The national ambulance fee schedule implemented by CMS in April 2002, is inadequate to cover the higher costs associated with operating low volume rural ground ambulance services.  The temporary relief offered to rural ambulance providers in BIPA expires on 12-31-04, which will be devastating to rural ambulance providers already damaged by the fee schedule. 

Low volume rural ambulance services have similar fixed costs to busy urban services, but fewer transports to spread out their fixed costs.  Consequently, their per-transport costs are far higher than their urban counterparts (see the attached article Rural Ambulance Economics).  Both CMS and the Negotiated Rulemaking Committee who developed the fee schedule have acknowledged the failure of the fee schedule to compensate rural providers for this additional cost, and both MedPAC and GAO have repeatedly highlighted the problem. Last year, at the behest of Congress, CMS implemented a supplementary mileage “add-on” payment for rural transports as a “temporary proxy” to be used until a more appropriate system was developed. Unfortunately, mileage is a poor indicator with respect to identifying the low volume rural providers who require the additional funding. 

The best predictor of ambulance trip volume is the population density within a given service area. In order to more efficiently target low volume ground ambulance areas, the definition of “rural” must change from the current county-wide (MSA / Non-MSA) designation, to a sub-county level identified by zip codes.  Since there are roughly ten times as many zip codes as counties, a zip code based designation is significantly more precise and cost-effective. 

The concept of applying a rural adjustment on a zip code level based on the population density of each zip code was initially raised with CMS during the negotiated rulemaking, but was dismissed by CMS due to a concern that they could not implement such a system within the time constraints imposed by BBA ’97.  However, beginning in January 2001, CMS has required all ambulance claims to include the zip code of the point of pickup, therefore there should no longer be a barrier to implementing such a payment method. 

Many Members of Congress have acknowledged the funding shortfall for rural ambulance services, and in BIPA 2000, GAO was directed to complete a study on the relationship between the cost of providing ambulance services, and the population density of their service area.  The GAO report has been delayed, and is expected to be published in July or August of 2003.   However, legislators may request an advanced briefing by the GAO in order to validate the concepts put forth in this legislation. 

An Urbanized Areas (UA’s) are densely populated areas defined by the Bureau of Census that correspond to cities and adjacent densely settled census blocks that together encompass a population of at least 50,000 people.  In general, these boundaries follow the city limit borders, rather than county lines as is the case with MSA’s. The 2000 Census resulted in the identification of 453 UA’s in the United States. A listing of these can be found in the May 1, 2002 Federal Register. 

The reason UA’s are used in the legislation is because there are a few zip codes that are located within large cities that may technically have low population densities. For example a large office building may have its own unique zip code.  The UA reference is intended to exclude the payment of a rural adjustment within a large city. 

Estimating the cost of the proposed legislation is difficult without having current claims data, which CMS has not made available.  However, rough estimates are that this resolution to the rural ambulance problem could cost as little as $200 - $300 million. 

The reason that these costs are far less than other proposals is that the additional money is better targeted to where the need is.  The more rural the ambulance service is, the lower the transport volume, the higher the cost per transport, and therefore the higher the adjustment. 

While the proposal calls for a much higher payment to the lowest density areas (3.5 times the urban rate), it will only be applicable to the 4% of the population that lives in such remote areas. 

Based on zip code data from the U.S. Census Bureau, the following table represents the percentages of the population living in the areas affected by the rural modifier. 
 
 

Several other factors must be taken into consideration when estimating the cost for this legislation: 

1. This proposal substitutes the existing “temporary proxy” of paying a higher mileage rate on some rural transports with a more rational payment policy. The money currently allocated to mileage will be redirected to the new density adjustment. 

2. A rational density adjustment will not have a significant effect on call volume. Rural residents utilize ambulance services at a far lower rate than do their urban counterparts. 

3. Rural ambulance services have historic charges less than those in urban areas, and some continue to charge less than the Medicare Fee Schedule.