2002). An example from the Richmond Ambulance Authority is shown in Figure 2-2. In that system, Medicare represents 40 percent of billings, but 55 percent of revenues.

The Medicare program recently completed a 5-year transition to a new fee schedule. Under the old reimbursement system, EMS agencies received two payments per transport. The primary payment was a cost-based, fee-for-service rate that reimbursed EMS for the service provided. The secondary payment was reimbursement for the number of miles the ambulance traveled. Under that system, ambulance services were concerned primarily with reporting their charges and mileage. The new system keeps the mileage reimbursement but abandons the cost-based payment and replaces it with a prospective payment system, similar to the system in place for outpatient health services (Overton, 2002). EMS was the last Medicare Part B provider to transition from a fee-for-service to a prospective payment system. Under the new system, ALS transports are reimbursed at a higher rate than basic life support (BLS) transports, and higher payments are provided for transport in rural areas to reflect the typically long travel times to and from hospitals (MedPAC, 2003).

Overall, the new fee schedule significantly reduces Medicare payments to EMS providers. Two years into the transition to the new system, data indicated that Medicare reimbursements were approximately 45 percent below the national cost average for transport, leading to a $600 million shortfall for services provided to Medicare beneficiaries. As a result, local EMS systems may now need greater subsidization from local governments or may be forced to reduce costs through personnel cuts, reductions in

FIGURE 2-2 EMS patient revenues, Richmond, Virginia.

SOURCE: Overton, 2002.