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US Senate Testimony

US Senate Testimony

The U.S. Senate Committee on Governmental Affairs held a hearing,

Thursday, November 15, 2001, on Medicare Payment Policies for Ambulance

Services.

Below is testimony of J. Connor on behalf of EMCAP:

Thank you for affording me the opportunity to offer testimony to the

Senate Governmental Affairs Committee on this critical issue - Medicare Payments

to Ambulance Providers.

My name is Connor and I have been involved in emergency health care

services for over 20 years. I am currently the Chief Executive Officer of

Armstrong Ambulance Service, one of the largest privately-held ambulance

services within Massachusetts. I am also the President of the Massachusetts

Ambulance Association and the founder and acting Chairman of the Emergency

Medical Coalition of Ambulance Providers (EMCAP). EMCAP is a new organization,

comprised of state ambulance associations and ambulance providers. EMCAP's

mission is to protect the future of this nation's emergency health care network,

through the passage of legislation to assure adequate funding and through the

promulgation of rational and meaningful regulations.

The proposed Medicare ambulance fee schedule is inadequate. The

methodology for computing payments is flawed and will drive ambulance providers

across the country out of business. Massachusetts' ambulance providers will see

a 40 percent decrease in overall revenue; ambulance providers in 32 other states

will face similar decreases in Medicare revenues.

Some ambulance trade associations see the problem as simply one of budget

assumptions. The budget assumptions used to compute ambulance payments (in

particular in computing the national base rate or conversion factor) are

inadequate. But the problem goes beyond budget assumptions. The underlying

payment methodology simply doesn't protect our communities and our patients.

The members of EMCAP believe they have a responsibility to the communities

they serve, and the future of ambulance providers is part of that

responsibility.

Over the last two months, members of this body and health care

professionals have questioned whether our health care system and our emergency

health care system are prepared for a terrorist attack and, in particular,

bio-terrorism. These are important questions, and questions we as a nation must

confront. It would be easy to wrap the need for more funding for ambulance

providers in the mantle of national security, but the reason to protect the

future of our nation's ambulance providers goes beyond the threat of terrorism.

On September 11th, ambulance providers responded to the tragedies in New

York City and Washington. Some emergency medical staff gave their lives. But we

should not forget that every day, ambulance providers and other emergency health

care personnel respond to the medical needs of the communities they serve.

Ambulance providers are an essential part of the emergency health care system.

We cannot let the proposed fee schedule destroy the viability of ambulance

services across the country.

The proposed ambulance payment methodology fails in a number of areas.

Does CMS Understand the Nature of Ambulance Services?

It is not clear whether the Centers for Medicare and Medicaid Services

(CMS) understands the nature of ambulance services.

First, CMS believes that some ambulance services are not health care

providers. CMS classifies ambulance providers operated by institutional health

care providers - such as hospitals, nursing homes or home care agencies - as

health care providers. However, CMS does not classify ambulance providers

operating independently of an institutional health care provider as health care

providers. They classify these ambulance providers as ambulance suppliers, akin

to a supplier of medical devices.

If officials from CMS would leave Washington for just one day and spend

that day with an ambulance provider not operated by a hospital or nursing home,

they would soon learn that all ambulance providers are health care providers -

regardless of corporate sponsorship or affiliation.

While this may sound like a trivial matter, this distinction permeates the

proposed ambulance payment methodology. This classification scheme allows CMS to

undervalue some ambulance services. It creates a payment methodology that fails

to recognize that ambulance providers are an important part of our health care

delivery system.

Second, the maintenance of ambulance services is very similar to the

maintenance of hospital emergency departments. Hospital emergency departments

are very expensive to maintain. Even during slow periods, hospitals must

maintain expensive staff, equipment and supplies. In reimbursing hospitals for

emergency services, the Medicare program recognizes the validity of these fixed

costs. The proposed methodology for reimbursing ambulance providers does not

recognize that, like hospital emergency departments, ambulance providers have a

large proportion of fixed costs.

Emergency vs. Non-Emergency payment categories

This problem is most evident in the proposed payments for emergency and

non-emergency services. Under the proposed methodology, the Medicare program

would pay providers substantially less for non-emergency ambulance services than

for emergency ambulance services. While there are some differences in the cost

of emergency and non-emergency ambulance services, the differences are minimal.

CMS may want to believe it costs substantially less to transport

non-emergency patients, but in the real world, many communities and ambulance

providers use the same equipment and staff to provide emergency services as they

do for non-emergency services. These communities know that the hourly wages of

staff, medical supplies or malpractice insurance does not cost less for

non-emergency services.

While the real world may not fit CMS' theories, the proposed fee schedule

must recognize these real world costs.

In some parts of the country, the proposed regulations will decrease

Medicare payments for non-emergency services by as much as 70 percent.

Massachusetts ambulance providers transport 1,034,000 patients a year. Medicare

categorizes fifty percent, or 517,063 patients, as needing emergency or

immediate services and fifty percent, or 517,533 patients, as needing

non-emergency or non-immediate services. The proposed fee schedule would reduce

Medicare payments for non-emergency services by 26 percent. Medicare payments to

Massachusetts ambulance providers will decline by approximately $22.8 million

dollars annually. This reduction in payments will make it difficult, if not

impossible, for many ambulance providers to offer services seven days a week, 24

hours a day.

CMS must recognize the implications of their proposed payment methodology

and develop a fair and reasonable method of paying for ambulance services.

Rural Ambulance Providers

The problem of stand-by or fixed costs is most acute for rural ambulance

providers. Many rural communities simply do not have the population base to

efficiently support an ambulance provider. Ambulance providers in these

communities have a low volume of services coupled with having to travel long

distances. In the preamble to the proposed payment methodology, CMS wrote, " we

recognize the inadequacy of the proposed methodology to completely compensate

(rural providers) for these costs. " CMS goes on to say that the proposed

methodology is " temporary " and some time in the future they will fix it.

Ambulance providers in many rural communities can not afford to wait for CMS to

fix the problem " some time in the future. "

A number of rural ambulance groups recently proposed that CMS reimburse

rural ambulance providers the greater of the amount due under the current

payment methodology or the amount due under the proposed fee schedule. We

believe this approach to be fair and equitable.

Computation of the National Base Rate or Conversion Factor

The methodology CMS used to determine the national base rate or conversion

factor is flawed. For example, in many instances, CMS' computation of total

Medicare spending for ambulance services excluded the cost of supplies and

additional services, the cost of services provided by some public or community

ambulance providers, and the cost of mileage in some states or for ambulance

providers billing separately for mileage. There are many indications that in

computing the average cost of ambulance services, CMS overestimated the number

of ambulance services provided and as a result underestimated the average cost

of each service.

Similarly, CMS' methodology does not reflect new medical standards. For

example, the American Heart Association recently established a new standard of

care for cardiac arrest patients, requiring the administration of the drug

amiodarone by ambulance providers in the field. At $150 per dose, the current

baseline expenditures do not account for the purchase of this new medication. We

estimate the total additional industry-wide cost to be $15 million.

Is There a Remedy?

CMS' proposed ambulance payment methodology is an experiment, and by their

own admission not yet a successful one. Ambulance services are too important to

be left to what could turn out to be a failed experiment. Can our emergency

health care network survive this experiment?

Senator Dayton recently introduced the Medicare Ambulance Payment Reform

Act of 2001 (S. 1350) to correct some of the problems with the proposed payment

methodology. We applaud Senator Dayton and support his bill. While Congress

should enact Senator Dayton's legislation, I would strongly urge Congress to

delay implementation of the proposed Medicare payment methodology.

Today more than ever, our nation can ill afford the destruction of the

emergency health care system.

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