“In 2017, we find that helicopter air ambulance carriers owned by two private equity firms, who together make up 64% of the Medicare market, had a standardized average charge of $48,250 (7.2 times what Medicare would have paid). This is markedly higher than the $28,800 (4.3 times what Medicare would have paid) standardized average charge for the same service by air ambulance carriers that are not part of a private equity-owned or publicly-traded company.
[..] one study found that nearly 80% of helicopter air ambulance transports for commercially-insured patients are out-of-network and that for half of these out-of-network transports, the insurer pays the full charge with no apparent correlation to the magnitude of the charge. While the insurer paying the out-of-network air ambulance operator’s full charge is helpful to the individual patient, these costs are typically reflected in higher premiums and can incentivize providers to set high charges. By comparison, roughly one-quarter of out-of-network professional service bills at in-network ambulatory surgery centers had their charges paid in full.
[..] Companies that operate air ambulances often attempt to defend high prices by citing what they consider underpayments by public payers. While not implausible, particularly for publicly-run carriers, empirical studies have consistently contradicted such “cost-shifting” claims in the context of hospitals. And again, even if true, it is hard to envision how changes over time in air ambulance payer mix can explain the extreme growth in prices and charges over the last decade.
More likely, certain market failures that characterize the provision of air ambulance services may help explain the high and rising prices. Air ambulance prices are less constrained by typical price competition than prices in other markets, given the common inability for patients or their health plan to select a carrier and that carriers can balance bill out-of-network patients. Increasing charges is also made more profitable by employers’ willingness to pay full charges for out-of-network provisions with seemingly little regard to the magnitude of the charge, likely due at least in part to the rarity of air ambulance services and the financial toll such a bill would place on an employee.
[..] fixing the air ambulance market likely requires one of two approaches, discussed in greater detail in another paper. One option would follow a similar structure to proposals aimed at addressing broader surprise out-of-network billing, combining a prohibition on balance billing with a minimum payment requirement tied to a multiple of Medicare’s prices – which already include adjustments for geography and bonuses for pickups in rural locations. Bipartisan Congressional proposals released by the Senate HELP Committee, House Energy & Commerce Committee, and House Education & Labor Committee include a similar approach, although with the minimum payment requirement tied to current average in-network payment rates rather than a multiple of Medicare prices. The other option is to create a competitive bidding process to award contracts to different air ambulance carriers to cover different geographic regions, similar to a public utility regulation model.”
Full article, Adler L, Hannick K and Lee S. Brookings Institute, 2020.10.13