The Changing Face of Medical Reimbursement

Where does EMS fit in Accountable Care Organizations?

In June, the U.S. Supreme Court determined that the Patient Protection and Affordable Care Act (PPACA) was constitutional, paving the way for sweeping healthcare reform throughout the United States. However, even before the Court’s decision, many changes to the healthcare landscape contained in the PPACA, which will directly affect the delivery of EMS throughout the country, were already in the process of being implemented.


Historically, the U.S. healthcare system has consisted of “silos” of healthcare providers, each doing their own thing with little or no coordination across providers or platforms. Unnecessary duplicative testing is ordered, and patients are often prescribed dangerous medication combinations because of a lack of provider communication. The result has been a highly inefficient system with the costs of healthcare spiraling out of control. In fact, the CMS has projected that national healthcare spending will amount to more than $4.3 trillion by 2018, and would account for more than 20% of the Gross Domestic Product (GDP) if radical changes aren’t implemented. Furthermore, according to U.S. Census Bureau statistics in 2010, 49.9 million people were uninsured. These are some very scary economics, indeed.


As a result, our leaders in Washington realized they needed to come up with a new way to do business that would not bankrupt the country, while at the same time provide more comprehensive healthcare coverage. A policy strategy was formulated that included the triple aim promoted by former CMS Director Donald Berwick, MD. It stresses better health, better care and lower costs, but it also incorporates quality measurement and improvement standards (including non-disease specific measures), better use of evidence-based medicine, better care coordination among providers, incentives for more effective use of technology and more efficient provision of care, and compensation practices that ultimately promote these objectives.

Accountable Care Organizations 

Under the new system, the concept of independent silos will be replaced by Accountable Care Organizations (ACOs). Although the categories of the “silos” will still exist, the focus will instead be on the overall response and management of the patient’s healthcare.


Accountable care highlights the need for physicians, hospitals, other providers, payers, patients and their caregivers to work collaboratively to ensure and measurably improve appropriate, high-quality, efficient and cost-effective delivery of healthcare.


The vehicle to do this is via groups of healthcare providers formalized as ACOs that agree to be accountable for quality, cost and overall care of beneficiaries assigned to them. The idea is that ACOs can facilitate medical care coordination among healthcare providers to improve the quality of care and reduce unnecessary spending. A number of ACO organizational models are cropping up, which vary from closely to loosely integrated. Regardless of which model is chosen, all ACOs require a legal and organizational framework, the ability to coordinate care, measure, report and share savings–and approval by CMS to operate as an ACO.

How is an ACO different from an HMO?

Many differences exist between HMOs and ACOs, mainly because their primary focuses are different. HMOs focus on disease prevention and discounting payments to providers while micromanaging the care which beneficiaries are entitled. ACOs, on the other hand, place the emphasis on providing the right care at the right time in the right place and the management of chronic diseases through robust systems and care models that incentivize providers as well as bundle services among providers.

Where does EMS fit?

EMS providers will play an important role in the way the ACO model is structured. Although EMS providers will still be independent in the sense that the providers will probably continue to be their own separate companies and/or municipal services with their own management, inevitably some consolidation will occur as there is in any industry when companies can’t survive financially. Consolidation isn’t the focus of the health-care reform act; however, EMS providers will most likely have no choice but to become part of an ACO if they want to continue to receive reimbursement for services rendered.


The ACO concept will reward providers who form formal relationships and implement cost savings through the bundling of services. Right now, when a patient calls 9-1-1, both the EMS provider and the hospital bill CMS and/or private insurers separately for the services they each performed. This is highly inefficient–and costly. Under the new ACO system, the EMS provider and hospital bills will have to be bundled because the focus will be on the totality of the medical incident–not on the individual silos of providers who treated the patient. This means that there will only be one payment, which will be made to the ACO, and the reimbursement will have to be split by all the providers involved in the totality of the medical incident.


The idea is that the ACOs will control the market and, as a result, EMS providers will have to negotiate with the ACO to determine what share of the bundled fee they will get, rather than simply automatically receiving the full amount they’ve been used to getting.

Political realities

The U.S. is in the midst of a recession, and money is tight everywhere. This past year, the federal government nearly defaulted on the national debt, and it was only a last-minute deal to raise the debt ceiling that averted financial disaster. Never mind the seemingly never-ending battles it took to pass a federal budget. “Belt-tightening” has taken on a whole new sense of urgency, and Medicare and Medicaid are on the chopping block.


The Medicare Ambulance Fee Schedule is just one more “thorn in the side” of Congress. It contains temporary adjustments that must be renewed each year until Washington comes up with a more permanent solution. The process is very time consuming and stressful for everyone. As it was, at the end of last year, the Medicare ambulance fee schedule was facing an across-the-board 20% cut, which was only averted at the last minute.


The vision for “the healthcare system of tomorrow” will take a more holistic approach to patient care. In addition, clinical integration will spread beyond acute to pre- and post- acute care as the concepts of continuum of care and care coordination across all phases of patient care take center stage, and clinically integrated hospitals and physicians, who will be “on the hook” for all of Medicare Part A and B, will now care about EMS providers because they’ll ultimately be financially responsible. And, as a result, EMS providers cannot–and will not–continue to live in their own separate world for much longer. As a result, the EMS industry as a whole must be able to prove that it contributes appropriate, high-quality, efficient and cost-effective care to the delivery of healthcare in this country.

The Independent Payment Advisory Board

To solve the reimbursement issues, the PPACA calls for an Independent Payment Advisory Board (IPAB), whose purpose is to reduce per capita rate of growth in Medicare spending. The IPAB is similar in concept to the military’s Base Closure and Realignment Commission, in that the IPAB is tasked with making decisions based on the CMS Actuary’s recommendations, and Congress will just need to make “up or down” votes.


In years where Medicare growth is below the target growth rate set in the PPACA, the IPAB will make mandatory non-binding recommendations to reduce spending. The IPAB can’t ration care; raise taxes or Medicare Part B premiums; change benefits, eligibility or cost-sharing standards; or recommend reduced premium support for low-income Medicare beneficiaries. However, in years where Medicare growth exceeds the target growth rate, the IPAB will be responsible for proposing rate cuts to providers.


The hospitals cut a deal during the enactment of the PPACA that exempts them from rate cuts until 2020. This translates into a much smaller pool of providers who will need to share a larger percentage of funding cuts beginning as early as 2014, including EMS providers. The IPAB recommendations take effect eight months after the IPAB submits a proposal to the president and Congress, unless Congress passes an alternative to achieve the same level of savings, which is unlikely, given the short timeline involved.

What if an EMS service doesn’t want to be part of an ACO?

In essence, the federal government is getting out of the medical reimbursement business and has privatized it. Privatization will save the federal government money by allowing it to reallocate resources and focus its efforts on making money through enforcement actions rather than hemorrhaging it. ACOs and other so-called “accountable” provider organizations that meet CMS benchmarks for access, value, innovation, patient safety, technology and quality of care will receive payments from CMS to divide up among their contracted partner providers. All others will be left to their own devices and will have far less money available to them. So if EMS providers want to continue to get paid for the services they provide, they’ll essentially have no choice but to contract with ACOs in their area.

“We’re not in Kansas anymore” 

The money to implement the PPACA was included when it was enacted, so it’s rolling ahead, and any legislation undoing the PPACA is unlikely to pass until sometime in 2013, at the earliest.


More importantly, even though the PPACA was under review by the Supreme Court, many health and hospital systems and private insurers had the foresight to continue to move ahead with the creation of ACOs, technology and efficiency initiatives, and changes to reimbursement structures in anticipation of the changes taking effect in Washington. In fact, ACOs have begun forming and are already being approved by CMS.


On the one hand, the Supreme Court’s decision means more patients will have insurance of some kind by 2014, and theoretically, more EMS calls will be reimbursed in at least some amount. On the other hand, the court overturned the requirement for states to expand their Medicaid programs, instead leaving the states the option to “opt in” to Medicaid expansion.


This means that approximately 15 million of the estimated 30 million people who would have automatically had coverage are still in a “gray area” and will possibly end up paying the “penalty” rather than obtain insurance coverage.


As a result, EMS providers may not only see a decrease in reimbursement due to a smaller pool of patients with insurance coverage than previously anticipated, but they may also face reimbursement rate cuts and decreased payments from government entities if they don’t contract with ACOs.


Therefore, EMS providers need to pay close attention to what’s happening in Washington and in their own states, and they need to make sure their voice is heard and that they have a seat at the table going forward. This article only scratches the surface. Be sure to consult with an attorney to review your organization’s specific needs and obtain appropriate advice on these and related issues.


  1. Centers for Medicare & Medicaid Services–NHE projections 2008—2018, Forecast Summary and Selected Tables. In National Health Expend Data. Retrieved June 19, 2012,
  2. (Sept. 2011). Overview of the Uninsured in the United States: A Summary of the 2011 Current Population Survey, September 2011. In U.S. Department of Health & Human Services. Retrieved June 19, 2012,

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