What Lies Ahead for Prehospital Care Finances

From the operational challenges associated with a global pandemic, to staffing difficulties, to ongoing reimbursement shortfalls, it seems as if the Prehospital Care Community in the United States has been under siege for years. And now, as the budget reconciliation process continues in Washington and the Federal Government recalibrates in the post-DOGE era, there are both risks and opportunities for healthcare providers and suppliers.  

Headwinds Ahead

In an ever-shifting landscape, uncertainty has become the norm. Here are some of the challenges that lie before the pre-hospital care community:

Cost Pressures

The cost pressure is no surprise to anyone who follows our industry. However, what does the future hold on this front? It stands to reason that labor costs will continue to rise as certain members of our teams catch up from historically low wages. Shortages of key professionals are expected to continue and, in some cases, accelerate in the years ahead. In addition, the cost of equipment, supplies and technology continues to rise at alarming rates—if you can even get the medications and/or ambulances to put them in.

Government Budget Challenges

As the saga of the Federal budget process plays out in our nation’s capital, we should note there are challenges in State and Local municipal budgets as well. The projected cuts in Federal spending are destined to impact Medicaid, Medicare, and many other healthcare programs. To compound the issue, many State and Local agencies are seeing federal dollars that they relied on for other key programs to cut. Likewise, changes in funding for education are likely to impact the institutions that offer the majority of the training required to develop new EMTs, Paramedics, and Nurses.

Balanced Billing Challenges

The EMS community is entering an era of uncertainty as States continue to address the impact of balance bills to patients. Those of you in the air medical services portion of our community are several years into what we know as the No Surprises Act (NSA). While many states are taking a slightly different approach to addressing this issue on the ground side, the reality remains the same, and our ability to cost shift (make up the shortfall from inadequate government payments, uncompensated and undercompensated care) will be significantly diminished.

Tariffs

While we are still relatively early in the “tariff era,” economists believe the near-term impact will be higher prices for many goods used in healthcare delivery. Some remain hopeful there will be a more positive long-term impact as domestic production of many of these items ramps up. Only time will tell, but it seems logical to assume the current tariff related cost pressures will evolve into significant cost increases for healthcare supplies for the next 1-4 years.

VA Reimbursement Cuts

The stay of execution on VA payment cuts was issued last year. It was a huge relief for agencies that operate in areas with large Veteran populations. However, there is still a need for VA leadership to address the findings of the Government Accountability Office (GAO) study and develop a more balanced payment mechanism for medical transport services to avoid reduced payments from the VA.

Opportunity on the Horizon

At the same time, there are doors that can open even in times of uncertainty. Here are some of the opportunities that may present to the pre-hospital care community:

Market Rationalization

Our organizations operate with very high fixed costs (what we call readiness costs). This means that the ultimate performance metric, cost per transport, is tied tightly to the volume of episodes of care we provide. As economics become more challenging, there are often reductions in the number of suppliers. That reduction creates an opportunity for the remaining organizations to reduce their cost per transport by increasing volumes and getting economies of scale. Of course, expansion of services and/or service areas must be carefully evaluated and implemented.

Medicare Payment Reform

Compiled data from the Ground Ambulance Data Collection System (GADCS) shows that there will now be relatively objective data on the operation of prehospital care organizations. Likewise, the NSA prescribes a similar data collection process for air ambulance service. The air ambulance process should commence with the publication of the final NSA rule. The industry is hopeful this data may be applied to a comprehensive effort to reform the current Medicare payment system. Anyone who has been around the EMS community for more than a few years understands that Medicare reimbursement is less than adequate. For the first time in many years, we may actually have the data to support a rational calibration of the Medicare Ambulance Fee Schedule.

Readiness Movement

In many areas of the country, community leaders have come to grips with the concept of readiness costs. Some communities are making efforts to compensate prehospital care organizations accordingly. While a great deal of work is left to be done in this area, there are certainly models to build upon. This is an area that has the potential to change the economic landscape of EMS in many portions of the country.

VA Payment Reform

While there is still risk the reimbursement payment system will result in dramatic reductions in payment for prehospital care providers, there is also an opportunity for the emergence of a rational system of compensation for the prehospital care of VA patients. EMS leaders need to continue to track this matter and pursue policy change that is balanced and rational.

There is Hope…

As you weigh these many factors that will impact prehospital economics in your own organization and in the years ahead, recognize there is hope and opportunity. There is more movement toward true financial reform than we have encountered in recent years. More data is now available to us. There appear to be emerging champions for EMS payment and financing reform. The industry seems to be more engaged and united in its commitment to achieve rational reforms.

While headwinds are inevitable—and EMS leaders must and prepare their organizations for the storm—we must never lose focus on the opportunities that lay before us.