The AIS Contract

AIS has provided EMS billing services to the City since 1988. When EMS was part of the Department of Public Health (DPH), AIS contracted with DPH to provide such ambulance transport services. Although EMS merged with the Fire Department in 1997, the transfer of the AIS contract did not occur until July 1, 2001 when a new contract began between AIS and the Fire Department. AIS receives a commission of 7.5 percent of actual cash collected, based on AIS billings, for EMS services.

The changes related to the merger of EMS with the Fire Department created a number of detailed, operational issues that have yet to be resolved. Several key parties are involved in the management and recording of EMS accounts receivable and revenue. These include AIS, the EMS Administration section within the Fire Department, the Accounting group with the Finance section of the Fire Department, Bureau of Delinquent Revenue (BDR) in the Office of the Treasurer and Tax Collector, and San Francisco General Hospital, which assists in providing information on patients transported there. Also involved are the other private hospitals to which patients are transported. As a result of the July 1 shift of the AIS contract to the Fire Department, as well as a result of this audit, some of these parties have begun meeting and attempting to resolve the operational details that were not clarified by July 1. We believe that this is a positive development that should continue.

While we believe that AIS is generally providing timely billings and collections, in accordance with its contract, we believe there may be opportunities for additional revenue collection with regard to the accounts that AIS is unable to collect. Since AIS is paid a commission for each account that it collects, the company has an incentive to retain EMS accounts for as long as possible and attempt to collect the accounts. We believe it would be more beneficial to the City if AIS transferred to BDR the accounts it is unable to collect after a reasonable period of time (specified in more detail in later sections when specific account types are addressed).

Billing Patients and Collecting Payments

From EMS Call to Bill

At the scene of an EMS incident Fire Department employees collect medical and administrative patient data in a Patient Care Report (PCR). The PCR provides fields for a detailed description of a patient"s conditions and the medical treatment provided. Also included in the PCR are fields for information necessary to generate a bill for the service. These fields include: patient name, address, phone number, date of birth, Social Security number, type of insurance, and insurance policy number. The original PCR is retained by the Fire Department and scanned into an electronic file and transferred to AIS, approximately seven to 10 days after the EMS service has been provided. AIS enters patient data, including billing information, from the PCR into its database. In addition, AIS assigns diagnostic codes for billing purposes to the specific medical services provided. AIS generates a bill based on the billing information included in the PCR and the diagnostic coding assigned.

AIS sends out a series of five bills for patients who are transported and four bills for patients who are not transported. Bills for patients who are transported always exceed $300. Non-transport bills are usually less than $300 unless a patient receives extensive care at the scene. AIS" stated policy is to transfer to BDR those accounts exceeding $300 that have not been collected within 180 days of the date of service (see "Uncollected, Billable Accounts" below).

For accounts for which the PCR lacks sufficient billing information, AIS researches its own database of prior patients, checks for Medi-Cal or Medicare eligibility if the PCR includes the Social Security number, researches a reverse directory, and finally sends a questionnaire to the hospital that treated the patient. In many instances, however, the hospitals do not respond or respond only after a long delay (see Section 4.3, "EMS Patient Data Collection"). Unless AIS can gather billing data for such accounts, the accounts are deemed "non-billable" and remain at AIS until they are purged from the AIS computer system after approximately three years.

Timeliness of Billings

We selected a sample of 125 EMS calls from August 2000 through January 2001 and traced the calls through the PCR and billing process. We tested whether bills were generated timely, in accordance with AIS" performance standards stipulated in its contract with the Fire Department. (See "Non-Billables" below and "EMS Patient Data Collection" findings for description of additional audit tests.) We found:

· Records were generally properly maintained, both at the Fire Department and at AIS. All calls for which there should have been a PCR, the PCR was on file. All calls for which a PCR was not completed, an appropriate explanation was provided. (See "EMS Patient Data Collection" for instances in which a PCR is not completed.)

· The AIS contract states that AIS will send out a bill for EMS services within three days of receipt of the PCR from the Fire Department. We were unable to test for compliance with this performance standard because AIS does not record the date that it receives the PCR from the Fire Department. However, our testing indicated that AIS is sending out bills within a reasonable time frame, approximately two to three weeks after the service is provided.

Collections, Non-Billables, and Uncollected Billable Accounts

AIS Collection History

In FY 2000-2001, AIS collected $15,117,058 for the Fire Department. Table 4.4.1 shows collections by AIS and compares it to the total service provided in the given fiscal year. The difference between "Gross Cash Collected" and "Total EMS Service Provided" consists of (1) non-billable accounts, (2) billable but not yet collected accounts, (3) billable but uncollectible accounts, and (4) allowances for payment limits of government programs such as Medicare and Medi-Cal. It is important to note that a portion of "Total EMS Service Provided" will never be recoverable by the City because of the limits on how much Medicare, Medi-Cal and other government programs will pay for EMS services. For example, of accounts collected by AIS in FY 2000-2001, adjustments for such payment limits reduced the total collected by $5,194,671. In other words, AIS would have collected $20,311,729 were it not for such limits on allowable charges.

Table 4.4.1
EMS Revenue Collections By AIS
FY 1997-1998 through FY 2000-2001

1. The contract between AIS and the Fire Department that took effect July 1, 2001, changed the commission paid to AIS to a flat rate of 7.5%. Prior to July 1, 2001, it was a graduated rate based on collections.

Potential To Improve Collections

We believe the Fire Department has the potential to improve its EMS revenue collections by directing AIS to transfer more accounts to BDR and to transfer them sooner. Table 4.4.2 below summarizes the different classifications of accounts by AIS as well as the Fire Department"s policy regarding such accounts.

Table 4.4.2
Transfer Policies for the
Transfer of Account from AIS to BDR

Non-Billables

AIS classifies as non-billable, accounts for which a bill cannot be generated or for which the patient falls within a particular group. AIS classifies non-billables into the following categories:

·Incomplete Address: These are patients for whom the PCR does not include enough address information, and AIS is not able to find the additional necessary information, to send out a bill. These accounts are identified as such as soon as AIS reviews and researches the PCR. In FY 2000-2001, 7,368 Incomplete Address accounts totaling $3,477,342 were identified.

·Bad Address: These are accounts for which AIS mails out a bill but the mail is returned as undeliverable. Therefore, these accounts are initially believed to be billable but are subsequently classified as non-billable. Bad Address accounts identified in FY 2000-2001 consisted of 6,389 accounts totaling $3,057,150.

·Medically Indigent Adult (MIA): These are homeless adults who, based on AIS" research, are not eligible for government assistance. MIA accounts identified as such in FY 2000-2001 consisted of 7,188 accounts totaling $3,024,476

·MUNI: This category represents accounts involving MUNI accidents at which MUNI is determined to be at fault. MUNI officials request that the account essentially be written off in order to reduce potential liability to the City. In FY 2000-2001, 28 such MUNI accounts were identified totaling $7,612.

·Jail: These are patients who are in the custody of the San Francisco Police Department. The Fire Department does not bill the Police Department or the patient for EMS services provided to these patients. In FY 2000-2001, AIS identified 384 such accounts totaling $146,684.

EMS service provided in FY 2000-2001 totaled $33,336,521. Of the categories described above, "Incomplete Address" represented 10.4 percent of total service provided, "Bad Address" represented 9.2 percent, and "MIA" represented 9.1 percent. The MUNI category represented 1.5 percent and the Jail category represented less than 1 percent. Table 4.4.3, below summarizes the categories of non-billables and the value of accounts identified as non-billables in FY 2000-2001.

Table 4.4.3
EMS Non-Billables By Account Type
Identified in FY 2000-2001

Table 4.4.4, below shows the value of accounts identified as non-billables in Fiscal Years 1997-1998 through 2000-2001, and also shows non-billables identified each year as a percentage of the total EMS service provided in the that year.

Table 4.4.4
Non-Billable Accounts FY 1998-FY 2001

Accounts are classified as "Incomplete Address" or "Bad Address" when billing data in the PCR is either incomplete or inaccurate. (See "EMS Patient Data Collection" regarding testing of these categories.) Of the $9,713,265 in non-billable accounts in Fiscal Year 2000-2001, 6,389 accounts totaling $3,057,150 were classified as "Bad Address." "Incomplete Address" accounts totaled $3,477,342 and represented 7,368 accounts. The total of these two categories was $6,534,492, or 67.3 percent of the total $9,713,265 non-billables. Throughout the year, AIS recovers some accounts deemed as non-billable. AIS does not track non-billable recoveries separately but estimates that such recoveries are approximately $200,000 to $300,000 annually.

Because there is simply not enough billing information in the PCR, it is difficult to tell from the PCR whether these "Incomplete Address" and "Bad Address" accounts may be billable to an individual or a third-party insurance company. While AIS has a written procedure for researching such accounts and attempting to collect billing data, we believe that the subsequent transfer of such accounts to BDR (if AIS is unsuccessful) may allow the Fire Department to improve its EMS collections.

We tested a sample of "Incomplete Address" and "Bad Address" accounts and could not always determine whether AIS had adhered to its written procedure for research because it does not consistently record whether such procedures have been followed. While AIS officials stated that all non-billable accounts are subject to research steps stipulated in its written policy, we were unable to verify this through our testing because AIS does not consistently record the performance of every research step in its system. We sampled 60 accounts classified as "Incomplete Address" and "Bad Address" and in 35 cases were unable to determine from review of the billing records, whether the AIS research procedures were followed. However, even if such procedures were consistently followed, we believe that non-billable accounts should be transferred to BDR to maximize collection potential.

As soon accounts are classified as non-billable, and within no more than 90 days of EMS service, they should be transferred to BDR for the following reasons:

(1) BDR functions as a collection agency for the City and accordingly, has a number of collection agency tools not available to AIS, which aid in locating those who owe the City money. These tools include:

(2) Since accounts are not transferred to BDR, they remain indefinitely at AIS until its system is purged approximately three years later. There are no controls that limit the ability of AIS employees to access such older, inactive accounts. We believe the lack of internal controls to prevent such access increases the potential for fraudulent collection accounts. Although we found no irregularities related to these accounts, or any other indication that such a fraud had occurred or was occurring, the current internal controls would not prevent such activity from occurring. The transfer of accounts from AIS to BDR would serve as an internal control to limit the risk in this area.

AIS currently transfers billable accounts in excess of $300 to BDR. We believe such transfers should be expanded to include non-billable accounts in excess of $300. Section 10.38 of the Administrative Code states that departments "shall report to the Bureau of Delinquent Revenue Collection all accounts receivable over $300 that remain uncollected for a period in excess of 90 days, as shown by the records of each such department or office."

We further believe that it may be beneficial to the City for AIS to transfer non-billable accounts of $300 or less (non-transport accounts) to BDR as well, since there are a large number of these accounts. AIS does not maintain a breakdown of non-billable, non-transport accounts. However, AIS estimates that approximately 25 percent of the non-billable accounts are for non-transports and this represents about 10 percent of the value of all non-billables, meaning approximately $971,327 of the $9,713,265 of non-billables in FY 2000-2001 was for non-transport service. BDR has stated that it would be willing to accept all non-billables, those in excess of $300 as well as those that are $300 or less. Further, we obtained an opinion from the City Attorney that stated that such accounts ($300 or less, whether non-billable or billable) could be transferred to BDR since the Administrative Code simply requires the transfer of accounts to BDR that are greater than $300, but does not prohibit the transfer of accounts that are $300 or less. Further, BDR has indicated that it has accepted accounts that are $300 or less from other City departments .

Even if a small percentage of the non-billables were collected, it would result in additional revenue for the Fire Department. Even if we assume that all non-billables classified as Jail and MUNI are not collectible ($154,296 in FY 2000-2001), this would leave $9,558,968 in the "Incomplete Address", "Bad Address", and "MIA" categories. In FY 2000-2001, BDR collected $361,155, or 8.4 percent, of $4,294,300 in accounts that were transferred from AIS. These accounts were at least 10 months, or 300 days old (see "Uncollected, Billable Accounts" below). For FY 2000-2001, the "Incomplete Address", "Bad Address", and "MIA" categories totaled $9,558,968. Assuming, based on AIS" estimate, that $300,000 of this amount would be recovered by AIS, $9,258,968 would remain. If BDR could receive such accounts if they remain uncollected by AIS 90 days after the EMS service is provided and collect five percent, this would result in additional revenue of $462,948 for the Fire Department, less $115,737 for a work order for BDR, resulting in net revenue of $347,211. (BDR charges the Fire Department 25 percent of collections for its services.)

Uncollected, Billable Accounts

Billable accounts that AIS is not able to collect are eventually classified by AIS as uncollectible. AIS" stated policy is to transfer to BDR accounts that exceed $300 and remain uncollected after 180 days. Section 10.38 of the San Francisco Administrative Code states that City Departments "shall report to the Bureau of Delinquent Revenue Collection all accounts receivable over $300 that remain uncollected for a period in excess of 90 days, as shown by the records of each such department or office."

We recommend that the transfers of accounts to BDR occur on a more timely basis than they have been occurring. While AIS has a stated policy of transferring such accounts at 180 days, BDR transfer records indicate that in FY 2000-2001, the accounts that AIS transferred were for service provided either 10 or 11 months earlier, approximately 300 or 330 days earlier, respectively. The more recent an account is, the more likely it is to be collectible. We recommend that AIS transfer such accounts after 90 days from the date of the first billing if AIS has not been able to collect them. Exceptions to this could be allowed for (1) accounts for which AIS anticipates payment from a third-party but such payment has not yet been received

and (2)accounts for which a third-party payer has denied the claim; AIS should then be allowed an additional 90 days to bill the patient for the balance.

The incentive structure of the contract between AIS and Fire Department encourages AIS to retain the accounts for as long as possible. As a result, these billable, uncollected accounts did not benefit from BDR"s collection tools in FY 2000-2001 until they were 300 or more days old. While BDR was able to collect 8.4 percent of such accounts, had they been transferred sooner, the collection rate would likely have been higher.

Accounts that are $300 or less are classified as uncollectible but not transferred to BDR because of the $300 threshold in the Administrative Code. Such accounts are retained by AIS. These billable, uncollected accounts (each $300 or less) totaled $922,224 in FY 2000-2001 and have historically never been transferred to BDR. As with the non-billable accounts discussed previously, BDR has indicated that it would be willing to accept accounts that are $300 or less and the City Attorney has advised that such a transfer would be allowable. We recommend that such accounts be transferred to BDR if AIS is unable to collect them after 90 days from the date of the first billing. As described above, the same exceptions could apply with regard to anticipated third-party payments.

Local EMS Agreement With The Fire Department

Title 22, Section 100173 (4) of the California Code of Regulations ("Paramedic Service Provider") that approved ALS service providers "have a written agreement with the local EMS agency to participate in the EMS system and to comply with all applicable State regulations and local policies and procedures, including participation in the local EMS agency"s continuous quality improvement program as specified in section 100172." The EMS Authority advises that it does not have such an agreement in place with the Fire Department. This may increase the City"s liability as the argument could be made that the Fire Department is not an approved ALS service provider and thus a third party could argue it does not have to pay the higher ALS rate for services.

Conclusions

The Fire Department contracts with a private company, Allied Information & Services Corp. (AIS), for billing and revenue collection related to EMS ambulance transport services. Billable accounts exceeding $300, which AIS is unable to collect, are currently transferred to the City"s Bureau of Delinquent Revenue (BDR) under the Treasurer/Tax Collector"s Office. BDR is a collection agency for the City with a variety of tools unavailable to AIS.

AIS classifies a significant number of accounts as "non-billable" due to insufficient or inaccurate billing information. In FY 2000-2001, 21,357 accounts totaling $9,713,265 were deemed non-billable. Such accounts represented 29.1% of the $33,336,522 in EMS service provided in FY 2000-2001.

Such accounts remain in AIS" system for three years and are accessible to employees in the same manner as active accounts. Though we found no evidence of any irregularity, the lack of internal controls to prevent employee access increases the risk of fraudulent collection.

The accounts that AIS currently transfers to BDR are not transferred in a timely manner. Further, the Fire Department may be losing revenue because (1) non-billables are not transferred to BDR, (2) billable accounts that AIS is unable to collect are not transferred to BDR in a timely manner and (3) smaller billables are not transferred to BDR.

If transfers to BDR are made in a timely manner and expanded to include non-billables and smaller billables not currently transferred, the Fire Department may be able to collect additional revenue. A five-percent recovery of non-billables would result in $347,211 in additional net revenue for the Fire Department. If smaller, billable accounts totaling $922,224 are transferred to BDR and collected at the same rate as past billables that have been transferred, this should provide additional net revenue of $58,099. This would bring total additional net revenue to $405,310. Also, the more timely transfer of accounts would allow BDR to collect more on accounts that are currently transferred.

Recommendations

The Fire Department should:

4.4.1 Direct AIS to transfer non-billable accounts of more than $300 to BDR if they remain uncollected by AIS 90 days after the provision of EMS service.

4.4.2 Direct AIS to transfer non-billable accounts of $300 or less to BDR if they remain uncollected by AIS 90 days after the provision of EMS service. As noted previously, the City Attorney advises that the transfer of such accounts is allowable and BDR notes that it has accepted such accounts in the past from other departments..

4.4.3 Direct AIS to transfer billable accounts of more than $300, which are currently transferred to BDR, on a more timely basis. Such transfers should occur if such accounts remain uncollected by AIS 90 days after the first billing. Exceptions to the 90 day rule should be allowed for (1) accounts for which AIS anticipates payment from a third-party, but such payment has not yet been received; and, (2) accounts for which a third-party has denied the claim, whereby AIS should be allowed an additional 90 days to bill the patient for the balance.

4.4.4 Direct AIS to transfer billable accounts of $300 or less to BDR if such accounts remain uncollected by AIS 90 days after the first billing. The exceptions described in 4.4.3 should also apply to these accounts. As noted previously, the City Attorney advises that the transfer of such accounts is allowable and BDR notes that it has accepted such accounts in the past from other departments.

4.4.5 Enter into an ALS provider agreement with the local EMS agency, as required by the California Code of Regulations.

Costs and Benefits

There would be no net cost to implement these recommendations.

These recommendations could increase revenue collections by $540,414 less $135,104 for a workorder for BDR to collect such additional revenue, resulting in net revenue of $405,310. Collections may be further increased by the more timely transfer of accounts to BDR from AIS.