Multifactor Productivity- The Dreaded Adjustment

The MFP is coming…

Never before, since the inception of the Ambulance Fee Schedule (AFS), has the AFS amounts decreased. Now we may have seen a zero increase, but never a decrease.

Well all that’s about to change thanks to three letters that will send shockwaves to our industry- MFP!

Now that the “Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2011” has been published in yesterday’s (November 29, 2010) Federal Register by the Centers for Medicare and Medicaid Services (CMS) a new era is dawning for the Medicare ambulance reimbursement world.

Fractional Mileage is definite!

Before we go too far, the Federal Register publication seals the deal for the Fractional Mileage reporting requirement that we blogged about two weeks ago. Effective January 1, 2011 ambulance suppliers must report fractional mileage for all loaded miles billed to Medicare under 100 miles.

No shock here… it was a done deal before publication. Might as well get ready now… you only have a month!

So what is the MFP?

When the Medicare fee schedule became a reality several years ago, annual adjustments were driven by another alphabet soup label known as the Ambulance Inflation Factor or AIF.

The AIF was actually a mirror image of the Consumer Price Index for urban consumers (CPI-Urban) but with one significant difference- if the CPI-U turned out to be negative, meaning that inflation was negative in a given year, the AIF, by law, could not be negative. This meant that even if inflation retreated, the ambulance fee schedule would not negatively change from the previous year. AFS reimbursement amounts would remain unchanged moving to the next year.

Even though all of us in the industry know that from one year to the next our costs increase, we could at least take solace in the fact that even though we may not see an increase in the approval rates, we wouldn’t also see a decrease. Good, bad or indifferent there was at least a level of comfort that Medicare revenue wouldn’t go down from one year to the next.

Not anymore!

The new Healthcare Reform Bill introduced the new Multifactor Productivity Adjustment or MFP. In their “infinite wisdom”, our legislators believe that as time goes on new technologies and other factors will tend to make all of us more efficient and therefore it must mean that we will require less Medicare dollars to put our trucks on the street everyday. Somehow they came up with a percentage figure to represent that assumption and they called it MFP.

If I even attempt to comment on that one, it wouldn’t be pretty… so I’ll simply continue to explain the effect and leave you to form your own opinion on the subject.

So here’s how it will all work…

The MFP works together with the AIF and the end result will be the final AFS amounts each year. The MFP is meant to adjust the AIF, accounting for new efficiencies realized by ambulance suppliers.

Let’s say that the CPI-U comes in at 2.5% for the current year. Because the AIF is a mirror, then the AIF factor will also be 2.5%. Under the old rules, the Ambulance Fee Schedule adjustment would have meant that we would have all potentially seen a 2.5% increase in reimbursements in the New Year.

Now enter in the MFP… let’s say that the MFP is calculated (good luck trying to figure out how they arrive at that one) at 1.5%. The MFP’s entrance into the equation “adjusts” the AIF downward and the resulting effect in our little scenario here would mean that the Ambulance Fee Schedule amounts increase by just 1.0% instead of the 2.5% based solely on the tie-in between the CPI-U and the AIF.

The formula is this CPI-U = AIF. Once the AIF is arrived at, then the final forumla checks in as AIF – MFP = AFS (Ambulance Inflation Factor minus Multifactor Productivity equals Ambulance Fee Schedule update).

That doesn’t sound too bad….it’s still an increase, right?

But hold on a minute…

What if inflation is fairly stagnant (which was the case last year) and the CPI-U is only 0.5% (remember last year there was no adjustment because the CPI-U and resulting AIF was 0%). Now walking through the same formula, if the AIF turns out to be only 0.5% and the MFP winds up to be our imaginary 1.5% then the MFP will negatively adjust the AIF and the result will be a decrease of 1% in the Ambulance Fee Schedule amounts (0.5% – 1.5% = -1.0%).

That has never happened before!

So what we’re trying painstakingly to describe to you using our imaginary scenario is… the industry sees an increase in costs by half a percent, yet somehow Congress feels we all deserve a full percent less reimbursement.

And….they arrive at this “brilliant” deduction after telling us just a few years ago that our industry is underfunded nationwide by 6% and without Congressional intervention the Nation could face an EMS crisis in just a few years! Unbelieveable!

Adding insult to injury!

As if a negative adjustment wasn’t bad enough, there is a very good possibility that the ambulance industry will lose the 2% urban, 3% rural and 22.6% bonus payments we have been enjoying for a few years.

Factor this reduction in on top of the possibility of a negative adjustment and now we’re talking potentially losing some significant Medicare reimbursement dollars looking ahead to 2011.

Oh, and by the way, have you run the numbers yet to determine how much the fractional mileage billing is going to decrease the numbers even more?

Be realistic…

So it’s coming. You need to prepare. Once all the numbers are published, we suggest that you quickly determine the potential effect on your service. Next, set up a plan of action.

If you outsource your billing, your billing contractor should be able to help you draw out the numbers you need to get an idea of what the effect will be to your service while assisting you with understanding it all. Cutting edge EMS-specific billing software, like we use here should yield everything you need to prep for the coming changes.

However, if you find you don’t have those capabilities and would like to know more about how we do things, take a minute and give us a call.

The winds of change are going to blow hard and fast. Now’s the time to begin preparing for the worst and hope for the best. Heck, we’re used to that….it’s what we do every day! Somehow, as an industry, we’ll survive….but it sure would be nice if someone took the time to talk to US before they set things like the MFP in motion!

What’s your opinion on the coming changes? Tell us what you think.

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