Imagine a business where 70 percent of your customers only pay for 50 percent of the cost of the service you provide. The remainder of your customers contest their bills. When they do decide to pay, they delay payment by 120 to 140 days and probably don’t pay the full amount. Now, further imagine that the 70 percent share of the underpayers is growing and so are your equipment, personnel, and training costs while your bad debt rate is running 10 to 12 percent or around $10 million a month? And your company is getting slammed in the national media almost daily for allegedly overcharging customers. This is the current situation at the nation’s largest air ambulance provider: Air Methods. And things aren’t much better at its competitors.
The nation’s air ambulance providers are getting squeezed by public and private payers while being asked to do more as the country’s rural health care system contracts. What’s happening to the nation’s air ambulance providers is in many ways symptomatic of larger problems with a broken national health care system that has expanded public benefits in part by under-reimbursing health care providers who in turn shift costs onto private payers, including commercial insurance carriers.
At Air Methods, 70 percent of the patients it flies are covered by Medicare or Medicaid, said Chris Myers, the company’s executive vice president for reimbursement. The average Medicare reimbursement per flight is around $5,800 Myers says, about 50 percent of the actual cost. Medicaid reimbursements are far worse, sometimes amounting to as little as a “few hundred dollars.” The reason Air Methods and other air ambulance companies must charge what they do, Myers says, is that 85 percent of their costs are fixed: aircraft, hangar, crew and support salaries, etc. The average air medical base costs $3 million a year to maintain.
And while Medicare and Medicaid have underpaid for air medical services for years, Myers says the “majority” of private insurance claims are now denied on the first submission on the grounds of “medical necessity.”
“Insurers are looking for a preauthorization, which in our business you don’t have because the service is emergency in nature,” Myers said. “There isn’t really a good understanding of how our service is ordered. These are not scheduled flights. We are responding to 911 or a call from a hospital. Time is of the essence. A typical scenario is that a patient is wheeled from the ambulance at a rural hospital straight to our helicopter at a hospital and taken to a Level One trauma center. That is a real challenge for payers to understand.”
Air Methods employs a staff of 25 “patient advocates” to work with patients dealing with the paperwork tsunami associated with attempts to get their private insurance claims paid. For patients who work with company advocates and still can’t get a favorable insurance resolution, Myers said Air Methods has a “robust” financial assistance program that contributes to the healthy, multimillion-dollar, monthly write-downs. “Almost everyone qualifies,” he said.
Longer term, Air Methods is working with private insurers to expand its participation in their coverage networks, expanding from 10 percent in-network coverage where the company flies to 26 percent by the end of 2018. Myers hopes to double that number by the end of 2019. However, given the dynamics of the aging patient population, a divided Congress needs to act to increase Medicare reimbursement rates, Myers said. “It needs to be fixed in the long run. We do have a challenging situation here. But everyone is aware of the need to have the services covered.”