MEDICARE FEE SCHEDULE FOR AMBULANCE SERVICES

BACKGROUND:
The Balanced Budget Act of 1997 (BBA) required the Centers for Medicare & Medicaid Services (CMS) to replace its current ambulance payment methodologies with a national fee schedule to be developed through negotiated rulemaking. A proposed regulation based on the consensus of the negotiated rulemaking committee was issued in September 2000, and CMS received over 340 public comments on the proposed rule. A final regulation will be published February 27, 2002 in the Federal Register. It went on display in the Office of the Federal Register today. Phased-in implementation will begin April 1, 2002.

Until the new regulation is implemented, payment for ambulance services will continue to be based on "reasonable charges" for independent suppliers and "reasonable costs" for provider-based services. This is the last major Medicare Part B benefit to be paid according to these methods; other benefits were moved to fee schedules over the past decade. Reasonable charge payments are based on historic local charging patterns that have resulted in large geographic discrepancies.

The negotiated rulemaking committee was convened by an outside convener and included CMS and 9 other members representing a wide range of industry interests, including urban, rural, volunteer, independent, hospital-based, ground, and air ambulance providers, as well as emergency physicians.

BBA requirements: In establishing the fee schedule, the BBA stated that aggregate payment during its first year may not exceed the aggregate amount that would have been paid that year without the fee schedule. The BBA also directed the Secretary to:

*establish mechanisms to control increases in expenditures for ambulance services; *establish definitions for ambulance services that link payments to the type of services furnished; *consider appropriate regional and operational differences; *consider adjustments to payment rates for inflation and other relevant factors; *phase-in the fee schedule in an efficient and fair manner; and *require ambulance suppliers and providers to accept assignment.

MAJOR PROVISIONS OF THE FEE SCHEDULE

KEY PARAMETERS SET BY NEGOTIATED RULEMAKING:
The negotiated rulemaking committee, which was convened by an independent convener, included CMS and 9 other members representing a wide range of industry interests, including urban, rural, volunteer, independent, hospital-based, ground, and air ambulance service providers, as well as emergency physicians. When the negotiations ended in February 2000, all members signed a consensus agreement, which CMS used as the basis for drafting the proposed regulation. In its consensus agreement, the committee recommended:

FUTURE ADJUSTMENTS:
The fee schedule rates will be adjusted if actual experience under the fee schedule is significantly different than the assumptions used to calculate the rates (for example, the relative volumes of different levels of service, or the extent of charges below fee schedule amounts, are different than expected).

CHANGES IN THE FINAL RULE FROM THE PROPOSED RULE

CHANGES IN CALCULATION OF THE FEE SCHEDULE "CONVERSION FACTOR":
To establish payment base rates, the RVUs for each level of ambulance service are multiplied by a conversion factor (CF). Under the proposed rule, the CF for ground ambulances was $157.52. Under the final rule, the ground CF is increased to $170.54 because of the following changes:

(CMS did not calculate RVUs and a CF for air ambulance services because there are only two kinds of air ambulances: fixed wing and rotary wing. The fee schedule rates for these services were calculated directly, using similar procedures and assumptions as were used for ground services.)

IMPLEMENTATION AND PHASE-IN:
The final rule provides for the fee schedule to begin on April 1, 2002 (rather than January 1, 2001, as stated in the proposed rule), and the proposed 4-year phase-in has been extended to 5 years.

DEFINITIONS OF LEVELS OF SERVICE:
The final rule revises several aspects of how BLS and ALS service levels are defined. It also clarifies when an "emergency response" or the administration of certain drugs during transport may qualify for extra payment, and changes the payment for transports in which more than one patient is onboard the ambulance.

MEDICAL CONDITION CODES:
The final rule states that suppliers and providers may include in the "remarks" field of an ambulance claim a condition from the list of medical conditions developed by a work group of the negotiated rulemaking participants, and that Medicare contractors may not deny or reject claims solely for this reason. However, including a condition from the list does not automatically establish medical necessity. The contractors may still require documentation sufficient to show that the service was medically necessary.

PHYSICIAN CERTIFICATION OF MEDICAL NECESSITY FOR NON-EMERGENCY AMBULANCE TRIPS:

BED-CONFINEMENT:
The final rule clarifies that bed-confinement alone does not necessarily establish the medical necessity of a non-emergency ambulance transport (other documentation may also be required). Beneficiaries who are not bed-confined may also be eligible for non-emergency ambulance transport if medical necessity is documented for other reasons.

OTHER CHANGES MADE BY BIPA THAT ARE IMPLEMENTED IN THE FINAL RULE

CRITICAL ACCESS HOSPITAL EXEMPTION:
BIPA exempted ambulance services provided by critical access hospitals (CAHs) (or entities owned and operated by a CAH) from the fee schedule, if there is no other ambulance provider or supplier within 35 miles. These entities will continue to be paid according to "reasonable costs".

RURAL MILEAGE INCREASE:
BIPA increased payment for rural ambulance mileage greater than 17 miles and up to 50 miles by at least one-half of the additional payment per mile established under the fee schedule for the first 17 miles of a rural transport, for services provided before January 1, 2004.

MILEAGE PHASE-IN EXEMPTION:
BIPA exempted mileage payment from the fee schedule phase-in for suppliers in States in which, prior to the fee schedule, the carrier did not pay separately for in-county mileage (applicable only to North Carolina and Tennessee). These suppliers will be paid the full fee schedule mileage amount from the date the fee schedule begins rather than blended mileage payment during the phase-in period.

INCREASED INFLATION:
The inflation factor used to set rates in 2001 was increased by one percent. The rates in the final rule build on this one percent increase.

STARTING DATE AND PHASE IN SCHEDULE
Implementation of the fee schedule will begin on April 1, 2002, and will be phased-in over a 5-year period according to the following schedule:

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