Appraisers are called on from time to time to provide fair market value opinions for ground ambulance services. The need for an FMV opinion usually arises when a healthcare facility client (such as an acute care hospital, long-term care hospital, or a SNF) is reimbursed under a Medicare Part A prospective payment system (PPS). Under an all-inclusive payment system, the client facility is financially responsible for the ambulance services it provides patients within the normal scope of patients' plans of care (for example, transporting an inpatient to another facility to receive a service not provided at the client facility). To provide the necessary services, client facilities without their own ambulance resources will contract with a third-party provider.
Since the client facility may be in a position to refer non-PPS covered business to the ambulance service provider, it is important that the rates charged by the ambulance service provider for PPS-covered services be fair market value and commercially reasonable. A contract for ground ambulance services that includes an improper discount for the client facility (i.e., not FMV and not commercially reasonable) could potentially constitute prohibited remuneration under the anti-kickback statute. See Advisory Opinion AO 99-2 for more guidance.
Determining whether an ambulance service provider's rates are FMV and commercially reasonable can be challenging. To help in the process, BFMV has identified three resources that appraisers and healthcare facilities can use when examining prices for ground ambulance transports:
Download - FMV Resources for Ground Ambulance Services
1. Medicare's Ambulance Fee Schedule: Medicare pays for ground ambulance services using a dedicated fee schedule. The schedule has seven payment categories and two components: a base payment and a mileage payment, which are summed together and geographically adjusted. (See the attachment for a look at Medicare reimbursement in one community.) Is Medicare business profitable for ambulance providers? According to a 2012 GAO Report, yes. The median Medicare margin was about +2 percent in 2010 (meaning that providers' Medicare payments per transport exceeded their overall costs per transport). Some providers reported Medicare margins as high as +9 percent.
2. Ambulance Provider Online Price Lists: The ambulance services system in the U.S. is a hodgepodge of private and public providers. (See the attachment for a breakdown of ambulance service providers in the U.S.) Many of these providers publish their price lists for ground ambulance services online. BFMV found online price lists for 20 different ambulance providers across the U.S. Prices ranged from $250 to $2,000 for the same service. The huge differences are in part due to varying collection success market to market. BFMV’s research of ambulance service audits and performance reviews indicates a 46% average collection rate (i.e., % of gross revenues collected before any adjustments). Prices charged by the 20 ambulance providers were, on average, more than 2 times what Medicare pays. However, adjusted to reflect a 46% collection rate, the prices were similar to Medicare.
3. Ambulance Provider Cost Data: The Bipartisan Budget Act of 2018 requires the development of a data collection system for cost and financial data from ambulance service providers. CMS will start collecting and reporting data in 2020. Past studies have shown that providers' cost per transport varies widely. The 2012 GAO Report showed median cost per transport of $429, with a range of $224 to $2,204 per transport. Higher volume of transports, higher proportions of non-emergency transports, and lower government subsidies were associated with lower costs. Given major differences in provider cost structures, we anticipate CMS cost data will help appraisers better pinpoint FMV and economically justified (i.e., commercially reasonable) rates.
How to Use the Resources: Assuming FMV is indicated by cost plus a reasonable profit margin, we believe Medicare reimbursement rates will likely be FMV in many markets across the U.S. Adjusted ambulance provider prices and soon-to-be-available cost data are additional resources that appraisers can use to develop an FMV opinion for ground ambulance services.