Medicare Change Threatens Ambulance Companies.

UNDER A NEW MEDICARE reimbursement rule, 10 to 15 of the state's 224 licensed ambulance companies might go out of business, according to the Arkansas Ambulance Association.

And the new rule will disproportionately affect rural areas.

But Medicare's Health Care Finance Administration rule, a part of the Balanced Budget Act of 1997, that was supposed to take effect Jan. 1 was delayed until April 1 and again until July 1. Several ambulance executives think the rule will likely be pushed back again to the beginning of the next quarter or as late as Jan. 1, 2002.

About half of the ambulance transports done in Arkansas annually involve Medicare reimbursement.

The current HCFA reimbursement rate for an advanced life support (ALS) unit with a paramedic is still less than the $445.82 average cost per transport in rural Arkansas, said Kenneth Starnes, CEO of Emergency Ambulance Service Inc. of Pine Bluff (Lusby's). And the reimbursement rate for a basic life support (BLS) unit with an emergency medical technician on board is less because it costs less to operate.

Currently, HCFA reimburses ambulance companies based on the type of unit, ALS or BLS, that responds to the scene. And ambulance companies can seek reimbursement from the patient for additional costs. But under the proposed rule, HCFA bundles the medication, supplies and disposables cost into a fee based system that uses $157 as its base rate. That amount is multiplied by the level of service the call required, and the product of those numbers is then multiplied by a cost of living adjustment to get the base rate for reimbursement. Then the mileage allowance is added. But the ambulance company must accept the reimbursement as payment in full and may not bill the patient for added expenses.

"When the industry saw the conversion factor of only $157, it meant a disaster for the majority of states," Jon M. Swanson, executive director of MEMS in Little Rock and secretary/treasurer of the Arkansas Ambulance Association, said. "The industry thinks it should be $236 plus a bump to rural providers because the low call volume increases the cost of each transport."

HCFA will review the Medicare transports retroactively and reimburse for the type of unit that could have responded to the call. Many in Arkansas' emergency transport community say that is patently unfair, especially since many cities and counties require ALS service. MEMS is required to provide ALS service.

"We can only go on the limited information we get from the caller," Swanson said of ambulance companies in general. "We have to determine with that limited information whether to send an ALS or BLS unit. If you have an elderly patient who falls and breaks a hip, it is an emergency and we send out an ALS unit. When he arrives on scene, the paramedic assesses the patient to see if a stroke might have caused the fall. If it wasn't a stroke, the new rule says HCFA will only reimburse us at the BLS rate because the call wasn't life-threatening. But it could have been. HCFA has the advantage of reviewing the entire case in determining how to reimburse us."

Swanson said that to prepare for the new rule, MEMS reviewed its run history to estimate the loss in revenue. He said that in Arkansas "it is an estimated 25-28 percent loss in Medicare revenue. Since Medicare is about 50 percent of all revenue collected, that is 12-13 percent loss of total revenue."

Swanson said there may be an interruption in cash flow as Medicare implements the new rule. And since many ambulance companies don't have a reserve, that may push them over the edge financially.

Swanson said MEMS started putting money aside to prepare for the new rule two years ago. The company does 28,000 patient transports each year, 51 percent of which are reimbursed by Medicare.

"MEMS stands to begin losing $100,000 a month right away when this goes into effect," he said. "I don't want to jeopardizemy ability to respond to those calls, nor do I want to present the city and county government with a short-term financial crisis. And I have an obligation to my employees, too. I don t want to cause concern about pay freezes or layoffs. I've assured my employees that we'll keep on doing business as usual until we assess actual financial impact."

Starnes, CEO of Lusby's, said the basic idea behind HCFA reform is a good one.

"It is designed to equalize rates across the country. An excellent idea, but some premises are messed up because Congress said it had to be budget-neutral based on 1998 figures. The problem is that the numbers will not be budget neutral. They will spend $1.6 billion less than they did in 1998. As a result, you're going to have many ambulance providers nationwide go out of business, or reduce quality of service. The bigger the service, the better you will be able to survive this. You can do some cost shifting to survive, but you can't do that much cost-shifting."

Central EMS of Fayetteville operates one unit each in Prairie Grove, West Fork and Lincoln. Administrator Tony Hickerson said 40 percent of the nonprofit service's 6,000 annual transports involve Medicare.

"The new HCFA rules will reduce revenue which will, in turn, reduce services," he said. "We're looking at a reduction of $250,000 per year, at most. Unless they change the definition of rural in the new rule, no part of Washington County is rural. There is a greater mileage allowance for rural service under the new rule."

The rule may force him to seek a larger subsidy from Washington County and the city of Fayerteville. Currently, the county and city kick in 19 percent of Central EMS's revenue.

"You can get real scared, and there's good reason to be," he said. "At what point will public policy makers, on the local level realize they need to step in? As a rule, ambulance service is not something that people think about. They don't understand all the funding intricacies. You've got to reimburse the cost, otherwise somebody has to pay the unreimbursed cost or service is going to suffer. If the suggestion is that we can cut expenses to make up for the shortfall, you have to realize that means a reduction in patient care."

Ken Kelley, owner and president of ProMed Ambulance Inc. of E1 Dorado and president of the Arkansas Ambulance Association, said the 68 members of the state association are concerned about the proposed rule's effect on patient care and the bottom-line.

"We're concerned that HCFA has put in a cookie-cutter approach to pay for ambulance service," Kelley said. "The rule does not allow for unpredictable procedures. Most services anticipate a 24-25 percent decrease in revenue."

And since the new rule sets a base rate for the service, supplies and medication, Kelley said it could cause a crisis in patient care.

"Some of these drugs cost $150 a dose to restart the heart," he said. "If I can't recoup my cost, what's the incentive to put it on the street?"

Kelley said that since the companies would not be able to continue providing a high level of care without further reimbursement, and communities will probably be unwilling to pay subsidies, that leaves only one option: Delay implementation, revisit the problem and realistically look at the costs.

"We're asking that HCFA do adequate cost studies to determine what it's costing to provide service," Kelley said. "One estimate had the state's ambulance companies losing $121 million in ancillary charges for oxygen, medications, disposables and supplies. Then there's the estimate of what we lose with lower base rate. Just for an average sized service, that would reduce revenues anywhere from $ 150,000$300,000. There is a greater impact in rural areas because the cost to provide a high level, of care is going to be spread among fewer transports. Urban areas have shorter transport times, they can share resources and there are more calls over, which to spread the cost. If an ambulance company normally responds in 15-20 minutes, that number might increase to 45 minutes or more in rural areas because of the new rule."