Medicare's ambulance fee schedule dispatched: Medicare's new ambulance fee schedule means more revenue for some providers but less for others

Healthcare Financial Management, August, 2002 by Paul L. Grimaldi

Medicare's ambulance fee schedule, which took effect April 1, 2002, has meant higher payments for some providers and suppliers, but lower payments for others. (a) Healthcare financial managers must revise their policies, procedures, and chargemasters to satisfy new requirements. Expanded and revised diagnosis and procedure codes are required for billing purposes. Financial managers need to develop and implement methods to track the impact of the new fee schedule on their organizations bottom lines. Overall, Federal actuaries expect the new fee schedule to reduce Medicare spending for ambulance services by about 2 percent in 2002.

Former Methods

Previously, Medicare used two methods to pay for ambulance services. Providers (hospitals, skilled nursing facilities, and home health agencies) were paid on a reasonable-cost basis, which includes an inflation cap on the reimbursable cost per trip. Suppliers (entities independent of any provider) were paid on a reasonable-charge basis that linked payment to the lowest of a supplier's actual, customary, prevailing, or inflation-indexed charges.

The following four methods were used to bill for ambulance services:

* A single, all-inclusive charge for all services, supplies, and mileage;

* One charge for all services and supplies, and a separate charge for mileage;

* One charge for all services and mileage, and a separate charge for supplies; and

* Separate charges for services, supplies, and mileage.

In some localities, separate charges were allowed for supplies used with specialized services (eg, intubation and intravenous drug administration) commonly furnished during advanced life-support transportation, as well as for unusual waiting time. Suppliers within the same locality used different billing methods and were locked into the billing method they had chosen. ICD-9-CM diagnosis codes described the nature and symptoms that necessitated ambulance transportation; HCPCS procedure codes indicated the trip's origin and destination. After meeting the annual Part B deductible of $100, Medicare beneficiaries were responsible for 20 percent of billed charges. Suppliers (but not providers) did not have to accept assignment (ie, Medicare as full payment for covered services), but were permitted to bill the beneficiary the excess of their billed charges over the Medicare allowed-payment amount.

Fee Schedule

Under the new schedule, ambulance fees vary with the level of service and the length of the beneficiary's trip. Payment for mileage includes an add-on for beneficiaries picked up in a rural area. Providers and suppliers must meet revised certification requirements and use revised and expanded diagnosis and procedure codes to bill for ambulance services. Because the fee schedule affects the Medicare payment amount, it also affects a beneficiary's coinsurance liability.

Covered entities. Ambulance services may be furnished by providers or other entities, referred to as suppliers. Virtually all providers and suppliers that furnish ambulance services to Medicare beneficiaries have been covered by the new fee schedule since its launch date. The only exemptions are critical-access hospitals (CAHs) or CAH-owned and operated entities that are the only providers or suppliers of ambulance transportation within 35 miles of the CAH or the entity. Exempted hospitals and entities continue to be reimbursed on a reasonable-cost basis for ambulance services furnished to Medicare beneficiaries.

Covered services. Part B of Medicare pays for ground (ie, land and water) or air ambulance services when a beneficiary's condition justifies ambulance transportation and the specific level of service provided. Beneficiaries may be transported from their home, an accident scene, or other point of origin to the nearest hospital or skilled nursing facility furnishing the needed service. A beneficiary who resides at home and has end-stage renal disease may be transported to a renal-dialysis facility, regardless of whether it is hospital-based or freestanding. Rarely does Part B cover ambulance trips to a physician's office, urgent-care center, or freestanding radiological facility.

Part B coverage is preempted if the beneficiary, when transported, is an inpatient of a hospital or any other provider paid under Part A. In such instances, Part A pays the facility for the beneficiary's medically necessary ambulance services, for example, when a skilled nursing facility patient is taken for treatment to a hospital.

Both vehicles and vehicle staff must meet revised certification requirements to qualify for Medicare payments for ambulance services. A covered trip may be for a medical emergency or nonemergency. For the latter to be covered, the beneficiary must be bed-confined and unable to use another means of transportation, or the beneficiary's condition (regardless of whether the patient is bed-confined) must warrant ambulance transportation. Specific rules govern Medicare's coverage of nonemergency trips on a repetitive or nonrepetitive basis. For nonemergency trips that are either unscheduled or are scheduled on a nonrepetitive basis, a written order for the trip must be obtained from a qualified physician assistant, nurse practitioner, clinical nurse specialist, registered nurse, or discharge planner if a timely order cannot be secured from the beneficiary's attending physician.