Setting ambulance fee schedules can be challenging and complex.
On one hand, governing bodies and EMS providers do not want to place an undue burden on patients who require an ambulance for an emergency medical need. On the other hand, providers need to try to optimize revenues for their agency to maintain operations and provide the highest level of care.
Another complexity of ambulance fee rate setting is that transport fees are considered a healthcare service; because of this, the amount a provider charges for transports is completely disconnected from the amount payers will pay.
Governmental payers – Medicare and Medicaid primarily – pay based on a set fee schedule which is not connected to the actual cost of the individual entity providing the service. Medicare and Medicaid transports typically represent two-thirds to three-quarters of an EMS agency’s transport volume, which results in a substantial gap between the cost of providing the service and the reimbursement they receive.
Only with commercial payers – insurance carriers – do EMS providers get close to what they charge in payment.
So, especially for municipal providers with relatively high cost structures, there is no amount that could be charged that would result in full cost recovery. An agency would need to charge some astronomical amount, such as $10,000 per transport, and be able to recover 75% of those charges from the 10-20% of the patients that have commercial insurance coverage, to come close to recovering their costs. Of course, charging $10,000 per transport is unlikely to get either governing body approval or community support!
Here are some of the pros and cons of aligning ambulance transport fees to costs in 911 systems:
- Accurately reflects the cost of providing the service
- Can objectively be measured and adjusted periodically
- Promotes awareness within the community of the cost of providing 24/7, immediate response services
- Creates awareness for the various involved service providers (labor, management, governing bodies) of the contributors towards overall costs
- Likely is the best-case scenario for maximizing revenue and offsetting a substantial portion of the cost of providing the service
- Charging the cost of the service, especially for municipal providers, may result in a charge level that exceeds what the governing body and the community feel comfortable supporting
- Places an undue burden on uninsured or underinsured patients
- Creates a subsidization scenario in which commercial insurance providers are “subsidizing” the system since governmental payers do not adjust their payments based on costs or charges
- Increases the patient responsibility for patients with commercial insurance because co-pays are often tied to a percentage of charges (e.g., 20% is typical)
There are substantial and significant cons. But from an industry perspective, agencies are doing a disservice to their fellow providers by not charging at least equal to costs.
Undercharging reinforces the insurance practice of paying at a usual and customary level that is completely detached from the cost. The case needs to continue to be made through available avenues to Medicare and Medicaid that providers deserve to recover their cost of providing the service. For patients, agencies can establish hardship policies to mitigate some of the excess burden put on uninsured and underinsured individuals. As for patients with commercial insurance who get hit with high co-pays, the burden can be lessened by making sure hardship policies provide relief for people who truly cannot afford the payments.
In the end, the EMS community cannot “fix” the growing burden on patients. Patients do have protection once they reach a total out-of-pocket amount, but there is no doubt the financial burden is heavy when a patient experiences a medical emergency – of which the costs related to ambulance services is only a small piece.