Shock Advised: EMS Economics in Critical Condition

As our nation celebrates the 50th anniversary of EMS Week this month, a time when we’re honoring the profession and celebrating our country’s dedicated clinicians, there’s something we don’t seem to be talking about enough: our broken EMS reimbursement model. A model that’s still tied to EMS’ roots based on payment for transport, and classified by the Centers for Medicare & Medicaid Services (CMS) as a “Supplier of Services,” like durable medical equipment, rather than a Provider.

EMS professionals are highly trained, delivering advanced medical care. Assessing and treating physically ill, critically injured, and mentally at-risk patients. They’re more than a ride or a supplier of goods, and the outdated reimbursement model is failing private agencies and municipal EMS alike.

The good news is that key EMS organizations are working to change the broken system. The National Association of EMTs, the American Ambulance Association, the International Association of Fire Chiefs, and others are making efforts to influence key policy-makers. 

Yes, it’s complicated. The challenges with each payer are different. For Medicaid and Medicare, it’s typically very low payments that come nowhere close to reimbursing agencies for the cost of care, supplies, and transport. Commercial insurance for ambulance service varies widely from policy to policy with the “allowable” amount typically arbitrary, often tied to some multiple of the Medicare ambulance fee schedule or an opaque “usual and customary” amount. Once the insurance company sets their “allowable,” the difference between the charge and the “allowable” becomes stranded. This remaining balance ends up becoming the patient’s responsibility. Patients are further punished because any stranded amounts are typically not credited against any deductibles or out-of-pocket maximums associated with their insurance policy. This dilemma is what’s led to patient protective legislation such as the No Surprises Act (currently not applicable to ground ambulance services, but under review by the federal Advisory Committee on Ground Ambulance and Patient Billing). In the absence of federal rules, several states are taking action to pass legislation that protects patients. Washington, Indiana, Delaware, Maine, and Colorado have recently set up new protections from large ambulance bills.¹

“For commercial insurance, the challenge is that some insurers will arbitrarily decide what they think is a fair payment for the service,” explains Maxine D'Agostino, Vice President of Billing Services at Digitech, a provider of EMS billing and technology services. “This leads to agencies not getting full reimbursement for the services provided, and also leads to remaining balances that are billed directly to patients, which the insurance industry has successfully labeled as ‘balance billing.’”

Jonathan Washko, MBA, FACPE, NRP, AEMD, Assistant Vice President of Northwell Health’s Center for EMS and a subject matter expert notes, “Because EMS generates revenue, people believe we have a pot of gold and that we’re reimbursed like healthcare. If they see a $5,000 ambulance bill, first there’s sticker shock, and everybody thinks we collect that $5,000, but we don’t. We may charge $5,000, but we may collect $500 if we are lucky.”

To complicate matters, costs nationwide are rising dramatically for labor, vehicles, supplies, medications, and fuel, while reimbursement rates across the board are largely stagnating.

Washko says there’s been an exponential rise in the expense of EMS services due to factors like labor shortages, COVID-19, and supply chain issues. “There’s no leveling mechanism in Medicare that's appropriate to keep pace with expenses,” he says. “Say there’s a new drug that comes out that costs $1,000 per dose that’s going to save somebody’s life, there’s no additional reimbursement that comes with that. If there’s a new procedure or a new piece of medical equipment, there’s no additional reimbursement. We get paid our base rate plus every mile we transport and that’s about it.”

No Transport, No Dollars

Today most EMS agencies report that up to 33% of calls do not result in transport. Even when the patient is thoroughly assessed and receives medical treatment on-site, there are often zero reimbursements from most state Medicaid programs nor Medicare for these calls (and Medicare patients typically represent 40% to 50% of EMS calls).

Community paramedicine and mobile integrated healthcare (MIH) are smart, much-needed services in our country. These models are critical to a patient-centered healthcare system and will help serve the traditionally underserved. But we’ll never get them off the ground nationwide unless EMS can get fairly compensated for this type of care.

“The sad part is that in many cases, the best thing for the patient is not to go to the emergency department,” emphasizes Digitech’s D'Agostino. “But EMS agencies are only compensated for the transport, and ironically the transport is to the most expensive part of the health system–the hospital ER.”

What does it look like If agencies do not get fairly reimbursed? Eventually, if they’re privately owned, they may go out of business, and it’s happening at an alarming rate. Approximately 55 ambulance services have gone out of business since 2021, according to local and national media reports tracked by the American Ambulance Association (AAA) and the Academy of International Mobile Healthcare Integration (AIMHI).2 When an agency goes out of business, another entity is forced to step in and fill the gap. Or, worse, we end up with “ambulance deserts."

“When COVID hit, EMS was decimated,” says Washko. “Even though we’ve been talking about the fragility of EMS for a long time, COVID brought more awareness to the funding gaps that exist. Today, many EMS systems across the country are literally failing and are having to shut their doors.”

This frequently leads to public EMS services needing tax subsidies, so taxpayers foot the bill to keep emergency medical services alive.

“From a safety net perspective, ultimately a private provider may still continue its mission,” explains Washko. “But it would have to be subsidized by the government.”

The system is undeniably broken, and we’re in dire need of a solution that protects patients and the ambulance services they depend on, as well as taxpayers.

How Can We Shock the System?

We should start with collaboration across the healthcare space to get to commonsense solutions that benefit the patient and provide them with healthcare at the right clinically appropriate timeframe, in the right place, at the right quality, and at the right cost. This requires all parties to agree on solutions. We all need to rally behind an aligned strategy from those national organizations that represent EMS, like IAFC, NAEMT, AAA, and others.

An education effort is needed at the national, state, and local levels as to what financial resources are needed to run an EMS system, and we all need to be transparent about costs.

A major stumbling block is that EMS systems vary widely and so do their costs. Some communities opt to outsource emergency services to private ambulance organizations. Those agencies historically have low pay structures and employ more EMTs vs. paramedics. Other communities provide service through their municipal structure, such as fire-based or third-service EMS, which typically employs paramedics who are paid union-negotiated wages, benefits, and pensions. The cost structure of a municipal-based system is typically much higher than a private-based system, so it’s very difficult to define a fair cost structure across the entire industry. EMS providers would benefit from banding together to determine a baseline cost structure, and this collaboration would lead to more success in engaging with large payers.

Legislation on various levels will be a big part of any real, lasting solution. There is some hope on the horizon as several states are working to require commercial insurance companies to reimburse at locally approved or regulated rates. However, state legislation only covers state-regulated plans, and commercial insurance typically represents less than 20% of an agency’s billing. The challenges with underfunding by Medicare and Medicaid still need to be addressed. Simply put, Medicare and Medicaid need to pay a fair amount and pay for all services.

Finally, there needs to be a solution to serve patients without insurance–who pays for them? It can’t be a case of EMS agencies absorbing the cost (i.e., loss) unless other parties are willing to pay more to offset the uninsured.

In reflecting on the 50th anniversary of EMS Week, Washko first asserts that EMS is undeniably essential. “In places where it doesn't exist, morbidity and mortality rates are higher because of the life-saving work that EMS does. 50 years is not a long time and EMS is still in its infancy. We have a lot of work to do,” he explains. “We’ve been focused on developing the delivery model, the framework, and the system. Not enough time, energy, or attention has been paid to how we get reimbursed,” adds Washko. “It’s going to take a lot of work on the federal level, on the state level, at the insurance level, and at the agency level in order to get EMS the funding it needs to last another 50 years. As of right now, I don’t know that we’d last another 50 years as an industry in its current form.”

With that in mind, let’s celebrate EMS Week with a reckoning in this country. Let’s agree that EMS is an essential part of our nation’s continuum of care, one that has a growing role in serving our communities. There’s tremendous value in having lifesaving services available 24 hours a day, seven days a week, but there's also a real and rising cost of providing those services. Most EMS agencies are not looking to drive outrageous profits, they're simply trying to not lose money, pay their staff a living wage and benefits, and be part of a community healthcare solution.

1. https://www.axios.com/2024/03/27/surprise-medical-bills-ambulance-health-costs
2. https://icma.org/articles/pm-magazine/ems-economic-and-staffing-crisis-creates-opportunity-improved-system-design

Michael Brook has been in the EMS billing industry for 15 years in a variety of capacities, including both overseeing billing operations and managing client accounts. He currently provides leadership and support to Digitech clients, partnering with them to optimize revenue and navigate a changing marketplace. Michael would love to hear your thoughts and can be reached on LinkedIn.