This originally appeared as an analysis in the American Health Lawyers Association's Health Law Digest, July 2002

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1 This originally appeared as an analysis in the American Health Lawyers Association's Health Law Digest, July 2002 By Marc D. Goldstone, Esq., MICP Tenet Health System Fort Lauderdale, FL Review And Analysis Of The Final Rule Implementing A National Medicare Fee Schedule For Ambulance Service I. INTRODUCTION On February 27, 2002, the Centers for Medicare and Medicaid Services (CMS) published a final rule (final rule) implementing a national Medicare Fee Schedule for payment of ambulance services. 1 This rule contains significant changes to the reimbursement methodologies previously used by Part A Fiscal Intermediaries and Part B Carriers when processing provider and supplier claims 2 for ambulance services. Because it is believed that, on average, at least 50% of ambulance transports in the U.S. are covered by Medicare, 3 these changes will have a sweeping impact on the entities that provide the service. In response to this rule, ambulance suppliers and hospitals that own ambulance providers will have to implement major changes in their own operations to ensure that they obtain and document the information necessary to receive the appropriate reimbursement. In addition, many independent ambulance suppliers benchmark the fees in their service contracts to the applicable Medicare rate. Hospitals that contract with such independent suppliers for the provision of ambulance services will need to be aware of the fee schedule s service levels and payment provisions in order to appropriately pay for their contracted ambulance services. II. BACKGROUND AND HISTORY Section 1861(s)(7) of the Social Security Act (Act) requires that Medicare Part B provide coverage for medically necessary ambulance service. 4 Section 1834(l)(1) of the Act required that CMS establish a fee schedule for ambulance service via negotiated rulemaking 5. Previously, ambulance service providers and suppliers had been reimbursed on a reasonable charge or reasonable cost basis 6. On January 22, 1999, 1 67 Fed. Reg , amending 42 C.F.R. Parts 410 and When claims are submitted to Part A by hospital owned ambulance services, CMS refers to the ambulance service as a Provider ; when submitted by independent services to Part B, CMS refers to the ambulance service as a Supplier. 3 Medicare patients compris[e] 50% of total transports for our industry on average American Ambulance Association Past President Mark Meijer's Testimony, Senate Hearing on Medicare Ambulance Payment Policies, Nov. 15, U.S.C. 1395(x). 5 Section 1834(l)(1) of the act was implemented by the Benefits Improvement and Protection Act of 2000 (BIPA). 6 Reasonable cost for Providers; Reasonable charge for Suppliers. 67 Fed. Reg

2 CMS published a solicitation for participation in a negotiated rulemaking process for ambulance service 7. CMS did not intend for the negotiated final rule to reduce aggregate expenditures for ambulance service. 8 On January 25, 1999, CMS published a preliminary final rule 9 with a comment period. This rulemaking was intended to revise and update the Medicare ambulance benefit. On February 22, CMS Medicare Ambulance Fee Schedule Negotiated Rulemaking Advisory Committee (NRM Committee) held its first meeting 10. On February 14, 2000, after nine meetings, the NRM Committee issued a final statement. On March 15, 2000, CMS published a final rule 11 responding to public comments received regarding the January 25 rule. On September 12, 2000, CMS published a proposed rule 12 with a comment period. Due to the volume of comments received, CMS was unable to implement the rule in a timely manner 13. On February 27, 2002, CMS published a final rule 14 without the opportunity for public comment 15. The final rule was implemented on April 1, III. SUMMARY OF CHANGES IN THE FINAL RULE The final rule implemented the following changes in Medicare s reimbursement methodology for ambulance service: Five year phase-in of the new Fee Schedule; Mandatory assignment is now required for all ambulance claims; New levels of service have been identified, and assigned new HCPCS 16 codes; 7 64 Fed. Reg The committee was chartered pursuant to the Federal Advisory Committee Act, 5 U.S.C. App Fed. Reg Fed. Reg This rule dealt with destinations to which ambulance service would be covered; equipment, staffing, and vehicular requirements; and coverage of non-emergency ambulance service. In addition, the rule implemented coverage for rural paramedic intercept service, as required by the Balanced Budget Act of 1997 (P.L ). 10 Pursuant to the Negotiated Rulemaking Act of 1996, 5 U.S.C , the Committee was to be composed of individuals associated with national organizations that represented interests that were likely to be significantly affected by the fee schedule. Many entities responded to the solicitation. At the end of the selection process, represented on the Committee were: American Ambulance Association (AAA), American College of Emergency Physicians (ACEP), National Association of EMS Physicians (NAEMSP), American Health Care Association (AHCA), American Hospital Association (AHA), Association of Air Medical Services (AAMS), Health Care Financing Administration (HCFA, now CMS), International Association of Firefighters (IAFF), International Association of Fire Chiefs (IAFC), National Association of Counties, National Association of State Emergency Medical Services Directors (NASEMSD), and the National Volunteer Fire Council. The meetings of the committee were facilitated by Commissioners from the Federal Mediation and Conciliation Service Fed. Reg Fed. Reg CMS received more than 340 comments on the proposed rule. 67 Fed. Reg Note 1, supra. 15 The February 27 rule indicated that CMS would only accept comments regarding: (1) Cost reimbursement for ambulance services furnished by certain critical access hospitals, and (2) certain technical issues regarding reimbursement for ambulance mileage expenses. 16 Health Care Financing Administration Common Procedure Coding System (HCPCS). HCPCS codes are used for billing medical services and procedures to Medicare and other federal healthcare programs. 2

3 Emergency response modifier basis has been changed; Multiple billing methods have been eliminated; Reasonable cost reimbursement for providers has been eliminated 17 ; New physician certification statement requirements for non-emergency ambulance service (including a national definition of the term bed-confined ) have been implemented; Multiple ground ambulance mileage rates have been eliminated; Location-based payment modification rules have been changed; New payment policies for multiple patients in one ambulance have been implemented; and Medicare payment for Advance Life Support (ALS) mandated responses has been eliminated. IV. REVIEW OF THE MEDICARE AMBULANCE TRANSPORTATION BENEFIT In order to understand the impact of these changes on ambulance providers and suppliers, it is important to have a firm grasp of Medicare s ambulance transportation benefit. 18 Therefore, a brief overview of the benefit follows. Ambulance transportation is a covered benefit of Medicare Part B. Coverage is based on the following criteria: The services must be medically necessary and reasonable for the condition of the patient; The condition of the patient must contraindicate transportation by any other means; An ICD-9-CM condition code representing the patient s condition at the time of the transfer must be submitted with the claim; The ambulance personnel s record must support the medical necessity for ambulance transportation; Transportation from a hospital to another hospital is covered when the care required by the patient is not available at the first hospital, the patient is admitted to the second hospital, the second hospital is the closest appropriate facility for the patient based on their medical condition, and the other elements of medical necessity are met; Transportation from a hospital to an extended care facility or to the patient s home is covered, when the other elements of medical necessity are met; and 17 Pursuant to 205 of BIPA, reasonable cost reimbursement was preserved for Critical Access Hospitals (or entities owned or operated by CAHs) that provide ambulance service if there is no other ambulance provider or supplier within a thirty-five-mile drive. 18 The Medicare fee-for-service ambulance benefit is a transportation benefit. If no transport of a Medicare beneficiary occurs, then there is no billable service covered under the Medicare ambulance benefit. In the event that an ambulance provider or supplier responds to the scene of an emergency and renders treatment, but the patient is left at the scene, such services, in general, are not covered Medicare benefits. However, the entity that furnishes a non-covered service to a Medicare beneficiary may bill the beneficiary for such service. 3

4 Transportation is only covered when provided by a Carrier-approved supplier of ambulance service. The following conditions may establish medical necessity for ambulance service: The transport resulted from an emergency situation (e.g., as the result of an accident or emergency); The patient needs to be restrained 19 (i.e., to prevent danger to self or others, etc.); The patient is unconscious or in shock 20 ; The patient requires oxygen 21 or other emergency treatment on the way to their destination; The patient has to remain immobile because of a fracture that has not been set (or the possibility of such a fracture); The patient has sustained an acute stroke or myocardial infarction; The patient is experiencing severe hemorrhage; The patient has a condition that requires them to be moved only by stretcher; and The patient has a condition that makes them bed-confined 22 before and after the ambulance trip. There is an additional requirement for coverage of certain instances of nonemergency ambulance service. Ambulance suppliers are required to obtain a physician s written order (Physician s Certification Statement or PCS) certifying the need for certain scheduled or non-emergency ambulance transportation prior to submitting a claim for reimbursement 23. A PCS is not required for non-emergency, unscheduled transportation of beneficiaries residing at home (or elsewhere not under the direct care of a physician). It is thought that this is a rare exception because most non-emergency transports occur for patients receiving dialysis (repetitive, scheduled) or diagnostic tests (scheduled), and are thus subject to the PCS requirement. V. FIVE-YEAR PHASE-IN OF THE NEW FEE SCHEDULE 19 The term needs to be restrained has been the subject of some discussion in the health law bar. It has been posited that the term needs to be indicates that the patient does not actually have to be restrained. Additionally, it has been pointed out that there are varying levels of restraint for example, locking the ambulance doors, verbally insisting that the patient remain still, use of seat belts, soft restraints, hard restraints (hand cuffs, etc.). 20 It is believed that many types of shock, including hypovolemic, anaphylactic, neurogenic, toxic, etc. constitute medical necessity for ambulance service pursuant to this provision. 21 It should be noted that the presence of patient administered oxygen (i.e., personal, portable DME oxygen tank and regulator) and/or the ambulance crew s substitute of the crew s own oxygen equipment for same, does not create medical necessity for ambulance transportation. 22 CMS national definition of bed confined is as follows: The patient is unable to get up from bed without assistance; [is] unable to ambulate; and is unable to sit in a chair or wheelchair. 42 C.F.R (d)(1). For purposes of medical necessity for ambulance transportation, the term bed confined is not synonymous with the terms bed rest or non-ambulatory. 23 See infra for a complete discussion of PCS requirements. 4

5 CMS recognized that implementation of the National Fee Schedule would have a significant financial impact on ambulance service suppliers and providers. In order to mitigate this impact, the proposed rule specified implementation of the Fee Schedule over a four-year period. 24 After reviewing comments received on the September 2000 rule, CMS decided upon a longer, five-year implementation schedule, noting that suppliers and providers need additional time to adjust to the fee schedule. 25 The phase-in will be accomplished by reimbursing suppliers a specified percentage of the fee schedule allowable amount, and a specified percentage of the former payment the supplier would have been entitled to. The percentages will change each year, as follows 26 : Former payment percentage Fee schedule percentage Year One (4/ /2002) 80% 20% Year Two (CY 2003) 60% 40% Year Three (CY 2004) 40% 60% Year Four (CY 2005) 20% 80% Year Five (CY 2006) 0% 100% CMS is not making any allowance for the agency s own delay in implementation of the final rule. Rather, the first quarter of 2002 is simply ignored, and the first year of the Fee Schedule s implementation is composed of only nine months. Providers are also subject to a phase-in. 27 VI. MANDATORY ASSIGNMENT Section 1834(l)(6) of the Act requires that all payments for ambulance services must be made on an assignment-related basis. The final rule 28 thus provides that [e]ffective with implementation of the ambulance fee schedule... all payments made for ambulance service are made only on an assignment-related basis. Ambulance suppliers must accept the Medicare allowed charge as payment in full and may not bill or collect from the beneficiary any amount other than the unmet Part B deductible and Part B coinsurance amounts. CMS responses to public comments on the proposed rule indicate that assignment is mandatory even where Medicare is the secondary payor. 29 This is a substantial change to established billing and collection practices. Many ambulance suppliers have traditionally eschewed assignment and balance billed the patient for the difference between the Medicare approved amount and the supplier s global fee. Because many suppliers rely on specialized software to operate their billing and collections systems, balance-billing may occur without the supplier s knowledge, unless the software s settings are changed to accommodate the new rule. It is important Fed. Reg Id Fed. Reg Fed. Reg See infra for more details on the Provider phase in C.F.R Fed. Reg

6 to be aware that engaging in the practice of balance billing patients amounts in excess of the Medicare co-payment and/or deductible after April 1, 2002 may subject the ambulance supplier to sanctions. 30 VII. NEW LEVELS OF SERVICE HAVE BEEN IDENTIFIED AND ASSIGNED NEW HCPCS CODES The final rule establishes nationally uniform levels of ambulance service. The levels of service are first divided by two differing transport methods by air or by ground 31. Each method is then subdivided by the level of care required by the patient. A. Air Transport Air ambulance transportation is divided into two categories: Fixed Wing (FW) and Rotary Wing (RW; i.e., helicopter). Air ambulance transport is covered when the point from which the beneficiary is transported to the nearest hospital with appropriate facilities is inaccessible by land vehicle, or great distances or other obstacles (for example, heavy traffic) and the beneficiary s medical condition is not appropriate for transport by either BLS (basic life support) or ALS (advanced life support) ground ambulance. 32 The aircraft used to provide the service must be certified as either an FW Air Ambulance or an RW Air Ambulance in order for the provider or supplier to receive Medicare reimbursement. 33 FW Air Ambulance transport is generally utilized when an acutely ill or injured patient is admitted to a remote facility for stabilization. Once the patient has been stabilized and a definitive course of treatment has been determined, the patient may require transportation to a regional reference facility (i.e., cardiac surgery center, etc.). If the distance to the reference facility is great (and the time to transport the patient by ground is too great, given the patient s condition) or, in the alternative, access by ground ambulance is blocked, then an FW air ambulance may be the appropriate choice to move the patient. RW Air transport is typically utilized when the patient has suffered significant trauma and requires rapid transportation to a specialized trauma center. 34 In the alternative, RW Air Ambulance transport may be required when the patient is injured in a remote site and cannot practically be removed to a receiving area for a ground ambulance or a landing area suitable for a fixed wing air ambulance. Air Ambulances are relatively scarce resources, when compared to the number of ground ambulances available in the U.S. Thus, over-utilization is rarely a problem. The Fee Schedule is fairly straightforward regarding reimbursement for these services Fed. Reg The term ground includes ambulance transportation by land and by water (i.e., boat). 67 Fed. Reg Fed. Reg C.F.R For purposes of patient care, the term trauma center also includes specialized burn centers when referring to patients with clinically significant burns. 6

7 Therefore, providers and suppliers of air ambulance service are among the groups least affected by the complexities of the final rule. FW Air Ambulance has been assigned HCPCS code A0430; RW has been assigned code A0431. Loaded miles to the closest appropriate facility 35 are paid separately, on a per-mile basis 36. FW Air Ambulance mileage has been assigned HCPCS code A0435; RW air ambulance mileage has been assigned code A B. Ground Transport Ground transport is divided into three categories: BLS, ALS, and Specialty Care Transport (SCT). BLS ground ambulance transport is generally provided where the patient requires no advanced care enroute, but rather, cannot safely be transported by other means. BLS ground ambulance transportation is defined as transportation by ground ambulance vehicle and medically necessary supplies and services, plus the provision of BLS ambulance services. BLS ambulance transportation is the most common form of ambulance transport provided in the U.S. The final rule requires that the ambulance be staffed by an individual who is qualified in accordance with state and local laws as an emergency medical technicianbasic (EMT-Basic). 38 This is a change from the definition contained in the proposed rule, which would have required personnel to meet a federal standard 39 that has largely been unimplemented by the various states. 40 Non-emergency BLS ground ambulance transport has been assigned HCPCS code A ALS ground ambulance transport is generally provided when the patient requires advanced care enroute. ALS ground ambulance transport is divided into two categories: ALS-Level 1 and ALS-Level ALS-Level 1 (ALS-1) service is defined as transportation by ground ambulance vehicle, medically necessary supplies and service and either an ALS assessment by ALS personnel or the provision of at least one ALS intervention. 43 ALS-Level 2 (ALS-2) service is defined as ALS-1 service plus the administration of at least three medications 44 by intravenous push/bolus or by 35 Medicare only pays for medically necessary ambulance transportation when the destination is the closest appropriate facility. In general, the closest appropriate facility is the nearest licensed acute-care hospital that has the capacity to provide the care required by the patient. If a beneficiary wishes to be transported to a more distant facility (for any reason, including proximity to the patient s home, the presence of a preferred physician, the reputation of the more distant facility, etc.), then the beneficiary may enter into an agreement with the ambulance provider to pay out of pocket for the additional mileage charges. 67 Fed. Reg All ambulance mileage rates are subject to a rural modifier. 37 The appendix to this article contains a complete listing of the new HCPCS codes and their corresponding service lines C.F.R The National EMS Training Blueprint 67 Fed. Reg Fed. Reg Certain levels of ground ambulance transport are subject to an emergency response modifier. 42 ALS-1 ambulance transport is subject to the emergency response modifier. ALS-2 is not. 42 C.F.R (c)(1) C.F.R ALS interventions include an ALS assessment, even if that assessment results in the finding that no further ALS treatment is warranted. 44 Three discrete doses of the same ALS-2 medication qualify, as do two discrete doses of the same ALS-2 medication and one dose of another ALS-2 medication. 67 Fed. Reg

8 continuous infusion excluding crystalloid, hypotonic, isotonic and hypertonic solutions (Dextrose, Normal Saline, Ringer s Lactate)... or the provision of at least one of the following ALS procedures: Manual defibrillation/cardioversion; Endotracheal Intubation; Central venous line; Cardiac pacing; Chest decompression; Surgical airway; Intraosseous line. 45 As with BLS level service, certification of the ALS provider is as required by state or local law. 46 Non-emergency ALS-1 ground ambulance service has been assigned HCPCS code A0426. ALS-2 has been assigned code A0433. Determining how to code appropriately the charges for these levels of service presents a significant challenge to the ambulance provider or supplier. To receive ALS- 1 payment, the ALS responders must provide an ALS Assessment to the patient. However, it is not necessary that the ALS assessment result in a determination that ALS care is required. 47 In fact, in areas with two-tier response, both an ALS and a BLS ambulance may be dispatched to a call for assistance, based on the nature of the request. 48 If the ALS provider arrives, performs an ALS assessment and determines that no ALS is required but the patient is transported by the BLS ambulance crew without the ALS personnel in attendance, the call may still be coded and billed at the higher ALS-1 rate, rather than at the BLS rate. 49 Because payment for paramedic intercept services is extremely limited, 50 it is likely that, in the majority of these ALS Interfaces, the ALS provider or supplier and the BLS entity will have to share the reimbursement received from the Medicare program. Unfortunately, CMS does not permit the submission of two bills to a Medicare carrier in respect of a single ground ambulance transport, even if two providers or suppliers respond together and each provides a different component of care. 51 In such ALS Interface cases, an agreement between the ALS and BLS agencies is required to specify the way in which the service will be billed 52 and the way in which the reimbursement will be shared. In the event that a BLS service bills for the ALS service (with or without the ALS provider s consent, and thus blocking the ALS provider s ability to bill for the service) but does not forward to the ALS provider their 45 Id. 46 [A]n individual trained to the level of emergency medical technician-intermediate (EMT-Intermediate) or emergency medical technician paramedic (EMT-Paramedic)... in accordance with State and local laws. Id. 47 Id. 48 For example, serious trauma, cardiac arrest, stroke, poisoning, etc Fed. Reg Fed. Reg (quoting 42 C.F.R (c)) Paramedic intercept services occur when the paramedic agency responds in conjunction with a BLS ambulance provider that is legally prohibited from billing. In general, paramedic intercept services are only reimbursable by Medicare in a small area of rural New York State. 51 This is not the case where a ground ambulance transports a patient to and/or from a landing zone before or after air ambulance transport. In those instances, both the ground ambulance and the air ambulance may bill Medicare separately for their services. 52 The BLS service may bill for the ALS level of service and reimburse the ALS service; or, the BLS service may reassign its right to receive benefits for the service to the ALS service (if the ALS service is a Part B provider) and then the ALS service may bill for the transport and reimburse the BLS provider. The presence of such an agreement raises interesting issues regarding the Anti-Kickback Statute. For example, if the BLS provider demands more reimbursement as a result of the interface than they would otherwise be entitled to if the ALS provider had not participated in the ALS Intercept, it is likely that such demand could create ALS liability for the BLS provider. 8

9 share of the reimbursement, the BLS service risks fraud and abuse liability from CMS and civil tort liability in state court. The final rule is silent regarding several important issues that arise as a result of the usual way that ALS ambulance service is provided in the U.S. For instance, the fee schedule provides significantly higher reimbursement for ALS-2 level care than ALS-1 care. 53 However, the rule requires the administration of three doses of medications via the IV push, bolus, or infusion route in order to qualify for the enhanced reimbursement. 54 Unfortunately, the rule does not recognize the administration of medications via other routes, such as intra-muscular (IM) injection, 55 subcutaneous (SQ) injection, 56 nebulized inhalation, 57 transdermal absorption, 58 sublingual absorption, 59 or other routes that may only available to ALS personnel in many states, as qualifying for the increased ALS-2 payment. The rule also fails to consider the use of solutions that, when administered in low concentrations, constitute maintenance drips but when administered in high concentrations constitute powerful therapeutic agents. An example of this type of solution is Dextrose. When administered as a 5% solution, it is a common keep vein open or KVO fluid. When administered at a concentration of 50% (10% or 25% in pediatric patients) it is the drug of choice for counteracting life-threatening hypoglycemia. The rule as written does not allow the administration of hypertonic dextrose to contribute to the three medications 60 required for the higher ALS-2 reimbursement. 61 Specialty Care Transport is defined as interfacility 62 transportation of a critically injured or ill beneficiary by a ground ambulance vehicle, including medically necessary supplies and service, at a level of service beyond the scope of the EMT-Paramedic. SCT is necessary when a beneficiary s condition requires ongoing care that must be furnished by one or more health professionals in an appropriate specialty area, for example, nursing, emergency medicine, respiratory care, cardiovascular care, or a paramedic with additional training. 63 CMS responses to comments received on the proposed rule indicate that the term paramedic with additional training is defined in terms of State or local authority that governs the licensing and certification of EMS personnel in the State in which a paramedic is licensed. It seems possible, even likely 53 The relative value unit (RVU) for ALS-1 emergency ambulance service is The RVU for ALS-2 ambulance service is C.F.R (c)(1). 54 Or the provision of one of the ALS-2 interventions. 42 C.F.R Thiamine, naloxone, etc. 56 Epinephrine 1:1,000, insulin, terbutaline, etc. 57 Albuterol sulfate, etc. 58 Nitroglycerine paste, etc. 59 Nitroglycerine tablets, etc. 60 The rule specifically excludes common medication such as aspirin (used for its anti-coagulant properties when treating a suspected myocardial infarction) and oxygen. 67 Fed. Reg CMS web-based guidance found at indicates that drugs represented by the HCPCS in the range J7030 through J7130 do not qualify as ALS2 drugs. At recent meetings, Part B carriers have stated that they will contact CMS to conversely determine if medications NOT on this list (i.e., 50% Dextrose infusion, etc.) DO constitute ALS-2 drugs. 62 Ground transports to/from a landing zone before/after air ambulance transport are also included in the definition of SCT, provided that the ground transport begins or ends at a facility. Id C.F.R

10 that there is no comparable definition in every state. 64 This deliberate vagueness creates special problems for providers or suppliers that wish to receive Medicare reimbursement for SCT services. For example, in New Jersey, the state s Office of Emergency Medical Services does not allow paramedics to provide SCT-level care. Thus, in order to bill for an SCT transport, a registered nurse (or physician) must accompany the patient. It would be wise for ambulance suppliers and providers to obtain written documentation from their local EMS licensing authorities regarding the nature of the additional training that would be required of paramedics in order for those individuals to provide SCT care in their state. Without such documentation, ambulance suppliers and providers may be placed in a position whereby they cannot bill for SCT services (and are thus locked out of the significantly higher SCT reimbursement). 65 In the past, ambulance providers and suppliers have not been required to stratify their claims for reimbursement in the widely diverse manner required by the final rule. Although prior ambulance payment policies differentiated between ALS and BLS levels, there were no sub-levels of service. SCT was typically reimbursed at the ALS ambulance service level. This new stratification of reimbursement levels presents a significant compliance challenge for the ambulance provider or supplier. Patient care report documentation must accurately reflect the certification level of the caregiver and the identity and frequency of medications and/or procedures that are administered to the patient. Without such detailed documentation, it will be impossible to accurately code claims for ambulance service. Inaccurately coded claims (or claims for which the code is not supported by the ambulance provider s written patient care records) are simply fodder for an audit, or worse, for a qui tam suit. VIII. EMERGENCY RESPONSE MODIFIER CHANGE In the past, increased reimbursement for emergency responses has been obtained based on the condition of the patient as discovered upon the ambulance s arrival. The final rule provides increased emergency response reimbursement based on the additional overhead cost of maintaining the resources required to respond immediately to a call and not for the cost of furnishing a certain level of service to the beneficiary. 66 Therefore, effective April 1, 2002, an emergency response is defined as responding immediately at the BLS or ALS-1 level of service to a 911 call or the equivalent in areas without a 911 system. 67 An immediate response is one in which the ambulance supplier begins as quickly as possible to take the steps necessary to respond to the call. 68 If an ambulance responds in a non-emergent manner but, upon arrival, determines that the patient is suffering from an emergent condition, the provider or supplier may not then bill that call at the emergency level. 69 This constitutes a change in practice for many ambulance suppliers and providers. Interestingly, this definition fails to recognize that a supplier may incur Fed. Reg (emphasis added). 65 The SCT RVU is 3.25, as compared to the ALS-1-Non Emergency RVU of C.F.R (c)(1) Fed. Reg C.F.R Id. 69 As established during the negotiated rulemaking, the emergency payment rate is intended to cover the cost of readiness to respond immediately to a 911 type call. The emergency payment is not designed to accommodate, nor was it established based on, serendipitous or chance events. 10

11 significant costs to maintain a system to respond to emergency calls that do not originate from a 911 center. For example, many skilled nursing facilities (SNFs) frequently utilize ambulance service for their residents. Due to this frequency, the SNFs often contract with a private ambulance supplier, rather than burden the local 911 system with constant utilization. Within such contracts, the private ambulance service substitutes for the local 911 provider. The SNF s request for service is made the same way as a 911 request, with the exception of an extra four digits dialed. The supplier incurs the same costs to be ready as the local 911 provider. The ambulance responds in the same way and provides the same treatment. Yet the rule seems to exclude the private ambulance supplier from obtaining the enhanced emergency modifier reimbursement 70 in this situation. Fortunately, later issued guidelines squarely address this matter. 71 The emergency modifier is not applicable to ALS-2 and SCT level service 72. The final rule is silent on whether this exclusion also acts to make these non-emergency services such that a physician certification statement (PCS) regarding medical necessity for the transport is required prior to submitting a claim for reimbursement. Because claims for ALS-1 emergency ambulance services do not require a PCS and ALS-1 emergency is a lower mode service than ALS-2 or SCT, it is likely that that the PCS requirement does not apply to claims for ALS-2 and SCT ambulance services. IX. ELIMINATION OF MULTIPLE BILLING METHODS Previously, CMS permitted ambulance suppliers to bill by one of four different methods. Method 1 was utilized by suppliers that submitted a single, all-inclusive charge reflecting all services, supplies, and mileage. Method 2 was similar to Method 1, but allowed a separate charge for mileage. Method 3 billers submitted one charge for all services and mileage, with a separate charge for supplies. Method 4 billers submitted separate charges for services, mileage, and supplies. Under the final rule, all suppliers must bill by a single, national method. Effectively, the final rule converts all suppliers to the old Method 2. During the transition period, providers that previously billed under Methods 3 or 4 may continue to submit separate charges for supplies. However, the reimbursement for supplies will be reduced each year during the transition until the end of the transition period, at which time separate reimbursement for supplies will be eliminated, and payment for these items will be considered included in the base rate The RVU for BLS non-emergency ground ambulance service is 1.00; the RVU for BLS emergency ground ambulance service is 1.60; an increase in reimbursement of 60%. 71 The phrase 911 call or equivalent is intended to establish the standard that the nature of the call is the determining factor. Regardless of the medium by which the call is made (e.g., a radio call could be appropriate) the call is of an emergent nature when, based on the information available to the dispatcher at the time of the call, it is reasonable to issue an emergency dispatch in light of accepted, standard dispatch protocol. An emergency call need not come through 911 even in areas where a 911 call system exists. Where a particular provider or supplier develops an historical pattern of such calls, depending on local conditions, the fiscal intermediary or carrier may determine that such pattern or practice merits additional review Fed. Reg Fed. Reg

12 The elimination of multiple billing methods is certain to cause confusion among ambulance suppliers and providers. The final rule indicates that thirty HCPCS codes previously used to bill Medicare for ambulance service have been condensed into twelve permanent and two temporary codes under the new Fee Schedule. 74 Additionally, the bundling of supplies into the base rate raises an issue in regard to the DHHS Ambulance Restocking safe harbor. 75 In order to receive the benefit of the Safe Harbor s protection from liability, [u]nder no circumstances may the ambulance provider (or first responder) and the receiving facility both bill for the same replenished drug or supply. 76 Replenished drugs or supplies may only be billed (including claiming bad debt) to a federal healthcare program by either the ambulance provider (or first responder) or the receiving facility. Drugs and medical supplies (including linens) initially used by a first responder and replenished at the scene of the illness or injury by the ambulance provider that transports the patient to the hospital or other receiving facility will be deemed to have been used by the ambulance provider. 77 If, as the Fee Schedule rule states, payment for supplies (such as those replenished under the Safe Harbor) is included in the base rate, then hospitals that engage in restocking programs cannot bill for the supplies issued to ambulance suppliers that bill for their services if they wish to invoke the protection of the Safe Harbor. 78 Of course, the Safe Harbor allows hospitals to limit restocking programs to ambulance suppliers that do not bill for their services 79 ; still, this is a significant limitation on the Safe Harbor s utility. X. REASONABLE COST REIMBURSEMENT FOR PROVIDERS HAS BEEN ELIMINATED Ambulance providers owned by hospitals bill the appropriate Part A Fiscal Intermediary (FI) for their services. In the past, FIs reimbursed providers for ambulance services on a reasonable cost basis. 80 Year to year increases in this reimbursement were recently capped by a statutory inflation factor. 81 After April 1, 2002, ambulance providers will receive reimbursement based on a blending of the amount payable under the old system and the amount payable under the final rule 82. The relative percentages of the blend are identical to those specified in the Part B transition. This will present some challenges to hospitals that operate ambulance providers when preparing Part A cost reports Fed. Reg Fed. Reg C.F.R (v)(2)(1)(A) C.F.R (v)(1). 78 At least to the extent that supplies were replenished in respect of those used in the ambulance provider s care of a federal healthcare program beneficiary. Given the realities of the healthcare business and the difficulty in segregating the patients in respect of whom replenishment is offered, it seems that the Fee Schedule rule has the practical effect of eliminating Safe Harbor coverage for replenishment arrangements with ambulance providers that bill for their services, if the replenishing hospital cannot ensure that it will not bill for the replenished supplies C.F.R Fed. Reg Id., discussing 4531 of the Balanced Budget Act of Pursuant to 205 BIPA, reasonable cost reimbursement was preserved for Critical Access Hospitals (or entities owned or operated by CAHs) that provide ambulance service if there is no other ambulance provider or supplier within a thirty-five-mile drive. 12

13 The final rule requires that [a]ll submitted charges attributable to ambulance services furnished during a cost-reporting period [must] be aggregated and treated separately from the submitted charges attributable to all other services furnished in the hospital. 83 Additionally, providers must maintain statistics necessary for the Provider Statistics and Reimbursement report to ensure that the ambulance fee schedule portion of the blended transition payment will not be cost-settled at cost settlement time. 84 The mandatory assignment rule is also imposed upon providers. 85 It is apparent that the final rule will have the effect of reducing reimbursement to providers and increasing reimbursement to suppliers. 86 Another effect of the final rule is to increase reimbursement to rural providers at the expense of urban providers. 87 Hospitals may wish to utilize suppliers, such as Internal Revenue Code 501(e) shared services consortia, to reduce their costs for ambulance service. Utilization of a 501(e) organization can provide not only significant cost savings, but also a significant degree of control over the provision of the services; control that is not often possible when utilizing completely independent suppliers. XI. NEW PHYSICIAN CERTIFICATION STATEMENT REQUIREMENTS FOR NON- EMERGENCY AMBULANCE SERVICE (INCLUDING A NATIONAL DEFINITION OF THE TERM BED-CONFINED ) CMS imposes special certificate requirements for suppliers that provide nonemergency ambulance services. 88 Providers have always been required to obtain a certificate attesting to the medical necessity of the ambulance service for which they bill. In recent years, suppliers have been subject to a series of program memoranda regarding certification requirements for ambulance service. The final rule implements a national policy regarding suppliers responsibilities to obtain written certifications attesting to medical necessity prior to submitting claims for certain incidents of non-emergency ambulance service. Of course, the supplier must also maintain patient care documentation demonstrating that ambulance service is medically necessary. If such documentation is not available (whether because the ambulance crew did not complete the documentation, or because medical necessity was not present), the supplier should not submit a claim for reimbursement to a federal healthcare program. A. Non-Emergency, Scheduled, Repetitive Ambulance Service Prior to the provision of scheduled, repetitive non-emergency BLS ambulance service, 89 the supplier must obtain a written order from the beneficiary s attending Fed. Reg Id. 85 Id Fed. Reg Fed. Reg CMS web-based guidance reveals that the utility of the PCS requirement is under review. medlearn/faqambpc.htm. Interested parties may submit comments regarding this matter via to Bart Kershbaum 89 But in no case more than sixty days before the date of service. 42 C.F.R (d)(2). 13

14 physician certifying that the medical necessity requirements of [42 CFR (d)(1)] are met. 90 If the supplier does not obtain the required certification, it may not submit a claim for the service. The supplier is not required to submit a copy of the certification with the claim; however, it must maintain the certification on file, and upon request, present it to the [Part B] contractor. 91 On May 1, CMS provided additional guidance regarding this requirement, via an Internet based Q & A website. 92 The Q & A indicates that the term repetitive ambulance service is defined as medically necessary ambulance transportation that is furnished either three or more times during a ten-day period or at least once per week for three weeks. However, regularly scheduled ambulance services for follow-up visits, whether routine or unexpected are not repetitive... unless one of the quantitative standards is met. Based on the context of the rule, it appears reasonable to presume that coincidental incidents of non-emergency ambulance service that meet the qualitative standards, but do not arise from the same cause, 93 do not constitute repetitive ambulance service. B. Non-Emergency, Unscheduled, Or Scheduled But Non-Repetitive Ambulance Service If unscheduled, or scheduled non-repetitive non-emergency BLS ambulance service is provided to a resident of a facility who is under the care of a physician, the ambulance supplier must obtain the PCS from the beneficiary s attending physician within 48 hours after the transport. 94 However, CMS realizes that it may be difficult for the supplier to locate the patient s physician, and obtain the necessary PCS within fortyeight hours. The final rule provides alternative mechanisms to comply with this requirement. If the provider or supplier is unable to obtain a signed PCS from the patient s physician, they may attempt to obtain it from a: Physician Assistant; Nurse Practitioner; Clinical Nurse Specialist; Registered Nurse; or Discharge Planner who has personal knowledge of the beneficiary s condition at the time the ambulance transportation is ordered or the service is furnished. This individual must be employed by the beneficiary s attending physician or by the hospital or facility where the beneficiary is being treated and from which the beneficiary is transported. 95 The individual must be licensed pursuant to Medicare regulations and applicable state licensure laws. 96 In the event that the ambulance supplier cannot obtain the required certification within twenty-one calendar days after the date of the service, the supplier can document 90 Id C.F.R (d)(3)(v) For example, in the space of a ten-day period, transportation provided to a patient once for an orthopedic consult, once for a diagnostic x-ray, and once for an opthalmological evaluation, would meet the quantitative, three-trip standard. However, because each trip arose from a separate cause, the trips would not likely be considered repetitive C.F.R (d)(3)(i) C.F.R (d)(3)(iii). 96 Id. 14

15 attempts to obtain the certification and then submit the claim 97. Such documentation can take the form of a signed return receipt from the U.S. Postal Service or other similar service that evidences that the ambulance supplier attempted to obtain the required signature from the beneficiary s attending physician or other [approved] individual. 98 To be conservative, it is recommended that a form of documentation that provides the recipient s signature be utilized when submitting claims pursuant to this provision of the final rule. C. National Definition Of Bed Confined The various Part B carriers have maintained separate definitions for the term bed confined as used to support medical necessity for ambulance service. Ambulance lore tells of one carrier that indicated that bed confined was a condition, such that if a patient were suffering it, and their bed were to catch fire, absent assistance, the patient would surely burn to death. The final rule implements a national definition of the term bed confined. For purposes of determining medical necessity for ambulance transport, bed confined means: (1) the beneficiary is unable to get up from bed without assistance; (2) the beneficiary is unable to ambulate; and, (3) the beneficiary is unable to sit in a chair or wheelchair. 99 The final rule also indicates that bed confinement is not, in and of itself, the sole criterion in determining medical necessity for ambulance transportation. Rather, it is one factor to be considered. The beneficiary must be bed confined and it must be documented that their condition is such that other methods of transportation are contraindicated. 100 If the ambulance crew s patient care report indicates that the patient walked to the stretcher, it is likely that a PCS form indicating that the patient was bed confined will suffice to constitute medical necessity such that the claim properly may be submitted for reimbursement. Ambulance suppliers and providers must examine their patient care forms carefully to determine if they may receive Medicare reimbursement for non-emergency BLS ambulance transport before submitting claims. It is likely that not every incident of such transport will be reimbursable. XII. ALL GROUND AMBULANCE MILEAGE CHARGES PAID AT ONE RATE The final rule establishes a single, unified code for ground ambulance mileage. HCPCS code A0425 has been assigned to ground ambulance mileage. 101 Payment for this item will be phased in along with the rest of the National Fee Schedule. This will likely result in a decrease in total ALS ambulance reimbursement, and may increase some BLS ambulance reimbursements. In conjunction with the mandatory assignment requirement, suppliers must be careful to not to balance bill patients for more than the co-payment associated with this new unified code and not to balance bill for a higher amount based on the use of the old ALS or BLS mileage codes C.F.R (d)(3)(iv). 98 Id C.F.R (d)(1). 100 Id Fed. Reg

16 XIII. LOCATION-BASED PAYMENT MODIFICATION Prior to the Fee Schedule s implementation, Part B carriers maintained different reimbursement schedules for ambulance service. In the past, ambulance suppliers were able to maximize their Medicare revenue by garaging their ambulances in the region with the highest reimbursement levels. Because reimbursement was based on the location where the responding ambulance was garaged, the pickup location was not relevant to the reimbursement claim. The final rule provides that the location of service payment modifiers will be based on the point of pickup, as defined by the zip code of the street address where the patient was placed in the ambulance. 102 The comments indicate that this was adopted to prevent, in part, the relative ease of moving the location of the company or garage to achieve higher payment. 103 The final rule includes two point of pickup payment modifiers. The first is the Geographic Adjustment Factor (GAF). The GAF is calculated as the practice expense (PE) portion of the geographic practice cost index (GPCI) from the Medicare physician fee schedule and it is applied to a percentage of the base rate. 104 The applicable GAF is the GPCI PE that applies to the zip code at the point of pickup. 105 The GAF is applied to 70% of the ground ambulance service rate. 106 For air ambulance services, the GAF is applied to 50% of the base rate. 107 The second location-based modifier is the Rural Adjustment Factor (RAF). The RAF is defined as an adjustment applied to the base payment rate when the point of pickup is located in a rural area. 108 The RAF is applied to the mileage rate for ground ambulance service when the point of pickup is located in a rural area 109. The mileage rate is increased by 50% for the first seventeen miles, and by 25% for miles eighteen to fifty. For air ambulance service, the total payment (base plus mileage) is increased by 50%. 110 It may prove difficult for ambulance suppliers to correctly calculate the locationbased modifications. In fact, it may prove difficult for carriers to undertake this task. After all, the final rule provides the following simple formulae 111 by which to calculate ambulance payments: C.F.R Fed. Reg C.F.R Fed. Reg C.F.R (c)(4). 107 Id C.F.R Rural area means an area located outside a Metropolitan Statistical Area (MSA) or a New England County Metropolitan Area (NECMA) or an area within an MSA that is identified as rural by the Goldsmith modification. 42 C.F.R Goldsmith modification means the recognition of rural areas within certain Standard Metropolitan Statistical Areas wherein a census tract is deemed to be rural when located within a large metropolitan county of at least 1,225 square miles, but is so isolated from the metropolitan core of that county by distance or physical features as to be more rural than urban in character. Id C.F.R (c)(5) Fed. Reg

17 Ground Urban: Payment Rate = [(RVU*( (0.70*GPCI) ))*CF] + [MGR*#MILES]. Rural: Payment Rate= [(RVU*(0.30+(0.70*GPCI) ))*CF] + [(((1+RG1)*MGR)*#MILES17) + (((1 + RG2)*MGR)*#MILES18-50) + (MGR*#MILES>50)] Air Urban: Payment Rate = [((UBR*0.50) + ((UBR*0.50)*GPCI) )] + [MAR*#MILES]. Rural: Payment Rate = [( RA)*((UBR*0.50)*GPCI) )] + [(1.00+RA)*(MAR*#MILES)]. Legend for Formulas: Symbol and Meaning = less than or equal to > = greater than * = multiply CF = conversion factor (ground = $159.56; air = 1.0) GPCI = practice expense portion of the geographic practice cost index from the physician fee schedule MAR = mileage air rate (fixed wing rate = 6.49, helicopter rate = 17.30) MGR = mileage ground rate (5.40) #MILES = number of miles the beneficiary was transported #MILES17 = number of miles the beneficiary was transported less than or equal to 17 #MILES18-50 = number of miles beneficiary was transported between 18 and 50 #MILES>50 = number of miles the beneficiary was transported greater than 50 RA = rural air adjustment factor (0.50 on entire claim) Rate = maximum allowed rate from ambulance fee schedule RG1 = rural ground adjustment factor amount: first 17 miles (0.50 on first 17 miles) RG2 = rural ground adjustment factor amount: miles 18 through 50 (0.25 on miles 18 through 50) RVUs = relative value units (from chart) UBR = the payment rates without adjustment by the GPCI (unadjusted base rate) Notes: The GPCI is determined by the address (zip code) of the point of pickup. XIV. NEW PAYMENT POLICIES FOR MULTIPLE PATIENTS IN ONE AMBULANCE On occasion, multiple patients may be transported in a single ambulance. The most common scenarios in which this situation occurs are multiple trauma incidents, and post-partum mother and baby transports. Previously, there had been no coherent 17

18 national Medicare policy on billing for such transports. The final rule now provides clear direction regarding this situation. When transporting two patients in the same ambulance, the payment allowance for the Medicare beneficiary (or for each of them, if both are Medicare beneficiaries) is 75% of the applicable base rate (modified by any location-based modifiers) in respect of the level of service provided to the beneficiary, plus 50% of the applicable mileage payment allowance. 112 If three or more patients are simultaneously transported in the same ambulance, the payment allowance is decreased to 60% of the applicable base rate per Medicare beneficiary transported, plus the applicable mileage allowance divided by the number of patients on board, per beneficiary. 113 Many ambulance suppliers do not have a mechanism to determine when several patients have been transported simultaneously in the same ambulance. It is recommended that suppliers staff include in the patient care records for such multiple patient transports documentation of the number of patients in the ambulance and a unique identifier for each so as to enable the supplier s billing department to determine the number of Medicare beneficiaries transported in the same ambulance. XV. ELIMINATION OF MEDICARE PAYMENT FOR ADVANCE LIFE SUPPORT MANDATED RESPONSES In the past, Medicare paid for BLS ambulance service at the ALS rate if the ambulance supplier was required by local ordinance to provide only ALS level service in the jurisdiction. This is referred to as ALS Mandate. Payment for ALS Mandated service resulted in significantly higher reimbursement to suppliers in ALS Mandate areas. The final rule eliminates payment for ALS Mandated services. 114 Rather, the Fee Schedule will only reimburse the level of service actually provided, as modified by location-based modifiers. In order to mitigate the effect of this change on ambulance suppliers located in ALS Mandate jurisdictions, payment for ALS Mandated services will be phased out in steps, in the same manner as the Fee Schedule will be implemented. HCPCS code Q3019 has been assigned for claims in which BLS-Emergency ambulance was provided by an ALS vehicle. 115 Code Q03020 has been assigned for claims in which BLS-non emergency ambulance service was provided by an ALS vehicle. 116 XVI. CONCLUSION Implementation of the Fee Schedule will affect many hospitals and nearly every ambulance supplier and provider in the U.S. Suppliers and providers should review their C.F.R (c)(6). 113 Id Fed. Reg Fed. Reg Id. 18

19 compliance plans in view of the guidance contained in the final rule. It is likely that Part A fiscal intermediaries and B carriers will have difficulty implementing the many changes contained in the final rule. It will be incumbent upon providers and suppliers to make certain that they identify any overpayments received and to promptly refund the money. It is also important to ensure that providers and suppliers are appropriately reimbursed and to request additional sums if claims are incorrectly underpaid. Providers and suppliers may also request interest if payments are significantly delayed. In any event, implementation of the National Fee Schedule will help fiscal intermediaries and carriers standardize their procedures and will assist CMS in resolving Carrier/Provider disputes in an efficient manner. 19

20 Appendix Ambulance HCPCS Codes 67 Fed. Reg Current HCPCS Code New HCPCS Code Descriptions of final new codes A0380,A A0425 Ground mileage (per statute mile). A0306, A0326, A0346, A A0426 Ambulance service, advanced life support, non-emergency transport, level 1 (ALS-1). A0310, A0330, A0350, A A0427 Ambulance service, advanced life support, emergency transport, level 1 (ALS1-Emergency). A0300, A0304 *, A0320, A0324 *, A0340, A0344 *, A0360, A0364 *..A0428 Ambulance service, basic life support, non-emergency transport (BLS). A0050, A0302, A0308 **, A0322 A0328 **, A0342, A0348 **, A0362, A0368 **.A0429 Ambulance service, basic life support, emergency transport (BLS-Emergency). A A0430 conventional A A0431 Ambulance service, air services, transport, one way (fixed wing (FW)). Ambulance service, conventional air services, transport, one way (rotary wing (RW)). Q A0432 Paramedic ALS intercept (PI), rural area, transport furnished by a volunteer ambulance company which is prohibited by State law from billing third party payers. A0433 Advanced life support, Level 2 (ALS-2). The administration of at least three different medications and/or the provision of one or more of the following ALS procedures: Manual defibrillation/cardioversion, endotracheal intubation, central venous line, cardiac pacing, chest decompression, surgical airway, intraosseous line. A0435 Air mileage; fixed wing (per statute mile). 20

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