New Medicare “Locality Rule” May Lead to Denied Mileage Claims

CMS has announced a new change to its guidelines regarding the so-called “locality rule.”  Effective September 18, 2017, Medicare Administrative Contractors (MACs) will have the discretion to define “locality” in their service areas.  This means that some MACs may not recognize any “localities” in their jurisdictions and others may provide specific locality determinations for ambulance coverage.  It is also possible that MACs will simply continue to process claims as they have been under the current provisions of the Medicare Benefit Policy Manual.  CLICK HERE to review the new CMS Transmittal 236 (CR 10110). 

Here is some brief background of the locality rule and the impact that this new policy is likely to have. CMS Regulations state that ambulance transports are covered to the “nearest hospital, Critical Access Hospital or Skilled Nursing Facility that is capable of furnishing the required level and type of care for the beneficiary’s illness or injury.”  (42 CFR 410.40(e)).  This is often referred to as the “nearest appropriate facility” requirement (see section 10.3 of the Medicare Benefit Policy Manual).  However, most MACs when processing ambulance claims have not strictly limited mileage claims to the nearest facility when a community is served by multiple facilities and any one of them could adequately treat the beneficiary’s condition.  For instance, if an area is served by multiple hospitals and one is 5 miles from the point of pickup and one is 8 miles away, Medicare has generally paid the full mileage to either of the facilities that normally serve that community. 

However, now that CMS has clearly given discretion to the MACs to define “locality” in their jurisdictions, this means that some MACs may elect not to define any “localities” and instead may strictly apply the “nearest appropriate facility” requirement from the CMS regulations.  This means that some ambulance services may face denied mileage claims for any covered mileage that exceeds the geographically closest facility that can appropriately treat the beneficiary.  In this event, ambulance services will be required to bill the beneficiary for the excess mileage that the MAC determines exceeds the nearest appropriate facility.  It is also possible that some MACs will not define a locality in writing, but will continue to pay excess mileage claims in accordance with the existing Manual provisions under unwritten “locality” interpretations.

Ambulance services should contact their MACs through appropriate provider input channels and urge them to define realistic localities.  If MACs refuse to define any localities and elect to strictly enforce the nearest appropriate facility rule, this will likely have the effect of limiting Medicare beneficiaries’ exercise of free choice of facilities and expose them to increased out-of-pocket expenses even to go to a facility that normally serves their community.  It will also increase hardships on ambulance services by making them bill patients for mileage that was previously covered by Medicare, resulting in more uncollected reimbursement and thus more uncompensated care, at a time when margins for some ambulance services are already decreasing. 

Ambulance services may wish to expand their use of Advance Beneficiary Notice of Noncoverage (ABN) forms in order to notify Medicare beneficiaries (or their financially responsible parties) that they may be billed for non-covered mileage charges if transported to a destination beyond the geographically nearest appropriate facility.  CLICK HERE for the newly-updated PWW Model ABN Form (which becomes effective on June 21st).  Of course, ABNs should never be used in emergencies or when the beneficiary is under duress.  In addition, in non-emergency cases, ambulance services may collect non-covered mileage charges prior to the time of transport in order to reduce their financial risk.

In addition to expanding the use of ABN forms to notify Medicare beneficiaries of their potential out-of-pocket liability for excess mileage, ambulance services should also focus on documenting the reason for bypassing closer facilities when those facilities do not  have the appropriate resources to treat the beneficiary’s condition.  In other words, when the patient requires transport to a more distant facility because closer facilities lack the ability to provide the specific type of test, services or procedure the patient requires, the ambulance service should be sure to obtain appropriate documentation of that fact to support their mileage claims to the more distant facility. 

Transmittal 236 also clarifies that an ALS assessment qualifies as an ALS1-emergency even if no ALS interventions are required.  This is not a change in Medicare policy but only a clarification added due to a MAC’s previous incorrect interpretation of this issue. 

The updated CMS locality rule will be discussed in much more detail at the all-new abc³⁶⁰ conference in Hershey, PA on October 24-25, 2017.  CLICK HERE for more information.