Medicare Change Threatens Ambulance Companies

Under a new Medicare reimbursement rule, 10 to 15 of the state’s 224 licensed ambulance companies might go out of business, says the Arkansas Ambulance Association. And the new rule will disproportionately affect rural areas.

But Medicare’s Health Care Finance Administration rule, a part of the Balanced Budget Act of 1997, that was supposed to take effect Jan. 1 was delayed until April 1 and again until July 1. Several ambulance executives think the rule will likely be pushed back again to the beginning of the next quarter or as late as Jan. 1.

About half of the ambulance transports done in Arkansas annually involve Medicare reimbursement. For Central EMS of Fayetteville, which operates one unit each in Prairie Grove, West Fork and Lincoln, about 40 percent its 6,000 annual transports are affected.

“The new HCFA rules will reduce revenue which will, in turn, reduce services,” said the company’s administrator, Tony Hickerson. “We’re looking at a reduction of $250,000 per year, at most. Unless they change the definition of rural in the new rule, no part of Washington County is rural. There is a greater mileage allowance for rural service under the new rule.

The rule may force him to seek a larger subsidy from Washington County and the city of Fayetteville. Currently, the county and city kick in 19 percent of Central EMS’s revenue.

“You can get real scared, and there’s good reason to be,” he said. “At what point will public policy makers on the local level realize they need to step in? As a rule, ambulance service is not something that people think about. They don’t understand all the funding intricacies. You’ve got to reimburse the cost, otherwise somebody has to pay the unreimbursed cost or service is going to suffer. If the suggestion is that we can cut expenses to make up for the shortfall, you have to realize that means a reduction in patient care.”

The current HCFA reimbursement rate for an advanced life support (ALS) unit with a paramedic is still less than the $445.82 average cost per transport in rural Arkansas, said Kenneth Starnes, CEO of Emergency Ambulance Service Inc. of Pine Bluff (Lusby’s). And the reimbursement rate for a basic life support (BLS) unit with an emergency medical technician on board is less because it costs less to operate.

Currently, HCFA reimburses ambulance companies based on the type of unit, ALS or BLS, that responds to the scene. And ambulance companies can seek reimbursement from the patient for additional costs. But under the proposed rule, HCFA bundles the medication, supplies and disposables cost into a fee-based system that uses $157 as its base rate. That amount is multiplied by the level of service the call required, and the product of those numbers is then multiplied by a cost of living adjustment to get the base rate for reimbursement. Then the mileage allowance is added. But the ambulance company must accept the reimbursement as payment in full and may not bill the patient for added expenses.

“When the industry saw the conversion factor of only $157, it meant a disaster for the majority of states,” Jon M. Swanson, executive director of MEMS in Little Rock and secretary/treasurer of the Arkansas Ambulance Association, said. “The industry thinks it should be $236 plus a bump to rural providers because the low call volume increases the cost of each transport.”

HCFA will review the Medicare transports retroactively and reimburse for the type of unit that could have responded to the call. Many in Arkansas’ emergency transport community say that is patently unfair, especially since many cities and counties require ALS service. MEMS is required to provide ALS service.

“We can only go on the limited information we get from the caller,” Swanson said of ambulance companies in general. “We have to determine with that limited information whether to send an ALS or BLS unit. If you have an elderly patient who falls and breaks a hip, it is an emergency and we send out an ALS unit. When he arrives on scene, the paramedic assesses the patient to see if a stroke might have caused the fall. If it wasn’t a stroke, the new rule says HCFA will only reimburse us at the BLS rate because the call wasn’t life-threatening. But it could have been. HCFA has the advantage of reviewing the entire case in determining how to reimburse us.”

Swanson said that to prepare for the new rule, MEMS reviewed its run history to estimate the loss in revenue. He said that in Arkansas “it is an estimated 25-28 percent loss in Medicare revenue. Since Medicare is about 50 percent of all revenue collected, that is a 12-13 percent loss of total revenue.”

Statewide, one estimate said Arkansas’ ambulance companies could lose $121 million in ancillary charges for oxygen, medications, disposables and supplies. An average-sized ambulance services could also loose $150,000-$300,000 on its base rate.