June 17, 1997 proposed rule would have defined 
ambulance services as either BLS or ALS and linked Medicare payment to 
the type of service required by the beneficiary's condition. We 
received a large number of comments on this provision, and, in general, 
commenters were very concerned about our proposal.

II. Discussion of Public Comments on the Proposed Rule

    In response to the publication of the September 2000 proposed rule, 
we received approximately 340 comments. We received comments from, 
among others, national ambulance organizations, emergency physician 
groups and State emergency programs. The majority of the comments 
addressed issues related to medical condition descriptions lists, 
physician certification, and definitions of services.
    As stated previously, the headings for the policy issues in this 
final rule correspond to the headings used in the September 2000 
proposed rule. For the convenience of the reader, the analysis of 
comments and their responses are integrated with the discussion of each 
issue.

A. Proposals Based on Negotiated Rulemaking

    In our proposed rule, published September 12, 2000, we discussed 
the negotiated rulemaking procedures used to formulate our policy for 
the ambulance fee schedule.
    Comment: One commenter stated that we should reconvene the 
Committee to consider the comments received in response to the proposed 
rule and also reconvene the Committee annually to consider all future 
adjustments.
    Response: We have decided not to reconvene the Committee. We have 
adhered to the Committee's recommendations in all cases in which the 
Committee addressed an issue. Furthermore, some issues were excluded 
from the negotiation process, and therefore, were not within the 
purview of the Committee. Also, we believe that reconvening the 
Committee would significantly postpone the implementation of the 
regulation.
    Comment: Commenters from various regions stated that their 
organizations were not represented on the Committee.
    Some commenters believe that the North American Association of 
Public Utility Models (NAPUM) should have been included as a 
participant in the negotiated rulemaking process. NAPUM could have 
shared its Public Utility Model EMS system in the development of the 
ambulance fee schedule.
    Another commenter stated that the fixed wing air ambulance 
organizations were not properly represented at the negotiated 
rulemaking meetings and, therefore, the payment rates for fixed wing 
air mileage are inadequate.
    Response: There was a public solicitation through the Federal 
Register (January 22, 1999) for participation in the negotiated 
rulemaking process. All interested parties who responded to this public 
notice were given due consideration by the neutral convener whom we 
retained for this purpose. Also, the Association of Air Medical 
Services (AAMS), which has approximately 130 members that are fixed 
wing providers, represented the air ambulance industry.
    In the proposed rule, we proposed the following additions to part 
414 based on the recommendations of the Committee.
1. Definitions and Levels of Services
    In part 414, we proposed to add subpart H, Sec. 414.605 that would 
define several levels of ground ambulance services ranging from BLS to 
specialty care transport (SCT). (Note that the term ``ground'' refers 
to both land and water transportation. The definitions and RVUs for 
each of the levels of service are described in Sec. 414.605, 
``Definitions.'') Also, this section proposed that the mileage rate 
paid under the fee schedule per ground mile would be the same for each 
level of ground ambulance service.
    In the course of establishing national standards for ALS and BLS 
during 1990, the development of a training blueprint and the evaluation 
of current levels of prehospital provider training and certification 
were identified by the national emergency medical services (EMS) 
industry as a priority need for EMS. As a result, the National EMS 
Training Blueprint Project was formed.

[[Page 9106]]

    In May 1993, representatives of EMS organizations adopted the 
Blueprint consensus document. This consensus document was used as the 
basis for defining the levels of service. As stated in the Blueprint, 
Executive Summary, printed September 1993, ``The Blueprint divides the 
major areas of prehospital instruction and/or core performance into 16 
`core elements.' '' For each core element, the Blueprint recommended 
that there be four levels of prehospital EMS providers ``corresponding 
to various knowledge and skills in each of the core elements.'' At the 
First Responder level, personnel use a limited amount of equipment to 
perform initial assessments and interventions.
    The EMT-Basic has the knowledge and skill of the First Responder, 
but is also qualified to function as the minimum staff for an 
ambulance. EMT-Intermediate personnel has the knowledge and skills 
identified at the First Responder and EMT-Basic levels, but is also 
qualified to perform essential advanced techniques and to administer a 
limited number of medications. The EMT-Paramedic, in addition to having 
the competencies of an EMT-Intermediate, has enhanced skills and can 
administer additional interventions and medications.
    After the release of the Blueprint, a consensus panel of EMS 
educators had recommended that DOT/NHTSA revise the document. The 
Department of Transportation, National Highway Traffic and Safety 
Administration (DOT/NHTSA) has accepted the recommendation of the panel 
and is expected to release a revised Blueprint or an equivalent 
document in the near future.
    To request a copy of the National Emergency Medical Services 
Education and Practice Blueprint, please fax your request to: NHTSA/EMS 
Division, (202) 366-7721. Please include your name and address. Because 
of staffing and resource limitations, NHTSA will forward the requested 
document via regular mail.
Levels of Ambulance Services
    Payment for all ambulance services under the fee schedule will be 
based on a base rate payment. In addition, there will be a separate 
payment for mileage.
    In the proposed rule, we stated that there would be two levels of 
air ambulance services to distinguish fixed wing from rotary wing 
(helicopter) aircraft. In addition, to recognize the operational cost 
differences of the two types of aircraft, there would be two distinct 
payment amounts for air ambulance mileage. The air ambulance services 
mileage rate would be calculated per actual loaded (patient on board) 
miles flown, expressed in statute miles (that is, ground, not nautical, 
miles).
    In the proposed rule, we proposed the seven levels of ambulance 
services shown below. We expressed the qualifications for staff at the 
various levels in terms of the Blueprint. As just noted, we are 
revising the proposed qualifications to indicate that the vehicle 
staffing will comply with existing State and local laws for each level 
of service.
    a. Basic Life Support (BLS)--In the proposed rule, we stated that, 
when medically necessary, the provision of basic life support (BLS) 
services is defined in the National Emergency Medicine Services (EMS) 
Education and Practice Blueprint for the Emergency Medical Technician-
Basic (EMT-Basic) including the establishment of a peripheral 
intravenous (IV) line.
    b. Advanced Life Support, Level 1 (ALS1)--In the proposed rule, we 
stated that, when medically necessary, this level of service requires 
the provision of an assessment by an advanced life support (ALS) 
ambulance provider or supplier and the furnishing of one or more ALS 
interventions. An ALS assessment is performed by an ALS crew and 
results in the determination that the beneficiary's condition requires 
an ALS level of care, even if no other ALS intervention is performed. 
The proposed rule also stated that an ALS provider or supplier is 
defined as a provider trained to the level of the EMT-Intermediate or 
Paramedic as defined in the National EMS Education and Practice 
Blueprint. We proposed to define an ALS intervention as a procedure 
beyond the scope of an EMT-Basic as defined in the National EMS 
Education and Practice Blueprint.
    c. Advanced Life Support, Level 2 (ALS2)--In the proposed rule, we 
stated that this level of service is defined by, when medically 
necessary, the administration of at least three different medications 
or the provision of one or more of the following ALS procedures:
     Manual defibrillation/cardioversion.
     Endotracheal intubation.
     Central venous line.
     Cardiac pacing.
     Chest decompression.
     Surgical airway.
     Intraosseous line.
    d. Specialty Care Transport (SCT)--In the proposed rule, we stated 
that this level of service is defined by, when medically necessary, for 
a critically injured or ill beneficiary, a level of interhospital 
service furnished beyond the scope of the paramedic as defined in the 
National EMS Education and Practice Blueprint. We stated that this 
service would be necessary when a beneficiary's condition requires 
ongoing care that must be furnished by one or more health professionals 
in an appropriate specialty area (for example, nursing, emergency 
medicine, respiratory care, cardiovascular care, or a paramedic with 
additional training).
    e. Paramedic ALS Intercept (PI)--In the proposed rule, we stated 
that these services would be defined in Sec. 410.40(c) ``Paramedic ALS 
Intercept Services.'' These are ALS services furnished by an entity 
that does not provide the ambulance transport. Under limited 
circumstances, Medicare payment may be made directly to the entity 
furnishing paramedic services. (To obtain additional information about 
paramedic ALS intercept services, please refer to the March 15, 2000 
final rule (65 FR 13911).)
    f. Fixed Wing Air Ambulance (FW)--In the proposed rule, we stated 
that fixed wing air ambulance services would be covered when the point 
from which the beneficiary is transported to the nearest hospital with 
appropriate facilities is inaccessible by land vehicle, or great 
distances or other obstacles (for example, heavy traffic) and the 
beneficiary's medical condition is not appropriate for transport by 
either BLS or ALS ground ambulance.
    g. Rotary Wing Air Ambulance (RW)--In the proposed rule, we stated 
that rotary wing (helicopter) air ambulance services would be covered 
when the point from which the beneficiary is transported to the nearest 
hospital with appropriate facilities is inaccessible by ground vehicle, 
or great distances or other obstacles (for example, heavy traffic) and 
the beneficiary's medical condition is not appropriate for transport by 
either BLS or ALS ground ambulance.
    Comment: In the context of determining when payment would be made 
at the ALS rate versus the BLS rate, some commenters disagreed with the 
definitions provided in the National Emergency Medical Services 
Education and Practice Blueprint (the Blueprint), stating that State 
definitions and standards differed from this document. Some States 
license as paramedics individuals who have not completed all of the 
hours or modules required by the Department of Transportation's 
National Standard Paramedic Curriculum. Technically, these individuals 
would not be ``trained to the level'' of a paramedic as defined in the 
Blueprint and the resulting National Standard Paramedic Curriculum. 
Commenters suggested that the definition of a

[[Page 9107]]

paramedic should be a person who is licensed by the State at an ALS 
level, regardless of whether the level of the training of the person 
meets the definition of ``paramedic'' as described in the Blueprint or 
National Standard Paramedic Curriculum.
    Several commenters also noted that the definition of BLS is 
confusing regarding establishment of a peripheral intravenous (IV) 
line. They further commented that, in many States, BLS personnel are 
not permitted by State law to establish IV lines. To clarify the 
definition, the commenters recommended that we make it clear that, when 
an IV line is established by an ALS crew, this is an ALS intervention 
that qualifies the trip as an ALS transport.
    Response: As a basis for defining the levels of service in the 
proposed rule, we incorporated the knowledge and skills outlined in the 
Blueprint. After considering the observations made by commenters and 
recognizing that the Department of Transportation, National Highway 
Traffic and Safety Administration has agreed to revise the Blueprint in 
the near future, we concluded that the knowledge and skill levels 
outlined in the Blueprint may be contrary to some existing State 
training standards and requirements. We have chosen instead, to rely on 
vehicle staffing requirements contained in existing State and local 
laws. Therefore, we are revising Sec. 414.605 to indicate that payment 
will be made at the ALS1 level if the service furnished is beyond the 
skill level of an EMT-Basic in accordance with State and local laws.
    Comment: Several commenters noted that the definition of ALS1 
differed from that in the Committee Statement. Specifically, the 
conjunction used in the Committee Statement between ``assessment by an 
advanced life support (ALS) ambulance provider or supplier'' and ``the 
furnishing of one or more ALS interventions'' was ``and/or'' rather 
than ``and.'' In addition, commenters pointed out that the ALS2 
definition differed slightly between the preamble of the proposed rule 
and the proposed regulation text. For ALS2, commenters addressed the 
Committee Statement definition which was based on the supplier's 
provision of ``three different medications or the provision of one or 
more of the following ALS procedures:
     Manual defibrillation/cardioversion.
     Endotracheal intubation.
     Central venous line.
     Cardiac pacing.
     Chest decompression.
     Surgical airway.
     Intraosseous line.''
    The proposed definition at Sec. 414.605 stated ``three different 
medications and the provision of one or more of the following ALS 
procedures:
     Manual defibrillation/cardioversion.
     Endotracheal intubation.
     Central venous line.
     Cardiac pacing.
     Chest decompression.
     Surgical airway.
     Intraosseous line.''
    Response: We agree with the commenters that the conjunction was 
inconsistent with the Committee Statement and, therefore, we are 
revising the regulation text to be consistent with the Committee 
Statement. We note, however, that we are using the conjunction ``or'' 
because this term carries the same meaning as ``and/or.''
    Comment: Many commenters stated that the proposed definition of ALS 
assessment is confusing. The definition states that the ALS assessment 
is one ``performed by an ALS crew that results in the determination 
that the beneficiary's condition requires an ALS level of care.'' The 
commenters stated that, in order to be consistent with the Committee 
Statement, the definition should state that an ALS assessment is one 
performed by an ALS crew to determine whether the beneficiary's 
condition requires an ALS level of care. Some commenters suggested that 
the definition should be revised as follows: `` `Advanced Life Support 
(ALS) assessment' is an assessment of a beneficiary with a medical 
condition requiring assessment by an ALS crew to determine whether ALS 
interventions are needed or may be needed during transport.''
    Response: We agree, and we have clarified the definition of ALS 
assessment accordingly. We are also clarifying that the ALS assessment 
is relevant only in an emergency case. While the Committee Statement is 
silent on this point, we believe that the ALS assessment would not be 
required in non-emergency or scheduled situations.
    Comment: Many commenters stated that we should provide payment for 
all drugs, both low and high cost. Commenters stated that we had 
refused to negotiate on the issue of a separate payment for drugs in 
addition to and apart from the fee schedule payment for the ambulance 
transport, on the grounds that all drug costs should be included in the 
base rate. The commenters believe that this position fails to take into 
account the fact that many ambulance systems are now being forced to 
pay for drugs that were previously paid for outside of the Medicare 
payment. These costs, they argue, were not captured in the aggregate 
ambulance payment amount which we calculated and upon which we would 
calculate the CF. Therefore, they argue, these costs would not be 
reflected in the base rates. One way drugs were paid for in the past 
outside the Medicare ambulance benefit was that a hospital would 
restock the ambulance without charge for any drugs that had been used. 
Commenters argue that, if hospitals do not continue restocking, 
ambulance suppliers will have to bear the cost of these drugs from a 
base rate that the commenters believe is already too low. The 
commenters believe that we should allow separate payments for drugs in 
addition to the ambulance fee schedule payment.
    Response: Medicare's drug benefit does not permit a discrete 
payment for drugs furnished on board an ambulance. Drugs in ambulances 
have been included in ambulance payment only because they have been 
considered to be ambulance supplies. The law permits payment for a drug 
furnished on board an ambulance only if the drug is considered an 
element of the ambulance service. At the same time, the law does not 
permit payment under the ambulance benefit other than through the 
ambulance fee schedule.
    As noted above, the BBA required that total payments during the 
first year of the fee schedule be no more than what would have been 
paid if the ambulance fee schedule were not in effect. The law provides 
no means to increase program payments for ambulance services that use 
new high-cost drugs. It provides only the inflation factor to increase 
rates under the ambulance fee schedule. With this constraint in mind, 
the Committee considered, within the structure of the fee schedule, 
establishing a separate RVU for drugs provided as ambulance supplies 
above a certain threshold cost. However, the Committee rejected this 
option. Therefore, payment for these items is included in the base 
rates for all levels of service.
    Comment: Commenters questioned whether oxygen, saline and aspirin 
are considered medications for purposes of meeting the alternate 
criterion for the ALS2 level of service that the ambulance supplier 
provide three different medications.
    Response: The proposed definition for an ALS2 level of service 
provides that this level of service is defined by, when medically 
necessary, the administration of at least three different medications 
or the provision of one or more of the following ALS procedures:
     Manual defibrillation/cardioversion.

[[Page 9108]]

     Endotracheal intubation.
     Central venous line.
     Cardiac pacing.
     Chest decompression.
     Surgical airway.
     Intraosseous line.

Only medications requiring a higher level of skill to administer are 
considered medications for purposes of this definition. We are 
clarifying in the final rule that payment at the ALS2 level requires 
the administration of at least three medications by intravenous push/
bolus or by continuous infusion, excluding crystalloid, hypotonic, 
isotonic, and hypertonic solutions (for example, Dextrose, Normal 
Saline, Ringer's Lactate). Therefore, oxygen, saline and aspirin are 
not considered as medications for the purpose of determining whether an 
ALS2 level of care has been furnished.
    Comment: Many commenters wanted to know whether three doses of the 
same medication on one transport warrant classifying the service as an 
ALS2 service.
    Response: Three separate administrations of the same medically 
necessary medication (of the kind specified in the criteria for ALS2) 
during a single transport qualifies for payment at the ALS2 level.
    Comment: Many commenters requested clarification regarding SCT. In 
particular, the commenters asked that we further define the phrase 
``paramedics with additional training.'' A commenter suggested that we 
include a reference to any State or local standards or protocols that 
define SCT training above and beyond the paramedic curriculum and a 
reference to a curriculum approved by the medical director of an EMS or 
ambulance system and shared with the carrier.
    Response: As indicated in the response concerning the Blueprint, 
above, we are revising Sec. 414.605 to indicate that vehicle staffing 
must be in compliance with existing State and local laws. We now define 
``paramedics with additional training'' in terms of State or local 
authority that governs the licensing and certification of EMS personnel 
in the State in which a paramedic is licensed. It seems possible, even 
likely that there is no comparable definition in every State.
    Comment: Some commenters asked whether the code for the SCT level 
service may be used as a code for a trip from a facility to an air 
ambulance and from the air ambulance to the final facility destination.
    Response: Yes, the SCT level of service may be used in transporting 
a beneficiary from the hospital to an air ambulance and then from the 
air ambulance to the second hospital, if the SCT criteria are met.
    Comment: Some commenters believe that paramedic intercept services 
will suffer because of the failure in the fee schedule to recognize 
paramedic intercept in States other than New York as a cost-effective 
means of the delivery of prehospital care. Commenters stated that it is 
important to provide adequate payment for paramedic intercept in all 
areas of the country.
    Response: As described in the regulations in Sec. 410.40(c) (and 
also in Program Memorandum B-00-01 issued in January, 2000), under the 
Medicare statute, payment may be made directly to the intercept 
supplier for intercept services only if--
    (a) The intercept service is provided in a rural area under a 
contract with one or more volunteer ambulance services;
    (b) The volunteer ambulance supplier is certified to provide 
ambulance services;
    (c) The volunteer ambulance supplier provides services only at the 
BLS level at the time of the intercept; and
    (d) The volunteer ambulance supplier is prohibited by State law 
from billing anyone for the service furnished. The entity providing the 
intercept services must also be qualified to provide services under 
Medicare and must bill all patients receiving its intercept services.
    At this time, to the best of our knowledge, only the State of New 
York has areas that meet these four criteria. In all other areas, the 
BLS level ambulance supplier must bill the program for an appropriate 
level of service. If the paramedic intercept supplier wants to receive 
payment, it would have to make an agreement with the volunteer supplier 
regarding payment.
    Comment: One commenter asked whether the new levels of ALS2 and SCT 
under the fee schedule would be blended with the current ALS emergency 
code payment rates during the transition period.
    Response: For both ALS2 and SCT, the ``old'' portion of the blended 
amount is the allowance for ALS emergency services.
2. Emergency Response Adjustment Factor
    We proposed to add Sec. 414.610(c)(1) to state that, for the BLS 
and ALS1 levels of service, an ambulance service that qualifies as an 
emergency response service would be assigned higher RVUs to recognize 
the additional costs incurred in responding immediately to an emergency 
medical condition. An immediate response is one in which the ambulance 
supplier begins as quickly as possible to take the steps necessary to 
respond to the call. No emergency response adjustment factor applies to 
PI, ALS2, SCT, FW, or RW.
    Comment: Some commenters stated that the definition of ``emergency 
response'' for purposes of the fee schedule in the implementing 
instructions (Program Memorandum AB-00-88) is inconsistent with the 
definition in the proposed rule and with the definition in the 
Committee Statement. The definition in AB-00-88 is:
    An emergency response is one that, at the time the ambulance 
supplier is called, is provided after the sudden onset of a medical 
condition manifesting itself by acute symptoms of sufficient severity 
such that the absence of immediate medical attention could reasonably 
be expected to result in placing the beneficiary's health in serious 
jeopardy; in impairment to bodily functions; or in serious dysfunction 
to any bodily organ or part.
    The definition in the Committee Statement is:
    For the BLS and ALS1 levels of service, an ambulance service that 
qualifies as an emergency response will be assigned a higher relative 
value to recognize the additional costs incurred in responding 
immediately to an emergency medical condition. An immediate response is 
one in which the ambulance provider begins as quickly as possible to 
take the steps necessary to respond to the call. There is no emergency 
modifier for PI, ALS2, or SCT.
    Response: We agree with the commenter, and we will be changing the 
definition of ``emergency response'' in the final regulation to conform 
to the definition in the Committee Statement with one exception. We 
have decided to delete from the Committee Statement's definition the 
phrase ``emergency medical condition'' because the purpose of the 
higher payment for the emergency medical condition is to recognize the 
additional cost required in order to be prepared to respond immediately 
to a call (for example, from a ``911'' service) when it is received 
without regard to the condition of the beneficiary. The nature of the 
beneficiary's condition is considered in determining whether an 
ambulance transport was medically necessary and in determining the 
level of service (for example, BLS-Emergency, ALS1-Emergency or ALS2). 
However, the emergency rate is paid based on the immediate response to 
the 911-type call and not based on the services furnished

[[Page 9109]]

to the beneficiary. Therefore, we are revising the definition as 
follows:
    Emergency response means responding immediately at the BLS or ALS1 
level of service to a 911 call or the equivalent in areas without a 911 
call system. An immediate response is one in which the ambulance 
supplier begins as quickly as possible to take the steps necessary to 
respond to the call.
    We note that the definition of ``emergency response'' here is 
intended only to describe the circumstances under which higher payment 
would be made for services and its use is limited to this context. It 
would have no effect on other program definitions of ``emergency.''
3. Operational Variations
    We proposed to add Sec. 414.610(a), which would state that the 
ambulance fee schedule applies to all entities that furnish ambulance 
services, regardless of type. All public or private, for profit or not-
for-profit, volunteer, government-affiliated, institutionally-
affiliated or owned, or wholly independent supplier ambulance 
companies, however organized, would be paid according to this ambulance 
fee schedule, with the exception of CAHs as discussed above.
4. Regional Variations

a. Cost of living differences

    In our proposed rule, we proposed that the payment for ambulance 
services would be adjusted to reflect the varying costs of conducting 
business in different regions of the country. We stated that we would 
adjust the payment by a geographic adjustment factor (GAF) equal to the 
practice expense (PE) portion of the geographic practice cost index 
(GPCI) for the Medicare physician fee schedule. (For purposes of this 
document, we use the abbreviation ``GPCI'' to mean the PE portion of 
the GPCI.) The GPCI is an index that reflects the relative costs of 
certain components of a physician's cost of doing business (for 
example, employee salaries, rent, and miscellaneous expenses) in one 
area of the country as compared to another. The geographic areas would 
be the same as those used for the physician fee schedule. (A detailed 
discussion of the physician fee schedule areas can be found in the July 
2, 1996 proposed rule (61 FR 34615) and the November 22, 1996 final 
rule (61 FR 59494).)
    We proposed that the GPCI would be applied to 70 percent of the 
base payment rate for ground ambulance services; this percentage 
approximates the portion of ground ambulance service costs that are 
represented by salaries. Similarly, we proposed that the GPCI would be 
applied to 50 percent of the base payment rate for air ambulance 
services. The GPCI would not be applied to the mileage payment rate. In 
addition, the applicable GPCI would be based on the geographic location 
at which the beneficiary is placed on board the ambulance.
    We proposed to use the most recent GPCI; the physician fee schedule 
law requires that the GPCI be updated every 3 years. The latest 
revision became effective January 1, 2001. The updated data were 
published in the November 1, 2000 final rule on the physician fee 
schedule (65 FR 65585).
    Comment: A few commenters stated that the practice expense portion 
of the physician fee schedule GPCI does not properly reflect the cost 
of living when calculating payment for ambulance services.
    Response: We proposed using the practice expense portion of the 
GPCI, as described in the physician fee schedule final rule published 
in the Federal Register on November 1, 2000 (65 FR 65585). We based our 
proposal on the Committee Statement that using the PE of the GPCI is 
the most appropriate means available to measure the geographic 
differences in the costs of providing ambulance services. The 
components of the PE portion of the GPCI (for example, personnel and 
supplies) are similar to the components of ambulance services and the 
geographical variations in these costs for ambulances would therefore 
be similar to the cost variations for physician practices. Also, based 
on data available to the Committee, it recommended, and we agree, that 
the labor share of the costs of ambulance services is approximately 70 
percent of the ground and 50 percent of the air ambulance cost. 
Therefore, the GPCI will apply to only 70 percent of the ground and 50 
percent of the air ambulance base rates. We are not adjusting the 
mileage rates.
    Comment: Some commenters believe that both legs of a round trip 
should be paid on the basis of the initial point of pick-up of the 
beneficiary, and that both legs of a scheduled round trip crossing GPCI 
or State lines should be billed to the carrier with jurisdiction for 
the initial point of pick-up. The commenters state that, given the 
proposed rule, suppliers may have to bill different carriers for each 
of two legs on the same round trip. Also, beneficiaries are likely to 
be confused by bills which indicate different charges for each leg of a 
round trip, if it does not begin in a rural area. Finally, rural 
suppliers could lose the rural adjustment for the second leg of a round 
trip. Some commenters also believe the point of pick-up is not the best 
criterion for establishing level of payment. There were some commenters 
who felt that the GPCI should be matched to the location of the 
ambulance company. Also, some commenters wanted clarification on trips 
originating in another carrier jurisdiction.
    Response: The Committee determined that the most equitable way to 
apply the GPCI, as well as the rural adjustment payment, was by the 
point of pick-up and not by the destination, location of the ambulance 
company, or where the ambulance is garaged. One concern identified by 
the Committee with using the location of the company or the place where 
the ambulance is garaged was the relative ease of moving the location 
of the company or garage to achieve higher payment. A second issue was 
that any individual trip in a rural area would likely be longer and 
prevent an ambulance from furnishing an additional trip, thereby 
reducing utilization, whether the ambulance was garaged in an urban or 
rural area. Considering each leg of a round trip separately gives 
effect to the Committee's determinations. Moreover, considering each 
leg separately achieves administrative simplicity and greater 
administrative accuracy in making payments.
    Comment: One commenter suggested that the Medicare hospital area 
wage index be used in place of the GPCI, since many of the ambulance 
providers are hospital-based.
    Response: The Committee decided to use the GPCI, not the hospital 
area wage index. As stated above, the components of the ambulance 
service are more similar to the components of the PE portion of the 
GPCI than they are to the components of the hospital wage index. Also, 
fewer than 15 percent of ambulance services furnished to Medicare 
beneficiaries are hospital-based, so we do not see the hospital wage 
index as more appropriate than the GPCI. Thus, we will continue to use 
the practice expense GPCIs from the physician fee schedule.

b. Services furnished in rural areas

    We proposed to add Sec. 414.610(c)(1)(v), which stated that, for 
ground ambulance services in rural areas, a 50 percent increase is 
applied to the mileage rate for each of the first 17 miles; the regular 
(urban) mileage allowance applies to every mile over 17 miles. For air 
ambulance services, we stated, in rural areas, that a 50 percent 
increase is applied to the total payment for air services, both mileage 
and base rate. We proposed the 50 percent rural increase for the first 
17 miles in

[[Page 9110]]

consideration of the circumstances of isolated, essential ambulance 
suppliers (that is, when there is only one ambulance service in a given 
geographic area) which may not furnish many trips over the course of a 
typical month because of a small rural population. While we recognize 
that this methodology is not sufficiently precise to limit the rural 
bonus payment to only those rural ambulances that are isolated, 
essential, low-volume (the definition of rural we are proposing is not 
as precise as other alternatives), we proposed an adjustment to 
increase the rate of payment for mileage if the location at which the 
beneficiary is placed on board the ambulance is located in a rural 
area. We proposed to define a rural area to be an area outside a 
Metropolitan Statistical Area (MSA) or a New England County 
Metropolitan Area, or an area within an MSA identified as rural, using 
the Goldsmith modification.
    The Goldsmith modification evolved from an outreach grant program 
sponsored by the Office of Rural Health Policy of the Health Resources 
and Services Administration (HRSA) of the Department of Health and 
Human Services. This program was created to establish an operational 
definition of rural populations lacking easy geographic access to 
health services in large counties with metropolitan cities. Using 1980 
census data, Dr. Harold F. Goldsmith and his associates created a 
methodology for identifying rural census tracts located within a large 
metropolitan county of at least 1,225 square miles. However, these 
census tracts are so isolated by distance or physical features that 
they are more rural than urban in character. Additional information 
regarding the Goldsmith modification can be found on the Internet at 
http://www.ruralhealth.hrsa.gov/Goldsmith.htm.
    We could not easily adopt and implement, within the constraints 
necessary to implement the fee schedule timely, a methodology for 
recognizing geographic population density disparities other than MSA/
non-MSA. However, we will consider alternative methodologies that may 
more appropriately address payment to isolated, low-volume rural 
ambulance suppliers. Thus, the rural adjustment in this rule is a 
temporary proxy to recognize the higher costs of certain low-volume 
rural suppliers.
    Several difficult issues will need to be resolved to establish more 
precise criteria for suppliers that should receive the rural 
adjustment. Examples of such issues include: (1) Appropriately 
identifying an ambulance supplier as rural; (2) identifying the 
supplier's total ambulance volume (because Medicare has a record only 
of its Medicare services); and (3) identifying whether the supplier is 
isolated, because some suppliers might not furnish services to Medicare 
beneficiaries (thus, Medicare would have no record of their existence) 
and one of these suppliers might be located near an otherwise 
``isolated'' supplier. Addressing these issues in some cases will 
require the collection of data that are currently unavailable. We 
intend to work with the industry and with the Office of Rural Health 
Policy to identify and collect pertinent data as soon as possible.
    We stated in our proposed rule that the application of the rural 
adjustment would be determined by the geographic location at which the 
beneficiary is placed on board the ambulance. Under the proposed rule, 
the rural adjustment would have been made using the following 
methodology:
     Ground--A 50 percent add-on applied to only the mileage 
payment rate for the first 17 loaded miles and a 25 percent add-on 
applied to only the mileage payment rate for miles 18 through 50.
     Air--A 50 percent add-on applied to the base rate and to 
all of the loaded mileage.
    Comment: Several commenters expressed concern that there should be 
a more precise definition of low-volume rural ambulance suppliers and 
that the rural payment rate should be higher. They suggested that we 
could use data from the Office of Rural Health (ORH) or the 
Administration on Aging that would give a more precise determination 
than the MSA/non-MSA classification. Another commenter suggested using 
any areas that are designated as rural by the State. One commenter 
suggested that until a better rural adjustment is implemented, rural 
suppliers and providers should be paid under their current payment 
methodologies.
    Response: We are exploring alternative means for identifying low-
volume rural suppliers. We are exploring data from other sources, 
including the ORH, which has sponsored a study, Rural-Urban Commuting 
Areas (RUCA). This study was performed by the University of Washington 
Rural Health Research Center. We anticipate that a more precise 
definition of low-volume rural suppliers will reduce the number of 
suppliers who qualify for the higher rural payment, allowing us to 
better target the payment increases to these suppliers while adhering 
to the aggregate payment limit provided in the law. We do not have the 
legal authority to exempt rural ambulance services from the fee 
schedule and pay them under the current methodology with the exception 
of certain CAHs. (See discussion of section 205 of BIPA.) In addition, 
BIPA provided that the payment rate for rural ambulance mileage greater 
than 17 miles and up to 50 miles be increased by not less than one-half 
of the additional payment per mile established for the first 17 miles 
of a rural ambulance trip.
    Comment: A few commenters suggested that we adopt a more precise 
means of identifying rural areas for the fee schedule, using zip codes 
rather than MSAs as the basis for identification.
    Response: We are currently using zip codes to identify areas. 
However, we identify all zip codes as urban or rural, based on whether 
the zip code is located in an MSA or not, including the Goldsmith 
modifications. The zip code is the basis for determining point of pick-
up and the payment of claims. As stated above, we are examining other 
alternatives for identifying rural and urban areas more precisely.
    Comment: Some commenters asked if the rural modifier applies if the 
supplier bills less than $5 for mileage.
    Response: The law requires that payment be based on the lower of 
the fee schedule amount or the actual charge. If the supplier/
provider's charge for mileage is less than the rural mileage fee 
schedule amount, then payment is based on the lower actual billed 
amount.
    Comment: One commenter suggested that we double the payment to 
small, rural hospital ambulance providers in the following categories: 
sole community provider hospitals, hospitals eligible for the CAH 
program, and hospitals under 100 beds.
    Response: The Committee Statement does not include such a 
provision, and we would point out that, because of the requirements of 
section 1834(l)(3) of the Act, increased payments under such a 
provision would need to be offset by reduced payments to other 
ambulance providers and suppliers. Moreover, there is no authority to 
exempt these small rural hospitals from the fee schedule except as 
provided by the Congress in section 205 of BIPA. That section provides 
that only CAHs that are the only ambulance service provider/supplier 
within a 35-mile drive will be exempt from the fee schedule and will be 
paid based on their reasonable cost.
5. Mileage
    We proposed adding Sec. 414.610(c)(1)(iii) that would state that

[[Page 9111]]

mileage would be paid separately from the base rate. The payment for 
mileage reflects the costs attributable to the use of the ambulance 
vehicle (for example, maintenance and depreciation) which increase as 
the vehicle's mileage increases. Based on the Committee's agreement, 
the mileage rates for the base year 1998 would be as follows: $5 per 
mile for ground ambulance, $6 per mile for fixed wing ambulance, and 
$16 per mile for rotary wing ambulance. These rates will be adjusted by 
the ambulance inflation factor. However, payment for some mileage in 
rural areas is made at a higher rate as discussed in section II.A.4.b. 
of this final rule.
6. Structure of the Fee Schedule for Ambulance Services
    We proposed in Sec. 414.610(a) that the fee schedule payment for 
ambulance services would equal a base rate payment plus payments for 
mileage and applicable adjustment factors. (See Table 1 for a 
description of the structure of the ambulance fee schedule.)
7. Ambulance Inflation Factor
    We proposed adding Sec. 414.615, ``Transition methodology for 
implementing the ambulance fee schedule,'' which would state that the 
ambulance fee schedule would include the ambulance inflation factor 
specified in section 1834(l)(3) of the Act (recently amended by BIPA) 
and discussed below.
8. Phase-in Methodology
    We proposed adding Sec. 414.615 that would provide for a 4-year 
transition period, as the result of the Committee agreement. (The 
phase-in schedule is described in section IV of this preamble.)

B. Proposed Changes Not Based on Negotiated Rulemaking

    In the September 12, 2000 proposed rule, we proposed changes to 
certain policies that were not within the scope of the negotiated 
rulemaking process. These proposed changes were as follows:
1. Coverage of Ambulance Services
    In Sec. 410.40(b), we proposed revising the introductory language 
to provide a cross-reference to Sec. 414.605 for a description of the 
specific levels of services. We proposed to revise paragraph 
Sec. 410.40(d)(1) to state that transportation includes fixed wing and 
rotary wing ambulances. Also, we proposed revising Sec. 410.40(d)(3) by 
adding two options to document medical necessity.
2. Physician Certification Requirements
    On January 25, 1999, we published a final rule (64 FR 3637) that 
updated Medicare coverage policy concerning ambulance services. That 
final rule provided the documentation requirements for coverage of 
nonemergency ambulance services for Medicare beneficiaries. The rule 
requires ambulance suppliers to obtain, from the beneficiary's 
attending physician, a written order certifying the medical necessity 
of nonemergency scheduled and unscheduled ambulance transports. The 
final rule became effective February 24, 1999.
    Our present regulations (at Secs. 410.40(d)(2) and 410.40(d)(3)) 
set forth the requirements for scheduled and unscheduled nonemergency 
ambulance transports. The regulations require ambulance suppliers to 
obtain, from the beneficiary's attending physician, a written physician 
statement certifying the medical necessity of requested ambulance 
transports.
    Section 410.40(d)(3)(i) specifies that, in cases when a beneficiary 
living in a facility and under the direct care of a physician requires 
nonemergency, unscheduled transport, the physician's certification can 
be obtained up to 48 hours after transport. After publication of this 
rule, we were made aware of instances in which ambulance suppliers, 
despite having provided ambulance transports, were experiencing 
difficulty in obtaining the necessary physician certification 
statements within the required 48-hour timeframe.
    While we still believe that the 48-hour timeframe is the 
appropriate standard, we recognize that there may be instances when, 
not through fault of their own, it may not be possible for the 
ambulance suppliers to meet the requirement. Therefore, we have 
determined that there is a need to revise and clarify this requirement 
(as described in Sec. 410.40, ``Coverage of ambulance services,'' 
paragraph (d)(3)).
    We proposed that, before submitting a claim, the ambulance supplier 
must obtain--
    (1) A signed physician certification statement from the attending 
physician; or
    (2) If the ambulance supplier is unable to obtain a signed 
physician certification statement from the attending physician, a 
signed physician certification must be obtained from either the 
physician, physician assistant, nurse practitioner, clinical nurse 
specialist, registered nurse, or discharge planner who is employed by 
the hospital or facility where the beneficiary is being treated and who 
has personal knowledge of the beneficiary's condition at the time the 
transport is ordered or the service was furnished (the term ``physician 
certification statement'' will also be applicable to statements signed 
by other authorized individuals); or
    (3) If the supplier is unable to obtain the required statement as 
described in (1) and (2) above within 21 calendar days following the 
date of service, the ambulance supplier must document its attempts to 
obtain the physician certification statement and may then submit the 
claim. Acceptable documentation must include a signed return receipt 
from the U.S. Postal Service or similar delivery service. A signed 
return receipt will serve as documentation that the ambulance supplier 
attempted to obtain the required physician certification statement from 
the beneficiary's attending physician.
    In all cases, the appropriate documentation must be kept on file 
and, upon request, presented to the carrier or intermediary. It is 
important to note that the presence of the signed physician 
certification statement does not necessarily demonstrate that the 
transport was medically necessary. The ambulance supplier must meet all 
coverage criteria in order for payment to be made.
    Comment: Several commenters, including a national ambulance 
association and an association representing medical professionals, 
state that the proposed regulation permits physician certification 
statements to be signed by physician assistants (PA), nurse 
practitioners (NP), and clinical nurse specialists (CNS), but only if 
employed by the facility in which the beneficiary is being treated. The 
commenters state, however, that, in most cases, practitioners are 
employed not by the facility but by the attending physician. The 
commenters recommended that the requirements of Sec. 410.40(d)(3)(iii) 
be revised to specify that, in keeping with Medicare regulations, the 
PA, NP, or CNS may also be employed by the attending physician.
    Response: We agree with the commenters and are revising 
Sec. 410.40(d)(3)(iii) to clarify that the PA, NP, or CNS may be 
employed either by the facility or by the beneficiary's attending 
physician.
    Comment: Many commenters recommended that we revise 
Sec. 410.40(d)(3)(iv) to conform to Program Memorandum B-00-09 that 
clarified the circumstances under which a physician

[[Page 9112]]

certification is required for both scheduled and unscheduled 
transports.
    Response: Program Memorandum B-00-09 was issued in response to an 
inquiry that specifically addressed the 48-hour time requirement set 
forth in Sec. 410.40(d)(3)(i). The program memorandum specifies that, 
in cases where a beneficiary who is living in a facility and who is 
under the direct care of a physician requires nonemergency, unscheduled 
transport, the physician's certification can be obtained 48 hours after 
transport has been provided. Based on comments, we are, however, 
revising the regulation to clarify that Sec. 410.40(d)(3) is applicable 
to nonrepetitive, nonemergency, scheduled ambulance services. In 
specifying that the rule applies to nonrepetitive transports, we are 
aware that Sec. 410.40(d)(2), as currently written, contains a 
requirement that suppliers obtain the required documentation no earlier 
than 60 days before the date the service is furnished. We are revising 
Sec. 410.40(d)(2) to clarify that the 60-day requirement is applicable 
only to repetitive transports, not nonrepetitive ones.
    Comment: Many commenters, including a national ambulance 
association, expressed a concern that carriers may be interpreting the 
revised definition of ``bed confined'' to mean that the beneficiary be 
bed-confined even in cases where the medical condition of the 
beneficiary would otherwise indicate that transportation by means other 
than ambulance would be contraindicated. The commenters recommended 
that Sec. 410.40(d)(1) be revised as follows:
    For nonemergency transportation, transportation by ambulance is 
appropriate if the beneficiary is bed-confined or if his or her medical 
condition, regardless of bed confinement, is such that transportation 
by ambulance is medically required. In determining whether a 
beneficiary is bed-confined, the following criteria must be met:
    (i) The beneficiary is unable to get up from the bed without 
assistance.
    (ii) The beneficiary is unable to ambulate.
    (iii) The beneficiary is unable to sit in a chair or wheelchair.
    Response: In the June 17, 1997 proposed rule (62 FR 32719), these 
three criteria were developed to define bed-confinement. These criteria 
identify individuals who may need ambulance services: we identified as 
bed-confined only those individuals who are ``completely confined to 
bed and unable to tolerate any activity out of bed.'' Subsequent 
instructional guidelines (PM AB-99-53, AB-99-83, AB-00-103) were issued 
in an effort to clarify that the bed-confined criteria are not meant to 
be the sole criteria in determining medical necessity; bed-confinement 
is one factor to be considered. It is important that all factors 
relating to the beneficiary's condition are considered in evaluating 
whether the medical necessity criteria for ambulance services have been 
met. As always, it is the responsibility of the ambulance supplier to 
furnish complete and accurate documentation of the beneficiary's 
condition to demonstrate that the ambulance service being furnished 
meets the medical necessity criteria.
    It is not our intent either to require that the bed-confined 
condition be met in every case in order for an ambulance transport to 
be covered or to mandate coverage of an ambulance transport solely 
because a beneficiary is bed-confined.
    We agree with the commenters that our proposed revision was 
unclear. We are revising proposed Sec. 410.40(d)(1). In addition to the 
identifying criteria on bed-confinement, the final rule will now state 
that:

    For nonemergency ambulance transportation, transportation by 
ambulance is appropriate if the beneficiary is bed-confined and it 
is documented that the beneficiary's medical condition is such that 
other methods of transportation are contraindicated, or if his or 
her medical condition, regardless of bed-confinement, is such that 
transportation by ambulance is medically required. In determining 
whether a beneficiary is bed-confined, the following criteria must 
be met: * * *

3. Payment During the First Year
    As explained below in more detail, we stated that we would use the 
universe of claims paid in 1998 (reduced by the $65 million savings 
that would have been realized through implementation of the BLS and ALS 
definitions proposed in the June 17, 1997 proposed rule (62 FR 32718)) 
to establish the CF and would index the 1998 dollars to CY 2002 dollars 
using the compounded inflation factors derived from section 1834(l)(3) 
of the Act. (The transition and the inflation factors are described in 
Sec. 414.615.)
4. Billing Method
    In proposed Sec. 414.610, we stated that, after the transition 
period, we would bundle into the base rate payment all items and 
services furnished within the ambulance benefit. This would eliminate 
billing on an itemized basis for any items and services related to the 
ambulance service (for example, oxygen, drugs, extra attendants, and 
EKG testing). In addition, only the base rate code and the mileage code 
would be used to bill Medicare. (This decision was made in accordance 
with section 1834(l)(7) of the Act, which gives us the authority to 
specify a uniform coding system, as well as with section 1834(l)(2)(B) 
of the Act.) During the transition period, suppliers who currently use 
billing methods 3 or 4 may continue to bill for supplies separately 
(see section I.B. for a description of these billing methods).
5. Local or State Ordinances
    In proposed Sec. 414.610, we stated that, regardless of any local 
or State ordinances that contain provisions on ambulance staffing or 
furnishing of all ambulance services by ALS suppliers, we would pay the 
appropriate ambulance fee schedule rate for the services that are 
actually required by the condition of the beneficiary. We proposed this 
policy pursuant to the Medicare statutory requirement (see section 
1834(l)(2)(B) of the Act) to use definitions of services that link 
payments to the types of services furnished.
6. Mandatory Assignment
    In proposed Sec. 414.610, we stated that, effective January 1, 
2001, all payments for ambulance services must be made on an 
assignment-related basis, as mandated by section 1834(l)(6) of the Act. 
Ambulance suppliers must accept the Medicare allowed charge as payment 
in full and not bill the beneficiary any amount other than unmet Part B 
deductible or coinsurance amounts. There is no transitional period for 
mandatory assignment.
    Comment: One commenter asked whether the fee schedule and mandatory 
assignment apply when Medicare is the secondary payer.
    Response: Yes, both the ambulance fee schedule and mandatory 
assignment apply when Medicare is the secondary payer.
    Comment: Several commenters objected to the requirement of 
mandatory assignment for claims when the fee schedule is implemented. 
They claim that because the rates in some areas are so low, some 
ambulance suppliers will go out of business without balance billing. 
One commenter indicated that we have the discretion to delay 
implementation of mandatory assignment until the end of the phase-in 
period. The commenter also requested clarification that mandatory 
assignment pertains only to services that are covered by Medicare.
    Response: Mandatory assignment is required by section 1834(l)(6) of 
the Act.

[[Page 9113]]

We do not agree that there is discretion to delay its implementation 
until the fee schedule is fully phased-in. The implementation date 
given in the proposed rule will be changed to coincide with the actual 
implementation of the fee schedule. Historically, ninety-five percent 
of ambulance services have been submitted under assignment, and, while 
the fee schedule redistributes payments, we do not anticipate that the 
assignment requirement is a major issue nationally. It is correct that 
mandatory assignment pertains only to Medicare covered services.
    Comment: Some commenters asked whether the provider/supplier may 
bill the beneficiary for the non-covered charges for transportation to 
a facility beyond the nearest appropriate facility, or whether 
mandatory assignment prevents the provider/supplier from billing for 
this additional mileage.
    Response: Mandatory assignment does not preclude billing for this 
additional mileage. Mandatory assignment refers only to services that 
are covered by the Medicare program.
    Comment: Some commenters asked about the correlation between 
``Medicare+Choice'' (M+C) plan payments and the ambulance fee schedule. 
The commenters asked if the amount paid by M+C plans is affected by the 
fee schedule amounts and if the liability of M+C enrollees is affected 
by the mandatory assignment requirement for the fee schedule.
    Response: For ambulance services that are under contract with the 
plan, Medicare rates do not affect the payment amounts by the M+C or 
the enrollee's copay. For ambulance services that are not under 
contract (for example, out-of-area emergency transports), the M+C is 
liable for the Medicare allowance in that area less any copay that the 
beneficiary pays pursuant to the M+C plan's rule for coinsurance.
7. Miscellaneous Payment Policies
    The following payment policies were in effect before publication of 
the proposed rule; however, we used the proposed rule as an opportunity 
to clarify them.

a. Multiple Patients

    Occasionally, an ambulance will transport more than one patient at 
a time. (For example, this may happen at the scene of a traffic 
accident.) In this case, we proposed to prorate the payment as 
determined by the ambulance fee schedule among all of the patients in 
the ambulance. If two patients were transported at one time, and one 
was a Medicare beneficiary and the other was not, we would make payment 
based on one-half of the ambulance fee schedule amount for the level of 
medically appropriate service furnished to the Medicare beneficiary. 
The Medicare Part B coinsurance, deductible, and assignment rules would 
apply to this prorated payment.
    Similarly, if both patients were Medicare beneficiaries, payment 
for each beneficiary would be made based on half of the ambulance fee 
schedule amount for the level of medically appropriate services 
furnished to each beneficiary. The Medicare Part B coinsurance, 
deductible, and assignment rules would apply to these prorated amounts.
    Comment: Some commenters disagree with our paying only the rate for 
one trip if two patients are transported. The commenters contend that 
it is not true that transporting two or more patients in the same 
vehicle costs no more than transporting one patient. Additional time 
will be required to load and unload each patient. Each patient will 
require specific individual care. The supplier will also incur 
additional liability for each patient for whom it is responsible. The 
commenters believe that one mileage fee should be paid, but that two 
base rates should be paid.
    Response: With respect to multiple patient transports, we agree 
with the commenters that there would be, on average, a higher cost for 
multiple patient transports than for those with only a single patient 
onboard. While commenters stated that an extra attendant would be 
onboard and additional supplies would be used for multiple patients, we 
do not believe this would always be true. Therefore, if two patients 
are transported simultaneously, for each Medicare beneficiary we will 
allow 75 percent of the payment allowance for the base rate applicable 
to the level of care furnished to that beneficiary. If three or more 
patients are transported simultaneously, then the payment allowance for 
the Medicare beneficiary (or each of them) is equal to 60 percent of 
the service payment allowance applicable for the level of care 
furnished to the beneficiary. However, a single payment allowance for 
mileage would continue to be prorated by the number of patients 
onboard. Also, we are establishing a modifier to identify these claims.

b. Pronouncement of Death

    In the proposed rule, we stated that there are three rules that 
apply to ambulance services and the pronouncement of death. First, if 
the beneficiary was pronounced dead by an individual who is licensed to 
pronounce death in that State prior to the time that the ambulance is 
called, no payment would be made. Second, if the beneficiary is 
pronounced dead after the ambulance is called but before the ambulance 
arrives at the scene, payment for an ambulance trip would be made at 
the BLS rate, but no mileage would be paid. Third, if the beneficiary 
is pronounced dead after being loaded into the ambulance, payment would 
be made following the usual rules (that is, the same level of payment 
would be made as if the beneficiary had not died).
    Comment: Some commenters suggested that we pay at the ALS rate if 
the crew attempts to resuscitate, even though they may fail. Also, some 
commenters believe that the pronouncement of death needs to be 
clarified further, so that unnecessary transportation will be limited.
    Response: Program payment may be made only for medically necessary 
ambulance transports. There is no basis for us to pay under the 
ambulance benefit for services such as attempts to resuscitate, if no 
ambulance transport occurs. In this final rule, we are setting forth 
the following criteria to apply in the pronouncement of death:
     If the beneficiary is pronounced dead by an individual who 
is authorized by the State to pronounce death prior to the time the 
ambulance is called, no payment will be made.
     If the beneficiary is pronounced dead by an individual who 
is authorized by the State to pronounce death prior to the arrival of 
the ambulance, but after it is called, a BLS base rate payment will be 
made (except for air, as noted in the comment and response below). No 
payment for mileage will be made.
     If the beneficiary is pronounced dead by an individual who 
is authorized by the State to pronounce death during the transport of 
the ambulance, the same payment rules apply as if the beneficiary were 
alive.
    Comment: Some commenters suggested that, in the case where a 
beneficiary dies while an air ambulance is enroute to the scene, we pay 
air ambulance at the air base rate, not the BLS ground rate.
    Response: We agree with the commenters. We will not pay mileage 
because there is no transport, but we will pay the applicable air base 
rate.

c. Multiple Arrivals

    We stated in the proposed rule that, when multiple units respond to 
a call for services, we would pay the entity that provides the 
transportation for the beneficiary. The transporting entity would bill 
for all services furnished, as stated in current policy. For example, 
if

[[Page 9114]]

BLS and ALS entities respond to a call and the BLS entity furnishes the 
transportation after an ALS assessment is furnished, the BLS entity 
would bill using the ALS1 rate. We would pay the BLS entity at the ALS1 
rate. The BLS entity and the ALS entity would have to negotiate between 
themselves payment for the ALS assessment.
    Comment: Some commenters stated that the discussion of multiple 
arrivals in the proposed rule is confusing. They state that, although 
the issue was not discussed by the Committee, our discussion appears to 
be inconsistent with the industry's understanding that the ALS level of 
service may be billed only if an ALS supplier/provider is involved in 
the actual transportation.
    Response: According to the definition of ``ALS assessment'' that we 
are promulgating in this final rule, an assessment may result in the 
determination that no ALS level service is required and, in that 
instance, an ALS1-Emergency level payment may be made to the 
transporting BLS ambulance supplier even if no ALS paramedic rides 
onboard.
    Comment: One commenter stated that when two ALS ambulances respond, 
the ambulance fee schedule payment should be divided between them 
according to the services each provided.
    Response: We have always construed the Medicare law as permitting 
payment for services only to the entity that provides the services, in 
this case, ambulance transport. Any suppliers that furnish services 
other than the transport must look to the transporting supplier for 
payment for other services. As described above, there is a limited 
provision of the law for paramedic intercept services under which the 
Congress permitted payment to be made directly to the entity furnishing 
the intercept service, but only under special circumstances provided in 
the regulations in Sec. 410.40(c). However, a provider (for example, a 
hospital or skilled nursing facility) may furnish ambulance services 
under arrangements in accordance with section 1861(w) of the Act. In 
this case, the provider may bill for the ambulance service, even if 
another supplier furnished the transport, if the service is furnished 
pursuant to an arrangement between the two entities in accordance with 
the law.

d. BLS Services in an ALS Vehicle

    The proposed rule stated that effective with implementation of the 
fee schedule, claims would be paid at the BLS level where an ALS 
vehicle is used but no ALS level of service is furnished. Claims would 
be filed using the appropriate BLS code. Like the other rules 
describing levels of service, these rules would be applicable on the 
effective date of this rule; there would be no transitional period for 
the rule.
    Comment: Several commenters stated that our decision to pay at the 
BLS rate for the use of an ALS vehicle when no ALS service is furnished 
has the effect of not recognizing all-ALS mandates by local authorities 
(situations where the local government mandates that all ambulances 
within its jurisdiction be equipped to provide an ALS level of 
service). The commenters stated that this policy, which will result in 
an immediate budget savings for Medicare of approximately $70 million 
in 2002, should be phased in on the same schedule as the other 
regulatory changes. The commenters believe that we should apply the 
transition provisions in the negotiated rule to all payment changes, 
including those stemming from our decision to pay BLS rates when BLS 
services are provided using an ALS vehicle. Because we did not propose 
to phase in this policy (that is, we are not continuing to pay at the 
ALS level under the old portion of the transition payment), the 
commenters believe that many emergency medical systems will be 
threatened and Medicare beneficiaries will be at risk of not having 
access to emergency and other medical transportation services.
    Response: While we continue to believe that BLS services should be 
paid at the BLS rate, even when an ALS vehicle is used, we agree with 
the comment to phase in the implementation of this policy. Therefore, 
when an ALS vehicle is used to furnish non-emergency BLS services only, 
the ``old'' portion of the blended rate will be at the ``old'' ALS non-
emergency payment level and the ``new'' portion of the blended rate 
will be at the BLS fee schedule amount.
    In addition, we are revising the definition of an ALS assessment 
needed to qualify for an ALS1-Emergency level of payment from the 
proposed definition. An emergency ambulance trip may be paid as an 
ALS1-Emergency even when the only ALS service furnished is an ALS 
assessment. This revision in the final rule will increase the trips 
paid at the ALS1-Emergency level, rather than at the BLS-Emergency 
level. Where the only ALS service furnished is an ALS assessment for an 
emergency, the ``old'' portion of the blended rate will be at the ALS 
emergency rate. We have also increased the amount of spending upon 
which the CF is based by the amount of savings that had been attributed 
to this policy.

III. Methodology for Determining the Conversion Factor

    As discussed in the September 12, 2000 proposed rule (65 FR 55078), 
our approach to determining the conversion factor (CF) was:
    (1) To use the most recent complete year of ambulance claims;
    (2) To translate those claims into the format that would have been 
used under the fee schedule; and
    (3) To calculate the CF, that, when applied to the RVUs for each 
level of service, results in the same total program payment for those 
claims, less $67 million that would have been saved if the fee schedule 
legislation had not been passed. (Under the final rule, as discussed in 
section III.D, we have decided not to subtract this amount in 
calculation of the CF.)
    We would then inflate this CF in accordance with the inflation 
factor prescribed in the statute. (See section 1834(l)(3) of the Act, 
as amended by section 423 of BIPA.) We used 1998 as the base year 
because this was the most recent complete year for which claims data 
were available. For claims processed by carriers (that is, claims from 
independent ambulance suppliers), we used allowed charge data. For 
claims processed by fiscal intermediaries (FIs) for provider-based 
ambulance services, we used the submitted charges on the Medicare 
claims multiplied by the cost-to-charge ratio applicable to the 
ambulance costs for each provider.
    We modified the claims data in several ways to calculate the 
proposed fee schedule and its impact. First, we separated all claims 
into two groups:
     Carrier-processed claims for ambulance services (8 million 
in 1998).
     FI processed claims for ambulance services (900,000 in 
1998).

A. Carrier-Processed Claims

    We had to adjust some of the 1998 claims for purposes of the 
proposed ambulance fee schedule calculation. Some of the claims did not 
report mileage and, because mileage will be required for each ambulance 
service under the fee schedule, an adjustment had to be made for the 
missing miles (see above). In other cases, the billing codes under the 
old system did not translate directly into services that would be paid 
under the proposed fee schedule. Below is a more detailed explanation 
of the adjustments that were made to the 1998 base year data in order 
to accommodate missing data.
1. Mileage
    Approximately 1.1 million claims for ground ambulance services did 
not

[[Page 9115]]

show any mileage. The proposed fee schedule for ambulance services will 
provide a payment for the trip and a payment per statute mile for the 
loaded mileage traveled. Therefore, in calculating the proposed CF, we 
added mileage to those claims that did not report mileage. We did so by 
assigning the mode value (that is, the number of miles billed most 
often) per trip in urban areas (1.0 miles) and the mode value or 
mileage per trip in rural areas (1.0 miles).
    Current billing instructions provide that only one ambulance trip 
may be billed per line on a claim. Because billing rules prohibit more 
than one trip to be reported on a line, we assumed any number greater 
than one was an error. Therefore, we did not count multiple trips 
billed on the same line of a claim. This reduced the total trip count 
processed by carriers by approximately 1 percent. This reduction of 
about 1 percent in the number of trips resulted in an increase of about 
1 percent in the average allowed charge per trip.
    Comment: Some commenters stated that some billers do not bill for 
mileage and will continue not to bill mileage after the fee schedule is 
implemented. Commenters stated that in other cases a supplier's 
submitted charge for mileage is lower than the fee schedule rural 
mileage rate and asked that the Medicare carrier automatically increase 
the supplier's charge by 50 percent before comparing the submitted 
charge to the fee schedule rural mileage rate. (This comparison is made 
because the law requires that payment be based on the lower of the 
actual submitted charge or the fee schedule amount.) Also, commenters 
stated that some billers have a lower charge for mileage that would 
offset their higher charge for the ambulance base rate service, but 
that this will not be considered when we process the claim for the base 
rate for purposes of the fee schedule.
    Response: In the process of setting the conversion factor (CF), we 
found over one million claims that should have reported mileage but did 
not. As stated above, we assigned a value of 1 mile to each of these 
claims. This was the mode value of mileage for both urban and rural 
ambulance claims. The average value was 7 miles for urban and 17 miles 
for rural claims. Assuming 1 mile each for claims without mileage 
results in a higher CF than would have resulted if we used the average 
number of miles. We will monitor claims data after the fee schedule is 
initially implemented and recalibrate the CF to reflect actual, as 
opposed to projected, billing practices.
    With respect to comments that we take into account suppliers that 
have high service charges but low mileage charges, we do not believe 
that this result is necessary or practical. Section 1833(a)(1)(R) of 
the Act states that CMS pays the lower of ``the actual charge for the 
services'' or fee schedule. While some commenters argued that we should 
be comparing total charges (that is, base rate plus mileage) rather 
than looking at the service and mileage separately, we believe 
comparing the components of the charge is equally consistent with the 
law. Moreover, the entire Medicare claims processing system is set up 
to process claims on an individual line-item basis. To change the 
claims processing system would jeopardize timely implementation of the 
fee schedule.
    Comment: Many commenters suggested that the urban/rural designation 
for round trips should be based on the original point of pick-up, 
rather than from each point of pick-up.
    Response: Each trip consisting of a point of pick-up and a 
destination is considered to be a trip on its own and must be billed, 
processed and paid individually.
    Comment: One commenter presented this hypothetical: beneficiary 
becomes ill on a cruise near Alaska. Beneficiary is airlifted. The 
nearest facility cannot adequately care for the beneficiary. The 
nearest facility that can adequately attend to the beneficiary is in 
Anchorage, Alaska. The beneficiary lives in the continental United 
States. The beneficiary requests to be sent to Seattle, Washington. Can 
this be done?
    Response: The program covers mileage only to the nearest facility 
equipped to treat the beneficiary. Any additional mileage is not 
covered by Medicare. However, the beneficiary may arrange with the 
ambulance supplier to pay the difference.
2. Billing Codes
    We determined that the billing codes that represent items and 
services included under the ambulance fee schedule are all billing 
codes submitted by ambulance suppliers in the range of Health Care 
Common Procedure Coding System (HCPCS) A0030 through A0999 (excluding 
HCPCS code A0888, which is not covered by Medicare) and Common 
Procedural Terminology-Fourth Edition (CPT-4) \1\ codes 93005 and 
93041. HCPCS billing codes A0030 through A0999 represent ambulance 
services, supplies, and equipment that are covered by the ambulance fee 
schedule, and CPT codes 93005 and 93041 represent electrocardiogram 
(EKG) services that may be billed by ambulance suppliers. In addition, 
we incorporated all HCPCS billing codes in the range of A4000 through 
Z9999; these services could have been paid by a carrier to an ambulance 
supplier only if they represented items and services covered under the 
Medicare ambulance benefit. We excluded all other CPT billing codes in 
the range of 00001 through 99999 (except the two EKG codes listed 
above) because they represent services not covered by the ambulance fee 
schedule.
---------------------------------------------------------------------------

    \1\ CPT codes and descriptions only are copyright 2001 of the 
American Medical Association. All Rights Reserved. Applicable FARS/
DFARS Apply.
---------------------------------------------------------------------------

    Next, we adjusted all billing codes that represented an ALS vehicle 
when no ALS service was furnished. We removed the actual allowed 
charges on these claims and replaced them with the charges that would 
have been allowed by the carrier for the corresponding BLS level of 
service (that is, emergency for emergency and nonemergency for 
nonemergency).
    Comment: Several commenters stated that our decision to pay at the 
BLS rate for the use of an ALS vehicle when no ALS service is furnished 
has the effect of not recognizing all-ALS mandates by local authorities 
(situations where the local government mandates that all ambulances 
within its jurisdiction be equipped to provide an ALS level of 
service). The commenters stated that this reduction in the amount of 
spending used to set the CF was inappropriate.
    Response: While we continue to believe that BLS services should be 
paid at the BLS rate, even when an ALS vehicle is used, we have decided 
to increase the amount of spending upon which the CF is based by the 
amount of savings that had been attributed to this policy.
3. Crosswalking the Old Billing Codes to the New Billing Codes
    We converted the old billing codes in the base year data to the new 
billing codes as they will be under the final fee schedule. The old BLS 
codes convert directly to the final BLS codes. The old air ambulance 
codes (fixed wing and helicopter) convert to the final air ambulance 
codes. The old water ambulance code converts to the final BLS-Emergency 
code. The old mileage codes distinguished ALS miles from BLS miles; 
both of these old codes will convert to the single proposed mileage 
code. Codes used to report air mileage will convert to the final codes 
for fixed and rotary wing mileage, respectively. All air miles will be 
reported in statute miles. As mentioned earlier, we

[[Page 9116]]

converted the codes for an ALS vehicle when no ALS services were 
furnished to the corresponding BLS codes. The conversion of the 
remaining old ALS codes (for example, when ALS services were furnished) 
to final ALS codes is less straightforward because there are more 
levels of ALS service under the final fee schedule than currently 
exist. All nonemergency ALS codes convert to the ALS1 (nonemergency) 
code. Based on advice from various members of the Committee, for 
purposes of calculating the CF, we proposed converting the old 
emergency ALS codes according to the following formulas:
     For claims on which both the origin and destination was a 
hospital: 33 percent will convert to specialty care transport (SCT), 5 
percent to advanced life support, level two (ALS2), and the remainder 
to ALS1-Emergency.
     For all other claims: 8.3 percent will convert to ALS2, 
and the remainder to ALS1-Emergency.
    Comment: Commenters stated that the projected volume of 8.3 percent 
of current ALS emergency claims that will be billed under the fee 
schedule at the ALS2 rate is too high. The commenters stated that the 
projection provided by the Committee was only 2.3 percent.
    Response: This comment was in error. We have verified with the 
Committee that the 8.3 percent projection was correct.
4. Low Billers
    A concern was raised about low billers of ambulance services. Low 
billers are suppliers who currently bill less than the maximum charge 
allowed by Medicare. There are several reasons low billers exist. For 
example, an entity may have a low charge because the cost of its 
operation is subsidized by local taxes (for example, a municipal 
ambulance company); the entity may use volunteers; its charge may be 
regulated by local ordinances, limited by an inflation-indexed charge 
that is part of the Medicare program's current reasonable charge 
policy, or restricted for other reasons.
    In the proposed rule, we stated that we have neither a means to 
estimate the extent to which low billing will continue after the fee 
schedule is implemented and the inflation-indexed charge limit no 
longer applies, nor a means to estimate the extent to which volunteer 
and municipal ambulances will choose not to file Medicare claims at the 
fee schedule amounts to which they could be entitled. Therefore, given 
the uncertainty of suppliers' future behavior, we proposed not to 
attempt to adjust the CF based on assumptions that low billing will or 
will not continue. We also stated that we will monitor payment and 
billing data and recalculate the CF as appropriate.
    Because the total ambulance service payment amount is based on the 
actual allowed charges from the base year (1998), the CF will reflect 
historical charges for some suppliers that may have been lower than the 
reasonable charges of other suppliers. At the same time, if low billers 
of ambulance services continue to charge less than the ambulance fee 
schedule amount, we will continue to pay the lower amount as the law 
requires. Therefore, some members of the ambulance industry have urged 
us to increase the fee schedule CF, anticipating that, otherwise, 
savings would result from billers who continue to charge less than they 
could, in this case, less than the fee schedule amount. We have 
estimated that in the base year 1998, if all low billers had billed the 
maximum charges allowed by Medicare, total allowed charges for 
ambulance services would have been approximately $150 million more than 
they were. Approximately half of this amount is attributable to charges 
that are 70 percent of the maximum allowed charges or greater. Assuming 
that billers whose current charge is 70 percent or more of the maximum 
will charge the full fee schedule amount and that one-half of the 
entities whose current charge is less than 70 percent of the maximum 
allowed charge may continue to bill at less than the fee schedule 
amount, approximately $39 million in the base year 1998 might continue 
to be attributed to low billing. Adjusted for inflation, this amount 
(annualized) is approximately $42 million in 2002.
    Comment: We received many comments questioning our approach to low 
billers. In particular, commenters believe that we were calculating the 
CF in such a way that we would inappropriately achieve between $75 
million and $150 million in savings by assuming all low billers would 
begin to bill at the full amount allowed under the fee schedule. 
Commenters stated that we were obligated to ensure that the 
implementation of the fee schedule was budget neutral.
    Response: We believe some commenters misunderstood our reasoning 
when we referred to the fact that an approximately $150 million 
difference existed in 1998 between ambulance suppliers' actual charges 
and the maximum charges allowed by Medicare and that approximately half 
of this amount (about $77 million) is attributable to charges that are 
70 percent of the maximum allowed charge or greater. For those 
suppliers already charging 70 percent or greater of the maximum charges 
allowed, our reasoning was that they are likely to increase their 
charges when the inflation-indexed charge limit no longer applies.
    While we continue to believe that future billing behavior is 
unpredictable, we have decided to make an adjustment in the CF in 
response to this comment. We will increase the CF to account for 
approximately $39 million in the base year 1998 (one-half of the amount 
attributable to the difference by which charges are less than 70 
percent of the maximum allowed by Medicare ($77 million)). In light of 
the lack of available data to project how many low billers will 
increase their charges, we have decided to assume that one-half of the 
remaining low billers (representing the billers whose charge is less 
than 70 percent of the maximum) may continue to bill at less than the 
fee schedule because we agree that some low billers may not increase 
their charges up to the fee schedule amount. We will review this issue 
as part of the annual review to determine whether a further adjustment 
is warranted. If the level of low charge billing is significantly 
different from the assumed level, we will adjust the CF and apply such 
an adjusted CF prospectively. We also note that, in other 
circumstances, we have made assumptions that resulted in a higher CF. 
For example, as discussed above, in the process of setting the CF, 
there were over one million claims that should have reported mileage 
but did not. We assigned a value of one mile to each of these claims. 
This has resulted in a higher CF than if we had assigned a higher 
mileage estimate to these claims.

B. FI Processed Claims

    Because all FI processed claims contained mileage, we did not make 
any adjustment for mileage. However, we did have to determine the codes 
that represented items and services included under the ambulance fee 
schedule. In the case of claims filed by hospital-based ambulance 
providers, services furnished in the emergency room and other 
outpatient departments of the hospital are reported on the same claim 
that is used to report the ambulance service. Therefore, it is 
impossible to know from the claims data where any of the nonambulance 
services were furnished. Because most of these nonambulance services 
were of the kind that would likely have been furnished in the 
hospital's emergency room, we did not include the data on them in data 
for the proposed ambulance fee schedule. Rather, we determined that

[[Page 9117]]

the billing codes that will be covered by the ambulance fee schedule 
are all billing codes representing ambulance services submitted by 
hospitals (for example, in the range of HCPCS codes A0030 through A0999 
(excluding HCPCS code A0888, which is not covered by Medicare)).
    Codes that represented the use of an ALS vehicle, but when no ALS 
level of service was furnished, were converted to the corresponding BLS 
billing code. However, in this case, no adjustment was made for payment 
because the correct data were already available since payment for these 
claims would have been made on a cost basis corrected to the proper 
amount at cost settlement.
    Comment: A few commenters stated that the regulations do not 
address the issue of bad debt for ambulance services. Medicare has 
traditionally paid for hospitals' bad debts for uncollected beneficiary 
deductibles and copayments. The commenters believe that Medicare should 
be responsible for payment of reasonable costs associated with bad debt 
for ambulance services as well.
    Response: There is no provision under the fee schedule for payment 
of bad debts. The law requires that the program pay 80 percent of the 
lower of the fee schedule amount or the billed charge and that the 
beneficiary is liable for the Part B coinsurance and any unmet Part B 
deductible amounts. Furthermore, sharing in bad debts for providers and 
not for independent suppliers would result in greater program payments 
to providers than suppliers for furnishing the same service. We believe 
that doing so would be antithetical to payment under a fee schedule.

C. Air Ambulance

    To establish a consistent system of RVUs that could be applied to 
ground and air ambulance services, we must know the cost per service in 
each setting. Unfortunately, these data do not exist. One member of the 
Committee presented data and stated that the data, when combined with 
an analysis by an economist, demonstrated that the total costs in 1998 
for air ambulance services were between a minimum of approximately 
$134.8 million and a maximum of $168 million. The higher amount 
exceeded the billed charges for air ambulance services. Because 
definitive cost data do not exist, the Committee decided to compromise 
by setting a range of total air ambulance costs between $134.8 million 
and $158 million within which we would set an amount reflecting 
incurred costs.
    We considered several approaches in an attempt to accurately 
estimate the appropriate amount for air ambulance services within the 
range prescribed by the Committee.
    We considered using cost data from a ground ambulance services 
survey acquired by an independent source that was hired by a member of 
the Committee. We tried to compare the results of this survey to cost 
data from our estimate. Because the study was only a self-reporting 
survey and did not report audited costs, and because the results varied 
widely and were substantially different from our estimate, we could not 
establish an estimate based on the survey that fell within the range 
prescribed by the Committee.
    We converted old billing codes to the proposed billing codes in the 
same way as discussed above for the carrier-processed claims. Using the 
billed charge adjusted by the provider's cost-to-charge ratio, we are 
able to estimate the provider's Medicare-allowable cost for all 
ambulance services. However, we are unable to estimate with any 
certainty the split of air ambulance services costs and ground 
ambulance services costs from the same provider because Medicare cost-
apportioning rules do not require data to be furnished in such detail. 
Originally, we assumed that the same cost-to-charge ratio within a 
provider applies to both air and ground ambulance services charges. 
However, because this assumption may not be correct, and because it 
results in an amount below the range specified by the Committee, we did 
not pursue this methodology.
    Next, we considered using the billed charges for ambulance 
services. Over 80 percent of ground ambulance services are furnished by 
independent (not provider-based) ambulance suppliers. However, the 
average adjusted charge (that is, the charge adjusted by the provider's 
cost-to-charge ratio) for ALS and BLS ground ambulance services, 
excluding mileage, furnished by provider-based ambulance services is 
more than 65 percent greater than the average charge for independent 
ambulance services suppliers ($342 vs. $206 per trip). Assuming the 
appropriate payment for ground ambulance services is the average 
allowed charge for the independent suppliers, the amount of money 
misallocated to provider-based ground ambulance services substantially 
exceeds the amount that would represent a total payment for air 
ambulance services at the maximum recommended by the Committee ($158 
million). This large discrepancy between the payment rates for 
provider-based and independent supplier ground ambulance services, and 
the fact that suppliers are able to furnish services at the lower rate, 
led us to conclude that the program cost apportionment process caused 
too much of providers' ambulance costs to be allocated to provider-
based ground ambulance services and not enough of these costs were 
allocated to provider-based air ambulance services. We believe that the 
appropriate payment for ground ambulance services is closer to the 
independent supplier charge. Consequently, we have chosen the maximum 
air ambulance total amount designated by the Committee, that is, $158 
million.
    Comment: A few commenters mentioned that the cap on per trip 
payment inflation imposed on providers by section 4531 of the BBA of 
1997, which states that the Secretary shall not recognize the costs per 
trip in excess of costs recognized as reasonable for ambulance services 
provided on a per trip basis during the previous fiscal year increased 
for inflation, is currently applied as a combined cost per trip cap for 
both ground and air ambulance trips. This, they state, is inappropriate 
because the mix of air and ground trips may change from year to year. 
The commenter stated that there should be separate caps for ground and 
air ambulance trips.
    Response: We have interpreted this provision of the law as 
requiring a single combined cost per trip inflation payment cap for 
providers, because the law refers to total ``costs per trip.'' We do 
not believe that the law contemplates the construction suggested by 
commenters. We also note that this issue arises only during the 
transition period. Once the fee schedule is fully implemented, there 
will be no provider-specific cost per trip limit.
    Comment: A few commenters wanted further clarification on the 
methodology used to set the air ambulance fee schedule rates. Some 
commenters stated that the air ambulance payment rates should not be 
increased to the point of the air ambulance recovering its cost when 
payments for the ground ambulance will be reduced further to an amount 
below its cost. Another commenter stated that it is not reasonable to 
set the air amount based on charges for ground services.
    Response: We do not have cost data to specifically distinguish the 
cost for air or ground services. The Committee recommended a range of 
$134.8-$158 million, and we determined the appropriate amount within 
that range. Because we believe that we have

[[Page 9118]]

providers' total costs for all ambulance services, we chose to use a 
proxy for the approximate charge (average charge for independent 
suppliers) for ground and subtract that amount from the total provider 
ambulance cost to estimate an appropriate amount for the air cost 
portion.
    Considering the large discrepancy between the payment rates for 
provider-based and independent supplier ground ambulance services, we 
believe that the appropriate payment for these ground ambulance 
services is closer to the independent supplier charge for the following 
reasons: (1) Over 80 percent of ground ambulance services are furnished 
by independent (not provider-based) suppliers, and (2) 95 percent of 
suppliers' claims are paid on an assigned basis (that is, suppliers 
accept the Medicare allowed charge as payment in full). Consequently, 
we have chosen the maximum air ambulance total amount recommended by 
the Committee, which is $158 million. Choosing an amount lower than 
$158 million would lead us to pay ground ambulance rates at closer to 
the hospital-based rate than the independent supplier rate, which we 
believe to be unwarranted.
    Comment: Some commenters cited abrupt and erratic increases in gas 
prices as a reason for the cost of air ambulance exceeding the proposed 
fee schedule rates. The impact will especially be felt for those 
providers whose aircraft consume from 60 to 103 gallons per hour.
    Response: We believe that if increases in the cost of fuel occur, 
they will be accounted for by the inflation update factor applied to 
the ambulance fee schedule. We have set the rates for air at the 
maximum recommended by the Committee.

D. Calculation of the CF

    We determined the total number of ambulance trips and loaded miles 
and the total amount of charges allowed by Medicare for ambulance 
services in the base year of 1998. In estimating the total volume of 
services at the new levels described under the fee schedule, we coded 
those cases in which an ALS vehicle was used in a nonemergency 
transport, but no ALS services were furnished, as BLS nonemergency 
services. Where an ALS vehicle was used in an emergency transport, we 
coded the transport as ALS1 if no ALS services were furnished because 
we assumed that an ALS assessment would always be performed; under the 
fee schedule, the criteria for ALS1 includes such an assessment.
    To calculate the CF for ground ambulance services, we used the 
following procedures:
     We multiplied the volume of services for each level of 
ground ambulance service by the respective RVUs recommended by the 
Committee (including application of the practice expense of the GPCI 
and of the rural mileage rate as described above).
     We summed those products to arrive at the total number of 
RVUs.
     We subtracted the total allowed amount for air ambulance 
services ($158 million as discussed above) from the total charges 
allowed by Medicare for ambulance services, which results in the total 
amount of charges allowed by Medicare for ground ambulance services.
     We subtracted the total amount of allowed charges for 
ground mileage from this total charge amount.
     We divided the remaining charge amount by the total number 
of RVUs for ground services and applied the cumulative ambulance 
inflation factor for the period 1998 through 2002, which results in a 
CF for ground ambulance trips of $170.54.
    We made five (5) changes from the calculation of the CF described 
in the proposed rule (which was $157.52). First, at the time of the 
proposed rule, we failed to crosswalk the emergency cases in which an 
ALS vehicle was used, but no ALS service was furnished, to the category 
of ALS1-Emergency services under the fee schedule; instead, we counted 
them as BLS-Emergency services. Second, there was a miscalculation of 
the number of rural ambulance miles that are less than or equal to 17 
in the 1998 base data. Third, in this final rule, we added 
approximately $42 million (the annualized amount for 2002) as an 
estimate of the amount of low billing that will occur under the fee 
schedule and, thus, the amount that will be available for other ground 
ambulance services. This is discussed further in section V.B. Fourth, 
we changed the inflation adjustment for 2001 to conform to the 
inflation adjustments contained in section 423 of BIPA. Fifth, we added 
back to the total amount used to calculate the CF the savings that 
would have accrued to the program had we implemented the policy 
proposed in June 1997 that would pay at the BLS rate for services 
furnished at the BLS level even though an ALS vehicle was used.
    We followed a similar procedure to determine the fee schedule 
amount for air ambulance services. Because there are only two kinds of 
air ambulance--fixed wing and rotary wing--we did not calculate RVUs 
and a CF, but calculated the actual fee schedule amounts directly. We 
divided the total number of billed air ambulance services into the 
total amount of payment available for these services ($158 million). 
The amounts in the base year (1998) are $2,286.52 and $2,658.42 for 
fixed wing and rotary trips, respectively. These numbers would then 
also be adjusted by the cumulative inflation factor provided in section 
1834(l) of the Act. (The inflation factor is discussed in more detail 
below.)
    We will monitor payment data and evaluate whether our assumptions 
used to establish the original CF (for example, the ratio of the volume 
of BLS services to ALS services) are accurate. If the actual 
proportions among the different levels of service are different from 
the projected amounts, we will adjust the CF accordingly and apply this 
adjusted CF prospectively.
    Comment: One commenter recommended a third air rate for air 
ambulance services furnished in remote, frontier areas such as Alaska. 
The commenter stated that the cost of furnishing these services is 
considerably higher than standard rural areas because of the sparse 
population and large distances that must be traveled.
    Response: We are not making this change to the fee schedule. 
Consistent with the Committee Statement, there will be two air rates: 
fixed wing and rotary wing (helicopter). As explained under the section 
for rural modifiers, there will be a 50 percent add-on applied to the 
base rate and to all of the loaded mileage for air ambulance services 
in rural areas. Therefore, longer trips will be paid proportionately 
more than shorter trips.
    Comment: Many commenters from various regions believe that the fee 
schedule rates are too low and that suppliers and providers will 
substantially lose profits. Some commenters suggested that, for various 
reasons, they should be exempt from the fee schedule and continue to be 
paid under the current system. For example, a commenter described the 
EMS system in New Jersey as unique and stated that placing New Jersey 
ambulance suppliers under the fee schedule would actually result in a 
higher cost to Medicare because it would ultimately force volunteer 
ambulance companies to close.
    Response: Section 1834(l) of the Act requires that the Secretary 
establish a fee schedule for ambulance services through negotiated 
rulemaking. Although the statute does call for consideration of 
appropriate regional and operational differences in the

[[Page 9119]]

design of the fee schedule, it does not authorize exemptions or waivers 
for individual providers or suppliers or groups of those providers or 
suppliers. However, with the enactment of BIPA, the Congress created 
one limited exemption from the fee schedule--CAHs that do not have 
another ambulance supplier within a 35-mile drive.
    The Congress required that the fee schedule be implemented in such 
a way that Medicare payments for ambulance services would not exceed 
what they would have been absent the new fee schedule. The fee schedule 
will increase payments for providers and suppliers with unusually low 
rates, and decrease payments for those who have historically received 
payments above the national average, while still accounting for 
geographic differences in costs and other factors. In anticipation of 
such shifts, the Congress provided for a phase-in period to allow 
ambulance providers time to adjust to the new payment rates.

IV. Implementation Methodology

    Currently, payment of ambulance services follows one of two 
methodologies, depending on the type of ambulance biller. Claims from 
ambulance service suppliers are paid based on a reasonable charge 
methodology, whereas claims from providers are paid based on the 
provider's interim rate (which is a percentage based on the provider's 
historical cost-to-charge ratio multiplied by the submitted charge) and 
then cost-settled at the end of the provider's fiscal year.
    In the September 12, 2000 proposed rule, we stated that the 
ambulance fee schedule would be phased in over a 4-year period. The 
transition was to begin on January 1, 2001 and the fee schedule was to 
be phased in on a CY basis. However, as explained above, we will 
implement the fee schedule beginning April 1, 2002. Therefore, for 
dates of service (DOS) beginning April 1, 2002, suppliers/providers 
would be paid based on 80 percent of the respective current payment 
allowance (as described in Program Memorandum AB-00-87) applicable to 
this time period plus 20 percent of the ambulance fee schedule amount. 
(See Sec. 414.615 for additional information.) Based on comments 
received, we will phase-in implementation of the ambulance fee schedule 
under a 5-year transition, as follows:

------------------------------------------------------------------------
                                          Former payment   Fee schedule
                                            percentage      percentage
------------------------------------------------------------------------
Year One (4/2002-12/2002)...............              80              20
Year Two (CY 2003)......................              60              40
Year Three (CY 2004)....................              40              60
Year Four (CY 2005).....................              20              80
Year Five (CY 2006).....................               0             100
------------------------------------------------------------------------

    Comment: Many commenters expressed concern over whether providers, 
suppliers, carriers, and CMS are fully prepared for the ambulance fee 
schedule implementation and whether all of the necessary steps to 
ensure successful implementation have been taken. Specifically, 
commenters believe there was insufficient time between the close of the 
comment period on November 13, 2000, and January 1, 2001, to:
     Educate intermediaries, carriers and all ambulance 
suppliers and beneficiaries in order to provide a smooth transition to 
the new system.
     Change our computer programs (and for suppliers to change 
theirs) and test these changes before placing them online.
    The fee schedule creates new codes, new requirements (for example, 
zip code for point of pick-up), new levels of service, and a transition 
blending methodology. The commenters stated that neither suppliers nor 
beneficiaries will understand how they are to be paid. Several 
commenters requested that we delay the implementation from January 1, 
2001, to a later date.
    Response: Although the proposed rule was largely based on an 
agreement reached as part of a formal, negotiated rulemaking process 
with representatives of the ambulance industry and other interested 
parties, we received a large volume of comments. We did not have 
sufficient time to carefully consider all comments and publish a final 
rule in time to implement the fee schedule by January 1, 2001. 
Therefore, payment under the fee schedule structure (that is, a blend 
of fee schedule amounts and current payments) did not begin on that 
date. This has allowed suppliers additional time to adjust to the 
proposed payment methodology.
    The proposed rule was published in the Federal Register on 
September 12, 2000 (65 FR 55078). Suppliers have also had access to the 
formal instructions we issued to contractors with respect to the 
systems changes necessary to implement the fee schedule. In addition, 
we held a training conference with intermediaries and carriers on 
November 16 and 17, 2000, on all issues related to the fee schedule. 
Contractors conducted training efforts directly with ambulance 
suppliers during December 2000. We will continue our training efforts 
as we implement the new billing codes.
    Comment: One commenter suggested that we cancel implementation of 
the ambulance fee schedule.
    Response: We are required by the Congress under section 1834(l) of 
the Act to implement a fee schedule for ambulance services.
    Comment: Two commenters stated that information in the Medicare and 
You publication was insufficient regarding the ambulance fee schedule.
    Response: The Medicare and You publication is a handbook that 
provides a general synopsis of all services in Medicare: the level of 
detail concerning payment policy and implementation of the ambulance 
fee schedule in that publication are aimed at the general reader and 
not necessarily ambulance suppliers. Payment policies for ambulance 
services are published in detail in the Federal Register and 
subsequently in the CFR.
    Comment: A few commenters disagreed with the phase-in schedule for 
the implementation of the ambulance fee schedule, stating that the 
implementation period was too short and not ``in an efficient and fair 
manner'' as required by the statute. The commenters stated that the 
phase-in is on a 3-year basis rather than a 4-year basis, as stated in 
the proposed rule. A few commenters wanted immediate, 100 percent 
implementation of the ambulance fee schedule, while others suggested 
other timeframes for a phase-in. Some commenters suggested a slower 
transition for providers as opposed to suppliers. Also, a few 
commenters recommended that SCT service payments be fully and

[[Page 9120]]

immediately implemented separately from the rest of the fee schedule.
    Response: We agree that suppliers and providers need additional 
time to adjust to the fee schedule. Therefore, we will change the 
phase-in schedule from the proposed 4 years to a 5-year transition, as 
shown above. Thus, the overall phase-in is reflected in a 5-year span, 
with year 5 being at 100 percent of the fee schedule.
    Comment: A few commenters requested that phase-in of the fee 
schedule should be by fiscal year for hospitals rather than by calendar 
year.
    Response: We have decided not to phase in the fee schedule for 
providers based on each provider's fiscal year. As described above in 
section III.C., in general, Medicare's payment per trip to providers is 
considerably higher than the payment per trip to suppliers. Allowing a 
phase-in schedule on the provider's fiscal year would provide an 
advantage for some providers over independent suppliers because the fee 
schedule would be implemented unevenly across ambulance entities.
    Comment: One commenter asked whether the limitation on review (in 
section 1834(l)(5) of the Act) refers only to the rates established 
under the ambulance fee schedule.
    Response: The limitation on review, by its own terms, prohibits 
both administrative and judicial review of the amounts established 
under the fee schedule, including all the ``considerations'' contained 
in section 1834(l)(2) of the Act, for example, the definitions for 
ambulance services and appropriate regional and operational 
differences. Thus, review of all these issues is precluded.
Revisions and Additions to HCPCS Codes
    Claims will be processed using the billing codes created for the 
ambulance fee schedule and contained in the proposed rule. From these 
codes, the amount for the portion of the payment based on the current 
system (80 percent in CY 2002) will be derived using the HCPCS 
crosswalks as shown below.
    We have already changed ``old'' HCPCS ambulance codes in order to 
implement the ambulance fee schedule, effective January 1, 2001. The 
HCPCS codes formerly used to report ambulance services could not be 
used effective January 1, 2001, except for those HCPCS codes under 
which a method 3 or method 4 biller may bill for supplies separately 
(since such billing may continue during the transition period) and 
those codes previously used to bill for mileage. These codes will be 
used until the fee schedule is fully implemented.
    The following chart shows how the former codes crosswalk to the 
final new codes under the ambulance fee schedule. Additionally, the 
chart shows ``old'' HCPCS codes that will not have a corresponding code 
under the final ambulance fee schedule. The items and services 
represented by these codes will be bundled into the base rate services.
    Codes Not Valid Under the New Fee Schedule (Codes Terminate 
Effective 01/01/06): A0382, A0384, A0392, A0396, A0398, A0420, A0422, 
A0424, A0999.
    HCPCS Code Changes:

----------------------------------------------------------------------------------------------------------------
                                                                   New HCPCS
                       Current HCPCS Code                            Code       Descriptions of final new codes
----------------------------------------------------------------------------------------------------------------
A0380, A0390...................................................        A0425   Ground mileage (per statute
                                                                                mile).
A0306, A0326, A0346, A0366.....................................        A0426   Ambulance service, advanced life
                                                                                support, non-emergency
                                                                                transport, level 1 (ALS1).
A0310, A0330, A0350, A0370.....................................        A0427   Ambulance service, advanced life
                                                                                support, emergency transport,
                                                                                level 1 (ALS1-Emergency).
A0300, A0304 *, A0320, A0324 *, A0340, A0344 *, A0360, A0364 *.        A0428   Ambulance service, basic life
                                                                                support, non-emergency transport
                                                                                (BLS).
A0050, A0302, A0308 **, A0322, A0328 **, A0342, A0348 **,              A0429   Ambulance service, basic life
 A0362, A0368 **.                                                               support, emergency transport
                                                                                (BLS-Emergency).
A0030..........................................................        A0430   Ambulance service, conventional
                                                                                air services, transport, one way
                                                                                (fixed wing (FW)).
A0040..........................................................        A0431   Ambulance service, conventional
                                                                                air services, transport, one way
                                                                                (rotary wing (RW)).
Q0186..........................................................        A0432   Paramedic ALS intercept (PI),
                                                                                rural area, transport furnished
                                                                                by a volunteer ambulance company
                                                                                which is prohibited by State law
                                                                                from billing third party payers.
                                                                       A0433   Advanced life support, Level 2
                                                                                (ALS2). The administration of at
                                                                                least three different
                                                                                medications and/or the provision
                                                                                of one or more of the following
                                                                                ALS procedures: Manual
                                                                                defibrillation/cardioversion,
                                                                                endotracheal intubation, central
                                                                                venous line, cardiac pacing,
                                                                                chest decompression, surgical
                                                                                airway, intraosseous line.
                                                                       A0435   Air mileage; fixed wing (per
                                                                                statute mile).
                                                                       A0436   Air mileage; rotary wing (per
                                                                                statute mile).
                                                                       A0434   Specialty Care Transport (SCT).
                                                                                In a critically injured or ill
                                                                                beneficiary, a level of inter-
                                                                                facility service provided beyond
                                                                                the scope of the Paramedic. This
                                                                                service is necessary when a
                                                                                beneficiary's condition requires
                                                                                ongoing care that must be
                                                                                provided by one or more health
                                                                                professionals in an appropriate
                                                                                specialty area (for example,
                                                                                nursing, emergency medicine,
                                                                                respiratory care, cardiovascular
                                                                                care, or a paramedic with
                                                                                additional training).
                                                                       Q3019   Ambulance service, Advanced Life
                                                                                Support (ALS) vehicle used,
                                                                                emergency transport, no ALS
                                                                                level service furnished.
                                                                       Q3020   Ambulance service, Advanced Life
                                                                                Support (ALS) vehicle used, non-
                                                                                emergency transport, no ALS
                                                                                level service furnished.
----------------------------------------------------------------------------------------------------------------
* A new code will be established to indicate during the transition period that where an ALS vehicle was used in
  a non-emergency situation to furnish only BLS services, the service will be ALS-nonemergency for the old
  portion of the blended payment and BLS for the Fee Schedule portion of the blended payment.
** A new code will be established to indicate during the transition period that where an ALS vehicle was used in
  an emergency response and furnished only BLS services, the service will be ALS-Emergency for the old portion
  of the blended payment and BLS-Emergency for the Fee Schedule portion of the blended payment.

    Payment to new suppliers that have not billed Medicare in the past 
will be subject to the transition period rules. New suppliers will be 
assigned an allowed charge under the current reasonable charge rules 
(for new

[[Page 9121]]

suppliers, the allowed charge is set at the 50th percentile of all 
charges for the service) and will receive the same blended transition 
payments as other ambulance suppliers. In all cases, the transitional 
payment will be subject (as will the fully implemented fee schedule 
payment) to the Part B coinsurance and deductible requirements.
    Currently, we pay the provider's claims based on the provider's 
interim rate (the provider's submitted charge multiplied by the 
provider's past year's cost-to-charge ratio). That interim rate is:
     Cost-settled at the end of the provider's fiscal year, and
     Limited by the statutory inflation factor, contained in 
section 4531 of the BBA, applied to the provider's allowed cost per 
ambulance trip from the previous year.
    The fee schedule transition will begin on April 1, 2002 and the fee 
schedule will be phased in on a calendar year basis. Therefore, for 
providers that file cost reports on a basis other than a calendar year 
(January 1-December 31) cost-reporting period, for cost-reporting 
periods beginning after April 1, 2002, two different rates will be 
blended. Effective for services furnished during 2002, the proposed 
blended amount for provider claims will equal the sum of 80 percent of 
the current payment system amount and 20 percent of the ambulance fee 
schedule amount. Although some providers may receive substantially 
lower payments than at present, the Committee recommended this 
particular phase-in, and we believe that our implementing payment under 
the fee schedule at only 20 percent in the first year will give 
ambulance providers a period of time to adjust to the new payment 
amounts. For dates of service in CY 2003, the blended amount will equal 
the sum of 60 percent of the current payment system amount and 40 
percent of the ambulance fee schedule amount. For dates of service in 
CY 2004, the blended amount will equal the sum of 40 percent of the 
current payment system amount and 60 percent of the ambulance fee 
schedule amount. For dates of service in CY 2005, the blended amount 
will equal the sum of 20 percent of the current payment system amount 
and 80 percent of the ambulance fee schedule amount. For dates of 
service in CY 2006 and beyond, the payment amount will equal the 
ambulance fee schedule amount. In all cases, the fee schedule portion 
of the blended rate equals the blending percentage multiplied by the 
lower of the fee schedule amount or the actual billed charges. The 
program's payment in all cases will be subject to the Part B 
coinsurance and deductible requirements.
    To assure that providers receive the correct payment amount during 
the transition period, all submitted charges attributable to ambulance 
services furnished during a cost-reporting period will be aggregated 
and treated separately from the submitted charges attributable to all 
other services furnished in the hospital. Also, providers must maintain 
statistics necessary for the Provider Statistics and Reimbursement 
report to ensure that the ambulance fee schedule portion of the blended 
transition payment will not be cost-settled at cost settlement time.
    New providers will not have a cost per trip from the prior year. 
Therefore, there will be no cost per trip inflation limit applied to 
new providers in their first year of furnishing ambulance services.
    New suppliers will use the CY 2000 allowed charge assigned for new 
suppliers in accordance with standard program procedures as described 
above, adjusted for each year of the transition period by the ambulance 
inflation factor that we announce.
    Section 1834(l) of the Act also requires that all payments made for 
ambulance services under the proposed fee schedule be made on an 
assignment-related basis. Pursuant to section 1842(b)(18)(A) and (B) of 
the Act, incorporated by reference in section 1834(l)(6) of the Act, 
ambulance suppliers will have to accept the Medicare allowed charge as 
payment in full and not bill or collect from the beneficiary any amount 
other than the unmet Part B deductible and Part B coinsurance amounts. 
Violations of this requirement may subject suppliers to sanctions. The 
law provides that mandatory assignment applies to all services ``for 
which payment is made under'' section 1834(l) of the Act; therefore, 
there will be no transitional period for mandatory assignment of 
claims. Nor is there any transition to the mechanisms and definitions 
required by the law. Thus, for instance, the level of services 
definitions (for example, that claims will be paid for the fee schedule 
portion of the blended payment at the BLS level if an ALS vehicle was 
used but no ALS level of service was furnished) will not be subject to 
transition.
    Comment: One commenter stated that we should share the new HCPCS 
codes with other payers in the interest of consistency among all 
payers.
    Response: HCPCS codes, when established, are routinely shared with 
all payers.
    Comment: A few commenters asked about HCPCS code A0888 (noncovered 
ambulance mileage) and whether it is being included in the crosswalk of 
old codes to new ones or is being terminated when the fee schedule is 
implemented.
    Response: HCPCS code A0888 is the code for noncovered ambulance 
mileage (for example, mileage traveled beyond the closest appropriate 
facility). This code has not been deleted and may continue to be used 
as it was previously.
    Comment: Some commenters suggested that we maintain current HCPCS 
codes for ambulance services for use by other payers.
    Response: The new codes have been established in accordance with 
standard procedures that include approval by a national coding 
committee with representatives from private payers. As a result, HCPCS 
codes in effect prior to January 1, 2001, for ambulance services have 
been terminated and replaced by new codes.
    Comment: Some commenters asked how payment would be made for new 
services that did not exist prior to the establishment of the new HCPCS 
codes (implemented January 1, 2001).
    Response: We may determine that a new level of service is necessary 
to accommodate new expensive technologies. However, the Congress 
provided only for an inflation factor each year to update the aggregate 
amount paid under the fee schedule. There is no other provision for 
increasing the aggregate amount paid for ambulance services in 
successive years. Therefore, if a new code representing a new level of 
service is created, the CF would have to be recalculated to preserve 
this statutory payment limit.
    Comment: A few commenters believe that, during the phase-in, 
suppliers should be allowed to bill for waiting time and an extra 
attendant.
    Response: The phase-in builds upon suppliers' current payments as 
well as on the fee schedule. Therefore, to the extent that suppliers 
are currently allowed by their carrier to bill under the reasonable 
charge system for waiting time and an extra attendant, they may 
continue to bill in that way during the phase-in only.
Fee Schedule Amounts and Examples of Payment
    The table below represents the fee schedule amounts for 2002 under 
this rule. Note that actual payment rates for 2002 will be a blend of 
the fee schedule amount and the payment allowances applicable for 2002.

[[Page 9122]]



                                              Table 1.--2002 Fee Schedule for Payment of Ambulance Services
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                Amount                               Rural       Rural
                                                                                  Unadjusted   adjusted   Amount not                ground      ground
                      Service level                          RVUs         CF       base rate    by GPCI    adjusted     Loaded      mileage     mileage
                                                                                    (UBR)+      (70% of     (30% of     mileage    (miles 1-  (miles 18-
                                                                                                 UBR)        UBR)                     17)        50)*
--------------------------------------------------------------------------------------------------------------------------------------------------------
BLS.....................................................        1.00      170.54     $170.54     $121.65      $52.14       $5.47       $8.21       $6.84
BLS-Emergency...........................................        1.60      170.54      272.86      191.00       81.86        5.47        8.21        6.84
ALS1....................................................        1.20      170.54      204.65      143.26       61.40        5.47        8.21        6.84
ALS1-Emergency..........................................        1.90      170.54      324.03      226.82       97.21        5.47        8.21        6.84
ALS2....................................................        2.75      170.54      468.99      328.29      140.70        5.47        8.21        6.84
SCT.....................................................        3.25      170.54      554.26      387.98      166.28        5.47        8.21        6.84
PI......................................................        1.75      170.54      298.45      208.91       89.54          (1) No Mileage Rate
--------------------------------------------------------------------------------------------------------------------------------------------------------


----------------------------------------------------------------------------------------------------------------
                                                    Amount     Amount not
                                     Unadjusted  adjusted by    adjusted    Rural air      Loaded     Rural air
           Service level             base rate    GPCI (50%     (50% of    base rate**    mileage     mileage***
                                       (UBR)       of UBR)        UBR)
----------------------------------------------------------------------------------------------------------------
FW................................    $2,314.51    $1,157.26    $1,157.26    $3,471.77        $6.57        $9.86
RW................................     2,690.96     1,345.48     1,345.48     4,036.44        17.51       26.27
----------------------------------------------------------------------------------------------------------------
\*\ A 50 percent add-on to the mileage rate (that is, a rate of $8.21 per mile) for each of the first 17 miles
  identified as rural. A 25 percent add-on to the mileage rate (that is, a rate of $6.84 per mile) for miles 18
  through 50 identified as rural. The regular mileage allowance applies for every mile over 50 miles.
\**\ A 50 percent add-on to the air base rate is applied to air trips identified as rural.
\***\ A 50 percent add-on to the air mileage rate is applied to every mile identified as rural.
 The payment rate for rural air ambulance (rural air mileage rate and rural air base rate) is 50 percent more
  than the corresponding payment rate for urban services (that is, the sum of the base rate adjusted by the
  geographic adjustment factor and the mileage).
\+\ This column illustrates the payment rates without adjustment by the GPCI. The conversion factor (CF) has
  been inflated for CY 2002.

Legend for Table 1

ALS1--Advanced Life Support, Level 1
ALS2--Advanced Life Support, Level 2
BLS--Basic Life Support
CF--Conversion Factor
FW--Fixed Wing
GPCI--Practice Expense Portion of the Geographic Practice Cost Index 
from the Physician Fee Schedule
PI--Paramedic ALS Intercept
RVUs--Relative Value Units
RW--Rotary Wing
SCT--Specialty Care Transport
UBR--Unadjusted Base Rate

    Formulas--The amounts in the above chart are used in the following 
formulas to determine the fee schedule payments--

Ground

    Ground-Urban: Payment Rate = [(RVU*(0.30 + (0.70*GPCI) ))*CF] + 
[MGR*#MILES].
    Ground-Rural: Payment Rate =
    [(RVU*(0.30+(0.70*GPCI) ))*CF] + 
[(((1+RG1)*MGR)*#MILES17)+ (((1 + RG2)*MGR)*#MILES18-50) + 
(MGR*#MILES>50)] (Sign before number 17 was erroneously published in 
the proposed rule.)

Air

    Air-Urban: Payment Rate = [((UBR*0.50) + ((UBR*0.50)*GPCI) )] + 
[MAR*#MILES].
    Air-Rural: Payment Rate = [(1.00 + RA)*((UBR*0.50)*GPCI) )] + 
[(1.00+RA)*(MAR*#MILES)].

Legend for Formulas

Symbol and Meaning

 = less than or equal to
> = greater than
* = multiply
CF = conversion factor (ground = $159.56; air = 1.0)
GPCI = practice expense portion of the geographic practice cost 
index from the physician fee schedule
MAR = mileage air rate (fixed wing rate = 6.49, helicopter rate = 
17.30)
MGR = mileage ground rate (5.40)
#MILES = number of miles the beneficiary was transported
#MILES17 = number of miles the beneficiary was transported less than 
or equal to 17
#MILES18-50 = number of miles beneficiary was transported between 18 
and 50
#MILES>50 = number of miles the beneficiary was transported greater 
than 50
RA = rural air adjustment factor (0.50 on entire claim)
Rate = maximum allowed rate from ambulance fee schedule
RG1 = rural ground adjustment factor amount: first 17 miles (0.50 on 
first 17 miles)
RG2 = rural ground adjustment factor amount: miles 18 through 50 
(0.25 on miles 18 through 50)
RVUs = relative value units (from chart)
UBR = the payment rates without adjustment by the GPCI (unadjusted 
base rate)

    Notes: The GPCI is determined by the address (zip code) of the 
point of pickup.

Examples Demonstrating Use of Fee Schedule Amounts

    The examples in the table and in the discussion below demonstrate 
the use of the ambulance fee schedule amounts during the first year 
(2002). Examples 1 through 4 relate to independent supplier claims, and 
Example 5 relates to hospital-based supplier claims.

                          Table 2.--Examples Demonstrating Use of Fee Schedule Amounts
----------------------------------------------------------------------------------------------------------------
                                                    Reasonable                       2002 fee
             Example                Reasonable     charge IIC  x     2002 fee       schedule  x    Total allowed
                                    charge IIC          80%          schedule           20%           charge
----------------------------------------------------------------------------------------------------------------
1...............................         $315.62         $252.50         $343.66          $68.73         $321.23
2...............................          292.44          233.95          425.62           85.12          319.07
3...............................        1,982.26        1,585.81        2,987.23          597.45        2,183.26
4...............................        1,564.80        1,251.84        6,250.83        1,250.17        2,502.01

[[Page 9123]]

 
                                                                  (Erroneously given in proposed rule in Example
                                                                                       4 as:
                                                                       $4,599.69         $919.94      $2,171.78)
----------------------------------------------------------------------------------------------------------------

Example 1: Ground Ambulance, Urban (Independent Supplier)

    A Medicare beneficiary residing in Baltimore, Maryland, was 
transported via ground ambulance from his or her home to the nearest 
appropriate hospital 2 miles away. An emergency response was required, 
and ALS services, including an ALS assessment, were furnished. 
Therefore, the level of service is ALS1-Emergency.
    Assuming that the beneficiary was placed on board the ambulance in 
Baltimore, it will be an urban trip. Therefore, no rural payment rate 
will apply. In Baltimore, the GPCI = 1.038. The fee schedule amount 
will be calculated as follows--

Payment Rate = [(RVU*(0.30 + (0.70*GPCI))) *CF] + [MGR*#MILES]
Payment Rate = [(1.90*(0.30 + (0.70*1.038))) *170.54] + [5.47*2.00]
Payment Rate = [(1.90*(0.30 + 0.727)) *170.54] + [10.94]
Payment Rate = [(1.90*1.027)*170.54] + [10.94]
Payment Rate = [1.951*170.54] + [10.94]
Payment Rate = [332.724] + [10.94]
Payment Rate = 343.664
Payment Rate = $343.66 (subject to Part B deductible and coinsurance 
requirements)

    Because 2002 will be the first year of a 5-year transition period, 
the ambulance fee schedule payment rate will be multiplied by 20 
percent and added to 80 percent of the payment calculated by the 
current payment system. The payment rate for Year 2 (CY 2003) will be 
calculated by multiplying the ambulance fee schedule payment rate by 40 
percent and adding the result to 60 percent of the current payment 
system amount. The payment rate for Year 3 (CY 2004) will be calculated 
by multiplying the ambulance fee schedule payment rate by 60 percent 
and adding the result to 40 percent of the current payment system 
amount. The payment rate for Year 4 (CY 2005) will be calculated by 
multiplying the ambulance fee schedule payment rate by 80 percent and 
adding the result to 20 percent of the current payment system amount. 
The payment for Year 5 (CY 2006) will be based solely on the ambulance 
fee schedule.
    The applicable codes are A0427 and A0425. Assuming application of 
the inflation indexed charge (IIC) in 2002, the reasonable charge 
allowance for this service in Maryland is $315.62 ($303.00 for the base 
trip plus $6.31  x  2 miles).
    Assuming that the Part B deductible has been met, the program will 
pay 80 percent, and the beneficiary's liability will be 20 percent, 
representing the Part B coinsurance amount, and the total allowed 
charge for this service during CY 2002 will be:

------------------------------------------------------------------------
                                                           Beneficiary
                 Medicare payment (80%)                  liability (20%)
------------------------------------------------------------------------
$256.98................................................          $64.25
------------------------------------------------------------------------

Example 2: Ground Ambulance, Rural (Independent Supplier)

    A Medicare beneficiary residing in Cottle County, Texas was 
transported via ground ambulance from his or her home to the nearest 
appropriate facility located in Quanah, Texas. Cottle County, where the 
beneficiary was placed on board the ambulance, is a non-MSA and, 
therefore, is, for purposes of this fee schedule, rural. A rural 
mileage rate will apply. The total distance from the beneficiary's home 
to the facility is 36 miles. A BLS nonemergency assessment was 
performed. Under this rule, the level of service will be BLS 
(nonemergency).
    For this part of Texas, the GPCI = 0.880. The proposed ambulance 
fee schedule amount will be calculated as follows--

36 mile trip = 17 miles at the 50% rural mileage increased rate plus 19 
miles at the 25% rural mileage increased rate.
Payment Rate = [(RVU*(0.30 + (0.70*GPCI)))*CF] + [(((1+ 
RG1)*MGR)*#MILES17)+ (((1+RG2)*MGR)*# MILES18-50) + 
(MGR*#MILES>50)]
Payment Rate = [(1.00*(0.30 + (0.70*0.880))) *170.54] + [(((1.00 + 
0.50)*5.47)*17.00)+ (((1.00 + 0.25)*5.47) *19.00) + (5.47*0.00)]
Payment Rate = [(1.00*(0.30 + 0.616)) *170.54] + [((1.50*5.47)*17.00)+ 
((1.25*5.47)*19.00) + (0.00)]
Payment Rate = [(1.00*0.916)*170.54] + [(8.21*17.00) + (6.84*19.00) + 
(0.00)]
Payment Rate = [0.916*170.54] + [139.49 + 129.91 + 0.00]
Payment Rate = [156.215] + [269.40]
Payment Rate = 425.615
Payment Rate = $425.62 (subject to Part B deductible and coinsurance 
requirements)
    The total allowed charge for this service during 2002 under our 
ambulance fee schedule is based on the following codes:

Old HCPCS Code(s) = A0300 and A0380
New HCPCS Code(s) = A0428 and A0425
    Assuming application of the inflation indexed charge (IIC) in 2002, 
the reasonable charge rate for this service in Texas will be $292.44 
($152.76 for HCPCS A0300, $3.88  x  36 miles for A0380).

    Assuming that the Part B deductible was met, the program will pay 
80 percent, and the beneficiary's liability will be 20 percent, 
representing the Part B coinsurance amount and the total allowed charge 
for this service during 2002 will be:

------------------------------------------------------------------------
                                                            Beneficiary
                 Medicare payment (80%)                      liability
                                                               (20%)
------------------------------------------------------------------------
$255.26.................................................          $63.81
------------------------------------------------------------------------

Example 3: Air Ambulance, Urban (Independent Supplier)

    A Medicare beneficiary was involved in an automobile accident along 
a busy interstate near Detroit, Michigan. A helicopter transported the 
beneficiary to the nearest appropriate facility located within the city 
limits of Detroit. The total distance from the accident to the facility 
was 14 miles. The level of service was rotary wing.
    Assuming that the patient was placed on board the air ambulance 
within the Detroit MSA, and because this is not a Goldsmith county, the 
trip will be urban. Therefore, no rural payment rate will apply. In the 
Detroit metropolitan area, the GPCI = 1.038. The ambulance fee schedule 
amount will be calculated as follows--


[[Page 9124]]


Payment Rate = [((UBR*0.50)+((UBR*0.50) *GPCI))]+[MAR*#MILES]
Payment Rate = [((2690.96*0.50)+((2690.96*0.50) *1.038))]+[17.51*14.00]
Payment Rate = [(1345.48+(1345.48*1.038) )]+[245.14]
Payment Rate = [(1345.48+1396.608 )]+[245.14]
Payment Rate = [2742.088]+[245.14]
Payment Rate = 2987.228
Payment Rate = $2,987.23 (subject to Part B deductible and coinsurance 
requirements)

    The total allowed charge for this service during 2002 is based on 
the following codes:

Old HCPCS Code = A0040
New HCPCS Code = A0431 and A0436

    Assuming application of the inflation indexed charge (IIC) in 2002, 
the reasonable charge rate for this service in Michigan is $1,982.26.
    Assuming that the Part B deductible has been met, the program will 
pay 80 percent, and the beneficiary's liability will be 20 percent, 
representing the Part B coinsurance amount; and the total allowed 
charge for this service during 2002 will be:

------------------------------------------------------------------------
                                                           Beneficiary
                 Medicare payment (80%)                  liability (20%)
------------------------------------------------------------------------
$1,746.61..............................................         $436.65
------------------------------------------------------------------------

Example 4: Air Ambulance, Rural (Independent Supplier)

    A Medicare beneficiary was transported via helicopter from a rural 
county in Arizona to the nearest appropriate facility. The total 
distance from point of pick-up to the facility was 86 miles. The level 
of service was rotary wing.
    Because the point of pick-up was in a rural, non-MSA area, this 
transport will be a rural trip under this rule. Therefore, a rural 
payment rate will apply. In Arizona, the GPCI = 0.978. The ambulance 
fee schedule amount will be calculated as follows--

Payment Rate = [(1.00+RA)*((UBR*0.50)+ ((UBR*0.50)*GPCI))]+ 
[(1.00+RA)*(MAR*#MILES)]
Payment Rate = [(1.00+0.50)*((2690.96*0.50)+ ((2690.96*0.50)*0.978))]+ 
[(1.00+0.50)*(17.51*86.00)]
Payment Rate = [(1.50)*(1345.48+ (1345.48*0.978) )]+[1.50*1505.86]
Payment Rate = [(1.50)*(1345.48+1315.879 )]+[2258.79]
Payment Rate = [1.50*2661.359]+[2258.79]
Payment Rate = [3992.039]+[2258.79]
Payment Rate = 6250.829
Payment Rate = $6,250.83 (subject to Part B deductible and coinsurance 
requirements)
    The total allowed charge for this service during 2002 is based on 
the following codes:
Old HCPCS Code = A0040
New HCPCS Code = A0431 and A0436
    Assuming application of the inflation indexed charge (IIC) for the 
example in question, in 2002 the reasonable charge rate for this 
service in Arizona will be $1,564.80.
    Assuming that the Part B deductible has been met, the program will 
pay 80 percent and 20 percent will be the beneficiary's liability and 
the total allowed charge for this service during 2002 will be:

------------------------------------------------------------------------
                                                           Beneficiary
                 Medicare payment (80%)                  liability (20%)
------------------------------------------------------------------------
$2,001.61..............................................         $500.40
------------------------------------------------------------------------

    (These figures were erroneously given in the proposed rule as:

------------------------------------------------------------------------
                                                           Beneficiary
                 Medicare payment (80%)                  liability (20%)
------------------------------------------------------------------------
$1,737.42..............................................        $434.36)
------------------------------------------------------------------------

Example 5: Ground Ambulance, Rural (Hospital-Based Supplier)

    A Medicare beneficiary residing in a rural area in the state of 
Iowa was transported via ground ambulance from her home located in a 
rural area (non-MSA) to the nearest appropriate facility (Hospital A). 
Because the point of pick-up is in a rural area, under our final rule, 
a rural payment rate will apply. The total distance from the 
beneficiary's home to Hospital A is 14 miles. A BLS nonemergency 
transport was furnished. The level of service will be BLS 
(nonemergency).
    For Iowa, the GPCI = 0.876. The ambulance fee schedule amount will 
be calculated as follows--

14 mile trip = 14 miles at the rural mileage rate plus 0 miles at the 
regular urban rate.

    The HCPCS codes to be used under the fee schedule are A0428 and 
A0425.

Payment Rate = [(RVU*(0.30 + (0.70*GPCI)))*CF] + [(((1 + RG1)*MGR)* 
#MILES17)+(((1 + RG2)*MGR)*# MILES18-50) + (MGR*#MILES>50)]
Payment Rate = [(1.00*(0.30 + (0.70*0.876))) *170.54] + [(((1.00 + 
0.50) *5.47)*14.00) + (((1.00+0.25) *5.47)*0.00) + (5.47*0.00)]
Payment Rate = [(1.00*(0.30 + 0.613)) *170.54] + [((1.50*5.47)*14.00) + 
((1.25*5.47)*0.00) + (0.00)]
Payment Rate = [(1.00*0.913)*170.54] + [(8.205*14.00) + (6.838 *0.00) + 
(0.00)]
Payment Rate = [0.913*170.54] + [114.87 + 0.00 + 0.00]
Payment Rate = [155.703] + [114.87]
Payment Rate = 270.573
Payment Rate = $270.57 (subject to Part B deductible and coinsurance 
requirements)

    Since 2002 will be the first year of a 5-year transition period, 
the ambulance fee schedule payment rate will be multiplied by 20 
percent. The portion of the total payment under the final fee schedule 
for 2002 is:

Payment Rate = Fee Schedule * Transition Percentage
Payment Rate = 270.57*0.2
Payment Rate = 54.114
Payment Rate = $54.11

    The remaining 80 percent of the payment rate is determined by the 
current payment system. For FIs, the current payment calculation is as 
follows.
    Assume that Hospital A's charge (HCB) for a BLS-nonemergency 
service is $220.00, its charge for mileage (HCM) is $4.00 per mile, and 
its past year's cost-to-charge ratio (CCR) is 0.9.
    Assuming that the beneficiary's Medicare Part B deductible has been 
met, the beneficiary's coinsurance liability for 2002 will be $55.10, 
calculated as follows:

Total Charge = HCB + (HCM*#MILES)
Total Charge = 220.00 + (4*14)
Total Charge = 220.00 + 56
Total Charge = $276.00 (Current system)

    For 2002, the coinsurance is equal to 20 percent of:
Total rate = (0.80*Current System) + (0.20*FS)
Total rate = (0.80*276.00) + (54.71)
Total rate = (220.80) + (54.71)
Total rate = $275.51
Coinsurance = 0.20*275.51 = $55.10

    For 2002, the transition payment rate is equal to:

Transition payment rate = [0.80*current rate] + [0.20*FS]
Transition Payment Rate = [0.80*((HCB)+(HCM*#MILES)) *CCR]+[0.20*FS]
Transition Payment Rate = [0.80*((220.00) + (4*14))*0.9] + [54.11]
Transition Payment Rate = [0.80*((220.00)+(56)) *0.9] + [54.11]
Transition Payment Rate = [0.80*(276.00)*0.9] + [54.11]
Transition Payment Rate = [198.72] + [54.11]
Transition Payment Rate = $252.83


[[Page 9125]]


    Assuming the part B deductible is met:

Medicare program payment = (transition payment rate)-(coinsurance)
Medicare program payment = 252.83 - 55.10
Medicare program payment = $197.73

V. Mechanisms To Control Expenditures for Ambulance Services

    We do not anticipate that the number of ambulance services 
furnished will increase to offset the effects of lower payments per 
service, and the Committee did not suggest mechanisms to control 
expenditures. However, we will monitor payment data and evaluate 
whether our assumptions used to calculate the original CF (for example, 
the ratio of the volume of BLS services to ALS services or the number 
of low billers) are accurate. If the actual proportions of the various 
levels of service are different (higher or lower) than those projected, 
we will adjust the CF accordingly.

VI. Adjustments To Account for Inflation and Other Factors

    In setting the CF for CY 2002, we are adjusting the base year data 
from 1998 for inflation. Section 4531 of the Balanced Budget Act of 
1997, as amended by section 423 of BIPA, prescribes the inflation 
factor to be used in determining the payment allowances for ambulance 
services paid under the current Medicare payment system. The inflation 
factor is equal to the projected consumer price index for all urban 
consumers (U.S. city average) (CPI-U) minus 1 percentage point from 
March-to-March for claims paid under cost payment (providers) and from 
June-to-June for claims paid under the reasonable charge system 
(carrier processed claims). The base year for our data is 1998. The 
inflation factors as percents are:

------------------------------------------------------------------------
                                      March-to-March      June-to-June
                                    (provider claims)   (carrier claims)
                                       (percentage)       (percentage)
------------------------------------------------------------------------
1999/1998.........................                0.9                1.1
2000/1999.........................                2.4                2.0
2001/2000*........................                3.7                3.7
2002/2001.........................                2.2                2.2
------------------------------------------------------------------------
Compounded inflation factor * (DOS               9.50              9.29
 = 1/1/02-12/31/02)...............
------------------------------------------------------------------------
* For date of service (DOS) during the 6-month period 1/1/01-6/30/01,
  the inflation factor was 2.7 percent, and for the 6-month period 7/1/
  01-12/31/01, the statutory inflation factor is 4.7 percent for an
  average of 3.7 percent for 2001.

    In addition, the Committee acknowledged that the statutory 
provisions in section 1834(l)(3)(B) of the Act, regarding annual 
updates to the fee schedule, will be used to make adjustments to 
account for inflation. That section of the Act provides for an annual 
update to the ambulance fee schedule based on the percentage increase 
in the CPI-U for the 12-month period ending with June of the previous 
year. Section 4531 of the BBA provided that, for 2001 and 2002, the 
increase in the CPI-U would be reduced by 1.0 percentage point for each 
year. However, this section was amended by BIPA, which mandated that 
the inflation factor for the period July 1, 2001 through December 31, 
2001 be 4.7 percent.
    As we indicated in the proposed rule, we will monitor payment data 
and evaluate whether certain assumptions used to establish the original 
CF (for example, the ratio of the volume of BLS services to ALS 
services) are accurate. Where appropriate, we will adjust the CF 
accordingly.
    In addition, we note that the inflation factor also applies to all 
mileage rates.
    Comment: Some commenters stated that the inflation factor referred 
to in the proposed rule is not correct for the year 2001. They stated 
that it should be the change in the CPI-U over the one-year period 
ending with June 30, 2000, minus one percent. The commenters 
recommended that, since the statutory inflation factor for 2001 is the 
CPI-U increase for the 12-month period ending in June of the previous 
year, we should be using that factor for the 2001 update, rather than 
an estimate for the 12-month period ending in June of 2001.
    Response: We agree. However, the Congress has since enacted a 
change in the ambulance inflation factor for part of 2001. Section 423 
of BIPA provides that this factor be increased to 4.7 percent for the 
period July 1, 2001 through December 31, 2001.
    Comment: Some commenters requested that we limit any adjustments to 
the CF to include only adjustments for the factors mentioned in the 
preamble. They state, for example, that the industry has no control 
over total volume of services and believe that we should not reduce the 
CF to offset increased charges resulting from any possible increase in 
total ambulance trips.
    Response: We are not reducing the CF to offset increased program 
payments that result from an increase in the total volume of ambulance 
trips.
    Comment: One commenter stated that operational costs in California 
(for example, personnel, insurance, fuel) are higher than other areas 
and the fee schedule should recognize these higher costs.
    Response: Differences in operational costs due to location are 
reflected in the fee schedule through the GPCI. This index is derived 
from cost-of-living factors in the operation of a physician's office, 
such as personnel, insurance, electricity. The Committee believed that 
this index was the most appropriate of the indices available to use for 
the ambulance fee schedule.

VII. Medical Conditions Lists

    When the Congress mandated that the ambulance fee schedule be 
developed through the negotiated rulemaking process, we deferred final 
action on our earlier proposal to base Medicare payment on the level of 
ambulance service required to treat the beneficiary's condition. The 
proposed ambulance coverage rule, published on June 17, 1997 (62 FR 
32715), also included diagnostic codes based on the International 
Classification of Diseases, 9th revision, Clinical Modification (ICD-9-
CM) that would have described the nature of the beneficiary's medical 
condition. Use of the ICD-9-CM codes would have assisted ambulance 
suppliers in billing the medically necessary level of ambulance 
service.
    While we did not propose a medical conditions list in the September 
2000 proposed rule (65 FR 55078), and while a medical conditions list, 
or codes for such a list, were not an official part of the negotiated 
rulemaking process, some of the negotiated rulemaking participants and 
other medical professionals, including carrier medical directors, 
emergency room physicians, and the Emergency Nurses Association,

[[Page 9126]]

came together as an ad hoc workgroup to discuss this issue. Their aim 
was to develop a list of medical conditions, not diagnoses, that 
generally require ambulance services and to identify the appropriate 
level of care for these conditions. The identified condition(s) would 
describe the beneficiary's medical condition, as presented to the 
ambulance crew upon arrival on the scene. The workgroup's final report 
was submitted to the Committee as a recommendation for further 
consideration.
    We published the list of medical conditions as Addendum A in the 
September 12, 2000 proposed rule (66 FR 55096). Suppliers and providers 
may submit these conditions on their Medicare claims. If they choose to 
do so, the condition must be reported in the ``remarks'' field on the 
claim. We will instruct Medicare contractors that they may not deny or 
reject claims solely because a supplier or provider has reported on the 
claim one of the conditions from the list of conditions. Also, the 
presence of a condition, in and of itself, does not establish the 
ambulance service as reasonable and necessary. Regardless of the 
presence of the condition on the claim, ambulance suppliers and 
providers must maintain and, upon request by the Medicare contractor, 
submit documentation sufficient to show that the service was reasonable 
and necessary. In other words, the presence of an identified condition 
on the claim will not make the claim payable if the beneficiary could 
have been safely transported by other means.
    We noted in the proposed rule that we have solicited information 
from interested parties on the need for such a list and the development 
of codes used in association with such a list that would best support 
the processing of claims for ambulance services. We also noted that, 
while we were not requiring the use of the conditions list at that 
time, we intended to work with members of the industry and other 
affected parties to develop a more complete set of conditions as well 
as a coding system that could be used under the fee schedule. Any such 
coding system, after August 16, 2002, would have to be created 
consistent with the electronic claim standards developed pursuant to 
the Health Insurance Portability and Accountability Act of 1996, Public 
Law 104-91 (HIPAA), described in the Federal Register on August 17, 
2000 (65 FR 50311).
    Comment: The majority of the comments on this subject stated that 
the list of condition descriptions should be adopted as written. Some 
commenters recommended that we not implement the fee schedule until we 
can implement the medical conditions list. The commenters stated that a 
coding system, upon which the new fee schedule is based, should include 
a means for suppliers and providers to indicate on the claim the 
symptoms presented by the beneficiary to the ambulance crew at the time 
of arrival on the scene that justify the level of service they furnish.
    Commenters also expressed concern that the medical conditions list 
is necessary for providers and suppliers to be able to report the 
appropriate level of service. One commenter noted that implementing the 
fee schedule without the medical conditions list will cause great 
hardship and confusion for ambulance suppliers and carriers regarding 
billing and claims processing.
    Response: The ambulance fee schedule is based upon HCPCS codes that 
reflect the level of services provided to the beneficiary. We have set 
forth in this final rule the seven levels of service upon which payment 
for ground ambulance services will be based. Although the medical 
conditions may be used as a guide to indicate the appropriate level of 
ground ambulance service, they are not necessary in order to proceed 
with the implementation of the fee schedule. The ambulance fee 
schedule, which is simply a pricing mechanism, does not depend upon the 
use of a coding system denoting the list of conditions.
    Under the current billing rules for ambulance services, Medicare 
carriers may request that suppliers document that the trip was 
medically necessary and that the appropriate level of service was 
provided. Currently, suppliers provide this documentation by using--(a) 
an explanation on the claims forms, (b) ICD-9-CM diagnosis codes, and/
or (c) medical records.
    As we stated above and in the proposed rule, we agree that a 
medical conditions list would help the ambulance supplier to identify 
the level of service at which a claim may be paid and would also aid 
Medicare contractors in their efforts to ensure that claims for 
ambulance services are paid appropriately. We understand the importance 
of implementing a uniform set of condition codes that all providers and 
suppliers can use. While this regulation does not contain such a set of 
codes, we pledge to work with the ambulance providers and suppliers, 
including hospitals, to develop a uniform set of codes over the next 
year. If a provider or supplier wishes to use the existing set of ICD-
9-CM diagnosis codes, we will instruct our carriers and intermediaries 
to review that set of codes.
    However, when the issue of a list of medical conditions was raised 
in the Committee, we advised the Committee that, while defining the 
levels of ambulance service was within the scope of the Committee, 
establishing the medical conditions that justify those levels of 
payment was not within that scope. Furthermore, we advised that 
recommendations about a coding system would have to be consistent with 
the regulations published pursuant to HIPAA. The HIPAA standards for 
electronic transactions final rule (65 FR 50312), which was published 
on August 17, 2000, established, among other things, Standards for the 
health care claims or equivalent encounter information transaction (45 
CFR 162.1102). In general, the standards for that transaction require a 
specific format, the ASC X12N 837, and specify the use of certain 
medical data code sets when the transaction is transmitted 
electronically by an entity subject to the rule. Under HIPAA, the ASC 
X12N 837 and the specified code sets for the health care claims 
transactions do not currently support the use of condition descriptions 
lists. However, HIPAA provides for the maintenance and modification of 
adopted standards and for the adoption of new standards, as set forth 
in the regulations at Sec. 162.910. Therefore, it is possible that, in 
the future, the health claims standards could be modified or expanded, 
or new standards created, in accordance with the procedures set forth 
in regulations, to accommodate condition descriptions lists.
    Comment: Commenters did not agree on the appropriate coding system 
to be used for the conditions list. Some commenters believe that ICD-9 
or ICD-10 codes should be associated with the condition descriptions, 
while others believe that we should not specify ICD-9 or ICD-10 codes 
as an appropriate system to determine medical conditions. Still others 
suggested that most conditions in the list could be mapped to existing 
ICD-9-CM codes, and the remaining conditions could be mapped to HCPCS 
codes. This approach would avoid the large expense to providers of 
implementing another coding system.
    Response: As noted above, there are many factors to be considered 
before we make a final decision regarding the development of an 
ambulance-specific medical condition coding system. We also note that 
the example in the proposed rule mistakenly referenced ICD-10-CM codes 
and should have referenced ICD-9-CM codes.

[[Page 9127]]

    Comment: One commenter stated that we should require Medicaid to 
use the new medical condition codes.
    Response: States are not obligated to adopt Medicare guidelines for 
ambulance services.

IX. Provisions of the Final Rule

A. BIPA

    BIPA provides the following changes to the ambulance fee schedule 
that have been incorporated into this rule.
     Critical Access Hospital (CAH)--The proposed rule would 
apply the ambulance fee schedule to all entities furnishing ambulance 
services to Medicare beneficiaries. Section 205 of BIPA provides that 
CAHs, or entities owned and operated by them, are paid for ambulance 
services based on reasonable cost, if there is no other ambulance 
provider or supplier within a 35-mile drive. As a result, these 
entities are exempt from the ambulance fee schedule described in this 
final rule. These entities are also exempt from the current cost-per-
trip inflation cap applicable to providers. This cap, established by 
section 4531(a)(1) of the BBA, limits increases in the cost per trip of 
ambulance services from each year to the next by the consumer price 
index for all urban consumers, reduced by 1 percentage point. 
Implementation of section 205 of BIPA requires us to establish a 
process for a CAH to qualify for this exemption. Such a process was 
addressed in a separate final rule, ``Medicare Program; Changes to the 
Hospital Inpatient Prospective Payment Systems and Rates and Costs of 
Graduate Medical Education; Fiscal Year 2002 Rates, etc.; Final 
Rules,'' published August 1, 2001 (66 FR 39828). The payment policy 
component is addressed in this rule.
     Rural Ambulance Mileage--The proposed rule would pay rural 
mileage greater than 17 at the same rate as mileage within urban areas. 
Section 221 of BIPA provided that the payment rate for rural ambulance 
mileage greater than 17 miles and up to 50 miles be increased by not 
less than one-half of the additional payment per mile established for 
the first 17 miles of a rural ambulance trip. We are waiving proposed 
rulemaking for this provision because we believe this amount is the 
minimum that is required by the plain language of the law and is not 
discretionary. We believe that proposed rulemaking, which would be 
necessary to set the amount at a level higher than the minimum, is 
impracticable in this instance for timely implementation of the law and 
will therefore implement it as a final with comment. Therefore, we will 
accept public comments on this policy.
     Inflation Factor--The proposed rule would increase the per 
trip payments for services furnished in 2001 over the per trip payments 
for these services furnished in 2000 by an amount equal to the change 
in the CPI-U reduced by one percent. Section 423 of BIPA provided that 
the ambulance inflation factor for services furnished during the period 
July 1, 2001 through December 31, 2001 be equal to 4.7 percent. We have 
implemented this provision without proposed rulemaking because it was 
self-implementing and neither permitted nor required interpretation.
     Ground Ambulance Mileage--The proposed rule would pay for 
all ground ambulance mileage during a four-year transition period based 
on a blend of the current payment rate and the fee schedule rate. 
Section 423 of BIPA also provided that all mileage furnished by 
suppliers and paid by carriers would be paid at the full fee schedule 
amount without any phased-in blended payment, but only in those States 
in which, prior to the fee schedule, the carrier paid separately for 
all mileage outside the county from which the beneficiary was 
transported, but did not pay separately for any in-county ambulance 
mileage. This provision does not apply to providers. We are waiving 
proposed rulemaking for this provision because we believe this amount 
is the minimum that is required by the plain language of the law and is 
not discretionary. We believe that proposed rulemaking is impracticable 
in this instance for implementation of the law and will therefore 
implement it as a final with comment. Therefore, we will accept public 
comments on this policy.

B. Inflation

    First, we corrected the inflation factor for 2001 to be equal to 
the percentage increase in the CPI-U minus one percent for the 12-month 
period ending in June of the previous year. This factor is applied to 
services furnished in the period January 1, 2002 through December 31, 
2002.
    Second, we clarify that the ambulance inflation factor applies to 
all mileage rates.

C. Physician Certification

    We added a provision which states that the health care professional 
who may certify the necessity of an unscheduled non-emergency ambulance 
transport may be an employee of the attending physician. Previously, we 
had required this person to be an employee of the facility in which the 
beneficiary was receiving treatment. We also clarified that all of the 
Medicare regulatory requirements and State licensure requirements for 
these health care professionals apply.
    We changed the requirement for certification for non-repetitive 
scheduled non-emergency ambulance transports. These transports no 
longer require certification in advance. They are now treated the same 
as unscheduled non-emergency ambulance transports for certification 
purposes. Certification in advance is now required only for repetitive 
scheduled non-emergency ambulance transports.
    In addition, we added the words ``provider or'' to clarify that the 
same certification requirements apply to both providers and suppliers.

D. Bed-Confined

    We clarified that bed-confinement is not necessarily sufficient 
justification for the medical necessity of a non-emergency ambulance 
transport. Other documentation may also be required. Other conditions 
in beneficiaries who are not bed-confined may also justify the medical 
necessity of a non-emergency transport by ambulance.

E. Future Adjustments to the Conversion Factor

    We clarified the factors for which we will adjust the CF. We will 
not, for example, adjust the CF in response to an increase in the total 
number of ambulance transports over the number of transports in the 
previous year. We will adjust the CF if actual experience under the fee 
schedule is significantly different from the assumptions used to 
calculate the CF (for example, the relative volumes of the different 
levels of service or the extent of charges below the fee schedule (that 
is, ``low billers'')).

F. Adjustment for ``Low Billing''

    We have decided to assume that one-half of these ``low billers'' 
(that is, those billers whose charge is less than 70 percent of the 
maximum allowed by Medicare) would continue to charge an amount that is 
lower than the fee schedule amount. Therefore, we have increased the CF 
to account for approximately $42 million that we anticipated as the 
difference between the aggregate fee schedule amount and actual charges 
that will be significantly less than the fee schedule amount (that is, 
``low billing'').

G. Ambulance Blueprint

    We changed the criteria in the definitions of the services that 
constitute a BLS level and an ALS level of care from those in the 
national

[[Page 9128]]

Blueprint to the criteria contained in State and local laws.

H. ALS Assessment

    We changed the definition of ALS assessment to conform to the 
definition in the Committee Statement and to clarify that an ALS 
assessment is recognized only in an emergency situation.

I. Emergency Response Definition

    In the proposed rule, we stated that an emergency response means 
responding immediately to an emergency medical condition. An immediate 
response is one in which the ambulance supplier begins as quickly as 
possible to take the steps necessary to respond to a call. We deleted 
the phrase ``emergency medical condition'' from the definition of 
``emergency response.'' We clarified that the additional payment for 
emergency response is for the additional overhead cost of maintaining 
the resources required to respond immediately to a call and not for the 
cost of furnishing a certain level of service to the beneficiary. We 
also clarified that ``emergency response'' refers only to a BLS or ALS1 
level of service.

J. Delayed Implementation

    We will implement the fee schedule on April 1, 2002. The proposed 
rule had stated implementation would be January 1, 2001.

K. Drug Administration Which Supports an ALS2 Level of Services

    We clarified the types of drugs that must be administered to the 
beneficiary in order for the ambulance transport during which the 
administration occurs to qualify for payment at the ALS2 level. We also 
clarified that three separate administrations of the same drug 
qualifies for the ALS2 level of care.

L. Multiple Patients

    We changed the amount paid for transports in which there is more 
than one patient onboard the ambulance. In the proposed rule, we stated 
that a single transport fee would be allowed and distributed equally 
among the patients. In this final rule, we provide that payment will be 
made as follows. If two patients are transported simultaneously, for 
each Medicare beneficiary, we will allow 75 percent of the payment 
allowance for the base rate applicable to the level of care furnished 
to that beneficiary. If three or more patients are transported 
simultaneously, then the payment allowance for the Medicare beneficiary 
(or each of them) is equal to 60 percent of the service payment 
allowance applicable for the level of care furnished to the 
beneficiary. However, a single payment allowance for mileage would 
continue to be prorated by the number of patients onboard.

M. Changes to the Conversion Factor

    Several changes have been made to the calculation of the CF from 
the methodology described in the proposed rule. The inflation factor 
used for calendar year 2001 was set at 3.7 percent. This is the 
annualized inflation factor provided by BIPA which has the effect of an 
inflation factor of 2.7 percent for the period January 1, 2001 through 
June 30, 2001, and 4.7 percent for the period July 1, 2001 through 
December 31, 2001 (as described above). Second, the CF was increased to 
reflect the assumption that some ``low billers'' (as described above) 
will continue to submit charges less than the fee schedule amount. 
Third, we corrected the number of rural miles equal to or less than 17 
miles that were billed in calendar year 1998. Fourth, we revised our 
assumption with respect to the number of services that we believe will 
be billed at the ALS1-Emergency level because a supplier that provides 
an ``ALS assessment'' may receive payment for an ALS1-Emergency level 
of service. Fifth, we added back to the total amount used to calculate 
the CF the savings that would have accrued to the program had we 
implemented the policy proposed in June 1997 that would pay at the BLS 
rate for services furnished at the BLS level even though an ALS vehicle 
was used.

N. Deceased Beneficiary

    We have clarified that, in the case of an air ambulance responding 
to a call for a beneficiary who was pronounced dead while the ambulance 
was enroute to the scene, payment will be made in the amount of the 
appropriate air base rate and not in the amount of a BLS ground rate. 
No payment will be made for mileage.

O. Medical Conditions List

    We have specified that suppliers and providers may choose to submit 
a condition from the list of conditions and, if they do submit a 
condition, they must report that condition in the ``remarks'' field on 
the claim. Contractors may not deny or reject claims solely because a 
supplier or provider has reported a condition on the claim. Also, the 
presence of a condition, in and of itself, does not establish whether 
the services were reasonable and necessary. Regardless of the presence 
of the condition on the claim, ambulance suppliers and providers must 
maintain and, upon request by the Medicare contractor, submit 
documentation sufficient to show that the service was reasonable and 
necessary.

P. Transition Period

    The transition period has been changed from the four-year 
transition in the proposed rule. The final rule provides a five-year 
transition with blended payments as follows:

------------------------------------------------------------------------
                                              Former
                                              payment      Fee schedule
                                            percentage      percentage
------------------------------------------------------------------------
Year One (4/2002-12/2002)...............              80              20
Year Two (CY 2003)......................              60              40
Year Three (CY 2004)....................              40              60
Year Four (CY 2005).....................              20              80
Year Five (CY 2006).....................               0             100
------------------------------------------------------------------------

Q. Payment for BLS Services Furnished by ALS Vehicle During Transition 
Period

    In the proposed rule, we stated that during the transition period 
the ``old'' portion of the blended payment for BLS services furnished 
using an ALS vehicle would be the payment allowance for a BLS trip. In 
the final rule, we are phasing in this policy and the ``old'' portion 
of the blended payment will be at the allowance for an ALS trip.

X. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995 (PRA), we are required to 
provide 30-day notice in the Federal Register and solicit public 
comment

[[Page 9129]]

when a collection of information requirement is submitted to the Office 
of Management and Budget (OMB) for review and approval. In order to 
fairly evaluate whether an information collection should be approved by 
OMB, section 3506(c)(2)(A) of the PRA requires that we solicit comment 
on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    We are soliciting public comment on each of these issues for the 
following sections of this document that contain information collection 
requirements.
Coverage of Ambulance Services (Sec. 410.40(d)(2))
    This section is revised so that it no longer requires that an 
ambulance provider or supplier, before furnishing nonemergency, 
scheduled, nonrepetitive services to a beneficiary obtain a written 
order from the beneficiary's attending physician certifying that the 
services are medically necessary prior to the date the service is 
furnished.
Coverage of Ambulance Services (Sec. 410.40(d)(3)(iii))
    This section states that if the ambulance provider or supplier is 
unable to obtain a signed physician certification statement from the 
beneficiary's attending physician, a signed certification statement 
must be obtained from either the physician assistant (PA), nurse 
practitioner (NP), clinical nurse specialist (CNS), registered nurse 
(RN), or discharge planner, who has personal knowledge of the 
beneficiary's condition at the time the ambulance transport is ordered 
or the service is furnished. This individual must be employed by the 
beneficiary's attending physician, or by the hospital or facility where 
the beneficiary is being treated and from which the beneficiary is 
transported. Medicare regulations for PAs, NPs, and CNSs apply and all 
applicable State licensure laws apply.
    The burden associated with this requirement is the time and effort 
necessary for the required hospital or physician's employee to provide 
the certification. We estimate that there will be approximately 5,000 
certifications on an annual basis at an estimated 5 minutes per 
certification. Therefore, the annual national burden associated with 
this requirement is 417 hours.
Coverage of Ambulance Services (Sec. 410.40(d)(3)(iv) & (v))
    The following paragraphs also have information collection 
requirements:
    Paragraph (d)(3)(iv): If the ambulance provider or supplier is 
unable to obtain the required certification within 21 calendar days 
following the date of the service, the ambulance provider or supplier 
must document its attempts to obtain the requested certification and 
may then submit the claim. Acceptable documentation includes a signed 
return receipt from the U.S. Postal Service or other similar service 
that evidences that the ambulance provider or supplier attempted to 
obtain the required signature from the beneficiary's attending 
physician or other individual named in paragraph (d)(3)(iii) above.
    Paragraph (d)(3)(v): In all cases, the provider or supplier must 
keep appropriate documentation on file and, upon request, present it to 
the contractor. The presence of the signed certification statement or 
signed return receipt does not alone demonstrate that the ambulance 
transport was medically necessary. All other program criteria must be 
met in order for payment to be made.
    The burden associated with these requirements is the time and 
effort necessary for the ambulance provider or supplier to document its 
attempts to obtain the requested certification statement and the time 
and effort necessary for the hospital or physician's employee to 
document the certification statement itself. We estimate that 5,000 
providers or suppliers will be required to submit a receipt instead of 
certification for an average of 12 instances each on an annual basis, 
at an estimated 5 minutes per instance for a total annual national 
burden of 5,000 hours. We also estimate that there will be 5,000 
certifications to be documented by the hospital or physician's employee 
at 5 minutes per instance for a total annual national burden of 417 
hours.
Point of Pick-Up (Sec. 414.610(e))
    This section states that the zip code of the point of pick-up must 
be reported on each claim for ambulance services so that the correct 
GAF and RAF may be applied, as appropriate.
    In the proposed rule, we stated that the burden associated with 
this requirement is the time and effort necessary for the ambulance 
provider or supplier to note the required zip code for each claim of 
service. We estimated that, of the 9,000 (potential) providers or 
suppliers, 5,000 providers or suppliers will be required to provide the 
documentation, for an estimated 550,000 (5% of total claims volume of 
11 million) instances on an annual basis. Per provider or supplier 
(5,000), we estimate 1 minute per instance to meet this requirement, 
for a burden of 2 hours per provider or supplier on an annual basis. 
Therefore, the annual national burden associated with this requirement 
is 10,000 hours.
    Comment: A few commenters stated that the burden of reporting the 
zip code on the claim applies to 100 percent of total volume of claims 
and more than 2 hours per supplier per year.
    Response: We agree with the commenters. The burden of reporting the 
zip code applies to all claims for ambulance services and to all 
providers and suppliers. We estimate that there will be approximately 
10 million claims for ambulance services, from approximately 10,000 
ambulance providers and suppliers, each of which will require the zip 
code to be entered. We estimate that entering the zip code requires 
about 15 seconds, giving a total annual burden of approximately 40,000 
hours or an average of 4 hours per provider or supplier per year. We 
expect that this burden will diminish as providers and suppliers become 
familiar with the zip codes in their service area.
    If you comment on these information collection and recordkeeping 
requirements, please mail copies directly to the following:

Centers for Medicare & Medicaid Services, Office of Information 
Services, Information Technology Investment Management Group, Attn.: 
Dawn Willinghan (Attn: CMS-1002-om N2-14-26, 7500 Security Boulevard, 
Baltimore, MD 21244-1850;
        and
Office of Information and Regulatory Affairs, Office of Management and 
Budget, Room 10235, New Executive Office Building, Washington, DC 
20503, Attn: Allison Herron Eydt, CMS Desk Officer.

XI. Regulatory Impact Analysis

A. Overall Impact

    We have examined the impacts of this rule as required by Executive 
Order 12866 and the Regulatory Flexibility Act (RFA) (Public Law 96-
354). Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and

[[Page 9130]]

equity). A regulatory impact analysis (RIA) must be prepared for major 
rules with economically significant effects ($100 million or more 
annually). This final regulation will have no fiscal impact on the 
Medicare program; therefore, we have determined that this is not a 
major rule. However, we are providing a regulatory impact analysis 
because some entities will experience a decrease in payments while 
others will experience an increase in payments. This impact is less 
than the $70 million savings estimate for FY 2002 shown in the proposed 
rule because we are paying for BLS services furnished by ALS vehicles 
at the ALS rate for the reasonable charge portion of the blended rate 
during the transition period and because we have increased the amount 
of spending upon which the CF is based by the amount paid for ALS 
vehicles that furnished only a BLS level of service. In addition, our 
data indicate that payments (80 percent of which will be program 
expenditures and the remainder because of Medicare Part B coinsurance 
and deductible requirements) will be redistributed among entities that 
furnish ambulance services.
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and government agencies. 
Most hospitals and most other providers and suppliers are small 
entities, either by nonprofit status or by having revenues of $5 
million or less annually. For purposes of the RFA, most ambulance 
providers and most ambulance suppliers are considered to be small 
entities. Individuals and States are not included in the definition of 
a small entity.
    In addition, section 1102(b) of the Act requires us to prepare an 
RIA if a rule may have a significant impact on the operations of a 
substantial number of small rural hospitals. This analysis must conform 
to the provisions of section 604 of the RFA. For purposes of section 
1102(b) of the Act, we define a small rural hospital as a hospital that 
is located outside of a metropolitan statistical area and has fewer 
than 100 beds. In the aggregate, in 2002, rural entities, which include 
both rural hospitals and rural ambulance suppliers, will receive an 
increase in total revenue while urban entities will experience a 
decrease in total revenue as summarized in the chart, below. It is also 
true that some rural entities will be paid less than their current 
rate. While we do not have specific data on the number of small rural 
hospitals that furnish ambulance services, we recognize that the rural 
adjustment factor incorporated in this proposal may not completely 
offset the higher costs of low-volume suppliers. As stated earlier, we 
recognize that this rural adjustment is a temporary proxy to 
acknowledge the higher costs of certain low-volume isolated and 
essential suppliers. We will consider alternative methodologies that 
would more appropriately address payment to isolated, low-volume rural 
ambulance suppliers. In addition, critical access hospitals that do not 
have an ambulance supplier within a 35-mile drive will be paid for 
ambulance services based on cost.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule that may result in an expenditure in any one year by 
State, local, or tribal governments, in the aggregate, or by the 
private sector, of $110 million. The final rule will not have any 
unfunded mandates.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct compliance costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. The final rule will not impose compliance costs on the 
governments mentioned.
    Although we view the anticipated results of this final regulation 
as beneficial to the Medicare program and to Medicare beneficiaries, we 
recognize that not all of the potential effects of this final rule can 
be anticipated.
    The foregoing analysis concludes that this regulation may have a 
financial impact on a number of small entities. This analysis, in 
combination with the rest of the preamble, is consistent with the 
standards for analysis set forth by the RFA.
    Comment: Many commenters noted that this is a major rule and that 
we should conduct a regulatory impact analysis under Executive Order 
12866. They argue that the impact is more than $84.5 million because it 
should include: (1) The effects of our treatment in calculating the 
conversion factor of suppliers with low charges and those that do not 
bill for mileage; (2) redistribution effects; and (3) the effect of 
mandatory assignment of benefits. In addition, the rule does not 
discuss the impact on public safety of the ambulance suppliers who will 
experience a reduction in payments. The commenters noted that we should 
conduct a State-by-State impact assessment of the proposed rule to 
determine if there are regulatory alternatives that would have a less 
drastic effect on ambulance providers, many of whom are small 
businesses.
    Response: As stated above, we have determined that this is not a 
major rule and that this final rule has no fiscal impact on the 
program. With respect to the mandatory assignment requirement, 
historically, ninety-five percent of ambulance services have been 
submitted to Medicare under assignment, and, while the fee schedule 
redistributes payments, we do not anticipate that the assignment 
requirement will be a major issue nationally. There may be areas of the 
country where balanced billing occurs more often than in other parts; 
however, the effect on total payments is unclear because payment in any 
of the areas may increase under the fee schedule. Also, as stated 
above, mandatory assignment of benefits is a requirement of the law and 
not subject to the discretion of the Secretary through this regulatory 
action. Also, we have included an amount in this final rule for 
suppliers of ambulance services who may choose not to bill the program 
at the full fee schedule amount.

B. Anticipated Effects

    Implementation of the ambulance fee schedule will have several 
general effects. Section 1834(l)(3)(A) of the Act requires that the 
aggregate amount paid under the ambulance fee schedule not exceed the 
aggregate amount that would have been paid absent the fee schedule. One 
of the characteristics of the present payment system is that widely 
varying amounts are paid for the same type of service depending upon 
the location of the service. In effect, the ambulance fee schedule will 
lower payments in areas of high current levels of payment and raise 
payments in areas of low current levels of payment. Thus, a given area 
could have a large reduction in payment only because such an area had 
historically been paid at a rate higher than average for the type of 
service. Even with a reduction, such an area may continue to have 
payment rates under the fee schedule that are higher than the national 
average.
1. Effect on Ambulance Providers and Suppliers
    One effect of the fee schedule will be that revenue will be 
redistributed from providers to ambulance suppliers because providers 
have been paid, on average, more for the same service furnished by a 
supplier.

[[Page 9131]]

2. Effects on Urban, Rural, and Air Ambulance Services
    Payment could be redistributed from urban ambulance services to 
rural ambulance services for two reasons:
    (1) Services furnished in urban areas have been paid more, on 
average, than the same services furnished in rural areas.
    (2) The ambulance fee schedule will pay more for the same services 
furnished in a rural area than in an urban area because of the rural 
adjustment factor (RAF). Payment will also be redistributed from urban 
air ambulance services to rural air ambulance services because of the 
RAF for air services.
    (3) Finally, there will be a redistribution of payment from ground 
ambulance services to air ambulance services. This effect is explained 
in greater detail in the discussion of the CF.
    Currently, providers (for example, hospital-based ambulance 
services) are paid on average 66 percent more than independent 
suppliers for the same type of ambulance service. This is because 
providers are currently paid based on reasonable cost and suppliers are 
paid based on reasonable charges capped by the inflation indexed charge 
(IIC). The IIC has limited the growth of suppliers' payments over the 
years, whereas, until enactment of the BBA in 1997, there had not been 
a limit on the growth of providers' reimbursable cost for ambulance 
services. As a result, providers of ambulance services will experience 
a reduction in total revenue while independent ambulance suppliers will 
experience an increase in total revenue.
    There are offsetting factors that affect payment in urban versus 
rural areas. While payment rates in rural areas will generally be 
lowered by the GPCI (because the GPCI is generally lower in rural areas 
than it is in urban areas), rural payment rates will increase because 
of the rural mileage add-on. The net result is that payments will be 
redistributed from providers and suppliers in urban areas to providers 
and suppliers in rural areas.
    Furthermore, payments will be redistributed from providers and 
suppliers of ground ambulance services to providers and suppliers of 
air ambulance services.
    The following chart summarizes these findings for 2002:

------------------------------------------------------------------------
                                                                Revenue
                From                             To            (million)
------------------------------------------------------------------------
Providers...........................  Suppliers..............        $14
Urban...............................  Rural..................         17
Ground..............................  Air....................          5
------------------------------------------------------------------------

These amounts represent total revenue, that is, the 80 percent Medicare 
portion plus the 20 percent beneficiary coinsurance liability. The 
redistributive effects of this final rule represent a negligible 
fraction of the total revenue (both Medicare at $2.7 billion plus all 
other non-Medicare sources of revenue) for ambulance providers and 
suppliers. Therefore, we conclude and the Secretary certifies that this 
final rule does not have a significant impact on a substantial number 
of small entities.
3. Effect on the Medicare Program
    We estimate that this final rule will have no fiscal impact on the 
Medicare program.

C. Alternatives Considered

    While there were many alternatives considered during the course of 
the negotiated rulemaking process, the statute requires that total 
program expenditures not exceed what the payments would have been 
without the fee schedule. None of the alternatives considered changed 
total program expenditures. The alternatives varied in the manner in 
which the total amount of program expenditures might be distributed 
among the entities that furnish ambulance services to Medicare 
beneficiaries. For example, the Committee considered other geographical 
adjustment factors, other relative values for the levels of ambulance 
service, other definitions for the levels of ambulance service and 
other definitions for ``rural entities,'' but it did not adopt them for 
various reasons. (A full description of these alternatives may be found 
at the Web site: www.hcfa.gov/medicare/ambmain.htm.)

D. Effect on Beneficiaries

    The ambulance fee schedule will have a leveling effect on 
coinsurance liability. About 10 percent of the 37 million beneficiaries 
enrolled in Medicare Part B receive a Medicare benefit for ambulance 
services. While beneficiaries in those areas of historically higher 
than average payment rates will benefit from lower coinsurance 
liability, beneficiaries in areas of historically lower than average 
payment rates will experience an upward trend of coinsurance liability. 
While, on average, for all Medicare beneficiaries receiving a Medicare 
benefit for ambulance services there is no change in coinsurance 
liability, the average beneficiary coinsurance liability will increase 
by one percent for beneficiaries located in rural areas with the same 
decrease in coinsurance liability for beneficiaries in urban areas.
    Beneficiaries will also benefit in those cases in which suppliers 
previously did not accept assignment and billed the beneficiary the 
difference between the Medicare program allowed amount and their actual 
charge, because under the fee schedule all suppliers must accept 
assignment.

E. Conclusion

    We anticipate that the ambulance fee schedule amounts for entities 
that have historically received lower than average payment rates will 
be relatively higher and the fee schedule amounts for entities that 
have historically received higher than average payment rates will be 
relatively lower. Generally, this will mean higher rates in the future 
for rural transports, lower rates in the future for urban transports, 
and higher rates in the future for air ambulance services. We believe 
that the statutory requirement to establish mechanisms to control 
increases in expenditures for ambulance services under Part B of the 
Medicare program is met by continuance of the application of the 
inflation factors prescribed in the statute.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects Affected in 42 CFR Part 410

    Ambulances, Health facilities, Health professions, Kidney diseases, 
Laboratories, Medicare, Rural areas, X-rays.

42 CFR Part 414

    Administrative practice and procedure, Health facilities, Health 
professions, Kidney diseases, Medicare, Reporting and recordkeeping 
requirements, Rural areas, X-rays.


    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services amends 42 CFR chapter IV as follows:

PART 410--SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS

    A. Part 410 is amended as set forth below:
    1. The authority citation for part 410 continues to read as 
follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).

[[Page 9132]]

Subpart B--Medical and Other Health Services

    2. Section 410.40 is amended by:
    A. Revising paragraph (b).
    B. Revising paragraph (d)(1).
    C. Revising paragraph (d)(2).
    D. Revising the paragraph (d)(3) heading and introductory text.
    E. Revising paragraph (d)(3)(i).
    F. Adding new paragraphs (d)(3)(iii), (d)(3)(iv), and (d)(3)(v).
    The revisions and additions read as follows:


Sec. 410.40  Coverage of ambulance services.

* * * * *
    (b) Levels of service. Medicare covers the following levels of 
ambulance service, which are defined in Sec. 414.605 of this chapter:
    (1) Basic life support (BLS) (emergency and nonemergency).
    (2) Advanced life support, level 1 (ALS1) (emergency and 
nonemergency).
    (3) Advanced life support, level 2 (ALS2).
    (4) Paramedic ALS intercept (PI).
    (5) Specialty care transport (SCT).
    (6) Fixed wing transport (FW).
    (7) Rotary wing transport (RW).
* * * * *
    (d) Medical necessity requirements--(1) General rule. Medicare 
covers ambulance services, including fixed wing and rotary wing 
ambulance services, only if they are furnished to a beneficiary whose 
medical condition is such that other means of transportation are 
contraindicated. The beneficiary's condition must require both the 
ambulance transportation itself and the level of service provided in 
order for the billed service to be considered medically necessary. 
Nonemergency transportation by ambulance is appropriate if either: the 
beneficiary is bed-confined, and it is documented that the 
beneficiary's condition is such that other methods of transportation 
are contraindicated; or, if his or her medical condition, regardless of 
bed confinement, is such that transportation by ambulance is medically 
required. Thus, bed confinement is not the sole criterion in 
determining the medical necessity of ambulance transportation. It is 
one factor that is considered in medical necessity determinations. For 
a beneficiary to be considered bed-confined, the following criteria 
must be met:
    (i) The beneficiary is unable to get up from bed without 
assistance.
    (ii) The beneficiary is unable to ambulate.
    (iii) The beneficiary is unable to sit in a chair or wheelchair.
    (2) Special rule for nonemergency, scheduled, repetitive ambulance 
services. Medicare covers medically necessary nonemergency, scheduled, 
repetitive ambulance services if the ambulance provider or supplier, 
before furnishing the service to the beneficiary, obtains a written 
order from the beneficiary's attending physician certifying that the 
medical necessity requirements of paragraph (d)(1) of this section are 
met. The physician's order must be dated no earlier than 60 days before 
the date the service is furnished.
    (3) Special rule for nonemergency ambulance services that are 
either unscheduled or that are scheduled on a nonrepetitive basis. 
Medicare covers medically necessary nonemergency ambulance services 
that are either unscheduled or that are scheduled on a nonrepetitive 
basis under one of the following circumstances:
    (i) For a resident of a facility who is under the care of a 
physician if the ambulance provider or supplier obtains a written order 
from the beneficiary's attending physician, within 48 hours after the 
transport, certifying that the medical necessity requirements of 
paragraph (d)(1) of this section are met.
* * * * *
    (iii) If the ambulance provider or supplier is unable to obtain a 
signed physician certification statement from the beneficiary's 
attending physician, a signed certification statement must be obtained 
from either the physician assistant (PA), nurse practitioner (NP), 
clinical nurse specialist (CNS), registered nurse (RN), or discharge 
planner, who has personal knowledge of the beneficiary's condition at 
the time the ambulance transport is ordered or the service is 
furnished. This individual must be employed by the beneficiary's 
attending physician or by the hospital or facility where the 
beneficiary is being treated and from which the beneficiary is 
transported. Medicare regulations for PAs, NPs, and CNSs apply and all 
applicable State licensure laws apply; or,
    (iv) If the ambulance provider or supplier is unable to obtain the 
required certification within 21 calendar days following the date of 
the service, the ambulance supplier must document its attempts to 
obtain the requested certification and may then submit the claim. 
Acceptable documentation includes a signed return receipt from the U.S. 
Postal Service or other similar service that evidences that the 
ambulance supplier attempted to obtain the required signature from the 
beneficiary's attending physician or other individual named in 
paragraph (d)(3)(iii) of this section. ]
    (v) In all cases, the provider or supplier must keep appropriate 
documentation on file and, upon request, present it to the contractor. 
The presence of the signed certification statement or signed return 
receipt does not alone demonstrate that the ambulance transport was 
medically necessary. All other program criteria must be met in order 
for payment to be made.
* * * * *

PART 414--PAYMENT FOR PART B MEDICAL AND OTHER HEALTH SERVICES

    B. Part 414 is amended as set forth below:
    1. The authority citation for part 414 continues to read as 
follows:

    Authority: Secs. 1102, 1871, and 1881(b)(1) of the Social 
Security Act (42 U.S.C. 1302, 1395hh, 1395rr(b)(1)).

    2. Section 414.1 is revised to read as follows:


Sec. 414.1  Basis and scope.

    This part implements the following provisions of the Act:
    1802--Rules for private contracts by Medicare beneficiaries.
    1833--Rules for payment for most Part B services.
    1834(a) and (h)--Amounts and frequency of payments for durable 
medical equipment and for prosthetic devices and orthotics and 
prosthetics.
    1834(l)--Establishment of a fee schedule for ambulance services.
    1834(m)--Rules for Medicare reimbursement for telehealth services.
    1848--Fee schedule for physician services.
    1881(b)--Rules for payment for services to ESRD beneficiaries.
    1887--Payment of charges for physician services to patients in 
providers.
    3. A new subpart H, consisting of Secs. 414.601 through 414.625, is 
added to read as follows:
Subpart H--Fee Schedule for Ambulance Services
Sec.
414.601   Purpose.
414.605   Definitions.
414.610   Basis of payment.
414.615   Transition to the ambulance fee schedule.
414.620   Publication of the ambulance fee schedule.
414.625   Limitation on review.

Subpart H--Fee Schedule for Ambulance Services


Sec. 414.601  Purpose.

    This subpart implements section 1834(l) of the Act by establishing 
a fee schedule for the payment of ambulance services. Section 1834(l) 
of the Act

[[Page 9133]]

requires that, except for services furnished by certain critical access 
hospitals (see Sec. 413.70(b)(5) of this chapter), payment for all 
ambulance services, otherwise previously payable on a reasonable charge 
basis or retrospective reasonable cost basis, be made under a fee 
schedule.


Sec. 414.605  Definitions.

    As used in this subpart, the following definitions apply to both 
land and water (hereafter collectively referred to as ``ground'') 
ambulance services and to air ambulance services unless otherwise 
specified:
    Advanced life support (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.
    Advanced life support (ALS) intervention means a procedure that is, 
in accordance with State and local laws, beyond the scope of authority 
of an emergency medical technician-basic (EMT-Basic).
    Advanced life support, level 1 (ALS1) means transportation by 
ground ambulance vehicle, medically necessary supplies and services and 
either an ALS assessment by ALS personnel or the provision of at least 
one ALS intervention.
    Advanced life support, level 2 (ALS2) means either transportation 
by ground ambulance vehicle, medically necessary supplies and services, 
and the administration of at least three medications by intravenous 
push/bolus or by continuous infusion excluding crystalloid, hypotonic, 
isotonic, and hypertonic solutions (Dextrose, Normal Saline, Ringer's 
Lactate); or transportation, medically necessary supplies and services, 
and the provision of at least one of the following ALS procedures:
    (1) Manual defibrillation/cardioversion.
    (2) Endotracheal intubation.
    (3) Central venous line.
    (4) Cardiac pacing.
    (5) Chest decompression.
    (6) Surgical airway.
    (7) Intraosseous line.
    Advanced life support (ALS) personnel means an individual trained 
to the level of the emergency medical technician-intermediate (EMT-
Intermediate) or paramedic. The EMT-Intermediate is defined as an 
individual who is qualified, in accordance with State and local laws, 
as an EMT-Basic and who is also qualified in accordance with State and 
local laws to perform essential advanced techniques and to administer a 
limited number of medications. The EMT-Paramedic is defined as 
possessing the qualifications of the EMT-Intermediate and also, in 
accordance with State and local laws, as having enhanced skills that 
include being able to administer additional interventions and 
medications.
    Basic life support (BLS) means transportation by ground ambulance 
vehicle and medically necessary supplies and services, plus the 
provision of BLS ambulance services. The ambulance must be staffed by 
an individual who is qualified in accordance with State and local laws 
as an emergency medical technician-basic (EMT-Basic). These laws may 
vary from State to State. For example, only in some States is an EMT-
Basic permitted to operate limited equipment on board the vehicle, 
assist more qualified personnel in performing assessments and 
interventions, and establish a peripheral intravenous (IV) line.
    Conversion factor (CF) is the dollar amount established by CMS that 
is multiplied by relative value units to produce ground ambulance 
service base rates.
    Emergency response means responding immediately at the BLS or ALS1 
level of service to a 911 call or the equivalent in areas without a 911 
call system. An immediate response is one in which the ambulance 
supplier begins as quickly as possible to take the steps necessary to 
respond to the call.
    Fixed wing air ambulance (FW) means transportation by a fixed wing 
aircraft that is certified as a fixed wing air ambulance and such 
services and supplies as may be medically necessary.
    Geographic adjustment factor (GAF) means the practice expense (PE) 
portion of the geographic practice cost index (GPCI) from the physician 
fee schedule as applied to a percentage of the base rate. For ground 
ambulance services, the PE portion of the GPCI is applied to 70 percent 
of the base rate for each level of service. For air ambulance services, 
the PE portion of the GPCI is applied to 50 percent of the applicable 
base rate.
    Goldsmith modification means the recognition of rural areas within 
certain Standard Metropolitan Statistical Areas wherein a census tract 
is deemed to be rural when located within a large metropolitan county 
of at least 1,225 square miles, but is so isolated from the 
metropolitan core of that county by distance or physical features as to 
be more rural than urban in character.
    Loaded mileage means the number of miles the Medicare beneficiary 
is transported in the ambulance vehicle.
    Paramedic ALS intercept (PI) means EMT-Paramedic services furnished 
by an entity that does not furnish the ground ambulance transport, 
provided the services meet the requirements specified in Sec. 410.40(c) 
of this chapter.
    Point of pick-up means the location of the beneficiary at the time 
he or she is placed on board the ambulance.
    Relative value units (RVUs) means a value assigned to a ground 
ambulance service.
    Rotary wing air ambulance (RW) means transportation by a helicopter 
that is certified as an ambulance and such services and supplies as may 
be medically necessary.
    Rural adjustment factor (RAF) means an adjustment applied to the 
base payment rate when the point of pick-up is located in a rural area.
    Rural area means an area located outside a Metropolitan Statistical 
Area (MSA), or a New England County Metropolitan Area (NECMA), or an 
area within an MSA that is identified as rural by the Goldsmith 
modification.
    Specialty care transport (SCT) means interfacility transportation 
of a critically injured or ill beneficiary by a ground ambulance 
vehicle, including medically necessary supplies and services, at a 
level of service beyond the scope of the EMT-Paramedic. SCT is 
necessary when a beneficiary's condition requires ongoing care that 
must be furnished by one or more health professionals in an appropriate 
specialty area, for example, nursing, emergency medicine, respiratory 
care, cardiovascular care, or a paramedic with additional training.


Sec. 414.610  Basis of payment.

    (a) Method of payment. Medicare payment for ambulance services is 
based on the lesser of the actual charge or the applicable fee schedule 
amount. The fee schedule payment for ambulance services equals a base 
rate for the level of service plus payment for mileage and applicable 
adjustment factors. Except for services furnished by certain critical 
access hospitals or entities owned and operated by them, as described 
in Sec. 413.70(b) of this chapter, all ambulance services are paid 
under the fee schedule specified in this subpart (regardless of the 
vehicle furnishing the service).
    (b) Mandatory assignment. Effective with implementation of the 
ambulance fee schedule described in Sec. 414.601 (that is, for services 
furnished on or after April 1, 2002), all payments made for ambulance 
services are made only on an assignment-related basis. Ambulance

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suppliers must accept the Medicare allowed charge as payment in full 
and may not bill or collect from the beneficiary any amount other than 
the unmet Part B deductible and Part B coinsurance amounts. Violations 
of this requirement may subject the provider or supplier to sanctions, 
as provided by law (part 402 of this chapter).
    (c) Formula for computation of payment amounts. The fee schedule 
payment amount for ambulance services is computed according to the 
following provisions:
    (1) Ground ambulance service levels. The CF is multiplied by the 
applicable RVUs for each level of service to produce a service-level 
base rate. The service-level base rate is then adjusted by the GAF. 
Compare this amount to the actual charge. The lesser of the charge or 
the GAF adjusted base rate amount is added to the payment rate per 
mile, multiplied by the number of miles that the beneficiary was 
transported. When applicable, the appropriate RAF is applied to the 
ground mileage rate to determine the appropriate payment rates. The RVU 
scale for the ambulance fee schedule is as follows:

------------------------------------------------------------------------
                                                               Relative
                                                                 value
                        Service level                            units
                                                                (RVUs)
------------------------------------------------------------------------
BLS.........................................................        1.00
BLS-Emergency...............................................        1.60
ALS1........................................................        1.20
ALS1-Emergency..............................................        1.90
ALS2........................................................        2.75
SCT.........................................................        3.25
PI..........................................................        1.75
------------------------------------------------------------------------

    (2) Air ambulance service levels. The base payment rate for the 
applicable type of air ambulance service is adjusted by the GAF and, 
when applicable, by the appropriate RAF to determine the amount of 
payment. Air ambulance services have no CF or RVUs. This amount is 
compared to the actual charge. The lesser of the charge or the adjusted 
GAF rate amount is added to the payment rate per mile, multiplied by 
the number of miles that the beneficiary was transported. When 
applicable, the appropriate RAF is also applied to the air mileage 
rate.
    (3) Loaded mileage. Payment is made for each loaded mile. Air 
mileage is based on loaded miles flown as expressed in statute miles. 
There are three mileage payment rates: a rate for FW services, a rate 
for RW services, and a rate for all levels of ground transportation.
    (4) Geographic adjustment factor (GAF). For ground ambulance 
services, the PE portion of the GPCI from the physician fee schedule is 
applied to 70 percent of the base rate for ground ambulance services. 
For air ambulance services, the PE portion of the physician fee 
schedule GPCI is applied to 50 percent of the base rate for air 
ambulance services.
    (5) Rural adjustment factor (RAF). For ground ambulance services 
where the point of pickup is in a rural area, the mileage rate is 
increased by 50 percent for each of the first 17 miles and by 25 
percent for miles 18 through 50. The standard mileage rate applies to 
every mile over 50 miles. For air ambulance services where the point of 
pickup is in a rural area, the total payment is increased by 50 
percent; that is, the rural adjustment factor applies to the sum of the 
base rate and the mileage rate.
    (6) Multiple patients. The allowable amount per beneficiary for a 
single ambulance transport when more than one patient is transported 
simultaneously is based on the total number of patients (both Medicare 
and non-Medicare) on board. If two patients are transported 
simultaneously, then the payment allowance for the beneficiary (or for 
each of them if both patients are beneficiaries) is equal to 75 percent 
of the service payment allowance applicable for the level of care 
furnished to the beneficiary, plus 50 percent of the applicable mileage 
payment allowance. If three or more patients are transported 
simultaneously, the payment allowance for the beneficiary (or each of 
them) is equal to 60 percent of the service payment allowance 
applicable for the level of care furnished to the beneficiary, plus the 
applicable mileage payment allowance divided by the number of patients 
on board.
    (d) Payment. Payment, in accordance with this subpart, represents 
payment in full (subject to applicable Medicare Part B deductible and 
coinsurance requirements as described in subpart G of part 409 of this 
chapter or in subpart I of part 410 of this chapter) for all services, 
supplies, and other costs for an ambulance service furnished to a 
Medicare beneficiary. No direct payment will be made under this subpart 
if billing for the ambulance service is required to be consolidated 
with billing for another benefit for which payment may be made under 
this chapter.
    (e) Point of pick-up. The zip code of the point of pick-up must be 
reported on each claim for ambulance services so that the correct GAF 
and RAF may be applied, as appropriate.
    (f) Updates. The CF, the air ambulance base rates, and the mileage 
rates are updated annually by an inflation factor established by law. 
The inflation factor is based on the consumer price index for all urban 
consumers (CPI-U) (U.S. city average) for the 12-month period ending 
with June of the previous year.
    (g) Adjustments. The Secretary will annually review rates and will 
adjust the CF and air ambulance rates if actual experience under the 
fee schedule is significantly different from the assumptions used to 
determine the initial CF and air ambulance rates. The CF and air 
ambulance rates will not be adjusted solely because of changes in the 
total number of ambulance transports.


Sec. 414.615  Transition to the ambulance fee schedule.

    The fee schedule for ambulance services will be phased in over 5 
years beginning April 1, 2002. Subject to the first sentence in 
Sec. 414.610(a), payment for services furnished during the transition 
period is made based on a combination of the fee schedule payment for 
ambulance services and the amount the program would have paid absent 
the fee schedule for ambulance services, as follows:
    (a) 2002 Payment. For services furnished in 2002, the payment for 
the service component, the mileage component and, if applicable, the 
supply component is based on 80 percent of the reasonable charge for 
independent suppliers or on 80 percent of reasonable cost for 
providers, plus 20 percent of the ambulance fee schedule amount for the 
service and mileage components. The reasonable charge or reasonable 
cost portion of payment in CY 2002 is equal to the supplier's 
reasonable charge allowance or provider's reasonable cost allowance for 
CY 2001, multiplied by the statutory inflation factor for ambulance 
services.
    (b) 2003 Payment. For services furnished in CY 2003, payment is 
based on 60 percent of the reasonable charge or reasonable cost, as 
applicable, plus 40 percent of the ambulance fee schedule amount. The 
reasonable charge and reasonable cost portion in CY 2003 is equal to 
the supplier's reasonable charge or provider's reasonable cost for CY 
2002, multiplied by the statutory inflation factor for ambulance 
services.
    (c) 2004 Payment. For services furnished in CY 2004, payment is 
based on 40 percent of the reasonable charge or reasonable cost, as 
applicable, plus 60 percent of the ambulance fee schedule amount. The 
reasonable charge and reasonable cost portion in CY 2004 is equal to 
the supplier's reasonable charge or provider's reasonable cost for CY 
2003, multiplied by the statutory inflation factor for ambulance 
services.

[[Page 9135]]

    (d) 2005 Payment. For services furnished in CY 2005, payment is 
based on 20 percent of the reasonable charge or reasonable cost, as 
applicable, plus 80 percent of the ambulance fee schedule amount. The 
reasonable charge and reasonable cost portion in CY 2005 is equal to 
the supplier's reasonable charge or provider's reasonable cost for CY 
2004, multiplied by the statutory inflation factor for ambulance 
services.
    (e) 2006 and Beyond Payment. For services furnished in CY 2006 and 
thereafter, the payment is based solely on the ambulance fee schedule 
amount.
    (f) Updates. The portion of the transition payment that is based on 
the existing payment methodology (that is, the non-fee-schedule 
portion) is updated annually for inflation by a factor equal to the 
percentage increase in the CPI-U (U.S. city average) for the 12-month 
period ending with June of the previous year. The CY 2002 inflation 
update factor used to update the 2001 payment amounts is applied to the 
annualized (average) payment amounts for CY 2001. For the period 
January 1, 2001 through June 30, 2001, the inflation update factor is 
2.7 percent. For the period July 1, 2001 through December 31, 2001, the 
inflation update factor is 4.7 percent. The average for the year is 3.7 
percent. Thus, the annualized (average) CY 2001 payment amounts used to 
derive the CY 2002 payment amounts are equivalent to the CY 2001 
payment amounts that would have been determined had the inflation 
update factor for the entire CY 2001 been 3.7 percent. Both portions of 
the transition payment (that is, the portion that is based on 
reasonable charge or reasonable cost and the portion that is based on 
the ambulance fee schedule) are updated annually for inflation by the 
inflation factor described in Sec. 414.610(f).
    (g) Exception. There will be no blended payment allowance as 
described in paragraphs (a), (b), (c), and (d) of this section for 
ground mileage in those States where the Medicare carrier paid 
separately for all out-of-county ground ambulance mileage, but did not, 
before the implementation of the Medicare ambulance fee schedule, make 
a separate payment for any ground ambulance mileage within the county 
in which the beneficiary was transported. Payment for ground ambulance 
mileage in that State will be made based on the full ambulance fee 
schedule amount for ground mileage. This exception applies only to 
carrier-processed claims and only in those States in which the carrier 
paid separately for out-of-county ambulance mileage, but did not make 
separate payment for any in-county mileage throughout the entire State.


Sec. 414.620  Publication of the ambulance fee schedule.

    Changes in payment rates resulting from incorporation of the annual 
inflation factor described in Sec. 414.610(f) will be announced by 
notice in the Federal Register without opportunity for prior comment. 
CMS will follow applicable rulemaking procedures in publishing 
revisions to the fee schedule for ambulance services that result from 
any factors other than the inflation factor.


Sec. 414.625  Limitation on review.

    There will be no administrative or judicial review under section 
1869 of the Act or otherwise of the amounts established under the fee 
schedule for ambulance services, including the following:
    (a) Establishing mechanisms to control increases in expenditures 
for ambulance services.
    (b) Establishing definitions for ambulance services that link 
payments to the type of services provided.
    (c) Considering appropriate regional and operational differences.
    (d) Considering adjustments to payment rates to account for 
inflation and other relevant factors.
    (e) Phasing in the application of the payment rates under the fee 
schedule in an efficient and fair manner.

(Catalog of Federal Domestic Assistance Program No. 93.774, 
Medicare--Supplementary Medical Insurance Program)

    Dated: December 7, 2001.
Thomas A. Scully,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: December 19, 2001.
Tommy G. Thompson,
Secretary.
[FR Doc. 02-4548 Filed 2-22-02; 12:00 pm]
BILLING CODE 4120-01-P