AIF Announced for Calendar Year 2021

AIF Announced For Calendar Year 2021

Christmas-like Anticipation

Do you remember what it was like when you were a kid and Christmas was right around the corner? You probably couldn’t wait for the big day when Santa would bring you that awesome new bicycle, video game or Barbie doll, right?

Well, if you’re an ambulance billing geek like we are, then you’ve probably been waiting with Christmas-like anticipation for this week’s announcement from CMS of the Ambulance Inflation Factor (AIF) for calendar year 2021.

Hold on!

While the anticipation is palpable we first need to take a look at how the AIF is calculated.

Two factors are combined to arrive at the annual ambulance adjustment factor. The first element of the formula is the Consumer Price Index for all urban consumers (CPI-U) which pulls data from the 12-month period ending in June of the previous year (for this year’s June 2019 was the cutoff). Once that value is calculated, then the productivity adjustment is configured, this is equal to the 10-year moving average of changes in the economy-wide private non-farm business multi-factor productivity index(MFP), and begins January 1, 2012 and is subtracted as an adjustment.

And so, the resulting calculation is represented by the following formula:

CPI-U – MFP = AIF

A CPI-U Refresher

The CPI-U is the statistical metric developed by the U.S. Bureau of Labor Statistics used to monitor the change in the cost of a set list of products. It really is a type of pseudo inflation monitoring device.  While not directly measuring inflation, the value provides the Federal government with a window into the price trending and predicts the severity of any pending inflation or deflation.

Using a cross-section of 8 major groups across 200 different types of goods, government statisticians pull the data to arrive at the CPI-U factor. The 8 major groups include: food and beverages, housing, apparel, transportation, medical care, recreation, education, communication and a catch-all category called other goods and services (ie. Tobacco and smoking products, personal care items and services such as funerals expenses etc.)

The monitoring of the fluctuations in the prices urban residents pay to purchase certain sets of “basket” goods ensures that the government can effectively follow the cost of living for those persons residing in the sample statistical areas.

Of course, remember that approximately 80% of the population of the United States resides in an urban setting. So, this particular data set is a very useful tool.

What is MFP?

The MFP or Multifactor Productivity adjustment is the calculation measuring changes in economic output per unit of combined units.

What?  Huh? Welcome to “governmentese” language!

Indices of MFP adjustment are pulled within the United States based on private non-farm business and manufacturing sectors of the economy.

MFP measurements reflect the joint effects of many variables including the effect on the economic efficiently from things like new technologies, economies of scale, managerial skill ratchet, plus changes in organizational factors surrounding production. What this means is the government is tempering any notion of rising costs by our ability to work smarter and more efficiently over time which they believe offsets the impact of inflation.

The end decision since the MFP was added to the AIF formula, is for the government to determine that the ambulance industry does not require a full inflationary boost because our own efficiency offsets the impact of inflation.

(sarcastically) Seriously?

2021 Application

For the 12-month period ending in June 2020, the federal Bureau of Labor Statistics has calculated the CPI-U at 0.6%, which is off by a full 1% over last year. Given the low CPI-U value, thankfully the MFP fell from 0.7% last year to 0.4% this year. Had this not happened, our industry would have seen the AIF fall to a negative value.  It certainly was a close brush with losing Medicare dollars which would have been unfortunate, especially in this very uncertain historical climate.

Luckily we will see a small increase calculated in this manner…

CPI-U 0.6% – MFP 0.4% = AIF 0.2%

What Comes Next?

Now that the AIF is final, the ambulance industry awaits the application to the final National Medicare Ambulance Fee Schedule for 2021. The fee schedule is annually released by CMS using the Public Use File (PUF).

And remember, the 0.2% increase will not mean a direct 0.2% dollar increase for next year’s ambulance payments from Medicare. Final fee schedule values won’t be known until the AIF is applied while factoring in the other elements of the fee schedule calculation including Relative Value Units (RVUs) and the Geographic Practice Cost Indices (GPCIs), as regional adjustments do apply from year to year.

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