CHASING THE COMPLIANT AMBULANCE SERVICE DEAL: A PRIMER ON HOSPITAL/MEDICAL TRANSPORTATION ARRANGEMENTS INTRODUCTION. Melissa L. Markey, Esq., EMT-P Marc Goldstone, Esq. As hospital services are increasingly consolidated at regional reference facilities, and increasingly complex patient care is rendered at off-campus locations, the need to transport patients between care locations is increasing. The unique issues presented by inter-facility transfers have been recently recognized by the Federal Government, and initiatives have been undertaken to address some of the special concerns related to medical transport. 1 At the same time, interest in privatizing the emergency side of the medical transportation business (Emergency Medical Services or "EMS") is increasing. In short, hospitals are getting into the ambulance business, or expanding previously established in-house transport departments. Because the operational and compliance issues related to EMS and medical transport can be very different than those arising in the typical facility based or physician relationship deal, in-house hospital and health system counsel need to understand the basics of the business, as well as the reimbursement and compliance implications of transport-related deals. Even armed with a knowledge of the industry, structuring and documenting facility/ambulance relationships in the wake of the implementation of the National Medicare Fee Schedule, and in harmony with the plethora of relevant OIG Advisory Opinions can be a daunting task. Driving these deals blind is a recipe for disaster. WHO S ON FIRST? EMS is the generically used term for both emergency pre-hospital care, and medically supervised inter-facility medical transportation. Unlike the "ambulance drivers" of old, modern 1 See the Guide for Interfacility Transfer, available at http://www.nhtsa.dot.gov/people/injury/ems/interfacility/index.htm.
EMS personnel are highly trained and capable of providing sophisticated, advanced care while en-route to or between facilities. Although the details of licensing and scope of practice vary among states, the basic structure and training for EMS providers is based on the United States Department of Transportation National Standard Curriculum ("NSC"). 2 The most basic level of licensed emergency care provider in most states is a first responder, often called a medical first responder ( MFR ). The training program for an MFR in most states is approximately 40 hours and includes training in basic emergency assessment, first aid, and administration of oxygen. Emergency Medical Technician-Basic ( EMT-B ) personnel have approximately 110 hours of training, including a brief internship of supervised clinical time. EMT-Bs are permitted to splint fractures, dress wounds, administer oxygen and, in some states, place a non-visualized airway adjunct, such as a Combi-tube. EMT-Bs also assist patients with administration of certain prescription medications, including nitroglycerin and epinephrine autoinjectors for severe allergic reactions. Some, but not all, states recognize a level of provider called Emergency Medical Technical-Intermediate ("EMT-I", also called "EMT-Specialist"). Where recognized, EMT-Is can do whatever EMT-Bs can, and, in addition, may start intravenous access lines, and intubate the trachea. In general, the most senior EMS licensure/certification level is EMT-Paramedic ( EMT-P 3 ), with over 1000 hours of didactic training and over 500 hours of supervised clinical internship. Paramedics are qualified to conduct advanced assessments, monitor and interpret three and twelve lead electrocardiograms; defibrillate, cardiovert and externally pace a recalcitrant heart; initiate intravenous fluids and administer a broad range of medications; intubate, use transport ventilators, and engage in other advanced treatments. Additional specialized training is available, including training regarding advanced life support in air evacuations (certified flight paramedic ("FP-C"); critical care transport (critical care emergency medical transport ("CCEMTP"); 2 Available at http://www.nhtsa.dot.gov under EMS. 3 In some states, EMT-Ps are also referred to as Mobile Intensive Care Paramedics, or MICPs, based on the fact that the paramedics oftentimes bring the equivalent of a hospital intensive care unit to the scene of the emergency. 2
pediatric neonatal critical care transport ("PNCTT")). There is currently vigorous dialogue regarding the future of EMS, and possible development of Advanced Practice Paramedics. DID SOMEONE CALL A TAXI? Several different modes of locomotion constitute the universe of medical transport vehicles. The most familiar is, without doubt, the ambulance. Ambulances may be ground or airbased. Ground-based ambulances are classified based on their construction and configuration as Type I (sometimes called modular style, built on a truck chassis, where the patient compartment is not connected to driver compartment), Type II (built on a "raised roof" van), or Type III (usually built on a van chassis, with a modular, pass-through door between patient and driver compartment). When contracting for the provision of medical transportation services involving ground ambulances, it is important to specify the type of ambulance that the contractor will be expected to provide. Further, the wise attorney will consult with the clinical personnel expected to utilize (or order) the ambulance to help identify attributes of the vehicle which might impact patient care or crew safety. The ambulance supplier may offer a better price if not required to produce a Type III ambulance; however, the NICU patient recovery crew may not be able to comfortably fit all of their equipment and supplies into a smaller Type II. Thus, the input of clinical personnel is critical when specifying the capabilities of the ground ambulance that the contractor must provide. Air ambulances are either fixed wing (airplane) or rotary wing (helicopters). Fixed wing ambulances come in two further categories: fixed engine and "STOL" (Short Take Off and Landing). STOL aircraft (sometimes incorporating a tilt rotor ) are necessary when an airport with a standard-length runway is not available in close proximity to the facility requiring the services of the medical transportation aircraft. Rotary wing air ambulances come in a variety of 3
shapes, sizes and engine configurations; some can carry only a pilot, a caregiver and a patient; others can carry multiple patients, crew members, and pilots. Recently, there has been much attention drawn to the safety of EMS helicopters 4. When contracting for air medical service (and especially so when contracting for rotor-wing service), it is vital for the written agreement to contain well defined and objective safety standards, identification of the aircraft by manufacturer name, model number, engine type/count (i.e., dual jet engine), flight control systems needed (i.e., Single Pilot-Instrument Flight Rules capable, or "SP-IFR") and a thorough description of the interior fit-up required. Other specifications to consider in the contract include pilot qualification and experience criteria. For example, many EMS helicopter operations, prefer pilots with combat or similar flying experience. YOU GOT A LICENSE FOR THAT THING? Each state licenses ambulances, and a vehicle may not carry ambulance indicia, or purport to provide ambulance services, absent compliance with state licensing laws. In general, most states also require licensed ambulances to display a copy of the license in the vehicle; and some states require the display of the license number on the side of the vehicle. In addition to licensure as an ambulance," some states specify that a basic licensed ambulance may not be utilized to provide advanced ambulance service such as Specialty Care Transport without additional licensure. Further, in those states, a basic ambulance may not be labeled to indicate that the ambulance provides an advanced level of service, even if the entity that operates the ambulance does provide such service. 4 "According to a report issued by the National Transportation Safety Board in early 2006, the number of flight hours flown by EMS helicopter operations has increased from about 162,000 in 1991 to an estimated 300,000 in 2005, the average accident rate has also increased from 3.53 accidents per 100,000 flight hours between 1992 and 2001 to 4.56 accidents per 100,000 flight hours between 1997 and 2001." As a result, the National Transportation Safety Board initiated a special investigation of these accidents and identified the following recurring safety issues: less stringent requirements for EMS operations conducted without patients on board, a lack of aviation flight risk evaluation programs for EMS operations, a lack of consistent, comprehensive flight dispatch procedures for EMS operations, and no requirements to use technologies such as terrain awareness and warning systems (TAWS) to enhance EMS flight safety. NTSB Report SIR-06/01 4
Only ambulances which meet the Federal KKK-A-1822E standards 5 are permitted to display the "star of life," the universal symbol for EMS in the United States. Of course, that does not mean that many vehicles which do not strictly meet the KKK standards have not been labeled with the ubiquitous star of life. When making deals for ambulance service, it is important to specify that all vehicles used by the provider will comply with all state and federal statutes and regulations concerning the identification/labeling of same. BROTHER, CAN YOU SPARE A DIME? Ambulance transportation is reimbursable by Medicare and Medicaid as long as certain medical necessity and similar requirements are met. Most, but not all, third party healthcare payors also reimburse the cost of medically necessary ambulance transportation. However, there are some important limitations to the general reimbursement rules. For example, an intercept "MICU" (mobile intensive care unit), also called an "ALS" intercept, is usually a non-transport vehicle (such as an SUV or a specially modified police car) staffed by at least one paramedic and equipped to provide ALS. Typically ALS intercepts are dispatched in a tiered response system, where lower levels of capability are deployed and dispatched either prior to or at the same time as the ALS. An ambulance must be dispatched to transport patients who receive ALS intercept services, and if necessary, the intercept paramedic will travel to the hospital with the patient to permit continued provision of advanced medical support. Because the Medicare ambulance benefit is based, for the most part, on transportation of the patient, ALS intercept services are not able to bill Medicare unless special rules (such as rural location rules) are met. Therefore, there is often a contract between the transporting ambulance company and the agency which operates the ALS intercept, permitting payment from the ambulance company to the intercept as compensation for the provision of ALS capabilities. 5 Available at http://www.gsa.gov/gsa/cm_attachments/gsa_document/ambulanc_1_r2fi5h_0z5rdz-i34k-pr.pdf. 5
REALLY, NO RUSH ON THAT. Several types of transport are available for non-emergency, scheduled or unscheduled, transports. Stretcher vans are similar to van ambulances and permit the transportation of individuals who require a stretcher but are not likely to require medical care enroute. Stretcher vans are not licensed to respond to emergencies, are not permitted to display the star of life or to use emergency lights or sirens, and may or may not be staffed by licensed personnel. Typically, stretcher van transport is not a Medicare benefit, although it may be a benefit under certain Medicaid programs. In some states, stretcher van service is regulated under the same rules as taxicabs and other modes of public transportation. Invalid coaches, also known as ambulettes, permit transportation of wheelchair patients, and in some states may require licensure by the EMS agency so as to permit use as back-up ambulances. 6 Medical livery vehicles, or aid cars, are simply vehicles used to transport patients to medical locations, and often do not require any special licensure. Neither ambulette nor medical livery transport are Medicare benefits, although some Medicaid plans may provide coverage. Medicaid coverage for such services is subject to substantial prior authorization and needs-testing rules. REIMBURSEMENT DETAILS. Ambulance service is a benefit of Medicare under both Part A and Part B. Section 1861(s)(7) of the Social Security Act authorizes payment for ambulance services under Part B when transporting patients (1) from any location to the nearest hospital (including a critical access hospital ("CAH") or skilled nursing facility ("SNF")) capable of treating the patient's medical condition; (2) from a hospital, CAH or SNF to the patient's home; (3) from a SNF to the nearest appropriate facility when a SNF resident requires care not available at the SNF; and (4) for end 6 See, e.g., Connecticut Attorney General Opinion (Sept. 25, 1995) available at http://www.ct.gov/ag/cwp/view.asp?a=1770&q=281570. 6
stage renal dialysis ("ESRD") patients, round-trip transport between the patients' home and the nearest dialysis facility. 7 However, ambulance transportation for these trips is only payable when medical necessity has been established. A finding of medical necessity for ambulance transportation requires both that a) other forms of transportation are medically contraindicated, and that b) the patient's condition requires medical services. In bona fide emergency situations, medical necessity will almost always be found to exist. If an ambulance responds to an emergency call for assistance, payment will be made even if that call is later downgraded to non-emergency. Currently, an "emergency response" is defined as "responding immediately at the ("BLS") or ("ALS1") level of service to a 911 call or the equivalent in areas without a 911 call system. 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." 8 A proposed modification in the rule published on May 26, 2006, would expand the definition of emergency response to state that "[e]mergency response means that an ambulance entity [1] Maintains readiness to respond to urgent calls at the BLS or ALS1 level of service; and [2] Responds immediately at the BLS or ALS1 level of service to 911 calls, the equivalent in areas without a 911 call system or radio calls within a hospital system when the ambulance entity is owned and operated by the hospital." 9 Under the National Fee Schedule, bed confinement, as defined by Medicare, 10 is insufficient by itself to establish medical necessity for non-emergency ambulance service; the patient's condition must also be such that other transport is contraindicated. Where the patient requires regular, non-emergency, scheduled transport (such as for dialysis treatments), the ambulance service should obtain from the patient's physician before the transport a statement that 7 42 C.F.R. 410.40(e). 8 42 C.F.R. 410.605 (67 Fed. Reg. 9133 (Feb. 27, 2002)) 9 71 Fed. Reg. 30358 (May 26, 2006), available at http://a257.g.akamaitech.net/7/257/2422/01jan20061800/edocket.access.gpo.gov/2006/pdf/e6-7929.pdf; see also, http://www.cms.hhs.gov/ambulancefeeschedule/downloads/cms1317p.pdf. 10 Bed confinement is defined as the patient being (1) be unable to get up from bed without assistance; (2) unable to ambulate; and (3) unable to sit in a chair or wheelchair. 42 C.F.R. 410.40(d) (67 Fed.Reg. 9132 (Feb. 27, 2002)). 7
the medical necessity requirements have been met. 11 This statement is generally referred to as a Physician Certification Statement or ( PCS ). This nomenclature is somewhat misleading, as the fee schedule rule permits this form to be completed by a plethora of persons other than the patient s physician, in many cases. If unscheduled, non-emergent transportation is required, a PCS signed by the patient's physician, or, in some cases, a physician assistant, nurse practitioner, clinical nurse specialist, registered nurse, or discharge planner employed by the patient's physician or the transferring facility with "personal knowledge of the [patient's] condition at the time " the transport is ordered or performed, must certify as to the medical necessity. 12 This certification may be obtained before or after the transport. If the ambulance provider is unable to obtain this documentation with 21 days, attempts must be documented 13 and then a claim may be submitted. Inter-facility transfers require somewhat different treatment than EMS calls, where the patient is taken from the scene of a pre-hospital emergency to an acute care facility for definitive care. Interfacility trips, often called ( IHOPs ), usually occur when patients who are hospital inpatients, or SNF residents, must be transferred to another facility to receive specialized treatment not available at the first facility. In this case, the Medicare reimbursement for the transportation is bundled in the hospital's charges or the SNF's charges. The ambulance is paid by the originating hospital or SNF, and may not bill Part B for the services, except in certain very limited cases. Besides medical necessity, ambulance services must be rendered at the proper level to be reimbursable by Federal Healthcare Programs. There are several levels of ambulance services, each of which is related to the training of the personnel needed to provide care appropriate to the patient s acuity, and the scope of services actually provided. Basic life support ("BLS") services are rendered by EMT-Bs. Advanced life support ("ALS") services are services that, under state 11 42 C.F.R. 410.40(d)(2) (67 Fed. Reg. 9132 (Feb. 27, 2002)). 12 42 C.F.R. 410.40(d)(3) (67 Fed. Reg. 9132 (Feb 27, 2002)). 13 i.e., through "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." Id. 8
law, require higher licensure than EMT-B (i.e., EMT-I or EMT-P services). ALS services are divided into two categories, ALS1 and ALS2, depending on the scope of advanced care provided. Specialty care transport ("SCT") services are interfacility transport services provided for a critically ill patient, which require services above the level of the EMT-P. These services may, subject to state law, be provided by a specially-trained paramedic such as a critical care paramedic ("CCEMTP") or specialty pediatric/neonatal critical care transport paramedic ("PNCTT"). Physicians, nurses or other specialty providers, such as respiratory therapists, may also be on the transport team. 14 From the standpoint of hospital contracting, it is important to consider the facility s EMTALA obligations with respect to each transport. If a patient requires ALS treatment during a transfer from one ED to another, the sending ED s ambulance contract should provide that the ambulance service send only the level of ambulance required by the patient (or higher); otherwise the sending facility may risk an EMTALA violation. Failure to specify the proper level of care during transport may also delay the patient in reaching definitive care, as a BLS crew cannot transport patients requiring ALS interventions, and transport will be delayed while a second ambulance with an ALS crew is dispatched. Formerly, ambulance/medical transport services were reimbursed by Federal Healthcare programs on a "reasonable cost" basis. Currently, ambulance services are reimbursed predominantly under the National Fee Schedule, which has been transitioning in over the past several years. Reimbursement under the fee schedule includes a base rate and a per loaded mile fee. The base rate varies, depending on the level of service provided (BLS, ALS1, ALS2, etc) and is intended to compensate the ambulance company for all services and supplies, including drugs, used during the transport. Ambulance suppliers are also required to accept Medicare assignment, and may not balance bill patients (other than co-pay and deductibles). To be able to 14 Proposed rules published on March 26, 2006, would clarify that specialty care transport reimbursement is available only on hospital-to-hospital transports. See, http://a257.g.akamaitech.net/7/257/2422/01jan20061800/edocket.access.gpo.gov/2006/pdf/e6-7929.pdf 9
bill, ambulance suppliers must obtain the signature of the patient or a representative. 15 Of course, commercial payors are free to set their own reimbursement requirements, but, as is typically the case, many have chosen to rely on the Federal standards in lieu of developing their own. Unfortunately, in many cases the National Fee Schedule payment is not consistent with the cost of care provided. THE COMPLIANCE ENVIRONMENT? Given the complexity of the universe of ambulance billing rules, it is not surprising that compliance in the medical transport arena is difficult to achieve. Particularly with respect to nonemergency transports from the patient's home, ambulances must rely on the representations of individuals over whom they have no control (the patient's physician and staff) to certify that requirements for coverage have been met. If, on arrival, it appears that the coverage requirements may not have been met, the ambulance provider is faced with the no-win choice of transporting and risking non-payment or leaving the patient and refusing to transport. However, typically an individual licensed or certified by the State as a professional healthcare provider (an EMT or paramedic) has initiated patient contact to make that determination. Therefore, to not transport risks charges of abandonment, unless the patient is in a medical facility that has the capacity to care for the patient s current needs. Another concern is the fact that the criteria for coverage can be vague, and therefore disputed. Should a patient who can sit in a geriatric chair 16 for short periods of time be considered bed-ridden? It is significantly harder for a patient in a wheelchair to maintain balance in a moving vehicle. Does the fact that the patient risks falling out of the chair suffice to 15 Transmittal AB-03-007 "Second Clarification of Medicare Policy Regarding the Implementation of the Ambulance Fee Schedule" (1/24/2003). "Medicare requires the signature of the beneficiary, or that of his or her representative, for both the purpose of accepting assignment and submitting a claim to Medicare. If the beneficiary is unable to sign because of a mental or physical condition, a representative payee, relative, friend, representative of the institution providing care, or a government agency providing assistance may sign on his/her behalf. A provider/supplier (or his/her employee) cannot request payment for services furnished except under circumstances fully documented to show that the beneficiary is unable to sign and that there is no other person who could sign." Available at http://www.kansasmedicare.com/news_flash/2003/ab-03-007.pdf 16 A special chair with restraints and a table, used for patients who are unable to maintain balance. 10
demonstrate medical necessity? Should the patient's stamina be considered? If the patient is able to maintain balance for short periods of time, but tires rapidly, is an ambulance transport appropriate? The ambulance industry itself has also been considered to be at high risk of fraud and abuse. Some ambulance services have blatantly falsified information to attempt to qualify for reimbursement, ordering their personnel to chart that the patient was "bedridden" when in fact that patient was able to ambulate. Similarly, ambulance services have been found on audit to have billed Part B for transports which clearly should have been billed to the facility under the Part A rules. In fact, in several different audits, the OIG determined that approximately 50% of ambulance charges were inappropriate. 17 Because of the poor compliance levels often demonstrated on audit, the Office of Inspector General of Health and Human Services (OIG) has announced two initiatives in the 2006 Work Plan focusing on ambulance compliance: a review of ground ambulance services and a review of SNF consolidated billing that will include scrutiny of ambulance transports. Of course, it is likely that the majority of ambulance service providers are compliant services who run their businesses in good faith. However, when negotiating ambulance service agreements, Hospital counsel should heed the words of former President Reagan and Trust But Verify ; the wise attorney will spend significant time developing the various compliance warranties, representations, and indemnities to be made by the ambulance provider. COMPLIANCE GUIDANCE FOR AMBULANCE SERVICES. Recognizing the challenging environment of ambulance compliance, the OIG has issued a significant amount of guidance. The OIG Compliance Program Guidance for Ambulance Suppliers, published March 24, 2003, includes the components familiar to health lawyers from 17 See, for example, "Review of Ambulance Services Provided by American Medical Response of Massachusetts, Inc.," (A-01-04-00502) (April 17, 2006), available at http://oig.hhs.gov/oas/reports/region1/10400502.pdf; "Medicare Part B Payments for Ambulance Services Rendered to Beneficiaries During Inpatient Stays: 2001 Through 2003," (A-01-04- 00513) (March 17, 2006), available at http://oig.hhs.gov/oas/reports/region1/10400513.pdf. 11
other compliance guidance: development of compliance policies and procedures; designation of a compliance officer; education and training; internal monitoring and reviews; responding to misconduct; developing open lines of communication; and enforcing disciplinary standards through well-publicized communications. 18 Additional guidance regarding ambulance compliance may be found in OIG Advisory Opinions (AOs) and investigative reports. A common theme in the OIG AOs for EMS is the ability of an EMS provider to waive co-pay and deductible amounts. In a series of AOs, the OIG set forth the basic rules: for EMS operated directly by a municipality, waiver of co-pay and deductible, or replacement of patient-paid co-pay and deductible amounts with tax revenues, is permissible. If the municipality provides EMS through a contract with a private entity, however, it is not permissible to waive co-pay and deductible. 19 The OIG appears to base this varying treatment of what is, in many ways, very similar circumstances, by noting that the Medicare Carrier Manual section 2309.4 expressly permits waiver of these amounts by governmentallyowned facilities. TRANSACTIONS AND DEALS: COMPLIANCE RISKS. In the Ambulance Compliance Guidance, the OIG notes that "[a]ny person or entity in a position to generate federal health care program business for an ambulance supplier, directly or indirectly, is a potential referral source " 20 Among those listed as potential referral sources are 911 dispatch centers, hospitals, nursing homes, home health agencies, physicians, and patients. Therefore, almost any transaction with an ambulance supplier will be viewed by the OIG as an arrangement with a potential referral source. Noted as arrangements which merit special scrutiny are: 18 68 Fed. Reg. 14245, 14247 (March 24, 2003). 19 See, e.g., OIG Advisory Opinion 01-10; 20 68 Fed. Reg. 14252 (March 24, 2003). 12
municipal contracts for EMS services, ambulance restocking arrangements that don't fit in the safe harbor, arrangements with other responders, arrangements with hospitals and nursing facilities, and arrangements with patients. A. Municipal Contracts. War has always been a source of great improvements in medicine, particularly emergency medicine and surgery. One of the first organized emergency medical services was created in 1797, when the French army, at the direction of Napoleon, developed a process for providing medical care to wounded soldiers in the field, and transporting to more definitive care. In its infancy, ambulance services were primarily provided by private parties - often, the hospital. Another common provider of emergency transportation was the local funeral home, which operated a station wagon as a vehicle to pick up injured people. Little or no treatment was provided, and if the patient died en-route, the vehicle simply diverted from the hospital to the sponsoring funeral home. Modern EMS grew from a 1966 white paper, titled "Accidental Death and Disability: The Neglected Disease of Modern Society," written by the National Academy of Sciences and the National Research Council. Training programs were started, to teach trauma and cardiac care in the field. Many of the early professional EMS programs were based in fire departments, and today there is still a significant EMS presence in the fire service. In fact, as the need for fire suppression has decreased due to the implementation of modern building codes, local fire chiefs often see EMS as a way to preserve departmental budgets, and organizations such as the International Association of Fire Fighters see it as a way to save union jobs. Thus, it is important to be aware that the drivers of EMS market entry/presence for some providers are VERY different than the drivers for Hospitals that operate EMS services. 13
From time to time, however, municipalities decide, for various reasons, that rather than directly providing EMS through either the fire department or a "third" service, EMS in the community will be contracted to a private company, either on a part-time or a full-time basis. The private company is typically selected after a local proposal/bidding process. The contract may be an exclusive contract, or the municipality may be divided into regions with multiple providers, or the provider may simply agree to respond when requested, to back up the existing response system (typical in communities with a pre-existing volunteer EMS service). Compliance issues which arise in this situation are: Remuneration intended to permit cherry-picking of the "best" areas, or the "best" patient population. Remuneration to the municipality that "sweetens the deal" to get the EMS contract. Agreements to not charge co-pays and deductibles, other than pursuant to an indigent/uninsured patient policy which considers individual financial circumstances. Conditioning the EMS contract on the provision of free or discounted non-ems services. Inflated payments for 911 or other services, intended to disguise a kickback. Subscription programs that are not actuarially sound. Several OIG AOs address compliance issues in municipal EMS contracts. The first relevant AO, 99-1, explains the OIG s usual rationale in analyzing these transactions. First, the OIG considers whether the proposed arrangement poses any harm to the integrity of federal health care programs, or poses any harm to beneficiaries, and whether any state-law safeguards exist to protect against possible harm. Finally, the OIG considers whether the proposed arrangement is a good program which complies with local law, rule and custom. One unique 14
aspect of municipal contract arrangements is also that the benefit of potentially abusive arrangements inures to the public, instead of a private person. Thus, risks are lessened. A substantial area of compliance concern in municipal EMS contracts is the routine waiver of co-pay and deductibles. Early in the development of professional EMS, fire departments took the role of providing EMS to their communities. As tax-supported institutions, these services were often provided without billing any payor. As tax revenues decreased and municipality costs increased, the search for other sources of revenue began. However, since the citizens were accustomed to no out-of-pocket cost for EMS, fire departments and municipalities wanted to waive co-pays and deductibles for residents, using tax revenues for this portion of cost instead. In several different AOs, the OIG approved many of these programs, noting that the Medicare Carrier's Manual permitted waivers of co-pay and deductibles by municipal facilities. 21 The outcome differs, however, where the municipality contracts with a private company to provide EMS. In OIG AO 01-12, the OIG noted that an exclusive contract between a municipality and an ambulance company which required the company to waive out-of-pocket Medicare costs was potentially violative of the anti-kickback statute ("AKS") and subject to prosecution. 22 However, the compliance concerns may be addressed by a situation in which the municipality covers the co-pay and deductible amounts out of tax revenues. 23 In an arrangement where a municipality contract required the ambulance to provide service to all who called and to bill third party payors for services, the municipality also required that citizens not be charged out-of-pocket expenses. Reviewing this arrangement, the OIG noted it implicated the AKS because the municipality could be referring federal program business to the ambulance service in return for the provision of services to indigent and uninsured residents of the municipality (i.e., a Medicare Swap ). However, since the arrangement: 21 See, e.g., OIG AO 01-10 (July 20, 2001); OIG AO 01-11 (July 20, 2001); OIG AO 02-8 (June 12, 2002); OIG AO 02-15 (Sept. 30, 2002); OIG AO 03-09 (April 17, 2003); OIG AO 04-02 (March 1, 2004); OIG AO 04-06 (June 4, 2004); OIG AO 04-12 ()September 21, 2004); OIG AO 04-13 (Oct. 5, 2004); OIG AO 04-14 (Oct. 28, 2004); OIG AO 05-10 (June 9, 2005); OIG AO 05-09 (June 6, 2005). 22 OIG AO 01-12 (July 20, 2001). 23 OIG AO 01-18 (Oct. 31, 2001). 15
was not likely to increase federal program costs; was unlikely to result in steering of business; was unlikely to result in excessive utilization of services; and served the public, rather than private, interests the OIG approved the arrangement, noting that the risks posed by the arrangement were minimal, particularly since provision of EMS is within the traditional police powers of a municipality, and the grant of contract occurred within a competitive bidding process. Another arrangement considered was an exclusive municipal EMS contract, where the municipality provided free dispatch services and the ambulance company provided free billing and collection services to the municipality. Although the OIG noted that the provision of free services constituted remuneration, the arrangement was permissible because the value of the exchanged services was equivalent, the arrangement was fair and equitable between the parties; and efficiency and quality of care would be improved, thus benefiting the public at large. As discussed in OIG AO 01-18 above, there was little risk of overutilization and competition would not be adversely affected, as the ambulance service was selected through a competitive bidding process. 24 B. Ambulance Restocking. Ambulance restocking arrangements were a source of concern for some time in the late 1990 s and early 2000 s, and resulted in the issuance of several OIG AOs. 25 With the adoption of the restocking safe harbor to the federal AntiKickback Statute, 26 much of the controversy with these arrangements has been resolved. As with any other arrangement, however, if goods or services are provided with one purpose of the transaction to induce a referral of services reimbursed by Federal Healthcare programs, the arrangement is prohibited by the AntiKickback 24 OIG AO 05-07 (Feb. 18, 2005). 25 OIG AO 00-9 (Dec. 8, 2000); OIG AO 02-2 (April 4, 2002); OIG AO 02-3 (April 4, 2002). 26 66 Fed. Reg. 62979 (Dec. 4, 2001). 16
Statute. If restocking is provided, accurate documentation regarding supplies provided should be maintained for at least seven (7) years. Another area of risk in restocking arrangements is billing for the goods stocked. Under the national fee schedule, Medicare payments to ambulance providers are intended to cover all services, goods and supplies used for a given transport. In almost all cases, if the hospital restocks, and then charges the Government for the medication (or includes the cost of the medication on the Hospital s Federal Cost Report), a false claim may have been submitted by the Hospital. This has caused some significant ambulance reimbursement problems, since in certain areas of the country medication costs were historically not charged by EMS (because hospitals provided the drugs) and thus ambulance reimbursement does not cover the added cost of medications now borne by the ambulance service. C. Arrangements with Other Responders. There are two common arrangements which EMS agencies typically enter into with other responders. The first is a mutual aid agreement, where each entity agrees to come to the assistance of the other if the other's resources are overwhelmed by an emergency situation. In most cases, these arrangements are straightforward, and pose little compliance risk. In states which have ratified the Federal Emergency Management Assistance Compact ("EMAC"), reimbursement for costs incurred during a mutual aid response is pre-set. However, where one agency offers something of value to another in return for referral of part of all of the first agency s mutual aid responses, such an arrangement should be viewed with strict scrutiny. Another form of agreement between responders is an intercept agreement. In this type of agreement, a non-transporting ALS service contracts with a transporting BLS (or, occasionally, ALS) service to provide transportation services. Often this arrangement is seen in a tiered system, where different levels of response are triggered based on the information available to the dispatch authority, which, in many cases, is NOT the ambulance service provider. In some municipal 17
deals, bidding ambulances are asked to reimburse the municipality for these first response services (typically provided by firefighters or police officers). In this situation, fair market value compensation for services rendered may be appropriate; however, there is concern that the remuneration might be intended to influence referrals. The value of services rendered and the amount paid should be carefully considered and documented, as the government will closely scrutinize payments which appear to be excessive. Fortunately, the OIG reviewed this type of arrangement in OIG AO 04-10. 27 Although the arrangement implicated the AKS because "the County is soliciting payment for first responder services in exchange for an exclusive contract " it was permissible because the fees for the first responder program were "only one part of a comprehensive [EMS] regulatory scheme ;" the first responder fees were only partial compensation for costs incurred; the risk of overutilization in emergency services is very low, and federal costs are not expected to be increased by the arrangement; competition was preserved through the bidding process; and the benefit of the arrangement inured to the public, rather than private interests. However, the OIG's concern with this type of arrangement was demonstrated by a listing of facts which, had they been present, would have changed the result. 28 A somewhat more complicated arrangement with a similar result is described in OIG AO 06-06 (May 1, 2006). Since the application of these AOs is so circumscribed, when evaluating such arrangements, it is wise to choose the more conservative approach, if possible, based on the various options available. As the OIG noted, arrangements with other responders could implicate anti-competitive concerns. Particularly regarding the new initiatives developed by many integrated healthcare systems concerning interfacility transfers, and evolving pressures from managed care entities, development of regional medical transportation programs is occurring and can be anticipated to continue. Three staff advisory opinions from the Federal Trade Commission ("FTC"), while not 27 Oct. 4, 2004. 28 OIG AO 04-10 (Aug. 11, 2004). 18
particularly recent, clarify that, so long as there is true functional and economic integration, and the arrangement does not result in monopoly power, the FTC is unlikely to challenge the arrangement. 29 D. Nursing Homes and Hospitals. Often, nursing homes/skilled nursing facilities and hospitals will enter into agreements with ambulance services to provide inter-facility transportation services for their patients, or for transports home for certain patients. As with any contract between referral sources, care must be exercised to ensure that only fair market value payment is offered. The risk of entering into an arrangement with a nursing home or SNF that involves, directly or indirectly, a swap of services reimbursed by Federal Healthcare programs, is greater than when contracting with other types of facilities, given the higher volume of Medicare/Medicaid work referred by such facilities. The OIG's concerns regarding arrangements between nursing homes and medical transport companies were described in OIG AO 99-2. In the proposed arrangement, an ambulance company proposed to provide all inter-facility transports required by SNF patients for which the SNF was responsible at a sharp discount (equal to 50% of Medicare rates). The company proposed to charge Medicare for Part B transports at full Medicare rates. The company argued that the discount for the Part A services was justified by savings related to consolidated monthly billing and better collection rates, since the nursing home would be paying the ambulance service directly. However, anticipated savings were significantly less than the discounted price. Furthermore, the ambulance service sought the AO only when their competitor offered the same deal to local nursing homes, and the requesting service s business was at risk. 29 Advisory Opinion, Federal Trade Commission Bureau of Competition, January 30, 1997 (Ohio Ambulance Network, Inc. and Mobile Health Resources, L.L.C) and December 22, 1997 (Alliance of Independent Medical Services, LLC). 19
In determining that the proposed deal was unacceptable, the OIG noted that arrangements which provide discounts to potential referral sources which are not also provided to Medicare are suspect, especially where the discounts result in charges below the cost of providing services, or where discounted rates are only offered to those who also offer the chance of nonprogram business. A similar concern arises if a contract ties emergency and non-emergency services. Because the hospital or SNF could be in the position to refer patients to the ambulance service for Part B and Medicaid patients, careful documentation of services rendered and fair market value determinations for inter-facility transports is important. As the OIG noted, "[a]ny link or connection, whether explicit or implicit, between the price offered for business paid out of the purchaser's pocket [i.e., the Part A business which the facility must pay] and referrals of federal program business billable by the ambulance supplier will implicate the AKS." 30 Similarly, the ambulance should not offer gifts of greater than nominal value to referral sources. Occasionally, hospitals will propose to provide items or services of value to EMS or medical transport services. Often these items or services relate directly to quality of care, and such exchanges may be permissible. For example, the OIG considered an arrangement in which a coalition of two competing hospitals proposed to purchase and lease to EMS providers, at a rate well below fair market value, certain cardiac diagnostic equipment. Although the OIG noted that the AKS statute was implicated, the arrangement was permissible because: any interested EMS services in the area were permitted to participate; the equipment would improve quality of care; the decision of which hospital would receive a patient was based on treatment protocols; there was little risk of overutilization as it impacted only emergency services; and 30 58 Fed. Reg. 14252 (March 24, 2003). 20
the participation of two competing hospitals in the coalition helped ensure that improper steering of patients would not occur. 31 It is important to recognize, however, that mere claims of quality improvement are not sufficient to insulate proposed arrangements. This is well-demonstrated by OIG AO 02-14 32 (provision of free safety equipment and pagers to hemophilia patients by an infusion therapy company) and OIG AO 06-01 33 (pre-op home safety evaluations by a home health care company). There are many instances, for example, where a more distant hospital will wish to incent ambulance services to bring patients to their facility for state of the art services. The Hospital may wish to reimburse the ambulance service for the additional burden associated with bringing the patients the extra miles to their facility. It is important to remember that the Medicare benefit of transport to the closest available facility does not include costs related to the transport to the closest center of excellence. Furthermore, the Government took transaction costs, readiness costs, and capital depreciation of the ambulance service s equipment into account when setting the rates in the National Ambulance Fee Schedule. Schemes to inject additional remuneration into the ambulance service, in exchange for taking the longer ride are likely to implicate liability under the AntiKickback statute. E. Patients. The compliance risks with respect to arrangements between ambulance companies and patients relate both to the prohibition against beneficiary inducement and the AKS. The OIG has long taken the position that, for most healthcare providers, the routine waiver of co-pays and deductibles poses a significant fraud and abuse risk. (As noted above, special rules apply for emergency medical services operated by municipalities.) Under OIG AOs 01-11 and 01-12, which are best read together, municipal ambulance services can waive co-payments; private 31 OIG AO 01-5 ((May 18, 2001). 32 Sept. 30, 2002. 33 March 20, 2006. 21
ambulance service bidders for municipal contracts cannot. Several other AOs reiterate this theme. One arrangement, which has been proposed to address waiver of co-pays and deductibles in EMS and medical transport arrangements, is the operation of a subscription program. In subscription programs, citizens are offered the opportunity of making a relatively small up-front payment, in return for which any services needed will be provided without additional out-ofpocket costs for a given period. The OIG has expressed concern that such programs could be disguised waivers of co-pay or deductibles. However, in OIG AO 03-11, the OIG agreed that subscription programs are permissible if the aggregate subscription fees approximate, in the aggregate, the amount of co-pays and deductibles due from an actuarial or historical perspective. 34 The OIG was silent on what the result would be if, after a year, the subscription program were determined to be actuarially unsound. When considering such arrangements, it is reasonable to also consider the potential unwinding of such arrangements if the numbers don t add up at year s end. DUE DILIGENCE FOR AMBULANCE/MEDICAL TRANSPORTATION DEALS. In many ways, reasonable due diligence for hospitals contemplating an ambulance or medical transportation transaction is similar to the process for other similar transactions. Below, we address some of the due diligence considerations which are unique to EMS and medical transportation deals. Due diligence components can be thought of as fitting roughly within one of several categories: clinical performance; operational performance; financial performance; organizational structure; and corporate culture. Not all of these factors will be important in every transaction. However, if a factor is immaterial, it is wise to document the process by which the Hospital made 34 Id. 22
such a determination, and to preserve the rationale in case the deal is later questioned or blows up. A. Clinical Performance. Clinical performance is, of course, one of the most important considerations in an EMS/medical transportation deal. Selection of a service which fails to meet clinical expectations can be costly in many ways. Conversely, selection of a service which meets or exceeds the clinical standards of the Hospital can reap substantial benefits in patient satisfaction, cost control, and public relations. 1. Licensure and Certification. Obviously, specifying and ensuring the licensure and certification level of the personnel providing care to the patient during transport is of paramount importance to a Hospital utilizing ambulance service for its patients. Some of the critical questions to ask when negotiating these deals include: What is the provider s ratio of EMT-B to Paramedic employees? Are all ambulances staffed with two Paramedics, or an EMT-B/Paramedic crew, or a combination of the two? Do the provider s Paramedics have additional certifications, such as Pediatric Advanced Life Support, Advanced Cardiac Life Support, Advanced Disaster Life Support, or critical care certifications? Are the service s EMT-Bs certified in Basic Trauma Life Support? If the contract is for emergency services, are personnel trained in hazardous materials, rescue, and related skills? 23
Can the service provide Registered Nurses with transport experience? Respiratory Therapists? Neonatal Nurse Practitioners? 2. Clinical Saves. A common measure of the quality of pre-hospital emergency medical services is based on clinical save statistics. A clinical save is often defined as resumption of spontaneous circulation following a cardiac arrest. Most reports indicate that the clinical save rate ranges between 2.9% and 22 %. 35 However, clinical save statistics may reflect many factors other than the effectiveness of the EMS system. For example, survival rates are significantly higher if the cardiac arrest is due to ventricular fibrillation and defibrillation is accomplished within 3-5 minutes after cardiac arrest; for each succeeding minute, survival rates drop by 10%. 36 Other factors which are not within the control of EMS, but which can affect clinical save rates, include prompt activation of EMS and bystander CPR. Accurate measurement of the important time points in resuscitation can be difficult. 37 Finally, many argue that return of spontaneous circulation is not the most appropriate measure; measures such as survival to discharge and survival without neurological sequelae are better indicators of EMS performance. When entering into agreements to provide street EMS, it is important to know what the ambulance service is capable of, and what the regional response network (including first responders, the regional dispatch authority, etc.) contributes to the potential success of the service, before agreeing to any level of clinical saves as performance measurement criteria. 3. Clinical Performance Indicators. Other clinical performance indicators which may be measured to evaluate EMS effectiveness include compliance with benchmarks and clinical guidelines for certain common 35 See, e.g., EMS and Cardiac Arrest, available at http://www.emedicine.com/emerg/topic710.htm. 36 American Heart Association, at http://www.americanheart.org/presenter.jhtml?identifier=3012016. 37 Cardiac Arrest and Cardiopulmonary Outcome Reports, American Heart Association, available at http://circ.ahajournals.org/cgi/content/full/110/21/3385. 24