What You Need to Know About Medical Transport and Fair Market Value 

March 27, 2024

Written by Alex Wiederin, CVA and Nicole Montanaro, CVA

Over the past few years, the medical transport industry has experienced constant growth, which is projected to continue into the foreseeable future. This growth can be attributed mainly to the increasing number of vehicle accidents, the growing elderly population, and medical tourism. As part of this trend, medical transport arrangements with hospitals have come under increased scrutiny from regulators as it relates to fair market value and compliance.  

When entering into a medical transport arrangement with a third-party provider, it is important for hospitals to understand what services are being provided, the reimbursement environment for medical transports, and the impact of any compliance issues. Services are often provided not just by the medical transport vendor, but also by the hospital, which may offer services to the medical transport vendor as well. From a compliance perspective, fees for both sets of services should be at fair market value (FMV). Based on VMG Health’s extensive experience in valuing medical transport arrangements, we have outlined some fundamental questions to help hospitals/facilities understand the elements of their arrangement and determine which services need to be valued. 

  1. Which transports are covered by Medicare? The Medicare Ambulance Fee Schedule (AFS) lists the levels of ambulance service that are covered under Medicare Part B. The Medicare AFS payment structure is a base rate plus a mileage rate. Reimbursement is tied to the particular level of service transport provided and includes compensation for staff, vehicle, equipment, and supplies. The rates are updated annually and adjusted by locality. Please see the chart below for the list of HCPCS codes included in the Medicare AFS and the corresponding level of service. 
HCPCS Code Level of Service Description 
A0425 Ground Mileage – Loaded per mile 
A0426 Advanced Life Support I – Non-emergency 
A0427 Advanced Life Support I – Emergency 
A0428 Basic Life Support – Non-emergency 
A0429 Basic Life Support – Emergency 
A0430 Fixed Wing Transport 
A0431 Rotor Wing Transport 
A0432 Paramedic Intercept 
A0433 Advanced Life Support II 
A0434 Specialty Care Transport 
A0435 Fixed Wing Mileage 
A0436 Rotor Wing Mileage 
  1. What transports are not covered by Medicare? The Medicare AFS does not have an analogous Medicare HCPCS code for all transport types; therefore, contracted rates for these transports cannot be tied to the Medicare AFS. Some examples of transports not covered by the Medicare AFS are non-emergency transports (ambulatory, wheelchair, and stretcher), bariatric transports, and ride-share services. These types of transports are most commonly used to assist patients by getting to and from their medical appointments, discharges from the hospital, and transports between facilities. The ride-share services are fairly new to the medical transport market but are expected to make a significant impact by offering lower-cost rides, allowing the patient to schedule their own rides, and by reducing the number of missed medical appointments. Transports not covered by the Medicare AFS should be valued to ensure compensation aligns with FMV. 
  1. What additional services are provided in the arrangement? Medical transport agreements can be tailored to the specific needs of each hospital or facility, usually associated with the provision of specialty care transports (neonatal, pediatric, and/or high-risk obstetrics). In some cases, the transport vendor can be contracted for exclusive transport services and/or the hospital or facility can provide support services to assist the transport vendor in providing the transports. These support services can include the provision of staff, medical supplies, medical equipment, program management, business outreach, medical direction, helipad, crew quarters, and branding. Generally, compensation for these additional services cannot be tied to the Medicare AFS and would need to be valued separately to ensure the fees are consistent with FMV. 
  1. Which party is financially responsible for the transports provided in the arrangement? One of the most frequently asked questions related to medical transports is, Who is paying for the transport? The answer to this question ultimately depends on what the transport is for and where is the patient going. Medically necessary transports to a hospital, critical access hospital (CAH), or a skilled nursing facility (SNF) are typically covered by Medicare Part B. For Medicare Part B transports, the transport vendor should seek payment from the patient or the patient’s insurance. However, a patient admitted to a hospital, CAH, or SNF may require transportation to another level or site of care as an inpatient. Reimbursement for these transports is generally included in Medicare Part A payments to the hospital/facility. For Medicare Part A transports, the transport vendor can seek payment from the hospital, CAH, SNF, or the entity that received the Medicare Part A payment. 
  1. What are the FMV/compliance risks associated with medical transport? With medical transport arrangements being under close watch by regulators, it is important to understand the risks around these types of arrangements. Some factors that can lead to noncompliant arrangements include oral arrangements, old contracts, transports not medically necessary, fees not covering the costs of the service, and “swapping.” One of the biggest compliance risks associated with medical transport arrangements is the risk of swapping. Swapping occurs when a transport vendor agrees to provide below-market (or sometimes below-cost) transports to the hospital or facility in exchange for sending the more lucrative transports covered by Medicare, other governmental payors, or commercial payors. To mitigate these factors, review the services provided by both parties, identify the transport direction (i.e., transports to or from the hospital or facility), tie fees to the Medicare AFS when possible, and watch out for services being provided for free or at a discount. 

Medical transportation plays a critical and necessary role in the healthcare industry. Arrangements for medical transportation services can be extremely complex. VMG Health has extensive experience valuing payments for all kinds of medical transport arrangements and understands the numerous risks associated with these types of valuations, which helps clients enter arrangements compliant with FMV. 

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