THE REBASING OF NORTH DAKOTA

MEDICAL SERVICE PAYMENT RATES

(PROVIDER TYPE: AMBULANCE)
RFP#325-01-10-049

July 31, 2008

110 Peach Street, Tinton Falls, NJ 07724

866.448.1834 Phone
208.575.2783 Fax
www.safetechsolutions.us
SafeTech Solutions Project Team
Gary Wingrove, EMT-P (retired)
Project Director
Buffalo, Minnesota

Nick Nudell, BBA(c), NREMT-P

Partner
Tinton Falls, NJ

John Becknell, BA, NREMT-P

Partner
San Diego, CA

Daniel Patterson, PhD, MPH, EMT-B

Statistician
Pittsburg, Pennsylvania

Brenda Staffan, BA Econ.

Economist
Reno, Nevada

Acknowledgement
The project team would like to thank the urban and rural North Dakota ambulance services that participated in
submitting cost data for this contract. We also thank Maggie Anderson, Barbara Fischer, Laura Olson, and Erik
Elkins from the North Dakota Department of Human Services (DHS) Medical Services Division for timely
responding to information requests and clarification.

Citations
This report has been prepared for the state of North Dakota and is in the public domain; however, we ask that in
referencing this report the following citation be used: Wingrove, G. L., Nudell, N. G., Becknell, J. L., Patterson,
D. P., Staffan, B. J. (2008). The Rebasing of North Dakota Ambulance Provider Medicaid Rates. Tinton Falls,
NJ: SafeTech Solutions.

110 Peach Street, Tinton Falls, NJ 07724

866.448.1834 Phone
208.575.2783 Fax
www.safetechsolutions.us
Table of Contents

EXECUTIVE SUMMARY 4

COLLECT COST INFORMATION FROM SELECT NORTH DAKOTA AMBULANCE SERVICE

PROVIDERS AND DEVELOP AN AMBULANCE COST REPORT 9
Overview 9
Data collection, verification, and validation 9

EVALUATION OF AMBULANCE SERVICE PROVIDER COST DATA 11

EVALUATION OF AMBULANCE COST DATA SOURCES 13

AMBULANCE FEE SCHEDULE 14

Ambulance Service Provider Cost Determination 14
Air Ambulance Cost Schedules 14
Fixed Wing Air Ambulance Rate Determination 14
Rotor Wing Air Ambulance Rate Determination 15
Ground Ambulance Rate Determination 16
Ground Ambulance Cost-based Fee Schedule 17

PREPARE A REPORT OF THE ESTIMATED COST TO IMPLEMENT THE CALCULATED NORTH

DAKOTA MEDICAID AMBULANCE FEE SCHEDULE. 19
Potential Interim Step 22

DEVELOP REBASING PROCESS TURNOVER PLAN 23

Recommendation for future study and consideration 23
SafeTech Solutions - 2008 Rebasing ND Medical Services Payment Rates – Provider Type (Ambulance)

Executive Summary
While hospitals and other health service providers use one or more standardized tools for cost reporting and
adjusting base rates, there exists no such resource for the ambulance industry. This gap in resources has
prevented many government entities and other payers from updating ambulance payment schemes to respond
to public need and demand for ambulances.
The North Dakota Department of Human Services (DHS) Medical Services Division contracted with SafeTech
Solutions, LLC (STS) to evaluate the cost of providing ambulance services in North Dakota, to develop a cost-
based fee schedule for ambulance services, and to provide a report outlining the estimated cost of rebasing
payment rates used by the North Dakota medical assistance (Medicaid) program if the fee schedule were to be
implemented. The project commenced February 15, 2008 and was completed July 28, 2008.
SafeTech Solutions is uniquely qualified to perform this task as the lead developer of the Ambulance Service
Budget Model Tool for the Rural EMS & Trauma Technical Assistance Center that is available from the US
Department of Health and Human Services, Health Resources and Services Administration, Office of Rural
Health Policy.
The key milestones, deliverables, and tasks for this first of its kind project included:
1) Provide the Division with a report including all calculations, assumptions, and documentation, outlining the
estimated cost of rebasing current payment rates used by the North Dakota Medicaid program for
ambulance services to payment rates based on the actual cost of providing these services.
2) Use the Division’s Medicaid claim data and cost information from ambulance providers to determine the
average urban and rural costs for delivering ground and air ambulance services in North Dakota. The
Division provided North Dakota Medicaid claims data, but we also used ambulance provider supplied cost
information and cost information from a Project HOPE report, a 2006 American Ambulance Association
(AAA) cost study and 2003 and 2007 reports from the United States Government Accountability Office
(GAO).
3) Compare North Dakota ambulance service data with other data publicly available from the GAO, a
published Project HOPE report, and an American Ambulance Association cost study.
4) Receive and maintain electronic volume and expenditure Medicaid data and store for at least two years in
an electronic format approved by the Division and provide access to cost report files during regular working
hours.
5) Produce all output and documentation in a format approved by the Division; that is comprehensive and
accurate; structured to be easily maintained; continually updated reflecting the current status; and free of
errors through the end of the contract period.
6) Designate a Project Director, STS partner Gary Wingrove, to supervise project staff, and remain available to
the Division staff Monday through Friday, from 8:00 am until 5:00 pm (CT) each day.
7) Use the Division staff to answer questions regarding policy and procedures, to coordinate responses to
questions, and to provide referral to other appropriate staff, if necessary.
8) Deliver each required report, including ad-hoc reports, to the personnel specified by the Division. Reports
will not be shared or delivered to any other entity without the written prior approval of the Division.
9) Provide the scheduled number of copies and media for current reports as specified by the Division and
develop, update, and maintain a report distribution list during the contract period to incorporate changes
required by the Purchasing Agency.
10) Became familiar with the current payment methodologies, reimbursement issues specific to the North
Dakota medical assistance program, and the constraints of relevant state and federal laws and regulations.
11) Provide assistance in turning over the project to the Division prior to the conclusion of the contract or in the
event of a termination for any reason. Following turnover of operations, we will provide the Division with a
Turnover Results Report which documents completion and accurate results of each step of the Turnover
Plan.
Although not contractually specified we required that all data, assumptions, and calculations be suitable,
reasonable, and reproducible for the development of an ambulance cost report and cost-based fee schedules
for North Dakota ambulance services. STS performed validation and verification testing on all data,

Page 4 of 25
SafeTech Solutions - 2008 Rebasing ND Medical Services Payment Rates – Provider Type (Ambulance)
assumptions, and calculations used to determine ambulance service costs and recommended fee schedules. As
used in this report, we define these terms as follows:
• Validation: Confirmation by examination and provision of objective evidence the fulfillment of particular
requirements for a specific intended use.
• Verification: Confirmation by examination and provision of objective evidence the fulfillment of specified
requirements.
Although this testing was performed, it is not equivalent to a financial audit and caution should be exerted when
interpreting the results. If the underlying data or information is inaccurate or incomplete, the results of the
analysis may likewise be inaccurate or incomplete. If there are material defects in the data, it is possible that
they would be uncovered by a detailed, systematic review and comparison of the data. Such a review was
beyond the scope of this project.
Differences between estimated and actual amounts depend on the extent to which future experience conforms
to the assumptions made for this analysis. It is almost certain that actual experience will not conform exactly to
the assumptions used in this analysis. Actual amounts will differ from projected amounts to the extent that actual
experience is higher or lower than expected. This project was designed to respond to North Dakota legislation
and uses a small, convenient sample of EMS agencies only from North Dakota. The sample was determined by
the Division in consultation with NDEMSA.
Other agencies in North Dakota and agencies in other states may differ across important demographic and
financial indicators from the agencies participating in this project (extreme selection/participation bias). As a
result, our results may be over or underestimates of the outcomes. Future efforts should include consideration of
probabilistically sampling EMS agencies from the target geography of interest and geographies in other places
with similar characteristics. Limited scope and sample size in this state-specific study may yield results that may
differ significantly in other places. Future studies in North Dakota and elsewhere should include additional
resources and devise strategies to include a larger sample. These efforts will improve the validity of study
results.
This report details the cost of implementing a cost-based Medicaid ambulance fee schedule to the state of North
Dakota. Another consideration is the cost of not implementing a cost-based fee schedule. Because of the data
analysis performed for this report, we discovered that North Dakota ambulance services were uncompensated
for 45.3% of the real cost to provide services to Medicaid beneficiaries (see Table 1) in SFY2007. Based on
current payment methodologies, we project the net payment deficit in SFY2008 will be approximately
$2,197,589 across all ambulance service lines.
Table 1: Provider cost of providing Medicaid services with current fee schedule
The provider cost of not implementing a cost based fee
schedule for ambulance service providers in SFY2007
SFY2007 SFY2007 SFY2007
Medicaid Provider Medicaid
Expenditures Cost Underpayments

Ground $2,192,822 $3,993,182.82 $1,800,360

Fixed Wing $335,889 $428,591.64 $92,703
Rotor Wing $122,034 $426,560.55 $304,526
Totals $2,650,745 $4,848,335 $2,197,589
We discovered the urban ground North Dakota ambulance service cost is significantly higher than the GAO
reported in its 2007 national average ambulance cost study. The GAO 1 determined the Medicare payment levels
to be 6% (95% confidence interval range of -18% to 6%, GAO report page 24) lower than the national average

1
U.S. Government Accountability Office. (2007). Report to Congressional Committees. Ambulance Providers
Costs and Expected Medicare Margins Vary Greatly. Washington, DC: Retrieved July 26, 2008 from
http://www.gao.gov/new.items/d07383.pdf
Page 5 of 25
SafeTech Solutions - 2008 Rebasing ND Medical Services Payment Rates – Provider Type (Ambulance)
cost of urban ambulance service while we found the North Dakota cost of urban ambulance service to be
approximately 50% higher than the 2008 Medicare payment levels.
These data on the surface may seem incongruent; however, AAA cost survey data show a disparity between
"types" of urban providers 2 depending on Medicare beneficiary transport volume. The AAA found the average
cost per transport for urban providers with less than 5,000 Medicare ambulance trips to be 33% higher than
those ambulance service providers with between 5,000 and 10,000 Medicare ambulance trips per year, and
nearly double the cost of urban providers with at least 25,000 Medicare trips per year.
The North Dakota urban ambulance services are sole providers in their area, meaning they capture virtually
100% of the patient volume. Of the three urban ground ambulance providers in this study, the provider with the
greatest North Dakota Medicare transport volume has less than 2,100 Medicare trips.
A 50% higher cost in urban North Dakota is consistent with existing AAA data for lower volume providers and
the GAO which found costs to be higher for providers with a lower ratio of transports per staffed hour. The cost
per trip within large metropolitan areas influenced the national average causing a significant urban disparity. In
2004 dollars these costs ranged from $99 to $1,218 (GAO report page 18) across all providers.
STS developed SFY2007 base year cost-based fee schedules (see Table 2) for North Dakota ambulance
service providers by using ambulance service provider actual expenses and Medicaid data for the number and
amounts of claims. The fee schedules for Air Ambulance and Ground Ambulance Services were separately
developed and in two primary categories: Urban and Rural.
Table 2: Base Year - SFY2007 Ambulance Service Provider Cost-Based Fee Schedule
Base Year - SFY2007 Ambulance Service Provider
Cost-Based Fee Schedule
A0428 BLS $ 301.43 A0428 BLS $ 381.71
A0429 BLSE $ 482.29 A0429 BLSE $ 610.74
A0426 ALS1 $ 361.71 A0426 ALS1 $ 458.05
A0427 ALS1E $ 572.71 A0427 ALS1E $ 725.25
Urban

Rural

A0433 ALS2 $ 828.93 A0433 ALS2 $ 1,049.70

A0434 SCT $ 979.64 A0434 SCT $ 1,240.56
A0425 Ground Mileage $6.25 A0425 Ground Mileage $6.25
A0430 FW Base $ 1,567.57 A0430 FW Base $ 2,351.36
A0435 FW Mileage $ 7.49 A0435 FW Mileage $ 11.24
A0431 RW Base $ 2,344.77 A0431 RW Base $ 3,517.16
A0436 RW Mileage $ 19.96 A0436 RW Mileage $ 29.94

The SFY2008 cost-based fee schedules (see Table 3) for North Dakota ambulance service providers were
calculated by applying an inflationary adjustment to the base year SFY2007 fee schedule (see Table 15).

2
Hogan C. (2007). AAA 2006 Ambulance Cost Study. McLean, VA: American Ambulance Association.

Page 6 of 25
SafeTech Solutions - 2008 Rebasing ND Medical Services Payment Rates – Provider Type (Ambulance)

Table 3: SFY2008 Ambulance Service Provider Cost-Based Fee Schedule

SFY2008 Ambulance Service Provider

Cost-Based Fee Schedule
A0428 BLS $313.79 A0428 BLS $397.36
A0429 BLSE $502.06 A0429 BLSE $635.78
A0426 ALS1 $376.54 A0426 ALS1 $476.83
A0427 ALS1E $596.19 A0427 ALS1E $754.99
Urban

Rural
A0433 ALS2 $862.92 A0433 ALS2 $1,092.74
A0434 SCT $1,019.81 A0434 SCT $1,291.42
A0425 Ground Mileage $6.51 A0425 Ground Mileage $6.51
A0430 FW Base $1,631.84 A0430 FW Base $2,447.77
A0435 FW Mileage $7.80 A0435 FW Mileage $11.70
A0431 RW Base $2,440.91 A0431 RW Base $3,661.36
A0436 RW Mileage $20.78 A0436 RW Mileage $31.17

The SFY2009 cost-based fee schedules (see Table 4) for North Dakota ambulance service providers were
calculated by applying an inflationary adjustment to the SFY2008 fee schedule (see Table 16).

Table 4: SFY2009 Ambulance Service Provider Cost-Based Fee Schedule

SFY2009 Ambulance Service Provider
Cost-Based Fee Schedule

A0428 BLS $330.42 A0428 BLS $418.42

A0429 BLSE $528.67 A0429 BLSE $669.48
A0426 ALS1 $396.50 A0426 ALS1 $502.10
A0427 ALS1E $627.79 A0427 ALS1E $795.00
Urban

Rural

A0433 ALS2 $908.65 A0433 ALS2 $1,150.65

A0434 SCT $1,073.85 A0434 SCT $1,359.87
A0425 Ground Mileage $6.85 A0425 Ground Mileage $6.85
A0430 FW Base $1,718.33 A0430 FW Base $2,577.50
A0435 FW Mileage $8.21 A0435 FW Mileage $12.32
A0431 RW Base $2,570.27 A0431 RW Base $3,855.42
A0436 RW Mileage $21.88 A0436 RW Mileage $32.82

The SFY2010 cost-based fee schedules (see Table 5) for North Dakota ambulance service providers were
calculated by applying an inflationary adjustment to the SFY2009 fee schedule (see Table 17).

Page 7 of 25
SafeTech Solutions - 2008 Rebasing ND Medical Services Payment Rates – Provider Type (Ambulance)
Table 5: SFY2010 Ambulance Service Provider Cost-Based Fee Schedule

SFY2010 Ambulance Service Provider

Cost-Based Fee Schedule
A0428 BLS $347.93 A0428 BLS $440.60
A0429 BLSE $556.69 A0429 BLSE $704.96
A0426 ALS1 $417.51 A0426 ALS1 $528.71
A0427 ALS1E $661.06 A0427 ALS1E $837.13
Urban

Rural
A0433 ALS2 $956.81 A0433 ALS2 $1,211.64
A0434 SCT $1,130.77 A0434 SCT $1,431.94
A0425 Ground Mileage $7.21 A0425 Ground Mileage $7.21
A0430 FW Base $1,809.40 A0430 FW Base $2,714.10
A0435 FW Mileage $8.65 A0435 FW Mileage $12.97
A0431 RW Base $2,706.50 A0431 RW Base $4,059.75
A0436 RW Mileage $23.04 A0436 RW Mileage $34.56

Page 8 of 25
SafeTech Solutions - 2008 Rebasing ND Medical Services Payment Rates – Provider Type (Ambulance)

Collect cost information from select North Dakota ambulance service

providers and develop an Ambulance Cost Report
Overview
We collected cost data from the North Dakota ambulance services specified by the Division. To determine the
makeup of the ambulance service cost study group, the Division collaborated with the North Dakota EMS
Association (NDEMSA). The Division and NDEMSA have notified STS of their mutual agreement with the
makeup of the study group. The Rural Ambulance Budget Model (Budget Model) format was used to develop
standardized estimates of the cost as specified by the RFP. The Rural EMS & Trauma Technical Assistance
Center (REMSTTAC) developed the Budget Model under contract for the US Department of Health and Human
Services. STS partner Gary Wingrove was the principal author of the Budget Model for REMSTTAC.
The data needed to perform a cost analysis across domains and demographics was requested from:
1) four urban ground ambulance services
2) ten rural ground ambulance services
3) two fixed wing air ambulance services
4) two rotor wing air ambulance services
The SFY2007 North Dakota state fiscal year was the most recent period for which Medicaid claim and
expenditure data was determined to be complete. A request was sent to each ambulance service designated by
the Division requesting cost data for the period July 1, 2006 to June 30, 2007. A multi-step process to verify and
validate the submitted data followed. A detailed report of this activity follows.

Data collection, verification, and validation

STS received expense (cost) data from the providers in various formats, from simple hand written reports
submitted by fax to electronically submitted spreadsheets from enterprise accounting systems. We observed
that ambulance service providers with robust accounting systems submitted data rapidly while other service
providers, primarily smaller rural services, were slower in providing data.
Ambulance services did not provide cost information in a standardized format because unlike other health care
segments, regulated cost accounting models for ambulance services do not exist. STS used the Budget Model
expense categories (see Table 18 on page 24) to complete collection and verification of the data prior to
analysis. Reported expenses matching Budget Model categories were assigned the same category; remaining
data points were assigned to appropriate Budget Model categories.

Figure 1: Ambulance Service Data Response Rate

Ambulance Service Data

Data Not
Provided
10%

Data
Received
90%

Predictably, some air and urban ground ambulance service providers submitted audited financial statements
facilitating data collection and verification due to compliance with the pseudo-standard format of the Budget
Model while rural ambulance services required some remote technical assistance.

Page 9 of 25
SafeTech Solutions - 2008 Rebasing ND Medical Services Payment Rates – Provider Type (Ambulance)
Next, STS validated the cost data through a manual review of each data point to ensure each ambulance
service had provided data for all the appropriate cost centers (e.g. such as personnel, vehicles, equipment, etc.)
and to assess for reasonableness compared to publicly available data. Expense data from several ambulance
services required additional clarification and correction. For example, an ambulance service reporting paid staff
but not reporting adequate commensurate salary costs required communication and data adjustment.
After data collection, verification, and validation, each ambulance service was provided a Budget Model detailed
report to obtain concurrence of the final data and the standardized categories each reported amount was placed
in prior to analysis. As a result, several minor clarifications were made. This resulted in validated datasets for
three urban ground, nine rural ground, and all four air ambulance services (see Figure 2).
Figure 2: Ambulance Services Submitting Data For Analysis

Ambulance Services Submitting

Data

Urban
Ground
19% Fixed
Wing
Air 13%
Ambulance
Rural Ground Rotor
24%
56% Wing
12%

Page 10 of 25
SafeTech Solutions - 2008 Rebasing ND Medical Services Payment Rates – Provider Type (Ambulance)

Evaluation of Ambulance Service Provider Cost Data

The North Dakota ambulance service providers are multidimensional, representing urban, rural, and air
ambulance service providers at the basic life support, advanced life support, and specialty care levels. Some
use fully paid staff but some also use volunteers or staff members whose expenses are not tracked and
attributed to the ambulance service duties they perform.
STS ultimately received 16 usable expense data reports from participating ambulance providers. STS identified
and quantified submitted data limitations and the potential impact on rebasing rates. Limitations and their impact
are explored in Deliverable 2.2: Evaluation of ambulance cost data sources.
To calculate the average cost per call for each type of service the following steps were completed:
1. Created a spreadsheet containing aggregate data
2. Summed the expenses of each provider
3. Divided each provider’s expenses by the number of their trips
For SFY2007, the weighted average costs per call (see Figure 3) were: $551.57 for urban ambulance services
(see Figure 4), $830.32 for rural ground ambulance services; $5,965.05 for fixed wing services (see Figure 5),
and $6,017.10 for rotor wing services.

Figure 3: Overall North Dakota Ambulance Service Provider Cost Per Call, SFY2007

7000

6000
SFY2007 Cost Per Call

5000

4000
Rural
3000 Urban
Rotor Wing
2000 Fixed Wing

1000

0
Air Ground
Service Category

Page 11 of 25
SafeTech Solutions - 2008 Rebasing ND Medical Services Payment Rates – Provider Type (Ambulance)

Figure 4: North Dakota Ground Ambulance Service Provider Cost Per Call, SFY2007

$1,000.00
$830.32
$800.00

$600.00 $551.57

$400.00

$200.00

$0.00
Ground

Urban Rural

Figure 5: North Dakota Air Ambulance Service Provider Cost Per Call, SFY2007

$6,030.00
$6,017.10
$6,020.00
$6,010.00
$6,000.00
$5,990.00
$5,980.00
$5,970.00 $5,965.05
$5,960.00
$5,950.00
$5,940.00
$5,930.00
Air Ambulance

Rotor Wing Fixed Wing

Page 12 of 25
SafeTech Solutions - 2008 Rebasing ND Medical Services Payment Rates – Provider Type (Ambulance)

Evaluation of ambulance cost data sources

In performing this analysis, STS has relied on data and other information provided by the State of North Dakota
and ambulance service providers as listed below:
1. Utilization data
a. Medical Services Division
i. ND SFY2007 Medicaid ambulance utilization data
b. American Ambulance Association
i. ND CY2006 Medicare data on ambulance service trips: carrier and hospital combined
2. Ambulance service expense data
a. 16 designated ambulance service providers
i. Budget Model expense categories
ii. Payer mixed based on number of trips
iii. Total billed miles per year
North Dakota Medicaid has historically maintained two ground and two air ambulance service rates. Our
contract specified the cost-based fee schedule be developed using the Medicare ambulance fee schedule
format with six ground payment levels for each of urban ground and rural ground, plus urban and rural fixed and
rotor wing payments.
Medicare’s billing rules use the zip code of the patient pickup location to determine if the service qualifies for
urban or rural payment rates. North Dakota Medicaid was unable to provide point of pickup zip code details for
rural/urban determination. The Division advised STS a new computer system is being developed that may
include the capability of capturing the point of pickup zip code.
In agreement with Division staff, we determined that urban and rural Medicare data would provide a reasonable
assumption of Medicaid patient urban/rural distributions. The Medicaid beneficiary’s home address was then
used by the state’s Medicaid data vendor to determine if trips were urban or rural. For comparison purposes,
North Dakota ambulance Medicare charge data were also analyzed.
The percentage of urban or rural Medicaid beneficiary home address zip code data from the North Dakota
ground ambulance expenditure summary was an exact match to the percentage of urban or rural data detail of
the Medicare point of pick up usage. The air ambulance Medicare report sample size was insufficient to be
usable for this purpose, so the actual Medicaid urban/rural home address based summary data was used for the
air ambulance cost-based fee schedule calculations. Since the Medicare and Medicaid air ambulance fee
schedule data both have urban and rural base rates and mileage with no other levels of service, this was a
reasonable approach.
During analysis of Medicaid utilization reports, STS observed a large increase in claims during SFY2007 over
SFY2006. After discussing this finding with Division staff, a definite cause remains undetermined. One potential
explanation resides with an increasing trend nationwide for ambulance services that historically relied on unpaid
volunteer staffing transitioning from not billing to a fee for service. Many of these ambulance service providers
have begun collecting fees and reimbursement, resulting in a permanent trend for increased Medicaid utilization
and payments. These types of evolutionary system changes will occur in the future, but the rate of continued
increased utilization is difficult to predict.
During data analysis, STS observed a larger ratio of ALS to BLS claims to Medicaid than Medicare. Medicaid
ambulance patients as a whole are generally less seriously ill than their Medicare counterparts. The Medicaid
patients that are seriously ill are usually in more of a critical condition, but are fewer when compared to
Medicare, which would have resulted in more BLS trips from Medicaid data than Medicare data. During
SFY2007 ALS procedure codes were used by North Dakota ambulance services to bill Medicaid whenever an
ALS ambulance was dispatched; which is in contrast to the Medicare rules requiring some trips to be billed BLS.
In SFY2008, Division staff met with ambulance service providers and jointly adopted Medicaid billing rules that
mirror Medicare. As a result of the change to use Medicare billing rules after our study period, STS
recommended the use of actual CY2006 Medicare percentages of utilization by levels of care to predict future
claims in each category of service; the Division concurred.

Page 13 of 25
SafeTech Solutions - 2008 Rebasing ND Medical Services Payment Rates – Provider Type (Ambulance)

Ambulance Fee Schedule

Ambulance Service Provider Cost Determination

As identified on page 11, the SFY2007 North Dakota ambulance service costs per call by categories are:
$551.57 for urban ambulance services (see Figure 4), $830.32 for rural ground ambulance services; $5,965.05
for fixed wing services (see Figure 5), and $6,017.10 for rotor wing services. The following sections detail the
cost determination for each category of service.
The use of Medicare payment categories for ambulances were stipulated by the Division in consultation with
NDEMSA, requiring separate analysis of rotor and fixed wing and rural and urban costs (see Figure 5). The cost
variables from the standardized chart of accounts (see Table 18 on page 24) were aggregated to find the total
annual cost.
The total annual mileage expense cost (calculated with the Medicare payment rate) was then subtracted from
the total annual cost to find the total annual cost less mileage (see Figure 6).
Figure 6: Illustration of Ambulance Total Annual Cost Less Mileage Calculation

The resulting amount was divided by the total number of ambulance trips to determine the average cost per trip.
The ambulance cost-based fee schedules are structured consistently with the Medicare fee schedule (see page
6).

Air Ambulance Cost Schedules

Fixed Wing Air Ambulance Rate Determination

The base rate is calculated using the following formula:
𝑩𝑩𝑩𝑩𝑩𝑩𝑩𝑩 𝑹𝑹𝑹𝑹𝑹𝑹𝑹𝑹 = 𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪 𝑭𝑭𝑭𝑭𝑭𝑭𝑭𝑭𝑭𝑭𝑭𝑭 × 𝑹𝑹𝑹𝑹𝑹𝑹
3
A Microsoft Excel® Solver equation was used to simplify the calculation of the conversion factor. The fixed
wing cost-based fee schedule for SFY2007 was calculated as follows:
Table 6: SFY2007 ND Fixed Wing Ambulance Mileage Adjustment
SFY2007 ND Fixed Wing Ambulance
Mileage Adjustment
Average Miles Medicare Allowed Mileage Payment
HCPC Per Call Charge Per Claim
Urban (per call) A0435 434 $7.49 $3,247
Rural (per call) A0435 382 $11.24 $4,299

HCPC Cost per Claim Less Mileage Subtotal

Urban A0430 $5,965 $3,247 $2,718
Rural A0430 $5,965 $4,299 $1,667

3
Microsoft. (2008). Define and solve a problem using Solver. Retrieved July 26, 2008 from
http://office.microsoft.com/en-us/excel/HP051996711033.aspx
Page 14 of 25
SafeTech Solutions - 2008 Rebasing ND Medical Services Payment Rates – Provider Type (Ambulance)

Table 7: Fixed Wing Air Ambulance Base Rate Determination

Fixed Wing Air Ambulance
Base Rate Determination
Conversion Factor: $ 1,568
Fee Schedule
Pickup Relative Value
HCPC Base Rate
Location Unit
Amounts
Urban A0430 1.00 $ 1,567.57
Rural A0430 1.50 $ 2,351.36

Rotor Wing Air Ambulance Rate Determination

The base rate is calculated using the following formula:
𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 = 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 × 𝑅𝑅𝑅𝑅𝑅𝑅
A Microsoft Excel® Solver equation was used to simplify the calculation of the conversion factor. The rotor wing
cost-based fee schedule for SFY2007 was calculated as follows:

Table 8: SFY2007 ND Rotor Wing Ambulance Mileage Adjustment

SFY2007 ND Rotor Wing Ambulance
Mileage Adjustment
Average Miles Medicare Allowed Mileage Payment
HCPC
Per Call Charge Per Claim
Urban (per call) A0436 138 $ 19.96 $ 2,752
Rural (per call) A0436 87 $ 29.94 $ 2,595

HCPC Cost per Claim Less Mileage Subtotal

Urban A0431 $ 6,017 $ 2,752 $ 3,265
Rural A0431 $ 6,017 $ 2,595 $ 3,422

Table 9: Rotor Wing Air Ambulance Base Rate Determination

Rotor Wing Air Ambulance
Base Rate Determination
Conversion Factor: $ 2,345
Fee Schedule
Pickup Relative Value
HCPC Base Rate
Location Unit
Amounts
Urban A0431 1.00 $ 2,344.77
Rural A0431 1.50 $ 3,517.16

Page 15 of 25
SafeTech Solutions - 2008 Rebasing ND Medical Services Payment Rates – Provider Type (Ambulance)
Ground Ambulance Rate Determination
Medicare is currently using a combination of artificially developed permanent and temporary mileage
adjustments as a rural cost adjustment proxy. We do not believe Congress will continue the mileage proxy
adjustments in the long-term. Rural ambulance services generally have fewer trips upon which to spread fixed
costs. The time cost of transportation does not vary from urban to rural, therefore the mileage rate is a poor
proxy to address increased fixed costs, and the application of a higher base rate to capture the higher fixed
costs is more appropriate. Therefore, the use of the urban mileage rate is reasonable for both urban and rural
areas.
Medicare adopted relative value units (RVUs) (see Table 10) when the Medicare ambulance fee schedule was
implemented on April 1, 2002. A relative value unit is generally a factor of the amount of effort, training, and
work deemed to be required for a particular service level. The RVU system also factors the complexity of
services provided and are distributed across six levels of complexity. To calculate the ambulance service fee
with RVU methodology, simply multiply the RVU for the level of service provided by the conversion factor.
Based on the RVU methodology, payments for BLS-E (RVU=1.6) are 60% higher than payments for BLS-NE
(RVU=1.0); and payments for ALS-E (RVU=1.9) are 70% higher than payments for ALS-NE (RVU=1.2). These
RVUs are the method by which the cost of readiness is built into the ambulance fee schedule payment structure.
Table 10: Medicare Relative Value Units
Medicare
Relative Value Units
HCPC Category Factor

A0428 BLS-NE 1.0

A0429 BLS-E 1.6
A0426 ALS-NE 1.2
A0427 ALS-E 1.9
A0433 ALS-2 2.75
A0434 SCT 3.25

Since established in 2002, two reports have found similar relationships between BLS and ALS costs as used in
the Medicare RVU methodology. The GAO 4 estimated that providers without shared costs specializing in ALS
and more complex services had average costs 32% higher than providers without shared costs specializing in
BLS transport services (p.21). The AAA 2006 Ambulance Cost Study 5 reported similar ratios (p.33 and 48).

4
U.S. Government Accountability Office. (2007). Report to Congressional Committees. Ambulance Providers
Costs and Expected Medicare Margins Vary Greatly. Washington, DC: Retrieved July 26, 2008 from
http://www.gao.gov/new.items/d07383.pdf
5
Hogan C. (2007). AAA 2006 Ambulance Cost Study. McLean, VA: American Ambulance Association.
Page 16 of 25
SafeTech Solutions - 2008 Rebasing ND Medical Services Payment Rates – Provider Type (Ambulance)
Table 11: SFY2007 ND Ground Ambulance Mileage Adjustment
SFY2007 ND Ground Ambulance
Mileage Adjustment
Average Miles Medicare Allowed Mileage Payment
HCPC
Per Call Charge Per Claim
Urban (per call) A0425 10 $ 6.25 $ 61
Rural (per call) A0425 31 $ 6.25 $ 194

HCPC Cost per Claim Less Mileage Subtotal

Urban A0425 $ 552 $ 61 $ 491
Rural A0425 $ 830 $ 194 $ 636

Ground Ambulance Cost-based Fee Schedule

The base rate is calculated using the following formula:
𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 = 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 × 𝑅𝑅𝑅𝑅𝑅𝑅
A Microsoft Excel® Solver 6 equation was used to simplify the calculation of the conversion factor. The fixed
wing cost-based fee schedule for SFY2007 was calculated as follows:

Table 12: Urban Ground Ambulance Base Rate Determination

Urban Ground Ambulance
Base Rate Determination
Conversion Factor: $ 301
Service Fee Schedule
Relative Value
Level HCPC Base Rate
Unit
Amounts
BLS A0428 1.00 $ 301.43
BLS-E A0429 1.60 $ 482.29
ALS1 A0426 1.20 $ 361.71
ALS1-E A0427 1.90 $ 572.71
ALS2 A0433 2.75 $ 828.93
SCT A0434 3.25 $ 979.64

6
Microsoft. (2008). Define and solve a problem using Solver. Retrieved July 26, 2008 from
http://office.microsoft.com/en-us/excel/HP051996711033.aspx

Page 17 of 25
SafeTech Solutions - 2008 Rebasing ND Medical Services Payment Rates – Provider Type (Ambulance)
Table 13: Rural Ground Ambulance Base Rate Determination
Rural Ground Ambulance
Base Rate Determination
Conversion Factor: $382
Fee Schedule
Service Relative Value
HCPC Base Rate
Level Unit
Amounts
BLS A0428 1.00 $ 381.71
BLS-E A0429 1.60 $ 610.74
ALS1 A0426 1.20 $ 458.05
ALS1-E A0427 1.90 $ 725.25
ALS2 A0433 2.75 $ 1,049.70
SCT A0434 3.25 $ 1,240.56

Page 18 of 25
SafeTech Solutions - 2008 Rebasing ND Medical Services Payment Rates – Provider Type (Ambulance)

Prepare a report of the Estimated Cost to implement the calculated North

Dakota Medicaid Ambulance Fee Schedule.

A comparison of reimbursement at SFY2007 levels to the cost based fee schedule is provided in Table 14.
Utilization data provided by the Division was used to calculate the impact of the new fee schedule to rates
reflective of actual costs. Submitted with this report, STS has provided the Division with all Excel files used in
the determining expenditure and cost-based fee schedules.
Table 14: Cost Based Fee Schedule Change Model
Cost Based Fee Schedule Change Model
SFY2007 SFY2007
Medicaid Provider Difference
Expenditures Cost
Base $ 665,800 $1,178,498 $ 512,699
Urban Ground
Miles $ 135,994 $ 146,519 $ 10,526
Base $ 820,965 $ 2,045,331 $ 1,224,366
Rural Ground
Miles $ 570,064 $ 622,834 $ 52,770
Base $ 23,554 $ 72,875 $ 49,321
Urban Fixed Wing
Miles $ 109,123 $ 87,068 $ (22,055)
Base $ 40,004 $ 75,056 $ 35,051
Rural Fixed Wing
Miles $ 163,207 $ 193,593 $ 30,386
Base $ 5,781 $ 21,772 $ 15,991
Urban Rotor Wing
Miles $ 8,528 $ 18,354 $ 9,826
Base $ 55,960 $ 219,746 $ 163,786
Rural Rotor Wing
Miles $ 51,765 $ 166,688 $ 114,923
Total $ 2,650,745 $ 4,848,335 $ 2,197,590

The SFY2008 estimated cost increases are based on the Consumer Price Index (CPI) as provided in Table 15,
Table 16, and Table 17 and are published by the US Bureau of Labor Statistics (BLS). The CPI does not include
a specific cost category for ambulance services. STS and the Division jointly determined the use of the Medical
Care Services category to be appropriate for this project. This category is defined as “Professional medical
services, hospital services, nursing home services, and health insurance imputation.” 7 Preparing for the
inevitable increases in cost is prudent because ambulance services are subject to the same cost pressures as a
hospital, clinic, or other health provider. Recently, the cost of fuel has more than doubled, placing undue
hardship on ambulance services that operate on negative or narrow margins. Because ambulances are mobile
and the use of fuel is required to perform ambulance services, it is not possible to mitigate increases in this
expense item without effecting the quality of service.
The calendar year CPI update was applied rather than a fiscal year update to provide the Division with adequate
time to prepare for the change before the start of the state fiscal year. Medicare uses a similar process.

7
U.S. Bureau of Labor Statistics, Division of Consumer Prices and Price Indexes. (2007). Measuring price
change for medical care in the CPI. Washington, DC: Retrieved July 26, 2008 from
http://stats.bls.gov/cpi/cpifact4.htm

Page 19 of 25
SafeTech Solutions - 2008 Rebasing ND Medical Services Payment Rates – Provider Type (Ambulance)
The North Dakota Legislature approved a 4% increase in all SFY2008 ambulance Medicaid payments and
added $347,029 to the base budget (see Table 15). The SFY2008 Estimate includes an inflation update of 4.1%
based upon the CY2006 Medical care services CPI 8.
A 5% ambulance Medicaid payment increase was implemented for the SFY2009 with the continuation of the $
347,029 appropriation (see Table 16). The SFY2009 Estimate includes an inflation update of 5.3% based upon
the CY2007 Medical care services CPI 9.
The Legislature has not yet addressed the SFY2010 ambulance services Medicaid payments. The $347,029
appropriation continues without sunset. The SFY2010 Estimate includes a continued inflation update matched
with the SFY2009 Estimate at 5.3% (see Table 17). This estimate should be updated once the CY2008 CPI is
published.
Table 15: Estimate of SFY2008 Inflationary Expenditure Impact
Estimate of SFY2008 Inflationary
Expenditure Impact
SFY2007 SFY2007 Cost Based
Difference
+4% Adjustment Model +4.1% CPI CY2006
Base $ 692,431 $ 1,226,817 $ 534,385
Urban Ground
Miles $ 141,433 $ 152,526 $ 11,093
Base $ 853,804 $ 2,129,190 $ 1,275,386
Rural Ground
Miles $ 592,867 $ 648,370 $ 55,504
Base $ 24,496 $ 75,863 $ 51,366
Urban Fixed Wing
Miles $ 113,488 $ 90,638 ($ 22,850)
Base $ 41,605 $ 78,133 $ 36,528
Rural Fixed Wing
Miles $ 169,736 $ 201,531 $ 31,795
Base $ 6,013 $ 22,665 $ 16,652
Urban Rotor Wing
Miles $ 8,869 $ 19,107 $ 10,238
Base $ 58,198 $ 228,755 $ 170,557
Rural Rotor Wing
Miles $ 53,836 $ 173,522 $ 119,687
Legislative Increase $ 347,029
Total $ 3,103,804 $ 5,047,117 $ 2,290,342

8
U.S. Bureau of Labor Statistics, Division of Consumer Prices and Price Indexes. (2007). Consumer Price Index
for All Urban Consumers (CPI-U): U.S. city average, by expenditure category and commodity and service group.
Washington, DC: Retrieved July 26, 2008 from http://www.bls.gov/cpi/cpid06av.pdf
9
U.S. Bureau of Labor Statistics, Division of Consumer Prices and Price Indexes. (2008). Consumer Price Index
for All Urban Consumers (CPI-U): U.S. city average, by expenditure category and commodity and service group.
Washington, DC: Retrieved July 26, 2008 from http://www.bls.gov/cpi/cpid07av.pdf

Page 20 of 25
SafeTech Solutions - 2008 Rebasing ND Medical Services Payment Rates – Provider Type (Ambulance)
Table 16: Estimate of SFY2009 Inflationary Impact
Estimate of SFY2009 Inflationary
Expenditure Impact
SFY2008 SFY2008 Cost Based
Difference
+5% Adjustment Model +5.3% CPI CY2008
Base $ 727,053 $ 1,291,838 $ 564,785
Urban Ground
Miles $ 148,505 $ 160,610 $ 12,105
Base $ 896,494 $ 2,242,037 $ 1,345,543
Rural Ground
Miles $ 622,510 $ 682,734 $ 60,224
Base $ 25,721 $ 79,883 $ 54,162
Urban Fixed Wing
Miles $ 119,162 $ 95,441 ($ 23,721)
Base $ 43,685 $ 82,274 $ 38,589
Rural Fixed Wing
Miles $ 178,222 $ 212,212 $ 33,989
Base $ 6,313 $ 23,866 $ 17,553
Urban Rotor Wing
Miles $ 9,313 $ 20,120 $ 10,807
Base $ 61,108 $ 240,879 $ 179,771
Rural Rotor Wing
Miles $ 56,527 $ 182,719 $ 126,192
Legislative Increase $ 347,029
Total $ 3,241,643 $ 5,314,618 $ 2,420,000

Table 17: Estimate of SFY2010 Inflationary Expenditure Impact

Estimate of SFY2010 Inflationary

Expenditure Impact
SFY2009 SFY2009 Cost Based
Difference
Unadjusted Model +5.3% CPI CY2009
Base $727,053 $1,360,305 $633,252
Urban Ground
Miles $148,505 $169,123 $20,618
Base $896,494 $2,360,865 $1,464,371
Rural Ground
Miles $622,510 $718,919 $96,409
Base $25,721 $84,117 $58,396
Urban Fixed Wing
Miles $119,162 $100,500 ($18,662)
Base $43,685 $86,635 $42,950
Rural Fixed Wing
Miles $178,222 $223,459 $45,237
Base $6,313 $25,131 $18,818
Urban Rotor Wing
Miles $9,313 $21,186 $11,873
Base $61,108 $253,646 $192,538
Rural Rotor Wing
Miles $56,527 $192,403 $135,876
Legislative Increase $ 347,029
Total $ 3,241,643 $5,596,288 $2,701,675

Page 21 of 25
SafeTech Solutions - 2008 Rebasing ND Medical Services Payment Rates – Provider Type (Ambulance)
Potential Interim Step
If the Division determines it is unable to make an immediate transition to a cost-based fee schedule, it may find
an interim implementation method to be appropriate. STS recommends consideration be given to a Medicaid
Fee Schedule adjustment matching the Medicare Fee Schedule with a cost-based implementation at a later
date.
The CY2008 Medicare fee schedule ground ambulance conversion factor is $199.67, the North Dakota fixed
wing conversion factor is $2,509.15, and the North Dakota rotor wing conversion factor is $2,917.24. The urban
ground mileage rate is $6.42, the urban and rural fixed wing mileage rates are $7.69 and $11.54 respectively,
and the rotor wing urban and rural mileage rates are $20.50 and $30.75 respectively. We recalculated the cost-
based SFY2007 table above using these CY2008 Medicare numbers. The resulting state cost is displayed in
Table 18.

Table 18: Interim Implementation Estimate for Adopting Medicare Ambulance Rates
Interim Implementation Estimate for Adopting Medicare
Ambulance Rates
2008 Medicare
SFY2007 Difference
Rate Model
Base $665,800 $780,652 $114,852
Urban Ground
Miles $135,994 $150,504 $14,510
Base $820,965 $1,069,899 $248,934
Rural Ground
Miles $570,064 $639,775 $69,711
Urban Fixed Base $23,554 $67,279 $43,725
Wing Miles $109,123 $89,393 ($19,730)
Rural Fixed Base $40,004 $169,507 $129,503
Wing Miles $163,207 $198,760 $35,553
Urban Rotor Base $5,781 $19,454 $13,673
Wing Miles $8,528 $18,851 $10,323
Rural Rotor Base $55,960 $281,029 $225,069
Wing Miles $51,765 $171,198 $119,433
Total $2,650,745 $3,656,302 $1,005,557

Page 22 of 25
SafeTech Solutions - 2008 Rebasing ND Medical Services Payment Rates – Provider Type (Ambulance)

Develop rebasing process Turnover Plan

STS has provided the Division with all the spreadsheets used to calculate the data presented in this report.
Each sheet has been carefully constructed to show cells that are inputs from data, cells that draw information
from another part of a spreadsheet, and cells that compute data. STS will provide telephone technical
assistance to Division staff, up to 10 hours of technical support, to update the sheets through December 31,
2009.

Recommendation for future study and consideration

Based upon our industry knowledge and communications with North Dakota ambulance service providers, there
are two factors affecting the cost of providing services to Medicare and Medicaid beneficiaries in which the
existing Medicare ambulance fee schedule is lacking, adding to the disparity of care in North Dakota versus
more populous regions of the country.
Ambulance services and home health providers are directly affected by the cost of fuel. Every patient encounter
for both types of provider are dependent on transportation of the care-giver to the patient, and in the case of
ambulance, additional transportation of the patient to definitive care.
Ambulance services are the only health care segment under the Medicare system where the higher cost of new
technologies are not addressed by the payment system. Under Medicare rules, new high cost drugs or
technologies can be approved for payment across all sectors except for ambulance services. Ambulance
services are limited to a base rate plus mileage payment methodology. Ambulance services with budgetary
capacity are disincentivized from purchasing or using specially designed ambulances and stretchers to transport
bariatric patients, continuous positive airway pressure (CPAP), 12 lead EKG machines for the identification of
ST Elevation Myocardial Infarction, and other improvements. Ambulance services without budgetary capacity to
absorb some of these costs are not able to provide the quality and safety enhancements of those in other
services.
For these reasons STS recommends the Division consider developing a mechanism to recognize the increased
costs for providing contemporary medical services, particularly in rural areas (statewide). The Division could
consider adding the use of bariatric transport, CPAP, and 12 lead EKG equipment to the approved Medicare list
for recognition of the ALS2 level of service.

Page 23 of 25
SafeTech Solutions - 2008 Rebasing ND Medical Services Payment Rates – Provider Type (Ambulance)
Table 19: Budget Model Standardized Chart of Expense Accounts
Budget Model Standardized Chart of Expense
Accounts
6103 Medical Supplies-Patient Care
6104 Gases (oxygen)-Patient Care
6105 Drugs-Patient Care
6106 Laundry & Linen-Patient Care
6108 Equipment Repair-Patient Care
6109 Minor Equipment-Patient Care
6111 Books & Periodicals-Patient Care
6112 Travel & Entertainment-Patient Care
6113 Uniforms
Dispatch
6203 Dispatch Supplies
6209 Dispatch Minor Equipment
6213 Telephone
6214 Radio Maintenance
6215 Radio Antenna (Monthly Fees)
6216 Cell Phone (Monthly Fees)
6217 Pager (Monthly Fees)
Administration
6303 Office Supplies
6308 Office Repair & Maintenance
6309 Office Minor Equipment
6311 Books & Periodicals
6312 Travel & Entertainment
6313 Administration Telephone
6320 Worker's Compensation
6321 Unemployment Tax
6322 FICA Tax
6323 General Liability Insurance
6324 Professional Liability Insurance
6325 Umbrella Coverage
6326 Health Insurance
6327 Pension Plan
6340 Physician Fees
6341 Accounting Fees
6342 Legal Fees

Page 24 of 25
SafeTech Solutions - 2008 Rebasing ND Medical Services Payment Rates – Provider Type (Ambulance)
Budget Model Standardized Chart of Expense
Accounts
6343 Collection Agency Fees
6344 Software Maintenance Contracts
6345 Consulting Fees
6346 Service Contracts
6347 Management Contract
6348 Claim Processing Contract
6350 Dues & Memberships
6351 Licenses
6352 Donations
6353 Food
6360 Printing & Publication
6361 Advertising
6362 Employment Agencies
Interest Expense
6400 Interest Expense
Building
6503 Facilities Supplies & Services
6508 Building Maintenance
6571 Property Taxes
6572 Utilities
6573 Housekeeping
6574 Laundry-non patient care
6576 Property Insurance
Vehicles
6681 Vehicle Gas & Oil
6682 Vehicle Repairs

Page 25 of 25