The ACA and Ambulance Transport Revenue

Jul 13, 2016, 16:50 PM
Author :
Subtitle :
Summary : The Wicked Problem in Healthcare The Patient Protection and Affordable Care Act (ACA) was designed to solve wicked problems. The ...
Display date :
Date : Mar 2, 2016, 08:35 AM

The Wicked Problem in Healthcare

The Patient Protection and Affordable Care Act (ACA) was designed to solve wicked problems. The cost of healthcare in America is increasing at unsustainable rates and is projected to continue rocketing upward. In response to this dire situation, the ACA was designed to accomplish what is referred to as the Triple Aim:

  • Lowering per capita cost
  • Improving patient care
  • Improving population health

Regardless of your stance on the ACA, these are valuable goals reflecting real problems that must be solved quickly. Part of that responsibility falls on EMS, because in some circumstances EMS can contribute to wasteful spending.

In most EMS systems, patients are treated in the field, loaded into a very expensive ambulance and taken to an even more expensive emergency room. Though it’s true that EMS accounts for less than 1% of the all healthcare dollars spent in America, this method of treatment is a source of huge costs.

The ACA’s expansions of Medicare and Medicaid may also drive down your agency’s ambulance reimbursements. Understanding how these changes will impact your ambulance reimbursement rates and keeping your eye on EMS delivery-system reform opportunities is crucial to keeping your agency ahead of the curve.

Understanding Your Revenue Problem: Payer Mixes

You must know your payer mix to understand how the ACA will financially impact your department. A payer mix is the percentage of patients that pay you through Medicare, Medicaid, commercial insurance or private pay. Most transport agencies have 50-60% of their patients on a combination of either Medicaid or Medicare, both of which fail to provide enough revenue to compensate your agency.

You also need to know the percentage of your population over 60 years old. This population will most likely transition from commercial insurance to Medicare upon reaching 65. This data point will help you predict changes in your payer mixes within the next five years, knowing that your ambulance reimbursements for that population will decrease from 100% of the billable amount to 20%-40% of billable amounts.

The exact number depends on what your typical ambulance transport charges are, whether you balance-bill Medicare patients and whether those transitioning to Medicare will have a supplemental health policy.

Understanding Your Revenue Problem: Payer Rates

It’s critical to know the payer rates of each classification of patients your agency transports. To highlight this problem, let’s assume an average ambulance billing rate of $1,500. In most cases, commercial insurance, along with the patient paying a co-pay, will reimburse your agency 100% of the billable amount.

On the other hand, Medicare will reimburse about $400, which is 26% of your billable amounts and Medicaid will pay about $120 or 12% of the billable amount. This consistent underfunding by governmentally sponsored health insurance forces many agencies to increase their ambulance billable rates well above the cost of providing the service. The result is that those with commercial insurance in effect subsidize the underfunded reimbursements from Medicare and Medicaid.

Three Wicked Scenarios Your Department Will Face

Considering the significant underpayment of Medicare and Medicaid when compared to your agency’s actual costs, from a business-survival perspective, there are three things you don’t ever want to see. Unfortunately, these three wicked-case scenarios are occurring or will occur in part as a result of the ACA.

Baby Boomers – This large segment of our society was born between 1946 and 1964 and account for roughly 26% of the population. Baby Boomers began reaching age 65 in 2011. This huge generation is retiring at the rate of 10,000 per day (“Baby Boomers Retire,” Pew Research Center, December 29, 2010). This rate of daily retirements is expected to last until about 2029. Most Baby Boomers will transition from commercial insurance to Medicare (Who Can Get Medicare [PDF]).

This will reduce your revenue by 73% for each new Medicare patient your agency transports. This impact may be mitigated, based on whether your department bills all your Medicare patients for the remaining balance and if those patients choose to have supplemental health insurance policies. Knowing how many people in your population are 60 is important to prepare for the next five years when they transition to Medicare.

You likely have been experiencing this wicked scenario since 2011, with a significant increase in Medicare billings for every year since.

PPACA – Many states expanded the maximum income threshold to qualify for Medicaid from 106% of the federal poverty level (FPL) to 133%. Some states like Connecticut have further increased this amount to 196% of the FPL for a parent of minor children (PDF).

This has allowed those with commercial health insurance to qualify for the cheaper option of Medicaid. Of the total patients in the U.S., 2.5% transitioned from commercial insurance to Medicaid.

As a result of this transition and the addition of previously uninsured individuals, Medicaid enrollment has increased by 5% (Impact of Healthcare Reform on California’s EMS System, California Ambulance Association, September 19, 2012).

For each patients transitioning from commercial insurance to Medicaid, your agency will lose 92% of the ambulance transport reimbursement for calls involving these patients.

Increasing 9-1-1 Call Load – This has been occurring for some time; we just may not have known why. Individuals with Medicare and Medicaid tend to overuse the emergency medical system 78% of the time, while those with commercial insurance overuse the emergency system 17%.

In the Medicaid program, most patients must see a primary care physician for the vast majority of their ailments. This is compounded because primary care physicians, who are already in shortage, can choose to accept or decline Medicaid patients. With a reimbursement rate of around 10%, many doctors understandably decline Medicaid patients.

Of course, when a Medicaid patient can’t access a primary care physician, they call 9-1-1 and seek care at the emergency room. Additionally, as Baby Boomers grow older and require more healthcare, they’ll find themselves increasingly using 9-1-1. Keep in mind that these patients now have Medicare. This may be why many EMS agencies across the nation have seen t increases in their EMS call volume with no proportional increases in the population they protect.

This third wicked scenario will have a compounding problem when your call loads increase to the point that, in order to maintain response time commitments, you must add additional ambulances, which only generate lower reimbursements, insufficient to offset their operating costs.

Conclusion

EMS systems will likely see decreasing reimbursements and increasing call volumes. We must understand that patient demographics have changed, but in most cases our delivery systems have not. Our reimbursement methodologies have not kept up with the changing population.

These wicked scenarios will break our budgets and, for many organizations, will not be sustainable. We can’t continue to automatically send very expensive paramedic ambulances to every patient problem when well over 60% of those patients don’t require such a response. We need to innovate our EMS services to address our patients’ actual problems.

Categories :
  • Finance
Tags :

Advertise in iCHIEFS

The publication’s targeted distribution reaches the desks of the major decision-making powers who have the purchasing authority throughout the multi-million dollar fire service industry in North America and internationally.

From 50 states and 30 countries worldwide, IAFC members are world-class experts in firefighting, EMS, terrorism response, hazmat response, wildland fire suppression, natural disasters, search and rescue, and public safety industries.

The IAFC consists of nearly 12,000 members. The majority are located within North America with nearly 200 members from 30 other countries worldwide.

Questions?
Please contact your sales representative, call our toll-free line and ask for the sales manager (866-999-1299) or email sales@matrixgroupinc.net.

Learn More