America’s air ambulances become ensnared in surprise medical bill debate

The root of the problem
The dilemma faced by legislators is that any solution to the surprise medical bills issue will be inimical to some of the key stakeholders. In other words, you can’t please everybody. Forcing out-of-network specialists to accept in-network fees will not only suppress their earnings but will give unfair leverage to insurers when negotiating their reimbursement rates. Forcing insurers to pay the differentials charged by out-of-network specialists would likely inflate insurance premiums – already out of reach for many Americans. Having government (through Medicare) set rates or capped fees for services (such as air ambulance rides) trammels on all stakeholders’ territories. And requiring competing parties to undergo arbitration to settle disputes raises questions about who should be the arbitrators and what their metrics should be. 

For international travellers, confounded by the complexities of America’s healthcare system, these ‘surprises’ come as a double whammy

Testifying before a House committee to explain why costs of air ambulance services rose by 300 per cent since 2006 in the sparsely populated state of New Mexico, where air ambulances are heavily relied upon, Rick Sherlock, President and CEO of the Association of Air Medical Services (AAMS – the trade association representing some 90 per cent of air ambulance companies in the US), explained that air ambulance reimbursements from publicly funded Medicare and Medicaid (approximately $6,205 in 2017, according to the GAO) do not nearly cover the cost of the air services. Therefore, private patients (insured or not) must make up the difference. In effect, costs must be shifted.

For international travel insurers, the sparsity of in-network contracts between air ambulance firms and the domestic insurers with which they partner, also leaves a gaping unknown factor in their assurances of cover; although it should be noted that some of the larger air ambulance firms are now working hard to carve out in-network deals with insurers.

Sherlock noted that air ambulances served more than 550,000 patients per year, and in many rural areas were the only speedy way to get patients to trauma centres and burn units. This need for more emergency medical air services has been exacerbated by the closure of more than 100 rural hospitals around the country since 2010. Sherlock expounded that more than 80 million people can get to a Level 1 or 2 trauma centre within an hour (known as ‘the golden hour’) only if they’re flown by helicopter.

Data from the AAMS reveals that seven out of 10 patients transported by emergency medical air ambulances are either enrolled in Medicare or Medicaid, or uninsured – and the remaining three out of 10 must subsidise the remaining cost. But Medicare rates are considerably below those in insured programmes or on the retail market, and federal law prevents balance billing for Medicare or Medicaid services. 

According to the AAMS, Congressional action would not be necessary if all air medical providers would be required to submit cost and quality data to the Centers for Medicare and Medicaid, which could then update the reimbursement schedule and pay air ambulances based on their actual costs. They could then reduce the cost-shifting to the private market and encourage more air ambulance firms to negotiate in-network contracts with insurers.

State legislators are picking up the ball
The continuing failure of federal politicians to deal with the surprise medical bill phenomenon has been partially mitigated by state governments that have enacted controls on their own. Toward the end of 2019, at least 28 states have enacted such laws.

But, according to the US Commonwealth Fund, an independent private foundation monitoring and promoting healthcare issues nationally and internationally, only 13 of the state measures have met what the Fund considers a required standard for comprehensive patient protection in that they: 

• Extend protections to both emergency and in-network hospital settings.
• Apply to enrollees of both HMOs and PPOs.
• Prohibit providers from balance billing.
• Adopt a payment standard or dispute-resolution process to resolve payment disputes between provider and insurers.

The problem with this partial solution is that the rules only apply to health insurers, facilities and providers regulated by the states, not to self-funded insurance plans such as those provided by the nation’s largest employers, which operate under federal laws and which cover 61 per cent of privately insured employees nationally. Also, they do not apply to air ambulances, which, under the 1978 Airline Deregulation Act (designed to encourage more airline competition), were freed from federal control of fares, routes, and market entry requirements.

Arbitrarily capping the amount providers can charge could result in many providers just exiting the market and leaving behind a huge hole in necessary services

Working out how to get the patient out of the middle of the surprise medical bills situation is a conundrum that has no clear-cut solutions. As the GAO emphasises, arbitrarily capping the amount providers can charge could result in many providers just exiting the market and leaving behind a huge hole in necessary services. Conversely, requiring insurers to pay the full amount charged by providers could lead to higher, perhaps unaffordable, insurance premiums.

However, it’s AAMS’ position that, instead of setting any benchmark rates, an Independent Dispute Resolution process to adjudicate balance billing disputes between insurance companies and providers could achieve fairer and more equitable results. This proposal would also establish a data collection process to improve transparency of pricing, patient billing and collections, and payment practices by the air ambulance industry.

To date, federal legislative proposals have incorporated a variety of consumer protection controls; among them: 

• Having government or some impartial body set specific compensation rates for out-of-network providers.
• Paying providers the median of all rates being for the same service in a given area.
• In case of arbitration, having each side lay out its offer and allowing an arbitrator to find the most reasonable middle ground.
• Requiring any non-network provider working in a network facility or service to accept that network’s terms and conditions.

All of these suggestions appear reasonable – but none have gathered consensus.

This is Washington: money talks
Lobbying for or against any or all of these ‘consumer protections’ has been intense, and hugely costly. After all: this is Washington, where money really talks.

According to investigations by the Center for Responsive Politics (CRP – a DC-based organisation that tracks political funding sources), physician-staffing companies owned by for-profit equity firms released a massive TV and op-ed blitz through the summer of 2019 to coincide with Congressional activity on the surprise medical bills issue – particularly, what they saw as an insurance-industry-backed proposal for government rate-setting.
For example: Air Medical Group Holdings was reported by Center researchers as spending a ‘shocking’ $1.2 million on its ‘public information’ campaign in the third quarter of 2019; and Global Medical Response – a KKR-owned air, ground and fire response ambulance company – spent six figures on its campaign. 

CRP researchers profess that physician staffing firms and emergency services companies (among them air ambulance companies) and their private equity backers have ‘a lot to lose’ if Congress caps the amount of money they can charge patients for receiving out-of-network care, which most often occurs during emergency visits.

Investors keen on air ambulance industry
America’s private equity firms have focused laser-like attention on emergency aeromedical services, their growth and profit potential. The 2017 and 2019 GAO reports on air ambulances highlighted that three private equity firms had gained control of 73 per cent of emergency medical helicopters in the US, and they paid well for them.
In 2017, private equity firm American Securities LLC acquired Air Methods, then the largest air ambulance firm in the US for a total transaction value of $2.5 million. Since then, Air Methods has signed in-network agreements with Anthem Blue Cross Blue Shield in 29 states.

Two years earlier, Air Medical Group Holdings (the second largest air ambulance firm at the time) announced it had been acquired by a private equity firm KKR for a reported $2 billion.
Certainly a far cry from a few dozen helicopters tethered mostly to a few hospitals in the 1980s.