[Federal Register Volume 69, Number 126 (Thursday, July 1, 2004)]
[Rules and Regulations]
[Pages 40288-40292]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-15090]



[[Page 40287]]

-----------------------------------------------------------------------

Part IX





Department of Health and Human Services





-----------------------------------------------------------------------



Centers for Medicare & Medicaid Services



-----------------------------------------------------------------------



42 CFR Part 414



Medicare Program; Medicare Ambulance MMA Temporary Rate Increases 
Beginning July 1, 2004; Interim Final Rule

  Federal Register / Vol. 69, No. 126 / Thursday, July 1, 2004 / Rules 
and Regulations  

[[Page 40288]]


-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 414

[CMS-1492-IFC]
RIN 0938-AN24


Medicare Program; Medicare Ambulance MMA Temporary Rate Increases 
Beginning July 1, 2004

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

ACTION: Interim final rule with comment period.

-----------------------------------------------------------------------

SUMMARY: This interim final rule codifies the four payment provisions 
for Medicare covered ambulance services contained in section 414 of the 
Medicare Prescription Drug, Improvement and Modernization Act of 2003 
(MMA).

DATES: Effective date: These provisions are effective on July 1, 2004.
    Comment date: To be assured consideration, comments must be 
received at one of the addresses provided below, no later than 5 p.m. 
on August 30, 2004.

ADDRESSES: In commenting, please refer to file code CMS-1492-IFC. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (fax) transmission.
    You may submit comments in one of three ways (no duplicates, 
please):
    1. Electronically. You may submit electronic comments to http://www.cms.hhs.gov/regulations/ecomments or to www.regulations.gov 
(attachments must be in Microsoft Word, WordPerfect, or Excel; we 
prefer Microsoft Word).
    2. By mail. You may mail written comments (one original and two 
copies) to the following address only: Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Attention: CMS-1492-
IFC, P.O. Box 8011, Baltimore, MD 21244-8011.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments (one original and two copies) before the 
close of the comment period to one of the following addresses. If you 
intend to deliver your comments to the Baltimore address, please call 
telephone number (410) 786-9994 in advance to schedule your arrival 
with one of our staff members: Room 445-G, Hubert H. Humphrey Building, 
200 Independence Avenue, SW., Washington, DC 20201; or 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    (Because access to the interior of the HHH Building is not readily 
available to persons without Federal Government identification, 
commenters are encouraged to leave their comments in the CMS drop slots 
located in the main lobby of the building. A stamp-in clock is 
available for persons wishing to retain a proof of filing by stamping 
in and retaining an extra copy of the comments being filed.)
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.

FOR FURTHER INFORMATION CONTACT: Anne E. Tayloe, (410) 786-4546.

SUPPLEMENTARY INFORMATION: Submitting Comments: We welcome comments 
from the public on all issues set forth in this rule to assist us in 
fully considering issues and developing policies. You can assist us by 
referencing the file code CMS-1492-IFC and the specific ``issue 
identifier'' that precedes the section on which you choose to comment.
    Inspection of Public Comments: Comments received timely will be 
available for public inspection as they are received, generally 
beginning approximately 3 weeks after publication of a document, at the 
headquarters of the Centers for Medicare & Medicaid Services, 7500 
Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of 
each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view 
public comments, call telephone number: (410) 786-7197.

I. Background

    [If you choose to comment on issues in this section, please include 
the caption ``Background'' at the beginning of your comments.]

A. Legislative and Regulatory History

    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 for the 
beneficiary. The House Ways and Means Committee and Senate Finance 
Committee Reports that accompanied the 1965 legislation creating the 
Act suggest that the Congress intended that: (1) The ambulance benefit 
cover 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.
    Our regulations relating to ambulance services are located at 42 
CFR Part 410, subpart B and 42 CFR Part 414, subpart H. 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. 
Part 414, subpart H describes how payment is made for ambulance 
services covered by Medicare.
    The Medicare program pays for ambulance services for Medicare 
beneficiaries when other means of transportation are contraindicated. 
Ambulance services (air and ground) are divided into different levels 
of service based on the medically necessary treatment provided during 
transport. These services include the levels of service listed below.
    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)
    Historically, payment levels for ambulance services depended, in 
part, upon the entity that furnished the services. Before the 
implementation of the ambulance fee schedule on April 1, 2002, 
providers (hospitals, including critical access hospitals, skilled 
nursing facilities, and home health agencies) were paid on a 
retrospective reasonable cost basis. Suppliers, which are entities that 
are independent of any provider, were paid on a reasonable charge 
basis.
    The Balanced Budget Act of 1997 (BBA) (establishing section 1834(l) 
of the Act) mandated the development of an ambulance fee schedule 
through negotiated rulemaking. On February 27, 2002, we published a 
final rule in the Federal Register (67 FR 9100) that established a fee 
schedule for the

[[Page 40289]]

payment of ambulance services under the Medicare program, effective for 
services furnished on or after April 1, 2002. The fee schedule replaced 
the retrospective reasonable cost payment system for providers and the 
reasonable charge system for suppliers of ambulance services. 
Additionally, the final rule--implemented a statutory requirement that 
ambulance suppliers accept Medicare assignment; codified the 
establishment of new Health Care Common Procedure Coding System (HCPCS) 
codes to be reported on claims for ambulance services; established 
increased mileage 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; revised the 
certification requirements for coverage of nonemergency ambulance 
services; and provided for a 5-year transition period during which 
program payment for Medicare covered ambulance services would be based 
upon a blended rate comprised of a fee schedule portion and a 
reasonable cost (providers) or reasonable charge (suppliers) portion. 
We are now in the third year of that transition to full payment based 
solely on the fee schedule amount.

B. Transitional Assistance for Rural Mileage 18 Through 50--Section 221 
of the Medicare, Medicaid and SCHIP Benefits Improvement and Protection 
Act of 2000 (BIPA)

    Section 221 of the Benefits Improvement and Protection Act of 2000 
(BIPA) provided a temporary bonus mileage payment through December 31, 
2003 for miles 18 through 50 for ambulance transports originating in a 
rural area. This bonus amount could not be less than one-half of the 
rural bonus paid under the ambulance fee schedule for miles 1 through 
17. This provision was implemented by Sec.  414.610(c) of the ambulance 
fee schedule final rule.

C. Medicare Prescription Drug, Improvement and Modernization Act of 
2003 (MMA)

    Section 414 of the Medicare Prescription Drug, Improvement and 
Modernization Act of 2003 (MMA) contains four provisions affecting 
payment for Medicare-covered ambulance services. All four affect only 
the fee schedule (FS) portion of the program's payment, and they affect 
only ground ambulance services. They are all cumulative; that is, they 
are percentage increases applied in concert with one another. They are 
all effective July 1, 2004, but with different sunset dates. The four 
provisions are as follows:
    1. A percentage increase in the FS payment rates for ambulance 
services-- 1 percent for urban and 2 percent for rural ambulance 
services. This increase sunsets on December 31, 2006.
    2. A 25 percent increase for the mileage rate for miles 51 and 
greater (both urban and rural). This increase sunsets on December 31, 
2008.
    3. A Regional FS that provides a floor amount for the ground 
ambulance base rate. The floor amount is determined by establishing 
nine FSs based on each of the nine census divisions using the same 
methodology as was used to establish the national FS. This increase 
sunsets on December 31, 2009.
    4. An increase in the payment for the base rate where the ambulance 
transport originates in a rural area determined by the Secretary to be 
in the lowest 25th percentile of all rural populations arrayed by 
population density. Rural areas include Goldsmith areas (a type of 
rural census tract). To determine these rural areas, first, all areas 
(rural counties plus Goldsmith areas) are arrayed in ascending order by 
population density. Then, all of these rural areas are divided into 
quartiles by population. The rural areas that comprise the lowest 
quartile of population (that is, the lowest 25 percent of rural 
population) comprise the areas eligible for this bonus payment. 
Approximately half of all rural areas (rural counties plus Goldsmith 
areas) are required to include 25 percent of the rural population when 
rural areas are arrayed by population density. The bonus amount is 
based on the Secretary's estimate of the ratio of the average cost per 
trip for the rural areas in the lowest quartile compared to the average 
cost per trip for the rural areas in the highest quartile. In making 
this estimate, the Secretary may use data provided by the General 
Accounting Office (GAO). This provision sunsets on December 31, 2009.

II. Provisions of the Interim Final Rule

    [If you choose to comment on issues in this section, please include 
the caption ``Provisions of the Interim Final Rule'' at the beginning 
of your comments.]

A. Percentage Increase in the Payments for Rural and Urban Ambulance 
Services

    Section 414.610 is amended by revising paragraph (c)(1) to specify 
that, for services furnished during the period July 1, 2004 through 
December 31, 2006, ambulance services originating in urban areas are 
paid based on a rate that is one percent higher than otherwise would be 
applicable under the ambulance FS, and ambulance services originating 
in rural areas are paid based on a rate that is two percent higher than 
otherwise would be applicable under the ambulance FS.

B. Payment Rate for Mileage Greater Than 50 Miles

    Section 414.610 is amended by adding a new paragraph (c)(7) to 
specify that, for services furnished during the period July 1, 2004 
through December 31, 2008, each loaded ambulance mile greater than 50 
(that is, miles 51 and greater) for ambulance transports originating in 
either urban areas or in rural areas are paid based on a rate that is 
25 percent higher than otherwise would be applicable under the 
ambulance FS.

C. Regional Ambulance Fee Schedule

    A new section 414.617 is added to specify that for services 
furnished during the period July 1, 2004 through December 31, 2009, the 
ground ambulance base rate is subject to a floor amount, which is 
determined by establishing nine fee schedules based on each of the nine 
census divisions, and using the same methodology as was used to 
establish the national FS. If the regional FS methodology for a given 
census division results in an amount that is lower than the national 
ground base rate, then it is not used, and the national FS amount 
applies for all providers and suppliers in the census division. If the 
regional fee schedule methodology for a given census division results 
in an amount that is greater than the national ground base rate, then 
the FS portion of the base rate for that census division is equal to a 
blend of the national rate and the regional rate in accordance with the 
following schedule:

------------------------------------------------------------------------
                                                     Regional   National
                    Time period                      percent    percent
------------------------------------------------------------------------
7/1/04-12/31/04...................................         80         20
CY 2005...........................................         60         40
CY 2006...........................................         40         60
CY 2007-CY 2009...................................         20         80
CY 2010 and thereafter............................          0        100
------------------------------------------------------------------------

D. Super-Rural Bonus

    Section 414.610(c)(5) is amended to specify that, for services 
furnished during the period July 1, 2004 through December 31, 2009, the 
payment amount for the ground ambulance base rate is increased where 
the ambulance transport originates in a rural area included in those 
areas comprising the lowest 25th percentile of all rural populations 
arrayed by population density. Rural areas include Goldsmith

[[Page 40290]]

areas (a type of rural census tract). Approximately half of all rural 
areas (rural counties plus Goldsmith areas) are required to include 25 
percent of the rural population arrayed in order of population density. 
The amount of this increase is based on the Secretary's estimate of the 
ratio of the average cost per trip for the rural areas comprised of the 
lowest quartile of population arrayed by density compared to the 
average cost per trip for the rural areas comprised of the highest 
quartile arrayed by density. In making this estimate, the Secretary may 
use data provided by the GAO. We have determined that the amount of 
this increase is equal to 22.6 percent.

III. Methodology

    [If you choose to comment on issues in this section, please include 
the caption ``Methodology'' at the beginning of your comments.]

A. Percentage Increase in the Payments for Rural and Urban Ambulance 
Services

    This provision is self-implementing. A plain reading of the statute 
requires a merely ministerial application of the mandated increase in 
rates, and there is no authority for any discretionary action by the 
Secretary.

B. Payment Rate for Mileage Greater Than 50 Miles

    This provision is self-implementing. A plain reading of the statute 
requires a merely ministerial application of the mandated increase in 
rates, and there is no authority for any discretionary action by the 
Secretary.

C. Regional Fee Schedule

    The statute requires that the same methodology be used to determine 
each of the regional fee schedules as was used to determine the 
national FS. We applied this methodology to Medicare claims data from 
calendar year 2001. We used 2001 data because they were the most recent 
complete data for a year in which Medicare payments were based solely 
on the reasonable charge/reasonable cost payment methodologies and not 
blended with portions of the national ambulance fee schedule 
implemented on April 1, 2002. We needed to use these former payment 
amounts (that is, payments exclusive of the national FS amounts) to 
apply the methodology used for determining the national FS, which had 
originally used claims data from 1998. For a full description of this 
methodology, see the Federal Register (``Medicare Program; Fee Schedule 
for Payment of Ambulance Services and Revisions to the Physician 
Certification Requirements for Coverage of Nonemergency Ambulance 
Services'')--Final Rule with Comment Period, published February 27, 
2002 (67 FR 9100). We then determined a regional conversion factor (CF) 
by using the 2001 claims data from the states in each Census Division. 
Then we divided the regional CF by the national CF for 2001 claims 
data. Where this result was less than 1.0, the value of 1.0 was used. 
Then we multiplied this number by 80 percent, which is the statutory 
phase-in percentage of the regional FS for 2004, and added 0.2 (20 
percent of 1.0) to that amount. In this way we created an index that 
reflects a blended FS amount of 80 percent regional FS and 20 percent 
national FS. This index was then applied to the FS portion of the 
blended payment rate for the period July 1, 2004 through December 31, 
2004. In subsequent years, the blending percentage between the national 
FS amount and the regional FS amount will change as described in the 
chart, shown in section II.C., above.

D. Super-Rural Bonus

    The statute states that in establishing the super-rural bonus, CMS 
will estimate the average cost per trip in the lowest quartile (25 
percentile) of rural population arrayed by population density as 
compared to the estimate of the average cost per trip in the highest 
quartile of rural population arrayed by population density. In order to 
implement this provision promptly, data may be used from the 
Comptroller General (GAO) of the U.S. We obtained the same data as the 
data that were used in the GAO's September 2003 Report titled 
``Ambulance Services: Medicare Payments Can Be Better Targeted to Trips 
in Less Densely Populated Rural Areas'' (GAO report number GAO-03-986) 
and used the same general methodology in a regression analysis as that 
used in that report. We considered only the full cost providers that 
were included in the data set, just as the GAO had done. The regression 
analysis correlated the providers' ambulance costs to the number of 
trips, the square of the number of trips, and the percentage of trips 
that were advanced life support (ALS) as opposed to those that were at 
the basic life support (BLS) level of care. The result of this 
regression was a formula that predicted the average cost per trip based 
on the variables just described. We then used the Medicare claims data 
from calendar year 2002 from every ambulance supplier and provider that 
furnished ambulance services in any rural area. These claims data 
showed the number of each level of ground ambulance services needed to 
satisfy the regression formula. The proxy that the GAO used for the 
total number of ambulance trips was the number of Medicare ambulance 
trips doubled. We then took the predicted average cost per trip in 
those rural areas in the lowest quartile of rural population arrayed by 
population density and compared that cost to the predicted average cost 
per trip in the rural areas in the highest quartile of rural population 
arrayed by population density. The result was that the average cost per 
trip in the lowest quartile was 22.6 percent higher than the average 
cost per trip in the highest quartile.

IV. Waiver of Proposed Rulemaking

    We ordinarily publish a proposed rule in the Federal Register and 
provide a period for public comment before we publish a final rule. We 
can waive this procedure, however, if we find good cause that notice 
and comment procedure is impracticable, unnecessary, or contrary to the 
public interest, and we incorporate a statement of this finding and its 
reasons in the rule issued. We find it unnecessary to undertake notice 
and comment rulemaking in this instance because the statute specifies 
that these provisions may be implemented on the basis of an interim 
final rule or program instruction, in recognition of the fact that the 
statutorily required implementation date could not be met otherwise. 
Pursuant to this authority, we have issued program instructions to our 
contractors implementing these provisions with an effective date of 
July 1, 2004, as specified by the statute. The purpose of this IFC is 
to provide a vehicle for public comment and to conform the Code of 
Federal Regulations (CFR) to the statutory language. Chapter 8 of the 
Contract with America Advancement Act of 1996 (CWAAA) generally 
requires an agency to submit a rule to Congress 60 days before it is to 
be effective. The CWAAA, however, contains an exception where the rule 
includes a waiver based on good cause, as here. For this reason, and 
because we have already implemented these provisions of the MMA under 
the authority cited, we have concluded that the requirement for a 60-
day delay in effective date for congressional review of major rules 
does not apply in this case.

V. Collection of Information Requirements

    This document does not impose information collection and record 
keeping requirements. Consequently, it need not be reviewed by the 
Office of

[[Page 40291]]

Management and Budget under the authority of the Paperwork Reduction 
Act of 1995.

VI. Regulatory Impact Analysis

    [If you choose to comment on issues in this section, please include 
the caption ``Regulatory Impact Analysis'' at the beginning of your 
comments.]

A. Overall Impact

    We have examined the impacts of this rule as required by Executive 
Order 12866 (September 1993, Regulatory Planning and Review), the 
Regulatory Flexibility Act (RFA) (September 16, 1980, Pub. L. 96-354), 
section 1102(b) of the Social Security Act, the Unfunded Mandates 
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.
    Executive Order 12866 (as amended by Executive Order 13258, which 
merely reassigns responsibility of duties) 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 equity). A 
regulatory impact analysis (RIA) must be prepared for major rules with 
economically significant effects ($100 million or more in any 1 year). 
We have determined that this is a major rule.
    The following impacts reflect the fact that the effective date of 
the MMA provisions is July 1, 2004 for all provisions. The figures are 
Medicare's expenditures (that is, exclusive of the Part B coinsurance 
and deductible requirements). These impacts also reflect the fact that 
the MMA provisions affect only the FS portion of the blended payment 
during the transition period, and, in 2004, the FS portion is only 60 
percent of the total blended payment (40 percent of the payment is from 
the former reasonable charge/reasonable cost methodology).
    Program Impact:

------------------------------------------------------------------------
                                                                Cost
                        Fiscal year                          ($millions)
------------------------------------------------------------------------
2004......................................................            20
2005......................................................           200
2006......................................................           220
2007......................................................           160
2008......................................................           120
2009......................................................           120
------------------------------------------------------------------------


   Breakout of 2004 Regional FS Impact on Ground Base Rates by Census
                                Division
------------------------------------------------------------------------
                                                              Regional
                                                               factor
                      Census division                        percentage
                                                              increases
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT)...................          23.3
2. Middle Atlantic (NJ, NY, PA)...........................           4.7
3. East North Central (IN, IL, MI, OH, WI)................           0
4. West North Central (IA, KS, MN, MO, NE, ND, SD)........           0
5. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV)....           0
6. East South Central (AL, KY, MS, TN)....................           0
7. West South Central (AR, LA, OK, TX)....................          10.2
8. Mountain (AZ, CO, ID, NM, MT, UT, NV, WY)..............           9.9
9. Pacific (AK, CA, HI, OR, WA)...........................          38.6
------------------------------------------------------------------------

    The Regulatory Flexibility Act (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 $6 million or less in any 1 year. For purposes of the RFA, 
most ambulance providers and most ambulance suppliers are considered 
small businesses. Individuals and States are not included in the 
definition of a small entity. This rule will have a significant impact 
on all ambulance providers and suppliers to the extent that this rule 
authorizes higher payments to anyone furnishing Medicare-covered 
ambulance services to Medicare beneficiaries. There is a one percent 
increase in payments for all urban transports and a two percent 
increase in payments for all rural transports, as well as a 22.6 
percent increase in payments for the base rate in the least populated 
rural areas in the country. Also, there is a 25 percent increase in the 
payments for mileage in excess of 50 miles, which we anticipate will 
occur primarily in rural areas. Finally, the ambulance entities 
furnishing services in 26 States will receive increased payments to 
their base rate because of the FS rate floor established by census 
division.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis 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. This rule will impact 
small rural hospitals to the extent that they furnish Medicare covered 
ambulance services. As noted above, ambulance FS payments are increased 
by 2 percent for all rural trips, and there is a 22.6 percent increase 
in the base rate payments for ambulance transports in the least 
populated rural areas in the country.
    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 expenditure in any 1 year by State, 
local, or tribal governments, in the aggregate, or by the private 
sector, of $110 million. This rule does not have any unfunded mandates.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it issues a proposed rule (and subsequent final 
rule) that imposes substantial direct requirement costs on State and 
local governments, preempts State law, or otherwise has Federalism 
implications. This rule does not impose any compliance costs on the 
governments mentioned.

B. Anticipated Effects

    This rule results in increased spending for all Medicare-covered 
ambulance services furnished to Medicare beneficiaries. Therefore, all 
entities that furnish these services will benefit from increased 
program revenues. Entities that furnish these services in rural areas 
will particularly benefit from increased revenue and especially those 
rural entities that furnish these services in the least populated areas 
in the country. Entities that furnish these services in 26 States will 
benefit from increased revenue resulting from the payment floor 
established based on the regional FS. There will be a commensurate cost 
to the Medicare program of approximately $840 million over the total 5-
year period during which these provisions will be in effect.

C. Alternatives Considered

    This rule conforms the Medicare program regulations to the 
statutory provisions contained in section 414 of the MMA. These 
provisions are essentially prescriptive in the statute and do not allow 
for discretionary alternatives on the part of the Secretary. In 
determining the super-rural bonus amount, we followed the statutory 
guidance of using the data from the

[[Page 40292]]

GAO report cited above and followed the same regression analysis that 
was used in that report.

D. Conclusion

    Because this rule results in higher payments to all entities that 
furnish Medicare-covered ambulance services to Medicare beneficiaries, 
we anticipate that the primary effect of this rule will be to increase 
revenues for these entities. This rule will not adversely affect any of 
these entities. Those entities that furnish ambulance services in rural 
areas will particularly benefit, especially for those services 
furnished in the least populated rural areas.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects in 42 CFR Part 414

    Administrative practice and procedure, Health facilities, Health 
professions, Kidney diseases, Medicare, Reporting and record keeping 
requirements.

0
For the reasons set forth in the preamble, the Centers for Medicare & 
Medicaid Services amends 42 CFR chapter IV as set forth below:

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

Subpart H--Fee Schedule for Ambulance Services

0
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, and 1395rr(b)(1)).


0
2. Section Sec.  414.610 is amended by--
0
A. Revising paragraph (c)(1).
0
B. Revising paragraph (c)(5).
0
C. Adding paragraph (c)(7).
    The revisions and addition read as follows:


Sec.  414.610  Basis of payment.

* * * * *
    (c) * * *
* * * * *
    (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. For services furnished during the period July 1, 2004 
through December 31, 2006, ambulance services originating in urban 
areas (both base rate and mileage) are paid based on a rate that is one 
percent higher than otherwise is applicable under this section, and 
ambulance services originating in rural areas (both base rate and 
mileage) are paid based on a rate that is two percent higher than 
otherwise is applicable under this section. The service-level base rate 
is then adjusted by the GAF. Compare this amount to the actual charge. 
The lesser of the actual charge or the GAF adjusted base rate amount is 
added to the lesser of the actual mileage charges or 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:
* * * * *
    (5) Rural adjustment factor (RAF). (i) 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.
    (ii) For services furnished during the period July 1, 2004 through 
December 31, 2009, the payment amount for the ground ambulance base 
rate is increased by 22.6 percent where the point of pickup is in a 
rural area determined to be in the lowest 25 percent of rural 
population arrayed by population density. The amount of this increase 
is based on CMS's estimate of the ratio of the average cost per trip 
for the rural areas in the lowest quartile of population compared to 
the average cost per trip for the rural areas in the highest quartile 
of population. In making this estimate, CMS may use data provided by 
the GAO.
* * * * *
    (7) Payment rate for mileage greater than 50 miles. For services 
furnished during the period July 1, 2004 through December 31, 2008, 
each loaded ambulance mile greater than 50 (that is, miles 51 and 
greater) for ambulance transports originating in either urban areas or 
in rural areas are paid based on a rate that is 25 percent higher than 
otherwise is applicable under this section.

0
(3) A new Sec.  414.617 is added to read as follows:


Sec.  414.617  Transition from regional to national ambulance fee 
schedule.

    For services furnished during the period July 1, 2004 through 
December 31, 2009, the amount for the ground ambulance base rate is 
subject to a floor amount determined by establishing nine fee schedules 
based on each of the nine census divisions using the same methodology 
as used to establish the national fee schedule. If the regional fee 
schedule methodology for a given census division results in an amount 
that is less than or equal to the national ground base rate, then it is 
not used, and the national FS amount applies. If the regional fee 
schedule methodology for a given census division results in an amount 
that is greater than the national ground base rate, then the FS portion 
of the base rate for that census division is equal to a blend of the 
national rate and the regional rate in accordance with the following 
schedule:

------------------------------------------------------------------------
                                                     Regional   National
                    Time period                      percent    percent
------------------------------------------------------------------------
7/1/04-12/31/04...................................         80         20
CY 2005...........................................         60         40
CY 2006...........................................         40         60
CY 2007-CY 2009...................................         20         80
CY 2010 and thereafter............................          0        100
------------------------------------------------------------------------


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

    Dated: May 27, 2004.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.

    Approved: June 17, 2004.
Tommy G. Thompson,
Secretary.
[FR Doc. 04-15090 Filed 6-30-04; 8:45 am]
BILLING CODE 4120-01-P