An Arm and a Leg:1 Paying for Helicopter Air Ambulances
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AN ARM AND A LEG:1 PAYING FOR HELICOPTER AIR AMBULANCES Henry H. Perritt, Jr.† Abstract An increase in Medicare reimbursement rates in 2002 caused the number of helicopter air ambulances in the United States to increase threefold. The vast majority of air ambulance flights are ultimately paid for through Medicare or private insurance reimbursement, although the patient often remains legally responsible for the cost of a flight. Average costs for helicopter air ambulance (HEMS) operators have increased much more rapidly than the reimbursement rate, mostly due to low utilization of the helicopters. New safety requirements imposed by the FAA, after a ten-year 1. Compare Mum Owes Leg to Rescue Chopper, AUCKLAND RESCUE HELICOPTER TRUST (Feb. 5, 2014, 5:00 AM), http://rescuehelicopter.org.nz/news/mum-owes-leg-to-rescue-chopper, and Elk Hunter Uses His SPOT Device to Assist Fellow Hunter in Northern New Mexico, SPOT, http://www.findmespot.com/en/ spotemergency/index.php?article_id=1060 (last visited Sept. 28, 2016) (describing the rescue of a hunter with broken leg), with franky, Cost of Yosemite Helicopter Rescue, SUPERTOPO (Nov. 10, 2015, 9:42 PM), http://www.supertopo.com/climbers-forum/2715105/cost-of-yosemite-helicopter-rescue (“[T]here is a very good chance that you’ll end up on a private . helicopter that will charge an arm and a leg.”). † Professor of Law and Former Dean, Chicago-Kent College of Law, the Law School of Illinois Institute of Technology. Commercial helicopter and private airplane pilot with instrument rating. Member of the bar: Virginia (inactive), Pennsylvania (inactive), District of Columbia, Maryland, Illinois, and the Supreme Court of the United States. Mr. Perritt has written twenty books and nearly a hundred law review articles on public policy and law and technology. In Sharing Public Safety Helicopters, 79 J. AIR L. & COM. 501 (2014), written with Eliot O. Sprague and Christopher L. Cue, he evaluated organizational structures for expanding helicopter support for law enforcement. He is familiar with health care policy issues, having written a number of law review articles on the application of ERISA to health care plans and a book on the Clinton Administration’s health care reform proposal. He served as Vice-Chairman of the “Coal Commission,” a commission appointed by U.S. Secretary of Labor Elizabeth Dole to solve a crisis in retired coal miner health care. He appreciates idea incubation on this subject from his friend, Eliot O. Sprague, who taught Mr. Perritt how to fly helicopters. He also appreciates valuable input from Ira Blumen, MD, Professor of Medicine, University of Chicago, and air ambulance safety expert; Randy Mains, international air ambulance helicopter pilot, pilot instructor, and safety expert; Clayton Beckmann, an Air Methods HEMS pilot, flying for Guardian Air in Winslow, Ariz.; Yasser Abdullah, a CPA and first-year law student at Chicago-Kent College of Law; Joel Brumlick, Chief of the Winthrop Harbor, Ill., Police Department; Lt. Greg Whalen, of the Glencoe, Ill., Public Safety Department; Michael I. Bitton, Commander, of the Winthrop Harbor, Ill., Police Department; Andrew Gust, a first-year law student at Chicago-Kent College of Law; Dave Klein, CFII; Jonathan S. Davis, CEO of Sentara Martha Jefferson Hospital in Charlottesville, Va.; Rod Kilduff, former line pilot with Air Evac; Austen Clark, a pilot with Air Methods, Jeff Fair, line pilot with Air Methods, flying for Life Star in Joliet, Ill; and Dan Harper, former flight nurse and flight paramedic, Air Methods. He also appreciates information provided by several HEMS personnel on the condition that they remain anonymous. Air Methods did not respond to several e-mail and telephone inquiries requesting an interview with senior finance and operations personnel. 317 318 JOURNAL OF LAW, TECHNOLOGY & POLICY [Vol. 2016 period of much higher accident rates for helicopter air ambulances than for the rest of helicopter aviation, have only partially brought HEMS accident rates to an acceptable level. To assess arguments for adjusting reimbursement rates and FAA safety rules, one must understand the different types of missions that helicopter air ambulances fly, the kinds of helicopters available, labor markets for the necessary personnel, the economics of helicopter ambulance operation, and the data on fixed and variable costs. Several policy options exist for resolving the funding controversy. The best is to keep the existing Medicare reimbursement formula, expecting private insurance to continue to model their policies on Medicare. This will encourage further consolidation and shrinkage of the fleet to a more sustainable level. State and local governments can support noncompensatory HEMS operations in areas where population density is insufficient to support breakeven flight frequencies. The FAA should complete the task of promoting safety by requiring autopilots on all HEMS aircraft, collecting complete safety data, and abandoning the position that air ambulance operators are “airlines,” which interferes with state health care regulation. TABLE OF CONTENTS I. A Story ................................................................................................ 319 II. Introduction ......................................................................................... 323 III. Missions .............................................................................................. 326 A. Medevac ...................................................................................... 327 B. Hospital-to-Hospital Transport .................................................... 328 C. Dispatching Air Ambulances....................................................... 331 IV. Industry Structure ................................................................................ 333 A. Legal Forms ................................................................................. 333 B. Economies of Scale and Concentration ....................................... 334 C. Two Models ................................................................................. 335 1. Hospital-Based (“Contract”) ................................................. 335 2. Community-Based ................................................................. 336 3. Hybrid Models ....................................................................... 336 4. Public Agency ....................................................................... 338 V. Risks and Safety Technologies ........................................................... 339 A. Weather: Instrument Meteorological Conditions (IMC) ............. 342 1. Single- Versus Multi-Engine ................................................. 344 2. Single- Versus Two-Pilot ...................................................... 346 3. Autopilots .............................................................................. 347 B. Collisions with Obstacles ............................................................ 348 1. Night Vision Goggles (NVGs) .............................................. 349 2. Radio Altimeters .................................................................... 350 3. Terrain Avoidance Warning Systems (TAWS) ..................... 351 4. Navigation Systems and IFR Operations ............................... 351 C. Flight Simulators ......................................................................... 353 VI. Human Resources ............................................................................... 354 A. Pilots ............................................................................................ 355 No. 2] PAYING FOR HELICOPTER AIR AMBULANCES 319 1. Recruitment and Qualifications ............................................. 355 2. Training and Safety Culture .................................................. 357 B. Flight Nurses ............................................................................... 362 C. Paramedics ................................................................................... 363 D. Dispatchers .................................................................................. 364 VII. Regulation ........................................................................................... 364 A. Safety Regulation ........................................................................ 364 B. Federal Preemption of State Economic Regulation ..................... 370 VIII. Economics of HEMS Operations ........................................................ 371 A. Fixed and Variable Costs ............................................................. 371 B. Utilization Is Critical ................................................................... 375 C. Competition ................................................................................. 377 D. Reimbursement ............................................................................ 380 E. Health Care Reform ..................................................................... 384 IX. The Reimbursement Crisis .................................................................. 387 A. The Perceived Problem ................................................................ 387 1. Proposed Legislation ............................................................. 390 2. Texas and Ohio Litigation Against Private Insurers .............. 390 B. The Facts ..................................................................................... 393 X. The Solution .......................................................................................