Fact Sheets

MEDICARE PROPOSES POLICY, PAYMENT CHANGES FOR AMBULANCE SERVICES

Overview:

The Centers for Medicare & Medicaid Service s (CMS) today issued a proposed rule that would refine payment policies under the ambulance fee schedule. This proposed rule would improve the accuracy of payments under the ambulance fee schedule and incorporate changes in geographic adjustments based on the most recent census data.   The proposed rule would resolve five issues that have arisen since April 1, 2002, when CMS began phasing in the ambulance fee schedule.  They are:

• Revising the designation of areas as urban or rural to incorporate changes made by the Office of Management and Budget to the Metropolitan Statistical Areas (MSAs), to reflect the 2000 census data;

• Replacing the Goldsmith Modification (identifying rural census tracts within  MSAs) with the most recent version based on Rural Urban Commuting Areas (RUCAs);

• Clarifying eligibility for payment as a Specialty Care Transport (SCT);

• Amending the definition of an “emergency response;” and

• Discontinuing formal annual reviews of “low billers” (providers or suppliers billing at less than the fee schedule amount) and air ambulances to determine whether adjustments are needed in the ambulance fee schedule conversion factor (CF).

Background:

On April 1, 2002, CMS began phasing in a national fee schedule for ambulance services furnished to Medicare beneficiaries.  Under the fee schedule, payments are differentiated by level of service.  In addition, the payments are higher when the beneficiary is picked up in a rural area, to offset the higher costs faced by rural ambulances which are likely to have fewer, but longer runs.

During the first four years, the ambulance fee schedule rates were phased in, so that the payments were based on a blend of payment under the prior methodologies for hospital-based and freestanding ambulance services, and the rates under the new ambulance fee schedule.  Payment has been made entirely under the fee schedule since January 1, 2006.

The Proposed Rule:

The proposed rule adopts the new Metropolitan Statistical Area (MSA) definitions developed by the Office of Management and Budget (OMB) based on 2000 census data.  Currently, Medicare uses MSAs based on 1990 census data to differentiate between rural and urban areas for purposes of ambulance payment.  CMS has already made similar revisions in geographic designations for the Inpatient Prospective Payment System, and other Medicare payment systems that include rural adjustments.  The 2000 census data reflect both urban-to-rural and rural-to-urban shifts across the nation, but overall there were more urban areas in the 2000 census than in the 1990 census.  Thus the proposed rule would lead to some redistribution of aggregate Medicare payments among ambulance services since trips originating in a rural area are generally paid at a higher rate than urban trips.  However, in areas newly-designated as urban, an ambulance company would be expected to have a greater volume of business; thus it would be paid for more ambulance trips.

As an extension of the new geographic definitions, CMS is also proposing to update the Goldsmith Modification with new Rural-Urban Commuting Area Codes (RUCAs) utilized by OMB.  The existing Goldsmith Modification recognizes rural census tracts within Large Area Metropolitan Counties (LAMCs), based on population density and commuting patterns.  In contrast, the RUCAs are based on a broader range of data, and allow recognition of rural census tracts within any metropolitan county.

In addition to updating these designations, the proposed rule addresses several technical issues that have arisen in the implementation of the ambulance fee schedule.  It would clarify that the extra payment for Specialty Care Transport (SCT) applies only to hospital-to-hospital ambulance transportation.  In addition, the proposed rule would clarify that the extra payment for emergency responses is available not only to ambulances “responding immediately . . . to a 911 call or the equivalent in areas without a 911 call system,” but also to ambulances available in a hospital setting when a 911 call is unnecessary to respond to an emergency.

The proposed rule would also eliminate the formal annual review of the number of ambulances billing below the fee schedule rate (known as “low billers”).  At the time the fee schedule was adopted, there was concern about whether a shift in the number of low billers would warrant an adjustment to the fee schedule conversion factor.  The annual reviews have not revealed such a shift, and therefore we are proposing to discontinue such frequent formal reviews.  We are also proposing to discontinue annual reviews to determine whether the conversion factor should be adjusted for air ambulances.  However, CMS will continue to monitor payment and billing data on an ongoing basis and to make adjustments as appropriate.

The proposed rule will appear in the May 26, 2006 Federal Register.  Comments will be accepted until July 25, 2006, and a final rule will be published later this year.  Additional information can be found at: www.cms.hhs.gov/AmbulanceFeeSchedule/