To hear more from Chris Kelly, click here to listen to his podcast.

In a report released last March, the Department of Health and Human Services' Office of Inspector General (OIG) published its findings from a study on Part B Medicare payments for ambulance transports rendered during inpatient stays. This is the second study specifically focusing on the ambulance industry released by the OIG in 2006, and is a further indication of Medicare's interest in pursuing abuse and recovering overpayments to ambulance service suppliers.

The study considered payments made for hospital inpatients during the years 2001--03. The purpose of the study was to determine whether Medicare carriers had made payments under Part B for ambulance services rendered to beneficiaries who were at "prospective payment system" (PPS) hospitals. PPS payments are made to hospitals under Part A of the Medicare program. These payments are all-inclusive and based on the patient's condition or diagnosis-related group (DRG). The DRG for a hospital inpatient includes nonphysician outpatient services the patient requires during their hospital stay. These outpatient services include transportation by ambulance to and from another facility for services not available at the hospital to which the patient is first admitted. Therefore, the proper procedure should have been to bill the hospital for the service; the hospital would then pay out a portion of the PPS per diem it had already received for the patient's care.

Instead, the ambulance suppliers billed, and were paid by, Medicare Part B. An example of how this might happen is when a hospital needs an MRI on a patient but does not have the necessary equipment. The hospital calls an ambulance service supplier for a trip to a facility that does, but then the ambulance service bills Part B instead of sending the bill to the hospital as it should.

The study found that Medicare carriers over the three years at issue (January 2001 through December 2003) made improper payments for 203,377 ambulance services provided to inpatients in PPS hospital stays. The potential damages caused by these improper payments include an overpayment by Medicare of approximately $21.7 million. An additional $6.2 million in improper payments could have resulted from Medicaid, private insurance or the patients themselves paying the coinsurance and deductible portions of the ambulance service charges.

The study also found that neither CMS nor the individual carriers had established computer edits to detect and prevent Part B payments during a patient's Part A inpatient stay, even though several carriers contacted by the OIG claimed to have such edits in place. Neither were there any postpayment review procedures in place. The OIG noted that it had done a similar study on inpatient services, which was released in August 2002. However, even though CMS and the carriers had no edits, had no review process, knew this was an area where improper payments might occur and did little to educate the ambulance supplier community, responsibility does not fall to them; it falls on the ambulance suppliers. This is a good example of why you must be on top of healthcare laws and regulations and not simply rely on carriers to educate and direct you. While the OIG report states that "carriers are responsible for ensuring that they do not pay for these services," the consequences will be felt by the ambulance industry, not by the carriers.

What are the consequences? The OIG recommended that payment edits should be established and/or postpayment review procedures implemented, and that the carriers be alerted to the most common payment errors and assisted with ambulance supplier education (which is where they fell down the last time this was recommended). The OIG also recommended, and CMS agreed, that the carriers should recover the $21.7 million from the ambulance services that were overpaid. There was no mention of interest on these overpayments, but under CMS policy, interest will begin to amass 30 days after the notice of assessment is given to the ambulance service. Therefore, if you are one of the many services affected by this, you will have to come up with the money quickly or possibly face the accumulation of interest as well. As far as how many services will be affected, the study showed that 7,403 different ambulance service suppliers were overpaid. Of these, however, 2,468 (or about one third) accounted for 88% of the overpayments, or $19 million. According to the OIG's estimated overpayments, that means these 2,468 ambulance services will bear the brunt of the cost of this overpayment assessment. For them the average assessment will be more than $7,700. For the other two thirds of suppliers, the average will only be a little over $500. Of course, these are only averages, and your specific overpayment assessment may be more or less depending on how many transports you were paid for during the years at issue.

In conducting the study, the OIG reviewed 150 specific transports and found that carriers had appropriately paid only three of those claims, which calculates to a 98% error rate. The OIG also contacted 130 Part B ambulance service suppliers. Out of those contacts, the OIG learned that many ambulance services either did not know the patient was an inpatient at the time of transport or were unaware of the Medicare program requirements in general. However, the OIG report also states that of the 150 transports reviewed, 50 were identified as inappropriate "because the ambulance suppliers or the hospitals submitted incorrect information" regarding the date of service or inpatient stay. Therefore, if these errors in dates are corrected, it may be that 33% of the claims are actually proper. This should be a consideration for any service assessed an overpayment, as you might have a chance of greatly reducing the amount you have to pay back.

In closing I want to make a couple of points. First, the ambulance industry is going to continue to be a target as long as studies such as these find significant errors and overpayments. Second, and more important, while the $21.7 million involved in this overpayment assessment will likely be spread out to the point where no single service is required to make a large repayment, I believe the OIG is currently conducting a similar study on SNF (skilled nursing facility) patients in Part A, or PPS, stays. Due to the nature of SNFs and their patients (i.e., SNFs don't have many services that their patients need) and to the length of time patients may be in a Part A stay in a SNF, it is likely that many more ambulance transports will have been rendered to these patients. If these trips were likewise billed improperly to, and paid by, Medicare Part B, the findings of this study could be much more damaging to the ambulance industry.

Finally, I understand that patient care is the most important aspect of ambulance services; however, there is a business side that has nothing to do with medical care. As frustrating as it may be, it is up to you to ensure that your policies are up to date with current rules and regulations. Let's face it: Ambulance services cost money to operate, and if you want to be reimbursed for your efforts, you have to know the rules. As I've said often in EMS Magazine, a good compliance program can be the key to the overall success of an ambulance service.

Related Articles:

• Snitching for dollars
  How the Deficit Reduction Act rewards employees who expose fraud or mistakes.
• OIG Report: Ambulance Industry Overpaid $402 Million
  If your service is running nonemergent transports, carefully consider these patients and their need for ambulance transportation.
• The entire OIG report can be viewed at www.oig.hhs.gov/oas/reports/region1/10400513.htm.

To hear more from Chris Kelly, click here to listen to his podcast.

G. Christopher Kelly is an attorney who focuses on federal laws and regulations as they relate to the healthcare industry, and specifically to the ambulance industry. He lectures and advises EMS service clients across the U.S. This article is not intended to be construed as legal advice. For information regarding any specific overpayment assessment or on how your service can implement a compliance plan and stay on top of these issues, Chris can be reached at chris@emscltd.com or 800/342-5460.