The basic design of an EMS system typically carries closely associated mechanisms for generation of revenue to fund ongoing and future EMS system needs and capabilities. Revenue models commonly differ between fire department (or other city agency administrated systems) and those conducted by public utility or privately held organizations. In fire service led agencies, EMS operational revenue generally is allocated from the fire department's overall annual budget. This, in turn, is most often funded from city, township, village, county, or fire district governmental authority general operating budget monies, also known as the “general fund” for that authority. General funds are most commonly enabled through tax revenue resulting from collection of sales taxes, property taxes, and in some areas, specifically identified fire service taxes. In local government agency–administered EMS systems in which the fire service may provide initial response and treatment, but does not transport, operational revenue is largely collected via the same mechanism(s) and then allocated to that government's so-called “third-service” EMS agency (the other two public safety services being the police and fire agencies).
In contrast, public utility model and privately owned EMS agencies rarely derive whole or majority percentages of operating revenue from geographical-related taxation.4 Important, though minority percentages, of EMS agency financing may be obtained via governmental area subsidy. For example, a city may contract with a private provider of ambulance service, giving the agency a set amount of money upfront per annum to partially offset the provider's anticipated operating costs in that city. Typically, the subsidy is far less than the income realized by the agency through billing for its medical care services directly to patients or indirectly via their health insurance companies.
Additional mechanisms of revenue more commonly affiliated with public utility model and privately owned EMS agencies are utility fee assessments for EMS and agency-specific service subscription programs. In the utility fee model, citizens in a served area may be assessed a set fee per month of utility service, typically water based, but any provided utility could be coupled for EMS revenue generation based on local government regulatory preferences. The concept in this model is straightforward: spreading EMS system operating costs among as many potential patients as possible increases funding stability while simultaneously keeping costs per potential patient reasonably low in most locales. Local governments generally allow citizens to “opt out” of such assessments, but commonly structure such preference to require active communication from the citizen to either the local government or the EMS agency directly. In the utility fee assessment model, while the participating population percentages will vary based on the individual agency and/or location served, a significant majority of the population usually participates. Some utility fee funding programs have enjoyed widespread acceptance by allowing participants to utilize EMS without additional billing beyond their health insurance covered charges.
In lieu of utility-linked fees, EMS subscription fee models exist to leverage revenue generation against the same concept. Even in communities utilizing a utility-linked fee, residents of rental property, multiunit dwellings, retirement facilities, or extended care facilities may not be eligible to participate based on the involved utilities being billed to property owner entities, individual, or corporate. In these situations, the subscription program allows individuals to pay on a set schedule, most often in advance and yearly, for EMS at reduced or no out-of-pocket costs at the time of actual service. Given the purposeful action that must be undertaken, and repeated at least annually, to participate in these subscription programs, EMS agencies often prefer the utility fee-related funding mechanism when given the option by its affiliated governmental authority. Either method can provide some financial certainty to EMS agencies that, solely due to system design, cannot access general fund taxation revenues.
The charges to the users of EMS may be established at agency or local governmental level. The actual costs paid by patients or their representative vary substantially depending on billing methodology. In EMS systems fully funded by one or more of the mechanisms discussed above, no further charges are generated. In these situations, the costs of care rendered have essentially been “prepaid” usually by the larger populace in taxation or utility-linked assessments or occasionally by the individual through a subscription program. Complete cost of care coverage is rare in subscription programs due to a more limited pool of participating subscribers.
Insured individuals are commonly provided EMS care with subsequent agency billing to their insurance carriers, health care oriented, or, in the specific instances of motor vehicle-involved injuries, automotive coverage oriented. Depending on local, state, and federal allowable practices, many EMS agencies negotiate reimbursement charges and rates with prominent insurance providers for the care delivered to their covered parties. This is the same concept utilized by hospitals and individual medical practitioners in establishing their payment schedules with the same insurers. Some areas allow EMS systems to bill insured patients any charges not paid by their insurers. This practice is commonly referred to as “balance billing” the patient. Other locales specifically prohibit this practice by local or state regulation.
In EMS systems that generate bills for services, patients that are uninsured/self-pay can expect to receive an invoice for charges set by the agency or its governing body. An EMS system may choose to utilize this billing practice for all users, with the insured individuals subsequently responsible for getting paid back by their own insurance company. This latter practice is relatively uncommon due to efficiency of payment channels that can be established directly between EMS agencies and insurance providers, depending on an individual agencies billing infrastructure.
Agencies that generate bills for individual service do so through two primary billing structures—in-house or contracted. “In-house” billing refers to local government or an EMS agency directly employing billing professionals and handling all aspects of its billing, from negotiating reimbursement rates and charges with insurance companies to the accounting related to individual payments. Given the complexity of health care financing and insurance reimbursement practices today, many governmental authorities and EMS organizations choose to subcontract billing services to a specialized financial firm. These billing companies are paid either by flat fee or percentage of billable dollars depending on their contract with the EMS system. While structuring the subcontract payment in percentage of billable dollars terms can provide motivation to bill and collect maximum allowable charges, this same motivation can be the genesis for questionable billing practices unless strict adherence to ethical billing is maintained.
The responsibility for ethical billing rests with the EMS agency, or in the case of governmental body-provided EMS, that local governmental body. This “ownership” of billing practices remains with the EMS even when contracting for billing services. Examples are evident in the lay press of the veracity of this principle. While billing service vendor deliberations are rarely part of an EMS physician's duties, the EMS system's adherence to appropriate stewardship of trust extended to it in all forms by its served citizens has clear benefit in fostering and protecting a reputation for quality clinical care.
Regardless of billing structure, financial viability of an EMS agency is directly impacted by its patient payor mix. Systems with a majority of patients covered by government programs, namely Medicare, Medicaid, and/or Tricare, are substantially impacted by subtle changes in reimbursement rates or timetables in these programs.5 Systems with significant portions of patients covered by commercial health insurance may also be affected by the aforementioned government programs, as some private insurers often index their payment rates to one of these same programs. With a multitude of options available in the commercial health insurance market, an EMS system that serves a community with diverse industry and administrative services may well find no one insurer has prominent effect on its revenue projections (Figure 25-2). EMS systems serving a preponderance of uninsured or underinsured patients may find increasingly difficult financial realities. As the practice of EMS medicine involves increasing technology-assisted therapies and emerging pharmaceuticals, costs of clinical care provision, regardless of insured status, rise for all patients.
EMS payor mix. (Based on data from the National EMS Advisory Council EMS System Performance-based Funding and Reimbursement Model May 23, 2012.)
In light of difficult economies over the last several years in the United States, many patients once insured, are now without health care underwriting. These patients may find particular value in EMS systems that do not charge individuals, offer relatively small utility-linked service fees, or encourage participation in subscription programs as previously discussed in this chapter. Although many clinical and administrative EMS personnel view “self-pay” status as equivalent to “no pay,” realities in many communities prove a number of patients view financial obligations to EMS systems seriously, arranging individual payment plans for services they have received.
No single mix of patient payor sources is optimal. In fact, nearly every EMS system finds on such analysis that just as it serves the full spectrum of the human condition, it is compensated by the full spectrum of payors. Accurate appraisal of payor sources and percentages of such sources is important for individual EMS system financial planning, particularly in regard to needed billing resources and efforts in collections.
Detailed discussions and advisements concerning formal contractual arrangements and performance stipulations for billing services are beyond the intent and the scope of this text. However, general concepts can be discussed with a solely educational objective. A major focus, at least in some billing service marketing materials and in comparing in-house billing activities with potential outsourcing options, involves the percentage of billable dollars collected, especially those ultimately placed into the EMS agency's operating funds. Many large, urban EMS systems in America that do bill individual patients realize less than 50% of billable dollars in return. Obviously, assuming proper ethical practices and financial efficiencies, the closer to 100% of billable dollars collected, the more favorable impact on future fiscal abilities in an EMS system.
Percentage collections of billable accounts may often trend with percentage collections of billable dollars, but this is a distinctly separate measure of billing efficacy. This performance measure evaluates the thoroughness of billing collection across the spectrum of payor mix. Even in the best of EMS systems with thorough care documentation and diligent billing efforts, insurers may deny payment for a variety of reasons and uninsured accounts may convert to unpaid accounts. Thus, while 100% of billable accounts reflecting collections would promote highly desirable service revenue, this is unlikely to be approached in nearly all EMS systems serving populous communities.
Both percentage of billable dollars collected and percentage collections of billable accounts are subject to view in timeliness of collections. “Aging” of an account refers to the length of time between invoicing and collecting revenue for services. For example, a bill for services sent March 1 and unpaid on May 10, would place that account in a 60- to 90-day “age” profile. Due attention should be paid to account aging in calculating usable revenue abilities in an EMS system. Theoretically, a billing operation could recognize close to 100% collection of billable dollars and billable accounts, but its affiliated EMS agency could be in financial ruin if the typical aging of accounts necessitated aging in years, not days.
As with any administrative service, the costs of billing operations will vary depending on multiple factors. Business overhead of operational space, computers, communications, numbers of full-time and part-time employees, employer-provided employee benefits, professional insurance, and ongoing professional continuing education are just a few of the factors impacting the finances of financial services. These costs of billing, particularly if outsourced, may be expressed to an EMS agency in an agreed upon total, or fixed, cost. Alternatively, a billing service may take its revenue as an agreed upon percentage of dollars billed on behalf of the EMS agency. At least one positive and one pitfall to such arrangement have been reviewed above.
There are no such EMS industry “standards” in either fixed costs or percent dollars billed costs. The astute EMS administrative leader must carefully evaluate costs of in-house billing operations against suitable outsourcing options and make a decision in the EMS agency's best financial interests.
Regardless of billing service infrastructure, the actual allowable charges for EMS have changed over time. Throughout the 1980s and the 1990s, EMS agencies were allowed to itemize bill for equipment and personnel utilized in the clinical care rendered an individual payment. Translated to a real example, the billing for a cardiac arrest resuscitation might include the following: bag-valve-mask device, oral airway, oxygen at 25 minutes use, endotracheal tube stylet, endotracheal tube, 10-cc syringe, electrocardiogram monitor/defibrillator supplies (electrodes, tracing paper, defibrillation pads), intravenous (IV) catheter, IV start kit, four epinephrine 1:10,000 prefilled syringes, two lidocaine 2% prefilled syringes, paramedic attendant, mileage from scene of cardiac arrest to hospital rounded up to nearest whole mile. Simply summed, the more equipment and procedures involved, the higher the bill. Other allowable billing options included: (1) one inclusive charge, reflecting supplies, service, and mileage; (2) two charges, one for supplies and service with a companion charge for mileage; and (3) two charges, one for service and mileage with a companion charge for supplies. With any of these four allowable billing calculations, once a Medicare beneficiary had paid their deductible costs, the beneficiary remained responsible for 20% of Medicare paid fees. Medicare also allowed for EMS agencies to directly bill the beneficiary for charges above those paid by Medicare. This process is known as balance billing.
Significant change in allowable billing structure occurred with the Medicare ambulance fee schedule implemented April 1, 2002. While overall Medicare spending for EMS-related services was forecast to slightly decrease, an individual agency's Medicare revenue could vary widely under the new schedule depending on prior billing practices, particularly attention to detail in itemized billing. The new, and current, Medicare ambulance fee schedule is based on two primary components: level of clinical care provided and distance of patient transportation. Additional monies are paid to EMS agencies initiating transports in classified rural areas.
Medicare now requires a signature from hospital personnel to certify EMS transport. Further, EMS billings must be filed using specified diagnosis and procedure coding. Based on Medicare review of the EMS documentation of patient condition, payment on behalf of its beneficiaries are made using the following nine levels of ambulance service: basic life support (BLS)-nonemergency; BLS-emergency; advanced life support, level 1 (ALS1)-nonemergency; ALS1-emergency; ALS, level 2 (ALS2); specialty care transport (SCT); paramedic intercept (PI) services; fixed-wing (FW) air ambulance; and rotary-wing (RW) air ambulance.6 Emergency designators apply to EMS agencies responding in immediate means to calls placed via 9-1-1 communications or an equivalent in areas without such systems. The clinician reader of this text may question the inclusion of even cursory details of current Medicare payment structures. The Medicare allowable payments translate into significant clinical ability impacts.
As mentioned earlier, many private insurance allowable payments closely follow those for Medicare beneficiaries. Additionally, in Medicare's billing structure since April 2002, itemized billing for used supplies is notably absent. Thus, when an EMS medical director discusses a new assessment technology, a new therapeutic device, or a new pharmaceutical for inclusion in an EMS agency's standards of care, the financial reality is that the direct costs of implementing that standard of care cannot be transferred in billings as an itemized component. Simple summation with current Medicare allowable charges is the more equipment and procedures involved, the less likely the EMS agency is to have its true costs of service reimbursed.
The clinician reader is directed to their local administrative EMS leaders and relevant health insurer ambulance service reimbursement materials for further study as may be warranted.
EXPENSE EVALUATION: LABOR
Like most service professions, EMS expenses are significantly comprised by costs of labor.7 Many EMS agencies, particularly those serving populous suburban and urban areas, find human-related costs far exceed capital and disposable equipment expenditures. Salaries and benefits have variability on nearly any geographic scale, to an extent that a multitude of related factors must be considered by prospective EMS employees. It is not unusual in many areas of the United States for a single ambulance, staffed at a paramedic level, and placed available for continuous service to be budgeted exceeding $300,000 per year, exclusive of medical equipment.
Durable medical devices prove integral in support of advancing the standards of EMS medical care. The EMS medical oversight physician must work cooperatively with operational and financial leaders to plan clinical advances with fiscal responsibility. Electrocardiographic (ECG) monitor/defibrillators have progressed tremendously over the past 15 to 20 years, now featuring multiple modality monitoring, such as automatic blood pressure determination, waveform capnography, and core temperature measurement. Prominent in clinical care support, these devices are equally prominent in capital equipment budgeting. Many urban EMS are now faced with a literally multimillion dollar decision when purchasing these newest generation monitors.
Mechanical chest compression devices, transport ventilators, battery-powered lift-assist stretchers, and self-loading and unloading stretchers are several other higher expense items increasingly encountered by EMS agencies. While each example can be advocated by medical and marketing literature, none can be obtained cheaply. Technology advances cost, pure and simple.
These higher dollar devices are by design or necessity often placed in multiyear purchasing plans for EMS agencies. Rarely does a sizeable EMS agency have capital equipment reserves or budgets to outfit an entire fleet upgrade by single purchase. The EMS oversight physician must always be a patient advocate, though a financial realist simultaneously.
A litany of other capital medical equipment is involved, but easily to overlook. Oxygen tanks, oxygen regulators, wall-mounted suction units, medical equipment carrying devices (backpacks, kits, bags), and portable communications, including Internet access, phones, and radios must be considered.
All of the previously mentioned capital equipment can be useful, but particularly so when placed on an ambulance for mobility of care provision. While ambulances may prove the ultimate expense in capital equipment budgeting for an EMS agency, the collective costs of durable and disposable medical equipment usually far exceed the base vehicle cost. It is certainly not cheap to buy a new ambulance; it is not cheaper to medically provision it in most situations.
Ambulance purchasing is typically the domain of an EMS executive or applicable government official. While respecting the authority of such, EMS medical oversight physicians should also clearly communicate clinical needs to assist in the proper specification of new vehicles. One current example involves periresuscitation therapeutic hypothermia. Cooling of normal saline to 4°C can be reliably achieved and maintained, but dedicated refrigeration or cooling devices are needed in planning ambulance design, preferably prior to construction of the involved vehicles.
Variety of disposable equipment options dwarfs that of capital equipment options. While many disposable items common in the delivery of EMS care costs fractions of a US dollar, those fractions often compound to surprising amounts in a year's budget. Conscientious EMS leaders, clinical and administrative, want to ensure needed equipment is reliably available. Often supply “cushions” create snowball effects in physical space and fiscal impacts. The sage supply officer may begin to question traditional practices common throughout the spectrum of medical supply stocking and ask: “Are we stocking what we stock by tradition? Or … are we stocking what we really use?” Accurate and timely data are essential in evaluating supply and demand answers for an EMS agency. The bottom line is increasingly the bottom (financial) line in stocking. Many answers to efficiency in ordering and inventory of EMS supplies now exist in commercially available software and hardware.
Financing education for EMS professionals becomes increasingly important once considering the ever-increasing clinical standards of care available. Some EMS agencies fund initial certification training for personnel either joining the organization or for established employees advancing in scope of practice level. Within these EMS systems, a few agencies directly conduct initial education programs using educators they employ full time for this purpose. Nearly all EMS organizations sponsor or contribute to some form of continuing education for their affiliated personnel, volunteer or paid. Costs of training go far beyond the educators involved. Training schedules can have significant impact on the costs for the delivery of information. Many EMS agencies choose to conduct ongoing training for only on-duty personnel to eliminate overtime labor costs. Depending on whether collective bargaining is involved in local EMS labor agreements, the duty status of personnel during continuing education may be additionally regulated. Textbooks, Internet accessed materials, tuition for packaged programs, and training materials such as manikins, disposable medical equipment, and capital equipment dedicated to training roles must be considered and budgeted. EMS medical oversight physicians will need to consider the training schedules and costs associated with new standards of care to promote their successful delivery.
Financial protection for all aspects of the EMS system previously discussed in this chapter must be seriously considered, and in many cases, is required by local statute or regulation. While medical liability and vehicle insurance premiums are quick to identify as necessary costs, additional suggested policies are numerous and include employee benefit insurance premium portions paid by the employer, durable medical equipment damage protection costs, and directors' and officers' policies for administrative leaders of the EMS system, just to name a few. Some systems also cover the costs for EMS physician policies that cover medical malpractice and administrative liability claims as part of the medical oversight professional services contract.
In sum, considerable attention is due to the expense evaluation of an EMS system given the multitude of required expenses and the variability that exists not only within those cost centers, but additionally those driven by additional standards of administrative and clinical capabilities. The future of EMS funding is likely to prove dynamic. As physician reimbursement is being viewed in bundling models with hospitals under accountable care organizations (ACOs), EMS may well prove inclusive in several of the ACO proposals.