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Shock Advised: EMS Economics in Critical Condition

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This article was originally published on EMS World in May 2024. You can check it out here.

As our nation celebrates the 50th anniversary of EMS Week this month, a time when we’re honoring the profession and celebrating our country’s dedicated clinicians, there’s something we don’t seem to be talking about enough: our broken EMS reimbursement model. A model that’s still tied to EMS’ roots based on payment for transport, and classified by the Centers for Medicare & Medicaid Services (CMS) as a “Supplier of Services,” like durable medical equipment, rather than a Provider.

EMS professionals are highly trained, delivering advanced medical care. Assessing and treating physically ill, critically injured, and mentally at-risk patients. They’re more than a ride or a supplier of goods, and the outdated reimbursement model is failing private agencies and municipal EMS alike.

The good news is that key EMS organizations are working to change the broken system. The National Association of EMTs, the American Ambulance Association, the International Association of Fire Chiefs, and others are making efforts to influence key policy-makers. 

Yes, it’s complicated. The challenges with each payer are different. For Medicaid and Medicare, it’s typically very low payments that come nowhere close to reimbursing agencies for the cost of care, supplies, and transport. Commercial insurance for ambulance service varies widely from policy to policy with the “allowable” amount typically arbitrary, often tied to some multiple of the Medicare ambulance fee schedule or an opaque “usual and customary” amount. Once the insurance company sets their “allowable,” the difference between the charge and the “allowable” becomes stranded. This remaining balance ends up becoming the patient’s responsibility. Patients are further punished because any stranded amounts are typically not credited against any deductibles or out-of-pocket maximums associated with their insurance policy. This dilemma is what’s led to patient protective legislation such as the No Surprises Act (currently not applicable to ground ambulance services, but under review by the federal Advisory Committee on Ground Ambulance and Patient Billing). In the absence of federal rules, several states are taking action to pass legislation that protects patients. Washington, Indiana, Delaware, Maine, and Colorado have recently set up new protections from large ambulance bills.1

“For commercial insurance, the challenge is that some insurers will arbitrarily decide what they think is a fair payment for the service,” explains Maxine D’Agostino, Vice President of Billing Services at Digitech, a provider of EMS billing and technology services. “This leads to agencies not getting full reimbursement for the services provided, and also leads to remaining balances that are billed directly to patients, which the insurance industry has successfully labeled as ‘balance billing.’”

Jonathan Washko, MBA, FACPE, NRP, AEMD, Assistant Vice President of Northwell Health’s Center for EMS and a subject matter expert notes, “Because EMS generates revenue, people believe we have a pot of gold and that we’re reimbursed like healthcare. If they see a $5,000 ambulance bill, first there’s sticker shock, and everybody thinks we collect that $5,000, but we don’t. We may charge $5,000, but we may collect $500 if we are lucky.”

To complicate matters, costs nationwide are rising dramatically for labor, vehicles, supplies, medications, and fuel, while reimbursement rates across the board are largely stagnating.

Washko says there’s been an exponential rise in the expense of EMS services due to factors like labor shortages, COVID-19, and supply chain issues. “There’s no leveling mechanism in Medicare that’s appropriate to keep pace with expenses,” he says. “Say there’s a new drug that comes out that costs $1,000 per dose that’s going to save somebody’s life, there’s no additional reimbursement that comes with that. If there’s a new procedure or a new piece of medical equipment, there’s no additional reimbursement. We get paid our base rate plus every mile we transport and that’s about it.”

No Transport, No Dollars

Today most EMS agencies report that up to 33% of calls do not result in transport. Even when the patient is thoroughly assessed and receives medical treatment on-site, there are often zero reimbursements from most state Medicaid programs nor Medicare for these calls (and Medicare patients typically represent 40% to 50% of EMS calls).

Community paramedicine and mobile integrated healthcare (MIH) are smart, much-needed services in our country. These models are critical to a patient-centered healthcare system and will help serve the traditionally underserved. But we’ll never get them off the ground nationwide unless EMS can get fairly compensated for this type of care.

“The sad part is that in many cases, the best thing for the patient is not to go to the emergency department,” emphasizes Digitech’s D’Agostino. “But EMS agencies are only compensated for the transport, and ironically the transport is to the most expensive part of the health system–the hospital ER.”

What does it look like If agencies do not get fairly reimbursed? Eventually, if they’re privately owned, they may go out of business, and it’s happening at an alarming rate. Approximately 55 ambulance services have gone out of business since 2021, according to local and national media reports tracked by the American Ambulance Association (AAA) and the Academy of International Mobile Healthcare Integration (AIMHI).2 When an agency goes out of business, another entity is forced to step in and fill the gap. Or, worse, we end up with “ambulance deserts.”

“When COVID hit, EMS was decimated,” says Washko. “Even though we’ve been talking about the fragility of EMS for a long time, COVID brought more awareness to the funding gaps that exist. Today, many EMS systems across the country are literally failing and are having to shut their doors.”

This frequently leads to public EMS services needing tax subsidies, so taxpayers foot the bill to keep emergency medical services alive.

“From a safety net perspective, ultimately a private provider may still continue its mission,” explains Washko. “But it would have to be subsidized by the government.”

The system is undeniably broken, and we’re in dire need of a solution that protects patients and the ambulance services they depend on, as well as taxpayers.

How Can We Shock the System?

We should start with collaboration across the healthcare space to get to commonsense solutions that benefit the patient and provide them with healthcare at the right clinically appropriate timeframe, in the right place, at the right quality, and at the right cost. This requires all parties to agree on solutions. We all need to rally behind an aligned strategy from those national organizations that represent EMS, like IAFC, NAEMT, AAA, and others.

An education effort is needed at the national, state, and local levels as to what financial resources are needed to run an EMS system, and we all need to be transparent about costs.

A major stumbling block is that EMS systems vary widely and so do their costs. Some communities opt to outsource emergency services to private ambulance organizations. Those agencies historically have low pay structures and employ more EMTs vs. paramedics. Other communities provide service through their municipal structure, such as fire-based or third-service EMS, which typically employs paramedics who are paid union-negotiated wages, benefits, and pensions. The cost structure of a municipal-based system is typically much higher than a private-based system, so it’s very difficult to define a fair cost structure across the entire industry. EMS providers would benefit from banding together to determine a baseline cost structure, and this collaboration would lead to more success in engaging with large payers.

Legislation on various levels will be a big part of any real, lasting solution. There is some hope on the horizon as several states are working to require commercial insurance companies to reimburse at locally approved or regulated rates. However, state legislation only covers state-regulated plans, and commercial insurance typically represents less than 20% of an agency’s billing. The challenges with underfunding by Medicare and Medicaid still need to be addressed. Simply put, Medicare and Medicaid need to pay a fair amount and pay for all services.

Finally, there needs to be a solution to serve patients without insurance–who pays for them? It can’t be a case of EMS agencies absorbing the cost (i.e., loss) unless other parties are willing to pay more to offset the uninsured.

In reflecting on the 50th anniversary of EMS Week, Washko first asserts that EMS is undeniably essential. “In places where it doesn’t exist, morbidity and mortality rates are higher because of the life-saving work that EMS does. 50 years is not a long time and EMS is still in its infancy. We have a lot of work to do,” he explains. “We’ve been focused on developing the delivery model, the framework, and the system. Not enough time, energy, or attention has been paid to how we get reimbursed,” adds Washko. “It’s going to take a lot of work on the federal level, on the state level, at the insurance level, and at the agency level in order to get EMS the funding it needs to last another 50 years. As of right now, I don’t know that we’d last another 50 years as an industry in its current form.”

With that in mind, let’s celebrate EMS Week with a reckoning in this country. Let’s agree that EMS is an essential part of our nation’s continuum of care, one that has a growing role in serving our communities. There’s tremendous value in having lifesaving services available 24 hours a day, seven days a week, but there’s also a real and rising cost of providing those services. Most EMS agencies are not looking to drive outrageous profits, they’re simply trying to not lose money, pay their staff a living wage and benefits, and be part of a community healthcare solution.

  1. https://www.axios.com/2024/03/27/surprise-medical-bills-ambulance-health-costs
  2. https://icma.org/articles/pm-magazine/ems-economic-and-staffing-crisis-creates-opportunity-improved-system-design

CMS Cost Reporting in 2023 and the Impact on EMS & Ambulance Medicare Reimbursement: Where Are We Now?

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Check out our webinar on this topic: Best Practices for EMS Providers Now That Mandatory Cost Reporting is Underway

Mandatory CMS cost reporting was announced in earnest several years ago, only to be interrupted and delayed (like many things in our lives) by the COVID Public Health Emergency. Now, ground ambulance providers are focused on reporting under the Medicare Ground Ambulance Data Collection System (GADCS), with approximately half of all EMS agencies well into or even having newly completed their mandatory data capture. The other half of EMS agencies are at the beginning stages of collecting the required data. The process of data submission to CMS has just begun, depending on the reporting period for each agency.

Now is a good time to take a look at some of the context around mandatory CMS cost reporting and examine the impacts on Medicare reimbursements in the medium-term as a result of these efforts.

GADCS Key Milestones for EMS Providers

GADCS Key Milestones for EMS Providers

First, let’s review the history of ambulance reimbursements and how the structure for ambulance reimbursements differs from the reimbursement allowables that Medicare sets for other healthcare services.

In 2002, Medicare implemented a phased-in national fee schedule for ambulance services. The goal was to address the high variability in the amounts being reimbursed depending on whether an EMS provider was hospital-based or independent. In 2005, the Government Accountability Office (GAO) conducted a cost study. Interestingly, of the responses received in the cost study, 1/3 were omitted because the responding services were Fire-based and did not have a clean carveout of only ambulance costs versus other costs. The GAO report estimated that in 2010, excluding most Fire based agencies, 39-56% of providers would receive average Medicare reimbursement payments that would exceed their costs – which means, conversely, that half or more of the providers would not be able to cover their costs with Medicare’s reimbursements (Ambulance Providers: Costs and Expected Medicare Margins Vary Greatly, 2007). Additionally, the GAO report identified super rural providers as being at the highest risk of having Medicare payments well below their costs.

In an attempt to address the perceived shortfall in Medicare reimbursement, Congress included temporary Medicare ambulance bonus payments in the Medicare Modernization Act that paid an additional 2% (urban), 3% (rural), and 22.6% (super rural), starting in 2004. Those temporary bonus payments have been extended, with much debate, every few years since then.

Elsewhere in healthcare services – hospitals, physicians, clinics, labs – Medicare payments are established via an annual collection of cost data from all providers. CMS uses the collected data to update the allowable amount continually to cover costs for the provider, plus a reasonable margin. Ambulance services have been the exception, and the industry has been vocal about the existing allowables not being sufficient to cover the costs of providing the service. Outside of the 2005 GAO study, which excluded a large number of fire-based municipal ambulance providers, there is little factual data that ties current reimbursements to current ambulance rates. The amounts set in 2002 are adjusted by an annual inflation factor. The “temporary” Medicare add-on bonus payments are a modest recognition that the current Medicare rates are insufficient.

As you likely have inferred, the ambulance cost reporting initiative by CMS is intended to put ambulance providers on par with other healthcare service providers in terms of assessing costs and delivering fair reimbursement. EMS providers have received a concession, at least initially, by not being required to submit cost data annually, but rather every four years.

The collected and reported data is going to the Medicare Payment Advisory Commission (MedPAC); MedPAC will then be required to submit a report to Congress on the adequacy of Medicare payment rates for ground ambulance services and geographic variations in the cost of furnishing such services. The timing of that report is not specified. The idea is that, at some point in the future, the data would be used for resetting the amounts Medicare will pay to ground ambulance providers.

There has been speculation by some providers that the Medicare allowable amounts will go up significantly as a result of the cost reporting submissions, while others believe the amounts could drop. This difference in perspective likely depends on what type of agency you are. Fully integrated providers under municipal structures typically have costs substantially higher than the current allowables, but private ambulance services that provide a large percentage of 911 services nationwide typically have a much lower cost structure. Also, agencies running all-ALS services have a higher cost structure than those that have a mix of ALS and BLS vehicles in their system.

No matter what, over the next several years, we expect to see changes to Medicare reimbursements in ground ambulance as a result of the cost reporting efforts. Generally the sentiment is that, at minimum, the cost of providing 24/7 911 services has increased faster than the current inflation factor accounts for. Time will tell, but there is a reasonable chance that reimbursements will be enhanced to better align with today’s costs of providing this critical service.

Digitech hopes that you find this context about the substantial Medicare GADCS cost reporting effort useful to understand the system more deeply or to explain the reasons to your key stakeholders. Please reach out to CMSDataCollection@digitechcomputer.com if you would like more information about Digitech’s data collection software, which assists agencies in organizing the required data elements, or if you would like assistance in data collection via our cost reporting consulting services.

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Check out our webinar on this topic: Best Practices for EMS Providers Now That Mandatory Cost Reporting is Underway

Why Should You Outsource EMS Billing?

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EMS billing isn’t for the faint of heart. While patient care is the core mission of any EMS organization, it’s impossible to provide adequate care without resources provided by a healthy revenue stream.

Billing Isn’t Just Paperwork

Agencies that handle their billing in-house, rather than outsourcing EMS billing to a third-party vendor, are in fact running two business. Ambulance transport and EMS billing are different enterprises with different requirements for staffing, IT infrastructure, compliance, operational costs, analytics, and more.

This leads many EMS agencies to outsource their billing. Smart decision. The fee that a billing service will charge will certainly be less than the cost of running a second internal business. Let a specialized company handle the specialized work of billing so that the EMS agency can focus on patient care and other operational priorities.

Here are five main reasons why EMS agencies have made the switch to outsourcing. 

1. Reduced Costs

An established third-party billing company has a head start on infrastructure that an in-house department may never catch up with. Staffing, workspace, IT, hardware, training, software licenses, maintenance, even office supplies and equipment – these essential elements create burdensome ongoing fixed costs. Letting the billing provider handle these costs allows the EMS organization to direct resources to other essential budget items. Meanwhile, if the billing company invests in scaling their operation, building technology, and attracting top-tier staff, those benefits will be passed along to clients.

2. Industry Expertise

Billing companies deal with hundreds of providers, payers, and facilities – far more than a single EMS organization with an in-house billing department ever will. You may transport to a few different hospitals, but a billing firm may have connections to hospitals across an entire region and access to databases of patient data that your in-house billing team will not have. Outsourcing EMS billing allows you to take advantage of these economies of scale and collect every dollar.

Billing vendors also have the benefit of a broader range of resources and staff who can engage with industry associations, attend events, and stay abreast of trends in the changing healthcare environment. A good partner will keep you informed of new developments when necessary and will make sure that changes are incorporated into technology and policy as needed.

3. Top-Tier Technology

All billing companies rely on claims processing software to manage their operations. Good billing companies develop their own claims processing software to manage their operations with efficiency, opportunities for customization, and automated processes balanced with manual oversight.

Simply put, it would be impossible for an in-house billing department to develop and scale the technological expertise needed to maximize the potential of technology for billing.

4. Customer Service for Patients

After a traumatic 911 event, the best customer service may be no customer service at all. In other words, the best thing for a patient is not to have to worry about how to pay for their emergency transport.

Often, individuals are confused about their insurance coverage for EMS services. Third-party billing companies have advanced technology solutions designed to identify patient insurance information quickly and efficiently – more so than an in-house billing department could do alone, even armed with the best software. If your billing company processes millions of claims annually, they have established manual and automated processes to uncover patients’ insurance information through clearinghouses, demographic databases, admitting hospital data access, and sheer manpower.

Patient inquiries and other sensitive customer service touchpoints will inevitably still arise, so it’s important to look for a third-party vendor with high levels of professionalism and sensitivity to your organization’s reputation.

5. Increased Collections

The results of the combination of cost reduction, industry expertise, targeted technology, and great customer service? Increased collections for your organization. A billing company has one goal: maximizing the return on every claim submitted. To keep the business viable long-term, they must do so compliantly and direct resources toward infrastructure and technological innovation. This results in increased collections for clients.

Third-party billing companies should also have the capability to perform sophisticated analysis by looking at the right metrics to measure performance. Your billing partner should help you understand the right data at the right time for the right reasons. Then, you’ll be able to monitor and assess your billing company as well as project revenues.

Deciding how to handle your agency’s EMS billing takes analysis and careful consideration, with plenty of pros and cons to weigh. We’ve provided a handful of good reasons to outsource EMS billing. What are your reasons to keep doing your own billing? 

50 Questions to Ask on Your EMS Billing RFP

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Issuing an EMS billing RFP this year? Selecting the right partner for EMS billing is a crucial decision for every EMS organization that outsources billing services.

Determining the best fit can be daunting. Choose wrong, and it could have devastating consequences to revenue and reputation. Choose right, and you could develop a mutually beneficial relationship with a vendor that helps your agency flourish for decades to come.

Many agencies go through a request for proposal process to find a billing partner, either for convenience and assistance with the search or because they are required by their governing body. Our team here at Digitech is highly experienced in creating proposal responses to these RFPs; we’ve read more than we care to admit over the years. In doing so, we’ve identified a standard set of questions that we believe should be in your next EMS billing RFP, whether you’re considering outsourcing for the first time, you know your department needs a change, or you are seeking to determine if your current provider is still the best fit.

This list arms you with 50 questions in six major areas to include in your EMS billing RFP. Answers to these questions will give you a deep understanding of the proposing vendors so you can make an informed choice.

Want a printable checklist? —> click here

Company Overview

  1. How many years has your company been in business?
  2. How many years has your company provided third-party EMS billing services?
  3. Disclose any key business partners, subsidiaries, and/or contractor relationships.
  4. How many EMS billing clients do you have and what type are they (e.g. municipal, hospital-based, private)?
  5. How many EMS claims does your company bill annually?
  6. How many employees to you have dedicated to EMS billing services?
  7. Provide an organizational chart providing the roles and responsibilities of the employees who will manage and/or be assigned to perform services.
  8. How many offices do you have dedicated to providing EMS billing services? Where are these offices located?
  9. Provide information about your customer service policies and procedures, including escalation and issue resolution processes.
  10. Describe how your company is notified of changes in legislation and how that information will be incorporated into your systems and processes in a timely fashion.
  11. List any professional EMS associations that your company belongs to.
  12. Provide a list of all award protests that your company has filed in the last five years, including the reason for the protest and the outcome.
  13. Provide contact information, start date, annual transports, and a brief narrative covering implementation and services provided for three current EMS clients of similar size, complexity, and scope.

Compliance and Regulatory

  1. Does your company have a compliance plan that is updated regularly?
  2. Is a copy of your compliance plan available for inspection upon request?
  3. Has your company, its parent, or a subsidiary ever been investigated for suspected fraud and abuse by any department or agency within the federal or state government such as OIG, Medicare, Medicaid, CMS, or Recovery Audit Contractor?
  4. Has your company, its parent, or a subsidiary ever been required by a department or agency of the federal or any state government to follow a Corporate Integrity Agreement?
  5. Has there been an investigation where the final determination resulted in a client paying a fine or penalty due to coding and billing actions that were related in any way to your provision of services?
  6. Are you able to furnish evidence upon request that all current employees are not excluded from participation in state and federal healthcare programs?
  7. Please provide a brief description of your company’s quality or audit process.
  8. Is any auditing process provided by an external vendor or source? If yes, briefly describe these audits.

Technology and Security

  1. Is the EMS claims processing and billing system you use proprietary to your company or is it software developed by a third party?
  2. Provide a general overview of the billing and records management solution. Describe the billing software used, who owns it, who supports it, how many clients use it, and describe the process by which required programming changes are made.
  3. List any additional licenses that are necessary to fully operate all available aspects of the proposed billing software, including reporting software.
  4. What level of access will be provided into the billing system? Will it include full visibility into all actions, notes, documents, etc.?
  5. Does your system provide logging of all activities on a patient account for all dates of service, and do you provide access to these logs?
  6. How is patient information stored, and for how long is this data retained? Are these records retrievable by the client?
  7. Please provide a brief description of your business continuity plan or disaster recovery plan.
  8. Provide a detailed listing of all data breaches including volume of patients affected and current status.
  9. Provide evidence of at least three years of annual SOC 1 Type 2 audits.

Coding and Billing Process

  1. What is your preferred method for receiving ePCR information?
  2. Explain the format that the ePCR data will be uploaded into the billing software, and what fields will be included, e.g. patient demographics, insurance, guarantor, medical procedures performed, chief complaint, dispatched as, and found to be.
  3. Briefly describe the training process for a new coder that starts with your company.
  4. How are coding personnel audited?
  5. How are claims assigned to coders? Are specific coders or groups of coders assigned to certain clients?
  6. If there is not enough information to code the claim, what is the process for obtaining the necessary information?
  7. Please describe the circumstances in which a claim would be returned to a client.
  8. What is the typical length of time required to bill a claim once the necessary information is received?
  9. What is your standard invoicing process and timeline?
  10. Describe the appeals and review processes for denied claims and the process for limiting denied claims. 
  11. Describe the cash posting process.
  12. Describe the refund process.
  13. Please describe your process, including the frequency, for providing documentation feedback to providers.

Implementation and Onboarding

  1. Describe the initial phases of this project, including a proposed implementation plan.
  2. Describe how you ensure that implementation and the transition to your system does not negatively impact the billing and collections processes for our organization.
  3. What resources will we need to provide during onboarding and implementation?
  4. Describe the support and training you provide during the onboarding process, and describe the ongoing support and training for our administrative personnel that you will provide once onboarding is complete.

Reporting

  1. Please provide sample of weekly or monthly client reports that are part of your standard client reporting process.
  2. How are requests for non-standard reports handled? Is there a cost for these types of reports? If so, how is pricing determined?
  3. Please include any additional information regarding your reports and the data analysis tools provided to your clients.

We hope this list helps you get started in your endeavor to create or revise an RFP related to your organization’s EMS billing and coding process.

Three Critical Questions About EMS Revenue and Performance

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Action is at the heart of EMS: making quick decisions in the heat of the moment that are often truly a matter of life and death.

In the field, the business maxim of “if you can’t measure it, you can’t manage it” doesn’t exactly apply. You don’t expect a medic to pull up an analytical dashboard between calls and begin crunching numbers.

And yet, data analysis plays a huge part – not only in improving patient care and outcomes, but crucially, in the performance of the entire EMS organization. It is critical to understand the available data about challenges, opportunities, and strategy in order to make the best decisions for your agency.

In this whitepaper, we focus on three critical questions for EMS billing. You can use these questions to guide your analysis and assessment of revenue collection performance of your billing department, billing vendor, or billing solution.

  1. How are you calculating collection percentage – and why?
  2. How are you analyzing collections per trip?
  3. How are you measuring efficiency?

Click here to keep reading or download the PDF.

Same Dashboard. Better Results.

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You asked, we delivered. 

All New Features on Digitech’s highly acclaimed  

Digitech’s development team has added some cool new features:

  • Multi-select Filtering – Drill down on multiple data points at once
  • Zooming and Scrolling – Zoom in your horizontal view to better view large numbers of data points
  • Legend Quick-Filter – Hide or show data points with a checkbox in the legend
  • Cross-hair – Show a vertical cross-hair to make reading line graphs easier

Let us know what you think! Reach out to our Account Managers if you have any questions.

Finding Money Ain’t Cheap

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Should your ambulance billing service collect $16 million in billings for you or $20 million? Seems like a stupid question. But what if the service knows they will make a profit of $240,000 on the $16 million but only $140,000 on the $20 million?

It’s more expensive to process claims that involve denials, appeals, and multiple phone calls. If your billing service collects an average of $250 per transport and charges 5% of collections, they make $12.50 per claim. What are they supposed to do with claims that need a $20-an-hour-employee to stay on the phone for an hour? Some billing services will ignore these claims; it’s more profitable to write them off and send them to the collections graveyard. And if you’re the EMS client, it’s your agency that loses, not the billing service.

Perhaps you are thinking your billing service has an ethical obligation to work every claim, and if you agreed to pay a set fee per claim, they clearly do. But when the fee structure is an incentive-based percent of collections, things get a bit murky. When paying a percent of collections, you’re basically telling your billing service, “We want you incentivized such that the more money we make, the more money you make – and if we make no money, neither do you.” If that’s the case, is it really a violation of the deal for the billing service to choose not to make money for you on the claims that are not profitable for them?

Everyone in government and business is looking for the best price. EMS chiefs and finance officers have to consider the lowest-price option when seeking bids for goods and services. That’s not only logical, it’s the law in many cases. But low cost and cost effective are not the same thing. Every good manager knows this. Yet when purchasing decisions face the scrutiny of an elected board of commissioners or a finance director or a purchasing office, managers need to have a strong justification for not buying the cheapest available product. Municipalities need to keep two things in mind: First, the profit-oriented private sector does not think like the politically accountable public sector; second, it’s really difficult to beat people at their own game.

For manufacturers and service providers, lowering the price has a number of ramifications, not all of which are pleasant. On the plus side, a low price:

  • Forces efficiencies
  • Makes a business clarify what’s essential
  • Fosters competition

But there are negatives too, including:

  • Forces cost cuts that affect training, support, and the quality of life you can provide to your employees
  • Quality gets compromised
  • The safety and security of your people, your PHI, and your investments may suffer

Any seller can cut price, but great brands offer something beyond low price – convenience, dependability, service, or innovation, for instance. Consider Jet Blue in the airline industry or Amazon in retailing. In the world of EMS billing, that “something beyond” is the ability to process every claim profitably while charging a competitive fee. Few ambulance billers can do that.

The math of collections is worth doing. You may be able to realize double digit collection increases with a single digit fee increase. The higher fee will cover the costs of the technology and advanced processes that can increase collections far beyond the difference you may be paying out. While initially more expensive, applying advanced technology to pursue every dollar on every claim will produce a substantial amount of incremental revenue.

Fire chiefs, revenue cycle managers, finance directors, and municipal officials need to consider their options carefully when making decisions about which billing company offers the best value for their organization. You might think you’re getting a bargain with a billing service that offers a low cost per claim, but just because something is cheaper doesn’t mean it’s a better value. When you’re paying people to find you money, don’t be surprised if they find more when you pay more.

The Right Partner

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optimizeEvery growing business is faced with critical, make-or-buy decisions. Accounting, tax, customer service, office management, maintenance — at some point these functions suck up too much time and resources to be handled internally. They distract you from your company’s main task: delivering a valued service to customers.

That’s especially true for billing: Outsourcing your billing with the right partner will outperform in-house billing every time. That partner will collect more, cost less, maintain a higher level of compliance, and often provide better reporting and analysis.

Why? Because the right partner’s collection software is better than your collection software — even if you’re buying from a third-party software “specialist.” You’d like to think that buying from a third-party vendor will give you the best-performing software available. But that’s not the case. In fact, using a third party vendor can almost guarantee that you won’t have best-in-class collections. That might seem contradictory. After all, wouldn’t a software specialist strive to provide the best product out there? The answer is no. The specialist’s business model doesn’t work that way.

A company that bills in-house must do two things to maximize profit: 1) collect everything it’s entitled to; 2) be as efficient as possible – that is, minimize the number of billers in the department. To try to accomplish that, the firm purchases billing software from among the small group of vendors that specialize in ambulance billing software.

This is where the economics get interesting, and not necessarily in a good way. The third party software companies are similarly striving to maximize profitability, which turns the vendor-client relationship into a zero-sum game. That means the more you get, the less they get — and vice-versa. Some partnership. To enhance their own profitability, software companies have an incentive to minimize the efficiency of their own product and pay less attention to helping clients maximize collections.

And therein lies the rub that has cost ambulance companies millions over the years. The contemporary software model is to sell by the seat license. The more seats a software vendor sells, the more revenue it earns and the higher its long-term (forever) monthly support fee. That system has worked pretty well for Microsoft, a company never accused of being customer-centric. If a billing software company boosts efficiency, it will sell fewer seats. Even worse, increasing the software’s efficiency also increases its complexity, which in turn raises costs for development, implementation, training, and support. Overall, that’s a really bad deal for the software company — inflating costs to reduce revenue has never been a good long-term business strategy.

Somewhat perversely, the software company is similarly incentivized to resist helping its client improve collections. To improve collections requires developing and testing new modules, upgrading a working system, re-training billers, and adding support costs. As firms rarely like to upgrade their software, even less so if they have to pay for it, the upgrade cycle becomes difficult. And if conscience, competition, and pride force the vendor forward (damn those torpedoes), losing a client for making that effort will likely recalibrate the conscience instantly.

Why would you lose a client for doing good, you might ask? Change creates frustration at the client’s company, wherein the software company has to deal with the ire that comes with upending the daily routine of billers who benefit naught from the improved collections. That sometimes leads to complaints to the owner who, aware of his complete dependence on his billing manager, may utter something like, “If you don’t like our vendor, go find one you do like.” SURPRISE! The billing manager likes the one that doesn’t need or require continuous upgrades.

The solution is to find the “right” billing partner, meaning not just any billing partner. You’ll need to do a bit of digging. Take a look under the hood. Develop a set of requirements. The good news is that choosing is less subjective than you might think as it revolves around the technology in use – or rather, that technology’s origin.

For starters, any billing service that uses someone else’s technology is in the same position as the entity that bills in-house. In fact, this partner could underperform the in-house group because it’s savvy enough to know which claims are profitable to collect and which aren’t and may decide to focus on those that are profitable. It’s classic Low-Hanging Fruit Syndrome. If they use someone else’s software, remove them from your list.

Identifying the right partner begins with the right technology. You’ll recognize it if they own their own processing software and have made a long-term commitment to improving its efficiency and ability to maximize collections. You’ll know this is the case if:

  • They have a staff of full-time programmers who work exclusively on this software. It’s a bonus if those programmers have a ton of experience with the company.
  • They upgrade their software regularly (weekly) and every client receives the benefit of those upgrades.
  • They can point to specific modules they have released in the last year that have improved collections or efficiency or both.
  • They offer full transparency. In other words, the service allows the client to access the billing system 24/7, produce a list of claims on screen that represent every transport done for a specific date range, and enables the client to drill down into each claim and find out everything that was done to collect that claim.

Those capabilities are a healthy start. You’ll know you have a partner who shares your priorities and has committed resources to achieve them. And you’ll know you have a partner that does not fear transparency. They won’t be trying to hide anything.

But there’s more you can do. If your partner has large municipal clients, you’ll know it has the following qualifications as these are required by many municipalities:

  • The firm has a solid IT infrastructure with good Disaster Recovery systems.
  • The firm has been audited by independent external auditing firms that are experts in the field.
  • The firm has audited, publicly available financial statements.
  • The firm has SOC 1 Audit results, which are reports by external auditor who insure this company meets its contractual obligations.
  • HIPAA and PHI breach data is publicly available.

References should be at the heart of any evaluation. While there are many companies that do ambulance billing, there are only a few that do it on a large scale. And in most cases, clients have moved from one of these top-tier companies to the other. Ask potential vendors to speak to clients that they have taken from competitors and then ask the clients about the circumstances under which they left. Who collected more, who responded better, how did their implementations compare, whose reporting was better? If one company’s name keeps popping up, and that company meets the criteria above, then maybe you’ve found the right partner.

 

 

Apples and Oranges: The Problem with Comparing Collection Percentages

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In completing over 500 responses to RFPs over the past 10 years, Digitech has encountered the requirement of a collection percentage guarantee multiple times. The municipality’s goal in including this requirement, we suspect, is to identify the agency with the higher collection percentage because that agency will collect more money. While intuitively this may seem inevitable, in reality and where medical billing is concerned, it is not.

Experience has shown us that collection rates for ambulance transports are dependent on several factors: the payer mix and demographics of the area, the speed of claims processing, the agency’s rates, treat-no-transport billing or not, and a number of other inputs that are variable across different types of agencies and different geographic locations. What applies to one emergency transport provider may not apply to the next. Even with reasonably accurate carrier mix data, using collection percentages as a means of comparing billing companies can be misleading. Comparing one service’s collection rate to another’s is often a futile attempt to make the apple taste like the orange.

Given the relationship between actual collections and collection percentages, a collection percentage guarantee is often not advantageous to the provider agency. Think about it: Would you prefer a vendor that collects 100% of a $400 charge or 50% of a $1000 charge? Increasing collections often means suggesting that you bill higher ambulance fees that will generate more revenue and, in the process, lower collection percentages.

On average, Digitech collects approximately 99% of the Medicare and Medicaid allowed amounts, between 80% and 93% of insurance, and anywhere from 1% to 8% of private pay. The overall collection percentage depends on the client’s payer mix. For instance, if all claims were Medicare claims, Digitech’s overall collection percentage would be 99%. If the payer mix is comprised completely of private pay claims, our collection percentage would be 8% or below. These are obviously extreme examples, but they illustrate the impact of carrier mix on overall collection percentage.

So if collection percentage analysis is not the best way to compare vendors, what is the alternative? We recommend looking at collections per transport (CPT) because it is generally a clearer measure of collections as it removes variance due to volume. This makes it easier to compare vendors’ performance. Ask the billing companies you’re considering for examples of where they have taken over from other companies and compare CPT. Then call those entities and ask specific questions.

Another way is to look at the technology that each prospective billing company is using and dig into its capabilities. Superior technology is the most significant determinant of success in ambulance billing. The best companies will have mature, well-conceived, customizable software that is specifically designed for ambulance billing.

Finally, references should be at the heart of any evaluation. In many cases, clients have gone from one billing company to another. Ask the clients about the circumstances under which they left their previous vendor. Who collected more? Who responded better? How did their implementations compare? Whose reporting was better? Answers to these questions paint a much more complete picture of prospective companies than collection percentages will.

Collection Improvement Examples

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Digitech has increased revenue recovery for our clients every time we have been contracted. Click on “Before” and “Digitech Year 1” to see how much.