Transportation Rates 101.

Rates Breakdown:

Having a rate structure that accounts for all scenarios is essential to remain profitable long-term.

This page will give an overview of the basic rates you should be familiar with. Although you may not need to incorporate every rate below into your rate structure, you should be familiar with them.

Terminology:

  • Leg 1:describes the portion of a trip from initial pickup address to destination, and generally includes wait time.
  • Leg 2:describes the second half of a round-trip, from the destination back to the riders original origin.
  • Base rate:this is the initial flat fee charged just to pick the passenger up. The base rate helps make sure you still make money on short trips (return base rate is for leg 2.
  • Mileage rate:this is the dollar amount rate charged for every mile between pickup and drop-off (return mileage-rate is for leg 2)
  • Included or “Free” miles:this is the number of miles you will drive for each leg before your mileage rate become effective.
  • Per minute rate:sometimes, for example in congested cities, trips are short but they take a long time to complete due to traffic. In such cases, it is wise to implement a per minute rate to offset your mileage rate’s losses.
  • Included or “Free minutes”:this works the same way as free miles
  • Pickup surcharge:your base rate helps make sure you make money on short trips, but not completely. Imagine receiving a 1-mile trip request base rate of $30 and a $2 mileage rate. If the trip is nearby, it’s worth it. But what happens if the pickup address is 50 miles away from your office? Is $32 worth employing a driver for 2 hours? Probably not. To implement a pickup surcharge, you first need to set a pickup radius, the farthest distance you will travel to a pickup address without adding to the price. After you set your pickup radius, you can set a pickup surcharge mileage rate, for example a $1.00 per mile mileage rate charges $1 for every mile outside of your radius you need to travel to pick the passenger up. You can also separately or in combination with the pickup surcharge mileage rate set a pickup surcharge flat fee, which automatically adds a set dollar amount to the trip price if the pickup address is any number of miles outside of your radius.
  • Dead-head surcharge:Now imagine a one-way trip with a pickup address 20 miles from your office and 10 miles away from your office to the destination. Your driver may need 45-60 minutes to drive back to your operational radius to take more trips. In such cases, set a dead-head radius, for example 30 miles. Then set a dead-head surcharge rate, say $0.50. This way, if you have the same one-way trip, because the drop-off address is at least 30 miles away from your office, we will multiply the dead-head surcharge by the total distance between the trip destination to your office and add $15.00 to the total cost of the trip.
  • Wait time rate:Sometimes, your driver must wait outside a facility until the return trip, and because they must be compensated for that time, the trip price should reflect wait time fees. Wait time rates can be based on ‘customer selection’, but a more sophisticated method is by setting a wait time radius. If you set a wait time radius to 40 miles, then trips with drop-off addresses over 40 miles away from your office, clearly outside of your normal operational area which means your driver must wait until the return, then wait time will be applied. It is usually advisable to add included or “free” wait time, which calculates the same way included minutes does for the ‘per minute’ rate. In addition, you may charge for example $50 per hour, but bill in certain increments to provide overall fairness for both you and your clients.

Rates by Program:

Medicaid

Broker base rates for ambulatory transportation average $10 and mileage rates average $1.25 nationally, whereas broker base rates for wheelchair transportation average $22 and mileage rates average $1.75.

Please be aware that averages do not imply that negotiating will achieve higher than average rates. Rather, average rates are more-so affected by the amount of money the broker has been contracted to receive for managing transportation in a given region. Certain states dedicated more or less funds to certain areas based on an array of factors including Medicaid population size and program usage estimates.

Private Pay

Private Pay base rates for ambulatory transportation average $30 and mileage rates average $2.50 nationally, whereas Private Pay base rates for wheelchair transportation average $55 and mileage rates average $3.00

In private pay, averages tend to revolve around socio-economic and population density levels of certain areas. In addition, averages are partially dependent on industry type. For example, you may find that it is easier to increase private pay rates for dialysis centers who may pay out of pocket in comparison to urgent care centers who may refer your company to individuals who are not as well funded.

Negotiating Rates:

When contracting with a broker, they will send you a rate sheet to review and approve. Many providers are unaware that you can negotiate these rates, and this section serves as a general ‘best practices’ explanation for negotiating rates with brokers.

Firstly, always be aware that the broker ultimately has the last decision, on which rates will be finalized. If your rate negotiations are perceived as over the top, you may be starting off on the wrong foot with the broker. At the same time, don’t let that stop you from negotiating rates fairly!

Brokers will typically contract base rates, mileage rates, and included or ‘free’ miles. They will sometimes contract wait time rates, and rarely no-show prices. Lastly, if you own a shuttle bus, they will most likely want to contract group rates with you.

Generally speaking, mileage rates are more difficult to negotiate than base rates and ‘included/free’ miles. If you are rurally located, your focus should be negotiating mileage rates and nothing else. This is because the bulk of your revenue may come from longer distance trips, and because you can profit tremendously by only slight mileage rate increases on long distance trips, it is advised not to negotiate your base rate, and to counter your mileage rate considering the price difference of the length of trips you expect to be taking.

For providers in more condensed areas that are expected to receive 5-10 mile trips, it is advised to focus on negotiating your base rate more than your mileage rate. One rate that providers should try to negotiate is “free/included” miles. It is unlikely that your broker will offer mileage from “mile 0”. However, if they offer 5 miles free, you can safely counter offer only 2 or 3 miles free. Some will say that providers should argue for zero miles included, however in our experience, most brokers will never offer this and because of that, you may be perceived as less experienced and uninformed by counter-offering what brokers perceive to be ‘over the top’.