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New SNF Consolidated Billing Edits: FAQs

On April 1, 2019, CMS implemented a new series of Common Working File (CWF) edits that it stated would better identify ground ambulance transports that were furnished in connection with an outpatient hospital service that would be bundled to the skilled nursing facility (SNF) under the SNF Consolidated Billing regime.

Unfortunately, the implementation of these new edits has been anything but seamless. Over the past few weeks, I have received numerous phone calls, texts, and emails from AAA members reporting an increase in the number of Medicare claims being denied for SNF Consolidated Billing.

This FAQ will try to explain why you may be seeing these denials.  I will also try to provide some practical solutions that can: (1) reduce the number of claims denied by the edits and (2) help you collect from the SNFs, when necessary.

Please note that, at the present time, there is no perfect solution to this issue, i.e., there is nothing that you can do to completely eliminate these claim denials.  The solutions discussed herein are intended only to minimize the disruption to your operations caused by these denials.  

I am new to Medicare ambulance billing. Can you explain what the SNF Consolidated Billing regime is, and how it operates?

Under the SNF Consolidated Billing regime, SNFs are paid a per diem, case-mix-adjusted amount that is intended to cover all costs incurred on behalf of their residents.  Federal regulations further provide that the SNF’s per diem payment generally the cost of all health care provided during the beneficiary’s Part A stay, whether provided by the SNF directly, or by a third-party.  This also includes the majority of medically necessary ambulance transportation provided during that period.  For these purposes, the “Part A Period” refers to the first 100 days of a qualified SNF stay.

However, medically necessary ambulance transportation is exempted from SNF Consolidated Billing (referred to hereafter as “SNF PPS”) in certain situations.  This includes medically necessary ambulance transportation to and from a Medicare-enrolled dialysis provider (whether free-standing or hospital-based).  Also excluded are ambulance transportations:

  • To an SNF for an initial admission;
  • From the SNF to the patient’s residence for a final discharge (assuming the patient does not return to that SNF on the same day);
  • To and from a hospital for an inpatient admission;
  • To and from a hospital for certain outpatient procedures, including, without limitation, emergency room visits, cardiac catheterizations, CT scans, MRIs, certain types of ambulatory surgery, angiographies (including PEG tube procedures), lymphatic and venous procedures, and radiation therapy.

For a fuller description of the SNF Consolidated Billing Regime, including a discussion of when ambulance services may be separately payable by Medicare Part B, I encourage members to consult the AAA Medicare Reference Manual.

Purchase the 2019 Medicare Reference Manual

Can you explain what prompted CMS to implement these new edits? 

In 2017, the HHS Office of the Inspector General conducted an investigation of ground ambulance claims that were furnished to Medicare beneficiaries during the first 100 days of a skilled nursing home (SNF) stay. The OIG’s investigation consisted of a review of all SNF beneficiary days from July 1, 2014 through June 30, 2016 to determine whether the beneficiary day contained a ground ambulance claim line. The OIG excluded beneficiary days where the only ambulance claim line related to: (1) certain emergency or intensive outpatient hospital services or (2) dialysis services, as such ambulance transportation would be excluded from SNF Consolidated Billing.

The OIG determined that there were 58,006 qualifying beneficiary days during this period, corresponding to $25.3 million in Medicare payments to ambulance suppliers. The OIG then selected a random sample of 100 beneficiary days for review.  The OIG determined that 78 of these 100 beneficiary days contained an overpayment for the associated ambulance claims, as the services the beneficiary received did not suspend or end their SNF resident status, nor was the transport for dialysis. The OIG determined that ambulance providers were overpaid a total of $41,456 for these ambulance transports.  The OIG further determined that beneficiaries (or their secondary insurances) incurred an additional $10,723 in incorrect coinsurance and deductibles. Based on the results of its review, the OIG estimates that Medicare made a total of $19.9 million in Part B overpayments to ambulance suppliers for transports that should have been bundled to the SNFs under SNF Consolidated Billing regime.  The OIG estimated that beneficiaries (and their secondary insurances) incurred an additional $5.2 million in coinsurance and deductibles related to these incorrect payments.

The OIG concluded that the existing edits were inadequate to identify ambulance claims for services associated with hospital outpatient services that did not suspend or end the beneficiary’s SNF resident status, and which were not related to dialysis. The OIG recommended that CMS implement additional edits to identify such ambulance claims.

The OIG’s report prompted CMS to issue Transmittal 2176 in November 2018.  This transmittal instructed the CWF Maintainer and the Medicare Administrative Contractors (MACs) to implement a new series of edits, effective April 1, 2019.

Can you provide a simple overview of how these new CWF edits operate?

Before we turn to the new edits, I think it is important to understand that CMS has had long-standing edits to identify outpatient hospital services that should be bundled to the SNF under SNF PPS.  These edits work by comparing the Healthcare Common Procedure Coding System (HCPCS) or Current Procedural Terminology (CPT) codes on the outpatient hospital claim to applicable lists of excluded codes.  To the extent the HCPCS or CPT code appears on the applicable list of excluded codes, the outpatient hospital claim will bypass the edit for SNF PPS, and be separately payable by the MAC.  To the extent the HCPCS or CPT code on the outpatient hospital claim does not appear on the applicable list of excluded codes, the claim will be denied as the responsibility of the SNF.  The new CWF edits for ambulance claims simply extend the existing process one step further, i.e., they compare the ambulance claim to the associated hospital claim.

Conceptually, the new edits “staple” the ambulance claim to the outpatient hospital claim, with our coverage piggybacked on whether the outpatient hospital claim is determined to be bundled or unbundled.

How would I identify a claim that is denied for SNF Consolidated Billing?

Typically, the denial will be evidenced by a Claim Adjustment Reason Code on the Medicare Remittance Advice.  The denial will typically appear as an “OA-190” code, with the following additional explanation: “Payment is included in the allowance for a Skilled Nursing Facility (SNF) qualified stay.  The “OA” stands for “Other Adjustment,” and is intended to notify you that the SNF is the correct payer.  Note: in some instances, the denial may appear as “CO-190” on the remittance advice.  However, the effect of the denial is the same, i.e., they are indicating that the SNF is financially responsible for payment.

Frequently, the denial will be accompanied by Remittance Advice Remark Code “N106,” which indicates “Payment for services furnished to Skilled Nursing Facility (SNF) inpatients (except for excluded services) can only be made to the SNF.  You must request payment from the SNF rather than the patient for this service.”

I have heard you refer to the new CWF edits as over-inclusive.  What do you mean by that?

When CMS elects to implement a new edit to the CWF, it has to make some decisions on how to structure the edit.  Two typical decisions that must be made are:

  1. Will the edit be conditional based on the submission of other Medicare claims? And
  2. Is the edit designed to be under- or over-inclusive?

For these purposes, a conditional edit is one where the coverage or lack of coverage depends, in part, on the claims submitted by other health care providers that furnished services to the same beneficiary (typically on the same date).  As you are probably aware, the Medicare rules for all Part B payments prohibit payment whenever the service has been paid for, directly or indirectly, under Medicare Part A.  Thus, all edits for hospital and SNF bundling are conditioned, in part, on the patient’s Part A inpatient status at the time of transport.

By contrast, an unconditional edit is one that operates the same regardless of other types of claims for the same patient.  For example, with respect to ambulance claims, the MACs medical necessity edits are unconditional, i.e., they apply to all ambulance claims, regardless of the patient’s inpatient status at a Part A facility.  The edits for origin/destination modifiers are another example of an edit that is typically unconditional.

In addition, CMS has to decide whether to make an edit under- or over-inclusive.  This is because no edit can be perfectly tailored to be applied to all qualifying claims, but no non-qualifying claims.  An “underinclusive” edit is one that is designed to identify the majority – – but not all – – of the claims that should be denied based on the edit criteria.  By contrast, an “overinclusive” edit is one that would deny not only all of the qualifying claims, but also some non-qualifying claims.

In many instances related to EMS coverage, the underlying facts and circumstances of the transport are ultimately what determines the coverage.  It is frequently difficult – – if not impossible – – to fully describe these circumstances with enough specificity on the electronic claim for CMS to perfectly apply its edits.  For that reason, CMS has historically elected to design its ambulance edits to be underinclusive.

Unfortunately, the new SNF edits are both conditional AND overinclusive.  To further complicate matters, they are not only conditioned on the claim of a single Part A provider, but two separate Part A providers, i.e., in order for the new edits to work properly, CMS is reliant upon information from both the SNF and the hospital to properly apply its new edits.

I recently received a denial for an emergency transport from an SNF to the hospital for an emergency room visit.  I thought emergency ambulance transports were excluded from SNF PPS?

They are. The denial was likely the result of your claim being submitted prior to Medicare’s receipt of the associated outpatient hospital claim.

As noted above, the new edits are both conditional and overinclusive.  In this context, they are designed to deny the ambulance claim UNLESS there is a hospital outpatient claim for that same patient with the same date of service.  If there is no hospital outpatient claim on file when your ambulance claim hits the system, the edit indicates that the MAC should deny your claim for SNF PPS.

OK, that makes some sense.  Does that mean I have to appeal the denial?

In theory, no.  The instructions in Transmittal 2176 make clear that the CWF should “adjust” the ambulance claim upon receipt of the associated hospital claim.  For these purposes, that adjustment should take the form of re-processing the ambulance claim through the edits to compare it to the associated hospital claim, and to bypass the new CWF edits if the hospital claim contains an excluded code.

However, there is no timeframe for how quickly these adjustments should take place.  Most ambulance providers are reporting that they are seeing few, if any claims, being reprocessed.

I submitted several claims without knowing the patient was in the Part A Period of an SNF stay.  These claims were initially paid, but a few days later, I received a recoupment request from the MAC indicating that the claim was the responsibility of the SNF under SNF PPS. 

As noted above, the edits were designed to deny claims to the extent CMS was unable to determine whether they should be bundled to the SNF, i.e., to deny if the associated hospital claim was not already in the system.  Therefore, in theory, it should be impossible for the ambulance provider to receive a payment and then a recoupment for SNF PPS.

I suspect the situation described above is one where the ambulance claim is submitted prior to CMS’ receipt of the associated SNF claim for the patient.  As noted above, in order for the edits to work properly, both the associated hospital and SNF claims must be in the system.  While CMS clearly contemplated the possibility that the ambulance claim might be submitted prior to the associated hospital claim, they do not appear to have considered the possibility that the ambulance claim might beat the associated SNF claim into the system.

When that happens, there is nothing in the CWF to indicate that the patient was in a Part A SNF Stay.  As a result, the claim bypasses these new edits entirely, and frequently ends up being paid by the MAC.  I suspect what happens next is that the SNF claim hits the system, and triggers CMS to automatically recoup the payment for the ambulance claim.

What should happen at that point is the ambulance claim should then be run through the new edits.  If the hospital claim is already in the system, the ambulance claim gets “stapled” to that claim, and then either passes the edit or gets denied based on the information on the hospital claim.  If the hospital claim is not in the system, the ambulance provider gets the “interim” denial discussed above, and the claim should be further adjusted if and when the hospital claim is submitted.

However, at this point, it is entirely possible that these claims are not being put through the edit.  The AAA has asked CMS to look into whether the new edits are working as intended in these situations.

This sounds like a complete mess:  

Not really a question, but you are not wrong.

This sounds extremely complicated.  Is there anything I can do to reduce the possibility that my claims get denied?

I think it is important to distinguish between: (1) denials that are correct based on the HCPCS or CPT codes on the associated hospital claim and (2) denials that are based solely on the timing of your claim, i.e., denials based on your claim being submitted prior to the submission of the associated hospital claim.  For these purposes, I will refer to the latter category as “interim denials.”

At the onset, I think all members should recognize that there is nothing you can do to eliminate denials for claims that are properly bundled to the SNF based on the HCPCS or CPT codes on the associated hospital claim.

For numerous reasons, I think the proper focus should be on reducing the interim denials.  First and foremost, the difficulty with an interim denial is that you don’t know whether that denial will ultimately prove to be correct, or whether the claim will ultimately be reprocessed and paid by the MAC.  Second, even if the claim will be reprocessed, there currently appears to be a significant delay in “when” that reprocessing takes place.  Finally, without knowing whether the claim will be reprocessed (and whether that reprocessing will result in a payment), you can’t know whether you should be billing the SNF.

What information would be helpful in reducing these interim denials?

You would need to know the following data points prior to the submission of your claim:

  1. Whether the patient was in a Part A SNF Stay on the date of transport?
  2. What was the specific procedure/service the patient received at the hospital?

If you knew with certainty that the patient was not in the Part A Period of their SNF stay, you would know that the new edits would be inapplicable to your claim, and you could submit it to Medicare as part of your normal billing workflow.

If you also knew the specific procedure/service the patient received at the hospital, you would also be in a position to know whether the service was the financial responsibility of the SNF, assuming the patient was in the Part A Period.  When you know the claim is the financial responsibility of the SNF, you could then immediately invoice the claim to the SNF.  If your arrangement with the SNF requires you to first obtain a Medicare denial, you would also have the option of submitting the claim and getting the proper OA-190 denial, and then invoicing the SNF. Note: in these situations, you would receive the oA-190 denial regardless of whether your claim was submitted prior to the hospital claim.

By contrast, when you know the patient is in the Part A Period AND the procedure/service is one that would be excluded from SNF PPS, you can avoid the interim denial by ensuring that your claim is not submitted until after the associated hospital claim. In other words, this is a situation where holding your claim for a reasonable period of time might be beneficial.

We currently ask the SNF to provide information on the patient’s Part A status.  However, they frequently tell us that they don’t know, or that we are not entitled to this information.  What can we do?

First, they are absolutely permitted to share this information with you.  Both you and the SNF are “covered entities” under the HIPAA Privacy Rule.  In this instance, information on the patient’s Part A status would be helpful to you in managing your payment practices.  The regulations at 45 C.F.R. 164.506(c)(3) permit one covered entity to share protected health information with another covered entity for the payment activities of that entity.

However, it is important to note that, while the SNF may share that information with you, the Privacy Rule does not require them to provide you with this information absent a written authorization from the patient.

This information is critical to navigating the new edits.  If you haven’t been asking for it up until this point, I would strongly encourage you to consider having a discussion with the local SNFs to explain why you will be asking for this information in the future.  You may also want to consider developing a specific form that they must complete (similar to the PCS form) that would provide this information.

We have asked for this information in the past, and are typically told that if we continue to ask, the SNF will consider using our competitor, who doesn’t ask too many questions. 

I understand.  I would try to explain to the SNF that the reason you are asking for this information is to be able to make an intelligent determination on whether the transport is likely to the be financial responsibility of the SNF.  This information allows you to avoid denials in certain instances where they would otherwise not be responsible.  If they don’t provide you with this information, the foreseeable consequence is that you will end up getting interim denials from Medicare, which may leave you no choice but to bill the SNF for the transport.

I feel bad for the person that asked the previous question.  Fortunately for me, we are the only ambulance provider in the area, so the threat of going to a competitor rings a bit hollow.  Do I have any additional options to get this information?

You do.  I would try to insert language into your agreements with the SNFs that obligate them to provide you with this information.  You could also try to insert language that makes them financially responsible whenever they fail to provide this information.

We don’t have agreements with the local SNFs.  Do we need an agreement?

One of the foreseeable consequences of this new edit is that it will increase the frequency with which you bill the SNFs.  One of the most common complaints I hear is that SNFs refuse to pay their bills.  In most instances, the problem is that the ambulance service lacks a written agreement with the SNF, and, as a result, they frequently end up in disputes about when the SNF is responsible.  A written agreement that clearly spells out when the SNF is responsible can not only minimize the potential for misunderstandings, but also afford you greater remedies when the SNF refuses to pay.

With respect to the new edits, what should that agreement say?

You should consult with your local attorney regarding the applicable language.  However, conceptually, you want to include language that indicates that a Medicare denial is conclusive evidence that the SNF is financially responsible.  This provision could then go on to provide that, in the event Medicare should reprocess and pay a particular claim, then you would refund the SNF’s payment.

What can I do to help the AAA in minimizing the administrative burden associated with these new edits?

The AAA is currently conducting a survey of members to help get a sense of the magnitude of the issues created by these new edits. If you would like to participate in the survey, you can click here.

Take the Survey

Have an issue you would like to see discussed in a future Talking Medicare blog?  Please write to me at

New SNF PPS Edits Highlight the Importance of Facility Agreements

On April 1, 2019, CMS implemented a new series of Common Working File (CWF) edits that are intended to better identify ground ambulance transports that are furnished in connection with an outpatient hospital service that is properly bundled to the skilled nursing facility (SNF) under the SNF Consolidated Billing regime.

These edits work by comparing the ambulance claim to the associated outpatient hospital claim.  Hospital claims were already subject to CWF edits designed to identify outpatient hospital services that should be bundled to the SNF.  These hospital edits operate by referencing a list of Healthcare Common Procedure Coding System (HCPCS) or Current Procedural Terminology (CPT) codes that correspond to outpatient hospital services that are expressly excluded from SNF Consolidated Billing.  Hospital claims for outpatient services that are submitted with one of these excluded codes bypass the existing CWF edits, and are then sent to the appropriate Medicare Administrative Contractor for further editing and payment.  Hospital claims submitted without one of these codes are denied for SNF Consolidated Billing.

The new ambulance edits will extend these process one step further.  The ambulance claim will be associated with the outpatient hospital claim on the same date.  To the extent that hospital claim is bundled under SNF Consolidated Billing, the associated ambulance claim will also be bundled.  To the extent the hospital claim is unbundled, the associated ambulance claim will be unbundled.

In order for these new edits to work properly, there must be an outpatient hospital in Medicare’s claim history. If the ambulance claim beats the hospital claim into the system, the ambulance claim will be rejected. If and when an outpatient hospital claim with the same date of service enters Medicare’s system, the initial rejection of the ambulance claim will be overturned, and the ambulance claim will be reprocessed using the same edits.

It is important to note that the new edits were designed to reject the ambulance claim as a bundled service unless the hospital claim indicates that it should not be bundled.  In other words, these edits are designed to be “over inclusive.”  This over-inclusiveness creates the potential for ambulance denials in situations that, on their face, would not appear to be bundled.

A few examples will help illustrate this point. Imagine a situation where the patient elects, for whatever reason, to pay out-of-pocket for their hospital care (in a situation where that care would not be bundled to the SNF), and, as a result, the hospital does not submit a bill to Medicare for its services.  Based on how the new edits are designed, your ambulance claim for the transport to that excluded service will be rejected based on the lack of a hospital claim. Or maybe the patient has both Medicare and the V.A., and has elected to have the V.A. be the primary payer for their required hospital care.  Again, there would likely be no outpatient hospital claim submitted to Medicare on that date of service, resulting in the rejection of your ambulance claim.

I can see your point, but those examples are pretty far-fetched.  How big an issue is this really?

I agree those examples are pretty far-fetched.  However, there are other situations that create the same problem.  For example, what about an emergent response to transport an SNF patient to the hospital for necessary emergency services?  Imagine if you are called to respond late at night (e.g., 11:30 p.m.) tonight.  Now imagine that, by the time you get to the patient, load them into the vehicle, and transport them to the ED, it has crossed over midnight into the next day.

What date of service is going to be on the hospital’s claim?  Almost certainly, the hospital will use tomorrow’s date.  As a result, when your claim hits Medicare’s system, there will not be an associated hospital claim, which will result in your claim being rejected as the responsibility of the SNF.  In this situation, Medicare’s edit has worked as intended, but the result is the denial of a claim that should be separately payable by Medicare Part B.

Okay, I can see how this might be annoying,
but I can appeal the claim and likely win on appeal, right? 

Yes and no.  The problem is that you are not likely to win on either of the first two levels of appeal, as they are likely going to rely upon the information in the CWF.  I can see you possibly winning your appeal at the ALJ level…5 to 7 years from now.

In other words, the appeals process is unlikely to provide an acceptable resolution.  Instead, I think the majority of ambulance providers are going to look to the SNFs to make good in these situations.  Of course, the SNFs are likely going to disclaim liability, arguing (correctly) that ambulance transportation to an ED is an excluded service.

This is where the agreement with the SNF comes into play.  One key purpose of contracts is to allocate known risks between the parties.  In this instance, the “risk” that needs to be addressed is the possibility that Medicare might incorrectly reject your claim thinking it is bundled to the SNF.  I would argue that this risk should be absorbed by the SNF.  The transport to the ED should have suspended the patient’s SNF stay, which would have allowed you to receive a separate payment from Medicare.  However, the fact that your claim was rejected is proof positive that the CWF does not reflect the suspension of the patient’s SNF stay.  Indirectly, it also serves as proof that the SNF received a per diem payment for the patient on that date.  To me, the fact that they accepted the per diem payment means they accepted the risk of a bundled ambulance service on that date.  I would also argue that it was their failure to properly suspend the patient’s SNF stay that set in motion your denial.  Either way, I would be looking to the SNF for payment.

Based on my experience, the typical agreement with an SNF does not address this situation.  Frequently, these agreements do not even address the specifics of SNF Consolidated Billing.  Instead, I tend to see general language indicating that the ambulance provider will bill the SNF when payment responsibility lies with the SNF under an applicable federal or state health care program.  I doubt that language is going to convince an SNF to take financial responsibility for the situation discussed above.

The good news is that your existing agreements can easily be revised to address this situation.  The language I would recommend is something along the lines of:

“The parties acknowledge and agree that a denial from Medicare for SNF consolidated billing shall constitute conclusive evidence that a transportation service is the financial responsibility of the facility.” 

In sum, the new SNF Consolidated Billing edits are going to increase the frequency with which we are forced to look to the SNFs for payment.  In most instances, it will be a situation where the SNF is legally responsible under SNF Consolidated Billing.  However, there will also be situations where the over-inclusive nature of the edits results in the claim being incorrectly denied as the SNF’s responsibility.  The question becomes how you want to handle these incorrect denials.  Do you want to appeal and hope CMS reverses its decision?  Or do you want to hold the SNF responsible?  If you want to hold the SNF responsible, you will likely need to revise your agreements with the SNFs.

Have an issue you would like to see discussed in a future Talking Medicare blog?
Please write to me at

HHS OIG Issues Advisory Opinion on Community Paramedicine

HHS OIG Issues Advisory Opinion Permitting Community Paramedicine Program Designed to Limit Hospital Readmissions

On March 6, 2019, the HHS Office of the Inspector General (OIG) posted OIG Advisory Opinion 19-03. The opinion related to free, in-home follow-up care offered by a hospital to eligible patients for the purpose of reducing hospital admissions or readmissions.

The Requestor was a nonprofit medical center that provides a range of inpatient and outpatient hospital services. The Requestor and an affiliated health care clinic are both part of an integrated health system that operates in three states. The Requestor had previously developed a program to provide free, in-home follow-up care to certain patients with congestive heart failure (CHF) that it has certified to be at higher risk of admission or readmission to a hospital. The Requestor was proposing to expand the program to also include certain patients with chronic obstructive pulmonary disease (COPD). According to the Requestor, the purpose of both its existing program and its proposed expansion was to increase patient compliance with discharge plans, improve patient health, and reduce hospital inpatient admissions and readmissions.

Under the existing program, clinical nurses screen patients to determine if they meet certain eligibility criteria. These include the requirement that the patient have CHF and either: (1) be currently admitted as an inpatient at Requestor’s hospital or (2) be a patient of Requestor’s outpatient cardiology department, and who had been admitted as an inpatient at Requestor’s hospital within the previously 30 days. The clinical nurses would identify those patients at higher risk of hospital admission based on a widely used risk assessment tool. The clinical nurses would also determine whether the patient had arranged to receive follow-up care with Requestor’s outpatient CHF center. Patients that do not intend to seek follow-up care with the CHF center, or who have indicated that they intend to seek follow-up care with another health care provider, would not be informed of the current program. Eligible patients would be informed of the current program, and offered the opportunity to participate. The eligibility criteria for the expanded program for COPD patients would operate in a similar manner.

Eligible patients that elect to participate in the current program or the expanded program would receive in-home follow up care for a thirty (30) day period following enrollment. This follow up care would consist of two visits every week from a community paramedic employed by the Requestor. As part of this in-home care, the community paramedic would provide some or all of the following services:

  • A review of the patient’s medications;
  • An assessment of the patient’s need for follow-up appointments;
  • The monitoring of the patient’s compliance with their discharge plan of care and/or disease management;
  • A home safety inspection; and/or
  • A physical assessment, which could include checking the patient’s pulse and blood pressure, listening to the patient’s lungs and heart, checking the patient’s cardiac function using an electrocardiogram, checking wounds, drawing blood and running blood tests, and/or administering medications.

The community paramedic would use a clinical protocol to deliver interventions and to assess whether a referral for follow-up care is necessary. To the extent the patient requires care that falls outside the community paramedic’s scope of practice, the community paramedic would direct the patient to follow up with his or her physician. For urgent, but non-life threatening conditions, the community paramedic would initiate contact with the patient’s physician.

The Requestor certified that the community paramedics would be employed by the Requestor on either full-time or part-time basis, and that all costs associated with the community paramedic would be borne by the Requestor or its affiliates.  The Requestor further certified that no one involved in the operation of the program would be compensated based on the number of patient’s that enroll in the programs. While one of the states in which the Requestor operates does reimburse for community paramedicine services, Requestor certified that it does not bill Medicaid for services provided under the program.

The question posed to the OIG was whether any aspect of the program violated either the federal anti-kickback statute or the prohibition against the offering of unlawful inducements to beneficiaries.

In analyzing the program, the OIG first determined that the services being offered under the program offer significant benefit to enrolled patients. The OIG specifically cited the fact that one state’s Medicaid program reimbursed for similar services as evidence of this value proposition. For this reason, the OIG concluded that the services constitute “remuneration” to patients. The OIG further concluded that this remuneration could potentially influence a patient’s decision on whether to select Requestor or its affiliates for the provision of federally reimbursable items and services.  Therefore, the OIG concluded that the program implicated both the anti-kickback statute and the beneficiary inducement prohibition.

The OIG then analyzed whether the program would qualify for an exception under the so-called “Promoting Access to Care Exception.” This exception applies to remuneration that improves a beneficiary’s ability to access items and services covered by federal health care programs and which otherwise pose a low risk of harm. The OIG determined that while some aspects of the program would likely fall within this exception, other aspects would not. Specifically, the OIG cited the home safety assessment as not materially improving a beneficiary’s access to care.

Having concluded that there was no specific exception that would permit the arrangement, the OIG then analyzed the arrangement under its discretionary authority, ultimately concluding that the program posed little risk of fraud or abuse. In reaching this conclusion, the OIG cited several factors:

  1. The OIG felt that the potential benefits of the program outweighed the potential risks of an improper inducement to beneficiaries. The OIG cited the fact that beneficiaries must have already selected Requestor or its associated clinic as their provider of services before learning about the program. As the OIG indicated “the risk that the remuneration will induce patients to choose Requestor or the Clinic for CHF- or COPD-related services is negligible because patients already have made this selection.” The OIG also noted that the community paramedic will inform beneficiaries of their right to choose a different provider prior to referring the beneficiary to the Requestor or its clinic for services outside the scope of the program.
  2. The OIG noted that, to the extent the program works as intended, it would be unlikely to lead to increased costs to federal health care programs. As noted above, Requestor had certified that it would not bill federal health care programs for the services of the community paramedic.
  3. The program was designed in a way as to minimize the potential for interference with clinical decision-making.
  4. The Requestor certified that it would not advertise or market the program to the public, thereby minimizing the chances of beneficiaries learning about the program prior to selecting Requestor for their CHF- or COPD-related care.
  5. The OIG noted that the program appeared to be reasonably tailored to accomplish the goal of reducing future hospital admissions. For example, the OIG cited the fact that the Requestor limited inclusion in the program to patients deemed to be at a higher-than-normal risk of hospital admission or readmission, and that it made these determinations using a widely used risk assessment tool.  The OIG noted that these patients would likely benefit from the continuity of care offered under the program. In addition, the OIG noted that the community paramedics would be in a position to keep the patients’ physicians appraised of their health by documenting all of their activities.

Potential Impact on Mobile Integrated Health and/or Community Paramedicine Programs

OIG advisory opinions are issued directly to the requestor of the opinion. The OIG makes a point of noting that these opinions cannot be relied upon by any other entity or individual. Legal technicalities aside, the OIG’s opinion is extremely helpful to the industry, as it lays out the factors the OIG would consider in analyzing similar arrangements. Thus, the opinion is extremely valuable to ambulance providers and suppliers that current operate, or are considering the operation of, similar mobile integrated health and/or community paramedicine programs. 

AAA Releases 2019 State Medicaid Ambulance Rate Survey

The AAA is pleased to release its 2019 State Medicaid Rate Survey. This survey sets forth the fee-for-service Medicaid rates for all 50 states. For each state, the Survey lists the rate paid for each of the following procedure codes:

  • A0428 – BLS Non-Emergency
  • A0429 – BLS Emergency
  • A0426 – ALS Non-Emergency
  • A0427 – ALS Emergency
  • A0433 – ALS-2
  • A0434 – SCT
  • A0225 – Neonate Transport
  • A0998 – Treatment, No Transport
  • A0425 – Mileage
  • A0422 – Oxygen
  • A0382/A0398 – BLS/ALS Routine Disposable Supplies
  • A0420 – Wait Time
  • A0424 – Extra Attendant

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The rates set out in this survey are based on publicly available information provided by the various State Medicaid agencies. While the AAA has taken steps to verify the accuracy of the information on this Survey, it is possible that the rates provided in the Survey may not reflect changes to a state’s reimbursement policies that have not been made publicly available. These rates may not also not reflect any emergency budgetary measures or other temporary reductions imposed by a state.

The AAA’s goal is to make this Survey as accurate as possible. Therefore, if you believe the rates for your state are inaccurate, please contact the AAA at or me at

Talking Medicare: CMS Implements Further Dialysis Cuts

Talking Medicare: CMS Implements Further Cuts in Reimbursement for Dialysis Services; Medicare Payment Data Shows Continued Reduction in Overall Spending on Dialysis Transports, but Net Increase in Dialysis Payments in Prior Authorization States

On October 1, 2018, CMS implemented an additional thirteen (13%) cut in reimbursement for non-emergency BLS transports to and from dialysis. This cut in reimbursement was mandated by Section 53108 of the Bipartisan Budget Act of 2018. This on top of a ten (10%) cut in reimbursement for dialysis transports that went into effect on October 1, 2013. As a result, BLS non-emergency ambulance transports to and from dialysis that occur on or after October 1, 2018 will be reimbursed at 77% of the applicable Medicare allowable.

In related news, CMS has released its national payment data for calendar year 2017. This data shows a continued reduction in total Medicare payments for dialysis transports. Medicare paid $477.7 million on dialysis transports in 2017, down from $488.9 million in 2016. This continues a downward trend that has seen total payments decline from a high of more than $750 million in 2013 (see accompanying chart to the right). Not coincidentally, it was in 2013 that our industry saw its first reduction in Medicare’s payments for dialysis transports.

The payment reduction is partially the result of the reduction in the amounts paid for dialysis services. However, it is also reflective of an overall decline in the number of approved dialysis transports. For this, we can look primarily to the impact of a four-year demonstration project that requires prior authorization of dialysis transports in 8 states and the District of Columbia.

As a reminder, the original prior authorization states were selected based on higher-than-average utilization rates and high rates of improper payment for these services. In particular, the Medicare Payment Advisory Commission (MedPAC) had singled out these states as having higher-than-average utilization of dialysis transports in a June 2013 report to Congress. The chart below shows total spending on dialysis in those states in the years immediately preceding the implementation of the prior authorization project up through 2017, the third year of the demonstration project. While the three states had very different trajectories prior to 2015, each showed a significant decrease in total payments for dialysis under the demonstration project.

However, it is the trajectory of these changes that I want to discuss in this month’s blog. In previous blogs, I discussed the impact of the particular Medicare Administrative Contractor on the outcomes under prior authorization. Specifically, I noted that, while dialysis payments dropped in each state, the decline was far more dramatic in the states administered by Novitas Solutions (NJ, PA) than in the South Carolina, which was administered by Palmetto GBA. This trend continued in the second year of the program, which saw prior authorization expanded into five additional states and the District of Columbia. Those states administered by Novitas (DE, MD) saw far greater declines than the states administered by Palmetto (NC, VA, WV).

Given these declines, the data from the third year is somewhat surprising. The states administered by Palmetto continued to see declines in total dialysis payments, with the only exception being West Virginia. However, in the states administered by Novitas, we saw total dialysis payments increase, particularly in New Jersey, which saw nearly a 33% increase in total dialysis payments.

Three years into the prior authorization program, it is starting to become clear that the two MACs have approached the problem of overutilization of dialysis transports using two different approaches. Palmetto appears to have adopted a slow-and-steady approach, with total payments declining in a consistent manner year after year. By contrast, Novitas adopted more of a “shock the system” approach, where it rejected nearly all dialysis transports in the first year, and has adopted a somewhat more lenient approach in subsequent years.

Key Takeaways

 Last year, I wrote that two years of data under the prior authorization program permitted two conclusions: (1) the implementation of a prior authorization process in a state will undoubtedly result in an overall decrease in the total payments for dialysis within that state and (2) the size of that reduction appears to be highly dependent on the Medicare contractor.

With an additional year of data, I think both conclusions remain valid, although I would revise the second to suggest that the initial reduction has more to do with the Medicare contractor. The evidence from the third year of the program suggests that the trends tend to equalize after the first few years. It is also possible that Novitas felt a more aggressive approach was needed in the first few years to address evidence of widespread dialysis overutilization in the Philadelphia metropolitan area.

This has potential implications beyond the demonstration project, as CMS looks towards a possible national expansion of the program. Among other issues, it suggests that the AAA must continue its efforts to work with CMS and its contractors on developing more uniform standards for coverage of this patient population.

What the AAA is Doing

The AAA continues to work on legislation that would restructure this cut to dialysis transport reimbursement. The AAA strongly supports the NEATSA Act (H.R.6269) introduced by Congressman LaHood (R-IL) and Congresswoman Sewell (D-AL) that would restructure the offset so that a majority of the additional reduction would be focused on those ambulance service agencies in which 50% or more of their volume are repetitive BLS nonemergency transports. AAA members and the AAA are working to get a Senate companion bill introduced shortly. The goal of this legislation would be to have the restructured offset go into effect as soon as possible. Thank you to the dozens of AAA members who have already contacted their members of Congress voicing their support for this critical legislation.

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Talking Medicare: DOJ Settlement Highlights Importance of Exclusion Testing

Talking Medicare: Recent DOJ Settlement Highlights Importance of Exclusion Testing

On July 17, 2018, the U.S. Attorney for the District of Maine issued a press release on a settlement that had been reached with an ambulance service in Maine. As a result of this settlement, the ambulance service agreed to pay $16,776.74 to resolve allegations that it had submitted false claims to the Medicare and Maine Medicare Programs.

While the Department of Justice’s press release referred to the matter as a civil health care fraud, that headline is somewhat misleading. The ambulance service was not alleged to “up-coded” its claims or to have billed for patients that did not require ambulance transportation. Rather, the ambulance service was accused of using monies paid to it by these federal health care programs to pay the salary and benefits of a woman hired to assist the company’s billing manager. The woman, who was not identified in news reports, had previously been excluded from participation in federal health care programs after surrendering her license as a pharmacy technician after being found to have inappropriately diverted certain controlled substances. The ambulance service apparently failed to conduct an exclusion test on this individual prior to placing her on its payroll. The ambulance service’s side of the story is discussed in greater detail in this article from the local newspaper.

This settlement provides a reminder of the potential liabilities associated with the employment excluded individuals. As the HHS Office of the Inspector General (OIG) noted in its May 2013 Special Advisory Bulletin, the effect of exclusion goes beyond direct patient care. The OIG noted that excluded individuals are prohibited from providing transportation services paid by a federal health care program, using the example of ambulance drivers and ambulance dispatchers. The OIG further indicated that excluded individuals cannot provide administrative and/or management services that are payable by federal health care programs, even if these administrative or management services are not separately billable. In the above-referenced case, the prohibition was applied to the wages and benefits payable to the excluded employee.

Do we need to conduct exclusion testing, and, if so, how frequently?

The OIG recommends that all health care providers conduct exclusion testing prior to an individual’s employment, and then periodically thereafter. However, the OIG takes no formal position on how frequently these periodic exclusion checks should be conducted. The OIG does note, however, that it updates its List of Excluded Individuals and Entities (LEIE) on a monthly basis.

Given the potential risks involved, I think monthly testing of all employees should definitely be considered a best practice. The hope is that this case serves as a cautionary tale for other ambulance providers.

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Talking Medicare: GAO urges CMS to continue prior authorization

Talking Medicare: GAO urges CMS to continue prior authorization efforts

On May 21, 2018, the Government Accountability Office (GAO) issued a report to the U.S. Senate Finance Committee on the use of prior authorization models by the Centers for Medicare and Medicaid Services (CMS). The GAO was asked to examine: (1) the impact of prior authorization on total expenditures, and the potential savings for items or service subject to prior authorization, (2) the reported benefits and challenges of prior authorization, and (3) CMS’ monitoring of these programs, and its plans for future prior authorization. To conduct its study, the GAO looked at payment data and other information provided by CMS. The GAO also interviewed CMS, the Medicare Administrative Contractors (MACs), and selected provider, supplier, and beneficiary groups.

Prior authorization was first implemented by CMS in 2012 for certain power mobility devices (e.g., power wheelchairs) in seven states. Subsequent prior authorization models were implemented for non-emergency hyperbaric oxygen and home health services. Most relevant to our industry, CMS implemented a prior authorization model for repetitive, scheduled, non-emergency ambulance transportation in December of 2014. Originally, this model was implemented in only three states: New Jersey, Pennsylvania, and South Carolina. In January of 2016, the prior authorization model was expanded to include the states of Delaware, Maryland, North Carolina, Virginia, and West Virginia, as well as the District of Columbia.

The GAO’s key finding is that these prior authorization models have been effective in reducing Medicare’s expenditures for various items. The GAO’s analysis of actual expenditures found that the estimated savings from all demonstrations through March of 2017 could be as high as $1.1 to $1.9 billion. Given this fact, it should not be surprising that the GAO is calling on CMS to continue the use of prior authorization.

The majority of the data included in this report relates to non-ambulance services. However, I do want to highlight a few data points noted by the GAO.

From the model’s implementation in December 2014 through March 2017, MACs collectively handled more than 337,000 prior authorization requests, including a total of 3,231 requests for authorization of a repetitive, non-emergency, ambulance patient. This includes 2,620 initial requests, and 611 resubmissions (i.e., subsequent requests for prior authorization following the rejection of the initial request).

The GAO provisional affirmation rate for both initial and resubmitted authorization requests rose in each demonstration between the initial implementation date and March 2017. For example, the GAO noted that the affirmation rate (i.e., the rate at which patients are approved for repetitive ambulance transportation) during the first six months of the non-emergency ambulance model was 28 percent. This rose to 66 percent during the most recent six-month period (October 2016 through March 2017). The GAO noted that MAC officials attributed this increase, in part, to provider and supplier education, which they felt improved the documentation being submitted by providers and suppliers. While this is undoubtedly true, it is also likely the case that the MACs refined their approval process over time.

The GAO estimated the total potential savings from the prior authorization model for ambulance to be nearly $387.5 million from December 2014 through March 2017. Importantly, 90 percent of that savings was attributable to reductions in utilization in the original three states. Moreover, more than half the reduced expenditures took place within the first six months of the demonstration project.

In terms of fitting this report into the larger picture, I think it is best viewed as further confirmation of what we already suspected: namely, that the federal government perceives prior authorization to be an effective tool for combating the perceived overutilization of ambulance to transport patients to and from dialysis. CMS indicated as much when it adopted the program in 2014. Medicare payment data has borne out those expectations. Recently, CMS issued its first interim report on prior authorization’s effectiveness. The GAO’s report adds an independent imprimatur to that belief.

Big picture, all of the stars appear to be lining up for an expansion of prior authorization next year. Stay tuned!!

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Talking Medicare: A Good Thing Poorly Explained

On April 13, 2018, CMS released two Transmittals, Transmittal 243 and Transmittal 4021, and a related MedLearns Matter Article (MM10550). Collectively, these documents clarify Medicare’s coverage of ambulance transportation of SNF residents in a stay not covered by Part B, but who have Part B benefits, to the nearest supplier of medically necessary services that are not available at the SNF. This clarification relates to both the ambulance transport to the site of medical care, and the return trip.

In order to properly understand the clarification, it is helpful to review Medicare’s coverage of ambulance transportation provided to SNF residents. At the onset, it is important to note that Medicare draws a distinction between the first 100 days of a beneficiary’s SNF stay, and any subsequent days of the same stay. The first 100 days are commonly referred to as the “Part A Period.” Under current Medicare rules, all ambulance transportation provided during the Part A Period is the financial responsibility of the SNF, unless a specific exemption applies. Outside the Part A Period, Medicare’s coverage rules generally mirror the rules applicable to ambulance transports that originate at the patient’s residence. However, there is an exception that relates to transportation to and from therapeutic or diagnostic sites (i.e., those facilities identified with the “D” modifier). This clarification relates to transportation to and from diagnostic sites.

Medicare rules are clear that transportation of an SNF resident outside the Part A Period for the purpose of receiving medically necessary care that could not be provided at the SNF will be covered to the extent the ambulance transportation was both medically reasonable and necessary. This is true regardless of the type of facility to which the patient is transported. In this context, the term “reasonable” refers to the costs of transporting the patient to the site of medical care. Where it is cheaper to bring the patient to the service (e.g., an MRI or CT scan), Medicare will cover the service. Where it is cheaper to bring the service to the patient (e.g., certain minor procedures), Medicare rules indicate that the transportation would not be covered.

In other words, once an SNF resident is outside the Part A Period, Medicare will cover a medically necessary ambulance transport to a diagnostic site provided that it is cheaper to transport the patient to that site than to transport the equipment needed to provide care to the SNF.

As you can imagine, determinations as to the reasonableness of a particular service can be quite subjective. Moreover, these determinations can typically only be made on a case-by-case basis, i.e., it is extremely difficult for Medicare Administrative Contractors to make such decisions without seeing the ambulance trip report and other supporting documentation. As a result, CMS has historically given its MACs broad discretion to make these determinations.

The MACs have elected to utilize this discretion in various ways. Some MACs have essentially elected to rely upon the ambulance provider to make such determinations prior to submitting the claims. These MACs have therefore elected not to implement front-end edits for such claims.

Other MACs have elected to issue an initial denial, and handle reasonableness determinations through the appeals process. These MACs do so by implementing edits into their claims processing system that automatically deny claims submitted with the “ND” modifiers. However, because Medicare coverage rules indicate that transportation from anywhere to an SNF may be covered, these MACs do not have a corresponding edit to deny claims submitted with the “DN” modifiers.

The result is various inconsistencies in the ways claims for these situations are handled. Depending on the MAC jurisdiction in which you operate, a claim for an ambulance transport from an SNF to a diagnostic site (“ND”) for a beneficiary outside the Part A Period may be paid or denied. For those of you that operate in jurisdictions where the MAC denies this claim, you may also see the return trip either paid or denied. Note: if the transportation to the diagnostic site is denied as not being “reasonable,” the return trip should be denied as well.

It is these inconsistencies that CMS is addressing. Essentially, CMS is instructing those MACs that use claims processing edits to deny the “ND” transport to remove those edits. The practical effect is to force the MACs to use some other criteria to determine whether the roundtrip is reasonable (and, therefore, covered by Medicare Part B).

Please note that the coverage rules and clarification summarized above applies only to therapeutic and diagnostic facilities. It does not apply to ambulance transportation to and from a physician’s office. With the narrow exception of emergency ambulance transportation to a physician’s office as an interim stop on the way to a hospital, such transportation has always been and remains a non-covered service.

While I believe the change is, on net, a positive one for the industry, I would caution against reading too much into this clarification. CMS is not indicating that these transports will be covered in all instances. CMS is simply saying that, with respect to the initial processing of claims, it is willing to sacrifice some potential accuracy for the sake of greater national consistency. CMS in not restricting its MACs from using other means to make reasonableness determinations, e.g., the use of development requests, prepayment review, etc. While it is reasonable to assume that most MACs will elect not to utilize these tools, only time will tell if that is indeed what comes to pass. In the meantime, I am going to enjoy one of those rare instances where CMS used common sense, and removed an additional burden on our industry.

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First Interim Evaluation Report on Medicare Prior Authorization

Talking Medicare: First Interim Evaluation Report on Medicare Prior Authorization (An 80-page report confirming what you already likely suspected)

On February 28, 2018, the Centers for Medicare and Medicaid Services (CMS) posted an interim report on its prior authorization demonstration project for repetitive, scheduled, non-emergent ambulance transportation. The report, titled First Interim Evaluation Report of the Medicare Prior Authorization Model for Repetitive Scheduled Non-Emergent Ambulance Transport (RSNAT), was conducted by Mathematica Policy Research, a nonpartisan think tank. Mathematica studied the impact of the prior authorization model on Medicare payments, ambulance utilization, and patient quality of care.


CMS implemented the prior authorization demonstration project in December 2014 in three states: New Jersey, Pennsylvania, and South Carolina (referred to in the report as “Year 1 States”). These states were selected based on higher-than-average utilization rates and high rates of improper payment for these services. The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) subsequently expanded the demonstration project to five additional states (Delaware, Maryland, North Carolina, Virginia, and West Virginia) and the District of Columbia on January 1, 2016 (referred to in the report as “Year 2 States”).

The goal of the demonstration project was to study the impact of prior authorization on the utilization of ambulance transportation. Under the program, ambulance suppliers in the affected states would be required to submit documentation related to medical necessity to their Medicare Administrative Contractors (MACs) prior to Medicare payments being authorized. The MACs would review this documentation, and approve those they felt were medically necessary, while denying those patients that they believed could be safely transported by other means.

Reports Methodology

Mathematica was retained by CMS to conduct a five-year evaluation of the impact of the RSNAT prior authorization model.  Specifically, Mathematica was asked to evaluate the program on five specific measures:

  1. The effect of prior authorization on Medicare use and cost. Did the model realize savings for the Medicare Program?
  2. How does the prior authorization model affect the quality of and access to care for Medicare beneficiaries?
  3. How does the prior authorization model affect Medicare program operations? What was the impact, if any, of the model on MAC operations?
  4. How does the prior authorization model impact non-emergency ambulance suppliers’ and other health care providers’ behavior? Did ambulance suppliers and other health care providers change their behavior in response to the model?
  5. Does prior authorization impact improper payment rates, the rate at which claims are denied, and related program integrity concerns?

Mathematica indicated that it conducted its review using both quantitative and qualitative data analysis. It analyzed data from January 2012 through June 2016. Mathematica noted that it estimated program effects by measuring the change over time in certain key metrics between the pre-model years (2012 through 2014 for Year 1 States, 2012 through 2015 for Year 2 States) and post-implementation years (2015 through 2016 for Year 1 States, 2016 for Year 2 States) in the nine model states. It also compared these states against non-model states.

Because dialysis patients account for more than 75% of all repetitive transports, the report focused on ESRD patients.

Key Findings

The study concluded that the RSNAT prior authorization model successfully reduced the utilization of ambulance, as well as Medicare’s expenditures on repetitive ambulance transportation.  The report indicated that a reduction of nearly 70% in the nine states combined. This was associated with an approximately $171 million reduction in Medicare payments for dialysis transports. Interestingly, the study concluded that it also led to a reduction in total Medicare FFS expenditures for ESRD beneficiaries.

Not surprisingly, the Year 1 States saw more dramatic reductions than the Year 2 States. Mathematic attributed this to the fact that the Year 1 States were specifically selected based on higher-than-average utilization rates, while the Year 2 States were selected based on their geographic proximity to the Year 1 States. Mathematic concluded that national expansion would likely result in additional reductions in Medicare payments, but that the impact would likely be less than what was seen with the Year 1 States.

With respect to issues related to access and quality of care, Mathematica found little quantitative evidence to suggest that prior authorization had a negative impact on quality or access to care. The authors noted that they defined a negative impact quite narrowly, limiting it to emergency department visits, emergency ambulance utilization, unplanned hospital admissions, and death. The study did note a 15% increase in emergency dialysis use, which the authors noted might suggest that some beneficiaries were delayed in receiving ESRD treatment. The authors further noted that some beneficiaries who were denied approval could experience difficulty in accessing alternative means of transportation. Finally, the study did note that stakeholders, including ambulance suppliers, expressed concerns that some beneficiaries may have turned to other services — including emergency ambulance transportation and ED services — in response to being turned down for ambulance transportation.

The study indicated that the MACs reported that they successfully implemented the prior authorization model, and that they have adequate staffing to ensure that they meet CMS’ timelines for responding to prior authorization requests. The MACs did note, however, that there were some difficulties in implementing the program in the Year 1 States, which they attributed to their underestimating the required amount of training. The MACs self-reported that they did far better implementing the program in the Year 2 States.

The impact on the ambulance supplier community was mixed. Mathematica noted a 15% decrease in the number of ambulance suppliers per 100,000 beneficiaries in the model states after implementation. The majority of the ambulance suppliers that (euphemistically) “left the program” were smaller services that specialized in dialysis transports. Other companies reported that they reduced their volume of dialysis transports, or stopped transporting dialysis patients entirely. Not surprisingly, the ambulance supplier community believed that the coverage standards being used by the MACs were too strict.

Finally, Mathematica indicated that it was difficult to determine the prior authorization model’s impact on improper payments. This was partly due to the fact that improperly paid claims for ambulance services increased in both the model states and non-model states during the review period.


Mathematica’s findings do not come as a surprise. Rather, they pretty much confirm what our industry has long recognized. The HHS Office of the Inspector General has long warned that dialysis transports are susceptible to overutilization. The Medicare Payment Advisory Commission (MedPAC) concluded the same thing in a June 2013 report to Congress.

Moreover, the A.A.A. has acknowledged the potential for fraud and abuse in connection with these transports. It was for this precise reason that the A.A.A. pushed for prior authorization as a better alternative to reductions in Medicare’s payment for dialysis transports. Our position was that payment reductions failed to adequately address the underlying incentives for overutilization, and, therefore, primarily punished the legitimate providers of such transports.

To its credit, Mathematica acknowledged that factors other than the ambulance suppliers’ financial motives contribute to overutilization. Specifically, it cited the difficulty many beneficiaries face in accessing alternative means of transportation, even where such alternative means would meet the patient’s medical needs. Mathematica also noted the confusion that exists among other health care providers, particularly physicians, in terms of when Medicare would cover an ambulance. Long term, my hope is that this acknowledgement will pave the way towards more constructive conversations between the industry and Congress, CMS, and other stakeholders.

In the short term, the report clears a statutory hurdle that has prevented CMS from considering the expansion of the prior authorization model to the rest of the nation. It remains to be seen whether CMS believes this report is sufficient to make a determination on national expansion, or whether CMS will want to see additional evidence.

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Talking Medicare: Low Volume Settlement Option

Low Volume Settlement Option – A Viable Solution to the ALJ Backlog?

The Centers for Medicare and Medicaid Services (CMS) recently announced a new initiative to help relieve some of the appeals backlog at the ALJ level. Titled the “Low Volume Settlement Option,” this new initiative appears, on its face, to offer ambulance providers and suppliers a viable alternative to the multi-year wait for an ALJ hearing.

First some background. In January 2017, CMS announced that there has been a 1,222% increase in the number of appeals submitted to the Office of Medicare Hearings and Appeals, which operates the ALJ hearing system. The dramatic increase in the number of appeals was the result of several program integrity initiatives implemented by CMS in prior years, most notably, the creation of the Recovery Audit Contractor Program (RACs). As a result, there were more than 650,000 appeals pending at the ALJ-level as of September 30, 2016. CMS simultaneously disclosed that it currently processed approximately 92,000 appeals per year.

Doing the math, this meant that CMS could clear the existing ALJ backlog in a little over 7 years at its current pace. Of course, that made no allowance for new appeals that would be filed during that 7-year period. Moreover, appeals are not treated equally at the ALJ level. Appeals filed by beneficiaries are given priority, with the intent of issuing a decision within 60-90 days of filing. This necessarily means that appeals filed by providers and suppliers are moved to the end of the queue. A good metaphor would be airport security, with beneficiaries being given TSA Preè, and providers and suppliers being stuck in the normal lane of traffic.

Enter the American Hospital Association. On behalf of its members, who were disproportionately targeted by the RACs, the AHA filed suit seeking a writ of mandamus that would require CMS to adjudicate ALJ-level appeals within the 60-day time limit prescribed in the regulations. This case bounced back and forth between the circuit and appeals courts for several years, until December 2016, when a district court judge ordered CMS to eliminate the ALJ backlog by 2020.

CMS appealed that decision, arguing that it would be impossible for the agency to comply with the judge’s order without either (1) a massive increase in its funding level or (2) offering mass settlements to entire classes of appellants. CMS argued that only Congress could appropriate additional funds. CMS simultaneously argued that existing law prohibited it from offering mass settlements. Essentially, CMS was arguing that it lacked the authority to take the only step (i.e., mass settlements) that could reasonably be expected to alleviate the ALJ backlog. In August 2017, the U.S. Court of Appeals for the D.C. Circuit sided with CMS, and remanded the case back to the district court to determine whether CMS could legally comply with the order to reduce the backlog.

That brings us to the Low Volume Settlement Option (LVSO). Despite CMS’ previous argument that it lacked the authority to offer mass settlements, that is precisely what the LVSO does. Providers and suppliers will be given the option to settle eligible claims at 62% of the net allowed amount, regardless of the merits of the appealed claims.

How will it work? Providers and suppliers will submit an Expression of Interest (EoI) through a CMS web portal, indicating that they would like to explore the option of settlement. Depending on the provider’s or supplier’s NPI, they will need to submit their EoI during one of two 30-day periods, with the first (for NPIs ending in an even number) starting on February 5, 2017. CMS will determine the provider’s or supplier’s eligibility, and then provide a list of the claims it believes are eligible to be settled. The provider or supplier will have the ability to suggest additions or removals from that list. Once the list is finalized, the provider or supplier will have to make a decision on whether to settle all of the claims on that list. In other words, CMS’ offer is an all-or-nothing proposition.

There are some additional criteria for eligibility. Perhaps the most important one is the requirement that the provider or supplier have fewer than 500 total Medicare appeals across all of its associated NPIs. Once the provider or supplier is determined to be eligible, there are also restrictions on the types of claims that can be settled. To be eligible for settlement, the claims must have been appealed on or before November 3, 2017, and must still be pending. The total billed charges for all claims in a particular appeal must total less than $9,000. The claims must also be fully denied, i.e., they must not be denied in part or downgraded. Finally, this settlement option only applies to Fee-For-Service Medicare claims, i.e., it does not apply to Medicare Advantage claims.

Providers and suppliers that elect to accept the settlement offer can expect to receive payment within 180 days.

Brian, that is all fine and good, but will this actually help my organization?

Ultimately, that is a determination that every provider or supplier will need to make for itself. If you have already been given an ALJ hearing date and are 100% convinced you will win your appeal, there is little benefit in settling the appeal. If you are convinced you will loss the appeal, the offer to settle at 62% probably looks like a windfall. However, it is unlikely that your appeal falls close to one of those two extremes. The main difficulty in valuing CMS’ offer is not knowing how long you might wait to get an ALJ hearing. A year is one thing, a 10-year wait is something else entirely.

That being said, there is little harm in submitting an Expression of Interest, and seeing which claims CMS would be willing to settle. For that reason, my recommendation is for every A.A.A. member to enroll in the program, and to wait for CMS to provide the spreadsheet of the claims it would be willing to settle before making any decision.

If you are interested in learning more about the Low Volume Settlement Offer, the AAA hosted a recent webinar on the initiative. Order the webinar on demand.

Have an issue you would like to see discussed in a future Talking Medicare blog? Please write to me at

Navigating a Post-Prior Authorization World

Talking Medicare: Navigating a Post-Prior Authorization World

Novitas Solutions, Inc. recently announced that it will no longer issue prior authorizations for scheduled, repetitive non-emergency transports, effective December 1, 2017. This announcement was based on Novitas’ expectation that the demonstration project will expire at the end of this calendar year. For ambulance suppliers in the states that currently operate under prior authorization, the focus invariably turns to what that means for their repetitive patient populations?

First a little background. In May 2014, CMS announced the implementation of a three-year prior authorization demonstration project for repetitive scheduled non-emergency ambulance transports. This demonstration project was initially limited to the states of New Jersey, Pennsylvania, and South Carolina. These states were selected based on higher-than-average utilization rates and high rates of improper payment for these services. In particular, the Medicare Payment Advisory Commission (MedPAC) had singled out these states as having higher-than-average utilization of dialysis transports in a June 2013 report to Congress. As initially conceived, the prior authorization demonstration project first went into effect on December 15, 2014.

Congress subsequently elected to expand this demonstration project to additional states as part of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). Specifically, Congress mandated that the program be expanded to six additional states (Delaware, Maryland, North Carolina, Virginia, and West Virginia) and the District of Columbia by January 1, 2016, and then potentially to the rest of the nation by January 1, 2017. However, CMS never issued the required report; as a result, the contemplated national expansion never occurred.

Where Do We Go From Here?

If you operate in a state that is not currently operating under prior authorization, the answer to this question is relatively straightforward, i.e., nothing will change.

If, however, operate in a state that is currently subject to prior authorization, this question is a bit trickier. What we do know is that the actual mechanics of submitting claims will revert to the same process you experienced prior to the implementation of prior authorization. You will submit claims for repetitive patients directly to the Medicare Administrative Contractor (MAC), who will likely process them in same manner they process other Medicare claims. In other words, 14 days after the submission of the claim, you will likely receive a remittance notice indicating that the claim has either been paid or denied.

We also know that you will no longer benefit from the protections against post-payment review of these claims. Under the prior authorization model, CMS made clear that it would not audit claims paid based on a valid authorization, except in instances where it could demonstrate that the prior authorization was fraudulently procured.

What We Can Expect from Medicare and its Contractors

What we don’t know is whether the MACs will implement any temporary measures to guard against ongoing over-utilization and/or fraud. To better understand what I mean, put yourself in the position of the MAC. You have empirical evidence (see the chart to the right) that prior authorization has resulted in dramatic reductions in the amount of Medicare dollars paid for dialysis transports. You have further seen little evidence that this reduction in payments has resulted in any serious access to care issues.

The logical conclusion you would draw is that the amounts paid for dialysis prior to the implementation of prior authorization were likely excessive. If so, you might consider some proactive steps to prevent dialysis utilization from increasing back to the levels seen prior to the implementation of prior authorization.
So, it is possible (perhaps even likely) that ambulance suppliers in some of these states may see their MAC elect to implement prepayment reviews for dialysis patients. This could be similar to the process Novitas used for the initial three round trip transports to dialysis.

I also think it is reasonable to expect that the MACs, the Zone Program Integrity Contractors, and the OIG will monitor utilization trends, with an eye towards conducting post-payment reviews on ambulance suppliers that see their dialysis volume increase sharply next year.

Other Potential Impacts

In the previous section, I touched on the steps Medicare and its contractors might take to prevent a return to pre-prior authorization levels of dialysis utilization. In this section, I want to talk about some of the knock-on effects ambulance providers are likely to see.

One of the more interesting changes we saw in the prior authorization regime was a re-balancing of the power dynamic between ambulance suppliers and facilities, i.e., assisted living facilities and skilled nursing homes. Prior to the implementation of prior authorization, that power dynamic was slanted heavily in favor of the facility. By that I mean they could exert tremendous pressure on ambulance suppliers to take marginal patients by ambulance. If you were involved in the industry prior to 2015, you undoubtedly heard an SNF administrator tell you something to the effect of “if your company won’t take the patient by ambulance, I can easily find another company that will.” In competitive markets, that statement was usually accurate.

Under the demonstration project, prior authorization or lack thereof traveled with the patient. What that meant is that if your ambulance company submitted a prior authorization request that was denied, that denial would apply to any other ambulance company that might be interested in taking the patient. As a result, the nursing home could no longer hold the threat of going elsewhere with their business over your head.

Prior authorization also affected the standing policies of dialysis centers. Many free-standing dialysis centers have standing policies that they will not assist in transferring the patient to and from the dialysis treatment chair. This meant that patients that could be transported in a wheelchair van, but who required assistance to transfer out of their wheelchair presented a conundrum. There wouldn’t be medical necessity for the ambulance, but there would be no easy way for you to transfer them into the treatment chair without a second crew member (something most wheelchair van services don’t offer). Under prior authorization, it was easier for the ambulance company to push back, since they knew they wouldn’t be paid for the ambulance. As a result, I have heard that dialysis employees in these states had started to assist patients in transferring.

No really, it’s true…

One potential consequence of the prior authorization going away is that it may shift this power dynamic back to the facilities, with all of the negative consequences that are likely to result.

“Okay, I get what you are saying, but what I really want to know is whether I should loosen our standards for accepting a dialysis patient or not?”

Good question. Unfortunately, not one that permits an easy answer. The implementation of prior authorization shifted the cost-benefit analysis associated with transporting dialysis patients. It was likely that you were going to have a smaller number of patients approved and paid, but you could rest easy that you wouldn’t be at risk of having to return that money years later as the result of a Medicare audit.

The expiration of prior authorization shifts the cost-benefit analysis yet again. It is likely that you have tightened up your criteria for who you accept for dialysis transportation as a result of prior authorization. Loosening those criteria would almost certainly result in an increase in your short-term revenues. However, that would be offset, to some degree, by the increased risk of a Medicare audit.

For that reason, the course of action I have been recommending to people is not to dramatically loosen your standards. Instead, I typically ask whether they currently have patients that they believe do require an ambulance, but who were rejected for prior authorization by the MAC. Most providers respond that they do. Put another way, we are trying to identify the patients that you would feel comfortable defending in an audit. That is the additional population I would target for transportation next year.

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Preliminary Estimate of 2018 Medicare Rates

A Preliminary Estimate of 2018 Medicare Rates

In this blog, I will provide a preliminary estimate of the Ambulance Inflation Factor (AIF) for calendar year 2018.  The AIF is main factor that determines the increase (or decrease) in Medicare’s payment for ambulance services.

Calculating the 2018 AIF

The AIF is calculated by measuring the increase in the consumer price index for all urban consumers (CPI-U) for the 12-month period ending with June of the previous year. For 2018, this means the 12-month period ending on June 30, 2017. Starting in calendar year 2011, the change in the CPI-U is reduced by a so-called “productivity adjustment”, which is equal to the 10-year moving average of changes in the economy-wide private nonfarm business multi-factor productivity index (MFP). The resulting AIF is then applied to the conversion factor used to calculate Medicare payments under the Ambulance Fee Schedule.

The formula used to calculate the change in the CPI-U is limited to positive increases. Therefore, even if the change in the CPI-U was negative over a 12-month period (a rarity in the post-war era), the change in the CPI-U cannot be negative. However, when the MFP reduction is applied, the statute does permit a negative AIF for any calendar year. That is precisely what occurred in 2016, where the change in the CPI-U was 0.1% and the MFP was 0.5%. As a result, the industry saw an overall reduction in its Medicare rates of 0.4%.

Based on current data, it is highly unlikely that the AIF will be negative in 2018. For the 12-month period ending in June 30, 2017, the Bureau of Labor Statistics (BLS) currently calculates the change in the CPI-U to be approximately 1.6%.

CMS has yet to release its estimate for the MFP in calendar year 2018. However, assuming CMS’ projections for the MFP are similar to last year’s projections, the 2018 MFP is likely to be in the 0.3% to 0.5% range.

Therefore, at this time, my best guess is that the 2018 Ambulance Inflation Factor will be a positive 1.1% to 1.3%.

Please note that this estimate assumes the Bureau of Labor Statistics does not subsequently revise its inflation estimates. Please note further that this projection is based on the MFP being similar to last year.  To the extent either of these numbers changes in the coming months (up or down), my estimate of the 2018 AIF would need to be adjusted accordingly. Ultimately, the 2018 AIF will be finalized by CMS by Transmittal, which typically occurs in the early part of the 4th quarter.

Impact on the Medicare Ambulance Fee Schedule

Assuming all other factors remained the same, calculating your 2018 Medicare rates would be a relatively simple exercise, i.e., you would simply add 1.1 to 1.3% to your 2017 rates. However, as part of its 2018 Physician Fee Schedule Proposed Rule (issued July 21, 2017), CMS proposed minor changes to the GPCIs. These changes can be viewed by going to the Physician Fee Schedule page on the CMS website, and clicking the link for the “CY 2018 PFS Proposed Rule Addenda” (located in the Downloads section). You would then need to open the file for “Addendum E_Geographic Practice Cost Indicies (GPCIs).”

If the PE GPCI in your area is proposed to increase, you can expect your 2018 Medicare rates to increase by slightly more than 1.1 – 1.3%. If the PE GPCI in your area is proposed to decrease, you can expect your 2018 Medicare rates to increase by slightly less than 1.1 to 1.3%.

If you are looking for a more precise calculation of your rates, you will need to use the following formulas:

Ground Ambulance Services

Medicare Allowable = (UBR x .7 x GPCI) + (UBR x .3)

 Air Ambulance Services

Medicare Allowable = (UBR x .5 x GPCI) + (UBR x .5)

 In this formula, the “UBR” stands for the unadjusted base rate for each HCPCS code. These are calculated by multiplying the national conversation factor by the relative value unit assigned to each base rate. To save some time, estimates for the 2018 unadjusted base rates are reproduced below (using the low-end estimate for the AIF):

Base Rate (HCPCS Code) 2018 Unadjusted Base Rate
BLS non-Emergency (A0428) $224.74
BLS emergency (A0429) $359.58
ALS non-emergency (A0426) $269.68
ALS emergency (A0427) $427.00
ALS-2 (A0433) $618.02
Specialty Care Transport (A0434) $730.39
Paramedic Intercept (A0432) $393.29
Fixed Wing (A0430) $3,049.69
Rotary Wing (A0431) $3,545.72

Plugging these UBRs into the above formulas will result in adjusted base rates for each level of ground and air ambulance service. The final step is to apply whatever temporary adjustments are in effect under the Medicare Ambulance Fee Schedule. For example, in 2017, there were adjustments in place for urban (2%), rural (3%) and super-rural (22.6% over the corresponding rural rate) transports. Note: these temporary adjustments are currently set to expire on December 31, 2017. Therefore, absent further legislation, they should not be added to the adjusted base rates for 2018.

2018 Projected Rates for Mileage:

 At this time, I am estimating the following rates for Medicare mileage:

Base Rate (HCPCS Code) 2018 Unadjusted Base Rate
Ground Mileage – Urban $7.23
Ground Mileage – Rural Miles 1 – 17 $10.84
Ground Mileage – Rural Miles 18+ $7.23
Fixed Wing Mileage – Urban $86.5
Fixed Wing Mileage – Rural $12.98
Rotary Wing Mileage – Urban $23.09
Rotary Wing Mileage – Rural $34.64

Please keep in mind that a number of assumptions went into these projections. The Bureau of Labor Statistics can revise its inflation figures in the coming months. CMS may announce an MFP projection that differs from what we expect. CMS may also announce that it is electing not to finalize its proposed changes to the GPCI (highly unlikely). If any of these assumptions was to change, these projections would need to be revised. Therefore, I would suggest that you view these as rough estimates at best.  The AAA will update members as more information becomes available in the coming months.

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Talking Medicare: Prior Authorization Spending Update

Prior Authorization Data Shows Continued Reduction in Overall Spending on Dialysis Transports; Pendulum Swings Back Slightly in New Jersey and Pennsylvania

In May 2014, CMS announced the implementation of a three-year prior authorization demonstration project for repetitive scheduled non-emergency ambulance transports. This demonstration project was initially limited to the states of New Jersey, Pennsylvania, and South Carolina. These states were selected based on higher-than-average utilization rates and high rates of improper payment for these services. In particular, the Medicare Payment Advisory Commission (MedPAC) had singled out these states as having higher-than-average utilization of dialysis transports in a June 2013 report to Congress.

Medicare payment data from calendar year 2015 showed the effect of the demonstration project. Total spending on dialysis transports was $559 million that year, down 22% from the year before.  That correlates to a cost savings to the federal government of $158 million. Telling, $137 million (86%) of those savings came from the three states that participated in the demonstration project.

The chart to the right shows total spending on dialysis in those states in the years immediately preceding the implementation of the prior authorization project up through the first year of the project. While the three states had very different trajectories prior to 2015, each showed a significant decrease in payments under the demonstration project.

We now have Medicare payment data for 2016. This blog will focus on the second year of the prior authorization demonstration project. This includes tracking the effects of prior authorization on the five additional states (DE, MD, NC, VA, and WV) and the District of Columbia, which were added to the demonstration project for 2016.

Existing States

In the first year of the demonstration project, both New Jersey and Pennsylvania saw sizeable reductions (85.5% and 83.5%, respectively) in the total spending on dialysis transports. Both states saw dialysis payments rebound in 2016, with New Jersey increasing by 14.7% and Pennsylvania increasing by 3.7%. The financial community uses the phrase “dead cat bounce[1]” to describe a temporary recovery from a prolonged or pronounced decline. It is possible that explains why payments increased for these states in 2016. However, the more likely explanation is that Novitas, the Medicare Administrative Contractor in both states, recognized that the standards it used were overly restrictive during the first year of the project. If so, the increases in 2016 reflect the pendulum swinging back somewhat. If you accept that Novitas has reached an equilibrium point, total spending on dialysis in these states would be roughly 75% below pre-2015 levels.

By contrast, South Carolina saw total dialysis spending decrease by an additional 7.9% in 2016, over and above the roughly 25% reduction in 2015. Thus, spending in 2016 was roughly 30% lower than pre-2015 levels.

Expansion to New States

The follow charts track dialysis payments in the five states and the District of Columbia that were first subject to prior authorization in 2016.  The chart on the left shows those states where the prior authorization project is administered by Novitas, while the chart on the right shows those states administered by Palmetto.

The phrase expresses the concept that even a dead cat will bounce if dropped from a tall enough height.

As you can see, both Delaware (72.3%) and Maryland (68.0%) showed sizeable reductions in total dialysis payments. Payments in the District of Columbia actually increased by 30%. However, a closer examination of the numbers shows that the increase was largely the result of an increase in the number of emergency transports to a hospital for dialysis, i.e., claims that fell outside the prior authorization project. Payment for scheduled BLS non-emergency transports fell 82.9% in the District, in line with reductions in the other two states.

The reductions in the Palmetto states was far more moderate, with reductions ranging from 27.8% (North Carolina) to 45.4% (Virginia). West Virginia saw a 36.0% decline.

Key Takeaways

 With two years of experience under the prior authorization demonstration project, I think we can safely come to two conclusions:

  1. The implementation of a prior authorization process in a state will undoubtedly result in an overall decrease in the total payments for dialysis within that state; and
  1. The size of that reduction appears to be more dependent on the Medicare contractor than on any perceived level of over utilization.

The first conclusion should come as no surprise. Dialysis transports have long been the subject of scrutiny by the federal government. Moreover, the original states were not selected at random; they were selected based on data that suggested they were particularly suspect to over utilization.

The second conclusion is less intuitive. After all, Medicare coverage standards are intended to be national. While you could argue that a sizable reduction was expected for New Jersey and Pennsylvania, as there was evidence of widespread dialysis fraud in the Philadelphia metropolitan area, there was no basis to suspect widespread over utilization in Maryland or the District of Columbia. In fact, the District had only 58 BLS non-emergency dialysis transports in 2015, i.e., the equivalent of a single patient being transported for 2 months. Rather, the 2016 data suggests that Novitas has simply taken a far harder stance on dialysis than Palmetto.

This has potential implications beyond the demonstration project, which is scheduled to expire at the end of this year. As many of you know, the national expansion of prior authorization is part of the House of Representative’s ambulance relief bill (it is not mentioned in the corresponding Senate bill). The data suggests that the AAA must continue its efforts to work with CMS and its contractors on developing more uniform standards for coverage of this patient population.

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[1] The phrase expresses the concept that even a dead cat will bounce if dropped from a tall enough height.

Talking Medicare: CMS Transmittal 236

On June 16, 2017, the Centers for Medicare & Medicaid Services (CMS) released Transmittal 236. This Transmittal makes some minor changes to Chapter 10 of the Medicare Benefit Policy Manual. Specifically, CMS is clarifying its definitions related to the “ALS assessment” and “locality.” The change to the locality definition has prompted some discussion within the industry as to the impact on Medicare’s reimbursement for mileage beyond the nearest appropriate facility. In this month’s blog, I will explain the recent change, and hopefully convince you that this isn’t something that should cause you undue concern.

Medicare’s Definition of “Locality”

The definition of “locality” appears in Section 10.3.5 of Chapter 10 of the Medicare Benefit Policy Manual. That definition reads as follows:

The term “locality” with respect to ambulance service means the service area surrounding the institution to which individuals normally travel or are expected to travel to receive hospital or skilled nursing services.

CMS then includes the following example to explain how that definition should be applied to real world situations:

EXAMPLE: Mr. A becomes ill at home and requires ambulance service to the hospital. The small community in which he lives has a 35-bed hospital. Two large metropolitan hospitals are located some distance from Mr. A’s community and both regularly provide hospital services to the community’s residents. The community is within the “locality” of both metropolitan hospitals and direct ambulance service to either of these (as well as to the local community hospital) is covered.

Conceptually, the locality definition is intended to address situations where there are several local options that residents of a community could choose for the receipt of necessary medical care. CMS recognizes that a strict adherence to its general policy of only covering mileage to the nearest appropriate facility would undermine a patient’s right to choose from these various institutional health care providers. The locality definition ensures that, when the two or more facilities are reasonably close to one another, the patient can safely choose the further facility without fear that they may end up being responsible for some incremental portion of the mileage.

The Proposed Clarification

Effective September 18, 2017, Transmittal 236 adds the following sentence to the end of the current definition of locality:

The MACs have the discretion to define locality in their service areas.

Analysis of the Proposed Clarification

The first question that should be asked is whether this clarification is actually a change in CMS policy? I would argue that it not, as Medicare Administrative Contractors have always had the discretion to define what constitutes the “locality” for an ambulance transport. For that reason, I view the purpose of this Transmittal as simply clarifying “who” (i.e., CMS vs. the MACs) has the primary responsibility for making these determinations.

Nor do I believe that this clarification is being made in response to potential abuse of the locality issue, either by providers billing for excess mileage under an expansive reading of “locality” or by the MACs in processing claims. Rather, I think this clarification is being made in response to repeated questions from the provider community, both on Open Door Forums and at state association meetings with their MACs. In other words, I think CMS is simply making clear that concerns regarding locality should be raised with the MACs, rather than CMS itself.

The Transmittal does leave open the possibility that MACs could impose their own definitions of locality. However, as I noted above, they already have this authority. I am not aware of any MAC ever electing to define the issue. Typically, the MAC will simply restate the CMS Manual definition of locality in its LCD.

So why have MACs been reluctant, up to this point, to define localities? I think it has to do with the administrative burden that would be involved. First and foremost, the MAC would need to have a sense of the larger demographic trends that dictate patient referral patterns in any given area. While that information is available, in theory, it is not available in any way that is readily useable by the MAC. Moreover, as the test focuses on what is “normal” or “expected” for patients, this would be a moving target, as patient preferences change over time, new facilities open, other facilities close or change the services they offer, etc. Thus, to the extent a MAC defined a locality, it would be constantly forced to revisit that definition every so often.  Finally, the MAC would have to make allowances for transports that are outside the locality, but where the patient is seeking specialized care that may not be available within the locality.

In sum, defining the locality for even a single community would be a significant administrative burden on the MAC. When you consider that there are hundreds, if not thousands of distinct communities within each state, you can understand the MACs reluctance to offer specific guidance on this approach.

Instead, I believe that the MACs will continue to address the mileage issue in the same way they have done up to this point. Most MACs have imposed an upper limit on the mileage they will pay without question. This upper mileage limit may be for its entire MAC Jurisdiction, it could be statewide, or it could have two or more mileage limits for a particular state.  For example, some MACs use a smaller mileage edit for transports that originate in and around a major metropolitan center, and a larger mileage edit for transports in the more rural areas of a state.

This approach offers a number of administrative benefits to the MAC.  First, it limits the number of claims that run afoul of the edit, and therefore that potentially may need to be reviewed by the MAC on appeal.  It also offers clarity to the provider community.

So, if your MAC has previously indicated that it has a mileage edit, I think you can safely assume that this will continue to be the guiding principle used by the MAC after the effective date. If the MAC doesn’t have a published mileage edit, I don’t think that is likely to change come September.

I would suggest that ambulance providers continue to monitor their remittances. If you are seeing mileage over a certain amount consistently denied by the MAC, that is their mileage edit. Please note that the MAC is not indicating this mileage is never covered, just that it has determined that it will not necessarily pay this higher number of miles without seeing the underlying documentation. In other words, the MAC is putting the burden on you to prove that the entire mileage was covered. If you are not seeing mileage being denied, I wouldn’t expect that to change either. I hope this helps to put everyone’s mind at ease.

Have a wonderful Fourth of July.

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OIG Looking into SNF Consolidated Billing Claims

Over the past few weeks, we have been contacted by a number of ambulance suppliers that have received letters from the HHS Office of the Inspector General (OIG). These letters indicate that the OIG is conducting a national review of ambulance services that are subject to the consolidated billing provisions of the skilled nursing facility (SNF) prospective payment system. The review covers claims for ambulance services with dates of service from July 2014 through June 2016.

In each case, the ambulance supplier is being asked to provide documentation on a handful of round trip transports of an SNF patient. The letter indicates that these services were furnished to a Medicare beneficiary during the beneficiary’s Part A SNF stay, and therefore “may be subject to consolidated billing.” The letter asks the ambulance supplier to complete a short (3-page) questionnaire related to the identified transports, and to return the completed questionnaire to the OIG within seven business days.

The questionnaire asks some fairly basic questions related to the identified transports, including whether the ambulance supplier actually furnished the identified transports, whether it was paid by Medicare, the point of pickup and destination, and information on who called to request the transport. The questionnaire also asks for information on how the ambulance supplier determined whether the patient was in the Part A period, and what information the ambulance supplier obtained in order to make its determination that the claims were separately payable by Medicare Part B.

The OIG has conducted similar reviews in the past. For example, in August 2009, the OIG issued a report on payments for ambulance transportation provided to SNF beneficiaries during calendar year 2006. That report concluded that 61 of the 114 claims it reviewed (53%) were incorrectly billed to Medicare Part B, as opposed to the SNF. Based on its sample, the OIG estimated that Medicare made $12.7 million in incorrect payments to ambulance suppliers during calendar year 2006.

It is possible that the OIG is simply updating its previous report on SNF Consolidated Billing and ambulance transports. However, there is another possible explanation for the OIG’s renewed interest in these types of transports. Many of the claims the OIG has requested information on relate to transports to what appears to be a physician clinic located on a hospital’s campus. If correct, the SNF would have been responsible for payment for the physician’s services (in addition to the ambulance claims). If so, it is possible that the OIG’s interest was triggered by the lack of a corresponding hospital claim being submitted to Medicare on that date.

If this sounds familiar to you, it should.

In September 2015, the OIG issued a report in which it highlighted seven so-called “questionable billing practices” by ambulance suppliers. One of these billing practices was the existence of an ambulance claim for a particular date of service, but where there was no corresponding hospital claim (or any other claim from a Part A institution) for the beneficiary on that same date. The OIG identified $30.2 million in payments during the first half of 2012 that tested positive for this measure.

In an earlier blog post, we discussed the Supplemental Medical Review Contractor (SMRC), StrategicHealthSolutions, LLC. The SMRC is tasked with lowering the improper payment rate and increasing efficiencies of the medical review functions of the Medicare and Medicaid programs. The SMRC has recently started auditing ambulance suppliers, and it appears to be focusing, in large part, on claims where patients were evaluated at a physician’s clinic located on a hospital’s campus. It is possible that the OIG is conducting its own inquiry of this same issue.

This leaves us with a basic question: Is the OIG simply updating an earlier report, or is this sort of audit going to be become the new “normal” for ambulance suppliers? Ultimately, time will tell.

However, regardless of the OIG’s motives, this recent string of audits serves as a valuable reminder to the industry that many hospitals do sublease space to physician practices, and that these independent practices are licensed separately from the hospital. A transport to these independent physician practices would be bundled to the SNF under SNF Consolidated Billing. As an industry, we need to identify these transports when they occur, and be sure to bill the SNF, whenever appropriate. Otherwise, the OIG is likely to continue these sorts of audits.

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UnitedHealthCare Denials for ALS-2 Claims

Talking Medicare

with Brian S. Werfel, AAA Medicare Consultant

Over the past few weeks, we have received emails from ambulance providers across the country reporting that UnitedHealthCare (UHC) has started to deny claims for the ALS-2 base rate. Affected claims include both commercial and Medicare Advantage claims. These providers are reporting that UHC is requiring the use of Current Procedural Terminology (CPT) Codes to support the ALS-2 level of service.

When these providers call UHC to question the denials, the customer service representative refers them to UHC’s online policies and procedures manual. The section of that manual devoted to the ALS-2 base rate largely mirrors Medicare’s definition. For example, it indicates that ALS-2 can be billed based on three separate administrations of one or more medications by IV push/bolus or continuous infusion, or upon provision of one or more of the designated ALS-2 procedures (e.g., an endotracheal intubation).

However, the manual section then goes on to indicate that “Ambulance Providers or Suppliers are required to report CPT or HCPCS codes… when reporting A0433Ambulance transport services that do not include the services described in criteria 1 or 2 above should be reported with a more appropriate ambulance transport code.

The manual section concludes with links to two lists of CPT codes. The first list, designated as “ALS2 Criteria 1 Codes” relate to the intravenous administration of various medications. These codes fall within the range of: 96365 – 96376. The second list, designated as “ALS2 Criteria 2 Codes” correspond to the various ALS interventions:

CPT Code:                            Description:
31500                                    Endotracheal Intubation, Emergency
31603                                    Under Incision Procedures on Trachea and Bronchi
31605                                    Under Incision Procedures on Trachea and Bronchi
36000                                    Under Intravenous Vascular Introduction & Injection Procedure
36555                                    Central Venous Catheter Placement, Patient Under Five Years
36556                                    Central Venous Catheter Placement, Patient Over Five Years
36568                                    Insertion of Central Venous Access Device
36569                                    PICC Line Insertion
36680                                    Intraosseous Line Infusions
92950                                    Cardiopulmonary Resuscitation
92953                                    Other Therapeutic Cardiovascular Services
92960                                    External Electrical Cardioversion, Non-Emergency
92961                                    External Electrical Cardioversion, Emergency

The ambulance providers have indicated that they have questioned UHC on the necessity of including CPT codes on these claims. These providers argue, correctly, that CMS does not require the use of CPT codes on Medicare claims. Instead, Medicare requires the ambulance provider to document in the billing narrative the justification for billing ALS-2. For example, a provider might list multiple administrations of epinephrine, the use of an intraosseous line, etc.

The fact that UHC is asking for the CPT codes suggests that it does not currently review the billing narratives. Instead, UHC appears to be using the CPT codes to ensure that the ALS-2 criteria are met.

Is UHC correct to insist upon the use of CPT codes? Probably not, at least for its Medicare Advantage claims. However, I think the more appropriate question to ask ourselves is whether it is worth fighting UHC on this issue? If using CPT codes ensure that UHC correctly processes and pays these claims with minimal delay, my opinion is that it is probably easier just to comply with their policy.

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Understanding CERT

Talking Medicare: Understanding CERT

Every year around this time, our firm receives a steady stream of questions from AAA members about the CERT Program. Typically, the provider has received a notice from what appears to be the Centers for Medicare and Medicaid Services (CMS), which asks for medical records for one or two patient transports. These providers naturally wonder whether they are being audited, and how they should respond. The intent of this post is to clear up any confusion.

What is the CERT program?

The Comprehensive Error Rate Testing (CERT) program is an attempt by CMS to measure the rate of improper payments in the Medicare Fee-for-Service Program. It does so by evaluating a statistically valid random sample of claims to determine whether these claims were properly paid under the applicable Medicare coverage, coding, and billing rules.

In August 2016, CMS awarded responsibility for conducting CERT reviews to AdvanceMed. Therefore, if you receive a letter from AdvanceMed, and that review is asking for only a single claim, it is likely that you are being asked to participate in the FY 2017 CERT review.

What is the National Error Rate for ambulance services?

In its report for Fiscal Year 2016, CMS indicated that the overall improper payment rate was 11.00% across all provider types. CMS estimated that this represented approximately $41.08 billion in improper payments. This is down slightly from the FY 2015 review, which estimated the improper payment rate at 12.09%, representing $43.33 billion in improper payments. The FY 2016 reporting period ran from July 1, 2014 through June 30, 2015.

The overall error rate for Part A Providers, i.e., hospitals, nursing homes, etc., was 13.98%. The overall error rate for Part B providers was 11.71%.  In contrast, the error rate for durable medical equipment, prosthetics, orthotics, and supplies (DME) was 46.26%.

The overall error rate for ambulance was 11.7%, or basically the same as the overall Part B error rate. The ambulance error rate was further broken down based on the basis for a payment error. The most common error, comprising more than three-fourths of all errors, was either no documentation or insufficient documentation. The lack of medical necessity for the ambulance comprised only 15.6% of all improperly paid ambulance claims.

Should I freak out if my service is selected for review?

In a word, “No.” The odds of your service being selected under the CERT program are quite low. If you are selected, it is helpful to keep in mind that the focus of this review is not on your billing practices. Rather, the focus is on whether your contractor processed your claim correctly. This is not to say that CMS will not attempt to recoup payment on the claim if it ultimately determines that the claim was paid in error; it will. However, from your perspective, that recoupment is the end of the matter.

In other words, the worst that can happen with a CERT review is that you would have to repay that single claim. It will not result in a large extrapolated overpayment. Nor is the denial of that claim likely to trigger a larger postpayment review. Therefore, other than being sure to respond to the record request in a timely fashion, there is little to fear from CERT.

I hope this helps put your mind at ease!

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2015 Medicare Data Shows Evident of Crackdown on Non-Emergency Transport

2015 Medicare Payment Data Offers Evidence of Nationwide Crackdown on Non-Emergency Ground Ambulance Transportation; Impact Varies Dramatically by Medicare Administrative Contractor

Every year, CMS releases data on aggregate Medicare payments for the preceding year. This file is referred to as the Physician/Supplier Procedure Master File (PSP Master File). This past month, CMS released the 2016 PSP Master File, which contains information on all Part B and DME claims processed through the Medicare Common Working File with 2015 dates of service.

In September’s blog post, I discussed the results of the first year of the prior authorization demonstration project for repetitive, scheduled non-emergency ground ambulance transports. During this first year, the project was limited to three states: New Jersey, Pennsylvania, and South Carolina. The data confirms that these three states saw a dramatic reduction in Medicare’s approved payments for dialysis transports.

This month, I will be discussing the national payment trends for non-emergency ground ambulance transports, and, in particular, Basic Life Support non-emergencies.

In 2015, Medicare paid approximately $990 million for BLS non-emergency transports. This is 13% less than what it paid for BLS non-emergency transports in 2014 ($1.14 billion). Please note that these figures only reflect payments for the base rate; when the payments for the associated mileage are included, the reduction is even more dramatic.

In actual terms, this means Medicare Administrative Contractors (MACs) approved nearly 1 million fewer BLS non-emergency transports in 2015 (5.86 million) than they approved in 2014 (6.81 million). Roughly 75% of this reduction can be directly attributed to the prior authorization program in the three states listed above. Note: the reduction in approved dialysis transports in New Jersey accounts for nearly half of the national decline). However, that leaves nearly 250,000 fewer approved transports in the remaining 47 states. This reduction was not the result of fewer claims being submitted in 2015; the number of submitted claims was actually higher in 2015 than 2014. Rather, the data shows that this reduction is the result of the MACs actively denying many more claims than in year’s past.

I believe these reductions are the direct result of a step-up in the enforcement activities of the MACs, which I also believe has the tacit, if not outright, approval of CMS.

To test this thesis, I looked at the state-by-state data to see if any trends could be found. What I found was that 28 states saw increases in the total number of approved BLS non-emergency transports in 2015, with 19 states seeing decreases. However, on its face, that number is somewhat deceiving. The states that saw increases tended: (1) to see either relatively small increases or (2) had relatively low utilization rates to begin with. The states that saw decreases tended to be larger states with higher utilization rates, and those decreases tended to be larger in percentage terms. For instance, California saw a 21.5% decrease in the number of approved BLS non-emergency transports. Ohio saw an 11.7% decrease.

Digging deeper, it becomes clear that a state’s overall change in payments for BLS non-emergencies is almost perfectly correlated with its change in payments for dialysis transports. In other words, to the extent the state saw an overall reduction in payments for BLS non-emergencies, that reduction – – in nearly all cases – – was the result of the total payments for dialysis decreasing by more than any offsetting increase in the total payments for non-dialysis transports.

These relative changes in dialysis were also highly correlated with the MAC that administers Medicare claims in that state. To the extent your state saw a reduction in dialysis payments, it is highly likely that neighboring states administered by the same MAC saw similar reductions in payments. The following charts will help illustrate this point:

2016-11-29-werfel-non-emergency-crackdown-chart-1As you can see, all three states within Cahaba’s jurisdiction saw a net increase in the total payments for dialysis. While the increases themselves were quite minor in Alabama and Tennessee, Georgia saw an 11.8% increase in total payments for dialysis. Similarly, both Florida and Puerto Rico saw significant increases in the approved payments for dialysis.

By contrast, every state in National Government Services’ (NGS’) jurisdiction with more than 1,000 paid dialysis transports in 2015 saw a net reduction in the total payments for dialysis. These reductions ranged from a relatively minor reduction of 1.17% in New York to a nearly two-thirds (64.58%) reduction in Minnesota.

2016-11-29-werfel-non-emergency-crackdown-chart-2This trend was present in all remaining jurisdictions, although the results were more mixed. For example, with the exception of South Carolina, the three remaining states administered by Palmetto all saw increases. Likewise, the majority of states administered by WPS saw decreases. This included Indiana, which has a sizeable dialysis population. Among WPS states, only Missouri saw a small (3.90%) increase.

California saw a 31.76% decrease in its payments for dialysis. The only other Noridian states with more than 1,000 paid dialysis trips were Hawaii and Washington, which both saw increases.

Novitas presents a more complicated picture, with several large states, such as Texas, seeing double-digit increases in payments for dialysis, while other large states saw sizeable decreases.

All in all, the data suggests that CMS and its contractors continue to pay close attention to the non-emergency side of our business, particularly BLS non-emergency transports. These transports have been under scrutiny for many years, as reports from the Office of Inspector General, the Government Accountability Office and other federal agencies have flagged this portion of our industry as being particularly prone to overutilization (and, in some cases, outright fraud).  However, this heightened scrutiny is not being uniformly applied across-the-board. The data suggests that certain MACs have been far more aggressive in targeting these sorts of trips across their entire jurisdictions, while others seem content to target specific (typically large) states within their jurisdictions. This could serve as a template for how MACs will approach prior authorization in their jurisdictions.

‘Praemonitus, Praemunitus’     

Latin Proverb, loosely translated to “forewarned is forearmed.”



Findings Patterns Where None Exist

On August 16, 2016, the HHS Departmental Appeals Board (DAB) issued a decision related to CMS’ authority to revoke a Medicare supplier’s billing privileges.  The DAB is the fourth and final level of administrative appeal within the Department of Health and Human Services.

Factual Background

The case involved John P. McDonough III, Ph.D., a clinical psychologist residing in Florida, and two of his affiliated medical practices, Geriatric Psychological Specialists and Geriatric Psychological Specialists II.  In October 2014, First Coast Service Options, Inc., the Medicare Administrative Contractor for Florida, notified McDonough and both medical practices that their Medicare billing numbers were being revoked for alleged abuses of their billing privileges.  Specifically, First Coast indicated that data analysis had revealed that the three suppliers had submitted a total of 420 claims for deceased beneficiaries over an approximately two-year period.

McDonough and his two medical practices appealed for a reconsideration of the revocation of their billing privileges, which was denied in February 2015.   The suppliers then appealed for an ALJ hearing.  The suppliers conceded that they submitted more than 200 claims for beneficiaries that were deceased on the date of service.  However, they attributed these claims to data-entry errors and other clerical mistakes.  The suppliers argued that these were simple billing errors, representing a small percentage of the tens of thousands of claims they submitted during this period of time.   In December 2015, the ALJ issued his decision.  While the ALJ seemingly accepted the suppliers’ explanation that these were billing errors, and that there was no intent on the part of the suppliers’ to submit false claims, the ALJ nevertheless upheld the revocation of their billing privileges.  Citing previous DAB decisions, the ALJ held that the admitted submission of repeated claims for services to deceased beneficiaries due to “incorrect billing entries due to similar beneficiary names or Medicare numbers, and inadvertent typing errors” was not inconsistent with a finding that the suppliers’ had abused their billing privileges.

The suppliers’ then appealed to the DAB. In its decision, the DAB first noted that it has consistently rejected contentions that revocation required a finding that the supplier acted intentionally:

“The Board has long held that the regulation’s plain language does not require CMS to establish fraudulent or dishonest intent to revoke a supplier’s billing privileges under this section and that the regulatory language also does not provide any exception for inadvertent or accidental billing errors.”

The DAB then countered the suppliers’ argument that CMS never intended to revoke a supplier’s billing privileges for simple mistakes.  They cited language from the June 27, 2008 final rule, where CMS stated revocation “is not intended to be used for isolated occurrences or accidental billing errors.”  The DAB noted that CMS, in that same final rule, indicated that it would not consider the submission of three or more improper claims to be accidental.  The DAB also noted that the relatively small percentage of erroneous claims was irrelevant, as the regulation does not require CMS to establish any particular error rate or percentage of improper claims.

The DAB held that since the record established that the suppliers’ had submitted more than 3 claims for deceased beneficiaries, CMS had met the requisite legal standard for revocation.  Accordingly, the DAB upheld the revocation of the suppliers’ billing privileges.

Potential Impact on Ambulance Providers

The DAB’s decision effectively establishes a strict liability standard for revocations based on the submission of claims for deceased beneficiaries.  The submission of three or more such claims over any designated period of time could constitute legal grounds for CMS to revoke a supplier’s Medicare billing privileges. 

The implications of this decision should give every Medicare provider pause.  However, given the nature of our operations, our industry needs to pay particular attention.  The psychologist and therapists that were the subject of the above-referenced case saw patients on a scheduled basis, and spent many hours with each of their patients.  This gave them ample time to obtain insurance information from each of their patients, and to confirm the accuracy of that information.  Yet the suppliers’ still had more than 200 claims billed incorrectly.

EMS providers do not have that luxury.  We frequently encounter patients on the street or at their home.  Many of these patients do not have their insurance information on them at the time of transport.  Even when the patient had this information on their person, under the stress of an emergency medical situation, the paramedic or EMT may not record this information accurately.

As a result, our billing offices spend a good portion of their time trying to verify a patient’s insurance.  Unfortunately, some of the administrative “shortcuts” we have developed to address these problems create the potential to inadvertently submit claims for deceased patients.  While there is nothing at present that suggests that CMS intends to expand the use of its revocation authority, we probably want to rethink these shortcuts.

An example you say?

Consider a transport of an elderly woman to the hospital in an emergency.  The crew does not obtain the patient’s insurance information at the time of transport.  However, they do obtain the hospital face sheet, which lists the patient’s social security number.  To convert this social security number to a Medicare HIC#, we need to include a Medicare suffix.  How would you go about doing that?

One option would be to ping the patient’s name, date of birth and SSN against an eligibility database.  While effective, provider’s typically pay for these lookups.

Another option would be to simply guess what the applicable suffix might be, affix that to the SSN, and submit the claim.  If it goes through, the provider guessed correctly.  If it rejects as an invalid name and HIC# combination, the provider would know to try another suffix.  So let’s assume the provider elects to use this option.  Playing the percentages, the provider would likely add the “B” suffix, on the theory that, given her age, the woman likely qualified for Social Security Benefits (and therefore Medicare benefits) based on the work history of her spouse.  But what if the provider was wrong, and the woman was the primary wage earner in her family?  If that were the case, her suffix would likely be the “A.”  Now imagine that her husband shared the same Social Security numerics, and that his suffix was the “B.”  Further imagine that he has since passed, and the provider has now inadvertently submitted a claim for the dead husband.

Now imagine this happens three times in a year…

Another way we can inadvertently submit claims for dead patients is not using front-end verification.  Many providers submit claims based off the insurance information they received at the time of transport (or from the hospital, nursing home, etc.), without any attempt to confirm its accuracy.  These providers recognize that the insurance information will be correct more often than not.  They are making the calculated decision that it is easier to deal with any issues after they have been identified by the payer.  However, one reason an insurance can come back as invalid is because the crewmember recorded the HIC# incorrectly.  For example, they may transpose a few digits (i.e., they wrote “1243” rather than “1234”).  If the transposed HIC# relates to a deceased beneficiary, that would be captured by the data analytics used by the Medicare contractors.

The DAB’s decision is certainly troubling.  However, I do not believe that our industry needs to overreact.  Rather, I would encourage everyone to view the DAB’s decision as a starting point, and to re-examine their own billing and verification processes to see if there is anything they can do to reduce the likelihood of their organization every confronting this issue.


Have an issue you would like to see discussed in a future Talking Medicare blog? Please write to me at

Prior Authorization Data Shows Dramatic Reductions in Spending on Dialysis Transports

In May 2014, CMS announced the implementation of a three-year prior authorization demonstration project for repetitive scheduled non-emergency ambulance transports.  CMS initially elected to limit this demonstration to three states: New Jersey, Pennsylvania, and South Carolina.  These states were selected based on higher-than-average utilization rates and high rates of improper payment for these services.  The Medicare Payment Advisory Commission (MedPAC) had previously singled out these states as having higher than average utilization of dialysis transports in a June 2013 report to Congress.

This demonstration project went into effect on December 15, 2014.  The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) subsequently expanded the demonstration project to five additional states and the District of Columbia on January 1, 2016, with a further expansion to all remaining states expected to occur at some time during 2017.  However, national expansion is contingent upon CMS determining that the demonstration project has been effective in reducing Medicare expenditures without jeopardizing patient’s access to necessary medical care.

Every year, CMS also releases data on aggregate Medicare payments for the preceding year.  This file is referred to as the Physician/Supplier Procedure Master File (PSP Master File).  This past month, CMS released the 2016 PSP Master File, which contains information on all Part B and DME claims processed through the Medicare Common Working File with 2015 dates of service.  I will be discussing this report in greater detail in next month’s blog.

This month, I want to focus on the impact the prior authorization project has had on total dialysis payments in the original three target states.  Reproduced below is a chart tracking the total payments for dialysis transports in these three states between 2010 and 2015.  Interestingly, these three states demonstrated very different trajectories prior to last year.

New Jersey saw a sustained, dramatic increase in payments over that time, increasing from approximately $56 million in 2010 to more than $106 million in 2014, an increase of nearly 90% over a 5-year period.  (Note: spending figures for 2014 and 2015 take into account the 10% reduction in payments for dialysis transports).

South Carolina saw a much more moderate increase over that same period, increasing from $51 million in 2010 to slightly more than $60 million in 2014, an increase of roughly 18%.  By contrast, payments in Pennsylvania peaked in 2011 at $69.6 million, and have been in steady decline ever since.

While these states’ trajectories were different prior to 2015, the results for 2015 are fairly similar.  Each state saw a significant reduction in the total expenditures for dialysis once the prior authorization project went into effect. 

 The fact that these states saw a reduction in overall spending on dialysis is not surprising (to me at least, I recognize this came as a shock to many providers in these states).  These states were not selected at random; CMS selected these states based on its belief that they were particularly suspect to overutilization.

What I do find surprising is the relative sizes of the declines in these states.  New Jersey and Pennsylvania both experienced a more than 80% reduction in payments for dialysis.  By contrast, the reduction in South Carolina (approximately 25%) was far less dramatic.

Does this suggest that abuse was more prevalent in New Jersey and Pennsylvania?  Perhaps.  An ongoing federal Medicare Strike Force in the Philadelphia metropolitan area has resulted in a number of convictions against fraudulent providers in these states.  However, the impact has not been limited to these alleged “bad actors.”  Even those companies employing accepted best practices have seen significant reductions in their approved patient populations.

To me, the common factor seems to be the applicable Medicare contractor.  New Jersey and Pennsylvania are both administered by Novitas Solutions, Inc., whereas South Carolina is administered by Palmetto GBA.  While Medicare’s coverage standards are intended to be national, it seems reasonable to conclude that Novitas has taken a far harder stance on dialysis than Palmetto.  Anecdotal evidence from the states that came went live with prior authorization in January 2016 seems to confirm this thesis, although we will not be able to know for sure until the 2016 Medicare payment data is released this time next year.

Those of you that have attended this year’s AAA Regional Conferences, or who participated on AAA webinars this past year have heard me say that the Medicare Administrative Contractor’s stance on dialysis is the most important factor in determining whether an ambulance provider needs to rethink its current approach to its repetitive patient population.  To the extent the MAC takes a fairly lenient stance, providers will likely find that only a few “tweaks” are needed to align their existing practices with a prior authorization regime.  AAA members in these states may even find it worthwhile to even considering expanding the spectrum of patients they accept for transport. If, however, the MAC takes a fairly restrictive stances (as Novitas has clearly done), providers will likely find it necessary to dramatically trim these populations, or to arrange for alternative sources of payment for these transports.

I also encourage AAA members to attend our panel discussion at this year’s Annual Conference & Tradeshow in exciting Las Vegas (November 7 – 9th).  I have the privilege of serving as the moderator for a panel consisting of several providers that are currently operating under the prior authorization project.  These providers will talk about their experiences, and will be able to offer helpful tips on how to best navigate this major shift in Medicare’s coverage rules. (See full Conference Agenda)

Have an issue you would like to see discussed in a future Talking Medicare blog?  Please write to me at

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