Air ambulances leave patients with sky-high charges

Talk about feeling airsick. The charges for air ambulance services in 2016 hovered between 4.1 and 9.5 times the rate allowed by Medicare, a recent study led by Carey Business School researcher Ge Bai shows. Publicly insured and in-network patients generally escaped paying full cost, but those uninsured and out-of-network were likely to be billed the whole amount, according to the study published recently in Health Affairs.

The high charges occurred in both forms of air ambulance service — rotary-wing, such as a helicopter (5.3 to 7.3 times the Medicare rate), and fixed-wing, typically a jet (4.1 to 9.5 times). In contrast, the national median charges for ground ambulance services in 2016 were 1.6 to 2.8 times the Medicare rate.

The study also examined prices based on median charge ratios, which are the ambulance companies’ charges divided by the Medicare rate. From 2012 through 2016, those ratios increased by 46 to 61 percent.

Lead author Bai, an associate professor at the Carey Business School, explains that the “sky-high charges” can be attributed to “a market failure” within the industry.

“It’s not realistic to expect people to shop in advance for the most economical air ambulance service or to be aware of provider network status. So we end up with a typical market failure in which consumers simply cannot comparison shop, say no, or walk away,” says Bai. “Air ambulance providers take advantage of this market failure and charge high.”

Air ambulance services in the United States are run primarily by for-profit companies, and their charges usually consist of an initial flat fee plus a fee per mile. The study says that in 2016 the median charges per mile for rotary-wing and fixed-wing ambulances were, respectively, $238 and $104 — compared to the median Medicare rates of $33 and $12. The median charges for one-way service via rotary-wing ($24,946) and fixed-wing ($17,838) were well above the median Medicare rates of, respectively, $4,814 and $4,204.

About 80 percent of trips were done by rotary-wing aircraft. The average distance traveled by a rotary-wing ambulance in 2012–2016 was about 60 miles, and about 200 miles for a fixed-wing craft.

While many states have passed legislation to help out-of-network medical patients hit with “surprise medical bills,” the federal Air Deregulation Act of 1978 makes it difficult for states to regulate the rates, routes, and services of commercial airlines, including air ambulance companies, Bai adds.

She says she sees some hope in a bipartisan Senate bill that would limit the price paid to out-of-network air ambulance providers.

“What emerges from our study is an evident need for a stronger federal effort to regulate air ambulance billing practices. Otherwise, patients, especially those in emergencies who have limited options and little bargaining power, will remain at risk of exposure to excessive charges,” says Bai.

In addition to Bai, the co-authors of the study, “Air Ambulances With Sky-High Charges,” are Professor Arjun Chanmugam of the Johns Hopkins University School of Medicine; Professor Gerard Anderson of the Johns Hopkins Bloomberg School of Public Health; and the Carey School’s Valerie Suslow, professor and Vice Dean for Faculty and Research.