One of the biggest challenges involved in providing superior prehospital care is obtaining the appropriate funding to pay for it. Funding is needed for salaries, equipment, as well as ongoing training. It seems that there is a disproportionate amount of money available for fire services, but these funds tend not to be as readily obtainable by emergency medical services (EMS). There are, of course, many models for EMS, all of which vary in their funding structure, but rarely does any model rely on a single revenue source. Similarly, each model has different requirements and often a different focus. For example, whereas a paid municipal department may rely heavily on tax revenues and government funding to pay for their employees and benefits, a private volunteer agency may receive no public funding and have minimal if any costs associated with payroll. However, both agencies would likely look to other funding sources such as private businesses, donations, state and federal grants, etc, to ensure the reliable delivery of high-quality care.

There is also variance among agencies regarding the level of service they are willing and able to provide, which may be a direct result of financial concerns. For example, some agencies choose to staff advanced life support ambulances only. Others choose to staff a mix of basic and advanced life support. Some choose to staff multiple ambulances to try to ensure their agency is the one providing timely service in the district, while others staff only a single ambulance, relying on surrounding agencies to cover their district when the primary agency is unavailable. These decisions of how to staff and the level of service to provide are often based on cost and resources but are key to strategic planning.

Another important aspect of EMS finance that varies among ­agencies is reimbursement. Serving a relatively poor population can be quite expensive, particularly if it is busy. Despite the high volume, low reimbursement rates and inability to collect on self-pay patients can lead to high losses. These agencies often are dependent on funding from the municipality as a public service. Conversely, serving an affluent area with patients carrying excellent insurance can be very lucrative, even with relatively low volume. Location near an institution with a large ­number of paid transfers can also be extremely lucrative. Regardless, finding funding sources to offset low reimbursements is critical to viability as is the ability to collect on bills. Variances in reimbursement vary not only locally, but regionally as well and these differences must all be considered when developing a budget and business strategy.

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  Describe sources of funding for EMS agencies.

  
  
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  Discuss levels of reimbursement for EMS.

  
  
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  Detail CMS (Centers for Medicare & Medicaid Services) criteria for reimbursement and discuss regional variability for reimbursement.

  
  
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  Define “payor mix” and discuss the financial impact of regional variability on EMS agencies.

  
  
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  Describe mileage as a modifier to reimbursement.

  
  
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  Describe “medical necessity” and preauthorization for interfacility transport calls.

  
  
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  Describe how electronic PCR (patient care record) may improve reimbursement.

  
  
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  Describe tax districts and discuss municipal funding.

  
  
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  Describe EMS district contracts.

  
  
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  Describe grant writing as a method to obtain needed equipment and training.

The National Academy of Sciences-National Research Council’s Accidental Death and Disability: The Neglected Disease of Modern Society and subsequent Highway Safety Act of 1966 contended that prehospital care had been terribly neglected. One of the tenets of the Highway Safety Act was to establish the Department of Transportation (DOT) and in doing so, gave the DOT authority and funding to try to improve EMS. This was essentially the first federal funding for EMS. Unfortunately, while somewhat helpful initially, these funds led to solutions that lacked sustainability despite extensions of funding in 1976 and 1979 and the bulk of the burden of funding fell to individual states and individual agencies to maintain financial viability—part of the reason why there is such variability in financial stability among EMS agencies.

Today, funding comes from a myriad of sources including various taxes, special contracts, direct patient billing, grants, private funding, fund-raising, and subscription services to name a few.¹ We will examine each of these potential revenue streams.

TAX REVENUE

Taxes are one of the most common means of raising money for EMS systems. These can include property taxes, sales taxes, real estate taxes, or other “special taxes.” Property taxes are among the most common. These taxes vary with property values and may or may not increase depending on assessed values, leading to the potential for variability. For better or for worse, it also follows that areas that are more affluent often generate more revenue with this type of system whereas poorer areas do not, and hence may not collect adequate funds. Sales taxes are another type of tax and can be used in different ways depending on the location. For example, a simple sales tax addition would net revenue for sales of all goods. However, in areas in which there is a large transient population or tourist population, a more specific sales tax may help offset some of the burden on the local population. This might include a hotel tax, restaurant tax, or other “tourist” tax.

In addition to property taxes, special real estate taxes can be added to real estate sales. These can be very lucrative but are most effective in areas where single-family homes are bought and sold as opposed to areas with many homes and apartments that are simply rented. Other special taxes may be instituted that are simply for the generation of fire/EMS funds. Most commonly the level of these types of taxes are based on dwelling size, fire-fighting measures (sprinklers), materials, etc. These taxes tend to be more often linked to fire prevention and therefore aid municipal fire service-based agencies far more than private/volunteer agencies.

CONTRACTS

Exclusive contracts are often an effective way to secure part of the market. These contracts are made between an agency and a municipality, a fire department, or a specific facility. With municipalities, in return for a sum of money and/or other considerations, a guarantee regarding certain services is given. This usually involves guarantees of response time, level of service, and availability. In some areas, contracts may be made between the fire district and an ambulance agency, and in others, the fire chief can simply decree that a certain agency will be called first for calls in the fire district and only if that agency is unavailable will a second agency be called. This type of exclusivity ensures a certain revenue stream despite where and how competitors may be positioning themselves. Contracts can also be made between agencies and facilities. This can be for transports into or out of that facility. Often specialty centers such as pediatric hospitals, burn centers, trauma centers, etc, contract with an agency for their many transfers of patients. Securing such a contract may be particularly lucrative as these transfers often carry a premium and commonly have a higher reimbursement rate than a typical emergency call.

The most intuitively obvious way to get paid for providing prehospital care is by billing the patient. Paradoxically, this is often the most complicated due to varying reimbursement schemes, which are discussed later. In general, reimbursement occurs via billing to Medicare, Medicaid, private/commercial insurance, or self-pay. Obviously not only is there wide variation based on the area of the country, but even within a local region there may be variance in payor mix between a relatively affluent area of young professionals and an area of poor seniors, both of which may be served by the same ambulance service.

GRANTS AND LOANS

Grants are another way in which EMS systems may earn revenue, although the availability of these grants by far favors fire agencies over EMS agencies. EMS agencies that are fire based may share in some of these funds depending on the precise wording and appropriation of the monies, but often are still left working with old and outdated equipment while their fire colleagues enjoy new vehicles, safety gear, and other critical apparatus necessary to their mission. Initially, these grants were often federal, beginning in 1966 and continuing through 1981 with some focus on self-sustainability. However, much of the grant money shifted from federal grants to state grants, which also left EMS competing for funds with other state public health initiatives. In very rare occasions, local grants may be available, but generally any grant money to be found must be located at the state and federal levels.

State funds are often available in the form of low-interest loans for ­capital improvements or state taxes or assessments related to driver licenses fees and fines. These are often only meager as they are generally distributed across the entire state. States may also become involved in special purpose grants designed for very specific reasons, but which then can have benefits beyond the original stated purpose. State grants may also be in the form of matching grants, in which case an agency must demonstrate that they can match the state dollars or at least some predetermined percentage of those dollars in order to receive them. Again, these funds tend to favor fire agencies far more often than they do EMS agencies, but occasionally these dollars do become available. Federal grant money is available, but rarely directly to an individual agency. Rather, these funds are most often dispensed through state agencies.

Private funding is another potential revenue stream that is available to a few agencies that often have the good fortune of being located in close proximity to large, national corporations with significant presence in an area and/or that have a large number of employees who live in a certain area. These corporations often support public services as a demonstration of goodwill and being a good neighbor, as well as for the obvious public relation benefit and tax benefits they may enjoy. Nonetheless, this type of funding is often available when sought out. Smaller corporate neighbors often can also contribute on a smaller scale and are happy to do so. Corporations may also sponsor employee donation matches, and in doing so, support their own employees as well as the organizations that they personally care about. Outside of the local community, there are also various foundations locally or nationally that may have funding available for EMS. These, again, tend to favor fire agencies over EMS, but in the age of current technology, Web sites such as http://foundation center.org help agencies locate foundations that may be of potential benefit to them. These foundations are often nonprofit organizations that exist expressly for supporting various causes. These are usually independent foundations. There are also corporate foundations that are formed as a vehicle for corporations to conduct their charitable contributions. Lastly, there are sometimes local foundations that tend to be more community based, focusing on aiding a specific area.

FUND-RAISING

Many agencies participate in some type of public fund-raising efforts. Those may include bake sales, car washes, boot drives, or simple direct-mail fund-raisers. Some popular fund-raisers that are often held at meetings or gatherings are 50/50 raffles, where the winner wins half and the other half goes to the sponsoring agency. The best type of fund-raiser may vary from area to area and with different demographics. These are decisions that must be made carefully, as while the funds do need to be raised, pragmatic concerns such as safety, the relative affluence of the community, etc, may impact which type of fund-raiser would be best received by the community and how frequently fund-raisers should be held.

One of the newer means of raising funds involves a “subscription service.” As opposed to a fire-based subscription service, which is often based on an annual fee per square foot with modifications for fire prevention measures, EMS programs usually charge an annual fee per address, which would cover either any and all EMS provided that year or the portion that is not covered by the patients’ health insurance. In this way, subscribers need not worry about calling the ambulance and significant expense for transportation. Conversely, the ambulance agencies may collect an annual “premium” without needing to provide any services at all. Nonsubscribers are billed in the traditional method and unaffected by this service. This type of program is obviously somewhat involved to implement and manage and requires due diligence be performed to ensure that the time and money invested by the agency in such a program does, in fact, yield a net benefit, but can be helpful to both the agency and the community.

The simplest way to understand EMS reimbursement is to recognize the use of the HCPCS (Healthcare Common Procedure Coding System) for billing by CMS (Centers for Medicare & Medicaid Services). These codes are used so that the appropriate level of payment is billed based on the services provided. In EMS, they range from AO425 to AO436, each with a slightly different code description, reflective of the various levels of service (Table 25-1).

The following definitions for the services above are provided by Chapter 10 of the Medicare Benefit Policy Manual:

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  ALS1 (advanced life support, level 1): Transportation by ground ambulance providing supplies and services including an ALS assessment or at least one ALS intervention. For these purposes, ALS is defined as an individual trained above the level of a Basic EMT. An ALS intervention is one that requires higher training than an EMT Basic and is deemed medically necessary.

  
  
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  ALS1-emergency (advanced life support, level 1-emergency): This is the same as an ALS1 response, but in the context of an emergency response. That is, one which requires an immediate response. In most systems, this would constitute a priority 1 or 2 response, a “hot” response, or a lights and sirens response. The type of response is determined by the dispatch protocol for that type of complaint.

  
  
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  BLS (basic life support): Transportation by ground ambulance, staffed by at least one EMT-basic

  
  
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  BLS-emergency (basic life support-emergency): Like ALS1, this is the same as a BLS response, but in the context of an emergency response as described above.

  
  
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  Paramedic intercept: These are ALS services that are provided without the ambulance transport. Usually this is in the context of an agency with BLS services being dispatched to transport a patient, but requiring advanced ALS services and so an ALS provider meets the ambulance on the way to the hospital. There are only limited situations in which this code can be used, as the services must be in a rural area, with a contract with a volunteer agency.² The volunteer agency must be prohibited from billing anyone for their services, and the ALS service must bill all patients who receive services from them, regardless of whether they are Medicare beneficiaries. As of 2008, New York is the only state in which these services are covered.

  
  
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  ALS2 (advanced life support, level 2): This is ALS service by ground ambulance that requires at least three separate administrations of one or more intravenous medications or the performance of at least one of several advanced procedures such as defibrillation, endotracheal intubation, chest decompression, etc.

  
  
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  SCT (specialty care transport): This is an interfacility transport by ground ambulance that requires a level of service above that that can be provided by a paramedic. Often this may require a nurse or physician to provide a higher level of care or monitoring of medications that are beyond the scope of the paramedic.

SCT transports are particularly lucrative because the relative value units (RVUs) for an SCT are 3.25 compared with 2.75 for the ALS2, 1.90 for the ALS1-emergency, and 1.20 for ALS1. This is interesting given that while SCTs often may involve the critically ill patient, there is a higher level of care available that may often provide whatever increased level of care is required.

In addition to the level of service that provides a reimbursement rate, there are also mileage modifiers to take into account the distance ­traveled with a patient aboard the ambulance. So, for example, an ­ALS1-emergency service would be reimbursed at the rate of the ALS1 rate plus the distance in miles traveled multiplied by the ground mileage rate. This aids agencies that have longer transports to facilities.

Air ambulance services, regardless of fixed wing or rotary wing, differ from ground ambulance coding in that the patient must meet certain requirements to determine whether reimbursement at the air ambulance rate will be approved. As with ground service, the service must be both “necessary and reasonable.” The air ambulance rates are much greater than ground to account for the much higher costs associated with providing such services. To qualify for this reimbursement rate though, a patient must meet certain requirements that make ground service inappropriate, which include such requirements as:

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  The patient requires immediate and rapid ambulance transportation that could not have been otherwise provided by ground.

  
  
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  The point of pickup is inaccessible by ground.

  
  
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  Great distances or obstacles are involved in getting the patient to the nearest appropriate hospital.

Medical reasonableness may be determined when time is a significant factor that puts the patient’s health at severe risk. Conditions that may meet this requirement include intracranial hemorrhage, life-­threatening trauma, emergent need for a hyperbaric oxygen chamber, etc. When time is a significant factor and that time by ground is excessive, air ambulance transport may also be appropriate.

In brief, the criteria for reimbursement are based on the codes as described above and the necessity of the services that are provided. Presuming that reimbursement is appropriate, over the past two decades, various adjustments have been made to the fee schedule to help account for differences in rural versus urban transports. In 1997, this began with the Balanced Budget Act which implemented the national fee schedule. Then the Medicare Prescription Drug, Improvement and Modernization Act of 2003 made adjustments that allowed for a regional fee schedule as well as a bonus on the mileage for transports over 50 miles. It also increased the base pay for ground ambulance transports originating in certain rural areas when the point of pickup was in a group of designated ZIP codes. Finally, a temporary increase in payments for rural areas (2% increase) and urban areas (1%) between 2004 and 2007 was approved. In 2008, the Medicare Improvements for Patients and Providers Act extended these increases through 2009 and increased them to 3% for rural and 2% for urban. Base payment rate for ground ambulance trips from the most rural areas based on population density was increased in 2010 with the Patient Protections and Affordable Care Act of 2010, unofficially referred to as the “super-rural” bonus. Rural and urban increases were extended through 2010 with this act and then again through 2011 with the Medicare and Medicaid Extenders Act of 2010 and through 2012 with the Temporary Payroll Tax Cut Continuation Act of 2011 and the Middle Class Tax Relief and Job Creation Act of 2012. The ­current legislation, the American Taxpayer Relief Act of 2012, extends the increases once again through 2013 along with the “super-rural” bonus.

The current payment structure is exceedingly complicated and open for change on a yearly basis. In addition to the various adjustments for rural and super-rural ZIP codes, there is also an adjustment based on the Geographic Practice Cost Index (GPCI), which adjusts for regional cost differences. For example, West Virginia has a GPCI of 0.828, while the areas that are classified in San Francisco, CA, have a GPCI of 1.360. When the full calculation is performed, for a rural ground base rate, the calculation is (RVU × (0.3 + (0.7 × GPCI))) × base rate × 1.03 + base rate × 1.03, and then for those in the super-rural areas in the lowest quartile of all rural populations by density, the base rate is then multiplied by 1.226, and for the first 17 miles of rural mileage by ground, the rural mileage rate is 1.5 times the base rural mileage rate.³

Reimbursement can be very highly variable based on demographics. While across the board, according to the Government Accountability Office Survey of Ambulance Services, nationally, a typical payor mix consists of approximately 40% to 45% Medicare, 15% to 20% Medicaid, 15% to 20% private/commercial insurance, and about 25% private pay, these numbers can vary drastically. What this means for an individual agency is that if the majority of their patients are uninsured or self-pay patients, they may have an extremely difficult time collecting any of their charges. Conversely, if the demographic mix is biased toward the Medicare population, the agency may be able to count on the complicated fee structure described previously, but may not be able to collect much more than that. If an agency has the good fortune of being located in an area that is relatively affluent or even primarily working middle class with private insurance, they may do very well with collecting charges and being a solvent agency while an agency with similar volume across town struggles to make ends meet. The GPCI mentioned above helps take these differences into account and adjust for them. While it may not completely solve the problem of agencies being able to collect charges from self-pay patients, at least it will ensure they will be able to recover monies from the Medicare and private insurance patients to help subsidize the other patients.