Health officials work on air ambulance plan

CASPER — Wyoming health officials are drafting an ambitious and unique plan to try to address air ambulance costs, though representatives of the life flight companies say the issue is how little they’re often paid, not how much they charge.

The issue of air ambulance costs has been prominent in Wyoming for some time, after the state lost a lawsuit brought by the providers here over workers compensation costs, and the Legislature debated how best to protect patients from hefty bills. Lawmakers passed a bill earlier this year that would seek to have all Wyomingites’ air ambulance needs covered by the state Medicaid program.

Now, the Wyoming Department of Health is in the process of drafting a more expansive and detailed plan that officials will submit to the federal Centers for Medicare and Medicaid Services later this year. The work thus far has been beyond what was envisioned in the bill passed earlier this year, and, if the federal government approves the proposal, it’s likely the Legislature will have to amend the statute in 2020.

As it stands currently, the plan would call for expanding Medicaid to cover all people in Wyoming for just air ambulance costs. It would essentially treat the service like a utility.

Franz Fuchs, a Health Department policy analyst who’s taken the lead on the air ambulance work, likened it to a town establishing a single ambulance service or fire department.

“It’s trying to give a regulated monopoly to a certain number of providers so we can keep a lid on supply and drive volume,” he said. Essentially, the state and Health Department are arguing that air ambulances are “like a public utility with high fixed costs and universal service,” according to a presentation officials have put together detailing the plan.

To achieve that, the state would essentially allow air ambulance providers to launch bids in order to establish bases around Wyoming. The state would regulate how many ambulance bases there were and, via the bidding process, would be able to control the cost. A single statewide call center would route cases to the companies that placed successful bids.

The state would establish several bases for helicopters and likely just one for airplanes. As it stands today, there are several helicopter and plane bases scattered around Wyoming. The majority of air ambulance trips here are not emergency cases, according to the department — most are transportation of patients between health care facilities.

The locations for the bases would be selected by the state by balancing emergency needs against cost — essentially, where will bases be best placed to maximize efficiency while still offering speedy response times to Wyomingites in need? Those decisions “could be made periodically by a board, with public accountability,” according to the state.

But if a community wanted a base, it could add one — for a price. If, for instance, Green River received an air ambulance base but Rock Springs wanted one, then the latter community could pay somewhere between $1 million and $3 million each year, according to the state.

In the end, this plan could save employers, insurers and individual Wyomingites money by controlling costs and keeping them fixed.

The details of this plan are important and speak to the difficulties of regulating the air ambulance industry. The state recently lost a lawsuit brought by three prominent providers because the state had attempted to regulate how much those companies could be paid under workers compensation. But a federal law — the Airline Deregulation Act of 1978 — broadly prohibits states from regulating air ambulances. Only the federal government can do that.

That’s why Medicaid is vital to Wyoming’s plan. Because Medicaid is a federal program, then it may be legally acceptable for it to regulate the ambulances. Emphasis on the “may” — Fuchs said he “wouldn’t be surprised” if providers sued Wyoming over the plan, should the federal government give the state the go-ahead.

That approval is far from certain. Fuchs said the state will submit the plan to CMS — which declined to comment for this article — in a few months. The plan is almost certainly unique to Wyoming, though the state is far from the only one trying to keep costs down.

Fuchs said health officials spoke with CMS representatives recently, who were “more receptive” than they had been previously.

“They had basically told us when we started (working on the plan) that they were going to advise us to stop,” he said. “But after we walked them through it, they seemed more receptive and wanted more information.”

Air ambulance companies are already expressing their concerns. In a letter to Fuchs, Richard Mincer — a Cheyenne attorney who represents one of the providers that successfully sued the state — broadly criticized the plan.

Mincer wrote that he questioned whether there was an air ambulance cost problem at all. He told Fuchs that Wyoming should wait for a federal task force, which is studying the issue, to conclude its work before crafting its own plan.

“If you fully appreciate the gravity of the situation, then you know the only way to significantly reduce prices to insurers and individuals ... is to increase reimbursement from Medicare and Medicaid,” Mincer wrote.

The attorney told the Star-Tribune earlier this week that air ambulance companies regularly are paid lower-than-charged sums by Medicare, Medicaid and patients who don’t have insurance. To balance those lower payments, the companies charge patients who do have insurance much higher amounts. He said the state should urge its congressional delegation — Sens. John Barrasso and Mike Enzi and Rep. Liz Cheney — to push for better reimbursement rates.

Air Methods, another air ambulance giant, echoed Mincer’s comments on Medicare and Medicaid in a statement to the Star-Tribune.

“(R)eimbursement for services has not kept up with costs. Medicare, which covers air medical services in emergency cases only, established the current air medical service payment rates in 2002 based on an estimated 1998 cost pool,” the company wrote. “Today, the average Medicare per-transport reimbursement covers approximately half of the cost per transport, according to the (Association of Air Medical Services) study.”

Mincer defended the providers, saying they weren’t making “exorbitant profits,” and that the market should be allowed to correct any issues within the industry.

But a 2017 study by the federal Government Accountability Office questioned whether the market was in a position to control air ambulance prices. Because patients often don’t have a choice when they’re being transported by aircraft, they cannot shop around or compare prices, nor can they choose where the aircraft takes them.

“Consequently, air ambulance providers are not subject to the price competition that typically occurs in competitive markets, where if prices are too high, consumers will find alternatives such as a lower-priced service or provider,” the report’s authors wrote.

The report also noted that the industry is dominated by three large providers, which may further limit any cost-correction within the market. It added that there is money to be made in air ambulances (something Mincer acknowledged, though he stressed there weren’t “exorbitant profits” being raked in). The government reported that Air Methods was purchased by a private-equity firm recently for $2.5 billion. AMGH, Mincer’s client, was acquired by a different private-equity firm for $2 billion.

“The presence of private equity in the air ambulance industry indicates that investors see profit opportunities in the industry,” the authors wrote.

The report concludes that the Airline Deregulation Act was intended to “promote reliance on competitive market forces” to control prices in the industry.

“Despite growth in the number of helicopters offering air ambulance service in recent years, lower air ambulance prices have not materialized,” the report states. “In fact, air ambulance prices have increased — approximately doubling between 2010 and 2014 — and large providers report average prices charged of over $40,000 per transport in 2016.”

The report does lend support to Mincer and Air Methods’ complaints about low Medicare payment: The authors indicate that Medicare paid comparatively little — the median payment was $6,502 in 2014, and that was higher than payments from Medicaid. Eight air ambulance providers told the authors of the federal report that the average cost per flight was between $6,000 and $13,000 per flight.