Paying All the Costs of Providing EMS
October 2, 2015
By Ed Mund
Fred’s car is sitting in his driveway, leaking lots of different colored fluids. It appears really sick and in serious need of professional care. He pulls out his smart phone, does a quick online search, and calls Cooks Hill Auto Repair and Towing because its web site says, "Immediate response with highly trained staff."
“Cooks Hill Auto, how may I help you?”
Fred: “My car is really sick, it’s leaking all over my driveway and down into the street. I’m afraid to bring it in myself, can you come get it?”
CHART: “Certainly, sir, give us your address and we can be there in just a few minutes.”
Fred: It’s a pretty big old station wagon. Can your truck handle it?”
CHART: Yes, sir. Our fleet is the newest in the area and equipped to carry vehicles of all shapes and sizes. Each one costs more than $200,000 to buy and equip.”
Fred: “OK, now your web site says you have highly trained staff. What does that mean?”
CHART: “All our mechanics are nationally certified. We spend thousands every year to send them to six months of initial training plus hours and hours of refresher classes. They have to pass each and every class to keep their jobs.”
Fred: “OK then, send the truck on over. Now, my insurance won’t pay for anything more than the tow – that won’t be a problem will it?”
Do you think that sounds ludicrous? If you provide ambulance services it should sound familiar because it is likely your business model. You carry all the costs of creating and providing a service to the community, but only get paid by your customers for one small portion of the job – transportation. If you don't transport, you don't get paid.
Imagine you were going to your voters, board of commissioners, or stockholders to create a start-up ambulance service based on that model. How far do you think you would get? Yet that is the way EMS is compensated, day in and day out, all across America. No matter if you bill Medicare, Medicaid, third-party insurance, or the customers themselves, it is all the same. Start-up, overhead, and operating costs are on you unless you can somehow cover them all for the price of a horizontal taxi ride.
Increasingly the EMS industry is asking, "Does it have to be this way?"
Some large EMS providers say yes. They have built successful business models by using related ancillary services to underwrite costs. Publicly-funded EMS agencies survive under the current model by using taxpayers to underwrite non-compensated costs.
But what about non-transporting first responders, or private-sector transporting services without affiliated deep pockets, or rural responders with very low call volumes? How does the current model serve them? In short, it can't. Other funding sources such as grants, revenue from fines, impact fees, and subscriptions offer some relief, but can be one-time, temporary, or only have minor impacts.
This leaves underfunded agencies to look at two main options for covering their true and complete costs: 1) Expand the types of services EMS can bill for; or 2) Change the reimbursement model to cover more than just the transport.
The type and number of new services an agency can provide and bill for comes in many shapes. Two commonly heard umbrella labels for expanded scope services are Mobile Integrated Healthcare (MIH) and Community Paramedicine (CP). Examples include:
- Hospital discharge follow-up home visits for high-risk patients
- Alternate service models for chronic 9-1-1 users
- Primary home care for minor illnesses instead of transporting
- Gap coverage to hospice patients
- Partnering with home health agencies to expand their reach
- Behavioral health screening and care
The decision of whether or not to expand services in a community start with three questions:
- Is there a market for the services? Can the agency offer something that either addresses an unmet need, or that improves on how the need is being met presently?
- Will government, insurance, and private payers compensate the agency for providing those services? As an example, hospitals may find that paying an outside agency for discharge follow-up home visits for high-risk patient groups costs less than the financial penalties incurred by excessive patient readmission rates.
- Can agency staff and infrastructure absorb the additional workload?
Advantages of expanding services include the ability to generate new income, more thoroughly utilize the capital investments made to create the agency's infrastructure, enhance the working environment for employees beyond the "routine" 9-1-1 response model, and offer employees a more diverse career path while retaining them within the organization.
What is an advantage for one agency could just as easily be a disadvantage for another. The expanded services model works well for a large, for-profit agency with paid staff. However, for smaller agencies, and especially volunteer agencies, expanding services can quickly overwhelm responders' available time and the capacity of the agency's infrastructure.
Changing Reimbursement Models
Many see two primary flaws with the current pay-for-transport model. First, paying for mileage and patient care rendered en route cannot adequately cover the entire start-up and ongoing costs of an ambulance service. Secondly, many of the alternative services just discussed are dis-incentivized. If the only way to get paid is to transport the patient to a full-service hospital emergency department, then there is no reason to explore alternatives. Different transport destinations, treat and release care scenarios, and expanded, non-transporting services simply add up to more work with no corresponding increase in income.
A 2008 study by NHTSA1 reported that 52.5 percent of responding EMS systems received tax subsidies as their primary sources of income. The primary source of income for 39.9 percent was fees/bill for services. Overall, 79.6 systems received some funding from fees/bill for services. These self-reported numbers show that reimbursement models have an impact on the majority of EMS systems in the U.S., including those that are publically funded. This is especially true in rural areas that lack local financial resources, yet are (rightfully) held to the same performance standards based on the level of care they are licensed to provide.
In 2012 the U.S. Fire Administration released a 175-page report titled, "Funding Alternatives for Emergency Medical and Fire Services."2 While not focusing on reimbursement models, this manual does offer suggestions on alternative sources of funding and revenue-producing opportunities in the public and private sectors that agencies can use to enhance their operational budgets.
The groundbreaking 2007 Institute of Medicine study report, "Emergency Medical Services at the Crossroads,"3 looked at the transport reimbursement model's ability to cover actual costs. One recommendation was, "The committee recommends that the Centers for Medicare and Medicaid Services (CMS) convene an ad hoc working group with expertise in emergency care, trauma, and emergency medical services systems to evaluate the reimbursement of emergency medical services and make recommendations with regard to including readiness costs and permitting payment without transport."3
In 2009, the National EMS Advisory Committee requested that CMS convene the ad hoc reimbursement committee. CMS declined.4 In October 2010 the National Association of State EMS Officials called on the U.S. Department of Health and Human Services and its Centers for Medicare and Medicaid Services to convene the ad hoc group.
A draft white paper released in July 2013 titled "Innovation Opportunities for Emergency Medical Services"5 offers another perspective on changing reimbursement models:
"Develop a theoretical framework for how to appropriately triage patients away from the ED and how it will work in your community. Then, design a demonstration for your community that may, for example, include:
- Expanding the fee for service model to reimburse EMS providers for assessment and treatment (including transportation) provided on site or for transport to a non- ED location.
- Design an evidence-driven protocol for appropriate disposition of patients who call 911 (this requires broad-based community input and support).
- A shared savings model where EMS providers are incentivized to avoid unnecessary ED transports."
One current national effort is looking at EMS system finance, along with other industry aspects. The "Promoting Innovations in Emergency Medical Services" (PIE) project is a nationwide effort to discover and implement best practices for emergency medical care. Supported by NHTSA and directed by the Mount Sinai Health System and UC San Diego, PIE's goals include, "identifying and addressing the regulatory, financial, and technological obstacles to improving our nation's EMS systems." The project encourages public and industry input via its web site at www.EMSinnovations.org. PIE progress can also be monitored there, with a final report and recommendations anticipated to be released in 2016.
Just like any other public service provider, EMS systems have traditionally been customized to best serve their communities. This is true with funding as well. While they share many common sources of income, the income stream that works best for one may not be best or even available for another. What is a common need, however, is that whatever your source of income is, it needs to cover your expenses. This is especially true in this era of declining tax dollar support for public agencies and increased demands for profitability in the private sector. For this reason, it is necessary to seek out and be open to alternative funding methods.
Ed Mund is a volunteer firefighter/EMT with Riverside Fire Authority in Centralia, WA. He is a National Volunteer Fire Council (NVFC) EMS/Rescue Section Director-at-Large, represents the NVFC on the Promoting Innovations in EMS Steering Committee, and is Treasurer of the Washington State Fire Fighters' Association.
1National Highway Traffic Safety Administration. (2008). "Configurations of EMS Systems: A Pilot Study." http://www.ems.gov/pdf/810911.pdf
2 U.S. Fire Administration. (2012). "Funding Alternatives for Emergency Medical and Fire Services." https://www.usfa.fema.gov/downloads/pdf/publications/fa_331.pdf
3 Institute of Medicine. (2007). "Emergency Medical Services at the Crossroads." National Academies Press. Washington, D.C. http://iom.nationalacademies.org/Reports/2006/Emergency-Medical-Services-At-the-Crossroads.aspx
4 National EMS Advisory Council. (September 29, 2009). "Finance Committee Report to NEMSAC, 29 September 2009." http://www.ems.gov/nemsac/FinanceCommitteeFinalReport092909.pdf
5 National Highway Traffic Safety Administration, Health and Human Services Office of the Assistant Secretary for Preparedness and Response, Health Resources and Services Administration. (2013) "Innovation Opportunities for Emergency Medical Services." http://www.ems.gov/pdf/2013/EMS_Innovation_White_Paper-draft.pdf