“Air ambulances, backed by private equity firms, leave patients with $45,000 bills” (LA Times) was sent to me by several different friends. A kid took a 66 nm helicopter ride, which would be about $500 round-trip in a flight school’s four-seat Robinson R44. The cost was $45,930 in a presumably magnificent turbine-powered machine. The parents’ presumably gold-plated university-affiliated health insurance plan paid out $6,704 for this trip, which should more than cover marginal operating expenses even for a deluxe turbine helicopter. But the operator has been fighting for three years to get paid the remainder.
The median charge to Medicare for a medical helicopter flight more than doubled to almost $30,000 in 2014, from $14,000 in 2010, according to a report last year by the U.S. Government Accountability Office. Air Methods’ average charge ballooned, from $13,000 in 2007 to $49,800 in 2016, the GAO said. Medicare, the federal health program for people 65 and older, pays only a fraction of billed charges; Medicaid, the state-federal program for the poor, pays even less.
In other words, after every four flights the turbine helicopter operator bills enough to purchase a decent-condition four-seat Robinson R44. After every eight flights the turbine helicopter operator bills enough to purchaes a brand-new Robinson R44.
Thanks to the decision by Americans to spend all of their wealth on health care, this Medicare biller turns out to be worth more than a medium-sized airline:
Wealthy investors attracted by the industry’s rapid growth have acquired many of the biggest air-ambulance operators, leaving control of the business in the hands of private-equity groups. American Securities LLC bought Air Methods for $2.5 billion in March 2017. Rival Air Medical Group Holdings, which includes Air Evac and several other brands, has been owned by New York private-equity firm KKR & Co. LP since 2015. Two-thirds of medical helicopters operating in 2015 belonged to three for-profit providers, the GAO said in its report.
Despite the apparent glut, air-ambulance operators are profitable. Air Methods had an average annual profit margin of 9.1% from 2012-16. Over the same period, companies in the Standard & Poor’s 500 Health Care Providers & Services index had margins of 7.9%, on average. PHI, a helicopter company that operates medical flights and transports for oil and gas drillers, reported average operating margins of 15.7% from 2014-17 in its medical segment, compared with 10.4% for the benchmark index in the same period.
As with everything else in the U.S. health care system, analysis under Econ 101 cannot be done:
Seth Myers, president of Air Evac, said that his company loses money on patients covered by Medicaid and Medicare, as well as those with no insurance. That’s about 75% of the people it flies.
According to a 2017 report commissioned by the Assn. of Air Medical Services, an industry trade group, the typical cost per flight was $10,199 in 2015, and Medicare paid only 59% of that.
One part of Econ 101 that does seem to apply is that a monopolist will price according to someone’s ability to pay:
In West Virginia, the Cox family went through two appeals with their health plan. After they retained a lawyer, Air Methods offered to reduce their balance to $10,000 on reviewing their tax returns, bank statements, pay stubs and a list of assets. The family decided to sue instead.
“I felt like they were screening us to see just how much money they could get out of us,” Tabitha Cox said. “I think about people that really struggle — single moms, people that don’t have the financial blessings that we have. Bottom line, it’s just not fair.”
(Why would a single mom be someone who “really struggles”? Under West Virginia family law, the maximum parental profit from obtaining custody of a single child is about $24,000 per year. Any child support award obtained above that number will generally be put into trust for the child on reaching adulthood. Children are simply not nearly as profitable as in a lot of other U.S. states.)
I’ve read that a lot of U.S. states have more dedicated medical evacuation helicopters than does the entire country of Canada. In the old days police and/or military helicopters would be used as necessary (they have to make up all kinds of training missions to stay proficient; why not fly patients every few days instead?). Or patients would be transferred on highways in heavily equipped ambulances. The helicopter is an old technology, having been mass-produced starting in the 1940s. The life-saving benefits of getting to a trauma center were well-known even then and documented by automobile manufacturers in the 1960s (they sponsored studies showing that the cost per life saved would be much lower with helicopter ambulances than with airbags and maybe even than with seatbelts (which are cheap, obviously, but most minivans get scrapped with all 7 or 8 seatbelts never having been needed).
Why is it 70 years after helicopters began hovering off assembly lines that we have this industry and this debate?
- FAA punches a hole in the U.S. economy today (some expensive new regulations for the air ambulance industry that may partially account for the price increase)
- “Arizona family shocked by $47,000 air ambulance bill for their child” (Arizona Republic): “The bill for the 15-minute emergency flight totaled $47,000. When the family’s insurer agreed to pay a fraction of the cost, $5,000, the air-ambulance company came after the Brunners for the rest, billing records show.” (it is a one-hour drive between these destinations)