Many public- and private-sector ambulance services have started subscription programs (also known as membership programs) to help fund their operations or enhance their financial performance. In a typical program, individuals, households and sometimes businesses pay an annual advance fee in exchange for forgiveness of any out-of-pocket amounts they would otherwise need to pay for medically necessary ambulance transports. In effect, the service agrees to accept whatever the member s insurance pays as payment in full for such services.
For some ambulance services particularly those in rural areas where call volume may be low and unpredictable membership programs can make the difference between solvency and insolvency. In some urban areas, a successful subscription program can turn a financially marginal operation into a profitable one.
Such programs do, however, raise significant legal issues, and an improperly structured program can lead to disputes with members or even enforcement action by state or federal authorities. Here are the most important issues to consider when starting a new program or evaluating an existing one.
State Insurance Laws
The first question to ask before starting a subscription program is whether insurance laws in your state permit such programs and, if so, whether those laws impose any special requirements. In many states, insurance is broadly defined to include any arrangement that pays for or discharges any part of the cost of health-care services.
Because this is arguably what membership programs do, some states view these programs as insurance. In general, insurance programs must be licensed by the state unless an exemption applies. However, the insurance laws of many states (or administrative rulings interpreting those laws)
provide an exemption for ambulance membership programs.
In some states, these exemptions are conditioned on compliance with special requirements. In Texas and Indiana, for example, an ambulance service must have its membership program approved by the local jurisdictions in which it will operate. In California, a provider s membership agreement and solicitation materials must meet a number of requirements, such as including warnings that the program doesn t cover the costs of other services that might transport the member. In states where subscription programs are considered insurance and no exemption exists, operation of an unlicensed subscription program would be illegal.
Medicare Anti-Kickback Issues
The Medicare Anti-kickback Statute prohibits providing anything of value to a patient as an inducement for the patient to use the provider for goods or services paid for by Medicare or other federal health-care programs. The Office of Inspector General takes the position that the routine waiver of cost-sharing amounts violates these statutes because the patient receives free or discounted services as an inducement to use the provider.
In a membership program, the provider agrees to accept what Medicare and other payers reimburse as payment in full and forego collection of any cost-sharing amounts during or after the time of service. The OIG has indicated that such programs implicate the Anti-kickback Statute to the extent they might be construed as a routine waiver of cost-sharing amounts.
However, in Advisory Opinion 03-11, the OIG indicated it generally would not view ambulance membership programs as illegal waivers of cost-sharing amounts if either of the following two tests is met:
The total subscription fees collected from all subscribers including but not limited to Medicare
beneficiaries reasonably approximate the amounts that the subscribers would expect to spend
for cost-sharing amounts over the period covered by the subscription agreement; or
The total amounts collected only from subscribing Medicare beneficiaries reasonably approximate
the amounts that the subscribing Medicare beneficiaries would expect to spend for cost-sharing
If either of these tests is met, the OIG will essentially view the subscription or membership fee as a prepayment of the cost-sharing amount, spread it out across all members in the program, rather than a waiver of those amounts. On the other hand, if the subscription amounts aren t actuarially or historically reasonable in comparison with the uncollected cost-sharing amounts under one of these two alternative tests, the OIG has indicated it may view the program as a scheme to disguise the routine waiver of Medicare cost-sharing amounts, which violates the Anti-kickback Statute.
Subscription programs also raise issues under state and federal Medicaid laws that specify that Medicaid beneficiaries may not be charged any cost-sharing amount or other out-of-pocket cost for emergency ambulance services. Because Medicaid beneficiaries would receive no benefit from a typical program (at least with respect to emergency transports), selling subscriptions to them could be viewed as fraud.
Another Medicaid rule requires pro_viders to accept what Medicaid pays as payment in full. An ambulance service that knowingly collects a membership fee from a Medicaid beneficiary may also violate this rule. In light of this, a few states prohibit the sale of membership programs to Medicaid beneficiaries. However, even in jurisdictions without an expressed prohibition, providers shouldn t knowingly solicit or sell them memberships.
It s important to carefully draft subscription program agreements and solicitation materials to ensure they adequately address the respective rights of the service and the members. An agreement should state that:
The member is financially responsible for full cost of transport, although the membership fee
discharges the member s liability for cost-sharing amounts and other out-of-pocket costs.
Otherwise, the member s insurance program may not cover the balance of the charges, because
a typical insurance contract pays only for charges the beneficiary is obligated to pay.
Only medically necessary transports are covered by the program. Other_wise, members may think
they are entitled to unlimited ambulance transports, regardless of whether insurance would cover
Only individuals with insurance will be eligible for membership. It also should specify what happens
if a member loses his or her insurance.
The member is financially responsible for full cost of transport, although the membership fee discharges the member s liability for cost-sharing amounts and other out-of-pocket costs. Otherwise, the member s insurance program may not cover the balance of the charges, because a typical insurance contract pays only for charges the beneficiary is obligated to pay.
Only medically necessary transports are covered by the program. Other_wise, members may think they are entitled to unlimited ambulance transports, regardless of whether insurance would cover the trip.
Only individuals with insurance will be eligible for membership. It also should specify what happens if a member loses his or her insurance.
If uninsured individuals are eligible for membership, consider structuring the program so such individuals receive a discount equal to the average cost-sharing amount that would be forgiven for insured members, rather than forgiveness of the entire cost of the transport. Alternatively, consider charging uninsured members a higher subscription fee to defray the higher cost of covering them.
Membership programs offer an in_creasingly popular way for providers to enhance their financial performance. However, in addition to the concerns outlined above, the relevant contracts must be carefully drafted to ensure the program preserves the provider s right to the member s insurance coverage and doesn t promise the provider will provide unlimited taxi service.