Medicare Margins

     A long-awaited report from the Government Accountability Office (GAO) on Medicare reimbursement for ambulance providers has concluded that the cost of providing care to Medicare patients is more than the reimbursement paid.

     Specifically, the GAO found that for the years 2001 to 2004, Medicare payments were on average 6% below the national average cost of providing ambulance services. However, the report also found a wide range in ambulance costs, depending on the location of the ambulance service, the types of calls they ran and whether they were receiving a tax subsidy. The range of actual costs were from a very nominal $99 per transport to a rather extreme $1,218 per trip. Obviously, with the cost numbers varying so greatly, some providers will be making a significant profit at the current Medicare rates, while others will be operating at a loss. For the report, the GAO looked at average costs and reimbursement and found that the average cost of providing ambulance transportation services was $415 per trip.

Underpayments Add Up
     The 6% average underpayment may not seem like a large amount, but if you look at it in terms of dollars, for each trip that costs the expected $415 to provide, you are receiving only $390. Every time you transport a Medicare patient, you are basically giving $25 to the Medicare program. The study also found that Medicare patients represent 40% of all ambulance transports; therefore, it does not take long for that $25 to amount to a significant sum of money. Also, the GAO did not take into account the potential for bad debt on the patient's 20% co-pay portion. Rather, it assumes that the full Medicare-allowed amount is paid. Look at your own write-off numbers for Medicare co-pays to determine how much more money you are losing on a Medicare patient. Unless you are getting all of your co-payments, you are losing even more on each transport than the report suggests.

Rural/Urban Disparities
     There was no significant disparity between urban and rural areas after applying the rural mileage payment adjustment and the geographical adjustments (the geographical price cost index, or "GPC"). However, the cost to reimbursement comparison was much worse for "super-rural" areas. For those locations, Medicare payments were 17% below the cost of supplying ambulance services. This means that the current adjustments for rural areas are working well to bring their reimbursement in line with urban areas; however, the adjustments for super-rural areas need more work.

Will Congress Modernize Medicare?
     The study was requested by Congress as part of the Medicare Modernization Act (MMA), which gives me hope that Congress will act upon the results they were looking for by adjusting the Medicare ambulance fee schedule rates to compensate for our subsidizing the Medicare program out of our operating budgets. In fact, there is already a bill pending that would extend the Medicare payment adjustments that were part of the MMA. If that legislation is passed, it would be a patch for the problem, but because of how the current adjustments are structured, it might not address the disparities in some areas of the country as much as others. Hopefully, any long-term resolution to this problem will be fair across the country and will take into account all of the study's findings. The report did find that even without additional modifications to the fee schedule, reimbursement rates by 2010 would catch up to the current underpayments.

     Of course, Medicare rates are a significant improvement over what we are paid by most states' Medicaid programs. But the two cannot really be compared: Medicare is an insurance program, while Medicaid is a government benefit for the needy. The reality is, while Medicaid rates may be far below the actual cost of providing service, the individuals who need access to healthcare may not be able to pay anything; therefore, the Medicaid rates are better than what providers may expect to collect otherwise.

     The full 61-page GAO report cannot be completely summarized here. It breaks down costs and reimbursement in several ways that might be of interest to different types of providers in different areas of the country. I encourage all of you to read the report with your service in mind. It can be viewed on the GAO's website at www.gao.gov.

This article is not intended to be legal advice.

G. Christopher Kelly is an attorney practicing in Atlanta, GA. Chris focuses on federal laws and regulations as they relate to the healthcare industry and specifically to the ambulance industry. He also lectures and advises ambulance company clients across the U.S. Contact him at chris@emscltd.com.

Chris Kelly is a featured speaker at EMS EXPO, October 11-13, in Orlando, FL. For more information, visit www.emsexpo2007.com.