Story ID: 134AirMedAINSept16EditedByAY_NM
HEMS at Odds with Insurers, Medicare
By: Mark Huber
Caption: In many cases air medical providers are compensated significantly below the cost of providing the service, say operators.
Word Count: 1739
Over the last several years, patient transport fees charged by the helicopter EMS industry in the U.S. have come under scrutiny from public policy makers, the private health insurance industry and elements of the general media. In many instances, the debate has become emotionally charged, with stories of uninsured or underinsured patients forced into bankruptcy by HEMS bills that at first blush appear usurious, sometimes exceeding $1,000 per mile. Concurrently, private health insurers are taking a harder line against HEMS charges, and the relationship between the health insurance companies and the HEMS industry often proves contentious and litigious, with HEMS companies more frequently taking insurers to court to compel payment or insurers extracting deeply discounted service to allow HEMS companies to participate in their networks as “approved providers.”

Air Methods, the nation’s largest HEMS provider, notes that it collected on only 74 percent of its private insurance claims in the first quarter of this year. A spokeswoman said the problem is more acute in states where one or two insurers have high market concentrations. “We do notice a trend, where a state or a concentrated market within a state has a dominant payer the insurance reimbursement is almost certainly below the national average for insurance reimbursement,” she said. She added that Air Methods has sued insurance companies to recover payments, but it no longer litigates with individual patients unless they keep insurance reimbursements.

“At the heart of the issue is that health insurance isn’t doing what health insurance is supposed to do: protect its members. The core purpose of health insurance is to protect individuals from catastrophic events, yet private health plans continue to shrink their coverage, shifting toward high-deductible, high-out-of-pocket models and reducing coverage for their members. They don’t offer patients adequate protection—financially or medically. No one wins in this scenario, except the insurance companies who choose to abandon their members by paying a minimal amount and walking away, leaving the hospital, Air Methods and, most important, their member and our patients to deal with the aftermath of their poor business practice. We have occasionally engaged in litigation in the past with a number of insurance companies, and we continually consider all our options to pursue certain legal claims against insurance companies when necessary,” she said.

The spokeswoman presented Air Methods’ response to patients whose insurance companies leave them in the lurch. “We don’t like it when our patients are put in these situations and we do everything we can to help them. We understand that every patient’s individual and financial circumstances are unique, and our team is dedicated to partnering with every one of them as they navigate through the post-flight and critical-care process. Our long-established charity care process allows us to reduce patient financial responsibility within appropriate legal parameters, and we provide patient financial counselors to patients to assist them throughout the process. In addition, Air Methods has an air medical membership ($49 per year per household) called OmniAdvantage; there is no additional transport cost for members flown via Air Methods. The most important thing a patient can do when faced with an air medical transport bill is to engage with our team. We will assist them through the process and help them in the process with the insurance company. The poor outcomes relative to unresolved balance bills are usually the result of a patient’s refusal to engage with us in the process. If they do not engage we cannot help them with the insurance company or complete the required financial relief application which allows us to write down part or all of an air medical bill for an individual,” she said.
Cost-containment Efforts
One third of all patients transported by HEMS have private insurance. Yet it is that one-third that is expected to disproportionately carry the cost of keeping the domestic HEMS industry afloat. This is a cost-sharing structure to which the commercial insurers naturally take umbrage. Blair Beggan, director of communications of the Association of Air Medical Services, drew the pie chart for AIN last month. “Today, roughly 14 percent of Americans are uninsured or underinsured, 18 percent are covered by Medicaid, 35 percent by Medicare and 33 percent have commercial insurance,” Beggan said. “Again, government-sponsored health insurance reimbursement has not kept pace with the cost to provide air ambulance services. Today, we estimate Medicare reimbursement averages about 30 percent of the average cost per transport, while Medicaid payments range between 2 and 25 percent. The fact is that unreimbursed care is a major factor in the cost structure, not just of air medical transport but of medical care in general. For seven out of 10 air medical transports, air medical providers are compensated significantly below the cost of providing the service.” Fairly or not, commercial insurers are compounding the problem, Beggan said. “Commercial insurance companies that cover healthcare provided in a brick-and-mortar hospital refuse to negotiate fair in-network rates for those same services when they are provided by clinicians in the back of an aircraft.”

AAMS is quarterbacking legislation on Capitol Hill to track air ambulance costs and raise the Medicare reimbursement rate accordingly, but it faces an uncertain future in this abbreviated election-year Congressional session. Beggan notes, “Under the current system, Medicare reimbursement fails to cover the basic cost of even the lowest-cost flights. Failure to correct this imbalance will make it difficult for providers to continue offering access to trauma, cardiac and stroke care in many less populated rural areas or areas with larger Medicare- and Medicaid-dependent communities.”

Beggan characterized the disconnect between the Medicare reimbursement level and the industry’s costs as extreme. “During the ten-plus years of the Air Ambulance Fee Schedule, providers have seen limited inflationary updates, on average 2.2 percent a year, as basic aircraft, labor, healthcare, safety and other operational costs continue to climb at a much faster pace. Keep in mind that the Fee Schedule has never been based on the cost of service. Rising operational costs have resulted in an estimated Medicare reimbursement-to-cost shortfall that exceeds 70 percent. Additionally, air medical operators have invested tens of millions of dollars to install the most modern safety technology benchmarked against international best industry practices. These technologies, which include HTaws and enhanced vision systems, are consistent with the NTSB’s recommendations to the FAA and were voluntarily adopted by the industry in advance of (recent) rulemaking by the FAA,” she said. (See box below.)

The Air Methods spokeswoman noted that the company has invested heavily in recent years in fleet renewal as a means of both meeting the most modern standards and attempting to contain costs. “The investment in new aircraft, which come with lower operating expense, fuel consumption and enhanced safety systems, will pay long-term dividends in managing a significant line item of our costs.” However, she acknowledged that the nature of healthcare makes some cost containment difficult. “We continually seek every efficiency and innovation to keep our costs down, but the nature of our service—and the complexities of the healthcare industry—dictate costs that are beyond our control.”

Beggan isn’t ruling out action on the bill this year. “We are having productive conversations with our Hill sponsors and committee leaders on potential paths to move our legislation forward this year. We are confident we are positioning ourselves with maximum maneuverability to be able to take advantage of any number of potential scenarios that could unfold,” she said.

Currently, the air ambulance industry falls under the protections of the Airline Deregulation Act (ADA) and is therefore immune to state regulation, including the rationing of air ambulances in any given state. States currently have the authority to regulate the number of ground ambulances that operate within their jurisdictions. Critics of the industry have long argued that an overabundance of idle EMS helicopters—more than 800 are operating within the lower 48 states—is artificially driving costs. The overcapacity argument aside, the Air Methods spokeswoman asserts that carving the air ambulance industry out of the ADA and turning it over to the states is simply impractical, and Air Methods opposed a recent attempt to do so in the U.S. Senate.

“Under the Airline Deregulation Act, states are precluded from regulating rates and services of a common carrier; as a common carrier under FAA rules, Air Methods is safe harbored under the ADA. Recently, there was a proposal in the U.S. Senate for an amendment that would have required a carve-out of the ADA and its application to air medical operators. However, those amendments did not survive final approval by the Senate. Air Methods did not support these proposed amendments. A large percentage of our flights cross state lines. As such, having different regulations governing our operations when we are transporting patients—in some cases, across two or three state lines—would be too chaotic. We strongly believe there should be a healthy conversation about the importance of access to these life-saving services, and Air Methods is committed to being an active participant in these conversations,” she said.
Relief Coming through Federal Regulation
Pending federal legislation contains several components designed to provide the industry with long-term relief: 

Cost-reporting Requirements: The legislation would require the Department of Health and Human Services to create and implement a system for air medical Medicare providers to report their cost on specific cost drivers. These cost drivers represent the basic operational costs at an average air medical base.

Independent Cost Analysis and Report to Congress: The Government Accountability Office (GAO) is tasked with analyzing the aggregate data and issuing a report to Congress that includes a recommendation as to the adequate level of Medicare reimbursement that reflects current operational costs while preserving access to critical air medical services.

Annual Report on Industry-Submitted Safety and Quality Measures: Additionally, the GAO will issue a report, updated annually, on certain industry safety and clinical quality measures.  The quality measures chosen have received industry consensus as to critical metrics to track and are currently being collected by most air medical programs.

Temporary Payment Adjustment: To provide a certain amount of immediate financial relief, the legislation would provide for a 20-percent increase in the air medical transport base rate the first year after enaction and subsequent adjustments of 5 percent for three subsequent years until Congress receives the GAO data study.