This requirement is known as a budget neutrality provision. Rural Ambulance Providers Face Multiple Challenges

In our July 2000 report, we noted that several factors characterizing rural ambulance providers may need consideration in implementing an appropriate payment policy. Compared to their urban and suburban counterparts, rural ambulance providers have fewer transports over which to spread their fixed costs because of the low population density in rural areas. New Fee Schedule Will Alter the Way Medicare Pays for Ambulance Services

Medicare’s proposed fee schedule, published in September 2000, reduces the variation in maximum payment amounts to similar providers for the same type of services. As a result, a national fee schedule is likely to provide increased per-trip payments to those providers that under the current system receive payments considerably below the national average and decreased payments to providers with payments that have been substantially above the national average. Some carriers were found to have applied criteria inappropriately, particularly for nonemergency transports. (The carrier’s policy has since changed.) Conclusions

Overall, the proposed fee schedule will improve the equity of Medicare’s payment for ambulance providers. In our July 2000 report, we recommended that HCFA modify the payment adjuster for rural transports to ensure that it is structured to address the high fixed costs of low-volume providers in isolated areas, as these providers’ services are essential to ensuring Medicare beneficiaries’ access to ambulance services.
Why GAO Did This Study

The Balanced Budget Act of 1997 required Medicare to change its payment system for ambulance services. In response, the Health Care Financing Administration (HCFA), now called the Centers for Medicare and Medicaid Services (CMS), proposed a fee schedule to standardize payments across provider types on the basis of national rates for particular services. Under the act, the fee schedule was to have applied to ambulance services furnished on or after January 1, 2000. HCFA published a proposed rule in September 2000 and has received public comment, but it has not yet issued a final rule. This testimony discusses the unique concerns of rural ambulance providers and the likely effects of the proposed fee schedule on these providers.

What GAO Found

Many rural ambulance providers face a set of unique challenges in implementing an appropriate payment policy. Rural providers--particularly those serving large geographic areas with low population density--tend to have high per-trip costs compared with urban and suburban providers. The proposed Medicare fee schedule does not sufficiently distinguish the providers serving beneficiaries in the most isolated rural areas and may not appropriately account for the higher costs of low-volume providers.