Administration and Leadership, Columns

Reimbursement: What Does the Future Look Like?

Issue 1 and Volume 43.


January is an excellent time to take a step back and ponder our future. What issues will be challenging our leadership this year? What trends have surfaced that require our attention?

We’ll start the conversation with reimbursement. Year after year, it tops the list as we continue to see revenue erosion and rising expenses. In most states, reimbursement alone is inadequate to keep pace with our increasing costs. In addition, Medicare seems to always be looking for ways to reduce our payments. Due to the Affordable Care Act, the number of people covered by Medicaid, typically a poor payer (i.e., low levels of reimbursement), has increased by an average of 10%. Medicare has reduced its rates twice in the last six years in many jurisdictions. Finally, the national sequester, which further reduced Medicare by 2%, remains in effect.

Pressure to Reduce

The continuing merger of major insurance companies has given the resulting giants more leverage to negotiate lower reimbursement rates against providers. The pressure to limit or reduce local, county and state taxes poses a further threat, as elected officials push for cutbacks to entitlements and reductions in the cost of public health and safety services. The new national trend to require non-profit hospitals to pay real estate taxes on programs not directly associated with their core missions has stretched budgets and is affecting the EMS services they provide.

Medicare continues to look at new ways to reimburse providers and suppliers, focused on reducing expenditures and rewarding those who can bend the healthcare cost curve downward. Initiatives to assess and refer patients, or treat them at their homes rather than transport them, have caught Medicare’s eye.

We’re also seeing Centers for Medicare and Medicaid Services (CMS) claims processers actively looking at imposing “medical necessity” rules for EMS reimbursement, meaning only certain diagnoses would be paid, regardless of the reason the ambulance was called.

All of this has placed tremendous financial strain on EMS providers. Recent bankruptcies and geographic market withdrawals by several large ambulance companies are a dramatic demonstration of the toll such reimbursement contraction has caused.

During a presentation I gave recently, I asked the audience of EMS providers and managers how they would rate the current financial state of their organization. The results were stunning.

The majority (55%) reported that their agencies were fiscally unstable or in trouble. What makes this even more disturbing is that 85% of the respondents received some form of tax subsidy or direct government funding, not relying on fee-for-service alone.

What Does the Future Hold?

CMS has learned that one way to reduce their expenditures over the short and long term is through restriction of reimbursements based on quality of service and outcomes of patients. They’ve also learned that, in order to reduce total healthcare expenditures, they must decrease the number of times patients repeatedly seek services for the same medical conditions. By rewarding providers who score high on quality and have the best patient outcomes, Medicare has been able to reduce its escalating reimbursements.

CMS recently introduced Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS). HCAHPS are standardized surveys that ask the patient how they felt about their care: How quickly they received care, the efficiency and compassion of the caregiver, the proficiency of the clinician, etc. All results are captured in a national database and then used to rank institutions and modify (increase or decrease) reimbursement payments.

Imagine that your patients were asked these kinds of questions within days of receiving services from your agency. How would they answer? If such results directly increased or decreased the reimbursement payments your agency received, how would your organization do? Many services already retain third-party survey companies that specialize in EMS so they can better understand how patients perceive their agencies.

CMS may also consider providing reimbursement for non-transport cases. Medicare has claimed for decades that such payments wouldn’t be compliant with existing regulations or the statute upon which they rely, however, there seems to be a recent change in attitude.

At least one study demonstrated that CMS would save hundreds of millions of dollars annually by paying EMS agencies to treat and release, or treat and transport to lower-cost healthcare facilities, instead of hospitals. The study concluded that if CMS reimbursed EMS services for “alternative handling” of emergency ambulance cases, they could save Medicare $283 to $560 million or more per year.1 If insurance payers did the same, the national annual savings would likely exceed twice as much.

CMS has found ways to reduce reimbursements for healthcare, often shifting moneys from poor performers to higher-quality providers. Prudence suggests our industry should be preparing for these monumental changes. To shift from a fee-for-service structure to one based on any other methodology won’t be without substantial difficulty. Nevertheless, it remains our responsibility to prepare our agencies for change when, and if, the time comes.


1. Albert A, Morganti K, Margolis G, et al. Giving EMS flexibility in transporting low-acuity patients could generate substantial Medicare savings. Health Aff (Millwood). 2013;32(12):2142–2148.