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To Be Par or Not to Be Par, That is the Question

March 03, 2017

In aviation, there is a term that is repeated three times by a pilot in distress.  You are likely familiar with it: mayday, mayday, mayday!  If you’re flying a nearby aircraft and listening on the right frequency, the signal commands attention and beckons air traffic control to resolve the situation with the troubled pilot.  

Over the last several years in EMS, mayday has been called more times than can be counted.  The industry is in distress and a major reason why is reimbursement – for many agencies it is below cost, and at times, a frustrating challenge to obtain.  Like the pilot facing her own mortality in the sky, EMS as we know it faces its own uncertain future.

Not only do federal and state entitlement programs dictate fee schedules with virtually no consideration given to the needs of EMS, but commercial payers deploy tactics specifically designed to frustrate the path to payment.  

In many states, this manifests itself in the form of short-paying, or a check being sent to the patient.  We’ll get into this momentarily.

As we know, emergency ambulance services live by certain expectations – be ready, be capable, be on time.  To live in this state of readiness requires more than this article has space to describe; what’s important now is to understand that EMS is required to respond and provide care without any guarantee of payment.  

EMS is caught in between the patient and the payer, fulfilling a critical need yet often forgotten or misplaced within the larger context of a healthcare system that groans under the weight of its own maneuvers.  

Some observers would look to the Centers for Medicare and Medicaid Services (CMS) and how it classifies EMS as transportation suppliers rather than healthcare providers and professionals.  This seemingly small detail can have lasting implications.  

Consider that if EMS was reclassified it may open avenues to reimbursement for non-transport services, an increasingly important talking point as traditional fee-for-service models are examined for their long term usefulness.  

The Medicare Ambulance Access, Fraud Prevention and Reform Act contains key provisions which can usher this change along.  It may also lead to changes in how CMS collects cost data, enabling the industry to move toward a periodic sampling model rather than a less accurate annual cost reporting model.

This last point is important, because if CMS would ever decide to substantially increase fee schedules, it would only do so after it had a chance to study data that is exhaustive, accurate, and provided in an ongoing manner.

Indeed, it is data like this that can help make the case for EMS, and demonstrate just how dire the financial reality is for agencies across the nation.  Which brings us back to an insurance check being sent to a patient.
For the uninitiated in our audience, this is a practice where a commercial payer receives an ambulance claim and pays for it, but instead of issuing the check to the ambulance company that serviced its member (the patient), the payer issues the check to the patient.

Often, the patient needs help understanding why he or she just received a check.  Is it “Christmas in July” as some would say?  Should it be cashed?  Other times, the patient spends the money on personal items with no regard for the ambulance company’s right to it.  

There are plenty of stories about repeat offenders who call 911 because they know that a check will soon follow.  For some, it’s tantamount to a second income.  For many others, the practice is simply confusing.  For the payers responsible for it, it’s actually quite clever. 

If one understands that the insurance companies are attempting to incentivize the ambulance companies through drudgery, it starts to make sense.  

After all, insurance company executives understand the time and resources involved in “chasing down” those checks.  They know all too well that it puts ambulance companies in difficult situations, pitting them against the misperceptions of the very patients they are trying to help.

But incentivize to do what?  Well, as the title of this article suggests, ambulance companies all face the same question – to be par or not to be par?  

To clarify, par in this context means to be participating, or in-network.  And to be sure, there are benefits to it.  Two big ones are that payment will come to the ambulance company, and it will come fast, usually within a few weeks.  

The downside is it comes with a catch.  To receive these benefits one must accept a drastically reduced rate as payment in full.  This rate is often equivalent to the prevailing Medicare fee schedule, or sometimes a small percentage over it.

To put this in perspective, let’s look at some examples.

Using generic numbers, and attempting simply to break even, let’s assume an average charge of $750 factors in base rate and mileage, and is necessary to simply offset our cost.  In this case, we are looking at 1,000 trips per year, which is costing us $750K, and the insurance company is paying 100% of the charge amount, sending checks to the patients.


In aviation, there is a term that is repeated three times by a pilot in distress.  You are likely familiar with it: mayday, mayday, mayday!  If you’re flying a nearby aircraft and listening on the right frequency, the signal commands attention and beckons air traffic control to resolve the situation with the troubled pilot. 

 

Over the last several years in EMS, mayday has been called more times than can be counted.  The industry is in distress and a major reason why is reimbursement – for many agencies it is below cost, and at times, a frustrating challenge to obtain.  Like the pilot facing her own mortality in the sky, EMS as we know it faces its own uncertain future.

Not only do federal and state entitlement programs dictate fee schedules with virtually no consideration given to the needs of EMS, but commercial payers deploy tactics specifically designed to frustrate the path to payment. 

 

In many states, this manifests itself in the form of short-paying, or a check being sent to the patient.  We’ll get into this momentarily.

 

As we know, emergency ambulance services live by certain expectations – be ready, be capable, be on time.  To live in this state of readiness requires more than this article has space to describe; what’s important now is to understand that EMS is required to respond and provide care without any guarantee of payment. 

 

EMS is caught in between the patient and the payer, fulfilling a critical need yet often forgotten or misplaced within the larger context of a healthcare system that groans under the weight of its own maneuvers. 

 

Some observers would look to the Centers for Medicare and Medicaid Services (CMS) and how it classifies EMS as transportation suppliers rather than healthcare providers and professionals.  This seemingly small detail can have lasting implications. 

 

Consider that if EMS was reclassified it may open avenues to reimbursement for non-transport services, an increasingly important talking point as traditional fee-for-service models are examined for their long term usefulness. 

 

The Medicare Ambulance Access, Fraud Prevention and Reform Act contains key provisions which can usher this change along.  It may also lead to changes in how CMS collects cost data, enabling the industry to move toward a periodic sampling model rather than a less accurate annual cost reporting model.

 

This last point is important, because if CMS would ever decide to substantially increase fee schedules, it would only do so after it had a chance to study data that is exhaustive, accurate, and provided in an ongoing manner.

 

Indeed, it is data like this that can help make the case for EMS, and demonstrate just how dire the financial reality is for agencies across the nation.  Which brings us back to an insurance check being sent to a patient.

For the uninitiated in our audience, this is a practice where a commercial payer receives an ambulance claim and pays for it, but instead of issuing the check to the ambulance company that serviced its member (the patient), the payer issues the check to the patient.

 

Often, the patient needs help understanding why he or she just received a check.  Is it “Christmas in July” as some would say?  Should it be cashed?  Other times, the patient spends the money on personal items with no regard for the ambulance company’s right to it. 

 

There are plenty of stories about repeat offenders who call 911 because they know that a check will soon follow.  For some, it’s tantamount to a second income.  For many others, the practice is simply confusing.  For the payers responsible for it, it’s actually quite clever.

 

If one understands that the insurance companies are attempting to incentivize the ambulance companies through drudgery, it starts to make sense. 

 

After all, insurance company executives understand the time and resources involved in “chasing down” those checks.  They know all too well that it puts ambulance companies in difficult situations, pitting them against the misperceptions of the very patients they are trying to help.

 

But incentivize to do what?  Well, as the title of this article suggests, ambulance companies all face the same question – to be par or not to be par? 

 

To clarify, par in this context means to be participating, or in-network.  And to be sure, there are benefits to it.  Two big ones are that payment will come to the ambulance company, and it will come fast, usually within a few weeks. 

 

The downside is it comes with a catch.  To receive these benefits one must accept a drastically reduced rate as payment in full.  This rate is often equivalent to the prevailing Medicare fee schedule, or sometimes a small percentage over it.

 

To put this in perspective, let’s look at some examples.

 

Using generic numbers, and attempting simply to break even, let’s assume an average charge of $750 factors in base rate and mileage, and is necessary to simply offset our cost.  In this case, we are looking at 1,000 trips per year, which is costing us $750K, and the insurance company is paying 100% of the charge amount, sending checks to the patients.


non participating table


Now, let’s assume everything remains the same, except now we have entered into a participating agreement, and agreed to accept $375 as payment in full.


Participating table


In the latter example, we’ve collected 100% and did so with a fast turnaround, yet we doubled our losses ($375,000 compared to $187,500).  Given this, why would this ambulance company become a participating provider with this payer? 

 

The decision of whether to be par or not to be par depends entirely on the specific circumstances of a given ambulance company, its costs, the proposed terms of the agreement, and the effectiveness of its billing solution, whether in-house, or third party.

 

It’s this last point which is most relevant to our discussion.  To demonstrate, let’s put ourselves in the shoes of an ambulance company director who maintains an in-house billing department with increasingly limited resources and time, one which is collecting 60% on checks sent to patients.


Non-Participating Table


While this agency director knows she would lose an additional $75,000 being par, she also knows she can eliminate the overhead (resources and time) related to actually collecting from the patients.  When she factors in all the other payers she could similarly participate with to cut costs, the relative pain of this $75,000 loss may be outweighed by an ultimate net gain, or at worst, a wash. 

 

What she knows for certain is that unless the in-house billing program generates a better result, she will need to consider an alternative, such as a company specializing in ambulance billing.   This route can deliver the resources necessary to tilt the equation in her favor, enabling her to remain non-par, while freeing her up for growth rather than restricting her to making decisions based on a constantly shrinking budget.

 

This stated, some ambulance companies can keep their costs low, and have their charges set to approximate the Medicare Fee Schedule, thus mitigating the losses typically associated with accepting in-network rates.  This can make for an easier decision to become participating, if only to expedite the process of receiving payments.  But these companies are the exception, and are generally found in more economically challenged rural areas where price inflation hasn’t had the same impact as in more populated areas.

 

This brings us to a core issue that the insurance industry brings up time and again, which deals with ambulance company charges.  Many insurance industry advocates refer to EMS rates as exorbitant, describe it as price-gouging, and adopt insinuating terms such as “surprise billing” when patients are billed for balances.

 

Ultimately, the insurance industry believes that many of the prevailing average charges in EMS are not “usual and customary.”  The Medicare Fee Schedule is cited as the benchmark reference – after all, if the government deems this reasonable, so should they. 

 

But what many in EMS are saying is based at least in part on the concept of our generic examples.  Here, we see that the insurance company is already paying either the full charge or a large percentage of it.  What is proposed then is quite simple, and would alleviate confusion for the patient: Just put a different address on the envelope that contains the check. 

 

The fact that insurance companies refuse to do this is telling in that it would not cost them anything additional, would make life easier on the patient, and would help EMS.  That’s a win for everyone, right?

 

On a deeper level, what seems evident is that EMS agencies are not trusted to evaluate and/or control their own costs.  At the very least, the cost data isn’t conclusive (hence the need to overhaul how it is collected).  And like any successful business, insurance companies who send payments to the patients aren’t about to squander an opportunity to shave costs, no matter how much frustration it creates.

 

This is evidenced by legislation either proposed or passed in several states, in large part by the tireless work of national and state EMS advocacy groups who labor for years to bring these frustrations to light.  In states like Pennsylvania, Maryland and others, that legislation would see payments made directly to ambulance companies, without an official participating contract needing to be signed. 

 

This is a win for some, yet there is a familiar catch – you have to accept lower rates as payment in full.  What’s the saying, if it walks like a duck…?

 

Now, up to this point, we’ve looked at this issue through the lens of a 911-only ambulance company.  Of course, there are thousands of non-emergency medical transportation suppliers evaluating whether to be par or not to be par, including some that run hybrid operations and also provide emergency services.

 

For companies performing non-emergency transports, the equation may be significantly affected by the volume and the nature of how those transports are requested.  Many transports are scheduled, and the facilities requesting them may direct those calls to transport companies they know are in-network with a certain payer.

 

Some payers will go so far as to post on their websites which ambulance companies not to use, because they don’t participate.  In the competitive world of non-emergency transportation, a key contract can make or break whether a sizable portion of business is realized or lost.  No comparison table is necessary to understand the value of being par in cases like this – if you’re not par, you don’t get the transport.

Of course, underlying this is the need for the terms of such contracts to be compliant, and for this matter, any contract should be reviewed by competent and experienced industry experts.

 

To this point, it is recommended that an ambulance company consult with its billing partner (if using a third party) prior to entering into any contract.  Assuming there is enough data available, a billing company can provide comparative analyses to measure the projected difference between participating and non-participating payments, can review contracts for terms and stipulations, and provide compliance guidance as it relates to those terms. 

 

This doesn’t replace the need for sound legal counsel; rather, it is one more source of information with which informed decisions can be made.  This becomes critical when ambulance companies find themselves debating the merits of entering into a participating agreement that is not only below the Medicare Fee Schedule, but also below their cost.

 

There are too many examples of improper contracts with cut rates that reflect the willingness of some to “go low” in order to gain business or remain competitive.  But beware – such agreements can hasten the end.  The news is littered with stories of companies either closing up shop, or unexpectedly pulling out of certain markets.  

 

We started this article with a pilot in distress, but that pilot did at least one thing right – she kept her cool and made the call for help.  As EMS decision makers navigate their own way over uncertain terrain, calling for help can take several forms. 

 

It may mean speaking with Cornerstone to better understand what the numbers reveal; it may mean working with neighboring agencies to find ways to increase efficiencies, improve purchasing power, and develop greater political influence.  It may mean engaging the public, educating them and gaining their advocacy.  It may mean pursuing alliances with like-minded health care organizations and creating non-traditional service lines such as mobile integrated healthcare. 

 

Most likely, it means all of these things, and more.  In this light, the question of to be par or not to be par is one best answered by those leaders who are informed about their finances, and who maintain a strong understanding of their billing program.  This transcends simply monitoring payments, and speaks to the payers behind those payments, the interplay of call volume, call type, service rates, contractual allowances, revenue cycle practices, documentation and compliance, and the moving target of optimum effectiveness in an age of decided uncertainty.  


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