Air ambulance operators in areas such as Europe and North America have identified a variety of factors that are causing a rise in the cost of air ambulance missions, although some have more bearing that others on end user costs. “There are several trends causing this rise,” said Eva Kluge, head of sales and marketing for Tyrol Air Ambulance GmbH (TAA) in Austria. “Increased fuel costs, requirements from authorities and regulatory bodies, globalisation, more demand for missions in remote or high-risk areas, and having to pay more for, for example, costly permits, war-risk insurance, and hygiene precautions.” Although air ambulance cases make up just a small percentage of insurance and assistance companies’ caseloads, “they are, however, a costly one,” she added.
Increase in demand
One of the reasons why repatriation is becoming more costly has been a growing requirement for air ambulance operators to offer a faster, longer-distance, more flexible and sophisticated service to the marketplace, which itself is a result of client needs. “Patients are demanding more support from their insurance company,” said Sean Culligan, chief operations officer for AMREF Flying Doctors, which operates in East Africa (and was the winner of the 2014 ITIJ Air Ambulance Provider of the Year Award). “They pay an extra premium for ‘repatriation’ to their home country, rather than ‘evacuation’, which would normally be to the nearest centre of medical excellence. Thus, evacuation distances grow,” he said, adding, “A $25,000-flight to the nearest centre of medical excellence can become a $150,000 flight to the patient’s home country.”
TAA, too, has experienced a rise in client expectations, especially for 'lower prices, more availability, fast turn-around-times, real-time information and reporting', Kluge said, also mentioning the subsequent growing need for investment in ‘staff, training, hardware, and software’. She added: “Despite all this, air ambulance average flight hour prices in Europe have fallen over the last five years between five and 12 per cent, which clearly affects the margins.”
Furthermore, air ambulance companies have to demonstrate the highest possible standards of patient care to insurance and assistance companies.
air ambulance companies have to demonstrate the highest possible standards of patient care to insurance and assistance companies
This development has led to ‘a set of standards of care for air ambulance flights and medical support’, said Culligan. “The insurance or assistance companies, mindful of the litigious world out there, wanted to ensure that their clients could never – after an evacuation – accuse them of going for the cheapest option at the expense of care,” he said.
“It is a long time since assistance and insurance companies just got a bill and paid it,” added Kluge, further explaining that since the 1980s, assistance companies have increasingly been looking for ways to offer a better service ‘to assist the client, and to have a better steerage of the claims costs’.
Increasing industry competition, and the subsequent need for air ambulance companies to stand out from the crowd, have also been pushing up repatriation costs. “During the last [few] years, even more companies have come onto the market, including smaller ones in countries such as Slovakia and Slovenia. Everyone is trying to get a part of the market square,” said Kluge.
“There is no doubt that the increased competition has meant that the air ambulance operator had to demonstrate that they were, in fact, better than their competitors, or at least on a level with them,” said Culligan. “All these factors combined make the air ambulance operators invest in the best aircraft and the best internal equipment for the task, and ensure medical crew are trained and experienced to give the best care.” Naturally, this all means higher costs.
A rise in operating costs
Another factor that increases the cost for insurance and assistance companies has been the growing expenditure on flight operations by the providers. Taking aircraft replacement and maintenance as an example, according to David Ewing, vice-president of Skyservice Air Ambulance in Canada: “Air ambulance aircraft are often over 30 years old. Providers will soon be forced to look at newer aircraft that have a high acquisition cost but greater fuel efficiency and lower maintenance costs,” he said.
Chris Connor, vice-president of Life Flight International Inc. in Canada, agreed that the cost of maintaining ageing aircraft becomes, at some point, unsustainable, and investment in new planes is necessary – but at a cost of around $3 million, that is a serious investment. “The current values being charged for the outdated aircraft cannot sustain the purchase and maintenance for newer replacement assets,” he told ITIJ. “So in turn, to keep a sustainable air ambulance industry that follows the aviation regulations, there is no question that the cost for air ambulance repatriation will go up.”
Referring to the Asia Pacific region, Prithpal Singh, CEO of Singapore-based Flying Doctors Asia, agreed that the cost of repatriation has risen due to having to replace older aircraft with newer ones, as well as the global issue of steadily increasing fuel costs. In addition, service-related operating expenses have played a role. “There are third-party costs which have to be passed on to the customer,” said Singh, further referring to inevitable cost rises. Ewing, meanwhile, said that among other costly investments, ‘liability and medical malpractice insurance, accreditation and licensure’ are vital to have, but can be expensive.
Licensing and regulation costs are a recurring theme for air ambulance operators, no matter where in the world they are based. “Over the years, requirements have become stricter for investments in infrastructure, in order to comply with stricter rules and regulations and quality, multiple membership fees, and improving employee retention,” said Anne Rodenburg, commercial director of USMX AirLink in Mexico. Sean Culligan added that geographical areas of operation will also have an effect on the prices charged by air ambulance operators. “Aircraft flying in Europe require highly sophisticated navigational equipment,” he said, explaining that: “As legislation becomes stricter, aircraft operating costs rise in order to comply with the new regulations.”
Some repatriation cost increases, though, have been inevitable due to external forces. “We have to keep in mind we are combining ‘private’ aviation with medicine, both demanding and complex topics,” said Rodenburg. “When companies have their own airplanes and the infrastructures to comply with the highest quality standards, the fixed cost of air ambulance companies of that kind are extremely high.” Likewise, Kluge has found an increase in standards in medicine and aviation an unavoidable contributing factor to rising costs: “This implies also high investments in air ambulance equipment and technology,” she said. “An increased shortage of experienced and trained doctors has also meant increasing costs for medical escorts.”
There are, however, some tools that air ambulance operators have been using to stop costs from escalating farther, and then passing these savings on to insurers. One such measure is the optimal use of staff, aircraft and resources to ensure an economical way of flying – such as the use of ‘empty legs’: “Some part of the journey will inevitably be positioning or recovering the aircraft,” explained Culligan. “A lower cost can be offered to the insurer if by chance they have a patient who can be carried on that empty leg.”
“Some air ambulance companies sell memberships as their primary business, or are diversified aviation companies,” added Rodenburg. “Or they only quote one-ways in the high season assuming the corresponding business risk. One-way quoting can make prices almost half as expensive sometimes, and thus gives companies a competitive position in the market. The chances that you get the flight confirmed and that customers will like your prices might be higher.”
Over in France, as a cost containment measure, Medic’Air International prefers to fly a stabilised patient needing transfer by air over medium and long distances using a stretcher on commercial airlines. “This includes Air France carriers; they are less expensive and safer than a light jet with many stops,” said Dr Hervé Raffin. To control hospital bills, Medic’Air will extract a patient from a costly hospital in case of inefficient care. “In accordance with the family, we calculate the ratio of benefit to risk, and without delay we evacuate the patient by air ambulance to a better hospital in his or her native country with an air ambulance with intensive care unit (ICU) capability,” Raffin said. Although the insurance will have to pay for the ICU air ambulance, for Medic’Air this approach means money can be saved on the total repatriation cost, thanks to avoiding what could have been a long hospital stay with potential complications.
TAA’s overheads are contained by double and multiple occupancy of air ambulance aircraft, of which some have an annual average of 41 per cent multiple occupancy, explained Kluge. Sensible aircraft fleet decisions, such as streamlining fleets to a maximum of one to two aircraft types also helps to keep maintenance costs as low as possible. To help keep staff budgets down, an operator can also join forces with other services, Kluge has found: “Some air ambulance companies offer merely a plane and equipment and allow specialised medical escort providers to run the medical teams aboard the flights, and use freelance pilots (TAA does not!).”
“The ability to combine multiple patients on one flight can certainly help to reduce the total cost per patient,” said Philip Zumstein, a spokesperson for Swiss Air-Rescue Rega, who also extolled the virtues of air ambulance companies being able to offer insurers the benefit of long-haul capabilities to help reduce the amount of stops and handling fees necessary in any one given case.
Dr Valerie Rego, medical director of World Travel Protection Canada Inc., said that in addition to investment in double-stretcher capacity planes and combining seated and stretcher patients, other tools air ambulance companies are using to keep costs down include offering flat rates for certain routes, especially during peak travel season.Optimal flight planning is often considered, and TAA utilises an ‘increased focus on strategic purchase units to achieve the best prices in terms of fuel, logistics, training, material, ground handling, and other providers’, Kluge explained, also referring to the option of a ‘dynamic flight level optimisation’, which, she added, can ensure significant reductions on fuel budgets.
The future of repatriation costs
Whilst some air ambulance operators foresee a continuation of the rise in costs, there are others that don’t. “Insurance costs continue to rise, with more and more insurers looking for higher levels of coverage, both for aircraft liability and medical malpractice from their providers,” said Ewing, adding: “The cost of medical repatriation should stabilise, but is subject to other market forces and world volatility, such as the cost of fuel.”
Dr Raffin also foresees an increase in costs in the coming years. An air ambulance company must remain competitive with the best professional, well-trained and experienced medical team, he argued. “This takes time, and money.”
Although hospital infections can be tested and detected prior to flight, Dr Raffin also argued that multi-patient air ambulance flights could be affected by the emergence of multi-resistant bacteria from high-risk tourist areas such as Greece: “It is too high a risk to transmit a dangerous bacteria from one stretcher to another onboard the aircraft. This means one patient by air ambulance: more flights, more expensive.”
In Europe, TAA foresees market consolidation and a potential shakeup in market dynamics: “In the air ambulance product life-cycle, flights in Europe have achieved the state of advanced maturity,” Kluge said. “Here, air ambulance companies are now fighting hard to keep their own costs controlled in order to remain competitive.” Zumstein of Rega, in fact, is of the opinion that in Europe at least, repatriation costs have remained stable of late: “At least in the past two to three years. Before that, following the financial crisis in 2008, prices could even be observed to decrease slightly in certain areas,” he said. For other regions such as South East Asia, China, or the Gulf Cooperation Council (GCC), a rise in costs to insurers is more likely, said Kluge. “Here, there is still less competition and less utilisation of aircraft,” she said, further attributing rising costs in these areas to 'a shortage of doctors in general, including experienced medical escort doctors'.Referring to the Asia Pacific area, for Singh, repatriation costs will ‘likely stabilise for a while since most other costs are quite stable for now’. The future, he added, could be bright for insurers seeking air ambulance providers in the region: “Competition is also increasing with new entrants, and this should keep costs down.”
Cost versus quality
Whether costs are set to rise or not, some may argue that cost containment is not something to be considered lightly, and could result in a lowering of service quality. “Cost containment is important,” said Rodenburg. “However, patients who need an air ambulance normally belong to their most critical patient group, and as an industry I believe it is essential to keep protecting this group by not accepting companies that under-price quotes at the expense of quality.”
Like some other operators, Singh too has experienced some insurance companies ‘pressing for the lowest prices rather than looking at the quality offered’, and agreed that ‘insurers should consider quality in addition to price when making a selection of the operator to use’. TAA, on the other hand, has observed a trend in insurance and assistance towards a more professionalised pre-selection of air ambulance providers who are focused on quality, and a more standardised accreditation: “Insurers are more worried than ever about their reputation, lawsuits and liability risks, and many now ask for EURAMI, CAMTS and the like,” said Kluge.
Working on a solution to bridge the knowledge and/or communication gap between air ambulance providers and insurance companies, TAA regularly invites clients to its home base: “We need to learn more from each other,” said Kluge, highlighting the importance of ‘helping to create a better understanding of how much investment is regularly necessary to be able to fly and to do a good job’. “The haptic experience of an aircraft, and the direct exchange with a doctor or a technician, help to create mutual understanding and can show the logistic and structural complexity behind the scenes. We also increasingly pursue partnerships instead of having the traditional principal-provider relationship,” she added. “This proves to be fruitful to all sides.”“I cannot stress enough the importance for insurers of doing due diligence on all of their air ambulance providers,” agreed Ewing: “Going to see them at their base, seeing the aircraft, looking at the medical equipment, meeting the medical director, and verifying that their trips are done with appropriate medical staff, are all key.”
Some might argue that insurers can ultimately benefit as a result of obtaining better value for money following rising repatriation costs – yes, the cost of repatriation is increasing, but the quality of care on offer is now more advanced that it has ever been before. Singh attributes this enhanced value to: “The quality of medical equipment, medicines, doctors and nurses and aircraft type, all of which have improved over time. This definitely helps the insurance company.”
For Sean Culligan, the advancement in technology means better patient care, which ultimately means more satisfied insurers and customers: “Although some insurers will always go for what they see as the cheapest option, the client or patient is generally getting the best possible care in flight from a state-of-the-art air ambulance aircraft.”
“Most certainly patients and insurers are getting better value for money,” Zumstein said, adding, for example, that whilst multiple repatriation flights are reducing costs, they also allow a higher level of service. “State-of-the-art medical equipment allows the transport of patients with specific medical needs, or in a critical or unstable medical state,” he said.
Finally, Kluge said: “Insurers will get more value for money if they fly with an established air ambulance company that regularly invests, has years of expertise, and works with experienced staff. However, for an insurer, the differences are hard to see and measure unless a challenging medical situation aboard the plane occurs. In such situations, the wheat will be separated from the chaff.”