Ambulance Services
Medicare Payments Can Be Better Targeted to Trips in Less Densely Populated Rural Areas Gao ID: GAO-03-986 September 19, 2003The Centers for Medicare & Medicaid Services (CMS) recently implemented a Medicare ambulance fee schedule in which providers are paid a base payment per trip plus a mileage payment. An adjustment is made to the mileage rate for rural trips to account for higher costs. CMS has stated that this rural adjustment may not sufficiently target providers serving sparsely populated rural areas. The Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) directed GAO to examine rural ambulance costs. GAO identified factors that affect ambulance costs per trip, examined how these factors varied across geographic areas, and analyzed whether Medicare payments account for geographic cost differences. GAO used survey data on ambulance providers and Medicare claims data.
Trip volume is the key factor affecting differences in ambulance providers' cost per trip. Ambulance providers' total costs primarily reflect readiness--the need to have an ambulance and crew available when emergency calls are received. Readiness-related costs are fixed, meaning that they do not increase with the number of trips provided, as long as a provider has excess capacity. As a result, providers that make fewer trips tend to have a higher cost per trip than those that make more trips. We also found that the length of providers' trips had little effect on their cost per trip. The modest variation in Medicare payments to ambulance providers that serve rural counties probably does not fully reflect their differences in costs because the key factor affecting provider costs--the number of trips--varies widely across rural counties. In 2001, the least densely populated quarter of rural counties averaged far fewer trips than the most densely populated quarter. This suggests that the cost per trip is likely higher for providers serving the least populated rural counties. On average ambulance providers are paid somewhat more for trips in the least densely populated rural counties than for those in other rural counties. However, those payment differences are dwarfed by the difference in trip volume. Because trip volume is a strong indicator of costs, the Medicare payment differences across rural counties likely do not fully reflect differences in providers' cost per trip. In implementing the fee schedule, CMS adjusted the mileage rate for rural trips to account for the higher cost per trip of providers serving rural areas. However, trip volume is a better indicator of providers' cost per trip than is trip length. Thus, adjusting the base rates for rural trips--the portion of Medicare's payment that is designed to pay for providers' fixed costs--is a more appropriate way of accounting for rural low-volume providers' higher cost per trip than adjusting the mileage rate.
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Report to Congressional Committees:
September 2003:
Ambulance Services:
Medicare Payments Can Be Better Targeted to Trips in Less Densely
Populated Rural Areas:
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-986] GAO-03-986:
GAO Highlights:
Highlights of GAO-03-986, a report to congressional committees
Why GAO Did This Study:
The Centers for Medicare & Medicaid Services (CMS) recently
implemented a Medicare ambulance fee schedule in which providers are
paid a base payment per trip plus a mileage payment. An adjustment is
made to the mileage rate for rural trips to account for higher costs.
CMS has stated that this rural adjustment may not sufficiently target
providers serving sparsely populated rural areas. The Medicare,
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000
(BIPA) directed GAO to examine rural ambulance costs. GAO identified
factors that affect ambulance costs per trip, examined how these
factors varied across geographic areas, and analyzed whether Medicare
payments account for geographic cost differences. GAO used survey data
on ambulance providers and Medicare claims data.
What GAO Found:
Trip volume is the key factor affecting differences in ambulance
providers‘ cost per trip. Ambulance providers‘ total costs primarily
reflect readiness”the need to have an ambulance and crew available
when emergency calls are received. Readiness-related costs are fixed,
meaning that they do not increase with the number of trips provided,
as long as a provider has excess capacity. As a result, providers that
make fewer trips tend to have a higher cost per trip than those that
make more trips. We also found that the length of providers‘ trips had
little effect on their cost per trip.
The modest variation in Medicare payments to ambulance providers that
serve rural counties probably does not fully reflect their differences
in costs because the key factor affecting provider costs”the number of
trips”varies widely across rural counties. In 2001, the least densely
populated quarter of rural counties averaged far fewer trips than the
most densely populated quarter. This suggests that the cost per trip
is likely higher for providers serving the least populated rural
counties. On average ambulance providers are paid somewhat more for
trips in the least densely populated rural counties than for those in
other rural counties. However, those payment differences are dwarfed
by the difference in trip volume. Because trip volume is a strong
indicator of costs, the Medicare payment differences across rural
counties likely do not fully reflect differences in providers‘ cost
per trip.
In implementing the fee schedule, CMS adjusted the mileage rate for
rural trips to account for the higher cost per trip of providers
serving rural areas. However, trip volume is a better indicator of
providers‘ cost per trip than is trip length. Thus, adjusting the base
rates for rural trips”the portion of Medicare‘s payment that is
designed to pay for providers‘ fixed costs”is a more appropriate way
of accounting for rural low-volume providers‘ higher cost per trip
than adjusting the mileage rate.
What GAO Recommends:
GAO recommends that CMS better target the rural adjustment to trips in
less densely populated rural counties by adjusting the base rates for
ground ambulance services provided in those counties. CMS stated that
the report will be useful as the agency develops a proposed rule to
address appropriate payment for ambulance services furnished in rural,
low-volume areas.
www.gao.gov/cgi-bin/getrpt?GAO-03-986.
To view the full product, including the scope and methodology, click
on the link above. For more information, contact Laura A. Dummit,
(202) 512-7114.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Ambulance Providers' Trip Volume Is the Main Factor Affecting Their
Cost Per Trip:
Medicare Ambulance Payments for Trips in Rural Counties Are Unlikely to
Fully Reflect Differences in Providers' Cost Per Trip:
Conclusions:
Recommendation for Executive Action:
Agency and External Reviewer Comments and Our Evaluation:
Appendixes:
Appendix I: Data and Methods:
Appendix II: Characteristics of Rural Counties Grouped by Medicare
Population Density:
Appendix III: Comments from the Centers for Medicare & Medicaid
Services:
Appendix IV: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Acknowledgments:
Related GAO Products:
Tables:
Table 1: Ground Ambulance Services Covered by Medicare's Ambulance Fee
Schedule:
Table 2: Ambulance Providers' Cost Components, 1998:
Table 3: Relative Cost Per Trip for Full Cost Ambulance Providers, 1998:
Table 4: Characteristics of Urban and Rural Counties, 2001:
Table 5: Average Number of Medicare Ambulance Trips, Population and Land
Area, by Counties Grouped by Population Density, 2001:
Table 6: Characteristics of Rural Counties and Their Ambulance
Providers, by Counties Grouped by Population Density, 2001:
Table 7: Average Number of Medicare Ambulance Trips, Trip Length, and
Estimates of Average Medicare PaymentA per Ambulance Trip, by Rural
Counties Grouped by Population Density:
Table 8: Full Cost Ambulance Providers by Average Number of Trips Per
Day, 1998:
Table 9: Full Cost Ambulance Providers by Average Number of Trips Per
Year, 1998:
Table 10: Rural Counties Grouped by Total Population Density and by
Medicare Population Density, 2001:
Table 11: Average Number of Medicare Ambulance Trips, Population and
Land Area, by Counties Grouped by Medicare Population Density, 2001:
Table 12: Characteristics of Rural Counties and Their Ambulance
Providers, by Counties Grouped by Medicare Population Density, 2001:
Table 13: Average Number of Medicare Ambulance Trips, Trip Length, and
Estimates of Average Medicare PaymentA per Ambulance Trip, by Rural
Counties Grouped by Medicare Population Density:
Figures:
Figure 1: The Relationship between Cost Per Trip and Total Ambulance
Trip Volume for Full Cost Providers With 5,000 or Fewer Annual Trips,
1998:
Abbreviations:
ALS: advanced life support:
ARF: Area Resource File:
BBA: Balanced Budget Act of 1997:
BIPA: Medicare, Medicaid, and SCHIP Benefits Improvement and Protection
Act of 2000:
BLS: basic life support:
CMS: Centers for Medicare & Medicaid Services:
EMT: emergency medical technician:
HCFA: Health Care Financing Administration:
HHS: Department of Health and Human Services:
HRSA: Health Resources and Services Administration:
MSA: metropolitan statistical area:
OMB: Office of Management and Budget:
RUCA: rural-urban commuting area:
RUCC: rural-urban continuum code:
SCT: specialty care transport:
UIC: urban influence code:
Y2K: Year 2000:
Letter September 19, 2003:
Congressional Committees:
In 2001, Medicare paid over $2 billion for over 10 million ambulance
trips for its 40 million elderly and disabled beneficiaries. Ambulance
providers[Footnote 1] that deliver Medicare-covered services range from
small community, one-vehicle operations staffed entirely by volunteers
to large privately owned firms or government agencies that operate many
vehicles and rely on paid staff. Medicare covers medically necessary
ambulance services when other means of transportation, such as a
wheelchair van or a taxi, are inadvisable, given the beneficiary's
medical condition at the time. Medically necessary ambulance trips
include both emergency care, such as responses to 911 calls, and
nonemergency care, such as transfers from one hospital to another.
In 2002, the Centers for Medicare & Medicaid Services (CMS) implemented
a congressionally mandated ambulance fee schedule that substantially
changed the way Medicare pays for ambulance services. Under the fee
schedule, providers receive a base payment per trip, which varies by
the kind of service provided, and a mileage payment, which varies by
the length of the trip. A rural adjustment, which is applied to the
mileage payment, increases the payment for trips that begin in rural
areas, generally defined as areas outside of metropolitan areas. CMS
has stated that this approach to a rural adjustment was the only one
feasible at the time the agency was developing the fee schedule.
However, as we have stated before[Footnote 2] and as CMS has
acknowledged, this adjustment may not sufficiently target the increased
payments to providers serving sparsely populated rural areas. These
providers may incur higher per trip costs than other providers because
of their low volume of ambulance trips. We have recommended that CMS
develop a more refined rural adjustment, and CMS is exploring
alternative approaches to adjusting payments for rural ambulance trips.
Developing a Medicare payment method for ambulance services that
maintains beneficiary access to these services has been complicated by
the wide variation in ambulance providers, their volume of trips, and
the areas they serve. For example, ambulance providers in rural areas
where there are few people are likely to be idle more often than
providers in more densely populated areas, and may need to earn more
per trip to maintain ambulances and crews. As a result, payments that
are appropriate for providers serving densely populated urban areas may
not be appropriate for those serving less densely populated rural
areas. Recognizing cost differences across providers in the payment
method is important because many providers rely on Medicare revenue and
their continuing availability is critical to ensuring beneficiaries'
access to services.
The Medicare, Medicaid, and SCHIP Benefits Improvement and Protection
Act of 2000 (BIPA) directed us to examine the cost of ambulance
services in rural areas.[Footnote 3] This report (1) identifies the
factors that account for differences in ambulance providers' costs per
trip, and (2) analyzes the geographic differences, particularly among
rural areas, in the factors affecting ambulance providers' costs and
whether Medicare's payments for ambulance services under the fee
schedule account for geographic differences in costs.
Our analysis focused on ground ambulance services and did not include
air ambulance services, which account for less than 1 percent of annual
Medicare-covered ambulance trips. To identify the factors that
influence ambulance providers' costs, we used data from the 1999
National Survey of Ambulance Providers, conducted by the Project HOPE
Center for Health Affairs.[Footnote 4] This survey, the sole national
data source on the costs of providing ambulance services, obtained
responses from a nationally representative sample of 421 ground
ambulance providers that participated in Medicare. To determine how the
factors affecting ambulance providers' costs vary geographically, we
used data from the 2001 Area Resource File (ARF), which is maintained
by the Health Resources and Services Administration (HRSA), to examine
the characteristics of urban and rural counties, such as their
population and land area. In addition, we used Medicare claims data for
2001 to determine the number and length of Medicare-covered ambulance
trips delivered in urban and rural counties, and the number of
providers that served those areas.[Footnote 5] We also used these data
to estimate Medicare's average payments for ambulance trips under the
fee schedule. Finally, we interviewed experts from eight industry and
professional organizations as well as several ambulance providers.
These data were adequate for addressing the issues in this report.
Where appropriate, we examined the data for implausible values and
tested the data for internal consistency. For more details on our data
and methods, see appendix I. We performed our work from November 2001
through September 2003 in accordance with generally accepted government
auditing standards.
Results in Brief:
Ambulance trip volume is the key factor affecting differences in
ambulance providers' average cost per trip. The majority of ambulance
providers' total costs are related to their need to have ambulances and
crew available when an ambulance is required. As long as a provider has
excess capacity, these readiness-related costs are fixed and do not
increase with the number of trips. Consequently, providers that make
fewer trips tend to have a higher cost per trip than those that make
many trips. For example, providers surveyed by Project HOPE that
averaged 3 or fewer trips per day had a cost per trip that was nearly
twice as high as the average cost per trip among providers that
averaged 9 to 12 trips per day.
The modest variation in Medicare payments to ambulance providers that
serve rural counties probably does not fully reflect their differences
in cost per trip because the key factor affecting provider costs--the
number of trips--varies widely across rural counties. In 2001, trip
volume was much lower in the least densely populated quarter of rural
counties than in the most densely populated quarter. Medicare per-trip
payments are somewhat higher on average for trips provided in the least
densely populated rural counties than for trips in other rural
counties. However, the modestly higher payments are unlikely to fully
account for the higher cost per trip of low-volume providers, which are
most likely to serve the least densely populated rural counties. The
Medicare payment differences are due to the greater length and the
resulting higher mileage payments for trips in the least densely
populated rural counties. The cost differences, however, are due to a
higher fixed cost per trip, for which Medicare's base rates are
intended to compensate.
We recommend that the Administrator of CMS better target the Medicare
rural payment adjustment to trips provided in rural counties with
particularly low population density by adjusting the base rates, rather
than the mileage rate, for ground ambulance services provided in those
counties.
In written comments on a draft of this report, CMS stated that the
report will be useful as the agency develops a proposed rule to address
appropriate payment for ambulance services furnished in rural, low-
volume areas. The eight ambulance associations that commented on the
draft report generally agreed with our findings and recommendation.
However, four of the associations raised concerns about using counties
to identify rural areas when targeting rural payments.
Background:
In recent years, the ambulance industry has experienced several
changes. In 2002, CMS implemented a new Medicare fee schedule for
ambulance services, replacing the previous system that paid providers
on a reasonable cost or reasonable charge basis. In addition, according
to industry experts, many volunteer providers have reported greater
difficulty maintaining adequate staff. Rural providers in particular
have begun to rely more heavily on paid staff. Experts also told us
that while many rural volunteer providers have not billed Medicare--or
have billed nominal amounts--more of these providers have begun billing
for services.
Characteristics of Medicare Ambulance Providers:
Recently, both the number of ambulance providers that bill Medicare and
the number of ambulance trips paid for by Medicare have increased. From
1998 to 2001, the number of ambulance providers that billed Medicare
increased from just under 9,300 to over 9,700, and the total number of
trips paid for by Medicare rose from roughly 8 million to over 10
million.
Medicare ambulance providers include a wide variety of provider types.
In 1998, about 8,200 freestanding providers and 1,100 hospitals and
other institution-based providers billed Medicare for ground trips.
Freestanding providers are a diverse group, including private for-
profit, not-for-profit, and public entities. They range from small
community one-vehicle operations to large fire and rescue departments
serving major metropolitan areas. They include operations staffed
almost entirely by community volunteers, public ventures that include a
mix of volunteer and paid professional staff, and private firms that
use only paid staff. In 1998, volunteer staff accounted for 80 percent
or more of full-time equivalent personnel for over one-third of
Medicare ambulance providers.[Footnote 6] About one-third of
freestanding Medicare ambulance providers are managed by local fire
departments.
Medicare ambulance providers also vary in the types of services they
provide. Some deliver only basic life support (BLS) while others
deliver advanced life support (ALS) services.[Footnote 7] In addition
to responding to emergencies, ambulance providers may provide
nonemergency transportation, such as transfers from one hospital to
another. For some ambulance providers, nonemergency trips account for a
significant share of their trips; for others, such trips account for
few or none of their trips. Some ambulance providers are the sole
providers serving their communities, while others operate in areas with
multiple ambulance providers.
Medicare ambulance providers also differ in the percentage of their
trips covered by Medicare and in their reliance on Medicare revenue. In
1998, Medicare beneficiaries on average accounted for about half of the
total trips by providers that billed Medicare. However, Medicare
beneficiaries accounted for less than one-quarter of trips for 13
percent of Medicare providers, and accounted for over 80 percent of
annual trips for 9 percent of providers. On average, Medicare revenue
accounted for 41 percent of providers' cash receipts.[Footnote 8] Other
sources of ambulance providers' revenue include local tax subsidies and
payments from private insurers, Medicaid, and individuals.
Requirements affecting ambulance providers vary by location. States and
localities may require certain training for ambulance staff, establish
maximum payment rates that licensed providers are allowed to charge, or
specify response times through contracts with providers. Some
jurisdictions--such as those that provide financial support to
ambulance providers--prohibit providers from billing for services. In
addition, some communities require all ambulance providers to maintain
ALS capacity on all vehicles.
Medicare Payment for Ambulance Services:
CMS recently implemented a Medicare fee schedule that changed the way
Medicare pays for ambulance services.[Footnote 9] The fee schedule,
mandated by the Balanced Budget Act of 1997 (BBA), recognizes seven
levels of ground ambulance services, ranging from BLS services to
specialty care transports. (See table 1.) Under the previous payment
system, Medicare paid institutional providers on a reasonable cost
basis and freestanding providers on a reasonable charge basis. This
approach led to wide differences in payments across providers for the
same services. The new fee schedule standardized payment rates across
provider types by applying the same payment rates to both institutional
and freestanding providers.[Footnote 10] The fee schedule's payment
rates are updated annually. Medicare's payment is based on the lesser
of the actual charge or the applicable fee schedule amount.
Table 1: Ground Ambulance Services Covered by Medicare's Ambulance Fee
Schedule:
Level of ambulance service: Basic life support (BLS); Definition:
Transportation by ambulance and the provision of medically necessary
supplies and services, including the provision of BLS ambulance
services as defined by the state; Staffing requirements: The ambulance
must be staffed by an individual who is qualified in accordance with
state and local laws as an emergency medical technician-basic (EMT-
Basic); Base rate (2003)[A]: $172.42.
Level of ambulance service: BLS-emergency; Definition: BLS level of
service provided in immediate response to a 911 call or the
equivalent; Staffing requirements: Same as BLS; Base rate (2003)[A]:
$275.87.
Level of ambulance service: Advanced life support, level 1 (ALS1);
Definition: Transportation by ambulance and the provision of medically
necessary supplies and services, including an ALS assessment by ALS
personnel or the provision of at least one ALS intervention.[B];
Staffing requirements: ALS personnel are individuals trained to the
level of the emergency medical technician-intermediate (EMT-
Intermediate) or EMT-Paramedic.[C]; Base rate (2003)[A]: $206.90.
Level of ambulance service: ALS1-emergency; Definition: ALS level of
service provided in immediate response to a 911 call or the
equivalent; Staffing requirements: Same as ALS1; Base rate (2003)[A]:
$327.60.
Level of ambulance service: ALS2; Definition: Transportation by
ambulance and the provision of medically necessary supplies and
services, including (1) at least three separate administrations of one
or more medications by intravenous push/bolus or by continuous
infusion,[D] or (2) the provision of at least one of seven ALS2
procedures.e; Staffing requirements: Same as ALS1; Base rate (2003)[A]:
$474.16.
Level of ambulance service: Paramedic ALS intercept; Definition: EMT-
Paramedic services furnished by a provider that does not furnish the
ground ambulance transport, provided the services meet certain
requirements.[F]; Staffing requirements: EMT-Paramedic; Base rate
(2003)[A]: $301.74.
Level of ambulance service: Specialty care transport (SCT); Definition:
Hospital-to-hospital transportation of a critically injured or ill
patient, including the provision of medically necessary supplies and
services, at a level of service beyond the scope of the EMT-Paramedic;
Staffing requirements: SCT is necessary when a patient's condition
requires ongoing care that must be furnished by one or more health
professionals in an appropriate specialty area, such as nursing or
respiratory care, or a paramedic with additional training; Base rate
(2003)[A]: $560.37.
Source: CMS.
Note: GAO summary based on information in CMS's final rule as published
in the Federal Register, a subsequent program memorandum regarding
definitions of ambulance services, and the ambulance fee schedule
public use file for calendar year 2003. See 67 Fed. Reg. 9100, CMS's
Program Memorandum AB-02-130 (Sept. 27, 2002).
[A] This is the base rate for each level of service prior to the
geographic adjustment for differences in wages across areas.
[B] An ALS assessment is an assessment performed by an ALS crew as part
of an emergency response that was necessary because the patient's
reported condition at the time of dispatch was such that only an ALS
crew was qualified to perform the assessment. An ALS assessment does
not necessarily result in a determination that the patient requires an
ALS level of service. An ALS intervention is a procedure that is, in
accordance with state and local laws, beyond the scope of practice of
an EMT-Basic.
[C] An EMT-Intermediate is an individual who is qualified, in
accordance with state and local laws, as an EMT-Basic and who is also
certified, in accordance with those laws, to perform essential advanced
techniques and to administer a limited number of medications. An EMT-
Paramedic is an individual who has the qualifications of an EMT-
Intermediate and, in accordance with state and local laws, has enhanced
skills that include being able to perform additional interventions and
administer additional medications.
[D] This excludes certain solutions.
[E] These include chest decompression, cardiac pacing, surgical airway,
and other procedures.
[F] Paramedic ALS intercept services are most often furnished for an
emergency ambulance trip in which a local volunteer ambulance that can
furnish only BLS services is dispatched to transport a beneficiary. If
the beneficiary needs ALS services, another provider dispatches a
paramedic to meet the BLS ambulance at the scene or enroute to the
hospital. The ALS paramedics then provide ALS services for the
beneficiary. In general, Medicare payment may be made only to the
provider furnishing the trip. However, the BBA provided that payments
also could be made for the ALS provider under limited circumstances.
CMS has stated that New York is the only state in which providers meet
the statutory requirements for Medicare payment.
[End of table]
For most ambulance services, the fee schedule payment is the sum of a
base payment and a payment for mileage.[Footnote 11]
* The base payment for a trip, which is intended to pay for fixed costs
such as staff and equipment, reflects both a base rate and a geographic
modifier. The base rate varies by the level of ambulance service
provided. The geographic modifier, which is applied to 70 percent of
the base rate, is intended to account for wage differences across
areas.[Footnote 12]
* The mileage payment reflects both the length of a trip and the per-
mile payment rate. For trips in which the beneficiary is picked up in
an urban area, the per-mile rate is $5.53. Because of the fee
schedule's rural adjustment, the per-mile rate for rural trips is 150
percent of the urban mileage rate for each of the first 17 miles
($8.30) and 125 percent of the urban mileage rate for miles 18 through
50 ($6.91).[Footnote 13] The urban mileage rate applies to every mile
over 50 miles. The mileage payment applies only to "loaded miles"--the
miles the beneficiary is transported by ambulance.
Under the fee schedule, rural areas are defined as areas outside of
metropolitan statistical areas (MSA) and New England County
Metropolitan Areas, as well as parts of MSAs that are identified as
rural by the Goldsmith modification.[Footnote 14] MSAs are groups of
counties containing a core of at least 50,000 people, together with
adjacent areas that have a high degree of economic and social
integration with that core.[Footnote 15] The Goldsmith modification
identifies small towns and rural areas within large metropolitan
counties that are isolated from central areas by distance or other
features, such as mountains. About one-quarter of the roughly 3,100
counties in the United States are in MSAs, and about 75 of those
counties have areas that are identified as rural under the Goldsmith
modification.
The ambulance fee schedule will be phased in over several years. During
this period, payments will be based in part on the fee schedule's
service-specific payment rates and in part on the amounts that Medicare
would have paid under the prior payment system. The proportion of the
payment based on the fee schedule will increase each year until 2006,
when provider payments will be based entirely on the fee
schedule.[Footnote 16] In 2003, payments are based on 40 percent of the
fee schedule payment and 60 percent of the rates under the prior
system.[Footnote 17]
Ambulance Providers' Trip Volume Is the Main Factor Affecting Their
Cost Per Trip:
Trip volume is the major determinant of differences across providers in
the average cost per trip. Ambulance providers' total costs primarily
reflect readiness--having an ambulance and crew available when
emergency calls are received. These readiness-related costs are fixed
costs, meaning that they do not increase with the number of trips
provided, as long as the provider has the excess capacity to make
additional trips. Consequently, providers that can spread these fixed
costs across more trips have a lower average cost per trip than
providers that make fewer trips.
Providers' Total Costs Are Predominantly Readiness Related, and Do Not
Vary With Trip Volume:
The majority of ambulance providers' total costs are related to
readiness--the need to have an ambulance and crew available when
emergency calls are received. Readiness-related costs include costs of
labor, vehicles, building space, and administration, as well as the
cost of any back-up vehicles and crew, which constitute a reserve that
permits responses to multiple simultaneous calls as well as scheduled
maintenance on other vehicles. (See table 2.) Readiness-related costs
are fixed, meaning that they do not vary with the number of trips a
provider makes, as long as the provider has excess capacity. For
example, total vehicle costs do not increase significantly when a
provider makes more trips. Likewise, building and administrative costs
are largely unaffected by trip volume. However, if a provider were to
add another ambulance and crew to respond to higher volume, its fixed
costs would rise substantially.
Table 2: Ambulance Providers' Cost Components, 1998:
Cost component: Labor costs; Percentage of total costs: 65.
Cost component: Administrative costs; Percentage of total costs: 14.
Cost component: Vehicle and equipment costs; Percentage of total costs:
11.
Cost component: Building costs; Percentage of total costs: 6.
Cost component: Supply costs; Percentage of total costs: 3.
Cost component: Total costs; Percentage of total costs: 100.
[End of table]
Source: Project HOPE.
Note: GAO analysis of data from Project HOPE's National Survey of
Ambulance Providers. Fuel costs are included in the vehicle and
equipment costs category. These data are for full cost providers. Those
that did not report costs for all five components were excluded. Full
cost providers are defined as those that have 80 percent or more of
their staff comprised of paid employees rather than volunteers, and
that pay for 80 percent or more of their garage and office space. These
data are for the fiscal year preceding the survey, which for most
providers included 6 months or more of calendar year 1998. Cost
component categories do not add to 100 percent due to rounding.
[End of table]
In contrast, an ambulance provider's costs for fuel and supplies (such
as drugs and oxygen) are variable because they increase with the number
of trips. These costs, however, account for a small fraction of
ambulance providers' total costs.[Footnote 18]
Fewer Trips Linked to a Higher Cost Per Trip:
Providers that make fewer trips tend to have a higher cost per trip
than those that make more trips. Figure 1 illustrates the average
relationship between ambulance providers' cost per trip and their total
trip volume, for providers that made 5,000 or fewer trips.[Footnote 19]
As trip volume increases, the cost per trip decreases. Our statistical
analysis considered other factors that affect providers' costs, notably
trip length, but trip volume was most strongly related to the cost per
trip.
Figure 1: The Relationship between Cost Per Trip and Total Ambulance
Trip Volume for Full Cost Providers With 5,000 or Fewer Annual Trips,
1998:
[See PDF for image]
Note: GAO analysis of data from Project HOPE's National Survey of
Ambulance Providers. The curve represents the predicted average cost
per trip, based on our statistical analysis of providers' total costs,
controlling for variation in type of service and trip volume, both of
which were statistically significant. Total trip volume includes all of
a provider's trips, not just those covered by Medicare. These data are
for full cost providers. Full cost providers are defined as those that
have 80 percent or more of their staff comprised of paid employees
rather than volunteers, and that pay for 80 percent or more of their
garage and office space. Providers with over 5,000 trips were excluded.
We found similar results when we analyzed all full cost providers.
These data are for the fiscal year preceding the survey, which for most
providers included 6 months or more of calendar year 1998.
[End of figure]
In addition, we found that providers surveyed by Project HOPE that
averaged 3 or fewer trips per day had an average cost per trip that was
nearly twice as high as the cost per trip among those that averaged 9
to 12 trips per day.[Footnote 20] (See table 3.) Providers that
averaged 4 to 8 trips per day had a cost per trip that was 1.3 times as
high as the average cost among providers with 9 to 12 trips per day.
Table 3: Relative Cost Per Trip for Full Cost Ambulance Providers,
1998:
Providers' average number of total trips per day (range): 3 or fewer;
Cost per trip relative to the average for providers with 9 to 12 trips
per day: 1.94.
Providers' average number of total trips per day (range): 4 to 8; Cost
per trip relative to the average for providers with 9 to 12 trips per
day: 1.30.
Providers' average number of total trips per day (range): 9 to 12; Cost
per trip relative to the average for providers with 9 to 12 trips per
day: 1.00.
Source: Project HOPE.
Note: GAO analysis of data from Project HOPE's National Survey of
Ambulance Providers. The relative cost per trip is the ratio of the
average cost per trip for each group of providers to the average cost
per trip of providers that averaged 9 to 12 trips per day. Total trip
volume includes all of a provider's trips, not just those covered by
Medicare. These data are for full cost providers. Full cost providers
are defined as those that have 80 percent or more of their staff
comprised of paid employees rather than volunteers, and that pay for 80
percent or more of their garage and office space. Providers that had
daily trip volumes outside the ranges shown above were excluded. The
cost differences are statistically significant at the .05 level between
the 3 trips or fewer group of providers and the other two groups (4 to
8 trips and 9 to 12 trips). The cost difference between the second and
third groups was statistically significant at the .10 level.
Significance was assessed using a one-tailed test. These data are for
the fiscal year preceding the survey, which for most providers included
6 months or more of calendar year 1998.
[End of table]
Medicare Ambulance Payments for Trips in Rural Counties Are Unlikely to
Fully Reflect Differences in Providers' Cost Per Trip:
Although Medicare's payments generally are higher for trips originating
in the least densely populated rural counties than in other counties,
the payment differential is probably not large enough to account for
the higher costs incurred by low-volume providers likely to serve these
areas. Far fewer Medicare-covered ambulance trips are typically
provided in rural counties than in urban counties. Trip volume also
varies widely across rural counties, with the least densely populated
generally having substantially fewer trips than the most densely
populated. This suggests that the cost per trip is likely higher for
providers serving the least densely populated rural counties. Ambulance
providers on average are paid more for trips originating in the least
densely populated rural counties than for those in the most densely
populated rural counties, but the payment differences are modest and
unlikely to reflect the higher cost per trip of low-volume providers.
Rural and Urban Counties Differ in Ambulance Trip Volume and Population
Density:
Rural counties, as defined by Medicare's ambulance fee schedule, tend
to have a much lower volume of ambulance trips than counties defined as
urban.[Footnote 21] In 2001, rural counties averaged about 1,200
Medicare-covered trips (both emergency and nonemergency), while urban
counties averaged about 9,100 trips. The lower number of trips in rural
counties suggests that providers that serve these areas likely have a
higher cost per trip than other providers.
The difference in the volume of Medicare ambulance trips provided in
rural and urban counties largely reflects differences in their
population density. Not surprisingly, the number of Medicare ambulance
trips in a county is strongly related to its population, with counties
with fewer residents having fewer trips. Trip volume is also related to
a county's land area, although to a lesser extent.[Footnote 22]
Population density--the ratio of population to land area--reflects both
of these measures. (See table 4.):
Table 4: Characteristics of Urban and Rural Counties, 2001:
Urban counties; Average number of Medicare ambulance trips: 9,144;
Average length of Medicare ambulance trips (miles): 14; Average
population density (persons/ sq. mile): 747; Average population:
276,791; Average land area (sq. miles): 844.
Rural counties; Average number of Medicare ambulance trips: 1,153;
Average length of Medicare ambulance trips (miles): 23; Average
population density (persons/ sq. mile): 47; Average population:
23,942; Average land area (sq. miles): 1,132.
Sources: HRSA and CMS.
Note: GAO analysis of HRSA and CMS data. We classified counties as
urban if they were in an MSA and as rural if they were not in an MSA.
The roughly 75 urban counties that contain rural areas as identified by
the Goldsmith modification are included in the urban county group. We
used the beneficiary's address as a proxy for where each trip
originated.
[End of table]
Dominant Providers in Less Densely Populated Rural Counties Provide
Fewer Trips:
The number of Medicare ambulance trips provided in rural counties
varies markedly with population density, with the least densely
populated rural counties tending to have fewer trips than other rural
counties. For example, the quarter of rural counties that are the most
densely populated, with 52 or more persons per square mile, averaged
over 2,200 Medicare trips in 2001.[Footnote 23] (See table 5.) In
contrast, only about 300 Medicare trips, on average, were made in the
quarter of rural counties that are the least densely populated, with 11
or fewer persons per square mile. Even fewer Medicare trips--only about
200--were made in frontier counties, which are counties with 6 or fewer
persons per square mile.[Footnote 24] This suggests that the cost per
trip is likely higher for providers serving the least densely populated
rural counties.
Table 5: Average Number of Medicare Ambulance Trips, Population and
Land Area, by Counties Grouped by Population Density, 2001:
County categories: Urban counties; Number of counties: 854; Average
number of Medicare ambulance trips: 9,144; Average population: 276,791;
Average land area (sq. miles): 844.
County categories: Rural counties; Number of counties: 2,273; Average
number of Medicare ambulance trips: 1,153; Average population: 23,942;
Average land area (sq. miles): 1,132.
County categories: 52+ persons/sq. mile; Number of counties: 569;
Average number of Medicare ambulance trips: 2,254; Average population:
45,612; Average land area (sq. miles): 502.
County categories: 30-51 persons/sq. mile; Number of counties: 568;
Average number of Medicare ambulance trips: 1,290; Average population:
25,351; Average land area (sq. miles): 654.
County categories: 12-29 persons/sq. mile; Number of counties: 568;
Average number of Medicare ambulance trips: 771; Average population:
16,744; Average land area (sq. miles): 898.
County categories: 0-11 persons/sq. mile; Number of counties: 568;
Average number of Medicare ambulance trips: 296; Average population:
8,021; Average land area (sq. miles): 2,477.
County categories: 7-11 persons/sq. mile; Number of counties: 182;
Average number of Medicare ambulance trips: 470; Average population:
12,288; Average land area (sq. miles): 1,491.
County categories: 0-6 persons/sq. mile; Number of counties: 386;
Average number of Medicare ambulance trips: 214; Average population:
6,009; Average land area (sq. miles): 2,942.
Sources: HRSA and CMS.
Note: GAO analysis of HRSA and CMS data. We classified counties as
urban if they were in an MSA and as rural if they were not in an MSA.
The roughly 75 urban counties that contain rural areas as identified by
the Goldsmith modification are included in the urban county group.
Rural counties are grouped by quartiles of total county population
density. The first quartile (0-11 persons per square mile) is further
divided into frontier counties (0-6 persons per square mile) and
nonfrontier (7-11 persons per square mile). We used the beneficiary's
address as a proxy for where each trip originated.
[End of table]
The dominant providers in the least densely populated rural counties
tend to have far fewer trips than the dominant providers serving other
rural counties. Overall, rural counties vary little in the number of
providers serving them. However, in most rural counties, one or two
providers dominate, delivering the bulk of Medicare trips, with others
having a much smaller share. We found that in 2001, about 70 percent of
the trips in a rural county were typically supplied by two providers.
The number of trips made by these dominant providers varied with
counties' population density. In the quarter of rural counties with the
lowest population density, the median number of Medicare trips made by
each of the top two providers--in all of the counties they served--was
275.[Footnote 25] (See table 6.) In contrast, the median number of
Medicare trips made by the top two providers was much higher--over
2,100 trips--in the quarter of rural counties that were the most
densely populated.[Footnote 26]
Table 6: Characteristics of Rural Counties and Their Ambulance
Providers, by Counties Grouped by Population Density, 2001:
County categories: Rural; Number of counties: 2,273; Number of Medicare
providers serving a county[A] (median): 5; Percentage of a county's
Medicare ambulance trips covered by the top 2 providers in a county
(median): 70; Number of Medicare ambulance trips in all counties for
each of the top 2 providers (median): 1,100.
County categories: 52+ persons/sq. mile; Number of counties: 569;
Number of Medicare providers serving a county[A] (median): 8;
Percentage of a county's Medicare ambulance trips covered by the top 2
providers in a county (median): 68; Number of Medicare ambulance trips
in all counties for each of the top 2 providers (median): 2,168.
County categories: 30-51 persons/sq. mile; Number of counties: 568;
Number of Medicare providers serving a county[A] (median): 6;
Percentage of a county's Medicare ambulance trips covered by the top 2
providers in a county (median): 70; Number of Medicare ambulance trips
in all counties for each of the top 2 providers (median): 1,422.
County categories: 12-29 persons/sq. mile; Number of counties: 568;
Number of Medicare providers serving a county[A] (median): 6;
Percentage of a county's Medicare ambulance trips covered by the top 2
providers in a county (median): 69; Number of Medicare ambulance trips
in all counties for each of the top 2 providers (median): 832.
County categories: 0-11 persons/sq. mile; Number of counties: 568;
Number of Medicare providers serving a county[A] (median): 4;
Percentage of a county's Medicare ambulance trips covered by the top 2
providers in a county (median): 74; Number of Medicare ambulance trips
in all counties for each of the top 2 providers (median): 275.
County categories: 7-11 persons/sq. mile; Number of counties: 182;
Number of Medicare providers serving a county[A] (median): 5;
Percentage of a county's Medicare ambulance trips covered by the top 2
providers in a county (median): 71; Number of Medicare ambulance trips
in all counties for each of the top 2 providers (median): 433.
County categories: 0-6 persons/sq. mile; Number of counties: 386;
Number of Medicare providers serving a county[A] (median): 4;
Percentage of a county's Medicare ambulance trips covered by the top 2
providers in a county (median): 75; Number of Medicare ambulance trips
in all counties for each of the top 2 providers (median): 215.
Sources: HRSA and CMS.
Note: GAO analysis of HRSA and CMS data. We classified counties as
rural if they were not in an MSA. Rural counties are grouped by
quartiles of total county population density. The first quartile (0-11
persons per square mile) is further divided into frontier counties (0-
6 persons per square mile) and nonfrontier counties (7-11 persons per
square mile). We used the beneficiary's address as a proxy for where
each trip originated.
[A] Providers that delivered less than 1 percent of their total
Medicare trips in a county were excluded from the count of providers
serving that county.
[End of table]
Medicare Ambulance Payments Are Somewhat Higher for Trips in Less
Densely Populated Rural Counties:
Ambulance providers on average are paid 16 percent more for trips
originating in the least densely populated quarter of rural counties
than for trips in the most densely populated quarter.[Footnote 27] (See
table 7.) Payments for those trips are higher because the trips are
generally longer, resulting in a higher mileage payment. In 2001, while
trips that began in the most densely populated quarter of rural
counties averaged 18 miles, trips in the least densely populated
quarter averaged 30 miles. The rural adjustment, which provides a
higher per-mile rate for the first 50 miles of rural trips, also
contributed to the higher mileage payments.
The modest difference in Medicare payment across rural counties is
dwarfed by the difference in trip volume: The difference in trip volume
between the least and most densely populated quarters of rural counties
is nearly eightfold.[Footnote 28] Because trip volume is an indicator
of costs, the Medicare payment differences likely do not fully reflect
differences across rural counties in providers' cost per trip.[Footnote
29]
Table 7: Average Number of Medicare Ambulance Trips, Trip Length, and
Estimates of Average Medicare PaymentAper Ambulance Trip, by Rural
Counties Grouped by Population Density:
County categories: Rural counties; Number of counties: 2,273; Average
number of Medicare ambulance trips: 1,153; Average length of Medicare
ambulance trips (miles): 23; Average Medicare payment per ambulance
trip: $463.
County categories: 52+ persons/sq. mile; Number of counties: 569;
Average number of Medicare ambulance trips: 2,254; Average length of
Medicare ambulance trips (miles): 18; Average Medicare payment per
ambulance trip: $434.
County categories: 30-51 persons/sq. mile; Number of counties: 568;
Average number of Medicare ambulance trips: 1,290; Average length of
Medicare ambulance trips (miles): 21; Average Medicare payment per
ambulance trip: $446.
County categories: 12-29 persons/sq. mile; Number of counties: 568;
Average number of Medicare ambulance trips: 771; Average length of
Medicare ambulance trips (miles): 25; Average Medicare payment per
ambulance trip: $465.
County categories: 0-11 persons/sq. mile; Number of counties: 568;
Average number of Medicare ambulance trips: 296; Average length of
Medicare ambulance trips (miles): 30; Average Medicare payment per
ambulance trip: $505.
County categories: 7-11 persons/sq. mile; Number of counties: 182;
Average number of Medicare ambulance trips: 470; Average length of
Medicare ambulance trips (miles): 27; Average Medicare payment per
ambulance trip: $490.
County categories: 0-6 persons/sq. mile; Number of counties: 386;
Average number of Medicare ambulance trips: 214; Average length of
Medicare ambulance trips (miles): 31; Average Medicare payment per
ambulance trip: $512.
Sources: HRSA and CMS.
Note: GAO analysis of HRSA and CMS data. We classified counties as
urban if they were in an MSA and as rural if they were not in an MSA.
The roughly 75 urban counties that contain rural areas as identified by
the Goldsmith modification are included in the urban county group.
Rural counties are grouped by quartiles of total county population
density. The first quartile (0-11 persons per square mile) is further
divided into frontier counties (0-6 persons per square mile) and
nonfrontier counties (7-11 persons per square mile). We used the
beneficiary's address as a proxy for where each trip originated.
[A] Payment estimates were calculated by applying 100 percent of the
2003 Medicare ambulance fee schedule rates to Medicare ground ambulance
trips delivered in 2001. These estimates reflect the mix of ambulance
services provided in the different county categories as well as the
geographic adjustment to account for wage differences across areas.
[End of table]
Conclusions:
Refining Medicare's ambulance fee schedule to adequately account for
cost differences in providing ambulance services across various
geographic areas is important to ensuring beneficiaries' access to
services. Access is a particular concern in rural areas, since
providers' cost per trip is likely to be higher because they provide
fewer trips. Moreover, our analysis shows that the cost per trip is
likely to be highest in the least densely populated rural counties.
While the fee schedule incorporates a rural adjustment to raise
payments for trips provided in rural areas, its definition of "rural"
is broad. As a result, the fee schedule's rural payment adjustment does
not sufficiently target trips provided in the least densely populated
rural counties.
In implementing the fee schedule, CMS adjusted the mileage rate for
rural trips to account for the higher cost per trip of providers
serving rural areas. However, trip volume is a better indicator of
providers' cost per trip than is trip length. Thus, adjusting the base
rates for rural trips--the portion of Medicare's payment that is
designed to pay for providers' fixed costs--is a more appropriate way
of accounting for rural low-volume providers' higher cost per trip than
adjusting the mileage rate.
Recommendation for Executive Action:
To help ensure that Medicare beneficiaries' access to ambulance
services is adequate, we recommend that the Administrator of CMS better
target the rural payment adjustment to trips provided in rural counties
with particularly low population density by adjusting the base rates,
rather than the mileage rate, for ground ambulance services provided in
those counties.
Agency and External Reviewer Comments and Our Evaluation:
We received written comments on a draft of this report from CMS. We
also received comments from eight ambulance associations: American
Ambulance Association,[Footnote 30] American Hospital Association,
Association of Air Medical Services, National Association of State
Emergency Medical Services Directors, National Volunteer Fire Council,
Rural EMS Advocate, American College of Emergency Physicians, and the
National Association of EMS Physicians.
CMS:
CMS stated that the report will be useful as the agency develops a
proposed rule to address appropriate payment for ambulance services
furnished in rural, low-volume areas. CMS also noted that the report
reflects the complexity of the issues and the need for careful analysis
to ensure that payment adjustments are made only for those ambulance
providers that require additional payment because of their low volume,
rather than, for example, inefficiency or competition from another
provider. CMS's comments appear in appendix III. CMS also provided
technical comments, which we incorporated as appropriate.
:
Ambulance Associations:
The associations that reviewed the draft report generally agreed with
our findings and recommendation. All of the associations agreed with
the need to address the higher cost of providing ambulance services in
rural areas. Six agreed that an area's ambulance trip volume reflects
its population density, while the remaining two associations did not
address this issue. The majority of the associations agreed that CMS
should adjust the base rates to recognize the higher cost per trip of
providing ambulance services in areas with low population density.
However, three associations went further, proposing to use both mileage
and base rates to address the higher costs in rural areas. While
supporting the principle of paying higher base rates to providers in
rural areas where costs are high, the state EMS directors' and EMS
physicians' associations were concerned that higher payments for rural
providers could be at the expense of other providers.
Four associations raised concerns about using counties as the
geographic areas for applying the adjustment. These associations said
that a system that used counties would not accurately target rural
ambulance payments. Three of these associations noted that, because
counties may include both densely and sparsely populated areas, a
system that used counties could overpay some providers and underpay
others. They proposed using zip codes as the geographic areas for
assessing population density and applying the adjustment. The rural
ambulance association, in particular, also advocated the use of
multiple rural categories based on population density to adjust
payments for rural trips. The fourth association emphasized the need
for a system that ensures that all areas with sufficiently low
population density are eligible for an appropriate payment adjustment.
Our Response:
GAO and the ambulance associations agree with the need to adjust
payments for rural trips and that the adjustment should be applied to
the base rate. With respect to adjusting payments for rural trips in
low population density areas, we believe the adjustment should be
applied to the base rate. We believe that the mileage rate for any
trip, rural or urban, is best suited to compensating ambulance
providers for costs that vary with trip length. As stated in the
report, a base rate adjustment is a more appropriate way of accounting
for rural low-volume providers' higher costs per trip because base
rates reflect fixed costs, and because trip volume is a better
indicator of providers' cost per trip than is trip length. With respect
to possible payment reductions for other providers, implementing our
recommendation could have this effect. If a revised rural adjustment is
implemented in a way to keep total Medicare expenditures the same, some
providers could face lower payments.
With respect to the geographic unit used to identify trips for the
rural adjustment, we agree that, since counties are relatively large
geographic units, it is possible for trips in some areas to be overpaid
and others underpaid. Moreover, in principle, a rural classification
system that uses a smaller geographic unit, such as zip codes, might
better target payments to trips in areas with low population density.
Yet our analysis indicates that zip codes do not explain variation in
trip volume as well as counties. Further, county boundaries tend to be
more stable over time than zip code boundaries. In addition, a variety
of technical difficulties hinder the use of zip codes for ambulance
payments, including the absence of zip codes for some rural areas. With
respect to multiple adjustment categories, we did not address whether
there should be a single adjustment or whether there should be multiple
adjustment amounts to reflect differing levels of population density. A
decision on single or multiple categories would require balancing
increased precision with increased complexity.
We are sending copies of this report to the Administrator of CMS,
appropriate congressional committees, and other interested parties. We
will also make copies available to others upon request. This report is
also available at no charge on GAO's Web site at [Hyperlink, http://
www.gao.gov] http://www.gao.gov.
If you or your staffs have any questions, please call me at (202) 512-
7114. Other GAO contacts and staff acknowledgments are listed in
appendix IV.
Signed by:
Laura A. Dummit
Director, Health Care--Medicare Payment Issues:
List of Committees:
The Honorable Charles E. Grassley
Chairman
The Honorable Max Baucus
Ranking Minority Member
Committee on Finance
United States Senate:
The Honorable W.J. "Billy" Tauzin
Chairman
The Honorable John D. Dingell
Ranking Minority Member
Committee on Energy and Commerce
House of Representatives:
The Honorable William M. Thomas
Chairman
The Honorable Charles B. Rangel
Ranking Minority Member
Committee on Ways and Means
House of Representatives:
[End of section]
Appendixes:
Appendix I: Data and Methods:
1999 National Survey of Ambulance Providers. To identify the factors
that influenced ambulance provider costs, we used the 1999 National
Survey of Ambulance Providers. This survey, conducted by the Project
HOPE Center for Health Affairs under the sponsorship of the American
Ambulance Association, is the only nationally representative source for
ambulance providers' costs. Project HOPE selected a stratified random
sample of providers that had billed Medicare in 1997, obtained 421
completed questionnaires, and reported a response rate of 56
percent.[Footnote 31] The survey included questions on costs, total
number of trips by type of service, geographic location, and total
mileage.
We took several steps to ensure that the Project HOPE data were
suitable for our analysis. We examined the accuracy and completeness of
the data by testing for implausible values and internal consistency. In
addition, we questioned an anomalous result in Project HOPE's initial
analysis of its data, which raised concerns about the credibility of
the data: emergency advanced life support (ALS) trips cost less than
nonemergency basic life support (BLS) trips.[Footnote 32] In response,
Project HOPE provided us with information about its subsequent
analysis, which showed the expected result--ALS trips cost more than
BLS trips, after controlling for providers' volume. This result
resolved our major concern about the data.
We limited our analysis of the factors affecting differences in
providers' costs to full cost providers--those providers that paid for
80 percent or more of their staff and paid for 80 percent or more of
their office and garage space. The costs reported by these providers
are more likely to reflect the full cost of providing ambulance
services. We also excluded ambulance providers that were part of fire
departments, because about half could not separate ambulance costs from
other costs. Finally, we excluded one provider that reported
implausible values. After these exclusions, we had 114 cases for
analysis. Certain analyses that did not pertain to all full cost
providers used a smaller number of cases. (See tables 8 and 9.):
Table 8: Full Cost Ambulance Providers by Average Number of Trips Per
Day, 1998:
Providers' average number of total trips per day: 3 or fewer;
Percentage of full cost providers: 22.
Providers' average number of total trips per day: 4 to 8; Percentage of
full cost providers: 27.
Providers' average number of total trips per day: 9 to 12; Percentage
of full cost providers: 9.
Providers' average number of total trips per day: 13 to 20; Percentage
of full cost providers: 7.
Providers' average number of total trips per day: 21 or more;
Percentage of full cost providers: 35.
Providers' average number of total trips per day: Total; Percentage of
full cost providers: 100.
Source: Project HOPE.
Note: GAO analysis of data from Project HOPE's National Survey of
Ambulance Providers. Total trip volume includes all of a provider's
trips, not just those covered by Medicare. Full cost providers are
defined as those that have 80 percent or more of their staff comprised
of paid employees rather than volunteers, and that pay for 80 percent
or more of their garage and office space. These data are for the fiscal
year preceding the survey, which for most providers included 6 months
or more of calendar year 1998. The number of full cost providers is
114.
[End of table]
Table 9: Full Cost Ambulance Providers by Average Number of Trips Per
Year, 1998:
Providers' average number of total trips per year: 5,000 or fewer;
Percentage of full cost providers: 58.
Providers' average number of total trips per year: 5,001 to 10,000;
Percentage of full cost providers: 20.
Providers' average number of total trips per year: More than 10,000;
Percentage of full cost providers: 22.
Providers' average number of total trips per year: Total; Percentage of
full cost providers: 100.
Source: Project HOPE.
Note: GAO analysis of data from Project HOPE's National Survey of
Ambulance Providers. Total trip volume includes all of a provider's
trips, not just those covered by Medicare. Full cost providers are
defined as those that have 80 percent or more of their staff comprised
of paid employees rather than volunteers, and that pay for 80 percent
or more of their garage and office space. These data are for the fiscal
year preceding the survey, which for most providers included 6 months
or more of calendar year 1998. The number of full cost providers is
114.
[End of table]
Area Resource File. The Area Resource File (ARF), which is maintained
by the Health Resources and Services Administration (HRSA), is a
county-based health resources information database that contains data
from many sources, including the U.S. Census. From the 2001 ARF, we
obtained county data on land area in 1990 and total population in 2000,
which we used to calculate population density. We also obtained data on
the number of persons age 65 and over in each county in 1999, which we
used as a proxy for Medicare beneficiaries. The ARF is a standard data
source that is well documented and widely used, so we did not
independently verify its accuracy or completeness.
Medicare claims files. We used Medicare claims data to determine the
volume and length of all ground-based Medicare-covered trips, as well
as Medicare's payments for those trips. We used the 2001 national
claims history 100 percent nearline file for physicians and suppliers
to identify claims for ambulance services by freestanding providers,
and the 2001 outpatient 100 percent standard analytic file to identify
claims for ambulance services by institutional providers. We used the
zip code of the beneficiary's primary address as a proxy for the point
where the ambulance picked up the beneficiary because the point of
pickup is not recorded in the 2001 data.[Footnote 33] Although we did
not independently verify the reliability of the national claims files,
we screened the files and excluded claims that were denied, claims that
were superseded by an adjustment claim, and claims for services in
other years. We retained all final claims for 2001.
Provider interviews. To gain an understanding of the ambulance
industry, we interviewed experts from eight industry and professional
organizations. We also interviewed several individual ambulance
providers.
Factors affecting ambulance providers' costs. To examine the effect of
selected factors on ambulance providers' costs, we analyzed the Project
HOPE survey data using a simplified version of a model reported by
Project HOPE.[Footnote 34] In our model, the natural logarithm of total
costs is a function of the number of trips, the number of trips
squared, and the proportion of the total trips that are ALS.[Footnote
35] We tested a number of additional terms, including length of trips,
but they were all either statistically insignificant or significant but
with very small effects. We restricted our model to providers with
5,000 or fewer total trips per year because we were primarily
interested in rural providers, which generally have fewer
trips.[Footnote 36] However, our sensitivity analyses showed that the
results were broadly similar when the model was applied to all full
cost providers.[Footnote 37] Our model has an adjusted R2 of 0.48,
indicating that the model explains 48 percent of the variance in costs.
In general, when trip volume declines, the estimated cost per trip
increases, although less than proportionately. That is, a 10 percent
decrease in trip volume is associated with an increase in cost per trip
of less than 10 percent.
Analysis of variation in factors affecting costs across geographic
areas. To examine differences between urban and rural areas in factors
affecting ambulance costs, we grouped counties with similar
characteristics. We followed CMS in classifying counties in
metropolitan statistical areas (MSA) as urban counties and counties
outside MSAs as rural.[Footnote 38] However, for our analysis we did
not apply the Goldsmith modification that CMS uses to identify as rural
certain areas within MSAs.[Footnote 39] These rural areas are typically
small, so we did not treat them as rural counties because that would
distort our urban and rural comparisons. Our sensitivity analyses
determined that our findings would have been generally the same if we
had considered these areas as rural counties, although in some cases
the differences between urban and rural counties would have been
heightened.
To examine differences among rural counties, we grouped them based on
their population density. Population density--the ratio of population
to land area--is a commonly used measure of rurality. We used
population density to group counties into quartiles, and then divided
the least densely populated quartile of rural counties into frontier
counties--those with six or fewer persons per square mile--and
nonfrontier counties, because of our interest in the most sparsely
populated rural areas. Using this grouping, we found that ambulance
trip volume decreased steadily from the most densely populated rural
counties to the least densely populated. We also examined several other
classification systems: urban influence codes (UIC), which classify
counties based on each county's largest city and its proximity to other
areas with large, urban populations; rural-urban continuum codes
(RUCC), which classify metropolitan counties by the size of the urban
area and nonurban counties by the size of the urban population and
proximity to a metropolitan area; and rural-urban commuting areas
(RUCA), which classify census tracts using patterns of urbanization,
population density, and daily commuting patterns, and then map the
census tracts into zip codes.[Footnote 40] These systems are more
complex than the system we used, and we found that they did not help
explain variation in trip volume as well as counties grouped by
population density.
To confirm the effect of population density on trip volume, we did
several additional analyses. We regressed counties' annual volume of
Medicare trips (expressed as natural logarithms) on population and land
area (expressed as natural logarithms). Population had a positive
effect on the number of trips, while land area had a negative effect.
An increase of 1 percent in population increased the number of trips by
about 1 percent in a county, while an increase of 1 percent in land
area decreased the number of trips by about 0.1 percent.[Footnote 41]
Population density combines the two effects: a 1 percent increase in
population density increases the number of trips by 0.7
percent.[Footnote 42]
[End of section]
Appendix II: Characteristics of Rural Counties Grouped by Medicare
Population Density:
Total population density is strongly related to Medicare population
density. (See table 10.) For example, 525 rural counties with the
lowest total population density were also lowest in terms of Medicare
population density. In total, 83 percent of all rural counties were in
the same density quartile, regardless of whether total population or
Medicare population was used to group rural counties. Our results with
respect to county characteristics and ambulance services would have
been similar had we used Medicare population density to group counties
rather than total population density. (See tables 11, 12, and 13.):
Table 10: Rural Counties Grouped by Total Population Density and by
Medicare Population Density, 2001:
Total population density: 52+ people/sq. mile; Medicare population
density: 7.6 + Medicare beneficiaries/sq. mile: 505; Medicare
population density: 4.3-7.5 Medicare beneficiaries/sq. mile: 61;
Medicare population density: 1.8-4.2 Medicare beneficiaries/sq. mile:
3; Medicare population density: 0-1.7 Medicare beneficiaries/sq. mile:
0.
Total population density: 30-51 people/sq. mile; Medicare population
density: 7.6 + Medicare beneficiaries/sq. mile: 64; Medicare population
density: 4.3-7.5 Medicare beneficiaries/sq. mile: 423; Medicare
population density: 1.8-4.2 Medicare beneficiaries/sq. mile: 79;
Medicare population density: 0-1.7 Medicare beneficiaries/sq. mile: 2.
Total population density: 12-29 people/sq. mile; Medicare population
density: 7.6 + Medicare beneficiaries/sq. mile: 0; Medicare population
density: 4.3-7.5 Medicare beneficiaries/sq. mile: 83; Medicare
population density: 1.8-4.2 Medicare beneficiaries/sq. mile: 444;
Medicare population density: 0-1.7 Medicare beneficiaries/sq. mile: 41.
Total population density: 0-11 people/sq. mile; Medicare population
density: 7.6 + Medicare beneficiaries/sq. mile: 0; Medicare population
density: 4.3-7.5 Medicare beneficiaries/sq. mile: 0; Medicare
population density: 1.8-4.2 Medicare beneficiaries/sq. mile: 43;
Medicare population density: 0-1.7 Medicare beneficiaries/sq. mile:
525.
Source: HRSA.
Note: GAO analysis of the 2001 Area Resource File. Bolded numbers refer
to the number of counties that fall in the same quarter of rural
counties--whether rural counties are grouped by total population
density or Medicare population density. We used the number of persons
age 65 and over in each county in 1999 as a proxy for the number of
Medicare beneficiaries.
[End of table]
Table 11: Average Number of Medicare Ambulance Trips, Population and
Land Area, by Counties Grouped by Medicare Population Density, 2001:
County categories: Urban counties; Number of counties: 854; Average
number of Medicare ambulance trips: 9,144; Average population: 276,791;
Average land area (sq. miles): 844.
County categories: Rural counties; Number of counties: 2,273; Average
number of Medicare ambulance trips: 1,153; Average population: 23,942;
Average land area (sq. miles): 1,132.
County categories: 7.6+ Medicare beneficiaries/sq. mile; Number of
counties: 569; Average number of Medicare ambulance trips: 2,279;
Average population: 45,362; Average land area (sq. miles): 517.
County categories: 4.3-7.5 Medicare beneficiaries/sq. mile; Number of
counties: 567; Average number of Medicare ambulance trips: 1,265;
Average population: 24,836; Average land area (sq. miles): 646.
County categories: 1.8-4.2 Medicare beneficiaries/sq. mile; Number of
counties: 569; Average number of Medicare ambulance trips: 752;
Average population: 16,584; Average land area (sq. miles): 841.
County categories: 0-1.7 Medicare beneficiaries/sq. mile; Number of
counties: 568; Average number of Medicare ambulance trips: 315;
Average population: 8,961; Average land area (sq. miles): 2,527.
Sources: HRSA and CMS.
Note: GAO analysis of HRSA and CMS data. We classified counties as
urban if they were in an MSA and as rural if they were not in an MSA.
The roughly 75 urban counties that contain rural areas as identified by
the Goldsmith modification are included in the urban county group. We
used the beneficiary's address as a proxy for where each trip
originated. We used the number of persons age 65 and over in each
county in 1999 as a proxy for the number of Medicare beneficiaries.
[End of table]
Table 12: Characteristics of Rural Counties and Their Ambulance
Providers, by Counties Grouped by Medicare Population Density, 2001:
County categories: Rural counties; Number of counties: 2,273; Number of
Medicare providers serving a county[A] (median): 5; Percentage of a
county's Medicare ambulance trips covered by the top 2 providers in a
county (median): 70; Number of Medicare ambulance trips in all counties
for each of the top 2 providers (median): 1,100.
County categories: 7.6+ Medicare beneficiaries/sq. mile; Number of
counties: 569; Number of Medicare providers serving a county[A]
(median): 9; Percentage of a county's Medicare ambulance trips
covered by the top 2 providers in a county (median): 67; Number of
Medicare ambulance trips in all counties for each of the top 2
providers (median): 2,080.
County categories: 4.3-7.5 Medicare beneficiaries/sq. mile; Number of
counties: 567; Number of Medicare providers serving a county[A]
(median): 6; Percentage of a county's Medicare ambulance trips
covered by the top 2 providers in a county (median): 69; Number of
Medicare ambulance trips in all counties for each of the top 2
providers (median): 1,366.
County categories: 1.8-4.2 Medicare beneficiaries/sq. mile; Number of
counties: 569; Number of Medicare providers serving a county[A]
(median): 6; Percentage of a county's Medicare ambulance trips covered
by the top 2 providers in a county (median): 71; Number of Medicare
ambulance trips in all counties for each of the top 2 providers
(median): 834.
County categories: 0-1.7 Medicare beneficiaries/sq. mile; Number of
counties: 568; Number of Medicare providers serving a county[A]
(median): 4; Percentage of a county's Medicare ambulance trips
covered by the top 2 providers in a county (median): 74; Number of
Medicare ambulance trips in all counties for each of the top 2
providers (median): 308.
Sources: HRSA and CMS.
Note: GAO analysis of HRSA and CMS data. We classified counties as
rural if they were not in an MSA. We used the beneficiary's address as
a proxy for where each trip originated. We used the number of persons
age 65 and over in each county in 1999 as a proxy for the number of
Medicare beneficiaries.
[A] Providers that delivered less than 1 percent of their total
Medicare trips in a county were excluded from the count of providers
serving that county.
[End of table]
Table 13: Average Number of Medicare Ambulance Trips, Trip Length, and
Estimates of Average Medicare PaymentA per Ambulance Trip, by Rural
Counties Grouped by Medicare Population Density:
County categories: Rural counties; Number of counties: 2,273; Average
number of Medicare ambulance trips: 1,153; Average length of Medicare
ambulance trips (miles): 23; Average Medicare payment per ambulance
trip: $463.
County categories: 7.6+ Medicare beneficiaries/sq. mile; Number of
counties: 569; Average number of Medicare ambulance trips: 2,279;
Average length of Medicare ambulance trips (miles): 19; Average
Medicare payment per ambulance trip: $434.
County categories: 4.3-7.5 Medicare beneficiaries/sq. mile; Number of
counties: 567; Average number of Medicare ambulance trips: 1,265;
Average length of Medicare ambulance trips (miles): 21; Average
Medicare payment per ambulance trip: $448.
County categories: 1.8-4.2 Medicare beneficiaries/sq. mile; Number of
counties: 569; Average number of Medicare ambulance trips: 752;
Average length of Medicare ambulance trips (miles): 25; Average
Medicare payment per ambulance trip: $467.
County categories: 0-1.7 Medicare beneficiaries/sq. mile; Number of
counties: 568; Average number of Medicare ambulance trips: 315;
Average length of Medicare ambulance trips (miles): 29; Average
Medicare payment per ambulance trip: $501.
Sources: HRSA and CMS.
Note: GAO analysis of HRSA and CMS data. We classified counties as
urban if they were in an MSA and as rural if they were not in an MSA.
We used the beneficiary's address as a proxy for where each trip
originated. We used the number of persons age 65 and over in each
county in 1999 as a proxy for the number of Medicare beneficiaries.
[A] Payment estimates were calculated by applying 100 percent of the
2003 Medicare ambulance fee schedule rates to Medicare ground ambulance
trips delivered in 2001. These estimates reflect the mix of ambulance
services provided in the different county categories as well as the
geographic adjustment to account for wage differences across areas.
[End of table]
[End of section]
Appendix III: Comments from the Centers for Medicare & Medicaid
Services:
[See PDF for image]
[End of figure]
[End of section]
Appendix IV: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Jonathan Ratner, (202) 512-7107; Phyllis Thorburn, (202) 512-7012:
Acknowledgments:
Major contributors to this report were Martha Kelly, Robin Burke, Eric
Wedum, Michael Kendix, and Jessica Farb.
[End of section]
Related GAO Products:
Ambulance Services: Changes Needed to Improve Medicare Payment Policies
and Coverage Decisions. [Hyperlink, http://www.gao.gov/cgi-bin/
getrpt?GAO-03-244T] GAO-03-244T. Washington, D.C.: November 15, 2001.
Rural Ambulances: Medicare Fee Schedule Payments Could Be Better
Targeted. HEHS-00-115. Washington, D.C.: July 17, 2000.
(290155):
FOOTNOTES
[1] The Centers for Medicare & Medicaid Services uses the term
"provider" to refer to institutional providers of ambulance services,
including hospitals and skilled nursing facilities, and uses the term
"supplier" to refer to freestanding ambulance providers--that is, those
not associated with a hospital, skilled nursing facility, or other
facility. In this report, unless otherwise indicated, we use the term
"provider" to refer to all organizations that provide Medicare ground
ambulance services--both institutional and freestanding.
[2] U.S. General Accounting Office, Rural Ambulances: Medicare Fee
Schedule Payments Could Be Better Targeted, HEHS-00-115 (Washington,
D.C.: July 17, 2000).
[3] Pub. L. No. 106-554, Appendix F, §221(b), 114 Stat. 2763A-463, 486-
87 (2000).
[4] The Project HOPE Center for Health Affairs is a nonprofit health
policy research organization.
[5] Our analysis focused on ambulance services paid under Medicare's
ambulance fee schedule and therefore excluded services paid for by
Medicare managed care organizations. Further, our analysis did not
include any ambulance services for Medicare beneficiaries that were not
billed to Medicare.
[6] See Penny E. Mohr and others, Findings from the 1999 National
Survey of Ambulance Providers (Bethesda, Md.: 2000), p.13.
[7] ALS services are provided by personnel with advanced training and
involve assessments by them or the provision of advanced interventions
or procedures.
[8] See Mohr and others, pp. 19-20.
[9] The fee schedule took effect April 1, 2002. The BBA had directed
that the fee schedule be effective for services furnished on or after
January 1, 2000. CMS stated that several factors--other statutory
obligations, the scope of systems changes required to implement the fee
schedule, and the need to ensure that its computer systems were
compliant with Year 2000 (Y2K) requirements--delayed implementation of
the fee schedule. 67 Fed. Reg. 9100. A federal district court order,
issued on January 16, 2003, required the Department of Health and Human
Services (HHS) to adopt a fee schedule for freestanding providers for
the period of January 1, 2000, through March 31, 2002. Lifestar Amb.
Serv., Inc. v. U.S., 211 F.R.D. 688 (M.D. Ga. 2003). On April 16, 2003,
CMS published a notice in the Federal Register stating that Medicare's
fee schedule would apply to ambulance trips provided by freestanding
providers during that period. 68 Fed. Reg. 18654. Payments would be
adjusted retroactively. HHS has appealed the court's decision.
[10] Several other changes to the way ambulance services are paid for
were introduced with the fee schedule. For example, in accordance with
the BBA, all providers must accept the Medicare payment amount as full
payment for covered services and may only collect allowed cost-sharing
amounts from beneficiaries. In addition, Medicare will pay a BLS rate
for services furnished at the BLS level even when an ALS vehicle is
used. This latter provision will be phased in over several years. As
specified by BIPA, ambulance providers that are critical access
hospitals or entities owned and operated by them are exempt from the
fee schedule and paid on a reasonable cost basis if there is no other
ambulance provider within 35 miles. Critical access hospitals are
small, isolated hospitals that have an annual average length of stay of
4 days or less.
[11] For paramedic ALS intercept services, there is no separate payment
for mileage.
[12] The modifier is the same as that applied to the practice expense
component of Medicare's physician fee schedule.
[13] The mileage rate increase for the first 17 miles was not mandated
by law, but was specified in CMS's final rule. The increase for miles
18 through 50 is a temporary increase mandated by law. BIPA required
that, for miles 18 through 50 of a rural trip, the mileage rate should
be increased by at least half as much as the mileage rate increase
established for the first 17 miles of a rural trip. BIPA stated that
this increase would apply to ground ambulance services provided on or
after July 1, 2001, and before January 1, 2004. Pub. L. No. 106-554,
§221, 114 Stat. 2763A-463, 486.
[14] CMS has stated that it could not easily adopt and implement other
methods for recognizing geographic differences in population density
within the constraints necessary to implement the fee schedule in a
timely manner. 67 Fed. Reg. 9100.
[15] CMS currently uses the MSA definitions established by the Office
of Management and Budget (OMB) and in effect prior to June 6, 2003,
when OMB announced revised definitions based on the 2000 census.
[16] Medicare payment for ambulance services is based on the lesser of
the actual charge or the applicable fee schedule amount. During the
transition period, the applicable fee schedule amount is a blended
payment, not the fee schedule payment.
[17] In response to the federal district court order that required HHS
to adopt a fee schedule for freestanding providers for the period of
January 1, 2000, to March 31, 2002, CMS issued a notice in the Federal
Register that specified blended payments applicable to 2000, 2001, and
early 2002. 68 Fed. Reg. 18654-55.
[18] In the available data on ambulance costs, fuel costs are not
always reported separately, so they are included in the vehicle and
equipment costs category.
[19] Total trip volume includes all of a provider's trips, not just
those covered by Medicare.
[20] These data are for full cost providers, defined as those that have
80 percent or more of their staff comprised of paid employees rather
than volunteers, and that pay for 80 percent or more of their garage
and office space. These data are for the fiscal year preceding the
survey, which for most providers included 6 months or more of calendar
year 1998.
[21] We classified counties as urban if they were in an MSA and as
rural if they were not in an MSA, using 2001 Area Resource File data.
The roughly 75 urban counties that contain areas identified as rural by
the Goldsmith modification are included in the urban county group. We
used the beneficiary's address as a proxy for where each trip
originated, since the 2001 national claims files did not contain that
information. (See app. I for details.)
[22] Larger counties have somewhat fewer trips than smaller counties,
after accounting for county population.
[23] We also grouped counties according to their Medicare population
density. See app. II.
[24] "Frontier" is a term used to describe counties with very low
population density, and in most cases frontier counties are defined as
those with six or fewer persons per square mile.
[25] Providers' trips are not necessarily limited to one county, since
providers may serve multiple counties.
[26] The total number of trips made by these providers would be
expected to be double the number of Medicare trips, since Medicare
beneficiaries account on average for roughly half of providers' total
trip volume.
[27] Payment estimates were calculated by applying 100 percent of the
2003 Medicare ambulance fee schedule rates to Medicare ground ambulance
trips delivered in 2001.
[28] There is a similar difference in trip volume for the dominant
providers serving these counties.
[29] Differences in trip volume likely result in smaller differences in
cost per trip.
[30] The American Ambulance Association represents many types of
ambulance providers. In this section we refer to it as representing
ground ambulance providers because they account for the majority of the
association's members.
[31] See Penny E. Mohr and others, Findings from the 1999 National
Survey of Ambulance Providers (Bethesda, Md.: 2000), p.11.
[32] See Mohr and others, p. 25.
[33] Beginning January 1, 2001, CMS required ambulance providers to
include the point of pick-up zip code on all claims, and on April 1,
2002, began using it for payment, to determine whether the rural
adjustment should be applied. Although the CMS contractors--fiscal
intermediaries and carriers--that pay the claims have had the point of
pick-up zip code in their data bases, it was not incorporated into the
national claims history files until April 1, 2003.
[34] See Mohr and others, pp. A1-A3.
[35] The Project HOPE model resembles a type of model frequently used
by health services researchers for analyzing costs of health care. For
example, see T. Grannemann and others, "Estimating Hospital Costs,"
Journal of Health Economics, vol. 5, no. 2 (1986), and J. Nyman, "The
Marginal Cost of Nursing Home Care," Journal of Health Economics, vol.
7, no. 4 (1988).
[36] Although some rural providers have more than 5,000 total trips per
year, most have less than 5,000 total trips per year.
[37] The coefficients had the same signs, although they differed in
magnitude.
[38] MSAs are groups of counties containing a core of at least 50,000
people, together with adjacent areas that have a high degree of
economic and social integration with that core. New England County
Metropolitan Areas are considered urban.
[39] The Goldsmith modification identifies small towns and rural areas
within large metropolitan counties that are isolated from central areas
by distance or other features, such as mountains. CMS uses a Goldsmith
modification based on 1980 census data.
[40] For more information on UICs, see http://www.ers.usda.gov/
Briefing/Rurality/urbaninf/; for more information on RUCCs, see http:/
/www.ers.usda.gov/Briefing/Rurality/ruralurbcon/; and for more
information on RUCAs, see http://www.fammed.washington.edu/wwamirhrc/
rucas/rucas.html.
[41] The adjusted R2 for the model is 0.74. The adjusted R2 is a
measure of the proportion of the variation in the dependent variable
(the natural logarithm of trips) accounted for by the independent
variables (the natural logarithms of land area and population).
[42] The adjusted R2 for the model is 0.60.
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