Private-equity air ambulance firms’ price increases outpace rest of market

As the cost of air ambulances soars, new research shows private equity-owned carriers charge significantly more than carriers that are not a part of a private-equity company. An analysis by the Brookings Institute shows helicopter air ambulance private-equity carriers charge 7.2 times what Medicare would have paid. Other carriers that are not owned by a private-equity firm typically charge 4.2 times what Medicare would have paid.

The analysis, done with 2017 data, shows two private-equity air helicopter ambulance carriers that make up 46% of the market charged an average of $48,250 per ride. That compares to $28,800 charged by other carriers.

 

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The same is true for the fixed-wing, or airplane, air ambulance market where small private equity-owned carriers represent 62% of the Medicare market. The average charge of $58,750 was 8.7 times what Medicare pays compared to other carriers’ $38,200 charge, which is 5.6 times Medicare prices.

These cost disparities have significant impact on patients, who often do not choose which service they use in times of emergency. A study published in the Milbank Quarterly found 80% of helicopter air ambulance transports for insured patients are out of network. Half the time, the insurer pays the full charge which is reflected in higher premiums.

Private-equity helicopter service charges grew by 79% between 2012 and 2017, an average of 12.4% per year, which compares to 36% growth for the same five-year period for carriers not part of a private-equity or public company.

The United States Government Accountability Office found Air Methods, a large helicopter air ambulance provider which was acquired by private-equity firm American Securities in 2017, increased its average charge 283% from $13,000 in 2007 to $49,800 in 2016. Among fixed-wing carriers, average charges from private-equity operators grew by 65% between 2012 and 2017, compared to 19% by other carriers. 

According to a report by NPR last summer, Rep. Ben Ray Luján, D-N.M, questioned Rick Sherlock, president and CEO of the Association of Air Medical Services, over soaring air ambulance service costs. Sherlock responded that since Medicare and Medicaid do not cover the costs, private patients are forced to cover the difference.

This problem impacts patients nationwide, but is especially significant for Alaska residents who often depend on air ambulance service for medical transportation. In Juneau, for example, Bartlett Regional Hospital’s records show 1,000 people were medevaced over three years, according to a report by Alaska Public Media. There, residents can join a membership program which serves as gap coverage for medevac services. Households pay a flat fee between $49 and $125 a year.

Alaska recently rolled back its air ambulance ‘membership’ plan regulations. The Division of Insurance used to look over the plans’ fine print, but a regulatory order says the state’s three air ambulance providers no longer need to file plans with the state for approval. The approval process could take months, so the industry appreciates the change. 

Consumer advocates, on the other hand, say the issue raises red flags.

The nonprofit advocacy group Consumer Reports, based in San Francisco, urges more regulation of air ambulance carriers. Alaska can’t set rates to control costs for air ambulances due to the fact that the 1970  deregulation of airlines extends to air ambulances. But the No Surprises Act, introduced in 2019, would allow states to regulate the cost of medevac flights.