Historic Ambulance Inflation Factor for 2023

Historic Ambulance Inflation Factor for 2023

By Chuck Humphrey, B.A., EMT-B, CAC, CACO, CADS, *

 

Great News…

The Centers for Medicare and Medicaid Services (CMS) released great news on October 13th. Transmittal 11642 announced the highest-ever Ambulance Inflation Factor set to be factored into the National Medicare Ambulance Fee Schedule in 2023.

According to CMS, the AIF for 2023 will be an astounding 8.7%!

The increase will be applied to the formula for ambulance transportation payments for claims with a date of service of January 1, 2023, and after. The increased percentage bested last year’s adjustment by a whopping 3.6% and tops the record increase of 5.2% achieved in 1990.

 

…and Bad News

Bad news? How can that be?  

With Medicare reimbursements set to increase by a record amount for ambulance transportation, how can any of this be bad? Well, for the AIF to increase at this record pace, the overall factor driving the increase is the highest inflation in our American economy since the 1980’s. So, while the ambulance industry will be paid more dollars, we doubt that most EMS agencies will realize any relief. In fact, with the costs of goods and services skyrocketing, for most EMS services the increase in reimbursements will barely enable the industry to achieve break even status.

Add to this the fact that we are painfully aware that Medicare and Medicaid payments grossly undercut our costs to provide the service, and the end result is a bittersweet and muted celebration, in kind.

Calculating the AIF

On that note, let’s once again review 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, June 2021 was the cutoff.) Once that value is calculated, then the productivity adjustment is configured. The productivity factor is equal to the 10-year moving average of changes in the economy-wide private, non-farm business multi-factor productivity index (MFP) which begins January 1, 2014 and is subtracted as an adjustment.

The resulting AIF is represented by the following formula as explained above:

CPI-U – MFP = AIF

The AIF is then added to the base calculations (sometimes offset by adjustments in the regional Geographic Practice Cost Index/GPCI values) for the new fee schedule which the Public Use File (PUF) is released near the end of the fourth quarter of each year to allow the Medicare Administrative Contractors (MACs) to adjust their payment systems.

The Pieces of the Puzzle Explained

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 is a pseudo-inflation factor metric. While not directly measuring inflation, the value of the statistical funnel provides the Federal government with a view into price trending and predicts the severity of pending inflation or deflation.

The government’s statisticians use a cross-section of 8 major groups spanning 200 types of goods in order to arrive at the CPI-U metric. Those 8 major groups include: food and beverages, housing, apparel, transportation, medical care, recreation, education and communication plus a miscellaneous category labeled other goods and services (i.e., tobacco and smoking products, personal care items and services for example hair care, funeral expenses, etc., just to name a few.)

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. Given the fact that approximately 80% of the American population resides in urban areas, this calculated data set is a very useful tool for fiscal planning and review agencies.

MFP

Are we more efficient as time goes on? The Feds think so.  

As such, several years ago the MFP was added to the formula. The Multifactor Productivity calculation measures changes in economic output per unit of combined units. Indices of MFP adjustment are pulled from the American economy based on private, non-farm business and manufacturing sectors of the economy.

MFP measurements reflect the joint effects of many variables including the over effect on economic efficiency based on the additions of new technologies, calculating economies of scale, managerial skill ratchet along with added changes in organization factors surrounding production. Using the MFP equates to the government tempering any notion of rising costs which they believe is offset by our ability to work smarter and increasingly efficient over time which they believe offsets the impact of raw inflation.

As such, the decision was made to add the MFP to the AIF formula in essence imposing that the ambulance industry does not require a full parallel inflationary boost because during that same time the MFP “proves” we have become more efficient.

Is this MFP debatable? Absolutely. But, until Congress decides to adjust and ultimately fix the ambulance fee schedule, this is what we must live within our industry.

This year’s numbers…

With inflation at such a high, the CPI-U jumped from 5.4% to 9.1%. The MFP ticked 0.1% higher, landing at 0.4%. As such the formula for the new year is…

CPI-U 9.1% – MFP 0.4% = AIF 8.7%

Will it Rain on our Parade?

Hooray for the increase! Any increase is good. But will the Feds rain on our AIF increase parade?

If the Ambulance extenders are allowed to expire at the end of 2022, the 8.7% increase will turn out to be a bust. In a previous blog, we spoke extensively about the possibility of those extenders expiring at the end of this calendar year. Congress must act quickly and decisively to extend those extenders and as advocated by the American Ambulance Association, it would be an added bonus and expression of appreciation to the ambulance industry if those extenders were increased.

Keep your fingers crossed and watch this blog space for the latest.  

Until then, we’ll take the news of the highest AIF in history and run with it and hope for the best as our industry experiences historic financial strain.

More to come!

*Chuck Humphrey is an independent contractor who spent 25 years in the EMS revenue cycle management industry, prior to his retirement from Quick Med Claims. In addition to holding active EMT credentials in Pennsylvania, he is also a Certified Ambulance Coder, Certified Ambulance Compliance Officer, and Certified Ambulance Documentation Specialist via the National Academy of Ambulance Compliance. Humphrey is a periodic guest contributor to the QMC blog and podcast space.