ASTM F1493-93(2003)
(Guide)Standard Guide for Financing and Financial Accountability of Medical Transportation Systems
Standard Guide for Financing and Financial Accountability of Medical Transportation Systems
SCOPE
1.1 This document establishes guidelines for understanding the financing of medical transportation systems. It identifies factors affecting financing, system design and performance requirements, revenue sources, financial accountability and management, and requirements for financially efficient systems.
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Designation:F1493–93 (Reapproved 2003)
Standard Guide for
Financing and Financial Accountability of Medical
Transportation Systems
This standard is issued under the fixed designation F 1493; the number immediately following the designation indicates the year of
original adoption or, in the case of revision, the year of last revision. A number in parentheses indicates the year of last reapproval. A
superscript epsilon (e) indicates an editorial change since the last revision or reapproval.
1. Scope 4.3 Cost Accounting—It is recognized that medical trans-
portation services frequently are a part of a larger organization.
1.1 This guide establishes guidelines for understanding the
However, the proper use of this guide mandates that all costs,
financing of medical transportation systems. It identifies fac-
real and imputed, directly or indirectly related to providing
tors affecting financing, system design and performance re-
ambulance service, regardless of organizational structure, be
quirements, revenue sources, financial accountability and man-
totally and accurately accounted for through the use of gener-
agement, and requirements for financially efficient systems.
ally accepted accounting principles.
2. Referenced Documents 4.4 Application—This guide, as part of the ASTM Stan-
dards and Practices, shall apply in its entirety whenever the
2.1 ASTM Standards:
entire document, or any part thereof, is used by any govern-
F 1177 Terminology Relating to Emergency Medical Ser-
mental authority to establish, operate, manage or regulate the
vices
delivery or payment for medical transportation services.
3. Terminology
5. Environmental Factors
3.1 Definitions of Terms Specific to This Standard:
5.1 Several significant factors of a given service area affect
3.1.1 patient transport price—determined by summing all
its system’s resources and related costs. They require careful
costs related to patient transports, to include all non allowed
examination and analysis. Understanding these factors will
chargesandcontractualallowanceandadjustedbyanyrevenue
enhance the ability of those who direct, administer, manage
generated by any subsidies, contributions and subscription
and/or regulate medical transportation systems to more accu-
fees. The resulting amount is divided by the total number of
rately determine anticipated needs and evaluate actual costs.
patient transports to determine the patient transport price.
5.2 Terrain—Areas with mountains, valleys, waterways and
3.1.2 medical transportation system—(see Terminology
bridges,andsoforth,willusuallybelessaccessibleandrequire
F 1177 for the definition of this term.)
more resources resulting in reduced efficiency and a higher
3.1.3 medical transportation services—(see Terminology
patient transport price.
F 1177 for the definition of this term.)
5.3 Roads and Highways—Outdated and dangerous design
4. Significance and Use
of roads create hazards. These hazards create more demand for
service and thus require a greater concentration of resources.
4.1 Management—Sound fiscal management is essential for
The extra resources increase system costs.
all medical transportation systems. Without sufficient financial
5.4 Weather—Systems subject to extreme weather condi-
resources, a system will fail to consistently achieve its objec-
tions (that is, cold and snow, heavy rain and rock/mud slides,
tives. Therefore, finance is a primary responsibility in all
hurricanes, heat and dry conditions, wild/forest fires, and the
systems; be they hospital owned/operated, private, public or
like) will need seasonal or periodic plans to meet area needs
volunteer organizations, or any combination thereof.
during such extremes. Maintenance of proper response plans
4.2 Cost Determination—This guide is designed to accu-
and participation therein is a cost factor to the system. During
rately determine actual and imputed costs of providing ambu-
such times maximum resources are required and system
lance service. It provides methodology for understanding the
efficiency is reduced resulting in higher overall patient trans-
value of services rendered and a basis for realistic industry-
port costs.
wide comparisons.
5.5 Population Density—Areas of high population density
generate higher call volume and allow greater flexibility in
This guide is under the jurisdiction of ASTM Committee F30 on Emergency
utilization of resources resulting in lower overall patient
Medical Services and is the direct responsibility of Subcommittee F30.03 on
transport costs.
Organization/Management.
5.5.1 Demographics—Areas with population characteristics
Current edition approved Sept. 10, 2003. Published October 2003.
Annual Book of ASTM Standards, Vol 13.02. with high concentrations of the elderly and economically
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F1493–93 (2003)
disadvantaged, or both will result in higher call volume and a 6.5.3 Taxes—Federal, state, and local taxes apply to pur-
greater demand on resources to meet the needs of these chases, property, incorporation, and the like.
portions of the total service area.
6.5.4 Other Non-EMS Related Costs—Other restrictions
5.6 Natural/Man Made Disasters—Systems subject to un-
include building and zoning regulations.
predictable events of extreme consequences (for example,
earthquakes, airplane crashes, structural fires, hazardous mate-
7. System Factors Related to Expense
rial incidents, and the like) will need emergency preparedness
7.1 Exclusionary Policies—Systems that exclude providers
planning to meet area needs during disaster events. Mainte-
from emergency or non-emergency calls, respectively, by
nanceofproperresponseplansandparticipationinexerciseare
design increase total system cost. Utilization of all resources
cost factor to the system. During disasters maximum resources
within the service area is necessary to achieve maximum
are required and system efficiency is reduced resulting in
economy while maintaining performance requirements,
higher overall patient transport costs.
thereby resulting in lower overall patient transport price.
6. System Design Factors 7.2 Performance Factors—Jurisdictional authorities have a
responsibility to establish performance requirements for the
6.1 Service Area—It is generally more economical for a
provider(s) of service and demand accountability and compli-
medical transportation system to serve a larger population.
ance thereof. In the design of such requirements, cost consid-
Systems which provide a larger volume of transports within a
erations, allowances for geography, population density, demo-
given area will benefit from the inherent economies of scale
graphics, economies of scale, duplication and/or multiple
and generate a lower average cost per transport.
responders and exclusionary policies, must be addressed.
6.2 Medical Transport Providers—The number of medical
Precise accounting practices for the system must be initially
transport providers in a service area directly influences the cost
established and routinely maintained so all cost factors within
per transport. Duplication of resources by multiple providers
the system design can be identified and reviewed with rela-
withinaserviceareacannegativelyimpacteconomiesofscale.
tionship to the performance factors.
6.3 Health Care Facilities—The number and location of
7.2.1 Operations—Factors include meeting standards for
hospitals, nursing homes, and the like, will influence costs. A
averageresponseandtotaltimes,staffingpatterns,andsoforth.
significant number of transports to hospitals outside the service
Systems that require shorter response and total time perfor-
area can increase costs.Alarger ratio of nursing home beds to
mance will demand greater resources and will cost more than
a given general population can result in higher economies of
those with less rigid requirements.
scale than a smaller ratio and thereby lower costs.
6.4 Start-Up Costs—Sufficient funds must be available to
7.2.2 Clinical Capability—Factors include meeting stan-
ensure the success of initial start-up, or expansion of an dards for the license level of the service (Basic to Paramedic),
existing service. To determine the required level of funding, the license level of the personnel, on-line medical control,
consideration must be given to the following; quality assurance activities, and the like. Systems that require
6.4.1 Offıce/Service Facility—Items to be included are higher levels of clinical care, training and medical supervision
building, office equipment, furniture and fixtures, computers, will demand greater resources and will cost more than those
and so forth. with lesser requirements.
6.4.2 Equipment—Items to be included are ambulances,
7.3 Effıciency—Efficiency is affected by policies, ordi-
administrative vehicles, communication equipment, medical
nances, and rules which limit the flexibility of the provider or
equipment and supplies, and so forth.
which do not provide incentives to promote efficiency.
6.4.3 Inventory—Items to be included are sufficient levels
7.3.1 Efficient systems deploy ambulance, staffing, and
of supplies for on-going operations of ambulance services and
equipment resources to eliminate duplication.
office functions for the period of time it is expected to take to
7.3.2 Efficient systems promote cooperation between the
establish cash flow to support on-going operation.
jurisdictional authorities and the providers to identify and
6.4.4 Personnel—Items to be included are expenses related
eliminate waste, inefficiencies and restrictive regulations in
to recruiting, hiring, training, salaries and benefits.
order to reduce overall system cost while improving system
6.4.5 Insurance—Actual premium paid, or imputed costs
efficiency.
for self-funding.
6.4.6 Working Capital—Funds adequate to support overall
8. System Factors Related to Revenue
operations until such time as sufficient cash flow is established.
8.1 Revenue Sources—Different types of revenue sources
6.5 Jurisdictional Responsibilities—Jurisdictions exist at
fund the providers within an EMS system. The different types
the federal, state, regional, and local level which have an
of revenue, separately or in combination with each other, have
impact on the operation of each EMS provider and the EMS
different impacts on the operations of the system.
system. They may include the following:
8.1.1 Subsidies—Revenue received from direct governmen-
6.5.1 EMS Regulations/Legislation—EMS regulations and
talfunding.Subsidiesrangefromtotalfundingtosupplemental
legislation are usually passed at the state or local units of
compensation to affect shortfalls from other revenue sources.
government. They are usually influenced by EMS guidelines
recommended at the federal level. 8.1.2 Subscription Fee—Pre-paid fee for a family or indi-
6.5.2 Labor—Federal labor laws cover issues related to vidual who belong to a membership plan which agrees to
Health & Safety, Collective Bargaining, and Wages & Hours. provide ambulance service for reasons of medical necessity.
F1493–93 (2003)
8.1.3 Contributions/Donations—Revenue received from in- 9.2.2.1 Current Liabilities—Obligations which will gener-
dividual or general solicitations, fund raising, grants, and so ally be paid within a twelve month (FY) period (for example,
forth. accounts payable, accrued payroll expenses, current portion of
8.1.4 Fee for Service—Revenue received from charges for long-term debt, and the like).
specific services performed.
9.2.2.2 Long-Term Liabilities—Obligations owed by the
8.2 Reductions in Revenue—Revenue may be reduced be-
system whose payment term extends beyond a twelve month
cause of management practices related to third party payor
(FY) period (for example, bank notes, bond payments, ad-
regulations, group purchases of service, or non-payment of
vances from stockholders, and the like).
fees.
9.2.2.3 Other Liabilities—Obligations whose payment
8.2.1 Non-Allowed Charges—Third party payors such as
terms are indeterminable (for example, deferred taxes, and the
MedicareandMedicaidreimbursespecificserviceandsupplies
like).
utilized at a lower rate than the normal billing rate. The
9.2.3 Equity—The value of the difference between total
unreimbursed amount is referred to as non-allowed charges.
system assets and liabilities which reflect the net value of the
This is applicable only on transports where the provider
system.
accepts Medicare or Medicaid assignment.
9.2.3.1 Paid in Capital—Initial or additional investment in
NOTE 1—It is not mandatory that a provider must accept assignment on
the system.
Medicare claims. Providers may submit claims as non-assigned and
9.2.3.2 Retained Earnings/Reserves—The total net income/
charge patients the full amount for services rendered, thereby avoiding the
loss which remains in the system at a specific point in time.
reduction in revenue for non-allowed charges.
9.3 Income Statement—The measure of the financial perfor-
8.2.2 Contractual Allowances—Specific group purchasers
mance of the system over a period of time.
may be granted pre-determined discounts based upon negoti-
9.3.1 Revenue—Total income from all revenue sources, less
ated agreements (for example, exclusive contract, accelerated
revenue reductions.
payment, and the like).
9.3.2 Operating Expenses—Total costs, real or imputed,
8.2.3 Bad Debt—Although bad debt is a cost of doing
which relate to producing the service (for example, service
business,itbearsspecialmentionwithrelationshiptoreduction
related salaries and associated costs, supplies, vehicle mainte-
in revenue.
nance and depreciation, insurance, and the like).
8.2.3.1 An EMS provider will have a significant number of
9.3.3 General and Administrative Expenses—Total costs,
accounts (much higher than most other industries) which will
real or imputed, which relate to administration and promotion
not be paid. These accounts are bad debt, for which the
of the service (for example, administrative/clerical salaries and
responsible party is unwilling or unable (indigent) to pay.
associated costs, advertising, computer systems, professional
8.2.3.2 Calculation of projected bad debt is determined by
fees, and the like).
deducting a historical percentage from gross charges. This
percentage will vary by provider, its ability to manage its 9.3.4 Income Taxes—Federal, state and local income taxes
collection policies and a given service area. required of providers who are not tax exempt.
8.3 Revenue Surplus/Profit—A surplus in revenue occurs
9.4 Reserve and Working Capital—An annual capital and
when revenue is greater than all expenses (operating, general
operating budget is an estimate of yearly expenses. As i
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