Major Topic #7: Financial Considerations
Meeting the cost of IFT involves a thorough understanding of incurred expenses as well as mechanisms for reimbursement. While most payers make payment for services and equipment provided, identification of alternative funding sources may be necessary to cover the cost of providing “preparedness” (the day-to-day fixed and operating costs of IFT service). This may require creativity and collective thinking on the part of IFT stakeholders. A careful, comprehensive assessment of costs can be useful in meeting the financial needs for an ongoing IFT service.
Costs are incurred by an IFT service to assure a constant state of readiness, even if no patients are transported. IFT service assumes additional costs every time a patient is transported. The following is a list of considerations in determining fixed and other operating costs, and how these costs increase once patient care is initiated.
Fixed costs/readiness/surge capacity
- Labor — for those providers who are not volunteer.
- Equipment, medications, and supplies.
- Vehicle maintenance.
- Overhead for facility housing transport mode and/or administration.
Other operating costs
- Marketing – customer/hospital/facility education regarding the availability and capabilities of the IFT transfer services.
- Legal and accounting.
- Educational and continuing education costs.
- Licensure for providers.
- Administrative personnel.
- Field personnel --some services deal with this cost by using personnel on an independent contractor basis (to avoid this fixed cost).
- On-call pay.
- Dispatch center functions.
- Quality Improvement.
- Infrastructure costs – additional costs related to function as part of an EMS system, e.g., communication.
Adding the cost of patient care
These costs include expenditures related to providing basic care to stable patients with very little or no risk for deterioration; and additional variable costs of fuel, supplies, equipment, and personnel.
Adding the cost of critical care
These costs include expenditures related to providing advanced care to all patients whose acuity surpasses that of stable patients and additional variable costs of fuel, additional supplies, equipment, and personnel to provide the required level of care.
Supply and demand — “back-up” capacity
Represents replacement (back-up/on call) crew, equipment and other infrastructure costs when the primary unit/ambulance is providing IFT services and/or payment for additional or higher-level medical personnel if needed, to assist in the transport. For the purposes of this document, discussion of back-up capacity is limited to the day-to-day capacity of any one IFT program to meet the demand for its services. The discussion will not include the capacity to handle an epidemic illness or injury, natural disaster, intentional acts of mass injury, otherwise known as “surge capacity.”
Definition of level of service1 (as defined by CMS, for service provided)
It is important for IFT services to understand how payers such as CMS define levels of service
- Basic Life Support (BLS) – where medically necessary, the provision of basic life support services as defined in the National EMS Education and Practice Blueprint for the EMT-Basic including the establishment of a peripheral intravenous line
- Advanced Life Support, Level 1 (ALS1) – where medically necessary, the provision of an assessment by an advance life support provider and/or the provision of one or more ALS interventions. An ALS provider is defined as a provider trained to the level of the EMT-Intermediate or Paramedic as defined in the National EMS Education and Practice Blueprint. An ALS intervention is defined as a procedure beyond the scope of an EMT-Basic as defined in the National EMS Education and Practice Blueprint.
- Advance Life Support, Level 2 (ALS2) – where medically necessary, the administration of at least three different medications and/or the provision of one or more of the following ALS procedures: manual defibrillation/cardioversion, endotracheal intubation, central venous line, cardiac pacing, chest decompression, surgical airway, intraosseous line.
- Specialty Care Transport (as defined by the Centers for Medicare & Medicaid Services) — SCT is interfacility transportation of a critically injured or ill beneficiary by an ambulance, including the provision of medically necessary supplies and services, at a level of service beyond the scope of the EMT-Paramedic. SCT is necessary when a beneficiary’s condition requires ongoing care that must be furnished by one or more health professionals in an appropriate specialty area, for example, emergency or critical care nursing, emergency medicine, respiratory care, cardiovascular care, or a paramedic with additional training.
- Emergency – Emergency response is a BLS or ALS1 level of service provided in immediate response to a 9-1-1 call or the equivalent. The immediate response is one in which the ambulance provider/supplier begins as quickly as possible to take steps necessary to respond to the call.
It may be helpful for IFT stakeholders to write a business plan to develop strategies to meet the financial needs of the IFT service. Writing a business plan will provide essential information as well as a tool to track, monitor, and evaluate the financial status of an IFT service. There are many forms of business plans, but most have three purposes: communication, management, and planning. A comprehensive plan can be used to establish timelines and milestones, gauge progress and compare your projections to actual accomplishments, and it is a living document to be modified as financial considerations evolve and change. For more specifics on writing a business plan, refer to Appendix C.
When developing and deploying a business plan, it is wise to consider circumstances specific to your service, community, and situation. These may include:
Urban Services and Rural Services
- While urban areas are assumed to have shorter transport times, transport times and costs can be increased by urban traffic congestion and diversion of ambulance patients by overcrowded EDs and hospitals.
Many of the problems of an urban service can be magnified in a rural service. Even including the Rural Adjustment Factor (RAF), which is defined by CMS as an adjustment rate applied to the payment amount for ambulance services when the point of pick-up is in a rural area, rural services may face additional financial challenges:
- Rural services may have difficulty finding trained and experienced personnel. Recruiting can be difficult for rural services. Pay differentials may contribute to the difficulty in recruiting.
- Training costs may include the additional cost of travel, as personnel often need to travel, either to provide or receive necessary training.
- For IFT, the mileage and hourly expenses may be magnified because transport is generally over longer distances. The transporting service must pay for fuel, wear and tear on the vehicle, and the time of the personnel. Longer transport times also mean that the personnel must be prepared for more contingencies with the patient, increasing the cost of readiness. This includes the cost of such things as a larger quantity and bigger selection of drugs and equipment.
- Shipping, fuel, and maintenance cost more in a rural environment. It is more difficult to get any material into the area, and that usually translates into higher prices.
- Rural services may be low-volume, and not be able to recoup fixed costs as easily as busier services.
- Regional planning for reimbursement models can be key in minimizing cost. While reducing competition, regional planning can also reduce redundancy and resultant increase in expense.
- Trying to insure coverage by linking services within a designated locality can be facilitated by the linkage of the appropriate reimbursement plans.
Integrating CMS reimbursement rules with third-party payers
EMS offices can involve both public- and private-party payers in the IFT planning process. Medicare patients make up a significant portion of all ambulance patients; therefore Medicare rules set the standard for many payers and Medicare rules should be reviewed in the IFT planning process. For optimal simplicity and consistency, there should be agreement among all payers, on definitions and standards for medical necessity, service levels, practitioner level definition, covered services and other necessary elements of IFT.
Education and active participation of stakeholders
In the IFT planning process, stakeholders can educate third-party payers about what the IFT system includes and can involve them in the discussion of providing IFT services. At a minimum, such education includes:
- the difference among various payment levels;
- the discrepancy between the cost of providing preparedness versus fee for specific services provided;
- the difference between subsidized versus non-subsidized services and their impact on IFT services; and
- the difference between volunteer versus paid (or mixed) services — since fixed personnel costs would be different.
Significant financial gaps may be identified, requiring creativity on the part of all stakeholders to provide support for IFT. Billing of third-party payers is only one strategy for revenue. Other unconventional ideas may be useful in meeting the costs of IFT:
- in-kind support, such as contribution of equipment and/or services (if allowed);
- transition to an overall model of reimbursement for IFT through hospitals and/or physicians. Adopting this model may provide the IFT program with a broader range of reimbursable services than those included in transport reimbursement models.
1. Centers for Medicare and Medicaid Services. Definitions of Ambulance Services. Program Memorandum. Transmittal AB-02-130 http://www.cms.hhs.gov/center/ambulance.asp