Problem Analysis final project: Centers for Medicare and Medicaid Services (CMS)

Essay by shanbanana March 2006

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In 2002, the Centers for Medicare and Medicaid Services (CMS) implemented a congressional mandated ambulance fee schedule that substantially changed the way Medicare pays for ambulance services (GAO reports, 2003). Through the new structure, a provider is reimbursed a flat fee, which is geographically dependant based upon regional averages. Prior to this change, Medicare paid based on what were considered reasonable charges. While the reimbursement rate has never been impressive by Medicare, roughly 0.60 per dollar, the means of doing business by ambulances services must change for their survivability. Because of these adjustments, CMS established a five year transition period which they slowly introduced the new fee schedule, which today is completely in affect. During the initial year of 2002, Medicare paid 80% via the old method and 20% via the new schedule, each subsequent year these changes adjusted by 20%, up to today where the payment is based off of 100% of the new fee schedule (Grimaldi, 2002).

As a result of these changes and implementations, clearly Northwest needed to analyze the means of conducting business and achieve the greatest return on investment possible. For two years prior to the 2006 budget Northwest failed to meet their budget and showed a substantial loss. This resulted in the parent company, Inland Northwest Health Services (INHS), to hire the consulting firm Assocaites, LLC to conduct an overall analysis of business model. Through their analysis they looked at aircraft type, aircraft utilization, and aircraft location, strategic placement of remote bases, referral patterns, team configurations, crew compensation, and billing practices. While clearly both INHS, the board of directors, and the medical community identified a vital need for the service, the company needed to cut costs in order to be solvent.

Associates, LLC made the following recommendations to the INHS board of directors for...