Rural Ambulances: Medicare Fee Schedule Payments Could Be Better Targeted
(Letter Report, 07/17/2000, GAO/HEHS-00-115).

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

GAO noted that: (1) because many rural ambulance providers serve a large
geographic area with a low population density, they face a set of unique
challenges; (2) unless they rely on volunteers, they tend to have high
per-trip costs because of the lower volume of transports as compared to
urban and suburban providers; (3) rural providers also tend to have
longer ambulance transports than their urban counterparts, making the
adequacy of reimbursement for mileage costs more central to their
overall payments than for providers in more densely populated areas; (4)
in addition, because rural residents may have fewer alternatives for
transportation to hospitals, ambulances may transport some beneficiaries
whose conditions do not allow for Medicare reimbursement; (5)
furthermore, revenue sources are changing for rural providers with an
increasing reliance on Medicare revenues; (6) moreover, maintaining
volunteer staffs, which are more common in rural than urban areas, is
becoming more difficult; (7) the proposed Medicare fee schedule will
alter the way rural ambulance providers are paid; (8) much of the
variation in payment rates among similar rural providers will be
eliminated; (9) some providers that now are paid more than the national
average are likely to receive lower payments under the fee schedule;
(10) others, including rural South Dakota providers, that are paid less
than the national average are likely to receive increased payments; (11)
in addition, providers that transport beneficiaries in rural areas will
receive enhanced payments intended to help sustain essential ambulance
service in sparsely populated areas; (12) however, this adjustment does
not sufficiently distinguish the providers serving beneficiaries in
isolated areas and may not be applied appropriately; (13) GAO's review
of 1998 claims data show that payment denials have varied widely among
carriers, which are the contractors that process claims for freestanding
ambulance providers; (14) such variation can result in unequal coverage
for Medicare beneficiaries; (15) different practices among carriers,
including increased attention to potential fraud, differences in local
policies, and carriers' failure to apply the coverage criteria
appropriately, may have contributed to the variation in claims denials;
(16) claims have also been denied because providers did not properly
fill out forms; and (17) the absence of a national coding system that
readily identifies the beneficiary's medical condition at the time of
the transport has impaired providers' ability to convey information to
carriers in a way that facilitates review of claims.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HEHS-00-115
     TITLE:  Rural Ambulances: Medicare Fee Schedule Payments Could Be
	     Better Targeted
      DATE:  07/17/2000
   SUBJECT:  Health insurance
	     Medical fees
	     Health resources utilization
	     Medical services rates
	     Economically depressed areas
	     Emergency medical services
	     Claims processing
IDENTIFIER:  Emergency Medical Services Training Program
	     Medicare Program
	     AID Project HOPE
	     North Dakota
	     South Dakota
	     Wyoming
	     Montana
	     North Carolina

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GAO/HEHS-00-115

Appendix I: Scope and Methodology

26

Appendix II: Medicare Coverage Criteria for Emergency and Nonemergency
Ambulance Transports

27

Appendix III: Medicare Payment Method for Freestanding
Ambulance Providers

29

Appendix IV: Organizations Represented on the Negotiated
Rulemaking Committee on Medicare Ambulance Fee Schedule

30

Appendix V: Recommendations From the Negotiated Rulemaking Committee on
Medicare Ambulance Fee Schedule

31

Appendix VI: Comments From the Health Care Financing
Administration

33

Table 1: Characteristics of Medicare Ambulance Transport by Urban
and Rural Freestanding Providers, 1998 9

Table 2: Maximum Medicare Payments to Freestanding Ambulance Providers by
Service in Selected Rural Areas, 1999 12

Table 3: Levels of Ambulance Assistance 31

Figure 1: Denied Emergency Ambulance Transports for the Nine
Carriers, as a Percentage of Total Submitted Claims, 1998 19

ALS advanced life support

BBA Balanced Budget Act of 1997

BLS basic life support

EMS emergency medical services

EMT emergency medical technician

GPCI geographic practice cost index

HCFA Health Care Financing Administration

ICD International Classification of Diseases, 9th revision

IIC inflation-indexed charge

MSA Metropolitan Statistical Area

RVU relative value unit

Health, Education, and
Human Services Division

B-283274

July 17, 2000

The Honorable Thomas A. Daschle
United States Senate

Dear Senator Daschle:

Ambulance services are essential to an effectively functioning emergency
medical services (EMS) system. Ambulance providers must be ready to supply
services rapidly and at all times, otherwise services may be of little
value. Maintaining this capacity may be particularly difficult in some rural
areas because rural providers are likelier than others to have a relatively
low volume of ambulance trips in relation to significant overhead costs. In
addition, the population they serve is dispersed, raising the direct costs
of ambulance trips, known as transports. Some freestanding ambulance
providers in rural states believe that Medicare payment for their services
is not adequate and that their claims for payment are too often denied by
Medicare.1

In an effort to ease administrative burdens for both the Health Care
Financing Administration (HCFA) and providers, offer predictable rate
increases, and incorporate payment incentives for providers to improve their
efficiency, the Medicare program has begun to change its payment system for
ambulance services. In the Balanced Budget Act of 1997 (BBA), the Congress
mandated that by January 1, 2000, HCFA develop an ambulance fee schedule
that reflects the different types of ambulance services provided.2 However,
development of the fee schedule has been delayed and, according to HCFA, the
fee schedule will be implemented January 1, 2001.

Currently, Medicare payments for ambulance services are determined using a
complex method based on historical charges for freestanding providers and
reasonable costs for hospital-based providers. The fee schedule will
standardize payment rates across provider types and will be based on
national rates for particular services. In this context, you asked us to
address the following questions: (1) What are the challenges faced by rural
ambulance providers? (2) How will the upcoming fee schedule affect rural
providers relative to their current situation? (3) What factors have
affected claim denial rates for ambulance services?

To answer these questions, we interviewed ground and air ambulance
providers, local and state government officials, and other knowledgeable
individuals. We also interviewed officials from HCFA; observed meetings of
the Negotiated Rulemaking Committee on Medicare Ambulance Fee Schedule;
reviewed pertinent laws, policies, and regulations; and observed a
contractor's claims processing system. In addition, we analyzed Medicare
claims data for ambulance services provided in calendar years 1997 and 1998.
We performed our work in accordance with generally accepted government
auditing standards between January 1999 and June 2000. (See app. I for more
information about our methodology.)

Because many rural ambulance providers serve a large geographic area with a
low population density, they face a set of unique challenges. Unless they
rely on volunteers, they tend to have high per-trip costs because of the
lower volume of transports as compared to urban and suburban providers.
Rural providers also tend to have longer ambulance transports than their
urban counterparts, making the adequacy of reimbursement for mileage costs
more central to their overall payments than for providers in more densely
populated areas. In addition, because rural residents may have fewer
alternatives for transportation to hospitals, ambulances may transport some
beneficiaries whose conditions do not allow for Medicare reimbursement.
Furthermore, revenue sources are changing for rural providers with an
increasing reliance on Medicare revenues. Moreover, maintaining volunteer
staffs, which are more common in rural than urban areas, is becoming more
difficult.

The proposed Medicare fee schedule will alter the way rural ambulance
providers are paid. Much of the variation in payment rates among similar
rural providers will be eliminated. Some providers that now are paid more
than the national average are likely to receive lower payments under the fee
schedule. Others, including rural South Dakota providers, that are paid less
than the national average are likely to receive increased payments. In
addition, providers that transport beneficiaries in rural areas will receive
enhanced payments intended to help sustain essential ambulance service in
sparsely populated areas. However, this adjustment does not sufficiently
distinguish the providers serving beneficiaries in isolated areas and may
not be applied appropriately. Therefore, we recommend that HCFA refine the
payment adjuster to better target the necessary fixed costs of essential
providers in isolated areas. HCFA agreed with this recommendation and said
it would take action to obtain the information needed to enable better
targeting in the future.

Our review of 1998 claims data shows that payment denials have varied widely
among carriers, which are the contractors that process claims for
freestanding ambulance providers. Such variation can result in unequal
coverage for Medicare beneficiaries. Different practices among carriers,
including increased attention to potential fraud, differences in local
policies, and carriers' failure to apply the coverage criteria
appropriately, may have contributed to the variation in claims denials.
Claims have also been denied because providers did not properly fill out
forms. Additionally, the absence of a national coding system that readily
identifies the beneficiary's medical condition at the time of the transport
has impaired providers' ability to convey information to carriers in a way
that facilitates review of claims.

Medicare is the nation's largest health insurance program, with nearly 40
million beneficiaries. It includes almost all persons 65 years of age and
older and certain disabled persons. Medicare's Part A, the hospital
insurance program, covers inpatient hospital, some home health, skilled
nursing facility, and hospice services. Part B, the supplemental insurance
program, covers physician, outpatient hospital and laboratory services, and
an array of other services, including ambulance service.

HCFA, the agency that administers the Medicare program, contracts with more
than 50 insurance companies to process and pay Medicare claims. These
contractors include both fiscal intermediaries and carriers. Fiscal
intermediaries process inpatient hospital and skilled nursing facility
claims under Part A as well as certain services covered under Part B, such
as ambulance claims submitted by hospital-based providers. Carriers process
other Part B claims, including ambulance claims submitted by freestanding
providers. Before paying claims, the contractors must ensure that the claims
meet Medicare's coverage criteria that identify whether Medicare will pay
for a service, and they must deny inappropriate claims. They are also
responsible for supplying information to providers (through educational
workshops, newsletters, or other methods) about coverage policy and required
procedures.

Medicare covers medically necessary ambulance services when no other means
of transportation to receive health care services is appropriate given the
beneficiary's medical condition at the time of transport. Medicare pays for
both emergency and nonemergency ambulance transports that meet the
established criteria. To receive Medicare reimbursement, providers of
ambulance services must also meet vehicle and crew requirements. Transport
in any vehicle other than an ambulance--such as a wheelchair or stretcher
van--does not qualify for Medicare payment. (For more information on
Medicare's coverage criteria, see app. II.)

Between 1987 and 1995, Medicare payments to freestanding ambulance providers
more than tripled from $602 million to almost $2 billion, an average annual
increase of 16 percent. Overall Medicare spending during that same time
increased 11 percent annually. From 1996 through 1998, payments to
freestanding ambulance providers stabilized at about $2.1 billion.

Currently, Medicare uses different payment methods for hospital-based and
freestanding ambulance providers. Hospital-based providers are paid based on
their reasonable costs, and freestanding providers are paid based on a
reasonable charge system, which includes an upper limit. (For more
information about the reasonable charge system, see app. III.) For
freestanding providers, Medicare pays a base rate, and providers can bill
separately for mileage and certain supplies.3

In 1997, 11,135 freestanding and 1,119 hospital-based providers billed
Medicare for ground transports.4 Approximately 10 percent of Medicare
ambulance providers are hospital-based.5 The freestanding providers are a
diverse group, including private for-profit and nonprofit and public
entities. They include operations staffed almost entirely by community
volunteers, public ventures that include a mix of volunteer and professional
staff, and private operations using paid staff operating independently or
contracting their services to local government. About 34 percent are managed
by local fire departments. In several communities a quasi-government agency
owns the ambulance equipment and contracts with private companies for staff.

The majority of air ambulance transports are provided by hospital-based
providers. An estimated 275 freestanding and hospital-based programs provide
fixed-wing and rotor-wing air ambulance transports, which represent a small
proportion (about 5 percent) of total ambulance payments.6

Medicare pays for different levels of ambulance services, which reflect the
staff training and equipment required to meet the patient's needs. Basic
life support (BLS) is provided by emergency medical technicians (EMT).
Advanced life support (ALS) is provided by paramedics or EMTs with advanced
training. ALS with specialized services is provided by the same staff as
standard ALS but involves additional equipment.

The BBA required that a fee schedule be developed for all ambulance services
to replace the current charge- and cost-based reimbursement systems.7
Although the fee schedule was to have applied to services furnished on or
after January 1, 2000, HCFA does not expect to implement it until January 1,
2001.

The BBA stated that the fee schedule for ambulance services should include

ï¿½ mechanisms to control increases in expenditures,

ï¿½ definitions linking payments to the type of services provided,

ï¿½ consideration of regional or operations differences in costs,

ï¿½ payment adjustments to account for inflation and other relevant factors,
and

ï¿½ an efficient and fair phase-in period.

The law also stipulated that total payments under the fee schedule for
ambulance services in 2000 should not exceed essentially what total payments
would have been under the old payment system. This requirement is known as a
budget neutrality provision.

As required by BBA, HCFA is developing the fee schedule using a negotiated
rulemaking process, which involves a committee made up of representatives
from different interested parties. The Negotiated Rulemaking Committee on
Medicare Ambulance Fee Schedule was charged with developing recommendations
for HCFA that are to be used as the basis of the fee schedule. The committee
had a series of meetings beginning February 1999, completed its work in
February 2000, and published recommendations for the fee schedule. If HCFA's
resulting payment proposal adheres to the committee's recommendations, the
members agree not to oppose it. HCFA will use those recommendations as the
basis of the proposed fee schedule to the maximum extent possible. (See app.
IV for a listing of all the organizations participating in the Negotiated
Rulemaking Committee and app. V for details of the report.)

Several factors characterize rural ambulance providers and may need
consideration in implementing an appropriate payment policy. Some of these
factors may affect providers' per-transport costs, such as low volume of
transports and the long distances traveled in rural areas to provide
ambulance care. The lack of alternative transportation in rural areas
results in some providers transporting beneficiaries whose conditions do not
meet Medicare coverage criteria. Increasing reliance on Medicare revenue and
changing staff composition are other characteristics of rural providers.
More specifically, the issues are as follows:

ï¿½ High per-transport costs in low-volume areas. Compared to their urban and
suburban counterparts, rural ambulance providers have fewer transports over
which to spread their fixed costs because of the low population density in
rural areas. According to Project Hope, rural providers--both freestanding
and hospital-based--average fewer than 1,200 transports per year while urban
providers average over 14,000 transports per year.8 Yet, rural providers
must meet many of the same basic requirements as other providers to maintain
a responsive ambulance service, such as a fully equipped ambulance that is
continually serviced and maintained and sufficient numbers of trained staff.
As a result, rural providers that do not rely on volunteers generally have
higher per-transport costs than their urban and suburban counterparts.

ï¿½ Longer distances traveled. A common characteristic of rural ambulance
providers is a large service area, which generally requires longer trips.
Longer trips increase direct costs from increased mileage costs and staff
travel time. They also raise indirect costs because ambulance providers must
have sufficient backup services when vehicles and staff are unavailable for
extended periods. Among the freestanding ground providers that bill
Medicare, rural ground providers had more than 10 times as many transports
of 50 miles or greater than their urban counterparts and at least four times
as many trips of 20 to 49 miles as urban providers. (See table 1.) Current
Medicare payment policy generally allows freestanding providers to be
reimbursed for their mileage costs. Nevertheless, mileage-related
reimbursement issues, such as the amount paid for mileage, represent a
greater concern to rural providers because of the longer distances traveled.

                                          Transports of      Transports of
                        Number of          20-49 miles         50+ miles
                       transports
                                          (percentage)       (percentage)
 Transport type     Urban     Rurala    Urban   Rurala     Urban  Rurala
 Ground
                    2,405,524 580,130   3.2     11.3       0.5    5.3
 nonemergency
 Ground
                    2,404,369 802,412   2.1     10.7       0.2    3.6
 emergency
 Air (emergency
 and                427       459       3.8     5.2        4.2    36.8
 nonemergency)

aDefined as rural if the address of the beneficiary who was transported was
not in a metropolitan statistical area (MSA).

Note: Figures from this table represent all claims in which mileage was
billed separately.

Source: HCFA, National Claims History 100% Nearline File, 1998 (June 1999).

ï¿½ Lack of alternative transportation services. Rural areas may lack
alternative transport services, such as taxis, van services, and public
transportation, which are more readily available in urban and suburban
areas. According to one expert, rural elderly beneficiaries may call the
emergency number (911) because they have no other transport options. This
situation is complicated by the fact that some localities require ambulance
providers to transport in response to an emergency call, even if the
severity of the problem has not been established. Because of this situation,
some providers end up transporting a Medicare beneficiary whose need for
transport does not meet Medicare coverage criteria and, consequently, they
must seek payment from the beneficiary or another source.

ï¿½ Increasing reliance on Medicare revenue. Medicare payments account for an
increasing share of revenue for rural providers that bill Medicare. Among
these providers, 44 percent of their annual revenue, on average, was from
Medicare, in contrast to an estimated 15 percent in 1989, according to
Project Hope.9 (Urban providers' reliance has risen from 31 to 37 percent.)
For some rural providers, this is because, to some extent, other revenue
sources--such as subsidies from local tax revenues, donations, or other
fundraising efforts--have not kept up with increasing costs of delivering
the services.

ï¿½ Decreasing availability of volunteer staff. Rural ambulance providers
traditionally have relied more heavily on volunteer staff than providers in
urban or suburban areas. According to Project Hope, half of the providers
based in nonmetropolitan counties rely on volunteer staff, compared to 24
percent of providers based in metropolitan counties.10 Volunteer staff can
make a substantial difference in cost for rural providers. Rural ambulance
providers that rely on volunteers had lower costs per transport than their
nonrural counterparts, according to a 1991 study by Project Hope. However,
if the rural providers used paid staff, their average costs per transport
were higher than those of providers in more densely populated areas. Some
communities are having difficulty recruiting and retaining volunteers and
may have had to hire paid staff, which increases the costs of providing
services. To support volunteer services, some state governments have
intervened. For example, North Dakota, a predominantly rural state, will
provide a total of $940,000 during fiscal years 2000 and 2001 to help
volunteers maintain their certification as EMTs and paramedics.

Services

HCFA is developing a fee schedule for ambulance payments based on
recommendations from the Negotiated Rulemaking Committee and has agreed to
follow the committee's recommendations to the maximum extent possible.
Therefore, even though the fee schedule details have not been finalized, it
is clear that Medicare payments for ambulance services will change as a
result. A fee schedule will eliminate the current wide variation in payments
that exists across similar providers for similar services. It will also
eliminate the different payment methods used for freestanding and
hospital-based providers. Under the likely proposal, all providers who
transport beneficiaries in rural areas will receive a supplement to their
mileage payment. However, the higher payment is not targeted to transports
by low-volume providers in isolated areas but rather applies to all
transports involving rural residents. Implementation of a fee schedule will
increase payments for those providers who historically have received low
payments and reduce them for those with relatively high payments.

The design of the new fee schedule will be substantially different from
Medicare's current payment method for ambulance services. Under the present
system, there are considerable variations in payments to similar providers
for the same type of services. The fee schedule, which will likely be phased
in over 4 years, will assign one payment amount for each type of ambulance
service. This amount will vary across geographic areas to account for labor
and other cost differences across the country. The amount will also vary
based on whether the beneficiary was transported from an urban or rural
location. (See app. V for details about the fee schedule.)

In the rural states that we surveyed, we found that the current system has
led to widely varying payments to freestanding providers for similar
services. For example, emergency providers in rural South Dakota had much
lower reimbursement rates in 1999 for ambulance services and associated
mileage than providers in neighboring rural states--North Dakota, Wyoming,
and Montana (see table 2). The variation stems from the way providers are
paid under the reasonable charge system. Under this system, payment amounts
are limited to a maximum allowable amount, which is based on 1985 charges
that have been updated for inflation.11 These charges were billed during a
time when providers may have had proportionally higher subsidies from local
or state governments or more volunteer staff and, therefore, had lower
charges than those of an unsubsidized, fully professional service. While the
situation of the provider may have changed--particularly with regard to
subsidies or volunteer staff--the Medicare payment has been updated only to
account for inflation. Consequently, the maximum allowable amounts may vary
because of underlying historical charges. They also may not reflect the
current costs of delivering services.

                               Maximum payment amount in rural areas (in
                                               dollars)
 Ambulance service          South Dakota Montana   North Dakotaa Wyominga
 BLS, emergency             $85          $189      $150          $144
 ALS, emergency             137          231       347           138
 ALS, emergency,
 specialized services       167          231       350           227
 BLS per-mile payments      2.17         4.00      3.00          4.00
 ALS per-mile payments      2.17         5.67      4.13          6.00

aUnlike South Dakota, the maximum payment amount in Montana, North Dakota,
and Wyoming is the same for urban and rural areas.

Note: Except for per-mile payments, amounts are rounded to the nearest
dollar.

Source: GAO analysis of 1999 carrier reasonable charge data provided by
HCFA.

The shift to the fee schedule will narrow the wide variation in payments to
freestanding providers for similar services. Under the likely proposal,
payments to providers in rural areas for the same service will be adjusted
only to account for geographic cost differences, such as for wage rates.
This adjustment will likely be based on the practice expense component of
Medicare's geographic practice cost index (GPCI), which is used for the
physician fee schedule. The practice expense component of the GPCI measures
the relative cost differences of nonphysician labor and overhead costs in
physician practices across the country. Under this method, payments will
vary at most by about 2 percent in the four states we examined.12 This
variation is considerably smaller than the current range of maximum
allowable amounts for services among the four states. For example, payment
for emergency BLS is about 120 percent greater in Montana than in South
Dakota, and payment for emergency ALS is about 150 percent greater in North
Dakota than in South Dakota.

Current variations in maximum payment rates do not necessarily reflect
expected differences in provider costs. For example, the maximum payment
amounts for emergency ALS with no specialized services and for ALS with
specialized services are the same in Montana and are almost the same in
North Dakota. By contrast, the payment levels differ for these two types of
service in Wyoming and South Dakota, where both services are paid at much
lower levels. Some of Wyoming's rates are anomalous; for example, the
maximum payment amount for a BLS emergency is higher than for an ALS
emergency, which requires a higher skill level of care.

Under the current system, payments to hospital-based providers, which
represent 26 percent of providers in rural areas and 12 percent in urban
areas, also may vary substantially.13 Hospital-based providers are paid
under a system separate from freestanding providers with payments based on
their reported costs.14 The fee schedule is not likely to distinguish
between types of providers for payment purposes. Therefore, for the same
service, payments to hospital-based and freestanding providers in the same
area will be identical.

The fee schedule will eliminate the payment differences based on individual
ambulance provider costs or historical charges. Most likely, there will be
one fee for each level of service. This fee is not expected to vary among
providers except for two possible adjustments--one for geographic wage and
price differences and the other based on the beneficiary's location, rural
or urban.

Low-Density Areas

As part of its mandate, the Negotiated Rulemaking Committee was directed to
consider the issue of providing essential ambulance service in isolated
areas. The committee recommended a rural payment adjustment to recognize the
higher costs associated with low-volume providers and to ensure adequate
ambulance services. The proposed adjustment is an additional mileage payment
for the first 17 miles for all transports of beneficiaries in rural areas.
HCFA intends to define rural as any area outside of a metropolitan
statistical area (MSA) and areas within MSAs that are identified as rural.
(See app. V for details about the rural adjuster.)

An adjustment based on a non-MSA classification treats all providers in a
range of rural areas identically. However, characteristics of rural areas
may vary greatly. Some are near metropolitan areas and have relatively large
populations, while others are sparsely populated and far from any urban
centers. This variety among rural areas is illustrated by the U.S.
Department of Agriculture's rural-urban continuum code. The code classifies
rural counties based on the size of their urban population and proximity to
an MSA. There are six categories for nonmetropolitan counties, ranging from
counties with an urban population of 20,000 or more and adjacent to a
metropolitan area to those with less than 2,500 urban population and not
adjacent to a metropolitan area. The latter are defined as completely rural.

Furthermore, HCFA's intended definition of rural does not target providers
that offer the only ambulance service for residents in an isolated area.
This may have two results. First, some providers may receive the payment
adjustment when they are not the only available source of ambulance service.
Second, the adjustment may be too low for the truly isolated providers
because it was extended to a larger group. For example, payments to rural
health clinics were modified in an attempt to ensure access to primary care
in rural, underserved areas. However, our previous work showed that because
of the overly broad eligibility criteria, the supplemental payments
benefited well-staffed, financially viable clinics in suburban areas.
Furthermore, we found that sparsely populated, underserved communities still
needed help and were not receiving it.15

Medicare has recognized the need to develop targeting mechanisms that extend
beyond the MSA/non-MSA distinction. For example, Medicare's "sole community
hospital" designation aims to identify facilities located in geographically
isolated areas. These hospitals are defined as the sole providers of
inpatient, acute-care hospital services in a geographic area. This
definition is based on distance and travel time to other facilities, severe
weather conditions, market share, or some combination of those factors. Not
all of these sole providers are rural, and not all rural hospitals qualify
as sole community hospitals.

There are indications that the rural adjustment in the ambulance fee
schedule may not be sufficiently targeted. The Negotiated Rulemaking
Committee members were not satisfied with the definition that HCFA intends
to use for rural areas, which they believe does not sufficiently target the
low-volume, isolated rural providers. They accepted the definition because
no other option could be easily adopted and implemented by HCFA, and they
did not want this issue to delay implementation of the fee schedule.
However, they stated that the currently proposed rural adjustment should be
temporary and expressed their belief that a new methodology needs to be
developed that more adequately targets the low-volume, isolated rural areas.

In addition, the intended rural adjustment will be tied to the mileage
payment rather than the base rate and, therefore, may not adequately help
low-volume providers. Such providers may not have enough transports to
enable them to cover the fixed costs associated with maintaining ambulance
service. The per-mile cost would not necessarily be higher with longer
trips. It is the base rate, which is designed to pay for general costs such
as staff and equipment--and not the mileage rate--that may be insufficient
for these essential providers. For that reason, adjusting the base rate
rather than the mileage rate would better account for their higher
per-transport fixed costs.

for Others

Even though the actual payment amounts have not yet been finalized, a
national fee schedule is likely to provide increased per-trip payments to
those providers that under the current system receive payments considerably
below the national average and decreased payments to providers with payments
that have been substantially above the national average. For example, the
maximum payment in 1999 for ALS emergency services in North Carolina was
$106, compared to $347 in North Dakota. Payments for ALS emergency services
in North Carolina were about 70 percent less than those in North Dakota.
However, the practice expense component of the GPCI for North Carolina
exceeded that of North Dakota by about 5 percent.16 Under the likely design
of the fee schedule, for the same distance transport, the payment to a rural
provider in North Carolina will be about 4 percent higher than the payment
for a rural provider in North Dakota.17

Because the geographic wage and price adjuster for all non-MSA areas varies
43 percent between the lowest and highest areas, payments under the likely
fee schedule will move closer together.18 For example, in Colorado, the
maximum payment to freestanding providers for BLS emergency in 1999 was
about 320 percent higher than the payment for the same service in South
Dakota. Yet, the geographic payment adjustment under the fee schedule will
likely result in a payment that is only 11 percent greater for Colorado
providers than for South Dakota providers.19

In conjunction with the fee schedule, all ambulance providers will be
required to accept Medicare's allowed payment amount as payment in full
(known as accepting assignment), which could affect whether providers'
payments go up or down under the fee schedule. Providers that accept
assignment receive 80 percent of the allowed amount from the Medicare
program and bill the beneficiary for the remaining 20 percent of the
Medicare-allowed amount.20 Providers that do not accept assignment can bill
beneficiaries for the balance of their charge above the Medicare-allowed
amount up to a limit. (This is known as balance billing.) Currently,
ambulance providers may choose whether or not to accept assignment.
Eliminating the balance billing option may not affect the Medicare revenues
of providers in low-payment areas because their fee schedule rates will be
higher than their historic payments. For others, in cases where the fee
schedule is considerably lower than current rates, their payments may
decrease even more after implementation of the fee schedule if they have
generally billed the beneficiary above the Medicare-allowed amount. Because
HCFA intends to require providers to accept assignment at the beginning of
the 4-year transition to the fee schedule, providers in low-payment areas
that have not accepted assignment may see decreased payments in the short
term.21

Whether a claim for ambulance transport is approved varies among carriers,
and these discrepancies can translate into unequal coverage for
beneficiaries. Different practices among carriers, including increased
scrutiny due to concerns about fraud, may explain some of the variation in
denial rates. In addition, some variation in denials may result from
providers in certain areas lacking information about how to fill out
electronic claim forms correctly. Claims review difficulties are exacerbated
by the lack of a national coding system that easily identifies the
beneficiary's health condition and links it to the appropriate level of
service (BLS, ALS, or ALS with specialized services). As a result, the
provider may not convey the information the carrier needs to understand the
beneficiary's medical condition at the time of pickup, creating a barrier to
appropriate reimbursement.

Substantially

For both emergency and nonemergency ambulance transports, the denial rates
in 1998 varied from about 9 to 26 percent for the nine carriers that
processed two-thirds of all ambulance claims.22 For emergency transports,
denials ranged from about 2 to 20 percent (see fig. 1). Noridian, the
carrier serving 11 states including North Dakota and South Dakota, had the
highest denial rate for emergency ambulance transports and, along with
Trailblazers, the highest overall denial rate.

Percentage of Total Submitted Claims, 1998

Source: GAO analysis of HCFA National Claims History 100% Nearline File,
1998, as of June 1999.

Variation among carriers in their efforts to combat fraud and abuse may have
resulted in some carriers scrutinizing claims more carefully than others,
and more closely than previously. A June 1996 National Fraud Alert from HCFA
focusing on nonemergency ambulance transports may have resulted in carriers
giving individual claims greater scrutiny. Studies conducted by the Office
of the Inspector General of the Department of Health and Human Services have
shown that ambulance services can be susceptible to abuse. One study
indicated that about $52 million was paid in the first 6 months of 1996 for
ambulance transports that did not meet Medicare coverage criteria.23

Noridian's claim denial rates in North Dakota and South Dakota increased
substantially between 1996 and 1997. The percentage of denied claims rose
from about 11 to 24 percent in North Dakota and from about 16 to 34 percent
in South Dakota. Providers in those two states have complained of high claim
denial rates.24 A HCFA representative suggested that the increased denial
rates could reflect increased scrutiny of these claims. Noridian also
attributed the increase in claims denial to an effort to get providers to
properly use their provider identification numbers.

Another possible reason for the variation in denial rates is that national
coverage policy exists only for some situations. Providers have complained,
and HCFA officials agree, that the national medical coverage criteria for
ambulance services are vague. Generally, Medicare coverage policies are set
by individual carriers rather than nationally by HCFA. Consequently, similar
claims may be treated differently across carriers. For example, in 1998, the
carrier covering ambulance providers in New Jersey and Pennsylvania, where
local ordinances mandated ALS as the minimum standard of care for all
transports regardless of the beneficiary's medical condition, reimbursed
transports at ALS levels. However, an ambulance provider in Fargo, North
Dakota, had many of its ALS claims reduced to BLS payment rates even though
a local ordinance required ALS services in all cases. The carrier's policy
has changed since then. Now, if a provider sends an ALS-level vehicle and
personnel, the carrier will not reduce the claim to the BLS payment level.

In addition, some carriers may be applying criteria inappropriately,
particularly for nonemergency transports. For example, Medicare coverage of
a nonemergency ambulance transport requires that a beneficiary be
bed-confined. This requirement does not apply to emergency transports
because that coverage is based on the need for immediate medical care.

(For more information about criteria for emergency and nonemergency
transports, see app. II.) Noridian was applying bed-confined criteria to
both emergency and nonemergency transports. During the course of our review,
HCFA became aware of this situation and in September 1999, Noridian
consolidated the bed-confined policies for the 11 states for which it
administered Part B claims to conform to national policy.

Furthermore, some providers are concerned that carriers sometimes determine
medical necessity using the patient's ultimate diagnosis, rather than the
patient's condition at the time of transport. HCFA officials have stated
that the need for ambulance services should be based on the patient's
medical condition at the time of transport, not the diagnosis made later in
the emergency room or hospital.

Inaccurate information on what services particular hospitals offer may
result in inappropriate partial denials, in which the carrier may allow
payment for some but not all of the mileage, contending that the beneficiary
should have been transported to a closer facility. Carriers are responsible
for determining whether the beneficiary was taken to the nearest appropriate
facility, as required for Medicare reimbursement. At least some of the
carriers use surveys from hospitals in their states to determine what
services a hospital offers and, thus, whether it could have appropriately
served a beneficiary. However, the survey information does not always
accurately reflect the situation at the time of transport, such as whether a
bed was available or if the hospital was able to provide the necessary type
of care. Although these denials can be appealed, doing so requires
additional time and work. Furthermore, these partial denials can have a more
serious effect on rural ground and air ambulance providers than on urban
providers because of the potential for a larger number of disallowed miles.

In addition to carrier practices, other factors, such as incorrectly
filled-out claim forms, contribute to denials. According to Noridian
officials, some providers have put insufficient information on the claim
form to determine if a patient's condition warranted an ambulance transport.
Providers in South Dakota, North Dakota, and Wyoming told us that Noridian
has not provided sufficient instructions or provider education to enable
them to fill out claims correctly. However, Noridian provided a manual on
Medicare ambulance services to ambulance providers to help them better
understand how to fill out a claim form. In addition, because the South
Dakota EMS Director was concerned about denied claims, the state paid to
have carrier staff conduct provider education classes.

Volunteer staffs in particular may have difficulty filling out Medicare
claim forms, and an improperly filled-out claim form increases the
possibility of a denial. According to one state EMS director, volunteers do
not have the time to learn about the Medicare reimbursement process.
Consequently, some volunteer providers have not billed Medicare because they
lack the expertise to file claims. Other volunteer companies have addressed
the problem by hiring billing agents that charge from 12 to 17 percent of
the collected amount to fill out their claims. North Dakota recently
conducted a pilot program to help volunteer staffs by hiring a professional
ambulance billing company to file volunteer company claims.

Rural ambulance providers in certain states appear to have difficulty with
electronic claims filing. Medicare policy states that electronic claims will
be paid more quickly than paper claims. In 1997, 80 percent of Part B claims
were submitted electronically. In stark contrast, in South Dakota, North
Dakota, and Wyoming, more than 98 percent of the claims submitted in 1997
and 1998 by freestanding ambulance providers were paper claims. Some of the
providers we spoke with in those states did not understand how to use the
electronic form to provide all the information carriers needed to determine
whether a transport met the coverage criteria. Some incorrectly believed
that they were limited to 22 characters to describe a patient's condition.
Some said that they filed paper claims because, when they had filed claims
electronically in the past, they were later required to submit the trip
report, which cannot be submitted electronically. However, if the providers
had known that they could include additional information electronically
about the beneficiary's condition and done so, the trip report might not
have been requested.

Difficulties

Unlike the billing information required for physician services, the medical
information required for ambulance claims is not conveyed consistently to
carriers. Some carriers require providers to use a system of medical
condition codes called ICD-9 (International Classification of Diseases, 9th
revision). Other carriers simply rely on individual providers' descriptions
to explain the beneficiary's condition at the time of transport. Such
explanations may require considerable interpretation by the carrier.
Inadequate information on claim forms hinders carriers' ability to determine
whether the transport meets Medicare criteria for medical necessity and
whether the appropriate level of service--ALS or BLS--was provided. If the
information is questionable or insufficient, the carrier may be obliged to
suspend or deny the claim.25

HCFA believes that a standardized, mandated coding system would be helpful,
and has proposed a coding system for claims using ICD-9 codes, since these
are an accepted set of diagnostic and symptomatic codes used for payment of
medical bills. According to HCFA, using these codes would promote
consistency in the processing of claims and reduce the uncertainty for
providers regarding claims approval because using the codes would help in
filing claims properly.

While they agree that a coding system would be helpful, a number of
ambulance providers are opposed to using the ICD-9 codes as the basis of the
system. One concern is that the ICD-9 codes are based on diagnosis, yet EMTs
and paramedics are not trained to diagnose patients. The Negotiated
Rulemaking Committee has developed an alternative coding system and given it
to HCFA for consideration. That system identifies medical conditions and
links them to the levels of services provided. HCFA has not yet made a final
decision on the use of that coding system.

Implementation of a national fee schedule is likely to benefit those rural
freestanding ambulance providers whose payments are currently below the
national average because fee schedule payments will be based on average
payment amounts. For rural freestanding providers that receive
lower-than-average payments currently, such as those in South Dakota,
payments will likely increase. Overall, the fee schedule will improve the
equity of Medicare's payment for rural ambulance providers. However, the
system will need to be refined after it is implemented. The Negotiated
Rulemaking Committee on Medicare Ambulance Fee Schedule concluded that a
payment adjustment would be appropriate for ambulance providers transporting
beneficiaries in low-population, isolated areas; yet the adjuster that will
likely be used does not adequately target these providers or their higher
fixed costs per transport.

Concerns about claims denials need to be addressed separately from
development of the fee schedule. Under the current system, coverage policy
can vary from carrier to carrier, which can lead to differences in whether
similar claims are paid. In addition, some rural providers may need
additional education about how to file claims. A uniform coding system for
ambulance claims is likely to improve claims processing and lead to more
transparent decisions about claims payment.

We recommend that the HCFA Administrator develop a more refined payment
adjuster that better targets the ambulance providers that serve isolated,
rural areas where their services are essential to ensuring that Medicare
beneficiaries have access to ambulance transports. The rural adjuster should
also be structured toward providers' high fixed costs incurred because of
the low volume of transports in these isolated areas.

We provided HCFA and Noridian an opportunity to comment on a draft of this
report. HCFA agreed with our findings and recommendation (see app. VI). In
its comments, HCFA said that assuring and enhancing access to quality care
for rural beneficiaries was an agency priority and discussed its efforts to
do so, particularly with regards to the new ambulance fee schedule. HCFA
agreed with our recommendation that a more refined payment adjuster is
needed for ambulance providers that serve isolated rural areas. However,
given the time frame for putting the fee schedule in place and the limited
available data, HCFA will follow the consensus of the committee on the
payment adjuster. HCFA said that this was a temporary approach and that it
would work with the ambulance industry to identify and collect relevant data
to refine adjustments to the fee schedule. HCFA also highlighted its efforts
to clarify ambulance coverage criteria and provide guidance to contractors
and providers so that claims are properly submitted by providers and paid by
carriers. Noridian provided some technical comments, which we incorporated
where appropriate.

As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days from
the date of this letter. At that time, we will send copies to Nancy-Ann Min
DeParle, Administrator of HCFA, and make copies available to others upon
request.

If you or your staff have any questions, please call me at 202-512-7119 or
Sheila Avruch at 202-512-7277. Other major contributors were Deborah
Spielberg, Robert Sayers, Tom Taydus, and Wayne Turowski.

Sincerely yours,

Laura A. Dummit
Associate Director, Health Financing
and Public Health Issues

Scope and Methodology

To do this work, we met with more than 50 ground and air ambulance
providers, both freestanding and hospital-based, in North Dakota and South
Dakota and received comments by telephone or in writing from freestanding
and hospital-based ambulance providers located in Minnesota and Wyoming. We
also interviewed the state Emergency Medical Services (EMS) Directors in
North Dakota, South Dakota, and Wyoming.

We attended meetings of the Negotiated Rulemaking Committee on Medicare
Ambulance Fee Schedule and met with the major groups whose members are
involved in providing ambulance services. We obtained information from the
Health Care Financing Administration (HCFA) and reviewed studies prepared by
Project Hope on the costs of providing ambulance services, including the
costs specific to rural ambulance providers. In addition, we examined 1999
prevailing charge data from HCFA and paid ambulance claims data for calendar
years 1997 and 1998. The data represent claims processed as of June 30,
1999. We did not independently test the reliability of HCFA's data. However,
we note that a 5 percent sample of this database, which includes all
Medicare Part B claims, is often used by researchers investigating important
issues in health economics and policy.

We visited Noridian, where we observed the ambulance claims processing
system and appeal process for freestanding providers and interviewed staff
about the ambulance claims processing system. We also contacted by telephone
the fiscal intermediary that determines the payments for hospital-based
providers in South Dakota and Iowa.

Medicare Coverage Criteria for Emergency and Nonemergency Ambulance
Transports

Medicare covers ambulance services only when the use of other transport
methods would be harmful to the beneficiary's health. Medicare coverage
includes both emergency and nonemergency ambulance transports. The coverage
is available when the beneficiary

ï¿½ was transported in an emergency situation, for example, as a result of an
accident, injury, or acute illness;

ï¿½ was unconscious or in shock;

ï¿½ needed to be restrained;

ï¿½ required oxygen or other emergency treatment on the way to the
destination;

ï¿½ had to remain immobile because of a fracture that had not been set or the
possibility of a fracture;

ï¿½ sustained an acute stroke or myocardial infarction;

ï¿½ was experiencing severe hemorrhage;

ï¿½ was bed-confined before and after the ambulance trip; or

ï¿½ could be moved only by stretcher.

Emergency ambulance transports are provided after the sudden onset of a
medical condition manifesting itself by acute symptoms of such severity
(including severe pain) that the absence of immediate medical attention
could reasonably be expected to result in any of the following:

ï¿½ Placing the beneficiary's health in serious jeopardy,

ï¿½ Serious impairment of the beneficiary's bodily functions, or

ï¿½ Serious dysfunction of any bodily organ or part.

Medicare also covers nonemergency transports--both scheduled and
non-scheduled--if the beneficiary is bed-confined or meets other medical
necessity criteria, listed below. Bed confinement is defined as when the
beneficiary is unable to get up from bed without assistance, to ambulate, or
to sit in a chair or wheelchair.

Nonemergency nonscheduled ambulance transport requirements include the
following:

ï¿½ For beneficiaries in a facility--such as a nursing home--and under the
direct care of a physician, ambulance providers must obtain a written order
from the beneficiary's attending physician within 48 hours after the
transport certifying that the medical necessity requirements for bed
confinement were met. This is not a requirement for a beneficiary residing
at home or in a facility where he or she is not under the direct care of a
physician.

ï¿½ Ambulance providers must obtain a written order from the beneficiary's
attending physician certifying that the medical necessity requirements for
bed confinement are met.

ï¿½ The certification must be dated no earlier than 60 days before the date
the service is furnished.

Medicare Payment Method for Freestanding Ambulance Providers

Payments to freestanding ambulance providers are based on the reasonable
charge method. The Medicare-allowed amount (payment) for a specific
ambulance service is set at the lowest of the following:

ï¿½ actual submitted charge;

ï¿½ provider's customary charge, which is the median charge for a procedure by
the particular provider in the prior year;

ï¿½ prevailing charge in the locality, which is the 75th percentile of the
prior year's customary charges, arrayed from low to high, weighted by
frequency that the charge occurs; or

ï¿½ the inflation-indexed charge (IIC), which is the lowest of the provider's
actual charge, customary charge or prevailing charge in the locality from
the previous year, updated for inflation.

The IIC was implemented in 1985 as a cost containment measure and limits the
amount of annual increase. Since then, providers cannot receive payment for
actual, customary, or prevailing charges that are higher than the lowest
charge in any of the four categories from the previous year. That lowest
charge updated for inflation becomes the IIC for the current year. In four
states we examined--Montana, North Dakota, South Dakota, and Wyoming--the
IIC is the amount paid for the majority of services.

Organizations Represented on the Negotiated Rulemaking Committee on Medicare
Ambulance Fee Schedule

American Ambulance Association
American College of Emergency Physicians and National Association of EMS
Physicians
American Hospital Association
Association of Air Medical Services
Health Care Financing Administration
International Association of Fire Fighters
International Association of Fire Chiefs
National Association of Counties
National Association of State Emergency Medical Services Directors
National Volunteer Fire Council

Recommendations From the Negotiated Rulemaking Committee on Medicare
Ambulance Fee Schedule

The committee agreed on the major points regarding the fee schedule, which
will be the basis for the payment regulations being developed by HCFA.
Services will be paid in relation to a base rate in a relative value system,
as is done for physician services. The committee defined the levels of
ambulance assistance and assigned relative value units (RVUs) for ground
ambulance services, as shown in table 3.

 Service level26          RVU
 BLS                      1.00
 BLS--emergency           1.60
 ALS1                     1.20
 ALS1--emergency          1.90
 ALS2                     2.75
 Specialty care transport 3.25
 Paramedic intercept27    1.75

HCFA will determine the total amount of money available for ambulance
payments and a dollar amount conversion factor that is multiplied by the
RVU.28 The following example illustrates how the RVUs will be used once the
dollar amounts are determined: if the conversion factor were $100, the ALS1
would be $120 ($100 x 1.20 RVU).

To account for wage and overhead cost differences across the country, 70
percent of the base rate for ground ambulance will be adjusted by the
practice expense portion of the geographic practice cost index (GPCI) used
to adjust payments to physicians. The GPCI will be applied to 50 percent of
the air ambulance base rate.

The committee agreed that all ground ambulance miles, regardless of the
level of service provided, should be paid $5 per mile. For air transports,
the committee agreed on $6 per mile for fixed-wing and $16 per mile for
rotor-wing (helicopter) transports.

The committee agreed to a payment adjustment that will increase by 50
percent the mileage rate for the first 17 miles for all ground transports of
beneficiaries picked up in a non-MSA area.29

For air transports, HCFA will set the RVUs and the conversion factor based
on Medicare expenditures attributed to air ambulance services in the base
year. The rural adjustment will be applied to the total payment. (The actual
percentage adjustment will be determined after the base year expenditures
for air transport are established.)

Comments From the Health Care Financing Administration

(101788)

Table 1: Characteristics of Medicare Ambulance Transport by Urban
and Rural Freestanding Providers, 1998 9

Table 2: Maximum Medicare Payments to Freestanding Ambulance Providers by
Service in Selected Rural Areas, 1999 12

Table 3: Levels of Ambulance Assistance 31

Figure 1: Denied Emergency Ambulance Transports for the Nine
Carriers, as a Percentage of Total Submitted Claims, 1998 19
  

1. The term freestanding is used to describe ambulance providers that are
not affiliated with a hospital or other health care facility.

2. P.L.105-33, 4531(b), Stat. 251, 450-52.

3. This is true for 99 percent of all freestanding ground ambulance
transports. The payment for the remainder is a base rate that includes
mileage.

4. Project Hope, "Results from the National Survey of Ambulance Providers,"
presented by Penny Mohr to the Negotiated Rulemaking Committee on Medicare
Ambulance Fee Schedule (Dec. 1999).

5. Penny E. Mohr, Michael Cheng, Curt D. Mueller, and others, "Findings from
the 1999 National Survey of Ambulance Providers," Final Report, Project Hope
(Mar. 2000).

6. Estimated number of air ambulance companies is from Report of Findings
From the National Air Ambulance Cost Study, Ernst & Young LLP (Dec. 1999),
p. 3. Estimated percentage of Medicare air transport payments is from the
Association of Air Medical Services.

7. Section 4531(b) of the BBA established a new subsection 1834(l) of the
Social Security Act. 42 U.S.C. 1395m(1).

8. Project Hope (1999).

9. Current data reflect the providers' most recent fiscal year, which for
most is 1998, and were provided to GAO by Penny Mohr, Project Hope (personal
communication, Jan. 11 and 14, 2000). Data for 1989 are from a Project Hope
survey of 206 ambulance providers in four states (California, Massachusetts,
Michigan, and Texas), which were chosen because they represented different
regions of the country.

10. Volunteer providers are defined by Project Hope as those with volunteer
staff composing 80 percent or more of the total staff. Nonmetropolitan is
the designation used to identify rural providers.

11. For more information about the current payment method for freestanding
providers, see app. III.

12. The practice expense component of the GPCI is relative to 1.0, so values
below 1.0 reduce payments below the average and values above 1.0 raise
payments. The states we examined have lower costs than the national average.
The GPCI for South Dakota is 0.873 (45th among the 50 states) compared to
0.877 for North Dakota (42nd), 0.877 for Montana (41st), and 0.895 (34th)
for Wyoming. Only 10 states (not including metropolitan areas that have
separate GPCI values) have a GPCI practice expense number above 1.0. The
GPCI will be applied to 70 percent of the base payment rate.

13. Project Hope (Mar. 2000).

14. During any given year a hospital receives an interim payment based on
its costs from the previous year. The final payment is determined at the end
of the hospital's fiscal year, as part of a year-end cost settlement
process. The determination of the final payment may also include an audit by
fiscal intermediary staff of the reported costs.

15. Rural Health Clinics: Rising Program Expenditures Not Focused on
Improving Care in Isolated Areas ( GAO/HEHS-97-24, Nov. 1996).

16. The practice expense component of the GPCI is 0.924 for North Carolina
(26th among the 50 states for their nonmetropolitan areas), compared to
0.877 for North Dakota (42nd).

17. It is about 4 percent higher because the GPCI will be applied only to 70
percent of the base rate payment.

18. This percentage is based on the range of non-MSA GPCI (from 0.828 to
1.183) for all states.

19. The GPCI is 0.873 for South Dakota (45th among the 50 states). The GPCI
is 0.97 for Colorado (15th).

20. Providers that accept assignment receive a higher payment from Medicare
and can be paid directly by Medicare. If providers do not accept assignment,
Medicare payment is sent to the beneficiary, who must then pay the provider.

21. According to HCFA, the law requires that assignment take effect when the
fee schedule is first implemented.

22. These denial rates are based on our analysis of HCFA's National Claims
History 100% Nearline File database and include all 1998 claims that were
paid prior to June 1999.

23. Office of Inspector General, Medical Necessity of Medicare Ambulance
Services, OEI-09-95-00412 (Washington, D.C.: Department of Health and Human
Services, Dec. 1998).

24. There are three sequential levels of appeal for a denied Medicare claim.
The first appeal is a second review of the claim conducted by an employee of
the contractor who did not review the claim initially. If that employee
decides to uphold the initial denial, the decision can be appealed to a
Hearing Officer employed by the contractor. If the claim denial continues to
be upheld, the denial can be appealed to an Administrative Law Judge.

25. When a claim is suspended, the carrier requests additional information
before deciding whether to approve or deny the claim. If a claim is denied,
the claim must be appealed for the carrier to give it additional
consideration, and more information is provided to the carrier at that time.

26. Medicare pays for different levels of ambulance services, which reflect
the staff training and equipment required to meet the patient's needs. Basic
life support (BLS) is provided by emergency medical technicians (EMTs).
Advanced life support (ALS1) is provided by paramedics or EMTs with advanced
training. ALS2 is provided by the same staff as standard ALS but involves
additional equipment. Specialty care transport is provided by health
professionals in an appropriate specialty area such as nursing, medicine, or
cardivascular care or by a paramedic with additional training.

27. Paramedic intercept is ALS service provided by an entity that does not
provide the ambulance transport. Under limited circumstances, these services
are reimburable by Medicare.

28. BBA stipulated that total payments for ambulance services during the
first year of the fee schedule should not exceed what total payments would
have been under the current system. Therefore, HCFA must determine the
amount that would have been spent under the existing system before assigning
a dollar conversion factor to be used with the relative value units.

29. According to the committee statement, the definition of a rural area is
an area outside of a Metropolitan statistical area (MSA), a New England
County Metropolitan Area, or an area within an MSA identified as rural,
using the Goldsmith Modification. The Goldsmith Modification is used to
identify small towns and rural areas within large metropolitan counties that
are isolated from central areas by distance or other features.
*** End of document. ***