The truth about air medical transportation costs

hospital helicopter
It's all about balance

Chris Myers, EVP of Reimbursement at Air Methods, details what changes need to be made at a legislative level if balance billing of emergency medical flights can be stopped

If you’ve seen coverage of emergency air medical services (aka ‘air ambulances’) in healthcare or US media recently, there’s a good chance the topic was costs. Across the industry, consumers, legislators, and payers are asking how a lifesaving 15-minute helicopter ride could cost $30,000 or more – and what can be done to stabilise the industry.

The perception is that air medical transportation has widely out of control prices, a narrative that can be traced directly back to the reporting on the high bills some patients face after receiving critical care in the air services. In an era when clicks and shares are the measure of newsworthiness, these shocking costs naturally receive sensationalist media coverage.

Congress needs to fix the root cause of the problem

Frequently left out of the reporting is the fact that the costs are often due to an air medical provider trying to recover some of their significant financial losses through cost shifting onto commercial payers. In addition, what many patients believe is a bill (and what some outlets present as the ‘bill’ the patient or their family received) is actually an explanation of benefits (EOB) sent from the payer that lays out all charges and what is covered by health plans. The total shown on the EOB is not reflective of the payments the air medical service actually receives from the payer – indeed, the amount collected from the payer often ends up being only a fraction of the charges shown on the EOB. No different than after a standard typical hospital stay, the hospital would have significantly higher charges but only receive a fraction of those charges in payment.

To be fair to the many hardworking reporters and editors covering healthcare, industry and national media also cover the importance of air medical services—the lives that air medical crews save, and the impact those patients go on to have in their community and beyond.

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We agree that patients shouldn’t bear the cost

Here’s another detail too often left out of air medical stories: we in the emergency air medical service industry agree that the costs patients face in these isolated billing incidents are too high. In fact, we value transparency and welcome scrutiny of our business practices and cost structure.

all stakeholders must work together to develop a solution that preserves access for patients while also stabilising costs and reimbursement

Emergency air medical services are critical to the millions of Americans who depend on them for life-saving care. That’s what inspires people to join the air medical field in the first place, and it’s what inspires so many who join to remain for many years. Because of this, there is unanimous support for charting a sustainable future for the industry. We recognise that all stakeholders must work together to develop a solution that preserves access for patients while also stabilising costs and reimbursement.

To arrive at that solution, two things must happen soon: first, the federal government must modernise its antiquated method for reimbursing air medical transports, as current reimbursement rates are not tied to today’s actual costs of providing services. Second, more insurers and other managed care organisations must step up to the negotiating table to reach in-network agreements with emergency air providers. While a few insurers have done this, there are still insurance plans that refuse to negotiate an in-network contract for air medical services.

This consensus would eliminate balance billing sticker shock, while also ensuring managed care organisations with in-network air medical coverage can continue to rely on the highest-quality emergency care for their members. The right path forward would also deliver lower overall costs, better outcomes and greater member satisfaction for these organisations.

emergency medical transport

A costly operation

Rapid transport and immediate medical intervention during flight can give patients the best chance at survival and recovery. For emergency air medical providers, maintaining a level of 24/7/365-readiness is expensive. At all times, crews must be ready to respond within a moment’s notice. Air medical crews include highly trained pilots, paramedics, nurses, and other medical professionals, as well as state-of-the-art medical, aviation, and safety equipment.

The cost of this around-the-clock readiness? On average, nearly $3 million per year for each air base maintained by emergency air medical providers, according to an independent air medical provider cost study, conducted and published last year by Xcenda and prepared for trade group the Association of Air Medical Services (AAMS). Furthermore, 77 per cent of air medical providers’ costs are fixed costs associated with operating an air base, giving these companies little leeway in reducing costs on their own.

US congress legislation

Low reimbursement leads to cost-shifting
Despite the significant operating costs, emergency air medical transport services account for a miniscule amount of the Centers for Medicare and Medicaid Services (CMS) annual budget – less than 0.1 per cent – due to the agency’s low reimbursement rates that have not remained tethered to the costs borne by air medical services. These rates then exert a trickle-down economic effect on air medical service rates for private payers and patients.

77 per cent of air medical providers’ costs are fixed costs associated with operating an air base

One clear example: Medicare, which covers air medical services in emergency cases only, not transfers, established the current air medical service payment rates in 2002 based on an estimated 1998 cost pool. Since then, however, Medicare has increased the payment rates solely by an inflationary factor (based on general consumer price growth) and has not revalued the payment system to reflect significant market changes. Every year since 2002, yearly healthcare cost growth has been greater, often doubling or more, consumer price growth. That means that for the past 17 years, Medicare reimbursement has been falling further and further behind the true costs of emergency air-medical transportation.

That inequity is part of the reason why the average Medicare per-transport reimbursement of $5,998 covers just 59 per cent of the median $10,199 cost per transport, according to the AAMS study. Payments from Medicaid are even lower, averaging $3,463 per transport, while payments from uninsured patients average just $354.

For the air medical providers and the patients who rely on their critical services, the consequences of this imbalance are dramatic. Reimbursement for seven out of every 10 air medical transports does not cover the cost per transport, as five out of every 10 patients are insured through Medicare or Medicaid, and two out of each 10 are uninsured, according to the AAMS. The result is cost-shifting onto the three out of 10 patients who are commercially insured to offset the low reimbursements for Medicare, Medicaid and uninsured patients. 

medical bill dollars cost emergency

A simple, two-step solution
When this cost shift happens to patients whose insurers don’t have in-network agreements with emergency air medical providers, balance billing and eye-catching headlines about ‘sky-high costs’ typically follow.

But here’s another reality these stories too often fail to capture: Although the factors that lead to excessive bills for patients can be complex, the solution is not. In fact, it requires just two simple, straightforward steps.

organisations can negotiate fair and reasonable in-network agreements with air medical providers in their service areas

First, Congress needs to fix the root cause of the problem – it has to change outdated CMS reimbursement rates that do not reflect the current cost of emergency air medical service. Managed-care organisations’ lobbying groups can drive that change by educating lawmakers about how insurance companies are bearing the cost of these antiquated rates.

Second, organisations can negotiate fair and reasonable in-network agreements with air medical providers in their service areas. Many are already doing so, and recent progress on this front has been significant as more insurance companies realise emergency care is a relied-on and medically necessary benefit for all their members, whether it is delivered on the ground or in the air. As evidence, air medical services have increased their network participation by an estimated 20 per cent in the past year, according to the AAMS.

In-network agreements don’t just benefit air medical providers. By awarding such coverage, managed care organisations can be assured that their health plan members will continue to have access to the highest quality emergency care, which can save their life or prevent additional adverse health events. In some instances, eliminating care delays enables better outcomes and faster recoveries, which can reduce overall care costs. As they recover, members with in-network air medical coverage will not be burdened by balance bills, improving their satisfaction with their care and health plan. High member-satisfaction rates and in-network air medical coverage benefits can also be useful for marketing health plans to employers and communities, particularly in rural areas.

All stakeholders must step up to support and drive the needed change. By completing the two steps most foundational to solving the current cost and reimbursement imbalance, we can create a sustainable future for our industry. More important, we can preserve access for the nearly 85 million Americans in predominately rural areas who rely on air medical providers for life-saving services such as trauma and stroke care. We can ensure that 24/7/365-readiness remains the standard, and that air medical crews continue to have the resources, equipment, and support they need to always answer the call.