Does a variation in pricing in the international fixed-wing air ambulance industry reflect differing quality of providers, or are some providers simply making more profit than others? James Paul Wallis reports
It’s no secret that international air ambulance flights are not cheap. While the healthy size of the sums that insurers and assistance companies regularly pay providers may be common knowledge in the industry, the mainstream media all too often features scare stories of uninsured travellers languishing in foreign hospitals while they try to crowdfund the cost of a flight home on a medical aircraft.
The prices are high, but are they fair? It’s a topic that is regularly discussed within the industry, not least at the various International Travel & Health Insurance Conferences (ITICs) that take place around the world. Last November at ITIC Global in Geneva, for example, Dr Bettina Vadera, Chief Executive and Medical Director of AMREF Flying Doctors
, Kenya, shared a stage with industry veterans Andy Lee and Julie Remmington to discuss the balance between quality and cost. Both Lee and Vadera highlighted that quality and cost are linked, and that not all providers offer the same level of service.
Such discussions can raise comments that touch on seemingly contradictory viewpoints that (with slight exaggeration) on the one hand, these missions are cash cows that are potentially lucrative enough to lure in the cowboys who cut corners and reap huge rewards; while on the other hand, it is a price-sensitive market where even large operators with multi-aircraft fleets must work hard to maximise plane usage in order to make ends meet. To shed some light on the issue, ITIJ spoke to international fixed-wing air ambulance providers around the world for their take.
Price pressure arises because not every air ambulance company adheres to the same medical standards
For Hemma Niederegger, Project Manager, Sales and Marketing at Tyrol Air Ambulance
of Austria, the air ambulance industry is not an easy dollar – rather, providers need to keep a lid on costs: “The air ambulance industry is a very competitive industry, especially in Europe, and therefore there is a certain price pressure on the providers.” While this might seem to favour unscrupulous, cut-price providers, Graham Williamson CEO at LIFESUPPORT Air Medical Services
, reflects that ‘racing to the bottom’ is not sustainable: “The providers we see come and go typically enter the business to compete on price. They lack quality and they lack accreditation. The result is their quick entry into, and often rapid exit from the market.” However, Niederegger suggested that companies that make the effort to offer a high-quality service might not find it easy to raise their prices to match: “Further price pressure arises because not every air ambulance company adheres to the same medical standards. This is due to the fact that even within the European Union, there is no uniform legal basis regarding the quality criteria for medical patient transports. This results in different levels of investment, which also influences the pricing of providers.”
Asked whether established providers have similar fees for similar missions, Eva Kluge of Air Alliance
, which has bases in Germany, Austria and the UK, told ITIJ
: “In principle, yes, at least for the same types of aircraft. Pricing depends also largely on where the aircraft is located (time to patient) and how long the mission will be. If a routing is 30-60 minutes shorter, it can make quite a difference in the quote. Variable costs (fuel, permits, etc) are more or less the [same] for everybody.”
A provider with lower standards may hire pilots who are less experienced and charge a lower salary
The only real way to lower costs, said Kluge, is to reduce funding on niceties such as staff and training – not necessarily areas where an insurer might want their air ambulance partner to skimp on investment: “You cannot save that much on the aircraft. However, a provider with lower standards may hire pilots who are less experienced and charge a lower salary. They may also try to save on medical equipment (using older or expired models) [or] on team training, and they may use cheaper medical staff with lesser qualification: doctors or nurses/paramedics who are not clinically current are an example.”
Paul Tiba, Managing Director of France’s Airlec Air Espace
, also stated that staff investment makes up a significant contribution to providers’ costs: “As far as we are concerned, in France, the main challenge is the employees’ cost. I strongly believe that it will be a more and more tight job market for both [talented]/specialised medical doctors and experienced pilots. We decided not to compromise our highest standards of quality and to follow the market.”
The advantage of eschewing such ideals and instead minimising investment is that a provider can afford to undercut its competitors to attract business or charge the going rate and enjoy a higher profit margin. However, in the long run, there is a clear and present downside to the dime-store strategy, said Kluge: “All this is putting the patient’s safety at risk and will cause – sooner or later – a loss of reputation for the provider.”
On another note, Tiba suggested that it’s not only a difference in quality that may result in a difference in pricing. There could be other factors that mean that providers are not competing on level terms, he suggested: “Different social regulations also bring [a] lot of unfair competition. For instance, it is totally forbidden to hire freelance pilots for commercial operations in France, while other countries appreciate it.” Perhaps more surprising is the suggestion that some providers are able to endure despite, in fact, not being able to make ends meet, instead using just their income from flights. Tiba revealed: “I do not think everyone has fair prices, but I understood some are making more loss (not profit!) than others. I would even suggest that some have been dumping for several years. Some others are receiving massive subventions and donations and it is somewhat unfair and creates distortion in competition.”
There are many ways to respond to demands of competition. One would be to strive to offer a better service for a lower price; another is to lean on transparency in the offering and the pricing structure. One example of a provider with a clear-cut structure to calculate prices is US-based AMR Air Ambulance. Jay Paladino, General Manager, explained: “With regards to pricing, we generally use a fixed rate per mile and a ‘base’ rate (commonly referred to as a launch fee). We do this because with US insurance, this is how plans are setup to pay. The mileage rate is based upon loaded miles.”
any assistance company should adhere to a strict aeromedical vetting process
Returning to the question of quality, there’s an onus on purchasers to do their homework and not simply buy the proverbial ‘pig in a poke’. Kluge commented: “Any assistance company should adhere to a strict aeromedical vetting process in order to avoid black sheep and to compare apples with apples.” Speaking to ITIJ in the capacity of an independent consultant, Andy Lee recognised that buyers rightfully look for a best deal, but added that all too often, operators lose flights because payers don’t take the necessary due diligence steps to understand the benefits available from the more expensive quote, such as a higher level of insurance indemnity for aircraft and medical malpractice. ‘The provider with the higher quote may have spent more on flight crew and medical team validation training’, he added, and may be offering an aircraft that is more appropriate for the mission. The tension between cost and quality is not new, and Niederegger doesn’t see it improving: “We have noticed a trend emerging where more importance is being placed by the customer on the price and quick handling of the mission than the patient’s wellbeing and the medical checks necessary to ensure a risk-free transport.”
Indeed, Andy Lee believes that until there is ‘a level playing field with an agreed standard across the industry’, the pricing variation will continue. It has to be said that creating a truly level playing field would require some fairly big steps. Lee suggested that the key would be to have a single, industry-regulated standard that applied across the board. To achieve that, he said, ‘you would need payers to become more aware of what they are paying for and whether it is the best option to mitigate risk to the patient during transfer; the accrediting bodies to agree on a minimum standard; and payers to come together and agree to only use accredited operators’. He added: “This, in my opinion, means insurers/assistance companies would make a judgement on the service to be used on availability, positioning and price, knowing that the operators are all similarly compliant with an agreed standard.”
until there is ‘a level playing field with an agreed standard across the industry’, the pricing variation will continue
Such moves may be some way off and working against such co-operation are the pressures of competition – and also, perhaps, a desire for freedom of choice among both the payers and the providers, not all of whom want to sign up to an accreditor, even if they have the quality to make the grade. In the meantime, forums such as ITIC ‘offer a way to take steps in the right direction’, said Lee, who referred to the Air Ambulance and Medical Assistance Forum that took place in Geneva at ITIC Global
and saw insurers and assistance companies present mission case reports together with air ambulance operators. Lee explained: “This was the first time this has happened and should continue [at ITIC Global] in Malta this year, as dialogue creates understanding and helps form trust in a relationship.”
Considering all this talk of competition and cowboys, does all this mean that prices from reputable providers are already at rock bottom with little or no wiggle room for offering reduced rates to reward valued clients or to entice new customers? Niederegger confirmed that the scope for discounts is ‘very limited’. However, there are some circumstances where prices can be lowered, she noted: “An example would be so-called ‘empty legs’, where a provider’s aircraft is positioned at a location after finishing a mission, and another patient happens to be awaiting transport either at the same location or en route to base.” So, there may be the occasional opportunity for an insurer to save a bit of money on an air ambulance flight, but in reality it seems that in the air medical world, as with everything else really – you get what you pay for.