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Audit shows flaws in city's ambulance billing

City's contract with billing company up for renewal as substantial lost revenues disclosed due to lax record-keeping, billing practices

The contractor hired by Palo Alto to bill residents for ambulance service has been charging patients inconsistent rates, mailing duplicate bills and in some cases failing to send bills at all, a new audit has found.

The report by City Auditor Lynda Brouchoud evaluates the performance of ADPI-Intermedix, a Florida-based contractor that has been providing the city with ambulance billing and revenue collection services since 2005.

Some of the problem stem from faulty or incomplete record-keeping by city Fire Department drivers, who recorded sharply divergent mileage for the trips of the same distance, the audit showed.

Palo Alto's contract with ADPI-Intermedix is currently up for renewal and the city is in the process of reviewing responses from billing companies.

The audit, conducted last year, uncovered a series of errors in the billing process, from consistent delays in getting the bill to the patient on time to varying charges for ambulance trips from similar locations.

According to the report, the contractor is required to send out the first bill within two days of receiving information about the ambulance services the city provided. The Palo Alto Fire Department provides the emergency medical service and then sends a patient care report (PCR) to the contractor's Oakland office. ADPI-Intermedix then creates a bill and sends it to the patient.

In July, the auditor looked at a sample of 36 cases and found that the contractor had not sent out the first bill within the required two days in any of these cases. The time frame for when the first bill was sent out ranged from 3 to 42 days after the contractor received the information from the fire department. In three cases, the contractor hadn't sent a bill at all, the report states.

The contractor attributed the delays to recently implemented changes and "improved processes to enhance revenues for Palo Alto." In a response to the audit, a company official said the company has been taking longer to send out the claims because it has been identifying the patients' insurance information before sending the bill. These automated insurance searches take 10 days, wrote Michael Brook, the company's senior vice president for the West Region.

"So, while from an audit perspective we did not meet the terms of the contract (invoice patients within 48 hours of receiving the mailing information from Palo Alto), we find that this is a better and more expedient way to secure payment and minimizes the impact on the patients," Brook wrote.

The company's response also noted that the 36 accounts were audited in June, a time when ADPI-Intermedix was going through another process change. The contractor was sending the city's information for processing in its Columbus, Ohio, office because the company believed there would be "process and quality efficiencies." This added from two to four days to the process. In October, the company moved the process back to its Oakland office.

The audit also found that in some cases, the contractor's system created a bill but did not send it out to the patient. The contractor maintained that these bills were held up because there were problems with the stated billing address. But the report notes that the system had "no established internal control in place to follow-up on these accounts to identify the information and send a bill."

In one case, the report notes, the ambulance service was provided on April 16, but the contractor didn't send the first invoice until August 8, nearly four months after the service date. In another case, the ambulance service was provided in January 2007, but the account was deemed by contractor to be "uncollectible" and turned over to the city.

The Administrative Services Department's revenue collections office contacted the patient in March 2008, the report notes. The patient then sent in the payment with a note stating, "Your 'final notice' is my very first one. Please explain why it took you over a year to inform me of this outstanding bill."

The company acknowledged that its "manual follow-up processes could be quicker and more robust when we have invalid mailing information" and said it now conducts a bi-weekly review of all accounts with bad addresses. It had also begun calling patients regularly when it doesn't have a valid mailing address and the account is ready to be turned over to the city for collection.

The company also attributed its failure to send out some bills to a data-entry person who missed entering information on several reports the city provided.

"We have since relocated the data entry back to the Oakland office and have been auditing the accuracy of PCRs entry on a monthly basis."

The audit also found that patients were charged varying amounts for ambulance trips from the same locations -- due to faulty record keeping by Fire Department drivers. In one case, two patients were transported from the same location and were driven 8 miles. One patient was charged $160, while the other one was charged $20. The mileage errors were largely attributed to the fire department's reporting, which typically relies on employees' estimates rather than actual odometer readings.

Of the 54 ambulance bills the audit sampled, 42 contained mileage errors.

The audit makes 17 recommendations, many of which city staff and the contractor have already begun to implement. These include a better mechanism to ensure accounts do not remain unbilled if the system rejects the billing address; quarterly meetings between the contractor, the fire department and city staff; and a lower commission rate for the contractor.

ADPI-Intermedix currently collects a commission of 7 percent on the revenues it collects.

The City Council's Finance Committee is scheduled to discuss the auditor's report Tuesday night.

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